William G. McAdoo to Woodrow Wilson

Representatives of the various foreign powers borrowing from the United States were recently asked to revise, and if possible reduce, their requisitions for loans from this Government. This disappointing result may be thus stated:1. Great Britain. The British Government, instead of reducing its requests for assistance, has renewed urgently its request that the $400,000,000 open account owed to New York bankers be now covered by a loan from the Treasury. They indicate the urgent need of many millions of dollars for purchasing wheat in Canada and cotton in the United States. Furthermore, huge sums are being monthly expended by them for purchasing foreign exchange bills offered in the New York market, which means substantially that they are unable to pay for goods purchased in neutral countries, although they are being entirely relieved as to direct governmental purchases in the United States by the loans regularly made to them. They also indicate for the campaign of 1918 a rate of munition expenditure which will increase rather than decrease the amounts required for such purposes. It is proposed to prepare for weekly discharges of 83,000 tons of projectiles on the west front. This is substantially double the amount that has been expended per week during the recent offensive, which in turn was a far greater expenditure than had ever been known before.

Independently of the pressure from the British Government, there is strong pressure from Ottawa for a large loan to the Canadian Government. It is represented to me that it will be impossible to continue sending the munitions which Canada has heretofore supplied to England unless help is obtained from the United States Treasury.2. France. The French Government reports that it is impossible to reduce now its request for $160,000,000 a month. A previous request for money with which to pay for cotton is temporarily suspended due to a tentative arrangement by which the expenditures of our army in France are made to balance cotton purchases in the United States. There is no indication that the amount requested by this Government will diminish, and, possibly, in conformity with the English plan of huge campaigning in 1918, there may be demands for larger amounts of munitions. 3. Italy. Italian requests for funds for October show a considerable increase over the requests for the previous months. They desire $100,000,000, whereas, previously it was $70,000,000, $40,000,000 and $60,000,000 for August, July and June, respectively. In addition to this, they very urgently ask that $25,000,000 be furnished them as a special fund with which to pay a loan made in the United States before we entered the war, and maturing on the fifteenth of October. They appear to be wholly without means to meet this indebtedness, and speak of default if the loan is not renewed or paid by advances from the Treasury.4. Russia. The disturbed situation in Russia and the difficulties of transportation to that seat of war may possibly diminish in the future the demands upon the Treasury. Just now, however, that Government is drawing heavily upon its already established credits, and these will be exhausted at a relatively early date. Additional requests for credits totalling $235,000,000 to January 1st have just been submitted, this figure being in addition to a sum, approximately $140,000,000, for railway material deliverable next year, and for which Mr. Stevens committed our government in an irresponsible but embarrassing proclamation. A special credit ($75,000,000) was established for Russian expenditures outside of the United States this on an urgent telegram from Mr. Root. Other demands of this sort are to be expected.5. Belgium. The Belgian Government, as you will remember, receives regularly $7,500,000 a month to cover the supply of food for its civil population, and has recently been forced to obtain here loans at the rate of about $4,000,000 per month for the maintenance of its army in the field, as both England and France have stopped all supplies purchaseable here for that purpose. They ask for funds to construct a military railway behind their lines, but this has not been granted.6. Cuba. After having received recommendations from the War and Navy Departments, and your approval, a loan of $15,000,000 has been determined upon for the Cuban Government. It is hoped and believed that this particular government will not increase its demands beyond the figure thus named. 7. Roumania. Very urgent demands have come from Roumania through Petrograd, the original sum asked being $200,000,000. We have had some advice from our own representatives in Russia and Roumania indicating that the amount mentioned is extravagantly high. At this moment, Ambassador Francis is still endeavoring to keep the burden of supplying the Roumanian army upon the Russian Government where it seems properly to belong. His attitude, however, may change at any moment; and in the meantime I am put under great pressure by General Scott to make loans to Roumania at once with or without the advice of Mr. Francis. It is not improbable that it would seem wise to offer some aid to the Roumanian Government with the consequent addition to the burdens of the Treasury. Very recent information from British sources indicates that Great Britain and France may possibly join in this subvention, the share of each to be about $5,000,000 per month.8. Greece. An urgent demand has just reached me through the State Department from the Greek Government asking for an immediate credit of $50,000,000 in order that their troops may be mobilized against the Central Powers. This is seconded by requests from the British and French Governments. No wise decision can be reached without further inquiry into the proposed military movements in view.9. China. The State Department presents to me for immediate consideration a proposition that $25,000,000 to $50,000,000 should be at once credited to China, as this country, having declared war against Germany, may, if given the necessary funds, be able to assist considerably in the contest; and, furthermore, American influence in China would be much strengthened if the loan were made by our Government to the existing Chinese Government.

It remains to be seen whether any South American country now about to enter the war will join with all the other belligerents in looking to the United States for financial support.

The French Government has accumulated over a million tons of goods in the United States for which no transportation is available. The Russian and Italian Governments have also immense stocks similarly situated. There is constant pressure upon the Shipping Board by foreign representatives to relieve the congestion above mentioned, and that Board is without the necessary information to determine wisely the allocation of shipping to the various governments in question. Their determinations, like those with respect to loans, must be made without due knowledge of the relative importance of the requisitions made upon them.Enough has been said above to show the enormous and constantly increasing burdens falling upon our Government in connection with the great war. Substantially it may be said that while the European Governments are spending large sums independently of those borrowed from us, yet all the belligerent operations against Germany are now founded upon the obtainment of financial help from the United States.At the same time that we feel this increased pressure from abroad, our own Departments are entering upon a course of expenditure umparallelled in the history of the world. I have recently obtained estimates from the War and Navy Departments as to their probable actual paying out of money during the next few months. It is indicated that more than a billion dollars per month will be actually checked out in October, November and December, with probable increases thereafter.As the result of these combined pressures, it appears that we must immediately raise by loans of one sort or another at least $1,250,000,000 every month. Should the financial exhaustion of the European belligerents become more marked, or should it seem wise that military operations should become more active, the demand upon the United States from foreign quarters would correspondingly increase. The rate at which money must be raised may, therefore, be higher even than that rate which is now confronting me, and which is so high that only by the most energetic and careful measures will it be possible to meet these extraordinary demands.Viewing the whole situation, I feel it my imperative duty to urge that steps substantially on the lines heretofore presented to you should be taken to have a review of the whole scheme of war making. It is possible that such a review would result in the acceptance of the existing European plans, but it seems beyond doubt that some economies will result from a challenge of the whole existing situation, and a correllation of efforts which now seem to be so little correllated. Into such a coordinated study I feel that our own military expenditures should enter.

It seems not improbable that some of our expenditures may be modified through closer adjustment to the military needs of the allies, and to the exigencies of the Treasury.

I cannot doubt that the vast complex of problems which are suggested in the foregoing statements should be made the subject of study by such an Inter-Ally Council as has already been proposed and agreed to by European governments, with the condition expressed by their representatives that its functioning will be of little value unless American representatives take part in its councils. Being continuously impressed with the lack of coordination in all of the military efforts which are being made by those who are associated in the war against Germany, I, therefore, feel it again my duty to lay this situation before you and to repeat my recommendation that an American representative or representatives should be permitted to be attached in a consultative capacity to the Inter-Ally Council in order that the financial forces of the United States particularly, and by correllation those of other governments associated with us in the war, should be marshalled against our common enemy with the maximum of efficiency. I am profoundly convinced that there is great lack of efficiency in this matter at present. The progress already made by obtaining the consent of the allied governments for the establishment of the Inter-Ally Council justifies me in urging this particular plan as the one to which we should now adhere, and which needs only to be perfected by the addition of American representatives in order that it may be at a very early date set into motion.

In the meantime, I remain, my dear Mr. President,

Secretary.


The President,
The White House.