The Secretary of the Treasury (Morgenthau) to the Secretary of State

Dear Cordell: I am sending you herewith a photostat of a memorandum from the President.27

We have drafted a memorandum for the President,28 and before forwarding it to him, I would like to have your approval so that I can inform the President that this is the combined opinion of State and Treasury.29

Sincerely yours,


Memorandum by the Secretary of the Treasury (Morgenthau) for President Roosevelt

The Netherlands Government has made a request that this Government commit itself to a loan of $300 million to be obtained from the R.F.C. and to be secured by the pledge of privately owned securities in this country belonging to nationals in the Netherlands. It is our understanding that this loan has been requested by the Netherlands Government for the purpose of financing postwar purchases and not for meeting its war expenditures which are amply provided for under Lend-Lease arrangements.

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Since making the request for the loan the Dutch Finance Minister has, I understand, informed Secretary Jones that they would be satisfied with our commitment to make the loan after the war subject to whatever conditions we would wish to impose with respect to its availability and its use. Mr. Jones feels that there would be no harm in such a qualified commitment and it would be of some assistance to the Dutch Government and is inclined to favor making such a commitment. I am appending his memorandum on the subject.

It seems to me, however, that it would be unwise to make even a limited commitment at this time for the following reasons:

1. The financial resources of the Netherlands Government are substantial and entirely adequate to meet the contemplated payments on postwar orders they may wish to place. According to its own memorandum, the Netherlands already holds in the names of the Government and the Central Banks large resources in the form of gold, dollar balances and foreign exchange, amounting in all to more than $1,050 million of which more than $900 million is in the form of gold and dollars. This is in addition to the privately owned Netherlands assets held in this country. In view of the fact that the total budgeted expenditure of the Netherlands Government for 1943—including military and naval expenditures—is only $65 million, it is obvious that the resources available to the Netherlands Government are very large without additional borrowing and without touching privately held funds in this country of Netherlands nationals.

The Netherlands Government can acquire any needed part of the gold and foreign exchange reserves of the Central Banks of the Netherlands and the Netherlands Empire in return for national currency. We are cognizant of the reluctance of the Netherlands Government to use the gold and foreign exchange reserves of the Central Banks of the Netherlands and the Netherlands Empire. However, we call attention to the fact that other United Nations have acquired and used the gold and foreign exchange reserves of their central banks.

2. Even if it were apparent that the Netherlands Government will need financial aid in the immediate postwar period it seems to us undesirable to make a commitment with respect to such loans at this time. The loan made to the British Government by the R.F.C. was for the purpose of meeting war expenditures.

The commitment requested by the Netherlands is for postwar purchases. Such a commitment would establish an undesirable precedent and would be likely to call forth similar requests for large sums on the part of other United Nations. It would be extremely difficult to deny such governments, lacking the resources of the Netherlands Government, loans to enable them to make postwar purchases. For [Page 470]the United States to begin now a large scale program of loans or commitments for loans for the postwar period would represent a departure from our present policy which is likely to meet with serious public criticism. You would probably want to present the question to Congress before making any commitments on postwar loans.

This Government will be in a much better position to make a satisfactory decision as to the volume and distribution of foreign loans when we have a clearer idea as to the world’s needs for American products and of our ability to produce for export in the immediate postwar period. Pending the development of an over-all program on postwar credits for reconstruction and development, it would seem inappropriate for this Government to embark upon a policy of making loans to foreign governments for postwar purposes.

3. If the need for dollar credits by the Netherlands Government should become manifest in the postwar period, such a loan should be secured directly from American investors rather than from this Government. The credit position of the Netherlands Government is so strong that there can be little doubt of its ability to secure a loan from private investors on reasonable terms after the war. The investing community in this country would be likely to resent a policy under which this Government would compete with private investors in making loans to countries whose high credit standing assures them access to our capital markets on favorable terms.

Henry Morgenthau, Jr.
  1. Not printed.
  2. See enclosure.
  3. Marginal note in long hand on original by Cecil W. Gray, the Assistant to the Secretary of State, reads: “Sept. 1, 1943. Answered orally for Sec. Hull on telephone to effect that State Dept. did not have jurisdiction, but that personally he was opposed to loan. C. W. Gray”