William G. McAdoo to Woodrow Wilson

I received your letter of the 9th instant about the cable which I asked the Secretary of State to forward on January 5 to Mr. Crosby, concerning the suggestion that General Bliss confer and cooperate with Mr. Crosby on his return to Europe.

I am distressed that you should have the impression that I did not consult you about this matter before the Secretary of State was asked to send the cable. This obliges me to review the situation somewhat at length, as I should like you to know exactly how it came about.

On January 2, I wrote you in reply to your letter of December 26, in which I outlined the problem confronting the Treasury Department in the allocation of credits to the Allies, and emphasized the importance of a related study of the expenditures of the War Department and other Departments of our Government and the expenditures of the Allies for the general purposes of the war. I attach copy of that letter marked "Exhibit A." Not having received a reply from you, I fear you may have overlooked it, and it is for that reason that I bring it again to your attention.

On the same date, I took the liberty of writing the Secretary of War, suggesting that General Bliss' return to Europe offered, it seemed to me, the opportunity of a coordinated study of the financial problems as related to joint military operations of the Allies and the United States and of the shipping facilities that would be available for the carrying out of any plans that might be determined upon. The Treasury cannot meet the demands now being made upon it indiscriminately unless those demands have relation to the ability of all the Governments concerned to translate them into actual power or force upon the battlefronts. A copy of my letter to the Secretary of War dated January 2, together with a copy of my letter to you of the same date, transmitting for your information a copy of said letter to the Secretary of War, are attached hereto as "Exhibit B" and "Exhibit C" respectively.

By reference to page 3 of my letter to the Secretary of War, you will observe that I merely made a suggestion to the Secretary of War as to the manner in which I thought General Bliss could cooperate with Mr. Crosby and the Inter-Ally Council in a way which would be highly beneficial not alone to the United States Treasury, but to the general situation, and I said specifically:"If you and the President should think well of it, I should be glad to have the United States represented by a military officer, as well as by a financial secretary upon the Inter-Ally Council. Meanwhile, it seems to me that this second trip of General Bliss to Europe will offer an opportunity for obtaining some light upon the problems which I have suggested, informally if you like. Needless to say, Mr. Crosby will be glad to cooperate in every way with General Bliss if you should determine to instruct the General to take action on the lines suggested."I am sending a copy of this letter to the President, so that he may be informed, if you think it worthy of discussion with him."On the 4th instant I received from the Secretary of War a letter expressing his entire approval of my suggestions (copy attached as "Exhibit D"). In view of the fact that I had sent you a copy of my letter of January 2 to the Secretary of War and had suggested that he take the matter up with you if he thought it worthy of discussion, I assumed upon receipt of the Secretary of War's letter that he had consulted you and that I was free to act upon his letter.

Therefore, on the 5th of January I requested the Secretary of State to cable Mr. Crosby. Copy of that cable is attached marked "Exhibit E." You will observe that Mr. Crosby was advised that General Bliss, Chief of Staff, on his return to Europe had been instructed by the Secretary of War "to confer with you and to cooperate in every way" and that the cable concluded with this sentence: "He (the Secretary of War) will await action on this pending recommendation from General Bliss after conference with you." The whole matter was left in position to be dealt with by yourself, the Secretary of War and myself after a full report of the conferences between General Bliss and Mr. Crosby had been received.

On the 7th of January I sent to you a copy of the Secretary of War's reply to my letter of the 2d instant, together with a copy of the cable which I had asked the Secretary of State to send to Mr. Crosby (copy attached marked "Exhibit F").

On the 8th of January I received through the Secretary of State copy of a cable from Mr. Crosby dated January 7th (copy attached marked "Exhibit G").

I sincerely hope that you will read these Exhibits in their order because they tell a connected story, a full knowledge of which on your part I regard as of genuine importance.Perhaps I was not justified in assuming, after the receipt of the Secretary of War's letter of January 4, that he had consulted you, but I think you will agree with me that it was a natural presumption. In my eagerness to despatch business and to get things forward, I perhaps jumped to the conclusion that you and the Secretary of War had conferred about the matter and that he was advising me not only as to his own views, but as to yours as well.

The problem presented by this correspondence is of a very grave and pressing character. It must be settled and settled promptly, and I earnestly hope that you will give the whole subject as prompt consideration as you possibly can and advise me as to the course you wish to have pursued.What concerns me deeply is the renewed expression of your feeling that Mr. Crosby is disposed to go too far afield. The work which the Inter-Ally Council was intended to accomplish in coordinating demands upon the United States Treasury obliges consideration of the available supply of ships and the military plans and is of such vital importance and of such urgent necessity in order to relieve the Treasury of some of the stupendous and unbearable demands now being made upon it that the representative of the United States in attendance upon the Inter-Ally Council must not only take all these subjects into consideration in determining what credit demands shall be satisfied by the United States Treasury, but he must be as well a person having your entire confidence.

I am obliged to say in all candor that unless a more effective and intelligent check can be imposed upon the expenditures now being made by the different Departments of our own Government and upon the demands being made upon the Treasury by the Allied Governments, it will be impossible to meet these demands. It is absolutely impossible for the Secretary of the Treasury unaided to assume the great responsibility of determining which demands shall be refused and which shall be granted in view of the grave consequences, military and otherwise, which such determinations carry.Mr. Crosby's experience as Assistant Secretary of the Treasury, and the admirable work he did here, in combination with his unusual qualifications for the important mission upon which he was sent to Europe, fit him preeminently for this service, but unless he can enjoy your complete confidence and command your full support, it would be wise, in my judgment, to recall him and to substitute another representative. I confess I have no one in mind who is suitable for the task or who can approach Crosby in the matter of qualifications.Personally, it would be a great relief to me to have Crosby returned to the Treasury. He is invaluable here. I need at least two Assistant Secretaries in charge of financial matters, one of whom shall give his attention primarily to loans to foreign governments, and the other to domestic finance.

I have spoken to you of my desire that Crosby should be designated High Commissioner of the United States, partly in order that he might have the prestige and rank which are necessary to the efficient performance of his duties as the representative of the United States upon the Inter-Ally Council, and also with a view to enabling me to accept his resignation as an Assistant Secretary of the Treasury and to appointing another Assistant here who could give me further much needed assistance. For these reasons I am disposed to recommend that Crosby be recalled and another substituted who will have your entire confidence, or that if I have over-estimated the significance of what you have written me about Crosby and if he does really enjoy your confidence in fundamental matters, you strengthen his position by giving him the suitable rank and title of High Commissioner of the United States, or some similar title, and leave me free to choose another Assistant Secretary of the Treasury.

I should like to repeat that I know of no one whose qualifications to represent the United States on the Inter-Ally Council are at all comparable with his. The work Mr. Crosby is doing is extremely difficult. In fact, I know of no more difficult position for an American to occupy in Europe, and I fear that you are likely to do him unconsciously an injustice as a result of hearing one sided accounts of his activities and reading his cables without being fully informed of all the details and ramifications of the financial problems with which those cables deal.Please forgive me for instancing in this connection your comment in your note to me of November 19 on Crosby's telegram No. 5 dated November 16, concerning the Italian situation. When I explained the facts at the time, you were quick to recognize that they threw another light on the matter of Crosby's cable, and I may add that a substantial part of the credit of $230,000,000 which had been established for Italy at that time remains unavailed of. The matter is unimportant in itself, but shows how a message from Crosby, which appeared unsympathetic on its face, gave me, in fact, precisely the information which I had to have in order to know how to meet the demands which the Italian Ambassador here was at the moment pressing, but which he subsequently withdrew and which actual experience has shown were without any basis.Similarly, I am confident that in every instance a full exposition of the situation to you would convince you that the subjects discussed by Mr. Crosby in his cables are most intimately and directly connected with precisely the problems he was sent over to Europe to handle. In the light of my own knowledge of the financial problems, I have found Crosby's cables intelligent, wise and relevant to his duties. The single departure from what I should regard as his immediate affair""the suggestion in relation to the Italian shipping problem""he has explained in his cable No. 36, to which I have already referred, and which is attached as "Exhibit H" and which I hope you will be careful to read. This cable was sent in reply to one I had sent to Crosby by your direction, cautioning him against mixing in too many matters.

This seems a very long letter. I am under such pressure that I have not time to compact it into something more brief. The situation is of such fundamental and grave importance that I have felt obliged to review it somewhat at length.With the earnest hope that it may receive your prompt and thoughtful consideration, I am, as always