The Acting Secretary of State to the Commission to Negotiate Peace
166. For Col. House from McAdoo. While I have recently been in cable communication with the British Chancellor regarding rates of interest, maturity and other details of obligations of foreign governments held by United States, inquiries have been lately made by representatives of foreign governments which make me apprehensive that an effort will be made by some of European Allies to bring questions concerning our foreign loans into discussions at the peace conference. These questions include (1) cancellation of our foreign loans, (2) fixing the maturity and other terms of our foreign obligations, (3) exchange of obligations of one Allied Government which we hold for those of another, (4) equalization of loans as between lending belligerents, and (5) linking our foreign loans with questions such as reparation by Germany and financing reconstruction of France and Belgium. That some financial questions touching [Page 539] our foreign loans may be attempted to be brought up at the peace conference seems to be the more probable if, as current reports indicate, Bonar Law, Beading and Tardieu, all of whom are well versed in finance, are included in the British and French peace missions, respectively. I have been advised from Europe as follows:
- First: Suggestions have been not infrequently made in important but unofficial quarters in both London and Paris regarding the possibility of the cancellation of all loans made by the Governments associated in the war to any other of such governments.
- Second: British Treasury has suggested probably unofficially that future aid to Allies should now be taken over by the United States on theory that our loans to Allied Governments should be equalized with British loans to such governments.
- Third: British Treasury has asked information regarding our war expenditures and annual growth of our wealth before the war.
- Fourth: British foreign office has made public announcement that its Allies and United States are ready to contribute all their resources to work of restoration of economic basis of civilized and orderly life to countries which prove they wish civilization and order. British Treasury has stated that it will not borrow from United States to cover supplies to needy countries of materials of same nature as Great Britain may be importing from United States.
I have instructed Treasury representatives in Europe as follows:
- First: Our loans to foreign governments will now be greatly decreased.
- Second: Our loans for purchases without United States will be promptly discontinued.
- Third: Treasury will not consider or discuss suggestions to cancel our foreign loans as it has no power to make such cancellations.
- Fourth: Treasury will not make loans on theory of equalizing same with British loans.
- Fifth: Treasury opposed in principle to use of our foreign loans at peace conference in an endeavor to conciliate rival claims for indemnities and other advantages.
- Sixth: Treasury prepared to discuss in Washington with governments concerned conversion of our foreign demand obligations into long time obligations.
- Seventh: That I understand it is the intention of our Peace Conferees not to deal with our loans at conference.
- Eighth: That as Treasury is not officially represented at Peace Conference it must not be unofficially represented there.
In presenting our foreign loan bills to Congress I have given my opinion that the loans made are good and will be collected in due season. I am confident that cancellation of our foreign loans or any action which would diminish their value would not meet with the approval of Congress or of our people who would thereby be subjected to heavy additional taxation. I have sent to Ways and Means Committee of House draft of bill permitting loans to be made for [Page 540] purposes growing out of the war and after peace to governments previously associated in the war to the extent that existing appropriation remains unexpended. I have estimated such unexpended amount at $1,500,000,000. Indications are there will be some opposition even to this bill which is designed to enable Treasury, with approval of President, to establish credits in case progress of events shall demonstrate necessity therefor. Already the suggestion of cancellation of our loans has caused concern as well as opposition in some quarters of Congress to the making of further loans and to any enlargement of existing powers of Secretary of the Treasury to make loans after return of peace. I feel very strongly that there is no valid reason why our financial relations with the Allies should be involved with any other questions and that all discussions in regard to the loans which we have made or loans which we may hereafter be willing to make for war or reconstruction purposes should be kept out of the conference if possible. This seems to me desirable from the standpoints of international and internal policy alike. If events should develop so that consideration of these financial questions at the conference cannot be avoided I trust it will be arranged that Treasury will be given ample warning and opportunity to present its views in an adequate way. Satisfactory disposition of these financial questions is of very great importance to our future. I cannot speak for my successor but he would doubtless desire to have Treasury views presented by representatives selected by him for that express purpose if it should prove impossible for him to deal with these questions in Washington.