The Secretary of State to the Chargé in the United Kingdom (Johnson)
3900. Your 4139, December 19.29 The following is an unofficial summary of what the President is reported to have said informally as background for correspondents on December 17:[Page 27]
The President said that in the present world situation there was absolutely no doubt in the minds of an overwhelming number of Americans that the best defense of the United States is the security of Great Britain in defending itself; and that therefore, quite aside from the historical interest of this nation in the survival of democracy, it was equally important for us to do everything to help the British Empire to help itself. He said that he had read a lot of nonsense during the last few days about the method of financing British purchases. He said that in his memory and historically no major war had been won or lost through the lack of money. He stated that we had been getting stories which went back to that attitude, and he emphasized that it is not merely a question of our doing things in a traditional way and that there are lots of other ways of doing things. He declared that the one thing that is important is additional production facilities in this country, at shipyards, munitions plants and other places, in order to achieve a strong national defense. He said that orders from Great Britain are therefore a great asset for American defense because they create facilities.
The President said that he was talking from the selfish point of view and that production must be encouraged by us, and that there were several ways of encouraging it—not just one, the way a narrow-minded person might assume. The narrow-minded fellow had assumed that the only way was to repeal certain existing statutes like the Neutrality Act and the Johnson Act,30 and then lend the money to Great Britain to be spent here. Another way of encouraging such production was perhaps a gift, including gifts to Great Britain of ships, planes, guns, ammunition and the like. In this connection, however, he asked the correspondents if they themselves would ask for a gift if they were in the position of Great Britain. He doubted very much that Great Britain would care to have a gift from the United States. He said that there were also other ways to encourage production and that these were being explored. He could speak only in generalities, and these other ways had been in the process of exploration for three or four weeks.
The President said that it was possible for the United States to take over British orders, and because they are essentially the same kind which we use ourselves we could turn them into American orders and then hand them over upon completion to the British. He explained that we could either lease these materials or sell them subject to a mortgage, on the general theory that it still may prove true that the best defense of Great Britain is the best defense of the United States. What he was trying to do was to eliminate the dollar sign. In this connection he gave the following illustration: Suppose the [Page 28] house of a neighbor catches fire. If you have a hose and connect it with his hydrant, you may help him to save his house. You don’t say to your neighbor that your hose cost $15 and that he must pay $15. After the fire is over, the neighbor might return it with thanks, or if it were smashed, ask how many feet of hose you loaned him. You might say 150 feet, and he would say he would replace it. The President said that if we lend munitions and the like to Great Britain and get them back after the war, if they are intact, it is all right. He said that he did not desire to go into the legal question, but that the broad thought was that we would take over not all of the future British orders but whatever would be necessary. We could enter into an agreement with the British that when the war is over we will get repaid in kind some time. This would substitute for the dollar sign a gentleman’s obligation to repay in kind.
At the conclusion of the President’s remarks a number of questions were posed by the correspondents. One asked if title to the goods intended for the British would under such an arrangement still remain in our name. In reply, the President said that this would take a lawyer to decide. He gave the following illustration: Suppose that you desire to borrow $4000 or $5000 on your home, which is unencumbered. You give a mortgage, and in your mind you still think it is your home but in the strictest legalistic sense the title has passed to the mortgage-holder. The President said that he did not think it made any difference who held the title to the goods.
A correspondent inquired whether the President thought that such a plan in action would take us more into the war than we are now. The President replied in the negative.
Asked if he had in mind turning over American naval vessels under this plan, the President answered in the negative and said that he referred only to merchant vessels. A correspondent inquired if such ships would be delivered under the American flag the President replied that this would not necessarily be the case, and indicated that it was not necessary to send U. S. flag vessels or crews into war zones.
Asked if these plans involved repeal of the Neutrality Act, the President replied in the negative.
Asked if such a plan applied to articles to be delivered in the future, following present contracts, the President answered in the affirmative. He said that the British have sufficient exchange for present orders, but that there might be a problem in their payment for additional orders.
A correspondent inquired if and when the President intended to present such a plan to Congress. The President replied that he intended to present this or a similar plan after the new Congress opens on January 3, but that the details must be worked out both here and in Great Britain.[Page 29]
The following is from a Treasury Department Press Release giving an extract from testimony by Secretary Morgenthau before the Subcommittee of the House Appropriations Committee on December 18, in response to questioning by Chairman Ludlow:32
“Secretary Morgenthau:—so if it gets down to the question of—which it has—Great Britain needing financial assistance to pay for the orders that she wants to place with us, I think that is a matter for Congress to decide—as to how that financial assistance should be given to Great Britain, that is how I feel.
“Mr. Ludlow: But you feel that she has arrived at the point where she needs financial assistance?
“Secretary Morgenthau: I said so—they have so advised me as to further orders. They do need financial assistance for the orders they want to place with us for airplanes and boats and munitions.”
[For text of radio address by President Roosevelt, December 29, 1940—the “arsenal of democracy” speech—see Department of State Bulletin, January 4, 1941, page 3.]