Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
28275767
label
Volume 11, November 1 – November 14, 1935
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
28275767
sourceUrl
contentType
document
title
Volume 11, November 1 – November 14, 1935
citationUrl
collections
Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
28275767
levelOfDescription
fileUnit
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
5970fcc8893c9a73
ocrText
DIARY
Book 11
November 1 - November 14, 1935
Regraded Unclassified
4 1 I
Book Page
Agricultural Adjustment Administration
See Budget
XI
168
Copy of HMJr's letter to Chairman, Committee on Agriculture
and Forestry, concerning 30% allocation of Customs funds
6/26/35
172
Copy of memorandum to FDR concerning same - 8/20/35
173
Agricultural Adjustment Administration Act
Conference on substitutes if Act is held unconstitutional:
Haas and Harlan represent Treasury - 11/1/35
4
- B -
Budget
See also Agricultural Adjustment Administration
HMJr does not approve of Bell's actions, at meeting with FDR
11/12/35
168
a) Agriculture budget includes item of $107 million
or 30% of estimated Customs receipts for next fiscal
year; HMJr does not like this "earmarking" of funds
which do not go through Committee on Appropriations;
HMJr asks that this item be dropped from Agriculture
budget and paragraph included in budget message
urging repeal of this part of Agricultural Adjustment
Administration Act, Bell protests
b) HMJr also helped Bell get Reconstruction Finance
Corporation under Budget - Bell not particularly
grateful
Catledge (Turner) article disturbs FDR and HMJr - - 11/14/35..
186
- C -
Canada
See Trade Agreement, Canada-United States
61,113,
116,118,
136,154,168
China (arranged chronologically)
Monetary change: Sze phones Lochhead of message to be delivered
to HMJr personally; Sze, Lochhead, and Oliphant go to Fishkill
11/2/35
st
a) No information concerning
1. Silver or gold basis
2. To what other currency it will be linked
3. To what purpose proceeds of proposed silver sales
will be applied
b) Sze mentions further cable indicating desire to sell
100 to 200 million ounces of silver to United States
at a fixed price
Regraded Unclassified
- C - (Continued)
Book
Page
China (Continued)
Monetary change (Continued)
XI
54
c) HMJr thinks
1. Proceeds of any silver purchased by United States
should be used solely for stabilization purposes
and not for purchase of armaments, defraying army
expenses, et cetera
2. Basis of change should be satisfactory to
United States; yuan should be tied to United States
dollar
d) Proposed loan also discussed
e) Suabilization Committee should have 2 of its 3 members
Americans
Kung cables Sze 11/3/35 (Sunday) of critical situation in
Shanghai and that currency change will be announced on
11/4/35 (Monday)
8+
a) Yuan to be stabilized around present level
b) Chinese banks and subjects ordered to turn in
silver holdings to Central Bank of China against
bank notes without any premium; foreign banks -
same terms. HMJr asked to use his good offices
to the end that American banks in China comply
Chase National Bank, New York, notified by branch in Shanghai
about 9 P.M. 11/3/35 that announcement has been made:
a) Official rate of 1 shilling, 2ª pence to the yuan
(about 30+ United States)
b) Chase+National City Bank both confirm request to turn
over silver holdings to Central Bank of China
1. National City Bank has 9 million yuan of silver
2. Chase National Bank has 11 million yuan of silver
3. American Express Company has 500 thousand yuan of
silver
Sze receives further message: agreement withheld on tying yuan
to dollar; HMJr sends message indicating disappointment to
Sze (Copy in Book XI, page 11)
Kung's message 11/4/35
12
a) Points 1, 2, and 4 agreed
b) Point No. 3 - Currency Reserve Board already appointed;
Committee already created; 9 members - including American,
British, French, and Japanese
c) Point No. 5 (tying to United States dollar) "We have
announced maintenance of stable exchange at present level
by Government bank buying and selling unlimited amount
HMJr will exchange" confer with Sse in Tressury at 10 A.M. Wednesday 11/6/35 13
a) Sze asks for earlier appointment, possibilities discussed
HMJr, Phillips (State Department), Oliphant, Lochhead, and
Sze confer 11/6/35
17
a) HMJr tells Phillips Baruch knows all details of
negotiations - only FDR could have told him
Regraded Unclassified
- C - (Continued)
Book
Page
China (Continued)
HMJr, Phillips (State Department), Oliphant, Lochhead,
and Sze confer - 11/6/35 - (Continued)
XI
17
b) Sze announces agreement that:
1. Money will be used for stabilization only
2. Money will be kept in an American bank
3. United States will be kept informed on how
money is used
c) HMJr says Point No. 5 not yet answered (tyIng
to United States dollar)
d) HMJr does not think loan necessary if United States
buys silver
Resume' of all negotiations to date by HMJr
21
a) Memorandum handed HMJr by Sze, attached
23+
Substitute No. 5 decided upon by HMJr, Oliphant, Haas,
Lochhead
a) Copy attached
30
b) FDR suggests an accompanying qualifying memorandum
c) HMJr, Oliphant, and Lochhead against accompanying
qualifying memorandum
Bewley (Financial Counselor, British Embassy) confers with
HMJr 11/7/35
33+
a) Says China has decided to abandon silver
b) British officials fear they will have to do something
c) Thinks Hong Kong will go on managed paper currency
or else "link up with sterling"
d) Thinks Hong Kong will want to sell their reserves -
about 100,000,000 fine ounces. Asks, "Will United
States buy silver direct or should it be put on the
market?"
e) HMJr thinks exchange of information is first basis
of cooperation; tells Bewley all United States money
in London is on deposit with Bank of England; they
know every move United States makes; Bewley did not
know this and says he will tell British Treasury also
HMJr, Haas; and Oliphant confer as to moves if Hong Kong
sells reserves, et cetera
35
Pittman informed by HMJr 11/7/35
37+
FDR asks for Treasury reaction
47+
Sze receives reply from Kung about Point No. 5: "Not able to
say just now that currency will be linked to anything
because of external political situation" - 11/8/35
50
Sze and HMJr confer concerning silver purchases on Saturday
afternoon 11/9/35
58
a) United States is willing to purchase 20 million ounces
at 65-5/84 per ounce when it has been delivered on
board American steamer at Shanghai
b) Business to be done through both American banks at
Shanghai
Regraded Unclassified
- C - (Continued)
Book
Page
China (Continued)
Conference: FDR, HMJr, Lochhead, Haas, and Oliphant 11/9/35- XI
63
a) Resume' of all references by FDR to silver program
in connection with present Chinese situation
b) FDR refers to Washington Evening Star article quoting
Japanese 8.8 not consulted about change in Chinese
monetary system and feeling British are behind it
e) Leith-Ross quoted as saying Chinese announced the
plan before consulting him
d) HMJr suggests, as one way of preventing China and
Hong Kong from selling silver, allowing price to
decline, temporarily, to around 40¢ level, making
paper yuan worth as much as silver
e) FDR mentions settlement of trade balances by shipments
of silver and gold combined in some manner - thus
insuring physical distribution of both gold and silver
reserves among various nations of the world; Oliphant
says he has studied symmetalism at some length
Sze confers with HMJr 11/13/35
155
a) Says if "during the next 12 months" is added to
Point No. 3, Kung will accept all other points
b) Says China has $50,000,000 of foreign exchange and gold,
asks United States to take more than 20,000,000 ounces
almost immediately, HMJr says China should pay extra
ship insurance
c) HMJr confers with FDR; suggests 20 million ounces on s/s
President Coolidge 11/19, and 20 million ounces on
S/S President Jefferson 11/26
d) FDR inquires about getting it to the Philippines and
using army transports; finally HMJr and FDR agree to
guarantee to take "up to 50 million ounces"
e) HMJr 80 informs Sze
f) HMJr reads Buck cable to Sze (page 158) giving information
contrary to conditions as related by Sze
g) HMJr tells Sze he will have copy of four points agreed upon
sent to Ambassedor Johnson for Buck
159
h) Asks Sze to assure United States first refusal if China
sells further
Cochran, H. Merle
139
See Italy
Cook, Morris
See Rural Electrification Administration
15
Cooperatives Edward Filene sponsors scheme to finance, with Reconstruction
Finance Corporation money, chain of cooperative retail stores
137
11/12/37
a) HMJr does not approve - 80 informs FDR
138
b) Filene's letter attached
Customs See Agricultural Adjustment Administration Budget (30% allocation
of Customs funds for Agricultural Adjustment Administration)
168,172,173
Buffalo office - investigation of - See Investigations,
Treasury Personnel
179,1814
Regraded Unclassified
- D
Book Page
Davey, Mrs. Martin
HMJr asks Helvering concerning information regarding her
income tax case; Helvering says Internal Revenue gives out
no information; after case is turned over to Board of Tax
Appeals, it becomes public information - 11/13/35
-
XI
163
FDR disturbed about publicity
167
- E -
Eccles, Marriner
Reappointed to Governorship of Federal Reserve Board:
November, 1935
14
a) Sparkman (Clerk of Senate Banking and Currency
Commission) tells Upham of O'Connor (Comptroller)
visit to Fletcher, expressing opinion FDR has made
grave mistake; O'Connor says he will fight
confirmation in every possible way. Glass will
renew fight on confirmation; also McAdoo and Smoot
Excess Reserves
Eccles tells HMJr he thinks Board would vote 25% increase
if it were put to them now - 11/7/35
28
a) Eccles will tell Board HMJr's reasons against;
wants to see what will happen with regard to:
1, Bonus
2. Budget
3. War in Europe
Reserve board data (confidential) - 11/12/35
142
a) Total - all member banks
b) Reasons for and against raising requirements
c) Smead's memorandum to Eccles
148
- F -
Federal Alcohol Control Administration
Hoyt wants to appoint & General Counsel and increase staff
to 190 (20 additional investigators); HMJr urges no
additional personnel until Congress approves their
appropriation, which is carried in the Deficiency Bill
11/1/35
2+
Memoranda attached
534
Resentment expressed by HMJr at treatment of his
representative (Graves) at meeting in Hoyt's office
4
General Counsel for Federal Alcohol Control Administration
discussed by FDR and HMJr
134
a) FDR warns HMJr not to oppose Judge's wishes on the
Hill
HMJr tells Hoyt that FDR and he have discussed:
1) No larger personnel at this time
2) Treasury will provide all possible help while budget
is being prepared - 11/11/35
133 A-B
Filene, Edward A.
137,138
See Cooperatives
Regraded Unclassified
- G -
Book Page
Georgia
Intelligence Unit report on graft in Highway Department
XI
165
Germany
See Steel (German)
188+
Gold
See Stabilization
Government Reorganization
135
FDR suggests Board to study; Owen D. Young to head Board,
perhaps
FDR asks HMJr if he would object if Public Health were
transferred from Treasury; HMJr replies, "Not at all"
- H -
Hoyt, Franklin C. (Judge)
See Federal Alcohol Control Administration
2,4,
53,134
- I - -
Income Tax Returns, Investigation of
See Davey, Mrs. Martin
163,167
" Louisiana
163
If Roosevelt, Elliott
1921-
Investigations, Treasury Personnel
Customs office - - Buffalo, New York
a) Conference: HMJr, Gibbons, McReynolds, Moyle, Dow,
Gorman, and Ballinger - - 11/14/35
179
b) Report of Special Agent Mack - 11/13/35
181+
Collector of Internal Revenue - Cleveland, Ohio - Carl E. Moore
a) Charles West talks to HMJr 11/14/35
191 A-H
Italy
FDR asks for information on how long Italy "can last" 11/12/35.
139
a) HMJr asks State Department to send H. Merle Cochran
b) State Department's instructions to Cochran 11/13/35
162
- L - -
LeHand, Marguerite
HMJr suggests Earle Bailie's advice on stocks
202
Louisiana
Farley asks HMJr about "various Treasury cases" - 11/13/35
163
HMJr tells FDR "not & day passes but some one tries to
stop investigation"; both agree to proceed - 11/14/35
186
Regraded Unclassified
- M -
Book Page
Marriner, Theodore
HMJr tells Dunn (State Department) excellence of Marriner's
work in Paris - 11/1/35
XI
1
Monetary Policy
Resume prepared by Oliphant for conference with FDR 11/9/35,
covering extracts from FDR's speeches, emergency legislation,
Acts of Congress, et cetera
79+
Moore, Carl E. (Collector of Internal Revenue - Cleveland, Ohio)
See Investigations, Treasury Personnel
a # I
Political Gossip
Gibbons reports: 11/14/35
202
a) Walter Cummings wants to be Vice President
b) Lehman wants to be Ambassador to Switzerland
c) Jones, Kennedy, Eccles, and Cummings want to be
Secretary of Treasury
Postal Savings Account
Burgess and HMJr talk over investment; HMJr finds there is
on hand 88 million in cash - 11/7/35
42 A-B
- R -
Reorganization of Government
See Government Reorganization
135
Roosevelt, Elliott
Investigation of income tax return for 1934
192+
Rural Electrification Administration
HMJr lists four points in his own record on public utilities
which qualify him to suggest sensible financial set-up for
Rural Electrification Administration.
15
- S -
Silver (arranged chronologically)
See also China
HMJr asks McReynolds for sketch of New York City showing
location of all buildings in which silver is stored-11/6/35
16
Conference: FDR, HMJr, Lochhead, Haas, Oliphant 11/9/35
63
a) Resume of all references by FDR to silver program in
connection with present Chinese situation
Rogers estate as site for storage suggested by FDR
136
Social Security Board
McReynolds discusses with HMJr problem of relationship of
Treasury and Social Security Board, with respect to accounts
and records
115
Regraded Unclassified
- 8 - (Continued)
Book
Page
Spain
HMJr tells Dunn United States is rapidly accumulating all
gold and silver in world; time to make some European
country a loan; Spain is best prospect; won't "hook" loan
to trade treaty now under way - 11/1/35
XI
1
Stabilization (arranged chronologically)
See China - Conference by HMJr with Bewley (Financial
Counselor, British Embassy) (exchange of information)
33+
Great inflow of gold worries FDR and HMJr; HMJr wants to
build up $100 million supply in London to check a possible
future rush of gold out of United States; tells FDR he
wants to begin to buy whenever gold sells below $35.00 an
ounce in London - 11/12/35
141
Treasury and Federal Reserve experts think well of this;
Cochran cables, "Central Bank of Sweden, for exchange,
would increase dollar holdings if it could buy and sell
direct without operating through sterling"
170
Memorandum prepared on plan after conference with Coolidge,
Oliphant, and Lochhead - 11/14/35
177
Coolidge asks HMJr whether he would approve sale of gold
other than to countries on gold standard - 11/14/35
184
a) HMJr prefers to postpone decision until French
situation is cleared up
b) Coolidge says Harrison opposes whole plan
Steel (German)
Oliphant warns HMJr newspaper men may question purchase for
Triboro Bridge; HMJr explains set-up of Committee: Admiral
Peoples, a member, to decide price differential on bids
using foreign-made material: 25% decided on; HMJr explains,
because of personal feeling toward Germany, decisions always
turned over to some other Treasury official - 11/14/35
188+
Symmetalism
Oliphant tells FDR of study over 6-months period
73
- T -
Talmadge, Eugene (Governor, Georgia)
See Georgia
1634
Trade Agreement, Canada-United States
Hickerson (State Department), HMJr, Haas, Oliphant confer
11/9/35
61
a) General provisions similar to Swedish, Brazilian,
and Colombian ones
b) Agreement will be OK for signing 11/14/35
c) HMJr wants table showing potential loss or gain in
Customs revenue given to FDR; Hickerson says this
is impossible; HMJr reminds him of figures in connection
with Cuban agreement showing possible loss of $23,000,000
in revenue
Regraded Unclassified
T
Book
Page
Trade Agreement, Canada-United States
Hickerson (State Department), HMJr, Heas, Oliphant confer
11/9/35 - (Continued)
XI
61
d) Hickerson says both FDR and HMJr have already
approved reduction in tariff on whiskey; HMJr
smazed
e) HMJr reminds Hickerson of potential $50,000,000 he
hopes to collect in a claim from Canada on back taxes;
Hickerson does not think reduction in tariff on
whiskey will affect this claim in any way
f) HMJr phones FDR, who suggests "initial with the under-
standing that it is subject to confirmation in 48 hours"
Opper, Graves, and Eli Frank confer with HMJr 11/11/35
concerning HMJr's lack of information regarding tariff
reduction on whiskey
113
a) HMJr criticizes character of Treasury representation
at State Department and asks for list of all employees
on interdepartmental committees, et cetera
b) Woolley, President of American Radiator Company -
HMJr would like to have him for a year to represent
Treasury at State Department
Reduction of duties on certain Canadian whiskies - conclusions
of Treasury transmitted to State Department 11/11/35
116+
Arguments for and against
121
Effect on Customs revenue given
1184
Publicity - FDR wants good man to direct, HMJr suggests Gaston.
136
Snag hit: discrimination against Great Britain on Scotch and
Irish whiskeys - 11/12/35
154
a) Graves suggests Treasury advise State Department to
inform British Government United States wants to include
Scotch and Irish whiskeys because of excellent cooperation
in efforts to combat smuggling; HMJr agrees
Graves gives HMJr figures on bonded whiskey in United States;
tells him Hickerson was pleased that HMJr phoned Treasury did
know, in June, when reduction of tax on imported whiskey WBB
considered - 11/13/35
168
Triboro Bridge
See Steel (German)
- U -
Unemployment Relief
Formula to be worked out by Edna Lonigan as basis for Government
contributions to states when all relief is turned back to them;
Roche, Altmeyer, Bain, and Williams to be consulted - 11/11/35. 111
Funds for Federal construction and for all relief should be
handled by one agency, HMJr decides
112
a) FDR told of plans
134
United States Savings Bonds
HMJr tells Gaston to alternate advertising in national farm
papers and state and sectional farm papers - 11/14/35
188
Regraded Unclassified
- U - - (Continued)
Book Page
United States Employment Service
HMJr tells FDR "it has fallen down in number of places";
suggests it be put under Social Security Board
XI
135
- W -
Whiskey (Bonded)
See Trade Agreement, Canada-United States
61,113,
116,121,
154,168
Woolley, Clarence (Chairman of Board, American Radiator Company)
HMJr, dissatisfied with Treasury representation at State
Department, conceives idea of asking Woolley to come for
a year and represent Treasury
113
(See Book XII, page 5, for refusal)
- Y -
Young, Owen D.
See Government Reorganization
135
Regraded Unclassified
1
November 1, 1935
Mr. Dunn called on me and gave me the latest informa-
tion on the European situation.
I told him I thought Marriner was doing a fine job
in Paris and that he was very close to Laval and it seemed
a shame to move him out. He said he was very glad to get
this information and they had decided to leave him there
until the first of March.
He asked me what I had in mind about Spain. I told
him I thought we ought to consider soon making some country
in Europe a loan, as we were rapidly accumulating all the
gold and silver in the world and it was up to us to do
something about it and that, based on Cochran's report,
I felt that Spain offered the best prospect for a loan.
He said, "You wouldn't try to hook this loan up with our
Trade Treaty that we are negotiating with Spain?" I
said I wouldn't do anything with Spain or any other country
that was not entirely agreeable to the State Department.
He said that if I were willing to wait until they had
signed the trade treaty with Spain that then they would
be more than pleased if I would take up the question of
a loan, but what he was afraid of was that if we tied
the loan in with the trade treaty, every other country
would hold back on signing until they got a loan.
Dunn got quite enthusiastic about the idea, but I
told him that as far as we were concerned, we would much
rather make the loan purely as a financial matter and
entirely independent of any trade treaties. I did not
tell him (because I did not think it was the right time
to tell him) that I had spoken about this matter to Secre-
tary Wallace and that Wallace is in favor of our making
loans abroad, but wants to tie it up very closely with
the tariff. I also told Dunn that if we were going into
any loans, we would, of course, have to use the Export-
Import Bank and I wished the State Department and the
Treasury could grab off the Export-Import Bank and have
it under our complete control and eliminate Mr. Peek,
who is nothing but a "bull in a China shop." He agreed
with me 100%.
I will next take up the idea of a loan to Spain
with the President.
Regraded Unclassified
2
November 1, 1935
Judge Hoyt came in today and gave me the attached
memorandum. Graves also was present.
The first question Judge Hoyt raises is, can he
appoint at this time a General Counsel and increase his
staff up to 190, of which 20 would be additional investi-
gators.
I suggested that we take the matter up with Mr. Bell
because Judge Hoyt's organization for the time being is
being paid out of Treasury funds. Mr. Graves is under
the impression that Mr. Bell has instructions from the
President that there should be no addition to the personnel
of FAA until they get their appropriation out of the De-
ficiency Bill. I want to check this with Mr. Bell and
find out whether this impression that Mr. Graves has is
right or wrong.
I sent for Mr. Bell and Mr. McReynolds and they came
in. Mr. Bell corroborated Mr. Graves' opinion, but quali-
fied it to the extent that it was right when we took them
on the emergency rolls, the day the President was leaving
on his vacation, but is not sure that it is right now.
He said he had talked the matter over with Comptroller
General McCarl who told him he was on thin ice when he
paid them from emergency funds but he promised to approve
the expenditures and also cautioned Mr. Bell that if he
were in Bell's place he would not increase the force of
employees.
I told Judge Hoyt to address a letter to me, to be
sent to McReynolds, telling me exactly what he needed
and that within an hour after its receipts it would be
turned over to Mr. Bell, the Acting Director of the Budget,
who would take it up with the President to see what he
wanted done. I assured Judge Hoyt that the Treasury would
go the limit to cooperate with him.
Regraded Unclassified
3
FEDERAL ALCOHOL ADMINISTRATION
November 1, 1935
MEMORANDUM OF MATTERS TO DISCUSS WITH THE SECRETARY
Before deciding to assume the responsibilities and
duties of Administrator, I discussed with the President and
Mr. Choate at Hyde Park several matters that I felt should be
definitely determined prior to my taking office. I am in-
formed that the President has recently discussed the Adminis-
tration's problems with you and I assume that he has told you
of the decision reached at the time of our Hyde Park Conference.
There were two matters which I particularly desired
to have the President's approval of in advance, and I under-
stood at that time that both were agreeable to him: first,
that I be permitted to select a suitable General Counsel to
head my legal staff; and secondly, that I be permitted to fill
other positions, including twenty new investigators, to bring
the staff up to a total of one hundred and ninety employees.
In other words, when I left Hyde Park on September 16th,
there was no doubt in my mind that both of these matters had
been definitely approved and that authorization would be ar-
ranged in due course to provide for them without delay. I
sincerely hope that this can be done at this time. I should
like the General Counsel to be appointed as of November 1st.
Regraded Unclassified
4
November 1, 1935
At a group meeting this morning, George Haas re-
ported on the conference held yesterday to discuss
possible courses of action in the event of an unfavorable
Supreme Court decision on AAA and processing taxes. At
this meeting Haas and Harlan represented the Treasury
Department.
Among the substitutes suggested for processing
taxes were a general sales tax; a tax on royalties
and patents by which the Government could receive revenue
from patents which would expire in ten years and the
Government would take royalties on the inventions; a
manufacturers' excise tax on agricultural commodities.
Haas said he did not indicate a preference. When asked
if the Treasury had considered the subject, Haas told
them he did not know what the Secretary's ideas were,
but that we were hoping it would be declared consitutional.
I told the group that Graves had reported to me on
a meeting held in Judge Hoyt's office. One of the things
Hoyt wants is a General Counsel and I am pretty sure he
has one and 80 does Graves. They acted very childishly
with Graves and he had to practically force his way in.
They had him sit in at the meeting, but somewhere in the
back of the room, but with his ability they had to bring him
up to the front table. I am going to take the attitude
when Hoyt comes in to see me this forenoon that the Secre-
tary of the Treasury was very much hurt that his personal
representative did not have a seat at the conference.
Regraded Unclassified
5
Saturday, November 2, 1935
Dr. Sze, Chinese Ambassador to the United States, telephoned this
morning and stated that he had received 8. message from China which he
wished to communicate to Mr. Morgenthau in person. I learned from Dr.
Sze that his message related to & proposed monetary change in the Chinese
currency and was related to his previous inquiry as to whether or not the
United States Government was prepared to purchase a large amount of silver
from the Chinese Government. Upon telephoning to Mr. Morgenthau at Beacon,
New York, Mr. Morgenthau suggested that Dr. See make arrangements to go
to Beacon today in order to discuss this question. I was instructed to
accompany Dr. Sae and accordingly made arrangements to leave Washington
on the noon train. During the course of the trip Dr. Sze allowed me to
see a copy of the message from the Chinese Government but the contents of
the note were not discussed by Dr. Sze and myself on the trip. However,
in general conversation, Dr. Sze did not appear to be particularly well
informed as to the financial situation in China nor did he seem to have
any particular grasp of monetary matters. Mr. Oliphant joined us at New
York and we proceeded by train to Beacon and went immediately to Mr.
Morgenthau's residence. Dr. Sze delivered a copy of his note to Mr.
Morgenthau, which is attached. Mr. Morgenthau expressed his desire to
talk openly and frankly to Dr. Sze regarding this subject which he wished
to treat 88 a monetary question only and only in as far, etc. as it was
purely financial and within the province of the Treasury Department. The
various points of the note were discussed, but it was pointed out to Dr.
Sge that the note did not specify what the basis of the new currency was
to be; neither did it give any information as to whether the new currency
was to be on a gold or silver basis, or whether it was to be linked to some
other currency such as the English pound, Japanese Yen, or the United States
Dollar. Neither did it contain any of the information as to what purpose
the proceeds of proposed silver sales were to be applied. As to the suggested
loan of 10 million pounds, mentioned in the note, Dr. Sze admitted that this
was not an accomplished fact but only & hope of the Chinese Government.
Dr. Sze also referred to a further Cable which he had received from
Dr. Kung but no copy of this was supplied to us. In this supplementary
Cable the Chinese indicated their desire of arranging a contract to sell
100 to 200 million ounces of silver to the United States Government at a
fixed price, and added that this silver would be ready for delivery
practically immediately.
will
Regraded
6
Saturday, November 2, 1935
Mr. Morgenthau asked Mr. Oliphant and myself to discuss the question
with him apart from Dr. Sze. Mr. Morgenthau felt that the plan as con-
veyed by Dr. Sge was vague and not satisfactory. Rumors were current in
Shanghai that the new Chinese currency was to be tied to the pound sterling
and that the United States Government had arranged to purchase a large
quantity of silver from the Chinese. All indications pointed to the
possibility that the Chinese had made some arrengement with the British
to tie their currency to the pound sterling and obtain funds to stabilize
the currency by selling silver to the United States as the stabilization
loan of 10 million pounds which W&B mentioned was only & possibility.
The sale of silver to the United States would be the only practical way
in which they could get funds on short notice. In the plan outlined by
the Chinese it might be possible that by our action in buying silver from
them we would simply be assisting them to leave the silver standard which
would be in direct opposition to the general plan of improving the
standard of silver as B. monetary metal. Mr. Morgenthau also felt that in
view of bis determination to treat this as B. monetary question it would
be very necessary to make sure that the proceeds of any silver purchased
by the United States from the Chinese Government be used solely for
stabilization purposes and not diverted to other channels such as purchase
of war supplies, defraying army expenses, etc. which might very readily
be embarrassing. It WBB thought that if the United States Treasury agreed
to buy a large quantity of gilver from China to assist them in effecting
a monetary change that some assurance be obtained from China that the new
currency be on a basis satisfactory to the United States. To aggure this
it would be desirable to have the Yuan tied to the United States dollar
rather than any other currency such as the pound sterling or Yen and that
some provision be made to continue the use of silver as a monetary metal
in their currency.
It was accordingly decided to make any purchase of silver conditional
on the acceptance of the suggestions contained in the proposal, & copy of
which is attached. This was discussed with Dr. Sre and each sentence 6%
plained. At first the purchase of only 50 million ounces of silver was
mentioned by Mr. Morgenthau but this was later modified to 100 million,
as Dr. Sze explained that it would be desirable for the success of this
plan to be able to announce that they had sufficient resources to carry it
out successfully. Mr. Morgenthau then telephoned the President to acquaint
him of the offer it was proposed to make to the Chinese Government, which
the President approved with the addition of the word "proposes" after the
word "Chinese" in the third point. The proposal was then again reviewed
with Dr. Sze, who at that time brought up the point of a proposed loan
from the United States to be also used in the stabilization of China's
currency. Mr. Morgenthau informed him frankly that he did not even care
to discuss the possibility of such & loen and stated that he did not feel
that Dr. Sze could entertain any hopes of obtaining one. Mr. Morgenthau
pointed out that we were lending them & great deal of assistance by agree-
ing to purchase this silver and that he felt that, properly administered,
the sale of such silver should emply cover the purposes of stabilization.
Dr. Sze then left to return to New York in order to prepare his message to
the Chinese Government.
Regraded Unclassified
7
Saturday, November 2, 1935
I accompanied Dr. Sze on the train from Beacon to New York
City and during the course of the trip he expressed the opinion
that the Chinese Government will be somewhat upset by the receipt
of our message. He seemed to be particularly concerned as to the
suggested make-up of the Stabilization Committee on which it was
proposed that two of the three members be Americans. He indicated
that it was doubtful whether this proposal would be acceptable
as in the eyes of the Chinese public the Chinese Government would
lose "face" if they consented to such an arrangement. He also
appeared somewhat disappointed at his failure to obtain any
assurance that the United States would consider a straight loan
to China in connection with the change in the monetary system.
He apparently thought the mention that the British were consider-
ing such a loan would make the United States a great deal more
responsive to the idea. Upon arriving at New York City and before
taking the train to Washington, Dr. Sze dispatched a short Cable
to his Government which he showed me, stating that he had met
Secretary Morgenthau, that the interview had been satisfactory,
but that special conditions had been insisted upon, the details
of which he was forwarding by Cable in code on his arrival in
Washington.
Regraded Unclassified
8
Sunday, November 3, 1935
Dr. Sze telephoned about moonday advising that he had started in
to dispatch his message to China, that it was going in three sections,
the last section of which would not be complete until about 3 o'clock
in the afternoon. Mr. Oliphant telephoned in the afterno and stated
that he had been thinking over Point 5 in our message of saturday and
thought that the payment of the Yuan note in silver at the rate of $1.29
per ounce should not be at the option of the Chinese Government be-
cause of the fact that at the present price of silver it would give the
Chinese Government the opportunity of redeeming their notes at half their
real value. In other words, if the Yuan price vas fixed at 25$ U. S. it
would only take 12 1/24 in silver to pay it. I agreed with Mr. Oliphant
that in all probability this point would have to be discussed but that
it probably could be covered by making payment in silver at the option
of the holder rather than the Chinese Government. Dr. Sze again called
in the early evening and stated that when he received his message from
China on Saturday morning he immediately cabled Dr. Kung, advising that
Secretary Morgenthau and President Roosevelt were out of town and in
the circumstances suggested that any announcement of a currency change
be postponed until such time as he had an opportunity of discussing it
with Mr. Morgenthau. He has now received a reply from Dr. Kung inform-
ing him that due to the critical situation in Shanghai it was impossible
to postpone taking action and that announcement of the currency change
was being made in China on Monday morning. Dr. Kung stated that they
were going to stabilize the Chinese Yuan around the present levele by
buying or selling exchange as required. Chinese banks and Chinese subjects
were being ordered to turn in their silver holdings to the Central Bank of
China against bank notes without any premium. Foreign banice in China were
being requested to turn over their silver to the Central Bank of China
on the same terms. Dr. Kung requested that Secretary Morgenthau use his
good offices to the end that American banks in China follow the request
of the Chinese Government. Dr. S28 said that this message was addressed
by Dr. Kung to Secretary Morgenthau personally rather than officially and
that he was not advising the U. S. State Department as to its contents
unless we requested him to do SO. Dr. Sze has not received a reply to
the Cable dispatched by him on Sunday and did not think that any reply
would be received before Monday.
Conveyed this information to Secretary Morgenthau by telephone.
Mr. Morgenthau felt that in the absence of further details as to China's
plan for a monetary change it would be premature for him to even consider
taking up the question of delivering their silver with the American banks
and that no action along this line would be taken for the present. Mr.
Morgenthau also expressed the opinion that Mr. Oliphant's suggestion as
to a possible correction of redeeming Yuan and silver could be left until
an answer to our message was received from the Chinese Government.
About 9 o'clock in the evening news was received from the Chase Bank,
New York, from their Shanghai Office, that the Chinese Government had an-
Regraded Unclassified
9
-2-
Sunday, November 3, 1935
nounced the change in their currency and they had set the official rate
of 1 shilling, 2 1/2 pence to the Yuan and were stabilizing the currency
at that level by purchase and sales in the market. This rate is equal
to about 30# U. S. and the Central Bank of China had also made some
trades in dollars at this figure. The Chase and City Bank both confirm
that they had been requested to turn over their silver holdings to the
Central Bank of China but had made no decision on this subject.
Regraded Unclassified
10
Monday, November 4, 1935
The Shanghai exchange market continued to hold steady with the Yuan
rate working out at about 30# to the dollar according to advices received
by both the Chase and City Bank from their Shanghai offices. The City
Bank reported that it had about 9 million Yuan of silver. The Chase
Bank reported holdings of about one and a quarter million Yuan and the
American Express Company holdings of 500 thousand Yuan. The Chase Bank
felt that there holdings were so small that it was probably that they
would accede to the Chinese Government's request and turn the silver into
the Central Bank of China but were awaiting the views of the manager of
their Shanghai office. The National City Bank, holding & larger amount,
was less inclined to deliver their silver but thought that if the cir-
cunstances made it seem desirable they would also turn their silver over
but were awaiting further news from Shanghai. No intimation was given to
either of these banks that the Treasury had been approached by the Chinese
Government regarding the turning over of silver by American banks.
About 8 P. M. Dr. Sze called and advised receipt of a message from China
which he had been waiting for, and at my request forwarded me a copy by
messenger. Informed Mr. Morgenthau by telephone of the receipt of this
message, copy of which is attached. It was thought that the Chinese had
withheld agreement to the two most important points, especially number
five, which would have linked the Yuan to the United States dollar. Mr.
Morgenthau did not feel that the message was at all satisfactory and in
formed me that he would telephone me a little later after he had discussed
it with the President. About 9 A. M. Mr. Morgenthau telephoned and asked
me to advise Dr. Sge "Secretary appreciates your courteous message but is
disappointed in the contents. He will be glad to discuss it with you at
10 A. K. Wednesday morning." Dr. Sze then expressed the desire of seeing
Mr. Morgenthau before 10 o'clock on Wednesday morning, but I told him
that from what I knew it would be impossible for Mr. Morgenthau to give
him an interview before Wednesday morning.
Regraded Unclassified
11
Message from Secretary Morgenthau to Dr. Sze in answer to
Cable of November 4, 1935
November 4, 1935
"Secretary appreciates your courteous message
but 1s disappointed in the contents. He will be
glad to discuss it with you at 10 A. M. Wednesday
morning."
Regraded Unclassifie
12
Please express profound thanks to President and
Secretary of Treasury for timely aid which means EO much
to our success.
As to details: points one, two and four agreed.
Reference number three Government already appointed Currency
Reserve Board of leading Chinese bankers to control bank note
circulation and have custody of reserve. Also announced
creation of Committee advisory to this Board which will
probably comprise nine members including American, British,
French and Japanese. Reference number five we have an-
nounced maintenance stable exchange at present level by
Government bank buying and selling unlimited amount exchange.
Trust these arrangements satisfactory.
Shanghai, November 4, 1935
Regraded Unclassified
13
Tuesday, November 5, 1936
Secretary Morgenthau telephoned this morning and stated that Dr. Sze
had just communicated with him by telephone and wished to know if it were
possible to make arrangements for Dr. Sze to go up to New York this evening
to talk with Secretary Morgenthau instead of waiting for the appointment
which had been arranged for Wednesday morning at 10 A. M. at the Treasury
Department. Mr. Morgentheu stated that he saw DO reasons to change his
original plans but that he was going to get in touch with Under Secretary
of State Phillips and then call me back in order to inform me as to what
message should be delivered to Dr. Sze. Mr. Morgenthau shortly after
telephoned and stated that he had decided not to see Dr. Sze before Wednesday
morning at 10 A. M. He stated that he preferred to talk with Dr. Sze only
while Mr. Oliphant and myself were present, and also stated that he had de-
cided to ask Under Secretary Phillips to attend the meeting. I accordingly
telephoned Dr. Sge that it would be impossible for the Secretary to see him
before the time set, on which Dr. Sge gave a long explanation of his desire
to leave Washington by 8 A. M. Wednesday morning. He is to address a dinner
given in Boston tomorrow evening by the Society of the Friends of China and
had made this engagement many months ago and was loathe to break his appoint-
ment as the Governor of Massachusetts was to be present as were also the
presidente of quite & number of universities. In order to get to the dinner
it will be necessary for him to leave on the 8 A. M. train as be was unable
to obtain satisfactory assurance from air port officials that the weather
would be satisfactory for flying tomorrow. He inquired if some arrangement
could be made to obtain 8. Government plane in the event that commercial planes
were not flying according to schedule. I told him I would be glad to make
inquiries for him as to this possibility, but he asked me not to make any
arrangements until he received further reports tomorrow morning as to the
commercial airline schedules. He intimated that if it was not possible to
make arrangements to go to Boston after the proposed meeting with Mr.
Morgentheu, that he would leave on the train at 8 A. M. and suggested that
in that case he send his Secretary to the Treasury to nee Mr. Morgenthau and
obtain any message which the Secretary might wish to rive. I told him that
I was sure that Mr. Morgenthau would not discuss this question with any third
person as he would like to talk directly with Dr. Sze. Dr. Sye stated that
if he went to Boston he would not return before Friday morning. I repeated
that the Secretary was ready to see him at 10 A. M. on Wednesday and Dr. Sre
would have to decide for himself the urgency of the situation and whether or
not he cared to postpone the meeting for two days. Dr. Sye stated he would
again communicate with me early tomorrow morning.
As requested by Mr. Morgenthmi, I notified Mr. Oliphant, who is in New
York, that a meeting was to be held at 10 A. M. tomorrow and that the Secretary
would like him to arrange to be here by that time. Mr. Oliphant stated that
he would be at the Treasury Department by 9 A. M. in the morning. Later in
the afternoon Mr. Morgenthan again telephoned and I reported my conversation
with Dr. See to him. He replied that he saw no reason to change his decision
to nee Dr. Sze only in the Treasury at the time get by him. He added that if
necessary a Coast Guard plane might be obtained to furnish transportation for
Dr. Sze to Boston if no commercial planes were available.
Regraded Unclassified
14
November 6, 1935
Upham told me today of a confidential conversation he had
had with Sparkman, which is interesting. It is copied below:
"For the Secretary:
Sparkman, clerk of the Senate Banking and Currency Committee
told me a few days ago over the telephone that the Comptroller
had visited Senator Fletcher, and expressed the opinion that the
President had made grave mistake in reappointing (or announcing
his intention to reappoint) Eccles to the Governorship (or Chair-
manship) of the Federal Reserve Board, and that he (the Comp-
troller) intended to do everything he could to have confirmation
refused. He added that he understood Senator Glass had evidence
of heavy stock market losses by Eccles.
I had lunch with Sparkman today. He says that Senator
Glass was in a few days ago --- is very critical of the appoint-
ment of David Stern to the board of the Philadelphia bank, is
renewing his fight on Eccles' confirmation, and generally dis-
posed to cause trouble on that and other appointments. He says
that opposition to Eccles also comes from McAdoo, and from former
Senator Smoot, of Utah.
I asked Sparkman the other day 1f they had a subcommittee
on appointments or confirmation. That gave him an idea, and
he is now suggesting to Fletcher that such a subcommittee be ap-
pointed, with Fletcher as chairman. Then confirmations would
go to that subcommittee instead of to the Glass subcommittee
where they now go. With Fletcher, Glass, Wagner, Barkley and
Norbeck on such a subcommittee, there would be much less danger
of eruptions."
Regraded Unclassified
15
November 6th
In discussing Morris Cook's work I wish to point out to the
President the following:
1.
That, as Chairman of his Agricultural Committee in Albany,
I was instrumental in getting a reduction of rural electric
rates.
2.
That at my instigation we took up in New York City through
Procurement the question of buying electricity in New York
for the government under one contract as against 173 con-
tracts. Through this move we saved about 32%.
3.
During the past year, against the interest and advice of
my pocketbook, I sold for my wife and myself every share
of public utilities stock that we owned.
4.
While our tax program was under consideration this year
I advocated and urged an inter-corporate dividend tax as
the best means of controlling public utility holding
corporations.
With this record on public utilities, I do not feel that
I have to apologize when I suggest a sensible financial set-up
for Morris Cook.
Regraded Unclassified
16
November 6, 1935
At. the group meeting this morning, Secretary Morgenthau
asked McReynolds to get for him a sketch which would show
the location in New York City of all assay offices and other
Federal buildings in which silver is stored. The Secretary
explained that he has in mind purchasing the other half of
the block on which the present Assay Office is located and
will ask the President for an allocation of funds for that
purpose with which he will have constructed a new building.
Silver is at present stored in the Assay Office, the Sub-
Treasury and the old Sub-Treasury buildings.
Mr. Grimm reported that the housing fair will start
on the evening of January 4, in Baltimore at the Fifth
Regiment Armory with a floor area of 60,000 square feet.
HM,Jr. said he would ask the President to open the show,
which Mr. Grimm thought would be splendid. Mr. Grimm
also said the next show 1s planned for Miami. HM,Jr.
asked Mr. Grimm for an extra set of newspaper clippings on
the Baltimore show.
At this point, Mr. Grimm presented a complicated plan
for financing of EHFA and REA, by which, with the President's
approval, the EHFA would receive $15,000,000 from WPA. Of
these funds, $5,000,000 would be used for financing the
purchase of electrical equipment and $10,000 for plumbing
equipment by REA. The funds would be deposited with EHFA
and REA would, in turn, borrow from EHFA for the reason that
the latter does not have facilities or personnel for promo-
tional work in connection with sales and would, therefore,
act only as banking agent.
Secretary Morgenthau said he was bitterly opposed to
financing which requires any juggling. He said, "If these
people will come to me and state their objective in an open
and above-board manner, we will assist in every way possible
with their financing, but it must be conducted in a business-
like manner. I am sick and tired of doing it in a slipshod
way." He told Grimm to explain to EFHA and REA that it was
not his intention to interfere with their policy, but from a
financial point of view he wanted it done in a strictly
businesslike manner and that he was pretty sure Jesse Jones
would agree with him.
Regraded Unclassified
17
November 6, 1935
H. M., Jr., asked Mr. William Phillips of the State
Department, to be present at the meeting with the Chinese
Ambassador. Oliphant and Lochhead were also present.
Mr. Morgenthau brought Mr. Phillips up to date as
to what had happened since Saturday. He told Mr. Phillips
that he had met Mr. Bernard Baruch on the train and that
Baruch knew everything about our negotiations, 80 far, with
the Chinese. The only person who could have told Mr.
Baruch was the President. HM,Jr. explained that the
reason he was saying this we.s because he wanted Mr. Phillips
to know that any information that Baruch or anyone else
might have, had not come from HM, Jr. He told Mr. Phillips
that the President had also told Mr. Hirst, former editor
of the London Economist, about our negotiations with the
Chinese.
Mr. Phillips asked Mr. Morgenthau whether he thought
it essential that the yuan be tied to the American dollar,
and Mr. Morgenthau said yes; that he had talked with the
President about this, about a year ago, and the President
had said then, very definitely, that he wanted to work
South America in as closely as possible and that we should
try to keep & foothold in China.
At this point, the Chinese Ambassador came in. He
said, "I got further message from Kung saying that his
disposition is to meet your wishes in every way possible.
Of course the message he sent you yesterday, that the five
conditions you put up to him, he has agreed to three of
them, 1, 2 and 4. They already made an announcement.
Your main object was, first, the money should not be used
for any purpose except for stabilization. He can agree
to that. The second point, money should be kept in an
American bank. He can agree to that. The third point,
which was embodied in our previous talk in which you said
you want to be kept informed how the money will be used."
Mr. Morgenthau then said, "Mr. Kung has to keep our
representative in China fully informed." He also wanted
to know, "Is your stabilization on a fixed point?" The
Ambassador replied that what they announced 1s that they
will stabilize on the present level. "That, of course,
is a fundamental thing," said Mr. Morgenthau. "As I
Regraded Unclassified
18
-2-
understand you, they have not tied the yuan to anything.
You announced it in terms of pence. It was just for
the day. A₈ I understand it, your devaluation is not
fixed to anything unless it 1s to the 6."
The Chinese Ambassador then said, "I forgot to tell
you another point. Mr. Kung told me that I am to say
nothing in regard to our negotiations in public.
Mr. Morgenthau said, "You came to my house a week
ago Monday night and I asked to know something about the
program and it was not until Saturday night that you had
an answer. It seems to me that the yuan is not tied to
anything," to which the Ambassador replied, "Except at
the present level.
"Where would you say we stand right now?" asked Mr.
Morgenthau. "How would you sum up the situation between
your Government and ours?"
The Chinese Ambassador said, "I do not exactly catch
the point.
Mr. Morgenthau queried, "What is the next move?"
The Chinese Ambassador answered, "You made five condi-
tions and three they can accept without question and the
other two they have already announced and they are in con-
flict with what you propose.'
Mr. Morgenthau said, "Suppose you have our $65,000,000.
I haven't yet got a guarantee that it would not be used for
any other purpose except stabilization. Suppose you decide
that you want to use $10,000,000 to buy munitions?"
The Ambassador said, "We could not do that.
"But," said Mr. Morgenthau, "suppose you do? All we
could say 18, 'Oh, that is terrible! That 1s terrible!
We have no guarantee that you will not."
The Ambassador said, "We have given you a pledge."
Mr. Morgenthau said, "There 1s no pledge."
The Ambassador then read from his cable: "Referring to
Regraded Unclassified
19
-3-
your cablegram of yesterday you may give specific assurance
proceeds used for currency stabilization only and that his
representative in China will be given fullest information.
As to stabilization Government decree November 3 provides
"Section 6 For the purpose of keeping the exchange value
of the Chinese dollar stable at its present value the Central
Bank of China, the Bank of China and the Bank of Communica-
tions shall buy and sell foreign exchange in unlimited
quantities." This 1e effective since Monday and operating
to general satisfaction."
Mr. Morgenthau said, "I do not feel that they have
answered our number 5. We want to tie your money to the
dollar. We are not asking for railroads, harbors or special
trade treaties. We think it would be mutually advantageous,
looking to the future, that your money and ours be tied to-
gether. You have to tie it to something in order to make
this very large transaction of $65,000,000. The only thing
that we are asking is that you tie your money to the dollar.
"I told you I did not think you need a loan. I thought
this thing would work out. I do say if we are going to do
this, number 5 is the cruz of the whole thing. You need
the money and everybody seems to think you moved too fast,
but to make this thing a success you need this money. But
we have our politicians and our public and our future to
think of. I would not recommend this if I did not think
that it was good for both of us. You have the Sterling
bloc and the dollar bloc. We are not going to invest
$65,000,000 and have you tie your money to Sterling. We
are dealing with today. You made this move and we want
to see you succeed. We feel that it is best for both
countries to have the yuan quoted in terms of dollars in-
stead of in terms of Sterling.
"You people are playing poker and you are bluffing.
You have not enough money to back up your bets. Before
you made this move you should have had the money to back
it up. Just B.B soon as everybody finds out that you haven't
got the money, your plan will fail. You need $50,000,000
or $60,000,000 to make this thing a success and we are will-
ing to give it to you. Kung could not announce his entire
plan because he was waiting for us to buy his silver."
The Ambassador then asked us to put up a new formula
that he could present to the Chinese Government. Mr. Morgenthau
20
told him: "If I had said to you, I insist that you tie
"so many" yuans to the dollar, that you might object, but
we never did this. We left that to you, but when you de-
cide, let us know.
Mr. Phillips said, "In regard to your question, can
you suggest a formula? We will be glad to help you in any
way you suggest."
Mr. Morgenthau then said, "The formula 1s in number 5."
Mr. Phillips then said, "If you are going to approach
it again, I suggest that you have another formula.
Mr. Morgenthau said to the Ambassador at this point,
"You have to pick the kind of money you are going to tie
the yuan to. You can't tie it to four; only one."
The Ambassador then said, "I asked you the other night,
if we tied our yuan to the dollar would you make us a loan
of $50,000,000, and you told me you could not give me any
encouragement."
Mr. Morgenthau said, "That 1s correct. If we made that
purchase of silver, I do not think you would need a loan.
Certainly the United States could not make you a loan by
itself. I suggest that our people and Mr. Phillips' people
get together and work on a new formula. When we have it pre-
pared I will give it to your First Secretary inasmuch as you
will be in Boston.
The Ambassador said, "In regard to number 3 ---
Mr. Morgenthau said, "The President made the suggestion
on the Advisory Committee; that we have a representative on
that. All moves that you make should be taken up with our
representative. We want the same relationship as our Open
Market Committee has with the Federal Reserve. Before the
Open Market Committee take action, they consult the Federal
Reserve. We will not fight very hard over number 3."
After the Ambassador left, Mr. Morgenthau said that the
best thing for the Chinese to do is to announce that we bought
this silver. The next day they ought to quote in terms of
dollars, and say nothing else. They should not make any an-
nouncement.
21
Dictated on November 6th
November 1st Lochhead informed me that the Chinese Am-
bassador had an important message in answer to our request for
further information given him the previous Monday.
On Saturday, November 2d, Lochhead gave me the gist of the
contents of the attached memorandum which was handed to me by the
Chinese Ambassador at Fishkill on the evening of November 2d. In
anticipation of Sze's coming, I asked Phillips to leave word where
he could be reached Saturday night. I spoke to the President for
the first time Saturday morning and told him about the message we
had received from China. A little later he called me up on the
phone and asked me whether I had gotten certain dispatches about
China via the State Department. I had not received them and the
President read them over the telephone to me.
Sze, Oliphant and Lochhead arrived about 6:45 and we
immediately went into conference and discussed the memorandum that
Sze had with him. Knowing that the President was going to eat at
7:30 I quickly called him and read the memorandum ver batim over
the phone to him so that he could be thinking about it. I told
him that we would go to work on an answer and after we had it
prepared I would like to read it to him over the phone. After
supper we went to work and prepared the following memorandum. (Attached)
Sze doubted that his government would agree to having a committee
of three of which two were Americans acting as Stabilization Committee.
I read the memorandum over the telephone to the President about
8:45 and he only changed one word. In paragraph three he had me
put in the words at the beginning of the paragraph "that Chinese",
the purport of this being that the suggestion would come from the
Chinese rather than from us - that a Stabilization Committee of
three experts be set up. The President said two or three times,
"that is fine, that is fine".
Immediately after calling him I called Phillips at the
Maryland Club in Baltimore and read the same memorandum to him.
He asked if he could not have until Monday to think it over and
consult his experts. I told him I was sorry he could not as the
President had approved it and Sze was waiting for it. Phillips
was very polite but I could tell that he did not like being rushed.
I did not hand a copy of this memorandum to Sze but as I wrote it
down myself he wrote down word for word what I dictated. He just
could barely make his train so I thought the polite thing to do
was to drive him down myself, which I did. Going down I said to
him, "are you not disturbed that your Premier has just been shot"
and he said, "not at all, I am delighted because it shows that my
people still have some spirit left". The reason for his saying
this is that the Premier who was shot is supposed to have been very
Pro-Japanese. He then told me this, "you know why the Japanese want
those five northern provinces" and I said, "no Mr. Sze" and he said,
- 2 -
22
"well in Manchuco the Japanese have not found the right grade of
iron ore but in these northern provinces of present China they can
get the right kind of iron that they need very badly. They have
also discovered that in these provinces they can grow a new strain
of cotton which, while it is not as good as our American cotton,
would answer the entire needs of Japan. He said with cotton and
iron ore they would practically be independent." I repeated this
to the President who was intensley interested and he said, "they
would still need rubber".
On the evening of November 4th, Lochhead read the attached
message to me over the telephone. This message boiled down simply
means that the Chinese were willing to agree to leave the money
they received from us, if we purchased silver, in a New York Bank.
Besides that they practically agreed to none of our suggestions.
I read this memorandum to the President and his advice
was that we sit tight and he suggested that if they were not
willing to accept our No. 3 suggestion that we make an alternate
suggestion - that an Advisory Committee of experts be set up on
stabilization, this Committee to be consulted on all moves prior
to action taken by the Stabilization Committee. I told the Presi-
dent that Key Pittman had announced that due to China's recent
move that within eighteen months silver would go to $1.29. Much
to my surprise and interest the President's response to this in-
formation was "Key Pittman is cock-eyed". I gather from this that
the President is less interested in putting up the price of silver
than he used to be. This is the first indication that I have had
along these lines. While the President was at our house Sunday for
lunch E. F. M. informs me that he announced to everybody that Sze
had been to see us the night before and I was more than surprised
that he should say this in front of Mr. Hirst, Editor of the London
Economist.
Regraded Unclassified
Hand me by chinese ambassador at E
Fishkill m evening 7 now 2. 1995
23
PLEASE INFORM SECRETARY OF TREASURY CONFIDENTIALLY PROGRAM
IS AS FOLLOWS:-
(ONE) STABILIZE FOREIGN EXCHANGE AT DEFINITE LEVEL.
(TWO) CENTRAL BANK OF CHINA TO BE REORGANIZED AS CENTRAL
RESERVE BANK PRINCIPALLY OWNED BY BANKS CHINESE GOVERNMENT
AND THE GENERAL PUBLIC AND BECOMING INDEPENDENT INSTITUTION.
REORGANIZED BANK WILL HOLD RESERVE BANKING SYSTEM; ACT AS
NATIONAL GOVERNMENT DEPOSITORY AND BANKER CHINESE GOVERNMENT.
BANK ALSO enjoy NOTE ISSUE MONOPOLY, OTHER BANKS' NOTES TO BE
WITHDRAWN WITHIN TWO YEARS.
(THREE) CREATION SPECIAL MORTGAGE BANK TO ASSIST UNFREEZING
COMMERCIAL BANK AND ADOPTION MEASURES STRICT REGULATION
COMMERCIAL BANKS.
(FOUR) OBTAINING FOREIGN LOAN POUND STERLING TEN MILLION
TO GIVE FUND FOR EXCHANGE CONTROL. ADDITIONAL FOREIGN EXCHANGE
WILL BE OBTAINED BY SELLING PORTION SILVER. AS LOAN NEGOTIATIONS
INVOLVE TIME, SUCCESS EXCHANGE CONTROL LEPEND ON IMMEDIATE SALE
SUBSTANTIAL AMOUNT SILVER.
(FIVE) BALANCING BUDGET OVER NEXT EIGHTEEN MONTHS BY
FIRST REDUCING EXPENDITURE AS FAR AS CONDITIONS PERMIT
SECOND INTERNAL LOAN COMMIRSION TO LONGER TERM AS OVER
HALF MANURE DURING NEXT FIVE YEARS
THIRD EMPLOY PROCEED OF SALE CENTRAL BANK OF CHINA SHARES
FOURTH PROJECTED MEASURES WILL CAUSE RAPID ECONOMIC
IMPROVEMENT WHICH WILL INCREASE GOVERNMENT REVENUE.
(SIX) PROCEED OF SILVER SALE WOULD BE USED FOR PROVIDING
FOREIGN EXCHANGE FUND FOR CURRENCY REFORM AND STRENGTHENING
CENTRAL BANK. WILLING TO AGREE TO USE THROUGH AMERICAN BANK
AND WILL KEEP TREASURY REPRESENTATIVE INFORMED A8 TO USE OF FUND,
+
24
SILVER COULD BE DELIVERED ALMOST IMMEDIATELY.
1-XI-35
NOTE:
Words underscored are mutilated in transmission
Regraded Unclassified
25
1.
U. S. proposes to buy on shipboard 100 million ounces of
silver from China and if proposed arrangements works out
mutually satisfactorily U. S. to consider further purchases.
2.
We suggest that all proceeds from sales will be used exclu-
sively for stabilization of Chinese currencies.
3.
That Chinese propose set up a stabilization committee of
three experts (with gemtlemens agreement that one member
is from Chase and Oile from National City)
4.
That funds secured from sale of silver be kept on deposit
in New York with agents of Central Bank of China. (It is
understood that this will be a U. S. Bank)
5.
It is further understood that if this proposal is mutually
agreed to that:
1.
That the yuan will be redeemable at the election
of the Chinese Government in any of these ways.
A.
At a fixed number of yuan to be the U. S. dollar
this ratio to be fixed at the outset by the Chinese
Government.
B. In a fixed weight of gold at $35.00 per öunce.
C.
In a fixed weight of silver at $1.29 ounce.
Regraded Unclassified
Read to me over telephone an
eneming of nov Y* 1935
26
Please express profound thanks to President and
Secretary of Treasury for timely aid which means so
much to our success.
As to details: points one two and four agreed.
Reference number three Government already appointed
Currency Reserve Board of leading Chinese bankers to
control bank note circulation and have custody of
reserve. Also announced creation of Committee
advisory to this Board which will probably comprise
nine members including American, British, French and
Japanese. Reference number five we have announced
maintenance stable exchange at present level by
Government bank buying and selling unlimited amount
exchange. Trust these arrangements satisfactory.
Shanghai November 4, 1935.
Regraded Unclassified
Read to me over telephone on evening of November 4, 1935. 27
Please express profound thanks to President and
Secretary of Treasury for timely aid which means so
much to our success.
AS to details: points one two and four agreed.
Reference number three Government already appointed
Currency Reserve Board of leading Chinese bankers to
control bank note circulation and have custody of
reserve. Also announced creation of Committee
advisory to this Board which will probably comprise
nine members including American, British, French and
Japanese. Reference number five we have announced
maintenance stable exchange at present level by
Government bank buying and selling unlimited amount
exchange. Trust these arrangements satisfactory.
Shanghai November 4, 1935.
Regraded
27A
M. S. Eccles
November 6, 1935.
Wednesday
H.M.Jr.:
Very well
E.:
I'm discussing with them the question of changing
reserve requirements.
H.M.Jr.:
Yes
E.:
-- Not with an idea of taking any action
H.M.Jr.:
Yes
E.:
-- But just with the idea of -- of getting a
settlement on the thing and discussing it with you.
H.M.Jr.:
Yes
E.:
-- Do you have any opinions on it - like the --?
H.M.Jr.:
Well - on the advice of counsel, see?
E.:
Yes
H.M.Jr.:
-- If you people want the opinion - they tell me
that with the bunch of historians and diary keepers
that you've got over there - that anything that I
say I better put in writing.
E.:
Laughs -
Well, the --
H.M.Jr.:
So when you people get ready and far enough along
that you think you can - of doing something --
if you want to -- if you'll ask me formally why
then I'll tell you formally.
E.:
Yes, but, well I want to talk to you informally
first, then.
H.M.Jr.:
O.K.
Well then --
E.:
You see what I mean?
H.M.Jr.:
Well, whenever you're r eady I'll talk to you.
E.:
Yes
H.M.Jr.:
I'm walking down - tomorrow's Thursday, with
Henry Wallace - why don't you walk down with me
Friday?
Regraded Unclassified
27B
-2-
E.:
Friday? All right.
H.M.Jr.:
You get up that early? - it's eight fifteen --
E.:
Well, I can
- but I don't usually. I tell
you what we ought to do, though - it's going to
take -- it's going to t ake - there's several
things I ant to talk to you
:
one is this
matter of calling these notes in.
H.M.Jr.:
Yes
E.:
And the other is, of course, this open market
and --
H.M.Jr.:
Well, do you want to come over Friday morning?
E.:
Well, or before, because if we are going to do
anything on this open market it ought to be done
pronto.
H.M.Jr.:
Well -
E.:
I mean, on this reserve requirement.
H.M.Jr.:
How about three o'clock tomorrow afternoon?
E.:
That will be better I think.
H.M.Jr.:
Three o'clock?
E.:
Let's make it three o'clock tomorrow.
H.M.Jr.:
O. K.
E.:
All right, then.
H.M.Jr.:
Thank you. Goodbye.
Regraded Unclassified
28
November 7th
Mr. Eccles discussed with Mr. Morgenthau excess reserves.
Eccles thinks that the Board would vote for increase in reserves
by 25% if it was put to them now.
Eccles is going to tell the Board that H.M.Jr's reasons
for not doing it are that he wants to see what will happen in
regard to:
A. The Bonus
B.
The Budget
C. The War in Europe
That the matter of months is not vital and that he wishes
to wait until after February 1st, when the new Board comes in.
29
November 7, 1935
Oliphant, Haas and Lochhead came to the house last
night and brought with them a substitute for the original
Number 5. (See Exhibit I attached.) Oliphant had been
over to see Phillips and Hornbeck and Feis, and they had
no suggestions to make.
After discussing the matter at considerable length,
I called up the President who, before I could get on the
Chinese question, congratulated me on electing a super-
visor in East Fishkill. He was in a grand humor and
bubbled over with laughter.
I read this new section to him and he redictated it
to Grace Tully, who evidently was there with him. The
President said, "I wish to make purely a snap judgment --
I think you ought to have some sort of a qualifying mem-
orandum to accompany this which would explain the purpose,
so that if it is given to the public, this qualifying
memo would be given out at the same time." He dictated
to me over the telephone the memorandum attached. (See
Exhibit II.)
After considerable discussion, we decided that the
President's suggestion was not so good and Oliphant
dictated a memorandum. (See Exhibit III.)
We then sent for the First Secretary of the Chinese
Embassy and gave him the new Section 5. He quite frankly
admitted that he did not know what it was all about and
said he would telephone Sze that evening at 11 o'clock.
We have since been informed that they would do nothing
about it until Sze returns on Friday. I did not give
the First Secretary the qualifying memorandum because I
thought it was useless.
Regraded
11- 7
B.
Exhibit I
30
5. That a definite ratio between the yuan and the
dollar be fixed by the Chinese Government; and that
its currency be redesmable in that number of grains
of gold or silver (at the holder's election) which,
at the United States monetary values of these metals
at the time of such redemption, would be worth the
corresponding number of yuan at such yuan-dollar
ratio.
Regraded Unclassified
these 7.H.R means for II 31
which
xample that if
the year redeniption
fosis is change d
in China by action atervise
in such event the year
b chinese gar. a
would the redermable
in the same gold - and
silver as the $ at the
v ime of the issuances of
the Lower yuan.
Our interpretation of this Exhibit
statement Known as ¥ 5 III32
that the chinese gu. shall
is that it does not suggest
fix the #- - your ratio from
time to time or that
it shall fix theratio and
not change it,
ox
O
x
Regraded Unclassified
33
November 7, 1935
Mr. Bewley, Financial Counselor of the British
Embassy, came in to see Mr. Morgenthau at a quarter
to four, He said, "On this question of silver at
Hong Kong, the Chinese Government has decided to abandon
silver." British officials are afraid that if the
Chinese abandon silver, they will have to do the same
thing.
He said that if the Chinese abandon silver, Hong Kong
would go on a managed paper currency or else link up
with Sterling. They will want to sell the silver re-
serve they have. The amount of silver that they have
he did not know, but after a preliminary estimate they
figured it to be about 100,000,000 fine ounces. This
is in Hong Kong. Mr. Bewley wanted to know whether
the United States would buy the silver direct or whether
it should be put on the market.
Mr. Morgenthau replied, "I appreciate the direct
way in which you have presented your problem. What I
would like to know is this, 'Do you represent the British
Treasury or the Foreign Office'?." Mr. Bewley answered,
"I represent them both. When I am in London, I am paid
by the Treasury. When I am here, I am paid by the
Foreign Office."
The Secretary then asked Mr. Bewley this question:
"If we bought your entire reserve, what kind of currency
would be issued?", and Mr. Bewley said, "We were told
that no definite decision has been made as yet."
"I want to ask them a question,' Mr. Morgenthau said.
"Provided we took this silver, would they be willing to
tell us what their program will be?" And Mr. Bewley
replied by saying, "It 1s B. fair question."
Mr. Morgenthau related to Mr. Bewley that Leith-Ross
had told Ambassador Johnson that the Chinese did this on
their own and that he had had nothing to do with it.
He said, "Before we make a move, I want to know what your
currency program 1s in Hong Kong. This 1s the first time
that there has been any indication on the part of the
British Treasury that they want to cooperate with the
United States Government and it 18 very welcome."
Regraded Unclassified
34
-2-
Mr. Bewley defended the attitude of his Government
by saying that he did not think there had not been any
desire not to cooperate. "On stabilization we do not
see eye to eye."
Mr. Morgenthau said, "In cooperation, the exchange
of information 1s the first basis of cooperation. All
of our money that we have in London is on deposit with
the Bank of England. Every time we buy or sell, you
people know about it. While the Supreme Court was making
up its mind and we operated so heavily in Sterling, you
people knew every day what we were doing. We always
first notified you what we were doing. I have been so
careful that whatever I have done in London, the Bank of
England has always been notified. We have never done
anything erratic, When the 6 was falling off rapidly
in that period, we purchased a large amount of Sterling,
but we were very careful in disposing of this Sterling
and stretched out the sale for somewhat over three months
in order to avoid any disturbance in the market. I am
just mentioning this because I feel the fact that you did
not know this, probably your Treasury does not know it
either. If I want to find out what the British stabiliza-
tion fund is doing I have to go to the Bank of France and
they tell me. I think we have done our part when we have
kept our dollars in the Bank of England."
Mr. Bewley said, "I will certainly report what you
have said to me."
Mr. Morgenthau told Mr. Bewley that, "What we are
trying to do 18 to stabilize a three-point situation,
which 1s London, Paris and New York, and the very basis
of that is the exchange of information. I never would
ask for it, because I did not want to be rebuffed. Having
you here, I thought I would talk to you about it."
Mr. Bewley told the Secretary that Leith-Ross said
that we all ought to send experts to Shanghai. To which
Mr. Morgenthau replied, "I would not send one of our ex-
perts to have him crucified over there. I will not go
any further other than to say what I said before. Before
I can answer you I would like to know whether they would
care to let me know what the currency program in Hong Kong
will be." Mr. Bewley said that Hong Kong would not want
to sell all the silver to the United States in bulk, but
would want to separate the sales and ship it over a period
of six months. He said the Hong Kong Bank was not in on
Regraded Unclassified
35
-3-
this deal at all. It is practically the English Govern-
ment.
Mr. Morgenthau told Mr. Bewley that he was here for
the week-end and would not mind being bothered on this
thing which is so critical.
Following Bewley's departure, HM, Jr. called in Haas
and Oliphant. He told them that the Hong Kong Government
would like to know whether the United States Treasury would
want to buy their silver reserve of 100,000,000 ounces or
whether they should dump it on the London market; that in
view of the Shanghai situation and Hong Kong being so close,
they will have to be guided by Shanghai. HM,Jr. told the
men that he had replied to Bewley, "If we do buy this silver,
and if the question is a proper one, what is your program?".
Bewley said it was a perfectly proper question.
Mr. Morgenthau told Haas and Oliphant that he gave
Bewley his talk about exchange of information; that we
got our information from Paris and nothing from them.
Bewley said he did not know that we kept All of our money
with the Bank of England and that every time we bought or
sold they knew about it.
The Secretary then consulted with Haas and Oliphant
and said, "Suppose I let silver drop 5 cents & day. What
happens to the Hong Kong Government? What happens to the
Chinese Government? They will have nothing to figure on.
I will take care of the Mexican silver and any other silver
where there is production. We then live up to the London
Agreement, but I will not take care of Hong Kong or Chinese
silver." He said, "I can pretty nearly prove that two or
three large mining corporations know several senators. One
big official in a mining corporation said that they know
everything we are doing; that they learn it directly from
the senators every time we do something on silver. If
that is true and we take care of the big producers in Peru,
Chile, etc., then they have nothing to worry about. If
Hong Kong will not work with us, then we will just drop
the price of silver and punish them. We will say that we
Regraded Unclassified
36
-4-
will offer to buy all newly-mined silver at 65 cents and
withdraw any other offers. Thus the price will drop in
London on Chinese silver. Il
Regraded Unclassifier
37
November 7, 1935.
Thursday
The following is a transcript of my conversation with
Key Pittrian today on the silver situation.
H.M.Jr.:
Hello - Hello
Key
Pittman:
Hello
H.M.Jr.:
Key?
P.:
Yes
H.M. Jr.:
How are you?
P.:
Pretty good.
H.M.Jr.:
This is Henry Morgenthau.
P.:
Yes
H.M.Jr.:
- Must be pretty early out your way?
P.:
Yes
H.M.Jr.:
Key, I want to tell you what we've been doing.
P.:
Yes
H.M.Jr.:
Can you hear me all right?
P.:
Fine -
H.M.Jr.:
This thing with the Chinese has been running along
now for about ten days, see?
P.:
Yes
H.M.Jr.:
And they originally came to me and wanted -- of
course what I am telling you is very confidential -
P.:
Yes
H.M.Jr.:
- They wanted us to buy a hundred million ounces
of silver, and I told them that we'd have to know
what their financial program was, see?
P.:
Yes
H.M.Jr.:
Well, then they came back and told us about what
they proposed to do but didn't tell us how much
Regraded Unclassified
38
-2-
they were going to devalue or anything like that,
you see?
P.:
Yes
H.M.Jr.:
So - we told them this, that any move that we made
that they'd have to tie the yuan to the dollar.
P.:
Yes
H.M.Jr.:
-- that that was our main interest. They'd also
have to promise us that any money they got for
silver would be used only for stabilization and
not to buy munitions, you see?
P.:
Yes
H.M.Jr.:
- And that they'd have to keep the money here in
America.
P.:
I see.
H.M.Jr.:
Well, this has been going on day and night, and
up to now they've agreed to everything except that
they'll tie their money to the dollar.
P.:
Yes
H.M. Jr.:
And the last time I saw them was about ten o'clock
last night. Now, as I told them - they're playing
poker in the world's market, but they haven't got
any chips.
P.:
Yes
H.M.Jr.:
- And that we'd be glad to furnish the chips if
they will tie their money to ours, but if they
are going to tie it up to sterling we're not
interested.
P.:
Yes
H.M.Jr.:
Now, how does that sound to you?
P.:
Fine, that sounds all right to me.
H.M.Jr.:
What suggestions have you got?
P.:
Well, - I'd suggest that
H.M.Jr.:
Yes
Regraded Unclassified
39
-3-
P.:
And you know how to play the game as well as I do.
H.M.Jr.:
Well, I don't know that, but at - but I can't see
why we should buy such a large block and have them
use the money to stabilize their currency with
sterling.
P.:
No, I don't see why they couldn't still have gold.
H.M.Jr.:
What's that?
P.:
I don't see why they couldn't still have gold and
stabilize with the pound sterling right now.
H.M.Jr.:
No - Now here's this suggestion, I mean, we've
made a suggestion that their money should be
redeemable either in gold at thirty five dollars
an ounce or silver at one dollar twenty nine. -
In other words that they be definitely tied on
the same basis as we are.
P.:
Yes
H.M.Jr.:
You see?
P.:
Yes - Well, I think that's quite a fair proposition
to them.
H.M.Jr.:
And I told them that I thought it was good for
China and it would be good for us, and if they did
that that they'd have every chance of pulling them-
selves out.
P.:
Yes
H.M.Jr.:
- But that they couldn't go on bluffing the world
when they had no money.
P.:
They were trying to get their - I should say
they were
were they not?
H.M.Jr.:
Well, they haven't got it, they've just been bluff-
P.:
I know, but just the same they're trying to
them.
H.M.Jr.:
Yes
P.:
sterling.
Regraded Unclassified
40
-4-
H.M.Jr.:
Yes - Well, they haven't got any loans and Leith-
Ross has been in to see the American Ambassador,
Johnson, and tells them that they've made no loans
and the Chinese Ambassador here tells me that they
have no promises of any loans - they just have a
hopes.
P.:
Well, I'd rather - I would rather myself
H.M.Jr.:
Yes
P.:
I'd loan them two hundred million, if necessary.
H.M.Jr.:
Yes
P.:
The amount
for them
provided they come to you at your own proposition.
H.M.Jr.:
You mean - make them a loan or buy silver?
P.:
No - I would, - I'd rather make them a loan.
H.M.Jr.:
You would?
P.:
About two hundred million or more - it's a safe
proposition.
H.M.Jr.:
Thank you
P.:
They wouldn't find buyers for that silver
H.M.Jr.:
Yes
P.:
Two hundred million
H.M.Jr.:
Yes
P.:
Of silver
provided you understood that,
you could control that - the gold in some way.
H.M.Jr.:
Yes
P.:
Either in this country and earmarked for their
sale
H.M.Jr.:
Yes
P.:
At just t he right time
H.M.Jr.:
But, but you agree with me, the fundamental principle
that I am fighting for is that they must tie their
money into the dollar.
41
-5-
P.:
Undoubtedly -
H.M.Jr.:
- And if they are going to tie it up with sterling,
then let the British finance them.
P.:
Yes
H.M.Jr.:
Is that right?
P.:
I think so - I think you're perfectly right on
that, Henry.
H.M.Jr.:
Yes - Well, I wanted to tell you absolutely in
confidence what I was doing, and 1f there is any
change one way or the other I'll let you know.
P.:
I wish you would - I'd appreciate it very much
indeed.
H.M.Jr.:
But, for the last five days that's all I've been
doing and It alked to the President once or twice
every day - he's keenly interested -
P.:
Yes
H.M.Jr.:
And he feels that if we could do this thing it
would be a great thing for the United States and
for the World Peace - because it would be stabiliz-
ing another currency.
P.:
Yes
H.M.Jr.:
And he's keenly interested and he's watching it
very closely.
P.:
Well, I'd like to keep in touch with 1t, Henry.
H.M.Jr.:
What's that?
P.:
I'd like to keep in touch with it - I'll be right
here for the next two days.
H.M.Jr.:
Well, if thore's any change - I'll let you know,
but, the Chi -
P.:
I was out to the mountains yesterday.
H.M.Jr.:
What's that?
P.:
I was out to the mountains yesterday and didn't
get in until last night.
H.M.Jr.:
Well, I wish I was out there with you.
Regraded Inclassified
42
-6-
P.:
It's quite nice out there.
H.M.Jr.:
I'll bet you.
P.:
All right, Henry.
H.M.Jr.:
Goodbye
P.:
Goodbye
42A
November 7, 1935.
Randolph Burgess
Thursday
H.M.Jr.:
Dr. Burgess?
B.:
Yes, sir.
H.M.Jr.:
Morgenthau -
B.:
Yes, sir.
H.M.Jr.:
Look, Burgess, Iwas looking over our Postal
Savings thing -
B.:
Yes
H.M.Jr.:
And I find that we've got eight million cash.
B.:
Yes
H.M.Jr.:
And they've got a hundred million dollar note.
I think we ought to sell about - go ahead with
that program that Jeff laid out -
B.:
On the --
H.M.Jr.:
- of selling those three per cent forty-six
forty-eight.
B.:
All right, yes.
H.M.Jr.:
Now the price he gave you was a hundred and two -
B.:
Twenty-six
H.M.Jr.:
Twenty-six
B.:
Yes
H.M.Jr.:
Well, I'd leave it there. I don't want to sell
more than three million in any one day.
B.:
Yes, I see.
H.M.Jr.:
I don't want to S ell more than three million dollars
in one day, though.
B.:
Yes - yes
H.M.Jr.:
See?
B.:
Yes
H.M.Jr.:
so, will you take that please?
Regraded Unclassified
42B
-2-
B.:
All right, sir, yes - I'll do that
H.M.Jr.:
All right
B.:
Yes, sir
H.M.Jr.:
Thank you
B.:
-
Goodbye.
43
November 8, 1935.
Friday
The following is a transcript of my conversation with
Key Pittman today on the silver situation.
H.M.Jr.:
Hello
P.:
Yes, hello
H.M.Jr.:
Henry Morgenthau
P.:
This is Pittman.
H.M.Jr.:
Good morning
P.:
Good morning
H.M.Jr.:
Key, I got your telegram, see?
Hello -
P.:
Yes
H.M.Jr.:
And I've read it with great interest. Now, since
then there are other things - have happened -
again very confidentially. The Hong Kong people
have sent a message to us, officially, wanting to
know whether we'd buy a hundred million ounces of
their silver reserve.
Hello -
P.:
Yes
H.M.Jr.:
Now, we're working on this whole thing and I just
wanted to know if the next day or two you are going
to be available on the telephone.
P.:
Yes, I'm going to be in Los Angeles at the Ambassador
Hotel.
H.M.Jr.:
Los Angeles?
P.:
Yes
H.M.Jr.:
When do you get to Los Angeles?
P.:
Yes
H.M.Jr.:
I mean, when will you get there?
P.:
I'm expecting to be there on Saturday night.
H,M.Jr.:
That's tonight?
Regraded Unclassified
-2-
44
P.:
Saturday night. No, I'll be here tonight.
H.M.Jr.:
Oh, you'll be here tonight and you're flying to
Los Angeles tomorrow?
P.:
I'm going to Los Angeles tomorrow.
H.M.Jr.:
Then you'll be at Los Angeles for how long?
P.:
At the Ambassador Hotel for about three days.
H.M.Jr.:
Well, that - that's all right.
P.:
Yes
H.M.Jr.:
Now, I haven't talked to anybody else on your
committee, see?
P.:
Yes
H.M.Jr.:
- And so I've only talked to you. You're the only
person outside of the Treasury and of course the
President that I've discussed this with.
P.:
Yes
H.M.Jr.:
But, I -- my interest is the United States Govern-
ment first, you see? - And I'm trying to figure
out what's best for us.
P.:
Yes
H.M.Jr.:
And I don't know yet, but I want to keep in touch
with you.
P.:
I see
H.M.Jr.:
But, I thought yesterday that the British were pretty
bold when they came in and said, 'Are you going to
take this or do you want us to dump it on the market?'
P.:
If they dump it why doesn't it come in?
H.M.Jr.:
Well, of course it would.
P.:
Let it come in, but it would come
why, let them bring it in
H.M.Jr.:
Yes, but look, what they are talking about is -
going on entirely a paper basis -
Regraded Unclassified
-3-
45
P.:
Well, I understand, but - what if they do go on a
paper basis?
H.M.Jr.:
Well, then let's say India goes next.
P.:
Well, suppose they do. I don't believe anything
of the kind.
H.M.Jr.:
Well -
P.:
If they do, let them do it and see what will
happen.
H.M.Jr.:
Well, then - then
P.:
everything as if they were playing
a strong game of poker.
H.M.Jr.:
Well, that's what we want and we
- I want to
out-bluff them if I can.
P.:
But I think they're playing poker, Henry.
H.M.Jr.:
Well, I want to out-bluff them, but I don't know -
and - I want -
P.:
They think that they'll have a revolution in India
if they start that.
H.M.Jr.:
Yes
P.:
They just can't do it in India.
H.M.Jr.:
Yes
P.:
Well, I don't
you
can't do anything about it.
H.M.Jr.:
No, Well, I'm not going to make any move until I
talk to you first.
P.:
All right.
H.M.Jr.:
Thank you.
P.:
Goodbye.
46
November 7, 1935
Bell came in and told the Secretary that Farm Credit
Administration wants to sell $50,000,000 2-3/4% 1942-47
Federal Farm Mortgage Corporation bonds at par or better.
HM,Jr., approved.
47
November 8, 1935
HM, Jr. called in Oliphant, Haas and Lochhead and
discussed with them the attached memorandum which had
been prepared as a basis of his talk with the President
this morning and on which the President hadsaid he
wanted the Treasury's reaction before 12 o'clock today.
Oliphant said the matter was too serious to be
disposed of in two hours and the Secretary thereupon
telephoned the President and told him the matter had
been discussed in the Treasury but we were of the opinion
that to give an answer by noon the same day would be too
hasty and that further consideration should be given to
the subject. He told the President that he thought the
earliest it was possible to give an answer after serious
consideration would be in twenty-four hours. The Presi-
dent gave his approval to the delay. The Secretary,
Oliphant, Haas and Lochhead will see the President tomorrow
afternoon to discuss the memorandum with him.
Regraded
didet Pres 8 or 6c/mp and
48
November 8, 1935
With the uncertainty of the outcome of the recent
move in China and due to the fact that it has been
brought to the Treasury's attention that the British
Government are considering changing their currency in
Hong Kong and proposing to issue a paper currency
without any silver or gold reserves and due to the fact
that we are being offered silver in blocks of 100,000,000
ounces, the United States Treasury will, until further
notice, continue to purchase newly-mined silver in the
United States at 77 cents an ounce and newly-mined silver
produced outside of the United States in North and South
America at 65 cents in New York City. Based on 1934
figures there were produced in the world 187,855,000
ounces of silver, of which 143,624,000 ounces were pro-
duced in North and South America.
At the London Economic Conference in 1933 it was
?
agreed by 51 (or 55) nations that in order to stabilize
world currencies it was deemed advisable that these
nations should look forward to a currency backed by
25 per cent gold reserve and silver.
At this moment, it looks as though a move to abandon
Regraded Unclassification
49
-2-
metallic reserves is about to be abandoned
?
in China and we are fearful that this may spread
to India and other silver using countries.
The United States Treasury does not wish to
be a party to this crime and, therefore, until we
can see more clearly the outcome of the recent
change in currency in China, we will refrain from
buying the floating supply of silver in the world's
market.
Regraded Unclassifi
50
November 8, 1935
Ambassador Sze: I reported the conversation of Wednesday
and got a reply this morning. They also got your
substitute No. 5. Kung is very sorry that he is not
able to say at the present moment that the currency
will be linked to anything on account of our external
political situation.
Mr. Morgenthau: The way the thing stands, as far as No. 5
goes and substitute No. 5, I understand that he cannot
do anything at this time.
Ambassador Sze: At the present time, he cannot commit him-
self. He wants to know whether you would be willing
to buy silver without tieing the yuan to the dollar.
Mr. Morgenthau: He does not say that he will not do No. 5?
Ambassador Sze: If he now linked it to any particular cur-
rency, he will have another disturbance.
Mr. Morgenthau: I will have to think it over. I cannot
give you an answer at this time.
Ambassador Sze: Kung says he is doing his best. If he saw
a way, he would do it. He appreciates your cooperation.
*****
The Ambassador left. Mr. Morgenthau asked Lochhead,
who had been present when the Ambassador met with the Secre-
tary, to remain and HM,Jr., also called in Oliphant and Haas.
Mr. Morgenthau told the group that "as far as I am con-
cerned, the thing that none of us has mentioned here and the
thing that I am terribly proud of is that for a year and a
half, the dollar has been stable. This has a great deal to
do with our recovery. We do not want to "rock the boat" any
more. On the other hand, we do not want to find ourselves
with several billion ounces of silver and no one interested
in buying silver except ourselves. We have the choice of
(a) making another important monetary move, which at this time
I consider most undesirable, (b) taking this silver in London
51
-2-
at the present price of 65-5/8 cents, or (c) dropping the
price every time the offering of silver gets too heavy, or
(d) gradually dropping the price to 8. level where it no
longer would be profitable for the Chinese to export silver.
Mr. Oliphant was of the opinion that none of the above
mentioned moves would be inconsistent with our monetary
policy today or with what the President has said or with
what we have done.
Mr. Morgenthau told the group that "Inasmuch as Sze
informed me, this afternoon, that at this time they considered
it impolitic to tie the yuan to the dollar, I think beföre
making any decision, we must wait to hear from the British
financial attache Bewley. In the meantime, nothing new is
happening from day to day and there is no real pressure on
us to make up our minds, except from Ambassador Sze and
Bewley. If we can get away with it politically at this
moment, I think the nicest "out" would be to drop the price
to around 40¢, which I understand is the present level on
which there would be no profit to export silver from China.
I want you to keep in mind that it is my opinion that it
would be to the best interest of England to get all of the
Orientals and Indians to using paper money with no backing
of silver, and the present Chinese move is in that direction
and if Hong Kong should follow Shanghai, it would not be long
before India would also make the same move and we would be
left "holding the silver bag."
52
November 8, 1935
When Judge Hoyt conferred with the Secretary, on
November 1, it was decided that Judge Hoyt should write
a letter to Mr. Morgenthau in which he would formally
request the appointment of a general counsel and twenty
additional inspectors for the new Federal Alcohol Con-
trol Administration. He wrote this letter under date
of November 1 and copy is attached hereto.
HM, Jr. instructed McReynolds to handle the matter.
McReynolds wrote a memorandum to Bell, Acting Director
of the Bureau, on the same date. Copy of the memo is
attached.
Acting on the recommendation of McReynolds, Oliphant
and Bell, HM, Jr. today sent to the President his views
and a copy of that memorandum is also attached.
Regraded Unclassified
53
(COPY)
November 1, 1935
My dear Mr. Secretary:
As suggested by you at our conference this morning, I
wish to set forth the two matters that I consider of partic-
ular importance at this time.
I understand that it is agreeable to you for me to appoint
a. General Counsel at this time. I have already given you the
name of Mr. Phillip E. Buck. Mr. Buck has been recommended to
me by Dr. Willard L. Thorp and Mr. Golden W. Bell, both of whom
were Members of the Board of the former Federal Alcohol Control
Administration, They have worked with Mr. Buck during the past
year and are personally familiar with his ability and qualifica-
tions. Mr. Buck is at present detailed to the Federal Trade
Commission from the NRA where he was formerly in charge of the
Litigation Division, with a staff of approximately one hundred
and fifty attorneys. I sincerely trust that I may be able to
act promptly in respect to Mr. Buck's appointment. The salary
of the General Counsel of the former FACA was $10,000. I have
suggested, and ask your approval of, a salary of $9,500 per
annum for the General Counsel of this Administration.
In order to administer the new Act effectively, it would
appear that B. total staff of one hundred and ninety employees
should be authorized at this time. This would permit a general
strengthening of our organization, especially in our enforcement
activity as this arrangement will permit the appointment of twen-
ty additional investigators needed in the field to report viola-
tions. This should not be further delayed as the industry will
be quick to detext laxity in enforcement of the new law. Suitable
personnel has already been chosen and we are ready to proceed with
the building up of our staff to the one hundred and ninety figure
basis as soon as the necessary authorization has been provided.
Several vacancies on our staff which should have been filled will
also be provided for under this arrangement.
As I have mentioned before, the contemplated staff 18 no
larger than that employed a few months ago by the former FACA.
With such a staff I believe that I can get results that will
be satisfactory both yo you and the President.
Cordially yours,
(Sga) Franklin C. Hoyt,
Administrator
The Honorable
The Secretary of the Treasury
Regraded Unclassifie
54
(COPY)
TREASURY DEPARTMENT
Inter Office Communication
Date Nov. 1, 1935
FROM:
Mr. McReynolds
To:
Mr. D. W. Bell
I transmit herewith & letter from Hon. Franklin C. Hoyt,
Administrator of the Federal Alcohol Administration, requesting
the appointment of a general counsel at $9500 a year, and addi-
tional inspection personnel.
In view of the fact that no funds were provided by Congress
for the Federal Alcohol Administration and that the salaries of the
employees of that administration are being paid from emergency
funds allotted to the Treasury Department on the theory that they
are on detail, it is my opinion that the Department may not legally
appoint the additional employees requested by Judge Hoyt, and that
to do so would place the Treasury Disbursing Officers in a position
where the Comptroller General would almost certainly disallow any
payments made on account of such salaries.
Therefore, I can only recommend adversely on Judge Hoyt's
request for the technical reasons stated. This is done without
any regard whatever to the merits of Judge Hoyt's proposals. I
might add, incidentally however, that the Treasury could not ap-
prove the salary for the proposed general counsel for the Federal
Alcohol Administration as high as that suggested by Judge Hoyt.
(Signed) Wm. H. McReynolds.
Inclassific
55
(COPY)
THE SECRETARY OF THE TREASURY
WASHINGTON
November 8, 1935
MEMORANDUM FOR THE PRESIDENT:
I am sending you herewith a letter dated November 1,
1935, from Judge Hoyt in which he requests the appointment
of a general counsel and twenty additional inspectors for
the new Federal Alcohol Administration which was recently
set up as a division in the Treasury Department. You will
recall that Judge Hoyt's organization is one of the units
for which funds were carried in the last Deficiency
Appropriation Bill, which failed of enactment by the last
Congress, and that as an emergency measure arrangements were
made to pay the salaries of the employees taken over by
Judge Hoyt from the old Federal Alcohol Control Administra-
tion from other Treasury funds pending the provision of direct
appropriation by Congress.
I am advised by my General Counsel that no money avail-
able for expenditure by the Treasury Department may be legally
used to employ the additional personnel requested by Judge
Hoyt. Furthermore, it is my opinion that it would be
undesirable for this new division to undertake any expansion
of its organization until its budget has been finally approved
and funds approved by Congress.
If I have your approval, I should like to say to
Judge Hoyt that while I am unable to supply the additional
employees he requests, he may call on my office for such legal
and investigational assistance as he requires, and that I will
undertake to have such assistance rendered by the existing
Treasury staff.
Faithfully yours,
(Signed) H. Morgenthau, Jr.
56
THE SECRETARY OF THE TREASURY
WASHINGTON
November 8, 1935.
MEMORANDUM FOR THE PRESIDENT:
I am sending you herewith a letter dated November 1,
1935, from Judge Hoyt in which he requests the appointment
of & general counsel and twenty additional inspectors for
the new Federal Alcohol Administration which was recently
set up as a division in the Treasury Department. You will
recall that Judge Hoyt's organization is one of the units
for which funds were carried in the last Deficiency
Appropriation Bill, which failed of enactment by the last
Congress, and that as an emergency measure arrangements were
made to pay the salaries of the employees taken over by
Judge Hoyt from the old Federal Alcohol Control Administra-
tion from other Treasury funds pending the provision of direct
appropriation by Congress.
I am advised by my General Counsel that no money avail-
able for expenditure by the Treasury Department may be legally
used to employ the additional personnel requested by Judge
Hoyt. Furthermore, it is my opinion that it would be
undesirable for this new division to undertake any expansion
of its organization until its budget has been finally approved
and funds appropriated by Congress.
If I have your approval, I should like to say to
Judge Hoyt that while I am unable to supply the additional
employees he requests, he may call on my office for such legal
and investigational assistance as he requires, and that I will
undertake to have such assistance rendered by the existing
Treasury staff.
Faithfully yours,
Minutan
57
FEDERAL ALCOHOL ADMINISTRATION
A DIVISION OF THE TREASURY DEPARTMENT
November 1, 1935
WASHINGTON.D.C.
By dear Mr. Secretary:
As suggested by you at our conference this morning, I wish to set
forth the two matters that I consider of particular importance at this time.
I understand that it is agreeable to you for me to appoint a
General Counsel at this time. I have already given you the name of Mr.
Phillip E. Buck. Mr. Buck has been recommended to me by Dr. Willard L. Thorp
and Mr. Golden W. Bell, both of whom were Members of the Board of the former
Federal Alcohol Control Administration. They have worked with Mr. Buck during
the past year and are personally familiar with his ability and qualifications.
Mr. Buck is at present detailed to the Federal Trade Commission from the NRA
where he was formerly in charge of the Litigation Division, with a staff of
approximately one hundred and fifty attorneys. I sincerely trust that I may
be able to act promptly in respect to Mr. Buck's appointment. The salary of
the General Counsel of the former FACA was $10,000. I have suggested, and
ask your approval of, a salary of $9,500 per annum for the General Counsel
of this Administration.
In order to administer the new Act effectively, it would appear
that a total staff of one hundred and ninety employees should be authorized
at this time. This would permit a general strengthening of our organization,
especially in our enforcement activity as this arrangement will permit the
appointment of twenty additional investigators needed in the field to report
violations. This should not be further delayed as the industry will be quick
to detect laxity in enforcement of the new law. Suitable personnel has
already been chosen and we are ready to proceed with the building up of our
staff to the one hundred and ninety figure basis as soon as the necessary
authorization has been provided. Several vacancies on our staff which should
have been filled will also be provided for under this arrangement.
As I have mentioned before, the contemplated staff is no larger than
that employed & few months ago by the former FACA. With such a staff I believe
that I can get results that will be satisfactory both to you and the President.
Cordially yours,
Franklin C. Hoyt
Administrator
The Honorable
The Secretary of the Treasury
58
Memorandum of Call Made by Ambassador Sze upon Secretary Morgenthau
Saturday Afternoon, November 9, 1935
*****.
Dr. Sze:
Good afternoon, Mr. Morgenthau.
Mr. Morgenthau: Good afternoon, Dr. Sze. I have asked you to
come down to my office regarding the proposed
silver purchases we have been discussing the
past week.
Dr. Sze:
Yes.
Mr. Morgenthau: We have given this question considerable thought
and notwithstanding the fact that you have not
as yet given satisfactory answers to the pro-
posals we made regarding the linking of the new
Yuan currency to the dollar, we have decided to
endeavor to do something practical in order to
furnish you with some assistance at this critical
period.
Dr. Sze:
That is very nice of you.
Mr. Morgenthau: I will be willing to purchase 20 million ounces
of silver from you at 65 5/8¢ per ounce when
it has been delivered on board American Steamer
at Shanghai, less expenses of delivery.
59
-2-
Dr. Sze:
Can't you make it more than 20 million ounces?
Mr. Morgenthau: 20 million ounces 1s all for which I care to
commit myself. I have talked this over with
the President and he is in agreement. As you
know, we are not asking you for any land or
harbors or railroads, we are simply offering to
buy 20 million ounces to tide you over the
immediate situation. As to further developments,
all I can say is the door 1A open 80 that they
may be discussed when the time comes.
Dr. Sze:
I will communicate this to Dr. Kung immediately.
You know the question of shipping only on
American boats came up in the form of wheat
transactions and the American boats took ad-
vantage and raised the rates so that there was
no profit left for us.
Mr. Morgenthau: Don't worry about that. We will see that the
American boats only charge the regular freight
on these shipments and if they attempt to take
advantage, I will put it on a British, French
or any other boat available.
Dr. Sze:
What will be the exact charges to be taken from
the 65 5/8¢ rate?
60
-3-
Mr. Lochhead:
These will be the usual charges covering all
expenses of delivery of the silver to the Mint
at San Francisco. These details can easily be
arranged later on through the regular channels.
Dr. Sze:
You would prefer using the National City Bank
for this transaction?
Mr. Morgenthau: No. It 1s simply that there are two United
States banks in Shanghai and in order that
there be no criticism or charges of favoritism
we think the business should be done through
both of them, and I think that this can be
easily arranged.
Dr. Sze:
Thank you very much for your kindness, and
please convey my thanks to the President for
his consideration and helpfulness.
61
November 9, 1935
This evening, at six o'clock, Mr. Hickerson of
the State Department, came in to see the Secretary.
Mr. Haas and Mr. Oliphant were also present.
Mr. Hickerson brought with him the general pro-
visions of the proposed trade agreement with Canada
which, he explained, were the standard and similar
to the sort used in the Swedish agreement, the Brazil-
ian agreement and the Colombian agreement. He said
that Johnson of the Customs Bureau had been working
with his Department on the provisions and rates; that
the rates were in form to be initialed; that they
would work on the description this week and be ready
to sign the agreement about Thursday, November 14.
The Secretary told Mr. Hickerson he thought the
President should be furnished with a table in connec-
tion with the agreement, which they did not have at
Cabinet yesterday, showing the potential loss or gain
in customs revenues, but Mr. Hickerson said that was
impossible because "Only God himself knows." Mr. Mor-
genthau reminded him that in the Cuban agreement we
had figures which showed a possible $23,000,000 loss
in revenue.
Continuing, the Secretary said that on a big
thing like this the President holds the Treasury De-
partment responsible. He called attention to the
figures given out on September 30 which showed that
we are operating within 7/10ths of the President's
estimated revenue and that Lew Douglas made the state-
ment that it was pure "window-dressing" and made for
purely campaign purposes, but it actually was an honest
statement. He also called attention to the fact that
if the President puts his signature on the proposed
agreement it might throw the budget out $25,000,000.
Mr. Morgenthau stressed the fact that he was inter-
ested in the agreement only as a fiscal officer of
the Government and whether the President could be a
good financial housekeeper and stay within his budget.
Mr. Hickerson said both the Secretary and the
President had already given approval to the reduction
in the tariff on whiskey, the President having done
so in August. Mr. Morgenthau disclaimed any knowledge
of it or that anyone in the Treasury would have acted
for him in this respect. Mr. Hickerson said both
Eli Frank, Jr., and Graves had cleared 1t; that at a
Regraded Unclassified
62
-2-
meeting of the Trade Agreements Committee, Eli Frank
had reported that the Secretary of the Treasury had
some doubts about it, but now that smuggling was well
bottled up, he saw no objections to going ahead.
Mr. Morgenthau reminded Mr. Hickerson that the
Treasury had a potential $50,000,000 which it hoped
to collect in 8. claim from Canada on back taxes and
was worried what effect the proposed reduction would
have on the outcome of the claim. He said that every
fancy lawyer in New York and Washington had been hired
to put this over and all sorts of heavy pressure
brought to bear and again said this was the first he
knew of the contemplated reduction. He refused to
take the responsibility for the loss of the claim until
after the Treasury Department and Justice Department
had had a chance to study the matter and until he
talked to the President. Mr. Hickerson said that in
this Canadian work the State Department had had in mind
the Treasury's effort to collect the back taxes and had
looked at it with the greatest sympathy and, considering
it from every angle, they could not see that it would
affect the Treasury's efforts in one way.
Secretary Morgenthau at this point talked to the
President on the 'phone and expressed his fears about
the outcome of the Government's claim for back taxes
as it might be affected by the agreement and the Presi-
dent said, "Initial with the understanding that it is
subject to confirmation in 48 hours.' This was agree-
able to the Secretary and Mr. Hickerson.
The State Department representative apoligized
to Mr. Morgenthau for not bringing the matter to his
attention and for the misunderstanding concerning his
not knowing of the proposed reductions. The Secretary
told him it was quite likely in his own shop, but that
neither Secretary Hull nor Mr. Phillips, in his talk
with them yesterday at the luncheon in honor of the
new Prime Minister of Canada, had any knowledge that
whiskey was involved. Mr. Morgenthau expressed his
sincere desire to cooperate with Mr. Hull and Mr. Hick-
erson gave Mr. Morgenthau his personal assurance that
in the future he would submit to him personally any
trade agreements under consideration.
Mr. Morgenthau promised to let Mr. Hickerson have
his opinion on the agreement before noon, Monday.
Regraded
November 9th
63
President:
Well, what have you brought me today?
Mr. Morgenthau: Since I talked to you yesterday morning I have
altered my 1deas somewhat regarding the plans
for the purchase of silver. We have done a
great deal of work since yesterday morning and
have given the problem considerable thought.
Mr. Oliphant has prepared this file which contains
the extracts from all your speeches and messages
covering everything you have said which bears on
our monetary policy and the Silver Program. He
has also prepared this summary of the monetary
program and its objectives.
Mr. Oliphant:
I feel that any action that we may take at this
time should be consistent with your statements
of monetary policy.
Mr. Morgenthau: Yesterday morning the idea was considered of buy-
ing only the newly mined silver, but there are
one or two other alternatives which we have thought
out that I would like to have your opinion on.
President:
Well, what is the first one?
Mr. Morgenthau: China has asked us to purchase 100 or 200 million
ounces of silver and now Hongkong has also asked
if we are prepared to take their silver. This
Regraded
64
-2-
Mr. Morgenthau:
means that they are willing to give up silver
(Cont'd.)
as a monetary base and that is not in accord-
ance with the 1dea of a wider use of silver as
one of the objectives of our silver plan.
President:
Have you heard anything further from Dr. Sze?
Mr. Morgenthau:
Yes. He called yesterday afternoon and said
that Dr. Kung could not give any promises as to
linking the Chinese Yuan to the United States
Dollar.
President:
Did he give any reasons?
Mr. Morgenthau:
Yes. He said that owing to political pressure
they could not announce the linking of the
Yuan to any other currency and simply repeated
that they were stabilizing it at the present
level.
President:
Internal or external pressure?
Mr. Morgenthau:
External pressure. The Japanese.
President:
This Evening's Star says that the Japanese
have made the statement that they were not con-
sulted regarding the change in the Chinese mone-
tary system and seem to feel that the British
are behind it.
Regraded Unclassifie
Mr. Morgenthau:
Yes. I have already seen that statement
and it ties in with other information of
the same nature which we have received
through various other sources.
The President:
Do you think the British knew that the plan
was going to be announced or were behind
it?
Mr. Morgenthau:
Leith Ross says that the Chinese announced
the plan before consulting him, or as he
expressed it, they "beat the gun".
Mr. Lochhead:
That may be true, but there is no doubt
that Leith Ross has been working with the
Chinese on some plan of currency reform
and the plan which they have announced is
apparently along the lines which the British
had in mind.
The President:
Did the Chinese say why they announced the
plan 80 suddenly?
Mr. Lochhead:
You will remember, Mr. Morgenthau, that last
Sunday Dr. Sze telephoned and stated that he
had a wire from Kung stating that the political
situation was 80 acute and the withdrawal of
66
Mr. Lochhead:
silver 80 serious that they could not delay
(Cont'd.)
making their announcement beyond Monday morning.
Mr. Morgenthau: The British plans were evidently prepared with
the 1dea of inducing the silver using countries
to give up the use of silver as a monetary metal.
If they can induce China to adopt a plan which
does not make use of silver, Hongkong will also
follow the same procedure, and then with this
accomplished, their difficulty regarding the
silver situation in India would be simplified
and they would also be able to eliminate the use
?
of silver there also. This is certainly contrary
to the thought of broadening the use of silver
as a monetary metal, but is apparently what
they would like to accomplish.
The President:
But the Chinese do not state what they are tying
their Yuan tc.
Mr. Morgenthau:
They have simply said that they are going to
stabilize their currency around the present
level, which 1s 30¢, or 1 shilling, 2 1/2 pence,
and will buy or sell this exchange to maintain
this level.
Regraded
Unclassifie
67
The President:
They cannot tie their currency on two entirely
different currencies such as the United States
Dollar and the pound sterling.
Mr. Lochhead:
They perhaps have left this question open
purposely BO as to maintain a trading position
and thus be able to play Britain and the United
States, one against the other, in order to se-
cure whatever advantage might be obtained there-
by.
Mr. Morgenthau.
I think I told you that the State Department
has informed me that the tie-up of the Chinese
Yuan to the U. S. Dollar is not a necessary
point from their standpoint.
Mr. Haas.
One thing we have to consider is this: If we
persuade China to tie their currency to the
dollar and anything goes wrong in China due
to the failure of their currency reform, they
will no doubt attempt to blame the United States.
Mr. Morgenthau:
The Hongkong Government declared an embargo on
the export of all silver effective at noon to-
day, but this embargo was just too late to
prevent a shipment of about 15 million ounces
made by the Hongkong & Shanghai Banking Cor-
poration.
68
Mr. Morgenthau:
One way to prevent China and Hongkong from
selling their silver 1s to allow the price
to decline to around the 40¢ level. This
would make their paper Yuan, if maintained
at the present level of 30¢, worth as much
as silver. In other words, there would be no
premium on the silver as against bank notes,
and neither China nor Hongkong would find
any advantage in selling their silver. When
the price of silver was going up rapidly,
some little time ago, Mexico approached us
and asked for time in order to prevent a
drain of silver out of the country. As a
consequence we withheld our purchases and
threw open our Mints so that they could have
new coins made which had a silver content
equal to the U. S., that is to say, on a
basis of $1.29 an ounce. This proved very
successful and as a result there was no large
outflow of silver from Mexico.
Mr. Oliphant:
It is too early to say whether or not they
have been successful in substituting paper
money for silver in Mexico. They have
probably succeeded to some extent in the
large cities, but the peons and others who
make up the great mass of Mexico's population
69
Mr. Oliphant:
will probably be very reluctant to give up
(Cont'd.)
the use of hard silver to which they have been
accustomed for years past.
Mr. Morgenthau: If we allow the price to go down to 40¢ for
the time being, this would give China a
breathing spell and then when their house was
in order the price of silver could again be
advanced.
Mr. Haas:
What advantages would China obtain if the price
of silver was held down to the 40¢ level?
Mr. Lochhead:
The new Central Bank would probably be able to
obtain a considerable amount of silver from
the outlying districts if there was no premium
against bank notes. Otherwise this silver
would probably be smuggled out. If the Central
Bank of China had a large amount of silver as
a result of an exchange against their new bank
notes, they would look more kindly towards
any later plan for an advance in the price of
silver, as they would then be able to secure
the advantage of this rise.
Mr. Morgenthau:
This is only a temporary plan and would not
tie our hands for later action. It would
simply give China a breathing spell.
70
Mr. Morgenthau:
(Cont'd.)
I heard from Key Pittman again. He apparently
has changed his mind somewhat since our last
telephone conversation and does not seem to
feel that we should refuse to buy silver if
offered to us by the Chinese as long as we
paid for it in credit or legal tender rather
than actual gold.
Mr. Lochhead:
If we made payment in credit or legal tender
there would be no essential difference than
paying for it in gold as they could buy gold
in other markets at the present time at
slightly better rates than the $35 plus 1/4%
charged by the U. S., and could pay for the
gold by drawing down their balances with us.
The President:
One thing that has to be considered 1s that it
may be easy enough to drop the price of silver
but a very difficult thing to raise it once
such action has been taken.
Mr. Oliphant:
Whatever it 18 decided to do should not be
accompanied by any publicity as that might
cause uneasiness and lead to considerable
discussion in the Press. It does not seem
necessary to make any announcement of any kind
at this time.
71
The President:
No. This idea of dropping the price does not
seem 80 good. What 1s your other idea?
Mr. Morgenthau: The other idea is to buy some silver from China
but not necessarily 100 or 200 million ounces
as they ask. They are having a very difficult
situation over there at present and if we could
give them some help it might at least tide them
over for the time being.
The President:
Have you ever considered the 1dea of a trade
dollar? You know, if you go back 75 years or
more you will find that there was a silver
American trade dollar coined for use in China
which was later supplanted by the Mexican silver
dollar.
Mr. Oliphant:
In order for such a trade dollar to be of any
real use, the price of silver would have to
be fixed. Otherwise, the value of the trade
dollar would fluctuate constantly in response
to the fluctuations in the price of silver.
Mr. Lochhead:
One of the objections to the use of an American
trade dollar 18 that the Chinese have been united
for sometime past on the idea that they should
have control over their own currency and have
endeavored to standardize the unit of currency.
70
Mr. Lochhead:
It was for this reason that they established the
(Cont'd.)
Yuan dollar and made the use of the various tales
illegal. Any attempt to introduce a trade dollar
containing a foreign imprint would probably arouse
considerable opposition among the Chinese bankers
and financial authorities.
The President:
I would feel much better if these communications
from China came from Dr. Soong rather than Dr.
Kung. I have more faith in Dr. Soong than I have
in Dr. Kung.
Mr. Morgenthau:
Dr. Soong is in complete charge of all these affairs
and Dr. Kung only handles the details as Minister
of Finance. I think that we may consider that all
that is being done in China along monetary lines
is with the full approval of Dr. Soong.
The President:
An idea to be considered 18 one that would insure
the physical distribution of both gold and silver
reserves among the various nations of the world.
In other words, settlements of trade balances by
shipments of both gold and silver combined in
some manner.
Regraded Unclassified
73
Mr. Oliphant:
I have made a study of this subject requiring
over six months time and in fact went BO far
as to have a sample coin made in the Mint.
The 1dea of symmetalism appears to be entirely
feasible, but of course in considering this
subject careful study must be given to the
ratio of gold and silver and to do this one
has to go back over 8. period of say 100 years
to study the relationship which probably can
best be determined by ascertaining the amount
of gold and silver produced during this period
and fixing a relationship between the two metals
in that proportion.
President:
(Laughingly addressing Mr. Oliphant) William
Jennings Bryan.
Mr. Oliphant:
of course you understand that my ideas on this
subject are not emotional, the opinions I ad-
vanced being purely intellectual ones on my part.
The relationship between the two metals as fixed
by Alfred Marshall is nearer 20 to 1 than 16 to 1.
Mr. Haas:
In making a study of this problem I have come to
the conclusion that any ordinary country can in-
dependently adopt a symmetaliem system successfully
Regraded Unclassified
-2-74
Mr. Haas:
and there can be no doubt that the United
(Cont'd.)
States, with its enormous gold and silver
reserves, as well as of vast natural resources,
could, if it wished, set up such a system
with undoubted success. There seems to be
sound economic justification for it and
Marshall made quite a study of it back some-
where in 1890. However, at the present time
the business picture in this country is very
fine and everything is progressing satisfactorily.
Any ideas of this nature expressed at this
time might very well be untimely and cause a
feeling of uncertainty, which would be most
unfortunate. It might be possible at some
future time to combine this idea along with
the control of credit inflation and put them
over together without disturbance.
President:
This is only an idea which has occurred to
me which I do not care to take any immediate
action upon but simply want you to think it
over as of possible interest. Suppose for
instance some country had a favorable balance
of trade with the United States.
Mr. Lochhead:
Colombia, for instance.
The President:
How was Colombia's favorable balance with the
United States obtained?
Regraded
Unclassified
75
Mr. Lochhead:
Colombia sells practically all of her main export
commodity, which is coffee, in the United States.
She does not buy nearly as much U. S. products as
would offset the proceeds of the coffee sold by
her.
The President:
Well, say, for example, that at the end of some
period of time, say a year, or three months, or
even one month, Colombia had a favorable trade
balance with the United States of 10 million
dollars. Suppose this balance was not settled
from day to day, but was held up until the end
of a stated period. At the end of that period
we owe Colombia 10 million dollars. We might
then say we intend to settle this balance by
actually shipping you 10 million dollars consist-
1ng of both gold and silver. You will have to
actually take this metal and hold it in your re-
serves. In this manner the actual metal would be
distributed.
Mr. Lochhead:
The difficulty in this specific case would be
that, although Colombia has a favorable trade
balance with us, she has an unfavorable trade
balance with some other nations. Colombia could
not keep this whole amount of gold and silver in
her currency reserve as she is under the necessity
of purchasing currency such as the pound sterling
Regraded Unclassified
76
Mr. Lochhead:
and French Francs to settle her adverse trade
(Cont'd.)
balances with those countries. In order to obtain
the sterling and francs it would be necessary for
her to ship the gold and silver to those countries,
or any other country where a market existed for
these metals, and sell the gold and silver in
order to obtain the foreign exchange necessary for
settling her adverse trade balance with a par-
ticular country.
The President:
Well, as I said before, this is only an idea which
1s not necessary to consider at the present time.
(After this meeting Mr. Oliphant informed Mr.
Lochhead that the example given did not entirely
cover the case as only the balancing of one
country's trade balance was discussed, whereas
for a proper discussion, the question of settling
trade balances between all countries would have to
be considered.)
The question seems to settle down as to what is
the best thing we can do at the present time to
help China.
Mr. Morgenthau:
They have asked us to purchase 100 million ounces
and although I do not feel that we should agree
to this amount, it does seem that we might be able
to tide them over by agreeing to purchase, say,
25 million ounces.
Regraded
77
The President:
My idea would be 20 million ounces which we may
consider as a bet on what may develop in the
future. Yes, I think that 1s the best thing we
can do. That 1s, to go along without making any
radical changes in the price of silver and see
what happens.
Mr. Lochhead:
The thing I am afraid of for the immediate future
is that Hongkong may force us to make a decision
suddenly. They have offered to sell us 100 million
ounces and have intimated that if we do not care to
buy this from them direct, they will dump it on the
London market.
Mr. Morgenthau:
Well, I think we can take care of this.
Mr. Lochhead:
Some morning I may give you an early telephone call
to tell you that we have been offered 25 or 50
million ounces of silver and that we will either
have to make up our mind to take it or let the
market drop.
Mr. Morgenthau:
It will not be the first time that you have tele-
phoned me early in the morning, and they will not
do anything radical in the London market without
giving us time before they announce the fixing.
If what you are afraid of occurs, we can very easily
back away from the offerings if we think it advisable.
Regraded Unclassified
78
Mr. Morgenthau:
I have a report here giving the details of some
transactions covering various sales made by
American concerns for export to Italy. Lochhead
follows this up through a special man in the
Federal Reserve Bank of New York BO that we may
have a picture of what is going on from time to
time (This report was discussed in detail.
The shipments covered mostly exports of gasoline
and oil which were paid for immediately by the
debit on the New York Banks' books of the
account of Italian customers).
The President:
The New York banks apparently do not extend any
credit to the Italians for these purchases.
Mr. Lochhead:
No. Aside from the ethical or moral questions
involved, the banks do not consider credits to
Italians a good business risk, especially in
view of their previous experiences with Germany.
The President:
Where do the Italians obtain their funds to pay
for these purchases?
Mr. Lochhead:
The balances of Italians on the books of New
York banks have remained fairly constant around
11 million dollars despite payments for these
purchases. The accounts are replenished from
time to time, probably through the sales of gold
by Italy.
Regraded Unclassified
79
The President:
Do we buy any gold from Italy?
Mr. Lochhead:
No. We have not received any shipments of
gold from Italy but it 1s probable that Italy
obtained New York funds by selling gold in
Paris and securing their dollars in that
market.
The President:
When do the League of Nations sanctions go
into effect?
Mr. Lochhead:
November 18.
The President:
Will they be able to sell gold to countries
belonging to the League of Nations after the
sanctions go into effect?
Mr. Lochhead:
Yes. The purchase of gold from Italy 1s not
prohibited by the sanctions, the thought being
that the sale of gold by Italy would weaken
her position.
The President:
Well, we are building up a case.
80
THE ADMINISTRATION'S MONETARY POLICY
Everything the President has said on monetary matters, and
everything the Administration has done in relation to money, group
themselves around five basic propositions, which constitute the
underlying and long-time monetary policy of the Administration.
These five basic purposes are:
1. To restore commodity price levels;
2. Thereafter to establish and maintain a
dollar less variable in its purchasing
and debt paying power;
3. To use both silver and gold, on a co-
ordinated basis, as a yardstick of
value;
4. To increase the proportion of silver in
the metallic reserves back of paper
currency; and
5. To vest in the Government title to all
monetary gold and keep it in bullion
form.
Under these five headings, there are listed below extracts from
the President's utterances on monetary matters and references to the
various monetary steps taken by the Administration.
PURPOSE TO RESTORE COMMODITY PRICE LEVELS
Statements of This Policy
"The Administration has the definite objective of raising commodity prices
to such an extent that those who have borrowed money will, on the average,
be able to repay that money in the same kind of dollar which they borrowed.
We do not seek to let them get such a cheap dollar that they will be able
to pay back a great deal less than they borrowed." - Radio Address May 7,
1933.
Regraded
-2-
81
"Finally, I repeat what I have said on many occasions, that ever since
1ast March the definite policy of the Government has been to restore
commodity price levels." - Radio Address, October 22, 1933.
"In conformity with the progress we are making in restoring a fairer price
level If - Message to Congress, January 15, 1934.
Action Taken
Recommendation, passage, and approval of Thomas Amendment, May 12, 1933,
authorizing decrease in the value of the gold and the silver dollar.
Devaluation of the dollar after a progressive increase in the price of
gold to determine the best point at which to fix such devaluation. -
January 31, 1934.
PURPOSE TO ESTABLISH LESS VARIABLE DOLLAR
Statements of This Policy
"Let me be frank in saying that the United States seeks the kind of a
dollar which & generation hence will have the same purchasing and debt
paying power as the dollar value we hope to attain in the near future."-
President's Message to the London Economic Conference, July 2, 1933.
"When we have restored the price level, we shall seek to establish and
maintain a dollar which shall not change in its purchasing and debt pay-
ing power during the succeeding generation. I said that in my message
to the American Delegation in London last July. And I say it now once
more. My aim in taking this step (raising price of gold) is to
establish and maintain continuous control. This is a policy and not an
expedient. It is not to be used merely to off-set & temporary fall in
prices. We are thus continuing to move toward a managed currency." -
Badio Address, October 22, 1933.
"Permit me once more to stress two principles. Our national currency must
be maintained as a sound currency which, insofar a.8 possible, will have
e fairly constant standard of purchasing power and be adequate for the
purposes of daily use and the establishment of credit." -- Message to
Congress, January 15, 1934.
"In conformity with
... our purpose of arriving eventually at a less
variable purchasing power for the dollar - Message to Congress,
January 15, 1934.
"As a part of the larger objective, some things have been clear. One in is
that me should move forward as rapidly as conditions permit
stabilizing the purchasing and debt-paying power of our money on a more
equitable level." President's Message to Congress, May 22, 1934.
Regraded Unclassified
÷
82
"This objective of a greater steadiness (of prices and values) we have
constantly kept before us as our national policy," - President's Speech
to Bankers, October 24, 1934.
Action Taken
Recommendation, enactment and approval of various pieces of legislation
giving the power to adjust the value of the gold and of the silver dollar
up or down; to buy and sell gold and silver only in combination and at
at fixed ratio of ounces if symmetallism is desired; and to provide for the
unlimited coinage, or purchase and sale, of silver at a fixed ratio to
gold if bi-metallism is desired.
PURPOSE TO USE BOTH SILVER AND GOLD AS YARD-
STICK OF VALUE
Statements of This Policy
"We can proceed with this program of increasing our store of silver for use
as a part of the metallic reserves for our paper currency without seriously
disturbing adjustments in world trade. However, because of the great world
supply of silver and its use in varying forms by the world's population,
concerted action by all nations, or at least a large group of nations, is
necessary if a permanent measure of value, including both gold and silver,
is eventually to be made a world standard. To arrive at that point, we must
seek every possibility for world agreement, although it may turn out that
this nation will ultimately have to take such independent action on this
phase of the matter as its interests require." - President's Message to
Congress, May 22, 1934.
"Accordingly, I have begun to confer with some of our neighbors in regard to
the use of both gold and silver, preferably on a coordinated basis, as a
standard of monetary value. Such an agreement will constitute an important
step forward toward a monetary unit of value more equitable and stable in
its purchasing and debt paying power." -- Message to Congress, May 22, 1934.
Action Taken
Recommendation, enactment and approval of various pieces of legislation
giving power to buy and sell gold or silver separately or in combination
and at any price and otherwise operate 2. monetary system under control of
an index of prices.
PURPOSE TO INCREASE METALLIC RESERVES OF SILVER
Statements of This Policy
"Governments can well, as they have in the past, employ silver as a basis
Regraded Unclassified
83
for currency, and I look for a greatly increased use." - Message to
Congress, January 15, 1934.
"As part of the larger objective, some things have been clear. One is that
we should move forward as rapidly as conditions permit in broadening the
metallic base of our monetary system Another is that we should not
neglect the value of an increased use of silver in improving our monetary
system. Since 1929 that has been obvious.
Of the former class (of
measures appropriate for independent action) is that of increasing the pro-
portion of silver in the abundant metallic reserves back of our paper
currency. This policy was initiated by the proclamation of December 21,
1933, bringing our current domestic production of silver into the Treasury,
as well as placing this Nation among the first to carry out the agreement
on silver which we sought and secured at the London Conference. We have
since acquired other silver in the interest of stabilization of foreign
exchange and the development of a broader metallic base for our currency.
We seek to remedy a maladj ustment of our currency." - Message to Congress,
May 22, 1934.
Action Taken
This Administration took the leadership in London in securing the London
Silver Agreement of July 26, 1933.
On December 21, 1933, the President issued a proclamation bringing the
current domestic production of silver into the metallic reserves of the
Treasury.
Recommendation, passage and approval of the Silver Purchase Act, providing
for a metallic reserve one-fourth silver and three-fourths gold. - June 19,
1934.
Nationalization of silver - August 9, 1934.
PURPOSE TO TAKE OVER GOID
Statement of This Policy
"Thereafter it is a prudent step to vest in the Government of our nation
the title to and possession of all monetary gold within its boundaries and
to keep that gold in the form of bullion rather than in coin." - Message to
Congress, January 15, 1934.
Action Taken
Recommendation, passage, and approval of the Gold Reserve Act, vesting in
the Government title to all monetary gold and providing for its being kept
in bullion form. - January 30, 1934.
Regraded Unclassified
84
TABLE OF CONTENTS
1. Statements on Silver in Democratic and Republican
1932 Platforms
2. Salt Lake City Speech by Franklin D. Roosevelt
September 17, 1932
3. Butte, Montana, Speech by Franklin D. Roosevelt
September 20, 1932
4. Message Speech to London Economic Conference
July 2, 1933
5. Report on London Economic Conference
August 24, 1933
6. Broadcast re Purchase of Newly Mined Gold by R.F.C.
October 22, 1933
7, Newly Mined Silver Purchase Proclamation
December 21, 1933
8. President's Message to Congress on Gold
January 15, 1934
9. Gold Reserve Act of 1934
Approved January 30, 1934
10. Devaluation of Dollar Proclamation
January 31, 1934
11. President's Message to Congress on Silver
May 22, 1934
12. Silver Purchase Act of 1934
Approved June 19, 1934
13. President's Speech to American Bankers Association
October 24, 1934
Regraded Unclassified
in
October 24, 1934
85
TIME RIPE FOR ALLIANCE OF ALL FORCES INTENT ON RECOVERY
By Franklin D. Roosevelt, President of the
United States
I am glad to be here to-night at your invitation to speak to you
informally about some of our common problems.
As many of you know by personal experience, it is not a new thing
for me to talk with bankers. I have been seeing many of your number almost
daily during the past year and a half, and let me make it quite clear that in
these meetings I have not done all the talking.
I have been a good listener and I have asked many questions. I have
found there is the striking lack of unanimity of opinion among bankers that
characterizes many other groups in the country. It has been my purpose to seek
out underlying agreement in the opinions that bankers have expressed.
A true function of the head of the Government of the United States is
to find among many discordant elements that unity of purpose that is best for
the nation as a whole. This is necessary because government is not merely
one of many co-ordinate groups in the community or the nation, but Government
is essentially the outward expression of the unity and the leadership of all
groups.
Consequently, the old fallacious notion of the bankers on the one side
and the Government on the other as more or less equal and independent units
has passed away. Government by the necessity of things must be the leader,
must be the judge of the conflicting interests of all groups in the community,
including bankers. The Government is the outward expression of the common
life of all citizens.
What is a bank and what are its relations with the people? Why do the
people through their Government supervise banks? The people put their money
Regraded Unclassifie
- 2-
86
into banks. They do this in order to protect it and in some cases to have
it eará & small income.
It costs money to provide this service and, therefore, the banks are
permitted to invest these deposits in order to pay their expenses and to pro-
vide a reasonable profit to their stockholders.
The public has no means of knowing whether the bank is making safe
investments, so it turns to its Government to supervise the bank. Government
has accepted this responsibility.
In its relation with bankers, the purpose of Government should be three-
fold. First, to promote the confidence of the people in banks and banking in
view of the important service that banks and banking may perform for the people
as a whole. Second, to make this confidence a real and living thing by assisting
banks to render themselves useful and worthy of this confidence through wise
supervision.
A third purpose now offers itself, and I wish with all earnestness to
press this point to-night. Government should assert its leadership in encour-
agingnot only the confidence of the people in banks, but the confidence of the
banks in the people.
In March, 1933, I asked the people of this country to renew their con-
fidence in banks. They took me at my word. To-night I ask the bankers of
this country to renew their confidence in the people of this country. I hope
you will take me at my word.
I need not recount the situation of the banks in the spring of 1933.
I found that the restoration of banking activity itself was my first responsi-
bility on assuming office.
It was necessary that the Government throw itself squarely into the
Regraded
- 3 -
87
task of bringing back to the banks the deposits of the citizens of the
country. As a result of my appeal the people responded by restoring their
confidence in the banks of the United States.
The primary purpose accomplished, it became necessary that the Congress
and the Administration enact measures to build up the banking structure so
that it could once more provide support for the economic life of the country.
Moreover, it had to be built and we built it strong enough 80 that
it could resist future stresses and strains. The Government found it neces-
sary to create and get under way new emergency credit agencies and to use to
the fullest extent the already existing RFC.
These credit agencies moved with heroic energy, and it was a source
of the utmost satisfaction to find that when the Federal Deposit Insurance
Corporation went into operation the banking structure had regained & very
considerable amount of its strength and its vitality.
I think it is only fair to say that never since the formation of
our Government has such a task been achieved in so short a time. Happily,
the present security of our banks bears witness to the wise course that we
pursued.
1 find almost general agreement among bankers that these agencies
must continue until such time as the banks and other private credit agencies
are themselves able and ready to take over these lending functions; and when
that time comes, 1 shall be only too glad to curtail the activities of these
public agencies in proportion to the taking up of the slack by privately
owned agencies.
I venture to suggest to you that when the history of these years comes
Regraded Unclassified
4-
88
to be written, while the closing and the reopening of the banks will occupy
a prominent place, even greater interest will be centered in the fact that
within & few months not only was the banking structure strengthened but the
great governmental lending agencies went into action and also saved from
disastrous deflation, liquidation and loss a vast portion of the farms,
homes, railroads and corporations of the nation.,
This definitely rescued the security and happiness of all of us.
Just as it is to be expected that the banks will resume their res-
ponsibility and take up the burden that the Government has assumed through
the credit agencies, so I assume and expect that private business generally
will be financed by the great credit resources which the present liquidity
of banks makes possible.
Our traditional system has been built upon this principle and the
recovery of our economic life should be accomplished through the assumption
of this responsibility. The present steady and unmistakable revival of
public demand for goods and services should provide the assurance necessary
to the financing of industrial life.
The Government is bending every effort through the Treasury, the
Federal Reserve System, the Reconstruction Finance Corporation, the Securities
and Exchange Commission and the Federal Housing Administration to facilitate
and encourage the revival of private investment.
I commend the objectives of the Housing Administration to your in-
mediate consideration, but at the same time I ask you to note that all of
these new agencies are seeking consultation and cooperation with you bankers.
While there lies before us still the necessity for large expenditures
for the relief of unemployment, I think we should all proceed in the expectation
Regraded
- 5 -
89
that the revival of business activity will steadily reduce this burden.
I am gratified to know of the expressions of belief, public and
private of your members that the speed that we shall make toward this
objective is something that no one has the wisdom or the hardihood to esti-
mate. This recognition reflects a growing appreciation of the problems
resting upon & responsible Chief Executive.
With respect to international relationships, I have been glad to
note the growing appreciation in other nations of the desirability of arriv-
ing, as quickly as possible, at a point of steadiness of prices and values.
This objective of a greater steadiness we have constantly kept be-
fore us as our national policy.
The fact that American business men and bankers are devoting more
and more individual study and attention to the wider problems of our nation
and of international affairs is manifesting itself in many ways. It seems
to me that this is a very important development.
Let me make it clear to you that the Government of the United States
has daily and even hourly contact with sources of information which cover
not only every State and section of our own country, but also every other
portion of the habitable globe. This information is more complete, informa-
tive and accurate than that possessed by any private agency.
I need not tell you that true wealth is not a static thing. It is
a living thing made out of the disposition of men to create and to distri-
bute the good things of life with rising standards of living. Wealth
grows when men cooperate; but it stagnates in an atmosphere of misunderstand-
ing and misrepresentation.
Here, in America, the material means are at hand for the growth of
true wealth. It is in the spirit of American institutions that wealth
- 6 -
90
should come as the reward of hard labor of mind and hand.
That is what we call a profit system. Its real fulfillment comes
in the general recognition of the rights of each factor of the community.
It is not in the spirit of partisans, but partners, that America has
progressed.
The time is ripe for an alliance of all forces intent upon the
business of recovery.
In such an alliance will be found business and banking, agriculture
and industry, and labor and capital. What an all-American team that is!
The possibilities of such a team kindle the imagination-they encourage our
determination-they make easier the tasks of those in your Government who
are leading it.
The nation does not merely trust or hope that we will do our duty--
the nation is justified in expecting that we will do our duty.
-
-
Regraded Unclassifie
<
and
12
the
91
SILVER PURCHASE ACT OF 1934
(Approved June 19,1934)
SILVER PURCHASE act OF 1934
AN ACT to authorize the Secretary of the Treasury to purchase aliver, Issue
aliver certificates, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the short title
of this Act shall be the Silver Purchase Act of 1934."
Sec. of It is hereby declared to be the policy of the United States
that the proportion of silver to gold in the monetary stocks of the
United States should be increased, with the ultimate objective of
having and maintaining, one fourth of the monetary value of such
stocks in silver.
Swo. 3. Whenever and so long as the proportion of silver in the
stocks of gold and silver of the United States is less than one-fourth
of the monetary value of such stocks, the Secretary of the Treasury
is authorized and directed to purchase silver, at home or abroad,
for present or future delivery with any direct obligations, coin, or
currency of the United States, authorized by law, or with any funds
in the Treasury not otherwise appropriated, at such rates, at such
times, and upon such terms and conditions as he may deem reasonable
and most advantageous to the public interest: Provided, That no
purchase of silver shall be made hereunder at & price in excess of
the monetary value thereof: And provided further, That no purchases
of silver situated in the continental United States on May 1, 1934,
shall be made hereunder at a price in excess of 50 cents a fine onnee.
Szc. 4. Whenever and so long as the market price of silver exceeds
its monetary value or the monetary value of the stocks of silver is
greater than 25 per centum of the monetary value of the stocks of
gold and silver, the Secretary of the Treasury may, with the approval
of the President and subject to the provisions of section 5, sell any
silver acquired under the authority of this Act, at home or abroad,
for present or future delivery, at such rates, at such times, and upon
such terms and conditions as he may deem reasonable and most
advantageous to the public interest,
Smo. 5. The Secretary of the Treasury is authorized and directed
to issue silver certificates in such denominations as he may from
time to time prescribe in a face amount not less than the cost of all
silver purchased under the authority of section 3, and such certificates
shall be placed in actual circulation. There shall be maintained in
the Treasury as security for all silver certificates heretofore or
hereafter issued and at the time outstanding an amount of silver
in bullion and standard silver dollars of a monetary value equal to
the face amount of such silver certificates. All silver certificates
heretofore or hereafter issued shall be legal tender for all debts,
public and private, public charges, taxes, duties, and dues, and shall
be redesmable on demand at the Treasury of the United States in
standard silver dollars; and the Secretary of the Treasury is author-
ised to coin standard silver dollars for such redemption.
(25)
SILVER PURCHASE ACT OF 1934
(Approved June 19,1934)
26
27
Sec. 6. Whenever in his judgment such action is necessary to effec-
it refers, the price for which such interest is or is to be transferred
tuate the policy of this Act, the Secretary of the Treasury is author-
and the cost thereof and the allowed expenses. Any person liable
ized, with the approval of the President, to investigate, regulate, or
for payment of tax under this subdivision (or anyone who nets in
prohibit, by means of licenses or otherwise, the acquisition, impor-
the matter que agent or broker for any such person) who is 8 party
tation, exportation, or transportation of silver and of contracts and
to any such transfer, or who in pursuance of any such transfer deliv-
other arrangements made with respect thereto; and to require the
ers any silver ballion or interest therein, without a memorandum
filing of reports deemed by him reasonably necessary in connection
stating truly and completely the information herein required, or who
therewith. Whoever willfully violates the provisions of any license,
delivers any such memorandum without having the proper stamps
order, rule, or regulation issued pursuant to the authorization con-
affixed thereto, with intent to evade the foregoing provisions, shall
tained in this section shall, upon conviction, be fined not more than
be deemed guilty of a misdemeanor. and upon conviction thereof
$10,000 or, if IN. natural person. may be imprisoned for not more than
shall pay a fine of not exceeding $1,000 or be imprisoned not more
ten years, or both; and any officer, director, or agent of any corpora-
than six months, or both. Stamps affixed under this subdivision
tion who knowingly participates in such violation may be punished
shall be canceled (in lieu of the manner provided in section 804) by
by II like fine, imprisonment, or both.
such officers and in such manner as regulations under this subdivi-
SEC. 7. Whenever in the judgment of the President such action
sion shall prescribe. Such officers shall eancel such stamps only if
is necessary to effectuate the policy of this Act, he may by Executive
it appears that the proper tax is being paid, and when stamps with
order require the delivery to the United States mints of any or all
respect to any transfer are so canceled, the transferor and not the
silver by whomever owned or possessed. The silver HD delivered shall
transfereo shall be liable for any additional tax found due or penalty
be coined into standard silver dollars or otherwise added to the
with respect to such transfer. The Commissioner shall abate or
monetary stocks of the United States as the President may deter.
refund, in accordance with regulations issued hereunder, such por-
mine; and there shall be returned therefor in standard silver dollars,
tion of any tax hereunder as he finds to be attributable to profits (1)
or any other coin or currency of the United States, the monetary
realized in the course of the transferor's regular business of furnish-
value of the silver so delivered less such deductions for seigniorage,
ing silver bullion for industrial, professional, or artistic use and (a)
brassage, coinage, and other mint charges as the Secretary of the
not resulting from a change in the market price of silver bullion,
Treasury with the approval of the President shall have determined:
or (b) offset by contemporaneous loases incurred in transactions in
Provided, That in no case shall the value of the amount returned
interests in silver bullion determined, in accordance with such regula-
therefor be less than the fair value at the time of such order of the
tions, to have been specifically related hedging transactions; or (2)
silver required to be delivered as such value is determined by the
offset by contemporaneous losses attributable to changes in the mar-
market price over a reasonable period terminating at the time of
ket price of silver bullion and incurred in transactions in silver
such order. The Secretary of the Treasury shall pay all necessary
foreign exchange determined, in accordance with such regulations,
costs of the transportation of such silver and standard silver dollars,
to have been hedged specifically by the interest in silver bullion
coin, or currency, including the cost of insurance, protection, and
transferred. The provisions of this subdivision shall extend to all
such other incidental costs as may be reasonably necessary. Any
transfers in the United States of any interest in silver bullion, and
silver withheld in violation of any Executive order issued under this
to all such transfers outside the United States if either party thereto
soction or of any regulations issued pursuant thereto shall be for-
is resident of the United States or is a citizen of the United States
feited to the United ies, and may be seized and condemned by
who a has been a resident thereof within three months before the date
like proceedings as those provided by law for the forfeiture, seizure,
of the transfer or if such silver bullion or interest therein is situated
and condemnation of property imported into the United States con-
in the United States; and shall extend to transfers to the United
trury to law; and, in addition, any person failing to comply with
States Government (the tax in such cases to be payable by the trans-
the provisions of any such Executive order or regulation shall be
feror), but shall not extend to transfers of silver bullion by deposit the
subject to a penalty equal to twice the monetary value of the silver
or delivery at a United States mint under proclamation by
in respect of which such failure occurred.
President or in compliance with any Executive order issued pursuant this
See. 8. Schedule A of title VIII of the Revenue Act of 1926, as
to section 7 of the Silver Purchase Act of 1934. The tax under in
amended (relating to stamp taxes), is amended by adding at the end
thereof a new subdivision to read as follows:
addition to the on tax under súch subdivision. This subdivision silver shall
subdivision transfers enumerated in subdívision 4 shall be
10. SILVER, AND 80 FORTH, GALES AND TRANSFERS.-On all transfers
of any interest in silver bullion, if the price for which such interest
bullion after the enactment of the Silver Purchase Act of 1934,
apply (1) with respect to all transfers of any interest in and
is or is to be transferred exceeds the total of the cost thereof and
(9) with respect to all transfers of any interest in silver Silver bullion Pur- on
allowed expenses, 50 per centum of the amount of such excess. On
every such transfer there shall be made and delivered by the trons-
or chase Act of 1984, except that in such cases it shall be paid by
after May 15, 1934, and prior to the enactment of the the
feror to the transferee a memorandum to which there shall be affixed
transferor in such manner and at such time as the Commissioner, regula-
lawful stamps in value equal to the tax thereon. Every such mem-
tions prescribe, and the requirement of a memorandum of
with the approval of the Secretary of the Treasury, may such by trans-
orandum shall show the date thereof, the names and addresses of
the transferor and transferee, the interest in silver ballion to which
fer shall not apply.
Regraded Unclassified
SILVER PURCHASE ACT OF 1934
(Approved June 19,1934)
28
29
"As used in this subdivision
the time contained in the standard silver dollar and the gold dollar,
The term 'cost' means the cost of the interest in silver bullion
to the transferor, except that (a) in case of silver bullion produced
respectively; The term stocks of silver means the total amount of silver at
from materials containing silver which has not previously entered
the time owned by the United States (whether or not held as security
into industrial, commercial, or monetary use, the cost to a trans-
for outstanding currency of the United States) and of silver con-
feror who is the producer shall be deemed to be the market price
tained in coins of the United States at the time outstanding;
at the time of production determined in accordance with regulations
The term 0 stocks of gold means the total amount of gold at the
issued hereunder; (b) in the case of an interest in silver bullion
time owned by the United States, whether or not held as a reserve
acquired by the transferor otherwise than for valuable consideration,
or as security for any outstanding currency of the United States.
the cost shall be deemed to be the cost thereof to the last previous
SEC. 11, There is authorized to be appropriated, out of any money
transferor by whom it was acquired for a valuable consideration;
in the Treasury not otherwise appropriated, the sum of $500,000,
and (c) in the case of any interest in silver bullion acquired by the
which shall be available for expenditure under the direction of the
transferor (after April 15, 1934) in a wash sale, the cost shall be
President and in his discretion, for any purpose in connection with
deemed to be the cost to him of the interest transferred by him in
the carrying out of this Act; and there are hereby authorized to be
such wash sale, but with proper adjustment, in accordance with regu-
appropriated annually such additional sums as may be necessary for
lations under this subdivision, when such interests are in silver
such purposes.
bullion for delivery at different times.
SEC. 12. The right to alter, amend, or repeal this Act is hereby
The term transfer' means a sale, agreement of sale, agreement
expressly reserved. If any provision of this Act, or the application
to sell, memorandum of sale or delivery of, or transfer, whether
thereof to any person or circumstances, is held invalid, the remainder
made by assignment in blank or by any delivery, or by any paper
of the Act, and the application of such provision to other persons
or agreement or memorandum or any other evidence of transfer or
or circumstances, shall not be affected thereby.
SEO. 18. All Acts and parts of Acts inconsistent with any of the
sale; or means to make a transfer as so defined.
The term interest in silver bullion' means any title or claim to.
provisions of this Act are hereby repealed, but the authority con-
ferred in this Act upon the President and the Secretary of the
or interest in, any silver bullion or contract therefor.
The term 'allowed expenses' means usual and necessary
Treasury is declared to be supplemental to the authority heretofore
expenses actually incurred in holding, processing, or transporting
conferred.
the interest in silver bullion as to which an interest is transferred
Approved, June 19, 1934, 9 p.m.
(including storage, insurance, and transportation charges but not
including interest, taxes, or charges in the nature of overhead),
o
determined in accordance with regulations issued hereunder.
44 The term memorandum means a bill, memoranduro, agreement,
or other evidence of a transfer.
"The term wash sale' means a transaction involving the transfer
of an interest in silver bullion and, within thirty days before or
after such transfer, the acquisition by the same person of an interest
in silver bullion. Only 80 much of the interest so acquired as does
not exceed the interest BO transferred, and only so much of the inter-
est so transferred as does not exceed the interest sn acquired, shall
be deemed to be included in the wash sale.
The term silver bullion means silver which has been melted,
smelted, or refined and is in such state or condition that its value
depends primarily upon the silver content and not upon its form."
SEO. 9. The Secretary of the Treasury is hereby authorized to
issue, with the approval of the President, such rules and regulation.
as the Secretary of the Treasury may deem necessary or proper to
carry out the purposes of this Act, or of any order issued hereunder.
SEX 10. As used in this Act-
The term u. person means an individual, partnership, association,
or corporation:
The term the continental United States 19, means the States of the
United Alaska: States, the District of Columbia, and the Territory of
The term " monetary value means a value calculated on the
basis of 81 for an amount of silver or gold equal to the amount at
1.75 II
92
PRESIDENT'S MESSAGE RE SILVER URCHASES
73p CONGRESS
SENATE
DOCUMENT
2d Session
No. 181
SILVER PURCHASES
MESSAGE
FROM
THE PRESIDENT OF THE UNITED STATES
RECOMMENDING
ENACTMENT OF LEGISLATION DECLARING IT TO BE THE POLICY
OF THE UNITED STATES TO INCREASE THE AMOUNT OF SILVER
IN OUR MONETARY STOCKS WITH THE ULTIMATE OBJECTIVE
OF HAVING AND MAINTAINING ONE FOURTH OF THEIR MONE-
TARY VALUE IN SILVER AND THREE FOURTHS IN GOLD
MAY 10 (calendar day, MAY 22), 1934.-Ordered to lie on the table and to be
printed
To the Congress of the United States:
On January 11, 1934, I recommended to the Congress legislation
which was promptly enacted under the title, "The Gold Reserve Act
of 1934." This act vested in the United States Government the
custody and control of our stocks of gold as a reserve for our paper
currency and as a medium of settling international balances. It set
up a stabilization fund for the control of foreign exchange in the
interests of our people, and certain amendments were added to
facilitate the acquisition of silver.
As stated in my message to the Congress, this legislation was
recommended as a step in improving our financial and monetary sys-
tem. Its enactment has laid a foundation on which we are organizing
a currency system that will be both sound and adequate. It in a
long step forward, but only a step.
is that we-should move forward as rapidly as conditions permit in
As a part of the larger objective, some things have been clear. One
broadening the metallic base of our monetary system and in stabilizing
the purchasing and debt-paying power of our money on 8 more equi-
table level. Another is that we should not neglect the value of an
increased use of silver in improving our monetary system. Since
1929 that has been obvious.
Some measures for making a greater use of silver in the public
interest are appropriate for independent action by us. On others,
international cooperation should be sought.
the abundant metallic reserves back of our paper currency. This
Of the former class is that of increasing the proportion of silver in
Regraded Unclassified
PRESIDENT'S MESSAGE RE
2
SILVEB PURCHASES
policy was initiated by the proclamation of December 21, 1933,
bringing our current domestic production of silver into the Treasury,
as well as placing this Nation among the first to carry out the agree-
ment on silver which we sought and secured at the London Confer-
ence. We have since acquired other silver in the interest of stabiliza-
tion of foreign exchange and the development of a broader metallic
base for our currency. We seek to remedy a maladjustment of our
currency.
In further aid of this policy, it would be helpful to have legislation
broadening the authority for the further acquisition and monetary
use of silver.
I, therefore, recommend legislation at the present session declaring
it to be the policy of the United States to increase the amount of
silver in our monetary stocks with the ultimate objective of having
and maintaining one fourth of their monetary value in silver and
three fourths in gold.
The Executive Authority should be authorized and directed to
make the purchases of silver necessary to attain this ultimate objective.
The authority to purchase present accumulations of silver in this
country should be limited to purchases at not in excess of 50 cents
per ounce.
The Executive authority should be enabled, should circumstances
require, to take over present surpluses of silver in this country not
required for industrial uses on payment of just compensation, and to
regulate imports, exports, and other dealings in monetary silver.
There should be a tax of at least 50 percent on the profits accruing
from dealing in silver.
We can proceed with this program of increasing our store of silver
for use as a part of the metallic reserves for our paper currency without
seriously disturbing adjustments in world trade. However, because
of the great world supply of silver and its use in varying forms by the
world's population, concerted action by all nations, or at least ft.
large group of nations, is necessary if a permanent measure of value,
including both gold and silver, is eventually to be made a world
standard. To arrive at that point, we must seek every possibility for
world agreement, although it may turn out that this Nation will
ultimately have to take such independent action on this phase of the
matter as its interests require.
The success of the London Conference in consummating an inter-
national agreement on silver, which has now been ratified by all the
governments concerned, makes such further agreement worth seeking.
The ebb and flow of values in almost all parts of the world have created
many points of pressure for readjustments of internal and international
standards. At no time since the efforts of this Nation to secure inter-
national agreement on silver began in 1878 have conditions been more
favorable for making progress along this line.
Accordingly, I have begun to confer with some of our neighbors in
regard to the use of both silver and gold, preferably on a coordinated
basis, as a standard of monetary value, Such an agreement would
constitute an important step forward toward A monetary unit of
power. value more equitable and stable in its purchasing end debt paying
THE WHITE HOUSE, May 22, 1934.
FRANKLIN D. ROOSEVELT.
03
And - disign
name - 3PM
ann - -
Passivia -
- 500 MR REV
4D X - NH inin
10
-
***
SAM sy
new
weem
93
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLAMATION
WHEREAS, by virtue of Section 1 of the Act of Congress ap-
proved March 14, 1900 (31 Stat. L.45), the present weight of the gold
dollar is fixed at twenty-five and eight tenths grains of gold nine
tenths fine; and
WHEREAS, by Section 45, Title III of the Act approved May 12,
1933 (Public No. 10, 78d Congress), as amended by Section 12 of the Gold
Roserve Act of 1954, it is provided in part as follows:
"Whenever the President finds, upon investigation,
that (1) the foreign commerce of the United States is ad-
versely affected by reason of the depreciation in the value
of the currency of any other government or governments in
relation to the present standard value of gold, or (2) action
under this section is necessary in order to regulate and
maintain the parity of currency issues of the United States,
or (3) an economic emergency requires an expansion of credit,
or (4) an expansion of credit is necessary to secure by
international agreement a stabilization at proper levels of
the currencies of various governments, the President is
authorized, in his discretion -
"(a) To direct the Secretary of the Treasury to
enter into agreements with the several Federal Reserve
banks and with the Federal Reserve Board whereby the
Federal Reserve Board will, and it is hereby authorized
to, notwithstanding any provisions of law or rules and
regulations to the contrary, permit such reserve banks
to agree that they will, (1) conduct, pursuant to existing
law, throughout specified periods, open market operations
in obligations of the United States Government or cor-
porations in which the United States is the majority stock-
holder, and (2) purchase directly and hold in portfolio
for an agreed period or periods of time Treasury bills
or other obligations of the United States Government in
an aggregate sum of $8,000,000,000 in addition to
those they may then hold, unless prior to the termination
94
- 2 -
of such period or periods the Secretary shall consent to
their sale. No suspension of reserve requirements of the
Federal Reserve banks, under the terms of section 11(c)
of the Federal Reserve Act, necessitated by reason of
operations under this section, shall require the imposition
of the graduated tex upon any deficiency in reserves as
provided in said section 11(c). Nor shall it require any
automatic increase in the rates of interest or discount
charged by any Federal Reserve bank, as otherwise specified
in that section. The Federal Reserve Board, with the ap-
proval of the Secretary of the Treasury, may require the
Federal Reserve banks to take such action as may be necessary,
in the judgment of the Board and of the Secretary of the
Treasury, to prevent undue credit expension.
"(b) If the Secretary, when directed by the
President, is unable to secure the assent of the several
Federal Reserve banks and the Federal Reserve Board to
the agreements authorized in this section, or if operations
under the above provisions prove to be inadequate to meet
the purposes of this section, or if for any other reason
additional measures are required in the judgment of the
President to meet such purposes, then the President is
authorized -
*.....
"(2) By proclamation to fix the weight of the
gold dollar in grains nine tenths fine and also to fix
the weight of the silver dollar in grains nine tenths fine
at 8. definite fixed ratio in relation to the gold dollar
at such amounts as he finds necessary from his investigation
to stabilize domestic prices or to protect the foreign
commerce against the adverse effect of depreciated foreign
currencies, and to provide for the unlimited coinage of
such gold and silver at the ratio so fixed, or in case the
Government of the United States enters into an agreement
with any government or governments under the terms of which
the ratio between the value of gold and other currency
issued by the United States and by any such government or
governments is established, the President may fix the
weight of the gold dollar in accordance with the ratio
so agreed upon, and such gold dollar, the weight of which
is so fixed, shall be the standard unit of value, and all
forms of money issued or coined by the United States
shall be maintained at B. parity with this standard and
it shall be the duty of the Secretary of the Treasury to
maintain such parity, but in no event shall the weight
of the gold dollar be fixed so as to reduce its present
95
- 3 -
weight by more than 50 per centum. Nor shall the weight
of the gold dollar be fixed in any event at more than
60 per centum of its present weight. The powers of the
President specified in this paragraph shall be deemed to
be separate, distinct, and continuing powers, and may be
exercised by him, from time to time, severally or together,
whenever and as the expressed objects of this
section in his judgment may require; except that such
powers shall expire two years after the date of enactment
of the Gold Reserve Act of 1934 unless the President
shall sooner declare the existing emergency ended, but
the President may extend such period for not more than
one additional year after such date by proclamation
recognizing the continuance of such emergency"; and
WHEREAS, I find, upon investigation, that the
foreign commerce of the United States is adversely affected
by reason of the depreciation in the value of the currencies
of other governments in relation to the present standard value
of gold, and that an economic emergency requires an expansion
of credit; and
WHEREAS, in my judgment, measures additional to
those provided by subsection (a) of said Section 43 are re-
quired to meet the purposes of such Section; and
WHEREAS, I find, from my investigation, that, in
order to stabilize domestic prices and to protect the foreign
commerce against the adverse effect of depreciated foreign
currencies, it is necessary to fix the weight of the gold
dollar at 15 5/21 grains nine tenths fine,
NOW, THEREFORE, be it known that I, FRANKLIN D.
ROOSEVELT, President of the United States, by virtue of the
authority vested in me by Section 43, Title III of said Act
96
- 4 -
of May 12, 1933, as amended, and by virtue of all other
authority vested in me, do hereby proclaim, order, direct,
declare and fix the weight of the gold dollar to be 15 5/21
grains nine tenths fine, from and after the date and hour of
this proclamation. The weight of the silver dollar is not
altered or affected in any manner by reason of this proclamation.
This proclamation shall remain in force and effect
until and unless repealed or modified by act of Congress or
by subsequent proclamation; and notice is hereby given that
I reserve the right by virtue of the authority vested in me
to alter or modify this proclemation as the interest of the
United States may seem to require.
IN WITNESS WHEREOF I have hereunto set my hand and
have caused the seal of the United States to be affixed.
DONE in the City of Washington at 3:10 o'clock in
the afternoon, Eastern Standard Time, this
31st day of January, in the year of our
(Seal)
Lord one thousand nine hundred and thirty-four,
and of the Independence of the United States
the one hundred and fifty-eighth.
FRANKLIN D. ROOSEVELT
By the President:
Cordell Hull
Secretary of State.
6
the
6
GOLD RESERVE ACT OF 1934
97
(Approved January 30,1934)
GOLD RESERVE ACT OF 1934
AN ACT To protect the currency system of the United States, to provide for
the better nse of the monetary gold stock of the United States, and for
other purposes,
Ba it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That the short title
of this Act shall be the Gold Reserve Act of 1934."
Smc. 2, (a) Upon the approval of this Act all right, title, and Inter-
GHT, and every claim of the Federal Reserve Board, of every Federal
Reserve bank, and of every Federal Reserve agent, in and to any and
all gold coin and gold bullion shall pass to and are hereby vested In
the United States; and in payment therefor credits in equivalent
amounts in dollars are hereby established In the Treasury In the
accounts authorized under the stxteenth paragraph of section 16 of
the Federal Reserve Act, as beretofore and by this Act amended
(U.S.O., title 12, sec. 467). Balances In such accounts shall be pay-
able in gold certificates, which shall be in such form and In such
denominations as the Secretary of the Treasury may determine. All
gold 90 transferred, not in the possession of the United States. shall
be held In custody for the United States and delivered upon the order
of the Secretary of the Treasury; and the Federal Reserve Board, the
Federal Reserve banks, and the Federal Reserve agents shall give
such instructions and shall take such action as may be necessary to
assure that such gold shall be so held and delivered.
(b) Section 16 of the Federal Reserve Act, as amended, is further
nasended to the following respects:
(1) The third sentence of the first paragraph is amended to read as
follows: "They shall be redeemed in lawful money on demand at the
Treasury Department of the United States, in the city of Washington,
District of Columbia, or at any Federal Reserve bank."
(2) Bo much of the third sentence of the second paragraph as
precedes the proviso is amended to read as follows: The collateral
security thus offered shall be notes, drafts, bills of exchange, or accept-
ances acquired under the provisions of section 13 of this Act, or bills
of exchange endorsed by a member bank of any Federal Reserve die-
triet and purchased under the provisions of section 14 of this Act, or
bankers' acceptances purchased under the provisions of said section
14. or gold certificates:".
(8). The first sentence of the third paragraph is umended to read as
follows: Every Federal Reserve bank shall maintain reserves In gold
certificates or lawful money of not less than 35 per centum against its
deposits and reserves in gold certificates of not less than 40 per centum
against its Federal Reserve notes in actual circulation: Provided, how-
oper. That when the Federal Reserve agent holds gold certificates as
collateral for Federal Reserve notes Issued to the bank such gold
certificates shall be counted ns part of the reserve which such bank is
required to maintain against its Federal Reserve notes In actual
dresition."
19
Regraded Unclassified
GOLD RESERVE ACT OF 1934
Tamicon
20
PROVISIONAL REGULATIONS
GOLD BESERVE ACT OF 1934
21
(4) The fifth and sixth sentences of the third paragraph are
Federal Reserve notes when offered by the Reserve book of which he
amended to read us follows: Notes presented for redemption at the
la director. Upon the request of the Secretary of the Treasury
Treasury of the United States whall be paid out of the redemption
the Federal Reserve Board shall require the Federal Reserve agent to
fund and returned to the Federal Reserve banks through which they
transmit to the Treasurer of the United States an much of the gold
were originally issued, and thereupon such Federal Reserve bank shall,
certificates beid by him as collateral security for Federal Reserve
upon demand of the Secretary of the Treasury, relmburse such re-
notes as may be required for the exclusive purpose of the redemption
demption fund in lawful money or, if such Federal Reserve notes have
of such Federal Reserve notes, but such gold certificates when depos-
been redeemed by the Trensurer in guld certificates, then such funds
lted with the Tréamrer shall be counted and considered ne If collateral
shall be reimbursed to the extent deemed necessary by the Secretary
security on deposit with the Federal Reserve agent."
of the Treasury In gold certificates, and such Federal Reserve bank
(6) The eighth paragraph In amended to read be follows:
shell, so long as any of Its Federal Reserve notes remain outstanding.
"All Federal Reserve notes and all gold cortificates and lawful
maintain with the Treasurer in gold cortificates an amount sufficient in
money Issued to or deposited with any Federal Reserve agent under
the Judgment of (lie Secretary to provide for all redemptions to be
the provisions of the Federal Reserve Act shall herenfter be held for
made by the Treasurer. Federal Reserve notes received by the
such agent, under such rules and regulations BE the Federal Reserve
Treasurer offerwise than for redemption may be exchanged for gold
Board may pre-eribe, in the joint eastody of himself and the Federal
certificates out of the redemption fund bereinafter provided and
Reserve bank to which he is accredited. Such agent and such Federal
returned to the Heserve bank through which they were originally
Reserve bank shall be jointly liable for the safe-keeping of such Fed-
Issued, of they may be returned to such bank for the credit of the
end Reserve notes, gold certificates, and lawful motiey. Nothing
United States."
berein contained, however, shall be construed to prohibit a Federal
(5) The fourth, fifth, and sixth paragraphs are amended to read 09
Reserve agent from (lepositing gold certificates with the Federal
follows:
Reserve Board, to be held by such Board subject to his order, or with
The Federal Reserve Board shall require ench Federal Reserve bank
the Treasurer of the United States for the purposes authorized by
to maintain on deposit in the Treasury of the United States n sum In
law."
gold certificates sufficient in the judgment of the Secretary of the
(7) The sixteenth paragraph in amended to read as follows:
Treasury for the redemption of the Federal Reserve notes Issued to
The Secretary of the Treasury is hereby authorized and directed
such link, but In no event less than 6 per centum of the total amount
to receive deposits of gold or of gold certificates with the Treasurer
of notes issued less the amount of gold certificates held by the Federal
or any Assistant Treasurer of the United States when tendered by
Reserve agent as collateral security but such deposit of gold cer-
any Federal Reserve bank or Federal Reserve agent for credit to its
tifleates shall be counted and included an part of the 40 per céntum
or bis account with the Foderal Reserve Board. The Secretary shall
teserve bereinbefore required. The Board shall have the right, neting
prescribe by regulation the form of receipt to be issued by the Treas-
through the Federal Reserve agent, to grant in whole or in part, or to
urer or Assistant Treasurer to the Federal Reserve bank DE Federal
reject entirely the application of any Federal Reserve bank for Fed-
Reserve agent making the deposit, and a duplicate of such receipt
eral Reserve notes; but to the extent that such application may be
shall be delivered to the Federal Reserve Board by the Treasurer at
granted the Federal Reserve Board shall, through its local Federal
Washlogton upon proper advices from any Assistant Treasurer that
Reserve agent, supply Federal Reserve notes to the banks so applying,
such deposit has been made. Deposits 80 made shall be held subject
and such bank shall be charged with the amount of the notes lasned
to the orders of the Federal Reserve Board and shall be payable in
to It and shall pay such rate of Interest as may be established by the
gold certificates on the order of the Federal Reserve Board to any
Federal Reserve Board on only that amount of such notes which
Federal Reserve bank or Federal Reserve agent at the Treasury or
equals the total amount of Its outstanding Federal Reservo notes Tesm
at the Subtressury of the United States nearest the place of business
the amount of gold certificates held by the Federal Reserve agent a
of such Federal Reserve bank or such Federal Reserve agent. The
collnteral security. Federal Reserve notes issued to any such bank
order used by the Federal Reserve Board in making such payments
shall, upon delivery, together with such notes of such Federal Reserve
shall be sigmed by the governor or vice governor, or such other officers
bank na may be Issued under section 18 of this Act upon security of
or members us the Boand may by regulation preseribe. The form of
United States 2 per centum Government bonds, become a first and
such order shall be approved by the Secretary of the Treasury."
paramount Hon on all the assets of such bank
(8) The eighteenth paragraph is amended to rend as follows:
"Any Federal Reserve bant may at any time reduce its liability for
"Deporits made under this section stonding to the eredit of my
outstanding Federal Reserve notes by depositing with the Federal
Federal Reserve bank with the Federal Reserve Board shall, at the
Reserve agent its Federal Reserve notes, gold certificates, or lawful
option of unld bank, be counted as part of the lawful reserve which H in
money of the United States. Federal Reserve notes NO deposited shall
required to meintain against substanding Federal Reserve notes, or as
not be relassed, except opon compliance with the conditions of an
. part of the reserve It is required to matatain against deposits."
original fame,
Bax. 3. The Secretary of the Treasury shall. by regulations Issued
The Federal Reservé agent shall hold such gold certificates or
hereunder, with the approval of ibe President, prescribe the conditions
lawful money available exclusively for exchange for the outstanding
under which gold MAY be acquired and held, transported. melted of
Regraded Unclassified
22
PROVISIONAL REGULATIONS
GOLD RESERVE ACT OF 1034
28
treated, Imported, exported, or enrmarked: (a) for Industrial, profes
by the United States (Including the gold held as security for gold cer-
atonal, and artistle use; (b) by the Federal Reserve banke for the
tiffentes and as e reserve for any United States notes and for Treasury
purpose of bettling International bulances: und, (e) for such other
notes of 1800) shall be covered into the Treasury 0.6 e missellaneous
purposes as In his Judgment are not Inconstatent with the purposes of
receipt: and, in the event that the weight of the gold dollar shall at
this Act. Gold to any form may be acquired, transported, melted
any time be increased, the resulting decrease in value of the gold beld
or treated, imported; exported, or earmarked or held In custody for
as n reserve for any United States notes and for Treasury notos of
foreign or domestic account (except on behalf of the United States)
1500, and as security for gold certificates shall be compensated by
unly to the extent permitted by, and subject to the conditions prescribed
transfers of gold builion from the general fund, and there In hereby ap-
In, or pursuant to, such regulations. Such regulations may excupt
propriated an amount sufficient to provide for such transfers and to
from the provisions of this section, in whole or in part, gold alforted
cover the decrease in value of the gold in the general fund.
in the Philippine Islands or other places beyond the limits of the
San. 8. Section 3700 of the Revised Statutes (U.S.O., title as,
continental United States.
see. 734) is amended to read an follows:
Seo. 4. Any gold withheld. acquired, transported, melted or treated,
Src. 8700. With the approval of the President. the Secretary
Imported, exported, or earmarked or held in enstody, In violation of
of the Treasury may purchase gold in any amounts, nt home or abroad,
this Act or of may regulations Issued hereunder, or licenses Issued
with any direct obligations, coin, or currency of the United States,
pursuant thereto, shall be forfeited to the United States, and may be
authorised by law. or with any funds In the Treasury not otherwise
selsed nod condemned by tike proceedings as those provided by law
appropriated, at such raten and upon such terms and conditions na he
for the forfeiture, seizure, and condemnation of property imported Into
may deem most advantageous to the public Interest: any provision of
the United States contrary to law; and In addition any person failing
law relating to the maintenance of parity, or limiting the purposes
To comply with the provisions of this Act or of any such regulations or
for which any of such obligations, coln, or currency, may be Issued, or
licenses, shall be subject to a pennity equal to twice the value of the
requiring any such obligations to be offered full a popular loan or on a
gold In respect of which such failure occurred.
competitive baste, or to be offered or Issued at not loss than par, to
Sec. G. No gold shall hereafter be coined, and no gold coin shall
the contrary notwithstanding. All gold no purchased shall be Included
herenfter be paid out or delivered by the United States: Provided,
as an seart of the general fund of the Treasury."
however, That coinage may continue to be executed by the minie of
8m. 9. Section 3009 of the Revised Bistotes (U.S.C., (itle 31,
the United States for foreign countries In accordance with the Avt
sec. 735) is amended to read as follows:
of January 29. 1874 (U.S.C., title 31, sec. 367). All gold coin ot the
Sec. seue. The Becretary of the Treasury may anticipate the
United States shall be withdrawn from circulation, and, together with
payment of interest on the public debt, by a period not exceeding
all other gold owned by the United States, shall be formed Into barn
con year, from time to time, either with or without a rebate of Interest
of such weights and degrees of fineness ns the Secretary of the Trensury
upon the compons, as to him may seem expedient; and he may sell gold
may direct,
in any amounts, at home or abroad, in such manner and at such rates
Sxc. 6. Except to the extent permitted in regulations which may be
and upon much terms and conditions as be may deem most advan-
traned herennder by the Secretary of the Treasury with the approval
begrons to the public Interest, and the proceeds of any gold ao sold
of the President, no currency of the United States shull be redeemed
shall be covered Into the general furd of the Treasury: Provided,
in gold: Provided, hoseever, That gold certificates owned by the
however, That the Recretary of the Treasury may sell the gold which
Federal Reserve banks shall be redeemed at such times and in such
in required to be maintained as & reserve or as security for currency
amounts as, in the Juigment of the Secretary of the Treasury, are
Issued by the United States, only to the extent necessary to maintain
necessary to maintain the equal purchasing power of every kind of
such currency at a parity with: the gold dollar."
currency of the United States: And provided further, That the reserve
Rec. 10. (a) For the pur, of stabilising the exchange value
for United States notes and for Treasury notes of 1800, and the
of the dollar, the Secretary of the Treasury, with the approval of the
security for gold certificates (Including the gold certificates held in
Preddent, directly or through such agencies as be may designate,
the Treasury for credits payable therein) whall be maintained In gold
to authorized, for the account of the fund established in this section,
bullion equal to the dollar amounts required by law, and the reserve
to dest in gold and foreign exchange and such other Instruments of
the Federal Reserve notes shall be maintained in gold certificates, or
credit and securities BS he may deem necessary to earry out the
to credits payable In gold certificates maintained with the Treasurer
purpose of this section. An annual sudit of such funds shall be made
of the United States under section 16 of the Federal Reserve Act, na
and & report thereof submitted to the Preddent.
beretofore and by This Act amended.
(b) To enable the Secretary of the Trensury to carry out the provi-
No redemptions to gold whet be made except in gold bullion
efona of this section there be hereby appropriated, out of the receipts
waring the stemp of a United States mint or assay office In an amount
which are directed to be covered into the Treasury under section 7
equivalent at the time of redemption to the currency surrenCered for
bereof, the sum of $2,000,000,000, which sum when available shall be
evot purpose,
deposited wilh the Treasurer of the United States in a stabilization
Sec. T. In The event that the weight of the gold dollar shall at
food (bereinefter culled the "fund") inder the exclusive control of
ary time be reduced, The resulting increase to value or the gold held
the Becretary of the Treasury. with the approval of the President,
Regraded Unclassified
24
PROVISIONAL REGULATIONS
GOLD RESERVE ACT OF 1934
25
whose dectsions shall be final end not be entiject to review by any
The President is further authorized to Issue silver certifi alea to
other officer of the United States. The fund shull be available for
ench denominations as he may prescribe Against any silver bottion,
expenditure, under the direction of the Secretary of the Treasury and
gilver, or standard silver dollars to the Treasury not then bold for
In his discretion, for any purpose in connection with earrying out the
redemption of any outstanding ullver certificates, and to coin stand-
provisions of this section, Including the Investment and relivestment
and silver dollars or subsidiary currency for the redemption of much
In direct obligations of the United States of any portions of the fund
dillyer certificates.
which the Secretary of the Trensury, with the approval of the Presi-
The President to authorised, In life discretion, to prescribe different
dent, may from time to time determine are not currently required for
terms end conditions and to make different charges, or to collect dif-
stabilizing the exchange value of the dollar. The proceeda of all anles
ferent seigniorage, for the coininge of silver of foreign production than
and investments and all earnings and Interest accruing under the
for the colunge of aliver produced In the United States of Its depend-
operations of this section shall be paid Into the fund and shall be
enclés. The silver certificates herein referred to shall be Issued, de-
available for the purposes of the fund.
livered, and cireulated substantially In conformity with the low now
(c) All the powers couferred by this section shall expire two years
governing existing silver certificates, except as may herein be expressly
after the date of enactment of this Act, unless the President shall
provided to the contraty, and shall have and possess all of the privileges
sonner declare the existing emergency ended and the operation of
and the legal tender characteristics of existing aliver certificates now
the stabilization fund terminated; but the President may extend
in the Treasury of the United States, or in circulation.
such period for not more than one additional year after such date by
The President is authorized, in addition to other powers, to reduce
proclamation recognizing the continuance of such emergency.
the wéight of the standard ailver dollar in the same percentage that he
Sec. 11. The Secretary of the Treasury is hereby authorized to Issue,
reduces the weight of the gold dollar.
with the approval of the President, such rules and regulations as the
The Prestdent in further authorized to reduce and fix the weight of
Secretary may deem necessary or proper to carry out the purposes
subsidiary colns so as to maintain the parity of such cottis with the
of this Act.
standard gilver dollar and with the gold dollar."
Sec. 12. Paragraph (b) (2), of section 43, title III, of the Act
Sec. 13. All actions, regulations, rules, orders, and proclumations
approved May 12, 1933 (Public, Numbered 10, Seventy-third Congress),
beretofure taken, promulgated, made or issued by the President of the
is âmended by adding two new sentences at the end thereof, reading
United States or the Secretary of the Treasury, under the Act of
as follows:
March 9, 1933, or under section 43 or section 45 of title III of the Act
Nor shall the weight of the gold dollar be fixed in any event at
of May 12, 1980, ure hereby approved, ratified, and confirmed.
more than 60 per centum of Its present weight. The powers of the
Spo. 14. (a) The Second Liberty Bond Act. as amended, is further
President specified in this paragraph shall be deemed to be separate,
amended AE follows:
distinct, and continuing powers, and may be exercised by bim, from
(1) By adding at the end or section 1 (D.S.O., title 81, sec, 752:
time to time, severally or together, whenever and as the expressed
Supp. VII, title 31, see. 752); a new paragraph as follows:
objects of this section in his judgment may require; except that such
Notwithstanding the provisions of the foregoing paragraph, the
powers shall expire two years after the date of enactment of the Gold
Becretary of the Treasury may from time to time, when be deems It
Reserve Act of 1934 unless the President shall sooner déclare the
to be in the public Interest, offer such bonds otherwise than no a
existing emergency ended, but the President may extend such period
popular loan and be may make allotments to full, or reject or reduce
for not more than one additional year after such date by proclamation
alfotments upon any applications whether or not the offering was made
recognizing the continuence of such emergency."
as G. popular loan."
Paragraph (2) of subsection (b) of section 43, title III, of an net
(2) By Inserting in section B (U.S.O., title 31, sec. 771), after the
entitled "An act to relieve the existing national economic emergency
words certificates of indebtedness", il comma and the words Treas-
by Increasing agricultural purchasing power, to raise revenue for
ury bills".
extraordinary expenses Incurred by reason of such emergency, to pro-
(0) By striking out the Agures $7,500,000,000 where they #p
vide emergency rellef with respect to agricultural indebtedness, to
pear in section 18 (U.S.C., title 31, - 750) and Inserting to Heu
provide for the orderly liquidation of Joint-stock land banks, and for
thereof the figures $10,000,000,000."
other purposes", approved May 12, 1933, is amended by adding at
(4) By adding thereto two now sections, as follows:
the end of said paragraph (2) the following:
'Suc. 19. Notwithstanding any other provisions of law. any sibli-
The Prevident, In addition to the authority to provide for the
gations authorized by this Act may be issued Tut the purchase,
unlimited coinage of silver at the ratio ao fixed, under meh terms and
redemption, or refunding, at or before maturity, of any outstanding
conditions as he may prescribe, la further nuthorized to cause to be
bonds, notes, certificates of indebtedness, or Treasury bills, of the
Issued and delivered to the tenderer of nilver for coinage, nuver cer-
United States, or to obtain funds for such purchase, redemption, or
tificates in lleu of the standard after dollars to which the tenderer
refunding. under such rules, regulations, terms, and conditions no the
would be entitled and la no amount in dollars ognal to the number of
Secretary of the Treasury may prescribe,
coined standard allver dollars that the tenderer of such silver for
Smc. 20. The Secretary of the Treasury may Lesse any obligations
colnage would receive in standard silver dollars.
authorized by this Act and maturing not more than one year from the
Regraded Unclassified
GOLD RESERVE ACT OF 102/
97
26
PROVISIONAL REGULATIONS
date of their issue on a discount basis and payable at maturity without
Interest. Any such obligations may also be offered for sale on a com-
petitive basis under such regulations and upon such terms and con-
ditions as the Secretary of the Treasury may preseribe, and the decisions
of the Secretary in respect of any issue shall be final."
(b) Section 6 of the Victory Liberty Loan Act (U.S.C., title 31,
see. 707: Supp. VII, title 31, seca, 767-767a) is amended by striking
out the words for refunding purposes!", together with the preceding
comma, at the end of the first sentience of subsection (a).
(c) The Secretary of the Treasury is authorized to issue gold
certificates In such form and in such denominations as he may deter-
mine, against any gold held by the Treasurer of the United States,
except the gold fund held as a reserve for any United States notes and
Treasury notes of 1890, The amount of gold certificates issued and
outstanding shall at no time exceed the value, at the legal standard,
of the gold 80 held against gold certificates.
SEC. 15. As used in this Act the term United States" means the
Government of the United States: the term the continental United
States" means the States of the United States, the District of Columbia,
and the Territory of Alaska : the term currency of the United States"
means currency which is legal tender in the United States, and in-
cludes United States notes, Treasury notes of 1890, gold certificates,
silver certificates, Federal Reserve notes, and circulating notes of
Federal Reserve banks and national banking associations; and the term
"person" means any individual, partnership, association, or corpora-
tion, including the Federal Reserve Board, Federal Reserve banks, and
Federal Reserve agents. Wherever reference is made in this Act to
equivalents as between dollars or currency of the United States and
gold, one dollar or one dollar face amount of any currency of the
United States equals such a number of grains of gold, nine tenths
fine, ns, at the time referred to, are contained in the standard unit of
value, that is, so long na the President shall not have altered by
proclamation the weight of the gold dollar under the authority of sec-
tion 43, title III, of the Act approved May 12, 1938, as heretofore and
by this Act amended, twenty-five and eight tenths grains of gold, nine
tenths fine, and thereafter such a number of grains of gold, nine
tenths fine, as the President shall have fixed under such authority.
Sec. 16, The right to alter, amend, or repeal this Act is hereby ex-
pressly reserved. If any provision of this Act, or the application
thereof to any person or circumstances, is held Invalid, the remainder
of the Act, and the application of such provision to other persons or
circumstances, shall not be affected thereby.
Sec. 17. All Acts and parts of Acts inconsistent with any of the
provisions of this Act are hereby repealed.
Approved, January 30, 1834.
o
Regraded Und
98
PRESIDENT'S MESSAGE RE GOLD
78D CONGRESS
SENATE
DOCUMENT
2d Session
No. 114
IMPROVEMENT OF MONETARY SYSTEM
MESSAGE
FROM
THE PRESIDENT OF THE UNITED STATES
REQUESTING
CERTAIN ADDITIONAL LEGISLATION TO IMPROVE THE FINAN-
CIAL AND MONETARY SYSTEM OF THE UNITED STATES
JANUARY 11 (calendar day, JANUARY 15), 1934.-Read; referred to the Com-
mittee on Banking and Currency and ordered to be printed
To the Congress:
In conformity with the progress we are making in restoring a fairer
price level and with our purpose of arriving eventually at a less vari-
able purchasing power for the dollar, I ask the Congress for certain
additional legislation to improve our financial and monetary system.
By making clear that we are establishing permanent metallic reserves
in the possession and ownership of the Federal Government, we can
organize a currency system which will be both sound and adequate.
The issuance and control of the medium of exchange which we call
money is a high prerogative of government. It has been such for
many centuries. Because they were scarce, because they could
readily be subdivided and transported, gold and silver have been used
either for money or as a basis for forms of money which in themselves
had only nominal intrinsic value.
In pure theory, of course, a government could issue mere tokens to
serve B8 money-tokens which would be accepted at their face value
if it were certain that the amount of these tokens were permanently
limited and confined to the total amount necessary for the daily cash
needs of the community. Because this assurance could not always or
sufficiently be given, governments have found that reserves or bases
of gold and silver behind their paper or token currency added stability
to their financial systems.
There is still much confusion of thought which prevents 8. world-
wide agreement creating 8 uniform monetary policy. Many advocate
gold an the sole basis of currency; others advocate silver; still others
Regraded Unclassified
98
PRESIDENT 15 MESSAGE RE GOLD
2
IMPROVEMENT or MONETARY SYSTEM
IMPROVEMENT OF MONETARY SYSTEM
3
advocate both gold and silver whether pur separate bases, or on e basis
legislation to fix the lower limit of permissible revaluation at 50 por-
with n. fixed ratio, or on & fused b usis.
cent. Careful study leads me to believe that any revaluation at
We hope that, despite present world confusion, events are leading
more than percent of the present statutory value would not be
to some future form of general agreement. The recent London agree-
in the public interest. I, therefore, recommend to the Congress that
ment in regard to silver was B. step, though only n step, in this
it fix the upper limit of permissible revaluation at 60 percent.
direction.
That we may be further propared to bring some groster degree of
At this time we can usefully take a further stop, which we hope
stability to foreign exchange rates in the interests of our people, there
will contribute to an ultimate world-wide solution.
should be added to the present power of the Secretary of the Treasury
Certain lessons seem clear. For example, the free circulation of
to buy and sell gold at home and abroad, express power to deal in
gold coins is unnecessary, lends to hoarding, and tends to B. possible
foreign exchange ns such. As a part of this power, I suggret that,
weakening of national financial structures in times of emergency,
out of the profits of any dovaluation, there should be set up a fund of
The practice of transferring gold from one individual to another or
$2,000,000,000 for such purchases and sales of gold, foreign exchange,
from the Government to an individual within a nation is not only
and Government securities as the regulation of the currency, the
unnecessary but is in every way undesirable. The transfer of gold
maintenance of the credit of the Government, and the general welfare
in bulk is essential only for the payment of international trade
of the United States may require.
balances.
Certain amendments of existing legislation relating to the purchase
Therefore it in n prudent step to vegt in the government of B nation
and sale of gold and to other monetary matters would add to the con-
the title to and possession of all monetary gold within its boundaries
venience of handling current problems in this field. The Secretary of
and to keep that gold in the form of bullion rather than in coin.
the Treesury is prepared to submit information concerning such
Because the safe-keeping of this monetary basis resta with the
changes to the appropriate committees of the Congress.
Government, we have already called in the gold which was in the
The foregoing recommendations relate chiefly to gold. The other
possession of private individuals or corporations. There remains,
principal precious metal-silver-has also been used from time im-
however, B very large weight in gold bullion and coins which is still
memorial as a metallic base for currencies (LE well as for actual cur-
in the possession or control of the Federal Roserve banks.
reney itself. It is used as such by probably half the population of the
Although under existing law there is authority, by Executive net,
world. It constitutes B very important part of our own monetary
to take title to the gold in the possession or control of the Reserve
structure. It is such a crucial factor in much of the world's inter-
banks, this is B step of such importance that I prefer to nsk the Con-
national trade that it cannot be neglected.
gress by specific enactment to vest in the United States Government
On December 21, 1933, 1 issued a proclamation providing for the
title to all supplies of American-owned monetary gold, with provision
coinage of our newly mined silver and for increasing our reserves of
for the payment therefor in gold certificates. These gold certificates
silver bullion, thereby putting us among the first nations to carry out
will be, 68 now, secured at all times dollar for dollar by gold in the
the silver agreement entered into by 66 governments at the London
Treasury-gold for each dollar of such weight and fineness 69 may be
Conference. This agreement in distinctly 8 step in the right direction
established from time to time.
and we are proceeding to perform our part of it.
Such legislation places the right, title, and ownership to our gold
All of the 66 nations agreed to refrain from melting or debasing
reserves in the Government itself; it makes clear the Government's
their silver coins, to replace paper currency of small denominations
ownership of any added dollar value of the country's stock of gold
with silver coins, and to refrain from legislation that would depreciate
which would result from any decrease of the gold content of the
the value of silver in the world markets. Those nations producing
dollar which may be made in the public interest. It would also, of
large quantities of silver agreed to take specified amounts from their
course, with equal justice, cast upon the Government the loss of auch
domestic production and those holding and uning large quantities
dollar value if the public interest in the future should require an
agreed to restrict the amount they would sell during the 4 years
increase in the amount of gold designated as & dollar.
covered by the agreement.
The title to all gold being in the Government, the total stock will
If all these undertakings are carried out by the governments con-
serve as a permanent and fixed metallic reserve which will change in
cerned, there will be n. marked increase in the use and value of silver.
amount only NO far na necessary for the settlement of international
Governments can well, AP they Lave in the past, employ silver how- as a
bélances or as may be required by a future agreement among the
basis for currency, and I look for a greatly increased use, I am, to
gold, untions of the world for a redistribution of the world stock of monetary
further over, extension of the monetary use of silver because 1 believe
withholding any recommendation to the Congress looking that
With the establishment of this permanent policy, placing all mone-
we should gain more knowledge of the results of the London agree-
lary gold in the ownership of the Government BG a bullion base for
ment and of other monetary measures
its currency, the time has come for a more certain determination of
Parmit me our once more to stross two principles. Our insofar nations!
the gold value of the American dollar. Because of world under-
must be maintained ne a sound currency which, as
tainties, I do not believe it desirable in the public interest that an
currency possible, will have a fairly constant standard of purchasing establishment power
exact value be now fixed. The President is authorized by present
and be adequate for the purposes of daily use and the
of oradit
Regraded Unclassified
PRESIDENT'S MESSAGE RE GOLD
4
IMPROVEMENT OF MONETARY SYSTEM
The other principle is the inherent right of government to issue
currency and to be the sole custodian and owner of the base or re-
serve of precious metals underlying that currency. With this goes
the prerogative of government to determine from time to time the
extent and nature of the metallic reserve. I am confident that the
Nation will well realize the definite purpose of the Government to
maintain the credit of that Government and, at the same time, to
provide a sound medium of exchange which will serve the needs of
our people.
FRANKLIN ROOSEVELT.
THE WHITE HOUSE,
January 15, 1934.
RO
E,
of
Doe
In
To
bisk
le
Regra
7
T
Regraded Unclassified
99
NEWLY MINED SILVER PROCLAMTION
December 21, 1933
COINAGE OF SILVER
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLAMATION
WHEREAS, by paragraph (2) of section 43, Title III, of the Act
of Congress, approved May 12, 1933 (Public No. 10), the President
is authorized By proclamation to fix the weight of the gold dollar
in grains nine-tenths fine and also to fix the weight of the silver
dollar in grains nine-tenths fine at a definite fixed ratio in relation
to the gold dollar at such amounts as he finds necessary from his
investigation to stabilize domestic prices or to protect the foreign
commerce against the adverse effect of depreciated foreign curren-
cies, and to provide for the unlimited coinage of such gold and
silver at the ratio so fixed,
and
WHEREAS, from investigations made by me, I find it necessary,
in aid of the stabilization of domestic prices and in accordance with
the policy and program authorized by Congress, which are now
being administered, and to protect our foreign commerce against
the adverse effect of depreciated foreign currencies, that the price
of silver be enhanced and stabilized; and
WHEREAS, a resolution presented by the Delegation of the
United States of America was unanimously adopted at the World
Economic and Monetary Conference in London on July 20, 1933,
by the representatives of sixty-six Governments, which in substance
provided that said Governments will abandon the policy and prac-
tice of melting up or debasing silver coins; that low valued silver
currency be replaced with silver coins and that no legislation should
be enacted that will depreciate the value of silver; and
WHEREAS, a separate and supplemental agreement was entered
into, at the instance of the representatives of the United States, be-
tween China, India, and Spain, the holders and users of large quan-
tities of silver, on the one hand, and Australia, Canada, Mexico,
Peru, and the United States on the other hand, as the chief pro-
ducers of silver, wherein China agreed not to dispose of any silver
derived from the melting up or debasement of silver coins, and India
agreed not to dispose of over 85,000,000 ounces of silver per annum
during a period of four years commencing January, 1, 1934, and
Spain agreed not to dispose of over 5,000,000 ounces of silver annu-
ally during said period, and both of said Governments agreed that
at the end of said period of four years they would then subject
themselves to the general resolution adopted at the London Confer-
ence, and in consideration of such limitation it was agreed that the
Governments of the five producing countries would each absorb
from the mines in their respective countries a certain amount of sil-
(5)
99
NEWLY MINED SILVER PROCLAMTION
December 21, 1933
6
7
ver, the total amount to be absorbed by said producing countries
Notice is hereby given that I reserve the right by virtue of the
being 35,000,000 othices per annum during the four years commenc-
authority vested in me to revoke or modify this proclamation as the
ing the 1st day of January, 1934; that such silver so absorbed would
interest of the United States may seem to require.
be retained in each of said respective countries for said period of
IN WITNESS WHEREOF I have hereunto set my hand and
four years, to be used for coinage purposes or as reserves for cur-
caused the seal of the United States to be affixed.
rency, or to otherwise be retained and kept off the world market
DONE at the City of Washington this 21st day of December, in
during such period of time, it being understood that of the 35,000,-
the year of our Lord nineteen hundred and thirty-three, and of the
000 ounces the United States was to absorb annually at least 24,421,-
Independence of the United States of America the one hundred and
410 ounces of the silver produced in the United States during such
fifty-eighth.
period of time.
FRANKLIN D. ROOSEVELT.
NOW, THEREFORE, finding it proper to cooperate with other
By the President:
Governments and necessary to assist in increasing and stabilizing
William PHILLIPS,
domestic prices, to augment the purchasing power of peoples in
Acting Secretary of State.
silver-using countries, to protect our foreign commerce against the
adverse effect of depreciated foreign currencies, and to carry out
the understanding between the sixty-six Governments that adopted
the resolution hereinbefore referred to; by virtue of the power in
me vested by the Act of Congress above cited, the other legislation
designated for national recovery, and by virtue of all other authority
in me vested;
I, FRANKLIN D. ROOSEVELT, President of the United States
of America, do proclaim and direct that each United States coinage
mint shall receive for coinage into standard silver dollars any silver
which such mint, subject to regulations prescribed hereunder by the
Secretary of the Treasury, is satisfied has been mined, subsequently
to the date of this proclamation, from natural deposita in the United
States or any place subject to the jurisdiction thereof. The Director
of the Mint, with the voluntary consent of the owner, shall deduct
and retain of such silver so received fifty per cent as seigniorage
and for services performed by the Government of the United States
relative to the coinage and delivery of silver dollars. The balance
of such silver so received, that is, fifty per cent thereof, shall be
coined into standard silver dollars and the same, or an equal number
of other standard silver dollars, shall be delivered to the owner or
depositor of such silver. The fifty per cent of such silver 80 deducted
shall be retained as bullion by the Treasury and shall not be disposed
of prior to the thirty-first day of December, 1937, except for coining
into United States coins.
The Secretary of the Treasury is authorized to prescribe regula-
tions to carry out the purposes of this proclamation. Such regu-
lations shall contain provisions substantially similar to the provisions
contained in the regulations made pursuant to the Act of Congress,
approved April 23, 1918, (40 Statutes at Large, Page 535), known
as the Pittman Act, with such changes as he shall determine pre-
scribing how silver mined, subsequently to the date of this proclama-
tion from natural deposits in the United States or any place sub-
ject to the jurisdiction thereof, shall be identified.
This proclamation shall remain in force and effect until the
thirty-first day of December, 1937, unless repealed or modified by
Act of Congress or by subsequent proclamation.
The present ratio in weight and fineness of the silver dollar to
the gold dollar shall, for the purposes of this proclamation, be main-
tained until changed by further order or proclamation.
Regraded Unclassified
6
FOR THE PRESS
October 22, 1933. 100
Address of the President delivered by radio from the White House
CAUTION: This address 1s for release in editions of all newspapers appearing
on the streets NOT EARLIER THAN 10 o'clock P. M., Eastern Standard
Time, without further notice of release.
STEPHEN EARLY
Assistant Secretary to the President
It is three months since I have talked with the people of this country about
our national problems; but during this period many things have happened, and I am
glad to say that the major part of them have greatly helped the well-being of the
average citizen.
Because, in every step which your government is taking we are thinking in
terms of the average of you - in the old words "the greatest good to the greatest
number"- we, as reasonable people cannot expect to bring definite benefits to
every person or to every occupation or business, or industry or agriculture. In
the same way no reasonable person can expect that in this short space of time, dur-
ing which new machinery had to be not only put to work, but first set up, that
every locality in every one of the 48 states of the country, could share equally
and simultaneously in the trend to better timos.
The whole picture, however - the average of the whole territory from coast
to coast - the average of the whole population of 120,000,000 people - shows to
any person willing to look - facts and action of which you and I can be proud.
In the early spring of this year there were actually and proportionately
more people out of work in this country than in any other nation in the world.
Fair estimates showed 12 or 13 millions unemployed last March. Among those there
were, of course, several millions who could be classed as normally unemployed -
people who worked occasionally when they felt like it, and others who preferred
not to work at all, It seems, therefore, fair to say that there were about 10
millions of our citizens who earnestly, and in many cases hungrily, were seeking
work and could not get it. of these, in the short space of a few months, I am con-
vinced that at least 4 millions have been given employment - or, saying it another
way, 40% of those seeking work have found it,
That does not mean, my friends that I an satisfied, or that you are satis-
fied that our work is ended. We have a long way to go but we are on the way.
How are we constructing the edifice of recovery - the temple which, when
completed, will no longer be a temple of money changers or of beggars, but rather
a temple dedicated to and maintained for a greater social justice, a greater wel-
fare for America - the habitation of & sound economic life. We are building,
stone by stone, the columns which will support that habitation. Those columns
are many in number and though, for a moment the progress of one column may disturb
the progress on the pillar next to it, the work on all of them must proceed
Regraded
- 2 -
101
without let or hindrance.
We all know that immediate relief for the unemployed was the first essential
of such a structure and that is why I speak first of the fact that three hundred
thousand young men have been given employment and are being given employment all
through this winter in the Civilian Conservation Corps camps in almost every part
of the Nation.
So, too, we have, as you have, expended greater stims in cooperation with
states and localities for work relief and home relief than ever before - sums
which during the coming Winter cannot be lessened for the very simple reason that
though several million people have gone back to work, the necessities of those who
have not yet obtained work is more severe than at this time last year.
Then we come to the relief that is being given to those who are in dangor
of losing their farms or their homes. New machinery had to be set up for farm
credit and for home eredit in every one of the thirty-one hundred counties of the
Unitod States and overy day that passes 18 saving homes and farms to hundreds of
families. I have publicly asked that foreclosures on farms and chattels and on
homes be delayed until every mortgagor in the country shall have had full oppor-
tunity to take advantage of Federal credit. I make the further request which many
of you know has already beon made through the great federal credit organizations
that if there is any family in the United States about to lose its home or about
to lose its chattels, that family should telegraph at once either to the Farm
Credit Administration or the Home Owners Loan Corporation in Washington requesting
their help.
Two other great agencies are in full swing. The Reconstruction Finance
Corporation continues to lond large sums to industry and finance with the dofinite
objective of making easy the extending of credit to industry, commerce and finance.
The program of public works in three months has advanced to this point:
Out of a total appropriated for public works of three billion threo hundred mil-
lion, one billion eight hundred million has already been allocated to Federal
projects of all kinds and literally in every part of the United States and work on
these is starting forward. In addition three hundred millions have been allocated
to public works to be carried out by states, municipalities and private organiza-
tions, such as those undertaking elum clearance. The balance of the public works
money, nearly all of it intended for state or local projects, waits only on the
presentation of proper projects by the states and localities themselves. Washing-
ton has the money and is waiting for the proper projects to which to allot it.
Another pillar in the making is the Agricultural Adjustment Administration,
I have been amazod by the extraordinary degree of cooporation given to the Govern-
ment by the cotton farmers in the South, the wheat farmers of the West, the bobacco
farmers of the southeast, and I am confident that the corn hog farmers of the mid-
dle west will come through in the same magnificent fashion, The problem me seek to
solve had been stoadily getting worse for twenty years but during the last six
months we have made more rapid progress than any nation has ever made in a like
period of time. It 18 true that in July farm commodity prices had been pushed up
higher than they are today, but that push came in part from pure speculation by
people who could not tell you the difference between wheat and rye, by people who
had never soen cotton growing, by people who did not know that hoge were fod on
corn - people who have no real interest in the farmer and his problems.
102
- 3 -
In spite, however, of the speculative reaction from the speculative advance,
it Beema to be well established that during the course of the year 1933 the farmers
of the United States will receive 33% more dollars for what they have produced than
they received in the year 1932. Put in another way, they will receive $400 in
1933, where they received $300 the year before. That, remember, is for the average
of the country, for I have reports that some sections are not any better off than
they were a year ago, This applies among the major products, especially to cattle
raising and the dairy industry. We are going after those problems as fast as we can.
I do not hesitate to say in the simplest. clearest language of which I am
capable, that although the prices of many products of the farm have gono up and al-
though many farm families are better off than they were last year, I am not safis-
fied either with the amount or the extent of the rise, and that it is definitoly a
part of our policy to incroase the rise and to extend it to those products which
have as yot felt no benefit. If we cannot do this one way we will do it another.
Do it, TO will.
Standing boside the pillar of the farm - the A. A. A. - is the pillar of
industry - the N. R. A. Its object is to put industry and business workers into
employment and to increase their purchasing power through increased wages,
It has abolished child labor. It has eliminated the swort shop. It has ended
sixty cents a week paid in some mills and eighty cents a week paid in some mines.
The measure of the growth of this pillar lies in the total figures of reemployment
which I have already given you and in the fact that reemployment is continuing and
not stopping. The secret of N. R. A. is cooperation. That cooperation has been
voluntarily given through the signing of the blanket codes and through the signing
of specific codes which already include all of the greater industries of the nation.
In the vast majority of cases, in the vast majority of localities - the
N. R. A. has been given support in unstinted measure. We know that there are
chisellers. At the bottom of every case of criticism and obstruction we have found
some solfish interest, some private axe to grind.
Ninety per cent of complaints como from misconception. For example, it has
been said that N.R.A. has failed to raise the price of whoat and corn and hoge;that
N.R.A. has not loaned enough money for local public works, of course, N.R.A. has
nothing whatsoever to do with the price of farm products, nor with public works.
It has to do only with industrial organization for oconomic planning to wipo out
unfair practices and to create reemployment. Even in the field of business and in-
dustry, N.R.A. does not apply to the rural communities or to towns of under twenty-
five hundred population, except in BO far as those towns contain factories or chain
stores which come under a specific code.
It is also true that among the chisellers to whom I have referred, there are
not only the big chisellers but also petty chisellers who seck to make undue profit
on untrue statements.
Lot me cite to you the example of the salesman in a store in a largo eastern
city who tried to justify the increase in the price of & cotton shirt from one dol-
lar and a half to two dollars and a half by saying to the customer that it was due of
cotton and the processing tax amounted to four and a quarter cente on that pound
to the cotton processing tax Actually in that shirt there was about one pound
of cotton.
seventy million people who live in the cities and larger towns of the nation for
At this point it 1s only fair that I should give credit to the sixty or
their understanding and their villingness to go along with the payment of even
4
103
these small processing taxes, though they know full well that the proportion of the
processing taxes on cotton goods and on food products paid for by city dwel lers
coos one mindred per cent towards increasing the agricultural income of the farm
dwellers of the land,
The last pillar of which I speak is that of the money of the country in the
tanks of the country. There are two simple facts.
First, the Federal Government is about to spend one billion dollars as an
imediate loan on the frozen or non-liquid asseta of all banks closed since January
1, 1933, giving a liberal appraisal to those assets. This money will be in the
hunds of the depositors as quickly as it is humanly possible to get it out.
Secondly, the Government Bank Deposit Insurance on all accounts up to $2500
goes into effect on January first. We are now engaged in seeing to it that on or
before that date the banking capital structure will be built up by the Government
to the point that the banks will be in sound condition when the insurance goos into
effect.
Finally, I repeat what I have said on many occasions, that ever since last
March the definite policy of the Government has been to restore commodity price
levels. The object has been the attainment of such a level as will enable agri-
culture and industry once more to give work to the unemployed. It has been to make
possible the payment of public and private debts more nearly at the price level at
which they were incurred. It has been gradually to restore 8 balance in the price
structure 50 that farmers may exchange their products for the products of industry
on a fairer exchange basis. It has been and is also the purpose to prevent prices
from rising beyond the point necessary to attain these ends, The permanent welfare
and security of every class of our people ultimately depends on our attainment of
these purposes.
Obviously, and because hundreds of different kinds of crops and industrial
occupations in the huge territory that makes up this Nation are involved, we cannot
reach the goal in only a few months. We may take one year or two years or throe
years.
No one who considers the plain facts of our situation believes that commodity
prices, especially agricultural prices, are high enough yet.
Some people are putting the cart before the horse. They want a permanent
revaluation of the dollar first, It is the Government's policy to restore the price
level first, I would not know. and no one else could tell, just what the permanent
valuation of the dollar will be. To guess at a permanent gold valuation now would
certainly require later changes caused by later facts.
When we have restored the price level, we shall seek to establish and main-
tain a dollar which will not change its purchasing and debt paying power during the
succeeding generation. I said that in my mewsage to the American delegation in
London last July, And I say it now once more.
Because of conditions in this country and because of events beyond our con-
trol in other parts of the world, it becomes increasingly important to develop and
apply the further measures which may be necessary from time to time to control the
gold value of our own dollar at home.
- 5 -
104
Our dollar is now altogether too greatly influenced by the accidents of in-
ternational trade, by the internal policies of other nations and by political dis-
turbance in other continents, Therefore the United States must take firmly in its
own hands the control of the gold value of our dollar. This is necessary in order
to prevent dollar disturbances from swinging us away from our ultimate goal, namely,
the continued recovery of our commodity prices.
As a further effective means to this end, I am going to establish a govern-
ment market for gold in the United States. Therefore, under the clearly defined
authority of existing law, I am authorizing the Reconstruction Finance Corporation
to buy gold newly mined in the United States at prices to be determined from time
to time after consultation withtho Secretary of the Treasury and the President.
Whenever necessary to the end in view, we shall also buy or sell gold in the world
market.
My aim in taking this step is to establish and maintain continuous control.
This is a policy and not an expedient.
It is not to be used morely to offset a temporary fall in prices. no are
thus continuing to move towards a managed currency.
You will recall the dire predictions made last Spring by those who did not
agree with our common policies of raising prices by direct means. What actually
happened stood out in sharp contrast with those predictions. Government credit is
high, prices have risen in part. Doubtless prophets of evil still exist in our
midst. But government credit will be maintained and a sound currency will accompany
a rise in the American commodity price level.
I have told you tonight the story of our steady but sure work in building
our common recovery. In my promises to you both before and after March 4th, I
made two things plain: First, that I pledged no miracles and, second, that I would
do my best.
I thank you for your patience and your faith. Our troubles will not be over
tomorrow, but we are on our way and we are headed in the right direction.
Regraded Unclassified
5
REPORT ON LONDON ECONOMIC CONFERENCE
TREATY INFORMATION
BULLETIN NO. 47
AUGUST 1933
Regraded Unclassified
105
REPORT ON LONDON ECONOMIC CONFERENCE
THE DEPARTMENT OF STATE
TREATY INFORMATION
BULLETIN NO. 47
AUGUST 31, 1933
Compiled by the Treaty Division
and on
OF STATE
OF STATES OF
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 1988
For male by the Superintendent of Documents, Washington, D.C.
Price 19 centa
Subscription prior, $1 a year
Regraded Unclassified
REPORT ON LONDON ECONOMIC CONFERENCE
CONTENTS
ИОШАМЛОЧИЕ УТАЗЯТ
PROMOTION OF PEACE
ARBITRATION, CONCILIATION, AND JUDICIAL SETTLEMENT
Page
Permanent Court of International Justice
1
Article 36 of the Statute of the Permanent Court of International
Justice
1
ARMAMENT REDUCTION
London naval treaty of 1930
1
Washington naval treaty of 1922
2
INTERNATIONAL LAW
Protocols adopted at the Conference for the Codification of Inter-
national Law, The Hague, 1930
4
Convention and code of international private law
4
MUTUAL GUARANTEES
Conventions defining aggression
4
RESTRICTION OF WAR
Convention for the amelioration of the condition of the wounded and
sick of armies in the field-Convention relating to the treatment
PUBLICATION No. 508
of prisoners of war
a
Protocol concerning the prohibition of the use in warfare of asphyxiat-
ing, poisonous, or other gases, and of bacteriological methods of
warfare
6
POLITICAL
Agreement between the United States and Haiti concerning the
Haitianisation of the Garde, withdrawal of military forces from
Haiti and financial arrangement
7
HUMANITARIAN
SLAVERY
International slavery convention
9
WOMEN AND CHILDREN
International convention for the suppression of traffle in women and
children
9
ECONOMIC
AGRICULTURE
Whent Conference
10
AVIATION
Commercial aviation convention
11
Third International Conference on Private Aerial Law
11
COMMERCE
International Monetary and Economic Conference
11
Tariff truce
11
1H
Regraded Unclassified
105
REPORT ON LONDON ECONOMIC CONFERENCE
iv
CONTENTS
ECONOMIC-Continued
FINANCE
Page
Silver agreement
12
LABOR
Convention concerning the creation of minimum wage fixing
machinery
13
PROMOTION OF PEACE
Convention concerning the marking of the weight on beavy packages
transported by vessels
13
ARBITRATION, CONCILIATION, AND JUDICIAL
NAVIGATION
SETTLEMENT
International lond line convention
14
POSTAL
PERMANENT COURT OF INTERNATIONAL JUSTICE
Universal postal convention
14
Postal Union of the Athericas and Spain
14
Venezuela
Pareel post agreement between the United States and Greece
15
TELECOMMUNICATIONS
The American Consul at Geneva reported by a telegram dated
International redio convention
15
August 10, 1933, that the instrument of ratification by Venezuela of
North and Central American Regional Radio Conference
15
the protocol concerning the revision of the Statute of the Permanent
Court of International Justice, signed September 14, 1929, was
TEXTS OF TREATIES AND AGREEMENTS
deposited with the Secretariat on August 4, 1933.
Silver agreement
17
Convention for the unification of certain rules relating to the pre-
ARTICLE 36 OF THE STATUTE OF THE PERMANENT COURT OF
cautionary attachment of aircraft
22
INTERNATIONAL JUSTICE
Convention for the unification of certain rules relating to damages
caused by aircraft to third parties on the surface
27
Germany
Convention defining aggression
36
According to a circular letter dated July 24, 1933, from the League
RECENT PUBLICATIONS
43
of Nations, the instrument of ratification of the declaration of ac-
ceptance by Germany of the optional clause provided in the protocol
of signature concerning the Statute of the Permanent Court of
International Justice, signed December 16, 1920, was deposited with
the Secretariat on July 5, 1933.
to
ARMAMENT REDUCTION
LONDON NAVAL TREATY OF 1930
Great Britain
By a note dated July 25, 1933, the British Embassy at Washing-
ton informed the Secretary of State of the laying down of the keel
of H.M.S. Amphion.
By a note dated August 3, 1933, the Acting Secretary of State was
informed by the British Embassy at Washington of the laying down
of the keels of H.M.S. Phaston, Fame, and Firedrake.
See Bulletin No. 44. May 1933, p. 2.
Regraded Unclassified
105
CONFERENCE
2
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
3
The particulars of the vessels furnished in accordance with the
Date of signing contract: February 17, 1982
provisions of article 10 of the London naval treaty are given as
Date of laying keel: May 8, 1938
Standard displacement: 13.5 tong (13.71 metric tona)
follows:
Length at water line: 53 feet 9 inches
Extreme beam at or below water line: 11 feet
Amphion
Mean draft at standard displacement: 2 feet 11/2 inches at
Classification: Cruiser
step
Date of laying keel: June 26, 1933
Standard displacement: 7,000 tons (7,112 metric tons)
By a note dated August 9, 1933, the British Embassy at Washing-
Length at water line: 555 feet
ton informed the Secretary of State, in accordance with the pro-
Extreme beam at or below water line: 56 feet 8 inches
visions of article XVI of the Washington naval treaty of 1922, of
Mean draft at standard displacement: 15 feet 8 inches
the particulars of three submarines which are being constructed for
Caliber of largest gun: 6 inches
the Portuguese Government by Messrs. Vickers-Armstrong, Ltd.,
Phacton
at Barrow-in-Furness. The particulars are given as follows:
Classification: Cruiser
Date of signing contract: March 9, 1933
Date of laying keel: July 8, 1933
Date of laying keels: May 12, 1933
Standard displacement: 7,000 tons (7,112 metric tons)
Standard displacement: 776 tons (788.6 metric tons)
Length at water line: 555 feet
Extreme beam at or below water fine: 56 feet 8 inches
Length at water line: 227 feet
Extreme beam at or below water line: 21 feet 91/2 inches
Mean draft at standard displacement: 15 feet 8 inches
Mean draft at standard displacement: 12 feet 1 inch
Caliber of largest gun: 6 inches
Fame
By a note dated August 16, 1933, the British Embassy at Wash-
ington informed the Secretary of State, in accordance with the pro-
Classification: Destroyer
visions of article XVI of the Washington naval treaty of 1922, of
Date of laying keel: July 5, 1933
Standard displacement: 1,375 tons (1,397 metric tons)
the particulars of the training ship Almirante Saldanha, which is
Length at water line: 326 feet
being constructed for the Brazilian Government by Messrs. Vickers-
Extreme beam at or below water line: 33 feet 3 inches
Armstrong, Ltd., Naval Construction Works, Barrow-in-Furness.
Mean draft at standard displacement: 8 feet 6 inches
Caliber of largest gun: 4.7 inches
The particulars are as follows:
Date of signing contract: February 7, 1933
Firedrake
Date of laying keel: June 10, 1933
Classification: Destroyer
Standard displacement: 2,713 tons (2,758 metric tons)
Date of laying keel: July 5, 1933
Length at water line: 262 feet 5 inches
Standard displacement: 1,375 tons (1,397 metric tons)
Extreme beam at or below water line: 52 feet 2 inches
Length at water line: 326 feet
Mean draft at standard displacement: 15 feet 81/2 inches
Extreme Leam at or below water line: 38 feet 3 inches
Mean draft at standard displacement: 8 feet 6 inches
By IL note dated August 28, 1988, the British Embassy at Wash-
Caliber of largest gun: 4.7 inches
ington informed the Secretary of State, in accordance with the pro-
visions of article XVI of the Washington naval treaty of 1922, of
WASHINGTON NAVAL TREATY OF 1922
the completion of the destroyer Vouga, constructed for the Portu-
Great Britain
guese Government by Messrs. Yarrow & Co., Ltd., Scotstown, Glas-
The British Ambassador at Washington communicated to the
gow." The particulars are as follows:
Acting Secretary of State, by a note dated July 25, 1938, the particu-
Standard displacement: 1,282 tons (1,805 metric tons)
Date of completion: June 24, 1983
lars of two 55-foot coastal motor boats under construction for the
Length at water line: 319 feet
Chinese Government by Messrs, J.I. Thornycroft & Co., Ltd., Smith
Square, London, S.W.1.
Mean draft st standard displacement: 9 feet 11 inches
Extreme beam: 30 feet 1/2 inches
The particulars furnished in accordance with the provisions of
follows: article XVI of the Washington naval treaty of 1922, are given as
'Bee Bulletin No. 26, November 1931, p. 4.
Regraded Unclassified
105
CONFERENCE
4
TREATY INFORMATION
BULLETIN NO. AT: AUGUST 1933
5
INTERNATIONAL LAW
delegation and reported on May 24, 1933, to the General Committee
by Mr. Politis, of Greece, Chairman of the Committee.
PROTOCOLS ADOPTED AT THE CONFERENCE FOR THE CODIFICATION OF
INTERNATIONAL LAW, THE HAGUE, 1930.
The text of the convention in French with translation is printed
in the section of this bulletin headed "Texts of Treaties and Agree-
Sweden
ments."
By a communication dated July 19, 1933, the Secretary General
A second convention defining aggression was signed in London
of the League of Nations informed the Secretary of State of the
on July 4, 1933, between Czechoslovakia, Rumanie, and Yugoslavia,
deposit on July 6, 1933, of the instrument of ratification by Sweden
countries of the Little Entente, Russia, and Turkey, This con-
of the convention on certain questions relating to the conflict of
vention is understood to be identical with the convention signed on
nationality laws and the protocol relating to military obligations
July 8, 1933, with the exception of the provisions of article IV,
in certain cases of double nationality, signed at The Hague on
which provides that the convention remain open for adherence by
April 12, 1930.
all other countries. The Department of State is not yet in receipt of
The ratification of the convention is given subject to the reserva-
an official copy of this convention.
tion made by Sweden at the time of signature:
The American Legation at Kansas reported by a despatch dated
July 21, 1983, that a convention defining aggression was signed
The Swedish Government declares that it does not accept the
by the representatives of Lithuania and Russia in London on
provisions of the second sentence of Article 11, as binding upon it
July 5, 1933. This convention is similar to the two conventions
in the case where the wife, as referred to in the article, after recov-
ering the nationality of her country of origin, fails to establish her
signed on July 8 and 4, 1933.
ordinary residence in that country."
The American Legation at Helsingfors reported by a despatch
dated July 25, 1933, that the Finnish Representative at Moscow
CONVENTION AND CODE OF INTERNATIONAL PRIVATE LAW
signed on July 22 a protocol of adherence to the convention defining
According to information received from the Director General of
aggression, or the so-called is Pact of the East
the Pan American Union the following countries not hitherto re-
RESTRICTION OF WAR
ported in the bulletin have deposited their instruments of ratifica-
tion of the convention and code of international private law:
CONVENTION FOR THE AMELIORATION or THE CONDITION OF THE
Brazil, August 8, 1929
WOUNDED AND SICK OF ARMIES IN THE FIELD-CONVENTION Re-
Cuba, April 20, 1928
LATING TO THE TREATMENT OF PRISONERS OF WAR"
Dominican Republic, March 12, 1929
El Salvador, November 18, 1931
Belgium
Panama, October 26, 1928
By a note dated July 27, 1933. the Chargé d'Affaires ad interim
of Belgium informed the Secretary of State, in conformity with
MUTUAL GUARANTEES
paragraph 2, article 10, of the Geneva convention of July 27, 1929,
CONVENTIONS DEFINING AGGRESSION
for the amelioration of the condition of the wounded and the sick
of armies in the field, that the Red Cross of Belgium is authorized
On July 3, 1933, a convention defining aggression was signed in
to lend its assistance to the Medical Corps of the Belgian Army in
London by the plenipotentiaries of Afghanistan, Estonia, Latvia,
case of war.
Persia, Poland, Rumania, Russia, and Turkey.
The convention is in substance identical with the definition of
Egypt
aggression adopted by the security committee of the General Dis-
The Secretary of State was informed by the Swiss Minister at
armament Conference which was based on the proposal of the Soviet
Washington in a. communication dated August 10, 1933, of the de-
. See Bulletin No. 38, November 1932,
See Bulletin No. 45, June 1983, p. 4.
Official translation of the League of p. Nations. 1.
See Bolletin No. 45, June 1983, p. 6,
10460
as
Regraded Unclassified
105
CONFERENCE
6
TREATY INFORMATION
posit of the instruments of ratification by Egypt of the convention
for the amelioration of the condition of the wounded and sick of
armies in the field and the convention relating to the treatment
of prisoners of war, signed at Geneva July 27, 1929.
The instruments of ratification were deposited on July 25, 1933,
POLITICAL
and will become effective six months from that date, namely, Janu-
ary 25, 1934, in accordance with the terms of articles 33 and 92,
AGREEMENT BETWEEN THE UNITED STATES AND HAITI CONCERNING
respectively, of the conventions.
THE HAITIANIZATION OF THE GARDE, WITHDRAWAL OF MILITARY
FORCES FROM HAITI AND FINANCIAL ARRANGEMENT
Great Britain-India-New Zealand
In compliance with the provisions of article 85 of the convention
On August 7, 1938, an agreement in two sections was signed
relating to the treatment of prisoners of war, signed at Geneva July
between the United States and Haiti. The first section concerns the
Haitianization of the Garde d'Haiti and the withdrawal of the
27, 1929, the Swiss Minister at Washington transmitted to the Secre-
tary of State with a note dated May 23, 1932, a copy of the official
United States Marine Brigade from Haiti. The second section con-
translation of this convention as adopted by the British Government,
cerns the adjustment of the financial guaranties stipulated in the
British Treaty Series No. 37 (1981). The enactment of special
protocol of 1919 and the loan contract of 1922.
legislation is not considered necessary to insure the application to the
The agreement provides that the Garde, the local constabulary,
United Kingdom of the provisions of the code on prisoners of war.
will be completely Haitianized and turned over to Haitian officers
This translation, the Minister's note also added, had been adopted
by October 1, 1934, and that the Marine Brigade will be withdrawn
from Haiti within a period of 80 days from October 1, 1934. A
by the Government of India as the official translation.
By a note dated July 27, 1983, the Swiss Minister at Washington
military mission, to be composed of not more than seven members
informed the Secretary of State that the Government of New Zealand
among the American officers who have served in Haiti, is provided
for if it is considered desirable by the President of Haiti to complete
had adopted as the official translation of the convention relating to
the instruction, training, and discipline of the Garde. The services
the treatment of prisoners of war of July 27, 1929, the English text
of this mission can be terminated upon 60 days' notice given by
as adopted by the British Government.
either party.
PROTOCOL CONCERNING THE PROHIBITION OF THE Use IN WARFARE or
The financial arrangement, which is to enter into effect on Janu-
ASPHYXIATING, POISONOUS, OR OTHER GASES, AND OF BACTERIO-
ary 1, 1934, provides that there shall be a Fiscal Representative and
LOGICAL METHODS OF WARFARE
a Deputy Fiscal Representative, appointed by the President of
Haiti upon nomination by the President of the United States to
Lithuania
carry on the services of the present Financial Adviser-General Re-
The American Ambassador to France transmitted to the Secretary
ceiver and of the Deputy General Receiver. The Fiscal Representa-
of State with a despatch dated July 20, 1933, a certified copy of the
tive will have under his control and direction the customs service
procès-verbal of the deposit of the instrument of ratification by
and the application of the laws relative thereto, as the customs rev-
Lithuania of the protocol concerning the prohibition of the use in
enues constitute the principal pledge to the holders of the bonds of
warfare of asphyxiating, poisonous, or other gases, and bacteri-
the 1922 loan. In carrying out his duties the Fiscal Representative
ological methods of warfare, signed at Geneva June 17, 1925.
may not employ more than 18 Americans among his employees and
The instrument of ratification was deposited with the Ministry
assistants.
The Internal Revenue Service is to be placed in the charge of a
for Foreign Affairs of France on June 15, 1938.
Haitian Director with a personnel exclusively Haitian. In view of
the fact that under normal conditions the operation of the sinking
See Bulletin No. 36, September 1932, p. 8.
fund will result in retirement of the outstanding series of the loan
authorized by the law of June 26, 1922, approximately by the year
1944, both Governments agree that the loan shall be considered
7
Regraded Unclassified
105
CONFERENCE
8
TREATY INFORMATION
closed and no additional series shall be issued. The Haitian Govern-
ment may retire the bonds issued in accord with the protocol of
October 8, 1919, in advance of their due date, if an arrangement
satisfactory to the holders of the bonds can be reached. In this
case the provisions of the financial arrangement will become null and
void and of no effect upon the completion of the funding operation.
HUMANITARIAN
The agreement also provides that any controversy which may
arise between the two Governments on the subject of the clauses of
SLAVERY
the agreement shall be submitted to arbitration in case it cannot be
INTERNATIONAL SLAVERY CONVENTION
settled through diplomatic channels, in accordance with the arbitra-
tion treaty of January 7, 1909, between the two countries.
Turkey
The text of the agreement, which will shortly be published as
According to information received from the League of Nations
Executive Agreement Series No. 46, has also been published in Press
under date of August 5, 1933, the Minister for Foreign Affairs of
Releases, Weekly Issue No. 203, August 19, 1933, p. 103.
Turkey notified the Secretary General of the accession of Turkey to
the international slavery convention, signed at Geneva September
25, 1926. The accession is effective as from July 24, 1933,
WOMEN AND CHILDREN
INTERNATIONAL CONVENTION FOR THE SUPPRESSION OF TRAFFIC IN
WOMEN AND CHILDREN #
Denmark
According to information contained in a communication from the
League of Nations dated August 2, 1933, the convention for the sup-
pression of traffic in women and children, signed at Geneva Septem-
ber 80, 1921, entered into effect for Denmark on January 1, 1933, A
declaration made at the time of the deposit of the instrument of rati-
fication by Denmark made the entry into force of the convention
subject to the coming into force of the Danish penal code of April
15, 1930, On July 10, 1933, the Government of Denmark informed
the Secretary General of the League of Nations that in consequence
of the entry into force of the penal code on January 1, 1933, the
convention became effective, as regards Denmark, from the sanje
date.
3 See Bulletin No. 12, March 1933, p. 9.
See Bulletin No. 43, April 1933, p. 15.
9
mémits the limit tools liter hast <1
Tests and la well edi ed iDod
105
CONFERENCE
BULLETIN NO. 47: AUGUST 1933
11
AVIATION
COMMERCIAL AVIATION CONVENTION¹
Honduras
ECONOMIC
By a note dated August 5, 1933, the Ambassador of Cuba trans-
AGRICULTURE
mitted to the Secretary of State a communication addressed to him
by the Acting Secretary of State of Cuba, by which the latter ad-
WHENT CONFERENCE
vised the Government of the United States of the deposit on July 18,
1983, of the instrument of ratification by Honduras of the commer-
At the request of the four principal wheat-exporting countries
cial aviation convention, adopted at the Sixth International Con-
(Argentina, Australia, Canada, and the United States), the Secre-
ference of American States, Habana, February 20, 1928.
tary General of the League of Nations on August 12, 1933, invited, in
addition to these four countries, the following wheat-importing and
THIRD INTERNATIONAL CONFERENCE ON PRIVATE AERIAL LAW
exporting countries to be represented at a conference to meet in
The Third International Conference on Private Aerial Law was
London on August 21: Austria, Belgium, Bulgaria, Czechoslovakia,
Denmark, Estonia, Finland, France, Germany, Great Britain, Greece,
held at Rome, Italy, from May 15 to 29, 1933. The delegates to the
conference had before them for consideration the draft conventions
Holland, Hungary, Irish Free State, Italy, Latvia, Lithuania, Nor-
relating to (1) precautionary attachment of aircraft and (2) lia-
way, Poland, Portugal, Rumania, Russia, Spain, Sweden, Switzer-
land, Turkey, and Yugoslavis.
bility for damages caused by aircraft to third parties on the surface,
adopted at the seventh annual session of the International Technical
This conference, at the request of its initiators, was held within
the framework of the Monetary and Economic Conference, The ob-
Committee of Aerial Legal Experts, held in Stockholm, Sweden, in
July 1932.* The drafts adopted at Stockholm were revised at the
ject of the conference was to conclude an international agreement on
Rome conference. Translations of the conventions as adopted at
the production and trade in wheat on the basis of the conversations
Rome are printed in the section of this bulletin headed Texts of
which began at Geneva on May 10, 1933, between the four principal
Tresties and 'Agreements."
exporting states, and which were continued in London in June and
July at the time of the Monetary and Economic Conference, first
COMMERCE
between the same countries and then with the help of other export-
ing countries and of certain wheat-importing countries.
INTERNATIONAL MONETARY AND ECONOMIC CONFERENCE
Two agreements were concluded, one between the importing coun-
TARIFF TRUCE³
tries, the other between the exporting countries. The texts of both
agreements will be printed in Treaty Information when received by
A corrigendum dated August 1, 1988, to the Journal of the Mone-
the Department of State.
tary and Economic Conference, No. 39, July 28, 1933, deletes the
10
word « Siam from the list contained in the latter of the parties
Bee Bulletto No. 45, June 1983, D. 9.
See Bulletin No. 36, September 1932, pp. 6, 13-18.
See Bulletin No. 46. July 1933, p. 11.
105
CONFERENCE
12
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
13
to the tariff truce resolution of May 12, 1933. After making the
correction indicated, this official record reads as follows:
the aggregate purchase, or otherwise arrange for withdrawing from
the market, thirty five million fine ounces of silver from the mine
Abyssinia
Iceland
Afghanistan
production of such countries in each calendar year for a period of
India
Albania
four years commencing with the calendar year 1934. The said Gov-
Iraq
Argentine Republic
Irish Free State
ernments undertake to settle by agreement the share in the said
Austria
Italy
thirty five million fine ounces which each of them shall purchase
Belgium
Japan
or cause to be withdrawn."
Bolivia
Latvin
Brazil
In accordance with the provisions of this article, separate agree-
Lithuania
United Kingdom of
ments were signed by these countries allotting to each its share of
Luxemburg
Great Britain
Mexico
the said B5 million fine ounces of silver to be purchased or with-
andNorthernIre-
Netherlands
drawn. The text of the allotment agreement signed by the United
land
New Zealand
States of America is printed in full in the section of this bulletin
Bulguria
Nicaragua
headed Texts of Treaties and Agreements." The allotment agree-
Canada
Norway
Chile
ments signed by Australia, Canada, Mexico, and Peru are identical
Paraguay
China
Persia
in text with the exception of the allotment to each country of the
Cuba
Peru
amounts to be withdrawn or purchased by it, which were agreed
Czechoslovakia
Poland
upon as follows:
El Salvador
Portugal
Australia
652, 365 fine ounces
Free Denmark City of Danzig
Rumania
Canada
1,672, 802 fine ounces
Spain
Mexico
Dominican Republic
159, 108 fine ounces
Sweden
Peru
Eenador
1,095,325 fine ounces
Switzerland
Egypt
United States
472, 410 fine ounces
Estonia
Turkey
Finland
Union of South Africa
France
United States of America
LABOR
Germany
Union of Soviet Socialist
Republics
CONVENTION CONCERNING THE CREATION OF MINIMUM WAGE FIXING
Greece
Uruguay
MACHINERY
Guatemala
Haiti
Venezuela
Norway
Hungary
Yugoslavia
According to information received from the League of Nations
under date of July 19, 1933, the ratification by Norway of the con-
FINANCE
vention concerning the creation of minimum wage fixing machinery,
Suven AGREEMENT
adopted by the International Labor Conference at its eleventh session
(Geneva, May 30-June 21, 1928), was registered with the Secretariat
Pursuant to a resolution adopted on July 20, 1933, by subcommittee
on July 7, 1933.
II (Permanent Measures) of the monetary and financial commission
of the Monetary and Economic Conference, an agreement was signed
CONVENTION CONCERNING THE MARKING OF THE WEIGHT ON HEAVY
Australia, Canada, the United States of America, Mexico, and Peru
holders of large stocks or users of silver, and by the delegates of
on July 22, 1933, by the delegates of India, China, and Spain as
PACKAGES TRANSPORTED BY VESSELS
Germany
in as principal full producers of silver. The text of the agreement is printed
According to information received from the League of Nations
Agreements." in the section of this bulletin headed Texts of Treaties and
under date of July 14, 1933, the instrument of ratification by Ger-
many of the convention concerning the marking of the weight on
Article 2 of the agreement provides that 'the Governments of
heavy packages transported by vessels, adopted by the International
existence Australia, Canada, the United States, Mexico and Peru, during the
Labor Conference at its twelfth session (Geneva, May 30-June 21,
of this agreement, shall not sell any silver, and shall also in
1959), was registered with the Secretarist on July 5, 1983.
I
Regraded Unclassified
105
CONFERENCE
14
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
15
Italy
According to information contained in a communication from the
PARCEL POST AGREEMENT BETWEEN THE UNITED STATES AND GREECE
League of Nations under date of July 27, 1933, the instrument of
ratification by Italy of the convention concerning the marking of
On August 8, 1988, the President approved and ratified the parcel
post agreement and the regulations pertaining thereto between the
the weight on heavy packages transported by vessels, adopted by the
United States and Greece, signed at Washington August 1, 1933,
International Labor Conference at its twelfth session (Geneva, May
and at Athens July 14, 1933.
30-June 21, 1929), was registered with the Secretariat on July 18,
1933,
TELECOMMUNICATIONS
NAVIGATION
INTERNATIONAL RADIO CONVENTION
INTERNATIONAL LOAD LINE CONVENTION
Colombia
Siam
The American Legation at Bogotá transmitted to the Secretary
By a note dated August 28, 1933, the British Embassy at Wash-
of State in a despatch dated August 14, 1933, a copy of Decree
ington informed the Secretary of State that the accession of Siam to
No. 1340 of 1933, by which the President of Colombia ratified the
the international load line convention, signed at London July 5,
international radio convention and the regulations annexed thereto,
1930, was notified to the British Foreign Office on July 11, 1933, and
signed at Washington November 25, 1927. The decree was signed
will take effect on October 11, 1983.
on July 30, 1933.
NORTH AND CENTRAL AMERICAN REGIONAL RADIO CONFERENCE
POSTAL
The North and Central American Regional Radio Conference,
UNIVERSAL POSTAL CONVENTION
which met at Mexico City on July 10, adjourned on August 9, 1933.
Venezuela
Delegations from Canada, Costa Rica, Cuba, El Salvador, Guate-
By a despatch dated August 14, 1933, the American Legation
mala, Honduras, Mexico, Nicaragua, and the United States par-
at Caracas reported that the President of Venezuela signed on
ticipated at the conference and adopted recommendations relating
February 6, 1933, and the National Congress approved on July 16,
to the allocation of the frequencies between 1,600 and 6,000 kilo-
1933, the universal postal convention and the protocol concerning
cycles. The recommendations concerning those frequencies, which
are largely used for communication purposes, are too lengthy to be
1929. the transportation of regular mails by air, signed at London June 28,
reproduced here. The recommendations adopted on broadcasting
are as follows:
POSTAL UNION OF THE AMERICAS AND SPAIN
I. The participating governments shall make observations and
Venezuela
measurements necessary to determine the conditions under which
each of them receives the signals of the broadcasting stations of
The Spanish Ambassador at Washington transmitted to the Sec-
other countries as well as its own with the object that at a later time
retary of State with a note dated August 4, 1933, the certificate of
the specifications and characteristics of the stations to operate on
the net of deposit of the instrument of ratification by Venezuela
different frequencies can be duly considered.
IL The present width of 10 ke for broadeast channels shall be
of the convention of the Postal Union of the Americas and Spain
maintained.
and the agreements relating to parcels post and postal money orders,
III. The frequencies of the carrier waves for broadcasting shall be
signed at Madrid November 10, 1931. The deposit took place on
assigned in multiple numbers of 10.
July 7. 1933.
IV. In the participating countries the broadcasting stations shall
control the frequency of operation in such a way that the frequency
'See Bulletin No. 44, May 1933, p. 17.
See Bulletin No. 46, July 1933, p. 31.
of the emitted wave shall not differ more than 50 cycles per second,
plus or minus, from the nominal frequency assigned.
. See Bulletin No. 45, June 1933, p. 40.
Regraded Unclassified
105
CONFERENCE
16
TREATY INFORMATION
V. The participating countries shall exchange information re-
specting the assignment of frequency to end the alteration of power
of broadcasting stations in their respective countries.
VI. Directional antennae, the synchronization of stations and
other technical means shall be employed where possible in order to
reduce the number of frequencies required for a certain number of
stations.
TEXTS OF TREATIES AND AGREEMENTS
VII. The assignment of frequencies for broadcasting to the vari-
ous participating countries shall be left pending for the time being.
SILVER AGREEMENT
MEMORANDUM OF HEADS OF AGREEMENT entered into by the Delegates
of India, China and Spain as holders of large stocks or users
of silver, and of Australia, Canada, the United States, Mexico
and Peru as principal producers of silver, at the Monetary and
Economic Conference held in London, July, 1933.
WHEREAS, at a meeting of the Sub-Commission II (Permanent
Measures) of the Monetary and Financial Commission of the
Monetary and Economic Conference held on Thursday, July 20th,
1933, the following Resolution was unanimously adopted,
" Be it resolved to recommend to all the Governments parties to
this Conference:
" (a) That an agreement be sought between the chief silver pro-
ducing countries and those countries which are the largest holders or
users of silver with a view to mitigating fluctuations in the price
of silver; and that the other nations not parties to this agreement
should refrain from measures which could appreciably affect the
silver market:
(6) That the Governments parties to this Conference shall re-
frain from new legislative measures which would involve further
debasement of their silver coinage below a fineness of 800/1000;
" (o) That they shall substitute silver coins for low value paper
currency insofar as the budgetary and local conditions of each
country will permit;
" (d) That all of the provisions of this Resolution are subject to
the following exceptions and limitations:
# The requirements of such provisions shall lapse on April 1st,
1934, if the agreement recommended in paragraph (a) does not
come into force by that date, and in no case shall extend beyond
January 1st, 1938;
# Governments may take any action relative to their silver coinage
that they may deem necessary to prevent the flight or destruction of
their silver coinage by reason of a rise in the bullion price of the
silver content of their coin above the nominal or parity value of
such silver coin," and,
17
Regraded Unclassified
105
CONFERENCE
18
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1943
19
WHEREAS, the Governments of India and Spain may desire to
age or for currency reserves), or be otherwise retained from sale
sell certain portions of their silver holdings, and it will be to their
during said period of four years.
advantage that the countries which are large producers of silver
should absorb silver as herein provided, to offset such sales, and,
4. That the Government of China shall not sell silver resulting
from demonetised coins for is period of four calendar years com-
WHEREAS, it is to the advantage of the large producing countries
mencing January 1st, 1034.
named in Article 2 that the anles of silver from monetary stocks be
5. That the Government of Spain shall not dispose by sale of
limited as herein provided, and
more than twenty million fine ounces of silver during a. period of
WHEREAS, it is to the advantage of China that sales from monetary
four years commencing January 1st, 1934. The disposals during
stocks of silver be offset by purchases as herein provided, with a view
each calendar year of the said four year period shall be based on an
to its effective stabilisation;
average of five million fine ounces per year; it being understood,
Now, THEREFORE, it is agreed between the parties hereto:
however, that if in any year the Government of Spain shall not
1. (a) That the Government of India shall not dispose by sale of
dispose of five million fine ounces, the difference between the amount
more than one hundred and forty million fine ounces of silver during
actually disposed of and five million fine ounces may be added as
a period of four years, commencing with January 1st, 1934. The
additional disposals in subsequent years; provided further that the
disposals during each calendar year of the said four year period
maximum amount disposed of in any year shall be limited to seven
shall be based on an average of thirty five million fine ounces per
million fine ounces,
year, it being understood, however, that, if in any year, the Govern-
6, That the Governments concerned will exchange all such infor-
ment of India shall not dispose of thirty five million fine ounces, the
mation as may be necessary with regard to the measures to fulfil the
difference between the amount actually disposed of and thirty five
provisions of this memorandum of agreement.
million fine ounces may be added as additional disposals in subse-
7. That it is understood, that subject to the provisions of Article
quent years. Provided further that the maximum amount disposed
8, the undertakings of each party to the present memorandum of
of in any year shall be limited to fifty million fine ounces.
agreement are conditional upon the fulfilment of the undertakings of
(b) Notwithstanding anything previously stated in this Article, it
every other party thereto.
is understood that if the Government of India should after the date
8. That this memorandum of agreement is subject to ratification
of this agreement sell silver to any Government for the purpose of
by the Governments concerned. The instruments of ratification shall
transfer to the United States Government in payment of war debts
be deposited not later than the 1st April, 1984, with the Government
such silver shall be excluded from the scope of this agreement;
of the United States. It shall come into force as soon as the ratifica-
(e) Provided, however, that when the total of the disposals re-
tions of all the Governments concerned are received provided that
forred to in paragraph (a) above plus the sales referred to in para-
all the ratifications are received before the 1st April, 1934. A notice
graph (b) above by the Government of India under this agreement
by any Government that the affirmative action necessary to carry out
shall amount to one hundred and seventy five million fine ounces, the
the purposes of this agreement has been taken will be accepted as an
obligation of the parties hereto shall cease.
instrument of ratification. Nevertheless, if one or more of the
2. That the Governments of Australia, Canada, the United States,
Governments enumerated in Article 2 fail to ratify by the 1st April,
Mexico and Peru, during the existence of this agreement, shall not
1934, the agreement shall come into force at that date if the other
sell any silver, and shall also in the aggregate purchase, or otherwise
Governments mentioned in Article 2 which have ratified notify the
arrange for withdrawing from the market, thirty five million fine
other Governments which ratify that they are prepared to pur-
ounces of silver from the mine production of such countries in each
chase, or cause to be withdrawn, in the aggregate the amount of
calendar year for a period of four years commencing with the cal-
silver mentioned in Article 2. The Government of the United
endar year 1934. The said Governments undertake to settle by
States is requested to take such steps ILB may be necessary for the
agreement the share in the said thirty five million fine ounces which
purpose of the conclusion of this agreement.
each of them shall purchase or cause to be withdrawn.
Is WITNESS WHEREOF the undersigned have signed the present
3. That the silver purchased or withdrawn in accordance with
memorandam of agreement.
Article 2 above shall be used for currency purposes (either for coin-
Regraded Unclassified
105
CONFERENCE
20
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
21
DONE at London this 22nd day of July, 1983, in a single copy
which shall be deposited in the archives of the Government of the
It is understood that this agreement and the similar agreements
United States.
to be entered into by the Delegates of the Governments of Australia,
8. M. BRUCE
Canada, Mexico, and Peru, are subject to the following general
Delegate of Australia.
provisions:
1. That every provision of this agreement shall terminate on Janu-
EDGAR N. RHODES
ary 388,
Delegate of Canada.
2. last the absorption of silver referred to in this agreement
W. W. YEN
means current mine production.
Delegate of China.
3. That when the Government of India shall have sold, transferred
KEY PITTMAN
or otherwise disposed of Government stocks of silver to the net
Delegate of United States
amount of one hundred and seventy-five million fine ounces, BE pro-
of America.
vided in paragraph (c) of Article 1 of the attached memorandum of
GEORGE SCHUSTER
heads of agreement, the obligations of governments to purchase under
Delegate of India.
this contract shall cease.
EDUARDO SUÁREZ
4. That this memorandum is subject to ratification by the proper
Delegate of Mewico,
governmental authorities of the United States whose delegate has
executed this agreement, and the undersigned delegate undertakes
F. TUDELA
to use his good offices to secure such action at the earliest possible
Delegate of Peru,
date.
L. NICOLAU D'OLWER
5. That this understanding shall come into force as soon as the
Delegate of Spain.
ratifications of all the governments concerned are received, provided
that all the ratifications are received before the 1st of April, 1934.
Allotment Agreement Signed by the United States
A notice by any government, party to this understanding, that the
In connection with the attached memorandum of heads of agree-
affirmative action necessary to carry out the purposes of this under-
ment¹ entered into by the Delegates of India, China and Spain as
standing has been taken will be accepted as an instrument of ratifica-
holders of large stocks or users of silver, and of Australia, Canada,
tion. Nevertheless, if one or more of the governments parties to
the United States, Mexico and Peru, as principal purchasers of
this understanding have failed to ratify by the first of April, 1934,
silver, it is understood that the Government of the United States
the understanding shall go into force and effect at that date if the
shall purchase or otherwise arrange for withdrawing from the mar-
other governments parties to this understanding have ratified the
ket, as in the attached memorandum of agreement provided, twenty-
understanding and have given notice that they are prepared to pur-
four million, four hundred and twenty-one thousand. four hundred
chase or cause to be withdrawn in the aggregate these thirty-five
and ten, fine ounces of silver in each calendar year beginning with
million fine ounces of silver. The Government of the United States
the calendar year 1934.
is requested to take such steps as may be necessary for the purpose
This understanding is conditioned upon similar undertakings be-
of the conclusion of this agreement.
ing entered into by the Governments of Australia, Canada, Mexico
In WITNESS WHEREOF, the undersigned have signed this memoran-
and Peru whereby those Governments agree to purchase or other-
dum of agreement.
wise arrange for withdrawing from the market of amounts of fine
DONE at London this 26th day of July, 1933, in a single copy
ounces of silver which, with the obligation hereby entered into,
which shall be deposited in the archives of the Government of the
annually, will make in the aggregate thirty-five million fine ounces of silver
United States.
KEY PITTMAN
Delegate of the United States.
'Supra,
105
CONFERENCE
22
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
23
CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING
TO THE PRECAUTIONARY ATTACHMENT or AIRCRAFT
called, whereby an aircraft is seized, in a private interest, through
the medium of agents of justice or of the public administration, for
His Majesty the King of Albania, the President of the German
the benefit either of a creditor, or of the owner, or of the holder
Reich, the President of the United States of America, the Federal
of a lien on the aircraft, where the attaching claimant cannot invoke
President of the Republic of Austria, His Majesty the King of the
a judgment and execution, obtained beforehand in the ordinary
Belgians, the President of the United States of Brazil, the President
course of procedure, or an equivalent right of execution.
of the Republic of Chile, the President of the Nationalist Govern.
(2) In case the applicable law gives the creditor who holds the
ment of the Republic of China, the President of the Republic of
aircraft without the consent of the operator the right of detention,
Colombia, the President of the Republic of Cuba, His Majesty
the exercise of this right shall, for the purposes of the present Con-
the King of Denmark and Iceland, the President of the Republic
vention, be the same as precautionary attachment and be governed
of Ecuador, the President of the Republic of El Salvador, the Presi-
by the régime contemplated in the present Convention.
dent of the Spanish Republic, the President of the Républic of Fin-
land, the President of the French Republic, His Majesty the King
ARTICLE 3
of Great Britain, Ireland and the British Territories beyond the
(1) The following aircraft shall be exempt from precautionary
Seas, Emperor of India, the President of the Republic of Guatemala,
attachment:
the President of the Hellenic Republic, the President of the Re-
(a) Aircraft assigned exclusively to IL Government service, the
public of Honduras, His Most Serene Highness the Regent of the
postal service included, commerce excepted;
Kingdom of Hungary, His Majesty the King of Italy, His Majesty
(b) Aircraft actually put in service on B- regular line of public
the Emperor of Japan, the President of the Republic of Lithuania,
transportation and indispensable reserve aircraft;
the President of the United States of Mexico, the President of the
(c) Any other aircraft assigned to transportation of persons or
Republic of Nienragua, His Majesty the King of Norway, Her
property for hire, when it is ready to depart for such transportation,
Majesty the Queen of the Netherlanda, the President of the Republic
except in a case involving a debt contracted for the trip which it is
of Poland, the President of the Republic of Portugal, His Majesty
about to make or IL claim arising in the course of the trip.
the King of Rumania, the President of the Dominican Republic,
(2) The provisions of the present article shall not apply to a pre-
the Captains Regent of the Most Serene Republic of San Marino,
cautionary attachment made by the owner of an aircraft who has
His Holiness the Sovereign Pontiff, His Majesty the King of Sweden,
been dispossessed of the same by an unlawful act.
the Swiss Federal Conneil, the President of the Czechoslovak Re-
ARTICLE 4
public, the President of the Republic of Turkey, the Central Execu-
tive Committee of the Union of Soviet Socialist Republics, the Presi-
(1) In case attachment is not prohibited or in case the aircraft is
Yugoslavia, dent of the United States of Venezuela, His Majesty the King of
exempt from attachment and the operator does not invoke such
exemption, an adequate bond shall prevent the precautionary attach-
having recognized the advantage of adopting certain uniform rules
ment or give a right to immediate release.
concerning the presentionary attachment of aircraft,
(2) The bond shall be adequate if it covers the amount of the
have to this end named their respective plenipotentiaries,
debt and the costa and is assigned exclusively to payment of the
following Convention:
who, being thereto duly authorized. have concluded and signed the
creditor, or if it covers the value of the aircraft in case this is less
than the amount of the debt and costs.
ARTICLE 1
ARTICLE 5
The High Contracting Parties agree to take the necessary measures
In overy case a judgment shall be rendered on # suit for release
to put into force the rules established by the present Convention.
of the precautionary attachment in a summary and rapid procedure.
ARTICLE 2
Arricia 6
(1) By precautionary attachment within the meaning of the
(1) If an aircraft has been attached which is exempt from attach-
ent Convention shall be understood any act, whatever it may pres- be
ment according to the provisions of the present Convention, or if
the debtor has had to furnish bond to prevent the attachment or
Translation by the Department of State.
Regraded Unclassified
105
CONFERENCE
24
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1033
25
to obtain the release thereof, the attaching claimant shall be liable
ARTICLE 12
in accordance with the law of the forum for the resulting damage
to the operator or the owner.
(1) The present Convention, after its coming into force, shall be
(2) The same rule shall apply in case a precautionary attachment
open for accession.
has been made without just cause.
(2) The accession shall be effected through a notification addressed
to the Government of the Kingdom of Italy, which shall inform each
ARTICLE 7
of the Governments concerned.
The present Convention shall not apply to precautionary measures
(3) The accession shall take effect ninety days after the notifica-
prescribed in bankruptcy proceedings, nor to precautionary measures
tion made to the Government of the Kingdom of Italy.
taken in case of violation of customhouse, penal or police regulations.
ARTICLE 13
ARTICLE 8
(1) Any one of the High Contracting Parties may denounce the
The present Convention shall not prevent the application of
present Convention through n. notification made to the Government
international conventions between the High Contracting Parties
of the Kingdom of Italy, which shall at once notify each of the
which provide for more liberal exemptions from attachment.
Governments concerned.
(2) The denunciation shall take effect six months after notification
ARTICLE 9
thereof and shall operate only with respect to the party making the
(1) The present Convention shall apply on the territory of any
denunciation.
one of the High Contracting Parties to any aircraft registered in
ARTICLE 14
the territory of another High Contracting Party.
(2) The expression "territory of a High Contracting Party
(1) The High Contracting Parties may, at the time of signature,
includes any territory under the sovereign power, suzerainty, pro-
deposit of the ratifications, or accession, declare that the acceptance
tection, mandate or authority of the said High Contracting Party,
which they give to the present Convention shall not apply to all or
for which the latter is a party to the Convention.
to any part of their colonies, protectorates, overseas territories, man-
dated territories or any other territory under their sovereignty,
ARTICLE 10
authority or suzerainty.
The present Convention shall be drawn up in French in one
(2) The High Contracting Parties may subsequently notify the
original copy which shall remain deposited in the archives of the
Government of the Kingdom of Italy that they intend to render the
Ministry for Foreign Affairs of the Kingdom of Italy, and of which
present Convention applicable to all or any part of their colonies,
a duly certified copy shall be sent by the Government of the
protectorates, overseas territories, mandated territories or any other
Kingdom of Italy to each of the Governments concerned.
territory under their sovereignty, authority or suzerainty so excluded
from their original declaration.
ARTICLE 11
(8) They may, at any time, notify the Government of the Kingdom
(1) The present Convention shall be ratified. The instruments
of Italy that they intend to have the present Convention cease to
of ratification shall be deposited in the archives of the Ministry
apply to all or to any part of their colonies, protectorates, overseas
for Foreign Affairs of the Kingdom of Italy, which shall notify each
territories, mandated territories, or any other territory under their
of the governments concerned of the deposit thereof.
sovereignty, authority or suzerainty.
(2) As soon as five ratifications shall have been deposited, the
(4) The Government of the Kingdom of Italy shall inform each
Convention shall come into force between the High Contracting
of the Governments concerned of the notifications made in accord-
Parties which shall have ratified it, ninety days after the deposit
ance with the last two paragraphs.
of the fifth ratification. Each ratification which shall be deposited
subsequently shall take effect ninety days after such deposit.
ARTICLE 15
(3) It shall be the duty of the Government of the Kingdom of
Any of the High Contracting Parties shall be entitled, not earlier
Italy to notify each of the Governments concerned of the date on
than two years after the coming into force of the present Conven-
which the present Convention comes into force.
tion, to call for a meeting of another international conference in
order to consider any improvements which might be made in the
Regraded Unclassified
105
SCONOMIC
CONFERENCE
26
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
27
present Convention. To this end it shall communicate with the
For Gustemala:
Government of the French Republic, which will take the necessary
J. HERRERA
measures in preparation for such conference.
FEDERICO G. MURGA
The present Convention, done at Rome, May 29, 1933, shall remain
open for signature until January 1, 1934.
For Italy:
A. GIANNINI
In TESTIMONY WHEREOF, the plenipotentiaries have signed the
present Convention.
For Lithuania:
V. CARNECKIS
For Germany:
REINHOLD RICHTER
For Norway:
DR. WEGERIT
M. MJOELLNER
DR. ALBRECHT
DR. JUR. OTTO RIESE
For Poland:
LEÓN BABINSKI
For the United States of America:
The Delegation of the United States of America déclares that the Convention
For Rumania:
shall apply only within the continental limits of the United States of America
D.I. GHIKA
exclusive of the territory of Alaska.
AL. CANTACUZINO PASCANU
JOHN C. COOPER, Jr.
Er. VERON
JAECKEL
JOHN JAY IDE.
For San Marino:
Gozr
For Austria:
GRUENEBAUM
For Switzerland:
STROBELE
F. HESS
CLERC
For Belgium:
H. DE Vos
For Czechoslovakia:
SZALATNAY
For Brazil:
DR. JUR. Nerík
ALCIBIADES PEÇANHA
TRAJANO MADEIROS DO Paço
For Turkey:
H. VASSIF 8/6/33
For Denmark:
L. INGERSLEV
KNUD GREGERSEN
CONVENTION FOR THE UNIFICATION OF CERTAIN RULES RELATING
TO DAMAGES CAUSED BY aircraft TO THIRD PARTIES ON THE
For El Salvador:
SURFACE
A. SANDOVAL
His Majesty the King of Albania, the President of the German
For Spain:
Reich, the President of the United States of America, the Federal the
JUAN F. DE RANERO
President of the Republic of Austria, His Majesty the King of of
ALEJANDRO ARIAS SALGADO
Belgians, the President of the United States of Brazil, the President of
For France:
A. DE LAPRADELLE
the Republic of China, the President of the Republic of Colombia, Den-
the Republic of Chile, the President of the Nationalist Government the
GEORGE RIPERT
President of the Republic of Cuba, His Majesty the King of the
For Great Britain and North Ireland:
mark and Iceland, the President of the Republic of Ecuador, of the
A. H. DENNIS
President of the Republic of El Salvador, the President the
A. W. BROWN
For India:
President Spanish of the French Republic, His Majesty the King of
Republic, the President of the Republic of Finland, Great
A. H. DENNIS
Britain, Ireland and the British Territories beyond the Seas,
A. W. Brown
Translation by the Department of State.
105
CONFERENCE
28
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
29
Emperor of India, the President of the Republic of Guatemala, the
ARTICLE 3
Président of the Hellenic Republic, the President of the Republic of
Honduras, His Most Serene Highness the Regent of the Kingdom of
The liability contemplated in the preceding article cannot be Te-
Hungary, His Majesty the King of Italy, His Majesty the Emperor
duced or avoided except in the case where the negligence of the
of Japan, the President of the Republic of Lithuania, the President
injured party caused the damage or contributed thereto.
of the United States of Mexico, the President of the Republic of
ARTICLE 4
Nicaragua, His Majesty the King of Norway, Her Majesty the
(1) The liability contemplated in Article 2 shall attach to the
Queen of the Netherlands, the President of the Republic of Poland,
operator of the aircraft.
the President of the Republic of Portugal, His Majesty the King of
(2) Any person who has the right of disposal of, and uses the
Rumania, the President of the Dominican Republic, the Captains
aircraft on his own account shall be termed operator of the aircraft.
Regent of the Most Serene Republic of San Marino, His Holiness
(3) In case the operator's name is not inscribed on the aeronautic
the Sovereign Pontiff, His Majesty the King of Sweden, the Swiss
register or any other official document, the owner shall be presumed
Federal Council, the President of the Czechoslovak Republic, the
to be the operator subject to proof to the contrary.
President of the Republic of Turkey, the Central Executive Com-
mittee of the Union of Soviet Socialist Republics, the President of the
ARTICLE 5
United States of Venezuela, His Majesty the King of Yugoslavia,
Any person who, without having the right to dispose of the air-
having recognized the advantage of regulating in a uniform man-
craft, makes use of it without the consent of the operator shall be
ner the liability for damages caused by aircraft to third parties on
liable for the damage caused, and the operator who has not taken
the surface,
the proper measures to avoid the unlawful use of his aircraft shall
have to this end named their respective plenipotentiaries,
be jointly liable with him, each of them being bound on the con-
who, being thereto duly authorized, have concluded and signed
ditions and within the limits of the present Convention.
the following Convention:
ARTICLE 6
ARTICLE 1
In case of damage caused on the surface by two or more colliding
The High Contracting Parties agree to take the necessary measures
aircraft, the operators of such aircraft shall be jointly and severally
in order to put into force the rules established by the present
liable to the injured third parties, each one of them being bound on
Convention.
the conditions and within the limits of the present Convention.
ARTICLE 2
ARTICLE/7
(1) The damage caused by an aircraft in flight to persons or
The preceding provisions shall not prejudge the question as to
property on the surface shall give a right to compensation by the
whether the operator of the aircraft shall or shall not have recourse
mere fact that it is established that the damage exists and that it
was caused by the aircraft.
against the author of the damage.
(2) This provision shall be applicable to the following:
ARTICLE 8
(a) Damage caused by any body whatever fulling from the air-
not to exceed a sum determined at the rate of 250 francs per kilo-
(1) The operator shall be liable for each accident for an amount
craft, even in the case of regulation jettison of ballast or jettison
made in a. case of necessity;
gram of weight of the aircraft. By the weight of the aircraft shall
(b) Damage caused by any person on board the aircraft, except
be understood the weight of the aircraft with the full maximum
in the case of an act intentionally committed by n. person who is not
load, as shown on the certificate of airworthiness or any other official
a member of the crew, not connected with the operations, without
the operator or his agents having been able to prevent it,
document, (9) However, the limit of the operator's liability cannot be less
(3) The aircraft is considered as in flight from the beginning of
than 600,000 francs nor more than 2,000,000 france.
the arrival. operations of departure until the end of the operations of
damages caused to property and the other two-thirds to compensation
(3) One-third of this value shall be assigned to compensation for
Regraded Unclassified
105
CONFERENCE
30
TREATY INFORMATION
BULLRTIN NO. 47: AUGUST 1983
31
for damages caused to persons, provided that in this last case the
(8) The insurance, the cash deposit and the bank guarantee must
compensation contemplated cannot exceed 200,000 francs per person
be especially and preferentially assigned to payment of the compen-
injured.
sations due on account of the damages contemplated in the present
ARTICLE 9
Convention.
If several persons have suffered damages in the same accident and
ARTICLE 13
if the total amount to be paid as compensation exceeds the limits
(1) The kind, extent and duration of the sureties contemplated
contemplated in Article 8, a proportional reduction in each one's
in Article 12 above shall be evidenced either in an official certificate
rights must be made in such manner that the total shall not exceed
or by an official notation on one of the ship's papers. Said certifi-
the above-mentioned limits.
cate or document must be produced whenever required by the
ARTICLE 10
public authorities or upon the request of any party concerned.
(2) Said certificate or said document shall serve to attest the
(1) The persons who have suffered damages in the same accident
situation of the aircraft with respect to the obligations of the present
must assert their rights or give notice of their claims to the operator
Convention.
within the maximum period of six months from the day of the
ARTICLE 14
accident.
(2) This period having expired, settlement of the compensation
The operator shall not be entitled to avail himself of the provisions
may properly be made; the interested parties having permitted the
of the present Convention which limit his liability:
above period to elapse without asserting their rights or giving notice
(a) if it is proved that the damage was caused by gross negligence
of their claims shall not be able to exercise their rights except on
or wilful misconduct on the part of the operator and his agents,
such amount BS shall not have been distributed.
unless the operator proves that the damage was due to an error in
piloting, operation or navigation, or, in a matter affecting his agents,
ARTICLE 11
that he has taken all the proper measures to prevent the damage;
If different injured third parties act in accordance with the provi-
(b) if he has not furnished one of the sureties prescribed in the
sions of the preceding articles and Article 16 before courts situated
present Convention, or if the sureties furnished are not in force or
in different countries, the defendant may submit a statement, before
do not cover the operator's liability for the damage caused within
each of them, of the total amount of the claims and moneys due, with
the terms and limits of the present Convention.
a view to preventing the limits of his liability from being exceeded.
ARTICLE 15
ARTICLE 12
In case the operator of more than one aircraft furnishes the surety
(1) Any aircraft entered on the register of a territory of one High
prescribed in the present Convention in the form of 5 cash deposit
Contracting Party, in order to navigate above the territory of another
or a bank guarantee, the surety shall be deemed to cover the full limit
High Contracting Party, must be insured against the damages con-
of his liability for all the aircraft operated, if the deposit or the
sidered in the present Convention, within the limits determined in
guarantee amounts to a sum arrived at by reducing the amount of
Article 8 above, with a public insurance institution or an insurer
the surety which be should furnish for the total number of his
authorized for this risk in the territory of registry of the aircraft.
aircraft by one-third in case he operates two aircraft, and by one-half
(2) The domestic legislation of any High Contracting Party may
in case he operates three or more. Furthermore it shall be deemed
substitute for the insurance, wholly or in part, another guarantee
to cover the full limit of liability for all the aircraft if it amounts to
for the risks considered in the present Convention:
the sum of 2,500,000 francs for two aircraft or 3,000,000 francs for
(a) in the form of B cash deposit made in a public fund or a bank
three or more.
authorized aircraft; for this purpose in the territory of registry of the
ARTICLE 10
The following have competent jurisdiction over suite for damages the
(b) in the form of a guarantee given by B. bank authorized for
in the territory of any one of the High Contracting Parties, as domi-
this purpose in the territory of registry of the aircraft.
claimant elect: the judicial authorities of the defendant's
Said cash deposit and said guarantee must be brought up to their
cile and those may of the place where the mage was caused, without
full amount as soon as the sums which they represent become
subject to reduction by the amount of a payment for compensation.
Regraded Unclassified
105
CONFERENCE
32
TREATY INFORMATION
BULLETIN NO. 47; AUGUST 1933
33
prejudice to the injured third party's right of direct action against
ARTICLE 23
the insurer in a case in which it can be exercised.
The present Convention shall be drawn up in French in a single
ARTICLE 17
copy which shall remain deposited in the archives of the Ministry for
Foreign Affaire of the Kingdom of Italy, and of which & duly certi-
(1) Such suits shall be barred after one year from the day of the
fied copy shall be sent by the Government of the Kingdom of Italy
damage, If the injured party proves that he could not have known
to each of the Governments concerned.
either of the damage or the identity of the person liable, the period
of limitation shall begin from the day when he could have had
ARTICLE 24
knowledge thereof.
(1) The present Convention shall be ratified. The instruments of
(2) In every case, the suit shall be barred after three years from
ratification shall be deposited in the archives of the Ministry for
the day when the damage was caused.
Foreign Affairs of the Kingdom of Italy, which shall notify each of
(3) The manner of calculating the period of limitation as well as
the Governments concerned of the deposit thereof.
the causes of suspension and interruption of the period shall be
(2) As soon as five ratifications shall have been deposited, the
determined by the law of the court before which the suit is brought.
Convention shall come into force as between the High Contracting
Parties which shall have ratified it ninety days after the deposit of
ARTICLE 18
the fifth ratification. Any ratification which is deposited subse-
In the case of the death of the person liable, an action for damages
quently shall take effect ninety days after such deposit.
lies in accordance with the terms of this Convention against those
(8) It shall be the duty of the Government of the Kingdom of
legally representing his estate.
Italy to notify each of the Governments concerned of the date on
ARTICLE 19
which the present Convention comes into force.
The sums stated in francs in the present Convention are con-
ARTICLE 25
sidered to refer to the French franc containing 651/2 milligrams of
(1) The present Convention, after coming into force, shall be
gold of a fineness of 900/1000, They may be converted into any
open for accession.
national currency in round numbera.
(2) Accession shall be made through a notification addressed to
ARTICLE 90
the Government of the Kingdom of Italy, which shall inform each
(1) The present Convention shall be applicable whenever any
of the Governments concerned thereof.
damage has been caused on the surface in the territory of one High
(3) The accession shall take effect ninety days after the notifica-
Contracting Party by an aircraft registered in the territory of
tion to the Government of the Kingdom of Italy.
another High Contracting Party.
ARTICLE 26
(2) The expression territory of one High Contracting Party'
(1) Any one of the High Contracting Parties may denounce the
shall include, for the purposes of the present Convention, any
present Convention by a notification addressed to the Government of
territory under the sovereign power, suzerainty, protection, mandate
the Kingdom of Italy which shall at once inform each of the Gov-
or authority of the said High Contracting Party for which the latter
ernments concerned Chereof.
is a party to the Convention.
(2) The denunciation shall take effect siz months after the notifi-
ARTICLE 91
cation of the denunciation and shall operate only with respect to the
The present Convention shall not apply to military, customhouse
party making the denunciation.
or police aircraft.
ARTICLE 27
ARTICLE 22
(1) The High Contracting Parties may, at the time of signature,
The present Convention shall not apply to damages caused on the
deposit of the ratifications or accession, declare that the acceptance all
surface compensation for which is governed by a transportation con-
which they give to the present Convention shall not apply to or
tract or & labor contract entered into between the injured party
to any part of their colonies, protectorates, overseas territories, man-
and Convention. the one upon whom liability falls under the terms of the present
dated territories or any other territory under their sovereignty,
authority or suzerainty.
Regraded Unclassified
105
CONFERENCE
34
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
35
(2) The High Contracting Parties may subsequently notify the
For Brasil:
Government of the Kingdom of Italy that they intend to render the
ALCIBIADES PEÇANHA
present Convention applicable to all or to any part of their colonies,
TRAJANO MADEIROS DO Paço
protectorates, overseas territories, mandated territories or any other
For Denmark:
territory under their sovereignty, authority or suzerainty, so excluded
L. INGERSLEV
from their original declaration.
KNUD GREGERSEN
(3) They may, at any time, notify the Government of the King-
For El Salvador:
dom of Italy that they intend to have the present Convention cease
A. SANDOVAL
to apply to all or any part of their colonies, protectorates, overseas
territories, mandated territories or any other territory under their
For Spain:
JUAN F. DE RANEBO
sovereignty, authority or suzerainty.
ALEJANDBO ARIAS SALGADO
(4) The Government of the Kingdom of Italy shall notify each
of the Governments concerned of notifications made in accordance
For France:
with the last two paragraphs.
A. DE LAPRADELLE
GEORGE RIFERT
ARTICLE 28
For Great Britain and North Ireland:
Any High Contracting Party shall be entitled not earlier than
A. H. DENNIS
two years after the coming into force of the present Convention
Д., W. BROWN
to call for the meeting of another international Conference in order
For India:
to consider any improvements which might be made in the present
A. H. DENNIS
Convention. To this end it shall communicate with the Government
A. W. BROWN
of the French Republic which shall take the necessary measures in
preparation for such Conference.
For Guatemala:
J. HERRERA
The present Convention, done at Rome, May 29, 1983, shall remain
FEDERICO G. MURGA
open for signature until January 1, 1934.
IN TESTIMONY WHEREOF the Plenipotentiaries have signed the
For Italy:
present Convention.
A. GIANNINI
For Germany:
For Lithuania:
REINHOLD RICHTER
V. CARNECKIS
DR. WEGERDT
DR, ALBRECHT
For Norway:
DR. JUR, OTTO RIESE
M. MJOELLNER
For the United States of America:
For Poland:
Lnón BABINSKI
The Delegation of the United States of America declares that the Convention
shall apply only within the continental limits of the United States of America
exclusive of the territory of Alaska.
For Rumania:
D.I. Ghika
JoHN C. COOPER, Jr.
AL. CANTACUZINO PASCANU
JAECKEL
ET. VERON
JOHN JAY IDE
For Austria:
For San Marino:
Gozi
GRUENERAUM
STROBELE
For Switserland:
For Belgium:
F. Hrss
H. DE Vos
CLEMO
Regraded Unclassified
105
CONTERENCE
36
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
37
For Onechoslovokia:
Ba Majesté le Roi de Roumanie: M. Nicolas Titulesco, Ministre
SZALATNAT
DR. JUR. Nerik
des Affaires Etrangères;
Le Président de Is République de Turquie: Tevfik Rüstti-bey,
For Turkey:
Ministre des Affaires Etrangères;
H. VASSIF 8/6/33
Le Comité Central Exécutif de l'Union des Bépubliques Soviétiques
Socialiste M. Maxime Litvinoff, Commissaire du Peuple aux Affairos
CONVENTION DEFINING AGGRESSION*
Etrangères;
Lesquels ont convenu des dispositions suivantes:
Sa Majesté le Roi d'Afghanistan, le Président de la République
d'Estonie, le Président de la République de Lettonie, Sa Majesté
ARTICLE PREMIER
Impériale le Shah de Perse, le Président de la République de Pologne,
Chacune des Hautes Parties Contractantes s'engage à accepter
Sa Majesté le Roi de Roumanie, le Président de Is République de
dans ses rapports mutuels avec chacune des autres et à partir du jour
Turquie, et le Comité Central Exécutif de l'Union des Républiques
de la mise en vigueur de la présente Convention la définition de
Soviétiques Socialistes;
l'agression telle qu'elle a été expliquée dans des rapport du Comité
Désireux de renforcer la paix existante entre leurs pays;
pour les questions de sécurité en date du 24 Mai 1933 (Rapport
Considérant que le Pacte Briand-Kellogg, dont ils sont signataires,
Politis) à la Conférence pour la réduction et In limitation des
interdit toute agression;
armements, rapport fait à la suite de la proposition de la Délégation
Estimant nécessaire, dans l'intérêt de la sécurité générale, de
Soviétique.
définir de manière aussi précise que possible Pagression afin de préve-
ARTICLE II
nir toute prétexte pour sa justification
En conséquence, será reconnu comme agresseur dans un conflit
Constatant que tous les Etats ont également droit à l'indépendance,
international, sous réserve des accords en vigueur entre les parties
à la sécurité, à In défense de leurs territoires, et BU libre développe-
en conflit, l'Etat qui, le premier, aura commis l'une des actions
ment de leurs institutions;
suivantes:
Animés du désir, dans l'intérêt de la paix générale, d'assurer à
1. Déclaration de guerre à un autre Etat;
tous les peuples l'inviolabilité du territoire de leur pays;
2. Invasion par ses forces armées, même sans déclaration de
Jugeant utile, dans l'intérêt de la paix générale, de mettre en
guerre, du territoire d'un autre Etat;
vigueur entre leurs pays des règles précises définissant l'agression, en
8. Attaque par ses forces terrestres, navales ou aériennes, même
attendant que ces dernières deviennent universelles,
sans déclaration de guerre, du territoire, des navires, ou des aéronefs
Ont décidé, dans ces buts, de conclure In présente Convention, et
d'un autre Etat;
ont dûment autorisé à cet effet:
4. Blocus naval des côtes ou des ports d'un autre Etat:
Sa Majesté le Roi d'Afghanistan Ali Mohammed Khan, Ministre
5. Appui donné à des bandes armées qui, formées sur son terri-
de l'Instruction Publique.
toire, auront envahi le territoire d'un autre Etat, ou refus, malgré
Le Président de la République d'Estonie: M. le Dr. Oskar Kallas,
la demande de l'Etat envahi, de prendre, sur son propre territoire,
Envoyé Extraordinaire et Ministre Plénipotentiaire à Londres;
toutes les mesures en son pouvoir pour priver lesdites bandes de
Le Président de ls République de Lettonie: M. Waldemaras
toute aide ou protection.
Salnais, Ministre des Affaires Etrangères;
ARTICLE III
Sa Majesté Impériale le Shah de Perse: Fatollah Khan Noury
Esfandiary, Chargé d'Affaires à Londres;
Aucune considération d'ordre politique, militaire, économique ou
Le Président de la République de Pologne M. Edouard Baczynaki,
autre ne pourra servir d'excuse ou de justification à l'agression prévue
Délégué permanent auprès de la Société des Nations, Envoyé Ex-
Al'Article II. (A titre d'example voir l'Annexe.)
traordinaire et Ministre Plénipotentiaire;
ARTICLE IV
La présente Convention sera ratifiée par les Hautes Parties elles. Con-
'The publication of a text In this bulletin does not Imply that the United
States is, contemplates becoming, or la eligible to become a party.
tractantes conformément à la législation de chacune d'entre
Regraded Unclassified
105
CONFERENCE
38
TREATY INFORMATION
BULLETIN NO. 47: AUGUST 1933
39
Les instruments de ratification seront déposés par chacune des
légitimer les violations du droit des gens qui pourraient être
Hautes Parties Contractantes auprès du Gouvernement de l'Union
impliquées dans les circonstances comprises dans l'énumeration
des Républiques Soviétiques Socialistes.
ci-dessus.
[Signatures]
Aussitôt que les instruments de ratification auront été déposés par
deux des Hautes Parties Contractantes, la présente Convention en-
Protocole de Signature
trera en vigueur entre ces deux Parties. Elle entrera en vigueur pour
Il est convenu entre les Hautes Parties Contractantes que si
toutes les autres Hautes Parties Contractantes à mesure que con der-
ultérieurement un ou plusieurs des autres Etats immédiatement
nières déposeront à leur tour leurs instruments de ratification.
voisins de l'Union des Républiques Soviétiques Socialistes adhère à
Chaque dépôt des instruments de ratification sera immédiatement
notifié par le Gouvernement de l'Union des Républiques Soviétiques
la présente Convention, cette adhésion lui ou leur conférers les
mêmes droits et imposera les mêmes obligations que ceux des signa-
Socialistes à tous les signataires de la présente Convention.
taires originaires.
ARTICLE V
[Signatures]
La présente Convention IL été signée en huit exempleires dont
chacune dea Hautes Parties Contractantes en a reçu un.
[Translation]
En foi de quoi les Plénipotentiaires énumérés ci-dessus ont signé la
présente Convention et y ont apposé leurs sceaux.
His Majesty the King of Afghanistan, the President of the
Fait à Londres, le 8 juillet 1938.
Republic of Estonia, the President of the Republic of Latvia, His
Au Мочаммер KHAN, OSCAR KALLAS, WALDEMARAS SALNAIS, FA-
Imperial Majesty the Shah of Persia, the President of the Republic
TOLLA KHAN NURY ESPANDIARY, EDOUARD RACEYNSKI, NIKOLAS
of Poland, His Majesty the King of Rumania, the President of the
Trrulesco, TEVPIK Rüsrü-REY, MAXIM LITVINOV.
Republic of Turkey and the Central Executive Committee of the
Union of the Soviet Socialist Republics,
Anneage à l'Article III de la Convention relative à la définition de
Being desirous of strengthening the peace existing between their
Dagression
countries, In view of the fact that the Briand-Kellogg Pact, to which they
Les Hautes Parties Contractantes signataires de la Convention
are signatories forbids all aggression,
relative à la définition de l'agression,
Believing that it is necessary, in the interest of the general security,
Désirant, sous la réserve expresso de ne restreindre en rien In portée
to define aggression as precisely as possible in order to prevent any
absolue de la règle posée à l'Article III de indite Convention, fournir
pretext for its justification;
certaines indications de nature à déterminer l'agresseur.
Being aware that all states have an equal right to independence,
Constatent qu'aucun acte d'agression au sens de l'Article II de
to security, to the defense of their territories, and to the free develop-
ladite Convention ne pourra, entre autres, être justifié par l'une des
ment of their institutions,
circonstances suivantes:
Animated by the desire, in the interest of general peace, to assure
A. La situation intérieure Pun Etat. par exemple 88 structure
to all peoples the inviolability of the territory of their countries;
politique, économique ou sociale; les défauts allégués de son admi-
Deeming it expedient, in the interests of the general peace to put
nistration; les troubles provenant de grèves, révolutions, contre-révo-
into effect, as between their countries, precise rules defining aggres-
lutions ou guerre civile.
B. La conduite international d'un Etat, par exemple la violation
sion, pending the time when such rules shall become universal,
ou le danger de violation des droits ou intérête matóriels ou moraux
Have decided, for these purposes, to conclude the present conven-
d'un Etat étranger ou de sea ressortissants; la rupture des relations
tion, and have thereunto duly authorized:
diplomatiques ou économiques; les mesures de boycottage économique
His Majesty the King of Afghanistan: Ali Mohammed Khan,
ou financier; les différends relatifs à des engagements économiques,
financiers ou autres envers des Etate étrangers; les incidents de
Minister of Public Instruction;
The President of the Republic of Estonia: Dr. Oskar Kallas,
frontière ne rentrant pas dana un des cas d'agression indiqués dans
l'Article II.
Envoy Extraordinary and Minister Plenipotentiary at London;
The President of the Republic of Latvia: Mr. Waldemaras Salnais,
Les Hautes Parties Contractantes sont d'autre part d'sccord pour
Minister of Foreign Affairs;
reconnaitre que la présente Convention ne devra jamais servir à
Regraded Unclassified
105
COMPERENCE
40
TREATY INFORMATION
BULLETIN NO. 67: AUGUST 1933
41
His Imperial Majesty the Shah of Persia: Fatollah Khan, Noury
Arricial IV
Esfandiary, Chargé Affaires at London;
The present convention shall be ratified by the High Contracting
The President of the Republic of Poland: Mr. Edouard Raczyn-
Parties, in conformity with the laws of each of them.
ski, Permanent Delegate to the League of Nations, Envoy Extraor-
The instruments of ratification shall be deposited by each of the
dinary and Minister Plenipotentiary:
High Contracting Parties with the Government of the Union of
His Majesty the King of Rumania: Mr. Nicolas Titulesco, Minis-
the Soviet Socialist Republics.
ter of Foreign Affairs;
As soon as the instruments of ratification shall have been deposited
The President of the Republic of Turkey: Tevfik Rüstil-bey, Min-
by two of the High Contracting Parties, the present convention shall
ister of Foreign Affairs:
enter into effect between those two parties. As each of the other
The Central Executive Committee of the Union of Soviet Socialist.
High Contracting Parties deposits in turn, instruments of ratification
Republies: Mr. Maximo Litvinoff, People's Commissar for Foreign
the convention shall enter into force for it.
Affairs;
Each deposit of the instruments of ratification shall immediately
Who have agreed upon the following provisions:
be notified by the Government of the Union of the Soviet Socialist
ARTICLE If
Republics to all the signatories to the present convention.
Each of the High Contracting Parties undertakes to accept in its
ARTICLE V
mutual relations with each of the others and from the day that the
The present convention has been signed in eight copies of which
present convention enters into effect the definition of aggression as
each of the High Contracting Parties has received one.
it was explained in the report of the committee on questions of
In faith whereof the Plenipotentiaries mentioned above have
security under date of May 24, 1983 (Politis Report) to the Confer-
signed the present convention and have affixed their seals thereto.
ence for Reduction and Limitation of Armaments, a report made
Done at London, July 8, 1933.
following the proposal of the Soviet Delegation.
Au MOHAMMED KHAN, OSCAR KAILAS, WALDEMARAS SALNAIS,
FATOLLA KHAN NURY ESPANDIARY, EDOUARD RACEYNSKI,
ARTICLE II
NIKOLAS Trrulesco, TRVFIR Rüsrü-ner, MAXIM LITVINOV.
Consequently, the state which shall first have committed one of the
following acts shall be, subject to the agreements in effect between
Annea to Article III of the Convention relative to the Definition of
the parties to the dispute, considered as the aggressor:
Aggression
1. Declaration of war on another state;
2. Invasion by its armed forces, even without a declaration of
The High Contracting Parties signatory to the convention rela-
war, of the territory of another state;
tive to the definition of aggression,
3. Attack by its land, naval, or aerial forces, even without is dec-
Being desirous, subject to the express reservation of not in any
Inration of war, on the territory, the vessels, or the aircraft of
way restricting the absolute scope of the rule laid down in article
another state:
III of the said convention, of providing certain indications of a
4. Naval blockade of the coasts or the ports of another state:
nature to determine which is the aggressor state.
5. Support given to armed bands which, having been organized
Note that no act of aggression within the meaning of article II
on its territory, shall have invaded the territory of another state,
of the said convention can, among others, be justified by one of the
or the refusal, despite the request of the state invaded, to take, on its
following circumstances:
own territory, all measures in its power to deprive such bands of
A. The domestic situation in a state, for example its political,
any aid or protection.
economic, or social structure; alleged defecta in its administration;
ARTICLE III
disturbances arising from strikes, revolutions, counter-revolutions,
No consideration of a political, military, economic or other nature
or civil
B. The war. international conduct of a state, for example violation of or
stiall serve as an excuse or justification for the aggression as specified
danger of violation of material or moral rights or interests economic a
in Article II. (For an example see the Annes.)
foreign state or of its nationals; rupture of diplomatic or
Regraded Unclassified
105
CONFERENCE
42
TREATY INFORMATION
relations; economic or financial boycott measures; differences rela-
tive to economic, financial, or other engagements with respect to
foreign states; frontier incidents not included in one of the cases
of aggression indicated in article II.
The High Contracting Parties agree, moreover, in recognizing
RECENT PUBLICATIONS
that the present convention must never serve to legitimate the viola-
tions of international law that might be involved under the circum-
During August, the following publication of direct interest in
stances comprised in the above list,
connection with Treaty Information was published by the Depart-
[Signatures]
ment of State and may be secured from the Superintendent of
Protocol of Signature
Documents, Government Printing Office, Washington, D.C.:
It is agreed among the High Contracting Parties that if subse-
Papers Relating to the Foreign Relations of the United States:
1918, Supplement 2-The World War. Publication No. 476.
quently one or several of the other states, immediate neighbors of
1xxix+862 pp. $1.50 (cloth).
the Union of Soviet Socialist Republics, should adhere to the present
43
convention, such adherence shall confer on them the same rights
and impose on them the same obligations as those of the original
signatories.
[Signatures]
of
to
in
Regraded Unclassified
<
4
M
3
(COPY)
106
DEPARTMENT OF STATE
FOR THE PRESS
July 3, 1933
The Secretary of State, Mr. Cordell Hull, at London,
in his capacity as Secretary of State, today made public the
following message to him from the President of the United States,
dated July 2, 1933:
"I would regard it 8.8 8. catastrophe amounting to a
world tragedy if the great Conference of Nations, called
to bring about a more real and permanent financial
stability and a greater prosperity to the masses of all
nations, should, in advance of any serious effort to con-
sider these broader problems, allow itself to be diverted
by the proposal of & purely artificial and temporary
experiment affecting the monetary exchange of a few nations
only. Such action, such diversion, shows & singular lack
of proportion and & failure to remember the larger pur-
poses for which the Economic Conference originally W&S
called together.
ml do not relish the thought that insistence on such
action should be made an excuse for the continuance of the
basic economic errors that underlie so much of the present
world wide depression.
"The world will not long be lulled by the specious
fallacy of achieving a temporary and probably an artificial
stability in foreign exchange on the part of & few large
countries only.
"The sound internal economic system of & nation is a
greater factor in its well being than the price of its
currency in changing terms of the currencies of other
nations.
mIt is for this reason that reduced cost of government,
adequate government income, and ability to service govern-
ment debts are all 80 important to ultimate stability. So
too, old fetishes of so-celled international bankers are
being replaced by efforts to plan national currencies with
the objective of giving to those currencies a continuing
purchasing power which does not greatly vary in terms of
the commodities and need of modern civilization. Let me
be frank in saying that the United States seeks the kind
of & dollar which a generation hence will have the seme
purchasing and debt paying power as the dollar value we
hope to aggain in the near future. That objective means
more to the good of other nations than 8. fixed ratio for 8
sonth or two in terms of the pound or franc.
Regraded
107
- 2 -
"Our broad purpose is the permanent stabilization of
every nation's currency. Gold or gold and silver can well
continue to be & metallic reserve behind currencies but this
is not the time to dissipate gold reserves. When the world
works out concerted policies in the majority of nations to
produce balanced budgets and living within their means,
then we can properly discuss & better distribution of the
world's gold and silver supply to act as a reserve base
of national currencies. Restoration of world trade is
an important partner, both in the means and in the
result. Here also temporary exchange fixing is not the
true answer. We must rather mitigate existing embargoes
to make easier the exchange of products which one nation
has and the other nation has not.
"The Conference was called to better and perhaps to
cure fundamental economic ills. It must not be diverted
from that effort."
Regraded
3
to
the
108
Extract from New York Times report of unprinted speech of Franklin
D. Roosevelt delivered at Butte, Montana, September 20, 1932.
"All prosperity springs from the soil. Agriculture and mining -
these are fundamental.
"I am glad Senator Walsh read to you the platform of the two
parties on silver. The difference between the Republican and Democratic
platforms on the money question is not a difference of alleged purpose,
but it is a difference of attitude and method.
"But, remember well, that attitude and method - the way we do things,
is nearly always the measure of our sincerity. It is so in this case.
"The Republican leaders say that when an international conference
is called by someone else, they will participate. We promise on our own
initiative to call such & conference. This I propose to do without delay
or evasion, when I go to Washington next March.
"I believe in American initiative in this and in all other important
matters of world-wide concern. You and I know the manner in which dif-
ferent parts of the United States are interdependent, and you and I are
coming to recognize the interdependence of all nations in the world in such
matters.
"The improvement of conditions in the mining industry will be
attained by no single panacea. I want to be fair and honest with you as
I was with the farmers at Topeka the other day and say that with problems
of such many-sided importance the way out is difficult. Particularly is
this true of the problems of improving the condition of silver and the res-
toration of trade on the Pacific.
"It must be done with the pledge of the platform in mind that sound
currency be maintained at all regards. This must and shall be done.
"I pledge to you and I pledge myself to the farmers, willing hands
and a sincere purpose. This is, my friends, the issue of the campaign,
on the one side cynical and unsympathetic acceptance of things as they are -
on the other, determination and faith in the possibility of change, of
progress and of a new deal."
3
3
109
Extract from speech of Governor Franklin D. Roosevelt, delivered
at Salt Lake City, Utah, September 17, 1932 on the question "The
Railroads - Republican Mistakes and Democratic Remedies."
"And one of the greatest of these questions of international
relationship is that of money, of gold and silver. I am glad to note
that the administration in Washington has at last come to recognize
the existence of silver.
"To move in the direction of consideration of this question is
thoroughly in accord with the Democratic platform: 'We favor a sound
currency to be preserved at all hazards and an international monetary
conference called on the invitation of our government to consider the
rehabilitation of silver and related questions.'
"The elements of this question have changed profoundly in the
past generation. The economists of the world have come to recognize
that the problem of money is largely one of international concern. I
propose to speak of this in more detail very shortly, outlining the
difference between the platforms and policies of the two major parties."
Regraded
I
-
©
ment
Unclassified
110
MEMORANDUM CONCERNING SILVER QUESTION AND
THE DEMOCRATIC PARTY
Extract from the Platform adopted by the Democratic
National Convention of 1932.
"We advocate 8. sound currency to be preserved at
all hazards and an international monetary conference
called on the invitation of our government to consider
the rehabilitation of silver and related questions."
*******
REPUBLICAN NATIONAL PLATFORM
Statements on Silver
"We favor the participation by the United States in an
international conference to consider matters relating to
monetary questions, including the position of silver,
exchange problems, and commodity prices, and possible
cooperative active action concerning them."
Unclassifie
111
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE: November 11, 1935
To
Mrs. Klotz
FROM
Mr. Haas 90A
At the 9:30 group meeting this morning Secretary Morgenthau
requested me to have Miss Lonigan work up a formula which could
be used as a. basis for government contributions to the States
when all "relief" is turned back to the States as has already been
done in some instances.
Secretary Morgenthau suggested that Miss Lonigan discuss
the matter with Miss Roche; Mr. Bain, Executive Secretary of the
Social Security Board; Aubrey Williams, Works Progress Administra-
tion; and Mr. Altmeyer, Member of the Social Security Board.
A report is to be ready for the Secretary by Thursday,
November 14, 1935.
112
November 11, 1935
At the 9:30 group meeting this morning, the follow-
ing were present:
Secretary Morgenthau
Mrs. Klotz
Mr. Oliphant
Mr. Gaston
Miss Roche
Mr. Haas
The Secretary said that he had been giving a good
deal of thought and worrying a great deal about a plan
for handling the relief situation so that the President
might have something definite on which to work and some-
thing that could be defended as perfectly sound in place
of the present scrambled arrangement of agencies.
His present idea was that all the money for Federal
construction ought to come out of a single fund. If
the President decides to ask for $500,000,000 for this
purpose, it should be handled by one agency. He didn't
much care whether it was Procurement or some other
agency, but it should be handled on a separate basis
independent of relief and handled as one project. It
was ridiculous to have constructions funds parceled out
among so many agencies of the Government.
He thought relief funds ought also to be handled by
a single agency and it seemed to him that the Social Se-
curity Board would be the proper agency to do the work.
Unemployment Insurance 18 in its infancy and it is the
expectation that as this work grows in importance it
will gradually take up the relief load, BO it is entirely
logical to have the same agency take over the present
relief responsibility. As the one function grows, the
others will dwindle. H.M., Jr. said Hopkins should be in
this picture.
He asked Mr. Haas what was being done to decide on
a fair basis of allocation of relief funds to the States.
Mr. Haas said that Mr. Bain and Mr. Altmeyer were already
doing some investigation along this line. The Secretary
asked Mr. Haas to instruct Miss Lonigan to see Miss Roche
and to get in contact, through her, with Altmeyer and
Regraded Unclassified
113
-2-
Bain to work out a plan of allocation on some fair
basis. The Secretary added that it was perfectly
asinine to talk about immediate balancing of the budget.
Everybody knew that it could not be balanced now with
any decent attention to human needs, but what we could
do is to put the relief plans on a really business-like
basis for the first time. He felt that the President
was groping for a sound solution of this dilemma and
that we could do him a great favor by presenting a plan
which would be business-like and which he could defend
as orderly administration to replace the present "jack-ass"
arrangement.
After the regular group meeting was over and Miss
Roche had left, Eli Frank, Jr., Clarence Opper and
Harold Graves joined the Secretary and members of his
staff to discuss the pending Canadian-United trade
agreement, particularly with reference to the fact
that the Secretary had no knowledge that reduction
of liquor taxes (import duties) had been approved in
the Treasury Department. Mr. Haas then produced his
memorandum, dated June 20, 1935, with a foot-note in
pencil, dated June 22, to this effect: "Mr. Haas took
up with Secretary at staff meeting; Secty. said he
had no objection. Mr. Haas informed Collado." A
copy of this memorandum is attached hereto as are copies
of other memoranda on the subject, and a letter to Sec-
retary Hull, stating the Treasury's position as of today
which 1s, briefly, that the Treasury will not object
to the reduction since it does not appear that there
will be any legal effect upon the cases now pending
against Canadian distillers.
The Secretary criticised the character of the
Treasury's representation at the State Department on
trade agreement conferences, saying it had been very
"loose." He instructed Mr. McReynolds to get for
him a list of each Treasury employee who is on an
interdepartmental committee or in any way representing
the Treasury outside of the Department. He wants to
know to whom each reports and through what channels
those reports are received. He said he considered
that the job of representing the Treasury at the State
Department on trade agreements was a full-time job for
a very competent person. He said that the misunder-
standing on the present trade agreement was no fault
114
-3-
of George Haas because Haas has been burdened with
a million things and had had to spend part of his
time representing us, which was practically humanly
impossible.
It is Mr. Morgenthau's idea to get Mr. Wooley,
President of the American Radiator Company, a man
of 70 or 71 years, wealthy, well informed, and sympa-
thetic with the President. He would like very much
to have this gentleman come to the Treasury for a
year and represent us on these committees at the
State Department, which would be a solution of the
whole problem.
Unclassified
115
MEMORANDUM
Mr. McReynolds requested an opportunity to discuss
with the Secretary the problem of Treasury relationship
with the Social Security Board, particularly with respect
to accounts and records that will be required in connection
with the old-age benefits.
Mr. McReynolds pointed out that since this involved
a monthly report from practically all employers of the amount
earned during that period by somewhere between 35 and 40
million persons, it was a matter of primary importance, if
the system is to actually operate, that the records be
obtained with as little disturbance to the employers them-
selves as possible and with the minimum of routine on the
part of the Government. Looking to this end he suggested
that the conclusion seemed unescapable that the Treasury
could obtain the information required in connection with
the assessment of taxes required by law with less effort on
the part of the employer than would be required if the employer
must report the earnings to the Social Security Board as well
as make returns to the Treasury for tax purposes.
After some discussion, Mr. McReynolds was authorized
to discuss the matter again with the Social Security Board
and ascertain what the Board's desires were in the matter.
(Mr. McReynolds reported later that the Board
has decided to undertake the collection and
maintenance of these accounts and records).
Regraded Unclassified
Copy
116
November 11, 1935
Dear Mr. Secretary:
I attach the text of the statement
which Mr. Oliphant read to Mr. Hickerson
over the telephone, this morning, of the
Treasury Department's conclusion follow-
ing the examination of the question of
reduction of the duty on certain Canadian
whiskies.
Very truly yours,
(Signed) H. Morgenthau, Jr.
The Honorable
The Secretary of State.
Inclosure.
nmc
Regraded
117
It is not apparent that there could be any legal
effect upon pending cases against Canadian distillers
resulting from the proposed trade agreements with
Canada. The possibility, however, exists that from
a negotisting, diplomatic or psychological standpoint,
the Canadians may feel that the consummation of the
agreement will be an indication of the abandonment on
the part of the United States of its intention further
to press these cases. To avoid this, it is suggested
that the United States make it clear, at the time the
agreement is signed, that 1t, of course, assumes that
the Canadian Government will cooperate in such cases
to the extent of making records and other information
available to the United States as provided by existing
treaty; and that the objective of pending legislation
affecting the right to import products of the Canadian
distillers involved in such cases is not to be considered
inconsistent with the agreement.
Regraded Unclassified
118
November 11, 1935.
To
Secretary Morgenthau
From Mr. Haas
Effect on Customs Revenue of the Proposed Trade Agreement with Canada
Tariff :
: Change
para- :
Commodity
:
in
graph :
(condensed definition in some cases)
:
revenue
1
Acetic acid (over 65% acid)
- $100,000
2
Vinyl acetate, polymerized or unpolymerized
- 15,000
71
Acetylene black
- 3,000
302 (1)
Ferrosilicon (8-30% silicon)
- 8,000
401
Lumber - Douglas fir and western hemlock
+ 30,000
401
Lumber - Spruce, pine, eastern hemlock, larch
- 280,000
1803 (1)
Lumber, n.s.p.f.
- 20,000
402
Maple, birch and beech flooring
- 1,000
503
Maple sugar
- 25,000
710
Cheese, cheddar
+ 120,000
717 (a)
Fish, fresh or frozen:
Halibut
- 20,000
Salmon
- 30,000
Swordfish, not including frozen
- 8,000
Rels
- 2,000
719
Fish, pickled or salted:
(1) Salmon
- 7,000
720 (a)
Fish, smoked or kippered:
(2) Herring, whole or beheaded, not further
advanced
- 2,000
734
Apples, green or ripe
- 1,500
763
Grass seeds:
Alfalfa
- 2,000
0
Alsike clover
0
Sweet clover
- 10,000
Timothy
-
4,000
Blue grass
- 90,000
773
Turnips and rutabagas
- 20,000
779
Hay
Regraded Unclassified
119
Secretary Morgenthau - 11/11/35 - 2
Tariff :
: Change
para- :
Commodity
:
in
granh :
(Condensed definition in some cases)
: revenue
302 (d)
Ferromanganese, 1-3 percent carbon
302 (e)
- $100,000*
Ferromanganese and spiegeleisen, not over 1
percent carbon
717 (a)
- 4,000
Fish, fresh or frozen:
Lake fish (8 species)
720 (a)
- 60,000
Fish, smoked or kippered:
(3) Herring, skinned, boned, etc.
721 (b)
- 1,300
Razor clams, canned
Negligible
29
Cobalt oxide
201 (a)
- 20,000
Fireorick, n.s.p.f.
- 1,500
203
Limestone not suitable for building stone
- 2,000
203
Lime, n.s.p.f.
- 4,000
203
Lime, hydrated
-
500
207
Feldspar, crude
- 1,000
209
Talc, ground (valued at not over $12.50 per ton)
- 7,000
214
Basic refractory material, n.s.p.f.
- 70,000
(also
204
302 (m)
Ferrotitanium, ferrovanadium, ferrouranium
Negligible
353
Electric cooking stoves and ranges
Negligible
412
Ice Hockey sticks
Negligible
711
Poultry, live
0
714
Horses, valued not over $150
- 30,000
719
Fish, pickled or salted:
(5) Alewives
---
726
Oats, milled
- 10,000
732
Cereal breakfast foods
- 3,000
736
Blueberries, frozen or preserved
- 14,000
1402
Pulp-board in rollsfor wall board
- 12,000
1502
La crosse sticks
Negligible
1502
Ice skates
- 2,500
1519 (c)
Silver or black fox furs
- 3,000
1530(b) (4) Patent leather
- 1,200
1541
Pipe organs for use in churches and similar places
- 1,000
701
Calves (live cattle weighing less than 175 lbs.)
+ 25,000
701
Cattle weighing 700 pounds or more
+ 500,000
707
Cream
+ 350,000
.
If the Brazilian agreement goes into effect there will be an additional
loss of revenue of $60,000.
120
Secretary Morgenthau - 11/11/35 - 3
Tariff :
: Change
para- :
Commodity
: in
graph :
(condensed definition in some cases)
: revenue
771
Seed potatoes
- $40,000
Total change in revenue without whisky reduction
+ $68,500
802
Scotch and Irish type whiskies
- $4,000,000
802
Canadian and American type whiskies (see
memorandum)
Range o to - $7,500,000
Regraded
121
November 11, 1935.
To
Secretary Morgenthau
From
Mr. Haas
Subject:
Arguments for and Against the Proposed Reduction in the Duty
on Whisky
The considerations of chief moment with respect to the proposed re-
duction, in the trade agreement with Canada, of the duty on whisky from
$5 to $2.50 a gallon, appear to be as follows:
In favor of the reduction:
1. Such a reduction would be of appreciable aid in securing a
satisfactory trade agreement. The Canadian Cabinet places considerable
importance upon this measure, viewing it as a significant means of in-
proving their balance-of-payments position. Moreover, political pres-
sure is being exerted by the owners of stocks of American whisky in
Canada.
2. The present duty of $5 a gallon equalled an average ad valorem
rate, in 1934, of 1a per cent. Not only is the rate of duty very high,
but it was enacted during the prohioition period, with no regard to
economic considerations, which now are paramount.
2. A lowering of the price of bonded whisky by some 60 cents a
quart, and of blended whiskies by 10 cents or more, could reasonably
be expected to result from the reduction of the duty. American stocks
of bonded whisky are still very low; the price of this type of liquor
is dictated by the price of the imported varities, while producers of
blended and straight whiskies have been able to secure some advantage
from this situation.
Aminst the reduction:
1. Little increase in employment in Canada could be expected to
result from the duty reduction, since Canadian distillers are no longer
producing American-type whisky, and are not planning to do so in the
future, their product being no better and no lower in cost than the same
article of American make.
Regraded Unclassified
122
Secretary Morgenthau - 11/11/35 - 2
2. Reduction would cause some loss (a) to those domestic interests
which own the present limited stocks of aged whisky of domestic origin,
and (b) to certain domestic producers of young whisky who benefit from
the passing situation in that they get a better price than can be expected
to continue in the future. Such loss, however, would probably be small,
and certainly temporary, since with the accumulation of domestic stocks
of aged whisky, the prices of both types may be expected to fall.
3. A procable loss in revenue of several million dollars. (Discussed
more fully below, under "Further considerations.")
Further considerations:
1. The outcome with respect to customs revenue is in some doubt.
If, as Mr. Berkshire of the Bureau of Internal Revenue seems to think,
reduction of the duty leads to a considerable increase during the next
year in imports of American whisicy now in Canada, there would be little
loss in customs revenue, which in turn would be largely or wholly offset
by increased collections in internal revenue.
There are, however, reasons for disagreeing with this position. The
essentials of the situation are these: (a) the present shortage of aged
whisky will probably contimue for a year or more, being rapidly eliminated
thereafter; (b) present imports from Canada are almost entirely for blend-
ing purposes, only about 10 percent going directly into consumption as
aged whisky.
Hence it appears justifiable to conclude, relative to imports for
olending, first, that after a year or so, imports will be small, regard-
less of the duty, and second, that until the lapse of that period, imports
are unlikely to be altered by the proposed duty reduction. A $2.50 rate
of duty would cut the cost of blended whisky only about 12/1/20 cents a quart,
which could have but small effect on domestic consumption. Imports may be
expected to be in sufficient volume, whether the duty is $5 or $2.50, to
meet the needs - as long as the period of shortage exists - of domestic
consumption.
So far as imports for direct consumption (in the form of bonded whisky)
are concerned, even the full cost reduction of some 60 cents & quart (from
a level of about $4) could hardly give rise to a sufficient increase in
demand to have & significant effect on total imports, in view of the fact
that but 10 percent thereof now goes directly into consumption.
We are led to the conclusion that there may be & considerable loss of
revemie. Assuming a level of imports of some 4,000,000 gallons during the
coming year at a $5 rate of duty (or slightly less than estimated 1934
Regraded Unclassified
123
Secretary Morgenthau - 11/11/35 - 3
imports), and the moderately higher level of 5,000,000 gallons if the
rate is $2.50, the loss of customs revenue would be $7,500,000. Against
this must be set an increase of $2,000,000 in internal revenue, derived
from the sale of the additional million gallons. This leaves the net
loss at $5,500,000.
It is to be noted that this loss of revenue, if it occurs, will be
non-recurrent, coming to an end when the period of shortage in American
stocks is over.
2. If it is possible 30 to reclassify whisky imports as to confine
the duty reduction to Canadian whisky, the loss of revenue will be con-
fined to this item. Otherwise Scotch and Irish whiskies, coming in at
the lower rate of duty, would increase the loss by as much as $4,000,000
per annum, and this loss would recur from year to year.
This fact, together with the consideration that the United Kingdom
would be pleased to secure a reduction on Scotch and Irish whiskies, in-
dicates the desirability of making this reclassification. Extension of
the duty reduction to those categories can then be used for bargaining
purposes in connection with any trade agreement with the United Kingdom.
3. Though something has been made of it in the past, there seems
little likelihood that a reduction in the duty on Canadian whisky would
have much effect on smuggling, for the simple reason that this activity
appears to be responsible for only small liquor movements at the present
time.
124
TREASURY DEPARTMENT
Inter Office Communication
Date November 12, 1935
TO
Secretary Morgenthau
FROM
Mr. Haas
Subject: Proposed Trade Agreement with Canada -- Concession on Whiskey
1. At the meeting of the Committee on Trade Agreements of June 13,
1935, it was decided that the concession on the duty on whiskey should
be linked with a concession on anthracite coal by Canada. The minutes
of the meeting read in part:
"Whiskey (Par. 802). The negotiators should be prepared to
concede to Canada a duty of $2.50 per gallon for the life of the
agreement upon the assumption that in consideration of the bene-
fits which will be received from a generalization of the duty re-
duction on whiskey, the United Kingdom will consent to a modifica-
tion of the preference on coal enjoyed under the Ottawa agree-
ments. A removal or a substantial modification of such preference
will be required if Canada is to grant the concession on coal de-
sired by the United States
2. Anthracite coal is bound in the Canadian-United Kingdom trade
agreement. Imports from the United Kingdom are duty free, imports from
the United States enter at 50 cents per short ton, and the preferential
margin is guaranteed. To make any concession to the United States on
this item, Canada must obtain the consent of the United Kingdom.
3. Canada is the only export market for United States anthracite.
The effect of the Canadian-United Kingdom agreement has been to decrease
markedly the imports of anthracite from the United States and to in-
crease those from the United Kingdom. This is shown in the following
table:
Regraded Inclassified
125
Secretary Morgenthau - 11/12/35 - 2
Imports of Anthracite Coal into Canada from the
United States and the United Kingdom
United States
United Kingdom
(1)
Duty Free from Both Countries
Calendar year 1928
3,211,941 tons
529,240 tons
Calendar year 1929
3,172,942 tons
729,458 tons
Calendar year 1930
2,945,954 tons
996,127 tons
January-May 1931
965,011 tons
174,401 tons
(2)
United States 40 cents, United Kingdom Free
June-December 1931
1,254,983 tons
701,963 tons
January-November 1932
1,556,581 tons
1,323,133 tons
(3)
United States 50 cents, United Kingdom Free
December 1932
134,911 tons
67,445 tons
Calendar year 1933
1,404,331 tons
1,603,071 tons
Calendar year 1934
1,754,275 tons
1,613,424 tons
4. The United States negotiators had requested the removal of the
duty during the five or six month period ending April 30th of each
year, and either the reduction of the duty to 25 cents during the rest
of the year or, if necessary, the maintenance of the present 50 cent
duty during this period.
5. The Canadian Government informs us that it has not already
secured and cannot secure the consent of the United Kingdom in time to
conclude the trade agreement with the United States during the next few
days. It had been planned, therefore, to make the concession on whiskey
limited to Canadian and American types only, excluding Scotch and Irish
whiskies.
6. On November 11, 1935, the Treasury approved the concession on
Canadian and American type whiskies only.
126
Secretary Morgenthau - 11/12/35 - 3
7. The only way in which the concession can be limited to Canadian
and American type whiskies is by the reclassification: "Whiskey aged not
less than four years in charred oak barrels. The State Department feels
that this reclassification constitutes a discriminatory classification,
thus violating the principles of most-favored-nation treatment. The
Canadians insist on the concession on Canadian and American types of
whiskey at least. It appears, therefore, that it will be necessary to
make the concession on all whiskies in order to conclude the trade agree-
ment with Canada. The Canadians have offered to take up the question of
anthracite coal with the United Kingdom and to attempt to secure the
latter's consent to a reduction, but can promise no definite results,
8. It is ostimated (see memorandum of November 11, 1935) that the
loss of revenue resulting from the concession on Canadian and American
type whiskies would range from zero to $7,500,000 during the calendar
year 1936 and that thereafter it would be zero. It is estimated that
the loss of revenue from the reduction on Scotch and Irish type whiskies
from all countries will be $4,000,000 additional each year that the con-
cession is in force.
9. The State Department is obtaining the vote on this matter of
each of the Departments represented on the Committee on Trade Agreements,
and is desirous of obtaining the Treasury's decision this afternoon.
Regraded Unclassified
127
June 20, 1935
To
Secretary Morgenthau
From
Mr. Hass
Subject: Reduction in the tariff on whisky approved by the Trade
Agreements Committee in connection with the proposed trade
agreement with Canada.
(1) The Trade Agreements Committee has approved a reduction
in the tariff on whisky from $5.00 to $2.50 per proof gallon. This
concession has been linked with the request that Canada reduce the
duty on anthracite coal in the following way: The present rates
on anthracite coal are bound in the Canadian trade agreement with
England and any reduction mist have the consent of the latter. As
England values her preferential duty she will not easily give it
up. Since 40 percent of the whisky imports into the United States
in 1934 were from England, she would obtain considerable benefit
from a concession on the duties on whisky. It is proposed to use
this as & means to secure her consent to the coal concession. If
the attempt is unsuccessful, it is proposed to reclassify, giving
the lower duty only to Canadian and American type whiskies.
(2) Reasons for making the concession:
(a) The concession would be a. help in obtaining the
anthracite coal concession.
(b) The average ad valorem equivalent of the duty was
101 percent in 1934.
(c) The reduction might tend to check smiggling.
(d) A reduction in the prices of imported whisky and
of blended whisky, containing a proportion of the
imported product, would benefit consumers.
(e) Canada has stocks of American type whisky properly
aged amounting to 8 million gallons. There are
but very small stocks of properly aged whisky in
the United States.
(3) Reasons against making the concession:
(a) It is believed that all the Canadian stocks of
American type whisky will come into the United
States regardless of the duty. Consequently, the
reduction will not stimulate importe.
(b) The Canadian distillers have stopped producting
American type whisky and will not again make any.
Consequently. this concession will not tend to
increase employment in Canada.
128
Secretary Morgenthau 6/20/35 - 2
(c) The Canadian stocks are owned or controlled by
large interests which maintain plants in the United
States, and which import the aged whisky for blend-
ing purposes. It is, therefore, doubtful whether
the duty reduction would be reflected in a price
reduction. Probably the duty reduction would go to
the owners of the Canadian stocks.
(d) Imports of all whiskies during 1934 were 5.6 million
proof gallons. The duty collected amounted to
$28,000,000. The proposed concession would cut this
revenue in half, thus involving a loss of $14,000,000.
Against this loss there are possible gains resulting
from a reduction of administrative costs and increased
duty collections, due to a decrease in smiggling, and
a possible increase in imports from England. It seems
likely, however, that there will be a loss of revenue
of at least $10,000,000.
(e) This lose of revenue seems to be too much to pay for
an anthracite concession which will probably not be
secured. It seems to be the sense of the Trade Agree-
ments Committee that they will grant the concession
to the Canadian and American type whiskies regardless
of the anthracite concession. In this case the loss
of revenue would amount to about $8,000,000.
(f) There is an objection on moral grounds in that this
American type whisky was distilled during the pro-
hibition period for the express purpose of being
smuggled into this country.
(Penciled notes: 6/22 Mr. Haas took up with Secty. at Staff meeting:
Secty. said he had no objection, Mr. Haas informed
Collado.)
Regraded Unclassified
129
November 11, 1935.
Regraded Unclassified
To:
Secretary Morgenthau
From:
Mr. Hass
Subject: History of the Reduction of the Duty on Whisky
1. At & meeting of the Committee on Trade Agreements on May 22, 1935,
the question of a reduction in the duty on gin was considered in connection
with the Netherlands. While the discussion was taking place, the Treasury's
representative, Mr. Collado, who at that time was not aequainted with the
Treasury's position, telephoned Mr. Hass for instructions. Since Mr. Hass
was out, he telephoned to Mr. Frank. It was decided that he should oppose
the reduction. The minutes of the meeting read in part:
"Mr. Collado, representing the Treasury, voted against the
motion to approve the concession recommended with respect to gin."
2. The Committee on Trade Agreements took up the proposed agreement
with Canada in June. The Canadians requested a reduction in the duty on
whisky from $5 to $2.50 per proof gallon. Mr. Collado took this matter up
with Mr. Hass and was instructed to oppose the reduction. The following
statement is quoted from the mimites of the meeting of June 13, 1935:
"Whiskey (Par. $02). The negotiators should be prepared to
concede to Canada a duty of $2.50 per gallon for the life of the
agreement upon the assumption that in consideration of the bene-
fits which will be received from a generalization of the duty re-
duction on whiskey, the United Kingdom will consent to a modifica-
tion of the preference on coal enjoyed under the Ottawa agreements.
A removal or & substantial modification of such preference will be
required if Canada is to grant the concession on coal desired by
the United States. Mr. Collado, representing the Treasury, voted
against this action of the Committee, pointing out that a reduction
in the duty would not greatly increase imports and would result in
a substantial loss of revenue. It was argued, however, that the
proposed reduction in duty would tend to check amuggling which de-
prives the Government of substantial customs revenue and for the
suppression of which a considerable amount of Government funds is
expended."
3. Mr. Collado, in a memorandum to Mr. Haas dated June 18, 1935, sum-
marized the arguments presented at the meeting of the Committee. The name
memorandum was submitted by Mr. Haas to the Secretary, dated June 20, 1935.
130
Secretary Morgenthau - 11/11/35 - 2
4. Some time thereafter, Mr. Haas told Mr. Collado that the Treasury
would not oppose reductions in the duties on alcoholic beverages. Mr. Haas
told Mr. Collado not to reverse formally the Treasury's vote in the reduc-
tion on whisky, but to tell Mr. Grady, the chairman of the Committee, un-
officially.
5. At the meeting of November 1, 1935, it was mentioned that the
United Kingdom would not consent to the modification on anthracite coal.
At the close of the meeting, Mr. Collado asked Mr. Carr, the secretary of
the Committee, what action was contemplated on Irish and Scotch whiskies
as a result of this denial. Mr. Carr referred Mr. Collado to Mr. Hickerson
of the State Department, who had left the meeting. The next day,
Mr. Collado telephoned Mr. Hickerson. The latter said that he had dis-
cussed the whole question of the reduction on whisky with the Secretary,
that he had told the Secretary that there would be increased revenue due
to increased imports and the elinimation of smuggling, and that he had the
Secretary's approval. It may be noted that the Bureau of Customs states
that there is practically no smuggling of whisky from Canada since the
Canadian stocks are owned by large firms, such as Hiram Walker and
Seagram's, which have large interests in this country as well.
(This statement prepared by Mr. Collado)
131
November 8, 1935.
Regraded Unclassified
To:
Secretary Morgenthau
From:
Mr. Haas
Subject: Meeting of Trade Agreements Committee, November 7. 1935
Report on negotiations with Canada:
The Trade Agreements Committee was favored with B. report on the pres-
ent status of negotiations with the Canadian delegation by (r.Hickerson
of the State Department. After calling attention to the fact that if an
agreement inconsummated the United States will, under the most-favored-
nation clause, receive considerable reduction in duties on some 700 com-
modities, Mr. Hickerson proceeded to outline the present situation with
respect to agricultural commodities. These now occupy 8. focal position
in the discussions.
The Canadian delegates indicate a willingness on the part of their
country to abandon arbitrary valuations on all products except fruits and
vegetables. While they could give no guarantee against a re-imposition of
present arbitrary additions to invoice values, they stated that action of
this sort would be taken, if at all, only after a full hearing before the
Canadian Tariff Commission.
On fruits and vegetables the Canadian negotiators indicate a willing-
ness to reduce the present arbitrary additions by 25 percent and to reduce
the current level of duties by 50 percent on almost all products in this
class. On several of these products, notably tomatoes, a complete abandon-
ment of arbitrary valuation is suggested.
If these concessions, of very considerable importance to our exporters
of agricultural products, are to be granted by Canada, it appears absolutely
essential that the United States undertake to liberalize the present provi-
sions with respect to cattle, seed potatoes, and cream. As modest conces-
sions on these commodities, which he regarded ascufficient to promise the
attainment of an agreement most favorable to this country, Mr. Hickerson oug-
gested the following:
Cattle. A reduction of the duty from 3 cents to 2 cents per pound, this
reduction to apply to a volume of imports equal to 3/4 percent of the annual
slaughter of cattle and calves during the period 1928-1932. (This would per-
mit entry into this country from Canada of approximately 155,000 head.) The
132
Secretary Morgenthau - 11/8/35 - 2
application of the same provisions to calves was suggested. (In effect
this would permit the entry of some 52,000 head.) A similar recommendation
with respect to dairy cattle was also recommended, with a limit of 20,000
head.
Seed potatoes. Reduction of the present duty of 75 cents per 100
pounds to 45 cents, this reduction to be allowed on 750,000 bushels, was
regarded as a concession acceptable to Canada. Exception from this re-
duction would be made during the Cuban growing season.
Cream. Reduction of the duty from the present level of 56.6 cents per
gallon to 35 cents, imports subject to this reduced duty not to exceed 1g
million gallons.
No action was required by the Committee on these suggestions, since
equal or more generous ones had already been approved. The Committee felt
that the gains to American aporters of agricultural products involved in
the Canadian concessions were of sufficient importance to outweigh any pos-
sible loss to producers of the three products which are of such importance
to Canada.
Action taken:
In response to a request from the Negotiating Committee to authorize
reductions on certain additional products, the following action was taken:
Acetic acid. Reduction of duty from the present level of 2 cents per
pound to lt cents authorized.
Sperm whale oil. Reduction of duty authorized from the present level
of 5 cents per gallon to a level equal to the difference between American
and Canadian costs (according to the findings of the Tariff Commission),
though not to less than 2½ cents per gallon.
Harness and saddlery leather- Reduction authorized from present duty
of 12½ percent to the level of the compensatory duty, but not below 10 per-
cent.
Pulp toard in rolls (of & special type). Reduction authorized from
present duty of 10 percent to 5 percent, subject to investigation by the
Tariff Commission.
Lead pigments: litharge. Reduction authorized from 2) cente per pound
to 2.1 cents, provided investigation shows Canada to be the principal poten-
tial supplier.
133
Secretary Morgenthau - 11/8/35 - 3
Grains, unfit for human consumption, and mixed grains. Binding at
10 percent authorized.
Undressed furs of which Canada is the principal supplier. Binding
on the free list authorized.
Requests for concessions on the following products were denied: an-
hydrous sodium sulphate, sheep and lambs, binding twine, and cobalt linoleate.
Regraded Unclassified
133A
November 11, 1935.
Monday.
H.M.Jr:
Judge?
Judge
Hoyt:
Yes.
H.M.Jr:
I just heard from the President and I talked to him
about this matter which we're both interested in.
H.:
Yes.
H.M.Jr:
And he said that under the circumstances that he didn't
see that we could do a larger personnel at this time.
H.:
Yes.
H.M.Jr:
And that we should give you all the assistance that we
could which I said I'd offered you.
H.:
Yes.
H.M.Jr:
And then go ahead and prepare your budget for Congress.
H.:
Yes.
H.M.Jr:
So that's about the way it is.
H.:
All right, sir.
H.M.Jr:
And all I can say again is that anything that you want
that we've got we'll be glad to let you have it.
H.:
Well Mr. Secretary I appreciate your courtesy very much
indeed and I hope you know that I do.
H.M.Jr:
I think you're in a very difficult position.
H.:
Yes.
H.M.Jr:
And especially coming down here under the impression that
you were going to have one kind of Commission and you find
you have another and you find you haven't any money.
H.:
Yes.
H.M.Jr:
So you have all of my sympathy.
H.:
(Laughter) Thank you very much and I appreciate everything
you've done personally very much indeed.
H.M.Jr:
Thank you Judge
H.:
Yes.
Regraded Unclassified
13313
B
- 2 -
H.M.Jr: Goodbye.
H.:
All right goodbye.
134
November 11th
I spoke to the President about Judge Hoyt and told him that
the Treasury General Counsel held that it was his opinion that all
of the money which we are now paying Judge Hoyt's organization is
illegal. The President said, "why are you doubting that as long
as Comptroller McCarl said it was all right" to which I replied,
Wwell even McCarl may be wrong some times."
I then presented the President the attached memorandum signed
by myself also a memorandum from Hoyt to me - both of which he
returned to me. He agreed that we should let matters rest until
Congress meets. He then made a statement which rather surprised
me by saying "of course you should not oppose on the Hill Judge
Hoyt's wishes that he wants his own General Counsel. You agree
that he should have his General Counsel" and I said, "I would
rather not agree to it as I want to think it over but I can
assure you that when the matter goes on the Hill that we will
present a united front the way we always do".
I outline my theories on the organization to handle the
unemployment problem and also methods of paying, to the President
and, on the whole, he took my suggestions very well. I said to
him that I did not want to go ahead and work along these lines
unless he was sympathetic - and he was sufficiently so because he
told me to go ahead for this week and take it up with him next
Monday and then he made the following detailed suggestions and
comments.
He said, "in considering the federal government matching
monies with the states remember that no State Legislators meetin
1936." Next he said, he was thinking along the following lines:
1. That he would get from Congress enough money for relief
to last until January, 1937, to take care of the unemployed
employables.
2. That he would suggest to Congress that either they pass B
bill in the spring of 1936 which would authorize us to match
our contributions with the states or to wait and announce that
we will pass a bill in January, 1937, authorizing the federal
government to match monies with the states.
Enlarging on my suggestion he said that the next move would
be to take FERA and make it a section of the Social Security
Commission. The Social Security Commission will then have the
following functions:
1. To administer the old age security.
2. Unemployment insurance.
3. A new division which would simply give the money to the states
on a matching basis with federal inspectors to see that the
money only went to the employables who are out of work.
135
- 2 -
The foregoing statements by the President on top of what I
outlined to our own group this morning and then outlined to him
pretty definitely lays out a policy along the lines that I was
thinking and seems very sound to me.
Before he left this subject, I said, "do you know that the
United States Employment Service has fallen down in a number of
places"? and he said, "yes". I said, "how about putting that
service under the Social Security Commission"? At first, he said,
"no". Then I said, "logically it belongs there" and he replied,
"yes, but we can't overlook personalities". I said, "however,
if we could you agree that this service belongs with Social Security
Commission" and he said, "yes".
Next he said instead of asking Congress to give him new powers
for reorganizing departments he would send a message to Congress for
authority to appoint a Board to study reorganization of all depart-
ments and most likely put a man like Owen D. Young at the head of it
and, he said, for example, "you would not object if we transferred the
Health Service out of the Treasury to some other Department" and I
replied, "not at all". He said I would like to get this Board going
plus the Board on housing that I talked to you and Peter Grimm and
Frank Walker about". (At the time we gave him Grimm's suggestion for
a commission to study housing between now and December 15th the Presi-
dent said he would rather have that commission appointed late next
spring and work while the campaign was on as he thought it would
furnish good campaign material).
He then asked me how I felt about these floods of gold coming
here. I said, "there is nothing that we could do about it as, if I
showed the slightest worry, it would upset everybody. He then asked
me to have a study made to show how the gold that was coming here
was being used and to break it duwn into three divisions:
1. What proportion went to pay for balance of trade,
2. What proportion was sent here for safe keeping.
3. How much gold came here for the purchase of securities.
I then showed him the letter from Parker Gilbert and he was
a little too sneery about a letter from J. P. Morgan and, after reading
it, he said, "ah ha, again the war has broken out between J. P. Morgan
and the Chase Crowd ". By the Chase crowd he meant the Rockefellers.
I told him that I had informed Eccles that I did not want
anything done about increasing reserve requirements until after
February 1st and the President said, "you better stay on your 24 hour
basis because you do not know when you may have to do something quickly."
Regraded Unclassified
136
- 3 -
I said, "that was all right, but with our financing coming along
I certainly did not want to do anything until after December 15th".
He allowed that that was all right, I informed him that we would
need one billion dollars new cash on December 15th and this came
as a surprise to him. He said, "how are you thinking of raising it "
and I said, "by offering 8 long-term bond and most likely a five
year note". He then told me that he wished we would make an estimate
for him on how long we thought Italy could hold out financially.
He told me, in confidence, that it was the opinion of Mr. Hirst,
of the London Economist and the British government, that after the
final sanctions went into effect, on November 18th, that Italy could
not hold out for more than three months. He said he understood that
Laval concurred in this opinion. The President differed with these
people and said that as long as Italy was winning he felt that they
could hold out indefinitely. He wants us to give him, as quickly as
possible, our estimate.
He seems to be considerably worried about the kind of publicity
he is going to get on the Canadian treaty and wanted to know if we
had anybody who could work with the State Department in helping them
prepare the publicity. I told him that Gaston was the best person I
had. He told me to tell Gaston to get in touch with Phillips. He
said, "for example, the farmers in northern New York and Vermont will
raise hell when they learn that a lot of Canadian cream is going to
be permitted to come into the United States with the possible tempo-
rary drop in United States cream." He said, "the way to explain the
theory 1s, namely, if Canada sends us one million dollars worth of
extra cream Canada will buy from the city one million dollars worth
of extra dresses and manufactured goods." I was unkind enough to
say "how do you know they will buy these dresses in New York or in
United States cities"? and he said, "they will buy them somewhere".
The President and I then had a long discussion about where we
should locate a storage house for silver. He has in mind the Rogers
Estate adjoining him. This estate consists of 640 acres, half of it
between the river and the Albany Post road and the other half east
of the Albany post road. On the eastern side of the post road is one
of the oldest experiments in New York State in forestry and he would
like to see the United States government continue this project. I
realized that this is something that he wants but, I said, "do you not
think people are going to joke about your having one million ounces,
so to speak, in your backyard". He could not see this at all. He
said, "they might criticize our buying an estate, from close friends
of his. Personally I think the government would be very much criti-
cized if they bought a 640 acre estate, next to the President, for
this purpose. I promised to take it up with him again next week and
suggested that he sound out other people to see how they react.
I spoke to him about appointing Marvin Jones to a vacancy in
the Federal Court in the northern district of Texas. He said he
knew about this but it would be very difficult for him because
another Texan, who was very helpful to him in Chicago, wanted this
position but he would try and see if he could work it out.
- 4 -
137
I told him that Filene's scheme to finance, with RFC money,
a chain of co-operative retail stores was, in my opinion, at this
time, cock-eyed. He agreed with me.
Regraded Unclassified
136
Wm. Filene's Sons Company
Washington. Summer. Hawley. Franklin Streets
Boston
Office of President
November 12, 1935
The Honorable Henry Morgenthma, Jr.
Secretary of the Treasury
Washington, D. c.
Dear Mr. Morgenthau:
A few months ago I incorporated the Consumer Distribution Corporation
with a paid-in capital of one million dollars. It was organized for the purpose
of promoting and managing & Chain of Cooperative Department Stores, each store
of which will be wholly owned by the consumers in the trading area served by the
store. The Consumer Distribution Corporation will charge a fee for exercising
management and control and handling the centralized buying for each store, out
of which reserves will be set up to study the causes of high prices, as the Brit-
ish Cooperatives did, and for other purposes helpful to cooperation. At the end
of five years an impartial board, friendly to cooperation, will decide if the
time is right to turn over the Corporation to the cooperative units. In any
event, at the end of ten years the cooperatively-owned stores must acquire owner-
ship of the Corporation. All profits from operations of each store in the Chain
will go, after suitable reserves are set up, to the cooperative sharcholders in
proportion to their purchases and in the form of patronage dividends.
All of the capital of the Consumer Distribution Corporation has been
furnished by me, and I have fixed the condition that the interest cannot exceed
five per cent and shall be paid only if earned. I have made it impossible for
me to obtain any capital appreciation by a provision that when the capital is re-
paid, the amount shall not exceed that originally paid in and that it shall be
paid to a trust fund created for the purpose of promoting cooperation.
With my associates and a Board of Directors, which will shortly be com-
pleted, I am now prepared to actively proceed with the launching of the Chain
through the acquisition of existing stores, once I have assurance of there being that
the volume of their combined purchases will be large enough to give us the advan-
sufficient funds available for this purpose. We will need enough stores 80
has been offered to us and we have retained management counsel to investigate of
tages of chain stores and large department store groups. One store in New York
method of determining whether purchase is desirable. It is my belief
other stores. A report on one desirable store is available as a sample that our the
R. F. c. properly and legally supply the financing necessary, for the reasons
which may discussed at greater length in a supplementary memorandum attached.
The initial are financing calls for approximately fifteen million dollars needed and, as
soon assured of its availability, we shall begin to buy the and the
ber of and, employees. It is for the purpose of securing this financing
stores as we are through better management methods, increase their volume that I am non-
meeting with you today at the suggestion of the President.
Sincerely yours
Edward Milene
Edward s Filene
Enclosure
Regraded Unclassified
139
November 12, 1935
I told Coolidge and Haas today that the President
yesterday asked me to give him the best estimate we have
on how long Italy can last. He has indirect information
that they can only last three months.
I know that Cochran is in Geneva and, as I remember
it, I told him to go to England next. I asked Coolidge
to call up Phillips at the State Department and tell him
that I wanted Cochran to go to Italy and secure the infor-
mation that the President wants -- that is, how long from
November 18, the date on which the sanctions go into ef-
fect, do they think Italy can last. I want Phillips to
send an order to Cochran at once and tell him that I want
a report within ten days and to be sure and ask him to
give me an opinion and the facts on which his opinion was
based.
140
November 12, 1935
At the 9:30 conference this morning, Mr. Grimm again
brought up the question of "Little Eva" (EHFA) and said
that the matter is coming up again today and had reached
the point where it will be necessary for Mr. Morgenthau
to see the President about it:
Mr. McReynolds pointed out that the amount involved,
$15,000,000, would go directly from the 4-billion-8 emer-
gency appropriation to REA and that REA is authorized to
use that in financing the electrical and plumbing projects.
He was very definite that he was correct. Mr. Grimm said
it must have all been changed very recently.
Mr. Morgenthau told Mr. Grimm that as long as the
set-up on this $15,000,000 is straight financially, that's
as far as his interest goes; that he knows that Stewart
MacDonald has an appointment with the President tomorrow
and if he, MacDonald, wants to bring up the question of
these two agencies overlapping, that's one thing, but as
Secretary of the Treasury he does not want to interfere
since McReynolds tells him that the $15,000,000 goes
directly from the emergency appropriation to REA.
Mr. Oliphant told Mr. Morgenthau that he 1s handling
the matter that Iregy talked to him about yesterday; that
18, they are going to ask Moody whether he is going to try
the cases in New Orleans and if he does not want to, they
will get someone else. Mr. Morgenthau definitely asked
that Woodcock be left out of the picture. Mr. Oliphant
also reported that Jackson will be back next month and
will have his own crowd back with him; also, that Jackson
has been very successful.
Mr. Gaston said that Forbes Watson had planned a series
of art lectures over the country and that he had told Watson
It is our policy in the Treasury that a Treasury employee
1s supposed to give his full time to the Treasury and if
he makes any speeches at all he cannot accept payment for
them,
141
November 12, 1935
This great flow of gold is disturbing the President
and myself at this time. What disturbs me is that the
turn in foreign exchange may come next September or Octo-
ber due to the change in conditions in Europe and the
gold would begin to move out of this country entirely
due to European conditions, but coming at that time the
politicians here would claim that it was moving out of
this country because financial interests were worried
that Roosevelt was going to be reelected.
My idea is that if we gradually built up a supply
of $100,000,000 of gold in London and there were a few
sudden dips, we could sell this gold at that time and
check a rush of gold out of the United States. This
would take care of the political angle. However, I
would not do it for that reason if it was not sound
international finance to do it, irrespective of its
political effect.
H.M. Jr. called the President and told him that he
thought his speech was magnificent; that he spoke to
Phillips about having Gaston help him and Phillips was
delighted. He also gave him the gist of the above idea.
He told him that whenever gold sells below $35.00 an
ounce in London he would like to begin to buy gold in
London until we accumulate $100,000,000 worth and if
there are flurries we can gradually sell it. It will
stop the big rush coming this way and stop flurries when
it begins to leave here. By buying in London it seeks
its own level abroad. He would only buy gold below
$35.00 and only sell it above. The President said it
was a very good 1dea providing it can be worked out
technically.
Regraded Unclassified
142
November 12, 1935.
To:
Secretary Morgenthau
From: Mr. Haas
Subject: Confidential Reserve Board Data on Excess Reserves
1. Which banks hold the $3 billions of excess reserves?
(a) On October 30, New York and Chicago member banks held
about $1,700 millions; all other member banks held about
$1,300 millions.
(b) A better breakdown is available for the daily average
of excess reserves during September, when total excess reserves
averaged $2,628 millions; New York and Chicago member banks held
$1,423 millions; member banks in 61 other large cities (called
reserve city banks), $734 millions; and all other member banks,
called country banks, $471 millions.
2. If required reserves were increased by 50 percent, how many
banks would need new funds? (Answers based on June 29,1935
Call Report)
(a) About one-third of the member banks (2,041 out of 6,410)
would be short an aggregate amount of $328 millions of legal
reserves.
1,854 country banks would be short a total of $46.2 millions.
158 reserve city banks would be short a total of $130 millions
5 Chicago banks would be short a total of $1.7 millions.
24 New York City banks would be short a total of $150.0 millions.
(b) All but 125 of these 2,041 banks, however, have balances
with correspondent banks sufficient to enable them to comply with
the increased reserve requirements without, presumably, borrowing
from the reserve banks or selling securities. The data do not
indicate the aggregate reserve deficiencies of the 125 banks
without adequate correspondent balances.
3. If required reserves were increased by 25 percent, how many
banks would need new funds? (Answer based on June 29, 1935
Call Report)
(a) About 14 percent of the member banks (897 out of 6,410)
would be short an aggregate amount of $99 millions of legal
reserves.
143
794 country banks would be short a total of $15.5 millions.
86 reserve city banks would be short a total of $45.9 millions.
2 Chicago banks would be short a total of $0.5 millions.
15 New York City banks would be short a total of $37.5 millions.
(b) All but 45 of these 897 banks, however, have balances with
correspondent banks sufficient to enable them to comply with the
increased reserve requirements without, presumably, borrowing from
the reserve banks or selling securities. The data do not indicate
the aggregate reserve deficiencies of the 45 banks without adequate
correspondent balances.
4, What is the location of banks whose reserves would be deficient
under a 25 and 50 percent increase, respectively, in legal reserve
requirements?
Apart from the New York City and Chicago figures cited above,
the information is available only by Federal Reserve districts,
as summarized in the following table:
: If required reserves:
If required reserves
: were increased 25% :
were increased 50%
:Number of
:
:Number of :
banks with :Additional:banks with :Additional
:insufficient: reserves: insuficient: reserves
: reserves : required: reserves : required
otal - all member banks
897
$99,377,000
2,041
$327,820,000
otal for each district:
Boston
95
5,283,000
164
13,344,000
New York
145
46,882,000
288
172,388,000
Philadelphia
137
6,104,000
319
18,894,000
Cleveland
84
11,526,000
196
28,431,000
Richmond
51
2,604,000
130
8,921,000
Atlanta
45
2,259,000
113
8,758,000
Chicago
52
3,957,000
117
12,469,000
St. Louis
42
1,307,000
102
4,788,000
Minneapolis
54
755,000
136
2,141,000
Kansas City
53
3,234,000
133
11,742,000
Dallas
79
826,000
189
4,758,000
San Francisco
60
14,640,000
154
41,186,000
5. What further data are needed to determine the immediate
effects upon the banking system of an increase of 25 and 50 percent,
respectively, in required legal reserves?
(a) An analysis of the liquid assets held by banks with
insufficient excess reserves.
(b) An analysis of the number, character, and local
importance of the banks that would be embarrassed by an increase
in legal reserve requirements.
6. Summary of reasons for and against raising reserve requirements
at this time.
The summary submitted to Governor Eccles, a copy of which
accompanied the figures analyzed above, contains nothing unfamiliar
to you; and does not cover nearly as much of the ground as you have
already considered.
Regraded Unclassified
144
CONFIDENTIAL
November 5, 1935.
REASONS FOR RAISING RESERVE REQUIREMENTS AT THIS TIME
Arguments for immediate action
1. Member bank reserves at the present time are
$3,000,000,000 in excess of legal requirements. Further increases
in excess reserves through gold imports, silver purchases, and
through the ultimate use of the gold in the Stabilization Fund
may be expected. Demand deposits of member banks are now higher
than they ever were and they can be more than doubled on the basis
of existing reserves. This would be injurious credit expansion.
It will be necessary at some time to use the Board's powers for
absorbing excess reserves. It is, therefore, not a question of
whether or not the Federal Reserve System will have to act, but
merely a question of the best timing of the action.
2. It would seem best to take measures for absorbing at
least a portion of existing excess reserves before the banks have
had an opportunity to expand their activities on the basis of
these reserves. The banks are being urged by the Government
actively to seek opportunities for extending additional credit
and thereby to facilitate recovery. To let them proceed and
later, when many of them may no longer have excess reserves, to
put them in debt by increasing requirements or selling securities
may lay the System open to the charge of inconsistency. Action
at such a time, furthermore, might cause banks to liquidate loans
Regraded Unclassified.
145
or investments and might start a deflationary movement. Early
action would avoid these difficulties.
3. Gradual advances in reserve requirements started
at this time when reserves are ample would be less likely to
result in losing members from the Federal Reserve System than
would drastic action at a later date.
4. Banks are now in such a position that an advance in
reserve requirements would not inconvenience them and would not
act as a restraint on business recovery.
5. Action at the present time may have a good psycho-
logical effect, indicating that the System is alert to the situ-
ation and prepared to take the necessary steps to avoid inflation.
Arguments for raising requirements
6. The preceding arguments would apply equally to
selling securities and to raising reserve requirements, but
raising reserve requirements would have the advantage of making
use of a new method which was not available prior to the passage
of the Banking Act of 1935. Previously reserves could not be
advanced, except by the declaration of an emergency and with
approval of the President. The use of this method now enables
the System to say that it could not have acted sooner because
of lack of authority.
7. Raising reserve requirements would have the
additional advantage over selling Government securities that
it would not have any unfavorable effect on the market for these
securities.
146
8. It would also have the advantage of not diminishing
the earning assets of the Federal reserve banks, which may become
a serious matter if these banks should be put in a position where
they would have to go to Congress for appropriations.
9. It may be a good general policy to use changes in
reserve requirements as a method of readjusting the banking position
to new conditions, such as the present unprecedented reserves, and
to use the traditional methods of open market operations and dis-
count rates as the instruments for direct influence on expansion
or contraction of credit.
By raising reserve requirements gradually to a point
where excess reserves would not be very large, the Reserve banks
would be placed in a position to use open-market sales, which are
more flexible, to counteract inflationary tendencies.
Regraded Unclassified
147
November 5, 1935.
REASONS AGAINST RAISING RESERVE REQUIREMENTS AT THIS TIME
1. There is at this time no indication of an expansion of
credit and, therefore, no real occasion for taking any action of
a restraining character.
2. Federal Reserve policy should depend in part on its
psychological effect. For that reason it ought to be extremely
simple. The public should know that when the Federal Reserve
System does anything in the direction of restraint that this
constitutes a policy of restraint. A simple understanding of
red and green signals of credit policy is an advantage which
may be lost or impaired by actions that require more or less
subtle explanation.
3. The System's powers for counteracting the enormous
volume of excess reserves now in existence and in prospect are
limited. The open-market portfolio is $2,400,000,000 and the
maximum by which reserve requirements may be raised amounts
to a similar figure. Excess reserves might become larger than
could be counteracted by both of these instruments. Their full
utilization, furthermore, particularly the sale of Government
securities in large volume, may be a difficult matter. For
this reason, it might be better policy to husband the System's
resources in order to be in a position to utilize them to the
maximum effect when the need comes.
4. Action at the present time might, even though it should
not, result in a more hesitant attitude on the part of banks and
might, therefore, retard recovery.
Regraded Unclassified
148
CONFIDENTIAL
To:
Chairman Eccles
Date: November 1, 1935
From: Mr. Smead
Subject: Excess reserves
of member banks.
On October 30 excess reserves of member banks amounted to
$3,011,000,000, or about $600,000,000 above the amount reported for
June 29, 1935*, and about $380,000,000 more than average daily
excess reserves for the month of September, when they amounted to
$2,628,000,000. The average daily excess reserves during the month
of September of central reserve city, reserve city, and country
banks, in each Federal Reserve district, were as follows:
Federal Reserve
Central re-
Reserve
Country
Districts
serve city
city
banks
-
banks
banks
Boston
$125,000,000
$43,000,000
New York
$1,177,000,000
3,000,000
81,000,000
Philadelphia
75,000,000
32,000,000
Cleveland
129,000,000
43,000,000
Richmond
56,000,000
31,000,000
Atlanta
21,000,000
25,000,000
Chicago
246,000,000
74,000,000
69,000,000
St. Louis
54,000,000
23,000,000
Minneapolis
25,000,000
35,000,000
Kansas City
50,000,000
41,000,000
Dallas
20,000,000
32,000,000
San Francisco
102,000,000
16,000,000
Total
$1,423,000,000
$734,000,000
$471,000,000
Excess reserves of New York and Chicago banks on October
30 were about $200,000,000 and $90,000,000, respectively, above
the September averages. Later figures for reserve city and for
country banks separately are not available, but the combined aver-
*Calculated in accordance with the formula used since
the passage of the Banking Act of 1935.
Regraded
149
age for these two classes of banks for the month of September,
$1,205,000,000, was approximately $100,000,000 less than at
present and not much above the figures for June 29.
The last date for which we have figures of required
and excess reserves of each member bank is June 29, 1935, the
date of the last call report. On the basis of the June 29 condi-
tion reports 129 member banks had deficiencies in reserves, 768
had excess reserves of 25 per cent or less, 1,144 banks had excess
reserves amounting to between 26 and 50 per cent of required reserves,
and 4,369 had excess reserves amounting to more than 50 per cent
of required reserves. The following is a distribution of the number
of central reserve city, reserve city, and country banks on June
29, 1935, according to the ratio of excess reserves to required re-
serves:
:
Total :Central reserve:Re- ;
:number of: city banks :serve: Country
: member :New :Chicago :city : banks
:
banks
:York
:
:banks:
Total number of member banks
6,410
38
18
329
6,025
Number with deficient
reserves
129
#7
:
12
110
Number with excess re-
serves amounting to the
following percentages of
required reserves:
25 per cent or less
768
8
2
74
684
26-50 per cent
1,144
9
3
72
1,060
51-100 per cent
1,529
7
5
69
1,448
101-200 per cent
1,278
4
10
50
1,218
Over 200 per cent
1,562
3
2
52
1,505
#On the basis of average figures for the semi-weekly re-
serve computation period ended October 25 no member bank
in New York City had & deficiency in reserves, but 14 had
excess reserves amounting to 25 per cent or less of required
reserves.
Regraded Unclassified
150
It will be noted that 17 central reserve city banks,
86 reserve city banks, and 794 country banks did not have sufficient
reserves to meet an increase of 25 per cent in requirements. These
figures represent 30 per cent of the total number of central re-
serve city banks and 26 per cent of the total number of reserve
city banks, but only 13 per cent of the total number of country
banks.
In case reserve requirements were raised to 125 per cent
or to 150 per cent of present requirements, there would be a cer-
tain number of banks which would not have sufficient excess re-
serves to meet the increase without drawing down their balances
with other banks, selling securities, or borrowing from the Federal
Reserve banks. The number of banks that would be in that position
and the amount of additional reserves that they would have to secure
is indicated by classes of banks and by Federal Reserve districts in
the following table:
Regraded Unclassified
151
If required reserves
If required reserves
were increased 25%
were increased 50%
Number of
Additional
Number of
Additional
banks with
reserves
banks with
reserves
insufficient required
insufficient
required
reserves
reserves
otal - all member banks
897
$99,377,000
2,041
$327,820,000
Central reserve city banks:
New York City
15
37,461,000
24
150,024,000
Chicago
2
510,000
5
1,734,000
Reserve city banks
86
45,910,000
158
129,859,000
Country banks
794
15,496,000
1,854
46,203,000
Total for each district:
Boston
95
5,283,000
164
13,344,000
New York
145
46,882,000
288
172,388,000
Philadelphia
137
6,104,000
319
18,894,000
Cleveland
84
11,526,000
196
28,431,000
Richmond
51
2,604,000
130
8,921,000
Atlanta
45
2,259,000
113
8,758,000
Chicago
52
3,957,000
117
12,469,000
St. Louis
42
1,307,000
102
4,788,000
Minneapolis
54
755,000
136
2,141,000
Kansas City
53
3,234,000
133
11,742,000
Dallas
79
826,000
189
4,758,000
San Francisco
60
14,640,000
154
41,186,000
As indicated in the table, if reserve requirements were
increased 25%, 897 banks would have to provide $99,000,000 of addi-
tional reserves; and if requirements were increased 50%, 2,041 banks
would have to provide $328,000,000 of additional reserves.
Of the 897 banks which would have to increase their re-
serves to bring them up to 125 per cent of requirements, all but
45 had balances with correspondent banks sufficient to provide the
additional reserves. Likewise, of the 2,041 banks that would have
Regraded Unclassified.
152
to increase their reserves to bring them up to 150 per cent of re-
quirements, all but 125 had balances with correspondents sufficient
to meet the increase. The extent to which such balances would be
used for the purpose of meeting an increase in reserve requirements
and the extent to which such an increase would be met by borrowing
or by selling securities is impossible to tell from available infor-
mation.
In the event of an increase in reserve requirements, a
number of member banks in New York City would presumably have to
either sell securities or borrow to meet the greater part of the
additional requirements of $37,000,000, if requirements were in-
creased 25 per cent, or $150,000,000 if requirements were increased
50 per cent. In the final analysis it is to be expected that the
banks would liquidate some of their low-yield securities rather
than borrow.
Member banks in reserve cities and country banks presuma-
bly would draw on their city correspondents for a large part of the
additional reserves that they would be required to deposit with
Federal Reserve banks. If this were done most of the withdrawals
would be made from member banks in the large financial centers,
particularly New York. The total amount which would be withdrawn
from New York, however, even if reserve requirements were increased
50 per cent, would not be sufficient to bring about a drain of funds
which New York banks could not easily meet. The amount of funds
which might be withdrawn rom New York to meet an increase of 50
per cent in reserve requirements is small compared with the huge
Regraded Unclassified
153
volume of excess reserves now held by New York City banks in the
aggregate.
Should you desire it at any time we can furnish you with
excess reserves as of any Wednesday for each of the weekly reporting
memberbanks in New York, Chicago and 99 other leading cities.
Regraded Unclassified
154
November 12, 1935
Haas and Graves came in and reported that they had
"hit a snag" on the Canadian trade agreement because if
it were signed in its present form it would constitute
a discrimination against Great Britain on her Scotch and
Irish whiskeys.
Haas estimated the loss in revenue would be $4,000,000
a year if Scotch and Irish whiskeys were also given the
benefit of the reduction in tariff rates.
Mr. Morgenthau made the statement that stocks of four-
year old whiskey in this country are very low; that the
Scotch and Irish whiskeys are four or more years old while
Canadian is anywhere from one to four years, and suggested
that we specify in the trade agreement with Canada that
all Canadian whiskey to be imported under the terms of the
agreement must be at least four years old.
Mr. Graves thought we should have the State Department
let the British Government know that we wanted to include
Scotch and Irish whiskeys because of that Government's
excellent cooperation with the United States in the latter's
efforts to combat smuggling. Mr. Morgenthau agreed with
this suggestion.
Regraded Unclassified
155
November 13, 1935
Ambassador Sze came in and said to the Secretary, "I
88W Lochhead about the four points and I cabled home and
Kung says that he wants to know if we could not make No. 3
8. little different." Mr. Morgenthau inquired of the Am-
bassador, "What suggested changes would you make?" To
which the Ambassador replied, "I do not know. The Yokohama
Specie Bank made a b1g raid on the exchange fund and bought
very heavily. We have at our disposal $50,000,000 of foreign
exchange and gold, including $13,000,000 to come from you,
and yesterday there nearly was a panic. Kung appeals to
you and asks that you take more than 20,000,000 ounces almost
immediately." Mr. Lochhead remarked that the next steamer
sails on November 19.
Mr. Morgenthau told the Ambassador that if we put more
than the normal amount of silver on and if there 1s an addi-
tional insurance rate over the usual rate because of the
additional silver, then the Chinese should pay the extra
insurance and the Ambassador said, "That would be fair. It
Because of the political situation, the Chinese Ambas-
sador suggested that if we can add "during the next twelve
months" to No. 3, Kung would accept all of the other points.
The Secretary told the Ambassador that he wanted to
call the President and asked Mr. Sze to leave the room, which
he did.
HM,Jr., told the President the following: "The Chinese
Ambassador is waiting in an outer office and he has now agreed
to the four points which we asked him to submit to Kung and,
very briefly, they are: that they will keep the money over
here; that they will keep us fully informed; that they will
only use the money for stabilization purposes. Yesterday
the Yokohama Specie Bank raided the Chinese currency and
China only has about $35,000,000 or $40,000,000 in gold and
foreign exchange, and in order to fight it and hold it up,
they want a commitment on the 100,000,000 ounces of silver.
I told him I would talk to you. The first steamer that
sails is the PRESIDENT COOLIDGE on November 19 and I question
whether we can get more than 20,000,000 ounces on that and on
November 26 we will take another 20,000,000 on the PRESIDENT
JEFFERSON. The American steamers will divert their boats
156
for us if and when we want to send more. The Chinese are
desperate and I want to know if you want to take more at
this time. There are the English and Canadian boats going."
The President asked whether we could get it over to
the Philippines and HM,Jr., said he thought SO. The Presi-
dent then made the suggestion that perhaps we could put this
silver on our regular army transports.
The Secretary asked the President whether we should tell
the "poor devils" that we will take up to 50,000,000 ounces
and the President said yes.
At this point, Mr. Morgenthau called in the Chinese Am-
bassador. He told him that he and the President are friends
of the Chinese and that with the President's approval he could
make our commitment 50,000,000 ounces.
Mr. Morgenthau then told the Ambassador that he had re-
celved a cable from Buck, which he read to the Chinese Ambas-
sador. (See Exhibit 1 attached.) He also told the Ambassador
that Buck's cable is contrary to the actual conditions which
the Chinese Ambassador related. He said, further, "In view
of Buck's statements, which are contrary to yours, I want
your word of honor that if I buy 50,000,000 ounces of silver
that this is the document that we do business on." He re-
ferred to the four points. (See Exhibit 2 attached.) He
said, "I an trying to make it as easy as possible for China,
because we want to see you out of this trouble and I am
willing to go through with this agreement on my word of
honor and yours. I do not want any more changes. The
President suggested that to hurry it up, it could be put on
a steamer that goes from China to the Philippines. The
only reason for doing it is that everybody seems to be against
you and we will not ask for any trade preferences at' this time.
HM,Jr., also said to Ambassador Sze, "I take it that on
all of the silver that the Chinese wish to sell, they will
give us the first chance and after we agree to buy these
50,000,000 ounces that you will not turn around and sell
50,000,000 ounces more to the English.
Mr. Sze asked for Buck's cable and Mr. Morgenthau asked
Lochhead to paraphrase it and give the Ambassador a copy.
Mr. Morgenthau then repeated to the Ambassador, "I want to
Regraded Unclassified
-3-
157
repeat once more that this is the only agreement that I
recognize. Furthermore, if China wants to sell any more
silver, I want them to give us the first refusal."
Mr. Morgenthau told the Chinese Ambassador he would
send these four points to Ambassador Johnson and ask him
to show them to Buck.
The Ambassador left. HM,Jr., called McBride at the
State Department and told him we had a very confidential
cable to send to Ambassador Jchnson in China and McBride
said he would look after it.
158
EXHIBIT I
November 13, 1935
FROM:
Shanghai, China
TO:
The Secretary of the Treasury
From Buck. Referring to your telegram of 9th November:
Kung appreciates your assistance but expressed disappointment in
smallness of amount and stated that if China sells silver in the
world market, such market will be disturbed. Therefore, better to
have direct transaction with you stop. Apparently he is thinking
of selling 200 million ounces period He feels price of silver
will advance partly because of reference made to 1.29 per ounce
in your Point 5 period. He stated a higher price for silver will
help China greatly in supplying funds required for troop disband-
ment by means of credit balance project and for conservancy and
industrial projects, and that such funds would strengthen the
country and aid greatly in resisting Japan and would avoid compli-
cation of a loan stop. He emphasized that China would offer
U. S. of America special trade advantages if funds could be pro-
vided through the high price for silver period.
I appreciate your confidence expressed in my newly as-
signed responsibility.
Nicol.
Regraded Unclassified
EXHIBIT II
159
Memorandum Regarding Chinese Monetary Plan and Points on which
the United States Treasury and the Chinese Minister of Finance
are in Agreement
******
(1) All proceeds from sales of silver to the United States
Treasury will be used exclusively for stabilization of Chinese
currency.
(2) That funds secured from sale of silver to the United
States Treasury be kept on deposit in New York with agents of
Central Bank of China (it is understood that both the National
City Bank and the Chase National Bank be used for this purpose).
(3) That the United States Treasury representative in
Shanghai (Professor Buck) will be given fullest information as
to the disposition and employment of the Stabilization Funds and
that the United States Treasury be kept fully informed during
next twelve months as to monetary developments through him.
(4) That the United States Treasury agrees to purchase up
to 50 million ounces of silver .999 fine at 65 5/8 per ounce
less all the expenses of delivery to U. S. Mint at San Francisco,
payment of this silver to be made upon delivery of the silver on
board U. S. Steamship at Shanghai. free of any export tax or
duty. This silver may be delivered by the Chinese Government on
or before February 11, 1936.
(November 8, 1935)
160
Memorandum Regarding Chinese Nonetary Plan and Points on Which
the United States Treasury and the Chinese Minister of Finance
are in Agreement
......
(1) All proceeds from sales of silver to the United States
Treasury will be used exclusively for stabilization of Chinese
currency.
(2) That funds secured from sale of silver to the United
States Treasury be kept on deposit in New York with agents of
Central Bank of China (it is understood that both the National
City Bank and the Chase National Bank be used for this purpose).
(3) That the United States Treasury representative in
Shanghai (Professor Buck) will be given fullest information as
to the disposition and employment of the Stabilization Funds and
during next twelve months
that the United States Treasury be kept fully informed as to
monetary developments through him.
(4) That the United States Treasury agrees to purchase up
to 20 50 million ounces of silver .900 fine et 65 5/8d per ounce
less all the expenses of delivery to U. 5. Mint at San Francisco,
payment of this silver to be made upon delivery of the silver on
board U. S. Steamship at Shanghai, free of any export tax or
duty. This silver may be delivered by the Chinese Government on
or before February 11, 1936.
nov 8,1935
daya
161
Hemorendum Regarding Chinese Monetary Plan and Points on Which
the United States Treasury and the Chinese Minister of Finance
are in Agreement
(1) All proceeds from sales of silver to the United States
Treasury will be used exclusively for stabilization of Chinese
currency.
(2) That funds secured from sale of silver to the United
states Treasury be kept on deposit in New York with agents of
Central Bank of China (it is understood that both the National
city Bank and the Chase National Bank be used for this purpose).
(3) That the United States Treasury representative in
shanghai (Professor Buck) will be given fullest information as
to the disposition and employment of the stabilization Funds and
that the United States Treasury be kept fully informed as to
nonetary developments through him.
(4) That the United States Treasury agrees to purchase up
to 20 million ounces of silver .000 fine at 65 5/84 per ounce
less all the expenses of delivery to U. 5. Mint at Sen Francisco,
payment of this silver to be made upon delivery of the silver on
board U. S. Steamship at shanghai, free of any export tax or
duty. This silver may be delivered w the Chinese Government on
or before February 11, 1936.
que date
182
November 13, 1935
In connection with my request, made yesterday, that
Mr. Phillips of the State Department direct Cochran to go
to Italy for certain information that I could furnish to
the President, the following is the message sent to Cochran
by the State Department:
"November 13,1935
FOR COCHRAN
FROM STATE DEPARTMENT
The Secretary of the Treasury would like to have you go
to Italy in order to report on the current financial condition
of Italy, its available resources for the conduct of the war,
and the possible bearing of sanctions on the Italian financial
and exchange position.
You are authorized to proceed to Italy for this purpose
under the general authorization granted by the Treasury Depart-
ment for you to travel in Europe on Treasury matters at the
expense of the Treasury. You are furthermore directed to
proceed in the first instance to Rome and to report to the
Embassy on the purpose of your visit to Italy. You should
consult with the Ambassador as to the course you should pursue
to obtain the information you may consider advisable to have
for your purpose and as to the persons whom you should see in
Italy while you are there.
It would be advisable for you not to give any impression
to anyone other than at the Embassy that you are in Italy for
any particular purpose but should rather assume the attitude
that this is one of your many trips out of Paris in the general
line of your duties. You should, of course, be extremely care-
ful in your conversations with the Italian officials not to
make any predictions as to this Government's policy in the
future with regard to the situation presented by the Italo-
Ethiopia conflict and should remain within the limits of the
statements of policy already announced by the President and
the Secretary of State.'
November 13th
163
Farley called me and wanted to know what we were doing
about the various cases in Louisiana. I told him that we were
going right ahead and asked what he wanted to know particularly
so he sort of beat around the bush two or three times but what
he was trying to find out was whether we were going to try and
collect through a civil suit the back taxes owed us by Shushan
or whether we were going to drop the cases. I told him the papers
hid already been served, that we were going to go ahead with all
of the cases. He said two or three times, "that is all right".
I said, "the only exception we were making was that we were going
to attach Long's life insurance due Mrs. Long as the Louisianna
State Treasury had a lot of money which they owed Long which would
more than cover the taxes that we claim he owed us." Somebody
certainly approached Farley to try to find out what we were doing
about Abe Shushan - and he got his answer.
Based on the attached memorandum Helvering recommended
that we postpone action on the case of Governor Eugene Talmadge
until after March 15th - and I concurred.
I asked Helvering whether he gave out the information on
the tax case of Mrs. Davey, wife of Governor Martin Davey of Ohio,
and he told me that we never give out information of this kind.
However, after we turn a case of this kind over to the Board of
Tax Appeals it then becomes public information. Helvering also
told me that we received a wire from the Secretary of the Davey
Tree Company stating that they would not appear and enter judgment
and that default judgment will be entered to-day.
I then discussed the Louisiana cases with Helvering and
told him to keep his eyes and ears open on these tax cases; that
all kinds of pressure was being brought to bear to have me dis-
continue our procedure but, of course, I told him that my answer
to everybody is that we are going ahead. Helvering told me that
the worst case of all will be that of Seymour Weiss. Helvering
told me that Shushan owes us about $74,000 and that he is talking
about taking it out of the jackpot to pay us.
Helvering also told me that he talked to Governor Moody
yesterday and asked him for a definite answer and that he ought
to have a telegram from him to-day.
I also told Helvering to see Farley and talk to him about
the work that our Tax Collectors on relief rolls are doing in New
York.
Regraded Unclassified
Copy
164
ELI-DW
October 31, 1935.
Mr. E. C. Palmer,
Special Agent in Charge,
Atlanta, Ga.
The Commissioner expects to return to town
early next week and at that time I will discuss
with him the proposals contained in your letter of
October 30th, in reference to case SI-12741-F. In
the meantime, I suggest that you defer taking any
action in the matter.
(Signed) Elmer L. Irey
Elmer L. Irey,
Chief, Intelligence Unit.
Regraded Unclassifie
165
TREASURY DEPARTMENT
Internal Revenue Service
telligence
P. O. Box 4144, Atlanta, Georgia
Unit
October 30, 1935
tlente
I-12741-F
VIA AIR MAIL
Personal
and
Confidential
Chief, Intelligence Unit
Bureau of Internal Revenue
Washington, D. C.
In re: Governor Eugene Talmadge
Atlanta, Georgia
As result of the preliminary inquiries that I have
made under the above numbered case, I have reached the con-
clusion that the principal vehicle of graft, if paid as
alleged, is through the Georgia Highway Department.
I have made a confidential contact with one of the
largest asphalt factors in the south. I am lead to believe
that he is outstanding in his field, both from the stand-
point of business volume and personal integrity. He is not
aligned with the present state administration, but because
of the scope of his contacts, I am confident that he is in-
timately familiar with conditions now existing in the Georgia
Highway Department.
My informer advised me on October 29, 1935, that it would
be a serious mistake to undertake an active investigation of
the income tax liability of Governor Talmadge and his asso-
ciates at this time. He indicated that the manipulations of
the highway department did not reach their full swing until
the current year, and that the income now being received will
not be taxable until March 15, 1936. I have carefully con-
sidered this statement and find that the facts give some
weight to the conclusion.
Governor Talmadge was inaugurated in January, 1933. Dur-
ing the remainder of that year the highway department was in
8. condition of some turmoil, and not susceptible to control
Regraded Unclassified
SI-12741-F
166
by the Governor. That condition is indicated by the fact
that on June 19, 1933, Governor Talmadge placed the highway
department under martial law and discharged the members by
use of the state militia. Mr. J. W. Barnett, the then Chair-
man of the State Highway Commission, was succeeded by Mr.
J. J. Mangham.
Governor Talmadge was apparently unable to influence
Mr. Mangham, and the latter was discharged by the Governor
on November 22, 1933.
My informer advised that the conditions in the highway
department were still somewhat unsettled in the following year
of 1934, and that any graft payments that may have been made
in that year were negligible as compared to the payments which
are indicated for the present year.
It was also intimated by the informer that certain trans-
actions are now in process of negotiation, which, if consummated
will involve large sums of money. He feels that an active in-
come tax investigation at this time would have the effect of
placing the details of those transactions beyond the reach of
the Government, and he is confident that if there is no untow-
ard interruption in the negotiations, he will be in position to
make disclosures of value to the Government.
I am inclined to give some credence to this position. I
have discussed the matter with Mr. W. E. Page, Collector of In-
ternal Revenue, and Mr. William Brusse, Internal Revenue Agent
in Charge, Atlanta, Georgia, and they are also inclined to the
thought that it may be the wise course to defer the investiga-
tion until after March 15, 1936.
I will thank you to consider the matter and advise whether
you think it is of such importance as to warrant my appearance
in Washington for a conference.
(Signed) E. C. Palmer
(E. C. Palmer)
Special Agent in Charge
ECP:CB
-2-
Regraded Unclassified
167
November 13, 1935
The President called Mr. Morgenthau on the telephone
at a quarter past ten this morning and told him that he
was very much disturbed about the Davey story. The fol-
lowing is a clipping from the Washington Herald:
Mrs. Davey Called
In Tax Case
Gov. Martin L Davey, of Ohio.
who, though a Democrat. has
had several clashes with Roose-
velt administration officials dur-
ing the last year, particularly
Federal Emergency Rellef Admin-
istrator Harry L. Hopkins, now
is having his troubles with the
Treasury Department.
Today his wife Is due to ap-
pear before the board of tax ap-
peals in response to a subpocoa
to testify as to 1931 income tax
returns filed by the Davey Tree
Expert Company.
Despite the fact that Governor
Davey vigerously protested by
long distance tilephone against
the action in summoning his wife,
Internal Revenue Bureau officials
last night wer adamant in their
determination to put her on the
stand.
Mr. Morgenthau told him that he was 90% sure that the
story did not come out of the Treasury as he knew that it
was absolutely illegal for us to give out information of
this sort. However, he had asked Commissioner Helvering
to come in at a quarter of eleven, at which time he will
get the whole story and will call the President after the
meeting with Helvering.
He told the President that the reason he did not call
him was because everything was very quiet and he did not
think it was necessary to disturb him.
Mr. Farley called up and sald our tax collectors from
the relief rolls in New York are too "persnickety". Mr.
Morgenthau agreed with Mr. Farley and told him he was going
to send Helvering over BO that he, Farley, could get the
story direct from Helvering.
Regraded Unclassified
168
November 13th
Harold Graves came to the house at 7:45 a.m. and gave me
the following figures. We had in the United States on July 1st
in bond whiskey four years old and over 4,300,000 gallons. The
first year that we put any amount of whiskey in bond was in 1934
when we put into bond a little over 60,000,000 million gallons
and, of course, this year it will run double that amount. I had
these figures mainly in mind as I had seen them some months ago
when I recommended that we only reduce the tax on whiskey four
years old or over.
Harold told me that Hickerson was more than pleased at my
having telephoned him on Monday to say that the Treasury was wrong
in our argument with him as to whether or not we knew last June
that the State Department was considering reducing the tax on 1m-
ported whiskey.
At the meeting with the President yesterday, on the budget,
I did not like the way Bell acted. In the budget for the De-
pertment of Agriculture Bell included an item of 107 million dol-
lars which is 30% of the estimated receipts of Customs for the
next fiscal year. This money would go to Agriculture under the
bill that Marvin Jones got through. I very carefully felt my
way with the President but reminded him of our discussion over
this piece of legislation and that how disturbed I was at the
time and to my surprise and pleasure he added "how both of us
were disturbed" and that at the time he was considering the legis-
lation I had filed a memorandum of protest. (and this is where I
felt my way very carefully) And while he had not promised me that
he would have the legislation repealed still he did not say that
he would not. I pointed out that this was earmarking funds, that
these funds did not go through Buchanan's Committee of Appropriation,
that Buchanan had been very much disturbed at the time and that I
had agreed to the provisions in the AAA bill because we had to get
Congress out of town.
I now suggested that this item be dropped out of Agriculture's
budget and that a paragraph be included in his Budget Message urging
the repeal of that part of the AAA act which turned over to Agriculture,
without any limitations whatsoever, 30% of Customs' receipt. I told
the President that I discussed this with Wallace and that I had even
gone so far to suggest that the unexpended balance of the 90 million
dollars, turned over to him this year, under what I call the Jones
Act, should be refunded to the Treasury. The President followe me
very closely and I watched every flicker of his eyelashes. To my
great surprise, as I neared the end of my statement, Bell began to
murmur protests and I got rather cross with him and, in front of the
President said, "I cannot follow you Dan because at the time that
this legislation was under consideration you were so terribly excited
and opposed to it". He said, "that is right but I do not see what you
169
- 2 -
can do about it now. They were figuring on using this money for
curtailment of various agricultural or animal products." I snapped
at him, "well that is the function of AAA" and he replied that AAA
1s in the U. S. Department of Agriculture. I said, "yes we are con-
sidering the budget of the regular Department of Agriculture and any
money provided by Congress for the curtailment of agricultural pro-
duction should go exclusively to AAA and nowhere else". I told
them in discussing this whole question with Wallace that Wallace had
informed me that if the case of A.A.A. was lost before the Supreme Court
and he had to raise money other than through the processing tax that
he could get along with about 300 million dollars and I told the
President that I would much rather raise this money through some
form of taxation expressly for this purpose rather than have them
get part of their money through Customs' receipts. The President
agreed with me all along the line and, of course, it was B tremendous
momentous decision, particularly if the President sticks to it.
On walking back to the Treasury Bell's Assistant, in the
Treasury, who was with us, to show his pleasure, said something
about "well we ought to pay for another trip for the Secretary
to Europe if he can bring ideas home along these lines." So I said
that I did not want to use up my influence at these conferences
with the President over discussing hundreds of thousands of dollars
but that an item of 107 million was worth fighting for. I turned to
Bell and said, "Dan I just can't understand your position before the
President, that you did not back me up" and he said, "well, I never
for a moment drempt that the President would through that item out".
I think that Dan did not like my taking the leadership in such an
important matter and it is just too bad if he does not".
Another incident happened which shows which way the wind seems
to be blowing. Bell said to the President, "I can't get Jesse Jones
to submit his budget figures for the RFC (this 13 the second time
that Bell has spoken to the President about this) The President said
to Bell "tell him that I want him to give them to you" so I said,
"Mr. President, you better write out 8 note telling Jones to do this",
whereupon the President wrote a very strong note to Jesse Jones order-
ing to submit his figures to Bell.
As I walked out of the Boor I said to Bell, "I would like to have
a photostat copy of this". Five seconds later he walked over and
gave the slip to Kannee and said "mail it to Jones". Maybe he over-
looked the fact that I wanted 8. copy but I do not think he did. Bell
ought to have been most appreciative to me for getting him written
instructions from the President to Jones because Jesse Jones' refusal
had left Bell in a stupid position.
Regraded Unclassified
- 3 -
170
Also while we were leaving Bell asked the President when he wanted
to see him and Buchanan leaving me completely out of the picture.
They decided on Monday the 25th of November, if that was agreeable
to Buchanan. The President smiled at me and I could interpret it
as an invitation, although he didn't say anything. But I will take
it up with him the next time I am with him alone for two reasons:
1. Unfortunately, I am beginning to have doubts about Bell
and I think I better be around to look after the President's
interest.
2. And I think that if I am not at the meeting it will look
funny towards the public.
*********
The people in the Treasury and the Federal Reserve seem to
think well of my idea to buy gold in London when it goes below
$35. an ounce and build up a supply of gold there fore stabiliza-
tion purposes.
For some time, George Harrison has been urging me to permit
countries who are not on & gold standard to buy and sell gold to
us. Up to now I have not seen any good reason for doing this but
yesterday Cochran sent in cable No. 949 in which he says "both
economist Jacobson and President Tripp remarked to me that the
United States was really helping to consolidate the Sterlinb bloc
through its policy of not releasing gold to other than countries
on the gold standard. For example, the Central Bank of Sweden
would like to increase its dollar holdings but prefers to operate
through Sterling since it is certain of being able to convert
such exchange into gold and, if desired, repatriate it later.
Since America is accumulating so large a metallic stock it is
suggested any effective distribution thereof will remain impossible
so long as present restrictions upon export of gold to non-gold
countries continues".
I am going to work on this suggestion now because it may
be timely to make this next move, particularly if it will give
countries like Sweden an opportunity to buy and sell direct without
operating through Sterling.
171
COPY
June 26, 1935.
My dear Mr. Chairman:
Reference is made to H. R. 8492 entitled "An Act to
Amend the Agricultural Adjustment Act, and for other purposes",
passed by the House of Representatives June 18, 1935, and which
it is my understanding your Committee has under consideration.
This Department is particularly interested in Section
31 of the proposed bill, which provides, inter alia:
"There is authorized to be appropriated
for each fiscal year an amount equal to 30 per
centum of the gross receipts from duties col-
lected under the customs laws during the period
January 1 to December 31, both inclusive, pre-
ceding the beginning of such fiscal year."
Although the measure has not been referred to me for a report, I
am calling to your attention provisions of this section, because
it seems to me that they vitally affect the finances of the Gov-
ernment. I can not urge upon you too strongly my opposition to
the enactment of this proposed bill for the reason that no pro-
vision has been made for the raising of the necessary revenue to
meet an appropriation authorized to be made by this bill. On
the basis of the customs receipts during the calendar year 1934,
the appropriation may amount to approximately $90,000,000.
The foregoing is apart from the broad question of policy
172
-2-
as to whether there should be at this time further import restric-
tions calculated to accentuate the imbalance of our foreign trade.
On this point, I assume, your Committee will be advised through
other channels of the Administration's general position.
Very truly yours,
/s/ Henry Morgenthau, Jr.
Secretary of the Treasury
Hon. Ellison D. Smith,
Chairman, Committee on
Agriculture and Forestry,
United States Senate,
Washington, D. C.
SAMeC:mg 6/25/35.
Copy
173
August 20, 1935.
TO THE PRESIDENT:
Section 32 of H. R. 8492 as agreed upon by the Senate and
House conferees provides an appropriation for each fiscal year be-
ginning with the fiscal year ending June 30, 1936 of an amount
equal to 30% of the gross receipts from duties collected under the
customs laws during the period January 1 to December 31, both in-
clusive, preceding the beginning of each fiscal year.
This section is highly objectionable for the following
reasons:
(1) It appropriates directly instead of authorizing an
appropriation, thus denying to the President the opportunity and
right to inquire into the need for an appropriation and the sub-
mission of an estimate to the Congress as contemplated by the Bud-
get and Accounting Act; likewise it deprives the Appropriations
Committees of Congress of their right to consider and pass upon
the need for an appropriation.
(2) It makes a permanent indefinite appropriation in
direct opposition to the policy adopted by the enactment of the
"Permanent Appropriation Repeal Act of 1934." The following ex-
cerpt from the report of the subcommittee of the Appropriations
Committee which handled the Permanent Appropriation Repeal Act in
the last Congress will be interesting in this connection:
174
- 2 -
"It is maintained that neither by ethics,
logic, nor by Constitutional authority has
any one Congress the right of binding the
hands of posterity by the enactment of laws
mandatorily calling for automatic withdrawals
from the Federal Treasury without annual
examination, approval and supervision by
succeeding Congresses. It is the conclusion
of the Committee after hearing numerous wit-
nesses that permanent appropriations are a
vicious usurpation and invasion of the rights
of sitting Congresses; that they complicate
bookkeeping in the office of the Treasurer
and the Division of Bookkeeping and Warrants
of the Treasury Department; make auditing in
the Comptroller General's office difficult;
conceal from Congress many avenues of receipts
and expenditures (which in itself is an invi-
tation to extravagance), and for lack of pro-
per annual disclosure, make the work of the
Appropriation Sub-committees conjectural and
uncertain ****."
The Committee further points out that appro-
priations of this character have been availed of as a means of
foreclosing the right of each Congress to pass upon the appropri-
ation needs of any project or beneficiary of this favorite device,
and that by the use of them the doors of the Treasury are left
wide open to administrative authorities to expend such amounts as
they may deem necessary without Congress upon recommendation of
1ts duly constituted committees in any wise passing either upon
the element of need or reviewing the policies or purposes of those
charged with the administration and expenditure of Covernment moneys.
(3) It places annually at the disposal of a single indi-
vidual a sum ranging between approximately $90,000,000 for the fis-
cal year 1936 and an undetermined sum in subsequent years which,
if our customs receipts aggregate as much as they did in 1927, will
175
- 3 -
amount to $180,000,000, to be expended by him "at such time, in
such manner and in such amounts" as he may determine. This is
a delegation of power and authority with 8. vengeance; it denies
the President any authority whatever over the expenditure of huge
sums of money in the operation of an e xecutive agency.
(4) It provides for the expenditure annually for an un-
determined number of years of large sums of money without any
provision whatever being made for raising the revenue with which
to finance such expenditures. There is a total lack of coordina-
tion between the funds that are made available and the purposes
for which they are required.
(5) It provides for expenditures not contemplated in the
Budget estimates for the fiscal year 1936 and will materially in-
crease the deficit for that year as well as materially add to t he
annual expenditures for each year thereafter.
(6) The three purposes for which the fund may be used
represent a new agricultural aid policy of such significance as to
justify exhaustive debate and consideration in relation to the pre-
vailing policy. For such an important policy to become law by the
"back door" of conference committee agreement is to disregard the
very fundamentals of legislative procedure.
Under the circumstances I believe the bill should be re-
turned to the Congress without your approval to have this objection-
able section removed.
176
November 14, 1935
Subsequent to the conference this forenoon with Coolidge,
Oliphant and Lochhead, the attached memorandum was prepared
and I agreed on it with Coolidge this afternoon.
new. 14.
be 3500 hug lessall
In purchasing gold in London, the price paid should not
be higher than would allow for 11 expenses of shipment to
the United States.
$34.7559 Represents a price in London allowing for
1 1/2% interest per annum for time of
shipment.
$34.7626 Represents a price in London allowing for
#
3/4 of 1% interest per annum for time of
illion
shipment.
$34.77
Represents a price in London allowing for
no interest.
Originally, most New York banks figured on a rate of 1 1/2%
per annum, but laterally a number of them are working on a basis
of 3/4% per annum.
It would seem that the highest possible rate we could pay
for gold in London would be $34.77, and at the present time the
rate is about $34.7950. At the present time the movement of
gold to the United States is from France and until such time as
or the British Equalization Fund
gold is being sold from hoarded stocks/in London it is not
natural to suppose that the price will decline in the London
market to a level at which it would be profitable to ship to the
United States.
In engaging gold from Paris the banks figure that it is
necessary to obtain French francs at the rate of 6.58 3/4¢. If
gold was to be purchased in France and shipped to London with
the possibility that it might later be trans-shipped to New York,
the francs would have to be obtained at 6.58$. For the present,
at least, the commercial banks appear to be willing and able to
178
-2-
finance the total movement of gold from France to the United
States, basing their operations on francs at 6.58 3/4¢. Should
an extra heavy movement of gold occur, beyond their capacity
to handle, the rate might drop to 6.58$, at which level the
Treasury would be able to buy for shipment to London and if
necessary, ultimate transfer to the United States.
#25million$/ Paus 6.58
JHM2
179
November 14, 1935
The following met with the Secretary today:
Mr. Gibbons
Mr. McReynolds
Judge Moyle
Mr. Dow
Mr. Gorman
Mr. Ballinger
The Secretary read a report prepared by Mr. Irey and sub-
mitted it to Mr. McReynolds as a result of Special Agent Mack's
Investigation of the Buffalo customs office.
HM,Jr. then turned to Mr. Gorman and said, "I will address
this to you, but I don't want to hold you personally responsible.
I am not satisfied with the investigating force in Customs. I
have been here two years and we have had to spend a lot of money
and time putting outside people in to do the work which I think
should have been done by your group. I have about come to the
end of my rope on this situation. The people in Buffalo have
been about the last straw.
"That this thing should be going on is awful and what is
going on in the Appraisers' Stores is even worse. There is
still money being passed on the piers. Things are not any
better.
"I know," he gold Mr. Gorman, "that they say you cannot
TO into the Collectors' offices without first knocking at their
doors. I am going to say to you, in front of the Commissioner,
you can make your own rules and regulations as to what you need
in the way of help to clean up this mess and I will back you up.
I am talking about the people who are on the payroll of the
Customs Service. Just how many crooks there are, I do not
know.
Continuing, the Secretary said, "I want to give the
permanent Civil Service employees in Customs a chance to
clean their own house. If you cannot do it, I will do it for
you. It took five Secret Service men to clean up the Customs
crooks in New York City. It took me one year. Dow, Moyle
and Gorman are responsible.
He said, "I have waited for some intimation to come from
Customs and nothing has happened. Every time I send one of
-2-
180
our people in, they find another crook. Why do you let
a situation like Buffalo exist? How many other Buffalo's
have we? I would like to have you come back here Monday
at 11 o'clock and at that time I will take up one thing at
a time. I want to get one thing started. I want Gorman's
hands untied on a basis that he wants to investigate the
personnel of Customs. Let him write out what he wants and
show it to his two superiors. When I came here, Irey could
not spend more than 5% of his time on investigation of per-
sonnel unless the Secretary of the Treasury o.k'd it. I
changed that so that he can now devote 60% of his time to
the investigation of personnel.
He told Mr. Gorman, "If you will tell me what you want,
I will see you through 'hell'. I am not going to sit here
and see case after case come up. I want you to succeed.
You have been here 30 years and I want to give you a chance.
Let's get rid of the crooks in Customs!"
181
November 13, 1935.
MORANDUM FOR MR. MCREYNOLDS:
There is submitted herewith a file of papers including
3 report of Special Agent Clifton E. Mack, dated November 7,
1035, relating to charges against Mr. William J. O'Brian,
Collector of Customs, Buffalo, New York. In connection with
or investigation conducted by Supervising Customs Agent E. J.
Lewis, Mr. O'Brian addressed B letter to the Secretary of the
Treasury on September 28, 1935, making a general denial of the
charges which had been filed with the Treasury Department con-
cerning his official misconduct, and stating in his judgment
the allegations were the result of petty jealousies on the
part of dissatisfied employees, and efforts made by him to
Improve general conditions in the Buffalo District. He further
claimed that a general investigation of both the personnel and
the activities of the District would be essential, and would
exonerate him of the pending charges.
The principal charges against Mr. O'Brian consisted of
the misuse of Government property, including automobiles,
boats, etc.; falsification of records in connection therewith,
and use of employees to perform personal services on official
time. With respect to the charge of misuse of Government owned
automobiles, it is shown that since his induction into office,
May 26, 1934, four automobiles have been assigned to Collector
O'Brian. It is claimed that he misused these automobiles and
falsified the records in connection therewith by permitting
his son, William J. O'Brian, Jr., to use three of the cars,
and by having gasoline and oil supplied to his privately
owned automobiles, which were improperly charged on the
records as having been furnished to Government automobiles
in connection with official use.
The misuse of Government boats assigned to the Customs
Patrol Service by Mr. O'Brian consisted in his authorization
of personal trips in such boats by his son, William J. O'Brian,
Jr., and his son's friends; also that Mr. 0'Brian made trips
of an unofficial nature with his family and friends on patrol
boats. The facts developed by the investigation show that the
Collector has been guilty of the above charges relating to
improper use of Government property, including automobiles,
boats, etc., and the improper use of oil and gas in connection
therewith.
182
-2-
With respect to the charge of use of employees to perform
personal services on official time, it is shown that Collector
0'Brian had Customs employees Allen and DiCenzo perform repair
work at his home during official hours, and that DiCenzo also
made certain repairs to the home and driveway of Mr. J. E. Kilroy
8 relative of Collector O'Brian, such work having been performed
on official time. There is also evidence indicating that a Patrol
Inspector was assigned to act as chauffeur for Collector O'Brian
during the greater part of his term of office. From the investi-
gation made it further appears that gasoline and oil were issued
from the offical supply to the personally owned automobile of
Collector O'Brian, which were charged on the Government records
as having been used for his official car. In addition to the
above, information was obtained showing inefficiency on the part
of Collector O'Brian, and the resulting breakdown of morale predi-
ested upon his own irregularities which were known to the Customs
employees in his district.
Statements were also made by several persons with respect
to improper political activities on the part of Collector O'Brian.
It was learned that several months prior to the First New Deal
Entertainment held at the Armory, Buffalo, New York, on January
17, 1935, Collector "Brian handed a list with the names of
several Customs employees to a clerk employed at the Customs
office, and directed him to have these employees in the Col-
lector's office at two o'clock the following afternoon for a
meeting. It was explained that the purpose of the meeting was
to distribute tickets to the various employees with the idea of
nelling them. The evidence shows that these tickets (the proceeds
of which were used for political purposes) were practically forced
on the employees for purchase or sale by the Collector.
In view of the statements contained in the letter addressed
to the Secretary under date of September 26, 1935, Mr. 0'Brian
W.S afforded every opportunity to present all evidence or expla-
nation having any bearing on the charges against his official
misconduct. After affording him this opportunity an independent
investigation was made, with result that the pending charges
against him determined by Supervising Customs Agent Lewis con-
sisting of misuse of Government property, falsification of records
in connection therewith, and use of employees to perform personal
services on official time, were sustained by competent evidence.
The additional charge of political activity lends further weight
to the general charge of inefficiency and breakdown of morale,
for which Mr. O'Brian appears to have been responsible. Special
Regraded
183
-3-
Agent Mack expresses the opinion that Collector O'Brian is
not fully aware of the responsibility of his office; and that
his irregularities in connection with the misuse of Government
property, together with his improper political activities, have
had a most damaging effect on the morale of the employees of the
Service in that District. Agent Mack recommends, in view of all
the facts in the case, that Collector of Customs William J.
O'Brian be separated from the Service, in which recommendation
I concur.
Encls.
184
November 14, 1935
Mr. Coolidge, Mr. Oliphant and Mr. Lochhead met with
the Secretary today and Coolidge asked whether the Secretary
would be willing to sell gold to countries other than those
on the gold standard. He pointed out that at the present
time we buy gold, at $35.00 an ounce less È of 1%, from any
one who delivers it to the United States Mints. Our sales
are restricted to shipments to be forwarded to foreign
countries who are on a free gold standard and only when
the rate of exchange of the foreign currency against the
dollar would make it profitable. This subject has been
brought up in Mr. Cochran's cable of November 12.
Mr. Coolidge felt that if we would agree to sell gold
to other countries it would be a great step forward in the
ultimate stabilization of exchanges as it would allow
countries which seek to obtain gold reserve to obtain it
from the United States, where the largest stock is held,
instead of having to compete for it in the open market.
Mr. Oliphant pointed out that if we agree to sell
gold to any country, this would give England just the
opportunity she wanted in that it would provide a lever
to allow them to manage their currency against the dollar
just at a time when it looked as if France (whose currency
the English at present use as a basis for their operations)
was considering the idea of restricting the sale of gold
to other than gold countries.
Mr. Morgenthau wanted to know, if he reversed the
present procedure and agreed that any of the 52 central
banks could buy our gold, if that would not be just the
thing England wanted and said he would not do a thing
that England wanted unless he got something the United
States wanted, such as cooperation in Shanghai or her co-
operation at the coming Naval Conference in London.
While Mr. Coolidge felt that England's cooperation
in the Naval Conference would be an excellent thing, he
thought that asking for concessions would interfere with
the stabilization idea. Mr. Morgenthau told him that
the only person in the United States who knows the whole
picture of this big jig-saw puzzle was the President. He
pointed out that what he, the Secretary, is doing in China is
from a monetary point of view only, but the President knows,
for instance, what the relations between the United States
Regraded Unclassified
185
-2-
and Ethiopia are and what we want accomplished at the
Naval Conference and there are lots of other things the
President has on the fire. HM, Jr. said the State De-
partment was perfectly willing to have him handle the
Chinese matter because it is purely a monetary problem.
Mr. Oliphant felt that unless there is to be some
very positive advantage to be gained by selling gold to
countries other than those on the gold standard, it would
be a dangerous procedure as there would be much specula-
tion in New York and the papers would be very curious.
Coolidge felt that it would be laying the groundwork for
something very important in the future.
At this point Mr. Morgenthau said, "Let me put all
the cards on the table." He told them of his new idea
of trying to work out a formula that any time gold gets
below $35.00 a ounce, he would buy gold in London and
soften the flow of gold to this country, and when the rush
goes the other way, he would have things arranged to soften
the flow over there. He thought it was a scientific way
to use the Stabilization Fund, which was distinctly to our
advantage, and was surprised that someone in Federal Reserve
had not thought of it before this because it is a way to
soften the flow both ways.
Mr. Lochhead said that from an exchange stabilization
point it was very desirable to have gold in London and
also desirable to have it in other places.
Coolidge said that Harrison was against it; that he,
Harrison, did not mind the business going away from the
banks, but was afraid of repercussions that America was
going over to buy gold at higher prices than other people
are willing to pay.
Mr. Morgenthau was in favor of postponing action on
selling gold to countries other than those on the gold
standard until the French matter is cleared up, but he
told them he is very keen on his idea of building up gold
stocks in London at a price which the group present would
have to work out and not to let anybody know about it.
On the other thing, he can't see it yet until he knew
what the French were going to do but he would consult with
the French and tell them if we started to buy gold in
London because he feels much closer to the French than
he does to the English.
186
November 14, 1955
2. Morgenthau spoke to the President today and the
President told him be was very much disturbed about the
sttached article by Turner Catledge in the New York Times
today. b. Horgenthau told the President that he too
S&W it and did not like it, and called the President's
attention to the fact that nowhere in the article did
Ostledge make say reference to the Treasury. The Presi-
dent said that be was going to get in touch with Catledge
and tell him that he, the President, would like to explain
budget-making to him; that he knew that Catledge always
tried to do the right thing, but on budget making the
President felt he could be helpful to him.
Ine President also said that he thought Catledge
night succeed Arthur Krock.
E.Z. Jr., told the President that not 8 day passes
but what someone tries to stop us from going shead on
the New Orleans tax cases; that people tried to make
it very difficult for Mr. Morgenthau, but his answer has
been and will continue to be, to 5° ahead. The President
agreed very definitely with Mr. Morgenthau. Mr. Morgen-
thau also told the President that Woodcock was not big
enough to try these cases and that they are to hear defin-
itely within the next day or two 8.8 to whether Governor
Moody vill carry on.
The President asked Mr. Morgenthau whether we are
going ahead on the slot machine case and Mr. Morgenthau
said he mas.
The Secretary also told the President that an Italian
by the name of Mastri, who 18 also known as "Red Light
Mastri, is coming up on top as the "boss" of the under-
world in New Orleans and that Weiss is the connection to
Matri.
Das
York
Time
XO7. 14, 1085
HALF-BILLION CUT IN BUDGET
IS ORDERED BY ROOSEVELT;
ROPER REASSURES BUSINESS
Roosevelt administration but eirlieft
agencies by esecutive orders, and
as the depression continued, was
atfl) others win be recommanded io
ED BY BUSINESS GAINS
and to be sweeping again OFER the
Congress The the discard.
Federal establishment, Beightened
A horizontal salary cut for Fed-
this time by the signs of better
eral employes and a further attempt
business.
to curtail veterans' expenditures,
Some Washington observers see
the latter having turned out rather
ash of One Billion in
in these new economy activities NO
disastrously in the economy wave of
indication that Mr. Roosevelt will
1933, are not likely to be a part of
Deficit Is Planned as
enter his re-election campaign next
the new drive for government sav-
year on a retrenchment platform,
ings.
while some of those who are seek-
Revenue Increases.
End of the PWA a Possibility.
log to carry out his expenditure re-
duction orders believe he will be
There le R. likelihood that all re-
lief and re-employment expenditure
ury, Commerce and LADOT Depart
able by that time to cite persuasive
ments of increased business activ-
examples of his intention and abil-
will be thrown into one channel
By throughout lbs country. More
88 GOAL FOR BALANCING
ity to return the government to its
possibly something like the Work
will be known of the relief needs
Progress Administration. The pur
within the next tew weeks when
normal functions after the storm.
pose now le to provide à relief and
community chest drives have been
Increased Revenue Expected.
re-employment mechanism which
completed in many citime.
nus and Supreme Court Rul-
The figure for budget savings for
can be shut off quickly when re-
Bonus Prohlem suit Walts.
the flocal year 1937 has been net
0 on AAA Taxes Held Only
covery actually comes from around
roughly at $500,000,000. This. to-
most observers here believe to in-
A successful bottus drive. which
the corner.
Prospects of an Upset.
gether with $500,000,000 in increased
Such a revision in policy would
svitable, could throw the while of
revenue for the same period, which
of the administration out
mean the virtual end of any espan-
plan kilter. In round figures, $2,000,000
the Treasury confidently expects if
aton of the slow-moving public
would be required for this purposs are
business trends continue, will en-
works program. There would be
GHTER RELIEF LOAD SEEN
able the administration to lop a
little surprise In Washington If the
strangely unconcerred, however. the
Administration authorities
billion dollars off the deficit, and
President should fall to recom-
thus place the budget in position
brinks will have to be provided
about the present attitude that be
mend continuation of expenditures
fore even the beginning of the
to be balanced during the fiscal
VA and Other Agencies Are
through the current fiscal year, ex-
fiscal year. Some reel. for instance.
year 1938.
cept for completing projects for
kely to Go as Employment
that ment of the bonus. namely.
one of the arguments for pay- the
The sevings which experts are
striving for in preparation of the
which commitments have been
needy condition of the veterans, time
Tasks Are Concentrated.
new budget are said to be in addt
made,
be Iens of . factor by the
All energies Are now heing bent
another may veto test in before Congress
tion to the curtailment made in the
to keep the next budget down to
The processing laxes and the Invali- pow
outlays for the current fiscal year.
sibility that they may be
By TURNER CATLEDGE.
In bia statement of Sept. 30, Presi-
$7,000,000.000 or Isse for all pur-
dated by the Supreme Court pre- ad-
- M Tue Sew YORK TIMES,
dent Roosevelt estimated that the
poss. Anything like an esact fore-
sent a different problem. The
ASHINGTON, Nov. 12-Infor-
cast of expenditures for the next
ministration le committed to con- the
actual espenditures for this year
orders to cut Federal expendi-
year. or even of Placal policies, must
tinue benefit payments under you
would fall about $1,246,000,000 short
of necessity await the development
Agricultural Adjustment Act. An
- under the 1937 budget by
0,000,000 less than the newly car
of the amount forecast In January,
of forces now outside of the control
gardless ruling would deprive
of the court's declaion. the
lated total for 1936 have been 1a-
when Be submitted budget math-
males totaling $8,520,000,000, in-
of the administration-t necresity
adverse Treasury of more than $500,000,000 in
to administrative officials by
for rellef axpenditures. demande for
annually from this source and,
Mident Roosevelt, and as a re-
cluding the $4,880,000,000 for the
the veterans' bonus, and the Su-
work-reller program.
preme Court's decision on the agri-
all ing of different taxes to take
probability. necessitate the cheld
the lives of numerous Federal
Just what bureaus and agencies
cultural processing taxes,
PROJES and agencies, including the
will feel the economy AXD has not
Estimates for relief. M was the
place. Studies already are under way which
and some others of the better-
New Deal alphabetical units
yet been determined. or, If so, bas
CAFE Inst. year, will not be deter-
turn revente up could be provided.
new sources from Of
mined until A fdw days before the
not been disclosed. officials think
budget 10 submitted. II to the hope
such other hand. Use more optimists nacement
reported today to be hanging
it safe to predict, however, that
of officials to reduce the amount
severáj at them will not be provided
LA a Willion dollars or less. This
the officials believe that the diand
In the bélance
The emomy RSTV, which rose
for in the budget, others with be
hope has ripened almost mto an all
for at & much earlier sanguie
paying farm benefits will date the
Pub tide In the early days of the
wipod out DE complidated --- Hina
pretation during the last fow weeks
as reporta have come to the Treas
pear expected by their most
Associates at the outset.
188
November 14, 1935
The Secretary had his usual group meeting at 9:30
this morning. The absentees were George Haas, Miss
Roche, Mr. Robert and Mr. Upham. Present: Mr. Coolidge,
Mr. Oliphant, Mr. McReynolds, Mr. Gibbons and Mr. Gaston.
Mr. Morgenthau told Gaston that he was very much
disturbed about the article in the Wall Street Journal,
this morning, which said that Treasury officials approved
of Leo Crowley's suggestion that banks repurchase their
preferred stock and notes from RFC as rapidly as possible.
He also told Gaston how disturbed he was about the Catledge
story in the New York Times. Copies of these two articles
are attached,
He also told Gaston that when we come to the adver-
tising campaign on baby bonds in the national farm papers,
he doubts whether we can get into them before January.
Mr. Morgenthau suggested that in order to take the pressure
off of us, we should alternate each month between the
national farm papers and the State and sectional farm
papers. He said the cost is about the same, but suggested
starting in with the State and sectional farm papers and
then, the following month, the National farm papers and
alternating each month thereafter.
Mr. Coolidge told the Secretary that General Ireland
had called him to say the Treasury was lagging this year
in its contributions to the Community Chest. Miss Roche
is Chairman of the Treasury's Committee this year. Mr.
Coolidge asked the Secretary if he would sign a letter
to be sent to each Treasury employee urging generous con-
tributions. Mr. Morgenthau said he had no objection,
but he does not want to get in on the middle of the campaign
and suggested that McReynolds and Coolidge should get to-
gether with Miss Roche and Chip Robert, who was the Treas-
ury's chairman last year, and try to stimulate activities.
Miss Roche is very busy on other matters and Mr. Morgen-
thau realizes this, but he was sorry she was not present
at the group meeting so he could discuss the matter with her
Mr. Oliphant said that at the Secretary's press con-
ference this morning the newspaper men might bring up the
question of purchase of German steel for the New York Tri-
boro bridge. Mr. Morgenthau said that about B. year ago,
Peoples was placed on a committee to decide what the price
189
-2-
differential should be on bids using foreign-made
materials and that after careful study the committee
reported a 25% figure. Mr. Morgenthau said that as
a private citizen he would not get in on this dis-
cussion; that it had been his rule on German matters
(and he intended to continue to make it his policy) to
have someone else in the Treasury make the decisions
because of his personal feeling about the German situ-
ation and because in his efforts to be fair and impartial
he might lean backwards and be too generous.
Regraded Unclassified
Govember
14,
1980.
which
commitmente
-
made AU energies are now heing best
to keep the next budget down to
$7,000,000,000 or less for all pur-
strus piere am compat in position
posse. Anything like an sant fort-
las De belanced thring the flored
cast of expenditures for the awail
year. or eyes of fiscal policies. must
HALF-BILLION BUDGET CUT
year 1938.
of necessity await the development
The eavings which experts are
of forces now outside of Ose control
striving für in preparation of the
of the administration-the necessity
new budget are anid to be in addi-
for rellef axpenditures, demands for
tion to the curtaliment made in the
the veterans' bonus, and the Mar
prema Court's decision on the agri-
ORDERED BY ROOSEVELT;
outlays for the current fiscal year.
cultural processing taxes.
In his statement of Sept. 30, Presi-
Estimates for erlief. as was the
dent Roosevelt estimated that the
case last year. will not be defer-
actual expenditures for this year
mined until 5 few day# before the
would fall about $1.246,000,000 abort
budget is submitted. It le the hope
ECONOMY HITS BUREAUS
of the amount forecast in January,
of officials to reduce the amount
to a billion dollars or less. This
when be submitted budget esti-
hope has ripened almost into as -
mates totaling $8,520,000,000, in-
pectation during the Tast few weeks
$500,000,000 less than the newly es-
cluding the $4,880,000,000 for the
as reports have come to the Trans-
work-rellef program.
ury, Commerce and LADOF Depart-
SPED BY BUSINESS GAINS
Limated total for 1936 have been 18-
Just what bureaus and agencies
ments of increased business active
sued to administrative officials by
Ity throughout the country. More
President Roosevelt, and se a re-
will feel the economy exe has not
will be known of the rellaf paeds
suit the lives of numerous Federal
yet been determined, of, If so, has
within the next few washe whate
bureaus and agencies, including the
not been disclosed. Officials think
community chest drives have been
Slash of One Billion in
it safe to predict. however, that
completed in many cities.
PWA and some others of the better-
several of them will not be provided
Bonus Problem State Walls.
known New Deal alphabetical units
Deficit Is Planned as
were reported today to be hanging
for in the budget, others will be
A successful bonus drive, which
preseriously in the balance.
wiped out or consolidated with like
most observers here believe is In
agencies by executive orders, and
evitable, could throw the whole
Revenue Increases.
The economy wave, which rose
still others will be recommanded to
plan of the administration out of
to full tide in the early days of the
kilter. In round figures, $2,000,000
Ronsevell administration but abbed
Congress for the discard.
would be required for this purpose.
as the depression continued, was
A. horisontal salary cut for Fed-
Administration authorities are
eral employee and a further attempt
strangely unconcarned, however.
said to be sweeping again over the
1938 GOAL FOR BALANCING
Federal establishment, beightened
to curtail veterans' expenditures,
about the present attitude that the
this time by the signs of better
the latter having turned out rather
bonus will have to be provided be-
fore even the beginning of the next
business.
disastrously in the economy wave of
fiscal year. Some feel, for Instance,
Some Washington observers and
1932, are not Usely to be a part of
that one of the arguments ENP pay-
Bonus and Supreme Court Rul-
the new drive for government sav-
ment of the bonus, namely. the
in these new economy activities RD
Indication that Mr. Roosevelt will
ingw.
peedy condition et the vaterans.
ing on AAA Taxes Held Only
may be less of a factor by the time
enter his re-election campaign next
End of the PWA B Possibility.
another veto test la before Congress,
Prospects of an Upset.
year on a reirenchment platform,
There is a likellhood that all re-
The processing taxes and the pos-
while some of those who are seek-
lief and re-employment expenditures
sibility that they may be invall-
Ing to carry his expenditure redue-
will be thrown into one channel,
dated by the Supreme Court pre-
sent a different problem. The ad-
LIGHTER RELIEF LOAD SEEN
tion orders believe be will be able
possibly something like the Works
ministration is committed to con-
by that time to cite persuasive ex-
Progress Administration. The pur-
tinue benefit payments under the
amples of his Intention and ability
pose now in to provide A relief and
Agricultural Adjustment Act, N°
to return the government to its
re-employment mechanism which
gardless of the court's decision. An
normal functions after the storm.
adverse ruling would deprive the
Among New Deal Agencies
can be shirt off quickly when re-
Teeasury of more than $500,000,000
Likely to Go as Employment
Increased Revenue Expected.
covery actually comes from around
annually from this source and, in
The figure for budget savings for
the corner,
all probability, necessitate the levy-
Tasks Are Concentrated.
the fiscal year 1937 has been net
Such a sevision In policy would
Ing of different taxes to take their
roughly of $500,000,000. This, 10-
mean the victual end of any expan-
place.
gether with in increased
ston of the alow-moving public
Studing already are under way to
turn up bew sources from which
By TURNER CATLEDGE.
revenue for the same period, which
works program. There would De
such revenue could be provided. On
Special to THE New Toes TIMES
the Treasury confidently expects LE
little surprian in Washington le the
the other hand. the more optimiatle
Regraded
HALL STREET - new Turch OCEY - november 14, LOSS.
$3,000,000,000 HOLD Loans
Treasury Favors
Total volume of these loans outstanding
probably exceeds $3,000,000,000, out of the $1.-
750,000.000 authorized. Latest HOLC estimates
Payment of RFC
were that roughly 20% of its total mortgages
were more than 90 days overdue on interest.
These estimates, It is understood. were based
DO the total volume of business written by the
Loans By Banks
HOLC, including mortgages no longer on its
books. In other semi-official sources, it to eati-
mated that AS high as 50% of the HOLC".
actual present boldings are overdue, and thus
$900,000,000 Preferred Stocks
Other news on the 1. B. 4. convention
In This Class-Cut in 1937
will be found on Page 5.
Deficit Is Aim
dennitely out of the class of securities which
might appeal to banks or other investors. At
the same time, it is said, the HOLC portfollo
Also Lower Excess Reserves
does include some high grade mortgages, ob-
ligations which are so good, in fact, that there
has been some disposition within the HOLC to
BY THOMAS W. PHELPS
hold them in order that they might offset an-
ticipated losses on other loans and thus improve
sing Correspondent of Tax WALL STREET JOURNAL
the corporation's final showing.
NEW ORLEANS - Suggestion made here
by Leo T. Crowley, chairman of the Federal
Preferable to Top-Heavy Reserves
Deposit Insurance Corp., that banks repur-
Bankers here were unenthusiastic about the
chase their preferred stock and notes from
suggestion that they might buy any large vol-
the RFC as rapidly 58 possible, la heartily
ume of HOLC mortgages, though some did con-
approved by Treasury authorities. They hope
cede that If It came to a choice between having
by this means and sales of other Government
the Reserve Board raise reserve requirements
assets such as RFC and PWA bonds, and HOLC
or the banks' taking over enough securities from
mortgages, not only to cut down the gap be-
the various Government agencies to make a
tween actual federal income and outgo in the
real dent in unwieldy excess reservés, the lat-
1937 fiscal year to something like $750,000,000,
ter course might prove the more satisfactory
but to effect A. substantial reduction in excess from the long range point of view.
reserves of banks in the Reserve System.
The assumption was that once reserve re-
The RFC DOW holds roundly $900,000,000 of quirements were raised they world stay up until
bank preferred stock and notes, A third to a the next period of deflation sib in.
half of which might be paid off within a year, A possible deterrent to bank repurchases of
H. in believed, depending of course, on continued their preferred stock and notes, bankers here
business improvement There is less optimism pointed out, is the occessity of maintaining a.
na to prospects for large sales of Home Owners' conservative ratio between desponite and capi-
Loan Corp. mortgages to private Institutional tal. Dennails have gone on 500 are expected
investors, Driving there BAY< been armile ID- Le continue to (the further, with The comult flrat
quirtee from bonks along this une already some banke will med more capital, minor then
191 A
November 14, 1935.
Thursday
H.M.Jr.:
Hello
Charles
West:
Henry?
H.M.Jr.:
Yes
C.W.:
This is Charlie West.
H.M.Jr.:
Yes
C.W.:
I understood you were trying to get me -
H.M.Jr.:
Yes, Charlie, I tried to get you Monday -
C.W.:
Yes - and then I went to Ohio - I had a debate out
there last night with Ham Fish on the New Deal -
H.M.Jr.:
Oh - your congressman, - grand!
gave him
a
Good!
C.W.:
And had a great time. Why, - I talked to Mac about
getting an appointment for Bulkley.
H.M.Jr.:
Yes.
C.W.:
And he didn't want him down yet and Bulkley wanted
to bring that letter -
H.M.Jr.:
Yes
C.W.:
- give it to the President and then see you. And
give the kind of letter the President told him to get.
H.M.Jr.:
Yes
C.W.:
Well now, it holds up the thing, because Bulkley is
ready to come down.
H.M.Jr.:
Well, I've got to move on it - it's terribly em-
barrassing.
C.W.:
Well, how would it be if I'd call Bulkley then, and
have him come down tonight and see you - direct?
H.M.Jr.:
Well, let me call up McIntyre, because, now, they -
C.W.:
I think Mac has it wrong. He thinks that Bulkley
wants to argue this thing with the President -
191B
-2-
H.M.Jr.:
Well, you -
C.W.:
And Bulkley doesn't
H.M.Jr.:
All right, well now, let me call up McIntyre
C.W.:
Yes
H.M.Jr.:
And then call you back, may I?
C.W.:
Yes, that would be fine.
H.M.Jr.:
Are you at your office?
C.W.:
I'm at my office, now, Henry.
H.M.Jr.:
I'll call you right back.
C.W.:
All right
H.M.Jr.:
Thank you
C.W.:
Goodbye
191C
November 14, 1935.
Thursday
H.M.Jr.:
Hello
C.W.:
Hello
H.M.Jr.:
Charlie -
C.W.:
Yes
H.M.Jr.:
McIntyre said that he told you that he doesn't want
the President brought into this matter.
C.W.:
Yes, I know -
H.M.Jr.:
- that he appreciates Bulkley's attitude but the
President doesn'twant to see him.
C.W.:
Yes
H.M.Jr.:
Now, I've got to take the position that I've got to
have an answer.
C.W.:
Yes
H.M.Jr.:
Now let's you and I try to keep the President out of
this.
C.W.:
I think so too, Henry, I feel that I should try to do
that just as much as possible. I don't think he ought
to go into it, really.
H.M.Jr.:
- Will you call up Bulkley and get him down and tell
him it's very embarrassing that the -- Scripps-Howard
papers are pressing me very hard-
C.W.:
Yes
H.M.Jr.:
- And the longer we put off, the longer - the worse
the situation looks in Ohio.
C.W.:
Yes
H.M.Jr.:
Now, God, he ought to feel happy with this break that
he got on Mrs. Davey, which was given out by the Board
of Tax Appeals and not the Treasury. But he hates Davey,
doesn't he?
C.W.:
Oh, my gracious, yes.
H.M.Jr.:
Well, then he ought to be in a good humor.
Regraded Unclassified
191D
-2-
C.W.:
I think he is. I know he is.
H.M.Jr.:
Well, all right - well, now -
C.W.:
He was down and spoke at the national meeting of
the Building and Loan Association of Cincinnati
last night.
H.M.Jr.:
Yes -
C.W.:
And he's in Cleveland this morning.
H.M.Jr.:
Well, it's very embarrassing to me and I've really
got to clean it up this week, Charlie.
C.W.:
Well, Henry, I'll call Bulkley right away.
H.M.Jr.:
All right - let's keep the President out of it.
C.W.:
Well, I'll help you on that.
H.M.Jr.:
Thanks
C.W.:
- And I know that that's the right course.
H.M.Jr.:
And let me know - call me back when you ---
let's say we'll do it this week, shall we?
C.W.:
Yes, without fail.
H.M.Jr.:
0. K.
C.W.:
Will you be in your office all afternoon?
H.M.Jr.:
Yes.
C.W.:
I'll give you a ring - after I talk with Bulkley.
H.M.Jr.:
Thank you.
C.W.:
All right, goodbye
H.M.Jr.:
Thank you
C.W.:
Goodbye.
191E
November 14, 1935.
Thursday
Charles
West:
H.M.Jr.: Yes
C.W.:
- to be here tomorrow. He would like to come
Sunday night and said that he would positively come
and see you the first thing Monday morning -
H.M.Jr.: Fine
C.W.:
- if you could see him then.
H.M.Jr.:
Yes, what time would you suggest?
C.W.:
Any time that's convenient with you. He'll be in
here he said, by - I think, it's eight forty that
his train gets in from Cleveland.
H.M.Jr.:
Yes - Well, why don't we say - just a moment,
please -
C.W.:
All right
H.M.Jr.:
- at ten o'clock Monday morning?
C.W.:
Ten o'clock would be good.
H.M.Jr.:
Will you come with him?
C.W,:
if you'd like.
H.M.Jr.:
Very much so.
C.W.:
I'll - I want to get him to give to you just
exactly the kind of letter that is necessary to do
just what you want.
H.M.Jr.: Yes
C.W.:
And I have every feeling of assurance, from what he's
told me, that he has in his possession just that kind
of letter.
H.M.Jr.:
Well -
C.W.:
But, he did - his thought was, after he had talked
with the President, that the President wanted him to
bring that letter to him -
H.M.Jr.: Yes
191F
-2-
C.W.:
And of course there's a little delicacy there -
I don't want him to feel that he's being deprived -
H.M.Jr.:
Well -
C.W.:
- of that, and I don't think he does feel that.
H.M.Jr.:
Well, you - you can explain to him that the Presi-
dent appreciates it but doesn't want to - but wants
me to have it. - You could put it this way, after
talking to McIntyre, that if you want it - McIntyre
wants to put it that way, that the President doesn't
want to interfere with the operations within the
Treasury Department.
C.W.:
Yes
H.M.Jr.:
How would that be?
C.W.:
I think that would be all right, and I'll - and
I'll meet him at the train.
H.M.Jr.:
Wouldn't that be a graceful way of putting it?
C.W.:
I think that would be a very graceful way - and I
can say it to him in such a way that he won't take
any offense.
H.M.Jr.: Yes
C.W.:
Confidentially, he's a little touchy on things like
that, you know -
H.M.Jr.:
Yes , Well -
C.W.:
You know you know him that way as I do.
H.M.Jr.:
But I would put it the way, that the President doesn't
want to interfere with internal matters within the
Treasury Department.
C.W.:
Yes
H.M.Jr.:
And therefore he suggested that he come to me - of
course it's unusual that this collector doesn't bring
the letter himself -
C.W.:
But that's
H.M.Jr.:
It is, that's true, but that's all right - if the
Senator will come across with the letter - why
you and I will open up a bottle of Champagne - after
he leaves,
Regraded Unclassifie
191G
-3-
C.W.:
That's right, Henry.
H.M.Jr.:
And I'll enjoy it with you, with Jeff sitting here,
and I think the Champagne ought to be on Jeff.
(Laughter)
C.W.:
(Laughter) I think so too.
H.M.Jr.:
Jeff says he'll pay for it.
C.W.:
And I'll be in complete accord with the Treasury
Policy.
H.M.Jr.:
Jeff says he'll pay for one bottle. (Laughter)
C.W.:
(Laughter) I'm in complete accord with the new
Treasury policy to have Jeff to do that and he'll
believe that that's part of the New Deal.
Now, that's what I was talking last night - Say,
I told you I whipped Ham Fish, didn't I?
H.M.Jr.: Yes
C.W.:
- on the New Deal?
H.M.Jr.: O.K.
C.W.:
And I'll tell you some of the jabs that I gave him
when I - when I see you.
H.M.Jr.:
Right.
C.W.:
I had him on the run - I had his voting record.
H.M.Jr.:
Right
C.W.:
And I used it on him - (Laughter)
H.M.Jr.:
Right. And then I'll see you and the Senator and the
letter Monday morning the eighteenth at ten o'clock.
C.W.:
Without fail, Henry
H.M.Jr.:
Without fail.
C.W.:
Without fail.
H.M.Jr.:
Make the letter right.
C.W.:
(Laughter) I'll see that it's just as good as it can
be made.
Regraded Unclassifie
191H
I
-4-
H.M.Jr.: O.K.
C.W.:
All right.
H.M.Jr.: Thank you.
C.W.:
Goodbye.
H.M.Jr.: Goodbye.
192
MEMORANDUM
November 14th, 1935.
On October 16th, 1935, the Department received a letter from
Senator Nye, Chairman of the Special Committee Investigating the
Munitions Industry, requesting that the Bureau of Internal Revenue
make available to his Committee the income tax returns of Elliott
Roosevelt for the years up to and including 1934. When the letter
complying with this request came to Mr. McReynolds' desk he brought
it to the Secretary's personal attention. At the Secretary's
suggestion the Bureau of Internal Revenue was instructed to bring
the returns to Mr. McReynolde' Office.
There was attached to the 1934 return Form 1099 from the
Folcker organization reporting the payment of $5,000 to Elliott
Roosevelt, which amount was not shown as income in the return.
After the Secretary had called this matter to the President's
attention, Elliott Roosevelt was called in. He explained that in
February 1934, negotiations between him and Mr. A. H. G. Fokker
resulted in & contract. Soon after the contract was consummated
he found it advisable to withdraw and terminated the contract on
his part. However, in connection with the contract, certain services
had been performed by a Mr. Grenville 1. Stratton of Los Angeles,
California, and he understood that the $5,000 was paid to Mr. Stratton
by representatives of Mr. Fokker for such services. Mr. Roosevelt
stated that the $5,000 did not pass through his hands nor did he
have any connection with it.
At the direction of the Secretary the Deputy Commissioner of
Internal Revenue in Charge of the Income Tax Unit, Charles Russell,
called the Collector of Internal Revenue at Los Angeles and
ascertained that Mr. Stratton and his wife had filed returns on a
community property basis reporting the receipt of the $5,000 in
1934. The Deputy Commissioner made a report of these facts in
the usual form and instructed Fokker's representative to cancel
the Form 1099 issued to Elliott Roosevelt and issue one in lieu
thereof to Mr. Stratton.
These facts were all set out in detail in a letter dated
October 30, 1935, addressed to Senator Nye, and the income tax
return of Mr. Roosevelt together with the report of Deputy Commissioner
Russell were made available to Senator Hye's Committee on November 7.
1935. The Senator acknowledged this letter and expressed the Committee's
appreciation of the explanation developed by the investigators.
Regraded Unclassifie
193
ocr 30 145
My dear Mr. Chairman:
I have your letter, identified 59 Treasury Department Request
No. 78, with accompanying list dated October 15, 1935, requesting that
there be made available to the Special Committee Investigating the
Munitions Industry, United States Senate, income tax returns for the
years up to and including 1934 of Elliott Roosevelt, Washington, D. C.
Your letter states that inspection of these returns is desired
for the purpose of the investigation now being made by the Committee
pursuant to Senate Resolution 206, Seventy-third Congress. Authorize-
tion for inspection of income tax returns by the Special Committee
Investigating the Munitions Industry is contained in Precutive Order
dated May 14, 1935.
Upon receipt of your request an examination was ordered in accord-
ance with Section 257 (a) of the Revenue Act of 1926. The examination
of the return disclosed that dr. A. H. C. Fokker, Alpine, New Jersey,
had filed an information return (Form 1099) showing payment of $5000 to
Mr. Elliott Roosevelt, which was not disclosed on his return. I re-
quested Mr. Roosevelt to explain the apparent discrepancy and a copy of
his explanation is attached hereto, to the effect that in February 1934
negotiations between him and Mr. A. H. 0. Fokker resulted in a contract.
Immediately thereafter, or soon after the contract was consummated, he
found it advisable to withdraw end terminate the contract on his part.
However, in connection with the contract certain services had been per-
formed by & Mr. Grenville W. Stratton, Los Angeles, California, and he
understood the $5000 was paid to that individual by representatives of
Mr. Yokker, in connection with such services. Mr. Roosevelt states
the $5000 did not pass through his hands nor did he have any connection
therewith. le believes Mr. Fokker insivertently reported the sum no
being paid to him because he was one of the parties to the original
contract. I requested the Deputy missioner in Charge of the Income
Tax Unit to investigate the matter and as shown by his report attached
to the return, Mr. Grenville W. Stratton and his wife, Cora L. Stratton,
Los Angeles, Chliforniafiling separate returns on & community property
basis reported $6000 as being received from Mr. Fokker. Copies of the
correspondence in connection with the examination and a copy of the
Deputy Commissioner's report explaining the apparent discrepancy are
transmitted herewith.
Regraded Unclassified
194
I have issued instructions that the returns, associated
papers, and report thereon be nade available for inspection in
the Bureau of Internal Revenue, by the duly authorized repre-
sentative of the Committee.
In the event that further correspondence relative to this
matter is necessary, kindly refer to IT:E:CTR.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary.
Honorable Gerald P. Nye,
Chairman, Special Committee
Investigating the Munitions Industry.
United States Senate.
J.R.R.
10/30/35
Regraded Unclassifie
195
October 30, 1935.
fur Amesstions claimed on she return 129 small of 5aa where
Ind sole satisfactory In 201 Elliott Recsevelt and Rath o. Roosevelt,
12 for sperating M 1101 Penn Street,
his compation, is recemble.
Deversments 4d Yeart 1934. North, Texas. General. 25 to
Port
allowed
idditional the speak at teant the amount claims as trurelling
ILECERANCY in with remain. Describution
Commissioner of Internal Revenue, 278 so small that sig missulity
respected charge would not recli In sufficied)
Washington, D. offective.
un. COMMISSIONER:
immediately,
I have examined the income tax return of the above-named taxpayers
for the calendar year 1934 and report as follows:
in information return (Form 1099) was filed by A. H. G. Folder,
Alpine, New Jersey, for the calendar year 1934, showing $5000 ds having
been paid to Elliott Roosevelt during that year. The return filed by the
taxpayers for the calendar year 1934 did not include such payment in the
income reported. Mr. Elliott Roosevelt was interviewed and submitted the
following explanation:
That in February 1934 negotiations were commenced between him and
Mr. the E. G. Fokker, which resulted in the consummation of a contract
during that month. Immediately thereafter, or soon after the contract
was consummated, he deemed it advisable to withdraw and terminate the
contract on his part. In connection with the contract certain services
were performed by a Mr. Grenville W. Stratton, Los Angeles, California,
and in connection therewith $5000 was paid Mr. Stratton by Mr. Fokker or
his representatives. Mr. Roosevelt further stated that the $5000 did not
pass through his hands nor did he receive any part of it. Re assumed
that Mr. Folder inadvertently reported him as recipient of the payment
becau se he was one of the parties to the original contract, but from
which he had withdrawn.
Contact was made with the Internal Revenue Agent in Charge of the Los
Angeles Division who stated that Mr. Grenville N. Stratton and his wife,
Cora L. Stratton, 6626 Franklin Avenue, Los Angeles, California, filed
separate returns for the calendar year 1934, upon & community property
basis, that 15, each individual reporting one-half of the items of income.
The Agent in Charge had the returns before him and stated that each return
reported as taxable income $2500 or & total of $5000 AS having been No-
ceived from Fokker during the calendar year 1934. Mr. A. H. G. Fokker
has been requested to submit a revised information return (Form 1099),
showing the actual recipient of the payment.
-2-
196
The deductions claimed on the return are small and the taxpayer
has made satisfactory explanations. The five cents per mile claimed
as expense for operating an automobile, necessary in connection with
his occupation, is reasonable. It is the same amount as allowed
Government employees as approved by the Comptroller General. It is
believed the taxpayer spent at least the amount claimed as travelling
expenses necessary in connection with his occupation. Depreciation
claimed is reasonable. The deductions are so small that any reasonably
expected change would not result in sufficient additional tax to
warrant further investigation.
Respectfully,
(Signed) Chas. T. Russell
Deputy Commissioner.
197
October 30, 1935.
IT:E:CTR
Mr. A. H. G. Fokker,
Alpine, New Jersey.
Sirt
An information return (Form 1099) filed by you for
the calendar year 1934 shows $5000 as having been paid
to Mr. Elliott Roosevelt during that year. Mr. Roosevelt
disclaims any receipt of the payment, stating that the
payment was received by a Mr. Grenville V. Stratton, 6626
Franklin Avenue, Los Angeles, California. In this event,
you are requested to forward a corrected information re-
turn (Form 1099) showing the proper recipient.
Please refer your reply to the personal attention
of the undersigned.
Respectfully,
(Signed) Chas. T. Russell
Deputy Commissioner.
Regraded Unclassified
COPY
198
October 29, 1935.
My dear Mr. Secretary:
In reply to your letter of October 29, 1935, requesting
information as to $5,000 reported to have been paid to me by A. H. G.
Fokker, Alpine, N. J., I submit the following information:
During February 1934, negotations were entered into between ay-
self and Mr. A. H. G. Fokker, which resulted in the consummation of
a contract. Immediately thereafter, or soon after the contract
was consummated, I found it advisable to terminate the contract on
my part, which was done. However, in connection with the contract,
certain services had been performed by a Mr. Grenville W. Stratton,
of Los Angeles, Calif., and I understand $5,000 was paid to him by
representatives of Mr. Fokker in connection with such services. The
$5,000 did not pass through my hands, nor did I have any connection
therewith.
I hope this explains the payment which Mr. Fokker inadvertently
reported as being paid to me, perhaps because I was one of the parties
in the original contract. I believe an investigation of Mr.
Stratton's return you will find this sum reported by him as income.
Very sincerely yours,
Elliott Roosevelt.
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
199
October 29, 1935.
Regraded Unclassifie
My dear Mr. Secretary:
In reply to your letter of October 29. 1935, requesting
information no to $5,000 reported to have been paid to me by
A. E. G. Fokker, Alpine, N. J., I submit the following information:
During February 1934, negotiations were entered into between
myself and Mr. A. 1f. 0. Fokker, which resulted in the consumnation
of a contract, Immediately thereafter, or soon after the contract
was consumated, 1 foand it advisable to terminate the contract on
my part, which WAS done. However, in connection with the contract,
certain services had been performed by a Mr. Grenville W. Stratton,
of Los Angeles, Calif., and I understand $5,000 was paid to him by
representatives of Mr. Fekker in connection with such services. The
$5,000 did not pass through my hands, nor did I have any connection
therewith.
I hope this explains the payment which Mr. Fokloer inadvertently
reported as being paid to us, perhaps because I was one of the parties
in the original contract. I believe on investigation of Mr. Strattom's
return you will find this euro reported by him as income.
Very sincerely yours,
(Signed) Elliott Roosevelt.
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury.
MaRiflr
200
October 29, 1935.
My dear Mr. Roosevelt:
An examination of your income tax return for the
year 1934 discloses that no report is made of the receipt
of $5,000 which A. H. G. Folder of Alpine, N. J. reports
having paid to you during that year. Was this amount
overlooked in the preparation of your return?
Very sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary.
Mr. Elliott Receevelt,
1101 Penn Street,
Forti North, Texas.
NO Rifir
Regraded Unclassified
201
October 30, 1935.
IT:E:CTR
Mr. A. H. G. Fokker,
Alpine, New Jersey.
Sirt
An information return (Form 1099) filed by you for
the calendar year 1934 shows $5000 as having been paid
to Mr. Elliott Roosevelt during that year. Mr. Roosevelt
disclaims any receipt of the payment, stating that the
payment was received by a Mr. Grenville W. Stratton, 6626
Franklin Avenue, Los Angeles, California. In this event,
you are requested to forward a corrected information yes
turn (Form 1099) showing the proper recipient.
Please refer your reply to the personal attention
of the undersigned.
Respectfully,
(Signed) Chas. T. Russell
Deputy Commissioner.
Regraded Unclassified
202
November 14th
Mr. Cibbons came in to-day and gave Mr. Morgenthau the
following political gossip:
That Walter Cummings, of the Continental Bank,
wants to be Vice-President.
Farley wants to be Governor of the State of New York.
Mrs. Herbert Lehman told Charlie West that Governor
Lehman wants to be Ambassador to Switzerland.
Jesse Jones, Joe Kennedy, Eccles and Walter Cummings
want to succeed Mr. Morgenthau as Secretary of the
Treasury, especially Jesse Jones.
The reason that they are after Mr. Morgenthau is
that he is too tough on the contráctors and that they expected
to clean up on the asphalt business in Chicago; that they have
not been able to make a nickel on PWA projects and that Collins,
over at Procurement, has been very faithful to Mr. Morgenthau
and that they have been unable to get anywhere with him. McNutt
of Indiana Barkley of Kentucky and Bulkley of Ohio have particu-
larly "knocked" Mr. Morgenthau.
That the political gossip also is that the President
said it is important to carry Ohio; that if Jesse Jones gets the
job of Secretary of the Treasury they can then take care of
Jack Garner and, in this way, have Walter Cummings become Vice-
President.
Mr. Gibbons told Mr. Morgenthau that Farley is absolutely
broke and that he is desperate to do something for himself.
H. M. Jr. told Mr. Gibbons, in case he did not know,
that there are 6 Directors of the Continental Bank and that each
one of them owes the bank on stock about $250,000 each.
Yesterday the President told Mr. Morgenthau that Miss
LeHand had $5,000 which she wanted to invest and asked that he
recommend some stocks to her. This morning Mr. Morgenthau called
Miss LeHand and told her that some time ago Miss Dickerman came
to him and asked that he make some recommendations as to how she
could invest some money. At that time he suggested that she go
down to see Earle Bailie with a list of all of her securities and
that Earle Bailie would advise her. She did this and was very
satisfied. He told Miss LeHand that he really pays very little
Regraded Unclassified
203
- 2 -
attention to his or Mrs. Morgenthau's securities, that he leaves
it entirely to the discretion of Earle Bailie and recommended to
Miss LeHand that Mr. Bailey send her a list of suggestions which
she could have the President look over and that he too would be
be delighted to look over the list. She said this arrangement was
very satisfactory to her.
I called Mr. Bailie and asked him to send this list of
suggestions to Mr. Morgenthau.
Regraded Unclassified
204
November 14, 1955.
CONFIDENTIAL FILES
TELEPHONE CONVERSATION WITH
L. w. Knoke
BANK OF FRANCE
Mr. Cariguel called me at 11 o'clock today. He referred to
the advance of the French bank rate just announced and explained that
the change was made not so much because they had lost gold heavily in
the last week under report but because next Thursday there would be
a bigger loss. Furthermore, they had had to take into account the
fact that since the beginning of June they had lost on balance over
10,000,000,000 francs.
When I referred to & report received here from London yes-
terday stating that according to the London bullion brokers the Bank
of France was reluctant to let gold go to London, Cariguel said that
it was this very question which had caused him to call up today. At
great length he then stated that although they as much as ever stressed
the point that the franc was convertible into gold no matter what its
destination, nevertheless, they considered that shipments of gold from
Paris to London were undesirable because it meant that such gold went
out of the hands of the monetary authorities into those of the hearders
where it became entirely useless. This was a"class of very unhealthy
business which they did not consider justified. If hearders wanted to
buy gold in the open market they could get it in London which was a
free market just the same as they could buy cotton or copper; all they
had to do was to pay the price. As far as the Bank of France was con-
cerned they had no desire to be a party to such transactions which had
nothing whatever to do with the level of exchange between London and
Paris but were carried on irrespective of the exchange rates. As far as
Regraded Unclassified
205
November 14, 1935.
CONFIDENTIAL FILES
TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF FRANCE
- 2 -
the Equalization Fund's efforts were concerned to stabilize as much as
possible the London-Paris rate, the Bank of France not only did not
object to this but heartily welcomed it. If the Fund wanted to buy
gold in Paris that was very satisfactory to them. If they wanted to
take it to London they would most decidedly not object. "We very
heartily approve that when the franc is weak the Fund should buy some
and take gold and vice versa." He had talked the matter over with his
friends in the Bank of England who had heartily approved of the Bank
of France's attitude.
Cariguel was very anxious that I would notvfail to convey
his message immediately to Governor Harrison and make clear and explain
to him the Bank of France's attitude.
I asked Cariguel what the Equalization Fund's gold position
was in Paris and he said that the amount was still in the neighborhood
of 2,000,000,000 francs. He went on to explain that in his opinion,
if London had not been confronted with 8 substantial movement of capi-
tal to New York, the British would have been able to take considerable
amounts of gold from France.
I referred to the political situation in France and Cariguel
thought that the Committee of the Chamber would come to terms somehow
because the opposition was undoubtedly most unwilling to take power at
this time. Cariguel then mentioned 8 report circulating in the Paris
market to the effect that the total of foreign money in New York must
now be in the neighborhood of 2,500,000,000 dollars. I replied that I
had no figures available but felt that, in my opinion, that Regraded total was
Unclassified