40. Memorandum From Secretary of the Treasury-Designate Dillon to Secretary of State-Designate Rusk0

Given our present balance-of-payments position1 it is important that we get as much help as possible from the Germans, as promptly as possible, in the negotiations now under way. Particularly important would be German prepayment of the GARIOA debt, increased military procurement in the U.S. and the removal of restrictions on certain of our agricultural exports.

I am reasonably certain that the minimum price we will have to pay for this will be an agreement on our part to recommend legislative action for a limited return program for German vested assets. The attached memoranda, which have been reviewed technically by GER and L/EUR, set forth the background and recommended solution.

I hope that we can move forward on this immediately after the 20th and would appreciate your views.

Douglas Dillon



The issue of compensating Germany for U.S. seizure of private German assets during World War II has become of major political importance in Germany and a serious irritant in U.S.-German relations.

[Page 106]

Recent discussions with Germany indicate that the Germans may be prepared to conclude a settlement with the new Administration more favorable than we have hitherto been able to negotiate. The probable elements in this settlement would be:

Prepayment to the U.S., immediately, of $600 million of Ger-many’s $787 million GARIOA debt.
Cancellation of the remaining $187 million of the GARIOA debt in full settlement of the vested assets—a figure about half-way between the previous German request of $200 million and the previous U.S. estimate of $175 million. This cancellation would have to be submitted to the Senate as a treaty amending the GARIOA agreement.
Other actions by Germany to help the U.S. balance of payments, including increased German military procurement in the U.S., removal of German restrictions on certain U.S. agricultural exports, and possibly German payment of a part of U.S. military aid to Greece and Turkey.

There is no assurance that the Senate would approve a treaty offsetting vested assets against GARIOA since there is strong Congressional sentiment against any return program. Nevertheless mere submission of the treaty would ease German-U.S. relations and the other proposed actions, including the $600 million GARIOA prepayment, would be of great benefit to the U.S. at the present time.

The essential details of the long-continuing and complicated vested assets problem, and of the proposed settlement, are set forth in the attached memorandum.2

  1. Source: Department of State, Central Files, 811.10/1-1361. Confidential.
  2. For additional documentation on the balance-of-payments problem, see Documents 1 ff.
  3. For text of this paper, “Proposed Settlement of Vested German Assets Problem,” January 10, see the Supplement.