Memorandum by the Acting Secretary of State to President Roosevelt

In connection with the attached,88 I am certainly mindful of the political dangers inherent in the accumulation by the British Government [Page 44] of very large dollar balances as a result of the lend-lease program. However, may I recall certain facts which may make a proposal such as this one equivocal at this time?
Negotiations have been conducted with the British on the termination of certain lend-lease transfers which we regard as embarrassing, and no longer necessary. The British were assured by the Secretary of the Treasury and by Mr. Crowley that the changes submitted on January 7 were all we were going to undertake for the present, and that our proposals were being made in the light of domestic political considerations, not British assets. The British have not delayed these negotiations. Research on certain items being submitted was not completed by the Foreign Economic Administration until the middle of January, and some important items were not submitted to the British until about February 1. It is expected that the lists will be wound up by March 1. At a meeting in my office on February 15,89 Mr. Crowley told Lord Halifax it was his thought that at the conclusion of the present series of negotiations, the British lend-lease program could be stabilized in all major aspects until mid-Summer at least.
The question is more than one of embarrassment. The present British dollar balances must be considered as the only reserve for their growing financial commitments, especially in the Middle East and Far East. An ordering of their affairs which will reduce those holdings may gravely weaken their machinery of war finance. Against that background, the balances do not seem too high. Furthermore, they have risen largely because of our troop expenditures, a source of dollars which may well decline after the next few months. If the British are to be able to cooperate with us in multilateral solutions of trade and financial problems, they must finish the war with enough assets to carry through such a program.90 Even as things stand now, it would be difficult for the British to consider unfreezing sterling at or near the end of the war, or giving up many of their other economic controls. If the financial side of the war is run in such a way as to keep British balances at or about $1 billion, we thereby reduce our chance to achieve the basic economic policy we want and need.91
  1. See telegram 474 from President Roosevelt to Prime Minister Churchill, infra.
  2. Memorandum of meeting not printed.
  3. See vol. ii , sections entitled “Informal and exploratory discussions regarding postwar economic policy,” and “United Nations Monetary and Financial Conference …”
  4. On February 23, 1944, the Acting Secretary of State sent the following memorandum to Assistant Secretary of State Acheson: “This is to confirm that the President approved the cable which you drafted under his, instructions to the Prime Minister on this subject. The President read the covering memorandum and I explained orally that we felt this action might create considerable difficulty but he felt the domestic political aspect of the situation was great enough to be controlling.” (841.5151/2016)