File No. 861.51/142

The Secretary of State to the Ambassador in Russia (Francis)


1386. Your 1239, May 1, 8 p.m. Secretary of the Treasury replies to your telegram May 1 as follows:

The act of Congress authorizes the Secretary of the Treasury to lend money to foreign governments making war on Germany on such terms and conditions as he thinks necessary or desirable, but he must take back an obligation from the foreign government to [Page 8] which the loan is made, bearing 3½ per cent interest and having a maturity to be agreed upon. In order to negotiate such a loan it is necessary for some representative of the Russian Government in the United States to be empowered by the Russian Government to sign the necessary agreement or agreements containing the terms and conditions under which the loan is made, and also to execute the note or obligation of the Russian Government to the United States. After the loan is thus made, the representative of the Russian Government in the United States should have power to open an account with the Treasurer of the United States, or with banks in the United States designated by the Secretary of the Treasury, and to draw checks against such account in order that payments may be made from time to time for supplies purchased in the United States.

The loan transaction will be a direct one between the United States Government and the Russian Government, but no progress can be made until the Russian Government fully empowers its representative in the United States to act for and bind it. Will such power be conferred and upon whom? The loan so made by the United States Government will contain a provision that no supplies are to be purchased in the United States without the approval of a representative of the Treasury Department. This will insure the purchase of supplies in the United States upon the most reasonable terms and will facilitate prompt deliveries. This is as much to the interest of the Russian Government as to the American Government, because there is not an unlimited supply of credit in the United States and the demands of all the Allied Governments are great. Our credit resources must, therefore, be used to the best advantage. After the loan is made the Russian representative in the United States designated by the Russian Government to make purchases can negotiate immediately through the Treasury Department for the purchase of railroad cars and locomotives as desired by the Russian Government, and everything will be done by this Government to facilitate such purchases and deliveries. Please make this clear and cable reply quickly as possible.