File No. 763.72/8185
The Secretary of State to the Ambassador in Great Britain ( Page )
6109. For Crosby:
Treasury No. 40, your No. 16. Of the $93,000,000 requested by British from Italians only $60,000,000 is asked for December and arrangements are being made to make this advance. For current [Page 591] purposes January, Lever now asks $235,000,000 stating, however, that it may be necessary to ask that this be increased to $275,000,000. In addition to foregoing and to ship money, Lever asks $160,000,000 in reimbursement of expenditures for Russian account, this sum together with ship money to be applied to overdraft, and says in that event it is hoped that the loan maturing February 1 can be arranged for in New York market. In accordance with your advice, am asking President to authorize establishment of credit of $185,000,000 for January, and indicating that it will be necessary to ask for increase of this amount. It will be wholly impossible to provide any such sum in cash as Lever indicates or even as that suggested by you, to wit, $275,000,000 current, $33,000,000 balance of $93,000,000 for Italian, $86,000,000 ship money, $94,000,000 February 1 maturity. Consent to use of ship money for overdraft was on assumption that February maturity would be otherwise provided for. It will not be possible to make total cash advances to foreign governments in excess of $500,000,000 for January. French here formally ask $155,000,000 for January instead of $160,000,000 suggested by you and I am asking President’s approval of establishment of credit of $155,000,000. Italians have unused $100,000,000 of credit of $230,000,000 established at your suggestion just after your departure. Assuming $33,000,000 required to pay British for wheat, this leaves $67,000,000 for Italians’ own use. Provided cash advances to all foreign governments to and including February 1 shall not exceed about $500,000,000. I have under consideration proposing plan for taking up overdraft and collateral behind it and issuing in exchange United States Treasury certificates of indebtedness or Liberty loan bonds with restrictions upon sale. This is for your confidential information and advice. Steady liquidation collateral behind overdraft presents grave impediment to our own finance measures and leads me to reconsider position heretofore taken in this respect, but utterly impossible to increase cash advances to any important amount. As to your general question whether cash situation permits anything more than $500,000,000 per month for loans, the foregoing in large measure answers it. In my judgment an attempt to increase loans beyond that amount would involve risk of financial disaster as gravely injurious to Allied cause as military defeat. This, of course, assuming that our own military program is not greatly curtailed which, I gather from announcements reported here by European statesmen, they would not be willing to have done. The solution of the problem is in coordination of purchases, ships and finance so that only things are bought which can go forward and go forward to the point where they are most needed. I am satisfied that much of the [Page 592] expenditure of all concerned involved duplication and inadequate coordination with strain upon finances and no corresponding benefit to military situation. I count upon you and the Inter-Ally Council to put an end to this condition and am satisfied that with true coordination in man-power, in supplies and in ships the United States will be able to bear its great share of the financial burden; otherwise not. I should like to have exact figures as to amount spent by Great Britain and France in 1917 and contemplated in 1918, showing separately extent to which such sums were raised by taxes, by domestic loans, by loans in neutral countries, and by loans from United States. I should like to know what amount of gold Great Britain has in Africa and elsewhere in the control of the Government which does not appear in public statements. Answering your No. 19,1 I do not think it would be expedient for you to have Anderson there with you. Realize you must have some staff to help you but not an employee of bankers for British Government. Will make inquiry and submit names for your consideration. McAdoo.
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