Foreign Relations of the United States: Diplomatic Papers, Conferences at Malta and Yalta, 1945

Treasury Files

Memorandum by the Assistant to the Secretary of the Treasury (White)

[Washington, undated¹]

Memorandum for the Secretary’s Files

Meeting in Secretary Hull’s Office 9:30 a. m., September 20, 1944

Present:	Secretary Hull,
	Mr. Matthews of State Department.
	Secretary Stimson,
	Mr. McCloy of War Department.
	Secretary Morgenthau,
	Mr. White of Treasury Department.

The Secretary had requested the meeting for the purpose of reporting to Secretaries Hull and Stimson and [on?] his (Secretary Morgenthau’s) participation in the Quebec Conference.

The meeting began by Secretary Hull pointing to a letter² which he had on his desk which he said was an intercept from a high South American official to his Government describing a meeting at Welles’ home of high Latin American officials in which American policy toward Latin America and toward the Argentine was discussed. Hull appeared to be quite angry at the fact that Welles “seemed to be operating a second State Department” unofficially and that the President could stop him but didn’t.

Secretary Morgenthau described in some detail the sequence of developments and the highlights of the discussions that took place at Quebec in which he (Secretary Morgenthau) participated. He gave Secretary Stimson and Secretary Hull a copy of the memorandum on Germany initialed by Churchill and Roosevelt³ and described how the memorandum had been drafted. After his review of the discussions on the German matter he said that he would be happy to answer any questions but that he had given them the gist of all that had happened in the discussions bearing on Germany in which he participated.

Secretary Hull asked whether the question of dismemberment had been discussed and Secretary Morgenthau replied that it had not been discussed in his presence. Mr. McCloy handed a map⁴ to Secretary Hull on which were drawn the boundary lines of the zones in Germany that were to be placed under control of U. S., U. K. and the U. S. S. R. Secretary Morgenthau said that the President had stated that he had held up the matter of agreeing on the zones until the last minute notwithstanding the pressure from the military people below. The President had wanted the British to be in charge of the Ruhr and the Saar so that they would have to implement the policy which was outlined in the memorandum initialed by Churchill and himself. Mr. McCloy added that Austria was to be governed by a combined commission of U. S., U. K., and the U. S. S. R.

Secretary Hull wanted to know how important decisions on Germany could be reached without participation of the Russians. He said he didn’t know how many important decisions were being reached of that character without the knowledge of the Russians, and that that might make things very difficult. Mr. Matthews said that it was his understanding that the Russians had agreed with the U. K. and the U. S. authorities as to the boundary lines of their zone of control and that the remaining area was to be divided between American and British governments. Secretary Stimson mentioned, however, that the decision with respect to the Ruhr was a matter of broad economic ramifications and he presumed that Russia would be interested.

Secretary Morgenthau made clear that Churchill at first opposed the Treasury plan of handling the Ruhr and the Saar and described how Churchill reversed himself the following day and how Eden had objected strenuously to Churchill’s reversal. He repeated Churchill’s remark to Eden that “If it is between the British and German people, I am for the British . . .⁵ and I don’t want you running back to the war cabinet trying to unsell this proposal before I get there. I want to talk to them first about this.”

The Secretary handed Secretary Stimson and Secretary Hull copies of the memorandum on lend-lease aid to Britain⁶ and the accompanying directive initialed by the President.⁶ The Secretary pointed out that the memorandum on lend-lease aid was not drafted until the final day, and that Churchill had agreed to the policy on Germany prior to the final drafting of this memorandum. He explained that the President was about to approve of the request which the British made for lend-lease aid when he interposed and recommended that a committee be appointed to consider the matter. The Secretary pointed out that he was successful in getting the matter turned over to a committee though the committee would have to act in accord with the oral conversations between Roosevelt and Churchill on the matter. The Secretary said that if he had not been there the decision would have been made right there without being referred to a committee. Hull commented that that was a good piece of work—to have the work turned over to a committee. Secretary Morgenthau informed them that the President had, in writing and orally, asked him to be chairman of the American committee. The Secretary invited Mr. McCloy to attend the meeting that afternoon at 2:30⁷ as an observer.

Secretary Morgenthau described that Churchill seemed to be interested solely in the lend-lease arrangements whereas the President was thinking of policy toward Germany and was not very interested in lend-lease arrangements.

. . . . . . . . . . . . . .

Secretary Hull was very disturbed by the fact that the President made the decision on lend-lease with Britain without prior consultation with the men who had been working on the problem for a long time. He said that there were a number of matters with respect to commercial policy which they were trying to get from the British and which the British were running away from, and that they were delaying decisions on the lend-lease aid to Britain during Phase 2 in the hope of getting the other matters settled first. Now, however, the President had given away that bait.

I said that the directive and the accompanying memorandum could be interpreted so as to permit some flexibility of decision so far as the Americans were concerned in the amount and character of lend-lease aid that could be given the British. I mentioned that the British wanted to leave as little flexibility as possible for the committee’s decision because they were quite content with the President’s promise of the specific magnitude mentioned in the memorandum. Secretary Stimson, reading the memorandum over, said: “Yes, there may be some flexibility, but not much.”

Secretary Morgenthau then briefly described what happened with respect to the letter of recommendation⁸ that this Government go ahead with consummation of the negotiations of lend-lease aid to the U. S. S. R. The Secretary said that he was in a fog on these matters; that he had not been following them personally and had not raised the question at the Conference but that the President had asked him to discuss the matter with Secretary Hull. He said he thought that from what Harry Hopkins had told him some time previously that he (Harry Hopkins) had drafted the letter which went to various departments. His understanding was that the cause of the letter was the cancellation of some lend-lease material to Russia by the Army. Matthews said that that was his understanding also. The President had asked Secretary Morgenthau to discuss the matter with Secretary Hull [and Secretary Stimson].⁹ Secretary Hull said that the negotiations had gone so far he didn’t see how they could be stopped nor did he think that the letter referred to above meant to stop the concluding of the negotiations with Russia on the matter under consideration. Mr. Matthews said that on receipt of the letter they had checked with Harry Hopkins and Hopkins had said that the letter was not meant to apply to those negotiations.

Secretary Morgenthau then referred to the memoranda which had been sent to the President on lend-lease to France¹⁰ involving substantial amounts of lend-lease aid to France which seemed to be for purposes of reconstruction rather than for conducting the war.

The Secretary said that the State Department had sent a memorandum to the President recommending the signing of agreements and that Harry Hopkins had also sent a note to the President recommending the agreements. The Secretary said that he wasn’t up on the matter and so he had asked to telephone Bell to ask where the Treasury stood. Dan Bell had sent him a cable¹⁰ stating the Treasury’s disapproval of going through with the proposal. The Secretary said that there was some confusion inasmuch as Hopkins had taken the position that the signing of the agreement did not tie the President’s hands whereas Bell in the cable said that it would tie the President’s hands. Moreover, the Treasury felt that it was not the intent of Congress to permit lend-lease funds to be employed for relief or reconstruction purposes after the cessation of hostilities. Secretary Stimson said that he participated in the committee hearings in the first Lend-Lease Act and subsequent ones¹¹ and that it was his opinion that the purpose of the Lend-Lease Act was not to provide funds for reconstruction and rehabilitation. The fighting will have virtually stopped in France soon and to provide large sums for relief or reconstruction would, in his judgment, be not in accord with the purposes for which the Lend-Lease bill was passed. The Secretary pointed out that that was the Treasury’s position. Mr. McCloy said that the President himself had directed and approved negotiations with the French calling for negotiations on lend-lease aid such as was contemplated. He said that the Treasury likewise had approved the draft of the specified arrangements with the French. Secretary Morgenthau said that there was apparently a good deal of confusion about the matter and so he had recommended to the President that decision on the matter be postponed until an opportunity was had to reexamine the matter. Secretary Morgenthau also added that the President did not want his hands tied in his dealings with the French and that Churchill, who was present at the discussion, was also strongly opposed to giving lend-lease aid to the French. Secretary Hull commented that we would have to watch that situation because that might mean that the British were cooking up something with the French; that Churchill in the past had talked against De Gaulle, on different grounds to be sure, but at the same time the Foreign Office was going ahead with negotiations of a different character.

The Secretary asked Secretary Hull how he would like to proceed on this. Secretary Hull responded, rather bitterly, that he was rapidly losing interest in the whole matter; that if he was to be kept out of the discussions and the decisions on matters of such an important character that he was losing interest in the whole business. The Secretary replied that he had wanted to report to Secretary Hull and Secretary Stimson as quickly as possible all that had happened in Quebec and that he had participated in. He said that, as he had told Secretary Hull upon his return from London,¹² he would continue to interest himself to play an active part in considerations of policy toward Germany and the like so long as the President encouraged him to continue, and he proposed to continue until the President ceased to encourage him.

The Secretary said that he wanted to ask Secretary Hull’s advice on a point; that in all of these discussions up there and here no mention was made of Secretary Forrestal. He wanted to know what Secretary Hull advised with respect to bringing Forrestal in on these matters. Secretary Hull replied that he would tell Forrestal “that his name has been mentioned.” Secretary Morgenthau said that he thought Secretaries Hull, Stimson and Forrestal met once a week to discuss matters. The matter was left hanging.

Secretary Morgenthau suggested that White, McCloy and Matthews act as a committee to examine lend-lease matters with regard to France and Russia and to be prepared to report back to Secretaries Hull, Morgenthau and Stimson the following week. Secretary Hull commented that no time should be lost and the time was set for next Tuesday morning in Secretary Hull’s office. Secretary Hull commented: “Well, the President has made these big decisions and it is up to us to help him out as much as we can.”

The Secretary later told Mr. Matthews that if he would come over to Mr. White’s office. Mr. White would be glad to let him go over the file that he had in his hands and make any notes on it that he would care to make.

I told Jack McCloy that the directive¹³ which they had drafted was an excellent job and that we were quite pleased with it. He said, “You like it?”, and I said, “Yes, very much.” He said, “I have been talking to State Department yesterday on it and they are in agreement on all points except one, namely, the paragraph on economic control.” I said, “That is a vital paragraph.” He agreed. He asked the State Department to draft the paragraph as they wanted it and said that he would send a copy to us and we could go over the State draft with them. I asked what was the next step. He said that they were going to give a copy to the British and that they could give them everything except that paragraph. Then the British would offer their suggestions at the CCAC meeting, and he said, “I will ask you to be present so that you can participate in the discussions with the British.” I said that that would be quite satisfactory.

H. D. White

1. The date “9/25/44”, which appears at the end of the memorandum, is evidently the date of typing.
2. Not printed.
3. For the text of this memorandum, see Stimson and Bundy, On Active Service in Peace and War, pp. 576–577.
4. Not reproduced.
5. Points appear in the source text.
6. Not printed.
6. Not printed.
7. A meeting in Secretary Morgenthau’s office of members of the United States group who were about to participate in the new series of United States–United Kingdom lend-lease conversations.
8. Not printed.
9. Brackets appear in the source text.
10. Not printed.
10. Not printed.
11. Acts approved March 11, 1941 (55 Stat. 31), March 11, 1943 (57 Stat. 20), and May 17, 1944 (58 Stat. 222).
12. August 17, 1944.
13. “Directive to SCAEF Regarding the Military Government of Germany in the Period Immediately Following the Cessation of Organized Resistance (Post-Defeat)”, post, pp. 143–154.