File No. 841.51/68
The Acting Secretary of State to the Ambassador in Great Britain ( Page )
5139. At the request of the Secretary of the Treasury you may read to Mr. Balfour the following statement and leave with him a paraphrase thereof:
The American Ambassador at London informs me that at a conference with the Prime Minister, the Chancellor of the Exchequer, the Foreign Secretary, and the Governor of the Bank of England, and their advisers, regarding an overdraft of $400,000,000 owed to Morgan by the British Government, he was informed that Spring Rice, the British Ambassador in Washington, telegraphed on April 6 that a definite promise had been made to him that the British Government should receive this sum with a view to meeting this overdraft, and that the money from the Liberty Loan would be first applied to this purpose. It is not stated who, in behalf of the American Government, made such a promise to Spring Rice. No such promise was made or could have been made by the Secretary of the Treasury, or by anyone authorized to speak for him. The bill authorizing loans to foreign governments was not introduced in the House of Representatives until April 11, five days after the date of the alleged promise, and did not become a law until April 24. No one had authority to make such a promise on April 6.
It is also stated in Ambassador Page’s cable that it is claimed that Mr. McAdoo made the same promise to the Governor of the Bank of England on April 9. The Governor of the Bank of England did not arrive in Washington until April 22, and the Secretary of the Treasury had no communication with him until after his arrival. At no time, directly or indirectly, has the Secretary of the Treasury, or any one connected with the Treasury Department, promised to pay the Morgan overdraft.
[Page 544]Mr. Balfour had an interview with me late in April on the subject of loans to the British Government, during which we discussed the problem from many angles. I requested that a statement be submitted to me covering the British Government’s necessities and desires, and promised to give it consideration. Near the conclusion of the interview, Mr. Balfour spoke of the $400,000,000 due on overdrafts in New York and asked if it would be proper to include it in the statement. I said yes, include everything the British Government wished the Secretary of the Treasury to consider, and that I would give it as prompt consideration as possible. The interview with Mr. Balfour and his staff was for the purpose of discussing the situation generally and acquainting me with the essential facts to enable me to discharge intelligently responsibilities devolving upon me under the act of Congress. No definite program was agreed upon. Some of the most important information called for by me at that interview has been received only within the past few days; other essential information is still lacking. I stated at that time that the $3,000,000,000 of credit which Congress had authorized me, with the President’s approval, to dispense to foreign governments necessitated complete and comprehensive knowledge on my part of the European situation and the needs of the different governments; that these needs had to be related to each other; that the military phases of the situation were an essential part of my consideration and decision; that I was unable, at the time, to promise more than temporary relief, making advances from time to time as the facts justified. This course has been pursued consistently with all foreign Governments. They have been given advances from month to month, in such sums as the condition of the United States Treasury would permit, and as my judgment of the circumstances of each case warranted. I have already advanced to Great Britain $100,000,000 for July. I have under advisement her application for an additional $85,000,000 during the same month. Beyond that I cannot at this time go. I am looking carefully into the so-called Morgan overdraft. As soon as I am in possession of complete information about it, I shall be able to decide whether or not this Government can do anything in relation thereto.
Before any engagements beyond the month of July can be discussed, an understanding should be reached about a purchasing commission to be set up in Washington through which all purchases for the Allied powers in the United States should be made, and in connection therewith an agreement should be arrived at for the establishment of an Inter-Allied Council to sit in London or Paris to determine the relative needs and priorities of the different powers in the markets of the United States. This Inter-Allied Council should also make recommendations as to the allocation of loans or credits to the respective European powers. A draft of the suggested agreements will be forwarded shortly through the British Embassy at Washington.
The United States must of necessity reserve to itself independence of decision and freedom of action with respect to financial matters. Their financial policy will be dictated by a desire to cooperate to the fullest extent possible with the several powers making war in common [Page 545] against Germany, but America’s cooperation cannot mean that America can assume the entire burden of financing the war. It means that America will use her available resources to the extent that the Congress may, from time to time, authorize for the purpose of supplementing the resources of the Allied powers. In order that this may be done effectively, the financial resources of the governments seeking loans from the United States should be frankly disclosed from time to time in order to furnish an intelligent basis for the decisions of the United States Treasury in this vital matter.
Am I to understand that Lord Northcliffe has been designated financial agent of the British Government, and that he will conduct all negotiations? I am really confused by the number of people who undertake to speak for the British Government. We have every desire to be friendly and obliging. We have given conclusive evidence of this, but in order to avoid future misunderstandings, it would be wise to have it understood that nothing shall be considered as agreed to until signed memoranda or documents have been exchanged. McAdoo.