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Volume 253, April 10 – April 11, 1940
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Volume 253, April 10 – April 11, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 253
April 10 - - 11, 1940
- A -
Book Page
Incrion Tourist Expenditures
has - - 4/10/40
253
93
Argention
See letin America
- D - -
Desark
See lar Conditions: Seandinavia
- G -
Government Reorganisation
Flam Ic. 4: FIR's message to Congress - 4/11/40
303
- - I - -
Harrison, George L.
Tells HWr be is resigning as president of Federal
Beserve Bank of Sex York July 1st to become president
of les York Life Insurance Company - - 4/10/40
74
- I- -
Italy
Marcotics, Smaggling of: HWr, Welles, and Harris discuss
leniency in view of cooperation of Italian Government
and Italian Line - 4/10/40
21
a) Remission of Fines: H&Jr informs Welles - -
4/11/40
323
- L-
latin America
Argentina: Agreement resched with Bank of England on
future transfers of a financial character - 4/10/40
59
- . -
Movie Cases
See Tax Imsion
- If -
Parecties
See Italy
See lar Conditions: Sendinavia
at I I
Book Page
forguisation, Government
Plan Io. 4: FIH's masage to Congress - - 4/11/40
253
303
-- 1 I
Surplus Commodities
bet export mles, et cetere: Beas -
4/10/40
3
- -:- -
Tax Insia
Movie Cases: Progress report - 4/10/40
35
Tourist Inpenditures, American
has - 4/10/40
93
- I -
See laz Conditions
- I -
laz Conditions
Airplanes:
Bir ad Assistant Secretary of lar Johnson in
conference ast Collins which manufacturers are
witing to bear from kr Department; Collins
states Sell, Curtiss, and Lockbeed - - 4/10/40
103
a) Johnsm asis HWr to stand by him;
replies by asking him to stand
by FIR - 4/10/40
109
b) Mr's pencilled notes
155
c) Johnson reports that namufacturers have
been in and progress is assured - 4/10/40
245
32, Purvis, Fleven, Self, and Collins confer -
4/10/40
109
a) Requirements listed: See page 118
b) Conference with Louis Johnson reported
112
e) Johnson tald by 'phone of program
131
d) on iron and steel purchases
in latted States
145
e) - aluminum and light alley
147
1) Reports a orders with Wright Aeromentical
Corporation, General Motors (Allison engines),
Prett and Whitney, Curtiss bright (steel-
blade propellors)
159
w Program as tentatively established
163
Regraded Uclassified
- I - (Continued)
Book Page
Mr Conditions (Continued)
Airplanes (Continued):
Conference between Allied Purchasing Mission,
representatives of Mar end Havy Departments,
Procurement Division, and Curtiss Airplane
Company - 4/10/40
253
244
Purchase Expense: Amount applied to development
of model not restricted; amount allocated to
training of employees, et cetera -
Collins reports on discussion with
Purchasing Mission - 4/11/40
291,296
a) Memorandum from Purchasing Mission
298
Exchange market resume - 4/10/40, et cetera
1,286
Scandinavia:
Harrison (Federal Reserve Bank of New York) informs
H&Jr of progress being made by Foreign Exchange
Committee - 4/10/40
15,28
Berle and HWr confer - 4/10/40
24
Hull and HAJr confer - 4/10/40
31
Action to be taken by United States Government
now that there has been change of sovereignty
discussed at group meetings - 4/10/40
36,55,60
a) H&Jr confers with Bull concerning progress
at State Department
43
b) Foley asked to explain Treasury's legal
authority
52
c) Foley gives resume of action to date
55
1) Federal Reserve Bank of Ben York's
proposed statement read
d) Conference with Securities and Exchange
Comission, Federal Reserve Board, and
State Department described by Gaston -
4/10/40
60
e) Treasury procedure discussed
61
1) Volunteer method
2) Executive Order
a) Justice indicates Jackson will
sign letter establishing legality
f) FDR and HWr discuss best way
83
g) Hull and HMJr confer
86
1) Feis states amount of indebtedness
due United States citizens from
Denmark and Norway is approximately
$100 million
2) Hull not entirely satisfied with
Executive Order procedure
HMJr asks Harrison to ask Loree (Vice President,
Guaranty Trust Company) to assist in arranging
that Treasury be informed of all exchange
transactions in advance - 4/10/40
48
- 1 - (Continued)
Book Page
War Conditions (Continued)
Scandinavia (Continued):
"What does the invasion of Norway and Denmark
mean to United States?": White memorandum -
4/10/40
253
96
Gaston resume' - 4/10/40
100
Treasury Ruling No. 1 amending Executive Order
No. 8389 to the extent that Iceland is not
included with Denmark - (4/15/40)
102
Hull informs HMJr that both Demark and Norway
are "in indefinite military occupation"; therefore
State Department regards affirmatively proposed
action by Treasury - 4/10/40
105
Conference; present: Gaston, Foley, Bernstein, White,
Ransom, Goldenweiser, Berle, Moss, Purcell,
Goldsmith, and Townsend - 4/10/40
164
a) Gaston gives resume of Treasury action
to date
b) Berle gives State Department point of view
168,200
c) Treasury explains advantage of Executive
Order over voluntary action by banks,
et cetera
170
d) Ransom discusses advantages of voluntary plan.
183
e) Proposed Executive Order read by Foley
201
Publicity (proposed) discussed by HMr, Foley, Gaston,
Schwarz, Cochran, White, Berle, and Bernstein -
4/10/40
204
a) Proposed memorandum to FDR read
205,213
b) Executive Order (initialled copy)
217
1) Biddle's (Acting Attorney General)
approval
214
2) Allied Purchasing Mission told of
Executive Order - 4/10/40
269
3) Press comment
273
4) Berle congratulates HWr - 4/11/40
321
5) British reaction of pleasure reported
by Kennedy - 4/11/40
337
c) Regulations (initialled copy)
222
Securities Markets (High-Grade):
Current Developments: Haas memorandum - 4/10/40
7
U.S.S.R.:
American Steamship WILDWOOD bearing cargo for Amtorg
recalled by owners to Tacoma, Washington -
4/10/40
253
Regraded Uclassified
TREASURY DEPARTMENT
1
INTER-OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Norgesthan
CONFIDENTIAL
FROM Mr. Cochran
The foreign exchange market was quieter today and sterling recovered part
of the loss sustained is yesterday's trading. It opened at 3-45-7/8 and startly
thereafter business was date at 3.45. the low for the day. The rate then No
vanced steadily util the mid-afternoon, when a high of 3-49-7/8 125 reached.
The final quotation vas 3.49-3/8.
Sales of not starling by the six reporting banks vá the Federal isem
Bank of Sev Tork totaled $455,000, from the following surces:
: comercial concerns
1 144,000
3 foreign banks Charope, South America at Ter last) 1 261,000
by Federal Reserve ink state lev York (for Ingularia) 1 50,000
Total. : 455,000
Purchases of spet sterling securited to 1422,000, as indicated below:
by comercial concerns.
1 195,000
By foreign banks (Europe and South America)
is 227,000
Total. : 422,000
The following reporting sold cotton tills totaling 197.000 to the
British Control or the basis of the official rate if 4.02-1/2:
Jall & Inter a 18
20,000 by the Intional City
10,000 by the Bank of Kankattan
5,000 by the Quaranty Trust Co.
: 97,000 Total
The Guaranty trust Company reported that it had purchased 217,000 for forward
delivery from the British Control st 4.03-1/2. of this areast, 220,000 vill be
used to pay for ablyments of jute, al 17,000 for shipments of ribe.
Both the guilder mi the belgs were again under pressure h instarian If 8
result of the fear that folland at Belgium my became involved is the
var. Vaile the rate for the guilder remined steady is this nebt st -5309 est
of the day. it vesirened in the latter part of the statem to -5308 el the
Federal leserve lak of les York purchased 100,000 gillers de intention
and for account of the Tetherlanis 3mk. It vas reported that the Jutch
Regraded Uclassified
2
2
(5) cunsiderable agent to its currency in Ansterdan. Such support of guilders
against dollars in the part to tays amounted to approximately $19,000,000. The
Regraded Uclassi
belga, due closing at .1699 is Jev York yesterday, opened in this market st
.1667. During the in the rate recovered some of its loss and closed st ,1693.
The other Important surrencies closed as follows:
Trach france
.0198-1/4
Sales france
2242-1/2
Canading dollars
16-1/8% discount
A smll sent of business in Swedish kronor was transacted at 2340.
Ve purchased the following amounts of gold from the earnarted accounts of
the banks indicated:
£3,000,000 from the Bank of the Argentine Republic
375,000 from the National Bank of Belgium
$3,375.000 Total
the Federal lase 3 of Jev Tork reported that the following shipments
of gold had been consigned to it:
$5,132,000 from South Africa, shipped by the South African Reserve 3m, to be
earnarked for account of the Metherlands Bank.
2,514,000 from Canada, singled by the Bank of Canada, Ottawa, for sale to the
U. 5. lasey Office st les York,
2,255,000 from Regland, shipped by the Bank of England for account of the Swine
National The disposition of this shipment is ulum at the
present time.
$9,901,000 Total
The State Department forwarded to us a. cable stating that the Issue Federal,
3era, VSE shipping $266,000 in gold from Switzerland to the Istional City Bank,
Sev York, for sale to the :, 5, lessy Office.
The Bombay quotation for spot silver rose the equivalent of 3/15# to 41.06+.
There was a further informent today in the London silver prices. The spot
quotation vas fired st 20-25/161, so 7/15d, and the forward price - 20-7/58, any
3/84. The :, 5, equivalents were 32.72# and 32.43#.
inty al ins's nettlement price for foreign silver vas unchanged st 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35/-
To made four purchases = silver totaling 390,000 sunces under the Silver
Purchase Act. Of this ant, 200,000 ounces represented a sale from inventary,
and the reasining 190,000 - consisted of new production from foreign
countries, for forward delivery.
To also purchased 40,000 of silver from the Bank of Canada usist so
regular monthly agreement,
CONFIDENTIAL B.M.S.
3
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Mongenthau
FROM
Mr. Haas GRA
Subject: Wheat export sales and other market data from the
Federal Surplus Commodities Corporation.
Mar. 14: There was a little further export business in
American wheat from the Pacific Coast to Europe
yesterday, and it vas reported that 200,000 bushels
were sold.
There was considerable business in Canadian wheat,
with the United Kingdom buying about 10,000,000
bushels, all of it for shipment after the opening
of navigation via Canadian ports.
There are undoubtedly a good many people who have
been bullish on wheat because of the war and the
inflationary tendencies surrounding it. But the
price is low in Argentina though the crop was al-
most a failure, and it is also low in Canada even
taking account of exchange. There is no doubt that
wheat in our own country would have been selling at
a considerably lower price except for the successful
program wherein the Government exported about
100,000,000 bushels of wheat last year at a subsidy
of only 30 cents.
American corn worked for export to Scandinavian
countries totaled about 500,000 bushels, all of
which was "distressed" American corn in store on
the Atlantic Coast, for which there was apparently
no market except for export.
Mar. 15: There were no export sales of wheat reported from
the Pacific Coast, nor were there any sales of
Canadian wheat except for 750,000 bushels which
made up part of England's 10,000,000 bushel purchase.
4
Secretary Morgenthau - 2
About 500,000 bushels of United States corn were
sold to Denmark, but at a price about 2 cents per
bushel under a replacement basis. It 18 very
doubtful whether there will be any demand for corn
from now on in view of the heavy Argentine offer-
ings as & result of the early harvest there.
In spite of recent sales of Canadian wheat, the
wheat picture in Canada is far from healthy;
clearances of wheat for export from August 1 to
date are only 114,000,000 bushels as against
104,000,000 bushels last year. The balance remain-
ing for export and carryover is 350,000,000 bushels
as against 157,000,000 bushels last year. Therefore,
there is every indication that the reserve on August 1
will be large and the 1940 crop will certainly have
to be much smaller to develop any bullish enthusiasm.
Mar. 18: There was no export business reported either for
United States grain or for Canadian grain. Business
in Europe was at a standstill pending the outcome
of the present political conferences.
Mar. 20: There was no export business in American grain,
either wheat or corn, while export sales of Canadian
wheat were limited to about 200,000 bushels, mostly
to Scandinavian countries.
Europe has recently been making rather liberal pur-
chases of Argentine grain and it 18 interesting to
note that yesterday Argentine Rosafe wheat sold
about 6 cents a bushel under Number 2 Manitobas,
c.i.f. Antwerp.
Mar. 21: There was no export business in American wheat
or corn with export sales of 100,000 bushels of
Canadian wheat reported.
Mar. 23: With the holidays abroad, there was no export busi-
ness in American or Canadian grains.
Mar. 26: Export sales of American grain, both wheat and corn,
were at a standstill, while Canada reports export
sales of Manitoba wheat to the extent of about
250,000 bushels.
Regraded Uclassified
5
Secretary Morgenthau - 3
Mar. 27: It vas reported that 250,000 bushels of Pacific
wheat have been worked from Portland to Russia.
We received advice from Sydney, Australia, that
during the first 15 days of February that country
sold 2,500,000 bushels of wheat to Shanghai at
prices that, for American wheat, would require 8
subsidy of 36 to 37 cents per bushel.
Mar. 28: There was a good business in Canadian wheat from
Montreal with total sales about 2,000,000 bushels.
It was reported that Denmark bought 300,000 bushels
of cash corn for April and May shipment from the
Atlantic Coast; this corn was again sold below a
replacement basis.
Mar. 29: Export sales of American grain are negligible, with
Canada reporting sales of about 200,000 bushels of
Canadian wheat, mostly to Scandinavian countries.
Australia has been making larger sales of wheat to
Shanghai than have actually been reported lately.
Total exports from Australia were somewhat handi-
capped by the scarcity of ocean freight and high
freight rates, but we are advised that shipments
will be heavier from now on because the British
government 1s issuing instructions to convoy 100,000
tons of flour monthly from Australia to Great Britain.
In line with the British government's policy of
increasing purchases of cotton grown outside of the
United States, the Liverpool Cotton Association is
considering plans for establishing & new contract
on which cotton from Brazil would be taken.
Mar. 30: There was no export business in whest reported; and
even Winnipeg, which was expected to have a very
dull market, reported no business at all for the
day.
Apr. 1: The United Kingdom and the Continent took almost
all of the Canadian cash wheat that vas offered
overnight, and total sales were close to 10,000,000
bushels. So far as American grain is concerned, the
export business is at 8. standstill.
Regraded Uclassified
6
Secretary Morgenthau - 4
Apr. 2: The export demand for American grain was negligible
with Canada reporting sales of about 100,000 bushels
of Manitoba wheat.
TREASURY DEPARTMENT
CONFIDENTIAL
INTER-OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Morgeatham
FROM
Mr. Hass
Subject: Current Developments in the High-Grade Securities
Markets
SUMMARY
(1) Treasury securities fall sharply in price yesterday
on the news of the German invasion of Demark and
Norway, wiping out the gains of the past three weeks
(Charte I and II). High-grade corporate securities
declined much less.
(2) Current developments is Europe have not seriously
disturbed the market for LEV corporate issues. A
$7 millions debenture offering yesterday went to a
premium over the offering price, and another issue
of bonds amounting to $36 millions is being offered
today.
(3) Treasury note holdings of weekly reporting member
banks in New York City have increased by $157 ail-
lions in the past four statement weeks (Chart III).
Holdings of Treasury bills in Chicago reporting
banks decreased by $158 millions in the three weeks
ended April 3, presumably to supply a demand for
bills for tax avoidance purposes.
(4) Foreign government securities dealined notably
yesterday. Consols declined seven-eighths of a
point to 71-1/2 after three verits of insetivity
(Chart IV). Securities of Scandinavian countries
and of Continental neutrals broke sharply.
Prepared by: Ir. Purphy
Kr. Turner
Er. Eans
Regraded Uclassified
8
Secretary Morgenthau - - 2
L Domestic High-Grade Securities Markets
Treasury bonds which had been rising fairly steadily for
almost three weeks broke sharply yesterday on the news of the
German invasion of Denmark and Norway. The prices of Treasury
securities are now at about the level of March 20, just before
the latest price advance began (Chart I). The extent of
yesterday's movement may be seen in the following table which
compares the price movements of Government securities, by
saturity classes, from March 20 through April's, and on April 9:
:
Average price change
: March 20 - : April 8 -
:
April 8
:
April 9
(In thirty-seconds)
Notes
1-3 years
- 1
- 3
3-5 years
+ 4
- 7
Bonds
5-15 years to call
+22
-21
Over 15 years to call
+28
-30
The average yield of long-term Treasury bonds, noving 1s-
versely to prices, which had decreased from 2.26 percent on
March 20 to 2.20 percent at the close on Monday, April 8, 1a-
creased again to 2.26 percent yesterday (Chart II).
The Federal Reserve banks did not engage in open market oper-
ations in support of the Government bond market.
The stability of corporate securities on Tuesday is in sharp
contrast to the decline in Government securities. High-grade
corporate bonds, which had reached a new all-time high at the end
of last week, also reacted but not to such a degree as did Treas-
ury bonds. Our average yield of high-grade corporates increased
yesterday from its record low of 2.71 percent to 2.73 parcent
(Chart II). None of the bonds included in the average declined
more than three-quarters of a point yesterday, and the average
decline for those traded was less than three-eighths of a point.
Regraded Uclassified
Secretary Horgesthen - 3
п. New Security Issues
The market for new issues does not appear to have been
greatly disturbed by current developments in Europe. An offer-
ing yesterday of #7 millions of 3-1/2 percent, 15-year deben-
tures of the United Biscuit Company of America which was priced
at 102 went to a premium of 1/2 point over the offering price.
Further indication of "business as usual" is found in the offer-
inc today of $36 millions of 3 percent, 21-year first nortgage
bonds of the Inland Steel Company, at 102 to yield about 2.87
percent to naturity.
An interesting feature of the short-term financing of the
last two weeks WSS the sale of an aggregate of $74 millions of
six-month notes by 26 local housing authorities. The first
issue of such notes, amounting to $50 millions, occurred last
November. The recent transactions bring the total to $158 mil-
lions; but the first $50 millions will come due in about a
month, As was the case in the earlier issues, the repayment
provisions are such as to make the notes guaranteed in effect
by the United States. The bulk of the new issue, including
$39 millions issued by the New York City Housing Authority, was
purchased by a syndicate headed by the Chemical Bank and Trust
Company on an interest cost basis of .44 percent. The interest
cost on the last November's offering was .60 percent.
Also of interest 1s the offering last week of 714,835 shares
of common stock of the Indianapolis Power and Light Company, for
an aggregate of $17 millions. The offering constitutes the entire
stock of the company, and about 69,000 shares represent new
money financing. This 1a reported to be the largest block of 000-
zon stock of & public utility company offered directly to the pub-
lic in more than ten years. The issue was oversubsoribed and went
to 8 fractional premium over the offering price.
III. Bank Holdings of Government Securities
Treasury note holdings of weekly reporting member banks in
New York City increased by $157 millions between March 6, the
date of their most recent low, and April 3, the latest statement
date (Chart III). The Treasury note portfolios of New York report-
ing banks are now $30 millions above the level at which they stood
last December, before the December financing reduced the outstand-
1ng note volume by more than $1 billion. Reporting banks outside
of Sen York City have reduced their Treasury note holdings by
about $61 millions since March 6.
Regraded Uclassified
10
Secretary Morgenthau - 4
Treasury bill holdings of weekly reporting member banks have
been declining since March 13. Almost the entire decline is 80-
counted for by the decrease in the portfolios of Chicago banks,
which disposed of $158 millions out of a net decrease for all re-
porting banks of $163 millions. Presumably these bills were
purchased by individuals and corporations for purposes of tax
avoidance.
It is also interesting to note that the quarterly statements
of New York City banks indicate that over half of the net changes
in the Government security holdings and loans of weekly report-
ing member banks in that City were accounted for by one bank,
Government security holdings of weekly reporting banks increased
by $153 millions and their loans decreased by $113 millions in
the first quarter of 1940. The Governments held by the Guaranty
Trust Company increased by $111 millions, and the leans of this
bank decreased by $61 millions.
IV. Foreign Securities Markets
The new turn in the European war yesterday sent the prices
of foreign Government securities down sharply. British 2-1/2 per-
cent consols after about three weeks of relative inactivity closed
yesterday at 71-1/2, to yield 3.51 percent, off seven-eighths of &
point from the price of the previous day, but still one point
above the new minimum established three weeks ago (Chart IV).
French 3 percent rentes also declined in price yesterday, closing
at 74.50, equivalent to & yield of 4.04 percent, as compared with
75.50 the previous day and 73.40 on Monday, March 18.
The bonds of Scandinavian Governments sustained large price
losses yesterday, and securities of leading Continental neutrale
also fell sharply. The following table shows the 1939 and 1940
high prices, and the closing prices on Monday and Tuesday for
representative securities of the two Scandinavian countries in-
vaded by Germany, and of Belgium and Italy:*
:
1939
:
1940
:
Monday
:
Tuesday
:
High
:
High
I
April 8
:
April 9
Norway, 4-1/48 of 1965
103-7/8
80-1/2
71
41
Denmark, 4-1/28 of 1962
97-1/2
55-7/8
39-7/8
23
Belgium, 6s of 1955
108
100-1/2
100-1/8
90-1/2
Italy, 70 of 1951
76-1/2
72
62
57-1/2
6 No Swedish Government bonds are quoted in New York.
Regraded Uclassified
11
Chart I
CHANGES IN THE PRICES or U.S. SECURITIES
Petata Motted Improsent the Difference free - 5, - Price of Bodh Materity Class
1940
a
.
1939
1940
E
-
2
9
15
23
30
6
13
20
R
4
=
-
12
I
I
I
- -
(ar -
(ner -
Schooley Quitations
I
&
É
?
&
&
4
7
-
7
1
+
+
Y
1
letts, 3-6 Yes.
1
7
+
3-5 This.
4
.
-
o
-
1-3 The
/ from, ?
T
4
T
T
+
+
4
7
9
T
T
T
1
P
1
k
-16
5-5
- Call
÷
1
T
-lj
-
- 15 -
-18
- 5-15 Yes.
&
- Call
TO CALL
&
6
7
4
- Orca 15 Tas.
TO CALL
4
4
&
k
&
&
4,
4
&
&
P
.
T
7
«
&
+
de
&
&
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à
,
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IT
IT
7
1
&
à
4
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-
sex.
I
1
-
-
2
,
16
#
30
6
13
IN
27
4
11
#
a
1939
1940
É
-
1940
2 of - Summy of - -
- . -
F-15-4-1 155
Regraded Uclassified
12
Chart II
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
1939
1940
1940
-
E
-
-
-
AM
JULY
AUG
BEPT.
OCT
NOV
DEC
JAN
FEB.
MAR
APR.
MAY
ARE
JULY
AUS
SEPT
OCT
NOV
DEC.
MAR
APR
MAY
-
-
.
-
.
-
.
a
If
-
a
.
e
,
-
,
a
-
1
e
:
,
a
.
-
.
-
-
E
If
If
e
e
-
*
-
18
.
is
-
.
-
-
:
4
,
inverted State
Inverted Scale
Inverted Scale
PER CENT
PER CENT
PER CENT
WEEKLY. Seturday Quotations
DAILY
2.0
2.0
2.0
Long Term
Treasury
2.2
2.2
2.2
2.4
2.4
2.4
Long Term Treasury
- years - - - seriest cell dermal
2.6
2.6
2.6
2.8
2.8
2.8
Corporate
3.0
3.0
3.0
Corporate
3.2
3.2
1.2
3.4
3.4
14
3.6
3.6
3.6
3.8
3.8
3.5
PER
PER
PER
CENT
CENT
CENT
100
1.00
1.00
so
80
no
Spread Between Long Term
Treasury and Corporate*
Spread
60
.60
.60
40
40
40
20
20
20
o
-
a
If
.
0
-
-
=
=
=
-
-
-
a
-
#
-
=
o
-
-
-
.
-
.
-
-
-
-
$
-
-
-
-
-
@
,
E
JAM
FEE
1
ARE
MAY
AND
JULY
AUG
SEPT.
OCT
NOV
DEC
JAB
à
MAR
APR
MAY
JUNE
JULY
AUG
SEPT.
OCT.
NOV
DEC.
MAIL
APR
MAY
1939
1940
1940
- - - - change - - of 10mg form Transury everage
Modia leving -
P-M-6
Regraded Uclassified
U.S. GOVERNMENT SECURITY HOLDINGS, WEEKLY REPORTING MEMBER BANKS
Cumulative Net Change from December 6, 1939
1939
1940
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
MAY
6
13
20
27
3
10
17
24
31
7
14
21
28
6
13
20
27
3
10
17
24
8
15
22
29
DOLLARS
DOLLARS
T
MILL IONS
MILLIONS
New York City
600
600
400
400
BONDS
200
200
QUARANTEED
o
0
NOTES
BILLS
-200
-200
TOTAL
-400
-400
-600
-600
DESCRIBER
JANUARY
FEBRUARY
MARCH
APRIL
MAY
600
600
All Other
400
400
BONDS
TOTAL
200
200
BILLS
o
o
QUARANTEED
NOTES
13
-200
+200
-400
-400
-600
-$00
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
MAY
1000
1000
All Cities
800
600
600
600
BONDS
400
400
200
200
TOTAL
BUABANTEED
o
o
- DILLS
NOTES
-200
-200
-400
-400
-600
-600
6
13
20
27
3
10
17
24
31
7
14
21
28
6
13
20
27
3
10
17
24
1
8
15
22
29
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
MAY
Office of the Secretary of the Treasury
Division of Research and Statistics
F - 145 - 4
Regraded Uclassified
14
Chart IV
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
BONDS AND U.K. 2%% CONSOLS
1938
MAP
any
SEPT
1939
NOV
JAN
MAR
1940
MAY
JULY
BEFT
NOV
1945
JAN
MAR
- Scale
MAR
APR
MAY
"
-
is
JUNE
PER CENT
inverted Scale
=
WEEKLY, Friday Quotations
PER CENT
Inverted Bosis
Daily
PER CENT
22
22
22
24
24
2.4
Long Term Treasury
26
26
26
Long Term Treasury "(N - - - - earliest will date)
28
28
28
se
3.0
20
12
32
12
U.K. 2%% Consols
34
34
34
36
3.6
14
New Minimum
New Moinum
U.K. 2&X Console
as
18
18
40
4.0
40
Priose et Minimum
42
4.2
4,2
PER
CENT
PER
PER
CENT
CENT
=
1.6
LA
14
14
1.8
12
1.2
12
10
Differential
Differential
1.0
1.0
a
6
a
.
.
&
4
4
*
2
2
2
o
-
#
If
-
o
o
JULY
SEPT
--
NOV
at
of
.
JAM
MAR
MAY
1938
JULY
REPT.
NOV.
JAN
-
.
-
MAR
MAR
APR
MAY
JUNE
1939
1940
1940
Redie - -
- - a a compation of lang --- Prepary éverage
1
PO-129-0-1
Regraded Uclassified
15
April 10, 1940.
11:07 a.m.
H.M.Jr:
Hello.
Operator:
Go ahead.
H.M.Jr:
Hello.
George
Harrison:
Hello.
H.M.Jr:
Yes.
H:
Oh Menry?
H.M.Jr:
Yes.
H:
I'm in session with the foreign exchange committee,
I'm in a little booth 80 I can talk privately to you.
H.M.Jr:
Well -
H:
Can I talk to you a minute?
H.M.Jr:
I can listen. I have people here.
H:
Yes, well that's all right. I've put it up to them
and their whole disposition 18 to go as far as they
possibly can and I think certainly as far as the
compromise that you suggested.
H.M.Jr:
Yes.
H:
And this 18 a draft of what they tentatively agreed
upon and asked me to ask you if you thought it would
be all right. And at the request of the Treasury
Department they'd like to put that in if you really
mean it. The foreign exchange committee has agreed
to ask all banks, bankers and stock exchange houses
for the time being and until further notice to
withhold all payments and withdrawals from Danish
and Norwegian accounts, pending reference of each
transaction to the Treasury Department. It 18 therefore
suggested that any contemplated transaction be sub-
mitted to the Federal Reserve Bank of New York for
transmission to the Treasury Department.
H.M.Jr:
Now 18 this to go out publicly?
H:
That will go out on the ticker.
H.M.Jr:
Now I've got to, I'm going to ask you, if you don't
mind, to read that to Ed Foley.
16
- 2 -
H:
Yes.
H.M.Jr:
And let his take 8. look at it and I want him to be
satisfied.
H:
Now can I say just one thing. It says "pending
reference to".
H.M.Jr:
Yes.
H:
It doesn't say reference and approval because they say
that there are a great many transactions which they
are confident you would approve.
H.M.Jr:
Yes.
6:
But which their lawyers would say they would have to
execute even If the Treasury was reluctant to approve.
H.V.Jr:
Unless we invoke -
Bi
Yes of course. And of course if you invoke that, that
would completely protect them, but their favorites
are three classes of transaction, for instance checks
dated prior to April 8, for instance. They would
have no question about paying. Now, supposing you,
for some reason or another, said you didn't want them
to pay such & check they would, the law would say
they had to or they would be liable. There are also
for instance obligations to pay themselves on account
of naturing acceptances. This would not be possible.
They would have to refer such a transaction to you,
but supposing you said no, they would feel they would
have to do It legally, and there would be no protection
to their own stockholders or a suit would get by
stockholders unless they did make the payment.
H.M.Jr:
Well now -
H:
There are a number of transactions like that which I
would hope we would be able to get blanket approval
of.
H.M.Jr:
Well nov George, I'm going to talk to Ed a minute
on this wire, see?
H:
Yes.
H.M.Jr:
And then I'm going to ask you to repeat everything
17
- 3 -
that you've said to me.
H:
Yes.
H.M.Jr:
Because he's consulting the Attorney General, BO that
he knows what we're doing, 80 that we stay within
our authority.
H:
Yes.
H.M.Jr:
Will you hold on a minute?
H:
I'll hold on.
H.M.Jr:
Please.
Operator:
Operator.
H.M.Jr:
Put Mr. Foley on this wire.
0:
All right.
H.M.Jr:
Please.
Just a minute George.
H:
He knows of your conversations with me, doesn't he?
H.M.Jr:
Yes, he was here this morning.
Operator:
Shall I put Mr. Foley on?
H.M.Jr:
Put him on the same wire.
0:
Right. Go ahead.
Ed
Foley:
Hello.
H:
Hello, Mr. Foley?
F:
Yes sir.
H.M.Jr:
Just one minute George. I'm going to hang up.
H:
All right.
H.M.Jr:
Ed, George Harrison 1s on the wire, and I want him
to tell you just what he told me about a proposed
release.
F:
Yes.
18
- 4 -
H.M.Jr:
Take it down, or have someone take it down and
listen very carefully, and after you've decided that
we can or can not go along then come in and see me,
will you please?
F:
Yes I will.
H.M.Jr:
And George Harrison is on the wire now.
F:
O.K. All right.
H.M.Jr:
Thank you.
F:
Hello, Governor Harrison.
19
April 10, 1740
1:00 D.S.
H.M.Jr:
Hello.
Operator:
Go ahead,
Harry
Collins:
Hello.
H.M.Jp:
Yes, Harry.
C:
Mr. Secretary, pardon me for annoying you, sir,
but concerning this meeting this afternoon, after
we left they expressed the wish that they just
talk informally with these contractors in my
office as e neutral ground.
H.M.Jr:
Yes.
C:
And 18 that perfectly all right without having
anybody else in here with them? Because when the
final kill comes, of course there will have to be
representatives of the committee.
H.M.Jr:
Well, Harry, now I've had these -- I think it's 8.
mistake.
C:
To have -- not to have somebody here?
H.M.Jr:
I do.
C:
Well
H.M.Jr:
I think it's a mistake -- that's my offhand opinion.
C:
Well, I'll abide by your decision obviously, sir.
H.M.Jr:
I mean, everything is a matter of great importance
but I think that I'd have one -- somebody there
from the Army and Navy.
C:
Well, suppose I have the regular board here then.
H.M.Jr:
I'd have the regular board.
C:
All right, sir.
Regraded Uclassified
20
- 2 -
H.M.Jr:
I'd have the regular board.
C:
All right, sir. I'll do that.
H.M.Jr:
Yeah.
C:
Thank you, sir.
21
April 10, 1940
2:03 p.m.
H.M.Jr:
Yes.
Operator:
Mr. Harris for you.
H.M.Jr:
Hello.
Basil
Harris:
Yes.
H.M.Jr:
Basil......
H:
Yes.
H.M.Jr:
Summer Welles had lunch with me and he's interested
- he said if he could legally do something for the
Italian line it would be good ball.
H:
Yes.
H.M.Jp:
Now, what is the situation on that?
H:
Well, that was the -- the narcotic case that I was
speaking about.
H.M.Jr:
Yes. Well now
H:
I have already talked with their lawyers and told
them that we would entertain a -- an offer of 20
cents on E dollar.
H.M.Jr:
I see.
H:
And they seemed to think that was pretty fair.
H.M.Jp:
Well now, when you come to an agreement I promised
Summer Velles we'd let him know so he personally
could let the Italian Ambassador know.
E:
Yes.
H.M.Jp:
He wants to make quite a thing out of it.
H:
Yes. Well now, it's rather -- the cases are rather
unusual. We could even, with a pretty clear con-
science, go even further than that.
H.M.Jr:
Briefly what are the circumstances?
Regraded Uclassified
22
- 2 -
H:
Well, the circumstances are that there were --
there are four particular ships, the Rex, the Ida,
the Arsa and the Vulcania.
H.M.Jr:
Yes.
H:
And there were importations of narcotics. In one
or two cases the Italian line themselves have
worked -- well, the Italian Government, to begin
with, have worked very closely with our Treasury
people in Italy.
H.M.Jr:
Yes.
H:
And it's through that cooperation really that these
discoveries were brought to light, but the fact they
were on these ships and were picked up that techni-
cally makes them the violaters.
H.M.Jr:
Yeah.
H:
You see, that's the general subject that I wanted
to talkto you about some time ago and I think we
are being pretty severe on these fellows.
H.M.Jr:
Well now, let me ask you this.
H:
Yes.
H.M.Jr:
Did the Captain of the ship cooperate?
H:
Yes, in every way.
H.M.Jr:
Had this ever happened before?
H:
Well, ve had trouble up until about two years ago
when the Italian government took this up officially.
Since then there has been very little of it. And....
H.M.Jr:
Uh-huh. But the Line does cooperate?
H:
Oh, tremendously!
H.M.Jr:
They do?
H:
Yes.
23
- 3 -
H.M.Jr:
Look up what I did in the case of the Danish ship.
H:
Right.
H.M.Jr:
There was a Danish ship where they cooperated and
Mr. Hull asked me to do something about it.
H:
Yeah.
H.M.Jr:
I don't know what I did in that case.
H:
Yes.
H.M.Jr:
But supposing you look it up and it would be time
enough tomorrow morning, wouldn't it?
H:
Yes. Well now -- Yes, just to -- a little -- one
further word, and that is I felt fairly strongly
on this 80 I put it up to the head of the Marcotics.
What's his name -- Anslinger.
H.M.Jr:
Yes.
F:
And the people over in the Bureau, they wrote a
memorandum feeling that everything possible should
be done for the Italians in view of the cooperation.
H.M.Jr:
I see. Well, supposing you look up what I did in
the case of that Danish thing. It was about two
years ago.
H:
Yes.
H.M.Jr:
And then you might bring in Anslinger's memorandum
and I'll take a look at it.
H:
Yes. All right.
H.M.Jr:
See?
H:
Very good.
H.M.Jr:
Thank you.
H:
Thank you.
24
April 10, 1940
3:26 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Berle is in a conference but not with Secretary
Hull. I can get him to the phone if you'd like
me to.
H.M.Jr:
Yes, get him to the phone.
0:
All right.
(Pause.)
H.M.Jr:
Hello.
0:
Mr. Berle. Go ahead.
H.M.Jr:
Hello.
Berle:
Hello, Mr. Secretary.
H.M.Jr:
How are you?
B:
Well, we've had a lot of work to do and 50 have you.
I'm glad you took such swift action that night as
you did. I think that's one of the best things
that have happened in a long time.
H.M.Jr:
Meaning what?
B:
Blocking those balances.
H.M.Jr:
Oh, yes. Now that's what I'm calling you about.
I talked to the President and I told the President
that after the meeting this morning that we had
come to the decision that if ve wanted to carry
out his orders we needed an executive order.
B:
Right.
H.M.Jr:
And he wanted to know about Mr. Hull, so I've just
called Mr. Hull and Feis was in there and evidently
he had in mind a different -- something else, and
that is the question of Danish securities, you see?
Which is something entirely different.
25
- 2 -
¿:
Well thet's something entirely different and I
don't know why H.F. worries with that kind of
thing. I suppose that there are American liberty
bonds and things, government bonds, held in
Switzerland by Danes and 90 forth, but that's a
separate question and a long way off and a tough
job anyway.
H.M.Jr:
Well, and If ve were zoing to do anything the
exchange control would be the first step anyway.
::
of course. The two aren't incompatible.
E.V.Ir:
Correct. Now, I've asked him please to send for
you and have you inform his what happened in the
meeting this morning.
in
I will. Unfortunately I haven't had a chance to
check back. The meeting only broke up, as you
know, about a quarter of two; then we had this
proclemation to get out.
E.M.Jr:
I understand. Nov, I an sending over to you B.
copy of the President's executive order which has
been approved by Robert Jackson.
B:
Right.
H.V.Jr:
And I'm going to ask, if you would approve - if
you would initial it and I'm going to ask you if
Mr. Hull approves it, he'd initial it.
B:
I'll do 50 with pleasure.
H.M.Jp:
So that - because it's BO important that I'd like
to have both your initials and Mr. Hull's on it.
in
Vell, I think nine are supererogatory but you're
welcome to them.
R.M.dr:
Well, if you don't mind - I don't know whether
you do that at the State Department, but we do
that over here.
is
Yes, ve do that here too. I ought to say this,
the Department's position technically in the meet-
ing was that we favor the step. The method of
doing it, of course, is entirely in your juris-
diction.
Regraded Uclassified
26
3 -
H.M.Jr:
Well, we're had B. long talk here and if I'm
going to do what the President asked me to do in
the whole United States and not just in New York.
B:
Yes.
H.M.Jr:
I can't do it without an executive order.
B:
That was the sense of the meeting and I, myself
say, I personally agree with it.
H.M.Jr:
And the President said he'd sign it, but I want
Mr. Full to know what it's about and I went him
to approve it if he will.
B:
All right, sir. I'll endeavor to see that that's
done.
H.M.Jr:
And so the next move is -- he said he would send
for you and we are sending by hand to your office
this -- a copy of this thing.
B:
Right.
H.M.Jr:
And I take it after Mr. Full has seen you he'll
call me. And they told me what you said at the
meeting which influenced me greatly, and that 18
that If we do this, this is a notice to Germany.
Well now if we go into Holland, or Belgium, or
Switzerland, and those funds are in the United
States, we can't zet them.
B:
Well, Mr. Secretary, the whole background was
this. You may know that we canvassed the subject
partly at my instance in the -- after the seizure
of Czechoslovakia.
E.M.Jr:
Yes.
3:
At that time I was impressed with the fact that
this kind of operation was a purely profitable
operation.
H.M.Jp:
Yes.
B:
And I don't see why we should desist in making a
profitable one with all our desire for interna-
tional law and the rest of it. The other thing
Regraded Uclassified
27
- 4 -
was that for neutrality I don't see that it cuts
either way. If we accept Just casually the work
of a military government there, which is virtually
what you've got, we'll have trouble from the other
side.
H.M.Jr:
Yeah.
B:
So since we're between two fires on that either
way we had better, seems to me, do the thing that
serves our own interest best.
H.M.Jr:
Well, in other words, let's scrape the icing off.
B:
Yes.
H.M.Jr:
Off the cake.
B:
That's it.
H.M.Jr:
And if they still want the cake all right, but
they're not going to get the icing.
B:
Well, it struck me that that was the point of view
that ought to be considered.
H.M.Jr:
Well, I told the President that this had great
political significance.
B:
Well, I think it does.
H.M.Jr:
Yes.
B:
But I think for myself that we've gotten past the
stage where we can be -- we can be awfully worried
about what a very small minority says in a matter
which may become of major significance if it goes
on.
H.M.Jr:
Minority being one per cent.
B:
Not more than that at the outside.
H.M.Jr:
Right.
B:
Right.
H.M.Jr:
Thank you.
B:
Not at all, sir.
28
Anril 10, 1940
3:45 2.8.
George
Harrison:
Hello, Henry.
H.V.Jp:
Yes,
Bi
We've just broken up our meeting.
H.M.Jr:
Yes.
iii
And I presented to then your suggestion that they
advise us of any further transactions that they
might have today
H.M.Jp:
Yes.
61
before consummation.
H.M.Jr:
Teah.
E:
They said they would do 80.
H.M.Jp:
Good.
H:
Although if they are the kind that they think are
legal obligations that they'd have to pay without
doubt they would -- I told then we'd give then
word back before five o'clock.
H.M.Jp:
Yeah, that's right.
in
And if you said no I don't know what fix they'd
be in. They'd probably have to pay then anyway.
H.N.Jp:
Vell, they didn't know of any?
H:
No. In fact, they say they don't think there'll
be many more today anyway and the only chance is
that they'll get some from the three o'clock
clearings, that 16 checks
HM.Jp:
Yeah.
in
drawn on their account that come through the
clearings that they will probably have to pay or
dishonor by three-fifty. Now, they -- I don't
know whether they can do it - I mean, return
them through the clearings.
F.M.Jr:
Yeah.
Regraded Uclassified
29
- 2 -
is
But all those checks will probably be dated before
Agril 8th anyway.
H.M.Jp:
Tesh.
6:
You, I've got Knoke on the telephone because the
Federal Reserve Bank of New York has some trans-
actions that are ordered for this afternoon that
are still pending.
H.M.Jr:
Tesh.
A:
And we would like to comply with your request too.
H.M.Jr:
Well, can't Knoke dictate those to Cochran so I
can get them in writing and take an look at them?
61
All right.
H.M.Jp:
That?
AT
All right.
R.M.Jr:
It's pretty hard to do it all on the phone.
61
I agree, but I'm just saying this is going to be
cme of the difficulties, but we'll give then to
you any way that you want.
H.M.Jp:
Well, I - I surgest that you give then to Merle
Coctoren and then let Merle bring then in.
A
Yesh. All right. Well, he'll do that.
H.M.Jr:
Teah.
AM
Some of them are obviously necessary.
H.N.Jp:
Teah.
it
I rean, some, for instance, where B are getting
securities delivered to If for the Norwegian bank
and the Norge bank, Central bank, and pay out cash
against them. Now, it's only changing the fore of
their assets.
H.M.Jr:
Teah.
Regraded Uclassified
30
- 3 -
in
That, I should think, we would have to do.
H.M.Jr:
Well, if you -- you could just let Knoke talk
with Cochran and let Cochran make notes on it
and then he can come in.
H:
All right.
H.M.Jr:
I think that would be the easiest way for me.
H:
First-rate.
H.M.Jr:
Thank you.
31
April 10, 1940
4:40 p.m.
H.M.Jr:
Hello.
Operator:
Secretary Hull.
H.M.Jr:
Thank you. Hello.
Hull's
Secretary:
He's coming right on, sir.
H.M.Jr:
Thank you.
Cordell
HULL:
Hello, Henry.
H.M.Jr:
Hello, Cordell.
H:
I just O.K.'d that and sent it back. I -- Berle
was out at a meeting and just got back a few
minutes ago 60 I could see him.
H.M.Jr:
Well, that's fine.
H:
By the way, those bonds I referred to are held by
-- mainly by individual Americans here in this
country.
H.M.Jr:
I see.
H:
And the actual -- the amount will probably run over
that.
H.M.Jr:
I see. Well
H:
And that's why it's 80 important not to let any
government money get out of here until they're
paid. Especially with the Germans in charge over
there.
H.M.Jr:
Oh, I agree with you, and
H:
They wiped out the Polish debt, you know, just
complete.
H.M.Jr:
Yeah. Well, this is the first step. The one thing
dove-tails with the other, I think.
32
- 2 -
H:
Yeah. Yeah.
H.M.Jr:
Cordell, you're sending this over by messenger
to me?
H:
Yes.
H.M.Jr;
And you told them to come right to my office?
H:
I'll tell them to take it right to your office.
H.M.Jr:
Thank you.
H:
Yeah. All right.
H.M.Jr:
Thank you.
addward
33 V V
DECLARED ITS VIRTUAL INDEPENDENCE FROM
BENNARK TODAY used PARLIMENT AUTHORIZED THE COVERNMENT to TAKE OVER
THE PREROGATIVES w KING CURISTIAN.
4/10--R1036A
Regraded Uclassified
34
ADD ICELAND, REYKJAVIK
THE DECISION or THE ICELANDIC ALTHING or PARLIANENT -- THE WORLD'S
OLDEST PARLIAMENTARY boby WHICH DATES FROM THE 9TH CENTURY -- was
THE FIRST REACTION TO GERMAN INVASION or BENNARK FROM THIS WORTHERN
OUTPOST WHICH IS JOINED TO Denmark THROUGH A UNIQUE TYPE or NUTUAL
HOMARCHY.
ICELAND IS TECHNICALLY SEL-COVERNED BUT HAS RECOGNIZED THE DANISH
KING AS ITS SOVEREIGN.
THE DECISION or THE ALTRING TO CUT -- AT LEAST FOR THE TIME BEING
00 ITS LINE WITH THE DANISH SOVEREIGN was TAKEN - GROUNDS THAT KING
CHRISTIAN IS IN unable TO EXERCISE HIS POWERS OFFICE.
4/10--R1038A
Regraded Uclassified
35
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
April 10, 1940
FROM
E. H. Foley, Jr.
You have asked for & progress report on the movie cases. Since is
zemorandum of December 30, 1939, the following action has taken placer
1. Bioff Case: Bioff was indicted for income tax evasion in Los
Angeles in January. In March, he was remanded by Governor Olson of
California to Illinois to serve out the six months sentence for pandering
pessed in 1922. The Illinois Courts have held that Bioff must complete
his sentence and I understand he was committed to Bridewell prison yester-
day. The trial of the income tax charge was set down for May 22. However,
the United States District Judge indicated that he would not go ahead with
the trial until Bioff had completed his sentence in Illinois.
2. Schenck Case: The personal income tex case against Joseph Schenck
has been forwarded to United States District Attorney Cahill in Ser York,
who is presenting the case to e. grand jury. Special Agent Oftedal is
assisting Cahill's lawyers. Codd and Moskowits have already been before the
grand jury; a bench warrant has been issued for the appearance of former
Treasury agent Kadis; and Schenck is scheduled to appear before the grand
jury next week.
On February 21, San Clark advised Wenchel that Justice had no objec-
tion to the issuance of deficiency letters for 1935 and 1936, notwithstanding
the grand jury investigation. Accordingly, letters have been sent out in
the amount of $186,787.32 for 1935 and $96,295.97 for 1936.
3. Zanuck Case: You will remember that Sea Clark decided that we
should proceed with the civil case arising out of the Twentieth Century-Fox
serger before any criminal action was consenced. Me have sent out a 90-day
letter giving Zenuck a notice of deficiency in the amount of $730,576.04
for 1935. A petition has been filed with the Board of Tax Appeals by Zanuck
stating that he does not owe the tax. The next thing before the Board is
= trial which should be reached in about a year.
I shall continue to keep you informed.
E.N.7L
36
GROUP MEETING
April 10, 1940.
9:00 1.2.
Present:
Mr. Heas
Mr. Cochran
Mr. Thompson
Captain Puleston
Mr. Cotton
Mr. White
Mr. Harris
Mr. Gaston
Mr. Sullivan
Mr. Foley
Mr. Schwarz
Mr. Bartelt
Mr. Johnson
Mrs Klotz
H.M.Jr:
Herbert, I asked you last night after talking
to the President to have these things ready in
regard to Denmark and Norway. Now, where do
we stand?
Gaston:
Well, I have passed on the work to Mr. Johnson
and I think they are all ready. Mr. Johnson
talked to Mr. Harris.
Harris:
They are all ready.
H.M.Jr:
Are you ready to report?
Harris:
Well, they are all ready to go out this second.
We have had no official word from the State
Department on the extension of the belligerent
zone.
H.M.Jr:
Are you familiar yourself with it, or do you
want to bring Johnson in here?
Harris:
Johnson knows more - well, what --
H.M.Jr:
Where is Johnson?
Harris:
He ought to be in by office by now.
H.M.Jr:
The point is, who knows what we did?
Gaston:
In regard to Czechoslovakia, we first got noti-
fication from the State Department of the change
37
- 2 -
in jurisdiction and then we got out an announce-
ment that the rates of duty applicable to German
products would apply from and after midnight
of that day to the products of Czechoslovakia
and we added to give importers all possible
notice. Well, they had about five or six hours
notice. Now, when I talked to --
H.V.Jr:
How soon after they took over Czechoslovakia
did we do that?
Gaston:
About the next day afterward.
H.K.Jr:
Do you (Kr. Johnson) know exactly how soon after
the Germans went into Czechoslovakia we acted
on Czechoslovakia?
Johnson:
All the Sudetan land, it was a matter of several
weeks from October 11 to November 10. I am not
sure of the date of October 11.
S.K.Jr:
I see. Ne didn't do it the next day?
Johnson:
No, because we couldn't get anything from the
State Department.
E.M.Jr:
What does the State Department have to tell us?
Johnson:
A letter on the official recognition by the
United States of change of sovereignty.
Gaston:
But on Czechoslovakian products, we acted within
24 hours and there was a great deal of complaint
from importers.
H.M.Jr:
What do you mean?
Johnson:
On Sohemia-Moravia, they moved, I believe the
first word we had was about the 15th of March.
That news was somewhat confused. We had our
letter out on the 18th of March, which was
really 24 hours after any certainty.
Gaston:
Yes.
E.M.Jr:
What did you do in that case?
38
- 3 -
Johnson:
We sent a telegram to all Collectors of Customs
telling them that we were today advised by the
State Department of a change of sovereignty.
H.M.Jr:
On what countries?
Johnson:
The part of Czechoslovakia not covered by the
Sudeten transfer, that is, Bohemia-Moravia.
H.M.Jr:
Which came first? I have got to refresh my
memory.
Johnson:
Sudeten land came first in November of 1938.
Gaston:
That was under the Munich Agreement.
H.M.Jr:
First was what?
Johnson:
Sudeten land.
H.M.Jr:
And that - what was the date, approximately?
Johnson:
My recollection is October 11 and November 10.
H.M.Jr:
And then we moved on Sudeten land?
Johnson:
Yes, sir.
Gaston:
That and Sudeten land.
H.M.Jr:
Then when Germany went into Czechoslovakia,
when was that?
Johnson:
Into Czechoslovakia proper on the 15th of March,
I think it was.
H.M.Jr:
And how quickly did we move on that
Johnson:
Our telegram went out on the 18th, I believe.
H.M.Jr:
Does anybody know - how long will it take you
to get those dates?
Johnson:
I have the references to the dates to our action,
but as to the actual movements of the Germans,
I would have to check outside.
Regraded Uclassified
39
- 4 -
H.M.Jr:
What were the dates of our actions?
Johnson:
I have a reference to the Treasury Decision.
H.M.Jr:
This thing of Denmark, am I not right that it
is nearer to when they moved into Czechoslovakia
than it is the Sudeten land?
Johnson:
We ought to get in touch with the State Depart-
ment this morning and have a letter by noon,
I should think.
H.M.Jr:
What would that letter say?
Johnson:
It would support this statement. The State
Department having today advised the Treasury
Department that it regards Denmark as being
under the de facto government of German au-
thorities.
H.M.Jr:
May I have that?
Johnson:
It is & draft of a telegram.
H.M.Jr:
Basil, how much time do you think these people,
the fellows in New York, the business men, ought
to have to be fair to them? They say they are
complaining.
Harris:
I would think two weeks would be ample.
Johnson:
Might I say that we made it on date of exportation
and our action was very recently sustained in the
Court of Customs Appeals and Patent Appeals.
H.M.Jr:
The date of exportation?
Johnson:
We made the change effective as to dates of ex-
portation.
H.M.Jr:
I remember something - does that mean the date
of invoice?
Johnson:
That was true in the case of Czechoslovakia,
because that 18 an inland country. We do not
have that situation here. We would make it the
date of sailing of the vessel.
Regraded Uclassified
40
- 5 -
White:
You remember, Mr. Secretary, there would be
8. time that we felt that there hadn't been
enough time allowed for those who may have
goods in freight cars, et cetera, so we al-
tered the procedure.
H.M.Jr:
There are two different things, Harry. The
one that is comparable to this 18 the time
the Germans went into Czechoslovakia. In
that case, didn't we say when B. thing was on
the train, or was that in Sudeten land?
Johnson:
There was no difference in the two except in
this respect, that on the Sudeten land, on
the original order, we didn't define the date
of exportation until sometime after our tele-
gram went out and then we said we would apply
the usual Customs rule as to inland countries,
that 1s, the date of exportation would be de-
termined by the date of the invoice in the
absence of better evidence.
H.M.Jr:
Now, let me put it this way. If a steamer had
sailed yesterday from Denmark, that would come
in under the Danish customs.
Johnson:
Yes, sir.
H.M.Jr:
But let's say they were loading a steamer today.
Johnson:
They would have to change the marks, have to
take the higher duties.
H.M.Jr:
As of today?
Johnson:
Unless they got away before midnight.
Gaston:
If we set midnight as the cut-off date.
Johnson:
That is the way I have drafted it.
White:
Last time we moved B. little bit quickly and
questioned fudged in the interpretation in
order to give a little more time.
H.M.Jr:
But what you are talking about, Johnson, is
to say that anything which is loaded up to
midnight tonight would clear as Danish goods
Regraded Uclassified
41
- 6 -
Johnson:
Anything - departure, rather than loading.
H.M.Jr:
Do you think that is fair?
Harris:
Yes, that makes it about the two weeks I was
talking about. You are talking about departure
rather than arrival. I think departure is better.
White:
In the light of the last time when we thought
we rushed it just a little bit, unless there
is some good reason I think we had better err
on the side of a few days in the other direction,
because this is very much akin to the kind of
problem that gave us a little trouble in Czecho-
slovakia.
Gaston:
I would give them 24 hours to get cables over.
H.M.Jr:
Well, we can argue a little bit. I want to call
up the State Department. What we want is B.
letter from the State Department, advising us
that Denmark is under the de facto administration
of the German authorities.
Johnson:
Yes, sir.
H.M.Jr:
Now, we also want to raise the question, do they
want to give us such a letter from Norway and
until we get that kind of 8. letter, we can't act,
is that right?
Johnson:
We shouldn't.
Foley:
That is right.
H.M.Jr:
Is that the next move?
Foley:
Yes.
H.M.Jr:
Everybody agree?
Gaston:
This is Denmark, only.
Johnson:
Harry, any deferred effective date should be
handled through withholding it from the State
Department.
White:
Yes, but there was some fudging there which
helps out.
Regraded Uclassified
42
- 7 -
Gaston:
The situation isn't very clear as to Norway
yet.
White:
I am wondering whether they might treat that
lower part of Norway like they did Sudeten land.
Part of the delay was due, you remember, to the
series of negotiations we had with the State
Department to determine its status. It is possible
that in the light of that precedent they may act
much more quickly and determine that a part of
Norway which they are certain is under control --
(Telephone conversation with Secretary Hull
follows:)
43
April 10, 1940
9:12 a.m.
H.M.Jr:
Hello.
Operator:
Secretary Hull coming on.
H.M.Jr:
Thank you. Hello.
Secy Hull's
Secretary: He's coming right on, Mr. Secretary.
H.M.Jr:
Thank you. (Pause) Hello.
Cordell
Hull:
Hello, Henry.
H.M.Jr:
Good morning.
H:
I hope you are well.
H.M.Jr:
I'm well. And you?
H:
Yes.
H.M.Jr:
Cordell, I'm calling -- I think you were there
last night when the President called me.
H:
Yeah.
H.M.Jr:
And are you going to give us a letter advising us
that Denmark 16 under a defacto administration of
the German authorities?
H:
We're trying -- we're trying to get the fullest
Official data, you know.
H.M.Jr:
Yes.
H:
And I can tell this morning......
H.M.Jr:
Yes.
H:
as soon as I get this in here and sum it up
I can, within an hour or two, an hour maybe, I can
tell you.
H.M.Jr:
All right, because
Regraded Uclassified
44
- 2 -
H:
Do you remember in in Czechoslovakia the German
Government took charge of foreign affairs and
finances.
H.M.Jr:
Yes.
H:
And left the balance of the government to the other
fellows.
H.M.Jr:
Yes. Well now, the two cases I take it you're
referring to the second when they marched into
Czechoslovakia.
H:
Yes. No, I'm referring to the one when they took
Bohemia.
H.M.Jr:
Oh.
H:
That's where the big money was, you know.
H.M.Jr:
I see. Well, there's the Sudetenland on October
11th, or thereabouts which we......
H:
Yes.
H.M.Jr:
treated one way, and then when they went in
on March 15th we treated it another way.
H:
Yeah. Well, it's -- they're going to rob every-
body over there, I'm thinking.
H.M.Jr:
Yeah.
H:
Take everything that belongs to everybody else
that they can find, private and public.
H.M.Jr:
I'm sure. Well, we will wait then
H:
Yeah.
H.M.Jr:
until we hear from you to give us a definition.
H:
Yes, all right. We'll call -- I'll call you up
just B. little later.
H.M.Jr:
Now, one other thing, please. How are you going
to -- are you going to treat Norway the same way?
Regraded Uclassified
45
- 3 -
H:
Norway is -- they haven't made known yet just
what their attitude is, but I'm thinking that
they're going to put on an avowed protectorate;
that means German government practically.
H.M.Jr:
I see.
H:
But we've got to see just a little further on that.
H.M.Jr:
Well, in both cases when you know I'd appreciate
it if you'd call me.
H:
Yes, all right, Henry. I'm glad to see you back.
H.M.Jr:
Thank you.
46
- 8 -
Johnson:
I will keep in touch with the people who are
writing letters over there.
H.M.Jr:
Yes, but the point is - well, that helps you,
doesn't it, to define where we are at!
Johnson:
Yes, sir.
Foley:
I don't think we ought to do anything until
we get official notice from the State Department
of the occupied territory and then once we get
it, I think we have to act very promptly. I
don't think re can wait.
White:
Could you do this, merely to avoid repetition --
Foley:
They can delay over there.
White:
To avoid repetition of what happened last time,
I am wondering whether Chick Schwarz couldn't
let out that here is a case that is similar and
as soon as - if we receive notice, then action
will be taken instantly and that would get out
in the paper and give then two days notice.
H.M.Jr:
No, absolutely not.
Schwarz:
The business men, on the basis of previous ex-
periences, certainly are watching. They know
what is likely to happen.
H.M.Jr:
After all, I have called Mr. Bull now at 9:15
and he is working on it and he said be will
let me know in an hour or so. You can't expect
anything more. I take it, Basil, you will have
everybody on their toes and ready to go.
Harris:
They way they are running now, you only have 8.
boat about every ten days 02 two weeks coming
out of Denmark anyhow.
H.M.Jr:
Can you find out if there is any boat loading
there?
Harris:
Yes. In Norway, you have got E little different
situation. There are three American boats that
are fully loaded at the moment and have not
departed. They are awaiting instructions from
the State Department.
Regraded Uclassified
47
- 9 -
Octon:
As long as Norway 1s fighting, that is an en-
tirely different thing. I don't see how we
could say it Tas German until they quit.
Harris:
Well, the State Department will determine that.
B.N.IN
Sow, I haven't heard yet from George Harrison,
but the President, when I talked to him last
night, was very insistent that all balances be
frozen and that we don't let anything go through
for Denmark and Norway. Some Swiss bank had
told somebody in the State Department that Den-
mark - I don't know whether it was Denmark or
Norway - - Demark had three or four hundred
million dollars over here, which I don't believe
anything like that. Well anyway, I called up
George last night a little before 10:00 o' clock
and told him that for today I wished he would
ask his committee - they are still on the volun-
tear basis - that any transaction of any kind,
governmental or private, should be submitted to
Washington, to me, to pass on, see, because I
have the authority to do that. Better look that
up, Foley. But he said, "Do you want to keep it
on & volunteer basis," and I said yes and explained
to then that ve want to stall on it for 24 hours
and this is just Wednesday's plan and so he said
that he would get his bunch together and he was
sure that they would 8 along, because they
were very much pleased that they got the blessing
yesterday of the Treasury. I mean, that tickled
them. They were allowed to say they had con-
sulted with the Treasury and that put them back
again in good standing.
Gaston:
The Danish Minister wanted you to know that he
was very much pleased with your action in freezing
the accounts.
(Telephone conversation with George Harrison follows:)
Regraded Uclassified
48
April 10, 1940
9:19 a.m.
Operator: Go ahead.
George
Harrison:
Hello.
H.M.Jr:
Hello, George.
H:
Good morning, Henry.
H.M.Jr:
How are you?
H:
I've been in touch with Loree and I told him what
you were anxious to have accomplished up here
today.
H.M.Jr:
Yeah.
H:
He was very sympathetic and willing, but he says
that there's this difficulty, that while they'd
be perfectly willing to advise you of every with-
drawal, that nevertheless there are certain ones
which their lawyers say they must legally make
for customers and that they have no legal right
not to make. He said unlike Canada and Great
Britain they would be in the fix that they would
be subject to damages, suit for damages, if they
refused to make certain legal payments for cus-
tomers. In Great Britain and Canada they've got
a governmental indemnity if they fail to make
payment. Now he said, and he hoped this would
be satisfactory, that they will make only such
payments as their lawyers say they must legally
make for legitimate customers and that all others
they will refer to you for approval and that they
will advise you of every payment even those that
their lawyers say they must make.
H.M.Jr:
Well, now look, the world is made up of compromises,
see?
H:
Yeah.
H.M.Jr:
When their lawyers tell them that they've got to
make a transaction, see?
H:
Yeah.
Regraded Uclassified
49
- 2 -
H.M.Jr:
Before the money passes, I want them to tell ne
about it.
H:
Well, I'll -- -- I'll see what I can zet.
H.M.Jr:
See? Before the money passes I want to know about
it. See?
61
Yeah.
H.M.Jr:
You put that up to them.
H:
Yes. Well I'll try it. Loree is up town now at
a New York Central meeting. I got him out of the
meeting.
H.M.Jr:
Well, get him out again.
H:
He's going to talk to Ravenske and I'll call
Ravenske direct.
a
H.M.Jr:
Before the -- if the lawyer says that/certain
transaction has to pass, before the money passes
hands, I want to be consulted.
H:
Yeah.
H.M.Jr:
See?
H:
Yeah.
H.M.Jr:
Will you -- will you put that up......
H:
Well, I'll put it up to him. I remember, you know,
this is the same fix we got into in Czechoslovakia.
As a matter of fact, I question whether there are
going to be any transactions anyway.
H.M.Jr:
Well I'll have to insist on this, George.
H:
Yes.
H.M.Jr:
And lacking that we'll have to look up our legal
rights.
H:
Yes.
H.M.Jp:
Now, I'd much rather not have to ask for it legally,
but.....
Regraded Uclassified
50
- 3 -
H:
Oh gosh, I hope so!
H.M.Jr:
Well, I - I've got by instructions; I've got to
carry them out.
the
Uh-huh.
H.M.Jr:
And before any money passes I want to be consulted.
H:
Uh-huh. All right. Well, I'll let you know -
I'll put that back to them.
H.M.Jr:
I've got to be firm on this, George.
H:
Yes. All right, sir.
H.M.Jp:
Thank you.
51
- 10 -
Poley:
Well, Té would have to amend the foreign exchange
order of 1954 and I have got the amendment. you,
I don't know whether I can get Justice to 80
along with ne, because that is the thing they
balked on last time.
Well, you have got & DEV department over there.
How, what I thought I would do is this: When
these things come in, I thought I would set up
an informal comittee on this thing and I want
you, Herle, to sort of be Chairman and I want
Harry to be in on It and I thought if you (Poley)
would let Sernstein sit in on It and then when
19 got E transaction of this nature, the three
of you B over it and decide yes or no and then
let me know and within five minutes, I will see
you. You can tell that, that it isn't going to
be stalled around. : don't vant you tied up on
this thing.
Thits:
Do you have any idea of possibly not worrying
you about amounts of let's say an thousand or
TWO thousand? Set some figure. There will be
a number of small checks.
Test TE can do is, you can tell him whatever the
close of the business day is, get them all in
and If you come in at 3:00 or 3:30 it will only
take five minutes. The first ones, you see, I
want to see then.
Riter
Do you want to talk to them?
Encke to you (Cochran). But the little committee -
and you get them all together and you have & little
meating and say you have got something. There were
two yesterday, weren't there?
Cochran:
Yes.
3ut the President is very insistent and I can't
let this crowd block ne off.
Cochran:
: will get in touch with Knoke.
And TS will pass each day OR the day's business.
Tie won't carry it over and I don't know about
the legal.authority, but I Em going on the basis
Regraded Uclassified
52
- 11 -
I have got all the authority in the world.
White:
3d, can't you find out today!
Folay:
Whether I can get Justice to 8 along with me?
Thite:
Sure.
Poley:
I think If the President says he wants it and
he will sign the order, I don't think we have
to worry about the Department of Justice.
thite:
I mean have it ready.
S.V.Jr:
You heard Mr. Full. I was surprised to hear
Mr. Hull.
Foley:
And 30 long as you talked to George Harrison
the may you did, they will cooperate with you,
because they don't vant you to invoke your
foreign exchange control powers. That is the
last thing in the world they want.
Write:
You heard his response.
Foley:
Sure.
Earris:
Is the proclamation on the extension of the
belligerent 57885 signed?
The President said he didn't think he would do
anything on that last night. Ee didn't see -
when I got through talking to him, I called up
Herbert and asked him to notify the people, but
as I said last night, be didn't seen to think
he was going to do anything on that just now,
but that the one thing - and you could hear
Mr. Sull - that they are both interested in,
is to not let the Germans lay their hands on
this noney.
Cotton:
Is there the slightest doubt, Ed, about the
legal authority?
Poley:
Under the reporting power, Joe, we here in the
Treasury think that we can require all balances
in this country to be reported and all withdrawals
out of those balances to be reported and approved
Regraded Uclassified
53
- 12 -
here before they can be taken down. Now, when
we discussed the matter with Justice about a
year ago in connection with the proposed Execu-
tive Order, they gagged a little bit on that
reporting power and I don't know what their
attitude would be at the present time. Te think
that we can extend the foreign exchange order
to do this.
E.Y.Jr:
Eddie, have you got that letter ready?
Bartelt:
Yes, sir.
H.K.Jr:
Did you clear it with the -
Bartelt:
I have drawn this in alternate form, Mr. Secretary,
because if we issue the 500 million, it would be
over our debt limitation, counting on the 700
million from the corporations and 460 million
net taxes. I have the two forms. This one is
on the assumption that there won't be any finance.
This one is on the assumption that there will and
this shows it without the financing. Te will be
over our statutory authority in June, 1941, by
210 million.
E.V.Ir:
with no financing?
Bartelt:
With no financing. It will be all right until
March and with the financing you will be under
in December, but you will be a little over in
March on 200 million, counting the 460 million
in taxes.
E.V.Jr:
You nean it is under --
Sartelt:
Under the limitation, it will be 336 in December.
E.K.Jr:
Well, change this title. Put this black title
and put this word over in red. Well, this is
with the 500 million. You are all right -
Bartelt:
Until March, 1941.
H.M.Ir:
No, you are not here. You & over here.
Bartelt:
Yes, in March, 1941, you would be 200 million over.
Regraded Uclassified
54
- 13 -
H.M.Jr:
What would your balance be?
Bartelt:
One billion, nine hundred ninety-eight. Now,
that is counting the 700 million and the 450
million.
H.M.Jr:
I think I would put in the five.
Bartelt:
You would?
H.M.Jr:
Yes, because he can say, "Well, if you take
that March last --' I mean, this gives you a
balance of that much. That gives you a balance
of that much and this thing here, that is no
financing.
Bartelt:
That is the same thing without any financing.
H.M.Jr:
Which may do you think it is:
Bartelt:
I just wondered as a matter of policy if you
wanted to issue anything which would take you
over the debt limitation. of course, you do
have in that picture these special obligations
to trust funds that might hold up.
H.M.Jr:
Rewrite it and let me take a look at it.
Bartelt:
As I say, you have in this picture the special
issues of trust funds and you could hold those
up a while.
H.M.Jr:
Anybody wants to see me, I an available and if
anything breaks with Mr. Hull, I will have
another staff conference.
Regraded Uclassified
55
the DANISH AND NORWEGIAN ACCOUNTS
April 10, 1940.
11:45 a.m.
Present:
Mr. Cochran
Kr. White
Mr. Gaston
Mr. Foley
Mr. Bernstein
Mrs Flotz
Foley:
Do you want me to start on this thing?
H.M.Jr:
Yes.
Foley:
Governor Harrison called the Secretary and
said that he had his foreign exchange committee
together and that they had drawn up some state-
ment that they wanted the Secretary to approve
and if it met with his approval, they wanted
to put it on the wire. The statement is this:
"At the request of the Treasury Department, the
Foreign Exchange Committee has agreed to ask all
banks, bankers and stockbroker houses for the
time being and until further notice to withhold
all payments or withdrawals --"
S.K.Jr:
I want to interrupt you there. If we say stock
exchange houses, Jerry Frank will say the same
thing he said last time. The have no right to
give instructions to stock exchange houses with-
out talking to SEC.
Poley:
to withhold all payments and withdrawels
from Danish and Norwegian accounts pending
reference of each transaction to the Treasury
Department. It is therefore suggested that
any contemplated transaction be submitted to
the Federal Reserve Bank of New York for trans-
mission to the Treasury Department."
George Harrison recognizes that the Treasury
has power by Executive Order to impose complete
foreign exchange controls, so there would have
to be 8. complete licensing before any withdrawals
could be made from any accounts of countries or
nationals of those countries specified in an
Executive Order. That he wants to avoid if it
is at all possible to do it.
Regraded Uclassified
56
- 2 -
I have two objections right avey to the language
that he has given. First, It applies only to
the banks in New York and It doesn't apply to
the rest of the country and there very well may
be accounts in Boston and Philadelphis and other
parts of the country. Second, It seens to ne
that the inclusion of the words, "At the request
of the Treasury Department", make us liable and
I don't think without some kind of Executive
Order of the character I just nentioned the Treasury
would have the power to consent to the use of that
language.
White:
That troubles me particularly when it is combined
with -
R.K.Jr:
Now weit a minute. You call 5 George Harrison
and say that - SET that this 1s under discussion.
Te won't have an answer until sometime about half
past 2:00 or 3:00. I want you people to P into
Fr. Gaston's office and see if you CED come to
an agreement and I will see you after lunch. I
have been working at E hundred miles an hour from
9:00 until now and by brain is tired and If kr. Full
cannot make up his mind whether Demark has been
raided or not, takes all day, I can take two hours.
You 80 into Kr. Gaston's office and call me up
on this thing. Hull called me up and said he
would like to send somebody over and he said,
"Who do you want," and I said, *For about Berle?"
and he didn't seen to like that, Do you want
anybody from the State Department at this time?
Cochran:
You have to have then before you take final action.
Gaston:
I think it would be very desirable to carry them
along.
Poley:
And If we have somebody from the State Department,
probably we would want somebody from SEC. They
were in our other discussions.
E.M.Jr:
Herbert, I will call up Kr. Full now and Mr. Frank
and ask them to send somebody over to your office,
that we want somebody.
Caston:
Yes.
Regraded Uclassified
57
- 3 -
White:
In the meantine, they are following instructions
in lev York of freezing the balances.
Well, you are to contact Enoke.
Cochran:
They have just finished one transaction yesterday.
Te have held up the others.
E.M.Im
They have done one?
Cochran:
The one you okayed yesterday. They carried out
one of those yesterday. Today they have done
nothing so far.
lite:
In the Few York area, only.
Cochren:
That 1s, as far as I know.
White:
Tie have no information of what they are doing in
other areas.
M.In
My not have somebody come over from --
Poley:
You had better get somebody from Justice, too.
You can do that.
Poley:
I will do that.
LMR
And we will talk to the Federal Reserve Board. He
put it up to me, Berle 07 Feis, and I wouldn't say.
I will see you fellows st, let's say, 2:30.
Merle, will you call up and tell them to freeze
everything in the meantime?
Who is going to call George Harrison?
Poley:
I will call him.
White:
And of course this bill only applies to the New
York area, so I don't know whether you are cover-
ing the President's instructions.
Poley:
I think I had better talk to Governor Harrison
and -
Regraded Uclassified
58
- 4 -
H.M.Jr:
I always understood when we had New York
we had everything.
White:
They have probably got 97 percent of it.
E.K.Jr:
thy didn't you think of it sooner, Harry?
My God, you bring it in and what have you
been doing all morning? I told you on that
committee. Why do you suggest it at 8 quar-
ter of 12:00? Why bring it up to me? Why
don't you use your own brain? All these
people who bring it in, "Have I thought of
the rest of the country?" Why don't you
think of it, or Cochran?
White:
Now that we have thought of it --
H.M.Jr:
Why don't you do something? Why don't you do
something about it yourselves, use your own
brains? Everybody comes to me and asks what
I have done about it. What have I got 75,000
employees for?
White:
All right.
Regraded Uclassified
58
JT
GRAY
BUENOS AIRES
Dated April 10, 1940
Rec'd 6:35 p.m.
Secretary of State,
Washington.
98, April 10, 3 p.m.
According to a comunique of the Minister of Finance
of April 9 the Central Bank of Argentina and the Bank of
England have reached BEL agreement on future transfers of a
financial character to Great Britain and the Empire by which
only official pounds, based on the official dollar-pound
rate (at present 4.02), may be sold locally for such pur-
(instructions?)
pose. Central Bank circulars giving appropriate institutions
to the banks were issued this morning. In effect, according
to official interpretation obtained by private banks, it
means the suppression of "free market" transactions in pounds,
although banks are still permitted to buy free pounde here
and arbitrage them in Yes York or elsewhere for free curren-
cies.
AEMOUR
HPD
Regraded Uclassified
E0
RE DANISH AND NORWEGIAN BALANCES
April 10, 1940.
2:30 p.m.
Present:
Mr. Gaston
Mr. White
Mr. Cochran
Mr. Foley
Mr. Bernstein
Gaston:
Well, we discussed the whole thing for about
an hour and a half and we decided that every-
body agreed that something ought to be done
about these Norwegian and Danish balances and
nearly everybody was - we discussed the possi-
bilities of voluntary action of the banks and
the possibilities of an Executive Order and
most of us were in favor of an Executive Order,
which has been drafted.
Mr. Cochran thinks the other procedure would
be best, but in following the other procedure
he doesn't think that we ought to attempt to
require them to report transactions here for
approval and it seens to me that takes a good
deal of force out of that method of procedure.
Ronald Ranson was & little bit in doubt. Off-
hand, he leaned toward the voluntary method of
procedure, but he himself thought his Board
would be willing to BP along on the other method.
Goldenweiser WB5 quite firm from the outset that
if we are going to do anything effective we had
better do it in a formal way, through the Execu-
tive Order.
Berle, I think, took that same position, but he
thought the decision of the method was mainly
a Treasury problem. They were willing to accede
to whatever the Treasury wanted to do, but he
was quite positive that something must be done,
these balances must be frozen.
The Securities and Exchange people, Purcell and
one other man, were there and they didn't con-
sider it their special problem. They agreed to
talk it over anong the members of the Board,
but so far as dealing with balances which are
held by brokers, they said that didn't concern
them so long as it vasn't E securities matter.
Regraded Uclassified
61
- 2 -
P.V.Ir:
I have got to ask some questions to see If I
understand the problem. There is the volunteer
nethod whereby I say that George Earrison is
able to volunteer a committee that no transfers
of governmental or central banks of private funds
be transferred from one person to another where
the source of the origin of the ownership is
either in Denmark or Norway and one step further,
say before the actual transaction takes place,
day to day we will see where we are at. I want
the actual transactions submitted to Washington
for approval or disapproval. Is that stating
It correctly?
That is the way you had it this morning.
That is the vay I had it this morning. Be comes
back and says to ne that their lawyers say there
are certain transactions which they have to legally
agree to and that it im't in this country the
same AS in Canada or England, where If they refuse
to consumate their transaction, they will be in-
dermified by the Government.
Gaston:
That is right, that is what he said.
EMA
And therefore he gets this thing out in which he
said be is doing this at our request, but they
don't agree to submit these transactions to us,
which their lawyers say they have to do.
Foley:
So, he would submit everything to us.
Caston:
Ee was willing to submit it, but stating at the
Treasury's request end placing the responsibility
definitely on the Treasury by announcing that the
individual transactions were being referred to
the Treasury.
E.K.DA
Now that method, I understand. I an not sure
that I understand the alternate. What is the
other one?
Saston:
The other method is for the President to sign
an Executive Order which establishes control
over the balances of the Danish and Norwegian
Governments and their nationals in this country,
Regraded Uclassified
62
- 3 -
so that those balances cannot be used except
by the permission, formal permission of the
Treasury Department.
H.M.Jr:
And this Order would only affect these two?
Gaston:
Only those two.
Foley:
Specifically.
White:
Because those two countries are specified.
H.M.Jr:
Have we anything in writing from the State
Department advising us that these countries
have been invaded or anything?
White:
It is not involved. They don't have to have
that.
Foley:
It is not necessary. You see, this isn't a
Customs matter. This is a matter of --
H.M.Jr:
Talk out loud, Bernie, damn it!
Bernstein:
If you are at all concerned with the position
of the State Department, if they initial the
documents it seems you have got complete pro-
tection on that point.
Caston:
It is not Treasury, it is a Presidential action.
H.M.Jr:
Doesn't it have to go through the State Depart-
ment? It has to have their seal put on it.
Foley:
That is right.
H.M.Jr:
It has to go through --
White:
Have the State Department seal.
H.M.Jr:
Oh yes, any Order must have the seal. Any Order
that he signs as Secretary of the State.
Gaston:
The Great Seal of the United States which the
Secretary of State is accustomed to use.
Regraded Uclassified
63
- 4 -
H.M.Jr:
That is put on at the State Department?
Foley:
Berle had no hesitation in saying that it was
all right with the State Department. He said
either way would be all right.
White:
But he went further. He said it was definitely
the State Department's view that something ought
to be done, but he had a personal 1dea as to the
best way of doing it, but the Department had no
view as to which way the Treasury feels is a
desirable way of doing it.
H.M.Jr:
What was his personal idea?
Foley:
He thought the formal way through an Executive
Order is the more effective way to deal with
the situation, but he thought it was up to the
Treasury to decide whether it wanted to go the
informal route or the formal route, although
personally he felt the formal way was better.
Gaston:
We thought that you would probably want to
check with George Harrison before you took
final action after talking to us, and I presume
you want - since Merle was the only one who
argued forcibly against it --
H.M.Jr:
I want to hear Merle.
Gaston:
Yes.
Cochran:
I am getting to be sort of E. professional minority,
I think, Mr. Secretary.
H.M.Jr:
Don't let that worry you.
Cochran:
On this --
E.M.Jr:
If everybody agreed, it wouldn't be any use of
having conferences. We wouldn't have any law-
yers, either.
Cochran:
If we had & definite mandate from the President
to take the most effective way to stop these
things, I would say go ahead at once, go ahead
and draft an Order, an Executive Order. But if
Regraded Uclassified
64
- 5 -
ve haven't that, if we are still discussing the
nerits of the situation and tat neasures ve
night take, I think we should do neither this
nor the other of requiring them to submit in-
formally here for decision. I think If they
want to keep If informed as to what is going on
so that we can properly examine transactions,
I think we can properly request that, but not
submit it here for decision. RJ point is partly
one of policy and precedent that I think that
we may have the full authority under legislation
to put on this limited exchange control, full
exchange control as far as these two countries
and their currencies and their balances are In-
volved. I think that emergency, though, vas
intended for an American can emergency and not for
a Danish or Norwegian, and I don't see how the
interests of our own people require this. I
shared the idea, somewhat, of Yr. Ranson that
this might be interpreted ES the President
taking the opportunity, svailing himself of
this emergency legislation to perform an act
which micht be considered un-neutral. My prin-
cipal objection was on the ground that it was
not an American emergency, that we shouldn't
start this one step in exchange control, we didn't
do It with Poland, ve didn't do it with Crecho-
slovakia, ve had an informal arrangement there
with Czechoslovakia. With Foland, the State
Department was able to certify as to & change
or transfer of Government, as to signatures of
the central bankers who carried on the Bank of
Foland in France. I think they would still be
available to give that service and I think
what we ought to do DOV is to tell George and
son to let his bankers know that they ought to
take all due precautions and that the State
Department will see that such information is
published as are get officially. We could help
them in deciding.
Let ne interrupt. I vant to a back E minute.
If you go back on the volunteer basis, which
wasn't quite clear, they agreed to submit these
various miters. Sow, do they submit then be-
fore the transaction is consumated?
Regraded Uclassified
65
- 6 -
Well, I think that is the point which raised --
That is what isn't clear.
lasten:
I have got Ronald Ranson out here.
Sure. Will the thing be consumsted or do they
submit then all?
Poley:
lis. Secretary, when you say 80 back to the volun-
teer basis, I don't know whether you mean the
basis TO had yesterday or what we would have if
the thing that George Harrison proposed on the
telephone is put into effect. How, If you are
talking about what George Harrison proposed on
the telephone, they vould all be submitted in
advance through the Federal Reserve Bank in
Kew York to the Treasury, but the Treasury would
have to assume the responsibility, the legal
responsibility for having those transactions
held up and submitted here. The proposed state-
ment that he wants to put out says that this
action 18 being taken et the request of the
Treasury Department.
liy point is that there isn't any authority in
the absence of 801 Executive Order from the
President for the Treasury to take such action.
What was done yesterday is not the same as
what is being proposed now.
EMAIL
What is the difference?
Polay:
The difference between what was done yesterday
and what is being proposed now is that yesterday
they simply said after consultation with the
Treasury and the Federal Reserve Board, the banks
in New York had agreed to suspend any transactions
dealing with Danish and Norwegian accounts. That
was purely & voluntary action on their part and
no attempt on their part to share or to impose
responsibilities on the Treasury. Now they are
asking us to accept the responsibility for it,
which I say we haven't got the power to do.
Yor, If you want to accomplish what would be
accomplished by George Harrison's proposal,
Regraded Uclassified
66
- 7 -
it can be done simply by having an Executive
Order.
E.M.Jr:
Now wait a minute, Let me just say this: I
don't want to get into exchange control unless
I have to. I don't like it, see. You go back
to the thing which was ruined by Johnny Hanes
when I said in a meeting here, "What I want to
do 1s continue business as usual," and he over-
played it so that it made it the laughing stock,
but I said what I meant. He opened our exchanges
and everything else and I wanted to make this
place the one place in the world where you can
have free trade and - but I mean, he overplayed
it so that it got to be a kind of a. - I mean,
no matter what you do, he would throw that at
you. You remember.
Foley:
I remember.
R.M.Jr:
Now, this thing of exchange control is B. very
serious thing and I don't want to go into the
thing lightly, you see.
Foley:
That is right.
H.R.Jr:
And inasmuch as this Administration hasn't done
anything yet about Norway and Denmark, anything
that we do will be highlighted all over the
world, because it will be the first step that
we take. They haven't done anything, so this
will be the first step. Now, the only argument
that I can see in doing it is a purely political
one, is that if the President wants to notify
Germany he doesn't like what they are doing,
then he takes this step and in this way notifies
them that he is displeased with what they are
doing. Therefore, he is taking this very
drastic measure by issuing an Executive Order.
That is & political question, isn't it?
Foley:
And also indicating to these countries that
they can't go in and commit highway robbery
in other countries and get dollar balances in
the United States.
H.M.Jr:
What I don't see, I don't quite see how we
slipped from yesterday's arrangement into this.
Regraded Uclassified
67
- 8 -
What brought on this difference?
Foley:
When you asked George Harrison this morning
to have all transactions submitted to you
before they were cleared by the banks, including
the ones where the lawyers of the banks told
them that they would incur legal liability if
they held them up. Now, in my mind, sir, there
is no difference in effect if you publish what
George Harrison wants you to do and what you
would accomplish if you would put out an Execu-
tive Order.
H.M.Jr:
Just hold it, Herbert. Except that if you do
what George Harrison says, you don't think I
have the legal authority?
Foley:
No.
H.M.Jr:
You think that thing should be done by the
President and not by me?
Foley:
That is it.
H.M.Jr:
Why should I do something illegal?
Foley:
I don't think you should, sir.
H.M.Jr:
That takes care of that situation, doesn't it?
Foley:
Yes, sir.
H.M.Jr:
I mean, that - if I am usurping my authority,
then I don't want to do that.
Foley:
That is right, and I think that all of the ob-
jections that pertain to putting out an amendment
to your existing foreign exchange control execu-
tive order apply to this statement that George
Harrison wants to put on the wires. It will be
construed the same way and in addition to that,
people will say that you are taking action you
have no power to take and you are unwilling to
assume a direct method of doing it, which you
have under the statute, namely, by Executive
Order.
Regraded Uclassified
68
- 9 -
E.V.Jr:
Do you want to say something!
Geston:
Yes, the only thing I was going to say as to
that was that another exception was that this
voluntary method, I don't think, could be made
to cover the whole field that the other would
cover.
E.V.Jr:
That about covering the United States!
Foley:
Well, this obviously would only cover the New
York area and you would have to have similar
arrangements in each of the Federal Reserve
districts.
E.V.J.:
What about if the President does an Executive
Order?
Foley:
That applies all over, everywhere in the United
States.
R.M.Jr:
Well, by this discussion By feeling is that I
shouldn't do it the way George Harrison has
got it written, because I would be accused of
being dictatorial.
White:
I think we all agree on that.
Cochran:
Yes, I agree.
S.N.Jr:
You agree to that?
Cochran:
Yes, sir.
H.M.Jr:
Then let's agree that that is out. Then it
gets down to this: What other kinds of trans-
actions which the lawyers, the New York lawyers
tell these banks they have to do, what kind
are those?
Cochran:
You may have one tomorrow where Norway has ob-
tained an Export-Import Bank credit, you see,
and there are certain whest bills maturing and
they will submit those for payment to an Amer-
ican concern. It would come out of the balance
of the Bank of Norway. That is 8. clear-cut
case where we would certainly approve it if it
was submitted and where the bankers might tell
them they would have to & ahead and pay this.
Regraded Uclassified
69
- 10 -
Gaston:
Ronald Ransom just talked to George Harrison
and George Harrison 1s quite opposed to our
issuing & formal Executive Order. He thinks
it is not necessary. He thinks that we will
accomplish the results we seek in the case of
Csechoslovakia and Poland without it and that
the banks would do the same thing and he
thinks that the banks would do just about what
the Treasury requests them to do.
I asked Ransom particularly whether he thought -
whether George Harrison thought the banks would
be willing to submit these transactions in
advance of their being consummated, and he said
he didn't know that, he hadn't asked George
Harrison particularly about that, but Harrison
did say as to the language of this statement
that that wasn't final, that the language of
that statement might be changed.
E.M.Jr:
Let me put it this way before I call up George.
Supposing I call him up and say it is the unan-
imous opinion of Washington that we don't want
to do it that way. It leaves me down to two
alternatives, to stay on the basis we were as
of yesterday with the understanding that they
did what they did yesterday, before any trans-
actions go through, they tell us about it.
Cochran:
Well, the Fed gave us that informally and I
think you could still lot these people talk
with each other and even consult with the Fed.
I mean, they have B. committee set up there
and let the Fed inform us as to what is going
on, not requesting B. decision from us. The
minute we do that, then we are in the trouble
which Ed points out, but if they request a
decision from us, I see nothing except 8. formal
Order.
H.W.Jr:
What is the sense of telling us about it if it
isn't up to us to decide?
Bernstein:
That 1s it.
Foley:
You either have control --
Regraded Uclassified
70
- 11 -
H.M.Jr:
....or you don't.
Foley:
....OP you have nothing. It seems to me you
get control by an Executive Order. The other
way, you have got nothing at all.
Gaston:
The only point in their reporting to us would
be this, that when they report a type of trans-
action we don't like, then we can decide we
have got to have an Executive Order.
H.M.Jr:
Then it is too late. That is just what the
President doesn't want.
Cochran:
The big amount is in the Federal Reserve Bank.
I can't think they are going to take any action.
We could have an agreement with them that they
wouldn't.
H.M.Jr:
If he would agree to call me up and say, "Look,
Mr. Secretary, this transaction is before us,
Now, I want you to know about it before it is
consummated."
Bernstein: What you would do, Mr. Secretary, if you didn't
like the transaction --
H.M.Jr:
If I don't like it, I say no.
Bernstein:
Then they say to you, "Will you reimburse us?"
H.M.Jr:
Then I say, "You hold it five minutes and I will
release the President's Executive Order."
Gaston:
That is what it gets down to. "Now, George, I
want you to play fair with me and if it is some
transaction you don't like, I want you to give
me time to get out an Executive Order." Then
the only way to get what we want is by an
Executive Order right then.
Foley:
That is all right, Mr. Secretary, but George
Harrison hasn't got control of the situation.
It is the Chase and the National City and all
the others.
H.M.Jr:
Put it up to them. They will keep their word.
Regraded Uclassified
71
- 12 -
Foley:
Then what about the other cities?
White:
Mr. Ransom, in response to B. question, said
they would be very glad to attempt to get cooper-
ation of the other cities. He doesn't know
how effective it would be, but he was sure
they would be glad to cooperate. Whether the
banks in the other areas would get the degree
of cooperation among the member banks in their
districts and non-member banks is & question
he wouldn't be prepared to answer, but the
total of deposits in the other areas are
probably small, though we don t know.
Bernstein:
May I ask another question? How much time do
you think you are going to gain, Mr, Secretary,
by putting out your Executive Order the first
time a transaction comes up that you don't
like? What reason is there to believe that
that won't occur right away?
H.M.Jr:
I will tell you why. Because these banks,
knowing that an Executive Order is signed,
they hate this worse than poison.
Bernatein:
But it isn't the banks, it is what happens from
abroad. The orders come from abroad. The
banks receive them. An order comes from abroad
with & very fine Danish name and it comes the
regular way and you just don't have any informa-
tion as to what is behind that order and you
can't get any information as to what 1s behind
that order. The bank calls on its lawyer and
the lawyer says it follows the attest that you
have arranged with your foreign client. Now,
if you don't pay and that is B. valid order
made by the person voluntarily, the banks are
liable and they turn to you.
Cochran:
And we would have no more information than the
bank had in New York.
Foley:
No, but we could freeze it.
Gaston:
They could say, "We have established 8. rule
that we don't pay these amounts. We take
24 hours on all these Danish and Norwegian
matters."
Regraded Uclassified
72
- 13 -
White:
They might decide to accept the risk on 8.
good many rather than undergo the risk of
exchange control. The trouble of that is
that there would be some banks who wouldn't
care about an exchange control. Because the
Federal Reserve Bank in New York does that
doesn't mean that there may not be a lot of
other banks who may. On the other hand, it
may be the halfway step to have everything
ready and if the President wants to do it
under these conditions --
Poley:
We had a representative of the Department
of Justice there, Judge Townsend, the fellow
we worked with before and he cleared it this
time.
S.V.Jr:
What did he clear?
Foley:
The Executive Order.
S.K.Jr:
Well, there was doubt about that.
Cochran:
Yes.
Foley:
About the reporting part, Mr. Secretary. There
was no doubt in so far as the President's
power to impose foreign exchange controls are
concerned.
H.M.Jr:
As to the two countries?
Foley:
Well, you remember --
H.M.Jr:
He can pick the countries.
Foley:
Oh yes, he can pick the countries or all the
countries. You remember last year we had an
Order drafted imposing foreign exchange con-
trols as to all foreign countries and also
requiring complete reporting on the part of
all financial institutions and persons in
this country having to do with property in
this country of foreign governments and foreign
nationals and we got a clearance from the Attorney
General on the Executive Order with a caveat to
the President that perhaps the reporting part
might be questioned but they thought they could
sustain it in the courts.
Regraded Uclassified
73
- 14 -
H.M.Jr:
And now?
Foley:
And now he is willing to pass it.
H.M.Jr:
Let me talk to George Harrison.
Gaston:
The combat zone proclamation is out.
White:
I don't think they will get hold of many
balances at once, but if we leave it on a
voluntary basis it will probably begin to
peter out and they will become less and less
effective and it might be that they will get
hold of as much as ten or twenty dollars in
the course of six months, possibly.
H.M.Jr:
Which way is Goldenweiser?
Poley:
For the Order.
White:
Strongly in favor of the Order, Executive Order.
(Telephone conversation with George Harrison
follows:)
74
April 10, 1940
2:09 p.m.
Operator:
Go ahead.
H.M.Jr:
Hello.
George
Harrison:
Hello, Henry.
H.M.Jr:
Yes, George.
6:
You're not on the loudspeaker, are you?
H.M.Jr:
No.
6.
Why -- you know the matter I talked to you about
when you were at See Island over the telephone.
H.V.Jr:
Oh, yes.
a
I've been awfully anrious to wait and have a chance
to talk with you before I decided anything, but
unfortunately, as I indicated on the telephone the
other day, the time schedule didn't make that pos-
sible; 80 I had to let them know last week, last
Friday.
H.M.Jr:
Yes.
H:
That I would take it.
H.M.Jr:
Yes.
H:
And they've had their meeting today.
H.M.Jr:
I see.
6:
So it'll probably come out tomorrow morning, and
I didn't want you to face it in the newspaper for
the first time.
H.M.Jr:
Well that's very nice of you to let me know.
H:
Well, I wasn't -- I'm dreadfully disappointed be-
cause I would have liked to have gotten your
reactions for many reasons.
Regraded Uclassified
75
- 2 -
H.M.Jr:
Well......
H:
But I had it -- they gave it - offered it to me
just as I was going away on my wedding trip and
therefore it stalled along quite a bit after I
got back, 80 I Just couldn't ask them to wait
any longer. And that I wanted you to know.
H.M.Jr:
0. K.
H:
I'm not going to do it until July one.
H.M.Jr:
Good.
H:
And I'm going to make en announcement this after-
noon just merely to the effect that I resign from
my present office as of July one to become Presi-
dent there on that date.
H.M.Jr:
All right, George.
F:
And I thought this was the best chance to let you
know anyway.
H.M.Jr:
Thank you for calling me, very much.
H:
All right. We're going to hear from you at three
o'clock?
H.M.Jr:
Well, I'm meeting with the boys at two thirty.
I don't know what they're going to report.
H:
I see.
H.M.Jr:
Yeah.
in
All right.
H.M.Jr:
Thank you.
:
Thank you.
Regraded Uclassified
76
April 10, 1940
3:00 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Harrison.
Go shead.
H.M.Jr:
George.....
George
Harrison:
Yes, Henry.
H.M.Jr:
I have my crowd here and we all feel that that
suggested release that you read over the phone
to me and to Foley 1s out.
in
Yeah.
H.M.Jr:
Now, it gets down to two alternatives. One, that
we stay as we were yesterday.
ii
Yeah.
H.M.Jp:
And the other an executive order.
6:
Yeah.
H.M.Jr:
Nov, if we stayed as we were yesterday, how such
control could I promise to the President?
in
Well, you couldn't promise any control on the basis
of that statement as to payments or withdrawals.
E.M.Jp:
Uh-huh.
6:
That's just for exchange dealings. But I - the
only comfort that you could give to the President
is that these fellows and their lawyers are going
to be scared to death to make any payments or
authorize any withdrawals, except those that they
are perfectly certain are legal and necessary.
In other words, they're more scared about this
than you are.
H.M.Jp:
Yes, but if they think it's -- any transaction,
a withdrawl of money in an account, Danish account
here before that date
18 legal, they're going
to say go ahead and do it.
77
- 2 -
H:
Yes, but if they got an order from abroad
H.M.Jr:
Yeah.
H:
for B. transfer to a foreign bank, they are
very likely not to honor it.
H.M.Jp:
Yeah, but how about to a grain company or to a
stock exchange house?
H:
Here in this country?
H.M.Jr:
Heret Yes, let's say here.
H:
Vell, I don't know how they would regard that, but
probably if the order came from abroad they would
dishonor it.
H.M.Jr:
Well, supposing a concern here said they had shipped
a hundred thousand bushels of wheat to Denmark and
they want to be paid for it?
6:
Well, If they did that under & confirmed letter of
credit, then they would feel obligated to pay the
American exporter the proceeds of his shipment.
And I should think that is one thing we would want
them to do.
H.M.Jr:
Well, supposing - -- supposing you got an order from
the Central Bank of Denmark to transfer some of
its funds.
H:
I think he would -- I think the chances are that
they would dishonor it. I know that we would
unless we had a better authentication than we've
got now.
H.M.Jr:
Uh-huh.
H:
But on the other hand - you see, a great many of
these contracts that they've got, for instance,
they've accepted - made acceptances, the New York
banks have, for Norwegian account covering shipments
of goods. Acceptances fall due, and under their
contract with the Norwegian bank they are authorized
to take the money out of the Norwegian bank account
and reimburse themselves. Now that they would do
and I think they ought to, or they would honor any
Regraded Uclassified
78
Mi I I
checks or drafts that were clearly and unmistakably
drawn before Aril 8th, which I think they should do
too. Or, If they had E shipment of securities come
in for payment = receipt, they would probably pay
those, or they would make -- for instance, take a
Denish bank night order the Chase bank to transfer
two hundred thousand dollars to the - for their
own account to the City bank. Nov all that does
is to transfer the ownership - I mean, the deposit
account from one American bank to another American
bank without changing the equitable ovner abroad
at all. The situation would remain unchanged.
All those things I think they feel that they should
do and ought to do in fairness to Americans, but
If they get 2 order that comes from abroad to make --
to transfer to some other foreign bank or foreign
customer or foreign payee, I think they would say,
"Well, we don't know about this thing. Ye don't
know who is ruming this bank nov." The lawyers
would probably say, "You'd be 8. dam feol if you
made the payment, or the transfer." And for our
own protection they wouldn't do it. In other words,
It vould work out just the vay it worked out in the
case of Poland, and in the early days, in the case
of Czechoslovakia, where I think it worked pretty
well on the whole.
E.V.Jr:
Vell, of course, If we have the executive order on
the other hand
65
Then if you do that then you'll have to, yourself,
begin to nake the exceptions that we're just been
discussing.
P.M.Jr:
But ve could still use the aschinery -- your nachin-
ery down there to sift these things for us 28 our
agents.
AT
Oh, surely.
B.M.Jp:
Then you'd contimue to do that?
ni
Yeah. Oh, surely, we'd have to.
E.M.Jr:
Yeah.
Regraded Uclassified
79
- 4 -
I hope you won't have to resort to that executive
order, but that's Just e personal feeling I've got.
Well DOW
I have one other thought that has been running in
" mind If I may give it.
Please.
Is to have this group consider on their own, if
you will, after consultation with the Treasury if
you want or not, just to say that for the time
being they are not going to make any payments or
permit any payments or withdrawals against any
Norwerian or Danish account except for the follow-
inc purposes, and then list the ones that I have
just been discussing, the obvious ones.
Well nov let me ask you this. Supposing somebody
vants to do this in Chicago or San Francisco.
Where would that leave us?
Kell, of course, we haven't anv jurisdiction there.
I should think that the -- the Reserve Board could
get the Reserve Banks out there to do what we are
trying to do here.
Yeah.
or course, Henry, the statement that we drafted
this morning was just an effort to try to accon-
plish what I thought you and the President wanted.
I mean -- and the only reason they didn't go the
whole way, put It to your approval, was -- the
one that I discussed with you and Mr. Foley this
morning about legal damages if they didn't make
certain unquestioned legal payments.
Yell
But they -- they want to do anything that you want
to do that they can legally do.
Yell, I haven't talked to the President. I'm
going to try to get ahold of him now and put the
case to him and see what he -- how he feels.
Regraded Uclassified
80
- 5 -
F:
Yeah.
H.M.Jr:
And in the meantime, no money 18 changing hands,
18 it?
in
Well
H.M.Jp:
I mean, there are no transactions going on?
6:
Well, I presume that there are certain of those
legal payments of the kind that I just discussed
which they will have to pay or else run the risk
of damages.
H.M.Jr:
Well, do you know whether any have taken place?
H:
No, I do not know. I think there was one case
yesterday where one bank made a transfer under a
letter of instructions that was mailed in January.
H.M.Jr:
Yes. Well
BE
That's the only one that I've heard of.
E.M.Jr:
Could you have Knoke make a survey and let Cochran
know as soon as possible?
H:
Well, these fellows are coming in now and I'll talk
to them about it.
H.V.Jp:
Well, ask them, if they will, to hold everything
until I get a chance to talk to the President.
H:
And what I did this morning when we broke up was
to say that we will work under the statement of
vesterday.
H.M.Jp:
Well, ask them before they do anything today -- I
mean, I'd appreciate it.
in
Yes. Well, I imagine there won't be much more
done today, if any has been done.
H.M.Jr:
Well, out it to them, I'd appreciate it if they'd
do nothing without giving you a chance to talk to
me first. See?
Regraded Uclassified
81
- 6 -
iii
Yes. All right. Nov.
H.M.Jr:
I mean, I -- just put It that vay, that they dm't
do anything today without giving you a chance to
talk to me first, until I can get to the President.
6:
Yeah. Well, I -- -- I'll put it to then that vay,
but then again, If it's 8 question of a legal
payment that's this afternoon, we'll say, to at
American exporter of wheat by a confirmed letter
of credit, they would probably feel that they
would have to make the payment unless
H.M.Jr:
Vell, that still - they are not going to D. to
jail if you call me ID: and say, "Listen
H:
Oh, now.
H.M.Jp:
there's such and such 1 kind of and trease-
tion in the offing."
H:
Yes.
H.M.Jr:
That isn't going to send anybody to jail.
in
No, that's all right, 80 long 15 you waltn't
expect then to hold it over until tomorrow =
less something else is done.
H.M.Jr:
All that I'm asking is that If they have mything
that they are contemplating that you ask then to
hold off consumating It today mtil you can call
me up personally and tell me about it.
H:
Yes.
H.M.Jr:
Now, that's a perfectly reasonable request.
in:
Yes, and I'll explain that I'll have to due the
some sort of an enswer today.
H.M.Jr:
That's correct.
in
Yes, that's all I mean.
H.M.Jr:
That's correct.
Regraded Uclassified
82
- 7 -
61
Nov, on the suggestion that I had, and I'm just
trying to work out something, if they, on their
own, make the announcement that they're not going
to permit any withdrawals or payments except of
this approved list of catagories which they think
are imperative.
H.M.Jr:
Yes.
A
And then ask them to file with the Federal Reserve
Bank, If you will, all such transactions as they
do make under that list.
H.N.Jr:
Teah.
6:
Then for a few days we get all the information on
which you could if you want determine whether you
think it's necessary to issue a proclamation.
H.M.Jp:
Vell, let me think it over, George, and - I mean,
when I say think it over I'm going to try to get
to see the President.
in
All right.
H.M.Jr:
Thank......
Ai
Well now, there's no need in my keeping this crowd
here.
H.M.Jr:
30. No, just tell them of our conversation and
where It stands.
6:
Yes. All right.
H.M.Jr:
And that as of today I've asked the courtesy that
they tell you of any transaction and that you'll
call me and that you'll have an answer yes or no
before the business day is closed.
is
All right.
E.M.Jr:
See?
in
Fine.
E.M.Jr:
Thank you.
Regraded Uclassified
83
- 15 -
Polay:
On a voluntary basis.
Is this Order drawn up!
Poley:
Yes, sir.
E.N.Jr:
Is it ready to sign?
Sermstein:
A call just came through that Townsend has
just spoken to Jackson and Jackson will sign
the letter saying it is legal. In addition,
he is going to include 8. memorandum which
will say what he did in connection with the
other Order.
E.M.Jr:
Where is the Order!
Bernstein:
We have it downstairs.
Poley:
He has got & copy of it over there.
S.M.Jr:
(Speaking on the telephone to the President)
Hello, sir.
Why?
No, to encourage you.
I think It is out. What do I want?
Well, I am coming to papa.
What we want is this: We have been working
today on this question of the best way of freezing
these accounts in Denmark and Norway and we have
had Justice and State, SEC and the Federal Re-
serve in here. Now, on this volunteer basis which
they are operating on, the lawyers for the banks in
New York say that there are certain legal trans-
actions which have to take place and they say that
they cannot be indemnified the ray they are in
England and Cartada if they don't go through.
The alternative is an executive order which would
put exchange control on these two countries and
that would enforce it throughout the whole country.
Most of the people, in fact, I would say 90 per-
cent of them that met here this norning feel
Regraded Uclassified
84
- 16 -
that we should have an Executive Order.
No, we did not.
Well, it 18 only that ve have to have
it here because you put the great emphasis
with me that I shouldn't let any money get
out. Now, if & man has had E. transaction,
he has sold some grain to Denmark under a
letter of credit and he presents the letter
of credit for payment, they say legally they
have to go through with it, but if, on the
other hand, they got an order, say, from the
Central Bank of Denmark to transfer some of
the earmarked funds, they wouldn't do it.
We just got word that Jackson has passed
on it legally. He has had Townsend, who is
the opinion man, pass on it.
Townsend passed on It and we just got
word that Jackson has approved it.
Well, Berle sat in on it this morning
and he is very much for this. Now, one of
the reasons which Berle gives, which has
nothing to do with the financial thing, he
feels it is a notice to Germany that they
can't walk into either Belgium or Holland
and get the money and he is interested in
it from 8. political standpoint.
Well, Cordell - I have talked to him
on this twice. Ee has called me twice.
Well, I don't know whether he said
all right to it finally. Be has been tre-
mendously insistent that no money escape.
I will call Cordell and tell him what we
proposed. Do you want ze to bring it over
or --
Well, I think - I would like to say
hello.
Thank you. Goodbye.
Regraded Uclassified
85
- 17 -
E.N.Jr:
(After telephone conversation) He wants to do
it. Be said he hadn't done it in the case of
Foland, and why in this case? You heard what
I said, so he said we had better do it. But
he wanted to make sure about Cordell.
(Telephone conversation with Cordell Hall
follows:)
86
April 10, 1940
3:16 p.m.
Thribell
Hello, Henry.
E.
Hello. Cordell
At
Yes, sir.
I don't know whether Berle has had a chance to tell
you what happened at the meeting at the Treasury
this morning on foreign exchange.
Ai
No. No, I haven't seen him.
U.S.
Kgll, they had this meeting end I've just talked
to the President and if we're going to carry out
the President's wishes and really freeze this money,
the general opinion of this meeting this morning
at which Berle was one of those - greatest advo-
Date, that we should get out an executive order
invoking exchange control which gives us complete
control rather than on a volunteer basis.
At
Yesh.
Now, the President said how did you feel about it,
BD I said that I didn't know whether you knew what
had taken place at the meeting but that you were
as insistent that he was that we don't let any
money trickle through our fingers.
Yes. Feis has dug up the amount of indebtedness
the to our people, our citizens, largely from
Demark and - and Norway, and it anounts to
160 willion dollars.
E.
Yes.
It has been one of the best debts ve've had any-
where - good, regular meeting of the service and
considered E very high form of indebtedness BO
far as anything we own abroad is concerned. And
I - I agree with Feis' idea that ve ought not
to let this money get out of this country until
those debts are met.
Use
Well, the only way that I can control it and
Regraded Uclass
guarantee
87
- 2 -
is
That'll take some congressional action.
R.M.Jr:
No, an executive order.
E:
I doubt it.
H.N.Jp:
Well now, would you do this for me?
6:
Yeah.
E.V.Jp:
Could you send for Berle right away?
6:
Yeah.
F.M.Jr:
And get him to tell you what happened here at the
Treasury this morning.
AT
Yes, I vas bringing this other up because I think
this is a big factor that I hadn't fully gone
into this morning because if there are two or
three hundred million dollars here in this country
-- we let the Germans get away, you see, with a lot
of stuff that way by not holding onto theirs.
E.M.Jr:
I think they are two separate matters.
All
Yes, they are, but I was bringing this up so you
would be thinking about it.
E.M.Jr:
Well, the President said the order 1s ready. The
Attorney General has approved it.
Yeah.
E.M.Jp:
But I want to be sure, and he wanted to be sure,
that you are entirely satisfied. Now, if Berle
could tell you what happened
iii
Yes.
E.M.Jr:
And then if you'd call me back, I'll do nothing
until I hear from you. Or if you want me to come
over to see you I'll be glad to do that.
A:
Yes. Well, that's all right about that. I'll
get ahold of him 8.8 soon as I can.
Regraded Uclassified
88
- 3 -
H.M.Jr:
And you'll call me back?
H:
Yeah.
H.M.Jr:
Thank you 80 much.
H:
All right.
89
- 18 -
E.N.Jr:
You know, It is the funniest thing over at that
place. I mean, he said - I didn't ask him to
send Berle over here, He sent Berle over here
and Feis doesn't know what Berle does and Berle
doesn't know what Feis does. It is always the
same.
White:
When be asked whether you needed new legislation,
didn't he refer to possibly the question of balances
here in payment of any defaults on their part rather
than freeze balances?
Foley:
That is right, you would need Congressional su-
thority for that, but in order to hold the funds
here, Fr. Secretary, until you could take that
step before Congress, you would need this Execu-
tive Order. They overlap to that extent. è
was talking about the offset when be said we
couldn't do it by Executive Order.
H.M.Jr:
They had nothing to do with each other.
Poley:
Except you would want to hold those funds here
until then.
S.N.Jr:
But the exchange order would come to IS.
Poley:
That would freeze the money and then you would
go to Congress to get your offsets.
White:
The reason for your order must not be the other
at all, because in the statutes that would not
constitute & reason for giving your order.
F.M.Jr:
lies Ferle clear on this matter?
Foley:
Yes.
Caston:
Berle said the choice of the means, he thought,
was ours, that he didn't want to express an
opinion on it, although he had expressed an
opinion before that in favor of the formal
order, but he approved of whatever means were
necessary to freeze these balances.
White:
I spoke to Berle and I just told him I vanted
to make sure that he understood that I thought
Regraded Uclassified
90
- 19 -
Feis had been in the past, and Bull likewise,
strongly opposed to the imposition of any
exchange control.
As I have.
Wite:
Yes, and he said he was every of that and he
spoken to Bull that very morning and it WES
Hull's feeling that we ought to freeze the
balances but the nethod crasht to be left to
the Treasury's decision.
E.I.In
The President said to talk to Summer Welles,
but Hull is interested and there is - we will
sit here and wait for him.
laston:
After this Order is issued, somebody will have
a press conference and there will be & request
for an explanation of the ressons and I think
somebody ought to get up. and little memorandum
so that we won't give the wrong reasons for
this.
E.L.In
34, do that, will you please?
Incidentally, I have asked Fell to come back
and be here in the norning. There is too much
of that. I can't possibly do it all.
Wite:
Speaking again of exchange controls, this control
only applies to two countries. Full might get the
notion we are putting it on all of them.
Min
Why?
Thite:
Because he said this neans the imposition of
exchange control. You nentioned that over the
phone.
Un
For the two countries.
Thite:
I didn't know you nentioned that.
Foley:
May I make a suggestion! I think if we talk of
it more in the nature of freezing Danish and
Norwegian accounts in this country and getting
complete information as to what transactions
there are affecting them, It gives it 8. little
Regraded Uclassified
91
- 20 -
bit more of the proper picture than the use
of the term "exchange control", which I don't
think is quite applicable.
E.V.IN
Five of you 80 in there and write a statement
and show It to me so possibly I can show it
to the President before I give it out. Be
sure and have it ready so when I say yes, it
is ready, it will be ready. Don't you think
it would be 8. good thing to send a copy over
to Er. Rull? He might have it before him.
Poley:
All right. You mean a copy of the Order?
E.1.Jr:
Yes. Couldn't you get one to Berle's hands
quickly?
Poley:
I think so. I don't think it is necessary,
because I think he understands it thoroughly.
Call him up and tell Berle what has happened,
that Mr. Bull is going to send for him, does
he want & copy of the Order.
Cochran:
But shouldn't Mr. Hull see it before we pass on
it?
That is what I an suggesting.
Cochran:
Yes, I don't tean just let Berle tell him, let
M. Bull see 1t.
Foley:
I had the Order at the meeting this morning and
be didn't ask for it. I will call him and send
& copy to him right away.
F.M.In
May not - de I sign something?
Poley:
No, the President signs it.
But how about initialing it? How about getting
Mr. Hull to initial it?
Cothran:
He should, because he would have to sign by the
President later on this anyway.
Regraded Uclassified
92
- 21 -
White:
He will get it initialed. It won't do any
harm.
Bernstein: From the point of view of committing the State
Department, you are on sounder ground getting
his initials than the purely formal thing of
applying the seal which he has got to do as a
ministerial matter when the President sends it
to him.
Foley:
I will send it to Berle and tell him we may get
called over to the White House and it would be
nice if he could talk to Mr. Hull about it and
get his approval on it and that you have already
spoken to Mr. Hull.
H.M.Jr:
I will talk to him unless he is already in Hull's
office.
White:
If he doesn't want to initial it, it is well to
know it now.
H.M.Jr:
I think he ought to initial it.
Cochran:
He ought to see it and have time to go over it.
Regraded Uclassified
TREASURY DEPARTMENT
93
INTER OFFICE COMMUNICATION
DATE April 10, 1940.
TO
Secretary Morgenthau
FROM
Mr. Haas GOA
Mr. D. W. Bell requested me to give you some data
regarding American tourist expenditures. Attached memorandum
has been prepared accordingly.
S4
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Morgenthau
FROM
Mr. Hasg
Subject: American Tourist Expenditures
The foreign travel expenditures of United States residents
during the calendar years 1937, 1938, and 1939 are shown in the
following table: (The 1937 and 1938 figures are from published
reports of the Department of Commerce, while the 1939 figures are
very preliminary estimates obtained on a confidential basis from
that Department.)
:
:
:
Foreign country or region
:
1937
:
1938
:
1939
:
:
:
(In millions of dollars)
Canada
273
259
256
Mexico
45
44
53
West Indies
51
54
50
Other Americas
11
12
15
European and Mediterranean
167
135
100
Asia, Africa and Oceania
16
12
15
Total
563
516
489
About 52 percent of the total foreign travel expenditures of
United States residents during 1939 were made in Canada, While
such expenditures may be comembat reduced by Canada's status as a
belligerent, such reduction my be more than offset by the diver-
sion of tourist traval from Europe plus the enoouragement offered
by the discount on Canadian exchange (now about 16 percent).
Regraded Uctassified
95
Secretary Morgenthau - 2
Canada, it should be noted, has every reason to encourage American
tourist travel in order to help build up the dollar exchange re-
sources of the Empire.
About another 24 percent ($118 millions) of United States
travel expenditures in 1939 were made in American countries other
than Canada. These countries probably stand to gain more than
Canada by the diversion of tourist travel from Europe (they are
more "exotic"), and United States travel expenditures in them are
more likely to rise than to fall.
Total expenditures of United States travelers to European
and Mediterranean countries amounted to only about $100 millions
in 1939. This amount will, of course, be drastically curtailed
in 1940, and a portion at least of the curtailment - 1.e., that
neither saved nor absorbed by increased travel to other foreign
countries - will be spent for goods and services at home.
Regraded Iclassified
TREASURY DEPARTMENT
96
INTER-OFFICE COMMUNICATION
DATE April 10, 1940.
TO
Secretary Morgenthau
FROM
Mr. White
Subject: What does the invasion of Norway and Denmark mean to
the United States?
The German invasion of Norway and Denmark will have the
following effects on the United States:
On Trade
1. The bulk of our trade with Scandinavian countries will
probably be lost. Our exports, consisting chiefly of mechinery,
autos, petroleum, cotton, and iron and steel, have amounted to
roughly $125 millions a year; and imports consisting principally
of pulp and other wood products to approximately #75 millions.
2. Our trade with the Allies will increase. The German in-
vasion of Scandinavia will increase the Allies' dependence on
American sources of supply because:
a. They will have to replace imports of iron,
steel, food, timber, and pulp which they have been buy-
ing from Scandinavia, although some of the trade my con-
tinue through neutral third countries. These purchases
were running at the rate of roughly $350 millions & year.
The United States will not get all of the displaced trade
since the United Kingdom can obtain 6020 of the commodi-
ties from the sterling area, Canada, and countries with
which she has clearing agreements. The United Kingdom
may also take more energetic action to reduce domestic
consumption.
b. The Allies will have to meet the additional
military needs arising from the spread and intensifica-
tion of the war. The Allied purchasing commission will
probably speed up purchases of airplanes, powder, and
military machinery and supplies.
3. Our exports of war materials to European neutrals will
increase as the neutrals expand their military establishments with
the increased dangers facing them. Purthermore, the European neu-
trals will tend to move into one belligerent camp or the other,
involving a cessation of trade with the opposing camp. They will
then be forced to shift purchases, some of which will go to the
United States (if available).
Regraded Uclassified
37
Division of Monetary
- 2 -
Research
4. United States exports will partly replace Scandinavian
exports to third countries.
5. The net increase in United States exports, taking ac-
count of the loss of the Scandinavian market, will be at least
several hundred million dollars during the balance of this
calendar year.
On Shipping
The shipping situation 18 at the moment confused. Much
depende on the number of Norwegian ships which are outside of
Norwegian waters. Horway has E 1/2 million tons of shipping,
of which probably two-thirds are out of Norwegian waters at
any given time. The Allies will doubtless have control over
that part of the fleet which 18 not in Scandinavian waters.
On the other hand, they will now have to import some of the
bulky materials formerly imported from Scandinavia from much
more distant points, which will, of course, tie up more shipping.
Furthermore, Germany may be in a better position to carry out
raids against British commerce and to elude the British blockade.
The net result will probably be to increase Allied purchases of
American ships by perhaps as much as $50 millions within the
next year, and to drive up freight rates all over the world.
On Capital and Gold Movements
1. The United States has $40 millions of direct invest-
ments and $170 millions of securities in Norway and Denmark.
It is too early to predict the fate of these investments, but
most of the current revenue from them will probably be frozen
for the duration of the war.
2. The movement of capital to the United States will no
doubt be increased. However, very little private capital still
has freedom of movement.
Although central banks in European countries may accelerate
the shift of foreign exchange and gold assets to the United
States, the European neutrals may have already placed most of
their reserves in the United States. Scandinavia and the remain-
ing European neutral countries have more than # billions of
gold and balances here now.
Regraded Uclassified
98
Division of Monetary
- 3 -
Research
Balances and Earmarked Gold Held for Foreign Account
In the United States on March 20, 1940
(In millions)
Gold
:
:
:
under
:Official
Private
:
:
earmark
balances:
balances:
Total
:
:
Sweden
$ -
#112
$ 67
$ 179
Norway
20
25
43
88
Denmark
22
5
24
51
Belgium
171
1
176
347
Netherlands
371
14
183
568
Switzerland
156
117
307
580
Other European neutrals
40
58
153
251
Total
#780
#332
#953
$2,064
3. The flow of gold to the United States will continue
at rates even higher than in the past 6 months. We purchased
#750 millions of foreign gold in the first quarter of 1940.
With an increase of exports to the Allies and to European neu-
trals, the bulk of which will be paid for with gold, the rate
of gold inflow will increase.
On the Business Situation Here
After the passing of the first shook, the effect of the
German invasion of Scandinavia on domestic business should be
bullish.
1. Our exports to the belligerents and to accessible neu-
trals will expand further. We estimate the expansion above the
level which would have been reached otherwise at several hundred
million dollars at least. These exports will consist primarily
of war goods and of materials for the fabrication of war goods,
but there will also be some additional exports of foods and
other commodities.
Regraded Uclassified
99
Division of Monetary
- 4 -
Research
2. The tendency which existed in some quarters to let
inventories decline through fear of worsening business will
be checked by expectations of (a) increased exports (b) the
intensification of hostilities with greater destruction, and
(c) the acceleration of our own armament program. Instead of
a reduction in inventories, there may be a strengthening of
prices and an expansion of inventories. This would reverse
the business trend and bring about at least a moderate increase
in industrial production.
3. The cessation of our imports of competitive Scandina-
vian pulp, wood products, and special steel products will re-
sult in accelerated expansion of domestic production and pos-
sibly an increase in productive capacity of special steels and
pulp.
109
April 10, 1940.
CRANDUM
TO:
Secretary l'orgentheu
FROM: Mr. Gaston
mar
You called ne at 9:50 P.M. Tuesday, April 9, to tell ne that
you had just talked to the President and that he wished us to get ready
orders applying to Danish exports to the United States the same rule that
we applied to exports from Caechoslovakia after the German occupation.
You wished to have the orders prepared in Customs so that we could put
then into effect imediately. I asked whether the same thing would
apply to Norway and you said that we should get ready a separate order
applying the same treatment to goods from Norway. You wished to have
the orders prepared during the night so that they would be available
at the staff reeting at nine Wednesday morning. I said that I knew
T. R. Johnson was working in the Treasury on the combat zone order and
that I would call him. You suggested that I let Earris do it, but I
said that I knew how to get hold of Johnson immediately and was in doubt
about where to reach Earris.
I called the Treasury and found that Johnson was in Mr. Cairns'
office, as I expected, and relayed your message to him, asking his to
inform Mr. Harris. Johnson told ne that it would be necessary to have
a notice from the State Department on which to base the order and I
suggested that be leave the date blank or make it effective as of zid-
night Wednesday so that our order would follow the State Department
notice. I asked his opinion of this action and he said that he thought
it was entirely right as to Demark but that he didn't think the time
had arrived for such a. order as to Norway. He agreed to have the
blank orders available for nine o'clock Wednesday morning.
Regraded Uclassified
101
April 10, 1940.
RECRATION
TO: Secretary Margentham
PROM: Er. Gaston
You called - at 9:50 P.N. Tussday, April 9, to tell se that
you had just talked to the President and that be wished If to got ready
orders applying to Dunish experts to the United States the same rule that
- applied to exports from Caschealovakia after the Germen occupation.
You wished to have the orders prepared in Customs 80 that 19 could put
them into effect immediately. I asked whether the - thing would
apply to Norway and you said that w should get ready & separate order
applying the same treatment to goods from Norway. In wished to have
the orders prepared during the night so that they would be available
at the staff meting at nine Wednesday norning. I said that I Ince
I. R. Johnson was working in the Treasury on the coubet am order and
that I would call him. You suggested that I let Harris de 11, but I
said that I knew how to get hold of Johnson immediately and was in doubt
about where to reach Harris.
I called the Treasury and found that Johnson me in Mr. Cairns'
office, as I expected, and relayed your massage to him, eaking his to
inform Mr. Harris. Johnson told as that it would be necessary to have
a notice from the State Department en which to base the order and I
suggested that be leave the date blank or make it effective - of aid-
night Wednesday se that our order would follow the State Department
notice. I asked his opinion of this action and he said that he thought
it - entirely right as to Demark but that be didn't think the time
had arrived for such at order M to Formy. be agreed to have the
blank orders sysilable for nine o'clock Vednesday morning.
Regraded Uclassified
102
General Ruling No. 1 under Executive Order No. 8389,
April 10, 1940, and Regulations issued pursuant thereto,
relating to transactions in foreign exchange, etc.
The Secretary of State has advised me as follows:
"Denmark and Iceland are two separate political entities.
Acting under the authority of a provision of the Icelandic
Constitution the Icelandic Parliament has within the past few
days passed a resolution stating that since the King of Iceland
is not now in a position to carry out his Constitutional duties
with respect to Iceland, the Icelandic Government has assumed
for the time being the exercise of the Royal prerogatives and
the entire control of Icelandic foreign relations.
"In view of the foregoing it would not appear that Iceland
falls within the definition of the term 'Denmark' in Section 11
of the above-mentioned Executive Order."
In view of the foregoing, the Treasury Department construes the
term "Denmark" AS used in the above-mentioned Executive Order and
Regulations AS not applying to Iceland.
H. MORGENTHAU, Jr.
Secretary of the Treasury
Dated April 15, 1940
103
April 10, 1940
9:39 a.m.
Operator:
Operator.
H.M.Jr:
Captain Collins, please.
0:
Right.
(Pause)
0:
Captain Collins.
H.M.Jr:
Thank you. Harry.
Harry
Collins:
Yes, sir. Good morning, sir.
H.M.Jr:
Good morning. Assistant Secretary Johnson is
here with me.
C:
Yes, sir.
H.M.Jr:
And I wanted to tell him which are the manufac-
turers which are waiting to hear from the Var
Department?
C:
Bell, Curtis and Lochheed.
H.M.Jr:
Bell, Curtis and Lochheed.
C:
Yes, sir.
H.M.Jr:
They're waiting to hear from the Mar Department.
C:
Yes, sir.
H.M.Jr:
So that they can go ahead.
C:
Yes, sir. Now, they've had their preliminary
conversations and they've had their preliminary
negotiations with the Army and they're waiting
now to sit down and talk with the French and the
British on prices and numbers and deliveries.
H.M.Jr:
But it's Bell, Curtis and......
C:
And Lochheed.
Regraded Uclassified
104
- 2 -
H.V.Jr:
They're waiting to hear?
C:
Yes, sir.
E.M.Jr:
Those three?
C:
Yes, sir.
H.M.Jr:
Now just stand by.
C:
Yes, sir.
(Pause)
H.M.Jr:
Mr. -- Mr. Johnson said that you can tell these
three manufacturers that if they'll see Colonel
Burns sometime after eleven o'clock
C:
Yes, sir.
H.M.Jr:
he'll give them the green light.
C:
Aye, aye, sir. Thank you very much, sir.
H.M.Jr:
Now, while I have Mr. Johnson here, is there any-
thing else that I ought to bring up with him at
this time?
C:
No, sir. I think that will clear the atmosphere
because that will permit these people to go ahead.
H.M.Jr:
Well, those are his instructions.
C:
Yes, sir.
H.M.Jp:
And you'll get that word to the three manufacturers.
C:
I'll try to do that immediately, sir.
H.M.Jr:
Thank you.
C:
You're welcome, sir. Goodbye.
Regraded Uclassified
105
April 10, 1940.
10:31 a.m.
E.M.Jr:
Hello.
Operator:
He's coming on.
E.M.Jr:
Hello. Hello.
0:
He'll be right on. He's calling you through the
White House.
E.V.Ir:
Hello. Hello. Hello.
8:
Shall I ring you back?
3.Y.Jr:
Hello.
Cordell
Full:
Henry?
Us
Yes, Cordell.
AS
Our information here 1s that both Denmark and Norway
are is indefinite military occupation by troops of
the German Government.
Yes.
AT
that would - that, on its face would imply that the
military Government, no matter what they profess to
have it therefor, that It does carry with it a sort
of a super-Govermment.
E.V.Ir:
Yes.
A:
Any time and in any vay the Germans may see fit to
exercise direction over the civil Government.
Yes.
A:
In other words, there is on its face sufficient grounds
for, ve think, for our eight Governmental agencies
here to take any precautions at least for the present,
to saferuard any of the interests of our Government
or its nationals in the finances, financial resources.
Mr.
Yes.
So our attitude would be one of favor towards that -
any such action as the Treasury might see fit to take
in those circumstances, and anybody that we've got
here that could be helpful in sitting in on working
out a flexible arrangement that would enable the
Regraded Uclassified
106
- 2 -
Treasury to avoid any tying un where they might
be subjected to serious controversy by -- by the
payment
over there.
H.M.Jr:
Yes. Well now, let me see if I -- -- you're talking
now, I take it, about both Danish and Norwegian
balances.
F:
Yes. Both are in indefinite military occupation
by German troops.
H.M.Jr:
Well, since yesterday morning we've frozen those
accounts on a voluntary basis.
in
Yes.
S.M.Jr:
And no payments will be made by any bank on any
Danish or Norwegian account without first sub-
mitting it to the Treasury.
61
Yes.
H.M.Jr:
And so for ve haven't had any trouble.
iii
Yes.
E.V.Jr:
If there -- we have advised the Attorney General
what ve are doing to make sure that we are within
the law.
in
Yeah.
E.M.Jr:
Now, I'd be more than pleased if, when the first
question of some bank asks us as to some payment
and if there's any doubt, I'd be more than pleased
to let anybody you designate come over and sit in
when I pass on it.
E:
Yes. Well, any way you think we can be helpful
we'll be glad to do 60.
H.M.Jr:
Now, who would you like to sit in on that?
6:
Well, who would you prefer?
R.Y.Jr:
Well, do you use Berle?
iii
Just as you say.
Regraded Uclassified
107
- 3 -
H.M.Jr:
Or anybody that
H:
Well now we can -- our fellows are in and nt BO
much here ve never know, but If you'll let IS know
and give us your facts
H.M.Jr:
Well, supposing when the first case comes up that
there's any doubt about
in:
Yes.
H.M.Jr:
supposing I call up your office and ask you
to send someone over?
H:
Yes, all right.
H.M.Jr:
Now, may I just - while I have you on the whone.
H:
Yes.
H.M.Jr:
But I mean we have advised the Attorney General to
nake sure that we stay within the law.
in
Exactly.
H.M.Jr:
Now, as to -- you still don't want to advise 12 as
to a defacto Government in either one of these in
regard to customs?
H:
No, we haven't reached that stage of information
yet.
H.M.Jr:
I see.
H:
We just can't tell until a little later.
H.M.Jr:
Oh.
H:
Although of course 8. military government on its
face is a super-government, although they profess
not to be there to interfere with the political
independence in any way, with the - of the govern-
ment in existence.
H.M.Jr:
Well, we'll sit tight on that until 10 hear from you.
H:
Yes. All right then, Henry.
Regraded Uclassified
108
- 1 -
U.S.A.
And what I'm said about the finances 1s all
right with you?
Al
About the finances?
I mean, that n'm tied everything up.
A1
Yes. Yes, anything there until you can see what
our rights are and safeguard them.
I understand.
A1
Tesh.
Thank you.
109
April 10, 1940
10:15 an
(This art dictated with Captain Collins and Mrs. Ilotz
present before the Allied Purchasing Mission came in.)
Mr. Johnson vas here from 0:30 on and this
books in with the memorandum I dictated last night.
Johnson told me that ay talking with the
President yesterday at noon and telling the President
that things had not been settled, plus the advice I
care Ma to talk to the President last night, has
finally straightened the thing out after three veeks.
Johnson said it never rould have been straightened
out if it had not been for ne.
Ze said at the meeting this morning, with
the authority which the President gave him, he is
ready to clear up this whole mess.
Tast I an going to do is let then tell me
their story here and I will read what Johnson has
told 28 they can have. Be told ne Brett is an ex-
cellent officer if be sticks to the manufacturing.
Be should not be doing negotiating.
Johnson said three times to me, "Will you
be v friend? I need you," and I said, "Louie, I an
here only for the President." And I said, "The way
to be 7 friend is to serve the President.' He said,
"I can be very appreciative," and I said, "Well, no-
body can do anything for me. The only may to be 77
friend is do what the President said." Three times
he asked 3.
....
Present:
fr. Purvis
M. Fleven
Sir Benry Self
Capt. Collins
Mrs. Ilotz
fr. Purvis: You are looking rested.
Regraded Uclassified
110
-2-
HM,Jr: well, I lost whatever I gained.
Mr. Purvis: You still give the physical
appearance, at least, of having had & rest.
HM,Jr: Well, gentlemen, got everything
you want?
Mr. Purvis: Except Norway. Is the news
on the whole good, this morning, or bad? You can't
tell?
HM,Jr: I don't know. All I know is that
yesterday morning I froze every account belonging to
any Dane or Norwegian in this country. They can't
get a sou unless I personally give it to then. They
say I have not the legal right, but I still have done
it.
Mr. Purvis: That is some of the spirit we
were talking about a few minutes ago in the other room.
HM.Jr: I have done it and now they are going
to try to get the Attorney General to uphold me.
Mr. Purvis: Yes. That's the next move.
May I just give the picture in a broad way?
HM,Jr: I want to know where you rentlemen.
are at, just the way I talked yesterday.
Mr. Purvis: We, as you know, were in posi-
tion to move on April lst. Te have since been avait-
1ng the release situation. We have asked Captain
Collins to confirm whether our understanding of the
letter of April 2nd 18 correct, 1. e., the releases
are through, and that we can accept that as the sit-
uation. We have not yet got a reply from you on that,
Captain Collins.
HM,Jr: Let's put the horse and the cart in
a different relationship. What I would like you to
tell me today is, "Mr. Morgenthau, this is what we are
Regraded Uclassified
111
ready to buy. Me want to buy so and so today, or
re have bought.
Mr. Purvis: (handing the Secretary the
attached memorandum.) The engine thing occupies
the first three pages and there is the program of
the Allied plane requirements by planes.
HM,Jr: Tentatively you want 480 Curtiss
P-40s.
Is that right?
Mr. Purvis: That's correct.
HM,Jr: Is the improved Curtiss, is that
known as the Curtiss P-467
Captain Collins: Yes, P-46.
HM,Jr: Which, they tell me, from now on
is to be called 40-D, for accounting purposes.
Captain Collins: Army designation.
HM,Jr: They don't want it known as P-46.
They want it known as 40-D.
And you want the Bell P-39? That's not
on my list.
Mr. Pleven: That is what you call the
Airecuda.
Captain Collins: Airacobra.
HM,Jr: Hasn't that been released. That's
one of the three I spoke to you about this morning or.
the phone. That's been released, has it?
Captain Collins: For negotiation. That's
in the same category as the P-38, which is the Lock-
heed.
HM,Jr: I haven't got Bell on my list, but
that's been released?
Regraded Uclassified
12
Centain Collins: They have all been "
Leased for negotiations.
Purvis: Ye are in the position that
19 eximet really, IS. Secretary, have negotiations
with any of these manufactureres until they have cleared
with the Department in regard to the Department's regu-
Lations. Te don't know what those regulations are,
surselves.
Mr. Fleven: The situation is & little worse
that that, Mr. Secretary. Te saw Mr. Bell, who was
very andous that - take his planes and we think very
highly of his planes, and this was about ten days AZO,
and then, since he has been in Washington, he has tele-
parted us two or three times and said he is still un-
cole to continue the discussions.
El,Jr: Let's come to that in B. second.
The Lockheed Interceptor. That is the P-381
Mr. Pleven: Yes, that's right.
You don't B&Y here whether you want
the supercharder with it or not.
Mr. Purvis: Te have, in our letter, asked
for superchancer on all those.
EM,Jr: On bonbers. Glenn Martin 37. Let's
let the bombers go.
This 18 the situation. I was able -- Mr.
Louis Johnson was here at 9:30 this morning and after
two talks yesterday he had e meeting at 8 o'clock this
morning. I was able to call up Mr. Collins and teld
in to inform Curties, Bell and Lockheed at 11 o'clock
this morning to see Colonel Burns at the Tar Department
and they will be instructed to ze ahead and negotiate
-1th you. That's Curtiss, Bell and Lockheed. Now,
this is that has been clear. You can have all the
Curtiss P-40s that you want.
Xr. Purvis: Yes.
Regraded Uclassified
113
-5-
HM,Jr: Sometime today -- oh, yes, you
can also have the Curtiss P-40-D. That bes been
cleared.
That was cleared at 8 o'clock this
norning. Also the P-39, Bell.
Mr. Purvis: Good!
HM,Jr: That's cleared. And the Lock-
beed P-38 with the supercharger.
Mr. Purvis: That's right.
Captain Collins: That's type 3, Sir.
HX,Jr: will be cleared sometime today. It
has not been, but sometime today, -- the Lockheed P-38
with the supercharger. The type 3 -- they are clear-
ing the supercharger type 3 for installation on the
Allison engine 1710 for the P-38 plane. In other words,
y en you get the P-38 plane you will get engine 1710
with Type B supercharger.
Mr. Purvis: I see.
Captain Collins: Super-generator.
HM,Jr: I am quoting him. That will only
80 with that plane and with that engine. The reason
is they can then say, if Mexico wants one, no. In-
cidentally, this LockheedP-38 with the supercharger
of course is good for 424 miles an hour.
Mr. Purvis: Yes.
HM,Jr: 420 without the supercharger. And
18 this right? They tell me that the best the Germans
have is the Nesserschmitt 110?
Sir Henry Self: I understand the best twin
engine they have got is the 110. That's correct.
HM,Jr: And that is supposed to do 3891
Sir Henry Self: I did not think it was as
high as that, I thought it 188 370.
(At this point, HM,Jr spoke to Secretary Bull
on the phone and all the gentlemen left the room.)
Regraded Uclassified
114
-6-
I 12 sorry.
L. Purvis: Quite all right, sir.
But these are not -- normally, I
con't, but when lr. Hull wants to talk to me, I want
to talk to Mr.
Well, 207, me 89 back to where me were.
3 said the Lockheed P-38 with the super-
charger sometime today
Ir. Purvis: Yes.
.... will be svailable. And they
vist to put It this way: that Type B supercharger for
the Allison engine 1710 will be available on this Lock-
beed P-38. Does that make sense?
Mr. Pleven: Yes, sir.
Hillr: And 22 to now you have not been able
to get that
Mr. Pleven: Te have not.
I will just give you what he gare be
el : don't know whether you want it -- Consolidated.
It In't on your list.
Ir. Pleven: Four engine bomber.
You on get Consolidated. This is
being negotiated with the manufacturer. You can get
Consolidated 3-34 and the Boeing B-17. Those two are
available.
Now, the only other thing. Mr. Johnson said
this: that it would be very agreeable to his If -- and
it 150't 00 this list -- if you would take a look at the
Talte. Be says the Vulte without the supercharger is
good to 410 to 420.
lr. Fleven: Ir. Secretary, we have been look-
Ing very carefully at the Tulte. Again the trouble is
Regraded Uclassified
115
-7-
that Tulte takes the Pratt-Whitney engine. There
wre no Pratt-Whitney engines available because those
16 shall get from then ultimately have to be ear-
nicked for bambers, so 18 would have to put Allison
enrines or those Vultes. It would be not desirable
and they are not designed for Allison and have not
usie any United States Army tests.
El,In: $ said 3weden Just bought then.
2. Pleven: Sweden night have, but me are
operation = the policy not to buy planes that have
: passed the Army tests. But Vulte will get quite
1 large dare of X business.
Sir Senry Self: Te looked at the Vulte
several times, when TO unde previous purchases and
looked at it again, and our judgment is, apart from
the engine, ve would prefer other types we have in
uind which also has the advantage of taking the Allison
engine, but the suggestion was on 800 Lockheed P-38s,
200 or 300 should be placed as a direct order with
Vulte who would get their information from Lockheed.
Hil.Jr: You are going to ask Lockheed to give
Vulte some of those? Mr. Johnson's interest was simply
to build 20 Tulte AS another plant.
Sir Serry Self: We will give then an order
which will utilize their maximum capacity.
Captain Collins: Will they be licensed to
build a Lockheed plane?
Sir Benry Self: They will take a license from
Lockheed for the limited purposes of thie order.
51,Jr: lb. Johnson told me -- I don't know
whether this checks with you -- up to this morning
and up to what I did yesterday, that for three weeks
be had been stalled and it had only been cleared today.
Xr. Purvis: It also checks with the fact
TE have been stalled.
HM,Jr: The only other thing, he said when
Regraded Uclassified
116
-8-
you sign a contract -- and I told Collins to tell
these three manufacturers to see Colonel Burns this
morning and he would be told what I an telling you now,
# 11 o'clock this morning. Now I have tried to tell
you people to go shead with your contracts with these
people. By the time you get out of the office, if
everything clicks, they will have been told by the Var
Department they have a clearance. If they don't, you
let me know after lunch.
Mr. Purvis: Quite!
HM,Jr: All the Var Department is going to
ask for is that when a contract is signed that they
have a chance to see it and Johnson has given ne his
word be will not take more than 24 hours to give it his
sproval. He will not hold it up more than 24 hours
in the Tar Department. And that five-page memorandum
has been torn up.
Captain Collins: Should not have been written.
HM,Jr: But he said once you people sign up
with Curtise, 3ell or Lockheed, the manufacturer should
submit the contract to the War Department. Do we do
:: through you, Collins? Maybe you can work that out,
and they will not hold it more than 24 hours.
Mr. Purvis: Are any conditions going to be
made by the Army to those companies in their negotia-
tion with us in regard to expansion, because the finan-
sial question seens to have entered into the picture
that ve did not know about.
HM,Jr: Mr. Purvis, the best way to answer,
after I leave the manufacturers -- if I may suggest --
I would send for the Curtiss people, Bell and Lockheed.
Who are in town?
Captain Collins: Curtiss isn't.
HM,Jr: Who is here?
Captain Collins: The Vice President of Bell
is in town. Curties is in New York waiting to get the
Deradad
117
-9-
"go shead" from the War Department.
HM,Jr: Who is here? You say the Lock-
heed Vice President?
Captain Collins: No. He's West, but
of Lockheed is in Washington.
HIL Jr: Well, you can send for the manu-
facturers.
We want to talk to you about so many
Curtiss. Te understand that you have been authorized
to talk to us and we want to talk. What are the con-
ditions? We want so many planes. Are you ready to
sell then to us" -- and if there are some conditions
you don't think reasonable, come back and tell me.
Mr. Purvis: All right.
Captain Collins: Two of the people who will
negotiate are in New York.
Mr. Purvis: But this is the procedure you
mould like us to follow and if we find what we think
is St snag, we come back.
HM.Jr: And the President and I want this
thing cleaned up now.
Mr. Pleven: You see, Mr. Secretary, we have
been told by at least two officers of certain conditions
which, if maintained, will make negotiation very diffi-
cult.
HM,Jr: Don't let's cross any bridges until
we come to them.
Mr. Purvis: You think the situation may have
changed from what it was a few days ago.
HM,Jr: I don't know. I see stuff in the
paper all the time, but the way to find out is these
manufacturers were told to come over to the War Depart-
ment today. They will be told to 50 ahead. Now,
whatever the conditions are, they will be told and I
would rather have you get it direct from the manu-
Regraded Uclassified
118
-10-
facturers. Find out mist they IN. If 75 for"t
think they are fair, CODE back el ree If ands.
There may be something : verry start and taybe
there isn't.
Xr. Pevis: In. The first tity 1: you
want us to find out If time 10 anything.
HM,Jr: Jes. Let's fini at.
Mr. Parts 422 right. I vill let 702
know very promptly.
21,70 Do : zent X from the begindar?
lis. Parts: IN, The is.
201,000 [reating] " the in - just
in the hands of M. totar
the 570 Allied Sume und :: letrey
the ext of increasing mists expectity N 12
Tital 280 Employee e x = : mite
expeniture is estimated it 36,858, 200, of : the
411 de udded the net :: the -
- (5200 markets it sist di $300 each, recuring
$1,560,000 plus metine 1837, M.
"The first Myst : 12,777,000 23 been
=de today.
This Is X lines.
2. Purts: : :: :- 188 TETED
Ange after signing, April 1002
H1,Jr: (resured resting) % final
is to be Grafted within 30 Seys des to of
Income tax at 13% = « capital <ill have
to be settled, TE time, -10 N belo of the If 5.
Treasury.
Mr. Purris: It will Mr. : :: 2 certifs
coint, Saving the :: de 15 = the
EM,Jr: = unlerstred X of to
129 in with Sullivan tolay.
Regraded Uclassified
119
-11-
That des not say 260 engines per month.
1. Pleven: Te did not give you 8 figure
100, because it would not be a correct figure. It
Sepends upon the planes re buy and we think later we
shall know.
Mr. Purvis: Aim was to get quick action
there was a plant.
HI,Jr: Harry, nake a note. I want to know --
: = carrying these figures of 2900 engines. With this,
:- siding capacity of 260 engines here per month, what's
the base? How many do they produce 507 per month?
Sir Beary Self: The orders - have in mind,
just for rough purposes, 2000 under your options and
unter 2000 for this column of orders and that will
be 6000 between 201 and September 1341.
*. Purris: You zesa what propertion of
increase arises from this 260.
Hil,Jr: How many thousand horsepover are they
saking a month non.
Sir Benry Self:. Firms have been very discreet
in not disclosing to us their base per nonth.
l'r. Purvis: Te could hardly expect to get it.
Hil,Jr: That you have in sind 18 placing an
trier of 4000 engines from Wright?
1. Fleven: On this broad expansion, 2000.
in the first expension we began in November, those are
2000, 30 me have placed an order of 4000.
lb. Purvis: Part of which is exercise of
option.
31,Jr: that you are thinking of placing
12 the Wright is giving then an order for 4000 more
engines?
Regraded Uclassified
120
-12-
Mr. Pleven: Yes, all together.
Mr. Purvis: And ve have given them 8 000-
=itment which enables then to go shead with their
plant expansion.
We have exercised the option
and then there is another option, but the important
thing 18 it increases the output by 260, which will
enable us to take care of option requirements and
later requirements.
HM,Jr: As of today on, are you thinking
of ordering 2000 or 4000 more engines?
Mr. Pleven: 7e are, on the basis of ex-
pension indicated here, ordering 2000. On the basis
of the expansion we financed last year we have, to
April 9th, told then re are willing to take another
2000 engines on which me had an option.
HM,Jr: But on their books they will have
orders, new, April first, of virtually 4000 new.
Mr. Purvis: That's correct.
Mr. Pleven: That's right.
HM.Jr: So I can put on the bottom here,
'Ayril 1st, proposed orders will be for 4000 engines.
Mr. Pleven: Yes.
Mr. Purvis: Orders executed since the pro-
gree came through. Since I phoned you on April first.
HM,Jr: I put down here, "April 1st, proposed
order 4000 engines.
Sir Henry Self: Formal order has not gone
out yet.
HM,Jr: "Proposed order from April 1st on,
4000."
Mr. Pleven: In two batches.
Doaradod
121
-13-
Mr. Purvis: In two batches.
HM,Jr: (Resumed reading.) "General Motors.
Allison Engines. An order has been placed in the
hunds of the General Motors under which the two Allied
Governments have agreed to provide funds necessary to
increase the productive capacity of Allison Engines to
500 per month, of which 300 will be on option to the
Allies. The capital cost of the additional facilities
is estimated to be $5,548,000 to which will have to be
added the cost of training new labour, which 16 estimated
to be around $600,000."
Does that mean increase "by" or increase'
Mr. Pleven: To. We believe they were able
to make
....
Mr. Purvis: Increase of 300 per month, we
think.
HM,Jr: In this case, from April 1st, how
-ANY engines are you going to buy from Allison?
Mr. Pleven: 3500.
HM,Jr: 3500 engines? That will be every-
thing?
Mr. Pleven: Everything up to September 1941.
HM,Jr: This 18 April 1 to September 19417
Mr. Pleven: First applies to October.
HM,Jr: Delivery from October 1, 1940?
Sir Henry Self: I suggest, if you could,
take it a bit earlier because if there are any re-
leases of the P-40 we should get a corresponding re-
lease on engines. We may get them some months earlier
on your release of engines.
Captain Collins: There is one complication
Regraded Uclassified
122
-14-
on that point. Any engines that have been bought
and paid for by the Navy or Army for any P-40s are
not available. There 1s no may in the world we can
ret then back to you.
HM,Jr: You are getting too complicated.
Your delivery 13, irrespective of engines which would
accompany this, would be October 1.
Mr. Pleven: Yes. Te start October 1.
HM,Jr: October 1
.....
Mr. Pleven:
...
to September 1941.
HM,Jr: Is that the same on Tright?
Mr. Pleven: From Wright we practically don't
ret any engines in 1340.
HM,Jr: When do deliveries start?
Mr. Pleven: January 1941.
Mr. Purvis: Up to September 1941.
HM.Jr: September 1941.
Mr. Pleven: In fact, me have to go to Octo-
her.
The last engines we can get only in October.
HM,Jr: I said September. Should it be De-
tober?
Mr. Pleven: For Wrights. October.
HM,Jr: Nom ve have this thing here. I un-
derstand now.
(Resumed reading) "Pratt 5c Whitney. Active
negotiations are now going on with Pratt & Whitney, to
put in their hands an order for the expansion of their
plant capacity on a line similar to those followed in
the case of Wright and General Motors.'
But you did give then an order on April 1st.
Regraded Uclassified
123
-15-
lir. Purvis: Te have not actually formalized
the order.
Mr. Pleven: All that is complicated by your
yes or no.
Hll,Jr: Let's make it 2 little simple for me.
This is all proposed. Bor mach are you thinking of
giving Pratt Whitney?
Sir Henry Self: Roughly, 2000, under the
same options you had with Wright and another 2000 on
top, BO about 4000.
Mr. Pleven: If you think in terms of 1000
units. Te actually work into 1200. Actual number
of engines of 1200 units of engines would be about 4000
engines. 4,000 is about as near right.
HM,Jr: When would delivery start on that?
Mr. Pleven: The same. January 1, 1941 to
October 1.
HM,Jr: Deliveries start January 1, 1941?
Mr. Pleven: Yes. For reasons that re are
switching a certain number of engines.
Mr. Purvis: There is no hold up in the nego-
tistions.
HM,Jr: (Resumed reading) "Curtiss Wright
Steel Blade Propellers. à very substantial expansion
of the Pittsburgh plant of Curtiss Wright for the man-
ufacture of Steel Blade Propellers will have to be paid
for by the Allied Governments in connection with their
engine programmes. The Present estimate of the capital
expenditure required anounts to roughly between $5,000,000
and $6,900,000."
Well, the terms'steel blade propellers'
Sir Henry Self: That's just over 3,000 steel
bladed propellers.
Regraded Uclassified
124
-16-
Mr. Pleven: Terribly expensive.
HM, HM.Jr: 3,000? You are talking of a pro-
peller having three blades or four?
Sir Henry Self: Three. This is only for
that.
Mr. Pleven: 3000 planes.
Sir Henry Self: But that's only for steel
bladed propellers. There will be large purchase
from Hamilton and also from Curties, but the steel
blades, which is & speciality in America, the capacity
18 very limited and has to be increased. This
is
slightly misleading to talk only about 3000 in view
of full requirements.
HM, Jr: (Resumed reading.) "Programme as
Tentatively Established.
Fighters Curtiss P. 40
480
Improved Curtiss
960
Bell P. 39
200
Lockheed Interceptor
800
2440
Bombers
Glenn Martin 187
750
Douglas Attack Bomber
550
Douglas A. 20
200
Lockeed 37
400
Four-engined bomber
60
Dive-bomber
200
2160
The above programe specifies the types which
appear to be the most desirable from the Allied point
of view, but the quantities mentioned will not be neces-
sarily manufactured by the original designers of those
types. For instance, part of the Curtiss will be men-
ufscturered under 2. licence by North American. Lock-
need Interceptor will be partly manufactured under &
licence by Vultee. The Douglas Bomber will be manu-
factured partly by either Boeing or Comolidated. The
fires from which would be requested the four-engine
bomber or the dive-bomber will only be determined when
Regraded Uclassified
125
-17-
"we shall have had a chance to see the new types about
information 1s to be released by the services.'
(Concluded reading.)
Glenn Martin 137. Isn't that the one you
nze getting now?
Mr. Pleven: No, Mr. Secretary. Glenn Martin
187 19 the ship which 1s designed on our own requirements,
but it is a diversion of the ship called 167 which has
been released originally to us.
Sir Henry Self: We propose to follow the
Mrm's naming, 167-F-4. They have already got to
F-3 on the 167 type and if we call it 167-F-4 it shows
8 clicht modification of the 167-F-3 to meet particular
requirements of the Allied Governments.
HM,Jr: Now, have you got a release on that?
Mr, Pleven: Well, you see
HM,Jr: Has the War Department told you?
Mr. Pleven: Glenn Martin are unable to d1s-
russ it on secount of the hold UD.
HM,Jr: I think I ought to mention it to Mr.
Johnson.
7c will come back to that in AL minute.
Douglas attack bomber.
Mr. Pleven: That is a particular case where
71 are upset.
These two class bombers, 1e mely 8
thip which has been changed and we Are compelled to
217 that Mr. Dowglas feels very strongly about it and
be said if he could not agree with Dayton he would come
:: ree you.
HM,Jr: What 1s the technical number of
Deuglast
Sir Henry Self: DB-7-B.
Regraded Uclassified
126
-18-
Captain Collins: The DB-7, that's what
they have been buying.
Mr. Pleven: This 19 the original bother which
has been improved according to our suggestions.
H1,Jr: The Douglas A-20 is E. four-engine!
Sir Henry Self: No, that 1s on order at the
- for the British Government and to avoid any 30%
plientions we simply propose to exercise existing option
which we have under existing contracts with the Douglas
Company And limit the order to the option.
HM,Jr: So there will be no question of re-
lesse on that?
Sir Henry Self: No question on that.
HM,Jr: The Lockheed 37.
Sir Henry Self: That 1s A new type and we
have had no relations with Lockheed, who et first adopted
the Hudson, which was the British Hudson and has now
been converted to a new type at our suggestion simply
embodying our 1dea. It 1s called the Lockheed 3210
in production and we have asked them to modify that
still further to be known as the Lockheed P-37. So
in practice it may develop into 8 new type.
HM,Jr: Do you need any release on that?
Sir Henry Self: That's what I was riving you.
HM,Jr: Does 37 identify it?
Sir Henry Self: Yes.
Mr. Purvis: 17e don't otherwise quite know
with that we need a release, but we assume it does not
need R. release.
HM,Jr: Well, we will ask.
Mr. Purvis: We may be wrong in our assimption.
Regraded Uclassified
127
-19-
HM,Jr: On the four engine bomber. I told
you about that. What about the dive bomber?
Mr. Pleven: We would like to make our de-
cision after we have been in consultation with the
Army and Navy.
HM,Jr: You don't know what you want?
Mr. Pleven: Te have some ideas, of Curtiss
or Boeing perhaps.
HM,Jr: You don't know.
Captain Collins: You do have information
on the Havy bomber.
Mr. Pleven: Yes, but we want to make a choice
between what 18 existing.
HM,Jr: What other ones would you want to know
about?
Mr. Pleven: There are two Curtisses. Te would
like to choose the best ones.
Captain Collins: Which are the other two?
Mr. Pleven: Curtiss is one of them.
Mr. Purvis: We could get that information
very quickly.
Mr. Pleven: Te don't know exactly. Perhaps
Grauman.
Mr. Purvis: You really don't know what your
choices are.
HM,Jr: Supposing I say this to you, to Mr.
Johnson, that you gentlemen are here; that on the
fighters, from what he told me today, everything is
all right provided he has told the manufacturers. That's
all in the clear.
Mr. Purvis: Including the Lockheed Interceptor?
Regraded Uclassified
128
-20-
HM,Jr: Yes. You are interested in the
91enn Kartin 167-F-4.
Sir Henry Self: Which has been largely
developed at French instigation.
Mr. Pleven: What surprised us was that
the question of release should have been raised at
nill on the Glenn Martin.
HM,Jr: Let be tell his what you want.
The Dowlas attack bomber, DB-7-B. I will tell
his the Douglas A-20, which you are now buying.
Sir Henry Self: Simply exercising an ex-
latter option.
HM,Jr: And the Lockheed 37.
Sir Henry Self: I think the Lookheed 37
should be mentioned because me don't ment any hold
et 1n the negotiation.
(At this point, El,Jr placed a call for
:-. Johnson.)
HIl,Jr: What I met to do 18 call up Louis
and say, "Now, look, Louie, I told you I
+2035 let you know vitat they want. This 1s what
Cley was, which I think is all cleared. If it
110't I want to know.
After all, he told me to let him know and
" nint to do business today and we have to PO on
the assisption that he's [01]] to ocoperate. If he
we will have to TO see papa!
Mr. Purvis: I shall Also be leaving here
is Musinum memorandum which you asked for, which
Sir Benry has zone over. I think It will be worth
perusal.
HM,Jr: Thank you. I will read it.
Four engine bomber is what, Collins? The
end Consolidated?
Regraded Uclassified
129
-21-
and Consolidated.
Captain Collins: That's right, The Boeing
HM,Jr: But that's all been cleared? They
cleared. can have the B-17 Boeing and B-24 Consolidated. That's
Captain Collins: He said that this morning.
HM,Jr: You got that?
Sir Henry Self: Yes, I got that down. Al-
ready been released.
Mr. Purvis: There is a point here in the
letter to Captain Collins of April 5.
"As explained in our memorandum of the
14th of March, the information neces-
sary to enable our Board to reach de-
cisions must cover the results of the
engine's manufacturers' tests on en-
gines and also the results of service
and manufacturers' trials of airplanes,
with details of performance and handling
qualities. We understand that we are
now in a position to request this infor-
mation both from the services and from
the manufacturers."
Te have asked for confirmation of that. Can
we know that?
Captain Collins: I think 80 in connection with
the whole question of release, which has been cleared up
now.
Mr. Purvis: If it could be mentioned to
Johnson
HM,Jr: I don't think 80.
Captain Collins: Don't mention it, because
I an handling that.
Regraded Uclassified
130
-22-
HM,Jr: Are you people satisfied that
Allison can make good?
Mr. Purvis: I think 80.
Mr. Pleven: We realize it is a b1g risk,
but we believe too that they understand it and that
all cooperation will be behind it.
HM,Jr: I am going out in ten days.
Mr. Pleven: We mentioned this particularly
to Mr. Sloan and I believe that from top to end they
all realize we are taking a very b1g risk and that they
want to make it good.
Mr. Purvis: I think they are out to demon-
strate what can be done. Sloan has been very helpful.
He has come into it himself. I have seen him several
times. The other night he came up to dinner.
(At this point, HM,Jr spoke to Louis Johnson
and a record of their conversation follows this page.
131
April 10, 1940.
11:20 a.s.
H.M.Jr:
Hello.
Operator:
Mr. Johnson.
H.M.Jr:
Hello.
Louis
Johnson:
Hello Mr. Secretary.
H.M.Jr:
Louis, I have here in the office now, the gentlemen,
English and French purchasing mission. Hello.
J:
Yes.
H.M.Jr:
And this is their needs as to their fighters. Hello?
J:
Yes.
H.M.Jr:
Have you got a pencil?
J:
Yes.
H.M.Jr:
They want to buy the Curtis P-40, and the so-called
improved Curtis which you called
.....
J:
40-D.
H.M.Jr:
Right. And the Bell P-39.
J:
O.K.
H.M.Jr:
And the Lockheed intercepter. That's the Lockheed
....
J:
P-38.
H.M.Jr:
38. Now from our conversation this morning, those are
all in the clear, as I understand, I think you said
that the Lockheed intercepter, was that the one you
were going to clear today, I think.
J:
Yes, it's practically clear now, Bo they can go ahead,
and the manufacturers are in here now talking to
Burns, 80 they'll get it all clear in the next few
minutes.
H.M.Jr:
Now, you think they'll clear that in a few minutes.
J:
Yes.
Regraded Uclassified
132
- 2 -
H.M.Jr:
Now, as to the bombers, this is what they'd like to
get in the bombers. On the Glen Martin, they use a
number, 167-F-4, which is an improved bomber over
what they're getting now.
J:
P-48
H.M.Jr:
Yes.
J:
That's
H.M.Jr:
Hello.
J:
I didn't get that number.
H.M.Jr:
F-4. F-o-u-r.
J:
Oh, yes.
H.M.Jr:
167-F-4.
J:
Yes.
H.M.Jr:
That's on the Glen Martin. In the Douglas attack
bomber, No. 7-B.
J:
Yes.
H.M.Jp:
And they're also interested in a Douglas A-20,
which is, I understand, they're now getting, that
would be the question of exercising the options on
it.
J:
Well, we cleared that Douglas A-20 for them some
time ago.
H.M.Jr:
Well, I'm giving you the whole story, as I said I
would, and so if there's any question you can.
J:
How many do they want of each?
E.M.Jr:
On the Glen Martin?
J:
No, each one of them.
E.M.Jr:
You - well, I'll give you the figures.
J:
All right.
H.W.Jr:
Glen Martin.
- 3 -
133
J:
Yes.
H.M.Jr:
750.
J:
All right.
E.V.Jr:
Douglas attack bomber 7-B, 550.
J:
Right.
E.M.Jr:
Douglas A-20, 200.
J:
Right.
H.M.Jr:
Lockheed 37.
J:
No, 38.
E.K.Jr:
They said, no this is the 37, what they called the
improved Hudson.
J:
All right.
E.V.Jr:
400. Hello.
J:
All right. Go ahead.
E.M.Jr:
Well on the four engine bombers, they want the ones
that you said they could have, the Boying and the
Consolidated.
J:
Yes.
E.M.Jr:
Together 60, I don't know how they divide it,
but 60 between those two.
J:
Yes.
H.M.Jr:
And then they're in the market for 200 dive bombers
and they want the best, and they'd like to be
advised what the Army thinks 18 the best, they
don't know.
J:
Well -
E.N.Jr:
They'd like the advise of the Army on that.
J:
Yes, I think they're going to have to do a little
talking about that with us down here, because what
134
- &
constitutes E dive bomber is a very uncertain equation,
and if they tell 18 what they want, the characteristios
they want, we'll be glad to tell them what 16 the
best we've got.
R.Y.Jr:
Well, I'll tell then to talk with this coordinating
committee, and advise whoever, just let that go
through that way then.
J:
All right. Nov many Curtis P-40's do they want?
E.K.Jr:
480.
J:
And the Bell P-391
E.Y.Jr:
200.
J:
The Lockheed?
E.V.Jr:
800 end the approved Curtis 960.
J:
That's quite an order.
E.V.Jr:
Needless to say it's all secret.
J:
Oh yes, we'll so treat it. All right, we'll get
the ways greased here, we'll keep them going.
H.X.Jr:
Now what, can I hear from you again on these bombers?
On the dive bonbers?
E.M.Jr:
No, these Glen - no -
J:
On the 64 engines.
E.V.Jr:
Well on the Glenmartins, yes, yes on the Martin
bonbers, Douglas bonbers - what I've listed under
bombers, you see?
2:
All right. Well now, I'm going to get busy on that.
I imagine you'll hear from us in the early afternoon.
B.M.Jr:
In the early afternoon.
J:
Yes.
E.M.Jr:
That would be wonderful.
Regraded Uclassified
- 5 -
135
J:
All right.
H.V.Jr:
And on the dive bomber, -
J:
You know the different people use dive bomber 16 -
they don't know what they're talking about.
H.M.Jr:
Well, should they talk to General Arnold?
J:
Yes, they ought to talk to General Arnold about
that, I think, that's the best place, he's here.
H.M.Jr:
Well, vill he be available?
J:
Yes, we'll make him available any time they're ready.
H.M.Jr:
Could you Just hold the wire a minute?
J:
Right.
H.M.Jr:
Could he be at Captain Collins' office say at noon?
J:
Well -
H.M.Jr:
or would you rather have him after noon. Do you
need him?
J:
Why don't they come down here 80 as not to hold
Arnold - I'm clearing this other stuff up -
to Arnold's office, and I'll have Burns sit in
there with him, on the dive bomber. So that Burns
brings a practical application. I'd send them over
to Collins' office but I want to hold both of then
here to clear these bombers you want.
H.M.Jr:
Well why not let the dive bomber wait until we get
a clearance on the other.
J:
O.K. then that's better. Then we'll send them
wherever you want.
H.M.Jr:
If you need Arnold and Burns let's do nothing on
the 200 until we -
J:
Until we clear the others, and then they'll meet
at wherever they want to meet.
H.M.Jr:
How's that?
J:
That's fine.
136
- 6 -
H.M.Jr:
And then you'll call me.
J:
I will. Goodbye.
137
*
3/m They sugrested por DUE - to
MB Aml Armild #: ide office best tig sell
M misi its to 21% I sit =, to 200
- at set If 700 DAB get a Cream Et <ll
:- ter
---
I. Please: If - :- will y bitte
Is are Colonel Zeoquin les.
Tou people tare not Iff. to
- to Department get.
1. hris Te have zij 21 to in Cantain
office.
But 25 selá sometime the the
Ir. Parts Ture is = paint 2 will like
TO entiz, that TO N receiving through
the under 2xt experience 16 :: : contat DOD-
litims zie de these planes mill be und would be
to feel rither definitely the as between
Surements me cun of give bireda, but to
de information or such things : would
be quite eng :- principle.
E.:: : ThE surgrised in : a that thing
viried that my. It seezs to 29 the == to En - :
STYLE with you entirely, 217 Attrehes, leg end Day,
that they should see these planes unier be potili-
Tisas ind It seens : DE the ₹ to to ent be
total
Ir. Fleren: In Exet, it is to mit my ::
IN be, the only my you 382 ET the train you
rast.
They entaired to If to ml] infor-
utiz they get was through the regresentative of the
Justin Company è TES over the and the not
sitizfied <2 that, but If = ktz the DET DD to
the frost, it! they should be penditted to 70 to the
Print and see these ulanes nie fighting mitim ....
138
-24-
Mr. Purvis: No manufacturer would have
available to him the kind of information a Govern-
zent should want.
Mr. Pleven: In fact, vê have extended an
invitation to a United States representative to visit
the front.
HM,Jr: Yes. I asked that that be routed
through the State Department. After I read all that
Ir. Bullitt was supposed to have said to the Polish
Anbassador, it gave me the shivers. It wouldn't
nake very good reading what takes place in this office
here between us gentlemen!
Mr. Purvis: No, that's right!
HM,Jr: No. I think that sort of thing
cen be straightened out very easily. I have not
talked to anybody about this, but I have this suggestion
and I have not checked it with anybody else, but it
occurred to me, for instance, that as a sort of re-
ward -- supposing either the French or English have
a particularly successful flight, that the Flight Con-
mander, as part of his reward, be given a trip to the
United States to stay here a week. It's good for his
morale and he comes over for a week and he can see the
lights at night and would give us a chance, and I think
It makes both the Army and Navy very happy if a Flight
Compander of some successful flight came over and had
a chance to answer questions. I think it would be
good for both countries. I would find it most inter-
esting. As I say, this Flight Commander who made the
flight against Sylt, I see they made, him an Air Marshal.
Sir Henry Self: I don't think the man actu-
ally in command.
Mr. Purvis: I saw it in the papers.
HM,Jr: Supposing a gentleman like that -- "In
addition to that, we are going to put you on & steamer
and you go over to the United States for a week or ten
days; rebuild your nerves; 80 down to Washington and
Regraded Uclassified
139
-25-
see the authorities," -- I the It will be very
useful all around.
Sir Henry Self: 1 me visa Is the Air
Vershal 1s the air officer in commail et headquarters.
HM,Jr: I mean squadren lester. That's
what I mean. That's what I had in this If an
officer came here for a reet, it would be good for
his and good for us. The Amy and Terry would like
it.
Mr. Pleven: I agree.
Mr. Purvis: Whether TE have enough flight
pilots under present circumstances = leave while the
Gervens still have to be dealt ----
HM,Jr: Well, it's useful to heep us posted.
Mr. Pleven: Te could have 276 DONE on the
pretext of inspecting planes.
HM,Jr: Yes, if be only staged here II week.
A zun who has been on duty there continuously for three
or four months, certainly It would be good for his
nerves to get away for 8 few redits.
Mr. Purvis: Let us see vita: THE can So.
There is the sluminum
HM,Jr: Doesn't that cover 29 netty well
es of today?
Mr. Purvis: One little thing in another
field.
HM,Jr: And as soon 35 = her from Mr. Johnson
: -111 communicate with you, but you people will have
work to do here, because you have 1 now on
all of your types and on those 80 Burbers.
Mr. Purvis: Are these people here or in
New York?
Regraded Uclassified
140
-36-
Deptain Collins: In Jer Int.
lb. Punds: Te would like Centain Collins
: = 17) sometime to Ter Int, dthe this reek =
M
Centain Colling: I = not rugest this
In Se does not need any mut it the
=
30 you will be svailable for 19 de
used I will leave it to you how IN en get 12
the di Dollins. But If you have to # around
en? e this efternoon, maybe joz reali at then
:: = ton. I really think that it will be its-
thit] worthwhile to stay aron? al du = to ustil
15 $1, the cleared up, because I mut to 16t, it dared
S end I would like to have you gentlemen smilable.
b. Purvis: Quite! All right.
Bere is a peeuliar situation with time DER
Res perfectly will my ve are blocked, pet : seets
20 paty der both sides west to do the same thing.
:- buttleneck In increasing explosive production
:: this country is amonie oxidation units for making
- acid. One exists in the Arty, Plating e-
mi, dich they would be very bagge and villing to
set re-erscted at 12 expense In the Atlas plant.
It would satisfy then and will satisfy IS
of will zenn improved delivery on I.L.T. dich will
2 = importent. The difficulty 11 lemily they
must find aty N to sell It to 15. I valuered If
by could sell it to one Dovertment Department, Pm-
I
Both parties geen willing to have this
done.
El.Jr. : 11 tired. Let 22 consentrate
= = plane business, will you!
2. Purris: I will.
I don't not to get = tini on this.
Regraded Uclassified
141
-27-
b. Purvis: In that case, may I later,
det 18 get through with this, raise a couple of
IN things?
EM,Jr: Yes. I think it is much better
to let ne concentrate on this.
L. Purvis: So glad you are back!
000-000
C
0
P
ANGIO-PRENCE PURCHASING 90ARD
142
I
les Tork:
Tashington:
15 groad Street
125 - 15th St., N.F.,
This letter from New York
April 5, 1940.
yes Captain Collins:
I have pleasure in acknowledging your letter of April 2
$ ve you advise ne that the Tar Department has no objection to
= Foard initiating corrersations imediately with the namifacturers
of : nuter of types of airplanes, for the perpose afbotaining enough
information to enable the Board to reach decisions as to the suit-
prility of these planes for the proposed Allied purposes.
In order to avoid any misunderstanding I would like to set
NI our interpretation of your letter.
(1) Te understand that the types of planes referred to
in the second paragraph of your letter are released with
the new engines or with the engines and mechanical super-
chargers mentioned in our memorantum of the 14th of March,
the only exception being the one specifically mentioned in
your letter, i.e. the turbo superchargers.
(2) is explained in our remorante of the 14th of March,
the information necessary to enable our Board to reach de-
cisions must cover the results of the engine's namifacturers'
tests on engines and also the results of service and name-
facturers' trials of airplanes, with details of performance
and handling qualities. Te understand that we are now in a
position to request this information both from the services
and from the namfacturers.
(3) Te note that a decision as to the release of the
Boeing 3.17 and Consolidated 3.24 will be communicated to
us later. Prom the general public information which -
have, THE can already say that we are not interested in the
Boeing B.17, it wuld very much like to be authorized to
study Consolidated 3.24. The time factor is particularly
important in this case, as we shall certainly have to discuss
with the mamfacturers a number of changes in design necessary
to neet our conditions in Europe and me will be very grateful
to you for any action you might take to hasten a decision.
Te note that the general conditions governing corrersations
between our Board and the mamfacturers have been comminicated to the
by the Tar Department. In order that there my be no
taxes of risurierstanding as to the nature of these general conditions,
the of the possibility of which have cropped =p in our talks with
Regraded Uclassified
143
-2- - -
nanufacturers, can these conditions be made known to us direct? To
feel this step would help in avoiding delays in negotiations with
namifacturers.
Yours sincerely,
/s/
Arthur B. Purvis.
Captain E. 5. Collins,
Chairman, lixison Committee,
Procurement Division,
Treasury Department,
Tashington, D. C.
144
ANGLO-FRENCH PURCHASING BOARD
NEW YORK:
WASHINGTON:
15 BROAD STREET
795 15th ST, N. W.
Mar in New York
April 9, 1940
Dear k. Secretary:
Steel
Since writing you yesterday we have
received 2 correction in the figure for Scrap
orders and deliveries. 1 revised statement,
dated April 10th, is therefore attached.
Te have again cabled for the figures
for French orders and deliveries.
Yours sincerely,
acthur
The Secretary of the Treasury
Washington, D. C.
145
ALLIED IRS & m PURCHASES II THE UNITED STATES
Total
Sept. 1, 1939
Sept. 1, 1939
a
March
s
Peb. 2, 1940
1940
March 31,1940
-
THE
THE
NO KINGDOM
20 Iron
Orders
165,900
Deliveries
43
+
165,500
72,708
I.A.
I.A.
Orders
650,784
241,000
41
+
650,784
Deliveries
I.A.
I.I.
d-Finished Steel
Orders
566,906
+
76,213
41
566,506
Deliveries
LL.
I.L.
Finished Steel
Orders
60,000
+
60,000
Deliveries
+
N.A.
I.A.
vtal- All Iron & Steel
Orders
1,442,790
Deliveries
390,039
41
1,442,790
I.A.
I.A.
XIII
Deliveries are for actual arrivals to I.L I.I.- Not Yet Available
NADA
Steel Plate
Orders
30,780
Deliveries
30&780
Other Steel
Orders
Deliveries
3,420
Total- Orders All Iron & Steel
44 + 44 + ++
3,420
Deliveries
34,200
34,200
--A.D.
10, 1940
Regraded Uclassified
146
ANGLO-FRENCH PURCHASING BOARD
NEW YORK:
WASHINGTON
5 HOAD STREET
795 156 SI, N.W.
The latter has Washington, D.C.
April 10, 1940.
Hon. Henry Morgenthau
Secretary to the Treasury
Washington, D.C.
Dear Kr. Morgenthau,
When I talked with you just before
you went on holidays, certain particulars were
given verbally in regard to the aluminium
situation regarding which you asked for a
memorandum. This is DON enclosed and attempts
to give on very broad lines a picture of the
aluminium situation with special reference to
the availability in the United States of light
alloys for aeroplane production.
I hope you will find this is what
you want.
Yours sincerely,
arm BD
Regraded Uclassified
April 10, 1940
147
ALTRINTUM AND LIGHT ALLOX
Bauxite, the are of aluminium, is found in sany
parts of the world. The most economically worked deposit
is in British Gulana. The North American demand is in the
air satisfied from this source.
Baurite is shipped north, and on arrival is
treated first chemically, the pure netal being subsequently
isolated by electrolysis. For every ton of aluminium 3 1/2
toms of baurite are required, and a considerable quantity of
cryolite, and above all, a great deal of cheap electrical
cover. It is for this reason that the majority of aluminium-
producing units are situated near hydro-electric plants.
The world production of aluminium is estimated to
have exceeded 600,000 tons last year, half of which was
produced in Burope, no less than 180,000 tons in Germany
alone. of the remaining half, North America produced over
200,000 toms, small quantities being produced by Japan
and the U.S.S.R.
Baurite are for European production is found in
the Balkans and in Normy. There are also deposits in
France and Germany,
Alusinium as & crude metal is used for many
domestic purposes share a metal which is light, of moderate
price, and easily vorked is required. In its pare state,
however, it has no great strength. When used, therefore,
for construction purposes, where it has to be stressed, it
is necessary to alloy it with copper and magnesium and to
subject it to certain processes. The product of these
processes is imove as "light alloy", and has for its weight,
Then used in smill sections, as much strength as steel, or
Regraded Uclassified
148
more. Light alloy is used for the samufacture of light
railway trains and road vehicles to a small extent, but
in recent years the denand for it is aeroplane construction
has increased with the introduction of the skin stressed
aeroplane, until in most countries the majority of light
alloy is used for this purpose.
In order to convert into light alloy and
into the shapes in which it is used in construction, the
aluminium ingot has first to be alloyed in & selting
process. It is then cast in billets, which in their turn
are subjected to casting, forging, and rolling, the plants
for which are similar to those used in the case of steel.
The relative heat treatments are, however, at a different
temperature. There is another process which is largely
used in shaping alusinium - the process of extrusion,
which is well known in the trass and lead industry, but
which presents rather greater difficulties when applied to
light alloy.
For aeroplane therefore, there are
available light alloy forgings, eastings, extrusions, and the
product of the rolling mills, ein can be bars, rods, simple
sectional shapes, and sheet. The 20% complicated sectional
shapes, such as tube and intrieste sections, must be
extruded.
The production of light allay in the United States
in 1938 was in the region of 10,000 tens. It is probably
twice that today, and when the expensions now in hand are
completed this output my again be but this
prospective increase to a total expecity of say 40,000
tons per annum includes production of rolled har to a total
equal to roughly come third of the full total.
It is believed that ralled bar is used to a
greater extent for aircraft production in the United States
Regraded Uclassified
149
in substitution for extruded bar which is used in Europe;
but even so, it seems improbable that more than one
third of the rolled bar capacity available in the U.S.A.
can be utilised for balanced aircraft production. This
is illustrated by the following percentages of requirements
estimated for a. standard U.S.A. design in current production,
vis.:
(a) Light Alloy Sheets
64%
(b) Extrusions
25%
(e) Castings
6%
(d) Forgings
5%
It was stated in this case that every effort is
made to curtail the demand for extrusions by use of bent-
up sheets.
This allocation of requirements between the
several classes is roughly supported by European practice.
It follows that the high percentage requirements of sheets
and extrusions precludes full utilisation of the capacity
available for bars and rods if a balanced output is to be
maintained. This consideration suggests that the effective
total capacity of light alloys in the U.S.A. for a balanced
aircraft production will be of the order of 30,000 tons
per annum when the expansions now in hand are completed.
To compare the relative effort involved in a
British aircraft programs of construction and the same
thing in America, it is necessary to realise that aeroplanes
are not of the same size. In this respect, for instance, 1,000
aircraft of current types (excluding engines) in Great Britain
today would require 3,500 tons of light alloy in the
proportions mentioned in the previous paragraph, whereas
a similar number of aircraft of the types constructed in
America in 1939 would only have taken 1,500 tons. This
disparity is due to the fact that 500 of the American
Regraded Uclassified
4.
aeroplanes were of a very small types suited only to private
owners in peacetime. These small machines take no light alloy
at all.
There WES a very large numerical increase in the
number of aeroplanes produced in 1939 in America over those
produced in 1938. It is vorthy of note, however, that thereas
the small types more than doubled, the larger increased by less
than half. It will be seen from the above that the expansion
in actual aircraft numbers is no guide to the Affort which
would have to be made to increase American production to & size
comparative to that existing in Great Britain.
So far as expansion in the light alloy industry
is concerned, certain serious difficulties present themselves,
First and foremost anong then is the size and complexity of
the plant necessary. More particularly is this so with regard
to sircraft construction which relies even in America to a
very great extent upon artruded sections. In the case of
the aircraft design centioned above, 25% of the total
light alloy is in the form of extrusions. in extrusion
press takes upwards of nime to twelve months to build, and
a quotation received the other day for a comparatively small
one was for the sum of $250,000, - which gives a further
indication of the magnitude of this problem. Enquiry suggests
that it is in this respect that the major difficulty of
expansion will occur.
Finally, it must be borne in mind that even if as
output as small as 1,000 ailitary aircraft per sonth is envisaged,
they are likely (allowing for the light alloys needed for the
corresponding engines) to require 60,000 tons of light alloy, with
it is estimated is double the balanced and effective light alley
production of America in prospect today.
Regraded Uclassified
151
ANGLO-FRENCH PURCHASING BOARD
NEW YORK:
WASHINGTON
5 BROAD STREET
795 15th St, NW,
The letter from New York
April 8, 1940
Dear k. Secretary:
Steel
I inclose a statement covering the
United Kingdom and Canadian orders and deliveries
of steel from the United States during the six
months ending February 28, 1940, and during
March 1940.
The French figures are not yet to hand
but I will send them on immediately they arrive.
Yours sincerely,
arthur BRown
The Secretary of the Treasury
Washington, D. C.
152
152
ALLIED IRON & STEEL PURCHASES IN THE UNITED STATES
Total
Sept. 1, 1939
Sept. 1, 1939
to
March
to
Feb. 28, 1940
1940
Mar. 31, 1940
BIND KINGDOM
Pig Iron
Orders
165,500
+
165,500
Deliveries
72,708
N.A.
N.A.
Serup
Orders
480,448
-0-
480,448
Deliveries
70,752
N.A.
N.A.
Sen!-Finished Steel
Orders
566,506
-0=
566,506
Deliveries
76,243
N.A.
N.A.
Finished Steel
Orders
60,000
-0-
60,000
Deliveries
+
N.A.
N.A.
Total - All Iron & Steal
Orders
1,272,454
-0=
1,272,454
Deliveries
219,703
N.A.
N.A.
(LL not yet available.) Delivaries are for actual arrivals in U. L.
Steal Flate
Orders
30,780
30,780
Deliveries
-0-
+
Other Steel
Orders
3,420
Delivaries
Total- - All Iron & Steel
-0- -0- ÷ -0- -0- + -0-
3,420
+
-0-
Orders
34,200
34,200
Deliveries
-0-
-0"
4x21] 5, 1940
Regraded Uclassified
m : miltight
153
ment to the meeting
His is an attach- -
between Purvis +
Hmg on april 10, 1940
Refublic 2 ,
154
Shut ist.
Martin $850.00000
Louis Johnson 155
*
0
cleared
840 - curtis
156
1.40 C
P.40-D(P.46) certis
P39- Bell
with 420-
Loohkedp: 8 - Sometime Today
unsparable german 110=389
Chold agrees to supuchayer
Type B- for mikalls ten
in 1710 albim engine
fu P.38 Plane
382 -to - 424 miles
also valuese Am
with maint
yet to in negotiated
157
Consolidate B-24
(kuyine banker) 301 miles
Breing B-17 311mile
Hultu 410-420
would like to
available Johnson
be bought
1st fachtentland
00t11 to noth 10th
158
2nd March 15th into
Cecho 18th
0
SICRET
-59
WRIGHT AERONAUTICAL CORPORATION
An order has been placed in the hands of Wright
Aeronautical Corporation under which the two Allied Govern-
ments have agreed to defray the cost of increasing productive
capacity by an additional 260 engines per month. The amount
of capital expenditure is estimated at $6,558,000, and to this
will be added the cost of training the necessary personnel
(5200 workers at cost of $300 each, requiring $1,560,000 plus
extraordinary overtime: $830,000.
The first payment of $2,000,000 has been made today.
A final contract is to be drafted within 30 days when the
question of income tax at 18% on all capital expenditure
will have to be settled, we hope, with the help of the
U.S. Treasury.
april 10.1940
4,050 - govera
Oct.
stat you! 1941 =0 - 1941
Regraded Uclassified
SECRET
160
GENERAL MOTORS
ALLISON ENGINES.
An order has been placed in the hands of the
General Motors under which the two Allied Governments have
agreed to provide funds necessary to increase the productive
capacity of Allison Engines to 500 per month, of which 300
will be on option to the Allies. The capital cost of the
additional facilities is estimated to be $5,548,000 to which
will have to be added the cost of training new labour, which
is estimated to be around $600,000.
april 1st 3,500 engines
Octl
Leting from ,1940 to seft. 1941
Regraded Uclassified
SECRET
161
PRATT & WHITNEY.
Active negotiations are now going on with
Pratt & Whitney, to put in their hands an order for the
expansion of their plant capacity on a line similar to
those followed in the case of Wright and General Motors.
abtiet proposed 4,000
Nelding start Jaml, 1941 to Oct.1941
Regraded Uclassified
SECRET
162
CURTISS WRIGHT STEEL BLADE PROPELLERS.
A very substantial expansion of the Pittsburgh
plant of Curtiss Wright for the manufacture of Steel Blade
Propellers will have to be paid for by the Allied Governments
in connection with their engines programmes. The present
estimate of the capital expenditure required amounts to
roughly between $5,000,000 and $6,900,000.
SECRET
LES
PROGRAMME AS TENTATIVELY ESTABLISHED.
FIGHTERS
Curtiss P. 40
480
Improved Curtiss
960
Bell P. 39
200
Lockheed Interceptor
800
Total
2,440
ROWBERS
Glenn Martin 187 (167-7-4)
750
Douglas Attack Bomber (4,8.7-5)550
Douglas A.20
200
Lockheed 37
400
Four-engined Bomber
60
Dive-bomber
200
Total
2,160
The above programme specifies the types which appear
to be the most desirable from the Allied point of view,
but the quantities mentioned will not be necessarily manu-
factured by the original designers of those types. For
instance, part of the Curtiss will be manufactured under a
licence by North America Lockheed Interceptor will be
partly manufactured under a licence by Vultee. The Douglas
Bomber will be manufactured partly by #ither Boeing or Con-
solidated. The firus from which would be requested the
four-engine bomber or the dive-bamber will only be deter-
mined when we shall have had a chance to see the new types
about which information is to be released by the services.
Regraded Uclassified
164
E DANISE AND NORWEGIAN BALANCES
April 10, 1940.
(2n 17. Gaston's Office)
12:00 Noon
Presents
Mr. Ranson
Mr. Coldenweiser
Mr. Moss
Mr. White -
Kr. Foley
Mr. Cochran
Mr. Bernstein
Mr. Caston
Mr. Purcell
Mr. Goldsmith
Kr. Townsend
Mr. Berle
Gestons
I think probably all of you have some idea
of the subject that we have up here. It is
this matter of the Danish and Norwegian accounts
and balances in this country. Questions are
quite certain to arise as to the ownership and
the authority to transfer those funds, in view
of the German occupation of Donnark and of Nor-
way and Secretary Morgenthau considered the
situation yesterday morning. As a temporary
device he talked to George Harrison in New York
and George Harrison talked to Mr. Loree and they
agreed on the 24-hour basis for 24 hours, at
least, to hold up all transfers of funds, both
in the official Government accounts and in
private accounts there in New York. They have
been asked to continue that procedure for the
time being, but several questions arise. One
is that we have been dealing so far solely
with the New York district. It doesn't cover
all transactions. We have been dealing solely
on & voluntary basis.
They communicated to us today, that is, Mr.
Harrison did, a proposed announcement which
states that at the request of the Treasury
Department - do you have that there?
Poley:
Yes.
"At the request of the Treasury Department, the
Foreign Exchange Committee ... This 18 an in-
formal committee composed of foreign exchange
representatives from the large banks in New York --
"has agreed to ask all banks, bankers and stock-
broker houses for the time being and until
Regraded Uclassified
LES
- 2 -
further notice to withhold all payments or
withdrawals from Danish and Norwegian accounts
pending reference of each transaction to the
Tressury Department. It is therefore suggested
that my contemplated transaction be submitted
to the Federal Reserve Bank of New York for
transmission to the Treasury Department."
to have told Governor Harrison that we would
call him back at 3:00 o'clock when we have
this committee together. It W&S necessary to
discuss this with other departments and agencies
of the Government. It seems to me when they
ask us to approve 6. statement to the effect
that it is being nade at the request of the
Treasury Department, that the Treasury Department
is assuming legal responsibility in connection
with these transactions that are being suspended,
which means that we have to have some authority
for it in the absence of an Executive Order,
which would take the form of an amendment to
the Foreign Exchange Order of the President's
in 1934. I doubt very much whether the Treasury
could go along with such B statement as presently
constituted.
laston:
We have the clear authority to - that 18, the
President has the clear authority, apparently,
under the statute, in Vr. Foley's opinion, to
issue an Executive Order which would block
transfers without approval.
Poley:
That is true. Last June - last April, we had
up this sane question, except it dealt with
all foreign countries. It didn't deal with
any specific countries.
Serie:
Specifically, I think you were considering the
Czechoslovakian situation in drafting --
Tolay:
That is right, but we were envisaging the entire
situation and at that time we prepared an amend-
ment to the existing Foreign Exchange Executive
Order which put all transactions in foreign
accounts in this country on 8 license basis
and also required all financial agencies and
persons in this country having to do with such
accounts to make complete reports to the Treasury
Regraded Uclassified
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Department. The took the matter up with the
Department of Justice and the Department of
Justice at that time advised the President,
although the Order has never been signed and
never been used, and se have the letter and
the proposed Order in our safe. They advised
the President at that time that the Order amends
Executive Order No. 6560 of January 15, 1934,
and places further restrictions upon further
transactions in foreign exchange, transfers of
present payments and extra large withdrawal
of coin and bullion. This phase of the order
follows substantially the expressed language
of the statute and is wholly free from doubt.
I think that Judge Townsend worked on it at
the time and his people over there, and Judge
Townsend, I believe, had some question about
another phase of the order in regard to the
reporting provision and I think they said
legal doubt exists only with respect to that
provision which requires detailed reporting of
foreign-owned assets in the United States.
It is believed, however, that the order would
be upheld even in that respect If issued under
conditions of E national emergency, the existence
of which the President should determine.
Caston:
I think we have these two main questions to desl with
here and the first is the question of whether it
is desirable, whether we all agree that it is
desirable to exercise control and supervision over
the transfers of those funds, the Danish and Nor-
wegian accounts. Are se all agreed as to that?
Does anybody have any contrary view on that point!
Purcell:
I have no contrary view, but of course you must
appreciate that I couldn't speak affirmatively
for the Commission without referring it to the
Commission if you wanted their opinion on the
policy.
Caston:
But you are personally inclined to agree with
the idea that 58 ought to exercise control
Regraded Uclassified
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- 4 -
over these Denish and Norvegian funist
Ritz:
This doem't necessarily nean, Ferbert,
stopping it, but that night come up for
further consideration, but at least control
would take the form of knowing et It is
and being confronted with the necessity of
making a decision the to permit it OF
not.
Gestro:
Assuring nurselves that the transfers are
genuine and that the transfers are from
the legal owners for 8. legitimate purpose
to someone else.
Golden't:
In other words, the Services commandeering
accounts.
Geston:
Prankly stated, that is vist it amounts to.
Barle:
I should like to say that TE have 2028 pre-
lininary information not yet fully confirmed,
indicating that the tanks and fiscal offices,
and so forth, of the Danish Government are
already occupied and under pretty close con-
trol. That is not fully confirmed.
Holden'r:
But it stands to reason that that would In-
mediately happen.
Rdier
Between those two countries, there are -
which are substantial, both from the view of
the former - of the Danish and Forwegian
Governments, substantial from the point of
view of the inveding Governments, and not very
small even from our OF2 point of view If there
were going to be any suiden withirawal, though
one of the difficulties with which we are 000->
fronted is that we don't know whether the
figures we have are the total. The know they
are at least that, but owing to the numerous
channels of evasion, coupled with & large
residual Item which we cannot account for,
which TE discussed at that time, it is possible
that the amounts here my be substantially
larger then these, particularly since either
of these two countries my have been employed
Regraded Uclassified
_68
- 5 -
as an agency through which to transfer funds
in the name of others 30 we are in substantial
neasure operating in the dark until we are
able to acquire more information.
Golden'r:
lr. Gaston, if ve put it on the ground that
you vat to make sure that they are legitimate
transfers by the owners, I suppose there would
be no question of this being a definite un-
neutral act. That would be the one question
that would come up, whether by doing that -
we want to be definite and take sides. Without
taking any view myself as to whether we should
or should not, I just think that is one of the
things we ought to be sure of, whether or not
it 13.
You, Berle knows more about that than anybody
else.
Purcell:
That would also be the question I would have.
White:
Is that the basis upon which the issue is being
raised? I take it that our particular concern,
certainly our legal concern, would not be what
or who receives these funds. The issue that
is being directly related to the Act is one
which affects our question of exchanges and
outflows of funds and transfers of funds, in-
dependent of the other. The other may well be
1 - give rise to difficulties in forms, and so
forth, but even with that true, I an wondering
whether that would fit under particular powers
which re are talking about. What we are con-
cerned with is, there may be as much as a
quarter or half a billion dollars worth of
funds. Supposing they were transferred right
out.
Berle:
Ir. Chairman, we of the Department do not con-
sider that there was any question of neutrality
raised. The consider that an action of this
kind, so far as our Department is concerned,
would presumbly be predicated on three con-
siderations. First, the protection of American
interests in the nature of exchange and our
Regraded Uclassified
209
- £
financial stability, and so forth. Second,
and really E the that, the
assuring to our pemple that the persons
exercising disposition of the funds were
legitimately in E. position to do so, not
to determine the predise point or degree
of duress, at to protect our ONE ants,
heary, Federal Taserve, from subsequent
claims. And the $ possible point tie
we were still earning, the possibility
that under the lost contracts which we 26 Te
with the Janish Sevement securing outstanding
Danish dollar benin, there my be clauses
pledging that as of the balances which
belong to the Severnment as additional security
for those Inds and that by consequance some
of the security X the Daniel dollar bonds
outstanding in this country might be pledged
also to the plairal fortg nation, which
raises = petat of neutrality.
Missin
: just vanted that clarified, that is all.
lasten:
Yes.
Wimith:
That protably would be E. somembat wider
application, because the whole question
would come 10, tin American funds sight
now be tied 4 and nt Et the disposition
of the ONDARS ai 2 thet extent those figures
are due - to protact those and also the direct
investments if :- such countries.
Riter
There is I iffect question of exchange
stability, reagilting st some that even
if there NN instability in those two EI-
changes, it wellin't be $ matter of vital
importance to our national existence. Time-
theless, they - to exchanges.
You, supposing that these dollar balances
are thrown = the must in great eagerness
to gst then rut in thrse particular countries,
and that relses to question as to detier
they can 07 and be could be subtantial
fluctuations in the exchange arket on those
two Items tist right be better avoided during
the Interia period until we see
É 2
Regraded Uclassified
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- 7 -
Again, I say it is not vital, but it is E.
consideration and It is a factor I think that
would place the issue squarely under the Act
in which you may wish to act If you find such
action desirable.
Jeston:
Well now, the problem that we are facing is
that assuming that we wish to continue to do
this, whether we ought to proceed on an informal
basis as we have for the last 24 hours, or
should we exercise the legal authority and
ask the President to issue an Executive Order
which would place those funds under direct
control.
insont
May I ask this question! Under your present
plan, it is on a purely voluntary basis.
Aren't these banks themselves concerned as to
the questions which Yr. Berle has raised,
namely, who has the right to withdraw these
funds, who are the owners, and isn't it reason-
able to assume that they would exercise con-
siderable discretion on their own initiative
for 6 while at any rate.
Yes, they are concerned about protecting them-
selves in two directions, that is, making
transfers that my turn out later not to be
authorized and E second quite vital question
is refusing to make transfers that they my
not be able to - where they may not be able
to defend the refusal.
White:
Mr. Ransom, our legal staff raised this point.
They seemed to feel that many of the bankers
would much prefer to have the kind of protection
that an order of this kind would give them,
because it would relieve them at once of any
legal responsibility that night result from an
undse judgment, though I think we quite agree
with you that they will doubtless exercise
their judgment, but in this may they can say -
well, obviously -
I think it is obvious they would have E feeling
of reassurance under such an order that they
would lack without it. The question I was
Regraded Uclassified
171
- 8 -
exploring is whether or not you can't feel
they are going to exercise the same hesita-
tion with or without it. That doesn't involve
the merits any.
Berle:
May I say on that that we have been applied to
in a number of similar cases, the Czech case,
for the advice of our Department in the hope
of getting precisely that protection. I there-
fore get the distinct sense that the banks that
have been in contact with us in similar subjects
have looked for an expression of view which
they could use as a protection and in most cases
desired it.
Gaston:
There is very good evidence of that in the form
of that statement that they proposed to make,
They are putting the onus there directly on the
Treasury Department. They are doing this at
the request of the Treasury Department. They
realize they have got a thorny path.
Poley:
they realize we also have complete power if ve
want to exercise it, but they would rather do
it along the lines they suggest in this release
than by having us issue an amendment to the
Foreign Exchange Executive Order.
Gaston:
You think they would?
Foley:
They want us to have the responsibility without
having any of the inconveniences that the order
would impose upon them.
White:
There is one further difficulty I think we have
to throw into the pot in our evaluation of the
subsequent procedure. Voluntary arrangements
we have been able to arrange very easily with the
New York Bank by virtue of the close historical
ties that have been in the working out of these
things, but more because of the Czechoslovakian
situation in which this whole thing was thrashed
out and in which they set up a. foreign exchange
committee 80 that the machinery is all there.
You can be sure of a very high degree of effective-
ness in that area as that is controlled.
Regraded Uclassified
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- 9 -
4
Now, however, owing to two reasons, I should say,
one, to the fact that the knowledge that there
was & greater control in lev York my have led
foreigners to operate possibly in other areas,
in the Philadelphis area and in the Boston and
San Prencisco areas. Secondly, the President's
interest in this of seeing that the thing is
adequately taken care of raises the problem of
how can we get the same degree of assurance in
the other twelve regions where certainly in
nine of them there has been none of the preliminary
ground work which is necessary and since what we
are dealing with is not with the banks alone -
I don't - with the Federal Reserve banks, it
would be a very simple mtter to give their
cooperation in E. few hours, but those banks
have to deal with member banks al other banks
in their INS. You know what that involves
over the whole country and if 19 don't have the
whole country, what assurance do 18 have that
we are taking care of enough of the transactions
so that w can satisfy the requirements of the
administration that are asked of of That is
one of the problems.
Geston:
Do you vant to say smething on that, Dr. Golden-
weiser?
Golden'r:
It just went through 4 head. It is perfectly
clear, as far as I can see, that you have got
the choice of either doing nothing and letting
the banks take care of themselves 02 having the
Government take formal nation-vide action. It
seems to ne nothing -
Gaston:
You wouldn't think we would have my middle
ground?
Golden'r:
I think not. It seems to ne that is not the
thing to do. ky only personal opinion at this
time is that the Government should take formal
action.
Write:
What is your thought, Kr. Ranson, with respect
to the possibility that you could obtain the
necessary degree of both understanding of the
problem and cooperation on & parely voluntary
Regraded Uclassified
173
or I I
basis throughout the whole country without in
Qty may committing the Treasury to any liability
such as is implied in 8. statement of this kind
07 anything related to it:
That is 8. very difficult question to answer.
Mrst, because the subject is entirely new to
no. Only about ten minutes of 12:00 did I know
of this meeting and only since : have been in
the meeting as the full subject been developed.
= would say that It would be possible to get
Information out through the Federal Reserve
Banks as to the action which they would assume
for the sake of discussion might be taken by
this voluntary group in Yes York. I think
through the medium of the other eleven Federal
Beserve Banks we could say to the bankers in
those districts, This is what is being done in
Tem York." That at least would put all the tanks
or notice that they had better be careful and
with their step before they responded. That
would not produce necessarily any complete uni-
healty of action, because in the first place
you coultn't be sure that all the banks would
take notice of it or that each of then would
construe it in exactly the sans TE7, whereas
such E.M. order 8.5 I understand is being conten-
plated would be an official action and that
again would come to their notice more effectively,
= think, than any other procedure you could adopt.
that would be the long-rance implications in that!
15, Poley suggests that these bankers would prefer
the voluntary action to the suggested order. I
Sco't know.
Stleys
I nerely wanted to have represented here clearly
the position, as I understand it, of Governor
Harrison and his committee. : explained to his
and be understands fully that me have complete
authority to deal rith the situation If TO rent
to assume It. Fe did point out that even though
that rould give immity in 50 far as legal
liability is concerned to some of these trans-
actions that banks' lawyers may 187 they have
to go through with, irrespective of whether or
Regraded Uclassified
174
- 11 -
not they have to report them, they would prefer,
I gathered, quite strongly from what he said,
not to have the inconvenience of the appliance
of an official order, but that is perfectly
natural.
Write:
I think it is fair to say they would naturally
be inclined to avoid any actions which would
in any way - shall we say restrict the activities
of the banking community. Is there any reason
thy, 3d, let's say the - an order were issued.
Is there any reason why, after & week or two
after the necessary investigations were made
to determine the locations, why the order couldn't
be modified so that it could - the status could
be resumed as of prior to the order so that it
may last only & veek or two or three during the
interim period during which you night possibly
substitute this sort of thing for 8. voluntary
control and avoid any of the routine, red tape
that may be necessary after.
Foley:
I think undoubtedly this could be taken as E
emergency neasure merely to find out what was
here and the extent of the transactions and
the character of the transactions.
laston:
You weren't thinking, Sd, of including E. report
of balances?
Foley:
I should think that the order itself would not
be of great value unless it included a census
or reporting provision.
lasten:
You nean as to balances heldt
Foley:
Yes, sir.
Thite:
That would be very valuable.
Gaston:
Fave we any idea as to that Justice at this
stage of the matter would think of an order
which includes & requirement to report?
I think we could pass it.
Regraded Uclassified
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22 I I
Gastom:
Now, there is the question of the disadvantages
as well as the advantages.
Termsend:
Ne would have to define the existence of an
emergency.
Cochrant
That vas my point.
Paston:
That was your point, the disadvantages, and you
night state them merely as you see them, the
disadvantages of & formal order.
Cochrant
It puts us on exchange control certainly in
respect to the currencies of these two coun-
tries. My point is that we should reserve ex-
change control for protecting the dollar, no
matter how sympathetic we may be with these
two countries whose assets may be endangered
here now. I should prefer to see us go along
the informal way, passing the word through the
member banks, through your twelve banks, on
to their banks which do the business, and so
on, and I think they will find, as we do in
New York, that the balances of these two coun-
tries are pretty much centralized in 8 few
banks. I am sure in New York that is just a
few, the National City and two or three others
that have the bulk, and that we go ahead and
watch this a while, rather than take the step
now of putting on exchange control, which is
not an emergency.
Gaston:
What do you think about how the public gener-
ally, as distinguished from monetary experts,
with regard to distinction between - on the
one hand, a formal order which establishes
exchange control as to two particular coun-
tries which are admittedly in an anomalous
situation at the present time and on the other
hand, an exercise of the authority of the
United States which 19 patent and open, which
everybody knows about, to accomplish the same
end. will the public make any distinction
between those two things and 18 there really
any valid basis for distinguishing them? We
are doing the same thing in both instances.
We get the blame for it.
Regraded Uclassified
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- 13 -
Decliren:
I don't believe we ought to 80 as for LI the
Secretary suggested. Ea suggested ve might
consider this morning of having transactions
passed down here informally. I think there
is 8. responsibility on the Bank which they
ought to carry out. If we are not satisfied
with the ray they carry it ont, then ve have
the alternative of going the whole my and
getting out the order. When we do that, we
establish exchange control, which we shouldn't
do except in case of 8.71 emergency of our own.
Thite:
The use of the term "exchange control' is E
little bit misleading. In so for ES the term
means there is control which my be exercised
in the form of major or ninor restrictions,
I think that 18 in existence no, that ve have
that power, that merely by the use of an Execu-
tive Order you impose certain restrictions.
Ne have already some restrictions :- existence,
so that though I would quite agree de you,
Merle, that in the attempt to introduce major
restrictions or significant restrictions or
restrictions which would affect a large part
of commercial transections should be uniertaken
only when there is 8. very great deal - vien
there is no doubt as to the need and when our
economy is possibly seriously threatened by
some major monetary nove, that vist this will
bring about is the introduction of & very
narrow range of restrictions in nie you are
going to ask that the balances of these two
countries alone be subjected to $ measure of
control which may emerge into no restriction
at all. Tie may find ourselves passing on
90 or 95 percent.
Techran:
Yes, but it may turn out the other nj. It
may be that Germany will stay in there and to
hold these up indefinitely and then we will
have a real problem.
Thite:
What I an getting at is that 1 think cos weights
the case unduly when one says that visit ve are
confronted with now is the decision to impose
exchange control or not impose it.
Regraded Uclassified
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- 14 -
testane
The more important aspect, it doesn't seen to
ne this is exchange control at all. Exchange
control may have some minor bearing on it,
but what actually 18 are dealing with is dames-
tie interchanges of funds and we are dealing
with the question of protecting the interests
of our nationals and our Government in transfers
in which they night in the future be held liable
Im mistakes and errors.
Whites
Inst I don't take it is the major part of the
incidest that и are concerned with. It is a
question of imposing certain restrictions
which involve restrictions on exchange, but =7
point is that they are restrictions which apply
to BD DATION E range of our total transactions
that - would be doing the subject an injustice
were 12 to regard it in the same light as we
regard exchange controls, such as were imposed
by Prance and England, et cetera, at the outbreak
of the me, because that is exchange control
de all it implies.
IDT, to bring the implication of an over-all
widespread exchange control to this merely by
the use of the term "exchange control", I think
would mike it E little difficult for us to
evaluate it properly.
Cocheme
But sey Germany goes on and takes scee nore
countries.
White:
be I think we ought to extend the area -
Inclirance
Tie would be holding the balances to see whether
WE would give them to Germany if she returns
her sovereigity or not.
Thitee
I ** this problem becomes more acute if and
EE takes more countries for the very
BEING reasons that you want to impose a certain
amount = restrictions on those countries. and
for that reason, the same reason would hold
true with respect to other countries, but that
still would leave the bulk, not only the bulk,
It would still leave probably - 47 guess would
be 98 percent of your transactions -
Regraded Uclassified
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- 15 -
Foleyt
It seems to If that this order doesn't do any
more then you have already done informally.
Gaston:
That !s exactly the point I mis.
Toley:
The President has asked that there transactions
be suspended and informally the Foreign Exchange
Committee of the New York Star has provided for
that, but that is only temporary and nov when
they vant to make it E little more permanent
and they say until further notice, they are
asking us to assume legal responsibility for the
actions that they will be taking. Tor, I don't
think we are imposing any greater foreign ex-
change control through the issuance of this
proposed Executive Order the we have already
imposed in Sev York or the banks have imposed
voluntarily upon themselves. It seens to me
we are giving only effect and immity to volun-
tary action that has already teen assumed up
there.
-
I an quite sympathetic vità the point of view
you express as to the Treasury's position,
that these gentlemen have proposed to write
this voluntary agreement. You assume complete
responsibility and you do not have, ES I see
it, any legal authority, 50 I can understand
fully why you face E dilems there.
On the other hand, lr. Cochran impresses ne
with this idea, that you would be declaring
E state of emergency. Email you got to
declare 8. state of emergency!
Foley:
So, I don't think we have to do that, Governor.
The statute says during time of WE? or during
any other period of national emergency declared
by the President, the President TAJ, through
any agency that be may designate or authorize,
investigate, regulate or probibit under such
rules and regulations as be my prescribe by
means of licenses or otherwise any transactions
in foreign exchange. that we are doing is
amenting the existing Foreign Exchange Control
Order.
Regraded Uclassified
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- 16 -
White:
That emergency has already been declared as
having existed for months. It was declared
in 1933.
Bernstein:
Tie are existing under an emergency right now
within the terms of that statute.
Thite:
Tie would just modify the order. It is B.
long emergency.
Gaston:
Well, it is quite clear, as Mr. Cochran points
out, that there is some difference and, as a.
matter of record, there is some difference be-
tween putting an order on the books which has
the effect of law and entering it as a part
of our monetary history. I don't know how
to evaluate it, but as far as practical dif-
ferences are concerned, what we are proposing
to do is, we are suggesting that we may do
this under an Executive Order, is exactly what
we are doing on a temporary basis right now.
Cochran:
Just one point there was whether or not they
submit the propositions to us. I mean, the
Secretary wanted to do that informally. I
don't think we should do that informally. If
it is informal, just pass along to the banks
our interest in seeing them watch out for
things and then leave it, not have them sub-
mitting to us the individual cases.
Poley:
Then you would do nothing, Merle?
Cochran:
Nothing officially.
Gaston:
In other words --
Poley:
The have been asked to do something.
Cochran:
We have been asked, but we have some explanation
to make to the President of how we are in the
situation. If we want to just take that as a
mandate to go ahead, go on with your order.
White:
I think Merle is right, that we have the responsi-
bility if it is an unwise act to come back to
the President with the explanation, but I think
Regraded Uclassified
- 17 -
it is also fair to state that there will
be several members - branches of the Govern-
ment or members of the branches, as well
as bankers, who would feel very keenly about
any definite act which would have the apparent
implications of this act. It would appear as
though It is & step. It would be called ex-
change control, even though, 6.2 I wished to
esintain before, I think we have found that
it would be over such E narrow field that it
wouldn't be very important, but I think that
has to be thrown into the case, that it would
be a step of that kind.
I myself feel that if that is so, I can't quite
see vist the objection is to it, but there are
others who do feel it to be very objectionable.
Loss:
That practical difference, may I ask, would
there be between the payments that would be
made by the banks acting on their own responsi-
bility and payments that would be made by the
banks acting or. the Treasury's responsibility
under such an order? That is, would not the
test in each case be the legitimacy of the
order?
imsteln:
There would be no such limitation on the Treasury
Department.
0532
So, but what I am getting at is would the Pressury
80 beyond that test of the legitimacy of the
transaction or would It not?
Foley:
That would be passed upon in connection with
the individual transactions.
visa
Yes, but It seems to me that makes a difference
as to whether - 1f it WBS the object under the
order to only do that the banks themselves would
do, then there is more question whether the
order is necessary and desirable than there is
1f It is the intention to do certain things
under the order which the banks would not then-
selves do.
hite:
I think you are overlooking this one kind of
Regraded Uclassified
101
Regraded Uclassit
- 18 -
transaction which this would take care of.
There is a check that is due. Their payments
are due. Under the circumstances, the bank
either makes the payment or becomes liable
for a delay in the payment when due. I take
it if the Government were to issue an order,
the bank's liability for not meeting the pay-
ment at that date and at a later date ceases.
There still is the other liability that if
they make a. payment to a person who is not
the legal owner, that I don't think is taken
care of here, but this merely makes it possible
for banks to delay payment legally.
Now, the very incident has come up --
Moss:
Make an investigation, is that what you mean?
White:
No, more than that, The question arose this
morning, did it not, that several of the banks
said that in response to their perfectly willing-
ness to cooperate with us. They said, however,
there are some payments which their lawyers
tell them they must make or be liable. Now,
in the absence of any governmental authority,
you see, they would be liable were they to
postpone it on the voluntary basis. I don't
know what the liability would involve.
Moss:
What is the nature of those payments? Are they
payments - is there any indication that they
are payments which the Treasury would want to
hold up indefinitaly!
Poley:
They night very well be and this would give you
control, whereas without it you have no control
at all.
Moss:
But that is the case, if there are things you
want to accomplish beyond which you could reason-
ably expect the banks to go, you can't expect
the banks to do it on an informal basis. The
other alternative is to issue an order.
Cochran:
But these payments here which the banks have
rendered now, as I understand it, are mostly
local payments. Those are not the things,
182
- 19 -
as I understand, which we would be interested
in blocking. There would be some payments to
the benefit of Germany. They might be made
by a local bank, but I think any one of those
banks would go into it very carefully just as
they did in Poland. We got in touch with the
Fed and they got in touch with the other banks
and they held things up even longer than we
anticipated.
Panson:
I was going to ask you what your prior experiences
were which are essentially different from the
one you are dealing with now.
Cochran:
There is & little similarity in that the Bank
of Foland moved to France and continued to
function from there, so we had to get signatures
from the people who took over there and preserve
their rights here.
Serle:
May I say that it seems to me there is a slight
misapprehension as to the type of payments which
will actually be made. These won't be transfers
to Germany. You won't even see that. The funds
would actually be used presumably to pay German
expenses for war supplies or agencies or what-
not here or elsewhere, and those payments are as
likely to be made under the name of a private
Danish depositor or in the name of 8. Danish
Government as not. They will be in theory pay-
ments for American goods, American services and
for American accounts.
loss:
It seems to me that under an Executive Order it
might be that the Treasury would be able to
block payments on which it has what it considers
to be sufficient evidence that the payments are
for German account, although the bank might
not consider that it had sufficient legal evi-
dence.
Gastom:
Yes.
Berle:
There are other considerations that enter into
that, of which that is certainly one.
Regraded Uclassified
.83
- 20 -
Golden'r:
It is & very simple situation to me, because
this is not B. country that acts informally
on anything. It 1a not B. country in which
we have E. discipline - restricted market. Te
have got & lot of cities, lots of banks, &
lot of banks of all degrees of shadiness and
it is quite impossible to handle this situation
informally without having later & whole lot
of trouble and it seems to me that prompt and
immediate action on 8. formal basis is the
only way that this Government can enter into
it at all. If they don't, then they have got
to leave it to itself. I am not going to say
any more, but I feel very strongly and very
clearly it 18 the only thing to do and if you
don't you are going to be awfully sorry.
(anson:
I an just going to raise one question for
consideration. I am wondering if there won't
be this Interpretation of it, that the authority
of the bank emergency thing was extended to
create exchange control for other un-neutral
reasons. Now, I am taking the worst possible
view, what might be B. public reaction to what
I understand is being proposed. Now, certainly
you would want to avoid all three of those in-
plications. If it is possible to accomplish
your same objective, in spite of what Dr. Golden-
weiser says, by the banks realizing that they
are acting somewhat at their peril, I would
think you would like to avoid any one of those
three implications being brought into the exist-
ing situation. If you can't, 1f it 1s necessary
to protect the public interests for reasons
which would be known to you, or necessary to
protect the position of our own nationals who
would become involved in this by something like
an Executive Order, then that makes out & some-
what different case, but I can't say that I
have been wholly persuaded that these banks
can be put on an informal notice as I think
you have already put them. They are merely
trying to pass it back to the Treasury and
stand behind the Treasury, which again, I
understand in your reason for not wanting to
do it, I understand why they would like to
do it.
Regraded Uclassified
.84
- 21 -
As between acting on their own accord, volun-
tarily, end acting under such an order as would
have to be issued, I can see readily why their
first reaction would be that they would rather
take it voluntarily than take it under the Order.
Poley:
Tell, my answer to that is that that may be on-
tirely true for the Sew York area but how about
Soston and Philadelphia and San Francisco and
the other parts of the country where you may have
balances and you may have these deposits?
Panson:
I am not going to attempt to pass on the very
broad aspects involved which are the problems
of the Treasury and the Department of Justice
and Department of State and I can't in any way
express a view for the Board, as you gentlemen
well know, but for the sake of developing that
discussion and being able to take back to my
associates something tangible that they can
dig into, I have that feeling that if this was
done those three things would be charged sooner
or later: One, that you are using the emergency
of the banking authority and have decreed exchange
control for un-neutrel reasons. Perhaps you
can defend all three of them.
Coldem'r:
I would like to have you enumerate the three,
but I would also like to ask you whether those
propaganda allegations aren't going to be made
anyway.
Passon:
Quite possibly. I say I an not attempting to
pass on which decision these agencies of Govern-
ment may want to make, but I would like to bring
those three things up for consideration before
they make any decision.
Feries
Which are the three, Ronald?
Pansom:
Three, that you would be charged with using the
old emergency of the banking holiday to establish
exchange controls for un-neutral reasons.
Jaston:
That 1s really all one.
Regraded Uclassified
185
- 22 -
Penson:
It goes as a group. That is the whole thing.
Golden'r:
That sentence comprises all three?
hasm:
Yes,
lasten:
All right, how about the charges we are doing
that same thing if we do it informally without
any authority of law at all?
Foley:
I agree with you, Herbert. I think If you put
out this release either in the form that the
New York Bank has asked to approve it or by
modifying it and taking out at the request of
the Treasury, it seems to me that you are sub-
jecting yourself to the same criticisms as my
be forthcoming in any event.
Sastom:
I am B. little concerned about this question that
Merle --
Poley:
You could take that out and get them to agree
to it.
Cochran:
I don't agree with that last one.
laston:
I an a little concerned about Merle Cochran's
point of view. We have certain things which I
think we want to accomplish here and whether
the limits of our persuasive power for voluntary
action, whether they are going to accomplish
those things. Do you think we should make a
suggestion to the banks that they should be
very cautious about making transfers?
Cochran:
It worked in the case of Csechoslovakia.
Gaston:
And we don't get any reports, don't pass on any
transactions, don't ask them to submit any
transactions to us.
Serle:
Mr. Secretary, may I say that in the case of
Cxechoslovakia we had likewise the question of
who was really in control. We had likewise the
question of protection of American interests
and we had likewise the question of protection
of the American dollar bonds. So far as I an
Regraded Uclassified
186
- 23 -
aware, no one of those three questions was ever
solved to the satisfaction of American nationals.
I suppose that any action affecting any foreign
situation can be attacked as being un-neutral
in that it bears on one side or the other. I
think we have come to the point of view that we
must consider the American interests, letting
the chips fall where they may. My own Department
wouldn't presume to advise as between the methods
here, which is obviously a question for you
gentlemen, but I think we would feel that if
the real issue is whether you take some effective
action or no effective action, we will prefer
that the action be taken most.
Then there 1s the further question as to if
an order is issued, then the question seems to
me to arise as to what criteria ought to be used,
officially, in determining whether the thing is
to be paid or not, since it is possible that
the payments may be based on other considerations
than these, which might involve the question of
lack of neutrality. Aside from the administrative
feature, it seems to me if it is a question of
accomplishing these objects or not, the question
of neutrality certainly doesn't arise. The
question of neutrality arises only in the ad-
ministration of an order.
There have come to be a good many subsidiary ques-
tions which my own Department has not yet thor-
oughly explored. One of them, for instance, is
whether it might not be an incentive to military
occupations if the direct result 1s to inherit
huge windfalls of American exchange. We will
note that one point. It is a question, there-
fore, of whether when you begin to talk about
neutrality you may not feel more unneutral in
not taking the action than in taking it. That
is to take one possible point.
Gaston:
On that neutrality question, you have that not
only in the matter of making the decision to
establish a legal control, but you have it also
in the character of the decisions made. of
course, the advantage of a voluntary method is
that you don't take quite so much responsibility
for the particular decisions made as you do
under the formal method of procedure. Certainly
Regraded Uclassified
187
- 24 -
you have complete responsibility for the
final decisions made and the final washing
up of the thing, whatever the result.
Poley:
Well, on the basis that has been proposed
by the Fed, Herbert, I don't think there is
any difference in 20 far ES that goes between
what our responsibilities there would be ulti-
mately in so far ES each individual transaction
is concerned and what would be the case if we
reported under an Executive Order.
Penson:
That is not the Federal Reserve Board, if you
don't mind.
Poley:
Excuse me.
Ceston:
They are hanging two things on the Treasury,
responsibility for the supervision of these
accounts in the first place, and then also
the responsibility for the immediate decisions
made as to particular cases, because they say
there it will be referred to the Treasury.
Golden'r:
Toward the end of it, it says every transaction
will be submitted to the committee.
Caston:
On the basis of that, of course we wore thinking
of possibly some alternative form of wording
there.
White:
What about the --
Polay:
And nothing will be done until --
White:
Is there anything that relates to transactions
on the exchanges that would raise any special
problems that would require --
Purcell:
I can't see that this question really affects
the considerations which the Securities and
Exchange Commission apply under their statutory
authority powers and duties nearly 30 much as
it does the other branches of the Government.
In 50 far as it affects the procedures themselves,
we have no direct control over how they can
handle credit balances as between customers,
Regraded Uclassified
188
- 25 -
whether they be black, white, French or German.
is to whether it would affect stock transactions
on the market, I should think it would probably
be rather indirect. It would depend upon the
extent to which either balances were carried in
the form of securities which might be sold on
the market or balances carried in the form of
currency might be used for some strange reason
to buy securities.
Whiter
It is likely to be the other say, I mean if
there is any attempt to withdraw the balances
and assets it is more likely to be in the form
of liquidation of securities. Therefore, if
there is any interest in that direction, what-
ever order it is, a minor order is more apt
to be in the direction of --
Purcell:
I think so; liquidation would probably accent
the problem we have had for months.
Geston:
You are not much concerned with the balances
treated as banking balances?
Purcell:
Not in the sense as to their ownership or the
control of the country from which they emanate
or any of these considerations which kr. Berle
and some of the others have raised.
Gaston:
You are not interested in the stock market
phase?
Purcell:
Or the way in which credit balances are handled
in the financial position of a. broker regardless
of whom they may belong to.
Gaston:
Bernie --
Purcell:
You understand, of course, as I pointed out
at the outset, I an speaking personally only
and I an in even more of a position requiring
my reporting back in order to obtain any
opinion than Governor Ransom is, for instance,
he being a member of the Board itself. I
shall do that and if there is any view which
the Commission wants to express, I an sure
they will commicate it to you.
Regraded Uclassified
189
- 26 -
Poley:
Could you let us know by 2:30?
Purcell:
Yes, sure.
Caston:
Bernie, haven't you something to offer on
this for the record?
Bernstein:
I have got the documents. Well, one point
that I was discussing just for a moment with
Merle is this, that I think we are in agreement
on, Merle's suggestion is that we do nothing.
Now, he is not suggesting that if something
has to be done in the nature of restricting
the use of accounts, that the method of the
Executive Order is less desirable than the
method of the so-called informal --
Cochran:
It is more efficient.
Sernstein:
He says if you are going to block, that is
the way to block.
Paston:
That is just the impression I got, was the
reason I was asking about it. It seemed to
me that Merle's suggestion for informal action
was very little, that is, it didn't meet the
requirements.
Cochran:
We haven't any evidence yet that it wouldn't.
The banks certainly took every precaution
yesterday. They are willing to go ahead today,
as I understood, until we asked them to submit
even these questions on which they were sure
from a legal standpoint they had to 80 ahead.
Now, when we ask that those be submitted here,
then we assume control of the operations.
Gaston:
You wouldn't have them submit those questions?
Cochran:
No, sir, I would not.
Pernstein:
That is where I suggested earlier that perhaps
the question 1s, what is the assignment, that
is, if the President is saying that these
accounts should be restricted, then it seems
to me Merle's point is overruled and the only
question that arises is one of legality and
Regraded Uclassified
190
- 27 -
efficiency, and on that point I take it Kerle
is not at all in disagreement. As a matter of
fact, he is in agreement,
Cochran:
If you have at mandate to block the balances,
get out the order to do it. If - are dis-
cussing the merits of it, I think we have
gone ES far as we can.
White:
I think Merle's position is well taken in that
he is not taking for granted that we are ex-
cluded from discussing the merits of effective
action. I think our responsibility is, if ve
feel that vay, to report back that we think
the President's request - If it is the Presi-
dent's request - is unwise in the light of the
total situation, so that I think that Merle's
position is perfectly sound when he takes the
position that is all right to do something
if you can do it voluntarily, because you pro-
bably will succeed in blocking the bulk - or
taking care of the bulk of the transactions,
but 1f you want to do anything beyond that,
then you have got to 80 the full way and going
the full way, he would feel is less desirable
than not doing anything.
Caston:
Just what -
Sernstein:
I agree with that.
Gaston:
What would we succeed in doing by your method,
Merle?
Cochran:
Well, they stopped everything yesterday except
one payment which they had instructions to make
nine days ago.
Baston:
That is just on a. temporary basis.
Cochran:
And they strung their 24 hours out longer in
the case of Ozechoslovakia. I wasn't here and
I can't give you the details of that, but I
understand they kept It up several days.
Serle:
Where does It wind up?
Regraded Uclassified
191
- 28 -
behren:
It winds up rather dangerous in =y rind,
Mr. Berle. If we find out Te have to make
& decision as to what ve are going to to
with these balances --
bldsmith: But the nost harmless vay certainly from
the public point of view would be to say
re don't know who is the and what is etat,
SO let's just freeze a status quo and not
make any transactions one way 07 the other
until TE have first enough on what has
happened, who is the Government and where
it 18 and then the can make SD our vind.
30t I think the argument now should be that
we are just freezing it desd until at least
we can see what the situation is. Then in
a week or two weeks, or it may take longer,
after we have considered all the aspects of
the situation and all the agencies have had
a chance and the President has bad & chance
to get first hand reports and we can nake
up our minds about policy, then TO can make
& decision.
I feel that it will be difficult to hold the
banks to this informal thing more than another
24 hours and the thing wouldn't be clear by
that time. I can't see even by putting myself
in the most extreme other position how anything
could be said that it is un-neutral or exchange
control or what-not 1f we just freese It and
say it can't be noved.
Caston:
37 E. formal order.
Polays
Yes, that is the only vay you can do it.
May I state the position ES to one point
which does interest us! Those are the
balances of the Danish Government here. Te
shall presently be asked, possibly, to con-
sider whether E signature which comes over
and purports to be the signature of the
Denish Government is the signature of the
Danish Government. We have thus far taken
the view that Denmark and part of Yorrey
is under military occupation. The Government
Regraded Uclassified
192
- 29 -
of a military occupation transcends any govern-
ment there 18 there and by consequence unless
something appears to the contrary, one is
obliged to assume that the act is the act of
the military government rather than of the
civil or recognized government of Denmark until
the contrary is shown. The acts of 6. military
government have validity within the country
but would not necessarily have to be recognized
outside the country and it may very well be a
dangerous thing to recognize them outside the
country unless you are required to do so. There
you have precisely the kind of question that
arises from one angle.
Gaston:
Tie may get a little later a. repudiation of the
authority of the Legation here and the Consulates
to act and to draw upon funds.
Thite:
I would like to explore just in one further ques-
tion --
Barle:
It looks like a valid signature except that pro-
bably the Gestapo were sitting alongside.
White:
Supposing 8. formal order went out. Just what
is the effect that presumably is deleterious?
What does it interfere x th? Would it interfere
with trade, banking operations, with the attitude
toward business? I can't quite put my finger on
the adverse effects other than the general reason-
able position that we oughtn't to take any : tep
unless there is good reason for it. Merle, what
is there that particularly concerns you about
the consequences of this step? I mean, what is
it specifically that you feel we should wish to
avoid.
Cochran:
You mean on exchange control --
White:
Well, call it any name.
Cochran:
I don't see that you are going to hurt any in-
terests through doing it, but I don't feel that
we are called upon to take such B. step.
White:
So I understand that your objection lies on the
ground that you feel that the - an act which
Regraded Uclassified
193
- 30 -
may be called and so interpreted throughout the
world as imposing exchange control with its
psychological consequences is undesirable?
Cochran:
Just now we won't run any money out of the
country, probably, through putting our own
exchange control in, but 1f conditions were
different, we would undoubtedly - my guess is
that we would have quite a withdrawel of other
foreign funds. Maybe that would be desirable,
I wouldn't say.
Sermstein:
I believe to the contrary. The greatest pro-
tection E. European has in a weaker country 1s
just this action. Did you see the interesting
item in one of the columns the other night of
the new form of arrangement between the Dutch
and the New York banks? The New York Times
announced in that issue an invasion. They don't
pay out if God himself asks for it.
bidsmith:
You would affect lots more foreign money, pro-
bably. That might be undesirable if they knew
it is frozen the moment something happens to
their original government, or it might be desir-
sble.
Cochran:
If the French before the war knew that their
balances were going to be frozen, they wouldn't
have left then there.
Coldsmith: First, I don't think that individual balances
should be disclosed, and then only to the United
States Government but not to the French Govern-
ment.
Pute:
In the event that France --
Serion:
I don't myself exactly attach 8.3 much importance
to that objection 85 to the fact that we are
facing responsibility for decisions to what
money shall be paid out and what shall not be
paid out. Under 8 formal order we are certainly
clearly accepting that responsibility until
that order is rescinded and that seems to be
a far more serious matter than this question
of whether you may or may not call this exchange
control.
Regraded Uclassified
194
- 31 -
Poley:
But Herbert, you would have to assume responsi-
bility if you followed the procedure that the
Federal Reserve Bank and the informal committee
up there - 30 there is no difference.
Gaston:
That is right.
Purcell:
The only choice between doing nothing and doing
something --
Poley:
That is right.
Geston:
Except that Merle has suggested & totally dif-
ferent matter. He wouldn't have the specific
transactions referred here for decision at all.
He would just say to the bankers, "Watch your
step."
Purcell:
Nothing in print.
Cochran:
Yes.
Ranson:
Suppose this voluntary committee - I don't know
what its name would be - but let's assume that
that voluntary committee would choose to take
the responsibility of signing something which
they are proposing to take now in terms that
the Treasury obviously doesn't like. Suppose
they would say to the other bankers in the
country, "Here is 8 situation where you pay
these funds at your peril. It is wise to defer
any decision and take the chance of El possible
lawsuit, yes, but to defer it until there is a
clearance." If I understand Mr. Cochran, he
thinks that will produce almost the result that
the order will produce without putting on the
Treasury responsibility for making these decisions.
It is the making of those decisions which will
be the operation of an exchange control. It
isn't the name, but the fact that coming right
back to you will be the decision on all of these
items as to whether or not they shall be paid
out.
Cochran:
That is right.
Ranson:
If it is in - 1f the State Department and the
135
- 32 -
Treasury and Justice think this is the way to
accomplish a needed result, that this is positive
action and it will do it, 30 to ES the Federal
Reserve is concerned, I can mly SET that to
the best of their ability they will cooperate
to help you carry it out. that the point of
view is on the part of this group in Ier York
with which you gentlemen have been conferring,
I don't know, because = have had no contact
with them, as you know.
Yor, if you would like us to, I can communicate
with them. I don't know bow much of this 700
have said to Mr. Harrism. I can try to ascertain
whether there is any point that they are making
which st the present time isn't before you for
consideration, because I take it all, in effect,
you want the Federal Reserve System as such to
do is to try to carry out thatever decision you
gentlemen may reach and If you reach the decision
to do it by voluntary action, If 18 can be of
any assistance we vill. If you decide to issue
the Exacutive Order, them I take It there is E
part the System would play in helping you with
that.
Purcell:
It seems to me there is only one other question
and I am certainly net qualified to pass on it.
Panson:
Ye did mention it earlier, I think, and that is
the possibility of public construction of this
move as an un-neutral act, regardless of what
its true basis is. then I sey public construction,
I merely mean press construction. I will leave
that to more experienced tenis.
Ransom:
I understand from Ir. Berle that if it is involved
they would think It night be no.: un-neutral not
to do it than to do it.
Berle:
It is & question of policy and I would like to
point out that you are quite right in saying
that in an action of this kind there are two
sides. You must recognize that in these trans-
fers, you are certainly going to have one section
saying you have been un-seatral and have favored
the German side. I world say the State Department
is & little calloused.
Regraded Uclassified
136
- 33 -
-
Vould there be eny - AN It any my likely
20 in charged to be understal If 18 take
to setion than If TE don't?
will:
: in't think there is ey difference at all.
No:
: the it the banks vanted to issue - the Bank
it Ten Dark and the other bank wanted to issue
1 statement of this kind only because by 70-
past viti respect to blocking certain trans-
actions with they felt they should pay out and
they world be liable otherwise, 30 that I think
tuet Terle's point is well taken, that we might
notime voluntarily to operate d thout any
statement providing they were free of that legal
listility which attaches itself to withholding
balances that their lawyers tell them should
to pit out and might be possible through the
Federal Reserve Soard connection to get some
BLEN of entrol, as you suggested, and
comeration in other aress, so : think ve have
to set that on the other side EE against asking
to Predient to impose the order. I think
myself that that is the my it should be pre-
nented to the President If the decision is
going to be made by him " the alternatives
that yot are going to get some blocking through
voluntary action without up responsibility on
the an of the Government. Thether there will
be E press responsibility attached to it, whether
it dill be loon that the Government has asked
and met the effects of that will be, is &
different matter. I suspect they couldn't con-
time to do this more the another 24 or 48
hrs without It being know that they had
been requested to do so by the Government and
5 struld the Dovernment request matters of
that type illegally, 1: seems to me, makes
much mn of En un-neutral act or R. surrepti-
time act and night bring with it implications
to the President is doing the very thing
the his critics are charging Ma with, of using
to offices for - to further ends which be is
net willing to face the public ad Congress with.
lested:
That statement they made yesterday, this exchange
comittee, they took the responsibility themselves,
Regraded Uclassified
137
- 34 -
didn't they, Harry? Was the Treasury mentioned
in that statement yesterday?
Cochran:
Yes, They said after consultation with the
Treasury Department and the Federal Reserve
Bank of Bew York, the foreign exchange committee
announced the suspension of exchange trading in
Denish and Norwegian balances except for the
ascertained legitimate needs of customers,
Reston:
This by request of the Treasury comes in when
we asked them to refer the transactions here.
holdsmith: I think, like Dr. White said, that we are
just dodging the issue If we think that by
continued informal action we can do it, be-
cause after all we know that the Germans are
not 6.3 Inefficient as that, as to just let
the thing slide, et cetera. They are going
to work as fast and as well as they can under
the existing restrictions and I think it would
be very difficult to the banks just to refuse
to transfer funds. It is a heavily turdened
legal liability. I am not a. lawyer, but I can
see that. I think it is just dodging the issue
and putting an undue strain on them, or from
the beginning insuring that what we do is in-
effective. I would feel that certainly prudence
would dictate that where you don't know what
the situation exactly is, be sure that the
status quo cannot be changed. Anything else
is just - I think you expose yourself to the
danger that you are going to have a sudden
withdrawal of funds which you may want to
use and may need for what we believe legitimate
American interests and why should we run the
chance that the banks through fear or through
lack of knowledge will hand over of certain
number of million dollars which we could keep
control over if we froze it and consider the
thing after the President has had enough time
to make up his mind. I don't see how freezing
possessions is definitely non-interference
or can in any way be regarded as un-neutral
and interpreted as anything except whatever
prudent business would do in B. similar situa-
tion.
Regraded Uclassified
$ # #
Gaston:
Judge Townsend, have you an opinion on the
policy involved here, as to whether we
should do this in 8. voluntary may or by
formal order?
Townsend:
If there is a reasonable probability some
action is going to have to be taken in con-
nection with this, the time to take it is
right now.
White:
Judge Townsend, are you at all concerned over
the fact that what is happening is now with
respect to control over new areas - and this
1s the first time action of this kind is being
taken? Would that need to receive some weight?
Foley:
This is the first time the var has existed
in Europe and additional territory.
Townsend:
I am not able to answer that, because I don't
know what success informal measures have given
when carried out in other cases.
Bernstein: In the Polish case, there was a Government that
continued to exist and the Omtral Bank of
Poland continued to draw on its funds. The
Germans haven't taken over any portion of that.
Whether or not they have taken over any of the
funds that belonged to Poles to remined in
Poland --
Townsend:
Personally, I don't see any objection to the
suggestion that it be frozen until developments
can be made and find out just what we have get
to meet. If the situation develops whether we
should - would necessarily have to take action
later, you would be in I much better position
if you take it now than you will to take it
later. That is a question of - a State Depart-
ment question.
Gaston:
Are we in general agreement, first, that some
action ought to be taken, that the weight of
opinion here is that the action to take is
a formal action?
Regraded Uclassified
199
$5 I I
Townsend:
I think unquestionably that is the proper
action. With the other, you are exactly In
the sexe position so far as public opinion and
consequences are concerned by taking Informal
action and having the banks to act upon per
request. le beven't the legal status.
Gastons
Are TO all in agreement that all the other
agencies here concerned, so far as they has
the attitude of their Boards, are willing to
E° along on either action, either the voluntary
or the formal?
Purcell:
Speaking for myself, since I don't know the
attitude of my Commission and since I titnk
that they have very little concern with It, I
would rather not express any opinion, but ES
I said, issue E report back.
Panson:
F. Secretary, of course you know to I cell't
say what would be the effect of & Board dis-
cussion of the matter, although I can my that,
as you leos, te always try to do the best -
can to cooperate no matter where 18 are asked
to do so. The views I have expressed have been
in large part to try to develop the line of
thought that has existed around this table,
coming into it as cold as I did, end I wanted
to find out exactly what all of you thought.
lasten:
I - inclined to think that the final decision
here will have to be the President's and that
is the reason I stated it in that say, and
wight 18 & on this basis, that we will pre-
sent the issue to the Secretary and tell the
that the weight of opinion here is for the
formal action, and without further meeting at
it!
Rite:
I was vondering, Mr. Renson, whether M. feel
that you would like to indicate any objections
that you feel may be raised against 16 that
should be mentioned. Is there anything per
feel the Board would oppose this action is
that you wuld like to indicate?
Regraded Uclassified
200
- 37 -
X
I don't know of anything other than what I
have said, and I express the view that per-
haps this action may be construed to indicate
things that are not Intended by It at all
and the indication there is may be more in-
portant in the long run than the action itself.
If it is the view of the Treasury, cooperating
with the State Department, that it is neces-
sary to do something and do it now, I should
think the Treasury would wach prefer to do
it by authority rather then by the informal
very that has been submitted to you. the other
charge, as I see it, that to trust to the
voluntary action of these institutions in-
volved, nerely trying to keep in touch with
them and keep then informed -
this
But you don't have any view as to whether you
feel action is or is not necessary?
lest:
Based BC what I have heard here this norning,
it seems that action is desirable.
clien'm
They have already - in their announcement yes-
terday.
leis:
I should like to have the Department recorded
as concurring in the action without attempting
to advise as to method. I don't think Secretary
Bull feels that he ought to - could or at least
would express an opinion cm E. matter which is
in your judgent.
Astro:
You concur that action is necessary to take some
step to freeze these accounts?
leis;
Exactly, but we don't undertake to pass ES be-
tween any views I night express ES between the
formal and informal action, which would be
purely personal.
Polays
Eight I ask, fr. Berle, If the Department would
have any objection If we thought it better to
neet this situation - we proposed the Executive
Order!
Regraded Uclassified
201
- 38 -
Berlet
I have no reason to believe they would have
any objection.
and
The here in the Treasury have to make 8. report
en what conclusions we have come to by 2:30
this afternoon. If any of you gentlemen get
any new ideas on this subject before that time,
we would be glad to have them and if you get
then after that time, Te would be glad to have
them, too.
The
Ir. Gaston, I 87. mondering whether It might not
be desirable, since the Secretary indicated to
me he would like to see us at 2:30 and since
Mr. Earrison is with since they have been
in on this and would have some very definite
views, whether it night not be desirable to
indicate to then that our line of thinking is
and give then an opportunity to present any
counter objections that they might have. They
might think of something 16 may not have thought
of.
laston:
I would like very much to do that.
Vira:
Don't you think, since the Secretary talked
directly, it night be well that he would be
the one to talk to him?
issue:
May I ask you neo if you see any objection to
ay discussing it with Ir. Harrison after this
conference?
We:
I should think any discussion would be desir-
able.
letters
Not at all.
May I esk one other question? That would be
the language of your proclamation, on what do
you predicate it, what is your preamble?
Poley:
Nothing startling in It at all. It just says,
By virtue of the authority vested in me by
Section 5(b) of the Act of October 6, 1927,
as amended by Section 2 of the Act of March 9,
1933 and by virtue of all other authority
Regraded Uclassified
202
- 39 -
vested in me, I, Franklin D. Roosevelt, Presi-
dent of the United States, do hereby amend
Executive Order 6560, indicated January 16,
1934, regulating transactions in foreign ex-
change, transfers of credit and the export
of coin and currency by adding the following
sections after Section 8 thereof." And then
we go on.
Gaston:
Why not go on then?
Thite:
This statute, I understand, mentions the speci-
fic two countries so that the whole Order will
be seen as to relating to specific - it would
be a case of broad control and then subsequent
provision providing for the two countries, 30
that there will be that less danger of looking
like any kind of an over-all system.
Ranson:
I would suggest that if Mr. Harrison hasn't
had an opportunity to express his views to the
Secretary that he seems to have expressed to
someone else, that he be given that opportunity,
too, because those views may carry some weight
beyond anything that has been said here, because,
quite frankly, I don't know why they should be
particularly concerned.
Thite:
I certainly think they should be given an oppor-
tunity.
Foley:
The way it has been left, Covernor Ransom, is
this: We have an understanding with Governor
Harrison that we will call him at 3:00 o'clock
and he has gotten his committee together in the
Board room up there and they are going to be
present when we call at 3:00 o'clock. Couldn't
we just say for the Secretary that we have
refrained ourselves from calling Harrison, but
we suggest that the Secretary may wish to call
him before making a final decision?
White:
In fact, I think there may be some merit in
having him notified so that he won't get this
thing cold over the phone.
Panson:
I will do that, I will talk to him.
Regraded Uclassified
203
TREASURY DEPARTMENT
WASHINGTON
COMMISSIONER OF
ACCOUNTS AND DEPOSITS
April 10, 1940,
90 THE SECRETARY:
At 3:55 P.M. today the following information
VMS received from the Federal Reserve Bank of Sev York:
"Market today vas rather quiet. Some
selling and early trading. The
market steadily improved during the
rest of the day and turned quite
strong after 3 P.M. Prices at
present time are as such as 12 or
13/32nds above last night's close.
Turnover in the market was very
light."
E. Finance
Regraded Uclassified
204
DANISE AND NORWESTAN BALANCES
April 10, 1940.
4:45 p.m.
Present:
b. Foley
Mr. Gaston
Er. Schwarz
Mr. Cochran
Ir. White
E. Berle
b. Fernstein
Mrs Bots
Mr.
Now, what is the publicity!
The President today issued an Executive Order
establishing control over the Norwegian and
Danish balances and other assets in the United
States. The purpose of the Order is to prevent
exchange in settlement."
(Kr. Berle and kr. Bernstein enter the conference)
Barle:
There will soon be raised & question which comes
down to whether the Federal Reserve Bank is a
banking institution.
lasten:
It is comprehensive enough. All we said was
in the United States.
LIM
Now, where is the President's copy?
Foley:
Right here.
M.I.In
And what will he ask?
Foley:
Well, here is the Attorney General's approval.
Then they have attached a. little memorandum
that they have approved it as to formal legality.
It merely preserves the situation which held
before. They have approved this.
E.I.In:
All right.
Foley:
This is the Executive Order and that is where
he signs.
M.I.In
will he want me to initial that, do you think,
is that customary?
Foley:
Jo.
Regraded Uclassified
205
- 2 -
E.N.Jr:
I have done nothing.
Foley:
Well, you have got this to sign, if you think
we will have it.
2.147m
I will read it out loud. I an just doing my
homework now.
"Memorandum to the President:
"Pursuant to your request, I an prepared to
submit herewith an Executive Order which, in
effect, anends the outstanding Executive Order
relating to foreign exchange control. The
effect of the proposed Executive Order would
be to freeze all balances, exchange transactions,
et cetera, in which the Norwegian or Danish
Government or nationals thereof have any interest.
The Order also would enable the Secretary of the
Treasury by license to permit any such foreign
exchange transaction or withdrawal. The proposed
Executive Order also authorizes the Secretary
of the Treasury to require reports with respect
to all Norwegian and Danish property located in
this country."
That takes care of this thing Mr. Bull is worry-
ing about.
Serle:
I think his point is that nerely some of the
bond indentures are pledged to the service -
or this obligation - night be as those are examined
that some of the Danish bonds outstanding in the
hands of American citizens - it night be that
some of the funds of the Government of Demark
might become applicable under that pledge to the
service of those bonds. This freezing, of course,
holds it in suspense until that can be determined.
E.W.Jr:
"It is believed that such reports are necessary
if this Government is to consider adequately what
action should be taken hereafter with respect
to such property."
I hate to say this. It is terrible to take 6.
thing like that to the President.
Regraded Uclassified
206
V2 # I
"As you know, your foreign exchange Executive
Order of January 15, 1934 declared the existence
of a 'period of national emergency' which has
not been terminated. Accordingly, it has not
been necessary in the proposed Order expressly
to cite the existence of any new emergency to
justify the issuance of such Order.
"We have discussed the proposed Order with the
interested Departments and Agencies. The Depart-
nent of Justice has advised us that the Order is
legal. The Attorney General's letter of approval
is attached. Secretary Hull has indicated his
approval by initialing & copy of the Order.
"I have also attached herewith Regulations which
I have signed and which call for your approval.
Such Regulations would carry out the proposed
Executive Order by setting up E. system for the
receipt of applications for licenses, the passing
on such applications, and the issuance of licenses;
and also by requiring reports to be filed with
respect to all Norwegian or Danish owned property
located in this country.
"There is also attached E suggested statement
which you night want to have before you in case
you receive inquiries from the press in respect
to the Order."
I think I would leave that off, because he night
want to use this. Thoever did this, ask them to
leave a copy of it.
Foley:
You want to leave the last paragraph off?
B.K.Jr:
Leave the last paragraph off. I an going to ask
Mr. Berle and you to 80 with se.
(Unrecorded telephone conversation with Ya" Natson)
5:15; is it all in order?
Poley:
lie are getting this typed up.
H.M.Jr:
I don't think that this - personally, I don't
think that this is very good.
Regraded Uclassified
207
- 4 -
The President today issued an Executive Order
establishing control over the Norwegian and
Denish balances and other assets in the United
States. The purpose of the Order is to prevent
exchange in settlement."
Personally, I think that statement to the Presi-
dent is better than this.
So do I, I think it might be better to do it and
say nothing and if you want to feed out sone back-
ground to Steve Early 07 whoever it is over there,
in the event be makes 8 statement --
I think so. I had better put Steve on notice that
I an coming over.
arle:
wen't you think so?
STAR:
: think so. : think Steve had better do that.
Have you got the people on notice of the machinery?
Sector:
Yes. Thompson is having an operator stay so as
to notify the Federal Reserve Banks and he 18
calling the Federal Register to see whether we
can get it printed in tomorrow's Register. I
believe it has to be printed in the Federal
Register to be effective and I think the effective
date on this is according to the Federal Register.
Can't it be effective at midnight!
After:
I don't think so. The lawyers can tell you. The
publication of the Federal Register will be tomorrow
morning. I don't know whether we can get it in
tomorrow morning's Register OF not. That is what
he is finding cut.
Who:
Maton:
Norman Thompson.
while I am waiting, George Harrison tried to tell
me about some financial transactions and I told
him to tell you.
I have then all here and I have gone over them
with Sernstein.
Regraded Uclassified
208
- 5 -
E.V.Vr:
While we are waiting, may I have them?
Cochran:
The first one is the payment of $900,000 to
the Guaranty Trust. This is the Federal
Reserve Bank. On cable instructions dated
April 8 from Denmark's National Bank. The
payment would be for the account of Denmark's
National Bank with the Guaranty. That would
be just the transfer of funds from the Federal
Reserve Bank to the Guaranty Trust. This would
take care of coupons that mature April 15 on
a 40% Kingdom of Denmark External Gold Bond
No. 1952. This issue was floated in the United
States. Under the contract, the Guaranty as
paying agent must be provided with the funds
by Denmark five days prior to the coupon date,
so the payment would have to go across today
and I think it is a perfectly legitimate trans-
fer.
S.N./r:
That is the kind of thing Mr. Hull wants to see.
Berle:
That is a good --
E.M.Jr:
It is & good point to tell him. I an glad to
have you hear these first ones. Go ahead, that
is c. K.
Cochran:
Then there are three payments under instructions
dated March 15, March 29 and April 2, respectively,
all issued to the Brown Bros. Harriman Company.
These are payments which would be made against
delivery of the Norwegian Government bonds to
the Federal Reserve of New York. For some time
the Norwegian Government has been suporting its
own Government bond market here and these banks
have brought up bonds and turned them over to
the Fed. The Fed charges the dollar account
of the Norges Bank with the corresponding amount
and holds these bonds in the security account
of the Norwegian Central Bank, so it just means
that the Norwegian Central Bank would have its
own bonds instead of dollars in this account.
Herle:
That is all right.
H.M.Jr:
That settles those. They are just buying their
own bonds. 0. K.
Regraded Uclassified
209
- 6 -
Cochran:
Then there are some other payments totaling
$871,000. The Norwegian Central Bank gave
a telegraphic instruction of April 8 on all
these. These are for seven payments to be
made to New York banks for the credit of
certain private Norwegisn banks, that is,
banks other than the Norwegian Central Bank
and the amount would be debited to the account
of the Norwegian Central Bank.
H.M.Jr:
But the money is staying here?
Cochran:
The money is staying in this country with private
banks to the account of Norwegian private banks.
E.W.Jr:
That sounds all right.
Serle:
It will be frozen anyway.
H.M.Jr:
All of these will be frozen.
Cochran:
There is one payment Lnoke and I both questioned.
This is another one under the same authorization,
but it is for payment of $100,000 from the
Federal Reserve Bank, debiting the account of
the Norwegian Central Bank, payable to the
Bankers Trust in New York for the account of
the Copenhagen Handelsbank. That is a. payment
into another country,
R.M.Jr:
That I would hold.
White:
We all agreed on that.
E.M.Jr:
Well, hold that.
Cochran:
And then the last one, Harrinan Brown Bros. have
been presented with 8 draft on themselves for
$10,000 by a Canadian bank. How, there has
been a letter of credit established with Brown Bros.
covering grain shipments which & out from Montreal,
I think, from a Canadian port, and as the grain is
loaded, they can draw on this and get their funds,
so now they have presented this draft for $10,000.
White:
Who gets the grain?
Regraded Uclassified
210
- 7 -
Cochran:
The grain is on the ship and I can't think
that Canada would let the grain go out to
Germany. I don't know what the destination
will be now.
Bernstein: Who gets the money, the Canadian concern?
Cochran:
Yes, the Canadian bank has presented it --
Berle:
Denmark has bought Canadian grain.
White:
They will hold both the wheat and the money.
The money is not getting away anyway, that is
a certainty. Neither is the wheat.
E.L.In
Is the boat loaded?
Cochman:
In Canada with wheat for Norway.
Serle:
Is it American wheat?
Cochren:
I an afraid not.
Berle:
I don't suppose so, so that we are merely now
finishing up by paying in Canadian bills to
the Norwegian Covernment. I see no objection
to it, M. Secretary, unless you want -
If it YES a million dollars - I don't think it
is enough to nake an, issue out of.
derle:
Yes, it is stated here that the Canadians will
wind up with both the wheat and the money and
there is no objection on our part.
Min
I don't think it is worth - do you!
Cochran:
I think we can let It go.
Thite:
They have asked it because they are afraid they
won't get it, but I don't see why we should
worry if they do get it.
S.M.In:
Who gets it?
Edite:
Some Canadian bank.
Regraded Uclassified
211
- 8 -
E.V.IM
You mean Canada is worried about it?
White:
I suppose so.
LLin
Do you want to raise any objections?
White:
I think we ought to let as many go as we can,
particularly when they involve mushroom trans-
actions and when we are sure they won't get
where you don't want them to go.
Barle:
That grain is either going to stay in Canada
or 80 somewhere else now.
LLIN
is long as none of this gets into the diplomatic
files so that it will be published six months
hence by the Germans, it is all right - - B. la
Mr. Bullitt.
White:
Even if it does, this is a payment for Canadian
grain to be shipped to Norway.
Cochran:
It is rather an old credit.
B.V.Jr:
0. K., is that all?
Cochran:
That is all.
E.K.Jr:
That is very interesting, isn't it?
Serle:
Very.
Cochran:
It gives you a very good cross section.
White:
There is only one point to be raised and that is
it might be possible if a decision can't be made
for this to continue another day or two and you
could oppose this a day or two later if you wish,
and there probably wouldn't be any loss.
S.M.Jr:
I want to do this tonight. I think it should
be done tonight. I told the President I am
coming and I want to 5° over there now and get
it finished, and have you got everything?
Poley:
I have everything except the memorandum. You
will have to sign these Regulations.
Regraded Uclassified
212
- 9 -
H.M.Jr:
You (Berle) will 80 with me, won't you, please?
Berle:
It will be a pleasure. I didn't mean to thrust
myself into this.
H.M.Jr:
No, I am simply delighted. The President might
want to ask some questions. I don't date this,
do I?
Foley:
No, when we get it approved we will date it over
there.
White:
That is today's date.
H.M.Jr:
I am not worrying about the machinery and the
telegrams and all that.
213
0
P
Y
April 10, 1940
MEMORANDUM FOR THE PRESIDENT
Pursuant to your request, I have prepared and submit
herewith an Executive Order which in effect amends the out-
standing Executive Order relating to foreign exchange control.
The effect of the proposed Executive Order would be to freeze
all balances, exchange transactions, etc. in which the Hor-
wegian or Danish Government or nationals thereof have any in-
terest. The Order would also enable the Secretary of the
Treasury by license to permit any such foreign exchange trans-
action or thdrawal. The proposed Executive Order also au-
thorizes the Secretary of the Treasury to require reports
with respect to all Norwegian and Danish property located in
this country. It is believed that such reports are necessary
if this Government is to consider adequately what action
should be taken hereafter with respect to such property.
As you know, your foreign exchange Executive Order of
January 15, 1934 declared the existence of 8. "period of national
emergency" which has not been terminated. Accordingly, it has
not been necessary in the proposed Order expressly to cite the
existence of any new emergency to justify the issuance of
such Order.
We have discussed the proposed Order with the interested
Departments and Agencies. The Department of Justice has ad-
vised us that the Order is legal. The Attorney General's
letter of approval is attached. Secretary Hull has indicated
his approval by initialing a copy of the Order.
I have also attached herewith Regulations which I have
signed and which call for your approval. Such Regulations
would carry out the proposed Executive Order by setting up
a system for the receipt of applications for licenses, the
passing on such applications, and the issuance of licenses;
and also by requiring reports to be filed with respect to all
Norwegian or Danish owned property located in this country.
Attachments
BB:a 4/10/40
Regraded Uclassified
214
C
I
April 10, 1949.
The President,
The White House.
By dear Mr. Presidents
I - hereeith treasuitting 6. proposed Incutive
order, prepared is the Treasury Department of informally
submitted for ey consideration, enenting luctin Order So,
6560 of January 15, 1934, regulating transactions in foreign
exchange, transfers of credit, el the export of soin and
currency.
The proposed order has n approval 4 to form al
legality. Attention is invited to the exclosed
which deals with the legal questions invived,
Respectfully,
/s/ Francis Biddle
Acting Attorney Grand.
Regraded Uclassified
:
I
April 10, 1948
for Project Imestive order satitled '
of Resortive Order No. 6560 dated Junuary 15,
1936, regulating transactions la foreign -
change, transfers of credit, and the export
of sets and currency."
Legal doubt extite all with respect to that prevision of the
proposed apter vice mains detailed reporting of foreign-emed
sex-ta la the Dailted Metes, It is believed, hower, that the
order vosid is - is that respect If Issued ein eath-
time of other. the exterence of not is for the
President's determination.
the proposed order ef tes as authority section 5(b) of the
set of Details 6, 1917, 0 State 411, M sended by mills 2 of
the act of darth ", 1933, u State L. It minds Instin Order
So, 6580 of Junes 15, 1834, Mái places forther upon
transities is foreign exclusive, transfere of order, Mysests,
at - export or withins: of cela, billion or current), invoiv-
lag property of form at Imsurt or their mationals. This place
of the order fallows substantially is 4m language of the
rictets and Le stally free from doubt,
The order also provides for the filing of detailed reports
consersing not assots is be lated States. the
statute less art, is express terms, provide for the filing of 1
reports, but it is believed that auth requirement, cade during a
pariod of BLP 62 attel energency, is partainable et would be
spinide
The sure relief N for enthority reads M followse
*(a) During time of as or during at time
period if attal declared by the Presi-
dealy the Prestant es, through any this he
Regraded Uclassified
- 2 -
216
say designate, or othervise, investigate. regulate.
or prohibit. under such rules and regulations M has
my prescribe, by means of licenses OF otherwise,
any transactions in foreign exabinge, transfers of
credit between or payments by banking institutes no
defined by the President, and greent. harding,
milies. or gar-marking of gold or sllver coin or
bullion or currency, by any person within the United
States or any place subject to the jurisdiction there-
of, and the President say require any person engaged
in any transaction referred to in this subdivision
to furnish under oath, complete information relative
thereto, including the production of any books of
account, contracts, letters or other papers, in coanse-
tion therewith in the custody or control of such par-
son, either before or after such transaction is -
pleted. Whoever willfully violates any of the provi-
sions of this subdivision or of any license, order,
rule or regulation Issued theremder, shall, upon
conviction, be fined not more than $10,000, or, If
a natural person, my be imprisoned for not more them
ten years, or both, and any officer, director, or
agent of any corporation who knowingly participates
in such violation my be punished by a like fine,
imprisomment, or both. is used is this subdivision
the term 'person' means 48 individual, partnership,
association, or corporation." (Underscoring supplied.)
It is believed that the words "investigate, regulate, or
prohibit* in the statute could be relied upon as implying author-
ity to require the reports if the order were issued during a period
of var or other national emergency, upon the theory that knowledge
of the nature, losation, and ownership of the foreign-owned property
involved would be necessary for the proper and efficient administra-
tion of foreign exchange centrol.
It must be observed, however, that violations of the statute
and orders or regulations issued therounder are punishable, upon
conviction, by fine end Laprisonment. Thes, in the final analysis
any implication in the statute is to be resolved by the courts.
Whether the courts would sustain the implied authority, it is be-
lieved, would depend upon the nature of the energency existing.
The extent to which public opinion approved the exercise of the
power would unquestionably have a bearing upon the successful ad-
ministration of the order.
Regraded Uclassified
-
OF EXECUTIVE ORDER n.
6560, DATED JANUARY 15, 1934,
REGULATING TRANSACTIONS IN FOREIGN
EXCHANGE, TRANSFERS OF CREDIT, LND
THE EXPORT OF COIN AND CURRENCY.
By virtus of the authority vested in - by section 5(b)
of the Act of October 6, 1917 (40 Stat. 411), M associed W
section 2 of the Act of March 9, 1933 us State 1), and w
virtus of all other authority vested in as, 4 FRANKLIN D.
ROOSEFILT, PRESIDENT of the WHITED STATES OF AMERICA, à
lurely - Insorutive Order No. 6560, dated Junury 15, 1936.
regulating transactions in foreign exchange, trusters of
credit, and the export of coin and currency by afting the
following sections after section 8 thereof's
"Instim 9. my of the
provisions of sections 1 to 8, includive, of this
Order, all of the following are prokihited, except
M specifically authorised is regulations or licenses
1 W the Secretary of the Treasury persut to
this Order, if involving property in which have or
Demark or of national thereof but at my time - -
since April s, 1940, had any interest of my mine
whatsoever, direct or indirects
"L All transfers of credit laborn of
banking institutions within the Valied States
Regraded Uclassified
+
1 $ I - 1 I I If
I I a I I 1 w
I I I a PIPS I
I I br 1 1 (
I e visite of the Valued
I x I I # I a
1 I
% m - w a banking institution
I I a I
of a 1 a I z 1
I I a I If 1
⑈ a 1 I Days RUS a be
States, e the - of guid e dire ents
w billine e - w will permits within the
I I 1
% by - to the perpose e wide
lus the affect of only or availing the foregaing
prohibities.
m
Ill, ⑈ 11 s 1 1 1 # .
funn, at nb the er the and from the to time,
al w at I - possided in regulations
1 a # I Y a 1 -
request to all payably ₫ a stan - of
with hony e land e w national thereof is e
w the - of to with have er Donark et up
national - in e ind a interest of a ute
- and e instruct, and with respect to
up disposition, of un elher
dealing to má 1
Regraded Uclassified
y.
219
% The Bearetary of the Treasury wg
require the fornishing de esth of allitical
at supplamental information, industing the
production of up beeks of account, contracts,
letters or other papers with respect to the
atters omerating which reports are required
to be filst unler this Section.
"Section 11. Mitional in skiltion
to the definitions contained in Section To the fallowing
definitions are prescribed:
'L The terms 'Normy' and "Semert", respectively,
- the State and the Government of know and
Demark - April 8, 1940, al a palitical subtivisions,
agencias and instrmentalities through including
territories, dependencies and passentions, of all
arting or purporting to act directly e
indirectly for the benefit or - behalf d the foregoing.
The terms and Demark', respectively, stall
also include my and all other presents (including
political mbdivisions, agencies, and instrumutalities
thereof and pessons acting or paparting to act
directly or inlirectly for the or - bahalf
thereof) to the artent and only to the estent that
not premis amercise or claim to and de
you e de facts sovereignty - to an mich,
a April 8, 1940, constituted law or least.
9. The term 'national' of lang of heart
stall include my person to has las e de to
Regraded Uclassified
-
220
is reasonable cases to believe has been demiciled
in, w a subject, citizen or resident of formy
w Demark st up time since April a, 1940, but
shall not include up individual demiciled and
residing in the United States OR April s, 1940,
and shall also include up partnership, association,
or other organisation, including any corporation
organised under the law of, or which on April 8,
1940, had its principal place of business is formy
of Denark et which on or after such date has team
controlled w, or & substantial part of the stock,
shares, bonds, debentures, or other securities of
which w been owned or controlled w, directly
or indirectly, - or more persons, who have been,
or - there is reasonable cause to believe have
test, demiciled in, or the subjects, citizens of
residents of Kermy or Demark at any time on OF since
April 8, 1940, and all persons acting or purporting
to act directly or indirectly for the benefit or
- behalf of the foregoing.
sc. The term tasking institution' as used is
section , includes of person engaged primarily of
incidentally in the business of banking, of granting
of trunsferring credits, or of purchasing or salling
foreign or procuring purchasers and sellere
thereef, M principal or agent, or any person holding
credite for others w a direct or incidental part of
his indicess, or brokers; and, each principal, agent,
Regraded Uclassified
-5-
221
effilie, I 1 = I # Ir I
# engaged shall be regarded w a separate 'hanking
institution',
*Section 12. the Regulations
of levember 12, 1934, an hereby milfied insurer as they
are inconsistent with the provisions of sections 9 to 11,
inclusive, of this Order, and emert w ⑉ nodified are
hereby continued in full force and effect. The Secretary
of the Treasury is authorised and exposured to preseribe
from time to time regulations to carry out the purposes
of sections 9 to 11, inclusive, of this Order as -
and to provide in mb regulations w w relings más
puremat thereto, the conditions under which licenses
my be granted by such agencies as the Secretary of the
Treasury my designate."
(signed) I rankline D. Roment
* E as
april 10, 1960 6 p.m E.S.T.
aas.
EA H.F. GNA
Le
cH
Regraded Uclassified
Code w Poderal Regulations
Title n - my and Income Trousary
Chapter I - offices, Department of Truesay
Part 150
I '
Office of the Servicery,
,1980,
HOURS
Belating w transations b knip being,
Treasfers of tredit, Payments, at the Depart e
Bithdrawal of Geln, Bullien and Currenty and to
Departe of Pereign Property Interests in the
States. (=)
fortion 190.1. These regulations
are preseribed and insued ale authority of festies 5(b) of the we
of Outober by 1917 w ML (11) - comied w Section 2 of the we
of Burch % 1933 use State 1), end Insertive Order See 6560, detail
have 15, 1934, Id - ()
Section 130.2. Definitions-
(a) The term "Order" shall refer to Inservive Order It. use,
of January 15, 1934, as united.
(b) The was *regulations* shall refer w these repulations.
(a) The larse "property" el "property interet or *property
interests* shall include, bet not w mg of limitation, - -
truths, bullies, bank deposits, sevings assompte, any debin,
been or obligations, financial numrities commly doalt is w -
f I I I form, [ and I
(*) Sections 130.1 to 130.60 - fee. 9(b), w State as and 96.65 - 1,
a State " 12 U.S.C. 9901 b. Order 6510, In. 25, 19341 be for
.
. 1960.
Regraded Uclassified
223
2
I 1 I why a b 1
a I 1 to X I I I I a a
reading Mile of onlo, other - of title or going
I I 1 1 I 1 I - . (
real estate values miss land entructs,
I I 1 1 f 1 its IT 1
cytima, nagotialis - trade - regulties, tab
I [ I [ I 1 1
I 1 I 1 1 I 1 I I
#
(4) Bafe deposit bases shall be - w be is the "purtely"
I a = s 1 I Inter = x is I 1 I
1 s 1 I I 1 1 I I I y 1 s
the foregaing stall not to a w be reputal as a limitation -
1 $ rs a I a
(a) he the of other - reference should be mis w
the definitions contained w the (0)
bestion 130.3. enduce. -
m Applications for liemses to app to funds - -
a & I 1 a b I Y 1 [ b
Nates # the of - w der will w bullian w -
1 1 I b I a a s I I If
Warest has at 4 the a w - April 4, 1980, had my interest of
my stan - direct # intirest, smill be filed to deplieve
with the Pateral term bat of the district to with the applicant -
sides # Inc Me principal place of business # principal dies or -
w 48 the Printed have M of for In if the eypLisms too - Legal
release e principal place of business er principal office If to
a Primal harm district. Application feest By to obdated from my
Regraded Uclassified
- , -
Federal lasserve bank, sint of unly office, or the Secretary of the
THE s B of I I 11 I
before M afficer authorized to administer esths, R if entails
of the Dailted States, before a diplaratio or consular officer of the
hited States. the applicant stall fursish work further information w
stall to requested of kia w the Insuratory of the treasury w the Fuleral
Insure bask et vales the application is filed. Meases will be issued
by the Secretary of the treasury, seting directly or through my agencies
be my designate, and by the Federal have basis esting is -
cordence vith ná rules, regulations, al intrations at the feare-
way of the treasury my from the w time preseribe, is and 01:00
If classes of ⑉ as the Bearatary of the Treasury my detersize is
raise, regulations, and instructions presentied W Ma. The Federal
leave blak at which M application is filed will advise the applicant
of the greating or denial of the license. the the transaction white
1sed by the License has been completed the License should be returned w
the Liseases to the Pateral form best at which the application -
filed, except in the our of licenses for Lbs expert or withdrassed of
currently - gald E silver esta or bullion, is which case the license,
ofter buving Iss censelled by the collector of outens of the
through visa the or - min, shall be cast w
much collector of name # a to the Federal Increw last
st which the application me filst. Appropriate forms for applications
of licenses will be preseribed w the Secretary of the Treasury. 4
my be regired to file meria upen the - of the
incestions. the decision of the Secretary st the treasury with
respect to the approval or disapprevel of es application shall be
final. (c)
Section 130.4. x Interests of Berest and board
Regraded Uclassified
- & -
(a) Within 10 days from the publication of Une replistions in
the Poteral Register, reports shall be filed - Name day
customed miss make containing the information salled for is -
Form, with respect to all property situated to the Extred States a
the date M of which the report is unde is which lang If leest #
any actional thereef has et any time a or also April 4, 1948, had 4
interest of my niture statement, direct or Indirest. Issue reparts
stall be filed bys
(1) Injury person is the Dailed States directly w
inlinestly holding, w having title w, or earlaty, -
well, w presentem of - property iminting, without
my limitation - of the temply, may partice?-
skip, association, or corporation organization - the Low
of the Dated States of mg state e territory the
United Diabes, or having 19th principal place of Instance
is the United States, in the share of a studk or is
dues notes, bonds, coupons, or other chligations
or superities Formy w Demark or upp national thereof has
n - the - or sizes April 4, 1940, had my interest
of any state chatocover, direct or intirests and
(2) Every agent or representative in the United
States for Berray w Demark at my setional thereef having
any Information with respect to any noth property.
Previded, That M report as fees TFB-100 need be filed not the
total value of all property Interests to be reported is Loss the $250.
(b) The date M of which all reports as Pars 172-200 allo required
to be made is
. 1940.
(s) an the close of every business in is wish there small -
Regraded Uclassified
226
- 5 -
inf acquisition, transfer, dispocition, or my other dealing is
up of the property laterests designared is paragraph (a) above,
. report, w reports, e Are TTH-200, duly executed under salb, -
toining the information called for is nd form shall be filed w
3 I s 2 pleased / 1 I I ( Date
becover, that soth reporte for the too w parted free the date of
rebition of these regulations la the Federal Register, mp w filed
it my time within south to day period.
(a) Belther filling and the failure to flie a regard of reports
resided to be filed a hrs 122-100, - the about of a day to file
reck report or reports shall la any my affect the ésty to file a No
part - regarts es form TTB-200, at visa verse.
(a) Esports shall be executed and filed is trielicate with the
Federal harn bank of the district in which the party filing the
repart resides er has his principal place of becauses or principal
effice # 400, w if ná party has m legal residente R princi-
pal place of business w principal office # apply is 0 Federal Incorro
detrict, the with the Poteral Insure Best of for York. s report shall
be decomed to have boxe filed olses it is reselved w the proper Federal
serve test w - n so properly addressed and milled el beare -
postnark dated prior be sidnight of the date - skich the report to
dar. n the class of sech bendance ing the Federal leserve bet shall
formed to executed explos of my report filed - that by to the
leterstary of the Treasury.
(f)(1) All masse in the report east be properly filled La.
Seports found not to w in proper form, or Inching is resential details,
shall not be doesel to have been filed is compliance with the -
(2) Here space is the report fore does at peralt MIL unit
le quotions, the information required wf be set forth is empolementary
Regraded Uclassified
227
- 6 -
propers incorporated w reference to the regard of relatived
Dereith Supplamentary termets not papers smet be referred to
In the principal total is chronological or other appropriate order
and be described is soth - that they - be identified.
(s) 1 superate report other eath east be filed by each person
required to file . report enseyt that persons holding property jointly
asy file a joint report.
3 1 1 1 di 1 I 2 a s -
by party required to file - report, setting forth reserve wky the
report - be filed - or before the date such report is cus, the
Secretary of the Treasury, is Mr discretion, my great nb a a
teacher of the for milar the repart all - the shall
appear to be required,
(1) Separt Terms 978-160 of 198-200 my be obtained from if
leteral harm back, stat w assay effice and the leavious of the
(a) I of s
footing 130.5. Emitist Section 5(b) of the in of
October 6, 1927, as maint by Section 2 of the not of Brok " 1933,
provides to parts
a . - willfully violates my of the -
visims of tide midivides or of will Lisease, order,
ruis or regulation Land theremfor, stall, - -
visitin, be flast not use the $10,000, e, if a
esteral person, my be information for not sere then
to years, or both) at on effter, director, or agent
of my corporative who namingly participates is smok
violation w be punished by - like fine, invistment,
# both, to used in this sehilvision the tem 'person'
- - individual, partnership, association, or
corporation." (a)
Regraded Uclassified
I 1 I
1
w
the
APPROVED april P.m m
(signd Franklen D. Rosevelt
Eirth
BB HDW ur.
Regraded Uclassified
X < and Registion
! W II I - a I
X - instry Iffless, Department of y Theouy
5 M
TOSE
Iffice of 20 Secretary,
1 11,1940.
EXPLAYIONS
Balating to Transactions In Resign Exchange,
banders of Credit, Payments, end the Import =
of Coin, Bullion and Currency, and to
Sports of Pursign Property Interests in the United
=
letin 130.1. Authority for regulations. These regulations
n miki and issued mis authority of Section 5(b) of the Act
1 the 4, 1917 (40 Stat. m) as unit V Section 2 of the Act
( les 5, 1933 (48 Stat. 1), and Incutive Driver No. 6560, dated
(*) i all If #
lettin 230.2. Definitions.
(a) 2 in "Order" stall refer to bettin Order No. 6550,
- 15, 1934, as usended.
In In to "regilations" shall new to these regulations.
is) Inc tarms "property" and "proparty interest or "property
at stall include, but not by my of limitation, money, checks,
12, billin, bank deposits, smings smounts, any debts, indebted-
28 = siligtions, financial securities unsurily imlt in by bankers,
is al investment haves, sotas, stocks, bonds,
in 130.1 to 130.6: - Sec. 5(b), 40 Start. 415 and 966; sec. 2,
1 Brt. 1; 12 U.S.C. 95a; 11. Order 50, Jan. 15, 1934; b. Order
, 1940.
Regraded Uclassified
origins, bankers' acceptances, mortgages, pledges, lieu or other right
in the nature of security, warehouse receipts, bills of lading, trust
receipts, bills of sale, other evidences of title or amerskip, goods,
new, merchandise, chattels, stocks on hand, skips, goods on ships,
red estate mortgages, vendors' males agreements, land contracts,
real estate and any interest therein, leaseholds, ground rents,
options, negotiable instruments, trade acceptances, reyalties, book
accounts, accounts payable, judgments, estents, tradamario, coggrights,
insurance policies, safe deposit bores and their contants, ammities,
etc.
(d) Safe deposit boxes shall be deemed to be in the "curtody"
not only of all persons having access thereto but also of the lessors
of such boxes whether or not such lessors have access to such boxes.
X foregoing shall not in any my be regarded as a limitation upon
the meaning of the term "custody".
(e) For the asaning of other terms reference should be unde to
the definitions contained in the Order. (+)
Section 130.3. Licenses to engage in foreign exchange transactions,
etc. Applications for licenses to engage in foreign emisage transactions,
transfers of credit, payments, or the export or withdrawal from the
United States or the sermarking of gold or silver coin or bullion or cur-
reney, involving property in which Norway or Demark or my national
thereof has at any time on or since April s, 1940, had my interest of
any nature whatsoever, direct or indirect, shall be filed is duplicate
with the Federal Reserve bank of the district in which the applicant No
sides or has his principal place of business or principal office or agency,
at with the Federal Reserve Bank of New Tark if the applicant has M legal
residence or principal place of business or principal office or quicky in
& Federal Reserve district. Application form my be obtained from up
Regraded Uclassified
-8-
291
Federal Reserve bank, sint R assey office, or the Secretary of the
Treasury, Washington, D. C. Applications shall be exacuted under oath
Regraded Uclassified
before an officer authorised to administer oaths, or if assocuted outside
of the United States, before a diplomatic or consular officer of the
United States. The applicant shall furnish such further information M
shall be requested of him by the Secretary of the Treasury or the Federal
Reserve bank at which the application is filed. Licenses will be issued
by the Secretary of the Treasury, acting directly or through any agencies
that be my designate, and by the Federal Reserve banks acting in ao-
cordance with such rules, regulations, and instructions as the Secre-
tary of the Treasury my from time to time prescribe, in such cases
or classes of cases as the Secretary of the Treasury my determine in
rules, regulations, and instructions prescribed by him. The Federal
Reserve bank at which an application is filed will advise the applicant
of the granting or denial of the license. When the transaction author-
ised by the license has been completed the license should be returned by
the licensee to the Federal Reserve bank at which the application use
filed, except in the case of licenses for the export or withdrawal of
currency or gold or silver coin or bullion, in which case the license,
after having been cancelled by the collector of customs or the postmaster
through whose the exportation or withdrawal was unde, shall be sent by
such collector of customs or postanster to the Federal Reserve bank
at which the application was filed. Appropriate forms for applications
and licenses will be prescribed by the Secretary of the Treasury. W-
censees may be required to file reports upon the consumention of the
transactions. The declsion of the Secretary of the Treasury with
respect to the approval or disapproval of as application shall be
final. (*)
Section 130.4. Reports of Property Interests of Norway and Demark
232
not Nationals Thereof.
(a) Within 10 days from the publication of these regulations is
the Federal Register, reports shall be filed on Form TFB-100, duly
executed under oath, containing the information called for in such
Fora, with respect to all property situated in the United States on
2 late as of which the report is unde in which Normy or Demark =
any national thereof has at 4 time on or since April 3, 1940, bad 9
interest of any nature statement, direct or indirect. Such reports
shall be filed by:
(1) Every person in the United States directly or
indirectly holding, or having title to, or castody, con-
trol, or possession of such property including, without
any limitation mbstsoever of the foregoing, every parter-
ship, association, or corporation organized under the laws
of the United States or my state or territory of the
United States, or having its principal place of business
in the United States, in the shares of whose stock or in
whose debentures, notes, bands, compons, or other obligations
or securities Norway or Demark or any astional thereof has
at any time on or since April 3, 1940, had any interest
of any nature whatsoever, direct or indirect; and
(2) Every agent of representative in the United
States for Norway or Demark or any astional thereof having
any information with respect to my such property.
Provided, That no report on Para TFB-100 need be filed share the
total value of all property interests to be reported is less the $250,
(b) The date as of which all reports on Form TFS-100 are required
to be unde is April 8, 1940.
(c) At the close of may business day in which there shall and
Regraded Uclassified
23!
of credition, rate, disporities, If 4 the air is
any of the Rt intends inigial in W an,
report, II name, = hrs 33, till; entel ate atti, X-
taining the biratic alle for In in in n° THE X .
X you pichal Il 21 d * 5, M. to, Date
holever, that such not for the too = print : = in =
publication of 29 replictions is 5 fedent R = ne
it aty time attin at - der prisi.
(a) lette If III the in = file . regard = -
redred to be X = form IS-IN, = the in ( = in to a
such report IT you n° in X ET de the if = = -
part or regursa = 3ara S-II, ad do RESL
(e) Suparta all ze exte el filed in tito e the
Federal issue ant 1 the district in with the X7 If to
report retuins IF - the principal place 1 butter = pistipl
of'ice H agency, = = such If best = legal - = phri-
pal place of have IF placial de II 4 it * kind in
itstrict, the di the Redend issue 3ml 1 is Int. a NM. stall
be deemed to tare be The the it is saint - the If: had
= serve bank If de = à project and at di ni bes e
portaint istad prior to diright = à in I'm de $ - is
a R A M 1 W in as D M
a w 26 M a M. - y i 1 E pass; 8
x Section X A
a A T M M # el (00) # a 1.
Separts form st = be in F in, = lattle in netil arails,
É 9 n 1 MM a X as This 1 A # If
St E # R N N * A 3 A $ B.
to questions, the x or be et irt = -
Regraded Uclassified
234
0 I I
x incorporated by reference in the report and submitted
wealth. Supplementary documents of papers must be referred to
it the principal statement in caronological or other appropriate order
and be described in such mmer that they can be identified.
(c) 1 separate report under oath must be filed by each person
resuired to file E report except that persons holding property jointly
as file a joint report.
(n) Upon = witten request unde to the Secretary of the Treasury
by party recuired to file a report, setting forth reasons why the
report cannot be filed on or before the date such report is due, the
Secretary of the Treasury, in hi: discretion, my grent such an ex-
tension of time for miking the report as under the circumstances shall
appear to be required.
(i) Report Forms TFR-100 and TFB-200 my be obtained from any
Federal Reserve bank, sint = assay office and the Secretary of the
Treasury, Washington, D. c. (+)
Section 130.5. Penalties. Section 5(b) of the Act of
October 6, 1917, as anded by Section 2 of the Act of March 9, 1933,
provides in parts
4 + - willfully violates my of the pre-
visions of this subdivision or of my license, order,
rule or regulation issued timesair, shall, upon con-
viction, be fined not more the $10,000, or, if 4.
natural person, w be imprisoned for not sore than
tm years, or both; and Will officer, director, or agent
of my corporation who horingly participates in such
violation MY be purished by a like fine, invisonment,
or both. he used in this subdivision the term 'person'
- ID individual, partnership, association, or
corporation." (+)
Regraded Uclassified
235
- 7 -
Section 130.6. Modification or Revocation. These regulations and
any Forms or instructions issued hereunder may be modified or revoked
at any time.(*)
Secretary H.Mputhan of the Treasury
APPROVED: Afril 10 1940.
finality
235
Code of Federal Regulations
Title 31 - Money and Finances Treasury
Chapter I - Monetary Offices, Department of the Treasury
Part 130
TREASURY DEPARTMENT,
Office of the Secretary,
;gril 11,1940.
ORGATIONS
Relating to Transactions In Foreign Exchange,
Transfers of Credit, Payments, and the Export or
Withdrawal of Coin, Ballion and Currency; and to
Reports of Foreign Property Interests in the United
States. (*)
Section 130.1. Authority for regulations. These regulations
are prescribed and issued under authority of Section 5(b) of the let
of October 6, 1917 (40 Stat. m) as emended by Section 2 of the Act
of March 9, 1933 (48 Stat. 1), and Executive Order No. 6560, dated
January 15, 1934, as amended. (+)
Section 130.2. Definitions.
(a) The tara "Order" shall refer to Executive Order No. 6550,
of Jammry 15, 1934, as amended.
(b) The term "regulations" shall refer to these regulations.
(c) The terms "property" and "property interest* or "property
interests" shall include, but not by my of limitation, soney, checks,
drafts, bullion, bank deposits, savings accounts, any debts, indebted-
ness or obligations, financial securities commonly dealt in by beniors,
brokers, and investment boures, notes, debentures, stocks, bonds,
(*) Sections 130.1 to 130.6: - Sec. 5(b), 40 Stat. 415 and 966; sec. 2,
48 Stat. 1; 12 U.S.C. 95a; k. Order 6560, Jan. 15, 1934: a. Order
. 1940.
Regraded Uclassified
237
capanity bankers' acceptances, wripps, plaiges, liens or other right
is the reture of security, wurehouse receipts, bills of lading, trust
receipts, bills of sale, other evilances of title or overskip, goin,
new, merchandise, chattels, stocks 00 lend, skips, goods on ships,
rel estate nortgages, vendors' sales agreements, land contracts,
real estate and any interest therein, leaseholds, ground rents,
options, negotiable instruments, trade acceptances, royalties, book
accounts, accounts payable, judgests, patents, trademarks, cogyrights,
insurance policies, safe deposit boxes and their contents, amaities,
etc.
(d) Safe deposit bones shall be damed to be in the "custody"
not only of all persons having access thereto but also of the lessors
of such boxes whether or not such lessors have access to such boxes.
De foregoing shall not in any my be regarded as a limitation upon
the usaning of the tera "castaly".
(e) For the asaning of other tax reference should be unde to
the definitions contained in the Order. (+)
Section 130.3. Licenses to 42 in foreign exchange transactions,
etc. Applications for licenses to opp in foreign exchange transactions,
trusfers of credit, payments, e the export or withdrawal from the
United States or the survicing of gald or silver coin or bullion or -
reney, involving property is which kny or Denark or 4 national
thereof has at any time on or since April 3, 1940, had en interest of
us nature statsoever, direct as infirect, shall be filed in deplicate
with the Federal Beserve best of the district in which the applicant It>
sides R has his principal place of business of principal office =
or sith the Federal Reserve Back of Jer York if the applicant has as legal
residence or principal place of business or principal office or query in
a. Federal Reserve district. Application forus my be obtained from 4
Regraded Uclassified
part income bank, sist or essay office, or the Secretary of the
- Rashington, D. C. Applications shall be executed under 02t2
- = officer authorized to administer caths, or if executed outside
Inited States, before & diplomatic or consular officer of the
States. the applicant stall furnish such further information as
Cell be requested of his by the Secretary of the Tresury or the Federal
inserve bank at which the application is filed. Licenses will be issued
27 the Secretary of the Treasury, acting directly = through any agencies
tast X any designate, and by the Federal Baserve bists acting is as-
cordance with such rules, regulations, and instructions as the Secre-
- of the Treasury my from time to time prescribe, in such cases
as classes of cases as the Secretary of the Treasury my determine in
ries, regulations, and instructions prescribed by his. The Federal
inserve - at which an application is filed will airise the applicant
= the puting or denial of the License. libes the transaction autor-
::ad by the license has been completed the license should be returned by
to licensee to the Federal Reserve bank at which the application IRS
20sd, except is the case of licenses for the export ce of
namely = gold or silver coin or bullion, is which case the license,
Uter hering been cancelled by the collector of customs or the postmaster
- mos the exportation or withdrawal was mis, shall be sent by
- collector of customs or postmaster to the Federal Beserve bank
de the application was filed. Appropriate form for applications
des licenses will be prescribed by the Secretary of the Treasury. Li-
Yes my be required to file reports upon the consumation of the
the decision of the Secretary of the Treasury with
** to the approval or disapproval of an application shall be
14. (*)
Section 130.6. Reports of Property Interests of Sorway and Demark
Regraded Uclassified
- 4 -
239
sal Nationals Thereof.
(a) Rithin 10 days from the publication of these regulations in
the Federal Register, reports shall be filed on Form TFB-100, duly
executed under oath, containing the information called for in such
Form, with respect to all property situated in the United States on
the date as of which the report is made in which Norway or Denmark or
any national thereof has at any time on or since April 3, 1940, had any
interest of any nature shatsoever, direct or indirect. Such reports
shall be filed by:
(1) Every person in the United States directly or
indirectly holding, or having title to, or custody, con-
trol, or possession of such property including, without
any limitation whatsoever of the foregoing, every partner-
ship, association, or corporation organised under the laws
of the United States or any state or territory of the
United States, or having its principal place of business
in the United States, in the shares of whose stock or in
whose debentures, notes, bonds, coupons, or other obligations
or securities Norway or Demark or any national thereof has
at any time 00 or since April 8, 1940, had any interest
of any nature shatsoever, direct or indirect; and
(2) Every agent or representative in the United
States for Norway or Demark or any national thereof having
any information with respect to sty such property.
Provided, That no report on Form TFR-100 need be filed where the
total value of all property interests to be reported is less than $250.
(b) The date as of which all reports on Form TFR-100 are required
to be usde is April 8, 1940.
(e) At the close of every business day in which there shall occur
Regraded Uclassified
240
any scruisition, transfer, disposition, or my other dealing is
any of the property interests designated in paragraph (a) above,
- report, or reports, as Form 178-200, duly executed under oath, con-
taining the information called for in such Form shall be filed by
every person, agent, etc., referred to in paragraph (a) above, provided,
however, that such reports for the ten day period from the date of
publication of these regulations in the Federal Register, my be filed
at any time within such ten day period.
(d) Neither filing nor the failure to file a report or reports
required to be filed on Form TFE-100, nor the absence of a duty to file
such report or reports shall in any any affect the duty to file a re-
port or reports on Form TFR-200, and vice versa.
(e) Reports shall be executed and filed in triplicate with the
Federal Reserve bank of the district in which the party filing the
report resides or has his principal place of business or principal
office or agency, or if such party has no legal residence or princi-
pal place of business or principal office or agency in 6. Federal Seserve
district, then with the Federal Reserve Bank of Bes York. à report shall
be deomed to have been filed when it is received by the proper Federal
Eserve bank or when it is properly addressed and mailed and bears a
postmark dated prior to aidnight of the date upon which the report is
due. At the close of each business day the Federal Reserve bank shall
forward two executed copies of every report filed on that day to the
Secretary of the Treasury.
(f)(1) All spaces in the report must be properly filled in.
Reports found not to be in proper fors, or lacking in essential details,
shall not be deemed to have been filed in compliance with the Order.
(2) where space in the report form does not parmit full answers
to questions, the information required my be est forth in supplementary
Regraded Uclassified
- 6 -
papers incorporated by reference in the report end subditted
therewith. Supplementary documents and papers must be referred to
la the principal statement in chronological or other appropriate de
and be described is such samer that they can be identified.
(&) 1 separate report under oeth must be filed by each prem
recuired to file a report except that persons holding property juistly
my file a joint report.
(a) Joes a witte request made to the Secretary of the Treasury
by = party resuired to file a report, setting forth reasons my the
report cannot be filed on or before the date such report is due, the
Secretary of the Treasury, in hi: discretion, my grant such - EX-
tension of time for making the report as under the circumstances shall
appear to be required.
(1) Report Form TFB-100 and TFR-200 my be obtained from 4
Federal Reserve bank, sint or assay office and the Secretary of the
Treasury, Kashington, D. C. (*)
Section 130.5. Pepalties. Section 5(b) of the Act of
October 6, 1917, as amied by Section 2 of the Act of March 9, 1953,
provides in parts
If * Receivez willfully violates my of the pre-
visims of this subdivision or of any license, order,
rule or regulation issued thereunder, shall, upon -
victim, be fland not sore then $10,000, or, if a
natural person, My be imprisoned for not more the
to years, or both; and any officer, director, or agest
of 4 corporation who knowingly participates in such
violation My be punished by a like fine, inprisoment,
or both. is used in this subdivision the term 'persm³
- - individual, partnership, association, or
curporation." (+)
Regraded Uclassified
242
-7-
Section 130.6. Notification E limitim, These regulations al
any Forms or instructions ind Immir my be modified or reversed
at my time.(*)
Secretary HMputhan of the Treasury
APPROVED: , 1940.
finality
Regraded Uclassified
243
TREASURY DEPARTMENT
WASHINGTON
April 10, 1940.
MEMORANDOM FOR X SECRETARY:
The S.S. BRIX sailed from Copenhagen for In York
March 30th. The S. 8. MATILDA THORDEN sailed from Copezhagen
for New York April 4th. The East Asiatic Company's S. S.
AMERICA was scheduled to sail from Copenhagen April 5th to
London end In York.
There is no confirmation of this sailing.
These are the only ships that we have been able to
check, but TO do has that there are other ships presently in
Copenhagem, or my have just sailed.
I expect further infor-
mation later.
FURTHER INFORMATION:
The S/3 PRIXR MANSK (Danish flag) wes taken into
Hongiroug today W the British.
The S/S AND MARRISK (Danish flag) which ⑉ a day at
of the Paname Canal, has put back to the Canal.
1 Darish ship in - Camadian part - using) is
understood to have best taken over by the British.
Banil havis
Regraded Uclassified
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
April 10, 1940
FOR If SECRETARY
ceeting ms held this et which were present Mr. Purvis, Sir Secury Self,
% Flame, Frest, Degtain Irens, Ir. Wright and Mr. Goulding of Curtise Air-
Time Company, in. Beness el zyself.
Sir Sery referred to prior metion this be had bad with Vr. Wright and ssked if
in VII prepared to desn prices and the elements of which such prices were
respond. E. Bright stated that be M. Sir Servy asked if there was included in
the crice at be had arrived any assert covering development expense, and Mr.
Wright informed him that the prices did include $139,000 of development expenses which
THE Army authoritise informed his would have to be amortized over the British-Prench
postract. Sir Beary st me asked General Prett if be would give him a breakdown OF
E percentage basis of the elements totalling General Brett informed him
that be mas not is e position to furnish such information; that it wes confidential
DL that the figure of 1735,000 WILLS what the Army estimated was E. fair proportion of
(eveloment expenditures that should be charged to the panding contract with the
fright Airplane Company. Beth Sir Every and 1. Plevan argued that they did not feel
that rach charges should be made to the Wright contract. They were informed by
Email Brett that tais was a. matter that be WSS not in s. position to discuss insuruch
es it was included is 1 policy that had been approved and under which releases of
restricted types tad bem offered to the Allies.
:- triest further spoke of an item of approximately $420,000 included in his estimate
ein represented vastage = work is process incident to 1 switchover of approximately
324 AM from the Army contract to the Allies. The French and British representatives
instructed that they be give s breakdown of the $789,000, and this discussion me still
being antimed the the mosting was adjourned.
it spears from the tenor of the Allies' discussion today that they desire to have
considered as - offset to development expense the - of accey which have been er-
tented by thes in capital investants in eristion plants in this country. This point
may be brought oct into the open st the meeting of the Bell Aircraft people tomorrow.
Heallug
Regraded Uclassified
245
April 10, 1940
4:29 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Johnson.
Go ahead.
H.M.Jr:
Hello.
Louis
JOhnson:
Mr. Secretary?
H.K."r:
Yes.
J:
The manufacturers were all in on the Curtis P-40,
the Bell P-39, the Lochheed P-38, and our War
Department agreements are all signed end every-
thing 18 moving O.K.
H.M.Jr:
Wonderful!
J:
On the four new ones you gave me that I promised
to let you know about today.
(
H.M.Jr:
Right.
J:
The Lochheed Hudson, that's now in the clear with
us.
H.M.Jr:
Lochheed -- I'm making notes. Lochheed Hudson
J:
That was the fourth one you read. That's in the
clear with us.
F.M.Jr:
O. X,
J:
Now, GlennMartin and Douglas have both taken the
position -- the War Department didn't have any-
thing to do with this.
H.V.Jr:
Yes.
J:
They have now reversed themselves. They will be
at Wright field in the morning 80 that only a day
or two days before that's cleared.
H.M.Jr:
Just a moment. GlemMartin.
J:
GlennMartin and Douglas were bucking.
Regraded Uclassified
246
- 2 -
H.V.Jr:
Were bucking?
J:
Yes, they took the position that the War Depart-
ment didn't have a thing to do with this.
S.M.Jr:
Yes.
J:
And they could do -- the War Department and the
National Council of America as they please, but
they both backed down in the last hour or two;
changed their mind; will be at Wright field to-
morrow morning and we ought to have this in a day
or two.
B.V.Jp:
What does that mean, to Wright field? Why do they
go to Wright field?
J:
Oh, that's where the changes that go into that
A-20 of ours and so forth, are sent to be worked
out.
E.M.Jr:
I see.
J:
That's our material division.
H.M.Jr:
You mean, and they - -- they look them over there?
J:
No, the engineering staff 18 there.
H.M.Jr:
Oh, and they have to submit the plans. Is that it?
J:
That's right. And so that we understand each other
end there will be no confusion later. But they
aren't bucking any more. Martin, he'd like to
buck anyway.
E.M.Jr:
I know he does.
J:
But Douglas doesn't, and they are both straightened
out now and going all right.
H.M.Jr:
And -- and within a day or two on that?
J:
Yes, maybe tomorrow.
E.M.Jp:
Good.
J:
Because they will telephone us from there and we'll
give
Regraded Uclassified
247
- 3 -
E.M.Ir:
Vell.....
::
Ye've been talking on the time benbers.
Yes,
J:
General Arnold and his group don't know what they
nesn.
Yes.
J:
Dive bonbers is a Savy phrase.
Yes.
I:
The Havy has a ship they call time bonbers but
ve don't believe they're talking about that E.E
such.
R.V.Ir:
I see.
J:
But that conference between in Burns end General
Arnold with those people, Captain Dollins is
arranging for tomorrow sometime.
E.M.Jr:
Good.
J:
On the four engines.
E.M.In:
Good.
2:
The sixty four engines. That's ming to be the
toughest one of all to wit m.
E.V.Jr:
I see.
J:
See it's divided Boeing. There rill be no trouble
there.
3.7.2m
Yeah.
J:
And Consolidated - there will be 24 of Consolidated,
18 in itself an experimental ship that's just
us and I think It will take E couple veebs to work
flying. There will be change rin that affect
that one out.
E.V.In:
Vell I thought that on these borbers you told ne
it was O.L. on the 3-2. a m, you sald yet to be
negotiated with the
Regraded Uclassified
248
- 4 -
J:
Yes, I said that the B-24 and the Boeing would
be all right.
P.M.Jy:
Yes.
J:
But I'm just telling you that we'll get all of
this stuff for you in a day or two except that
when they get into the negotiations on the
Consolidated B-24, which we are willing to let
R
P.M.In:
Yes.
⑆
I think it's going to take a week, maybe
ten days, to get that thing worked out with
the Consolidated people between the two sides.
F.M.Jp:
How about the Boeing 17!
J:
No, there won't be any trouble about the Boeing.
E.M.Jr:
No trouble on the Boeing.
J:
Because you see the Boeing 18 the - the one that
we are/leasing is standardized and all the bugs
are out of it.
E.V.Jy:
I see.
J:
There are still some bugs in the B-24, the
Consolidated.
E.V.Jr:
But on the Boeing no trouble.
J:
No trouble.
E.V.Jp:
Well, as of today......
2:
As of today you're made more progress than all the
rest of the four months If they go ahead.
E.M.Jy:
Swell, but I can tell then this afternoon the
Lochheed Hudson 0. K. and on the pursuit ships -
me. Just a minute, please. The Curtis P-40 O.K.
just a minute, I want to get this thing before
J:
Yeah.
Regraded Uclassified
249
- 5 -
The so-called improved Curtis which -- 88 you
call P-40-D. Isn't that what you call it?
J:
That's right. 0. K.
T.M.Jr:
Bell P-39 O.K.
J:
Right.
H.M.Jr:
Lochheed intercepter?
J:
O.K.
E.M.Jr:
O.K.
That was the one you didn't know this
morning.
2:
That's right, but that's been signed since.
F.M.Jr:
That's O.K.
That's O.K.
E.".Jp:
And on the bombers, the so-called improved Loch-
heed Hudson, which they call the Lochheed
E.V.Jp:
Right?
J:
That's O.K.
E.M.Jr:
Well, that's wonderfull And on the others, these
two, the Martin and Douglas will 20 out to Vright
field
Tomorrow.
H.M.Jp:
Tomorrow.
J:
They'll be there tomorrow with our people and we'll
-- may get it cleared for you tomorrow.
F.M.Jp:
Well
J:
And that arises only because Martin and Douglas,
as I repeat to you, took the position, and the Army
didn't have anything to do with it.
Regraded Uclassified
250
- 6 -
H.M.Jr:
Well now they know they do.
J:
Yeah, now it's all right. They are cooperating
fully now. There's no question of even chastising
anything. They're all right.
H.M.Jr:
Fine., fine.
J:
So I think it's moving O.K.
H.M.Jp:
It seems 80 to me. Very much obliged.
J:
You're very welcome.
H.M.Jr:
Thank you.
J:
Goodbye.
251
April 10, 1940
4:35 p.m.
H.M.Jr:
Hello.
Operator:
Captain Collins 1s out of the room for 8 nimute.
They're calling him.
H.V.Jr:
Thank you.
4:36 p.m.
R.M.Jr:
Hello.
0:
Captain Collins. Go ahead.
H.M.Jr:
Harry......
Harry
Collins:
Yes, sir.
H.M.Jr:
Where are Purvis and his crowd?
C:
Right in my office, sir.
H.M.Jp:
Th-huh.
5:
And ve're -- the meeting 16 still in session.
H.M.Jr:
Who are you meeting with?
C:
The Curtis aeroplane and General Brett of the
Army and Captain Kraus of the Navy.
H.M.Jr:
Oh.
C:
Plus Mr. Purvis and Sir Henry and Monsieur Plevan.
H.M.Jp:
Well, I've got some news for then. I tell you,
I'm waiting to hear from across the street and I
may want to ask them to come over here. Seet
C:
Yes, sir.
H.M.Jr:
How long does it take you to come over here nor-
mally? Ten or fifteen minutes?
C:
Oh, about fifteen.
Regraded Uclassified
252
- 2 -
E.M.Ir:
Piftern. By - how - what stage are they is
your talk - I
C:
Vell, it my D. for mother hour.
E.M.Jr:
What?
:;
It may B. for another hour.
H.M.Jp:
Yell, why don't FDI to this. Eare then OTEZ --
come on over 17. Bring the three of then over
here, will you?
C:
Yes, sir.
H.M.Jp:
Because ! not to -- I think it's importat I
talk to then tonight yet.
C:
Yes, sir. Well then I'll tell then that and
ve'll start.
E.V.Ir:
Supposing you start over and they can adjours
their meeting - I wm't keep then more then fine
minutes.
C:
Yes, sir.
E.M.Jp:
Maybe they vest - but I'd like to see then for
five minutes.
C:
Ave, aye, sir. Pu bring then right over.
E.V.Jr:
What?
:-
I'll bring ther right over.
E.M.Jp:
Yes. It will only take THE five mimtes. Let then
come on over.
¿
Yes, sir.
Regraded Uclassified
253
TREASURY DEPARTMENT
WASHINGTON
April 10, 1940.
KR 1 SKERTAM:
The American Steenship WILDWOOD, which sailed from
You York tue Vistivastek, Russia, on February 19th, wes recalled
by the - of the ship while the vassel wes between Hosolulu
and Vlativostak, and the stomer returned to Tacoma, Washington,
share the up is being discharged onto the dock for account of
shippers, maly latery Trading Company.
The me of the s/s WILDWOOD ordered the return of
the ship or kis - responsibility, fearing seizure by the
british.
Baril have
Regraded Uclassified
STRICTLY CONFIDENTIAL
254
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Morgenthau
FROM Kr. Cochran
The Finnish Minister telephoned me at 10 o'clock this morning. Be asked
Whether I had any word for his from the Secretary. I answered in the negative,
explaining that the Secretary bad been, and still 1a, very busy with problems
resulting from Germany's move into Denmark and Norway. The Minister understood
that this complicated matters, but he insisted that Finland still needed help
and hoped that reconstruction could go ahead with purchases of supplies from
Svedes and other neighboring countries.
I inquired of the Minister as to whether he had any official news in re-
gard to the item which appeared on the news ticker yesterday in regard to
Busis asking further requests of Finland. He said that he had no official
word on this point, bat did not take the press item seriously. He said this
Item covered three points. The first two, namely. a new commercial agreement
between Soviet Russia and Finland and the construction of a railway across
Finland to Sveden, were really old points which were covered in the peace treaty
between Russian and Finland. The third point, as to joint ownership by Russia
and Finland of the nickel mines in the north of Finland, was & matter concerning
which the Minister was uncertain.
The Minister volunteered the confidential information that the State
Department had heard that Soviet Russia would not be too hard on Finland in de-
lisiting the nov frontier and would let Finland retain one important woodworking
center which from reports had gone to Russia. Minister Procope expects the
Geruans to exercise strong pressure on Sweden, even though hostilities may not
result therefrom, since Germany now has Sweden bottled up. and will likely be
coliged to have facilities for sending troops across Sweden by land to relieve
and reinforce the Gernan landing forces now established in Norway. Even if the
Servans hold Oslo. the Minister emphasized the difficulty of getting troops and
supplies to the various German outposts along the north coast of Norway, consider-
lag the lack of railway facilities. Procope did not refrain from expressing per-
socially to no his surprise that the Allied fleets had not been able to prevent
the progress which German Seval forces made to Norwegian vaters.
The Minister is going to In York this afternoon but will be back Thursday
eight and available Friday if the Secretary 507 be ready to talk with his.
R.M.S
Regraded Uclassified
STRICTLY CONFIDENTIAL
255
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE April 10, 1940
TO
Secretary Marganthan
FROM Mr. Cochrun
Mr. Laruy-Bemaliou, Fisancial Counselor of the French telephoned
no from New York at 10:45 this foremoon. Be inquired as to what action bad
been taken is regard to Danish and Norwagism balances is this country. I
referred his to Mr. Leree's Circular Jo. 86 of April 9. is regard to expension
in exchange trading in Death and Norwagisa currencies. had
this circular before his, but was particularly concerned to know whether steps
had been taken sizilar to those that were put into effect when Czecheslovakia
vas taken over by Germany.
In reply, I told Leroy-Feauliou that the banks would undoubtedly have mis
it difficult for exyone to withiraw Norwagism or Danish balances from this
country yesterday, and that the same situation obtained today. The be told -
that he vas costing to Washington on Thursday afternoon and would call at the
Treasury, I told Largy-Beanlien that I would give his mch information - night
be svailable and correct at that time, but for the present all decisions are
provisional. I asked further that be should not cable my report to his Govern-
nent in the presises until we night have a talk here in the fressury.
n.m.P.
Regraded Uclassified
256
BSM
PLAIN
Berlin
Dated April 10, 1940
Rec'd 11:55 8. The
Secretary of State,
Washington.
888, April 10, 9 a. 7.
Zy 864, April 8, 9 P. E.
TREASURY FROM HEATH.
The reduction of the Reichsbank discount rate
from four to three and one-half percent and the collateral
loan rate from five to four and one-half percent Effective
today which was decided upon in a meeting of the Board
of Mrsctors of the Reichsbank yesterday afternoon (SEE
my telegram under reference) was announced in this
morning's press.
The official announcement of the Reichsbank states
that this reduction was made possible by the increasing
liquidity of the money market during the last few months
which resulted in the progressive reduction of money rates
in general and specifically in several reductions in the
private discount rate and decreases in the discount rate
on Treasury bills (SEE my 832, April 5, 9 s. me). The
lowering of the Reichsbanks discount and collsteral loan
rates
257
ham -2- No. 888, April 10, 9 a. E., from Berlin
rates will, according to the Reichsbank's announcement,
further facilitate the Reich's war financing.
Berlin financial writers in commenting on this
development point out that the Reichsbank discount rate
which remained constant at four percent for right years
was out of line with declining private interest rates
and the reduction represents a necessary adjustment to
present money market conditions.
KIRK
PEG
258
JR
PLAIN
London
Dated April 10, 1940
Rec'd 1:05 pello
Secretary of State,
Washington.
909, April 10.
POR TREASURY FROM BUTTERWORTH.
British security markets continue week on small
turnover pending authoritative news of the course of
Scandinavi.m EVENTS.
KENNEDY
HeL
: 8 1
259
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: April 10, 1940, 6 p.m.
NO.: 452
FOR THE TREASURY. FROM MATTHEWS.
Today I had lunch with the managing director of the
Banque de Paris et des Pays Bas, Henry Johan. His main
preocoupation was naturally the developments in Scandinavia.
Ee said that despite telephone calls to Ansterdam and
London, he could get DO more news than the public had;
he found the atmosphere in Ansterdam quite depressed.
Johan talked confidently that the Allies were well prepared
to meet the German move, as they were fully aware of it
beforehand. However, I got the impression that his optimism
vas somewhat forced.
Johan seemed to think that French finances were quite
satisfactory, and said he could see no necessity in the
near future for using "any Keynes plan" for France, which
is partly because of the thrift and savings habits natural
to the Frenchman. At the opportune moment, he said, e
long term loan will of course have to be floated but he
does not think that one is being contemplated now.
He said that the resction of the market to the
Scandinavian invasions is impressively calm - in spite
of the large drop in the Norwegian Nitrate Company, in
which his bank holds substantial interests; that security
dropped
Regraded Uclassified
260
- 2 -
dropped from 1805 to 1300 today; yesterday it could not
be quoted.
Johan told me, in reply to By question, that French
industry was not in any way handicapped for lack of credit;
some armament firms, for example, have received loans up
to 150 million francs from the Government for the purpose
of plant operations and new tooling for production of
areaments. In view of practically guaranteed markets,
private bankers have been free in lending to the areament
industries and those related to it. Incidentally, he
emphatically condemned the unpreparedness of France in
September 1939 for any offensive war movement, both in
large caliber long range guns and in heavy shells, not
to mention aviation, of course. Johan said that yesterday
d'Autry, the Minister of Arnament, told him that France
had at last reached mass production of such long range
large guns.
As to var-time profit limits, Johan likewise denied
that they are a real handicap to industry; references:
telegrams of March 13, No. 335 (third paragraph) and
March 18, No. 357 from the Embassy giving the views of
de Wendel and others. However, in its incidence, Johan
said that the tax is not fair in that it is based OR
business turnover which is harder on sualler and less
261
- 3 -
prosperous concerns and on banks such as his than it is
on the larger concerns; however, he believes that this
situation will be remedied shortly. He made the remark
that the law was in the main "window dressing" for the mass
of the population, 80 they would not feel that the whole
burden of the war fell on them.
END SECTIONS ONE TO FOUR, INCLUSIVE.
MURPHY.
EA:LWW
262
QTY
JI
PARIS
Dated April 10, 1840
Rec'd 3:25
Secretary of State,
Washington,
452, April 10, 6 Pale (SECTION TYE)
Today's JOIRUAL OFFICIEL publishas too decress in N-
gard to the control of prices. The first provides for the
provisions of the basic price control decres of Sentaber S,
1939 (Telegram 2. 1999, September 15, acca) linfe as they
authorized price increases "varranted by the conditions of
exploration of enterprises = of fluctuations of the prices
of importel materials" vill be suspended 202 of "trid of
three months 46 May 1, 1940. In Exceptional CESES,
however, price increases may be authorised if the priots
of imported products and naterials should crosed 5 minima
percentage of increase to bE fixed by the Tational Comittee
for the surveillance of prices or by 2: internisterial
comittee on prices. The the months' pariod my be porte
longed by decret for 2 similar period of the 4
LMS:NFL
263
J.
GRAY
PARIS
Dated April 10, 1940
Rec'd 4:08 Pello
Secretary of State,
Washington.
452, Avril 10, 6 palle (SECYION SIX)
In the preamble to this measure it is stated that the
present moment would supear to be auspicious for the intro-
duction of the aforementioned suspension since "in Prance
prices have been fairly will stabilized since end of
February" (SEE for examle my 417, Anril 1, 5 p.m.) while
"the general index of gold prices of nineteen raw materials
in the United States which declined appreciably during the
month of January and showed but a slight increase in the
following weeks has fallen again Since the beginning of
March." The second decree on prices provides that any con-
sumer may report in writing to the civil authorities any
illegal increase in the price of merchandise products or
foodstuffs subject to price control. It is hoped that this
procedure nav bE an Effective instrument for the maintenance
of a strict control over prices.
CSB
264
GRAE
PARIS
Dated Arril 10, 1540
Rec'd 4:03 Della
Secretary of State,
Washington,
452, April 10, Code (SECTION SEVEN)
An explanatory statement with regard to these decrees
was issued last evening by the Under Secretary of State for
National Economy to the Effect that TICE stabulisation is
"of the greatest imortance from LIVE point of viry of defense
of the franc and fro the social wint of view. The Govern-
cent is determined to det with the greatest energy is
carrying out this NEW
The Journal Official also publishes a decree providing
for E. control OVER specified French Exports to certain
powers so as to revent their recrportation to Cermany,
29 telegray To. 1780, September 4, 7 Dalla
The French consodities concerned are given in list A
and relate to 165 tariff item including discellansous r:w
materials, ulnerals, fuels, Poodstuffs and iron and stal
products. List 3 gives the names of the nentral countries
I th respect to 5203 such exports are to be "controlled",
CSB
Regraded Uclassified
265
JT
GUY
PARIS
Dated April 10, 1940
Rec'd 5:53 Della
Secretary of State,
Washington.
452, April 10, 6 Dellie (section EIGHT)
It covers all neutral European countries with which France
has not signed an agreement by which the neutral government
guarantees that French merchandise exports to it will not be
reexported to Germany. List "3" countries are Albania,
Bulgaria, Dennark, Estonia, Finland, Sungary, Iceland, Latvia,
Ligchtenstein, Lithuania, The Netherlands, Norway, Portugal,
Rumania, San Marino, Spain, Sweden, Switzerland, Turkey,
Soviet Russia and Yugoslavia. In order to obtain a permit to
export to a list "3" country commodities appearing on list
"A" the French exporter must submit together with the export
permit request an agreement signed by the neutral importer
whereby the latter guarantees that the commodities in questic
vill not be resported to Germany. The llinistry of Blockade
will decide whether or not en export permit shall bE
granted.
MURPHY
EB
266
JT
GRAY
PARIS
Dated April 10, 1940
Rec'd 6 Palle
Scoretary of State,
Washington.
452, April 10, 8 pelle (SECTION NINE)
An arrete published in today's Journal Official states
that merchandise will be considered as originating in of 202-
tral country in accordance with the meaning of the basic
decree of September 1, 1039 regarding trode with the energy
(SEE above reference) if the production of such atrohindise
does not involve the USE of more than 25% of enemy materials
or labor. A further arrett states that the importation Into
Prance of "products native to or of original manufacture in
or coming from" the neutral European countries listed below
can only be Effected if a certificate of origin signed by
a French consul is presented in which it is certified that
such goods do not contain nore than 25% enery naterial or
1 abor. THESE countries ert: Albania, Belgiun-Luxembourg,
Bulgaria, Dennark, Estonia, Finland, Greece, lungary, Iceland,
Italy, Latvia, Licohtenstein, Lithuania, The Urtherlands,
Horway, Portugal (Excluding islands in the Atlantic Ocean),
Rumania, San Marino, Spain, Sweden, Switzerland, Turkey,
Yugoslavia.
HURPHY
ELIB
267
JT
CRAY
P.RIS
Dated April 10, 1940
Rec'd 4:17 pame
Secretary of State,
Washington.
452, April 10, 6 Della (SECTION TEN)
Another decree appearing in today's Journal Officiel
adds pulp vood and run to the list of materials which may bE
insured atainst risks of war (my telegram 10. 190, February
7, 5 Penele
The securities market vas stronger today and many
variable revenue issues both French and international regained
part of yesterday's losses. Rentes were subject to mixed
gains and losses ranging from 15 centimes down to 90 cen-
times up. From talls with French and American bankers I
gather the general feeling that yesterday's developments in
the north eart the beginning of an extremely important
phase of the var but that it is as vet too early and available
information too meager to draw any sound conclusions.
(ED 07 ESSAGE)
1 RPTY
ENB
268
April 10, 1940
6:15 p.m.
(After return from White House)
Present:
Mr. Cairns
Mr. Gaston
Mr. Foley
Dr. White
Mr. Cochran
Mr. Schwarz
HM,Jr: As I understand it, what we are going to do
18 to mimeograph this and release it at the State Depart-
ment.
Mr. Gaston: The only difficult thing is the real
reasons we cannot state.
HM,Jr: That's why I wanted it in your room. I
wouldn't tell them it's because we hope to get some of the
money Ribbentrop has in Denmark or anything like that.
Mr. Foley: We are going to have it mimeographed
and give it out over there and send all inquiries over
to you.
Mr. Schwarz: Are we going to make this public?
We would have to mimeograph that if we are going to make
it public.
Mr. Gastor: Let them know it has been signed and
will be filed in the Federal Register tonight.
HM,Jr: Now I can forget about the machinery?
Mr. Gaston: You can forget it. It goes.
0 00 o 00 0 00
265
April 10, 1940
6:25 p.m.
Present:
Mr. Plevan
Mr. Purvis
Sir Henry Self
Capt. Collins
HM,Jr: I'm awfully sorry, but I will tell you
in confidence what it is because it will be out in the
paper tomorrow morning anyway.
The President just signed the executive order
putting exchange control governing funds in this country
for Denmark and Norway, which includes all funds. So I
think it is worth waiting for.
Mr. Purvis: We did not have any doubt either that
it was worth waiting for.
HM,Jr: Means quite & lot for us to cross that
bridge. But all of their funds in this country are frozen.
You can see the notice to then that if they should go into
Sweden that the Swedish funds over here, which are tre-
mendous, in other words, if they are going to have the
cake there is going to be no icing. But I can't help it
you fellows are at war and you make the work for me.,
Mr. Purvis: We are conscious of it too.
HM.Jr: The reason I wanted to see you tonight is
I wanted to know from you what I have been told by the
War Department - is it working ? That's what I want
to know. Have these manufacturers been told that they
can go ahead?
Capt. Collins: That part, yes, sir.
Mr. Purvis: The only direct evidence we have is
in this case.
Regraded Uclassified
270
N I I
Capt. Collins: What have you seen?
Mr. Purvis: Only Wright this afternoon.
HM,Jr: Had Wright been told he could do business?
Mr. Purvis: Yes. General Brett was right in the
meeting and Trans was there too.
HM,Jr: I wanted to makesure.
Mr. Purvis: We just assumed that from the very
tenor of their facts.
Capt. Collins: or course he had been told.
HM,Jr: The other thing which he told ne, Johnson
called me at 4:30, Lockheed, Hudson, was O.K. And this
morning he said provisionally the Lockheed interceptor.
Capt. Collins: The P-38.
EM,Jr: the Lockheed interceptor.
Mr. Purvis: Good. Splendid.
HM,Jr: On the bonber thing, the Lockheed improved
Hudson is O.I. They have asked Glenn Martin and Douglas
to report to Wright Field tomorrow and they say that in
24 hours at the most they think they can give you a re-
lease on Glenn Martin and Douglas. He said Glenn Martin
had been acting baily, said it was none of the Mar Depart-
ment's business, but they now agree it is Mar Department
business and Glenn Martin and Douglas have been ordered to
Wright Field tonorrow and they think within one or two days
he will get a release on that. They say on the four-engine
thing, the Boeing 17, there will be no trouble about that,
but on the Consolidated they expect it will take a couple
of weeks.
Mr. Plevan: Ve are not interested in the Boeing.
HM,Jr: You are not? Well, anyway you are interested
in the Lockheed Endson and that is all right as of tonight,
and Douglas and Martin have been told to submit their plans
and they say cae to two days.
Regraded Uclassified
271
-3 -
On the dive bouber be sali be NEB in connection
vità you.
Capt. Collins: 30 wents to have 3. meeting some
time with our friends to Blease what ve have in the
atter.
Kr. Plevan: I spoke to Zarquia voc has seen the
live bonber of the lary. Be would like to have technical
sivice.
Capt. Collins: Be can have it.
EM,Jr: The air thing I wanted to make sure I vaso't
being kidded.
Mr. Purvis: Yes.
EX,Jr: Fooled - Dat's all I had.
Xr. Purvis: There is are thing we
EM,Jr: Look, I'm all 12. I'm finished for tonight.
% you nini? You will be here tororrow. I'm completely
all in physically.
Mr. Purvis: Yes. XAT se cone sometime tomorrow?
EX,Jr: Yes. Ken : originally asted you, when I
heard the President vas realy, I vanted to make sure that
what I had been told was safe, and incidentally, this is
very confidential, there was to have been - this is in
the family -- Johnson is going to have E press conference
tomorrow morning and announce all of this.
Cept. Collins: 4a usual.
Kr. Purvis: There is only one fundamental problem:
development expense.
EM,Jr: And I asked the President. Be said Johnson
should keep Ets mouth stat. is was going to announce all
that be had done today, but that's very much in the family.
Mr. Purvis: Quite.
Regraded Uclassified
272
- 4 -
HM,Jr: I will be available tomorrow. How's
three o'clock tomorrow? I am sorry.
Mr. Purvis: Please don't feel badly about it.
00 0 00 o 00 o 00
PRESIDENT ROOSEVELT TOWIGHT BY EXECUTIVE ORDER FROZE ALL
BALANCES AND FOREIGN EXCHANGE TRANSACTIONS IN THIS COUNTRY
INVOLVING NORWAY OR DEWMARK 02 THEIR NATIONALS.
4/10--$B627P
AND EXECUTIVE ORDER
BY THE SAME ORDER, THE PRESIDENT GAVE SECRETARY HORGENTHAU
DIRECT CONTROL OVER NORVEGIAN on DANISH CREDITS IN THIS COUNTRY
BY AUTHORIZING NIN TO PERMIT WITHDRAWAL OF DALANCES 08 CREDITS
WHICH HAD KD FROZEN.
THE PRESIDENT FURTHER AUTHORIZED NORGENTEAU TO REQUIRE REPORTS
WITH RESPECT TO ALL NORWEGIAN OR DAMISH PROPERTY IN THE 1. s.
NR. ROOSEVELY SIGNED THE ORDER FOLLOWING A PROTRACTED CONFERENCE
WITH ASSISTANT SECRETARY or STATE BERLE, TREASURY GENERAL COURSEL
VOLEY AND NORGENTHAU.
ALTHOUGH THE order was NOT EXPLAIMED INMEDIATELY IT was BELIEVED
IT IS INTENDED TO PREVENT GERMANY CLAINING CONTROL OF SUCK BALANCES
BY VIRTUE OF ITS OCCUPATION OF THE SCANDINAVIAN NATIONS.
ACTIVE PRESIDENTIAL SECRETARY NASSETT SAID THE GRDER WILL
EMABLE NORCENTEAU BY LICENSE TO PERMIT CONTINUATION OF FORKIGN
EXCHANGE OR VITHDRANAL or BALANCES BY THE COVERNMENTS 02 NATIONALS
INVOLVED. THE ORDER AMENDED A PREVIOUS ONE SIGNED JAM. 15, 1934. WHICH
REGULATED TRANSACTIONS IN FOREIGN EXCHANGE AND TRANSACTIONS or
CREDIT AND EXPORT or COIN AND CURRENCY.
4/10--$36447
Regraded Uclassified
274
April 11, 1940
9:15 a.m.
Present:
b. Timer
P. Mile
L. Thompson
b. Sullivan
b. Parris
le. Sénn
D. Gaston
b. in
5. Foley
b. Cotton
17. Thite
12. Bell
1:. Cochren
IN nots
M.In
1 met to thank everybody for the difficult
job DE gt through yesterday and Herbert
carrying the extra loads he did yesterday,
laston:
Thank you.
E...:::
it get very good reports on the vay you handled
the press last night.
lasten:
Indian, they had E. big story running.
MM
But everybody did their work very well. I told
È DDV. that be is back I vant him to concentrate
I the machinery of this thing to make sure that
this thing clicks. I told him about the people
and he has been getting the story this norming
and right after this be will P.S. into mother
conference.
Fell:
= weld like to have 8 little time to read the
documents first. About 11:00 o'clock.
M.Dr:
= have got to read them, too, sometime.
Bell:
herls is dictating a memorandum on that happened
yesterday in the transactions B this stall.
I worder If there will be any technical questions
they will ask at 10:30. Do you think so, do
yes think they got everything out of their system
last right!
Regraded Uclassified
275
- 2 -
Schwart:
They will try to get it today.
This is what I thought I would tell them, that
anybody who has any - is the owner of any For-
wegian money which is affected by this thing
should go to his bank and ask his bank in turn
to 8° to the Federal Reserve Bank in its district.
Foley:
Property or noney.
And I also thought what I would say is this, that
the purpose of this was that after all, we have
become the safe deposit vault of the whole world
for safekeeping of this money, so that this money
is here for safekeeping and we want to make E
hundred percent sure that the owners of this money -
that we continue to keep it for the original
owners.
lasten:
Yes.
Poley:
That is one of the things. I wouldn't put it
entirely on that basis.
that is the other phase?
Foley:
I think it is E. protection of our interests pri-
marily, rather than a protection of theirs, that
we have to hang this on in order to sustain its
validity.
United
Sor?
Foley:
Tie don't know what there is here. Te don't know
how much has come over here. Tie have B. general
idea, but Te don't know specifically. Te want
to freeze everything until we can get E census
and know where it is and how much it is and what
it is. Then ve can determine in the light of
our own interests -
E.M.In
What are our own interests?
Foley:
that proper action we should take.
E.M.Ir:
that are our interests?
Regraded Uclassified
276
- 3 -
Poley:
The effect it might have on our exchange, the
impact that this may have on our economic
situation.
E.U.Jr:
Well, what would it do?
Poley:
That is -
White:
Well --
The safe deposit covers those --
Thire:
So, you have to be pretty vague, because you
have hung this on a bill which certainly doesn't --
Poley:
If they quote you officially, 1t DAY be used, you
see, If this thing is attacked, and I think te
ought to put it on as broad B. ground as the can
rather than on that we are just a bank for the
whole world.
Vita:
It night well destroy the Norwegian dollar rate.
MAIN
: didn't say tin box. : said safe deposit vault.
carris:
Mr. Secretary, I think you ought to give as prompt
action to any appeals from Norwegian ship owners
as you can, because otherwise you vill disorganize
the whole shipping situation of the world.
Ball.Jr:
What we have got is this: They neet again st 2:30.
We receive all applications then and we are telling
the banks that If they will get anything that they
have up to 3:00 o'clock today to =, ve will give
then $ clearance before sunset. We can't work any
faster than that. We will clear business every
day, but ve won't take business from any Federal
Reserve Bank after 3:00 o'clock.
Cochran:
The question there, Mr. Secretary, which Ed ought
to advise us on is to whether we can accept in-
formal applications today by telephone 07 only
those on the forms submitted to banks.
I will Roswer that. I would say informal.
Gaston:
There is one other Allied question that I think
18 need to get the legal department's opinion on.
Regraded Uclassified
277
- 4 -
Danish and Norwegian ships in our waters tied
up at our docks, are they assets or property
covered under this?
You will know all the answers by 10:30, won't
you, Dan?
dell:
Oh, yes.
Well, supposing you and Poley sit in at 10:30
and if there is anything difficult, I will look
at you and if you don't know, you smile and look
at Ed. Ed will call up 3ernie.
usto:
The way it is, you make B statement and Rd says,
Now wait a minute, that isn't quite right."
Ed makes e. statement and then Pernie says, "Now
wait a minute, EC, that isn't quite right." And
then Harry White says to Fernie, "Now vait 8.
minute, Bernie --"
I think me had better not have a lawyer here.
You had better let ne do It in my own peculiar
manner.
It is one of the technical details to be worked
out, but I do think it is necessary to pin it
on just what you said, because there is no justi-
fication for the Act.
........
I will say the Order speaks for itself.
Foley:
Tie want to freeze everything so 16 can find cut
just what we have and what action we ought to
take.
thite:
You see, the Act also calls for an investigation --
L.V.Ir:
I will tell them to read the Act carefully, that
any business tan should go to his bank, the bank
should to to the Federal Reserve, and if they
can't have the answer, we are going to try to
clear the business every day. To regular busi-
ness will be held up. If possible, we will try
to - but we are going to give - I think re have
got to give the Federal Reserve Banks B. deadline the
of 3:00 o'clock. They will have to receive
business by 3:00 o'clock. I think that is fair,
don't you?
Regraded Uclassified
278
- 5 -
Sell:
You haven't put that 3:00 o'clock in any Order
or anything.
shite:
That is Just for today.
E.W.Jr:
I made that as a suggestion to you.
Bell:
I would leave it informally. I don't think you
can set any deadline for special transactions.
E.V.Jr:
We will try to clear everything every day.
Bell:
I think I would leave it that way.
B.N.Jr:
The purpose of the 2:30 meeting is for you to
come in here with these people and tell me what
the problems are and If there are any decisions
you think I ought to make, I will try to make
them at 2:30 in consultation with you and whoever
you bring in.
White:
That possibility of clearing everything every day
will be impossible, I can promise that, because
they give it to you over the phone toda; and until
the machinery gets going that is one thing, but to
commit yourself to clear these things every day
with thousands of reports coming from all over
the country, that is going to be different.
E.V.Ir:
The banks are going to be able to clear E lot and
we have got to give them a lot of authority.
Listen, Harry, I always use the example of Sears
Roebuck. I don't know how many - they had 50
million dollars of business last month. I don't
know how many orders they cleared. Their average
clearance on their orders, filling their orders,
is eight hours. If they can do it - we had about
12 or 15 orders yesterday. They take eight hours
to clear an order, fill it. It could be done.
Somebody will have to work nights, that is all.
White:
It can be done fine, but if you promise ahead of
time - yes, that is the objective.
E.X.Jr:
That is the objective. The Federal Reserve Banks,
they have no business. This gives them a little
business.
Regraded Uclassified
279
- 6 -
Bell:
It gives the Treasury EL little, too.
H.X.Jr:
No, but the banks have nothing to do, absolutely
nothing.
Bell:
I do think 18 ought to clear them.
Foley:
There ought to be E. lot of calls from the banks
today. Me put the Order and the Regulations on
the wire last night and we airmailed the forms,
which they will get this norning, most of them -
some of them won't get then until later - and I
suppose they will be calling in about the pro-
cedure.
E.E.Jr:
It ought to all go to Dan until he decides who
he will designate to handle it, but for the time
being, it is his taby, If be can stay awake.
Bell:
I will be all right tomorrow, but I am having &
little bit of difficulty today.
E.V.Jr:
Norman?
Thompson:
Nothing.
S.K.Jr:
Harry?
White:
There are several things I would like to see you
about this norning.
R.M.Jr:
When are you going to have that gold thing?
White:
Very soon, within $ few days.
EAR
Well, I was fishing.
Thite:
Within a few days. It is started. I am supposed
to give & talk tonight in New York. Is that --
H.M.Jr:
That is all right.
White:
That is all right?
S.E.Jr:
That is all right.
White:
There are several other things.
Regraded Uclassified
280
- 7 -
Harris:
I have that Italian thing. I would just like 8.
word with you on that.
E.M.IN
I will give you E. time now. Supposing -
Harris:
I think you could read the memo in five seconds.
B.N.Jr:
I vant to talk to you. And when you come in,
talk about shipments of coal to Italy.
Farris:
Coel to Italy?
E.V.Jr:
Yes, and the possibility that maybe - this is
just my own idea - there may be a tarter of silk
for coal, or something like that, but more busi-
ness, more purchases from Italy. The State Depart-
ment is very much interested in encouraging pur-
chases and you ought to know about it. 11:00 c'clock?
Harris:
Pine.
H.M.Jr:
Harry, you want to see me?
White:
Yes.
S.K.Jr:
11:15?
White:
Yes.
E.M.Jrs.
All right, George?
Eaas:
I just have that weekly routine report, that
railroad moving for export.
5.9.In:
That else?
Haas:
That is all.
F.M.Jr:
Anything new on the race horses?
Saas:
No, we haven't got the answer yet. I will give
it to you first.
E.K.Jr:
Chick?
Schwarz:
lie are up and current.
Regraded Uclassified
281
- B -
Gaston:
Chick, what about your speech problem?
Schwarz:
This morning?
Gaston:
Yes.
Schwarz:
The Womens Division of the National Democratic
Committee has asked Mr. Gaston to talk to E
small group of ladies at 11:00 o'clock this
morning at the club headquarters, New Hampshire
Avenue. They asked before Tuesday's develop-
ments. Now, in the light of developments,
possibly we might wish to send somebody else
over.
Isston:
On the budget.
Schuarz:
The budget and the debt. It is intended as &
preliminary skirmish before the national group
meets here next month.
L.R.Jr:
I wouldn't send anybody to talk on the budget.
lie don't know where we are at ourselves. I
wouldn't send anybody on the budget.
Schwarz:
Somebody can talk to them on more or less general
terms.
H.M.Jr:
I just can't be bothered with it, I really can't.
Everybody is too busy, we have got too much to
do to be running over and talking to a lot of
women at 11:00 o'clock in the morning. It is
silly. Just tell them we can't do it. There
is too much business going on at 11:00 o'clock
in the morning.
Schwarz:
The picture has changed since they asked for it.
Cotton:
The status of these Export-Import Bank Scandinavian
credits ought to receive some attention at some
time. I notice Mr. Jones had a conference with
the President yesterday and said he was holding
everything.
E.K.Jr:
I don't think that was the purpose of the con-
ference. What the purpose of the conference
Regraded Uclassified
282
- 9 -
really was, Mr. Welles told me - Mr. Welles
was very much annoyed that Mr. Jones had not
made any loans to these South American coun-
tries.
Cotton:
I knew that was coming up.
E.M.Jr:
And he took Mr. Jones over there to have him
spanked.
Cotton:
Well, these press reports of it were that on
the Scandinavian credits, they were discussed.
E.N.Jr:
He has been ordered to get some of these South
American loans through. Mr. Welles was very
much annoyed.
Cotton:
I think it ought to receive some attention
sometime. I have talked to the Bank people
a little bit. Pierson is in New York.
B.K.Jr:
Supposing you press it and find out what the
status is, because Procope is pressing Merle
Cochran to see me. I have got nothing to see
Procope about.
Cotton:
I mean, offhand the Danish credit has never
really been set up and I don't think you would
probably want to let that one go and the Nor-
wegian --
H.M.Jr:
If you want to know what the status 18, as a
representative of the Treasury, let them call
8. meeting of the Directors.
Cotton:
I think we ought to have 8. little bit about it
here, what you think ought to be done. These
things can be cancelled. They have cancellation
clauses in them.
H.N.Jr:
Why not take it up with Bell as part of the
assets of these countries, will you?
Cotton:
Right.
H.M.Jr:
And Bell, get your machinery running and this
is part of the picture.
Regraded Uclassified
283
- 10 -
Bell:
All right.
Merle?
Code:
The man who is substituting for Pinsent telephoned
me last night and asked me 1f I knew what It vas
that Summer Welles wanted Lord Lothian to learn
from England. He said he thought there was some
request up. I said yes, there was 8. request
several days ago and I had him get the letter
which had been sent to the State Department and
transferred on here. He said that had gone through
Chalkley's hands and was sure nothing had been
done on it, so he agreed to send 8. cablegram last
night.
S.V.Jr:
Mr. Welles agreed to talk to Lord Lothian yesterday
afternoon and ask Lord Lothian to give us an answer
to his letter of April 4 to %. Hull.
Cochran:
Yes.
E.V.Jr:
And I want one damn quick.
Cochran:
I told him that we had pressed through the State
Department for 1t, that we had held up the --
H.M.Jr:
In the letter, Lothian says he will have an answer
by telegraph.
Cochran:
He said the telegram was coming as soon as possible,
so nothing had gone out. That is all.
Sullivan:
I would 11ke to see you sometime today.
S.N.Jr:
Harry, is 15 minutes enough for you?
White:
I think I need a half hour.
3.K.Jr:
You won't get it today.
White:
Then I will settle for 15 minutes.
H.M.Jr:
11:30.
Sullivan:
I will not need 15 minutes.
Regraded Uclassified
284
- 11. -
S.M.Jr:
It sounds political.
Sullivan:
No, sir, far be it from me to crowd into the
sphere.
B.H.Jr:
All right. Fifteen minutes is enough for any-
body today.
Ed?
Poley:
Here is that memorandum you asked for the other
day on the novie cases. (April 11, 1940)
Here is an amindment to the authorization you
gave the General Counsel sometime ago to accept
or reject service of process for you. This
would add all other officials in the building
to the original order and centralize in one
place the receipt of legal process, which is
good administration.
H.M.Jr:
If anybody wants to be sued through the Under-
secretary 07 Director of the Vint, they can
see you.
Foley:
That is right.
E.M.Jr:
What else?
Poley:
That is all.
E.M.Jr:
Herbert?
Gaston:
Admiral Masche's appointment term as Commandant
expires in June. Shall I send a recommendation
for him?
P.M.Jr:
Sure. that else?
Gaston:
Prepare 11 letter for your signature?
H.M.Jr:
Please.
laston:
That is all. I have taken up with Berle and an
waiting for an answer from him on this question
of sealing the radios on Danish ships. It is
rather a complicated question. If there is any
Regraded Uclassified
285
- 12 -
evidence that they are going to communicate
with their masters in Denmark, the chances
are we want the radios sealed. There are
seven of them tied up at our wharves.
H.V.Jr:
What else?
Gaston:
That is all.
H.N.Jr:
Well, Dan, then we are all right and you go
on this thing, see.
Bell:
I am going to get right to work on it.
CONFIDENTIAL
286
TREASURY DEPARTMENT
Regraded Uclas
INTER OFFICE COMMUNICATION
DATE April 11, 1940
TO
Secretary
FROM Mr. Cechras
1 arted improvement in the sterling rate occurred abroad this sorning,
presmably as a result of reported British neval incossion. After closing here
at 3.49-3/8 last sight, the pound Jumped from 3.53-1/2 to 3.61-1/2 in Amsterdam
prior to the for York opening. The first quotation here was 3.58-1/4 and in the
space of a for states, sterling reacted to 3.54 From then on, the rate noved
arratically upand, teacking an of termoce peak of 3.57. the closing quotation
vas 3.56.
Sales of spot starling by the air reporting banks totaled 1549,000, from
the following seurces:
by commercial CORRETER
I 292,000
By foreign lasts (Burope, Par last and South America)
257,000
Total. & 549,000
Purchases of spot sterling amounted to 1654,000, as indicated below:
by commrcial consures.
I 70,000
by foreign banks (Barepo and Par East)
i 584,000
Total. 1 654,000
The Generanty Trust Company reported that it had sold cotton bills totaling
246,000 to the British Control a the basis of the efficial rate of 4.02-1/2.
The Cuaranty also stated that it had purchased 25,000 for forward delivery
from the British Central at 4.03-1/2. the funds will be used to pay for shipments
of juts.
Following the course of sterling, the Prench franc rose to .0205 in
Austardam, Surtly after the speaing hare, it fell to .0200-3/4. later in the
day, it recovered to class at .0202.
The Consition dollar improved to a discount of 15-3/8% in the early after-
men. this is the best rate that has been quoted for that currency in over a
math. The closing discount was 15-1/26.
The other important currencios closed as follows:
Guilders
.5308-1/2
Swies france .2242-1/2
Belgas
.1692
287
- 2
Regraded Uclassi
The Swedish krona TOSE to a noudal quotation of .2383-1/2 this morning.
The closing rate, also nominal, vas .2383.
The Federal Reserve Bank purchased 11,000,000 French france for account
of the National Bank of Tuguslavia.
Ve purchased the following state of gold from the earmarked accounts
of the banks indicated:
$15,000,000 from the Notherlands Bank
10,000,000 free the Bank of Prance
352,000 from the Central Bank of Chile
$25,352,000 Total
The Federal Reserve Bank of lev York reported that the following ship-
ments of gold were boing consigned to it:
$2,258,000 from England, shipped by the Bank of England for account of the Sviss
National Bank. The disposition of this shipment 16 unknown at the
present time.
1,693,000 from Italy, shipped by the Bank of Italy, to be earmarked for account
of the B.I.S.
$3,951,000 Total
The State Department forwarded to M R cable stating that Mocatta &
Goldsmid, London, shipped $7,000 in gold from England to the Banque Belge pour
l'Etranger, New York, for sale to the U. S. lassy Office.
The Bombay silver quotation was melanged at the equivalent of 41.064.
The prices fixed for silver is London were 20-9/16d and 20-1/24 for spot
and forward delivery, representing a decline of 3/8d in each case. The U. S.
equivalents were 33.404 and 33.12#.
Handy and Harman's gottlement price for foreign silver vas unchanged at
34-3/4#- The Treasury's purchase price for foreign silver vas also unchanged
at 35#.
We made six purchases of silver totaling 664,000 cances under the Silver
Purchase Act. of this amount, 300,000 susces represented sales from inventory,
200,000 cunces vore trading silver, and the reasing 164,000 ounces consisted
of new production from foreign countries, for forward delivery.
SMH
288
April 11, 1940
10:55 8.2.
H.M.Jr:
Hello.
Harry
Collins:
Mr. Secretary.
E.V.Jr:
Yes, Harry.
It's in an impass. The -- apparently the
main argument 18 this. That in this development
expense being allocated to these new contracts,
in them is included certain expense incident to
the development of past models which they have
already bought, notably the P-36 in the case of
Curtis and the P-40. Now, that comes Fight back
to a straight case of policy which has been
enunciated by Louis Johnson.
E.V.Jp:
Yes.
And the only thing seema to be to go back to Louis
Johnson and tell him just what the fly in this
ointment is and see whether he cares to change
that policy. Now, my thought vas this. Brett
has suggested that we go to Louis Johnson. I
was wondering whether you would prefer to have
that meeting in your office for a discussion with
Louis Johnson.
E.V.Jr:
(Pause) I don't know. Let -- just give ne more
details a minute, will you, BO I can evaluate it.
C:
Yes, sir. Well here, take the Curtis case. The
Army figured 739 thousand dollars, and they asked
last night for a break-down, on B. percentage basis,
by model.
May
Yes.
C:
And Brett came in this norning after having dis-
cussed it with Johnson and Burns last night and
said that he could not give that. That - then
it develops that what worries them 18 this, and
Self put it up and he has an argument to a certain
extent - that they had put their sums of money into
the Curtis plant in the development of that plant,
which had resulted in expediting production of the
P-36 as well as the P-40. Now, what they would
Regraded Uclassified
289
- 2 -
probably go for would be a compromise to their
wishes. They do not feel that they should pay
any development expense, first of all, but What
has stopped all the discussion 18 the fact that
there is included in this 739 thousand dollars
some of the development expense for the P-40,
for which they have a contract for 100, and none
of the development expense for the P-36.
E.V.Jr:
Why don't you do this, because I -- - the limit to
the smount of time that I can put on It.....
C=
I appreciate that.
E.M.Jr:
Mhy don't you take a crack at Johnson and see
where you can get?
C:
All right. Well then, would there be any objec-
tion if I go to Johnson with Brett?
H.M.Jr:
I think it would be fine.
8:
All right. Well then, I'm doing the listening
part for that fellow only though, sir.
5.M.Jr:
What?
C:
I'm doing the listening part only with him. I
mean by that I'm not going to make any suggestions.
Brett 16 the one who will have to develop
R.M.Jr:
Well, see where you can get. And can't you do two
at the same time? Can't you do Bell also?
C:
Yell, the Bell is just B. little different, you see.
Their claim on the Bell 18 not 80 - is not so
involved because here 1s one aeroplane and they
will simply have to take that. That 1s, if they
must take development expense why then they've
got to take this without argument.
E.M.Jr:
Yell, 20 and Bee what you can do with Johnson and
let me know. later.
is
Aye, aye, sir.
Regraded Uclassified
290
April 11, 1940.
2:47 p.m.
Hello.
Operator:
Captain Collins. Go ahead.
Hello.
Cantain
Collins:
Mr. Secretary.
Yes.
We're still in the throes of our discussion over
here. Was there anything other than this discussion
with which you talked to Sir Henry and Yr. Pleven.
What -- say that again.
I say was there any subject other than discussion
today with which you - about which you vishes
to talk to Sir Henry and Mr. Pleven.
E.V.In:
Other than the planes?
0:
Yes sir.
No.
All right. Well then inesruch es we're still
going on here and there's some other things to be
developed, and some other information which must
be had, would it be all right to postpone the
meeting with you until tomorrow.
F.M.Jr:
Yes, I'd be delighted.
ii
All right sir.
Well now, you don't know when do they - what time
do they want to come.
8:
I should think that we ought to be able to - say
eleven o'clock.
E.M.Jr:
Eleven o'clock.
C:
Yes.
R.V.Jr:
All right.
C:
Goodbye sir.
E.V.Jr:
Thank you.
Regraded Uclassified
291
April 11, 1940.
4:45 p.m.
Operator:
Go ahead,
1.2.Jr:
Harry?
Ceptain
Collins:
Yes sir,
M.M.Jr:
Bought any planes?
C:
No sir, not a one.
Are they still meeting?
C:
No sir. We adjourned here about, I guess some
thirty minutes ago.
9.M.7z:
Huhhuh.
C:
Well the situation was this. We discussed
together, at least they discussed quite at
length this question of policy. Have I talked
with you since I talked to Johnson?
S.I.Jr:
No.
:
All right. Well, we went over and told him just
the dilemma in which we found ourselves with
reference to the French and British and we
discussed that quite at length and he said that
inasmuch as the testimony had been what it was
on the Hill, that he didn't see how they could
change that policy.
T.M.Jr:
Yes.
C=
Now this afternoon it develops. We met them
again with the French, after we'd met with
Johnson and the British, we met with the French
and British after we'd met with Johnson, and
it develops now that the reason presumably more
that this percentage breakdown of which I spoke
this morning was to determine whether or not
any of this development expense was applicable
to some model that was not restricted.
Yes.
5
And then they dealt quite at length on the amounts
of money which they estimated for purposes of
discussion at twenty million that had already been
Regraded Uclassified
292
- 2 -
put up for capital extensions for training
of employees for overtime and premiums
for expedited deliveries. Of course the amounts
of money covered in the memorandum, a copy of
which Purvis left with you the day before
yesterday. And they said that they felt this,
that it was a debit and credit deal. They ad-
mitted at the last that the principle however
that they were properly chargeable with some
development expense, but they said in connection
with that they could not lose sight of the fact
that they had made very large outlays of money
for capital investments in this country which
after all, did provide additional facilities
for the use of the military service of this
country.
H.M.Jr:
Yes, but you can't sell that.
C:
Well I know but here the way it was with us
right now sir. The - it appears now from what
Brett said that, just before the meeting blew,
that it's a question of seven hundred and
thirty nine thousand dollars for Wright and
about three hundred and forty thousand dollars
for Bell.
H.M.Jr:
Yes.
C:
And he is now trying to get tonight, what it
will amount to on the Lockheed.
H.M.Jr:
Yes.
C:
They in turn, are bringing in as a matter of
information, tomorrow, the total amount of money
which they have laid out in this country.
H.M.Jr:
Yes.
C:
And I fear that we may have to have a meeting
with them and Louis Johnson to just see what
effect that may have on the policy unless you
desire to sit in on that meeting. They feel
very strongly that the amounts of money being
charged them for development are entirely too
high, and that consideration should be given
to the amounts that they have spent in plant
expenses.
H.M.Jr:
Well you can't get away with that.
293
- 3 -
C:
You don't think so.
E.V.Jr:
No. I think the Allies are entirely wrong.
C:
Huhhuh.
B.M.Jr:
And Johnson's got to have something and so's the
War Department, so's the President and so do I,
to tell them.
:
"
Yes.
E.N.Jr:
The public.
C:
Yes.
R.K./r:
And we - what's other more, we've got to have
some money.
C
Yes.
E.M.Ir:
To develop a new plane which will be one jump
ahead and they need this money to do that.
C:
Yes. Well look, unfortunately, in the talks out
there at Dayton, why the breakdown on the Curtiss
plane was given to the Curtiss people.
F.M.Ir:
Yes.
:
And this P-36 slipped into the discussion
yesterday and that's what upset the applecart.
E.M.Jr:
Well -
¿
Because they have a contract for that and they've
had it, you know, what is it, two hundred and fif-
teen of them delivered to them and they don't
see why we should go back to that. They said -
B.N.Jr:
No, but charge it all up to the new plant, why -
C:
Well that's just exactly what I said yesterday.
It's unfortunate that they ever got into this
dog fight at all on models. Just simply say
that's development expense applicable to this
new ship and let it go at that. But unfortunately
that attitude can't be assumed now because the
Army has smilled it. Now, they'll be no
meetings with these people tomorrow prior to the
session in your office. Now I presume they will
- 4
294
want to present that side of it. Purvis, I think,
is going to stay over and he will be there.
Well I want to see you and General Brett before
I see them.
Well, then, what time?
I'd like to see you and General Brett 1s my office
at nineo'clock.
C:
lline o'clock.
T.N.TN:
Yes. Brett's the man, isn't he?
Brett's the man all right. But Brett of course
is tied down by Louis Johnson's instructions.
F.M.Jr:
That's all right. I'm - from what I've heard,
this time I'm with Louis Johnson.
Well I am too. I had to admit to him today that
I could see his point and of course Louis comes
up for the question here that there was a whole
lot of this conversation held up there that's
not in the record. And they definitely, he said,
they want an off the record meeting with
Dowell Harter, he told him he was oine back
and save the Government's hide.
F.M.Ir:
I don't - I just was thinking whether I ought to
have Johnson here, and Brett or Brett alone.
Has Brett got all the figures?
C:
Yes, he has the figures all right sir.
R.V./r:
What?
⑆
He has the figures all right sir. I'm wondering -
Brett's in sort of a tight boat over there, and
I'm wondering if politically it might not be
a good thing to ask Johnson to come too.
S.V.Ir:
I'll ask him. I think I'll call up Johnson and
ask him whether he would come and bring whatever
officers necessary with him, to give me explana-
tion of this at nine o'clock tomorrow morning.
C:
All right.
Regraded Uclassified
295
- 5 -
H.M.Jr:
See?
C:
Yes. But look, if you could, if I might
suggest it, if you could consistently mention
Brett's name, why -
H.M.Jr:
I'll do that.
C:
I wish you'd do it, because otherwise he'll
bring this Burns in there, and Burns is - he
hasn't got the picture.
H.M.Jr:
I'll ask them to be at my office at nine
tomorrow morning. I'll call them right away,
because I want to get his story before I see
the Allies.
C:
I think that's very desirable. I was going to
try to get in touch with you later on today -
H.M.Jr:
I'll do that.
C:
- to bring up that point.
H.M.Jr:
Let me call Johnson and I'll ask him to come
with Brett tomorrow morning at nine.
C:
Yes sir.
H.M.Jr:
See ?
C:
Well you'll have Mac call me back if it's a go.
H.M.Jr:
Well, no, if you don't hear it's nine.
C:
All right I'll be there. I'll be there.
H.M.Jr:
Unless it's a cancellation it's nine o'clock.
C:
Aye aye sir. I'll be there.
296
TREASURY DEPARTMENT
PROCUREMENT DIVISION
ONCE OF THE DIRECTOR
WASHINGTON
April 11, 1940
MEMORANDUM FOR THE SECRETARY
Vesting was held in my office this morning at which were present Sir Henry Self,
the Pleven, General Brott, Captain Kraus, Mr. Bell, Mr. Whitman and Mr. Neely of the
Bell Aircraft Company, Mr. Bones and myself.
Mr. Rell stated that he was ready to discuss the contract for the P-39s. Sir Henry
asked if the price that he had included any development costs. Mr. Bell informed him
that it did and then turned to General Brett for a statement of the amount concerned.
Jeneral Brett stated that there had been allocated to the Bell Plant in connection with
this proposed contract for P-39s $360,000 for development expense. Sir Henry then -
ferred to B. question asked by him at a meeting yesterday afternoon and again asked
just what this expense covered and how it had been computed. General Brett stated
that computations had been made at Dayton; that consideration had been given to the
suns of money paid by the Army to Bell Airoraft for the development of the P-39; that
the 360,000 represented only a. proportion of the expense actually incurred by the
\rmy; and that, further, at no time had there been included any direct charges incurred
by the Army such as their engineering and administrative forces at Dayton.
Sir Henry then reverted to the discussions of yesterday concerning the $739,000 of
development expense which the Army determined would have to be ammortized by Curtiss
Airplane over contracts at present being negotiated for P-40s and P-46a and asked if
any of this expense was incident to development work on any models prior to P-40.
General Brett referred to the policy under which, as interpreted by the Air Corps,
the amount of development expenses incident to all of the companies had been computed.
Since the discussion had reached an empasse the meeting was recessed at 11 o'olock.
At 11:20 General Brett, Captain Kraus and I went to a conference with Assistant Secre-
tary of War Johnson and Colonel Burns, his aide. The discussions of yesterday and this
morning were briefly told to the Assistant Secretary, and it was pointed out to him
that the British and French desired to have 6. breakdown which would indicate the
distribution of any development expense chargeable to them over the different types
of airplanes to which it was applicable. After a general discussion of this point
Assistant Secretary Johnson decided to adhere to the policy laid down in his letter
to the manufacturers on April lat.
The meeting with Sir Henry and M. Plevan reconvened at 1:30 and after much discussion
there was presented for consideration by the proper authorities of the Government the
fact that approximately $25,000,000 had already been invested by them in capital ex-
tensions, training of employees and premiums for overtime and expedited deliveries
from suboontractors and that, further, the proposed purchase of airplanes would entail
Regraded Uclassified
291
: further expenditure of approximately $21,000,000 for capital investments, plant
artensions and training of new personnel, they desired that consideration be give to
€ change in policy which would recognize these expenditures as an offset, st least is
part, of development expense allocated to their new contracts. A further discussion
developed the fact that apparently the only other model in which they are presently
interested against which development charges would be made is the Lockheed P-38.
General Brett stated that he did not have the figures indicating this amount, that be
did, however, hope to be able to present them by tomorrow morning. M. Plevas pointed
out that until they knew what the total development expense was they could not make
e determination as to what their program would be, and Sir Henry added that the appli-
cation of this development expense, and he oited the proposed Bell contract 12 as
example, might result in their not buying any planes at all. Meeting Was then adjourned
until after the meeting in the Secretary's office tomorrow at 11 AM by which time the
total development expense allocable would be known. They indicated that they would
appreciate an opportunity of discussing with the proper authorities this question of
policy with B. view to having a reduction made in development expense charges.
In this afternoon's meeting the foreign representatives agreed to the policy of having
charged to them a proportion of development expense but immediately coupled it with
If request for consideration for the money they have expended in the extension of the
aviation industry in this country and stated that they felt that these two items
met be considered in arriving at any amount of development expense chargeable to them.
They further expressed the hope that in evaluating the benefits derived and to be
derived by our Government from extensions and training of employees for which they had
paid, that development expense chargeable to them might be reduced to a. aision.
Joeen
Regraded Uclassified
298
ANGLO-FRENCH PURCHASING BOARD
Copy
NEW YORK:
WASHINGTON
5
BROAD STREET
785 15th ST., N.W.
(his letter from Washington, D.C.
April 11, 1940.
Capt. H. E. Collins
Chairman, President's Liaison Committee
Procurement Division
Treasury Department
Washington, D.C.
Dear Captain Collins,
AS agreed at our meeting this
afternoon, I take pleasure in sending you herewith
in triplicate a statement of the expenditure
incurred by the French and british Governments
for the expansion of the capacity of the United
States aircraft industry, that is to say, the
building up of assets of importance for national
defence.
May these figures help to convince
the Under-Secretary of War that any development
charges, from which we may indirectly benefit,
have been more than offset by our contribution
to the development of the aircraft industry.
with kindest regards,
Yours sincerely,
Regraded Uclassified
SECRET
Statement of expenditure incurred by the
French and British Governments for expan-
sion of capacity of the U.S. aircraft
industry
1.
French and English orders placed prior to present
programmet
(a) Expansion of plant of Wright Aeronautical
Corporation for the manufacture of aero
engines.
Total cost
$10,372,000
(b) Expansion of plant of Pratt & Whitney
for the manufacture of aero engines
Total cost
$ 7,255,000
(c) Expansion of plant of Curtiss Wright
for manufacture of air frames
Total cost
$ 940,000
(a) Expansion of plant of Glen Martin
for manufacture of air frames
Total cost (including training) $3,292,000
(e) Expansion of plant of Consolidated
Aircraft for manufacture of air frames
Total cost
$ 940,000
(f) Expansion of plant of Curtiss and
Hamilton propellers
Total cost
$ 500,000
These figures do not include the cost of capital
expansions by the Lockheed and North American
companies which they were able to bring into being
by virtue of large British aircraft contracts.
Regraded Uclassified
2.
Expenditure involved by the present Allied
programme under discussion:
(a) New expansion of capacity of Wright
Aeronautical Corporation for the
manufacture of aero engines
Capital expenditure
$6,560,000
Cost of training personnel
1,560,000
(b) Capital cost for increase of
capacity of Allison plant for
manufacture of aero engines
Capital expenditure
$5,550,000
Cost of training personnel
600,000
(c) Expansion of Pratt & Whitney
(Figures not yet available but
estimated capital expenditure) $8,000,000
(a) Expansion of Pittsburg plant of
Curtiss Wright for manufacture of
steel bladed propellers
(Final figures not yet determined
but estimated minimum)
$5,000,000
(e) Estimated cost of increasing capacity
of sub-contractors and suppliers of
accessories and equipment such as
carburetors, magnetos, armament, etc.
$10,000,000
3.
Development charges incurred on designs for
French and English -
It is not possible to state a definite figure
here inasmuch as the cost has been included in
Regraded Uclassified
the contract prices, but it was by virtue of Allied
orders for the Glen Martin, Douglas, Lockheed and 301
North American types, which have been purchased
in the past, that the designs of these aircraft
have been largely elaborated.
Very important technical contributions have been
made by the experts of the French and British
Commissions to the re-designing of many aircraft
types in order to incorporate the requirements
demonstrated by war experience to be necessary.
4.
Summary
Without attempting to evaluate the contributions
referred to in the preceeding paragraph 3, it
will be seen that the direct contributions to
development of capacity of the aircraft industry
in the United States will reach a total figure of
$60,569,000. It is suggested that the creation of
this additional capacity constitutes an outstanding
contribution to the military preparedness programme
of the United States which, according to declarations
of Administrative policy, is a factor of recognized
importance.
Anglo-French Purchasing Board
April 11, 1940.
Regraded Uclassified
I
302
THE WHITE HOUSE
WASHINGTON
April 11, 1940.
Dear Mr. Secretary:
I am sending you herewith a copy
of the message the President will transmit
to the Congress today about noon -- a confi-
dential advance copy, to be held in confi-
dence until released when read in either
the House of Representatives or the Senate.
This is sent for your information.
Very STEPNEN sincerely EARLY yours,
Secretary to the President
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure.
:
303
ESLD FOB RELEASE
BOLD FOR RELIASE
HELL FOR EXCLASE
Agril 11, 1940.
CONFIDENTIAL: assure and the plan
transitted with 22 - must be bela in STRICT
and 20 parties, cympais, or intination be publicied or
give cus until the SIX of the Prusident's any
has began it the Senate or the Sease of irgresentatives.
Extreme care must therefore be etercised to avoid pressure
publication.
STEPHEN EARLY
Secretary to the President
TO THE 00023S 02 If UNITED STATE:
the year 430 the Cougress directed the President to investi-
gate the erganization of the Presutive establisment and to submit
plans for such transfers, organizations, and abolitions of agencies
as were found Decessary and decirable.
shortly tereihr I submitted 8.crganization Plan So. I
which inproved see over-all et the treative Brunch. This
will followed by Lorguation Please No. II which effected E letter
allocation of certain wades ud setivities and departments.
Although these tve plans DATA been is affect less the : year, meir
benefits DATE already best getifying. = - found the task of
coordinating the vort of the Trecutive truch less difficult. May
inprovements is service DATE occurred, und subtatiel economies
have resulted.
Recrgnation Flain So. m. realy submitted, is =
third step which will issue introduparto.ntal mass through
intersal adjustments is certain species.
I = 204 preposiar à fourts plan which
provides for 1 namber or interdepurtmistal recrgatirations. These
changes are designed to increase in the
of Government service by 15. 2028 logical groupits of certain functions
and by Ed further reduction in the number of independent agencies re-
porting directly to the Chief Questive.
accurdiacly, I - transmiting berewith Recrganization Plan
No. IV, which, the ism stigation, I DATE propared is persuance of
section 4 of to Recryanization net of 1939 (Public E. 19, 76th Congress,
1st Session) approved april 3, 1939; 820 I declare with respect to
zation tecessary to accomplish ONE or ARE- of the purposes of section
each recyclization zuda 52 this Plan, that I DETA true suit reorgazi-
1 (a) et the act:
1. % reduct
2. To increase d'ident;
5. To consolidate apactes corrding
to anjor purposes;
4. To reduce see number of yestes
by consolidating the
similar functions and by stolisting
such as my set by
5. To everlagging und agli-
atics 00
Its No I - transmit I all describe briefly 13 follows:
Regraded Uclassified
- 2 -
304
Department of State: The Dodniess Customs
is transferred to the Department of State from the Division of
Turritories 4 Island Possussions is the Department of the Interior.
2 State Department is tau most appropriate socy to supervise this
activity which involves relations with a foreign government.
Treasury Department: The Flat transfers to the Secretary
of the Treasury the function of the Attorney General of approving
settlements -- technically termad compresises -- of
cases arising ute the Federal Alcohol Admistration Act which have
201, prior to compraise, been referred to the Dipartant of Justice
for prosention. Is present requirement that the Attorney Goard
approve all compromises results in a comberson,
procudure eidch the small acounts involved to act arms. The pro-
posid valing will be simplar, less likely to cause delay, et consis-
test dti the procedure nos followed in corponias arising enter other
Acts shich the Truesury Department administers.
Department of Justice: Executive Order It. 5166, issued
Date 10, 1933, provided for the centralization of the distribut
function is - Davision of Disbursement in the Treasury District.
The realting Increase in efficiency has emply description the
vision of actralizing disburses.nt work. In offeruating the plan,
I DATE found it necessary to postpoor its application to
Odted States marshals because of the unusual chiracter of their
disbursing work in surving the courts. Experience indicates that this
the should be continued. I as proposing, therefore, the
post treasfer of the disbursament function of United States
artuls from the Treasury Department to the Dipartment of Justice.
Past Office Department: It bad also bless found desirable
to estima permanently in the Post Office Department the disbursment
of Post Affice runds. The special estracter of the work of this Depart-
and, involving disburs-munts in thousands of post offices throughout
the Nition, requires hore, as well as 12 the essa of the United
States medicals, a departure from the sound theory of central disbure-
ing. no its far-flung facilities, the Post office is
better squipped to carry on this work then the livide of Disbursement.
Another proposal affecting the Post Cifice Department relates
to the transportation of mil and other aterial between departments.
E the carly colonial days, the interchinge of correspondence and
- by tax simple nond-to-hind nethod. Grainally a Date
systematic derice because necessary to trasport assegns, with the
resultant evolution of the postal service. Business and private citizens
in gard bon made aso of that service, end today a have in our Post
Office Digurts.ct the most officient organization of it: tind is the
well. Bown, Date in the Capital City, the Pateral Contrasent,
instad of atilizing fully the resources of the Post Defice Department
to its suil and account survice, tos peraitted a aulti-
plicity OF interdeporta.atal services, und arring its ONELL
dipartment, burusa, or agency. Tals duplication of services is un-
at results in a constant crissertesing and overlapping of
personal end agaigment, all ungrood is E comon setivity. I un sure
that the citizen in Whishington, es well as officials of the
Convernent itsulf, DATE wondered at this paredox whinty the Federal
âmmust is failing to make the fullest as: of Cline of its DMD agencies
which is specially equipped to rander a daple. survice for
till the other special. This Reorganization Plan proposes to do exactly
they to provide for the transportution of cail, locuments, purkages,
and offices 02 1 regularly scheduled besis of sufficient Inquired to suet
sisilar saterial total all buildings secupied by Government
the reasonable use normal requirements of these offices sad to reduce
to 1 sizins the constant disputching of mussingurs on so-ealled
urgust bests 20 the agencies creapted by the Act.
and energity crronds. This service sill be evailable on e
Department of the Interior: I propos- to truster to the
Service relating to soil KGG moisture consumation 8 Lands the
Department of the Imerior the activities of the Soil Conservation under
Regraded Uclassified
ony
jurisdictive of the issue Department. with respect to private
lunds, the will conservition sori of the Federal Covernment Is
princrily ef a condition change use can boat be carried on
by the Department or sinte the occporation of the farmers
throughout the country. Is the of Fuderal Lands, this work
includes to retail application by 15, Government of noil conserve-
tion practices and 10 - furtion of the agency administer-
ing the land.
Department of Call of the purpose of the Reorganizo-
tion ACE 10 to rudux the namber of chinistrative egencies and thureby
sumplify the tosk of creative de have crido substantial
progress word this objuctive ender pevrlous recrgnnization plans. I
un - proputed unler strip in this firection by placing the Civil
Aeronmutics accurity vithia the frankerk of the Department of Com-
norse, Plus So. III, which decla with intradepartmental
trans = M prottical separation betwood the functions of the
ad tax Civil Aeromatics Bourd. In Plan IV, which is
concern É NETO rearginization, I an bringing the
Authority in - your pructers. The Administrator will
report 10 tb. SAVING et 2 board, however,
will : form its dijaticitive, cond investigative functions
ind client or - Departies In the interest of officioncy it will
bd supplied to 11 with budgeting, occounting, procurement,
and oth = diffee survice. AS realt of the adjustments provided
in Plans III - IT, 1 to Cittl Appocautics Board will be
sble finctively to carry results the important work of accident in-
v.otigution h.n.tof.r. performed by the Air Stify Board. In addition
to to ff.ctive USA discharg. of secident investigation
work thich this trade will futilitato, economies in administration
will by possible.
20 of the Vitar Buronu's functions to the
Stude's come/rov as del 4.4 to 16. Socialer tc transfer this Bureau
to to Department = an. IL development of the avistion
Ludustry has Lipoded upon the Buts: a mjor rusponsibility
in the filld of sir transportics. De truster to sho Department of
Demaires, 10 provided 12 this A., will pruit botter coordination
of Gov.res.nt actirities native so cristion and to commission generally,-
without in any W-5 lussuling the Eurou's contribution to agriculture.
Departas: of Liber: The 21:a transfors to the Secretary of
Labor the functions of 15- Signatury or the Treasury and the Sucretary
of th. Interior relatis to the of the minimum wage provi-
sichs in contracts for Rdd construction. The Secretary of Labor
15 sponsible by La for to: of the provniling wagu rates
in kvernet custricts and should properly have complete
responsibility for their
Bited Status Commission: I propose to tronsfer to
tb. Chited Status Veritis. Comission the /unctions of the Secretary
of 15. Sery relating to State aurias and mutical schools. These
cchools IN detoted to treating yeang --- for junior officer positions
in the percuant The guneral responsibility for developing
facilities fit the trainité of archent marine personnel is vested in
the Maritide Commission. A proposed transfer will thus purmit closer
coordination of the assisted schools with tax training work of the
Maritin Commission.
Federal Sucurity & Federal Security Agency has ea
its major purpose 13. production of gocial and sconomic security,
educational opportunity, - to helth of the citizens. The functions
of Soint Elizabotsa Suspital, Problem's Hospital, Howard University,
and Columbia Institution for the Def plainly come squarely within thoos
purposes. Consequently, I find it necessary and desirable in pursuance
of the objectives of the Recrginizution Act to transfer to the Federal
Security Agency the responsitilition of the Interior Department relating
to these institutions. The scri of Solut Elizaboths Hospital and
Products Hospital to must 200% da to the activities of the Public
Henlth Service la the Federal Secrity Agency than to those of any other
Federal establishment. Studerly, Howard University und Columbia Institu-
tion for the dest CEN detn ach benefit from association with the
Office of Mustics in the Poderal Security Agency than with any other
F.deral organization.
Regraded Uclassified
306
I further propose to transfer to the Federal Security
Agency the Food and Drug Administration with the exception of
two activities intimately related to the work of the Department
of Agriculture. The work of the Food and Drug Administration
is unrolated to the basic functions of the Department of Agri-
culture. There was, however, no other agency to which these
functions more appropriately belanged until the Foderal Security
Agency was created last year. I nov believe that the opportunity
for the Food and Drug Administration to develop along increasingly
constructive lines lios in this now Agency. There is also need
for coordination of certain of its functions with those of the
Public Health Service. To accomplish those objectives, the Plan
establishos the Administration as a separato unit within the
Fedoral Security Agency.
Economics: Functions any be transferred or consoli-
dated under this Reorganization Act, but the abolition of
functions is prohibited. Congress alone can curtail or abolish
functions now provided by law. Savings must come from adminis-
trative expenses which comprise only = smll fraction of Federal
expenditures. This preeludes the raking of large reductions in
expenditure through roorganization plans. The major achievements
in reorganizations under this formila must insvitably be found
in improved management and more effective service. However,
somo savings in administrative expenses will be possible under
this Plan. I estimate the imediate annual savings at approxi-
mately $800,000.
Future reorgenization needs: The reorganization plans
thus far submitted do not exhuust the transfers, consolidations,
and abolitions that my be necessary and desirable. Some changes
that now appear to have arit réquire further study. It is the
rosponsibility of the Prosident 15 Chief Exceutive to BOC that
noeded adjustments and improvements in administrative organization
are mdc. But this he cannot adequitaly accomplish without proper
statutory authority. The present Beorganisation Act entirely
exempts come 21 udministrative agencies from consideration.
Furthermore this Act expires on January 20, 1941.
I strongly recomend the reconstment of the Reorganism-
tion Act, without exemptions. The structure and management of
our Government, like the activities and services it performs,
must be kept abreast of social and esonamic change.
PRANKLIN D. ROOSEVELT
THE WHITE HOUSE
April 11, 1940.
Regraded Uclassified
PLAY X. IV
307
Prepared by the President and transmitted to the Senate and
the Bouse of Representatives in Congress assechled,
April 11, 1940, purcuant to the provisions of the
Peorganization Act of 1939, approved april 3, 1939.
Department 07 STATE
Section 1. Transfer of Customs Receivership.-
The functions of the Division of Territories and Island Posses-
tions in the Department of the Intorior relating to the Doninieurs
(istoms Receiveranip are transferred to the Department of State
and shall be administered by the Secretary of State or under
his direction and supervision by such agency in the Department
of State at be stall designate.
OF THE TREASURY
Sec. 2. Approval of Compromises.-T functions of the
Attorney General relating to the approval of compromises made
in accordance with the provisions of section 7 of the Federal
Alcohol Administration Act are transferred DO the Decretary of
the Treasury, to be exercised by his or under his direction and
supervision by such officer in the Department of the Treasury
LS Le shall designate: Provided, That exclusive jurisdiction
to compromise cases arising under the Federal Alcohol Adminis-
trution Act which are pending before the courts or which tive
team or may hereafter be reforred to the Department of Justice
for action shall bo restoc in the Attorney General, and may be
carreised by his DC by any officer 12 the Department of Justice
designated by him.
DEPARTMENT C JUSTICE
Sec. 3. Disburscent functions of United States
All functions relating to disbursement by United States carshals
which would otherwise become functions of the Treasury Department
on July 1, 1940, by virtue of the provisions of Executive and Order
30. 6166 of June 10, 1933, na enended, are transferred to
vested in the Department of Justice to be exercised by United
States narshals under the supervision of the Attorney General
in accordance with existing statutes pertaining to such functions:
Provided, That the Attorney General shall furnish the Secretary the
of the Treasury, when requested by him, such information as of
Treasury Department may require with respect to the excurts
money followed in connection therewith Provided further, the upon
received and disbursed by earshals and the proceiure that
the request of the Secretary of the Treasury, and with the
of the Attorney General, the facilities of Department in the
approval Justice be utilized in the disbursement, or alcing available
of my of public moneys of the United States
for experiture by any agency of the Government.
POST OFFICE DEPARTMENT
4. Functions of postal disburrements.-All and all functions other
relating to Sec. the divocrsement 01 for postal revenues end
has under the jurisdiation of the Post Office Department
Regraded Uclassified
the Postmater Reanl and the board of Trustees of the Postal
308
Swrings System aux would otherwise become finations of the
Treasury department = July 1, 1940, by virtus of Breative
Order Yes £168 of las 10, 1938, as anended, are transferred to
and vasted is (a) the Board of Trustees of the Festal Savings
System M to postal savings disbursements, and (b) the Post
Office Department as to all other distruments involved, and
such fusctions shall be exercised by postmasters and other
authorized disbursing agents of the Post Office Department and
of the Postal Sevings System in accordance with existing statutes
pertaining to such functions, Provided, That the Postmaster
General shall furnish to the Secretary of the Transay, the
requested by him, such information as the Inastry Department
say require with respect to the assets of noney record and
disbursed by the Post Office Department, its postmasters ned
other fiscal officers, and the procedure followed in comection
therefith Provided further, That upon request of the
of the Treasury, and with the approval of the Portactor learni,
the facilities of the Fort Office Department may be utilizad is
the or aiding in the disbursement, of public unlys
of the United States evailable for expenditure to any Agency of
the Construct.
Sec. & instr of interbuilding functions.-
(a) Except us prohibited by section 3(b) of the Recrginization
let of 1939, the faction of regular interbuilding missinger
service (including the trunsportation of mail) and the function
of transportation of mil between agencies and the
City Post difice, XV expreised in the Sistrict of Columbia by
agencies of the are transferred from such agencies
to and consolidated in the Fost Office Department and still be
administered by the Postmaster General under such rules and
regilations of the President shall proseribes Provided, that
this section stall 200 apply to the trunsportation a: notays and
sicurities by amored trair or by other special survice, or to
restage service between contigues buildings.
(b) The Diructor of the Burias of the Budget my waive
the transfer of my motor vehicle coming within the purvier of
section 14 of this Plaz shore be finds that the retention of
such vohicle is essential to the performance of functions the
than those transferred by this suction.
DEPARTMENT OF E INTERIOR
Sec. E. Certain hasties of the Soil Conservation
Service functions of the Soil Conservation
Service in the Department of Agriculture with respect to soil
and moisture conservation operations conducted en very Imás
under the jurisdiction of the Department of the Interier -
transferred to the Department of the Interior and shall be
administered under the direction und supervision of the Scere-
tary of the Interior through missing 4554) or agencies in the
Department of the Interier as the Secretary shall designate.
an E XUEX
Soc. 1. instit of civil Aerocantics Acthority.-
Office of the Aministrator of civil terenautics and its fune-
(a) the civil Aeronautics Authority and its functions, the
tiess, et the forties of the Air Safety Found are transferred
to the Department of Comproe.
(b) The of the Air Safety Board are cormoli-
dated with the (motions of the Ciril Acronactics Authority,
which stall hereafter be LS the Civil Asrenactics Board
and which stall, in addition to its other functions, discharge
the àtis buretofore vested in the Mr Safety Board so al to
Regraded Uclassified
309
- 2
provide for the independent investigation of aircraft accidents.
24 offices of the members of the air lafety Foard are abolished.
(c) The Administrator of Civil Importice, whose
forting shall be administered under the direction and super-
vision of the Secretary of Commarce, and the Civil Aeronautice
Bard, which shall report to Congress and the President through
the Secretary of Comerce, stall constitute the Civil Aeronautice
authority within the Department of Comerce: Provided, That the
Stril Auromatics Board shall exercise its functions of rule-
sider (including the prescription of rules, regulations, and
standards), adjudication. and investigation independently of
the Secretary of Commerce: Provided further. That the budgeting,
personnel, procurement, and related routine manage-
must factions of the Civil Aeronautics Board stall be performed
mier the direction and of the Secretary of Commarce
trap each facilities as be smill designate or establish.
Sec. 8. Transfer of Vesther hrm-fu Weather Burosu
la the Department of Agriculture toi its functions are transferred
to the Department of Conneros and stall be administered under the
Unitia and supervision of the Secretary of Commerce: Provided,
that the Department of Agriculture my contime to make snow
surveys and to conduct research concerning: (a) relationships
letrie wenther and crops. (3) long-rauge wasther forcenating,
and (e) relationships between westher end soil erosion.
CF LABOR
Sec. J. Transfer of certain functions relating to
efortant of wage payments DC public coastruction.--Tho func-
time of the Secretary of the [reat] and the Secretary of the
Interior under section 2 of the Act of June 13, 1934. entitled "An
let to affectuate the purpose of certais statutes concerning ratos
of N for labor. by mking It mlsdil to prevent anyone from
maining the compensation contracted for tharemder, and for
other purposes" (46 Stat. 948). Are transferred to the Secretary
of labor end shall be administered 7 his or under his direction
102 expervision by such exercy to the Department of Labor as the
Secretary shall disignate.
UNITED STATES MARTINE COMMISSION
Sec. 10. Transfer of school functions.-The
furtings of the Secretary of the with respect to furnish-
Ing. mistring, and repairing result for the use of State
write == antical schools and with respect to administering
grede of funds for the support of each schools ero transferred
to end stall be administered by the United States Maritime
Jurisdiction over vessela. apparcl. charts, books.
ni instruments DOW loaned to State murise or nutical schools
to transferred from the Socretary of the Dery to the Daited
States Comission.
TSSEAL SECURITY
Sec. 11. Transfer of certain Interior Department
institutions.-(a) Sairt Englial.- Saint Elizabethe
English is the Department of the Intertor and its functions are trace-
farred to the Federal Security Mary mad stall be administered under
the direction mi genervision of the Faieral Security Administrator.
Dr und report required to be so the Congress by
the of the Engital shall be submitted through
Regraded Uclassified
310
- 4 -
the Federal Security Administrator. The annual report
required to be furnished to the Secretary of the Interior by
the Board of Visitors shall be furnished to the Pederal
Security Administrator.
(b) Freedmen's Hospital.--Freedmon's Hospital in the
Department of the Interior and its functions are transferred
to the Federal Socurity Agency and shall be administered under
the direction and supervision of the Federal Security Adminis-
trator.
(c) Howard Univorsity.--The functions of the Dopart-
nent of the Interior rolating to the administration of Howard
University are transforred to the Federal Security Agency and
shall bo administered under the direction and supervision of
the Federal Sucurity Administrator. The annual report required
to be furnished to the Secretary of the Interior by the
president and directors of the University shall be furnished to
the Federal Security Administrator. The Office of Education
shall continue to nako ito inspections of and reports on the
affairs of Howard University in accordance with the provisions
of existing law.
(d) Columbia Institution for the Deaf--The functions
of the Department of the Interior relating to the administration
of the Columbia Institution for the Deaf are transferred to the
Federal Security Agency and shall be administered under the
direction und supervision of the Fodoral Socurity Administrator.
The annual report required to be furnished to the Secretary of
the Interior by the procident and directors of the Institution
shall be furnished to the Fodoral Socurity Administrator, and
the annual report of the suporintendent of the Institution to
the Congress shall be submitted through the Federal Security
Administrator.
(e) Federal Security Administrator.--The functions
transferred by this section sholl bo administered under the
diroction and supervision of the Pedoral Security Administrator
through such officers or subdivisions of the Federal Security
Agency as the Administrator shall designato.
Suc. 12. Transfer of Food and Drug Administration.--
The Food and Drug Administration in the Department of Agriculture
and its functions, except those functions rolating to the admin-
istration of the Insecticido Not of 1910 and the Naval Stores
Lot, are transforred to the Fodoral Security Agency and shall
be administered under the direction and supervision of the
Fodoral Socurity Administrator. The Chief of the Food and Drug
-dministration shall horeafter be known as the Commissioner of
Food and Drugs,
GENERAL PROVISIONS
Soc. 13. Transfor of functions of heads of departments.-
Excopt as otherwise provided in this Plan, the functions of the
hoad of any department rolating to the administration of any
agoncy or function transforred from his department by this Plan,
are trensforred to, and shall be exercised by, the hoad of the
department or agency to which such transforred agency or function
is transforred by this Plane
Seo. 14. Transfor of records, property, and porsonmol.-
Except as otherwise provided in this Plan, all records and
proporty (including office equipment) of the several agencios,
and all records and property used primarily in the administration
Regraded Uclassified
311
- S -
of any functions, transferred by this Plun, and all personnel
used in the administration of such agencies and functions
(including officors whoo chief duties rolate to such adminis-
tration and whose offices are not abolishod) 056 transforred
to the respective agencios concerned, for usd in the adminis-
tration of the agencies and functions transforred by this Plan:
Provided, That any performel transferred to any agency by this
section found by the head of such Agency to be in excess of the
personnel necessary for the administration of the functions
transformed to his agency shall bd retrunsforred under cxisting
law to other positions in the Government service, or separated
from the service subject to the provisions of section 10(a) of
the Roorganization Act of 1939.
Sec. 15. Transfer of funda.--20 much of the unexpended
balances of appropriations, allocations, 02 other funds avail-
able for the use of any agency in the exercise of any function
transferred by this Plan, or for the use of the had of any
agency in the oxercise of any function so transforred, as the
Director of the Burcau of the Budget with the approval of the
President shall detormine, shall be transforred to the agency
concerned for use in connection with the exercise of the
function so transforrud. In determining the anount to be
transforred the Director of the Bureau of the Dudget may
include un amount to provide for the liquidation of obligations
incurred against such appropriations, allocations, or other
funds prior to the trinsfor: Provided, That the USO of the
unoxpended balances of appropriations, allocations, or other
funds transforred by this section shall be sucject to the
provisions of section 4(d)(3) and section 9 of the Reorganiza-
tion Act of 1939.
Regraded Uclassified
312
Avril 11, 1940
8:57 R.n.
H.M.Jr:
Take B. look et the Vall Street Journal this
morning.
Harry
Collins:
Yes, sir.
E.M.Jr:
The War Department has been talking plenty again.
C:
oh, for God's sake!
E.M.Jp:
But there's nothing we can do about it.
C:
Yeah.
E.M.Jp:
You know they asked -- he asked me point blank
what -- how much each order was. I couldn't --
I had to tell him.
C:
Yes, sir.
H.V.Jr:
But I've tried to Xill a press conference he was
going to have this norning.
C:
Yes, sir.
E.M.Jp:
Now, what I want to know 18 what are they going to
do this morning.
C:
Well, now Bell 18 going to be down this morning,
and I don't think we're going to 20 80 fer with it.
E.V.Jp:
You don't?
C:
No. Now yesterday you were too tired to go into
1t, but on the Vright case the development expense
to be amortized in the Wright case was about 739
thousand dollars.
H.V.Jp:
Yeah.
6
Well, they asked about that end, in fact, that was
Just about the only subject discussed at yesterday's
meeting. And Brett said that he was not at liberty
to tell them the basis on which that had been ar-
rived at. He told them the formula but he wasn't --
he wouldn't give them the figures. As 8. matter of
fact he didn't have them.
Regraded Uclassified
313
- 2 -
H.M.Jr:
Yes.
C:
And he was stalling also against getting probably
authority from Johnson to tell them.
H.M.Jr:
Well, I mean, what do the British want? They......
C:
Well, they feel that's too much money.
H.M.Jp:
Now listen.
C:
Yeah.
H.M.Jr:
Let me tell you something. Now, seven hundred and
how much?
C:
Thirty-nine thousand.
H.M.Jr:
Over -- for what company?
C:
Wright, Wright.
H.M.Jp:
For which planes?
C:
The Curtis -- for the P-39.
H.M.Jp:
The P-399 Which 18 that?
C:
No, no, I mean the P-40 and the P-46.
H.M.Jr:
For the two together?
C:
That's right.
H.M.Jr:
That's all they want?
C:
That's right. Wait a minute, that -- this 18
development expense only to be amortized over the
contracts, you see.
H.M.Jp:
All right. Now listen, don't tell them to come
and weep on my shoulder on that. That's the
cheapest money they ever layed out. I don't want
them coming around weeping here. Now, if -- now,
wait a minute. Get this thing straight, Harry.
5:
Yes, sir.
314
- 3 -
H.M.Jr:
And if they don't want it I'll tell it to them
right between the eyes. If that's all that the
Var Department wants to charge up the Allies are
God damn lucky!
:
That's for one contract.
E.M.Jr:
Well that's cheap.
c=
Yes, I think 80 myself. I go with you on that.
E.M.Jr:
Well don't let them come over here at three o'clock
and do a lot of weeping on my shoulders because
I'll get rough. And if that's all that they have
to pay to get a release on these two planes, they
ought to get down on their knees and thank their
lucky stars.
C:
Well, I -- I quite agree with you and I think that --
I think that's one of the things that Brett feels
too. Now, if -- I don't know, I haven't been able
to get to him yet this morning. I don't think
that they're going to back up one foot, the War
Department, on that.
H.M.Jr:
Well, they shouldn't. I mean, I don't know it 18,
but if the War Department says it costs 739 thou-
sand dollars to develop these two models and they
want the Allies to assume that, the Allies are
getting off very reasonable and they should quit
trading and do business.
C:
Well, of course that 18 only. their share of it.
It costs well over 8 million, you know, on those
two models.
H.M.Jp:
Well, I still -- well then it's all the more reason
they......
C:
It certainly 18 from that point of view, yes, sir.
H.M.Jp:
Nov what I want the Allies to do, because I want
to know whether they're stalling. And this 18 as
good a thing as any because these two planes take
that engine with the super-charger, see?
::
That's right, sir.
315
- 4 -
H.M.Jr:
I'd like them to concentrate on this one order
with this super-charger engine and get one con-
tract signed and get the formula fixed. See?
C:
Yes, sir. Yes, sir.
H.M.Jr:
And this will be as good as any, the contract
with the Curtis.
C:
Well, I
H.M.Jr:
Is Curtis in town?
C:
No, they went back yesterday afternoon. They had
to.
H.M.Jr:
Well......
C:
But they have gone as far as they could go because
it's just now a case of price. It was rather
interesting -- Wright had a very good -- very good
story to tell them, and of course another point
why he asked -- he's asking for some 240 thousand
dollars which is representative of scrap values
that will accrue by virtue of the British taking
this plane over instead of going through with the
Army contract.
H.M.Jr:
Oh.
C:
And they were squawking about that, but of course
that's without the Army. That's not a government
deal. That's a deal for them to trade with
Wright on.
H.M.Jr:
Well, who are the Allies going to see this morning?
C:
Well, we're going to see the Bell aircraft this
morning.
H.M.Jr:
Well, do you know how much there is there?
C:
435 thousand, -- 335 thousand.
H.M.Jr:
Development cost.
C:
That's right.
H.M.Jr:
Yes.
316
- 5 -
C:
On a P-39, the fastest plane in the air.
F.M.Jr:
That's the Bell.
C:
That's right.
H.M.Jr:
Well, what I'm still suggesting 18 that they take
one. I don't care which it 16, whether it's Bell
or Curtis, but get through with one and get this
formula established.
C:
I think the Bell is an easier one to get it through
with because it's just one ship concerned there, you
see?
H.M.Jr:
Well then concentrate on Bell and the fact -- what-
ever the development cost of the other thing 18,
but -- in the Bell it's 350?
C:
335 is what I think it's going to figure.
H.M.Jr:
Cheap ! My heavens!
C:
Oh, of course it 1s. Why that's only a small share
of what they have put into that plane and what Bell
has put into it.
H.M.Jp:
I think the Army 18 very reasonable.
C:
Yeah.
H.V.Jr:
Don't you?
C:
I do. I don't -- I really can't see why anybody
should stumble over B. million dollare when you are
discussing 800 -- 800 ships, you know. And if
Bell -- now they want to go to 300 on Bell and
that'll make this 335, they'll amortize It even
down further.
H.M.Jr:
How many was it yesterday?
8:
200.
H.MJ:
Vell, whatever it 18 -- look, this is what I want
you to do.
::
Yes.
317
- 6 -
H.M.Jr:
Concentrate on one company and get the thing es-
tablished and get one thing signed.
C:
All right. Now we'll -- we'll concentrate on Bell
because I think it's an easier deal.
H.M.Jr:
All right.
C:
All right, sir.
H.M.Jp:
Now, who's -- are you going to have Brett there
today too?
is
Oh, absolutely!
H.M.Jr:
Good.
C:
Absolutely.
H.M.Jr:
When do you meet with them?
8:
When?
H.M.Jr:
Yes.
C:
This morning ten o'clock.
H.M.Jr:
Right. And let's see if we can't get one thing
through.
C:
All right, sir. We'll try on the Bell.
H.M.Jr:
0. K.
C:
Because I can talk very frankly to him and tell
him we want this thing rushed through.
H.M.Jp:
Because I won't believe that the Army is going to
play ball until I see one contract signed.
C:
Yes, sir. Well, I'll stick on top of it.
H.M.Jr:
All right.
C:
Have you got snother second?
H.M.Jr:
Yes.
Regraded Uclassified
318
- 7 -
C:
Yesterday afternoon I called up Burns, Colonel
Burns, and I asked Burns -- I sort of took his
breath away -- I asked Burns for one officer --
one, I said, from the War Department, and he said,
"Well, who has been working with you?" And I
said, "Brett." And he said, "You phone Brett and
tell him it's all right, will you?" I said, "I'll
be very happy to."
H.M.Jr:
Good.
C:
So that broke up that little play. You Bee, John-
son, after I came out of your office yesterday,
he wanted me to deal entirely with Burns; don't
pay any attention to these other people at all.
Well, Burns doesn't know what time it 18 AB far
as aircraft goes.
H.M.Jp:
Right. Well
C:
But we'll clear through this channel and get the
men we want each trip.
H.M.Jr:
0. K.
C:
All right, sir.
H.M.Jp:
Thank you.
C:
Well then, we have a standing date with you for
three o'clock, have we?
H.M.Jr:
That's right.
C:
All right.
H.M.Jr:
But don't let them come over and weep on my shoulders
on this development cost.
C:
Well, I'll tell them they had better keep quiet on
that.
H.M.Jr:
And they better pay it, and they're getting off
cheap. And I want to see them; now I've turned
myself inside out and the President has. I want
to see them sign a contract, The English.
319
- 8 -
C:
Yes, sir. I do too. You know, this 1a sort of
an about-face because Wright phoned me Sunday
H.M.Jr:
Yeah.
C:
and said that -- that he had this meeting
and he said in principle why he thought the British
had accepted this idea of development cost and
scrap damage. He said they seemed very pleased
over the fact that we were going to get these
planes.
H.M.Jr:
Yeah.
C:
And now, of course, they've -- yesterday was this
Henry Self who has -- about-face, and he's gotten
Plevan all upset over it too.
H.M.Jr:
What 18 the scrap thing? You might 8.8 well explain
it to me. I don't understand it.
C:
Well, in the -- in the switch-over, you Bee, to
the French plane, they want certain changes and
things of that made which will obsolesce certain
parts that have already been processed for the
Army '40's.
H.M.Jr:
I see.
C:
Which they are going to release to them.
H.M.Jr:
I see.
C:
And the changing around -- the change-over there
and the scrap which accrues all runs -- they
estimate at the moment, around 400 thousand dollars.
H.M.Jr:
I see. Now, let me ask you this. When they --
when they take the Bell plane do they get the
super-charger with that?
C:
Oh, yes.
H.M.Jr:
They do?
C:
That's been released.
H.M.Jr:
That does.
320
- 9 -
C:
Now they -- they've released the two stage
two speed and that's what Bell uses, you see?
He doesn't use the
. The
is
only used in that Lochheed.
H.M.Jr:
Well, let's get the Bell contract and let -- you
tell the Allies that I want them to concentrate
on one, I don't care which one it 1s, but let
them concentrate on one order and get that through.
C:
All right, sir. I shall.
H.M.Jr:
And if they come over tonight and do the baby act
at three o'clock it's going to -- they're going
to get a very cool reception.
C:
Well, I'll tell them I don't think it's any use
in worrying you in a discussion of that because
that's a matter that was one of the principles
layed down when these releases were made.
H.M.Jr:
Why I wouldn't -- absolutely! And I repeat I
think the Army 18 very reasonable.
C:
Yeah.
H.M.Jr:
I wouldn't blame the Army if they'd put the entire
development cost to Bell on the English.
C:
They haven't done it.
H.M.Jr:
Well, I think they're very reasonable.
C:
Yeah, yeah.
H.M.Jr:
O. K.
C:
All right, sir. Thank you, sir. Good morning.
321
April 11, 1940
9:44 a.m.
H.M.Jr:
Hello.
Operator:
Mr. Berle.
H.M.Jr:
Hello,
Adolf A.
Berle:
Good morning, Mr. Secretary.
H.M.Jr:
How are you?
in
First-rate. I hope you got some eleep last night.
K.M.Jr:
oh, yes. I slept well, A. good conscience; every-
thing else.
B:
Well, I think the order that you got out shouldn't
have weighed very heavily on your conscience.
H.M.Jr:
Are the Norwegians and Danes pleased at this end?
B:
The Danes are very pleased. I think the Norwegians
likewise, although I've -- I'll know more about
their attitude by the end of the morning. The Danes,
of course, are very happy.
H.M.Jr:
Well now, at two-thirty the boys are coming to my
room and tell me the various problems that have
developed during the day. If you would care to
sit in on it I would be delighted to have you.
B:
Well, I shall be very glad. It's -- unless they've
got some other Job for me here I'd like to do that.
H.V.Jp:
Well, -- I mean, they'll be bringing in the things
the way you heard them yesterday. See?
9:
Right.
H.M.Jp:
And the various problems that anybody has had dur-
ing the day, they're going to bring them in at
two-thirty, and if you are not otherwise occupied
I'd be glad to have you eit in.
B:
Thank you, Mr. Secretary. You may not realize it,
but you and the Danish Minister and the President
and I are building a Denmark in our heads for the
time being.
Regraded Uclassified
322
- 2 -
H.M.Jr:
What's that?
B:
I say, you may not realize it, but about three of
us are building a Denmark in our heads for the
time being.
H.M.Jr:
You mean -- meaning what?
B:
Well, obviously there isn't any Danish government.
There's a German Government there.
H.M.Jr:
Oh.
B:
And we're just arranging there's going to be a
Denmark existing somewhere in the upper ether
and Just keep on going until the Germans get out
of there.
H.M.Jr:
Well, if they want to send an Ambassador this
summer to Greenland, please consider my application.
B:
I'll put your application on file and consider
your qualifications.
H.M.Jr:
All right. I don't know whether I'm qualified,
but after all Ruth Bryan Owen went there and liked
it.
B:
Well, my grandfather explored that country in the
earlier days, crossing Greenland he was shipwrecked
on the coast up there and had a very good time.
H.M.Jr:
(Laughs) All right.
B:
All right.
H.M.Jr:
Goodbye.
323
April 11, 1940
11:05 a.m.
H.M.Jr:
Hello.
Operator:
Mr. Welles.
H.M.Jr:
Hello.
Sumner
Welles:
Hello, Henry. Good morning.
H.M.Jr:
Good morning.
W:
I wanted to let you know yesterday afternoon that
I had spoken to Lord Lothian.
H.M.Jr:
Yes.
W:
And he was sending a further rush telegram the
minute he left me.
H.M.Jr:
Good.
W:
And that he'd try and get a reply immediately.
H.M.Jr:
Good. Sumner
W:
Yes.
H.M.Jr:
You can inform the Italian Ambassador that on the
recommendation of Basil Harris I have remitted
all the fines on those four boats.
W:
Oh, I'm very much gratified. I think that will
be very helpful, Henry.
H.M.Jr:
There will be no fines.
W:
Thank you 80 much.
H.M.Jr:
I thought -- you said you'd like to let him know
yourself.
W:
Yes, I'm very much obliged to you.
H.M.Jr:
0. K.
W:
Thanks a lot.
H.M.Jr:
Goodbye.
W:
Goodbye.
324
April 11, 1740
1:00 p.m.
Operator: Go chead.
Adolf A.
Berle:
Hello, Hello.
0:
Just a minute, Mr. Berle.
H.M.Jr:
Hello.
B:
Hello, Mr. Secretary. Mr. Berle speaking.
H.Y.Jr:
Yeah.
B:
The Norwegian Minister is here and he has asked
a couple of questions and I'm proposing to answer
them, believing that I state your view 8.8 well A8
my own.
H.V.Jr:
Please.
B:
His first question is whether there was any intent
to block the funds, the government funda, in the
event that -- well, to put any obstacle in the way
of the Norwegian Government from getting ite funds
and I am anewering that by saying that there's not
the slightest intention and there will be no dif-
ficulty, 80 long, of course, as the Norwegian
Government remains 8. free agency and isn't sub-
merged by military government.
H.M.Jr:
That would be my interpretation.
B:
Mine too. Exactly. The second was that BO far
8.6 the Norwegian business interests and so forth
having funds here are concerned pretty much the
same rule would apply.
H.M.Jr:
I would say BO,
B:
I would say 80 too.
H.M.Jr:
But I would tell him this. This would keep our
hands free, that it's the Treasury -- to work
from day to day. We don't make any commitments
beyond one day.
Regraded Uclassified
325
- 2 -
B:
Well, I've been telling him that we're settling
each case on its merits, but what he's getting
1s the general guide wire of the principles
involved, because his government is now, of
course, I take it, operating outside the German
military line. Maybe there won't be any military
line if this keeps up but
H.M.Jr:
But if you would just as soon sort of act like a
windward - say that things move so fast
B:
.....we can't foresee.
H.M.Jr:
.....we can't foresee.
B:
All right. Thank you very much.
H.M.Jr:
Just give me that
B:
All right, I'll do that.
H.M.Jr:
Thank you.
B:
Thank you. Goodbye.
1
326
April 11, 1940.
4:53 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Johnson is taking a friend to the train.
We can locate him a little later.
H.M.Jr:
Who's in his office?
0:
His secretary is there.
H.M.Jr:
Let me talk with her.
0:
Right.
H.M.Jr:
Hello.
0:
Mr. Johnson's secretary. Go ahead.
H.M.Jr:
Hello.
Mr. Johnson's
Secretary:
Yes Mr. Morgenthau.
H.M.Jr:
Could you get this word to Mr. Johnson, please?
S:
I think so, sir.
H.M.Jr:
I'd very much like if he could be at my office
tomorrow morning at nine o'clock.
S:
I think so, sir.
H.M.Jr:
And bring General Brett with him.
S:
General Brett.
H.M.Jr:
And what I'd like to get from them is their
explanation of this money that they want the
Allies to pay to Curtiss, Bell and Lockheed
for so-called development costs.
S:
Curtiss whom?
H.M.Jr:
Curtiss, Bell and Lockheed.
S:
Huhhuh.
so-called developments.
H.M.Jr:
Yes, because I'm seeing the Allies at eleven,
the Allied Purchasing Mission.
S:
Huhhuh.
- 2 -
327
H.M.Jr:
And I want to get it directly from Mr. Johnson
and General Brett before I saw -
S:
Before you see the Allied Mission at eleven.
H.M.Jr:
And if for any reason Mr. Johnson can not make
it at nine, if you would let me know at home.
S:
All right.
H.M.Jr:
If I don't hear from you I'll take it that he
and General Brett will be here.
S:
Thank you Mr. Secretary, I think I can get him
probably within forty-five minutes.
H.M.Jr:
And if he wants to bring any other officer with
him of course that's entirely up to him.
S:
All right sir.
H.M.Jr:
But I would appreciate it if he could bring
General Brett.
S:
If you get no word it means he's coming.
H.M.Jr:
All right thank you.
S:
Thank you.
328
April 11, 1940
By dear Mr. Forster:
At Mr. Felay's request I an
sending you herevith, for your records,
copies of the ducuments which the
President signed last night.
Yours sincerely,
(Signed) H. S. Klotz
N. 3. Klets,
Private Secretary.
Mr. Rudelph Forster,
Inscutive Clerk,
the White House.
Inclosures.
&
Regraded Uclassified
329
April 11, 1940
My dear Mr. Paretor:
At Mr. Feley's request I an
cending you herevith, for your records,
copies of the documents which the
President signed last night.
Yours sincerely,
(Signed) H. S. Klotz
of w
Private Secretary.
Mr. Radelph Forster,
the White Home.
Inclesures.
Regraded Uclassified
330
3
April 11, 1940
I k á I
as Mr. Polay's required 1 -
Purpose I E & I I
espies of the documento which the
President signed last might.
Yours
(Signed) H. S. Klotz
of d deta,
Private Commethey.
á I
I I
the thise I
I
331
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 11, 1940
TO
Secretary Morgenthau
PROM
Mr. Haas GOA
Subject:
Railroad freight movement for export.
Export freight receipts elightly lower
Receipts of export freight at New York declined to
3,979 cars during the week ended April 6, reaching the lower
limit of the narrow range within which the receipts have
fluctuated since the first of the year. (See Chart 1 and
table attached). Receipts of export freight at 9 other North
Atlantic ports last week recovered slightly from the previous
week's decline, totalling 1,551 cars.
Actual exports at higher rate than receipts
The volume of freight exported from New York last week
18 estimated at 4,284 cars ( Bee Chart 2), which is slightly
below the total of the previous week. Since this figure 18
higher than the 3,979 cars of export freight received during
the week, the volume of export freight in storage has been
further reduced. This reduction 16 reflected in a further
decline in lighterage freight in storage and on hand for
unloading in New York harbor, shown in Chart 3.
Regraded Uclassified
332
RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK
AND AT NINE OTHER NORTH ATLANTIC PORTS
Week ended
Nine other North
1939-40
New York 1/
Atlantic ports
(In carloads)
October 28
3,707
November 4
3,562
November 11
3,547
November 18
3,334
November 25
3,497
December 2
3,435
December 9
3,922
1,548
December 16
4,088
1,658
December 23
4,848
1,602
December 30
3,856
1,104
January 6
4,000
1,251
January 13
4,056
1,433
January 20
4,060
1,557
January 27
4,389
1,825
February 3
4,274
1,498
February 10
4,617
1,590
February 17
3,974
1,637
February 24
4,550
1,667
March 2
4,577
2,388
March 9
4,059
2,448
March 16
4,072
1,845
March 23
4,424
2,033
March 30
4,150
1,492
April 6
3,979
1,551
Source: General Managers' Association of New York, Daily
Report of Operating Conditions in New York Harbor.
2/ Source: Association of American Railroads, Car Service
Division, Report of Carload Freight for Export
and Coastal Vessel Movement.
Regraded Uclassified
RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK
AND AT- 9 OTHER NORTH ATLANTIC PORTS
1939
1940
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
CARLOADS
GARLOADS
THOUSANDS
THOUSANDS
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
NEW YORK
3.5
3.5
3.0
3.0
2.5
2.5
9 OTHER PORTS
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
o
0
28
=
25
9
23
6
20
3
17
2
16
30
13
27
11
25
8
22
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
1939
1940
333 Chart 1
Office of the Secretary of the Treasury
= 1 I 1 I
C - 304
Regraded Uclass
CARLOADS OF FREIGHT EXPORTED FROM NEW YORK*
1939
1940
NOV.
DEC,
GARLOADS
JAN.
FEB.
MAR.
APR,
MAY
JUNE
THOUSANDS
CARLOADS
THOUSANDS
5.5
5.5
5.0
5,0
4.5
4.0
3.5
www
4.5
4.0
3.5
3.0
3.0
2.5
2.5
28
11
25
9
23
6
20
3
17
2
16
30
13
27
11
25
8
22
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
1939
1940
. AS ESTIMATED FROM DATA OF GENERAL MANAGERS' ASSOCIATION or NEW YORK,
Office of the Secretary of the Treasury
334 Chart 2
Division of - of
c - 308
Regraded Uclas
LIGHTERAGE FREIGHT IN STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR #
1939
1940
NOV,
DEC,
JAN,
FEB,
CARLOADS
MAR.
APRs
MAY
JUNE
CARLOADS
THOUSANDS
THOUSANDS
10
10
9
9
8
0
7
7
6
6
5
à
4
4
26
11
25
9
25
6
20
3
17
2
16
30
13
27
11
25
8
22
NOV.
DEC.
JAN.
FEB,
MAR,
APR.
MAY
1939
JUNE
1940
. LARGELY EXPORT FREIGHT, BUT ABOUT 10% REPRESENTS FREIGHT FOR LOCAL
Office of the Secretary of the Treasury
AND GOASTAL SHIPMENT. FIGURES EXCLUDE GRAIN,
335 Chart 3
United of - and total
0 - 303
Regraded Uclass
STRICTLY CONFIDENTIAL
336
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE April 11, 1940
TO
Secretary Morgenthan
FROM Xr. Cochrun
At 10:15 today, I telephoned Mr. Purcell of the Securities and Exchange
Commission that I had been confidentially informed that the British contem-
plated a second vesting order to be unde on Saturday, April 13. I told
Xr. Pinsent further that in the absence of both Pinsent and Opio from Vash-
ingtom the last of the week, there would be no daily figures on security
transactions until Monday or Tuesday. I promised to call him on one of these
days to give his the accumulated data as received from the British Embassy.
1.m.
Poaradod
337
JR
PLAIN
London
Dated April 11, 1940
Rec'd 12:48 Delle
Secretary of State,
Washington.
£19, April 11.
FOR treasury FROM BUTTER/ORTH.
1. The Critish Treasury is of course very pleased
about the EXECUTIVE order blodding Danish and Norwagian
assets in the United States.
2. The British security markets closed firm in
anticipation that Churchill's speech would contain both
Good war news and promise of dractic Dritish action.
After closing trading when the spesch had been made did
not indicate that the anticipation had been fully realized.
3. The Bank of England has circulated this morning
the following notice:
"The Bank of England wish to draw attention to
instructions issued today by the Central Bank of the
Argentine Republic under which remittances to the starling
area in respect of financial SERVICES which have previously
been affected through the Argentine official Exchange
market, must bE made through authorized Argentine
institutions at authorized rates of Exchange for sterling
based
Regraded Uclassified
338
-2- 2019, Dril 11, from London,
based on a sterling rate for United States dollars of
4.02 dollars. United Tingdom residents who obtain the
transfer of starling as = result of these instructions
of the Central Bank of the Argentine Republic will not be
required to offer the relative pesos for sale to His
Hajesty's Treasury in accordance with the defence (finance)
regulations. United Lingion residents who do not transfer
PESOS into starling in the munner provided for by the
instructions of the Argentine Centrol Bank must offer
their DESOS for sale to Zis liajesty's Treasury through
an authorized dealer in the United Eingdom. In no
circumstances my at transfer of PESOS bE Effected through
my other channel.ᵃ
KENNEDY
DDM
334
E DANISH AND NORWEGIAN HALANCES
April 11, 1940
Present:
Mr. Ransom
2:30 p.m.
Mr. Goldenweiser
Mr. Viner
Mr. Riefler
Mr. Cochren
Mr. Bell
Er. Foley
Sell:
Shall I start?
E.M.Ir:
Yes,
Bell:
Well, I don't know whether you know what was
done last night, but the boys sent to the
Federal Reserve Banks 8 telegram which more or
less summarized the provisions of the Executive
Order and told them that the regulations and
the forms, Executive Order, were all being sent
by airmail, most of which were received certainly
this morning. They also sent instructions to
the Collector of Customs and wrote a letter to
the Postmaster General, who in turn will instruct
all the Postmasters.
This morning we went over Form 1, which is an
application for a license and with a few changes,
approved it. There is not enough of importance
in the changes to justify wiring them, but on
the reprint we will have them changed.
On the license form, we also made & few changes,
but we are wiring those changes to the Federal
Reserve Banks so they can Incorporate them and
on the report form, which follows the license,
why, we have approved that.
On the other two forms, which they call 200 and
300, which is --
Foley:
They are the reporting forms.
Bell:
tunity of going over them. Harry White and and Mr.
Census, they call it; we have not had an oppor-
as soon as they get together we will have another
Ransom are working on that this afternoon
meeting and E° over that.
Regraded Uclassified
340
- 2 -
As to operations, we thought that it would be
well to have all of this information come in
the first instance to Mr. Cochran, either by
telephone or even the applications will be
concentrated in his office. Then for the time
being we have a meeting twice & day of Kr. Coch-
ran, Bernstein and Harry White in my office st
11:00 and 4:00 for the purpose of cleaning up
the business of the day and if the meetings are
required oftener, we can make arrangements to
do that, but we will try to clean up every
day's business in that day. That completes
about as far as we have gone today.
H.M.Jr:
Well now --
Sell:
I might add before you go on that Mr. Harrison
did call - Mr. Lancaster of the National City
called the State Department and they in turn
referred him to Harry White and he said that
he had a number of cases which should 20 through
today. He called Mr. Harrison and he said that
he didn't understand that, because they had
furnished the National City with all the informa-
tion they needed. We told him to again contact
them and if they had any information or any
cases that had to be handled promptly, they
could use the forms that we had sent them, just
typing them up, and telephone us the information
and we would try to pass on them this afternoon.
H.M.Jr:
Are you people perfectly happy over what has
happened so far?
Ransom:
The decision hasn't been made, Mr. Secretary.
We think that the mechanics for carrying it out
are just as good as can be done. We think per-
haps there will have to be some revisions such
88 Mr. Bell suggested, but they do not seem
to me to be material. There is one detail that
Mr. Harrison mentioned to me on the phone after
I left your office this morning that I would
like you to have in mind. He says that he thinks
it might expedite the situation if the Federal
Reserve Banks could grant licenses in some
routine cases above the thousand dollar limit
where they are satisfied that it is a trans-
action which has arisen before the 8th of this
341
- 3 -
month or in the case, for instance, of a banker's
acceptance where it was made sometime ago and
comes in. Now, there are three or four of those
sort of cases that Mr. Harrison could tell you
about and he thought it would speed up things
a good deal 1f they had that authority.
H.K.Jr:
Well, I wouldn't give it to him.
Bell:
You would not?
S.N.Jr:
No. That is just the thing he was arguing about
yesterday. There can't be 80 many. Let's clean
them up, those that happened before the 8th.
Viner:
You might find out whether there is a class of
routine cases that can be made that way, but
I would first let the flow come in.
E.K.Jr:
That is the point. Let's see what they look
like and then after we see, say this kind of
thing, yes.
Ranson:
I just say that I don't know whether Mr. Harrison
was suggesting that that be done immediately. He
thinks that in the development of this procedure
you may find it helpful, both for you people and
for the banks and the customers of the banks, if
they have some such authority as that.
U.S.Jr:
The only suggestion I have to offer is this: I
would be very glad if the Federal Reserve Board
would like to have an observer sit at this 11:00
and 4:00 o'clock meeting. I would be very glad
to have an observer there and that will keep you
up to date and if there is anything going on you
don't like, you will know it the same day, but
if you would like to have an observer there, we
will be glad to have him.
Ransom:
I would like to suggest for the first few days
that I would like to have Dr. Goldenweiser do
that, then as the routine of the thing develops
perhaps he can designate one of his younger men,
but for the first few days while we are finding
our bearings in this situation, I would like to
have him.
342
- 4 -
H.M.Jr:
That would be fine.
Bell:
I think as we go along we might find cases where
we can establish precedents in which they follow
this in all similar cases,
H.M.Jr:
After you have seen the run of the mine, you can
say, "Well, that kind of stuff, that is all right,"
but I would like everything to & through this
group first, because that was just the trouble
we had yesterday. I can't do what the President
asks me to do If I am going to say yes to stuff
which I don't know before I see it, but after we
have seen - let's say there are B. dozen cases all
the same and they all have the same purpose and
you decide, well, that kind of purpose is all
right.
Foley:
We have given the Banks, Mr. Secretary, authority
to issue licenses for normal commercial trans-
actions or traveling requirements in amounts not
more than a thousand dollars for any one person
in any one month. Those don't have to come down.
All the rest of them do come down.
Bell:
That is in your regulations.
H.M.Jr:
Let's leave it this way, Dan. I am willing to
leave it to this committee. When you have any
doubts at 11:00 or 4:00, let me know and I will
join you, but if you haven't - if you have any
doubts, let me know. Otherwise, certainly with
that group I am more than satisfied. All right?
Ransom:
All right.
H.M.Jr:
Got any ideas?
Viner:
No, it seems all right to me. I think that - I
have been wondering now with these licenses for
transactions under 8. thousand dollars, unless
the Federal Reserve Banks have an observer here
for e. few days, how those two are going to run
on the same principles. How do they know what
principles govern you in the larger transactions,
how do you know whether there is a match? You
might say it doesn't matter, but I say it is
Regraded Uclassified
343
- 5 -
some value in having the same principles govern
both sets of transactions and I would say it
would help very much, and also in the advice
they can give to people if there was the same
sort of 8 tie-up from the people who go to
operate this in the field and this group here.
Ranson:
Don't you think that night be accomplished through
Dr. Goldenweiser, who could keep in touch with
these Federal Reserve Banks? There are only one
or two of them where I think this is going to
be of any importance.
Viner:
Somebody ought to have the responsibility for
mintaining that contact.
Ransom:
Just let him maintain it.
Cochran:
And then yesterday, when they had about 15 dif-
ferent cases, they phoned them down and we dis-
cussed the merits on the phone. On this appli-
cation you notice that the Federal Bank has to
give its reconmendation om each case.
Viner:
Oh, I see.
Golden'r:
Certainly I wouldn't like to make it too many
people, but if I at going to start this, would
you have any objection if I had, say, Mr. Morris
with me so that after 8. while he could take By
place and be familiar from the beginning?
H.M.Jr:
Sure.
Bell:
I night say, Mr. Secretary, that Riefler and
Viner are going to sit in for the first few
days, tomorrow at least.
H.M.Jr:
I don't think we need anybody from the New York
Bank to sit in.
Ransom:
I think we could take care of that.
H.M.Jr:
Well, who do Riefler and Viner represent?
Bell:
The public.
H.M.Jr:
I see.
344
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: April 11, 1940, 6 p.m.
NO.: 461
FOR THE TREASURY DEPARTMENT. FROM MATTHEWS.
Today Pennachio had lunch at my house. He was of
course full of the news and rumors from Norway. I asked
his what was the reaction in Italy, and he said that the
German viewpoint had been played up in the Italian press,
to the effect that it had been necessary for Germany to
make the invasion in order to forestall Allied intervention
in the Scandinavian countries. Pennachio said he did not
think that this viewpoint represented public opinion in
Italy.
He seemed eager to learn of our reaction to the
events, and was impressed by the prompt action of the
United States in blocking Danish and Norwegian balances -
which action is described with much pleasure as "unprecedented"
in the French press.
He said that "the coal problem" was a source of
considerable worry to his country, and was frankly skeptical
as to whether Italy's requirements could be supplied by
Germany by rail. I remarked that I had seen in the news
this morning that Italian colliers are on their way to
England.
45
- 2 -
England. He indicated that negotiations are not going
well with the British, despite the favorable exchange aspect
for Italy resulting from the pound drop on free markets on
which the lira rate 18 based. Pennachio made no reference
to any political difficulties, but he did mention that
the British did not want to purchase what the Italians
had to sell, and had preferred "other products" - varieties
of armaments, I presume.
On the other hand, he remarked that the recent
trade and clearing agreement with France is working out
very well. However, he complained that he 18 swamped with
detail work, being alone here in Paris. I gather that 86
the war goes on he 1e finding his relations with former
French friends and associates increasingly cold.
Contrary to French and American opinion here, Pennachio
seeme to feel that regardlese of how bitter the pill may be,
and regardless of its effect on the British international
banking position, the British authorities will eventually
be compelled to block foreign sterling balances, though
not just now.
Incidentally, he told me that his New York "colleague"
believes that the British control intervened to support
the free market on several recent occasions, though this
view 18 not held by Pennschio himself. Local American banks
are
Regraded Uclassified
346
- 3 -
are inclined to doubt that the British control has 80
intervened; they at least have no knowledge of it. Since
the outbreak of the var they get very little or no exchange
information from New York. To ne the French authorities
have denied that there has been any intervention.
This morning I talked with Barrett of the Guaranty
Trust. He said that this morning the Bank of France had
sent a confidential intimation to "approved intermediaries"
that transactions such as that described in Section 5 of
telegram No. 437 of April 8 from the Embassy "should not
be encouraged" - that 18, the swapping by French concerns
of pre-war dollar balances for sterling on the free market
in New York, with conversion into francs subsequently.
This action did not constitute a direct prohibition, however,
nor has there been indication from the Bank of France that
such deals would be formally disapproved.
END SECTIONS ONE TO FIVE INCLUSIVE.
BULLITT.
EA:LWV
347
MR
GRAY
PARIS
Dated April 11, 1940
Rec'd 5:30 pame
Secretary of State,
Washington.
461, April 11, 6 p.m. (SECTION SIX)
The Securities market continued its improvement
today (?) the more Encouraging (though still confused)
news from Norway. French industrials registered
gains of 1% to 3% and Norwagian nitrate regained 300
francs of its previous 500 franc loss. Rentes
were up from 10 to 65 centimes with the Exception of
the 1925 sterling guarantee issue which dropped one
franc 20 centimes. The Bank of France statement for
the WEEK Ending April 4 shows that the state drew 8.
further 350,000,000 francs to a total of 20,900,000,000.
Note circulation increased mutably 863,000,000 to the
record figure of 157,895,000,000.
The only change in official Exchange rates was
the improvement in the belga to738-744 as with 742---
748.
(END OF MESSAGE)
BULLITT
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