845.515/545
Memorandum of Telephone Conversation, by the Adviser on Political Relations (Murray)
Mr. Harry White38 of the Treasury Department called me by telephone this morning to inform me of the latest developments in the question of lend-leasing 100,000,000 ounces of silver for use in combating inflation in India.
Mr. White stated that during the discussion of this matter with the “silver senators”, when the question was asked whether this silver should be lend-leased to the British Government or to the Government of India, several of the senators had expressed a preference for a direct lend-lease transaction with the Government of India. Mr. White further stated that Secretary Morgenthau39 favored dealing direct with the Government of India in this matter.
Recalling that this matter had been discussed earlier with certain officials of this Department and that a preference had then been expressed for dealing with the British Government in this matter, Mr. White inquired what our views were at the present time. I informed Mr. White that in the discussions which had taken place here we had been strongly of the opinion that the silver should be lend-leased direct to the British Government for any use they might see fit to put it to in India and that the British Government should assume the responsibility for the eventual return of the silver ounce by ounce.
In this connection I reminded Mr. White that the Government of India is not a “government” in our ordinary understanding of the word but is merely a term for the British Government exercising its rule in India; that in our view no possible political advantage would be gained by dealing with the Government of India in this matter, whereas certain future risks and disadvantages might result.
Mr. White then stated that the Treasury had not considered that the risks were any greater in one case than in the other and that he could not conceive of any government repudiating an agreement to return silver which had been furnished it under a Lend-Lease arrangement. I told Mr. White that I was unable to follow his reasoning that there would be no greater risk in dealing with the Government [Page 249] of India than there would be in dealing with the Government of Britain in this matter for the reason that no one could foretell what the set-up in India would be after this war; that a violently nationalistic government made up of Indians themselves might gain power and that it would, in our view, be rash to assume that such a native government, with possibly strong color prejudice against the white peoples of the West, would voluntarily assume obligations undertaken on their behalf by the British under the name of “Government of India” at this time. It seemed to me, therefore, advisable to place the responsibility in this matter squarely upon the British Government which, in turn, is in a position, if it wishes, to shift the burden of obligation to the Indians. If it does not wish to do so or if it feels that it cannot do so, that is of course of an intra-Empire matter, and irrespective of any such action which might be taken by Great Britain we would be in a position to look to it for the fulfillment of the transaction.
Mr. White inquired of me whether we had discussed this matter with Lend-Lease people since there was a feeling in Treasury that it was a matter for agreement between ourselves and Lend-Lease. I told Mr. White I did not know what there was precisely to discuss; that, however, in recent discussions regarding the method of obtaining under reverse Lend-Lease from India certain vitally needed raw materials we had strongly supported the view that Great Britain should assume the responsibility for coming to a satisfactory financial arrangement with the Government of India in order that the desired raw materials might be forthcoming. It seemed only natural to suppose that our viewpoint might be the same in the present matter of silver.
Mr. White then said that he agreed that there would probably be no useful purpose in our conferring with the Lend-Lease authorities about this matter and that he would take it up again with Mr. Morgenthau who might view the matter differently in the light of the factors in the situation of which he had not been aware when he had come to the conclusion that it might be preferable to deal direct with the Government of India in the lend-leasing of this silver.