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DIARY

Book 43

Cochran Resume of Stabilization:
Tripartite Agreement

Tripartite Agreement (Stabilization) resume by H. Merle Cochran

Part I - Arrangements leading up to signing of
Tripartite Agreement 9/25/36, and
subsequent events through 10/4/36

Part II - Through December, 1936; "giving particular
attention to implementing of the Tripartite

Agreement to permit gold reciprocity between
United States, France, and England, and to
supplementing of the arrangement between the
three countries to include Belgium,
Switzerland, and Netherlands"

Paris, October 26, 1936.
PERSONAL AND

STRICTLY CONFIDENTIAL

The Honorable

Henry Morgenthau, Junior,

Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:

During the past two months, which have witnessed
interesting developments in French and European finance,

I have sent you a number of cablegrams. The long-distance
telephone has also been employed in keeping you currently

informed. Since I do not have facilities for transcribing
a verbatim record of all of my telephone conversations,
particularly those received at my home, it may be

desirable to set down in this informal letter a chronicle
of recent events, which will at the same time constitute
a summary of my cablegrams and a memorandum of my

conversations by telephone.

When I called upon M. Baumgartner, Director of the
General Movement of Funds Section of the French Ministry
of Finance, on September 2, 1936, M. Baumgartner talked

about the visit to Paris of Dr. Schacht, German Minister
of

-2of Economics and President of the Reichsbank, which had
occurred the preceding week. M. Baungartner expressed

the opinion that it was out of the question to discuss
monetary realignment with Germany at that time. In his
mind, the first essential would be to arrive at some
sort of an understanding between France, the United

States and Great Britain. As I was leaving, M.
Baungartner told me that he thought the Minister of
Finance, M. Vincent Auriol, would ask me to call on
him at an early date to receive a communication which
M. Baumgartner believed would be of interest to us.
Professor Charles Rist lunched with me on September

3. His views on the French monetary situation were

quite pessimistic. He insisted that devaluation in
France was prevented only by politics. He said that
Premier Blum still considered the move impossible
because of the opposition of the Communists thereto.

Professor Rist said that so long as current practices
were followed, French export trade would continue to
decline and unemployment would rise. He pointed out

that French prices, which were already out of line,
were rapidly rising above the world level, and ability
of exporters to compete was declining, resulting in
the slowing up of industry and the augmentation of
unemployment, with accompanying aggravation of social
problems.

On the same day, September 3, M. Charles Cariguel,

in charge of foreign business at the Bank of France,
asked me to call on him. He informed me of the desire
of the Bank of France to build up a gold supply in the
United

-3 United States through shipping metal from Paris to
the Federal Reserve Bank at New York, to be held there
under earmark.

On the following day, I communicated to you the
substance of a somewhat similar message from Governor

Rooth of the Central Bank of Sweden (Sveriges Rikabank

at Stockholm), who desired that his Bank open a gold
deposit with the Federal Reserve Bank in New York. By
a cablegram sent on September 4, you informed me that

these inquiries were being given consideration but that
since earmarking is covered by the General License of
March 23, 1934, issued to the Federal Reserve Bank of
New York, the Banks of France and of Sweden should

discuss details directly with the Federal Reserve
Bank of New York. You let me know by telephone,
however, through a call received by me at my home,

at 8:45 on the evening of September 4, that, with
reference to the formal reply which you had made by
cable, you could assure me that the answer which would
be given by the Treasury when the question of earmarking
was passed on to it by the Federal Reserve Bank of New
York would be favorable. You permitted me to convey

this information informally to MM. Cariguel and Rooth,

but you did not desire that it be incorporated in the
official telegram. I communicated this information

orally to the two inquirers, utilizing the longdistance telephone with Governor Rooth.

At five p.m. on September 4, I reported to you by

cablegram that, at the request of the Minister of Finance
of

-4of France, I had called upon him that afternoon. When
I was received by him, MM. Baumgartner and Rueff were

present. The Minister orally referred to the fact that
I had been his first caller after he assumed his present
office and that my Government had been the first to

offer him cooperation. While, in his opinion, the
way had been barred to any sort of realignment when

our first conversations took place, he remarked that
it had subsequently been ascertained that there appeared
to be a good chance for the consummation of an agreement

of a type that could be found acceptable in France.
With this view in mind, his Ministry had drawn up a

provisional draft of a pre-stabilization agreement for
submission to the United States and to Great Britain.
If these three countries were found to be in agreement,
France would then endeavor to procure the agreement of

the two gold bloc countries, the Netherlands and
Switzerland. The immediate question of the Minister of
Finance was to know whether we preferred that the pro-

position be submitted simultaneously to the British and
ourselves or whether we preferred that the draft be
forwarded secretly and unofficially to you in advance.
M. Auriol would have appreciated the support which he
thought might come through obtaining our agreement

before making the proposition known to the British, but
he did not desire to take any step which might be
considered the least prejudicial or unfriendly by the

British. You promptly replied that it was pref rable
that the draft document be presented simultaneously to
the

the Treasuries of the United States and of Great Britain.
At 10:30 a.m. on September 5, I showed M. Baumgartner
a copy of your cablegram.

At 12 noon on September 5, I cabled you that the
French Ministry of Finance would hand to me at 10:30
a.m., Tuesday, September 8, a draft document for

cabling to you, and that M. Monick, the French
Financial Attache in London, would be given a copy of

the text for delivery to the British Treasury not later
than Wednesday, September 9.

At 1:20 p.m. on September 7, you telephoned me at
the Embassy, from Beacon. You reminded me that you

were launching a big bond issue the following day,
and you requested information in regard to the
political and economic conditions in Europe,
particularly with respect to Spain, France and Germany,
which might conceivably have some effect upon the

security market. After I gave you such information,
you referred to my cablegram of August 27 reporting the
visit which I had made to London in accordance with your

telegraphic instruction No. 318 of August 20, 7 p.m.,
which report you had found helpful.
As reported in my cablegram No. 843 of September

8, 8 p.m., the French Minister of Finance did not hand
me the French text of the draft document hereinabove

referred to until 6 o'clock that afternoon. I made an
English translation of the document that night and
returned to the Ministry of Finance, where M. Rueff,
who had served some years as French Financial Attaché
at

-6at London and is now Assistant Director of the General
Movement of Funds in the Ministry of Finance, checked

the translation with me.
In my cablegram No. 844, sent at 9 a.m. on

September 9, I incorporated a translation of the
proposed French note to the American and British

Governments, together with its annex, consisting of a
proposed pre-stabilization agreement. I explained that
when the Minister of Finance had handed me the document,

he had stressed its secret and unofficial character. He
said that any leak in the negotiations would precipitate
an attack on the franc which would necessitate immediate
imposition of exchange control. He desired that I submit

the draft to you, informally and confidentially, seeking
your reaction thereto, together with any suggestions for
its modification. An examination of the message under
reference will show that in this initial draft the
French sought a somewhat formal agreement, including

the fixing of the three respective currencies within

definite limits.
At 1:40 p.m. on September 9, you telephoned me

at the Embassy, inquiring as to when you might receive

the document from the Ministry of Finance. I explained
that it had already gone forward early that morning and
should have been in the Department of State by the time
you were speaking. At 5 p.m. on the same day, you
cabled me that the communication in question had arrived

and was receiving full and prompt attention.
On the morning of September 10, I received your
cablegram No. 342, dated 12 midnight, September 9, in
which

.....

-7which you incorporated a message for me to deliver

verbatim to the Minister of Finance of France. In
your message you did not suggest any specific revision

of the text of the French draft, but merely stated what
the position of the American Government has been and

would be in the contingency of a French devaluation.
At 12 noon on September 10, I was received by the
Minister of Finance and read to him your message.
I then delivered to M. Baumgartner, who was present,

the text of the verbatim communication. You telephoned
me at 3:30 p.m. at the Embassy to ask how your message

had been received. I told you that it had been very
well received, but that the Ministry of Finance was
seeking some way to arrive at concrete terms. I
informed you that I had told M. Baumgartner that
it would be best not to seek too rigid an arrangement.
M. Baumgartner promised to try to influence M. Auriol

in this direction. You stressed the point that we
must arrive at an agreement on general principles

first. I told you how surprised and favorably
impressed the officials of the French Ministry of
Finance had been by your quick response. They noted

that your cablegram was filed at midnight, and M. Auriol
thought it was a good sign that you people should be
working so late in an endeavor to move towards an

understanding with the French. While I was with the
Minister of Finance, he talked by telephone with M. Blum,

the Premier of France, and the latter asked that his
greetings be conveyed tc the President and to yourself.
The Minister

-8The Minister of Finance desired to discuss your
message with his assistants before giving me any
further message to send to you. M. Baumgartner told
me that M. Monick had delivered the text of the French
draft document to Sir Frederick Phillips, Undersecretary
of the British Treasury, on the evening of September 9.
In my cablegram No. 847 of September 10, 1 p.m.,

I invited to your attention one sentence in your
message No. 342 of September 9, 12 midnight, which I

thought was in error. Your cablegram No. 343 of
September 10, 1 p.m., made the necessary correction,
which I telephoned to M. Baumgartner at 10 a.m. on
September 11. When talking to M. Baumgartner on this

occasion, he told me that the Minister of Finance was
studying carefully your message, but would probably
await news from M. Monick as to the reaction of the

British to the French proposal before calling me to
the Ministry again. I suggested at that time the
desirability of seeing how far we were all in agreement
on general principles before raising questions of detail.
When I had delivered your message to the Minister of
Finance on the preceding day, M. Auriol had quickly
remarked that it revealed that the French and Americans
were in agreement on general lines. M. Baumgartner told
me that he was following out my suggestion and was using

his best efforts to influence the Minister to be satisfied with an arrangement less specific and rigid than
M. Auriol's juridical mind would normally seek.
As reported in my cablegram No. 859 of 7 p.m.,
September

-September 11, the French Financial Attaché in New

York, M. Jean Appert, called on me that day and let
me know that he would sail for New York September 17

on the S/S PARIS. In the same cablegram, I told you

that if the three principal Powers might reach an
agreement on the French currency alignment proposition

at an early date, M. Baumgartner was of the opinion
that Parliament would be convened ahead of the regular
date, which was provisionally understood to be October

22, to pass the necessary law. It would be planned to
put an embargo on the export of gold immediately before
or simultaneously with the announcement of the special
session of Parliament.
At 6 p.m. on September 14, I informed you through
my cablegram No. 865 that M. Baumgartner had told me

that afternoon that the British reply to the French
draft document had been received by M. Monick, who

was bringing it to Paris that night for study by the
Ministry of Finance the following day. The Bank of
England had also been informed of the course of the

negotiations and had sent to Paris its officer in
charge of foreign business, Mr. Cobbold, who was

discussing the question with M. Fournier, Undergovernor of the Bank of France. The Minister of
Finance again transmitted to me, through M. Baumgartner,
his appreciation of the promptness with which you had

provided the American reaction to the French proposal,

and of the frank spirit of cooperation which he found
evidenced therein. He regretted that there was some
delay

- 10 -

delay in the proceedings, but thought it best to
await the British reply before going any further.
On the morning of September 15, I received your
cablegram No. 348, filed at 11 p.m., September 14,
wherein you gave me a paraphrased summary of a secret

note transmitted to you by Sir Warren Fisher, through

the British Chargé d'Affaires at Washington, giving

the British reaction to the French draft proposition.
You left it to my discretion to pass on to the French
Treasury all or a part of the paraphrased text of the
British note to you under reference. At 11:45 a.m.,
September 15, I therefore called upon M. Baumgartner,
informed him of your message, and left with him the

paraphrased summary of the British note as incorpor-

ated in your cablegram. At 2:15 that afternoon, you
telephoned me at my home. You referred to the message

which you had sent me the night before, namely, that
paraphrasing the summary of the secret note from Sir

Warren Fisher. I told you that I had called on M.
Baumgartner during the forenoon and had communicated

the essential parts of your message to him. M. Baum-

gartner had told me at that time that they had not yet
received the text of the British reply but that, as
soon as M. Monick arrived in Paris, he would present
our communication to M. Auriol, together with the

original text of the British reply.
I reported the foregoing to you in my cablegram
No. 870 of September 15, 1 p.m. I added that M.
Baumgartner was convinced that we were all in agreement
as to

- 11 -

was quite tense, as a result of labor difficulties,
and Minister Auriol did not desire to give the public,
and particularly the Communists, a reason, through
undisguised devaluation, for rioting and perhaps
upsetting the Government.

At 12 noon on September 16, I cabled you that M.
Baumgartner had told me that morning that Minister

Auriol was not likely to communicate with us before
the following day since Cabinet meetings had prevented
him from studying the message which M. Monick had brought
from London. You telephoned me at 1:50 that afternoon

at the Embassy, inquiring about the general situation
and as to whether the French had anything to say to

us after receiving the British reply. I gave you
the substance of my message sent at noon.
On September 17, I cabled you (see my No. 882,

dated 5 p.m.) that M. Baungartner had telephoned me at

4:30. He said that Sir Frederick Leith Ross, Economic
Adviser to the British Government, who was in Paris for
two or three days returning from Geneva to London, was

calling to see the Minister of Finance at 6:30 that
evening. The Minister desired that I call at 7 to
receive

- 12 -

receive from him a proposal for a "joint declaration."
At 7:15 that evening the Minister of Finance handed to
me the document in question. I returned with this to
the Embassy, where I translated it into English. I
then took the translation to the Ministry of Finance,
where M. Rueff checked it with me. The translation
was then cabled to you at 9 p.m. on September 17, under

serial No. 884. Before handing the document to me, in
the presence of MM. Baumgartner, Rueff and Monick, the

Minister of Finance delivered a really impassioned plea
for our acceptance of this declaration, and asked me
to do what I could to hasten the matter. The Minister

favored the idea of a joint declaration as better
evidence of cooperation and more effective than three
simultaneous but somewhat different declarations. He
sought a joint declaration over the names of the heads
of the Governments and the heads of the Treasuries of

the three Powers. He thought that other countries

would quickly join in a declaration of this type,
which he deemed a proper foundation for a monetary
peace upon which could be built economic peace and,

finally, political world peace. The Minister said that
he was yielding on two points that the French had

originally desired. The first of these was the point
of a signed contract. He reminded me how dear such a
document always is to a Frenchman, but he said he was

willing to trust in the loyal cooperation of the
Americans and of the British without insisting upon
the more formal arrangement which he had originally
proposed.

- 13 -

results of a second devaluation might be illusory or
that this might lead to a whole series of devaluations
constituting a downward race. When I was at the
Ministry, my friends there were somewhat cheered up

by news of the settlement of the Lille strike that
evening, but they were all anxious for speed in the
devaluation arrangement. One copy of the French draft
of the proposed declaration was delivered to the
British Treasury in London on the evening of September

Roosevelt was leaving the city on the 11 o'clock train
that night, and you asked if the message containing the
proposed declaration could be received at Washington in

difficult to approve in its entirety, especially from
a political angle. You were good enough to express

your satisfaction with the manner in which negotiations
had progressed. You asked within what time a reply

would be expected by the French from you. I told you
that

- 14 that I had given them no promise other than that I
would cable the message to you the same night it was

received and would let you know that they were interested
in hastening the matter.
At 3 p.m. on September 18, you telephoned me at the
Embassy. You said that you had spent three hours the
preceding night studying my message and that Ambassador

Bullitt had participated in the group whom you had
consulted. You said that you were terribly disappointed
in the French draft and that you wanted me to tell the
French how you felt. You said that there was no use
trying to provide an answer to the draft as received
by you. You suggested that the French redraft the
document and you asked if there was anyone here who

could help them draft with a view to meeting American

political sentiment. I reminded you that I had transmitted only a literal translation of a draft which was
purely French, and that it was up to us to indicate
whatever changes we might desire. We naturally
expected the French to draft from a French viewpoint.

I had not presumed to participate in the drafting.
The whole idea of the exchange of drafts was to
permit each government to indicate its own ideas
and to work towards the incorporation thereof in the
official document.
You took objection to the draft because it
referred to an eventual return to an international
gold standard. You said this would have to come out.
Furthermore, you remarked that the document commenced

as if

- 15 -

as if it were a treaty. The whole thing was in such
form that it would not go with the American public.
It was too much for French consumption. You wanted

the reference omitted to improving the standard of

living of all social classes. You insisted that
you were as anxious as ever to be helpful and that
you wanted to see an agreement reached. You said
that by noon on Saturday, the following day, you
hoped to be able to give me a cablegram containing
definite suggestions. In the meantime, you wanted me

to talk over certain points with the French. In answer
to your inquiry, I told you that the French had not
yet received any reply from the British. In my conversation with you, I endeavored to make the point that I
was convinced that I could procure French agreement to

any reasonable draft which we might propose, but that

it was up to you people in Washington to indicate your
ideas.

You recapitulated the main points which you desired

that I take up: (1) entire elimination of return to the
gold standard; (2) revision of the introduction so that
the declaration would not be a joint declaration but a
declaration made simultaneously by each country, with
wording somewhat like this: "The Government of the

United States, after consultation with the Governments

of France and of Great Britain, declares, etc.;" (3)
removal of the sentence in regard to the improving of
the standard of living of all social classes; and,
finally, (4) indication by the French, if they care
to do so before we proceed further, of the percentage
they

- 16 -

they had in mind for devaluation of the French franc.
In conclusion, you asked that I have Mr. Wilson, the
American Charge d'Affaires at Paris, present while
talking on the telephone with you, since the Department
of State had thought that this matter was becoming
highly important and that Mr. Wilson should be

consulted. I explained to you that I had kept Mr.
Wilson currently informed and had shown him all messages,
and Mr. Wilson spoke to you over the telephone to the
same effect.

One hour after you telephoned me, I saw M.

Baungartner, at 4 p.m. At 5:30 p.m., I put in a
telephone call for you to report my conversation. Mr.
Wilson was at the Foreign Office when I put in the call
but was present towards the end of our conversation,
and when you asked me whether Mr. Wilson had anything

to say, the latter asked me to reply in the negative.
After my return from the Ministry of Finance and before
I had succeeded in reaching you by telephone, M. Baum-

gartner telephoned me asking that I stress the emphasis

which the Minister of Finance placed upon the desirability
of a common text for the declaration. After I had spoken
with you, he again telephoned, asking that I continue to
press this point.
In my message No. 892, sent at 10 p.m. on September

18, I confirmed the report of my above-mentioned conver-

sation with M. Baungartner which I had given you over

the telephone. I told you that M. Baumgartner felt
that most of the points which you had instructed me
to

- 17 to raise could be met by the French. He reminded me

that it was a purely French draft and that they would
welcome suggestions as to rephrasing with the view to
achieving a common declaration which would be fitted

for domestic consumption in each of the three countries.
After I made known your views to M. Baumgartner,

he consulted the Minister of Finance and then telephoned

to me. He said that if the form of preamble which you
suggested was to be accepted, the French must then

essentially insist upon a common text. The Minister
agreed with M. Baumgartner that it might be an advantage to the French to omit any reference to an eventual

return to the international gold standard. On this
occasion, M. Baungartner explained to me that the
French would probably follow the Belgian system in
devaluing. That is, the Government would seek from

Parliament at a special session authority to revalue
the franc within certain limits, and legislation
creating an exchange equalization fund. M. Baumgartner
indicated to me the limits that would be recommended,

that is, in percentage of devaluation of the present
franc, and also translated such percentages into terms
of francs to the pound. He said Leith Ross had said
that the lower limit could be accepted by the British
but he thought that the latter might be nervous if the
rate moved toward the upper limit of devaluation. In
my cablegram, I did not set down these highly confidential figures, although I had given them to you by
telephone.

- 18 telephone.

When I asked M. Baungartner whether they could

disclose at that time the rate of devaluation which
they anticipated, he said that they would probably
seek authority to fix by decree a new gold value for

the franc within the limits of from 24 to 32 per cent
less than the old franc. The mean average would be a
28 per cent devaluation. The 24 per cent cut would
mean about 100 francs to the pound, and a 32 per cent

cut about 110 francs to the pound. The average would
be between 104 and 105.

In my conversation with M. Baungartner, he
informed me that Mr. Neville Chamberlain, the

Chancellor of the British Exchequer, would not be in
London for consultation with his assistants before the
following Monday, so that the French could expect no

British reply before that day. M. Baumgartner said
that they, of course, had no objection to our consult-

ing with the British if we wished. He hoped that
agreement on a common declaration could be reached

early the following week so that the complete monetary
operation might be consummated before the end of the
week terminating September 26.

On September 19, I cabled you (see my No. 893 of
11 a.m.) that M. Baungartner had telephoned me during

the morning that Sir Frederick Leith Ross had indicated

that certain revision in the phraseology of the French
draft would be required before it would be suitable for

the British public, and that he also objected to the
inclusion of the reference to an ultimate return to an
international

- 19 -

international gold standard.
At 10:25 on the night of Saturday, September 19,
the code clerk of the Embassy telephoned me at my

home to the effect that a long message was being
received from Washington for me. I came to the
Embassy, where we worked on the deciphering of the

message until 1:15 a.m. I had telephoned M. Baumgartner

at his house at 11 p.m., as previously agreed, to let
him know that a message was being received, and we

arranged that he should call at the Embassy at 10
o'clock Sunday morning, September 20, to see the
text.

M. Baumgartner called at the Embassy at 10 a.m.
Sunday, September 20. I read to him your cablegram
No. 359 of September 19, 2 p.m., and gave him a copy

of the American draft declaration. M. Baungartner
departed to keep an 11 o'clock appointment with M.

Monick. He was then to find Minister Auriol at St.
Cloud for a conference before M. Monick left at 3
o'clock that afternoon for London.
At 10:30 on Monday, September 21, I telephoned
to M. Baumgartner two minor corrections which had been

made in the text of the American draft as received and
delivered to him on the preceding day. During the day
of September 21, M. Baumgartner telephoned me three

times to give the first reactions of the Minister of
Finance to the American draft. M. Baumgartner let me

know that they could not give me definite reactions,
awaiting a reply from London which had not arrived by
4:45

- 20 -

4:45 that afternoon. The Minister's first reaction
was good, and he appreciated the effort which you had

given to help achieve an understanding. He was

especially pleased with the first and last paragraphs
of your draft. He would like to soften somewhat the
sentence about each Government's looking out for its

own national prosperity. That is, he would prefer
not to have this as a single sentence but following
after some preface as "to close collaboration, but
it being, of course, understood that each Government
reserved its rights, et cetera." , There was nothing

really serious in his objections. He would still like
something incorporated about breaking down the restrictions and barriers to trade and some mention that this

agreement would serve as a starting point in that
direction. He would also like something about checking
capital movements. Likewise, he desired an expression
upon cooperation between Treasuries and Central Banks.

I had explained to M. Baumgartner that our expression
as to cooperation between Governments was really more

inclusive and important. Furthermore, there was a
question as to how far Governments could pledge cooperation between their Central Banks, which have a
certain independence. The French saw these points but

still indicated a desire to see some reference included
as to "close cooperation between monetary authorities,"

in addition to the pledge of cooperation between the
Governments.

At 5:30 p.m. on September 21, I talked with you by
telephone

- 21 telephone. I summarized the above-indicated French

reactions. In referring to the French preference for
certain paragraphs of the declaration, you said that
you were particularly fond of the fourth paragraph. I
let you know, in this connection, that the French clearly
got the point of this paragraph, seeking collaboration of
other nations and discouraging unreasonable competitive
exchange advantages. When you talked to me you were at

Beacon and told me the President was at Hyde Park. At

this time you instructed me to have a special telephone
placed in my apartment as soon as possible for long
distance use and asked me to cable you the number

thereof as soon as installed.
At 5:55 p.m., September 21, I talked with MM.
Baumgartner and Rueff. They said Mr. Chamberlain would

not be back in London until the following day. They
added, however, that M. Monick had talked with the

Chancellor's assistants and had found their reaction
good.

At 4 p.m. on September 22, President Trip of the
Netherlands Bank telephoned me from Amsterdam to the

effect that he would arrive in Paris at 6:10 p.m.,
Wednesday, September 23, to repay Governor Labeyrie's

call. Dr. Trip planned to go to the Bank of France
at 11:30 Thursday morning, where he would remain for
luncheon, and he made an appointment to see me at 9:30
on Thursday morning.

At 4:30 on the afternoon of September 22, M.
Baumgartner

- 22 Baumgartner told me that Mr. Chamberlain had not yet

returned to the British Treasury and that M. Monick
could not see him, therefore, before Late in the
afternoon. It was understood that M. Baungartner would

communicate with me later that night if any report was
received from London and if the French had any message
for us.

M. Baumgartner asked me to call at the Ministry
of Finance at 6 o'clock on the evening of September 22.
He informed me that no reply had yet been received
from the British but that Mr. Cobbold of the Bank of
England was in Paris conferring with the Bank of France.
Among the questions raised by Mr. Cobbold, the most

important one was that as to how the Stabilization
Funds of our three countries would operate in case
the transaction on which we were working might be

consummated. The particular question was that as to
whether the American Stabilization Fund would be willing

on the basis of reciprocity to yield gold to the
Stabilization Fund of France in exchange for dollars
which the French Fund might acquire. M. Baumgartner

anticipated that the Undergovernor of the Bank of France
would ask me to call upon him to discuss this question.
When I asked M. Baumgartner what the French attitude

would be towards yielding gold to the British and
American Funds in case one of us purchased francs and

desired gold after the franc had once left the gold
standard, he replied that the French Fund would be

willing to cede gold on a reciprocal basis,
At

- 23 At 7 o'clock, M. Cariguel telephoned me from the
Bank of France, asking that I call on Undergovernor

Fournier the next morning at 10 o'clock. I put in
a call for you at 6 p.m. on September 22 and obtained
a connection with you at Beacon at 7 p.m. I summarized
the information above given (which was forwarded in my
messages Nos. 904 and 907, dated 5 and 8 p.m.,

respectively, September 22). I let you know that M.
Baumgartner had spoken to me about the unsatisfactory

state of the Paris exchange market and had regretted
that the sudden return of M. Paul Reynaud to France

from the Harvard celebration was spoiling the period
of calm within which France had hoped to finish its
arrangements for devaluation. M. Baumgartner had said

that while no final report had been received from M.

Monick, since the latter was still conferring with
Chancellor Chamberlain when M. Baumgartner talked

with me, the initial report was to the effect that
the British were more disposed to accept the American
draft of a common declaration as a basis than they were

to utilize the French draft.
At 9:45 a.m. on September 23, President Trip
telephoned me from the Netherlands Bank at Amsterdam

to let me know that Governor Labeyrie had asked him

to change his luncheon date from Thursday to Friday.

Consequently, Dr. Trip would arrive in Paris one day
later than above indicated, and would call on me
between 9 and 10 o'clock on Friday morning.

At 10:15 on the morning of September 23, I called
on

- 24 on Undergovernor Fournier at the Bank of France, who

raised two questions. The first of these was as to
whether the United States Stabilization Fund would be

willing to yield gold to the French Stabilization Fund
on a reciprocal basis. He insisted that the French
Fund would not want to make the error which the French
made in 1926 of building up tremendous holdings of
foreign exchange, and would be disposed to convert

promptly into gold the dollars or sterling which it
might acquire in its stabilization operations. In our
conversation the Undergovernor spoke of a possible

devaluation of from 25 to 33 per cent of the current
franc. As to the second question, M. Fournier explained
that if an international agreement could be reached for
announcement on the night of Friday, September 25, there
would be a period, beginning with Saturday and probably
terminating on Monday, in which Parliament would be

talked with Governor Labeyrie. The latter raised the
question as to whether the Bank of France should
communicate with the Federal Reserve Bank of New York

in regard to technical cooperation. I told him that
for the time being negotiations were handled entirely
in Washington and that they should use present channels

until they received further suggestions from us. Both
the Governor and the Undergovernor impressed upon me the
necessity

- 25 -

necessity for haste in view of the nervous condition
of the French market.

I dropped in to see M. Cariguel as I was leaving
the Bank, since he had been consulted by the Governor

and the Undergovernor before I arrived. When I told
M. Cariguel of my reluctance to recommend that our

markets be closed lest this might cause undue alarm,

he personally and unofficially suggested that we might
give our word that the Treasury or Federal Reserve
would ask the important American banks to refrain
from trading in the French franc and possibly other
currencies during the period under reference. He
thought effective cooperation could be obtained in
this manner without upsetting the American public.
During my visit with M. Fournier I had asked him
whether the French had yet notified any other countries
of the negotiations under way. He replied in the
negative but added that as soon as agreement might be

reached on the declaration by the three powers, the
French would send three agents to the Netherlands,
Belgium and Switzerland to inform the monetary

authorities respectively as to the declaration, and to
solicit these countries to join the plan.
A message, No. 908, giving the above information
was sent out from the Embassy under date of 1 p.m.,
September 23. At 12:30, you had telephoned me at the
Embassy. You let me know that on the preceding evening
at 5 o'clock, a reporter from the WALL STREET JOURNAL

had disclosed at the Treasury in Washington that his
paper

- 26 paper had received a cablegram from Paris or Geneva

indicating that certain details in regard to our
negotiations might have been learned. (As it turned
out, nothing was published insofar as I am aware,
although it was at this time that a League report was
announced which recommended action in the international

monetary field somewhat along the lines of that actually
being negotiated.) I summarized to you my conversations

with Undergovernor Fournier and with M. Cariguel, as set
forth in my cablegram No. 908 of 1 p.m. You asked me

to find out what information, if any, M. Paul Reynaud
had actually had of negotiations towards French
devaluation while he was in the United States and
whom he had seen while there. You told me that we

could have an answer the first thing on the following
morning to the two questions which Undergovernor

Fournier had raised. You were quite sure that this
answer would be favorable on the gold question. Likewise, you would be in favor of asking the banks to
refrain from exchange operations, although the closing
of our markets was not to be considered. In our
conversation you told me, speaking from your farm at

Beacon, that you were entirely satisfied with the
manner in which the negotiations had been conducted

at this end. Incidentally, you mentioned the possibility of Mr. Butterworth's resuming Treasury work on
your terms.

At 3:20 p.m., September 23, M. Baumgartner telephoned

me to say that they were still having conversations with
the British

- 27 the British in London, through M. Monick. He said
that they would call me again around 4:30. I told
him of the WALL STREET JOURNAL affair and suggested

speed. I gave him my personal ideas, as far as M.
Fournier's inquiries were concerned, and said that
an official answer would be expedited.
At 5 p.m., September 23, Dr. Pennachio, repre-

sentative in Paris of the Bank of Italy, telephoned
me. He said he had just returned from Rome. He was
interested to know whether stories current in French

financial circles and attributed to M. Monick, to the
effect that the latter had obtained assurances from
the American and British in the event of French deval-

uation, were correct, He also let me know that a story
was current here that Sir Frederick Leith Ross had come

to Paris to consult with M. Paul Reynaud.
At 8:25 p.m., September 23, I telephoned M.
Baumgartner, who said M. Monick was still in conversa-

tion with the British Treasury. A reply from him was
expected at any time. M. Baumgartner would telephone
me as soon as he heard. He gave me his private
telephone address in order that I could communicate

with him in case of need. At 10 p.m., I cabled you
(my No. 913) that the Minister of Finance and M.
Baumgartner had been in conference with Premier Blum

during the day and were also in telephonic communication

with M. Monick, who was still negotiating in London with

the British Treasury. I let you know that up until 10
o'clock they had received no word to pass on to us.
I

- 28 I remained late at the Embassy on the night of
September 23 to receive any word which the French

Ministry of Finance might be able to give me. M.
Baumgartner telephoned me at 10:40 p.m. to the effect
that M. Monick said that the British were somewhat

distrustful lest the American and French Stabilization
Funds might achieve the result of placing the pound
actually on a gold basis, and that to escape therefrom

the British might have to let the pound slip. M.
Baumgartner said that there was, of course, no such

intention. M. Monick was to talk with the Treasury
again that night and M. Baumgartner agreed to call
me between 11:45 and midnight. He said the British
wanted to weaken the text of the declaration to provide
for "greatest stability possible." At 12:10 midnight,
I telephoned M. Baumgartner's office, and his Secretary
told me he was still in the Ministry and would call me
back when he returned to his office. M. Baumgartner
telephoned at 12:40 midnight to say that the new
British text (new but based on the American) had been
received. There were some passages in it which the

French could not accept, but he thought the British
would remove these. He said that he would give me

the definite proposal of the Minister of Finance at
9:30 the following morning and hoped that we could

get a reply back to him in the afternoon.

I put in a call for you at Beacon, N. Y., at 12:43
and got connection with you at 1:15 a.m., September 24.

I told you that I would cable you the text of the
English

- 29 -

English declaration early that morning. I asked where
I could telephone you since the French would like an
oral reply, if possible, the same afternoon. You made
the point that the French had been slow in the negotiations and that they were now wanting to rush us. You
asked that I insist on knowing the rates and the
definite terms of the devaluation which the French
were proposing. You asked also that I remind them
that the Hoare-Laval agreement had been released

prematurely. During our conversation, you expressed
the opinion that it seemed to you impossible for us to
finish our negotiations by Friday.
On the morning of September 24, I called on M.
Baumgartner at the Ministry of Finance at 9:30, the
time we had fixed the previous evening. While I was
with M. Baumgartner, he was in a telephonic conversation with M. Monick at London. I was obliged to wait
until 11 o'clock before M. Baumgartner could hand me

the document which I had called to receive. Since this
was in French, I translated it and returned to the
Ministry of Finance, where M. Rueff checked the
translation with me. The document under reference

constituted a compromise draft of a declaration which
the French had drawn up after receiving the British
draft on the previous evening. The French had found

the British draft unacceptable on several points.
Although the British had not at the time accepted the
compromise draft which was handed to me (and which was

only telephoned to M. Monick at London while I was at
the Ministry

- 30 -

the Ministry, for submission to the British Treasury)
I cabled you my translation of the document at 12 noon
on September 24, under 915.

While I was at the Ministry of Finance at noon
of September 24, M. Rueff mentioned to me a British
proposal for Anglo-French cooperation in the manage-

ment of their respective Equalization Funds. I told
him that this interested me very much and requested

an English copy of the proposal. This was received
and cabled to you under No. 917.

You telephoned me at 12:30 at the Embassy. I

gave you the information in regard to the receipt of
the French compromise draft and also the proposed
working agreement between the Equalization Funds

which I had cabled. While Rueff had indicated that

the British proposal in regard to this working
arrangement had been accepted by the French, M.

Baungartner insisted to me that final acceptance would

await the termination of all of the details of the
three-cornered alignment agreement.

While seeing M. Baungartner at 10:30 a.m. on

September 24, I obtained from him definite figures
in regard to the devaluation which France proposed.
These figures were incorporated in my cablegram No.

916 of September 24, 6 p.m. The range of devaluation
envisaged a cut of between 25 and 34.35 per cent in

the franc. It will be noted that such devaluation
was more extensive than that originally suggested to
me by the French, namely, from 28 to 32 per cent.
While

- 31 -

While talking with you at 12:30 noon, I gave you the

data with respect to rates. Just after I had finished
speaking with you, M. Baumgartner telephoned me that

M. Monick reported that the English were nervous over

public sentiment. The French gained the idea that Mr.
Chamberlain was being especially cautious in his steps.
While he was not afraid of the pound depreciating
unduly, he wanted to be very careful, lest something
might happen which would interferewith his alleged
ambition to become Prime Minister.
At 7:30 on the evening of September 24, M.

Baumgartner handed to me at the Ministry of Finance a

the British to you at 9 p.m., under serial No. 920.
In order that you might have also a French translation
of this declaration, it was arranged that M. Baumgartner
should cable such a text to M. Appert, the Financial
Attaché in New York, with instructions to take this at
once to Washington for delivery to you. Mr. Cobbold
of the Bank of England arrived in Paris at 9:30 on
the evening of September 24 to be available for the
discussion of technical cooperation between the Banks

of England and of France and their respective Equali-

zation Funds. At the Ministry of Finance, on the night
of September 24, M. Baumgartner told me that M. Spinasse,
French

- 32 French Minister of Economy, had gone to Bern, and

M. Rueff to the Hague, to inform the Swiss and the
Netherlands Governments, respectively, of the trend

of the negotiations. A third French official was in
Brussels for this purpose. It was still hoped that
agreement between the three powers might be reached

in time for announcement Friday night so that Parliament could be called at once.
At 9 p.m. on September 24, I put in a telephone
call for you at Beacon, but reached you in Washington.

I read twice to you the text of the British draft
declaration which I had cabled under serial No. 920.
We discussed the possible hour for the release of the
announcement of agreement if this might be consummated.

Since the New York Stock Exchange would not be closing

until the equivalent of 8 o'clock Paris time, it was
suggested that the release should be made at 3 o' clock
Washington time, at your Press Conference, and at 9
o'clock Paris time. You reminded me that the question

of rates and of the reciprocal yielding of gold had not
yet been settled. You told me that your office was
filled with economists, lawyers, one banker, one farmer
and one lady. I told you that I was alone, unbothered.
After I had given you the text of the British declaration, you said you would call me back in one hour.
I telephoned M. Baumgartner at 10:40 p.m. and

told him of the conversation which I had just had with
you. I asked him to confirm one word in the British

draft, namely, "relax." He told me that the British
were

- 33 were satisfied to drop the idea for a special preamble

which they had held for a while. I had not forwarded
the British preamble to you since the French had been
adamant against accepting it. M. Baumgartner was
anxious to inform the Dutch and the Swiss as soon as

we might indicate whether we were willing to accept

the British text. I told him that you were to receive
an official from the British Embassy, presumably
conveying a message from the British Treasury,

including the British draft, and that you would
telephone me back after this meeting. You had told me
that you stressed the question of yielding and receiving
gold and the question of the dollar rate versus sterling
and the franc more than you did the text of the declaration. I told M. Baumgartner that I would let him hear
from me as soon as you might call. He said that M.
Fournier, Undergovernor of the Bank of France, was

drawing up, in accordance with an informal request
which I had made repeatedly during the preceding week,

appropriate regulations to protect American banks which

might be operating in gold shipments from Paris at the
date that the prospective embargo was imposed. M.
Baumgartner agreed with your suggestion that the release

of the agreement should be fixed for 9 o'clock Paris
time.

Your telephone central advised me at 1:20 that

your call would not come through until 3 a.m. at my
home. M. Baumgartner had telephoned me at 11:45 p.m.

that he was going home. If any news was received from
you

- 34 you before 12:45, he desired that I telephone his
assistant at the Ministry of Finance. When you called
me at 3 a.m. at my home, it was confirmed that we were

in agreement with the French on the hour for the release

of the agreement. The British Embassy official had

delivered to you the text of the British draft, and
the word "relax" was confirmed. I told you that
appropriate arrangements were being made to protect

American banks dealing in gold in France. I let you
know that the French were waiting to hear from us so
that they could inform the Swiss and Dutch.

You told me that the British Embassy officials
had called on you at 7:30 p.m. that evening, bringing
with them four cablegrams, the last one of which had
reached Washington only at 7 p.m. This included the

British draft declaration. You let me know that you
had told the British that before you could reply to
this last draft you would have to have an understanding
on the dollar-sterling rate. You took it for granted
that the British Treasury wanted the rate continued as
at present, namely, from 4.90 to 5.10. In numerous
conversations which you had had with Mr. Bewley, the
British Treasury Attache in Washington, you had under-

stood that there was no objection to this rate. You
told me that you had not had time to check the draft
received from the British with that which I had
telephoned to you. You said that the important point
now was to learn whether your understanding of the

sterling-dollar rate was correct. You let me know that
you

- 35 you had informed the British that you were passing on

all of this information to me. You affirmed that the
President was backing your position entirely. You also
told the British that all through your recent conversations you thought that they had had in mind a five-dollar
pound. They had frequently intimated that they were

satisfied with the existing rate. You let it be known
that a telephone call from the Chancellor of the
Exchequer would be welcome. When I was telling you
of the arrangements that had been made to safeguard the

interests of any American banks in Paris which were
operating in gold that might be caught by the embargo,
you mentioned that the Federal Reserve Bank of New York

had 150 thousand dollars on deposit in a "complimentary"
account with the Bank of France, concerning which the

Federal Reserve officials were very much perturbed. I

asked whether or not this was really flight capital.
You requested that I tell the French officials that you
were "sitting tight" until the British communicated with
you on an understanding of the dollar-sterling rate. I
told you that I would be seeing the French at 9:30 that
morning. In closing, you said that Mr. Chamberlain had
received a personal message from Premier Blum asking

him to hurry his answer.
President Trip of the Bank of the Netherlands
called at the Embassy at 10:20 a.m., September 25. He
was due at the Bank of France for a conference at 11:30,

to be followed by a luncheon. He had received absolutely

no word of the tripartite monetary negotiations. When
the Governor

- 36 the Governor of the Bank of France informed him in
the premises at the luncheon, Dr. Trip made immediate
plans for departure for Amsterdam by aeroplane and left

Paris at about 2 p.m. M. Rueff had gone to the Netherlands the previous day, but had stopped at the Hague,
where he was to establish contact with the Dutch

Ministry of Finance. Dr. Trip had proceeded from
Amsterdam to Paris, crossing M. Rueff. I understand

that the Bank of France officials informed Dr. Trip
that they had endeavored to get into touch with him
at Amsterdam to prevent his coming on to Paris when

they realized that an agreement for Friday night was
approaching.

I called on M. Baumgartner at the Ministry of
Finance at 10 o'clock on September 25. I told him of

our conversation of 3 o'clock that morning, and I let
him know that you were seeking clarification of the
dollar-sterling cross rate from the British Treasury
before proceeding further with the agreement. While
I was still with him, M. Baumgartner telephoned M.
Monick at London to have him urge upon the British the

necessity of meeting our request. At 1:00 p.m., M.
Baumgartner telephoned me that M. Monick had received

from Mr. Waley of the British Treasury, the clear
impression that Mr. Chamberlain would give you

assurances either by telephone or by letter, or possibly
both, but the probable terms of such assurances were not
revealed. Toward noon, Undergovernor Fournier of the
Bank of France telephoned me to say that it was becoming
urgent

- 37 urgent that he begin communicating with our officials
at the Federal Reserve Bank of New York in regard to

technical cooperation. In reply to his query as to
whether we were yet in a position to answer the points

which he had raised earlier in the week about yielding
gold and closing markets, I told him that nothing could
be said until a point which we had up with the British
was settled.
At ten past one, you telephoned me at the Embassy.

I gave you the developments of the morning, as reported
in my cablegram No. 921 of September 25, 2 p.m. You

mentioned that MM. Williams, Knoke, Viner and Feis
were with you and that the State Department was being
kept fully informed of all developments. You asked me

to find out how big a Stabilization Fund the French
planned to set up.

You reiterated your desire to be helpful and your
sympathy with the French situation. You insisted,
however, that you must await word from the British and
then communicate with me further. You asked that I give
the Minister of Finance your warmest regards. You
reminded us that you had been of aid to the Bank of
France previously and you wanted to be helpful to the
French Government again. You mentioned that Mr. Knoke
had had a telephone message from M. Cariguel and that
you were making arrangements to support the franc

market on New York, using French gold already in the
United States.
I had received on the morning of September 24 your
message

- 38 message No. 367 of September 23, 12 midnight, setting

forth a provisional draft of a statement which you
might make with respect to gold dealings offered on a
reciprocal basis by the American Stabilization Fund
in the event that the tripartite agreement was consum-

mated. This I held confidential.
I kept in touch with the Guaranty Trust and other
banks during the day of September 25, which witnessed

a tremendous run on the franc. The cabinet meeting was

scheduled for that evening and the rumor was circulating
that devaluation would be decided upon. Everyone was,
therefore, nervously awaiting the outcome of this
meeting.

At 1:45 p.m., I telephoned M. Baumgartner of my

conversation I had had shortly before that hour with
you. M. Baumgartner asked me to express to you, when

next speaking with you, his Ministry's deepest appreciation of the cooperation and attention which you were
giving this matter. In view of the urgency for speed,
it was hoped that you might suggest a minimum of changes

in the British draft text of the declaration, contained
in my 920, September 24, 9 p.m.

Later in the afternoon, M. Baumgartner telephoned
me, requesting that I come to see the Minister of Finance.

When I reached the Minister's office at 4:15 p.m., he
was quite nervous because no reply had been received

from the United States. He said he was already overdue

at a cabinet meeting, at which it was to be his duty to
make known to his colleagues the plan for devaluation,
to be

- 39 -

to be carried out that night, and to prepare for the
special calling of Parliament. I told him that I had
talked with you shortly after noon and that you were
still waiting for word from the British. He asked
if I would not put in another telephone call to you.
I offered to go back to the Embassy to do this. M.
Auriol insisted, however, that the call be placed
from his office and that I remain with him. I told
him that it would take perhaps 40 minutes to get the
call through and that this would make him quite late

for his Council meeting, but I yielded to his insistence,
and the call was made by the Ministry of Finance to you.
While at the Ministry of Finance with MM. Auriol,
Baungartner and Rueff, I was provided with a summary
which had been telephoned to them by M. Monick from

London of the cablegram which the British were presumably sending to Washington in reply to your request

for clarification of the dollar-sterling cross rate.
I took down the following notes of this summary, which
did not presume to be the verbatim text:
"(1) The Chancellor of the Exchequer recalls

that he has no legal authority (means) to fix the
pound within gold points. Furthermore, the

principle of the British policy is to let the
pound find its natural level. (2) It is.possible
that the natural level of the pound may be $5.00.

It is possible also that it may be lower. This
eventuality has been many times envisaged (M.

Monick had intimated that while no precise
allusion

- 40 allusion to $4.86 was made, the Chancellor

presumably had this figure in mind). (3) This
being so, the Chancellor will in no way endeavor to depreciate the pound in a deliberate
manner. It is no more the policy of England
than of the United States to do this. (4)
Likewise the Chancellor will not take advantage
of the French monetary adjustment to depreciate

sterling by way of reprisal, no more than the

United States will do this. (5) The Chancellor,
moreover, does not foresee any depreciation of
the pound during the next few months which would

constitute monetary dumping. (6) The Chancellor
does not object to the French adjustment,
although he finds it somewhat too wide."
When I got connection with you on the telephone, I

told you that I was in the Ministry of Finance, at your
French colleague's desk, and that he asked that I transmit to you the following declaration:
"The French Government, while thanking Mr.

Morgenthau for all that he has already done,
wants to give him the assurance that it intends

in no wise on its side to depreciate its money
beyond the limits which will be sought in the

monetary law (as vis-a-vis the dollar). It
thinks that the simultaneous declaration,
despite the reservation which each country has

been obliged to make, to take account of its
public

- 41 -

public opinion, will consolidate effectively
the stability of the major currencies and will
constitute the starting point for a trustful
cooperation between the three great countries.

It insists on the urgency for its country of a
final decision, the Council of Ministers being
already (since 4 o'clock) in session. M. Auriol
extends his warmest personal greetings to Mr.
Morgenthau."

After giving you this message, I explained that

while the French did not desire to mix in our sterlingdollar cross-rate question, they were having a most

difficult time, following the frantic day on the market

The
so
that
have
to a If an could

and the important Cabinet meeting which was in session.

not before
to an on
that had lost 800
the I told

which to

asked
morning, million gold. that set take gold be up the reached I would francs losses let it Stabilization decision would you amount with of had know be gold that been the to necessary Fund 10 during American night. billion they heavy and place day. francs. they the agreement proposed they British perhaps You embargo would you

me to reassure the Minister of Finance of your sympathy
and desire to cooperate, but to let him know that you

had to await the direct message from the British. It
was agreed that I should return to the Embassy, where

Mr. Lochhead of your office, or some other official,
would telephone me any amendments which you desired to
make

- 42 -

make in the British draft text if this should be
adopted as the basis for a final agreement. I was
to be back at the Ministry of Finance by 8 o'clock,
when you were going to call us. I, therefore,
proceeded to the Embassy, but no call arrived from
you while I was there. At 6 p.m. I sent cablegram
No. 924 describing the day's operations on the Paris
exchange market. I also talked by telephone to M.
Cariguel at 7 p.m. He said that he had given an
order to the Federal Reserve Bank to hold the franc
on the New York market that evening. He had also
asked American cooperation toward suppressing

quotations of the French franc on the New York market

on Saturday morning and until after the French
Parliament had enacted the legislation necessary for
devaluation of the franc. The British had requested
their banks not to quote the franc before Tuesday
morning at the earliest.
Upon my return to the Ministry of Finance at 8
o'clock, I joined MM. Baumgartner and Rueff in the

former's office. It was then planned that the Parliamentary session should begin on Monday afternoon. The

declarations in France and England would be given out

by the respective Treasuries. When your call came in,
your office read to me the changes which you desired

to be made in the text of the declaration. I noted
this on my copy, and later M. Rueff corrected his
copy from mine and had the French translation made.

The only correction which could not be accepted was
that

- 43 -

that of referring to "fiscal" rather than "monetary"
authorities since the fiscal authorities in France
are the tax officials. You had not yet received a
final answer from the British. I told you that the
French were anxious to have the declaration given out

not later than 11 o'clock, if at all possible, since
the Minister of Finance had to telephone the President

of the Republic before 11:30. You were, I believe,
slightly amused at the idea that the President of France
could not be kept up later than this hour, considering
the importance of the occasion and the reputed practice
of Frenchmen keeping late hours. I let you know that
the Regents of the Bank of France were scheduled to

meet at midnight to decide upon limiting gold shipments,
et cetera.

I remained on at the Ministry of Finance, where I
checked the French translation of the text as you had

revised it. There were only two or three slight
differences in phraseology, which I let pass an insignificant. I did arrange, however, for the French to
telephone their translated text to the French Embassy
in Washington for immediate delivery to you at the
Treasury so that you could have the French text before

you at the time of the release thereof. M. Monick, at
London, was provided also with the French text and

checked this with Sir Frederick Leith Ross.
At 10:20, you telephoned that the British had
called on you. The message which Mr. Chamberlain had
given

- 44 given you was not quite so reassuring in tone as the
summary which M. Monick had provided the French and

which I had telephoned you in the afternoon. You

said, however, that you had given the British an
answer to Mr. Chamberlain's private communication to
you, which you were 98 per cent sure that he could

accept. You stated that the last sentence of your
note to Mr. Chamberlain read: "The Secretary of the
Treasury believes that this is not an obstacle (a
5 dollar pound) which need prevent the issuance of

the simultaneous statement in order to carry out a

broad, useful and essential action." You told me that
your message would be telephoned to the Chancellor and

that if he had no objection then you would give your
final acceptance to the agreement. You were not ready,
in any circumstances, however, to give final approval
until you yourself might have a reply directly from
the British.
The next two hours in the Ministry of Finance
were very tense ones; between one and two hundred

press correspondents were outside of the Minister's
room awaiting the release which had been promised for

9 o'clock. The Minister had returned from his Cabinet
meeting, where he had not been able to put his devalu-

ation proposition definitely but had given his colleagues
as clear as possible an idea of what he planned to do
and had procured blanket authority to go ahead with
the agreement and necessary announcements. A telephone

call was received from M. Monick at London, stating
that

- 45 -

that the British had sent a favorable reply to your
telephonic message. After this word was received,
Minister Auriol asked M. Baumgartner to bring me into
his private office, where he expressed to me his great
satisfaction that the affair had been terminated. I
told him that I must still await word from you directly,
and that no announcement could be given to the press

before that time. The Minister was quite uneasy lest
the news could not be given to the press in time for
publication in the morning papers. After a few minutes,
M. Monick again telephoned that the British considered
everything in order and were preparing to give the
notice to the press at once.

At the Minister's insistence, I no longer waited
for your telephone call but put in a call from the
Ministry for you. When I got connection, I explained
the situation to you. You understood that I was under
considerable pressure. Since the British had not yet
called on you to deliver the message which M. Monick
had advised us had been despatched, it was agreed to

hold the telephone line open. This facility helped
me greatly. I was seated in the chair of the Minister
of Finance. With him and his colleagues and assistants

pacing the floor of the magnificent Empire salon, in
the old Louvre Palace, which he occupies, glancing at
their watches, grinding cigarette stubs into the
marvellous carpet, and listening to the rumble of
voices from the press representatives outside their
door, made the situation extremely tense. Finally,
you told me that the British had arrived at your office.
We

- 46 We then waited until you had studied the reply. When

you let us know that this was satisfactory and that
we were in final agreement, there was great relief
on the French side. You asked that I put Minister
Auriol on the telephone so that you could extend
your best wishes to him in French. The Minister took
the telephone and exchanged greetings with you. Rueff
translated the Minister's remarks. You then told me
that everything was clear for giving out the communique.
After shaking hands all around, I took leave of

Minister Auriol. I had to pass out through the crowd
of journalists, but spoke to none of them. The rue de

Rivoli in front of the Ministry was filled with taxicabs waiting to carry the journalists to their respective papers or telegraph stations as soon as they
might receive the story. I proceeded to the Embassy,
where the code clerks were still on duty, and found
that while I had been at the Ministry there had arrived
the Department's cablegram No. 370 of September 25,

9 p.m., giving the final American redraft of the
simultaneous declaration. On checking this over, I
found that it was identical in terms with the declaration as I had revised it at the Ministry when Mr.
Lochhead telephoned me earlier in the evening from

Washington. Much relieved that the affair was finally
arranged, I walked to my home from the Place de la
Concorde and went to bed at 3 a.m.
At 11 a.m. on September 26, I filed cablegram No.

926, in which I reported that the Minister of Finance
had

- 47 had received the press at about 1 o'clock that morning
and had given to them the French text of the declaration
on monetary policy which had been made simultaneously

with the American and British declarations. I also
included the text of the French official communiqué
which announced that the Council of Ministers had
approved the terms of a monetary bill for reducing

the gold value of the franc to a unit containing
between 49 and 43 milligrams of gold 900/1000 fine.

The bill provided further that an exchange stabilization
fund, endowed with 10 billion francs, should be set up.
Pending adoption of the bill by Parliament, the Bank
of France was taking the necessary steps to control
the franc.
In the same cablegram I reported that the JOURNAL
OFFICIAL of Saturday morning, September 26, carried

three decrees, dated September 25, issued in connection
with the above-mentioned development in French monetary

policy. The first decree convoked the Senate and
Chamber of Deputies in extraordinary session for
September 28. The second decree suspended payment of

commercial obligations expressed in gold or in foreign
currencies. The third decree provided for the closing
of French security and commercial exchanges, beginning

with September 26 and up to a date which would be fixed

by decree by the Minister of Finance.
In cablegram No. 927, dated September 26, 13 noon,

I submitted the translation of a report, as carried in
the AGENCE ECONOMIQUE ET FINANCIERE, of the remarks
which

- 48 which Minister of Finance Auriol made to the press
upon the occasion of issuing the declaration of

monetary policy. He stressed the importance of the
step that had been taken and especially thanked the

two friendly Governments for their collaboration, and
particularly Mr. Morgenthau and Mr. Chamberlain. He

let it be known that the decision to align the franc
had followed conversations which had taken place
discreetly since the month of June.
At 10:30 on the morning of Saturday, September 26,
M. Cariguel telephoned me from the Bank of France. He

said that he had heard that the American Consul in Paris
was changing dollars on a basis of 23.50 francs to the

dollar. He said that this matter had been brought to
the attention of the Bank of France by financial
concerns. M. Cariguel expressed great surprise that

an official office in Paris of one of the three
Governments which had the preceding night adhered to

the tripartite agreement would the following morning
charge a rate of 23.50, when the maximum devaluation

anticipated by the monetary bill, whose terms had been

announced, was 22.96 francs to the dollar. I promised
M. Cariguel that I would look into the matter. He
emphasized the bad impression which this story would

make if the situation was not rectified. M. Cariguel
told me of the arrangements that had been made for

controlling trading in francs in London and New York.

He was also very happy to tell me that all gold which
had not actually been shipped on the preceding evening
by

- 49 by Paris-American banks which had contracted therefor
was placed in the name of the Federal Reserve Bank of

New York. That is, instead of leaving gold in the
name of the banks which were shipping it, the Federal
Reserve Bank was to be informed that, acting under

instructions of the specified banks, the Bank of France
had earmarked so much gold for its account, to be

shipped at the first opportunity. Thus, any difficulty
that might have arisen from placing an embargo on gold

that night was obviated. M. Cariguel told me that no
actual embargo had been placed on gold, but that at

the meeting of the Regents of the Bank of France, held
after midnight on September 25-26, the decision had
been reached to raise from 215 thousand to 5 billion
francs the minimum amount for bank notes against which

gold would be delivered by the Bank of France. This,
of course, constituted a practical embargo upon gold.
After talking with M. Cariguel I telephoned the
invoice section of the American Consulate General,

which is, of course, in the Embassy building. I
learned that as of that date the charge which the
Consulate General was making for official services

was calculated on a basis of 23.50 francs to the dollar,
while that previously charged had been at 15.50. I
then telephoned Consul (Fullerton, the Executive Officer
of the Consulate General, and explained to him that
the maximum of devaluation which could be effected in

the French franc, under the bill which had been drawn

up, was to the level of 22.96 to the dollar. I
explained

- 50 explained to Mr. Fullerton the complaint which had
reached me from the Bank of France, and I told him

that there was certainly no ground for charging more

than 22.96 to the dollar. I even intimated that the
French Equalization Fund might, at least for a while,
endeavor to maintain the franc at about the middle
point provided for by the devaluation law. On Sunday
morning I reported this matter to Mr. Wilson, then
acting as Chargé of the Embassy, since I thought it
was a matter of policy which concerned the Embassy.

Mr. Wilson told me that he thought Consul General
Southard should appreciate my bringing the matter

During the forenoon I checked up with various
Paris-American bankers. Mr. Pearce of the National
City Bank and Mr. Saint-Germain of the Guarantee Trust

both spoke highly of the manner in which M. Cariguel

of the Bank of France had looked after their gold
shipments and confirmed that the balance of the gold

due on their contracts was being released that day and
would be placed on board before midnight.

At 1 p.m. you telephoned me at the Embassy, I
told you that MM. Fournier and Cariguel were anxious
to

- 51 to know when a decision would be reached in regard to

our giving gold against dollars which the Bank of
France would acquire. They also desired to know
whether they should communicate with Mr. Knoke of the
Federal Reserve Bank of New York, or whether they should

wait until after the French monetary law had been passed.
You were happy to tell me of the splendid American press

reaction, irrespective of party lines, to the tripartite
agreement announcement on the morning of September 26.

You said everyone in Washington was bubbling over with

enthusiasm. I told you of the excellent press reaction
in Europe and let you know that the political section
of the Embassy was getting out a separate cablegram
thereon. You asked me to forward French and English
papers giving comments upon the declaration and also

to arrange for your Treasury Attaché at Berlin to
forward to you the German press. After talking with
you I endeavored to get into touch with Mr. Waite, your
representative in Paris, but it was then too late. On
Monday morning, however, I asked him to pass on to his

colleague at Berlin your request with respect to the
German newspapers. In cablegram 931, sent at 4 p.m.,

I recorded the inquiries of the Bank of France.
In the afternoon I telephoned M. Cariguel to
inform him that you had said he could talk to Mr. Knoke
directly in regard to technical arrangements.
+

At 5 p.m. on September 26, I sent cablegram No. 932

to report that a private telephone had been installed in
my &partment, according to your instructions, the number
being

- 52 being Galvani 70-92.

At 6 p.m. I despatched cablegram No. 933, to

tell you that M. Baumgartner of the Ministry of
Finance had telephoned me at 4:30 to announce that
they had been informed through diplomatic channels

that Switzerland would follow the French lead and
would devalue between 25 and 30 per cent.
In a further message, No. 934, dated September

26, 7 p.m., I gave you certain technical data upon the
gold operations on the Paris market. I also told of
the pleasure with which the French officials had
learned that the Belgian Government had issued a

sympathetic declaration of monetary policy on that
date, adhering to the tripartite agreement.
When I arrived home on the evening of September 26,

I learned that you had been calling for me while I was
en route from the Embassy. I called back and was
answered by Mr. Lochhead at 6:45 p.m. He told me of

the good press that the tripartite agreement was
continuing to have and of the pick-up on the stock and
Government security markets. He also told me that the
State Bank of Russia had sent an order to a correspon-

dent in New York to sell sterling. The Stabilization
Fund had taken the total amount offered.
In my cablegram No. 936, dated September 27, 4 p.m.,

I let you know that after Mr. Lochhead had called me on
Saturday evening, I telephoned M. Cariguel to advise
him and M. Fournier about the American Fund intervening

to buy sterling offered by the Russian State Bank, On
Sunday

- 53 Sunday morning, the Department's 371, September 26,

gartner telephoned me. He was happy to learn of the
prompt and resolute move which had been taken toward

making our monetary arrangement effective.
While I was at the Embassy on Sunday morning, I

had placed a call for you which came through at my

home at 2:05 p.m. In my conversation with you, I
told you why M. Baumgartner had called me. The

reason was this: The Minister of Finance was
scheduled to appear at 2:30 p.m., Sunday afternoon,
before the Finance Committee of the Chamber to propose

and explain the Government's monetary bill, which was

to be submitted to Parliament on Monday. M. Auriol
had asked M. Baungartner to find out from you whether
you would permit the Minister of Finance to relate to
the Finance Committee and state before Parliament that

you had sent your representative to the Ministry of
Finance on June 6, that conversations were then entered

working for this international agreement since early in
June. After talking with you, I at once telephoned M.
Baumgartner

- 54 Baumgartner and let him know that when you had been

asked in one of your press conferences as to who had

started the affair which had just been terminated,
you had replied that the initiative had been on the
part of the French. Consequently, it was not desired
that any different impression be gained from this side.
I told M. Baumgartner that you did not object to it's
being known that the French and Americans had been in

consultation since June 6, but that you thought the
fewer details given in regard to the conversations
and negotiations, the better it would be. Consequently,
it was deemed best that reference to individual acts
and agents should be suppressed.

In my cablegram No. 936 of September 27, 4 p.m.,

confirming my conversation with you and giving the

details of my subsequent talk with M. Baumgartner, I
mentioned further developments, including the decision
of the Netherlands taken on Saturday night, September

26, to put an embargo on gold. I let you know that I
had talked confidentially with M. Pennachio of the Bank
of Italy and had asked him personally whether he did

not think it would be wise for the Italians to "get
on the band wagon." As you are aware, Governor

Azzolini of the Bank of Italy depends importantly
upon my friend M. Pennachio for advice on international
monetary relations and policies.
At 10:30 p.m. on the night of September 27, I
talked by telephone with Dr. Jacobsson, the Swedish

Economist of the B.I.S. at Basel. All during the
negotiations

- 55 -

negotiations the Bank for International Settlements
had been entirely ignorant thereof. Dr. Jacobsson
was delighted with the tripartite agreement and was
especially complimentary of the manner in which the

negotiations had been conducted. That is, without
any leaks, and in a manner which permitted the

results to be announced in a spirit of cordiality,
and not of international recrimination.
When I came to my office on the morning of
September 28, I found that M. Cariguel had already
telephoned me. When I called him back I learned that

M. Fournier wanted to see me. I went immediately to
the Bank of France. M. Fournier told me that he had
telephoned to the Federal Reserve Bank on Saturday,

and that the latter had told him it could get no
answer from the Treasury at Washington in regard to

gold dealings. M. Fournier insisted to me that he
must know about gold arrangements before the law was

passed, especially if the law was enacted at an hour
which would make it impossible, because of the
difference in time between Paris and New York, to
communicate immediately with Mr. Knoke at New York.

In my cablegram No. 937, sent at 12 noon,

September 28, I reported that Auriol's devaluation
bill, with certain modifications, had been voted by
the Chamber Finance Committee on Sunday, by 20 against

12, with 7 members abstaining from a vote. I gave you

a brief summary of the provisions of the bill.
At 1 p.m. on September 28, I sent my No. 938,
reporting

- 56 -

reporting that up until noon of that date the Ministry
of Finance had not yet received the written text of
the amendments made on Sunday in the Chamber Finance

Committee to the devaluation bill. Since these were
slight, I proceeded to provide you in my cablegram

with a full translation of the bill as introduced.
You telephoned me at 4:25 on the afternoon of

September 28. I told you that the devaluation bill
had been approved by the Finance Committee; that

the Chamber had met at 9 a.m.; that it had adjourned

to read the bill; that it had met again after 11 o'clock
and had later adjourned to meet at 4 p.m. I let you
know that the Radical Socialists had held a caucus

at which they voted against the sliding scale for
wage adjustments which had been written into the bill,
but had approved the devaluation feature. I told you
further that the Chamber had voted 365 to 248 against
a motion for sending the measure back to the Committee.

I let you know that M. Cariguel had told me at 4 o'clock
that he thought there was no chance of the two bodies

of Parliament passing the measure that night. Consequently M. Fournier wanted you to know that the markets
would be closed in Paris and London on Tuesday, as they
had been on Monday, and that the Swiss and Dutch were

also closing theirs. In speaking to you of the
conversation which I had with M. Fournier, earlier in
the morning, I also mentioned that M. Fournier had said
that the British were uncertain as to just how cooperation
between the Americans and themselves was to be worked out.
M.

- 57 M. Cariguel had told me that the British had suggested
that any dealings which the Bank of France did in

sterling should be for the account of the British.
M. Cariguel seemed opposed to this idea, but you thought

that he was taking a wrong position if he objected
thereto. You said that you would ask the Bank of
France to act as agent if you called upon it to operate

for us. You told me to let the French officials know
that they would just have to be patient in the matter
of gold dealings. You said that you had taken care of
them in the past and would continue to do so in the

present situation. If they wanted to put any orders
through to buy dollars in the American market, they
should give the Federal Reserve Bank of New York the

order and indicate their rate.
I telephoned M. Cariguel at 4:50 p.m. to give him
the substance of your message, which was that you would

"not let the Bank of France down" and that they should
cease worrying. This assurance was entirely satisfactory

to M. Cariguel. As I recall it, you did not meet Undergovernor Fournier when you were in Paris a year ago,

since he was on sick leave at that time. M. Fournier

is a highly competent official and is carrying,
especially now that Governor Labeyrie is in office,
a heavy part of the load at the Bank of France. Since
he suffered a breakdown over a year ago, he has been

quite nervous. I give you this information as a partial
explanation of the Undergovernor's uneasiness during the
period which I am describing.
At

- 58 At 6 D.M., September 28, I sent cablegram No.

940, setting forth the inquiry which I had received
earlier in the day by telephone from Mr. Beyen,

resident head of the B.I.S., in regard to the

possibility for the B.I.S. to enjoy certain gold
facilities with your Treasury, particularly the
privilege of obtaining gold in New York for B.I.S.
account or in behalf of Central Bank clients.
At 11 a.m. on September 29 I sent cablegram No.

943, wherein I provided, in continuation of my 938 of
September 28, 1 p.m., annexes to the French devaluation

bill as originally proposed. The first of these dealt
with an agreement between the Minister of Finance and

the Bank of France as to the proceeds of devaluation,
et cetera, and the second constituted a convention
between the Minister of Finance and the Amortization
Fund.

At 12:00 noon on September 29, I despatched cable-

gram No. 944, giving details of shipments of gold made
by Paris banks to New York, clearing up transactions
undertaken before an embargo was placed on gold.
My cablegram No. 945 of September 29, 1 p.m.,

gave a translation of a decree that appeared in the
French JOURNAL OFFICIEL of that morning prohibiting

the export of gold.
Undergovernor Fournier of the Bank of France
telephoned me at 10 o'clock on the morning of September

29, to refer to an article which he had read in the
AGENCE ECONOMIQUE ET FINANCIERE of that morning,

purporting

- 59 purporting to constitute a communiqué given out by

you on the matter of the working of the tripartite
arrangement. I told M. Fournier, in answer to his
inquiry, that I had not yet received anything directly
from you which confirmed the report under question,

but that it seemed to me entirely logical and correct.
I again promised him to communicate with him promptly

as soon as I might have anything official in the
premises.

Dr. Pennachio of the Bank of Italy telephoned me
at noon to let me know that his country was studying

its monetary problems very carefully. He said that
for Italy a step toward devaluation must be very
seriously thought out since it involved the whole
economic problem of the country. The question was

more complicated for Italy than for Switzerland and
the Netherlands, since Italy lacked the gold resources
of the other two countries.
You telephoned me at 12:40 on September 29. You

told me that a 20 million dollar credit for the B.I.S.
had been arranged. This concerned, I believe, a
shipment of gold from Switzerland which the B.I.S. was
handling. I told you the substance of the communiqué
in the AGENCE ECONOMIQUE above-mentioned, and you

confirmed the general terms thereof.
In our conversation I let you know that Mr. Gay
President of the New York Stock Exchange, had sent the
following message to his Regional Advisory Committee

in Paris:
"Pending

- 60 "Pending issuance final decree French Government regarding monetary realignment you are
empowered to communicate French Minister of

Finance and offer him full cooperation of N.Y.S.E.
in fulfillment of any financial measure French
Government may wish to promulgate affecting its

citizens or resident also request all members
branch offices and representatives to cooperate
in every possible way with objective of French
Government. "

The Paris representative of the above Committee
had telephoned me previously the substance of this
communication and had sought my advice about informing

the French Government, particularly the Ministry of

Finance, of its receipt. I refrained from giving any
official advice in the premises.
In our conversation I informed you as to the
progress of parliamentary consideration of the
devaluation bill. The Chamber of Deputies had on the
forenoon of September 29 passed the devaluation bill in

its entirety, by a vote of 350 to 221, following a
separate voting on each item of the bill during an all
night session. A compromise was reached on the difficult
sliding scale provision of the bill. The Minister of
Finance had passed the bill on to the Senate Finance

Committee, which was expected to return it to the
Senate late in the afternoon or the following day.
Among the miscellaneous news which I mentioned was

that Dr. Schacht had called a meeting of the Central
Committee

- 61 Committee of the Reichabank; that the Dutch were going

to manage their currency without definite devaluation;
and that the Swiss measure for devaluation was before
Parliament that day.

At 3 p.m. I telephoned M. Cariguel at the Bank of
France to give him certain information which you had

passed on to me, particularly in regard to technical
operations.

At 4 p.m. I sent my cablegram No. 949, which

indicated that the Bank of France had begun to ship
gold to the United States to increase its earmarked

supply with the Federal Reserve Bank. I told you that,
according to press reports, Greece, Latvia and Turkey
had decided to base their currencies on sterling.
With respect to the Netherlands, I explained that
the Dutch had placed an embargo on gold and were

arranging for a stabilization fund of 300 million
florins. I quoted certain items from the London press,
indicating the splendid reception which had been given
to the tripartite arrangement.
Upon the receipt on the forenoon of September 30

of your cablegram No. 376 of September 29, 6 p.m., I
telephoned the Bank for International Settlements at

Basel to inform Dr. Beyen that such inquiries as that
which had been communicated in my cablegram 904 of

September 28 should be made directly to the Federal
Reserve Bank of New York.

On the morning of September 30, the debate began

in the Senate on the Government's monetary bill, which
had

- 62 had been taken up by the Senate Finance Committee the

preceding afternoon. After a debate of more than
twelve hours, the Senate passed the measure by a small

majority on the night of September 30. The Senate had
made certain amendments to the bill, however, which
were not acceptable to the Chamber. When the measure
was submitted to the Chamber Finance Committee, the

latter promptly revoted its own original text and
submitted it to the Chamber, which, in the early hours
of October 1, also revoted the bill in its original
form.

You had telephoned me at 1:20 p.m. on September 30.

I gave you an account of the progress being made in

voting the French devaluation bill and let you know
that I had sent you a large bunch of newspapers the
preceding evening. You mentioned that you had done

nothing in sterling. The Federal Reserve Bank of New
York had, however, received an order from the Bank of
France to supply whatever francs were necessary to
take care of the demand. You told me that the Federal

Reserve had handled 23 million francs at the time you
spoke to me. You suggested that it might be to the
general advantage if some announcement as to this

operation could be made, since this might relieve the
nervousness pending final voting of the French measure.
You suggested that either the Bank of France make the
announcement or permit you to make a statement in

Washington. It was understood that you would call me
back at 9:30 p.m.

I talked

- 63 -

I talked with M. Cariguel two or three times
during the day, and on the occasion after I had spoken
with you in the sense above reported I mentioned your

suggestion to M. Cariguel. He made the point that
France had not yet devalued the franc, and that the
Bank of France could not make or consent to a public
announcement anticipating action of Parliament.

At 5:30 p.m. I talked by telephone with Dr.
Jacobsson at the B.I.S. in Basel, requesting him to
pass on to me any information which he might procure

in regard to the statement which was to be given to
the press that afternoon by Dr. Schacht concerning the
German position on the currency question. At 8:20 p.m.
Dr. Jacobsson telephoned me back saying that he had
received a two-page typewritten summary, in German, of

the German statement. He provided me with a digest

thereof. The general purport seemed to be that the
Germans would not devalue; that no new special types

of marks were to be introduced; that the Germans would

not refuse to take part in any international negotiations
which might lead to permanent stabilization; that Germany
would have to give consideration to problems still
contingent upon the Versailles Treaty and would have
to safeguard the savings of the German people, et
cetera. Dr. Jacobsson also mentioned the large amounts
of gold which the Swiss National Bank was acquiring,
principally at London, and expressed apprehensions

lest France might impose restrictions and penalties
which would work against dishoarding of gold and
repatriation

- 64 -

repatriation of capital.
When you telephoned me at 9:30 p.m., I gave you
the German information and also a summary of the French

legislative progress. I mentioned minor items of
information contributed by MM. Baumgartner and Maxime

Robert of the French Ministry of Finance. You told me
that the Dow-Jones ticker had announced at 2:40,
Washington time, that it was understood that francs had
been made available in London and New York. At 10:30

p.m. I told M. Cariguel what you had said. He insisted
that the word had not been given out in Paris.
After talking with you I went over to the Chamber
of Deputies and listened in at the stormy debate on
the question of accepting Senate amendments or standing
by the Chamber devaluation bill, and remained there

until adjournment around 1 a.m. I then came to the
Embassy and, after getting you on the telephone at

2:10 a.m., informed you of the status of the legislation at that hour.
When the Senate met at 9:30 on the morning of

October 1, the outlook appeared difficult and there were
reports to the effect that the Prime Minister might be
forced to put the question to a vote of confidence
unless some compromise could be reached. With M.

Chautemps acting as mediator and with President Caillaux
of the Senate Finance Committee evidencing a considerate
attitude, the Chamber accepted a compromise provision

which was approved by a vote of 354 to 217. The bill
then

- 65 then went back to the Senate Finance Committee. After

further shuttling back and forth between the two
bodies, the measure was finally passed on the night

of October 1. I had talked with you shortly after
noon, giving you the information to date and anticipating that the bill would be passed before the next
day.

In my cablegram No. 956, dated October 2, 11 a.m.,

I gave you a complete translation of the French monetary
law as voted the preceding night and as promulgated on
page 1040 of the French JOURNAL OFFICIEL of October 2.

The special session of Parliament was adjourned

following the enactment of this legislation.
During the morning I talked with M. Baumgartner
and extended my congratulations upon the Ministry's

success in getting its legislation adopted.
My cablegram No. 960 of October 2, 5 p.m., sent
in continuation of my No. 957 of 11 a.m., summarized
three separate laws which had also been passed on the

night of October 1. The first abrogated certain decreelaws of 1934 and 1935 providing for levies or reductions
on war pensions, retirement allowance for war veterans,
and Legion of Honor and Military Medal payments. The
second law approved the convention concluded on Sep-

tember 27, 1936, with the Amortization Fund and

provided certain advantages for holders of the Auriol
baby bonds. The third law authorized the Ministry of
Finance to conclude a convention with the Crédit Foncier
de France in connection with an advance of 3 billion
francs

- 66 -

francs to permit the latter to reduce interest on
loans granted at high rates.
My cablegram No. 961, dated 6 p.m., October 2,
reported that the Paris bourse and exchange markets

its discount rate from 5 to 3 per cent.
At 9 o'clock on the night of October 2, the
Embassy code room informed me of the receipt of your

cablegram No. 383 of October 2, 1 p.m., requesting
me to keep you advised of any news regarding possible

Italian monetary action. I came to the Embassy at
once and filed my No. 963, at 10 p.m., giving you
information on this subject.
On October 3, 11 a.m., I sent cablegram No. 964,
informing you of further decrees which had been
published in the JOURNAL OFFICIEL to complete the

monetary legislation, including certain measures
taken to reduce customs duties and suspend quotas.

In this message I quoted an article from the London
TIMES upon Mr. Chamberlain's speech at Margate, which

referred very nicely to the cooperation between the
British, French and American Governments. I quoted
you a paragraph from an editorial in the TIMES on Mr.
Chamberlain's speech, and I also reproduced the
conclusion

- 67 conclusion of a leading article from the London
ECONOMIST upon the fall of the gold bloc. I gave you

M. Cariguel's confidential report of his operations
for the Saturday morning, and let you know that he
found everything moving smoothly. In conclusion, I
told you that the Bank of Italy representative in
Paris was not informed as to what decision the
Italian Government would take on Monday with respect

to the lira.
You telephoned me at my home at 3 p.m. on October

3. I gave you the forenoon's news, embodied in my
cablegram above-mentioned, and we discussed the general

situation. You had mentioned a few days previously the
possibility of sending me to London for a day or two.
It was decided, however, that since I would be going
to Basel for the B.I.S. meeting on October 11 and 12,
where I could see MM. Norman, Niemeyer and Cobbold of

the Bank of England, I should not quit Paris in the
meantime for a visit to London. You mentioned that
Dr. Feis was arranging for the Embassy at London to

be instructed to have periodic meetings with the
British Treasury. Reference was made of M. Monick.

I had let you know in an earlier conversation of the
story which came out in the ECHO DE PARIS in regard to

Monick's participation in the tripartite arrangement.
You gave me certain confidential information in regard
to the impression which Monick had made on his visit
to Washington last June. You remarked that you had not

made a single purchase of sterling during the week,
although

- 68 although you had taken some gold in London. You told
me that a high mark, since 1929, had been reached on

your stock and Federal bond markets on that day.
The week ended with Sunday, October 4, thus

witnessed the passage of legislation providing for
devaluation of the franc and saw the reopening of the
French markets. The present letter has given you the
pertinent chronology. This letter bears the date of

October 26, since the first half of it was dictated
on that date. The delays in starting and then in
completing this communication have resulted from

various causes. My stenographer quit and returned to
the United States when our negotiations were at their
height. The arrival of our new Ambassador at the end

of September called for extra work. Furthermore, I
have had a rather strenuous schedule of travel and

reporting in connection with the furthering of the
tripartite agreement, and technical cooperation
thereunder. In another letter I shall extend this
report to cover the negotiations which involved the
technical arrangements for gold reciprocity between
the three parties to the original three-power arrangement, and also the addition of Belgium, the Netherlands
and Switzerland to the group of countries entitled to

enjoy reciprocal facilities in gold trading.
It is still too early to evaluate the results of
the tripartite arrangement of September 25. This
arrangement was welcomed most enthusiastically by a

world which had almost despaired of international
cooperation

- 69 cooperation. For such an agreement to be reached

secretly, but cordially, between three great democracies
at a time when so many political situationswere causing
worry, gave ground for much relief and did a great deal
to reawaken hope. As is usual, certain speakers and
certain writers have been disposed to expect too much
too quickly. They thought that this move would be
followed immediately by a general breaking-down of

trade barriers. The important achievement actually
accomplished was to establish monetary cooperation

between the three leading monetary powers. This

provided, as the French so frequently said, the
starting point for other developments. The immediate
direct benefit was that France was able to devalue her

currency calmly in dignified circumstances. If the
economic and financial situation had been allowed to
deteriorate further in France, with the Government

hesitating to take a decision on its currency in the
absence of an international arrangement, there would

surely have been a serious catastrophe for the franc,
involving a much greater decline therein than that
accomplished through the monetary law of October 1.

The French lead was very shortly followed in an
orderly fashion by several other European countries.
In no case has there been evidence of willful exchange
competition, but of genuine "realignment." These steps

have not solved all of the problems in all of the
countries, but have constituted initial advances. The
results already visible in the Netherlands and Switzerland
are

- 70 -

are especially encouraging. The French situation,
because of politics and lack of confidence in Government, which has existed for several years, and because
of a most complicated and acute social problem, has

been more difficult than some of the others, and it
will take some time to work out. Whether the franc
may be held within the limits fixed by the Monetary
Law of October 1 cannot yet be determined. There is
a very good chance to maintain this rate. If the
French cannot hold the franc at the present figure,

there is little reason to believe that they could
prevent its complete collapse. While Dr. Schacht and

some other critics assert that permanent stabilization
has not been achieved, most observers are quite

satisfied that progress has been made decisively
toward establishing de facto stability in an atmosphere
favorable to further progress.

I was personally happy to see the tripartite
arrangement consummated in such a spirit of cordiality
with the French officials, and in a manner which left

France only the kindliest feeling towards our country.
Minister Auriol and his assistants were absolutely fair
and square in their dealings with me, even though they
were under much stress and worry. Diplomats and journalists have not yet ceased to marvel that such secrecy was

maintained on all three sides. I am deeply appreciative
of the confidence which you placed in me for the
negotiations.

- 71 negotiations.

Faithfully yours,

H. Merle Cochran,

First Secretary of Embassy.

HMC/wgs

Paris, October 26, 1936.

PERSONAL AND

STRICTLY CONFIDENTIAL

The Honorable

Henry Morgenthau, Junior,

Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:

During the past two months, which have witnessed

interesting developments in French and European finance,

I have sent you a number of cablegrans. The long-distance
telephone has also been employed in keeping you currently

informed. Since I do not have facilities for transcribing
a verbatin record of all of my tolephone conversations,
particularly those received at my home, it may be

desirable to set down in this informal letter a chronicle
of recent events, which will at the same time constitute
a summary of my cablegrams and a memorandum of my

conversations by telephone.

When I called upon M. Baungartner, Director of the
General Movement of Funds Section of the French Ministry
of Finance, on September 2, 1936, M. Baungartner talked

about the visit to Paris of Dr. Schacht, German Minister
of

of Economics and President of the Reichabank, which had
occurred the preceding week. M. Bauggartner expressed

the opinion that it was out of the question to discuss
monetary realignment with Germany at that time. In hic
mind, the first essential would be to arrive at some
sort of an understanding between France, the United

States and Great Britain. As I was leaving, M.
Baumgartner told me that be thought the Minister of
Finance, 11. Vincent Auriol, would ask me to call on
his at an early date to receive a communication which
M. Bauagartner believed would be of interest to us.
Professor Cherles Rist lunched with me on September

3. His views on the French monetary situation were

quite pessimistic. He insisted that devaluation in
Frence was prevented only by politics. He said that
Fremier Blue still considered the move impossible
because of the opposition of the Communists thereto.

Professor Rist said that so long as current practices
were followed, French export trade would continue to
decline and unemployment would rise. He pointed out

that French prices, which were already out of line,
were rapidly rising above the world level, and ability
of exporters to compete was declining, resulting in
the alowing up of industry and the augmentation of
unemployment, with accompanying aggravation of social
problems.

On the same day, September 3, M. Charles Cariguel,

in charge of foreign business at the Bank of France,
asked me to cell on him. He informed me of the desire

of the Bank of Fronce to build up a gold supply in the
United

United States through shipping metal from Paris to
the Federal Reserve Bank at New York, to be held there
under earmark.

On the following day, I communicated to you the
substance of a somewhat similar message from Covernor
Rooth of the Central Bank of Sweden (Sveriges Riksbank

at Stockholm), who desired that his Bank open a gold
deposit with the Federal Reserve Bank in New York. By
a cablegram sent on September 4, you informed me that

discuss details directly with the Federal Reserve
Bank of New York. You let me know by telephone,
however, through E call received by me at my home,

this information informally to MM. Cariguel and Hooth,

but you did not desire that it be incorporated in the
official telegram. I communicated this information
orally to the two inquirers, utilizing the longdistance telephone with Governor Rooth.

At five p.m. on September 4, I reported to you by
cablegram that, at the request of the Minister of Finance
of

-4of France, I hed called upon him that afternoon. when
I was received by him, MM. Baumgertner and Rueff were

present. The Minister orally referred to the fact that
I had been his first callor after he assumed his present
office and that my Government had been the first to

offer him cooperation. While, in his opinion, the
way had been barred to any sort of realignment when

our first conversations took place, he remarked that
it had subsequently been ascertained that there appeared
to be a good chance for the consummation of an agreement

of & type that could be found acceptable in France.

with this view in mind, his Ministry had drawn up a
provisional draft of a pre-stabilization agreement for
submission to the United States and to Great Britain.
If these three countries were found to be in agreement,
France would then endeavor to procure the agreement of

the two gold bloc countries, the Netherlands and
Switzerland. The immediate question of the Minister of
Finance was to know whether we preferred that the pro-

before making the proposition known to the British, but
he did not desire to take any step which might be

considered the least prejudicial or unfriendly by the
British. You promptly replied that it was proferable
that the draft document be presented simultaneously to
the

the Treasuries of the United States and of Great Britain.
At 10:30 a.m. on September 5, I showed M. Baungartner
copy of your esblegram.

At 12 noon on September 5, I cabled you that the
French Ministry of Finance would hand to me at 10:30
a.l.e. Tuesday, September 6, a draft document for

cabling to you, and that M. Monick, the French
Financial Attaché in London, would be given a copy of

the text for delivery to the British Treasury not later
than Wednesday, September 9.

at 1:20 P.M. on September 7, you telephoned me at
the Embassy, from Beacon. You reminded me that you

were launching a big bond issue the following day,
and you requeated information in regard to the
political and economic conditions in Europe,
particularly with respect to Spain, France and Germany,
which might conceivably have some effect upon the

security market. After I gave you such information,
you referred to my eablegram of August 27 reporting the
visit which I had made to London in accordance with your

telegraphic instruction lio. 318 of August 20, 7 p.m.,
which report you had found helpful.
As reported in my cablegram No. 843 of September

8, 8 P.M., the French Minister of Finance did not hand
me the French text of the draft document hereinabove

referred to until 6 o'slock that afternoon. I made an
English translation of the document that night and
returned to the Ministry of Finance, where M. Rueff,
who had served some years as French Financial Attaché
at

at London and is now Assistant Director of the General
Movement of Funds in the Ministry of Finance, checked

the translation with me.
In ay cablegram No. 844, sent at 9 a.m. on

September 9, I incorporated a translation of the
proposed French note to the American and British

Governments, together with its annex, consisting of a
proposed pre-stabilization agreement. I explained that
when the Minister of Finance had handed me the document,

he had stressed its secret and unofficial character. He
said that any leak in the negotiations would precipitate
an attack on the frane which would necessitate immediate

imposition of exchange control. He desired that I submit
the draft to you, informally and confidentially, seeking
your reaction thereto, together with any suggestions for
its modification. An examination of the message under

reference will show that in this initial draft the
French sought a somowhat formal agreement, including

the fixing of the three respective currencies within

definite limits.
At 1:40 p.m. on September 9, you telephoned me

at the Embassy, inquiring as to when you might receive

and was receiving full and prompt attention.
on the morning of September 10, I received your
eaologram No. 342, dated 12 midnight, September 9, in
which

which you incorporated a message for me to deliver

verbatin to the Minister of Finance of France, In
your message you did not suggest any specific revision

of the text of the French draft, but marely stated what
the position of the American Government has been and

would be in the contingency of a French devaluation.
At 12 neen on September 10, I was received by the
Minister of Finance and read to his your message.
I then delivered to M. Baumgartner, who was present,

the text of the verbatim communication. You telephoned
me at 3:30 p.m. at the Embassy to ask how your message

had been received. I told you that it had been very
well received, but that the Ministry of Finance was
seeking some way to arrive at concrete terms. I
informed you that I had told H. Baungartner that

it would be best not to seek too rigid an arrangement.
M. Baumgartner promised to try to influence M. Auriol

in this direction. You stressed the point that we
must arrive at an agreement on general principles

first. I told you how surprised and favorably
impreased the officials of the French Ministry of
Finance had been by your quick response. They noted

that your cablegram was filed at midnight, and M. Auriol
thought it was a good sign that you people should be
working 50 late in an endeavor to move towards an
understanding with the French. While I was with the
Minister of Finance, he talked by telephone with M. Blum,
the Premier of France, and the letter asked that hia
greetings be conveyed to the President and to yourself.
The Minister

The Minister of Finance desired to discuss your
message with his assistants before giving as any
further message to send to you. M. Baungartner told

no that M. Monick had delivered the text of the French
draft document to Sir Frederick Phillips, Undersecretary
of the British Treasury, on the evening of September 9.
In my eablegrem No. 847 of September 10, 1 p.m.,

I invited to your attention one sentence in your
message No. 542 of September 9, 12 midnight, which I
thought was in error. Your cablegram No. 343 of
September 10, 1 p.m., made the necessary correction,
which I telephoned to M. Baungartner at 10 a.m. on

September 11. When talking to M. Baungartner on this
oceasion, he told me that the Minister of Finance was
studying carefully your message, but would probably
await news from M. Monick 68 to the reaction of the

British to the French proposal before calling me to

the Ministry again. I suggested at that time the
desirability of seeing how for we were all in agreement
on general principles before raising questions of detail.
When I had delivered your message to the Minister of
Finance on the precoding day, M. Aurial had quickly
remarked that it revealed that the French and Americans
were in agreement on general lines. M. Baungartner told
me that he was following out my suggestion and was using

his best efforts to influence the Minister to be satisfied with an arrangement less specific and rigid than
M. Auriol's juridical mind would normally sock.
As reported in my eablegrea Ko. 859 of 7 P.M.,
September

September 11, the French Financial Attaché in New

York, M. Jeen Appert, called on me that day and let
me know that he would sail for New York September 17

on the s/s PARIS. In the same cablegram, I told you
that if the three principal Powers might reach an
agreement on the French currency alignment proposition

at an early date, M. Bauggartner was of the opinion
that Parliament would be convened ahead of the regular
date, which was provisionally understood to be October

22, to pass the necessary law. It would be planned to
put as embargo on the export of gold immediately before
or simultaneoualy with the announcement of the special
session of Parliament.
At 6 p.m. on September 14, I informed you through
my oablegram No. 865 that M. Baumgartner had told me

that afternoon that the British reply to the French
draft document had been received by M. Monick, who

was bringing it to Paris that night for study by the
Ministry of Finance the following day. The Bank of
England had also been informed of the course of the

negotiations and had sent to Paris its officer in
charge of foreign business, Mr. Cobbold, who was

discussing the question with M. Fournier, Undergovernor of the Bank of France. The Minister of
Finance again transmitted to me, through M. Baumgartner,

his appreciation of the promptness with which you had
provided the American reaction to the French proposal,

and of the frank apirit of cooperation which he found
evidenced therein. He regretted that there was some
delay

delay in the proceedings, but thought it best to
await the British reply before going any further.
On the morning of September 15, I received your
cablegram No. 348, filed at 11 P.M., September 14,
wherein you gave me a paraphrased summary of a secret

note transmitted to you by Sir Warren Fisher, through

the British Chargé d'Affaires at Washington, giving

informed him of your message, and left with him the
paraphrased summary of the British note as incorpor-

ated in your eablegram. At 2:15 that afternoon, you
telephoned no at my home. You referred to the message

which you had sent me the night before, namely, that
paraphrasing the summary of the secret note from Sir

Warren Fisher. I told you that I had called on M.
Bausgartner during the forenoon and had communicated

the essential parts of your message to him. M. Baum-

gartner had told me at that time that they had not yet
received the text of the British reply but that, as
soon as M. Monick arrived in Peris, he would present
our communication to M. Auriol, together with the

original text of the British reply.
I reported the foregoing to you in my cablegram
No. 870 of September 15, 1 p.m. I added that M.
Dawngartner was convinced that we were all in agreement
as to

as to motives and intentions. His problem was still
that of convincing the Minister of Finance that the
American and British replies offered sufficient basis
for developing the French case for unilateral devaluation in a form that could be accepted by the French
public as a realization of international "monetary
peace." The French political situation on this date
was quite tense, as a result of labor difficulties,
and Minister Auriol did not desire to give the public,
and particularly the Communists, a reason, through
undisguised devaluation, for rioting and perhaps
upsetting the Government.

At 12 noon on September 16, I cabled you that M.

Baungartner had told me that morning that Minister
Auriol was not likely to communicate with us before
the following day since Cabinet meetings had prevented
him from studying the message which M. Monick had brought
from London. You telephoned me at 1:50 that afternoon

at the Babasay, inquiring about the general situation
and as to whether the French had anything to any to

us after receiving the British reply. I gave you
the substance of my message sent at noon.
On September 17, I cabled you (see my No. 882,

dated 5 p.m.) that M. Baungartner had telephoned me at

4:30. He said that sir Frederick Leith Ross, Economic
Adviser to the British Government, who was in Peris for
two or three days returning from Geneve to London, was

calling to see the Minister of Finance at 6:30 that
evening. The Minister desired that I call at 7 to
receive

receive from him a proposal for B "joint declaration."
At 7:15 that evening the Minister of Finance handed to
ae the document in question. I returned with this to
the Subassy, where I translated it into English. I
then took the translation to the Ministry of Finance,
where M. Rueff cheeked it with me. The translation
was then cabled to you at 9 p.m. on September 17, under

serial No. 884. Before handing the document to no, in
the presence of MM. Beungartner, Rueff and Monick, the

Minister of Finance delivered a really impassioned plea
for our acceptance of this declaration, and asked me

to do what I could to hasten the matter. The Minister
favored the idea of a Joint declaration as better
evidence of cooperation and more effective than three
simultaneous but somewhat different declarations. He
sought a joint declaration over the names of the heads
of the Governments and the heads of the Treasuries of

the three Powers. He thought that other countries

would quickly join in a declaration of this type,
which he deemed a proper foundation for a monetary
peace upon which could be built economic peace and,

finally, political world peace. The hinister said that
he was yielding on two points that the French had

originally desired. The first of these was the point
of a signed contract. He reminded mo how dear such a
document always is to a Frenchman, but he said he was

willing to trust in the loyal cooperation of the
Americans and of the British without insisting upon
the more formal arrangement which he had originally
proposed.

proposed. The other point wes in regard to fixed limits
for pre-stabilization fluctuations of currencies. The
Minister had sought as definite an arrangement as might
be possible in order to overcome French fours that

by nows of the settlement of the Lille strike that
evening, but they were all anxious for speed in the
devaluation arrangement. One copy of the French draft
of the proposed declaration was delivered to the
British Treasury in London on the evening of September
17, and another copy handed to Sir Frederick Leith Ross,
who was remaining in Paris until September 19.
At 11:45 on the night of September 17, you
telephoned se at my apartment. You said that President

Roosevelt was leaving the city on the 11 o'clock train
that night, and you asked if the message containing the
proposed declaration could be received at washington in

difficult to approve in its entirety, especially from
a political angle. You were good enough to express
your satisfaction with the manner in which negotiations
had progressed. You asked within what time a reply
would be expected by the French from you. I told you
that

that I had given then no promise other than that I
would cable the message to you the saise night it was

received and would let you know that they were interested
in hastening the matter.
At 3 p.m. on September 18, you telephoned me at the

Smbassy. You said that you had spent three hours the
preceding night studying my message and that Ambessador

Bullitt had participated in the group whom you had

consulted. You asid that you were terribly disappointed
in the French draft and that you wanted me to tell the
French how you felt. You said that there was no use
trying to provide an answer to the draft as received
by you. You suggested that the French redraft the
document and you asked If there was anyone here who

could help them draft with a view to meeting American

expected the French to draft from a French viewpoint.

-15as if it were a treaty. The whole thing was in such
form that it would not go with the American public.
It was too much for French consumption. You wanted

the reference omitted to improving the standard of

living of all soolal classes. You insisted that
you were as anxious as ever to be helpful and that
you wanted to see an agreement reached. You said

that by noon on Saturday, the following day, you
hoped to be able to give me a cablegram containing
definite suggestions. In the aeentime, you wanted me

it was up to you people in Washington to indicate your
ideas.

You recepitulated the main points which you desired

United States, after consultation with the Governments

of France and of Great Britain, declares, etc.;" (8)
renoval of the sentence in regard to the improving of
the standard of living of all social classes: and,
finally, (4) indication by the French, if they care
to do so before we proceed further, of the percentage
they

they had in mind for devaluation of the French franc.
In conclusion, you asked that I have Mr. Wilson, the
American Charge d'Affaires at Peris, present while
talking on the telephone with you, since the Department
of State had thought that this matter was becoming
highly important and that Mr. Wilson should be

consulted. I explained to you that I had kept Mr.
Wilson currently informed and had shown him all messages,
and Mr. Wilson spoke to you over the telephone to the
same effect.

One hour after you telephoned me, I saw M.

Baungartner, et 4 p.m. At 5:30 p.m., I put in a
telephone call for you to report my conversation. Mr.
Wilson was at the Foreign Office when I put in the call
but was present towards the end of our conversation,
and when you asked me whether Mr. Wilson had anything

to say, the latter asked me to reply in the negative.
After ay return from the Ministry of Finance and before
I had succeeded in reaching you by telephone, M. Baum-

gartner telephoned me asking that I stress the emphasis

18, I confirmed the report of my above-mentioned conversation with M. Bausgartner which I had given you over

the telephone. I told you that M. Baungertner felt
that most of the points which you had instructed me
to

to raise could be net by the French. He reminded me

that it was a purely French draft and that they would
welcome suggestions as to rephresing with the view to
achieving a common declaration which would be fitted

for domestic consumption in each of the three countries.
After I made known your views to M. Baungartner,
he consulted the Minister of Finance and then telephoned

to me. He said that if the form of presamble which you
suggested was to be accepted, the French must then

essentially insist upon & common text. The Minister
agreed with M. Baungartner that it might be on advantage to the French to omit any reference to an eventual

Parliament at a special session authority to revalue

the frane within certain limits, and legislation
creating an exchange equalization fund. M. Haumgartner
indicated to me the limits that would be recommended,

that is, in percentage of devaluation of the present
franc, and also translated such percentages into terms
of franes to the pound. He said Leith Ross had said

that the lower limit could be accepted by the British
but he thought that the latter laight be nervous if the
rate moved toward the upper limit of devaluation. In
my eablegram, I did not set down those highly confidential figures, although I had given them to you by
telephone.

telephone.

when I asked M. Baumgartner whether they could

disclose at that time the rate of devaluation which
they anticipated, he said that they would probably
seek authority to fix by dooree a new gold value for

the frane within the limits of from 24 to 32 per cent
less than the old frenc. The mean average would be a
28 per cent devaluation. The 24 per cont out would
mean about 100 frence to the pound, and a 32 per cent
cut about 110 francs to the pound. The average would
be between 104 end 105.

In my conversation with M. Baungartner, he
informed me that Mr. Neville Chamberlain, the

Chancellor of the British Exchequer, would not be in
London for consultation with his assistants before the
following Monday, so that the French could expect no

British reply before that day. M. Baungartner said
that they, of course, had no objection to our consulting with the British 1f we wished. He hoped that
agreement on a common declaration could be reached

early the following week so that the complete monetary
operation might be consummated before the end of the
week terminating September 26.

on September 19, I cabled you (see my No. 893 of
11 a.m.) that M. Bauxgartner had telephoned me during

the morning that Sir Frederick Leith Ross had indicated
that certain revision in the phraseology of the French

draft would be required before it would be suitable for
the British public, and that he also objected to the
inclusion of the reference to an ultimate return to an
international

- 19 international gold standard.
At 10:25 on the night of Saturday, September 19,
the code clerk of the Hubasay telephoned me at my

home to the effect that a long message was being
received from Washington for me. I came to the
Embassy, where we worked on the deciphering of the

message until 1:15 a.m. I had telephoned M. Baungartner

at his house at 11 p.m., as previously agreed, to let
him know that a message was being received, and we

arranged that he should call at the Embessy at 10
o'clock Sunday morning, September 20, to see the
text.

M. Baumgartner called at the Rabasay at 10 a.m.
Sunday, September 20. I read to him your cablegram
No. 359 of September 19, 2 p.m., and gave him a copy

of the American draft declaration. M. Bamagertner
departed to keep an 11 o'clook appointment with M.

Monick. He was then to find Minister Auriol at st.
Cloud for a conference before M. Monick left at 3
o'clock that afternoon for London.
At 10:30 on Monday, September 21, I telephoned
to M. Baumgartner two ainor corrections which had been

made in the text of the American draft as received and

delivered to him on the preceding day. During the day
of September 21, M. Baumgertner telephoned me three

times to give the first reactions of the Minister of
Finance to the American draft. M. Baungartner let me

know that they could not give me definite reactions,
awaiting a reply from London which had not arrived by
4:45

- 20 -

4:45 that afternoon. The Minister's first reaction
was good, and he appreciated the effort which you had
given to holy achieve an understanding. He was

especially pleased with the first and last paragraphs
of your draft. He would like to softon somewhat the
sentence about each Government's looking out for its

own national prosperity. That is, he would prefer
not to have this as a single sentence but following
after some proface as "to close collaboration, but
it being, of course, understood that each Government

reserved its rights, et cotera. . There was nothing
really serious in his objections. He would still like
something incorporated about breaking Gown the restric-

tions and barriers to trade and some mention that this
agreement would serve as a starting point in that
direction. He would also like something about cheeking
capital movements. Likewise, he desired an expression
upon cooperation between Treasuries and Central Banks.
I had explained to M. Baumgartner that our expression
as to cooperation between Governments was really more

still indicated a desire to see some reference included
as to "close cooperation between aonetary authorities,"
in addition to the pledge of cooperation between the
Governments.

At 5:30 p.m. on September 21, I talked with you by
telephone

- 21 telephone. I summarized the above-indicated French

Beacon and told me the President was at Hyde Park. At

this time you instructed me to have a special telephone
placed in my apartment as soon as possible for long
distance use and asked me to cable you the number

thereof as soon as installed.
At 5:55 p.m., September 21, I talked with MM.
Bauagartner and Rueff. They said Mr. Chamberlain would

not be back in London until the following day. They
added, however, that M. Monick had talked with the
Chancellor's assistants and had found their reaction
good.

At 4 p.m. on September 22, President Trip of the
Netherlands Bank telephoned me from Amstordam to the

effect that he would arrive in Paris at 5:10 p.m.,
Wednesday, September 23, to repay Covernor Labeyrie's

call. Dr. Trip planned to go to the Bank of France
at 11:30 Thursday morning, where he would remain for
lunchson, and he made an appointment to see me at 9:30
on Thursday morning.

At 4:30 on the afternoon of September 22, M.
Baungartner

22 -

Baumgartner told me that Mr. Chamberlain had not yet

returned to the British Treasury and that M. Monick
could not see him, therefore, before late in the
afternoon. It was understood that M. Bausgartner would

communicate with me later that night if any report was
received from London and if the French had any message

for us.

M. Baungartner asked me to call at the Ministry
of Finance at 6 o'clock on the evening of September 22.
He informed me that no reply had yet been received

from the British but that Mr. Cobbold of the Bank of
England was in Paris conferring with the Bank of France.
Among the questions reised by Mr. Cobbold, the most

important one was that as to how the Stabilization
Funds of our three countries would operate in case
the transaction on which we were working might be

consummated. The particular question was that as to
whether the American Stabilization Fund would be willing

on the basis of reciprocity to yield gold to the
Stabilization Fund of France in exchange for dollars
which the French Fund might acquire. M. Bausgartner

anticipated that the Undergovernor of the Bank of France

would ask me to call upon him to discuss this question.
When I asked M. Baumgartner what the French attitude

would be towards yielding gold to the British and
American Funds in case one of us purchased france and

desired gold after the frane had once left the gold
standard, he replied that the French Fund would be

willing to cede gold on a reciprocal basis.
At

- 83 At 7 o'clock, M. Cariguel telephoned me from the
Bank of France, asking that I call on Undergovernor

Fournier the next morning at 10 o'elock. I put in
a call for you at 6 p.m. on September 22 and obtained
a connection with you at Beacon at 7 p.m. I summarized
the information above given (which was forwarded in my
messages Nos. 904 and 907, dated 5 and 8 p.m.,

respectively, September 22). I let you know that M.
Baumgartner had spoken to me about the unsatisfactory

state of the Paris exchange market and had regretted
that the sudden return of M. Paul Reynaud to France
from the Harvard celebration was spoiling the period
of calm within which France had hoped to finish its
arrangements for devaluation. M. Baungartner had said
that while no final report had been received from M.

Monick, since the latter was still conferring with
Chancellor Chamberlain when M. Baungartner talked

with me, the initial report was to the effect that
the British were more disposed to accept the American

draft of a common declaration as a basis than they were

to utilize the French draft.
At 9:45 a.m. on September 23, President Trip
telephoned me from the Netherlands Bank at Amsterdam

to let me know that Governor Labeyrie had asked him
to change his luncheon date from Thursday to Friday.

Consequently, Dr. Trip would arrive in Paris one day
later than above indicated, and would call on me
between 9 and 10 o'cloca on Friday morning.

At 10:15 on the morning of September 23, I called
on

on Undergovernor Fournier at the Bank of Frence, who

raised two questions. The first of these was as to
whether the United States stabilization Fund would be

willing to yield gold to the French stabilization Fund
on a reciprocal basis. He insisted that the French
Fund would not want to make the error which the French
made in 1926 of building up tremendous holdings of
foreign exchange, and would be disposed to convert

promptly into gold the dollars or sterling which it
might acquire in its stabilization operations. In our
conversation the Undergovernor spoke of a possible

devaluation of from 25 to 33 per cent of the current
frane. As to the second question, M. Fournier explained
that if an international agreement could be reached for
announcement on the night of Friday, September 25, there
would be a period, beginning with Saturday and probably
terminating on Monday, in which Parliament would be

talked with Covernor Labeyrie. The latter raised the
question as to whether the Bank of France should
communicate with the Federal Reserve Bank of Now York

in regard to technical cooperation. I told him that
for the time being negotiations were handled entirely
in Washington and that they should use present channels

until they received further suggestions from us. Both
the Governor and the Undergovernor impressed upon me the
necessity

- 25 necessity for haste in view of the nervous condition
of the French market.

I dropped in to see M. Cariguel as I was leaving
the Bank, since he had been consulted by the Governor

and the Undergovernor before I arrived. When I told
M. Cariguel of my relactance to recommend that our
markets be closed lest this might cause undue alarm,

he personally and unofficially suggested that we might
give our word that the Treasury or Federal Reserve
would ask the important American banks to refrain
from trading in the French franc and possibly other
currencies during the period under reference. He
thought effective cooperation could be obtained in
this manner without upsetting the American public.
During my viait with M. Fournier I had asked him
whether the French had yet notified any other countries

of the negotiations under way. He replied in the
negative but added that as soon as agreement might be

reached on the declaration by the three powers, the
French would send three agents to the Netherlands,

Belgium and switzerland to inform the monetary

authorities respectively as to the declaration, and to
solicit these countries to join the plan.
A message, No. 908, giving the above information
was sent out from the Embassy under date of 1 p.m.,

September 23. At 12:30, you had telephoned me at the
Embassy. You let me know that on the preceding evening
at 5 o'clock, a reporter from the WALL STREET JOURNAL

had disclosed at the Treasury in Washington that his
paper

- 26 paper had received a cablegram from Paris or Geneva

monetary field somewhat along the lines of that actually
being negotiated.) I summarized to you my conversations
with Undergovernor Fournier and with M. Cariguel, as set
forth in my cablegram No. 906 of 1 p.m. You asked me

to find out what information, if any, M. Paul Reynoud
had actually had of negotiations towards French

devaluation while he was in the United States and
whom he had seen while there. You told me that we

could have an answer the first thing on the following
morning to the two questions which Undergovernor

Fournier had raised. You were quite sure that this

answer on the Likeyou be in favor of the

the

of our was not to be

you told from
were

manner

at mentioned the possibilSeason, conversation refrain wise, this markets in would and. that from which would you exchange be Incidentally, the favorable negotiations me, operations, entirely speaking you considered. satisfied asking had gold although been question. your with conducted In banks our farm the closing to at

ity of Mr. Butterworth's resuming Treasury work on
your terms.

At 3:20 p.m., September 23, M. Bausgartner telephoned

me to say that they were still having conversations with
the British

the British in London, through M. Monick. He said
that they would call me again around 4:30. I told
him of the WALL STREET JOURNAL affair and suggested

speed. I gave him my personal ideas, as far as M.
Fournier's inquiries were concerned, and said that
an official answer would be expedited.
At 5 p.m., September 23, Dr. Pennachio, repre-

sentative in Paris of the Bank of Italy, telephoned
me. He said he had just returned from Rome. He was
interested to know whether stories current in French

financial circles and attributed to M. Honick, to the
effect that the letter had obtained assurances from
the American and British in the event of French deval-

ustion, were correct. He also lot are know that a story
was current here that sir Frederick Leith Ross had come
to Paris to consult with M. Paul Reynoud.
At 8:25 p.m., September 23, I telephoned M.
Baungartner, who said M. Monick vas still in converse-

with him in case of need. At 10 p.m., I cabled you
(my No. 913) that the Minister of Finance and M.
Bausgartner had been in conference with Premier Blum

during the dey and were also in telephonic nonmunication

with M. Monick, who was still negotiating in London with

the British Treasury. I let you know that up until 10
o'clook they had received no word to pass on to us.
I

I remained late at the Embassy on the night of
September 25 to receive any word which the French

Ministry of Finance might be able to give me. M.
Baungartner telephoned me at 10:40 p.m. to the effect
that M. Monick said that the British were somewhat

distrustful lest the American and French stabilization
Funds might achieve the result of placing the pound
actually on a gold basis, and that to escape therefrom

the British might have to let the pound slip. M.
Baumgartner said that there was, of course, no such

intention. M. Monick was to talk with the Treasury
again that night and M. Baungartner agreed to call
me between 11:45 and midnight. He said the British

wanted to weaken the text of the declaration to provide

for "greatest stability possible." At 18:10 midnight,
I telephoned M. Baungertner's office, and his Secretary
told me he was still in the Ministry and would call me

back when he returned to his office. M. Baungartner
telephoned at 18:40 midnight to say that the new
British text (new but based on the American) had been
received. There were some passages in it which the
French could not accept, but he thought the British
would remove these. He said that he would give me

the definite proposal of the Minister of Finance at
9:30 the following morning and hoped that we could

get a reply back to him in the afternoon.

I put in a call for you at Beacon, N. Y., at 12:43
and got connection with you at 1:15 a.m., September 24.

I told you that I would cable you the text of the
English

prematurely. During our conversation, you expressed
the opinion that it seemed to you impossible for us to
finiah our negotiations by Friday.
On the morning of September 24, I called on M.
Baumgartner at the Ministry of Finance at 9:30, the
time we had fixed the previous evening. While I was
with M. Baungartner, he was in a telephonic conversation with M. Monick at London. I was obliged to wait
until 11 o'clock before M. Baumgartner could hand me
the document which I had called to receive. Since this

was in French, I translated it and returned to the
Ministry of Finance, where M. Rueff cheeked the
translation with me. The document under reference

constituted a compromise dreft of a declaration which
the French had drawn up after receiving the Britiah
draft on the previous evening. The French had found
the British draft unacceptable on several points.
Although the British had not at the time accepted the
compromise draft which was handed to me (and which was

only telephoned to M. Monick at London while I was at
the Ministry

- 30 -

the Ministry, for submission to the British Treasury
I eabled you ay translation of the document at 12 noon
on September 24, under 915.

While I was at the Ministry of Finance at noon
of September 24, M. Rueff mentioned to me a British
proposal for Anglo-French cooperation in the manage-

ment of their respective Equalization Funds. I told
him that this interested me very much and requested

an English copy of the proposal. This was received
and cabled to you under No. 917.

You telephoned me at 12:30 at the Embassy. I

gave you the information in regard to the receipt of
the French compromise draft and also the proposed
working agreement between the Equalization Funds

which I had cabled. while Rueff had indicated that
the British proposal in regard to this working
arrangement had been accepted by the French, M.

Baungartner insisted to me that final acceptance would

await the termination of all of the details of the
three-cornered alignment agreement.

While seeing M. Baugartner at 10:30 a.m. on
September 24, I obtained from him definite figures
in regard to the devaluation which France proposed.
These figures were incorporated in my cablegram NO.

916 of September 24, 6 D.M. The range of devaluation
envisaged a cut of between 25 and 34.35 per cent in

the franc. It will be noted that such devaluation
was more extensive than that originally suggested to
me by the French, namely, from 28 to 32 per cent.
While

while talking with you at 18:30 noon, I gavo you the

data with respect to rates. Just after 1 had finished
speaking with you, M. Baumgartner telephoned me that

M. Monick reported that the English were nervous over

At 7:30 on the evening of September 24, M.
Baumgartner handed to me at the Ministry of Finance a

text in English of a declaration approved by the
British, after studying the French compromise draft
which I had submitted in translation in my No. 915 of
September 24, 12 noon. I cabled this latest draft of
the British to you at 9 p.m., under serial No. 920.
In order that you might have also a French translation
of this declaration, it was arranged that M. Baumgartner
should cable such a text to M. Appert, the Financial
Attaché in New York, with instructions to take this at
once to Washington for delivery to you. Mr. Cobbold
of the Bank of England arrived in Paris at 9:30 on
the evening of September 24 to be available for the
discussion of technical cooperation between the Banks

of England and of France and their respective Equali-

zation Funds. At the Ministry of Finance, on the night
of September 24, M. Baumgartner told me that M. Spinesse,
French

- 32 French Minister of Economy, had gone to Born, and

M. Rueff to the Hague, to inform the Swiss and the
Nethorlands Governments, respectively, of the trend

of the negotiations. A third French official was in
Brussels for this purpose. It was still hoped that
agreement between the three powers might be reached

in time for announcement Friday night so that Parliament could be called at once.
At 9 p.m. on September 24, I put in a telephone
call for you at Beacon, but reached you in Washington.

Since the New York Stock Exchange would not be closing

until the equivalent of 8 o'clock Paris time, it was
suggested that the release should be made at 3 o'clock
Washington time, at your Press Conference, and at 9

c'clock Paris time. You reminded me that the question
of rates and of the reciprocal yielding of gold had not
yet been settled. You told me that your office was
filled with economists, lawyers, one banker, one farmer
and one lady. I told you that I was alone, unbothered.

After I had given you the text of the British declaration, you said you would call me back in one hour.
I telephoned M. Baungartner at 10:40 p.m. and
told him of the conversation which I had just had with

you. I asked him to confirm one word in the British
draft, namely, "relax." He told me that the British
were

were satisfied to drop the idea for a special preamble
which they had held for a while. I had not forwarded
the British preamble to you since the French had been
adamant against accepting it. M. Baumgartner was
anxious to inform the Dutch and the Swiss as soon as

we might indicate whether we were willing to accept

the British text. I told him that you were to receive
an official from the British Embassy, presumably
conveying a message from the British Treasury,

including the British draft, and that you would
telephone me back after this meeting. You had told me
that you stressed the question of yielding and receiving
gold and the question of the dollar rate versus sterling
and the frane more than you did the text of the declaration. I told M. Bauagartner that I would let him hear
from me as soon as you might call. He said that M.
Fournier, Undergovernor of the Bank of France, was
drawing up, in accordance with an informal request
which I had made repeatedly during the preceding week,

appropriate regulations to protect American banks which
might be operating in gold shipments from Paris at the
date that the prospective embargo was imposed. M.
Baungartner agreed with your suggestion that the release

of the agreement should be fixed for 9 o'clock Paris
time.

Your telephone central advised me at 1:20 that

your call would not come through until 3 a.m. at my
home. M. Baumgartner had telephoned me at 11:45 p.m.

that he was going home. If any news was received from
you

- 34 you before 12:45, he desired that I telephone his
assistant at the Ministry of Finance. When you called
me at 3 a.m. at my home, it was confirmed that we were
in agreement with the French on the hour for the release
of the agreement. The British Embassy official had

delivered to you the text of the British dreft, and
the word "relax" was confirmed. I told you that
appropriate arrangements were being made to protect

American banks dealing in gold in France. I let you
know that the French were waiting to hear from us so
that they could inform the Swiss and Dutch.

British Treasury Attache in Washington, you had under-

sterling-dollar rate was correct. You let no know that
you

- 35 -

you had informed the British that you were passing on

all of this information to me. You affirmed that the
President was backing your position entirely. You also
told the British that all through your recent conversations you thought that they had had in mind a five-doller
pound. They had frequently intimated that they were

operating in gold that might be caught by the embargo,
you mentioned that the Federal Reserve Bank of New York

had 150 thousand dollars on deposit in a "complimentary"
account with the Bank of France, concerning which the

Federal Reserve officials were very much perturbed. I

him to hurry his answer.
President Trip of the Bank of the Netherlands
called at the Embassy at 10:20 a.m., September 25. He

was due at the Bank of France for a conference at 11:30,
to be followed by a luncheon. He had received absolutely

no word of the tripartite monetary negotiations. When
the Governor

- 36 the Governor of the Bank of France informed him in
the premises at the luncheon, Dr. Trip made immediate

plans for departure for Amsterdam by aeroplane and left
Paris at about 2 p.m. M. Hueff had gone to the Netherlands the previous day, but had stopped at the Hague,
where he was to establish contact with the Dutch

Ministry of Finance. Dr. Trip had proceeded from
Amsterdam to Paris, crossing M. Rueff. I understand

that the Bank of France officials informed Dr. Trip
that they had endeavored to get into touch with him
at Amsterdan to prevent his coming on to Paris when

they realized that an agreement for Friday night was
approaching.

I called on M. Baumgartner at the Ministry of
Finance at 10 o'clock on September 25. I told him of

our conversation of 3 o'clook that morning, and I let
him know that you were seeking clarification of the
dollar-sterling cross rate from the British Treasury
before proceeding further with the agreement. While
I was still with him, M. Baungertner telephoned M.
Monick at London to have him urge upon the British the
necessity of meeting our request. At 1:00 p.m., M.
Baungartner telephoned me that M. Monick had received

from Mr. Waley of the British Treasury, the clear
impression that Mr. Chamberlain would give you

- 37 urgent that he begin communicating with our officials
at the Federal Reserve Bank of New York in regard to

technical cooperation. In reply to his query as to
whether we were yet in a position to answer the points
which he had raised earlier in the week about yielding
gold and closing markets, I told him that nothing could
be said until a point which we had up with the British
was settled.

At ten past one, you telephoned me at the Embassy.

I gave you the developments of the morning, as reported
in my cablegram No. 921 of September 25, 2 p.m. You
mentioned that MM. Williams, Knoke, Viner and Feis
were with you and that the State Department was being

kept fully informed of all developments. You asked me
to find out how big a Stabilization Fund the French
planned to set up.

market on New York, using French gold already in the
United States.
I had received on the morning of September 24 your
message

58 -

message No. 367 of September 23, 18 midnight, setting

forth e provisional draft of a statement which you
might make with respect to gold dealings offered on a
reciprocal basis by the American stabilization Fund
in the event that the tripartite agreement was consum-

mated. This I held confidential.
I kept in touch with the Guaranty Trust and other
banks during the day of September 25, which witnessed

a tremendous run on the frenc. The cabinet meeting was

scheduled for that evening and the rumor was circulating
that devaluation would be decided upon. Everyone was,
therefore, norvously awaiting the outcome of this
meeting.

At 1:45 p.m., I telephoned M. Baungartner of my

conversation I had had shortly before that hour with
you. M. Baungertner asked me to express to you, when

in the British draft text of the declaration, contained
in my 920, September 24, 9 p.m.

Later in the afternoon, M. Baumgartner telephoned

me, requesting that I come to see the Minister of Finance.
When I reached the Minister's office at 4:15 p.m., he
was quite nervous because no reply had been received
from the United States. He said he was already overdue

at a cabinet meeting, at which it was to be his duty to
make known to his colleagues the plan for devaluation,
to be

39 -

from his office and that I remain with him. I told
him that it would take perhaps 40 minutes to get the
call through and that this would make him quite late

for his Council meeting, but I yielded to his insistence,
and the call was made by the Ministry of Finance to you.
While at the Ministry of Finance with MM. Auriol,
Baungartner and Hueff, I was provided with a summary
which had been telephoned to them by M. Monick from

London of the cablegram which the British were presumably sending to Washington in reply to your request

for clarification of the dollar-sterling cross rate.
I took down the following notes of this summary, which
did not presume to be the verbetin text:
"(1) The Chancellor of the Exchequer recalls

that he has no legal authority (means) to fix the
pound within gold points. Furthermore, the

principle of the British policy is to let the
pound find its natural level. (2) It is possible
that the natural level of the pound may be $5.00.

It is possible also that it may be lower. This
eventuality has been many times envisaged (H.

Honick had intimated that while no precise
allusion

40 -

allusion to $4.86 was made, the Chancellor

presumably had this figure in mind). (3) This
being so, the Chancellor will in no way endeavor to depreciate the pound in a deliberate
manner. It is no more the policy of England

than of the United States to do this. (4)
Likewise the Chancellor will not take adventage
of the French monetary adjustment to depreciate

sterling by way of reprisal, no more than the

United States will do this. (5) The Chancellor,
moreover, does not foresee any depreciation of
the pound during the next few months which would
constitute monetary dumping. (6) The Chancellor
does not object to the French adjustment,
although he finds it somewhat too wide."
When I got connection with you on the telephone, I

told you that I was in the Ministry of Finance, at your
French colleague's desk, and that he asked that I transmit to you the following declaration:
"The French Government, while thanking Mr.

Morgenthau for all that he has already done,
wants to give him the assurance that it intends

in no wise on its side to depreciate its money
beyond the limits which will be sought in the

monetary law (as vis-a-vis the dollar). It
thinks that the simultaneous declaration,
despite the reservation which each country has
been obliged to make, to take account of its
public

-41public opinion, will consolidate effectively
the stability of the major currencies and will
constitute the starting point for a trustful
cooperation between the three great countries.

It insists on the urgency for its country of a
final decision, the Council of Ministers being
already (since 4 o'clock) in session. M. Auriol
extends his warmost personal greetings to Mr.
Morgenthau."

After giving you this message, I explained that

while the French did not desire to mix in our sterlingdollar cross-rate question, they were having a most

difficult time, following the frantic day on the market
and the important Cabinet meeting which was in session.
The gold losses had been so heavy that they would have

to take a decision that night. If an agreement could
not be reached with the American and the British before
morning, it would be necessary to place an embargo on

gold. I let you know that they had lost perhaps 800

million francs of gold during the day. I told you
that the Stabilization Fund which they proposed to
set up would amount to 10 billion frenos. You asked
me to reassure the Minister of Finance of your sympathy
and desire to cooperate, but to let him know that you

had to await the direct message from the British. It
was agreed that I should return to the Embassy, where

Mr. Lochhead of your office, or some other official,
would telephone me any amondments which you desired to
make

you while I was there. At 6 p.m. I sent cablegram
No. 924 describing the day's operations on the Paris
exchange market. I also talked by telephone to M.
Cariguel at 7 p.m. He said that he had given an
order to the Federal Reserve Bank to hold the franc
on the New York market that evening. He had also
asked American cooperation toward suppressing

quotations of the French frane on the New York market

on Saturday morning and until after the French
Parliament had enacted the legislation necessary for
devaluation of the franc. The British had requested
their banks not to quote the frane before Tuesday
morning at the earliest.
Upon my return to the Ministry of Finance at 8
o'clock, I joined MM. Baungartner and Bueff in the

former's office. It was then planned that the Parliamentary session should begin on Monday afternoon. The

declarations in France and England would be given out

by the respective Treasuries. When your call came in,
your office read to me the changes which you desired

to be made in the text of the declaration. I noted
this on my copy, and later M. Rueff corrected his
copy from mine and had the French translation made.

The only correction which could not be accepted was
that

that of referring to "fiscal rather than "monetary"
authorities since the fiscal authorities in Frence
are the tax officials. You had not yet received a
final answer from the British. I told you that the
French were anxious to have the declaration given out

not later than 11 o'clock, if at all possible, since
the Minister of Finance had to telephone the President

I remained on at the Ministry of Finance, where I
checked the French translation of the text as you had

you at the time of the release thereof. M. Monick, at
London, was provided also with the French text and

checked this with Sir Frederick Leith Ross.
At 10:20, you telephoned that the British had
called on you. The message which Mr. Chamberlain had
given

given you was not quite so reassuring in tone as the
summary which M. Monick bad provided the French and

which I had telephoned you in the afternoon. You
said, however, that you had given the British an
answer to Mr. Chamberlain's private communication to

you, which you were 98 per cent sure that he could

the simultaneous statement in order to carry out a
broad, useful and essential action. You told me that
your message would be telephoned to the Chancellor and

press correspondents were outside of the Minister's
room awaiting the release which had been promised for

9 o'clock. The Minister had returned from his Cabinet
meeting, where he had not been able to put his devalu-

call was received from M. Monick at London, stating
that

45 -

that the British had sent a favorable reply to your
telephonic message. After this word was received,
Minister Auriol asked M. Baungartner to bring me into
his private office, where he expressed to me his great
satisfaction that the affair had been terminated. I

told him that I must still await word from you directly,
and that no announcement could be given to the press

everything in order and were preparing to give the
notice to the press at once.

At the Minister's insistence, I no longer waited
for your telephone call but put in a call from the
Ministry for you. when I got connection, I explained
the situation to you. You understood that I was under
considerable pressure. Since the British had not yet
called on you to deliver the message which M. Monick
had advised us had been despatched, it was agreed to

hold the telephone line open. This facility helped
me greatly. I was seated in the chair of the Minister
of Finance. with him and his colleagues and assistants
pacing the floor of the magnificent Empire salon, in
the old Louvre Palace, which he occupies, glancing at

their watches, grinding cigarette stubs into the
marvellous carpet, and listening to the rumble of
voices from the press representatives outside their
door, made the situation extremely tense. Finally,
you told me that the British had arrived at your office.
se

we then waited until you had studied the reply. When
you let us know that this was satisfactory and that
we were in final agreement, there was great relief
on the French side. You asked that I put Minister
Auriol on the telephone so that you could extend
your best wishes to him in French. The Minister took
the telephone and exchanged greetings with you. Hueff
translated the Minister's remarks. You then told me
that everything was clear for giving out the communique.
After shaking hands all around, I took leave of

Minister Auriol. I had to pass out through the crowd
of journalists, but spoke to none of them. The rue de

Washington. Much relieved that the affair was finally
arranged, I walked to my home from the Place de la
Concorde and went to bed at 3 a.m.
At 11 a.m. on September 26, I filed cablegram No.

926, in which I reported that the Minister of Finance
had

had received the press at about 1 o'clock that morning
and had given to them the French text of the declaration
on monetary policy which had been made simultanoously

with the American and British declarations. I also
included the text of the French official communiqué
which announced that the Council of Ministers had

approved the terms of a monetary bill for reducing
the gold value of the frane to a unit containing
between 49 and 43 milligrams of gold 900/1000 fine.

The bill provided further that an exchange stabilization
fund, endowed with 10 billion francs, should be set up.
Pending adoption of the bill by Perliament, the Bank
of France was taking the necessary steps to control
the frenc.
In the same cablegram I reported that the JOURNAL
OFFICIAL of Saturday morning, September 26, carried

three decrees, dated September 25, issued in connection
with the above-mentioned development in French monetary

policy. The first decree convoked the Senate and
Chamber of Deputies in extraordinary session for
September 26. The second decree suspended payment of

commercial obligations expressed in gold or in foreign

currencies. The third decree provided for the closing
of French security and commercial exchanges, beginning

with September 26 and up to a date which would be fixed

by decree by the Minister of Finance.
In cablegram No. 927, dated September 26, 12 noon,

I submitted the translation of a report, as carried in
the AOENCE ECONOMIQUE ET FINANCIERS, of the remarks
which

48 -

which Minister of Finance Auriol made to the press
upon the occasion of issuing the declaration of

monetary policy. He stressed the importance of the
step that had been taken and especially thanked the
two friendly Governments for their collaboration, and
particularly Mr. Morgenthau and Mr. Chamberlain. He

let it be known that the decision to align the frane
had followed conversations which had taken place
discreetly since the month of June.
At 10:30 on the morning of Saturday, September 26,
M. Cariguel telephoned me from the Bank of France. He
said that he had heard that the American Consul in Paris

was changing dollars on a basis of 23.50 france to the
dollar. He said that this matter had been brought to
the attention of the Bank of France by financial
concerns. M. Cariguel expressed great surprise that

an official office in Paris of one of the three
Governments which had the preceding night adhered to

the tripartite agreement would the following morning
charge a rate of 23.50, when the maximum devaluation

anticipated by the monetary bill, whose terms had been

announced, was 22.96 francs to the dollar. I promised
M. Cariguel that I would look into the matter. He
emphasized the bad impression which this story would

make if the situation was not rectified. M. Cariguel
told me of the arrangements that had been made for

controlling trading in francs in London and New York.
He was also very happy to tell me that all gold which
had not actually been shipped on the preceding evening
by

49 -

by Paris-American banks which had contracted therefor
was placed in the name of the Federal Reserve Bank of

New York. That is, instead of leaving gold in the
name of the banks which were shipping it, the Federal
Reserve Bank was to be informed that, acting under

instructions of the specified banks, the Bank of France
had earmarked so much gold for its account, to be

shipped at the first opportunity. Thus, any difficulty
that might have arisen from placing an embargo on gold

that night was obvinted. M. Cariguel told me that no
actual embarge had been placed on gold, but that at
the meeting of the Regents of the Bank of France, held
after midnight on September 25-26, the decision had
been reached to raise from 215 thousand to 5 billion
francs the minimum amount for bank notes against which

which is, of course, in the Embassy building. 1
learned that as of that date the charge which the
Consulate General was making for official services

was calculated on a basis of 23.50 francs to the dollar,
while that previously charged had been e* 15.50. I
then telephoned Consul Fullerton, the Executive officer
of the Consulate General, and explained to him that
the maximum of devaluation which could be effected in
the French frane, under the bill which had been drawn

up, was to the level of 22.96 to the dollar. I
explained

explained to Mr. Fullerton the complaint which had
reached me from the Bank of France, and I told him

that there was certainly no ground for charging more

than 22.96 to the dollar. I even intimated that the
French Equalization Fund might, at least for a while,
endeavor to maintain the franc at about the middle

point provided for by the devaluation law. on Sunday
morning I reported this matter to Mr. Wilson, then
acting as Chargé of the Embasay, since I thought it
was a matter of policy which concerned the Embassy.

Mr. Wilson told me that he thought Consul General
Southard should appreciate my bringing the matter

to the attention of the Consulate General, through
Executive Officer Fullerton. When I next saw Mr.
Fullerton, however, he told me that Consul General
Southard had neither welcomed the information which I
had passed on nor had acted thereon. The Consulate
General continued for some days to charge the rate
above indicated.
During the forenoon I checked up with various
Peris-American bankers. Mr. Pearce of the National
City Bank and Mr. Saint-Germain of the Guarantee Trust
both spoke highly of the manner in which M. Cariguel

of the Bank of France had looked after their gold
shipments and confirmed that the balance of the gold
due on their contracts was being released that day and
would be placed on board before midnight.
At 1 p.m. you telephoned me at the Embassy. I
told you that MM. Fourniez and Cariguel were anxious
to

51 -

to know when a decision would be reached in regard to

wait until after the French monetary law had been passed.
You were happy to tell me of the splendid American press

reaction, irrespective of party lines, to the tripartite
agreement announcement on the morning. of September 26.

You said everyone in Washington was bubbling over with

enthusiasm. I told you of the excellent press reaction
in Europe and let you know that the political section
of the Embassy was getting out a separate eablegrem

thereon. You asked me to forward French and English
papers giving comments upon the declaration and also

to arrange for your Treasury Attache at Berlin to
forward to you the German press. After talking with
you I endeavored to get into touch with Mr. waite, your

representative in Paris, but it was then too late. On
Monday morning, however, I asked him to pasa on to his

colleague at Berlin your request with respect to the
German newspapers. In eablogram 931, sont at 4 p.m.,

I recorded the inquiries of the Bank of Frence.
In the afternoon I telephoned M. Cariguel to
inform him that you had said he could talke to Mr. Knoke
directly in regard to technical arrangements.
At 5 p.m. on September 26, I sent cablegram NO. 932

to report that a private telephone had been installed in
my apartment, according to your instructions, the number
being

52 -

being Galvani 70-92.

At 6 p.m. I despatched cablegram No. 933, to

tell you that M. Baungartner of the Ministry of
Finance had telephoned me at 4:30 to announce that

they had been informed through diplomatic channels
that Switzerland would follow the French lead and
would devalue between 25 and 30 per cent.

In a further message, No. 934, dated September

26, 7 D.M., I gave you certain technical date upon the

gold operations on the Paris market. I also told of
the pleasure with which the French officials had
learned that the Belgian Government had issued a

sympathetic declaration of monetary policy on that

date, adhering to the tripertite agreement.
When I arrived home on the evening of September 26,

I learned that you had been calling for me while I was
en route from the Embassy. I called back and was
answered by Mr. Lochhead at 6:45 p.m. He told me of

dent in New York to sell sterling. The stabilization
Fund had taken the total amount offered.
In my cablegram No. 936, dated September 27, 4 p.m.,

I let you know that after Mr. Lochhead had called ac on
Saturday evening, I telephoned M. Cariguel to advise
him and M. Fournier about the American Fund intervening

to buy sterling offered by the Russian State Bank. on
Sunday

Sunday morning, the Department's 371, September 26,

1 p.m., giving further details of the above-mentioned
operation, was received. While I was endeavoring to
get into touch with the French Ministry of Finance to
pass on to them the information in question, M. Baumgartner telephoned me. He was happy to learn of the
prompt and resolute move which had been taken toward
making our monetary arrangement effective.
While I was at the Embassy on Sunday morning, I

had placed a call for you which came through at my
home at 2:05 p.m. In my conversation with you, I
told you why M. Baungartner had called me. The
reason was this: The Minister of Finance was
scheduled to appear at 2:30 p.m., Sunday afternoon,
before the Finance Committee of the Chamber to propose

and explain the Government's monetary bill, which was

to be submitted to Parliament on Monday. M. Auriol
had asked M. Baungartner to find out from you whether

you would permit the Minister of Finance to relate to
the Finance Committee and state before Parliament that

you had sent your representative to the Ministry of
Finance on June 6, that conversations were then entered

into, and that their result had finally been achieved.
It was explained that MM. Blum and Auriol had, in their
remarks to the press following the issuence of the
simultaneous declaration, mentioned that they had been

working for this international agreement since early in
June. After talking with you, I at once telephoned M.
Baumgartner

Baungartner and let him know that when you had been

asked in one of your press conferences es to who had

started the affair which had just been terminated,
you had replied that the initiative had been on the

part of the French. Consequently, it was not desired
that any different impression be gained from this side.
I told M. Baumgartner that you did not object to it's
being known that the French and Americans had been in

consultation since June 6, but that you thought the
fewer details given in regard to the converantions

and negotiations, the better it would be. Consequently,
it was deemed best that reference to individual acts
and agents should be suppreased.

In my eablegram No. 936 of September 27, 4 p.m.,

confirming my conversation with you and giving the
details of my subsequent talk with M. Baungartner, I
mentioned further developments, including the decision
of the Notherlanda taken OR Saturday night, September

20, to put an embargo oa gold. I let you know that I
had talked confidentially with M. Pennachio of the Bank
of Italy and had asked him personally whether he did
not think it would be wise for the Idalians to "get
on the band wagon." As you are aware, Governor

Azzolini of the Bank of Italy depends importantly
upon my friend M. Pennachic for advice on international
monetary relations and policies.
At 10:30 p.m. on the night of September 27, I
talked by telephone with Dr. Jacobazon, the Swedish

Economist of the B.I.S. at Basel. All during the
negotiations

- 55 negotiations the Bank for International Settlements
had been entirely ignorant thereof. Dr. Jacobason
was delighted with the tripartite agreement and was
especially complimentary of the manner in which the

negotiations had been conducted. That is, without
any leaks, and in a manner which permitted the

results to be announced in a spirit of cordiality,
and not of international reerimination.
when I came to my office on the morning of
September 28, I found that M. Cariguel had already
telephoned me. When I called him back I learned that

M. Fournier wanted to see me. I went imediately to
the Bank of France. M. Fournier told me that he had
telephoned to the Federal Reserve Bank on Saturday,

and that the latter had told him it could get no
answer from the Treasury at Washington in regard to

gold dealings. M. Fournier insisted to me that he
must know about gold arrangements before the law was

passed, especially if the law was enacted at an hour
which would make it impossible, because of the
difference in. time between Paris and New York, to
communicate immediately with Mr. Knoke at New York.

In my cablegram No. 937, sent at 12 noon,

September 28, I reported that Auriol's devaluation
bill, with certain modifications, had been voted by
the Chamber Finance Committee on Sunday, by 20 against

12, with 7 members abstaining from a vote. I gave you

a brief summary of the provisions of the bill.
At 1 p.m. on September 28, I sent my No. 938,
reporting

56 -

reporting that up until noon of that date the Ministry
of Finance had not yet received the written text of
the amendments made on Sunday in the Chamber Finance

Committee to the devaluation bill. Since these were
slight, I proceeded to provide you in my cablegram

with a full translation of the bill as introduced.
You telephoned me at 4:25 on the afternoon of

September 28. I told you that the devaluation bill
had been approved by the Finance Committee: that

the Chamber had met at 9 a.m. that it had adjourned

to read the bill; that it had met again after 11 o'clock
and had later adjourned to meet at 4 D.M. I let you
know that the Radical Socialists had held a cauous

at which they voted against the sliding scale for
wage adjustments which had been written into the bill,

but had approved the devaluation feature. I told you
further that the Chamber had voted 365 to 248 against
a motion for sending the measure back to the Committee.

I let you know that M. Cariguel had told me at 4 c'elock
that he thought there was no chance of the two bodies

also closing theirs. In speaking to you of the
conversation which I had with M. Fournier, earlier in
the morning, I also mentioned that M. Fournier had said

that the British were uncertain as to just how cooperation
between the Americans and themselves was to be worked out.
M.

- 57 M. Cariguel had told me that the British had suggested
that any dealings which the Bank of France did in

sterling should be for the account of the British.
M. Cariguel seemed opposed to this idea, but you thought
that he was taking a wrong position if he objected
thereto. You said that you would ask the Bank of

present situation. If they wanted to put any orders
through to buy dollars in the American market, they
should give the Federal Reserve Bank of New York the

order and indicate their rate.
I telephoned M. Cariguel at 4:50 p.m. to give him
the substance of your message, which was that you would

"not let the Bank of France down" and that they should
cease worrying. This assurance was entirely satisfactory

to M. Cariguel. As I recall it, you did not meet Undergovernor Fournier when you were in Paris a year ago,

since he was on sick leave at that time. M. Fournier

is a highly competent official and is carrying,
especially now that Covernor Labeyrie is in office,
a heavy part of the load at the Bank of Franco. Since
he suffered a breakdown over a year ago, he has been

quite nervous. I give you this information as a partial
explanation of the Undergovernor's unea-iness during the

period which I am describing.
At

At 6 p.m., September 26, I sent cablegram No.

940, setting forth the inquiry which I had received
earlier in the day by telephone from Mr. Beyen,
resident head of the B.I.S., in regard to the

943, wherein I provided, in continuation of my 938 of
September 28, 1 p.m., annexes to the French devaluation

bill as originally proposed. The first of these dealt
with en agreement between the Minister of Finance and

the Bank of France as to the proceeds of devaluation,
et cetera, and the second constituted a convention
between the Minister of Finance and the Amortization
Fund.

At 12:00 noon on September 29, I despatched cable-

gave a translation of a decree that appeared in the
French JOURNAL OFFICIAL of that morning prohibiting

the export of gold.
Undergovernor Fournier of the Bank of France
telephoned me at 10 o'clock on the morning of September

29, to refer to an article which he had read in the
AGENCE ECONOMIQUE ET FINANCIERE of that morning,

purporting

purporting to constitute a comunique given out by

but that it seemed to me entirely logical and correct.
I again promised him to communicate with him promptly

as soon as I might have anything official in the
premises.

Dr. Fennachio of the Bank of Italy telephoned me
at noon to let me know that his country was studying

its monetary problems very carefully. He said that
for Italy a step toward devaluation must be very
seriously thought out since it involved the whole
economic problem of the country. The question was

more complicated for Italy than for Switzerland and
the Netherlands, since Italy lacked the gold resources
of the other two countries.
You telephoned me at 12:40 on September 29. You

told me that a 20 million dollar credit for the B.I.S.
had been arranged. This concerned, I believe, a
shipment of gold from Switzerland which the B.I.S. was
handling. I told you the substance of the communique
in the AGENCE ECONOMIQUE above-mentioned, and you

confirmed the general terms thereof.
In our conversation I let you know that Mr. Gay
President of the New York Stock Exchange, had sent the
following message to his Regional Advisory Committee

in Paris:
"Pending

- 60 "Pending issuance final decree French Covernment regarding monetary realignment you are
empowered to communicate French Minister of

Finance and offer him full cooperation of N.Y.S.E.
in fulfillment of any financial measure French
Government may wish to promulgate affecting its

citizens or resident also request all members
branch offices and representatives to cooperate
in every possible way with objective of French
Government."

The Paris representative of the above Committee

had telephoned me previously the substance of this
communication and had sought my advice about informing

the French Government, particularly the Ministry of

its entirety, by a vote of 350 to 221, following a
separate voting on each item of the bill during an all
night session. A compromise was reached on the difficult
aliding scale provision of the bill. The Minister of
Finance had passed the bill on to the Senate Finance

Committee, which was expected to return it to the

Senate late in the afternoon or the following day.
Among the miscellaneous news which I mentioned was

that Dr. Schacht had called a meeting of the Central
Committee

-01Committee of the Reichabank; that the Dutch were going

to manage their currency without definite devaluation:
and that the Swiss measure for devaluation was before
Parliament that day.
At 3 p.m. I telephoned M. Cariguel at the Bank of
France to give him certain information which you had

passed on to me, particularly in regard to technical
operations.

At 4 p.m. I sent my cablegram No. 949, which
indicated that the Bank of France had begun to ship
gold to the United States to increase its earmarked

supply with the Federal Reserve Bank. I told you that,
according to press reports, Greece, Latvia and Turkey

had decided to base their currencies on sterling.
with respect to the Netherlands, I explained that
the Dutch had placed an embargo on gold and were

arranging for a stabilization fund of 300 million
florins. I quoted certain items from the London press,
indicating the splendid reception which had been given

to the tripartite arrangement.
Upon the receipt on the forenoon of September 30

of your cablegram No. 376 of September 29, 6 p.m., I
telephoned the Bank for International Settlements at

Basel to inform Dr. Beyen that such inquiries as that
which had been communicated in my cablegram 904 of

September 28 should be made directly to the Federal
Reserve Bank of New York.

on the morning of September 30, the debate began

in the senate on the Government's monetary bill, which
had

had been taken up by the Senate Finance Committee the

preceding afternoon. After a debate of more than
twelve hours, the Senate passed the measure by a small
majority on the night of September 30. The Senate had
made certain amendments to the bill, however, which
were not acceptable to the Chamber. When the measure
was submitted to the Chamber Finance Committee, the

latter promptly revoted its own original text and
submitted it to the Chamber, which, in the early hours
of October 1, also revoted the bill in its original
form.

You had telephoned me at 1:20 p.m. on September 30.

I gave you an account of the progress being made in

voting the French devaluation bill and let you know
that I had sont you a large bunch of newspapers the
preceding evening. You mentioned that you had done

Reserve had handled 23 million francs at the time you
spoke to me. You suggested that it might be to the
general advantage if some announcement as to this

operation could be made, since this night relieve the
nervousness pending final voting of the French measure.
You suggested that either the Bank of France make the
announcement or permit you to make a statement in

Washington. It was understood that you would call me
bank at 9:30 p.m.

I talked

63 -

I talked with M. Cariguel two or three times
during the day, and on the occasion after I had spoken
with you in the sense above reported I mentioned your
suggestion to M. Cariguel. He made the point that
Frence had not yet devalued the frane, and that the
Bank of France could not make or consent to a public
announcement anticipating action of Parliament.

At 5:30 p.m. I talked by telephone with Dr.

Jacobson at the B.I.S. in Basel, requesting him to
pass on to me any information which he might procure
in regard to the statement which was to be given to

the press that afternoon by Dr. Schacht concerning the
German position on the currency question. At 8:20 p.m.
Dr. Jacobason telephoned me back saying that he had

received a two-page typewritten summary, in German, of
the German statement. He provided me with a digest

thereof. The general purport seemed to be that the
Germans would not devalue; that no new special types

of marks were to be introduced; that the Germans would

lest France might impose restrictions and penalties
which would work against dishoerding of gold and
repatriation

repatriation of capital.
When you telephoned me at 9:30 D.M., I gave you
the German information and also a summary of the French

legislative progress. I mentioned minor items of
information contributed by MM. Baungartner and Maxime

D.M. I told M. Cariguel what you had said. He insisted
that the word had not been given out in Paris.
After talking with you I went over to the Chamber
of Deputies and listened in at the storay debate on
the question of accepting Senate amendments or stending

by the Chamber devaluation bill, and remained there
until adjournment around 1 a.m. I then came to the
Embassy and, after getting you on the telephone at

2:10 a.m., informed you of the status of the legislation at that hour.
when the Senate net at 9:30 on the morning of

October 1, the outlook appeared difficult and there were

reports to the effect that the Prime Minister might be
forced to put the question to a vote of confidence
unless some compromise could be reached. with M.

Chautemps acting as mediator and with President Caillaux
of the Senate Finance Committee evidencing a considerate
attitude, the Chamber accepted a compromise provision

which was approved by a vote of 354 to 217. The bill
then

then went back to the Senate Finance Committee. After

further shuttling back and forth between the two
bodies, the measure was finally passed on the night

of October 1. I had talked with you shortly after
noon, giving you the information to date and anticipating that the bill would be passed before the next
day.

In ay cablegram No. 955, dated October 2, 11 a.m.,
I gave you a complete translation of the French monetary
law as voted the precading night and as promulgated on
page 1040 of the French JOURNAL OFFICIAL of October 2.

The special seasion of Parliament was adjourned

following the enactment of this legislation.
During the morning I talked with M. Baumgartner
and extended my congratulations upon the Ministry's

succeas in getting its legislation adopted.
My cablegram No. 960 of October 2, 5 p.m., sent
in continuation of my No. 957 of 11 a.m., summarized
three separate laws which had also been passed on the

night or October 1. The first abrogated certain decreelaws of 1934 and 1935 providing for levies or reductions
on war pensions, retirement allowance for war veterans,
and Legion of Honor and Military Medal payments. The
second law approved the convention concluded on september 27, 1936, with the Amortization Fund and

provided certain advantages for holders of the Auriol

baby bonds. The third law authorized the Ministry of
Finance to conclude a convention with the credit Foncier
de France in connection with an advance of 3 billion
france

frence to permit the latter to reduce interest on
loans granted at high rates.
My cablegram No. 961, dated 6 P.M., October 2,
reported that the Paris bourse and exchange markets

its discount rate from 5 to 3 per dent.
At 9 o'clook on the night of October 3. the
Embassy code room informed me of the receipt of your

cablegram No. 383 of October 2, 1 p.m., requesting
me to keep you advised of any news regarding possible

monetary legislation, including certain measures
taken to reduce customs duties and suspend quotas.

In this message I quoted en article from the London
TIMES upon Mr. Chamberlain's speech at Margate, which

conclusion of a leading article from the London
ECONOMIST upon the fall of the gold bloc. I gave you

M. Cariguel's confidential report of his operations
for the Saturday morning, and let you know that he
found everything noving smoothly. In conclusion, I
told you that the Bank of Italy representative in
Paris was not informed as to what decision the
Italian Government would take on Monday with respect

to the lira.
You telephoned me at my home at 3 p.m. on October

3. I gave you the forenoon's news, embodied in my
cablegram above-mentioned, and we discussed the general

situation. You had mentioned a few days previously the
possibility of sending me to London for a day or two.
It was decided, however, that since 1 would be going
to Basel for the B.I.S. meeting on October 11 and 12,
where I could see MM. Korman, Nieneyer and Cobbold of

the Bank of England, I should not quit Paris in the
meantime for a visit to London. You mentioned that
Dr. Feis was arranging for the Embassy at London to

be instructed to have periodic meetings with the
British Treasury. Reference was made of M. Monick.
I had let you know in an earlier conversation of the
story which game out in the ECHO DE PARIS in regard to

made a single purchase of sterling during the week,
although

although you had taken some gold in London. You told
me that a high mark, since 1929, had been reached on
your stock and Federal bond markets on that day.
The week ended with Sunday, October 4, thus

witnessed the passage of legislation providing for
devaluation of the frane and saw the reopening of the
French markets. The present letter has given you the

pertinent chronology. This letter bears the date of
October 26, since the first half of it was dictated
on that date. The delays in starting and then in
completing this communication have resulted from

various causes. My stenographer quit and returned to
the United States when our negotiations were at their
height. The arrival of our new Ambassador at the end

of September called for extra work. Furthermore, I
have had a rather strenuous schedule of travel and

reporting in connection with the furthering of the
tripartite agreement, and technical cooperation
thereunder. In another letter I shell extend this
report to cover the negotiations which involved the
technical arrangements for gold reciprocity between
the three parties to the original three-power arrangement, and also the addition of Belgium, the Netherlands
and Switzerland to the group of countries entitled to
enjoy reciprocal facilities in gold trading.

It is still too early to evaluate the results of
the tripartite arrangement of September 25. This
arrangement was welcomed most enthusiastically by a

world which had almost despaired of international
cooperation

- 69 cooperation. For such an agreement to be reached

trade barriers. The important achievement actually
accomplished was to establish monetary cooperation

between the three leading monetary powers. This

provided, as the French so frequently said, the
starting point for other developments. The immediate
direct benefit was that France was able to devalue her
currency calmly in dignified circumstances. If the
economic and financial situation had been allowed to
deteriorate further in France, with the Government

hesitating to take a decision on its currency in the
absence of an international arrangement, there would

surely have been a serious estastrophe for the frane,
involving a much greater decline therein than that
accomplished through the monetary law of October 1.

The French lead was very shortly followed in an
orderly fashion by several other European countries.
In no case has there been evidence of willful exchange

competition, but of genuine "realignment." These steps

have not solved all of the problems in all of the
countries, but have constituted initial advences. The
results already visible in the Netherlands and Switzerland
are

.."0
are especially encouraging. The French situation,
because of politics and lack of confidence in Government, which has existed for several years, and because
of a most complicated and acute social problem, has

been more difficult than some of the others, and it
will take some time to work out. Whether the frone
may be held within the limits fixed by the Monetary
Law of October 1 cannot yet be determined. There is

a very good chance to maintain this rate. If the
French cannot hold the frene at the present figure,

there is little reason to believe that they could
prevent its complete collapse. While Dr. Schacht and

some other crities assert that permenent stabilization
has not been achieved, most observers are quite

satisfied that progress has been made decisively
toward establishing de facto stability in an atmosphere
favorable to further progress.

I was personally happy to see the tripartite
arrangement consummated in such a spirit of cordiality
with the French officials, and in a manner which left
France only the kindliest feeling towards our country.
Minister Auriol and his assistants were absolutely fair
and square in their dealings with me, even though they
were under much stress and werry. Diplomata and journal1sta have not yet ceased to marvel that such secreey was

maintained on all three sides. I am deeply appreciative
of the confidence which you placed in me for the
negotiations.

negotiations.

Faithfully yours,

H. Merle Cochran,

First secretary of Embassy.

HMC/wgs

Paris, October 26, 1936.
PERSONAL AND

STRICTLY CONFIDENTIAL

The Honorable

Henry Morgenthau, Junior,

Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:

During the past two months, which have witnessed
interesting developments in French and European finance,

I have sent you a number of cablegrams. The long-distance
telephone has also been employed in keeping you currently

informed. Since I do not have facilities for transcribing
a verbatim record of all of my telephone conversations,
particularly those received at my home, it may be

desirable to set down in this informal letter a chronicle
of recent events, which will at the same time constitute
a summary of my cablegrams and a memorandum of my

conversations by telephone.

When I called upon M. Baumgartner, Director of the
General Movement of Funds Section of the French Ministry
of Finance, on September 2, 1936, M. Baungartner talked

about the visit to Paris of Dr. Schacht, German Minister
of

of Economics and President of the Reichabank, which had

occurred the proceding week. M. Baungartner expressed

States and Great Britain. As I was leaving, M.
Baungartner told me that he thought the Minister of
Finance, M. Vincent Auriol, would ask me to call on
him at an early date to receive a communication which
M. Bauagartner believed would be of interest to us.
Professor Charles Rist lunched with me on September

3. His views on the French monetary situation were

quite pessimistic. He insisted that devaluation in
France was prevented only by polities. He said that
Premier Blum still considered the move impossible
because of the opposition of the Communists thereto.

Professor Rist said that so long as current practices
were followed, French export trade would continue to
decline and unemployment would rise. He pointed out

On the same day, September 3, M. Charles Cariguel,

in charge of foreign business at the Bank of France,
asked me to call on him. He informed me of the desire

of the Bank of France to build up a gold supply in the
United

United States through shipping metal from Paris 60
the Federal Reserve Bank at New York, to be held there
under earmark.

On the following day, I communicated to you the
substance of a somewhat similar message from Governor

Rooth of the Central Bank of Sweden (Sveriges Riksbank

at Stockholm), who desired that his Bank open a gold
deposit with the Federal Reserve Bank in New York. By
a cablegram sent on September 4, you informed me that

discuss details directly with the Federal Reserve
Bank of New York. You let me know by telephone,
however, through a call received by me at my home,

this information informally to MM. Cariguel and Rooth,

but you did not desire that it be incorporated in the
official telegram. I communicated this information

orally to the two inquirers, utilizing the longdistance telephone with Governor Reoth.

At five p.m. on September 4, I reported to you by
cablegram that, at the request of the Minister of Finance
of

of France, I had called upon him that afternoon. When
I was received by him, MM. Baungartner and Rueff were

present. The Minister orally referred to the fact that
I had been his first coller after he assumed his present
office and that my Government had been the first to

offer him cooperation. While, in his opinion, the
way had been berred to any sort of realignment when

our first conversations took place, he remarked that
it had subsequently been ascertained that there appeared
to be a good chance for the consummation of an agreement

of a type that could be found acceptable in France.
with this view in mind, his Ministry had drawn up a
provisional draft of a pre-stabilization agreement for
submission to the United States and to Great Britain.
If these three countries were found to be in agreement,
France would then endeavor to procure the agreement of

the two gold bloe countries, the Netherlands and
Switzerland. The immediate question of the Minister of
Finance was to know whether we preferred that the pro-

before making the proposition known to the British, but
he did not desire to take any step which might be
considered the least prejudicial or unfriendly by the

British. You promptly replied that it was preferable
that the draft document be presented simultaneously to
the

the Treasuries of the United States and of Great Britain.
At 10:30 a.m. on September 5, I showed M. Baungartner
a copy of your cablegram.

At 12 noon on September 5, I cabled you that the
French Ministry of Finance would hand to me at 10:30
a.m., Tuesday, September 8, a draft document for

cabling to you, and that M. Monick, the French
Financial Attache in London, would be given a copy of

the text for delivery to the British Treasury not later
than Wednesday, September 9.

At 1:20 p.m. on September 7, you telephoned me at
the Embassy, from Beacon. You reminded me that you

were launching & big bond issue the following day,
and you requested information in regard to the
political and economic conditions in Europe,
particularly with respect to Spain, France and Germany,
which might conceivably have some effect upon the

security market. After I gave you such information,
you referred to my cablegram of August 27 reporting the
visit which I had made to London in accordance with your

telegraphic instruction No. 318 of August 20, 7 p.m.,
which report you had found helpful.
As reported in my cablegram No. 843 of September

8, 8 P.M., the French Minister of Finance did not hand
me the French text of the draft document hereinabove

at London and is now Assistant Director of the Genoral
Movement of Funds in the Ministry of Finance, checked

the translation with me.
In my cablegram No. 844, sent at 9 a.m. on

September 9, I incorporated a translation of the
proposed French note to the American and British

Governments, together with its annex, consisting of a
proposed pre-stabilization agreement. I explained that
when the Minister of Finance had handed me the document,

he had stressed its secret and unofficial character. He
said that any leak in the negotiations would precipitate
an attack on the frane which would necessitate immediate

imposition of exchange control. He desired that I submit

the draft to you, informally and confidentially, seeking
your reaction thereto, together with any suggestions for
its modification. An examination of the message under

reference will show that in this initial draft the
French sought a somewhat formal agreement, including

the fixing of the three respective currencies within

definite limits.
At 1:40 p.m. on September 9, you telephoned me

at the Embassy, inquiring as to when you might receive

and was receiving full and prompt attention.
On the morning of September 10, I received your
cablegram No. 342, dated 12 midnight, September 9, in
which

-which you incorporated a message for me to deliver

verbatim to the Minister of Finance of France. In
your message you did not suggest any specific revision

of the text of the French draft, but merely stated what
the position of the American Government has been and

would be in the contingency of a French devaluation.
At 12 noon on September 10, I was received by the

Minister of Finance and read to him your message.
I then delivered to M. Baumgartner, who was present,

the text of the verbatim communication. You telephoned
me at 3:30 p.m. at the Embassy to ask how your message

had been received. I told you that it had been very
well received, but that the Ministry of Finance was
seeking some way to arrive at concrete terms. I
informed you that I had told M. Baungartner that
it would be best not to seek too rigid an arrangement.
M. Baumgartner promised to try to influence M. Auriol

in this direction. You stressed the point that we
must arrive at an agreement on general principles

first. I told you how surprised and favorably
impressed the officials of the French Ministry of
Finance had been by your quick response. They noted

that your cablegrem was filed at midnight, and M. Auriol
thought it was a good sign that you people should be
working so late in an endeavor to move towards an
understanding with the French. While I was with the
Minister of Finance, he talked by telephone with M. Blum,
the Premier of France, and the latter asked that his
greetings be conveyed to the President and to yourself.
The Minister

The Minister of Finance desired to discuss your
message with his assistants before giving mo any

further message to send to you. M. Baungartner told
me that M. Monick had delivered the text of the French

draft document to Sir Frederick Phillips, Undersecretary
of the British Treasury, on the evening of September 9.
In my cablegram No. 847 of September 10, 1 p.m.,

I invited to your attention one sentence in your
message No. 342 of September 9, 12 midnight, which I

thought was in error. Your cablegram No. 343 of
September 10, 1 p.m., made the necessary correction,

which I telephoned to M. Baungartner at 10 a.m. on
September 11. When talking to M. Baungartner on this
occasion, he told me that the Minister of Finance was
studying carefully your message, but would probably
await news from M. Monick as to the reaction of the

British to the French proposal before calling me to

the Ministry again. I suggested at that time the
desirability of seeing how far we were all in agreement
on general principles before raising questions of detail.
When I had delivered your message to the Minister of

Finance on the preceding day, M. Auriol had quickly
remarked that it revealed that the French and Americans
were in agreement on general lines. N. Baungartner told
me that he was following out my suggestion and was using

his best efforts to influence the Minister to be satisfied with an arrangement less specific and rigid than
M. Auriol's juridical mind would normally sock.
As reported in my cablegram No. 859 of 7 p.m.,
September

September 11, the French Financial Attaché in New

York, M. Jean Apport, called on me that day and let
me know that he would sail for New York September 17

on the s/s PARIS. In the same cablegram, I told you
that if the three principal Powers might reach an
agreement on the French currency alignment proposition
at an early date, M. Baumgartner was of the opinion
that Parliament would be convened ahead of the regular
date, which was provisionally understood to be October

that afternoon that the British reply to the French
draft document had been received by M. Monick, who

was bringing it to Paris that night for study by the
Ministry of Finance the following day. The Bank of
England had also been informed of the course of the

negotiations and had sent to Paris its officer in
charge of foreign business, Mr. Cobbold, who was

discussing the question with M. Fournier, Undergovernor of the Bank of France. The Minister of
Finance again transmitted to me, through M. Baumgartner,

his appreciation of the promptness with which you had
provided the American reaction to the French proposal,

and of the frank spirit of cooperation which he found
evidenced therein. He regretted that there was some
delay

- 10

delay in the proceedings, but thought it best to
await the British reply before going any further.
on the morning of September 15, I received your
cablegram No. 348, filed at 11 p.m., September 14,
wherein you gave me a paraphrased summery of a secret

note transmitted to you by Sir Warren Fisher, through

the British Chargé d'Affaires at Washington, giving
the British reaction to the French draft proposition.
You left it to my discretion to pass on to the French
Treasury all or e part of the paraphrased text of the
British note to you under reference. At 11:45 a.m.,
September 15, I therefore called upon M. Baumgartner,

informed him of your message, and left with him the
paraphrased summary of the British note as incorpor-

ated in your cablegram. At 2:15 that afternoon, you
telephoned me at my home. You referred to the message

which you had sent me the night before, namely, that
paraphrasing the summary of the secret note from Sir

Warren Fisher. I told you that I had called on M.
Baumgartner during the forenoon and had communicated

the essential parts of your message to him. M. Baum-

gartner had told me at that time that they had not yet

received the text of the British reply but that, as
soon as M. Monick arrived in Paris, he would present

our communication to M. Auricl, together with the

original text of the British reply.
I reported the foregoing to you in my oablegram
No. 870 of September 15, 1 p.m. I added that M.
Baumgartner was convinced that we were all in agreement
as to

- 11 -

At 12 noon on September 16, I cabled you that M.

Baungartner had told me that morning that Minister
Auriol was not likely to communicate with us before
J

the following day since Cabinet meetings had prevented
him from studying the message which M. Monick had brought

from London. You telephoned me at 1:50 that afternoon

at the Embassy, inquiring about the general situation
and as to whether the French had anything to say to

us after receiving the British reply. I gave you
the substance of my message sent at noon.
On September 17, I cabled you (see my No. 882,

dated 5 p.m.) that M. Baungartner had telephoned me at

4:30. He said that Sir Frederick Leith Ross, Economic
Adviser to the British Government, who was in Paris for
two or three days returning from Geneve to London, was

calling to see the Minister of Finance at 6:30 that
evening. The Minister desired that I call at 7 to
receive

- 12 receive from him a proposal for a "joint declaration.
At 7:15 that evening the Minister of Finance handed to
me the document in question. I returned with this to

the Nabassy, where I translated it into English. I
then took the translation to the Ministry of Finance,
where M. Rueff checked it with mo. The translation
was then cabled to you at 9 p.m. on September 17, under

serial No. 884. Before handing the document to me, in
the presence of MM. Baumgartner, Rueff and Monick, the

Minister of Finence delivered a really impassioned plea
for our acceptance of this declaration, and asked me
to do what I could to hesten the matter. The Minister

the three Powers. He thought that other countries

would quickly join in a declaration of this type,
which he deemed a proper foundation for a monetary
peace upon which could be built economic peace and,

finally, political world peace. The Minister said that
he was yielding on two points that the French had

originally desired. The first of these was the point
of a signed contract. He reminded mo how dear such a
document always is to a Frenchman, but he said he was

willing to trust in the loyal cooperation of the
Americans and of the British without insisting upon
the more formal arrangement which he had originally
proposed.

- 15

proposed. The other point was in regard to fixed limits
for pre-stabilization fluctuations of currencies. The
Minister had sought as definite an arrangement as might
be possible in order to overcome French fears that
results of a second devaluation might be illusory or
that this might lead to a whole series of devaluations
constituting a downward race. When I was at the
Ministry, my friends there were somewhat cheered up

17, and another copy handed to Sir Frederick Leith Ross,
who was remaining in Paris until September 19.
At 11:45 on the night of September 17, you
telephoned me at my apartment. You said that President
Roosevelt was leaving the city on the 11 o'clock train
that night, and you asked if the message containing the
proposed declaration could be received at Washington in

time for the President to see it. I told you of the
receipt and of the despatch of the draft declaration.
You asked my opinion of the draft. I told you that I
thought it was rather good from a technical standpoint
but that there were certain phrases which might make it
difficult to approve in its entirety, especially from
a political angle. You were good enough to express
your satisfaction with the manner in which negotiations
had progressed. You asked within what time a reply
would be expected by the French from you. I told you
that

- 14 -

that I had given them no promise other than that I
would eable the message to you the same night it was

received and would let you know that they were interested
in hastening the matter.
At 3 p.m. on September 18, you telephoned me at the

Embassy. You said that you had spent three hours the
preceding night studying my message and that Ambessador

trying to provide an answer to the draft as received
by you. You suggested that the French redraft the
document and you asked if there was anyone here who

could help them draft with a view to meeting American

expected the French to draft from a French viewpoint.

I had not presumed to participate in the drafting.
The whole idea of the exchange of drafts was to
permit each government to indicate its own ideas

and to work towards the incorporation thereof in the
official document.
You took objection to the draft because it
referred to an eventual return to an international
gold standard. You said this would have to come out.
Furthermore, you remarked that the document commenced

as if

as if it were a treaty. The whole thing was in such
form that it would not go with the American public.
It was too much for French consumption. You wanted

the reference omitted to improving the standard of

living of all social classes. You insisted that
you were as anxious as ever to be helpful and that
you wanted to see an agreement reached. You said

that by noon on Saturday, the following day, you
hoped to be able to give me a cablegram containing
definite suggestions. In the meantime, you wanted me

it was up to you people in Washington to indicate your
ideas.

You recapitulated the main points which you desired

United States, after consultation with the Governments

of Frence and of Great Britain, declares, etc.;" (3)
removal of the sentence in regard to the improving of

the standard of living of all social classes; and,
finally, (4) indication by the French, if they care
to do so before we proceed further, of the percentage
they

16 they had in mind for devaluation of the French franc.
In conclusion, you asked that I have Mr. Wilson, the
American Charge d'Affaires at Paris, present while
talking on the telephone with you, since the Department
of State had thought that this matter was becoming
highly important and that Mr. Wilson should be

consulted. I explained to you that I had kept Mr.
Wilson currently informed and had shown him all messages,
and Mr. Wilson spoke to you over the telephone to the
same effect.

One hour after you telephoned me, I saw M.

to say, the latter asked me to reply in the negative.
After my return from the Ministry of Finance and before
I had succeeded in reaching you by telephone, M. Baum-

gartner telephoned me asking that I stress the emphesis
which the Minister of Finance placed upon the desirability
of a common text for the declaration. After I had spoken

with you, he again telephoned, asking that I continue to
press this point.
In my message No. 892, sent at 10 p.m. on September

18, I confirmed the report of my above-mentioned conversation with M. Bawagartner which I had given you over

the telephone. I told you that M. Baumgartner felt
that most of the points which you had instructed me
to

to raise could be not by the French. He reminded me

that it was a purely French draft and that they would
welcome suggestions as to rephrasing with the view to
achieving a common declaration which would be fitted

for domestic consumption in each of the three countries.
After I made known your views to M. Baumgartner,

he consulted the Minister of Finance and then telephoned

to me. He said that if the form of preamble which you
suggested was to be accepted, the French must then

essentially insist upon a common text. The Minister
agreed with M. Baungartner that it might be en advantage to the French to omit any reference to an eventual

return to the international gold standard. On this
occasion, M. Baumgartner explained to me that the

French would probably follow the Belgian system in
devaluing. That is, the Government would seek from

Parliament at a special session authority to revalue

the franc within certain limits, and legislation
creating an exchange equalization fund. M. Beungertner
indicated to me the limits that would be recommended,

but he thought that the latter might be nervous if the
rate moved toward the upper limit of devaluation. In
my cablegram, I did not set down these highly confidential figures, although I had given them to you by
telephone.

- 18 telephone.

When I asked M. Baungartner whether they could

disclose at that time the rate of devaluation which
they anticipated, he said that they would probably
seek authority to fix by decree a new gold value for

the frane within the limits of from 24 to 32 per cent
less than the old franc. The mean average would be a
28 per cent devaluation. The 24 per cent out would
mean about 100 francs to the pound, and a 32 per cent
cut about 110 francs to the pound. The average would
be between 104 and 105.

In my conversation with M. Baungartner, he
informed me that Mr. Neville Chamberlain, the

Chancellor of the British Exchequer, would not be in
London for consultation with his assistants before the
following Monday, so that the French could expect no

early the following week so that the complete monetary
operation might be consummated before the end of the
week terminating September 26.

On September 19, I cabled you (see my No. 893 of
11 a.m.) that M. Baumgartner had telephened me during

the morning that Sir Frederick Leith Ross had indicated
that certain revision in the phraseology of the French

draft would be required before it would b3 suitable for
the British public, and that he also objected to the
Inclusion of the reference to an ultimate return to an
international

19 -

international gold standard.
At 10:25 on the night of Saturday, September 19,
the code clerk of the Enbessy telephoned me at my
home to the effect that a long message was being
received from Washington for me. I came to the
Embassy, where we worked on the deciphering of the

message until 1:15 a.m. I had telephoned M. Baumgartner

at his house at 11 p.m., as previously agreed, to let
him know that a message was being received, and we

arranged that he should call at the Embassy at 10
o'clock Sunday morning, September 20, to see the
text.
M. Baumgartner called at the Embassy at 10 a.m.

Sunday, September 20. I read to him your cablegram
No. 359 of September 19, 2 p.m., and gave him a copy

of the American draft declaration. M. Bawagartner
departed to keep an 11 o'clock appointment with M.

Monick. He was then to find Minister Auriol at St.
Cloud for a conference before M. Monick left at 3
o'clook that afternoon for London.
At 10:30 on Monday, September 21, I telephoned
to M. Baumgartner two minor corrections which had been

made in the text of the American draft as received and

delivered to him on the preceding day. During the day
of September 21, M. Baumgartner telephoned me three

times to give the first reactions of the Minister of
Finance to the American draft. M. Baumgartner let me

know that they could not give me definite reactions,
awaiting a reply from London which had not arrived by
4:45

80 -

4:45 that afternoon. The Minister's first reaction
was good, and he appreciated the effort which you had

given to help achieve an understanding. He was

especially pleased with the first and last paragraphs
of your draft. He would like to soften somewhat the
sentence about each Government's looking out for its

reserved its rights, et cetera." , There WGS nothing

really serious in his objections. He would still like
something incorporated about breaking down the restric-

tions and barriers to trade and some mention that this
agreement would serve as a starting point in that
direction. He would also like something about checking
capital movements. Likewise, he desired an expression
upon cooperation between Treasuries and Central Banks.

I had explained to M. Baumgartner that our expression
as to cooperation between Governments was really more

inclusive and important. Furthermore, there was a
question as to how far Governments could pledge co-

operation between their Central Banks, which have a
certain independence. The French saw these points but

still indicated a desire to see some reference included
as to "close cooperation between monetary authorities,"
in addition to the pledge of cooperation between the
Governments.

At 5:30 p.m. on September 21, I talked with you by
telephone

- 21 telephone. I summarized the above-indicated French

Beacon and told me the President was at Hyde Park. At

this time you instructed me to have a special telephone
placed in my apartment as soon as possible for long
distance use and asked me to cable you the number

thereof as soon as installed.
At 5:55 p.m., September 21, I talked with MM.
Baumgartner and Rueff. They said Mr. Chamberlain would

not be back in London until the following day. They
added, however, that M. Monick had talked with the
Chancellor's assistants and had found their reaction
good.

At 4 p.m. on September 22, President Trip of the
Netherlands Bank telephoned me from Amsterdam to the

effect that he would arrive in Paris at 6:10 p.m.,
Wednesday, September 23, to repay Governor Labeyrie's

call. Dr. Trip planned to go to the Bank of France
at 11:30 Thursday morning, where he would remain for
luncheon, and he made an appointment to see me at 9:30
on Thursday morning.

At 4:30 on the afternoon of September 22, M.
Baumgartner

Baumgartner told me that Mr. Chamberlain had not yet

returned to the British Treasury and that M. Monick
could not see him, therefore, before late in the
afternoon. It was understood that M. Baumgartner would
communicate with me later that night if any report was
received from London and if the French had any message

for us.
M. Baumgartner asked me to call at the Ministry
of Finance at 6 o'clock on the evening of September 22.
He informed me that no reply had yet been received
from the British but that Mr. Cobbold of the Bank of
England was in Paris conferring with the Bank of France.
Among the questions raised by Mr. Cobbold, the most

important one was that as to how the Stabilization
Funds of our three countries would operate in case
the transaction on which we were working might be
consummated. The particular question was that as to

whether the American Stabilization Fund would be willing

on the basis of reciprocity to yield gold to the
Stabilization Fund of France in exchange for dollars
which the French Fund might acquire. M. Baungartner
anticipated that the Undergovernor of the Bank of France

would ask me to call upon him to discuss this question.
When I asked M. Baumgartner what the French attitude

would be towards yielding gold to the British and
American Funds in case one of us purchased france and

desired gold after the franc had once left the gold
standard, he replied that the French Fund would be

willing to cede gold on a reciprocal basis.
At

At 7 o'clock, M. Cariguel telephoned me from the

Bank of France, asking that I call on Undergovernor

respectively, September 22). I let you know that M.
Baumgartner had spoken to me about the unsatisfactory

state of the Paris exchange market and had regretted
that the sudden return of M. Paul Reynaud to France

from the Harvard celebration was spoiling the period
of calm within which France had hoped to finish its
arrang ments for devaluation. M. Baumgartner had said
that while no final report had been received from M.

Monick, since the latter was still conferring with
Chancellor Chamberlain when M. Baungartner talked

with me, the initial report was to the effect that
the British were more disposed to accept the American
draft of a common declaration as a basis than they were

to utilize the French draft.
At 9:45 a.m. on September 23, President Trip
telephoned me from the Netherlands Bank at Amsterdam

to let me know that Governor Labeyrie had asked him
to change his luncheon date from Thursday to Friday.

Consequently, Dr. Trip would arrive in Paris one day
later then above indicated, and would call on me
between 9 and 10 o'clook on Friday morning.

At 10:15 on the morning of September 23, I called

on Undergovernor Fournier at the Bank of France, who

raised two questions. The first of these was as to
whether the United States Stabilization Fund would be

promptly into gold the dollars or sterling which it
might acquire in its stabilization operations. In our
conversation the Undergovernor spoke of a possible

assembling and legislation be considered. During this
period of uncertainty, the French would appreciate it
if the American and British markets might be closed.
After talking with Undergovernor Fournier, I subsequently
talked with Governor Labeyrie. The latter raised the
question as to whether the Bank of France should
communicate with the Federal Reserve Bank of New York

in regard to technical cooperation. I told him that
for the time being negotiations were handled entirely
in Washington and that they should use present channels

until they received further suggestions from us. Both
the Governor and the Undergovernor impressed upon me the
necessity

- 25 -

necessity for haste in view of the nervous condition
of the French market.

I dropped in to see M. Cariguel as I was leaving
the Bank, since he had been consulted by the Governor

and the Undergovernor before I arrived. When I told
M. Cariguel of my reluctance to recommend that our
markets be closed lest this might cause undue alarm,

he personally and unofficially suggested that we might
give our word that the Treasury or Federal Reserve
would ask the important American banks to refrain

from trading in the French franc and possibly other
currencies during the period under reference. He
thought effective cooperation could be obtained in
this manner without upsetting the American public.
During my visit with M. Fournier I had asked him
whether the French had yet notified any other countries
of the negotiations under way. He replied in the
negative but added that as soon as agreement might be

reached on the declaration by the three powers, the
French would send three agents to the Netherlands,

Belgium and switzerland to inform the monetary

authorities respectively as to the declaration, and to
solicit these countries to join the plan.
A message, No. 908, giving the above information

was sent out from the Embassy under date of 1 p.m.,
September 23. At 12:30, you had telephoned me at the
Embassy. You let me know that on the preceding evening
at 5 o'clock, a reporter from the WALL STREET JOURNAL

had disclosed at the Treasury in Washington that his
paper

- 26 paper had received a cablegram from Paris or Geneva

indicating that certain details in regard to our
negotiations might have been learned. (As it turned
out, nothing WES published insofar as I S aware,
although it was at this time that a League report was
announced which recommended action in the international

could have an answer the first thing on the following
morning to the two questions which Undergovernor

Beacon, that you were entirely satisfied with the
manner in which the negotiations had been conducted

at this end. Incidentally, you mentioned the possibility of Mr. Butterworth's resuming Treasury work on
your terms.

At 3:20 p.m., September 23, M. Baungartner telephoned

me to say that they were still having conversations with
the British

the British in London, through M. Monick. He said
that they would call me again around 4:30. I told
him of the WALL STREET JOURNAL affair and suggested

speed. I gave him my personal ideas, as far as M.
Fournier's inquiries were concerned, and said that
an official answer would be expedited.
At 5 p.m., September 23, Dr. Pennachio, repre-

sentative in Paris of the Bank of Italy, telephoned
me. He said he had just returned from Rome. He was
interested to know whether stories current in French

financial circles and attributed to M. Monick, to the
effect that the latter had obtained assurances from
the American and British in the event of French devel-

uation, were correct. He also let me know that a story
was current here that Sir Frederick Leith Ross had come

to Paris to consult with M. Paul Reynaud.
At 8:25 p.m., September 23, I telephoned M.
Baumgartner, who said M. Monick was still in conversa-

with him in case of need. At 10 p.m., I cabled you
(my No. 913) that the Minister of Finance and M.
Baumgartner had been in conference with Premier Blum

during the day and were also in telephonic communication

with M. Monick, who was still negotiating in London with

the British Treasury. I let you know that up until 10
o'olook they had received no word to pass on to us.

I...

- 88

I remained late at the Embassy on the night of
September 23 to receive any word which the French

Ministry of Finance might be able to give me. M.
Baungartner telephoned me et 10:40 D.M. to the effect
that M. Monick said that the British were somewhat

distrustful lest the American and French stabilization
Funds might achieve the result of placing the pound
actually on a gold basis, and that to escape therefrom

the British might have to let the pound slip. M.
Baungartner said that there was, of course, no such
intention. M. Monick was to talk with the Treasury
again that night and M. Baumgartner agreed to call
me between 11:45 and midnight. He said the British
wanted to weaken the text of the declaration to provide

for "greatest stability possible." At 12:10 midnight,
I telephoned M. Baungartner's office, and his Secretary
told me he was still in the Ministry and would call me
back when he returned to his office. M. Baungartner
telephoned at 12:40 midnight to say that the new
British text (new but based on the American) had been
received. There were some passages in it which the

French could not accept, but he thought the British
would remove these. He said that he would give me

the definite proposal of the Minister of Finance at
9:30 the following morning and hoped that we could

get a reply back to him in the afternoon.

I put in a call for you at Beacon, N. Y., at 12:43
and got connection with you at 1:15 a.m., September 24.

I told you that I would cable you the text of the
English

was in French, I translated it and returned to the
Ministry of Finance, where M. Rueff checked the
translation with me. The document under reference

constituted a compromise draft of a declaration which
the French had drawn up after receiving the British
draft on the previous evening. The French had found
the British draft unacceptable on several points.

Althorch the British had not at the time accepted the
compromise draft which was handed to me (and which was

only telephoned to M. Monick at London while I was at
the Ministry

the Ministry, for submission to the British Treasury)
I cabled you my translation of the document at 12 noon
on September 24, under 915.

While I was at the Ministry of Finance at noon
of September 24, M. Rueff mentioned to me a British
proposal for Anglo-French cooperation in the manage-

ment of their respective Equalization Funds. I told
him that this interested me very much and requested
an English copy of the proposal. This was received
and cabled to you under No. 917.
You telephoned me at 12:30 at the Embassy. I

gave you the information in regard to the receipt of
the French compromise draft and also the proposed
working agreement between the Equalization Funds

which I had cabled. While Rueff had indicated that

the British proposal in regard to this working
arrangement had been accepted by the French, M.

Baumgartner insisted to me that final acceptance would

await the termination of all of the details of the
three-cornered alignment agreement.

While seeing M. Baumgartner at 10:30 a.m. on

September 24, I obtained from him definite figures
in regard to the devaluation which France proposed.
These figures were incorporated in my cablegram No.

916 of September 24, 6 p.m. The range of devaluation
envisaged a out of between 25 and 34.35 per cent in

the franc. It will be noted that such devaluation
was more extensive than that originally suggested to
me by the French, namely, from 28 to 32 per cent.
While

- 31 While talking with you at 12:30 noon, I gave you the

data with respect to rates. Just after I had finished
speaking with you, M. Baumgartner telephoned me that

M. Monick reported that the English were nervous over

Baumgartner handed to me at the Ministry of Finance a

text in English of a declaration approved by the
British, after studying the French compromise draft
which I had submitted in translation in my No. 915 of
September 24, 12 noon. I eabled this latest draft of

of England and of France and their respective Equali-

zation Funds. At the Ministry of Finance, on the night
of September 24, M. Baumgartner told me that M. Spinesse,
French

French Minister of Economy, had gone to Bern, and

M. Rueff to the Hague, to inform the Swiss and the
Netherlands Governments, respectively, of the trend

of the negotiations. A third French official was in
Brussels for this purpose. It was still hoped that
agreement between the three powers might be reached

in time for announcement Friday night so that Parliament could be called at once.

At 9 p.m. on September 24, I put in a telephone
cell for you at Beacon, but reached you in Washington.

Since the New York Stock Exchange would not be closing

until the equivalent of 8 o'clock Paris time, it was
suggested that the release should be made at 3 o'clock
Washington time, at your Press Conference, and at 9

o'clock Paris time. You reminded me that the question

told him of the conversation which I had just had with
you. I asked him to confirm one word in the British

draft, namely, "relax." He told me that the British
were

- 33 were satisfied to drop the idea for a special preamble
which they had held for a while. I had not forwarded
the British preamble to you since the French had been
adamant against accepting it. M. Baungartner was
anxious to inform the Dutch and the Swiss as soon as

we might indicate whether we were willing to accept

the British text. I told him that you were to receive
an official from the British Embassy, presumably
conveying a message from the British Treasury,

including the British draft, and that you would
telephone me back after this meeting. You had told me

that you stressed the question of yielding and receiving
gold and the question of the dollar rate versus sterling
and the franc more than you did the text of the declar-

ation. I told M. Baungartner that I would let him hear
from me as soon as you might call. He said that M.
Fournier, Undergovernor of the Bank of France, was

drawing up, in accordance with an informal request
which I had made repeatedly during the preceding week,

appropriate regulations to protect American banks which
might be operating in gold shipments from Paris at the
date that the prospective embargo was imposed. M.
Baumgartner agreed with your suggestion that the release

of the agreement should be fixed for 9 o'clock Paris
time.

Your telephone central advised me at 1:20 that
your call would not come through until 3 a.m. at my
home. M. Bauagartner had telephoned me at 11:45 p.m.

that he was going home. If any news was received from
you

34 -

you before 12:45, he desired that I telephone his
assistant at the Ministry of Finance. When you called
me at 3 a.m. at my home, it was confirmed that we were

in agreement with the French on the hour for the release

of the agreement. The British Embassy official had

delivered to you the text of the British draft, and
the word "relax" was confirmed. I told you that
appropriate arrangements were being made to protect

American banks dealing in gold in France. I let you
know that the French were waiting to hear from us so
that they could inform the Swiss and Dutch.
You told me that the British Embassy officials
had called on you at 7:30 p.m. that evening, bringing
with them four cablegrams, the last one of which had
reached Washington only at 7 p.m. This included the
British draft declaration. You let me know that you
had told the British that before you could reply to
this last draft you would have to have an understanding
on the dollar-sterling rate. You took it for granted
that the British Tressury wanted the rate continued as
at present, namely, from 4.90 to 5.10. In numerous
conversations which you had had with Mr. Bewley, the
British Treasury Attaché in Washington, you had under-

sterling-dollar rate was correct. You let me know that
you

you had informed the British that you were passing on

satisfied with the existing rate. You let it be known
that a telephone cell from the Chancellor of the
Exchequer would be welcome. When I was telling you
of the arrangements that had been made to safeguard the

interests of any American banks in Paris which were

operating in gold that might be caught by the embargo,
you mentioned that the Federal Reserve Bank of New York

had 150 thousand dollars on deposit in a "complimentary"
account with the Bank of France, concerning which the

Federal Reserve officials were very much perturbed. I

him to hurry his answer.
President Trip of the Bank of the Netherlands
called at the Embassy at 10:20 a.m., September 25. He
was due at the Bank of France for a conference at 11:30,

to be followed by a luncheon. He had received absolutely

no word of the tripartite monetary negotiations. When
the Governor

the Governor of the Bank of France informed him in
the premises at the luncheon, Dr. Trip made immediate

plans for departure for Amsterdam by aeroplane and left

Paris at about 2 p.m. M. Rueff had gone to the Netherlands the previous day, but had stopped at the Hague,
where he was to establish contact with the Dutch

Ministry of Finance. Dr. Trip had proceeded from
Amsterdam to Paris, crossing M. Rueff. I understand

that the Bank of France officials informed Dr. Trip
that they had endeavored to get into touch with him
at Amsterdan to prevent his coming on to Paris when

they realized that an agreement for Friday night was
approaching.

I called on M. Baumgartner at the Ministry of
Finance at 10 o'clock on September 25. I told him of

our conversation of 3 c'clock that morning, and I let
him know that you were seeking clarification of the
dollar-sterling cross rate from the British Treasury
before proceeding further with the agreement. While
I was still with him, M. Baumgartner telephoned M.
Monick at London to have him urge upon the British the

necessity of meeting our request. At 1:00 p.m., M.
Baumgartner telephoned me that M. Monick had received

from Mr. Waley of the British Treasury, the clear
impression that Mr. Chamberlain would give you

39 -

urgent that he begin communicating with our officials
at the Federal Reserve Bank of New York in regard to

At ten past one, you telephoned ne at the Embassy.
I gave you the developments of the morning, as reported
in my cablegram No. 921 of September 25, 2 D.M. You
mentioned that MM. Williams, Knoke, Viner and Feis
were with you and that the State Department was being

kept fully informed of all developments. You asked me
to find out how big a Stabilization Fund the French
planned to set up.
You reiterated your desire to be helpful and your

sympathy with the French situation. You insisted,
however, that you must await word from the British and

then communicate with me further. You asked that I give
the Minister of Finance your warmest regards. You
reminded us that you had been of aid to the Bank of
France previously and you wanted to be helpful to the
French Government again. You mentioned that Mr. Knoke
had had a telephone message from M. Cariguel and that

you were making arrangements to support the frane

market on New York, using French gold already in the
United States.
I had received on the morning of September 24 your
message

- 58 message No. 367 of September 23, 12 midnight, setting

mated. This I held confidential.
I kept in touch with the Guaranty Trust and other
banks during the day of September 25, which witnessed

a tremendous run on the franc. The cabinet meeting was

scheduled for that evening and the rumor was circulating
that devaluation would be decided upon. Everyone was,
therefore, nervously awaiting the outcome of this
meeting.

At 1:45 p.m., I telephoned M. Baumgartner of my

conversation I had had shortly before that hour with
you. M. Baungartner asked me to express to you, when

next speaking with you, his Ministry's deepest appreciation of the cooperation and attention which you were

giving this matter. In view of the urgency for speed,
it was hoped that you might suggest a minimum of changes

in the British draft text of the declaration, contained
in my 920, September 24, 9 p.m.

Later in the afternoon, M. Baumgartner telephoned

at a oabinet meeting, at which it was to be his duty to
make known to his colleagues the plan for devaluation,
to be

London of the cablegram which the British were presumably sending to Washington in reply to your request

for clarification of the dollar-sterling cross rate.
I took down the following notes of this summary, which
did not presume to be the verbatim text:
"(1) The Chancellor of the Exchequer recalls

that he has no legal authority (means) to fix the
pound within gold points. Furthermore, the

principle of the British policy is to let the
pound find its natural level. (2) It is possible
that the natural level of the pound may be $5.00.

It is possible also that it may be lower. This
eventuality has been many times envisaged (M.

Monick had intimated that while no precise
ellusion

- 40 allusion to $4.86 was made, the Chancellor

presumably had this figure in mind). (3) This
being so, the Chancellor will in no way endeavor to depreciate the pound in a deliberate
manner. It is no more the policy of England

than of the United States to do this. (4)
Likewise the Chancellor will not take advantage
of the French monetary adjustment to depreciate
sterling by way of reprisal, no more than the

When I got connection with you on the telephone, I

told you that I was in the Ministry of Finance, at your
French colleague's desk, and that he asked that I transmit to you the following declaration:
"The French Government, while thanking Mr.

Morgenthau for all that he has already done,
wants to give him the assurance that it intends
in no wise on its side to depreciate its money
beyond the limits which will be sought in the

monetary law (as vis-a-vis the dollar). It
thinks that the simultaneous declaration,
despite the reservation which each country has

been obliged to make, to take account of its
public

public opinion, will consolidate effectively
the stability of the major currencies and will
constitute the starting point for a trustful
cooperation between the three great countries.

It insists on the urgency for its country of a
final decision, the Council of Ministers being
already (since 4 c'clock) in session. M. Auriol
extends his warmest personal greetings to Mr.
Morgenthau."

After giving you this message, I explained that

while the French did not desire to mix in our sterlingdollar cross-rate question, they were having a most
difficult time, following the frantic day on the market
and the important Cabinet meeting which was in session.
The gold losses had been so heavy that they would have

to take a decision that night. If an agreement could
not be reached with the American and the British before
morning, it would be necessery to place an embargo on

gold. I let you know that they had lost perhaps 800

million francs of gold during the day. I told you
that the Stabilization Fund which they proposed to
set up would amount to 10 billion francs. You asked
me to reassure the Minister of Finance of your sympathy

and desire to cooperate, but 60 let him know that you

had to await the direct message from the British. It
was agreed that I should return to the Embassy, where

Mr. Lochhead of your office, or some other official,
would telephone me any amendments which you desired to
make

make in the British dreft text if this should be
adopted as the basis for a final agreement. I was
to be back at the Ministry of Finance by 8 o'clock,
when you were going to call us. I, therefore,
proceeded to the Embassy, but no call arrived from

on Saturday morning and until after the French
Parliament had enacted the legislation necessary for

devaluation of the franc. The British had requested
their banks not to quote the frane before Tuesday

morning at the earliest.
Upon my return to the Ministry of Finance at 8
o'clock, I joined MM. Baungartner and Rueff in the
former's office. It was then planned that the Parliamentary session should begin on Monday afternoon. The
declarations in France and England would be given out

by the respective Treasuries. When your call came in,
your office read to me the changes which you desired

to be made in the text of the declaration. I noted
this on my copy, and later M. Rueff corrected his
copy from mine and had the French translation made.
The only correction which could not be accepted was
that

not later than 11 o'clock, if at all possible, since
the Minister of Finance had to telephone the President

meet at midnight to decide upon limiting gold shipments,
et cetera.

I remained on at the Ministry of Finance, where I
checked the French translation of the text as you had

you at the time of the release thereof. M. Monick, at
London, was provided also with the French text and
checked this with Sir Frederick Leith Ross.

At 10:20, you telephoned that the British had
called on you. The message which Mr. Chamberlain had
given

given you was not quite so reassuring in tone as the
summary which M. Monick had provided the French and

which I had telephoned you in the afternoon. You

said, however, that you had given the British an
answer to Mr. Chamberlain's private communication to
you, which you were 98 per cent sure that he could

the simultaneous statement in order to carry out a

broad, useful and essential action. You told me that
your message would be telephoned to the Chancellor and

press correspondents were outside of the Minister's
room awaiting the release which had been promised for

9 o'clock. The Minister had returned from his Cabinet
meeting, where he had not been able to put his devalu-

call was received from M. Monick at London, stating
that

-45that the British had sent a favorable reply to your
telephonic message. After this word was received,
Minister Auriol asked M. Baumgartner to bring me into
his private office, where he expressed to me his great
C

satisfaction that the affair had been terminated. I
told him that I must still await word from you directly,
and that no announcement could be given to the press

hold the telephone line open. This facility helped
me greatly. I was seated in the chair of the Minister
of Finance. With him and his colleagues and assistants

-46We then waited until you had studied the reply. When

translated the Minister's remarks. You then told me
that everything was clear for giving out the communique.

After shaking hands all around, I took leave of
Minister Auriol. I had to pass out through the crowd
of journalists, but spoke to none of them. The rue de

Washington. Much relieved that the affair was finally
arranged, I walked to my home from the Place de la
Concorde and went to bed at 3 a.m.
At 11 a.m. on September 26, I filed cablegram No.

926, in which I reported that the Minister of Finance
had

had received the press at about 1 o'clock that morning
and had given to them the French text of the declaration
on monetary policy which had been made simultaneously

with the American and British declarations. I also
included the text of the French official communique
which announced that the Council of Ministers had
approved the terms of a monetary bill for reducing

the gold value of the frane to a unit containing
between 49 and 43 milligrams of gold 900/1000 fine.

The bill provided further that an exchange stabilization
fund, endowed with 10 billion france, should be set up.
Pending adoption of the bill by Parliament, the Bank
of France was taking the necessary steps to control
the franc.
In the same cablegram I reported that the JOURNAL

OFFICIAL of Saturday morning, September 26, carried

three decrees, dated September 25, issued in connection
with the above-mentioned development in French monetary

policy. The first decree convoked the Senate and
Chamber of Deputies in extraordinary session for
September 26. The second decree suspended payment of

commercial obligations expressed in gold or in foreign
currencies. The third docree provided for the closing
of French security and commercial exchanges, beginning

with September 26 and up to a date which would be fixed

by decrea by the Minister of Finance.
In cablegram No. 927, dated September 26, 12 noon,

I submitted the translation of a report, as carried in
the AGENCE ECONOMIQUE ET FINANCIERE, of the remarks
which

which Minister of Finance Auriol made to the press
upon the occasion of issuing the declaration of
monetary policy. He stressed the importance of the
step that had been taken and especially thanked the

two friendly Governments for their collaboration, and
particularly Mr. Morgenthau and Mr. Chamberlain. He

let it be known that the decision to align the frane
had followed conversations which had taken place
discreetly since the month of June.
At 10:30 on the morning of Saturday, September 26,

M. Cariguel telephoned me from the Bank of France. He
said that he had heard that the American Consul in Paris

was changing dollars on a basis of 23.50 francs to the

dollar. He said that this matter had been brought to
the attention of the Bank of France by financial
concerns. M. Cariguel expressed great surprise that
an official office in Paris of one of the three
Governments which had the preceding night adhered to

the tripartite agreement would the following morning
charge a rate of 23.50, when the maximum devaluation

anticipated by the monetary bill, whose terms had been

announced, was 22.96 francs to the dollar. I promised

M. Cariguel that I would look into the matter. He
emphasized the bad impression which this story would

make if the situation was not rectified. M. Cariguel
told me of the arrangements that had been made for

controlling trading in francs in London and New York.
He was also very happy to tell me that all gold which
had not actually been shipped on the preceding evening
by

49 -

by Paris-American banks which had contracted therefor
was placed in the name of the Federal Reserve Bank of

New York. That is, instead of leaving gold in the
name of the banks which were shipping it, the Federal
Reserve Bank was to be informed that, acting under

instructions of the specified banks, the Bank of France
had earmarked so much gold for its account, to be

shipped at the first opportunity. Thus, any difficulty
that might have arisen from placing an embargo on gold

that night was obviated. M. Cariguel told me that no
actual embargo had been placed on gold, but that at

which is, of course, in the Embassy building. I
learned that as of that date the charge which the
Consulate General was making for official services
was calculated on a basis of 23.50 francs to the dollar,
while that previously charged had been at 15.50. I
then telephoned Consul Fullerton, the Executive officer
of the Consulate General, and explained to him that
the maximum of devaluation which could be effected in
the French franc, under the bill which had been drawn

up, was to the level of 22.96 to the dollar.
explained

- 50 explained to Mr. Fullerton the complaint which had
reached me from the Bank of France, and I told him

that there was certainly no ground for charging more

than 22.96 to the dollar. I even intimated that the
French Equalization Fund might, at least for a while,
endeavor to maintain the franc at about the middle

point provided for by the devaluation law. on Sunday
morning I reported this matter to Mr. Wilson, then
acting as Chargé of the Embassy, since I thought it
was a matter of policy which concerned the Embassy.

Mr. Wilson told me that he thought Consul General
Southard should appreciate my bringing the matter

General continued for some days to charge the rate
above indicated.

During the forenoon I checked up with various
Paris-American bankers. Mr. Pearce of the National
City Bank and Mr. Saint-Germsin of the Guarantee Trust
both spoke highly of the manner in which M. Cariguel

of the Bank of France had looked after their gold
shipments and confirmed that the balance of the gold

due on their contracts was being released that day and
would be placed on board before midnight.

At 1 p.m. you telephoned me at the Embasay. I
told you that MM. Fournier and Cariguel were anxious
to

- 51 to know when a decision would be reached in regard to

our giving gold against dollars which the Bank of
France would acquire. They also desired to know
whether they should communicate with Mr. Knoke of the
Federal Reserve Bank of Now York, or whether they should

wait until after the French monetary law had been passed.
You were happy to tell me of the splendid American press

reaction, irrespective of party lines, to the tripartite
agreement announcement on the morning of September 26.

You said everyone in Washington was bubbling over with

enthusiasm. I told you of the excellent press reaction
in Europe and let you know that the political section
of the Embassy was getting out a separate cablegram

thereon. You asked me to forward French and English
papers giving comments upon the declaration and also

to arrange for your Treasury Attache at Berlin to
forward to you the German press. After talking with
you I endeavored to get into touch with Mr. Waite, your

representative in Paris, but it was then too late. on
Monday morning, however, I asked him to pass on to his

colleague at Berlin your request with respect to the
German newspapers. In cablegram 931, sent at 4 p.m.,

I recorded the inquiries of the Bank of France.
In the afternoon I telephoned M. Cariguel to
inform him that you had said he could talke to Mr. Knoke
directly in regard to technical arrangements.
At 5 p.m. on September 26, I sent cablegram No. 932

to report that a private telephone had been installed in
my apartment, according to your instructions, the number
being

- 52 being Galvani 70-92.

At 6 p.m. I despatched cablegram No. 933, to

tell you that M. Baumgartner of the Ministry of
Finance had telephoned me at 4:30 to announce that
they had been informed through diplomatic channels

that Switzerland would follow the French lead and
would devalue between 25 and 30 per cent.
In a further message, No. 934, dated September

sympathetic declaration of monetary policy on that
date, adhering to the tripartite agreement.
When I arrived home on the evening of September 26,

I learned that you had been calling for me while I was
en route from the Embassy. I called back and was
answered by Mr. Lochhead at 6:45 p.m. He told me of

the good press that the tripartite agreement was
continuing to have and of ths pick-up on the stock and
Government security markets. He also told me that the
State Bank of Russia had sent an order to a correspon-

dent in New York to sell sterling. The stabilization
Fund had taken the total amount offered.
In my cablegram No. 936, dated September 27, 4 p.m.,

I let you know that after Mr. Lochhead had called me on
Saturday evening, I telephoned M. Cariguel to advise
him and M. Fournier about the American Fund intervening

to buy sterling offered by the Russian State Bank. on
Sunday

- 53

Sunday morning, the Department's 371, September 26,

gartner telephoned me. He was happy to learn of the
prompt and resolute move which had been taken toward

making our monotary arrangement effective.

While I was at the Enbassy on Sunday morning, I
had placed a call for you which came through at my

home at 2:05 p.m. In my conversation with you, I
told you why M. Baungartner had called me. The
reason was this: The Minister of Finance was
scheduled to appear at 2:30 p.m., Sunday afternoon,
before the Finance Committee of the Chamber to propose

and explain the Government's monetary bill, which was

to be submitted to Parliament on Monday. M. Auriol
had asked M. Baumgartner to find out from you whether

you would permit the Minister of Finance to relate to
the Finance Committee and state before Parliamont that

you had sent your representative to the Ministry of
Finance on June 6, that conversations were then entered

into, and that their result had finally been achieved.
It was explained that MM. Blum and Auriol had, in their
remarks to the press following the issuance of the
simultaneous declaration, mentioned that they had been
working for this international agreement since early in
June. After talking with you, I at once telephoned M.
Baumgartner

Baumgartner and let him know that when you had been

asked in one of your press conferences as to who had

In my cablegram No. 936 of September 27, 4 p.m.,

confirming my conversation with you and giving the

details of my subsequent talk with M. Baumgartner, I
mentioned further developments, including the decision
of the Netherlands taken on Saturday night, September

26, to put an embargo on gold. I let you know that I
had talked confidentially with M. Pennachio of the Bank
of Italy and had asked him personally whether he did

not think it would be wise for the Italians to "get
on the band wagon." As you are aware, Governor

Azzolini of the Bank of Italy depends importantly
upon my friend M. Pennachio for advice on international

monetary relations and policies.
At 10:30 p.m. on the night of September 27, I
talked by telephone with Dr. Jacobsson, the Swedish

Economist of the B.I.S. at Basel. All during the
negotiations

negotiations the Bank for International Settlements
had been entirely ignorant thereof. Dr. Jacobason
was delighted with the tripertite agreement and was
especially complimentary of the manner in which the

negotiations had been conducted. That is, without
any leaks, and in a manner which permitted the

M. Fournier wanted to see me. I went immediately to
the Bank of France. M. Fournier told me that he had
telephoned to the Federal Reserve Bank on Saturday,

and that the latter had told him it could get no
answer from the Treasury at Washington in regard to

gold dealings. M. Fournier insisted to me that he
must know about gold arrangements before the law was

In my cablegram No. 937, sent at 12 noon,

September 28, I reported that Auriol's devaluation

bill, with certain modifications, had been voted by
the Chamber Finance Committee on Sunday, by 20 against

12, with 7 members abstaining from a vote. I gave you

a brief summary of the provisions of the bill.
At 1 p.m. on September 28, I sent my No. 938,
reporting

reporting that up until noon of that date the Ministry
of Finance had not yet received the writtea text of
the amendments made on Sunday in the Chamber Finance

Committee to the devaluation bill. Since these were
slight, I proceeded to provide you in my cablegram

with a full translation of the bill as introduced.
You telephoned me at 4:25 on the afternoon of

September 28. I told you that the devaluation bill
had been approved by the Finance Committee; that

the Chamber had met at 9 a.m.; that it had adjourned

to read the bill; that it had met again after 11 o'clock
and had later adjourned to meet at 4 p.m. I let you
know that the Radical Socialists had held a caucus

at which they voted against the sliding scale for
wage adjustments which had been written into the bill,

but had approved the devaluation feature. I told you
further that the Chamber had voted 365 to 248 against
a motion for sending the measure back to the Committee.

I let you know that M. Cariguel had told me at 4 'clock
that he thought there was no chance of the two bodies

of Perliament passing the measure that night. Consequently M. Fournier wanted you to know that the markets
would be closed in Paris and London on Tuesday, as they
had been on Monday, and that the Swiss and Dutch were

also closing theirs. In speaking to you of the
conversation which I had with M. Fournier, earlier in
the morning, I also mentioned that M. Fournier had said

that the British were uncertain as to just how cooperation
between the Americans and themselves was to be worked out.

- 57 M. Cariguel had told me that the British had suggested
that any dealings which the Bank of France did in

sterling should be for the account of the British.
M. Cariguel seemed opposed to this idea, but you thought

that he was taking a wrong position if he objected
thereto. You said that you would ask the Bank of

France to act as agent if you called upon it to operate
for us. You told me to let the French officials know
that they would just have to be patient in the matter
of gold dealings. You said that you had taken care of
them in the past and would continue to do so in the
present situation. If they wanted to put any orders
through to buy dollars in the American market, they
should give the Federal Reserve Bank of New York the

order and indicate their rate.
I telephoned M. Cariguel at 4:50 p.m. to give him
the substance of your message, which was that you would

"not let the Bank of France down" and that they should
cease worrying. This assurance was entirely satisfactory

to M. Cariguel. As I recall it, you did not meet Undergovernor Fournier when you were in Paris a year ago,

since he was on sick leave at that time. M. Fournier

quite nervous. I give you this information as a partial
explanation of the Undergovernor's uneasiness during the
period which I am describing.

At 6 p.m., September 28, I sent cablegram No.

940, setting forth the inquiry which I had received
earlier in the day by telephone from Mr. Beyen,
resident head of the B.I.S., in regard to the
possibility for the B.I.S. to enjoy certain gold
facilities with your Treasury, particularly the
privilege of obtaining gold in New York for B.I.S.
account or in behalf of Central Bank clients.
At 11 a.m. on September 29 I sent cablegram No.

943, wherein I provided, in continuation of my 938 of
September 28, 1 p.m., annexes to the French devaluation

bill as originally proposed. The first of these dealt
with an agreement between the Minister of Finance and

the Bank of France as to the proceeds of devaluation,
et cetera, and the second constituted a convention
between the Minister of Finance and the Amortization
Fund.

At 12:00 noon on September 29, I despatched cable-

gram No. 944, giving details of shipments of gold made

by Paris banks to New York, clearing up transactions
undertaken before an embargo was placed on gold.
My cablegram No. 945 of September 29, 1 p.m.,

gave a translation of a decree that appeared in the
French JOURNAL OFFICIEL of that morning prohibiting

the export of gold.
Undergovernor Fournier of the Bank of France
telephoned me at 10 o'clock on the morning of September

29, to refer to an article which he had read in the
AGENCE ECONOMIQUE ET FINANCIERE of that morning,

purporting

purporting to constitute a communiqué given out by

but that it seemed to me entirely logical and correct.
I again promised him to communicate with him promptly

as soon as I might have anything official in the
premises.

Dr. Pennachio of the Bank of Italy telephoned me

at noon to let me know that his country was studying
its monetary problems very carefully. He said that
for Italy a step toward devaluation must be very

seriously thought out since it involved the whole
economic problem of the country. The question was

more complicated for Italy than for switzerland and
the Netherlands, since Italy lacked the gold resources
of the other two countries.
You telephoned me at 12:40 on September 29. You

told me that a 20 million dollar credit for the B.I.S.
had been arranged. This concerned, I believe, a
shipment of gold from Switzerland which the B.I.S. was

handling. I told you the substance of the communiqué
in the AGENCE ECONOMIQUE above-mentioned, and you

confirmed the general terms thereof.
In our conversation I let you know that Mr. Gay
President of the New York Stock Exchange, had sent the
following message to his Regional Advisory Committee

in Paris:
"Pending

60 -

"Pending issuance final decree French Government regarding monetary realignment you are
empowered to communicate French Minister of

Finance and offer him full cooperation of N.Y.S.E.
in fulfillment of any financial measure French
Government may wish to promulgate effecting its

citizens or resident also request all members
branch offices and representatives to cooperate
in every possible way with objective of French
Government."

The Paris representative of the above Committee

had telephoned me previously the substance of this
communication and had sought my advice about informing

the French Government, particularly the Ministry of

its entirety, by a vote of 350 to 221, following a
separate voting on each item of the bill during an all
night session. A compromise was reached on the difficult

sliding scale provision of the bill. The Minister of
Finance had passed the bill on to the Senate Finance
Committee, which was expected to return it to the

Senate late in the afternoon or the following day.
Among the miscellaneous news which I mentioned was

that Dr. Schacht had called a meeting of the Central
Committee

- 31 Committee of the Reichabank; that the Dutch were going

to manage their currency without definite devaluation;
and that the Swiss measure for devaluation was before
Parliament that day.

At 3 p.m. I telephoned M. Cariguel at the Bank of
France to give him certain information which you had

passed on to me, particularly in regard to technical
operations.

At 4 p.m. I sent my cablegram No. 949, which

indicated that the Bank of France had begun to ship
gold to the United States to increase its earmarked

supply with the Federal Reserve Bank. I told you that,
according to press reports, Greece, Latvie and Turkey
had decided to base their currencies on sterling.
with respect to the Netherlands, I explained that
the Dutch had placed an embargo on gold and were

arranging for a stabilization fund of 300 million
florins. I quoted certain items from the London press,
indicating the splendid reception which had been given

to the tripartite arrangement.
Upon the receipt on the forenoon of September 30

of your cablegram No. 376 of September 29, 6 p.m., I

telephoned the Bank for International Settlements at
Basel to inform Dr. Beyen that such inquiries as that
which had been communicated in my cablegram 904 of

September 28 should be made directly to the Federal
Reserve Bank of New York.

On the morning of September 30, the debate began

in the Senate on the Government's monetary bill, which
had

had been taken up by the Senate Finance Committee the

preceding afternoon. After a debate of more than
twelve hours, the Senate passed the measure by a small

latter promptly revoted its own original text and
submitted it to the Chamber, which, in the early hours
of October 1, also revoted the bill in its original
form.

You had telephoned me at 1:20 p.m. on September 30.

I gave you an account of the progress being made in

voting the French devaluation bill and let you know
that I had sent you a large bunch of newspapers the
preceding evening. You mentioned that you had done

nothing in sterling. The Federal Reserve Bank of New
York had, however, received an order from the Bank of
France to supply whatever francs were necessary to

take care of the demand. You told me that the Federal
Reserve had handled 23 million franes at the time you

spoke to me. You suggested that it might be to the
general advantage if some announcement as to this

operation could be made, since this might relieve the
nervousness pending final voting of the French measure.
You suggested that either the Bank of Frence make the
announcement or permit you to make a statement in

Washington. It was understood that you would call me
back at 9:30 p.m.

I talked

63 -

I talked with M. Cariguel two or three times
during the day, and on the occasion after I had spoken
with you in the sense above reported I mentioned your

suggestion to M. Cariguel. No made the point that
France had not yet devalued the franc, and that the
Bank of France could not make or consent to a public
announcement anticipating action of Parliament.

At 5:30 p.m. I talked by telephone with Dr.
Jacobsson at the B.I.S. in Basel, requesting him to
pass on to me any information which he might procure

the German statement. He provided me with a digest

thereof. The general purport seemed to be that the
Germans would not devalue; that no new special types

of marks were to be introduced; that the Germans would

lest France might impose restrictions and penalties
which would work against dishoarding of gold and
repatriation

repatriation of capital.
When you telephoned me at 9:30 p.m., I gave you
the German information and also a summary of the French

legislative progress. I mentioned minor items of
information contributed by MM. Baumgartner and Maxime

until adjournment around 1 a.m. I then came to the
Embassy and, after getting you on the telephone at

2:10 a.m., informed you of the status of the legislation at that hour.
When the Senate met at 9:30 on the morning of

October 1, the outlook appeared difficult and there were

reports to the effect that the Prime Minister might be
forced to put the question to a vote of confidence
unless some compromise could be reached. With M.

Chautemps acting as mediator and with President Caillaux
of the Senate Finance Committee evidencing a considerate
attitude, the Chamber accepted a compromise provision

which was approved by a vote of 354 to 217. The bill
then

- 65 then went back to the Senate Finance Committee. After

further shuttling back and forth between the two
bodies, the measure was finally passed on the night

of October 1. I had talked with you shortly after
noon, giving you the information to date and anticipating that the bill would be passed before the next
day.

In my cablegram No. 956, dated October 2, 11 a.m.,

I gave you a complete translation of the French monetary
law as voted the preceding night and as promulgated on
page 1040 of the French JOURNAL OFFICIEL of October 2.

The special session of Parliament was adjourned

following the enactment of this legislation.
During the morning I talked with M. Baumgartner
and extended my congratulations upon the Ministry's

success in getting its legislation adopted.
My cablegram No. 960 of October 2, 5 p.m., sent
in continuation of my No. 957 of 11 a.m., summarized
three separate laws which had also been passed on the

tember 27, 1936, with the Amortization Fund and

provided certain advantages for holders of the Auriol

baby bonds. The third law authorized the Ministry of
Finance to conclude a convention with the Crédit Foncier
de France in connection with an advance of 3 billion
francs

- 66
francs to permit the latter to reduce interest on
loans granted at high rates.
My cablegram No. 961, dated 6 p.m., October 2,

reported that the Paris bourse and exchange markets

had reopened that day for the first time since
September 25. I reported the heavy offers of dollars
and sterling and the strength of the bourse. At 7
p.m. I sent another cablegram, No. 962, reporting M.
Cariguel's summary to me of the day's operation. I
reported further that the Bank of France had lowered
its discount rate from 5 to 3 per cent.
At 9 o'clock on the night of October 2, the
Embassy code room informed me of the receipt of your

cablegram No. 383 of October 2, 1 p.m., requesting
me to keep you advised of any news regarding possible

monetary legislation, including certain measures
taken to reduce customs duties and suspend quotas.

In this message I quoted on article from the London
TIMES upon Mr. Chamberlain's speech at Margate, which

conclusion of a leading article from the London
ECONOMIST upon the fall of the gold bloc. I gave you

to the lira.
You telephoned me at my home at 3 p.m. on October

3. I gave you the forenoon's news, embodied in my
cablegram above-mentioned, and we discussed the general

the Bank of England, I should not quit Paris in the
meantime for a visit to London. You mentioned that
Dr. Feis was arranging for the Embassy at London to

be instructed to have periodic meetings with the
British Treasury. Reference was made of M. Monick.
I had let you know in an earlier conversation of the
story which same out in the ECHO DE PARIS in regard to

although you had taken some gold in London. You told
me that a high mark, since 1989, had been reached on

your stock and Federal bond markets on that day.
The week ended with Sunday, October 4, thus

witnessed the passage of legislation providing for
devaluation of the frene and saw the reopening of the
French markets. The present letter has given you the
pertinent chronology. This letter bears the date of

October 26, since the first half of it was dictated
on that date. The delays in starting and then in
completing this communication have resulted from

various causes. My stenographer quit and returned to
the United States when our negotiations were at their
height. The arrival of our new Ambassacor at the end

of September called for extra work. Furthermore, I
have had a rather strenuous schedule of travel and

the three parties to the original three-power arrangement, and also the addition of Belgium, the Netherlands

and Switzerland to the group of countries entitled to

enjoy reciprocal facilities in gold trading.
It is still too early to evaluate the results of
the tripartite arrangement of September 25. This
arrangement was welcomed most enthusiastically by a

world which had almost despaired of international
cooperation

- 69 cooperation. For such an agreement to be reached

too quickly. They thought that this move would be
followed immediately by a general breaking-down of

trade barriers. The important achievement actually
accomplished was to establish monetary cooperation

between the three leading monetary powers. This

provided, as the French so frequently said, the
starting point for other developments. The immediate
direct benefit was that France was able to devalue her

currency calmly in dignified circumstances. If the
economic and financial situation had been allowed to
deteriorate further in France, with the Government

hesitating to take a decision on its currency in the
absence of an international arrangement, there would

surely have been a serious eatastrophe for the frane,
involving a much greater decline therein than that
accomplished through the monetary law of October 1.

have not solved all of the problems in all of the
countries, but have constituted initial advances. The
results already visible in the Netherlands and Switzerland
are

- 70 -

been more difficult than some of the others, and it
will take some time to work out. Whether the frane
may be held within the limits fixed by the Monetary
Law of October 1 cannot yet be determined. There is

a very good chance to maintain this rate. If the
French cannot hold the frane at the present figure,

there is little reason to believe that they could
prevent its complete collapse. While Dr. Schecht and

some other crities assert that permanent stabilization
has not been achieved, most observers are quite

satisfied that progress has been made decisively
toward establishing de facto stability in an atmosphere
favorable to further progress.

I was personally happy to see the tripartite
arrangement consummated in such a spirit of cordiality

with the French officials, and in a manner which left
France only the kindliest feeling towards our country.
Minister Auriol and his assistants were absolutely fair
and square in their dealings with me, even though they
were under much stress and worry. Diplomats and journalists have not yet ceased to marvel that such secrecy was
maintained on all three sides. I am deeply appreciative
of the confidence which you placed in me for the
negotiations.

negotiations.

Faithfully yours,

H. Merle Cochran,

First Secretary of Embassy.

HMC/wgs

Paris, December 28, 1936.
PERSONAL AND

STRICTLY CONFIDENTIAL

The Honorable

Henry Morgenthau, Junior,

Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:

In my letter dated October 26, 1936, I provided
you with a chronicle of events culminating in the
tripartite monetary arrangement of September 25, 1936,

and reported the immediate results thereof, up through

October 4. In the present communication I shall

continue this chroncile, giving particular attention
to the implementing of the tripartite arrangement to
permit of gold reciprocity between the United States,
France and England, and to the supplementing of the
arrangement between these three countries to include
Belgium, switzerland and the Netherlands.

I telephoned you at 4 p.m. on October 5 and I sent
at. 5 p.m. my cablegram No. 968, which confirmed the

news I had given you over the telephone. This dealt
principally

principally with the devaluation of the Italian lira
and the activity on the Paris stock market. In my
telegram I also included an expression of opinion
obtained by telephone from Dr. Jacobsson at the
B.I.S. with respect to Italian and German monetary

policies. The B.I.S. observers approved of Italy's
step, and thought Germany was making a mistake in not
endeavoring to cooperate in some manner with the

tripartite arrangement. When I gave you the information which I had obtained here in regard to Italian
devaluation, you indicated that this was not in strict
accordance with the version set forth in a cablegram
from Ambassador Phillips at Rome. You asked that I

procure for you specific information in the premises.
After talking with you I got into touch with Dr.
Pennachio, the Bank of Italy representative in Paris,
and asked him to provide definite facts on the monetary
step that had been taken in Italy. While Dr. Pennachio
had received considerable information on this subject,
he was anxious to be of direct service and telephoned

Governor Azzolini of the Bank of Italy at Rome. Later
in the evening I talked with you, at 8:45 p.m., and gave
you the official information, as relayed through Dr.
Pennachio. Before I spoke with you on this occasion,
I got into touch with M. Cariguel at the Bank of France
and found that he had done a good business in obtaining

sterling on that day, but that there had been few dollars
in the market. He had been able to obtain some gold
against

-3against dollars in London.
When I talked with you on the night of October 5
you said that you desired that I let the French know
that you were working on the arrangement to yield gold.
You reminded me that there had been three parties to
the monetary arrangement of September 25. In view of

this partnership you thought it fair to give England
the same facility for gold as France. You said you
were seeing Mr. Mallet, the British Chargé d'Affaires
at Washington, to see if his people were interested.
You had told your press correspondents that any technical arrangement would be made public. You were planning
an arrangement which should be on a reciprocal and on a

twenty-four hour basis. You desired to find out whether
the French wished to make an announcement of reciprocity

simultaneously with you. You hoped that the three
original parties could stand together on this new

matter. Your declaration would be an amplification of
the statement of January, 1934. You did not insist that
there be declarations from the French and British, but
you did state that you were obliged to make an announce-

ment. I told you that there was a French cabinet meeting
that night at which the question was to be decided as to
the application of a tax of 50 per cent on market transactions made just prior to devaluation. I was to see
the Minister of Finance at 9:30 the following morning.
While awaiting your call on the evening of October
5 I drew up a draft of my own suggestions with respect
to an

-to an announcement for giving gold by the United States
under the new arrangement. I mentioned my ideas briefly
to you in our conversation by telephone. On the morning

of October 6 I took the liberty of amplifying and sending
to you my views in cablegram No. 970, dated 9 a.m. In
this, as in all of my messages, I gave you my frank
opinion. I was concerned Iest the statement which you
proposed might eventually prove to be too narrow, and I
hoped that you might yield gold to foreign "monetary
authorities."
At 10 o'clock on the morning of October 6, I called

on Minister of Finance Auriol. This was my first visit
with the Minister of Finance since the night of September
25. M. Auriol reiterated at this time his appreciation
of your cooperation in the tripartite move and insisted
that passage of the French monetary (devaluation) law

would have been absolutely impossible if it had not
been accompanied by the three-power agreement. I told
him of witnessing some of the debate in which he defended

his policies, and he reminded me of the bitterness with
which he was attacked by several of the parliamentary
leaders who personally shared his own views in the

premises but felt obliged to criticize on account of
political reasons. M. Auriol expressed his particular
pleasure at the privilege of having direct communication
with you and he hoped that this method could be utilized

in the future. I think I told you previously that I was
convinced that M. Auriol's exchange of felicitations
with you on the night of September 25 was his first
occasion

-5occasion to use the transatlantic telephone. He is
a very direct individual and appreciated the expeditious manner in which we had arranged matters through

direct contact, in contrast with the complications and
delays that would have necessarily been involved if the
more formal procedure of diplomatic correspondence had
been followed.

Incidentally, the Minister mentioned the serious
embarrassment which had been caused him in the early

stage of the conversations through M. Monick's excessive

zeal. M. Auriol let me understand confidentially that
M. Monick's visit to you last June had been inspired by
certain of Monick's friends, and that he, M. Auriol,
was then too new in office to object thereto. It was
understood, however, that Monick should go to the

United States only on a visit of observation, and
should enter into no negotiations. The Minister of
Finance told me that Monick exceeded his instructions
and began sending reports back to France, through the
French Embassy at Washington. These reports were

received by the Minister for Foreign Affairs, and
pertinent parts thereof were sent, according to practice,
to the President of the Republic. M. Auriol knew nothing
of these reports until President Lebrun summoned him to
the Elysée Palace and asked that he explain why he had

sent an emissary to the United States without the
President of the Republic even having knowledge thereof.
M. Auriol seemed convinced of the inadvisability of

utilizing M. Monick's services on any future journeys
to the United States, and I said nothing to encourage a
further

-6further mission on M. Monick's part.

M. Auriol thought that we had taken a big step
forward through the three-power declaration. He was

greatly pleased at the reception given this declaration
by most of the European countries, the principal exception being Germany. He was particularly gratified over
Italy's action. He told me that he had not desired
that Dr. Schacht should figure in the original negotiations principally because he felt that Dr. Schacht
and Governor Norman were so close that there might have
been some Anglo-German collusion which would have made

agreement difficult. The Minister was anxious to see
what Dr. Schacht would eventually do. He said that he
was sending word to Dr. Schacht, by Governor Labeyrie

of the Bank of France, since the two were to meet at
the B.I.S. that week-end, that whenever Germany might

see fit to follow the precedent set by France, the
latter would be ready to cooperate with Germany toward

achieving stabilization and toward reduction of trade
and exchange barriers. The Minister of Finance said,
however, that he would insist that the financial burden
which the policies of armament actually being followed in
Europe would entail, would prove to be unbearable by the

various Treasuries. That is, no hopeful progress toward

monetary stabilization could be achieved until military
policies might be brought within the paying capacities
of the countries concerned. The Minister said that
while we had made considerable progress, there was much
more

-7more to do in the way of consolidating our gains and
looking to future economic and monetary rehabilitation.
He expected to be in contact with Premier Van Zeeland

of Belgium within the near future on plans for cooperation in the premises, and promised to inform me of the
course of their discussions.
In our conversation, M. Auriol brought up the
subject of war debts owed by France to the United

States. He regretted that there was nothing that
France could do at present to clear up this matter.
He said that if his Government remained in power, he
hoped that, after internal order and some degree of
prosperity might be achieved, it would be his pleasure
and opportunity, say in another year or a year and onehalf, to make spontaneously to the United States an offer
of final settlement of the war debt. He said that such
an offer would be arrived at after studying all phases
of the question, including the Hoover Moratorium, the
Lausanne Agreement and the character of the constituent

parts of the indebtedness. I could not possibly conceive
the idea from this conversation that Minister Auriol
anticipated opening the question within the immediate
future, and, although I have made no inquiries in the
premises, I am of the opinion that recent moves with
respect to the war debts, which have attracted much
attention in the French and American press, did not

originate with Minister Auriol.
The purpose of my visit with the Finance Minister
was

-8was to ascertain whether the French would be interested
in making an arrangement and a declaration in regard to
gold of the character which you had suggested to me on
the preceding evening. The Minister of Finance told

me that he desired to consult his assistants and the
appropriate officers of the Bank of France on this
subject, and would endeavor to give me an answer

during the course of the day. The above information
was incorporated in my cablegram No. 971 of October 6,
12 noon.

After leaving the Minister of Finance I talked
with M. Baumgartner, Director General of the Movement

of Funds Section in the Ministry, and explained to him
the purpose of my visit with M. Auriol. M. Baumgartner
promised to call me back as soon as the Minister had
reached a decision. M. Baumgartner himself was

confident that they would act in complete accord with
your desires.
You telephoned me at 12:20 noon on October 6. You

told me that the British Embassy in Washington was
pleased with the offer which you had extended them to

participate in the gold declaration, but that you had
not yet had time to receive the reaction from the
British Treasury in London, to which the Embassy had

referred your proposition. I told you of my visit with
the Minister of Finance and let you know that I would
communicate further news as soon as I might obtain the

definite French answer. I mentioned in our conversation
that

-9that I had in my cablegram No. 970, sent at 9 a.m. that
morning, presumed to present my own views on the matter

of a declaration.
At 1:05 p.m. I talked by telephone with M.
Baumgartner, who was happy to tell me that his Minister
of Finance was in complete accord with you on the matter

of a statement in regard to giving gold on a reciprocal
basis. The Minister desired to know, however, what the
British had decided to do. The French officials made
the point that they already were practicing actual

reciprocity with the British.
I telephoned you at 2:30 p.m. to give you the
Minister's answer, as transmitted through M. Baumgartner.
In some manner, which I never understood, your assistants,
who were with you when you were speaking, gained the

impression that I had placed too much stress on the

issuance of a declaration. I assured you that there
had been no misunderstanding on this point and no

insistance on my part that the French should make any
declaration whatever. The French had been appreciative

of your offer to participate in a statement and did not
question in the slightest the propriety of such parti
cipation. You told me that you were anxious to get
the matter cleared up in a short time and that you
would call me back as soon as you had the official
British reply. In the meantime, there was nothing
further for me to do here.
In my cablegram No. 972 of October 6, 5 p.m., I
gave

- 10 gave you the market news of the day, which was princi-

pally to the effect that sterling was being offered
heavily against the franc. The new Italian lira was
quoted at exact parity in Paris.
As I was returning from my home to the Embassy

at 2:15 on October 7, you endeavored to reach me by

telephone, but we did not succeed that day in establishing connection. My cablegram No. 975, filed at 4 p.m.
on October 7, gave the news of the day, including the

fact that sterling continued to be offered in large
amounts at the Bank of France, and the report that
the Swiss had resumed contracting gold at London for

delivery the following week, it having become necessary

for the Swiss at one time to cease operations until
their bookkeeping might catch up with their buying.
In my cablegram I quoted at some length a statement

made by Mr. Chamberlain, Chancellor of the British
Exchequer, on the preceding evening, wherein he referred

to the tripartite arrangement.
On October 8 you telephoned me at 4:45 p.m. You

said that a very satisfactory answer had been received
from Mr. Chamberlain, and that you were working on a
reply. You had prepared a proclamation and a communiqué

for the press. You said you would cable both of these

to me that night. A representative of the British
Embassy was coming to see you shortly. You said that
you were also sending me a copy of Mr. Chamberlain's

message. You made the point that you were obliged to
make

- 11 make a statement. You thought the British would be
disposed to make a statement and you wanted the French

to feel free to do likewise if they cared to do so
after having seen your statement. This would be

entirely voluntary, however, on the part of the French.
You hoped to issue your statement on Sunday morning,

if possible, to become effective on Monday. It was
agreed that I should arrange to have your messages
decoded as early as possible so that I could show them

to the Minister of Finance and then telephone you back
as soon as I had obtained M. Auriol's reaction thereto.
You incidentally referred to my cablegram of October 6,
in which I had expressed my own opinions, and you
assured me that these were always accepted in the same

spirit in which they were sent, whether or not you might
be able invariably to act favorably thereon.
Later in the day, at 9:45 p.m., you telephoned me
at my home. You stated that there had been despatched
to me a copy of the new statement signed by the President.

You said this was a legal statement drawn up by attorneys.
You added that since Monday was a bank holiday, Columbus

Day, you were giving out your statement at a 4 o'clock
press conference on that day, instead of Sunday as

originally anticipated, and that the new procedure
would go into effect on Tuesday. You let me know that
you were giving the British the same information that
you were giving me and that you had told the British
that, once the statement was issued, they should get into
touch

- 12 touch with the Federal Reserve Bank at New York toward

working out details of gold reciprocity. You told me
that in your press conference you would answer any

general questions, but that you would not explain

that the gold price was to be fixed on a daily basis.
You told me that I could leave with Minister Auriol
copies of the messages you were sending me that night,

and it was arranged that I telephone you back at 2:30
p.m. the next day to give you the French reaction.
Before we finished our conversation I let you know that
I had talked with M. Cariguel during the day and he had
asked me if I had received any information from you on
gold reciprocity, since no word had been received from
the Federal Reserve Bank directly, and Undergovernor
Fournier was becoming quite nervous.
On the morning of October 9 the Embassy received

your cablegram No. 391, giving the text of the communication from the Chancellor of the Exchequer, and No.

393, setting forth the gold statement which you intended
to issue on Monday afternoon. The second of these

messages did not arrive until after 9 o'clock, and,
because of errors in transmission, it was no possible
to complete decoding thereof until 11:45. As soon as
I had received the finished copies from the code room,
I proceeded to the Ministry of Finance, where I was
received by MM. Auriol and Baumgartner. I summarized
developments to them and mentioned the idea of your

making a declaration at 4 p.m. on Monday, October 12.
I

- 13 -

I then went with M. Baumgartner to his office; I let
him read the two messages and then left with him

excerpts therefrom, consisting of the text of Mr.
Chamberlain's communication and the text of your
proposed declaration. M. Baumgartner told me that

he would talk with Undergovernor Fournier of the Bank

of France at 1 o'clock that afternoon and would try to
give me an answer between 4 and 5 p.m.

After returning from the Ministry of Finance, I
put in a call for you, at 12:50 noon, and got connection at 2 p.m. I reported the developments of the
morning to you. When I mentioned that your proposed

statement had come through in form practically identical

with that originally drafted, you volunteered that you
were working under terrific pressure, which I easily
understood. You said that the first step, the tripartite declaration, had been a great success and that
you had to move cautiously with this second step. You
gave me additional information which you said I could
pass on to the Bank of France.
Consequently, at 3:25 p.m., I telephoned M.
Baumgartner, who was then at Governor Fournier's office.

I told him that I had talked with you. I explained
that you desired that the French and British give out
your statement to the press; that they comment thereon;

and that they indicate that they are going to give gold
to the other two parties of the agreement under similar
conditions, that is, that gold moves on all sides of
the

- 14 -

the triangle; and, finally, that the declaration be
given to the press at 4 o'clock in Washington and 9
o'clock in Paris and London. I let M. Fournier know
that he was free to discuss with the Federal Reserve
Bank of New York the technical details incident to
procuring a working arrangement with the United States

along the lines being consummated with the British, as
set forth in Mr. Chamberlain's memorandum.

At 5 p.m. on October 9, I sent cablegram No. 983,

letting you know that the Paris bourse had turned quite

weak, with a decline in rentes, and that the reflux of
capital to France had slackened, for domestic and

international political reasons.
At 5:45 I telephoned M. Baumgartner and made an

appointment for 7 o'clock that evening. At 7 o'clock
he gave me the British communiqué which the Bank of
England had telephoned through the Bank of France.

The French were willing to give a simultaneous

declaration and were preparing it, their declaration,
and translating the statement of the Secretary of the
Treasury into French, for issuance at 9 o'clock on
Monday night.

At 9:15 p.m., October 9, I spoke with you from
my home. I told you that I had given your message to
MM. Fournier and Baumgartner, and that they had talked

with London and had received the text of the British
communiqué. You told me that you had not yet received

the British reply directly. You would telephone or
cable

- 15 -

cable it to me as soon as received. When I told you
that I was planning to leave for Basel on Saturday

night, to be there for the B.I.S. meetings, you told
me that you wanted the text of the English declaration
cleared up before I left. I mentioned in this conversation the sending of a special emissary by Dr. Schacht

to Minister Auriol.
At 10:20 a.m., October 10, I talked by telephone

with M. Baumgartner. I told him of my conversation
with you of the preceding evening and mentioned that

you had not yet received the official text from the
British. M. Baumgartner said that he had that morning
received the text officially through his Financial
Attaché in London, and that this was exactly the same
as the text which had been received by telephone through
the Bank of France.

In my cablegram No. 985, sent at 1 p.m., October 10,

I let you know that the French financial press was
continuing to criticize French legislation and regulations
against alleged hoarders and speculators, it being felt
that such measures were tending to prevent the reflux

of French capital. I also reported that I had talked
with M. Cariguel during the morning. He had told me
that he had worked out with the Federal Reserve Bank
at New York a forty-eight hour arrangement on gold.
At 3:15 p.m., October 10, you telephoned me at my

home. You stated that the British had given to you the

official statement, which was entirely satisfactory.
You

- 16 You had not checked this against the one which I had

telephoned you the preceding night. I let you know
that I was examining M. Baumgartner's French trans-

lations, and it was understood that these translations
were to be sent to you. You approved my 'departure for

Basel that night, for return to Paris on Tuesday morning,
but you wanted me to make sure that the French were not

to permit any leak before Monday night.

At 7:15 on the night of October 9, I had received
from M. Baumgartner the text, in English, of the
communiqué which the British planned to give to the

press. I had informed you of this in our conversation
by telephone on the night of October 9. At 12:35 noon,
October 10, M. Baumgartner transmitted to me a French

translation of the British communiqué and also a French

translation of the declaration which you proposed to
make. I checked these translations and called M.
Baumgartner back at 4:30 p.m. at the Ministry of Finance.
He agreed to one or two changes which I suggested and

he promised to maintain absolute secrecy until the
communiqués might be released at 9 o'clock on Monday

evening. He also promised that he would cable to his
Financial Attache in Washington the text in French of
the communiqués which he was issuing, in order that
these might be communicated directly to you.

Consequently, I left Paris at 10 o'clock Saturday
night, October 10, and spent Sunday and Monday in Basel.

In my cablegram No. 992, filed at 11 a.m. on
October

- 17 October 13, I summarized the information which I

gained on my visit at the B.I.S., where the principal
topic discussed by the Central Bankers over the weekend had been that of the currency changes started by
the three-power agreement. The general opinion was

that while the first purpose of the three-power plan
had fundamentally been to help France devalue, the
agreement had been received with such world-wide
interest and had been followed by such wide repercussions on other monetary systems that the plan had

probably acquired an even greater significance than
originally conceived.
I let you know the manner in which the Swiss and
Dutch Central Banks were conducting their currency

measures. I told you of the British and Italian
opinions. I particularly stressed the unhappiness of
Dr. Schacht over having not been informed, through the

B.I.S. or otherwise, of the plans for the tripartite
arrangement. Finally, I let you know that it was
generally agreed at Basel that the French had been

short-sighted in penalizing hoarded gold and in taxing
alleged profits from speculation. It was thought that
the return flow of capital would be much larger if the
French would not establish penalties. You telephoned
me at 3:25 p.m. on October 13. I summarized my Basel

cablegram above-mentioned. I told you that the
atmosphere here was more optimistic and that the
tripartite gold reciprocity announcement had appeared
as

- 18 as scheduled and had been well received, with the

slight exception of the "day-to-day" character thereof.
You told me that the story had gone over very well in
the United States and that the press had been quite
satisfactory, the best story having appeared in the
NEW YORK HERALD TRIBUNE.

In my cablegram No. 993 of October 13, 5 p.m.,

I made the point that the announcement of the preceding

evening of technical arrangements for reciprocal gold
movements between the French, British and American
Stabilization Funds had enabled the French Government

to display evidence that the agreement into which they
had entered was fully equipped with means to make it
effective.
At 4 p.m. on October 14, I depatched my cablegram

No. 1001, in which I reported the day's developments.

I also said that in a talk by telephone with Dr.
Jacobsson I had learned that the resident officers of
the B.I.S., and particularly the German Assistant
Manager, had been quite provoked to learn on the

morning of October 13, following the day of their
Directors' meeting and the departure of the Directors

for their respective capitals, that the three powers
had consummated a further arrangement of intense interest
to Central Bankers. Dr. Jacobsson had told me that M.

Beyen was considering the propriety of cabling the
Federal Reserve Bank of New York to the effect that
the B.I.S. thought the new move was good as far as it
went

- 19 -

went but that the B.I.S. would like to see it go
further. In my cablegram I mentioned that M. Baumgartner had told me that he considered the Paris press
reception of the new arrangement quite good, but that
there had been some political sniping, with the twentyfour hour feature the most vulnerable point. French

technical writers were generally appreciative of the
fact that this arrangement constituted a big forward
step. I quoted comments by French and British

financial writers.
You telephoned me at 3:15 p.m. on October 15.

You stated that you had two matters to take up with me.

First, my friends in Switzerland had cabled to the
Federal Reserve Bank that they wanted to join the gold
pact. The Federal told them that this matter would
have to be taken up through the Secretary of the
Treasury. You had consulted with the Department of

State, and the latter was glad to approve your use
of me in conducting the necessary negotiations in

Europe. An instruction was to be sent out from the
Department of State to the Paris Embassy the same day

to this effect, but you desired to save a few hours by
telephoning me. The American Minister in Switzerland
was not informed of the above facts, but I was to keep

him advised of any developments. I was not instructed

to consult with him. You stressed the point that you
desired to do business with the Minister of Finance,
that is, that negotiations would be between governments,
rather

- 20 rather than through their Central Banks.
The question had also been raised by Belgium.
Governor Franck of the National Bank of Belgium had
cabled Governor Harrison of the Federal Reserve Bank

of New York as follows: "On reciprocal conditions
your cable we confirm our arrangement to sell gold to

United States our legal parity. Please transmit to
Treasury." You explained that the Federal Reserve
Bank of New York had, at your request, telegraphed
the text of your gold announcement of October 12 to

the Central Banks. As in the Swiss case, the Belgians
had been informed that they had to work through
Treasuries.

You were to advise the British of the aboveindicated interest of the Swiss and Belgian authori-

ties in joining the gold pact. You desired that I
inform Minister Auriol in the same sense. I was to
ask the French Minister of Finance whether he desired

to join with the United States in extending reciprocal
gold privileges to Belgium and Switzerland. I was to
ask whether France already had any arrangements with

these two countries. I was to make it clear that we
were being spontaneously considerate of France and

Great Britain in keeping them informed and in ascer-

taining their interest toward joining in this
extension of the pact.
You explained that Belgium was probably the only

country eligible to draw gold from us under the old
announcement

- 21 announcement of February 1, 1934. You did not want
to cancel this announcement until you had a new
arrangement with Belgium. You did desire, however,
that the arrangement of October 12 should supersede

that of February 1 and that the earlier arrangement
be cancelled. That is, the reciprocal agreements
would be between Treasuries, and Central Banks would

act simply as agents of the Treasuries. It was not
essential that a country have a stabilization fund,
although it was perhaps easier if they did have such
a fund to operate through in cooperation with the funds
of the United States and other countries. The Ambassador
in Brussels was not being instructed as to my trip, but
I was to keep him informed.
You desired that the countries with which we
entered arrangements should be able to keep up their

own end, that is, support their own exchanges. You did
not want to take on any "lame ducks." You stressed
again that you wanted to cancel the 1934 arrangement

as soon as possible and have the October 12 the only
gold arrangement. You said again that the Department
of State was glad to have me act in the above-mentioned

capacity. You used the expression "through diplomatic
channels" two or three times when talking with me, to

the effect that negotiations should be through such
channels and not through the Central Banks. I asked
you if you meant that the negotiations should be through
the usual channels of our Embassies in the respective
countries.

- 22 -

countries. You said no, but through the "MorgenthauCochran" diplomatic channels. You desired, however,

that I inform Ambassador Bullitt of this arrangement.
When you inquired if I had any questions, I asked
you whether I was to go to Brussels and Bern. I thought

it would be better to discuss the matter in person. You
said I was the salesman of the idea and that I should
use my own judgment. Likewise, when I asked you if I
could make the appointments with the Ministers of
Finance through my Central Banking contacts, namely,
Governor Franck of the National Bank of Belgium and
President Bachmann of the Swiss National Bank, you said

you left this entirely to me. I told you that if I
made the trips I would send no cablegrams while absent
from Paris. You asked me to let you know whenever I

left Paris and to get in touch with you upon my
return.

At 6:45 p.m., October 15, I called on M. Baumgart-

ner at the Ministry of Finance. I told him of your
telephone call above-described in regard to the Swiss
and Belgians. M. Baumgartner said that he was sure
that the French would be glad to associate themselves

with this move. He would have to speak with the Minister
of Finance and would telephone me at 10 o clock the next
morning, October 16.

My cablegram No. 1008 of October 15, 5 p.m.,

described the exchange situation and quoted from the
London TIMES a report of Mr. Eden's speech, in which he
had

- 23 -

had referred very nicely to the tripartite arrangement
and its consequences.
As agreed, M. Baumgartner tel.ephoned me at 10

o'clock on the morning of October 16, but said that
the Minister of Finance had been ill and would be

late getting to the Ministry. M. Baumgartner subsequently informed me that the Minister was quite in
accord with the arrangement for bringing the Belgians

and the Swiss into our group. At 10:45 on the morning
of October 16, I telephoned Governor Franck of the
National Bank of Belgium at Brussels and made an

appointment with him for 10 o'clock the next morning.
It was arranged that he would receive me at the Bank

and would fix an hour for the Minister of Finance or
the latter's competent representative to meet with us.

I left this in Governor Franck's hands, simply explaining that I must be in touch with the Ministry of Finance.
I also telephoned to President Bachmann of the Swiss
National Bank at Zurich at 11 a.m. and made an appointment to meet him on October 19 at 9:30, at the head

office of his Bank in Bern. He was furthermore to
arrange an appointment for us with the Swiss Minister
of Finance for 11 a.m., October 19. I urged upon
President Bachmann the necessity for completing our

business on the one day, so that I could return to
Paris on Monday night.
On October 16 I had received the Department's

cablegram No. 405 of October 15, 12 noon, authorizing
me

- 24 me to establish contacts with the Swiss and Belgian

financial authorities and to negotiate with them in
your behalf. Your message No. 406 of October 15,
5 p.m. gave the texts of the messages which had been
received by the Federal Reserve Bank at New York from

the Swiss National Bank and the Governor of the National
Bank of Belgium.

In my message No. 1010 of 4 p.m., October 16, I

let you know that I was proceeding to Brussels that
night and to Bern on Sunday evening, and that Ambassa-

dor Bullitt had telephoned Ambassador Morris at
Brussels and Minister Wilson at Bern, informing them
of my plans.

Your cablegram No. 409 of October 16, 5 p.m.,

and your No. 410 of October 16, 6 p.m., giving the
texts of the Federal Reserve Bank's replies to the
National Bank of Belgium and the Swiss National Bank,

respectively, were not received in Paris until early
on the morning of October 17. I had arranged, however,

with an Embassy code clerk to be on duty quite early
that morning. The two messages were, therefore,
decoded and telephoned to me at my hotel in Brussels

before I went to the National Bank of Belgium to keep
my 10 o'clock appointment.
At 9:30 on Saturday morning I called on Ambassador

Morris and explained my trip to Belgium. The Ambassador

suggested that before leaving Brussels I call on the
Prime Minister, M. Van Zeeland, whom I have known for
some

- 25 some years.

After receiving in Paris your instructions to
visit Belgium and Switzerland for the purpose of
carrying on the negotiations under reference, I spent
some time going over all documents available to me in

regard to effective monetary legislation of those
countries. Your instructions as to the form in which
some arrangement should be reached with the monetary

authorities of the two countries were quite general.
I worked out the idea that perhaps the best arrangement
would be for the competent authorities to make a
declaration wherein they made clear the existing laws
affecting domestic and international gold dealings by
them, and indicated their competency and willingness

to effect gold dealings on a reciprocal basis with
your Treasury. Such a declaration should facilitate
your study of the eligibility of each country, since
this declaration would summarize pertinent legislation,
would indicate what type, if any, of stabilization or
equalization fund was in existence, and its method of
operation.

With the above plan in mind, I called on Governor
Franck of the Bank of Belgium at 10 o'clock on October
17. He had with him M. Joseph Warland, the General
Manager of the Belgian Treasury and Public Debt, and
M. Adolphe Baudewyns, Secretary of the National Bank

of Belgium. I referred to the exchange of cablegrams
between the National Bank of Belgium and the Federal
Reserve Bank of New York, and I indicated my purpose
in coming

- 26 -

in coming to Brussels. I had with me documents to

assist in explaining the American position and in
suggesting the lines along which the Belgian authori-

ties might clarify and set forth the Belgian position
with respect to gold transactions. A declaration was
then drafted in French.
After completion of the draft, MM. Franck, Warland

and I went to the Ministry of Finance, where the
Minister, M. Henri de Man, received us. He read,
approved and signed the declaration as drafted, after
Governor Franck and I had explained to him the purpose

thereof. Governor Franck signed the declaration, after
the Minister had signed, and the Minister of Finance
then handed the document to me. M. de Man was then

kind enough to telephone Prime Minister Van Zeeland,

with whom he arranged a twelve o'clock interview for
us. Governor Franck and I explained to the Prime

Minister the purpose of our visit, and he read the

declaration carefully. He found it quite satisfactory,
but he made the point that, relative to the second
paragraph of the first article of the declaration,
Belgium had had no provision of law which restricted
gold dealings to countries of the gold block and the

United States. After leaving the Prime Minister, I
returned with Governor Franck to the National Bank of
Belgium, where I translated the document from French
into English and had it checked by Secretary Baudewyns.
I lunched with Ambassador Morris and showed him
the