Memorandum by the Chief of the Division of Financial and Monetary Affairs (Collado) to the Assistant Secretary of State (Clayton)

There is attached a background memorandum94 for you and the Secretary in connection with the meeting this afternoon with Secretary Morgenthau on Russian credit matters.

As indicated on page 1 there are outstanding a number of telegrams, documents, and letters which require reply. Generals York and Wesson and Oscar Cox yesterday agreed to start drafting on certain of these matters. I do not believe it necessary for the Department to prepare a reply to the Secretary of the Treasury’s letter to the President (as requested by the President on January 11) until after this afternoon’s discussion.

With respect to our talk yesterday about the Treasury’s proposed terms relating to 3–C, I still feel the Treasury has a very good point [Page 961]which might be especially useful in connection with the British and possibly the French discussions, as well as an aid to the President in his forthcoming talks with the Russians. I have always recognized that the case for no interest was somewhat weaker in connection with the Schedule II items, the large industrial plants, but with respect to Schedule I items,95 which have something of the nature of surplus property, I believe the case for no interest is excellent. In the British case there will be no items comparable with Schedule II, and if an agreement is reached it will probably relate only to foodstuffs and other materials in the pipe line, I would be surprised if the French lend-lease arrangements contemplated any complete industrial plants, but rather items needed to rehabilitate existing communications, transportation, public utility, and other war essential plants. Thus the interest-less 3–C would be particularly appropriate in the British and French cases.

It occurs to me that it might be possible to compromise with the Treasury and maintain a proper position for dealing with the British and French by applying the Treasury’s terms to Schedule I of the Russian arrangement while keeping the present terms for Schedule II. This may seem unduly complicated. The present form of the agreement, however, provides entirely separate sections dealing with Schedule I and with Schedule II, although the same financial terms have been reproduced in each. It should not be impossible, therefore, to consider separate types of terms for the separate types of transactions.

  1. Supra.
  2. For schedules I and II, see text of proposed agreement quoted in telegram 2226, September 16, 1944, 11 p.m., to Moscow, Foreign Relations, 1944, vol. iv, p. 1139.