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2. The situation in regard to the payment for future orders would be clear if Congress passes the proposed legislation and follows it up with an appropriation.

In regard to No. 1, the question of total British assets is involved. I do not know who told you that they amount to 18 billion dollars all over the world. In my judgment that figure is altogether too high because what we are referring to are obviously British assets which they cannot either (a) sell or (b) pledge through the Government of Great Britain. My figure would be 9 or 10 billion dollars instead of 18 billion dollars.

Still speaking of No. 1, it seems probable to me that through the investment trust method in New York, and with the aid of Jesse Jones, perhaps the British can raise about one billion dollars in the next few weeks. I do not think their total assets in this country amount to more than a total of one billion five hundred million-and the last five hundred million dollars is not of a character on which to raise cash quickly except at a very heavy and unwarranted loss.

In regard to British assets outside the United States, it is clear that in many cases they have to be used in the locality in which they exist, i. e., Canada, to pay for munitions and food; Argentina, to pay for beef, wheat, etc., and other South American countries in the same way.

Assets in South Africa are probably already earmarked to pay for things they are getting from South Africa. Assets in India, Straits Settlements, China, etc., may be of some value to them to put up with us as security but there is real doubt as to how much value such assets would have for us ultimately-as, for instance, British property in Shanghai.

In regard to No. 2, i. e., putting up some form of security for the future program of orders, I need not assure you that I am wholly sympathetic in doing something like this in order to get the bill through. But, again, I am skeptical as to the value of British owned properties which could be put up as security.

There is always the possibility of their putting up their sovereignty to and over certain colonies, such as Bermuda, the British West Indies, British Honduras and British Guinea [Guiana?]. I am not yet clear in my mind, however, as to whether the United States should consider American sovereignty over these Islands and their populations and the two mainland colonies as something worth while or as a distinct liability. If we can get our naval bases why, for example, should we buy with them two million headaches, consisting of that number of human beings who would be a definite economic drag on this country, and who would stir up questions of racial stocks by virtue of their new status as American citizens?

'Lend-Lease Bill, introduced in Congress January 10, 1941. 8 Secretary of Commerce and Federal Loan Administrator.

In the Pacific there are certain small British Islands which not from the population or economic point of view, but from the military and naval point of view, might be a distinct asset, and, at the same time, might be a definite liability. These are the Islands south of Hawaii (Canton, Enderbury, Christmas, the Phoenix group, etc., and down to Samoa) and the Islands southwest of Hawaii and south of the Japanese mandated Islands (the Gilbert and Ellice groups). If we owned them they would be valuable as stepping stones in the control of the central Pacific area, but, at the same time, they would be difficult to defend against Japan or a combination of Japan with some other naval power.

You see the difficulties of all this-the dangerous over-estimates which have been made of British assets and the problem of finding other substitutes.

We might talk it over when I get back on Tuesday.9



Memorandum of Conversation, by the Secretary of State

[WASHINGTON,] January 11, 1941.

Sir Frederick Phillips 10 called at his request. I understood that Secretary Morgenthau had requested him to call to explain to me why the British Government could not put up any collateral, at least any substantial amount, as security for payment in connection with the five and one-quarter billion dollars worth of British orders in this country. Sir Frederick was reticent as to most of the figures I desired. I inquired as to how much cash or its equivalent the British Government expected to pay out in this country for military supplies obtained since the beginning of the war, that is, their estimated total expenditures up to the point where they would cease to make further payment and permit our Government to pay for all British supplies and deliver the same to Great Britain with barter or other arrangements, if any, that might later be entered into in regard to payment in whole or in part. He promptly indicated that he did not know what these figures were, but that they were available somewhere. I made further inquiries about the British financial situation, but with similar scant results.

I then said that this matter has been in the hands of Secretary Morgenthau and the President, and that I had virtually nothing to do with the drafting of the pending bill in Congress to authorize aid to

9 January 14.


Adviser to the British Treasury in the United States.

Great Britain; that I had suggested three or four points which I thought would facilitate the passage of the bill and preserve increasingly favorable public opinion in support of the policy of aid to Great Britain; that one of these suggestions was that if the British intend to make any kind of payment during the next twelve months or so for military supplies procured in this country, now is the one accepted time for them to do so in the form of collateral with a minimum of a billion and a half or two billion dollars; that this action would go further to disarm critics and to keep this whole movement on a favorable basis than anything else that might be said or done. I elaborated on this phase. I still got nothing virtually from Sir Frederick in the way of either arguments or facts or figures. I made it clear that my purpose was to help Great Britain most effectively, through the aid furnished by this country, by keeping favorable public opinion behind our Government. I emphasized that every fact and phase of the entire British financial situation would be brought out in the Congressional Committee hearings on the pending bill to aid Great Britain; and I reiterated that the matter was in the hands of Secretary Morgenthau and the President, adding that I was determined to aid Great Britain to the best of my judgment and ability and hence I was making this and certain other suggestions, which were intended to facilitate the passage of the bill and its general support by the country. I made no impression whatever so far as I could see.


[For statements of the Secretary of State in support of the LendLease Bill before the House Foreign Affairs Committee, January 15, 1941, see Department of State Bulletin, January 18, 1941, page 85.]


President Roosevelt to the Secretary of State

WASHINGTON, May 16, 1941.

DEAR CORDELL: I wish you would work out the over-all arrangement between the United States and the British Government relative to the consideration or considerations to be given us by the British in return for the material provided under the Lend-Lease Act."

I should like to discuss it with you at an early opportunity because I think it is important that we reach an agreement with the British at an early date.

Although I presume the agreement will not provide primarily for a return to us of cash, I think, nevertheless, you should consult with

" Approved March 11, 1941; 55 Stat. 31.

Secretary Morgenthau in regard to the broad provisions of the agreement.

Very sincerely yours,



Memorandum of Conversation, by the Assistant Secretary of State


[WASHINGTON,] July 7, 1941.

Mr. Keynes 12 called on me at his request to give me the substance of a conversation which he and the British Ambassador 13 had with the President upon the subject of the considerations to be contained in the Lease-Lend Agreement. Mr. Keynes stated that the President asked him to inform me of the conversation so that we might proceed with the drafting along the lines indicated. Mr. Keynes also showed me a cable which he and the Ambassador sent to the Prime Minister today reporting the conversation and asking for authority to submit to us a draft transmitted by cable, which Mr. Keynes also showed me. He expects an answer on Wednesday 14 or Thursday.

Mr. Keynes reported the President's views as follows:

The President feels that he is not under pressure from Congress for the early publication of a Lease-Lend Agreement with the British. He believes that at the time he requests further appropriations for lease-lend or makes his next report to Congress it would be sufficient for him to report that discussions with the British are entering their concluding phase and are progressing satisfactorily. He believes that if an agreement were published by the first of the year it would be within sufficient time. However, the President believes that there should be some agreement worked out now which can be in the nature of a preliminary agreement and which would be available for publication if that proved to be necessary.

The President discussed with the Ambassador and Mr. Keynes certain ideas which he did not desire to formulate in an agreement at the present time because he believes the situation is not sufficiently clear. These were the possible creation of an international force to preserve peace after the war and also the creation of customs agreements with the West Indies and with the Dutch East Indies after the war. These did not contemplate any territorial concessions, which were not re

12 John Maynard Keynes, financial adviser to the British Government.

13 Viscount Halifax.

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garded as in the interest of the United States. For these reasons the President did not think it desirable to formulate at the present time or to crystallize too rigidly the considerations moving from the British. The Ambassador and Mr. Keynes raised with the President the desirability of negativing certain types of consideration, even though it might not be possible to state positively the precise considerations which should be given. They mentioned to the President the importance inherent in the lease-lend idea of not creating a money debt and suggested phrases to indicate that the considerations should not be such as to interfere with the economic and commercial relations between the countries or between either of them and other countries. The President is reported to have believed that this would be possible. They further discussed with the President the question of separating the obligations growing out of a transfer of warlike articles which were consumed or destroyed and purely civilian articles. They urged that this should not be done and reported that the President concurred in this view.

Mr. Keynes reported also that the President, in discussing the undesirability of crystallizing the considerations to be given, suggested that certain types of consideration might be mentioned under broad headings. These consisted, as I recall them, in an obligation to return unused material, to transfer defense articles when required for the defense of the United States, to transfer defense articles which might be required in connection with any project to preserve international peace, to enter into arrangements for post-war relief and reconstruction, to enter into arrangements for economic organization.

The idea of the conversation, as I gathered it from Mr. Keynes, was that the President was agreeable to something in the nature of a preliminary or skeleton agreement which would negative an obligation by the British to pay for defense articles in cash and which would indicate very broadly the general areas in which the considerations were later to be worked out in detail.

Mr. Keynes said that he hoped to present to me on Wednesday or Thursday the draft which he had sent to London for approval and that he hoped that we might conclude within a couple of weeks a preliminary agreement. I told Mr. Keynes that as soon as we had a draft we would discuss it with the Acting Secretary, who would probably wish to discuss it with the President and that I would reply to him as soon as possible in the light of their comments.


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