No. 865
The Assistant Secretary of War ( McCloy ) to the Assistant Secretary of State ( Clayton )

Memorandum for Mr. Clayton

Subject: German Interim Financing

I have looked at your memorandum from the Secretary to the President1 on the War Department’s responsibility for German interim financing. I have no difficulty with the paper as far as it goes, but I think it is incomplete. The following points should be clearly understood, and I would think the gist of them should be incorporated in any memorandum to the President:

The War Department under present arrangements will be able to finance all food imports into Germany for whatever zone through October loadings.
Testimony before Congress indicated that funds made available for the War Department would not be used for maintenance of zones other than the United States, except for a brief turnover period not extending beyond the current calendar year.
With respect to any period of time or any zone, the funds which the War Department has received from the Congress for the present fiscal year are restricted to the prevention of disease and starvation.
If the President approves Secretary Byrnes’ memorandum, it is necessary that the President send a letter of instructions to the [Page 801] Secretary of War, specifying the extent to which he desires the War Department to finance supplies under the disease and unrest formula outside of the United States zone, and in addition the extent of general economic assistance that he desires the War Department to finance with respect to all zones, including the United States zone. Unless some standard is specified, we would not be able to determine the amount of appropriations we should go to Congress to obtain. In effect, we should have a letter similar to that which President Roosevelt sent to the War Department in November 1943.2
It is suggested that the part of the paper entitled “German Import Program”3 would be strengthened as a negotiating agent for our representatives in the Control Council, if there were added the following: “Recognizing the principle that proceeds from the sale of exports from Germany as a whole must be used to finance essential imports” at the beginning of the sentence which now starts “Procurement and financing responsibility …”4

I am returning the memorandum which you gave me.

John J McCloy
  1. It has not been determined whether McCloy was referring to document No. 346 (see vol. i) or to an early draft (not found) of document No. 883.
  2. Not printed in this compilation. A substantial portion of the operative part of the text appears, however, in Edwin J. Hayward, “Co-ordination of Military and Civilian Civil Affairs Planning”, printed in The Annals of the American Academy of Political and Social Science, vol. 267, p. 23.
  3. document No. 348, printed in vol. (i .
  4. Ellipsis in the original.