[Enclosure]
Memorandum by the Secretary of the Treasury
(Morgenthau) for
President Roosevelt
The Netherlands Government has made a request that this Government
commit itself to a loan of $300 million to be obtained from the
R.F.C. and to be secured by the pledge of privately owned securities
in this country belonging to nationals in the Netherlands. It is our
understanding that this loan has been requested by the Netherlands
Government for the purpose of financing postwar purchases and not
for meeting its war expenditures which are amply provided for under
Lend-Lease arrangements.
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Since making the request for the loan the Dutch Finance Minister has,
I understand, informed Secretary Jones that they would be satisfied
with our commitment to make the loan after the war subject to
whatever conditions we would wish to impose with respect to its
availability and its use. Mr. Jones feels that there would be no
harm in such a qualified commitment and it would be of some
assistance to the Dutch Government and is inclined to favor making
such a commitment. I am appending his memorandum on the subject.
It seems to me, however, that it would be unwise to make even a
limited commitment at this time for the following reasons:
1. The financial resources of the Netherlands Government are
substantial and entirely adequate to meet the contemplated payments
on postwar orders they may wish to place. According to its own
memorandum, the Netherlands already holds in the names of the
Government and the Central Banks large resources in the form of
gold, dollar balances and foreign exchange, amounting in all to more
than $1,050 million of which more than $900 million is in the form
of gold and dollars. This is in addition to the privately owned
Netherlands assets held in this country. In view of the fact that
the total budgeted expenditure of the Netherlands Government for
1943—including military and naval expenditures—is only $65 million,
it is obvious that the resources available to the Netherlands
Government are very large without additional borrowing and without
touching privately held funds in this country of Netherlands
nationals.
The Netherlands Government can acquire any needed part of the gold
and foreign exchange reserves of the Central Banks of the
Netherlands and the Netherlands Empire in return for national
currency. We are cognizant of the reluctance of the Netherlands
Government to use the gold and foreign exchange reserves of the
Central Banks of the Netherlands and the Netherlands Empire.
However, we call attention to the fact that other United Nations
have acquired and used the gold and foreign exchange reserves of
their central banks.
2. Even if it were apparent that the Netherlands Government will need
financial aid in the immediate postwar period it seems to us
undesirable to make a commitment with respect to such loans at this
time. The loan made to the British Government by the R.F.C. was for
the purpose of meeting war expenditures.
The commitment requested by the Netherlands is for postwar purchases.
Such a commitment would establish an undesirable precedent and would
be likely to call forth similar requests for large sums on the part
of other United Nations. It would be extremely difficult to deny
such governments, lacking the resources of the Netherlands
Government, loans to enable them to make postwar purchases. For
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the United States to begin
now a large scale program of loans or commitments for loans for the
postwar period would represent a departure from our present policy
which is likely to meet with serious public criticism. You would
probably want to present the question to Congress before making any
commitments on postwar loans.
This Government will be in a much better position to make a
satisfactory decision as to the volume and distribution of foreign
loans when we have a clearer idea as to the world’s needs for
American products and of our ability to produce for export in the
immediate postwar period. Pending the development of an over-all
program on postwar credits for reconstruction and development, it
would seem inappropriate for this Government to embark upon a policy
of making loans to foreign governments for postwar purposes.
3. If the need for dollar credits by the Netherlands Government
should become manifest in the postwar period, such a loan should be
secured directly from American investors rather than from this
Government. The credit position of the Netherlands Government is so
strong that there can be little doubt of its ability to secure a
loan from private investors on reasonable terms after the war. The
investing community in this country would be likely to resent a
policy under which this Government would compete with private
investors in making loans to countries whose high credit standing
assures them access to our capital markets on favorable terms.
