Quick Crisis

In Paris the social reforms, devaluation and so-called "New Deal" introduced by Socialist Premier Leon Blum were giving his Cabinet racking headaches last week, for Finance Minister Vincent Auriol was spectacularly running short of cash, so short that with much trepidation he was getting up his nerve to launch a 10 1/2 billion franc (about $480,000,000) Government loan.

Like the Roosevelt New Dealers, who are loudly praised by Premier Blum on frequent public occasions, the present French coalition of Communists, Socialists and Radical-Socialists take a confident view of themselves as much holier than Mammon, and Finance Minister Auriol has a habit of alternating blandishments and threats to thrifty Frenchmen who< are comfortably off. Only a few months ago M. Auriol tricked investors by bringing out a "baby bond issue" with gushing Socialist appeals to French proletarians to buy, then devalued the franc in which these bonds are repayable 40% (TIME, Oct. 5). By last week the upping of wages and shortening of hours under the Blum deal had so greatly raised French costs that many a French exporter found himself obliged to quote to overseas clients prices in devalued francs which work out in dollars or pounds about the same as before devaluation. Thus, especially in French wholesale markets, the more or less illusory "benefits of devaluation" are fading fast, and plenty of evidence had piled up in Paris that much of what Socialist Premier Blum has been doing is to attempt a series of risky experiments, however noble. Upon that record, could Finance Minister Auriol succeed in floating 104 billions in bonds? From the box of absent Speaker Edouard Herriot, who was abed with bronchitis, the Premier's charming wife, vivacious Mme Blum, decided to sit through the final Chamber debate on whether to issue the bonds. Just behind her sat the wife of Conservative Deputy Paul Bietrix, and the speech Premier Blum was making gradually amused Mme Bietrix more & more, until finally she greeted its close with a derisive shriek of laughter. Snapped Mme Blum, turning around furiously, "Hush up! You couldn't do as well as he!" Other statesmen's wives seated nearby joined verbal battle with such vim that the Chamber entirely dropped work, amused Deputies had eyes only for Herriot's box, the Premier's wife flushed beet red realizing that she had perhaps not behaved quite as the Premier's wife should, and devoted M. Blum hastily rushed upstairs to soothe her and calm the angry boxful with his suave tact.

What had so amused rudely-laughing Mme Bietrix was a most grave matter indeed. As financial correspondents were soon tapping out on their typewriters, the Blum Cabinet, in order to assure success of their loan, had modified the financial policies of their New Deal so drastically as almost to have reversed them. They had not however junked the social aspects. On the fiscal side, French New Deal persecution of gold hoarders was dropped; they were enabled, without giving even their names, to get full value for their gold at the Bank of France (i. e., a "40% profit" in devalued francs) and to buy bonds payable in francs, dollars or sterling upon demand; finally Finance Minister Auriol inspired confidence by giving up his stranglehold on the French currency exchange control fund and this will be managed by a new committee, one of which is Professor Charles Rist, long-time Bank of France executive and about as radical as Virginia's Carter Glass. In his speech Premier Blum had smoothly avoided replying to taunts that he himself seemed to have become about as radical as Britain's Ramsay MacDonald and to be leaving in the lurch the French proletariat--but the Communists and Socialists did not last week leave M. Blum, as English Laborites turned from Mr. MacDonald. The Reds scowled, but voted for the financial volte-face of Blum, the Pinks voted for it, and virtually the whole Chamber voted for it by the tremendous majority of 470 to 46. That might seem excruciatingly funny to some women, but to the enormous majority of steadygoing French folk it seemed like a godsend. Two nights later they heard on the radio President Albert Lebrun, a figure much esteemed for his dignified embodiment of the point of view of a small-town Frenchman, tell them that the entire nation must lay aside partisanship and buy up the loan.

In July 1914 a French Government loan of 5,700,000,000 present-day francs at 31% was oversubscribed 40 times on the first day. Last week 5,000,000,000 francs of the new loan at 4 1/2 were subscribed within eight hours. Delighted MM. Blum & Auriol four days later offered another 2,500,000,000 chunk of their 10,500,000,000 issue, "the largest peacetime loan in the history of France," and the French Parliament prepared to adjourn over Easter with broad smiles.

To give his Communist and Socialist supporters something to tell the proletarians back home, Premier Blum issued a Cabinet decree "nationalizing" the Schneider-Creusot works, biggest French armorers, and commonly called by irate Red & Pink orators such names as "The Blood-Sucking Armament Octopus." There was no reason to suppose that Ramsay Delano MacBlum was not perfectly sincere in issuing this decree, but it does not go into effect on any particular date. Eventual action is made to turn on the advice of the French General Staff, which is about as keen to turn Schneider-Creusot over to political Reds & Pinks as to turn it over to Adolf Hitler.

Meantime, a finesse which might have opened a tiny entering wedge in the Johnson Act was tried when the French New Dealers asked the Washington New Dealers last week if a fiscal agent such as J. P.

Morgan & Co. might be appointed--not to sell the bonds in Manhattan, for that would be illegal--but only to pay coupons in dollars to holders of these French bonds who might turn up in Manhattan and ask for payment in dollars. Although Secretary of the Treasury Henry Morgenthau Jr. took this occasion publicly to wish the French loan "great success," the Treasury was obliged to inform Paris that there would indeed be Congressional perturbation over any such attempt.

Morgenthau showed his close sympathy with Blum, however, by remarking to Washington correspondents: "So far as putting ten $100 bills in an envelope and sending the money to France for investment is concerned, there is no way to stop that." As $1,000 is 21,000 francs this was big news to Blum and even to Republican Senator Hiram W. Johnson, author of the Act. "The law is perfectly plain!" snapped the Senator. "It is unspeakable that any American or any official of the Government should seek to evade it."

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