Papers Relating to the Foreign Relations of the United States, The Lansing Papers, 1914–1920, Volume I

841.51/266

The Secretary of the Treasury (McAdoo) to the Secretary of State

North Haven, Maine, August 23, 1915.

Dear Mr. Secretary: I enclose copy of a letter from James B. Forgan, of Chicago, to Vice-Governor Delano, of the Federal Reserve Board, in reference to the matter of foreign loans in this country. The foreign exchange situation is so serious that it may become imperative for some of the foreign governments to establish credits in this country in order that they may continue to purchase freely our farm products and other supplies. The attitude of the Government, as expressed in the letter of Secretary Bryan to Senator Stone, January 20th, 1915,¹⁰ may seriously embarrass the creation of such credits in favor of foreign governments as are needed to enable them to continue their purchases in this country. Germany, by the way, disregarded this letter and placed more than ten million of short-time notes in this country through Chandler Brothers, of Philadelphia. It is not my purpose, however, to discuss that; I only mean to direct your attention to the importance of giving very serious thought to the points raised in Mr. Forgan’s letter. I have always felt that it was a mistake for our Government to discountenance in any way the establishment of credits in this country in favor of foreign governments, such credits to be employed in purchasing supplies in this country. It seems to me entirely inconsistent to say that the purchase of our farm products and manufactured articles and other supplies by foreign governments is lawful and to be encouraged, and then to say that we discourage and discountenance as being unneutral the credit operations which are an essential part of such transactions.

I merely desire to call your attention at the moment to the seriousness of the question and to say that I hope no action will be taken that will add to the embarrassments of the situation by reaffirming or emphasizing the position taken in Mr. Bryan’s letter of January 20th, last, until I have had an opportunity to discuss this with you and the President.

I shall certainly be in Washington on the first of September—maybe sooner. I look forward with pleasure to seeing you then.

With warmest regards [etc.]

W. G. McAdoo

[Enclosure]

The President of the First National Bank of Chicago (James B. Forgan) to the Vice Governor of the Federal Reserve Board (F. A. Delano)

Chicago, August 17, 1915.

My Dear Mr. Delano: I want to get some information for a very confidential purpose and it has occurred to me that you may be in a position to help me secure it.

It is, to put it bluntly; I would like to know what the attitude of the government administration in Washington would be towards the flotation of a large British loan in this country. Sometime ago I remember seeing in the press that the State Department had discouraged New York bankers on a proposition to float a British loan in this country, but at the same time it was stated that it was not within the province of the government to veto such a transaction. It would seem to me that the present condition of international exchange would deter the government from entering any objection to the flotation of such a loan in this country, or to the sale by Great Britain of American securities in this country. One or other of these transactions would seem to be a business necessity at the present time. As I am in a bit of a hurry to get the information I would appreciate a telegram indicating what you believe the government’s attitude would be. You might send me one of the following telegrams to indicate which of the positions you think the government would take in regard to the flotation of a large British loan in this country and I will understand your meaning:

1. Parties would be favorable to and would encourage such a transaction.

2. Parties would take no action either for or against such a transaction.

3. Parties would discourage such a transaction but would not offer any active interference with it.

4. Parties attitude would be such as to make such a transaction practically impossible.

With kind regards [etc.]

James B. Forgan

10. Foreign Relations, 1914, supp., p. VII (sec. 13).