File No. 102.1/393
The Secretary of State to the Ambassador in Great Britain ( Page )
5821. For Crosby from the Secretary of the Treasury:
Treasury No. 5 answering your No. 3½. I am obliged to raise the rate of interest on the 3 per cent loans in connection with the [Page 579] conversion of our own bonds. Recent loans have been at a 4¼ per cent rate. The rate on the 3½ per cent loans has been, of course, less than the cost of the money to the United States, and there appears to be an indisposition upon the part of the representatives of the Allied Governments here to make the rate of interest compensatory even in connection with the conversion of the short-time obligations into bonds. You may say that having regard to the expenses of preliminary financing and tax exemptions, and the burden laid upon the community in connection with each Liberty Loan campaign, I think the rate of 4¼ per cent does not compensate the United States for the cost of the money and must consider fixing a higher rate for future loans. I am also seriously considering imposing a higher rate of interest for that portion of our loans to foreign governments not used in the United States than upon that portion used here. This may be essential to the proper protection of our situation and the successful conduct of our financial operations both national and international. I earnestly hope that you will review this whole subject thoroughly in the light of international interests and with a view to some amelioration of the existing unsatisfactory exchange situation.