Financing Britain's War Requirements

January 2, 1941

Report Outline
Problem of Extending Fiscal Aid to Britain
Private and Public Loans to Britain, 1914–18
Policy of Banning Loans to Belligerents
Britain's Resources in United States

Problem of Extending Fiscal Aid to Britain

President Roosevelt's fireside chat of December 29, calling for an increased national effort to make the United States “the great arsenal of democracy,” laid the groundwork for submission to Congress in the annual message, scheduled for delivery January 6, of specific proposals for expanding American aid to Britain and financing an enlarged and uninterrupted flow of war supplies across the Atlantic. It is already indicated that opposition to any plan for rendering early financial aid will be forthcoming from groups that contend Britain has not yet by any means exhausted her financial resources in this country, and that she should be required to do so before asking the United States for assistance along those lines.

It became apparent a month ago that government circles were considering the possibility of recommending reversal of the policy, embodied in the Neutrality and Johnson acts, of withholding financial aid from belligerents and particularly from nations in default on their World War debts to the United States. On December 4 Federal Loan Administrator Jesse Jones told newspapermen he considered Great Britain “a good risk for a loan,” Two days later Secretary of the Treasury Morgenthau opened conversations with Sir Frederick Phillips, Under Secretary of the British Treasury, who was asked to draw up a balance sheet of his nation's holdings in this country. The British were understood to maintain the position that they could not proceed with the placing of large additional war orders unless assured of financial assistance.

President's Plans for Making Loans of War Equipment

Public discussion of the question of financial aid to England took a new turn in mid-December when President Roosevelt, returning from his Caribbean cruise, outlined an unusual plan for financing Britain's war requirements. At his press conference, December 17, the President suggested that the dollar sign be removed from the picture. He proposed that the United States, instead of loaning dollars to Britain, take over a large part of British war orders and then loan or lease to Great Britain, or sell subject to mortgage, the war materials and equipment produced under those orders. After the war, Britain would return the equipment to this country, replacing that lost or damaged with equivalent articles of British production. While the President said this plan would not require revision of the Neutrality or Johnson acts, he pointed out that Congress would have to grant authority and approve appropriations for its execution.

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