462.00R296/4219b: Telegram
The Acting Secretary of State to the Ambassador in France (Edge)
314. For Mr. Mellon and Mr. Edge. If you think it advisable, you may show the French the following despatch, since it is deemed best for them to be fully informed as to our view on the entire question.
Because of the serious situation economically existing throughout the world and because all powers on whose adherence the working out of the proposal hinges have accepted, except France, the President feels that if it is impossible for France to reach an arrangement which will carry out the spirit of his proposal, he would consider announcing to the world his second suggestion, in order to counteract the reaction which a failure of the first proposal would undoubtedly bring about This second proposal is that the United States will agree to a post ponement of all payments by its debtors for a period of 1 year, to be funded in say 25 years, at an interest rate averaging that paid on our Government’s own public debt at the termination of the preceding fiscal year. The President’s second proposal would be open to acceptance by all powers who agreed to grant similar concessions to their debtors, on acceptance of the American proposal, whether these debts consist of reparations or intergovernmental obligations of another [Page 118] nature. Naturally, it is understood that a concession of this character cannot be accorded by the American Government or by other cooperating governments to any powers which will not, in turn, make similar concessions to governments in debt to them. That is to say, the original proposition was made to all large creditor nations collectively and was made dependent upon acceptance by all of them. Because of the urgent need to ameliorate the existing situation of world-wide depression, the United States will still hold open its offer to postpone debt payments to each of its debtors individually subject to the conditions above described. Naturally, it is understood that any program of this sort is dependent upon Congress’ approval.
The object of this suggestion is in no wise to bring pressure to bear on France for the acceptance of our proposals (as France will, of course, be included in this second offer), but in the thought that, in order to prevent chaos in the world economic situation and to preserve the advances made already, an action such as this is necessary to stem the tide.