Source: Treasury Department, Division of Monetary Research, Mar. 9, 1944.

ATTACHMENT II

TERMS OF REPAYMENT

(This schedule deals with the repayment period and rate of interest at 3 percent repayment period 30 years.)

This attachment not reproduced at this time-relatively unimportant.

ATTACHMENT III

(Summary of facts on trade relations between the United States and U. S. S. R. during the interwar period, 1918-38.)

Not copied at this time.

Senator MALONE. On January 10, 1945, less than a year later, we find the Secretary of the Treasury sending a memorandum to the President based on the Harry Dexter White letter. As I said before,. I doubt if the President ever met the man. He probably never knew the origin of this concept. It reads:

I suggest consideration be given to a financial arrangement with the U. S. S. R. to provide her with $10 billion credits for the purchase of reconstruction goodsin the United States, with provision for repayment to us chiefly in strategic raw materials in short supply in the United States.

It goes on that

The interest rate could be 2 percent amortized over a period of 35 years.

The Russians have more than adequate means to assure full repayment. There are three principal sources from which she can obtain the necessary amount of dollars *** selling to us strategic raw materials which are in short supply in the United States ***.

Why are they in short supply? The conclusion is inescapable that it was because of the false principles advanced under the plausible guise of conserving our national resources that we have been putting into effect in the United States of America.

Paragraph 3:

An important feature of this proposal is that we will be conserving our depleted natural resources by drawing on Russia's huge reserves for current needs of industrial raw materials in short supply here. We would be able to obtain a provision in the financial agreement wherby we could call upon Russia for whatever raw materials we need without giving a commitment on our part to buy.

I will include in the record at this point the memorandum for the President of January 10, 1945.

(The matter referred to is as follows:)

JANUARY 10, 1945.

MEMORANDUM FOR THE PRESIDENT

A $10 BILLION RECONSTRUCTION CREDIT FOR THE U. S. S. R.

I suggest consideration be given to a financial arrangement with the U. S. S. R. to provide her with $10 billion credits for the purchase of reconstruction goods in the United States, with provision for repayment to us chiefly in strategic raw materials in short supply in the United States.

1. The interest rate could be 2 percent, amortized over a period of 35 years. A schedule of repayments is attached.

2. The Russians have more than adequate means to assure full repayment. There are three principal sources from which she can obtain the necessary amount of dollars.

(a) Selling to us strategic raw materials which are in short supply in the United States because of our depleted natural resources. (See attached memorandum.)

(b) Russia will be able to develop substantial dollar assets from tourists trade, exports of nonstrategic items to the United States, and from a favorable balance of trade with the rest of the world.

(c) Russia has a stock of gold estimated at $2 billion now and is reported to be able to produce from $150 milion to $250 million per year. These gold resources can be used to pay her obligations to the United States to the extent that her other dollar sources are not adequate.

3. An important feature of this proposal is that we will be conserving our depleted natural resources by drawing on Russia's huge reserves for current needs of industrial raw materials in short supply here. We would be able to obtain a provision in the financial agreement whereby we could call upon Russia for whatever raw materials we need without giving a commitment on our part to buy.

4. This credit to Russia would be a major step in your program to provide 60 million jobs in the postwar period.

CONSERVATION OF UNITED STATES NATURAL RESOURCES AND IMPORTS FROM

THE U. S. S. R.

The United States has had to draw heavily on domestic raw materials reserves during the war to meet peak production requirements. The following table prepared from some recent confidential reports for the Secretary of Interior discloses the depleted natural resources of the United States, and emphasizes the need for conservation measures.

We could safeguard and conserve our strategic material reserves in postwar years which are now at a minimum level, by importing from abroad to meet ordinary annual production requirements. The U. S. S. R. has tremendous reserves of many materials which the United States will urgently require after the war. A reconstruction loan to the U. S. S. R. will give the means whereby we can conserve our natural resources for the next two generations, by utilizing Russian reserves. The U. S. S. R. could provide substantial quantities of strategic raw materials for an annual basis within 5 years after the close of the war as indicated in the following table.

Metals and metallic ores (manganese, tungsten, graphite, mica, chrome, mercury, iron ore, platinum, copper).

Timber and wood products---.

Petroleum

Oils and oilcake_-_.

Other industrial raw materials_--

Total_____.

$80, 000, 000

45, 000, 000

50, 000, 000

10, 000, 000

15, 000, 000

200, 000, 000

Repayment schedule for advance of $10 billion credit for 35 years at 2 percent 1

Senator MALONE. Mr. Secretary, some of us have been working about 14 hours a day on this since Congress adjourned last summer. We find instances where foreign nations upon whom we have become dependent for certain strategic materials, stopped exports even in peacetime when it suited their purposes-we would be at their mercy in wartime.

For example, in peacetime a certain nation stopped the shipment of monazite sands that we needed at that time for our uranium nuclear energy setup. If there was no other source, they had us in their power.

No one in his right mind thinks you can get 900,000 tons of manganese from certain present sources of supply when war starts. Even if we were able to ship it across the oceans, these nations because of political reasons could refuse to ship it out of their country. You cannot make a ton of steel without manganese.

Here now is a letter from the Secretary of the Treasury, undated, presumably about the same time, from Mr. Morgenthau to the President at the White House.

During the last year I have discussed several times with Mr. Harriman a plan which we in the Treasury have been formulating for comprehensive aid to Russia during her reconstruction period. We are not thinking of more lend-lease or any form of relief but rather of an arrangement that will have definite and longrange benefits to the United States.

The next paragraph:

Ambassador Harriman has expressed great interest and would like to see the plan advanced.

I will just enter the letter in the record at this point. (The document referred to follows:)

THE SECRETARY OF THE TREASURY,

Washington.

The PRESIDENT,

The White House.

MY DEAR MR. PRESIDENT: During the last year I have discussed several times with Mr. Harriman a plan which we in the Treasury have been formulating for comprehensive aid to Russia during her reconstruction period. We are not thinking of more lend-lease or any form of relief but rather of an arrangement that will have definite and long-range benefits to the United States.

Ambassador Harriman has expressed great interest and would like to see the plan advanced. I understand from him that the Russians are reluctant to take the initiative but would welcome our presenting a constructive program.

You will recall that at Quebec Mr. Churchill showed every evidence that his greatest worry was the period immediately following V-E Day. We have now worked out the phase 2 lend-lease program with the British after 2 months' very hard work.

I am convinced that if we came forward now and present to the Russians a concrete plan to aid them in the reconstruction period, it would contribute a great deal toward ironing out many of the difficulties we have been having with respect to their problems and policies.

I hope that you will give me an opportunity to present to you the work which we have been doing here in the Treasury over a period of a year on this subject. I am furnishing Mr. Stettinius with a copy of this letter for his consideration. Sincerely,

Senator MALONE. Now, Mr. Secretary, I have in my hand a release by the President of the United States of July 23, 1946, upon the occasion of his signing the stockpile bill passed by the Congress, which is very enlightening in view of the past correspondence. This is the release signed when he approved Public Law 520 :

I have today signed the Strategic and Critical Materials Stockpiling Act because it is important to the national interest that this Government have the power to acquire stockpiles.

It is only because of the overriding importance of this purpose that I am able to overcome my reluctance to signing a bill which reaffirms the application to stockpile purchases of the provisions of title III of the act of March 3, 1933 (47 Stat. 1520), known as the Buy American Act. Those provisions will not only materially increase the cost of the proposed stockpiles but will tend to defeat the