1. Further to my 5682 [1], the termination of lend lease. I
discussed this matter with a high official of Foreign Economic
Administration and advised him of Australian hostility to the out
of hand manner of terminating lend lease. I also indicated that as
the result, there was now a strong possibility of our terminating
reciprocal aid on V-J Day [2] despite the fact that, prior to
F.E.A.'s peremptory action, the Australian Government appeared to
be favourably disposed towards the continuation of reciprocal lend
lease.

2. The F.E.A. official stated that he also disagreed with the
arbitrary manner in which the lend lease decision had been taken
and conveyed to the beneficiary countries. He felt, however, that
we should not lose sight of the following extenuating
circumstances:-

(a) As manifested in recent congressional and legislative action:

Congress and the public were opposed to the continuation of lend
lease and desired the earliest possible termination. Roosevelt
might have forced more favourable arrangements but the new
President is unwilling and probably unable to oppose Congress on
this point. We must remember that when Truman was Vice-President,
he cast the deciding vote in the Senate on the extension of lend
lease and at that time pledged that he would lend all his support
to the earliest possible termination of lend lease following the
end of the war.

(b) Despite repeated requests by F.E.A. since VE Day to consider
the lend lease problems which would arise on VJ Day the British
had avoided discussions aimed at mutual agreement on the proposed
procedures. In view of this unrealistic attitude, Crowley felt
very little good would result at this stage from detailed
discussions in which the British would undoubtedly adopt similar
stalling tactics.

(c) The Secretary of State and Crowley felt that the present
arrangements giving the appearance of prompt lend lease
termination in accordance with congressional desires should
establish goodwill in Congress for the consideration of the
solution to the difficulties confronting long term trading and
financial relationships between the United States and the British
Empire. While the solution of these problems is longer term
consideration, Byrnes felt that the continuation of lend lease in
the face of acute opposition might sour Congress and imperil
future discussions on matters of much greater importance to the
British Empire.

(d) The rapid termination of lend lease will also establish
background favourable to sympathetic administrative action by
F.E.A. in dealing with such matters as inventories and lend lease
discounts. By adopting generous approach to such administrative
action F.E.A. may be able to render benefit to recipient countries
which will be worth far more than the mere continuation of lend
lease for a month or two. As [evidence] of this beneficent
attitude of F.E.A., official cited Crowley's decision to restrict
the definition of inventory to goods in Government stores. He also
indicated that inventory stockpiles may be assessed on especially
favourable basis as regards special discounts, etc.

(e) The F.E.A. official furthermore claimed that extremely
favourable consideration has been given to lend lease countries in
extending opportunity for purchase of lend lease procured
materials under 3C section on the basis of thirty year repayment
at the low interest rate of 2 3/8%. This offer would apply only to
Government purchase of lend lease material in inventory or now on
contract and subsequent to VJ Day procurement through governmental
or commercial channels could probably be financed by export-import
bank only at considerably higher interest rates and on the basis
of much shorter repayment time.

(f) Further special consideration was being given to shipping
freights under lend lease. The official anticipated that F.E.A.

would continue payment of dollar freights under lend lease for a
period of thirty days after VJ Day even though the materials
carried will not be eligible for lend lease.

3. In reply to a query from me, the F.E.A. official advised that
they had not yet determined the position of non-lend lease cost
components included in the value of lend lease inventories
repossessed by the United States Government. I also raised the
question whether subsidiary operational stockpiles should be
included in the inventory or whether only material in base stores
should be taken into account. The official stated this question
had not previously been raised and therefore, no policy had been
established.

4. I again protested on the outofhand treatment that had been
adopted and suggested that the wisest course for F.E.A. in the
future would be the maintenance of the closest possible
consultation on difficult matters of this kind. The F.E.A.

official signified agreement and stated as his opinion that this
course would be followed in the future.

5. You are, no doubt, aware that the United Kingdom Government is
sending Keynes over within the next few days for full discussion
of the financial problems arising from lend lease termination. We
will of course, keep in close touch and advise you of all
important developments. [3]