The Vice President of the National City Bank (Samuel McRoberts) to the Acting Secretary of State 7

Mr. Counsellor: Supplementing our conversation of this morning, I desire to call your particular attention to the following conditions now existing in this country and abroad.

The outbreak of the European War came at a time when this country owed a large amount to Europe, particularly to England in the form of short time drafts, maturing between the outbreak of the war and the end of the year. The amount, while large, was not abnormal, considering the volume of our trade relations and was directly due to the anticipated shipment of cotton during the autumn.

War conditions, as you are aware, have made cotton bills unavailable for the settlement of this balance against us and it can only be wiped out by the shipment of the goods, in lieu of the cotton, that are now needed and desired by the various European countries. This is true, regardless of any temporary bridging over of the situation, and it has been the policy of the National City Bank, as far as possible and proper, to stimulate the unprecedented and unusual buying that is now going on in this country by foreign governments and their nationals. Since the beginning of the war this bank alone has received cabled instructions for the payment of in excess of $50,000,000 for American goods and the volume of this business is increasing. Owing to war conditions, this buying is necessarily for cash and it is of such magnitude that the cash credits of the European governments are being fast depleted. Lately we have been urged by manufacturers who are customers of the bank and, in some cases, by representatives of the foreign governments, to provide temporary credits for these purchases. For that purpose we have recently arranged to advance the Norwegian Government some three million dollars, practically all of which is to be expended for cereals in this country. Very recently the Russian Government has placed directly, and through agents, large orders with American manufacturers—such large orders that their cash credit has been absorbed and they have asked us to allow an overdraft, secured by gold deposited in their state bank, of some five million dollars.

Some of our clients have been asked to take short time Treasury warrants of the French Government in payment for goods and have, in turn, asked us if we could discount them or purchase warrants direct from the French Government for the purpose of replenishing [Page 137]their cash balances. We have also been asked by European interests practically the same question as to English Consols and Treasury securities. Some of our German correspondents have approached us with the suggestion that, without naming a particular security, we sell securities to increase their cash account with us, and we have little doubt this is indirectly for the purposes of the German Government.

We strongly feel the necessity of aiding the situation by temporary credits of this sort, otherwise the buying power of these foreign purchasers will dry up and the business will go to Australia, Canada, Argentine and elsewhere. It may in the end come back to us, but the critical time for American finance in our International relations is during the next three or four months and, if we allow these purchases to go elsewhere, we will have neglected our foreign trade at the time of our greatest need and greatest opportunity.

It is the desire of the National City Bank to be absolutely in accord with the policies of our own Government, both in its legal position and in the spirit of its operations and, while very anxious to stimulate our foreign trade, we do not wish to, in any respect, act otherwise than in complete accord with the policy of our government.

For the purpose of enabling them to make cash payments for American goods, the Bank is disposed to grant short time banking credits to European governments, both belligerent and neutral, and where necessary or desirable replenish their cash balances on this side by the purchase of short time Treasury warrants. Such purchases would necessarily be limited to the legal capacity of the bank and, as these warrants are bearer warrants without interest, they could not and would not be made the subject of a public issue. These securities could be sold abroad or be readily available as collateral in our foreign loans and would be paid at maturity in dollars or equivalent in foreign exchange.

This business which I have attempted to describe to you, we deem necessary to the general good and we desire to proceed along the lines indicated unless it is objectionable from the Government’s standpoint, in which case we assume that you will advise us.

Very respectfully yours,

Samuel McRoberts
  1. Numerous marginal and interlinear notations on this letter in Mr. Lansing’s hand indicate that it was used as a basis in the preparation of the memorandum accompanying his letter of Oct. 23, 1914, to President Wilson, infra.