No. 337
The Assistant Secretary of War (McCloy) to the Assistant Secretary of State (Clayton)

Dear Mr. Clayton: I have your note of June 18th,1 and I will see that the subject is discussed and given careful consideration in the Department. I will then advise you formally of our conclusions.

Pending this notification, however, I think that our chief difficulty arises from the fact that once we are in our separate zones, it is very difficult for us to justify expenditures for Army appropriations for the provision of civilian supplies in foreign occupied zones, the benefits of which would accrue to civilians of liberated areas. It is true that the Army in its zone and the Commander of the Army in his capacity as a member of the Control Council is an agent to carry out the policies of this Government, which include the utilization of German resources for the benefit of liberated areas.

We have heretofore justified our Army appropriations for civilian supplies on the basis of protecting our tactical operations against an enemy in the field. When those operations cease, it becomes, at least in respect of non-occupied territory, a matter for the relief and rehabilitation agencies of the Government to deal with and to finance. If this were not the case, I think we would have the rather anomalous [Page 471] situation of the Army determining the rehabilitation program of foreign countries. I do not believe that either the Congressional policy or the Administration policy encompass such an activity for the Army. The Army can supervise the work of the Germans in the production of German resources, but this is an entirely different function than financing the production of those resources, and some financing is needed. In other words, this is an expense of rehabilitation and not an expense of occupation. With every desire to be helpful in a situation, the acuteness of which we are all aware, I do not believe that we are taking a narrow point of view when we contend that the Army should not be called upon to produce these funds.

As I say, we will endeavor to give you a more formal reply to your letter. I am merely giving you my first reaction to it.


John J McCloy