462.00R296/4947a
The Secretary of State to President Hoover
Dear Mr. President: We are far enough away from the London Conference now to enable me to try to give you a birdseye picture of it from this end. I have been somewhat disturbed by the American press accounts which I have now received concerning the alleged misunderstanding between you and me, and although your kind telegram of congratulations17 is a reassurance, I should like you to know exactly the situation which Mr. Mellon and I faced in the Conference and which determined our course.
On July 15, the day I arrived in Paris, you told me over the telephone, as you doubtless remember, of the extreme gravity of the situation; how you felt that everything depended upon the holding of a Conference of Ministers in London with the French present, and a successful and harmonious joint solution to be arrived at by that Conference. The seriousness of your words deeply impressed me and I took that statement as the general mission and objective for which you wished me to strive. Henderson, who had arrived in Paris before me, had already made a quick and wise decision at an informal conference with Laval to give up his own trip to Berlin on condition that the French would come to London. But I very soon found there was still great danger that they would not actually go. [Page 316] I found that Henderson, who is not a financier, had imperfectly grasped the nature of the French proposal of a government-guaranteed loan, and, on the other hand, that his home Government, under the influence of Norman, were extremely suspicious of the good faith of the French, and believed that the whole French proposition was a mere bluff to serve as a bait to give them an opportunity to extort extreme political concessions from Germany. Accordingly, the British Government were fearful that Henderson was having his leg pulled and were sending him rather rigid instructions which, in turn, were tending to arouse friction between him and the French.
My first step was to make it clear to the French that we could not join in guaranteed loan and to do this without giving them an excuse of throwing up the whole conference and saying that it was our fault. Laval’s attitude at the first conference, when this matter was discussed and where he accepted our position and yet consented to go on, suggesting for further discussion a compromise proposal which left us free from any government guarantee, was strong evidence in my mind of his sincerity and of the exaggeration of Norman’s fears. But by this time Henderson had become frightened and when Laval asked to have further preliminary conversations at Paris, telling us frankly that he desired them merely for the purpose of preparing the mind of his own people so that they would accept the final result of a subsequent conference, which they might otherwise reject for the reason that it was held in London, Henderson made Laval’s course as difficult as possible, and I became gravely alarmed lest the whole thing should fail. Laval had never been out of France to a similar conference and was thus facing a situation entirely new to him. On Saturday, July 18, I went to see him entirely alone and in an informal talk took occasion to tell him that from my previous experience with MacDonald in the Naval Conference I felt confident that he, Laval, could expect perfectly fair treatment. After the Conference in London was all over, Laval reverted to this talk with me with expressions of gratitude. I am inclined to think it was one of the determining elements which induced him to go at a time when he was wavering.
In the conference on Sunday, July 19, at which, in addition to us and the British and Germans, the Belgians and Italians were also present, I stated the substance of the American position, pointing out that stabilization of the short-term credits was in our opinion the indispensable preliminary step before any additional credits should be considered, and using on the spur of the moment the illustration of the leaky tub, which at once caught the attention of the other delegates and through them got out into the press. In that meeting Laval formally announced the date of his departure for London. By the [Page 317] time I had left Paris on Sunday afternoon, July 19, I had satisfied myself that Laval was not playing the deep game of duplicity which Norman had charged him with, but I was not at all sure whether the French might not stubbornly insist upon their loan proposition with all the risk involved and make it necessary for us to have a standup fight with them before the Conference in London. The effect of such an issue would in any event be lamentable and might entirely wreck the rehabilitating purpose of the Conference.
Furthermore, both Mellon and I had been strongly impressed by the gravity of the situation in Germany which was disclosed to us by Bruening on Saturday night, and, while we did not waver in our concurrence with you that the stabilization of existing loans was the essential first step, we were much troubled as to how long the Bruening Government could hold out under the stimulus of that program alone. Bruening had insisted that it might really be only a matter of a few days. In order to acquaint you with this situation, we wrote you on the train on Sunday evening the warning cable which you must have received on Monday.18
We reached London Sunday at midnight and Monday morning, July 20, your detailed proposal contained in cable No. 218 of the Department of State19 was placed in my hands in London for the first time. It was an admirable statement of the proposition for which we had already been arguing in Paris and was used by me throughout the Conference as my trial brief.
Monday morning I called on MacDonald and talked over with him the plans for the Conference. I found that he was already familiar with what had taken place in Paris, having received through Henderson the notes of the three conferences there. He was quite familiar with our proposition as to the stabilization of credits and quoted to me my tub illustration with approval. He then showed me confidentially the draft of his opening speech to the Conference in which at the close he alluded to the two relief plans before the Conference, viz., the loan plan and the stabilization plan. He told me that he thoroughly agreed with us and that his Government under no circumstances would or could consider a guaranteed loan. He accepted an amendment which I suggested to his opening speech, eliminating a statement which I thought provocative to the French.
Thus, at the time when we entered the actual Conference in London, the chief problem which I had to face was to secure the consent of the French to a program which was acceptable to the British and probably the other minor countries. This had to be done in the face of the fact that the French had a different constructive proposition. [Page 318] Furthermore, it was necessary to accomplish this in a way which would not produce the appearance of a sharp difference of opinion, as well as a holding back by us and the British from aid which the French were ready to give. The situation was complicated by the fact that Bruening himself thought that our program was inadequate.
Just at this juncture, on Monday evening, you called me up and told me that some newspaper report from New York had represented me as endorsing the French loan position and suggesting that you “make a hundred-word statement” to dispel that idea. I replied that the situation was so delicate that I hoped you would not do so; that the following day, Tuesday, would be the crucial day, and I feared the effect of any outside governmental statements, at least until after that session. You acquiesced. Shortly after, Castle called me up and renewed the suggestion, saying that Mills rather insisted on the statement being made. I again insisted that it should not be done, and I accordingly entered the Conference Tuesday morning feeling assured that nothing was coming from Washington to disturb the delicate situation which I believed I faced.
The session Monday evening was occupied with merely the preliminary address of MacDonald, a report by Laval of what had taken place in Paris, and a statement by Bruening of the condition of Germany.
On Tuesday morning, July 21, at ten o’clock we met for the first real discussion. I had risen at six o’clock and on the basis of your cable of instructions, which I had received the day before, prepared the minutes of a speech setting forth the American proposition in case it should be needed. By that time, however, I had made up my mind that the French were gradually losing faith or interest in their loan proposition and if let alone would probably allow it to die, and I decided on the basis of that that it would be wiser not to run the risk of nagging them into a rehabilitation of their plan by any dramatic announcement of our plan. When in Paris I had found the ground swell of French acrimony against us for having sprung the moratorium proposal on June 20 to be still very bitter—unfounded and unreasonable as that feeling was. Furthermore, I had vividly in mind how the French delay in accepting your debt suspension program had practically destroyed its recuperative momentum and had brought on the present crisis. I therefore believed that it was of the utmost importance that the present Conference should be brief and harmonious, and that depended entirely upon swinging the French along with us from the very beginning. All of this gave me my warning and decided me in favor of introducing our proposal to the Conference in the most unobtrusive way possible. When the Conference opened Tuesday morning, fortune played into our hands, and I found my [Page 319] guess about the French was correct. MacDonald in his opening remarks referred to the two propositions which had been advanced in Paris, the loan proposition and the stabilization of existing credits. He offered the French an opportunity to discuss their loan proposal. They hemmed and hawed and sat silent. Snowden, who has a talent for making mischief, tried to goad them into a defense of it by some rather critical questions about it which he addressed to them. MacDonald came to the rescue by calling upon Bruening to give his views as to Germany’s need. After he had made a short statement I saw my chance and taking Bruening in hand as if he were a witness in court, I led him along until I got him to admit that a stabilization of the existing loans was in his opinion a primary and indispensable step in the solution of Germany’s condition. When Snowden broke in again, I took him in hand and finally brought him to the same admission. Then Snowden asked me my views and I then stated your entire proposition as well as I could in my own language and adapted to the previous discussion which had taken place. Thus, when the session ended, your proposal had been brought out before the Conference in the most natural and inoffensive way; Bruening and Snowden had both been made to admit that it was at least the first indispensable step to be taken and the French loan plan was dead without having been killed by anybody except themselves.
When I got back to my hotel that afternoon and went into my press conference I was bombarded by all of the correspondents with the news that the State Department at Washington had announced the previous day, Monday, that “a new American proposal” would be made by me in the Conference on Tuesday morning and that the terms of this proposal were already on the wire coming to London. I was at a double disadvantage, first, because after my talk with you and Castle over the telephone I did not expect any statement whatever to be either announced or given out without further notice and did not know what “a new proposal” meant; second, because the meetings of the London Conference had been in executive session and I felt under an honorable obligation not to divulge the details of what had taken place. Your instructions in cable No. 218 had expressly left it to my discretion how the American proposal should be introduced. I had in fact, as I have said, been using them as my trial brief. I therefore could not understand why they were being made public, and, in fact, had received no previous notice whatever that they were being so made public. My press conference was therefore rather a tumultuous proceeding, the correspondents insisting that this statement was already on the wires, and I had to disclaim any knowledge of it and yet was disqualified from telling them exactly what had happened in the meeting.
That I had not been entirely mistaken in my apprehension as to the effect which such a statement might make upon the French, if introduced [Page 320] as a formal proposal into the meeting, was rather confirmed by the effect which the news of the statement in Washington made upon their delegation in London. I was informed that afternoon that it created among them great confusion and consternation, and that for a little while they were thinking of returning to Paris. Fortunately, the meeting of the Conference had been ended in a harmonious spirit and before the next morning came everybody had settled down to the realization that no coup was being attempted and that the statement in Washington was merely intended to cover the same matters which we had discussed in the meeting.
On Tuesday afternoon the committee meeting of all the various Finance Ministers was held to draft a statement of our conclusions for the final action of the conference. Mellon represented us at this meeting. On my suggestion he carried with him into this meeting a copy of cable No. 218, in order that he might use it as I had in the general meeting as a guide for his action. When he returned from his labors in the evening he brought a proposal of three points which included, in addition to the stabilization of short credits and the extension of the $100,000,000 loan, a proposition for the rediscount by the various central banks of commercial paper now held by the Reichsbank secured by an indemnity fund which had been already raised by German industry. Bruening had declared in Mellon’s meeting that with these three points he could face his country with hope of success. Without the last one he could not. Mellon and I thought that with the aid of the guarantee funds the third proposition could be turned into a banking proposal of perhaps at least as much financial merit as anything that had been discussed. But when I called you up on the telephone you told us that our Federal Reserve Bank would not consider the proposition and that it must be dropped.
The following day, Wednesday, July 22, the plenary meeting of the Conference in the morning was occupied in repelling attacks on our program which had developed during the night. The British had become very pessimistic owing to withdrawals from the Bank of England and Snowden opened the proceedings by an attack upon the entire program, including the stabilization of short-term credits, which he had supported the day before. I answered him and restated our readiness to go ahead with that program and rather squelched him by reading to him the minutes of his statement the day before when he had so heartily supported the program he now denounced. MacDonald ineffectively tried to get the French to take over some of the British short-term loans to Germany. Towards the end of the session I introduced the motion for a committee which had been suggested in your cable of instructions.
[Page 321]Wednesday afternoon the Committee of Finance Ministers again met to conclude their draft of the proposal and this time they invited me to sit with them. We concluded the draft practically as it was adopted the following day and on Thursday morning in the plenary meeting the Conference was wound up. The results of their labors announced in their formal declaration embraced your entire program, I think, without any substantial omission whatever.
Friday morning, July 24, before he got away, I had a talk with Laval upon which I have already reported to you. It was of a most friendly character and the promises which he then voluntarily made to me as to the action which he proposed to take with the Bank of France in respect to withdrawals from England seem, as far as I can tell from the press and from MacDonald, to have been fulfilled to the letter. Laval’s statement of the friendly and satisfactory character of his talks with Bruening have since been confirmed to me by Bruening when I went to Berlin. My present impression is that in Laval we have a hopeful figure for the future in respect to French policy. Briand is failing, but unless I am greatly mistaken we can hope for Laval to give to moderate French policy a new leadership. His attitude throughout these conferences and in his private talks with me was in refreshing contrast to the viewpoint of Tardieu with whom I also talked.
At Berlin, as I have already reported, I had a series of very frank talks not only with Bruening and Curtius but with other members of their Cabinet, including particularly the Minister of War, and also with President von Hindenburg.20 So far as the financial crisis was concerned, those talks were confined to my impressing it strongly upon them that they could expect no further help from us and what in our opinion was chiefly needed was resolution and courage on their part. I told them what remained was a banker’s proposition and that no banker would lend money to a man who announced that he was broke. I asked Bruening if in 1918, when he was holding a machine gun post against an advancing enemy and received discouraging rumors, he would have poured out these rumors to men and he said, “Of course not.” I told him I thought the same spirit was required by him now. I expressed to Hindenburg the hope that Germany would show the same courage in dealing with the present situation that he himself had shown after the Hague Conference on the Young Plan when he had announced that Germany must stand on her own legs and carry out that plan.
Most of my conversations with the Germans, however, related not to financial matters but to disarmament. In those I went very frankly [Page 322] into what was the American attitude towards militarism not flinching from telling them how we felt towards them in going into the last war and applying it to our probable view as to any new militarism which should now come in Europe. I told them that they had in my opinion a very strong case for reduction in armament on the part of the rest of Europe arising out of their own present defenselessness, and that that situation was bound ultimately to win the sympathy of all impartial nations unless the Germans complicated it by new and unwise construction of their own.
On the whole I was very glad that I had come to Berlin, although I was there only two days. It gave me an opportunity for making our position clear and for receiving very frankly the views of the German Government, and, in addition to that, I spent Sunday, July 26, in company with Bruening going through the holiday crowds in and about Berlin and getting a firsthand impression of the German people at this moment. This was reassuring.
On my return to Great Britain I have had several further talks with MacDonald and Henderson. MacDonald has visited me here at Sciberscross Farmhouse, where I am staying in Scotland, and during his visit of two days I had very helpful talks with him on the subject of future policy as to disarmament.21 These were so long that I shall not try to enumerate them in this letter. In substance, however, the British have had a tri-party committee of Parliament at work for six months preparing for the Disarmament Conference next winter. This committee has contained in its membership the leaders of all three parties, including among others not only MacDonald, Henderson and Alexander of the Labour Party, but Lloyd George, Samuels and Philip Kerr representing the Liberals, and Chamberlain, Hoare and Inchcape and Eden representing the Conservatives. This committee, after getting reports from all the military services and from the Foreign Office has embodied its conclusions as to British policy in the Disarmament Conference in a resolution. MacDonald has placed in my hands, confidentially, this resolution and a number of the reports made to the committee on which it was based. At his visit to me we discussed them in great detail. He also discussed with me the steps which he has already begun taking to further the solution of the vexing political questions which lie as obstacles in the path of the Disarmament Conference. It has been on his suggestion that a series of visits between the Prime Ministers and Foreign Ministers of Britain, Germany, France and Italy has been undertaken beginning with the visit of Bruening and Curtius to Chequers last June. He told me what he hoped would be discussed at these conferences and on my return I should like to talk them over with you.
[Page 323]I have been now ten days in Scotland and am feeling very much refreshed and rested. I have taken my return passage on the Leviathan on the 28th of this month and hope to reach Washington full of new life and vigor for the coming year. I only wish that instead of the heat of Washington you might be now getting a little of the cool mountain air which I am breathing.
Faithfully yours,