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Volume 266, May 24 – May 27, 1940
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Volume 266, May 24 – May 27, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 266
May 24 - 27, 1940
- A -
Book Page
Africa
See War Conditions: South Africa
Appointments and Resignations
Brooks, Edward (Sears-Roebuck)
Wood and Rosenwald consulted concerning - 5/27/40
266
199,264
Nelson, Donald:
HMJr consults General Robert E. Wood concerning
availability - 5/27/40
199
Group discussion at 9:30 meeting - 5/28/40:
See Book 267, pages 122 and 153
- B -
Brazil
See Latin America
Brooks, Edward (Sears-Roebuck)
See Appointments and Resignations
Business Conditions
Haas memorandum on situation for week ending
May 25, 1940
295
- C -
Cable Tests
See War Conditions
Calder, Curtis E.
Recommended by Burgess, Rentschler, and Perkins -
5/24/40
12
Canada
See War Conditions: Airplanes
China
See War Conditions
Consolidated Aircraft
See War Conditions: Airplanes
- F -
Financing, Government
Debt Limit: Discussed by FDR, H/Jr, Hopkins, McReynolds,
and Smith - - 5/25/40
147
a) HMJr told to "feel out" the Hill
281
b) Senator Harrison reverses position and favors
increasing debt limit and a tax bill
281
6/15/40 program presented to FDR for approval . - 5/27/40
318
a) HMJr tells Bell of FDR's reaction
342
Finland
See War Conditions
France
See War Conditions: Airplanes; France
- G - -
Book Page
Germany
See War Conditions
Gold
See War Conditions: Belgium; Netherlands; South Africa
Great Britain
See War Conditions
- H - -
Hancock, John M.
Recommended by Burgess, Rentschler, and Perkins -
5/24/40
266
12
Hanes, Robert M.
Recommended by Burgess, Rentschler, and Perkins -
5/24/40
12
- I -
Inter-American Bank
See Latin America
International Law
Direct sales to belligerents and the implications thereof
discussed by HMJr, General Marshall, and Welles - -
5/25/40
110
Italy
See Har Conditions
- L - -
Latin America
Brazil: Domestic trading in dollar bonds and other foreign
bonds of Brazilian Government, et cetera - possibility of
permitting to be studied - 5/24/40
79
Inter-American Bank: Reply to Burgess on suggestions - -
5/24/40
55
- N - -
National Defense, Council of
Advisory Commission: Creation of discussed by FDR, HMJr,
and McReynolds - 5/24/40
27,32
a) Possible members
b) Foley memoranda
c) Rules and regulations as OK'd by FDR
d) Administrative order as OK'd by FDR
e) Conference at White House; present: FDR, HMJr,
Hopkins, McReynolds, and Smith - 5/25/40
147
National Defense Commission
FDR's and HMJr's suggestions on appointments - 5/25/40
52,53
Nelson, Donald
See Appointments and Resignations
Regraded Uclassified
- N - - (Continued)
Book Page
Netherlands
See War Conditions
Neutrality Laws
See War Conditions
Norway
See War Conditions: Airplanes
- 0 -
Odlum, Floyd
Frank (Jerome) letter concerning - 5/24/40
266
158
R 1 1
Rensult, Louis
See War Conditions: France
Revenue Revision
National Defense Tax (10%): H&Jr asks Blough to work on -
5/26/40
185
a) HMJr's own program
186
b) Tentative revenue estimates under proposed
provisions - 5/26/40
195
c) Tarleau memorandum on conference - 5/27/40
270
Conference in HMJr's office; present: H&Jr, Bell,
Sullivan, Helvering, Blough, Tarleau, O'Donnell,
and Magill - 5/27/40
274
H/Jr confers with Harrison and Cooper; Bell, Helvering,
Magill, and Sullivan; Harrison and Cooper favor
increasing debt limit and tax bill - 5/27/40
281,285
a) Harrison and Cooper favor 10% increase on
1939 corporation income tax but oppose
Sullivan's plan for increase in gasoline tax
b) Sullivan memorandum and estimates,
282
- S -
South Africa
See War Conditions
Stevens, Robert T.
Recommended by Burgess, Rentschler, and Perkins -
5/24/40
12
Sweden
See Har Conditions: Airplanes
- T -
Taxation
See Revenue Revision
D I 1
U.S.S.R.
See War Conditions
United Kingdom
See War Conditions
Regraded Uclassified
- W
Book
Page
War Conditions
Airplanes:
Gorrell, of Air Transport Association, confers with
Hinckley on "DC-3's airlines have on order" -
5/24/40
266
9
Manufacturers (list of) contacted for immediate survey
of number on order for United States and foreign
governments, et cetera - 5/24/40
17
FDR asks War Secretary, Chief of Staff, and Navy
Secretary for program of requirements; no future
contracts without clearing through Secretary of
Treasury to FDR - 5/24/40
23,26
a) Brett (Air Corps, War Department) memorandum
to HMJr stating he should have program but
has not - 5/24/40
35
1) FDR dictates order placing all aircraft
under HMJr as result of above memorandum
34
a) HMJr tells Mead - 5/25/40
119
b) Edison's acknowledgment and hope
that H&Jr will check his facts
carefully before reporting to FDR -
5/25/40
128
c) Louis Johnson's acknowledgment -
5/27/40
250
Progress report of Air Corps, Army, for period of
January 1 - April 30, 1940
257
Canada: Training program - interruption in supply of
planes from England and ways to supply planes
immediately discussed in Purvis memorandum to HMJr -
5/27/40
251,252,261
Consolidated Aircraft: Subsidiary plant to be built in
Texas taking over fixed assets, et cetera, of
Hall Aluminum Aircraft Corporation - 5/24/40
42
Engines:
Rolls Royce:
Kennedy consulted concerning transfer of plans
to United States - 5/25/40
92,124
a) H/Jr discusses with Mead.
115
Kennedy, by secret dispatch, reports plans to
arrive by English destroyer approximately
May 30th; United States licensed to proceed
with manufacture without charge - 5/26/40
188,192
a) Mead refused any part of this cable
187
(See also HMJr's letter to Woodring announcing
receipt of plans, et cetera, under date of
June 13, 1940: Book 272, pages 12-A and 98-A)
Chrysler correspondence: "Not interested" -
5/27/40
358
Allison:
Trouble at plant reported by HMJr to FDR - 5/26/40
154
Hoover (J. Edgar) consulted by HAJr - 5/27/40
207
Mead report - 5/27/40
262
- W - (Continued)
Book
Page
War Conditions (Continued)
Airplanes (Continued):
France:
Bullitt cables for additional planes: Welles asks
Marshall whether FDR is contacting War Department
directly or whether State is to contact War
Department and then report to FDR as to answer
266
25
a) Marchall replies that he does not
know answer - 5/24/40
24
Bullitt cables on same subject - 5/27/40
215,216,217
Machine Tools:
Conference; acceptances from representatives of
Pratt-Whitney, Worner and Swasey, Norton Company,
Abrasive Machine Tool Company, Jones and Lamson
Machine Company, and National Machine Tool Building
Association - 5/24/40
47
Sloan and HMJr discuss maintenance of usual economy
simultaneously with defense developments -
5/25/40
106
Conference on statement by Machine Tool Committee
of Army and Navy Munitions Board - 5/27/40
222
a) Data on requirements of Army and Navy
prepared by Henning (Navy) and Soderholm
(Army)
246
b) Rutherford (Ordnance, Army) report - 5/28/40:
See Book 267, page 89
Kennedy inquiry concerning British report that orders.
will not be filled if placed after May 26th -
5/27/40
260
Norway: Balchen and Norwegian Minister ask Welles as to
possibility of getting 75 to 100 used pursuit planes -
for example, P-36 - 5/27/40
210
a) H&Jr tells Welles "no possibility"; Marshall
has stated Army cannot spare a plane because
of pilot training program
Spitfire and Hurricane: Kennedy asks whother United States
wishes plans - 5/26/40
188
a) HMJr's reply asking also for Frazier-Nash
aircraft gun turret; magnetic mine detonator
as carried on aircraft; Junkers engine from
captured planes - 5/26/40
193
Sweden: Pursuit ships (70) of old type desired -
5/25/40
50
Belgium: British Embassy warns against collection of private
gold hoards and exportation by Germany - 5/27/40
290
Blast Furnaces: Map showing distribution in United States -
5/24/40
46
Cable Tests: Federal Reserve Bank of New York, Treasury,
and State Department plan - 5/27/40
340
Canada: See War Conditions: Airplanes (Canada)
- W - (Continued)
Book
Page
War Conditions (Continued)
China:
Freezing of Funds: Bell memorandum - 5/24/40
266
66
Treasury Attachd, Shanghai, reports on proposal to
create Central Control Board to be called har
Economic Commission and headed by Chiang Kai-shek
and Soong - 5/27/40
287
Exchange market resume - 5/24/40, et cetera
61,182,337
Finland:
Debt: FDR suggests no action at this time - 5/24/40
72
a) HAJr's memorandum concerning
73
France:
American and Canadian Securities, French-owned:
Banks and banking houses designated as depositories -
5/24/40
57
Renault to visit United States to arrange for
menufacture of heavy French tanks - 5/24/40
94
Germany: Federal Bureau of Investigation informs HiJr
Germen Consul in New York is expecting cablegram
remittance from Italy in emount of 89 million to go
to Marine Midland Bank and to be checked out immediately -
5/25/40
113
Italy:
Federal Bureau of Investigation informs Hillr
German Consul in New York in expecting cablegram
remittance from Italy in amount of 89 million to
go to Marine Widland Bank and to be checked out
immediately - 5/25/40
113
Stock prices charts
170,184
Machine Guns: Johnson memorandum on requirements at home
and abroad - 5/24/40
38
Netherlands:
Plea for "unblocking" of Dutch banks' balances in
United States - 5/24/40
75
a) Bolton (Bank of England) and Knoke (Federal
Reserve Bank of New York) discuss
76
b) Lercy-Beaulieu discusses Netherlands Bank
gold account in United States with Cochran;
Cochran thinks Purchasing Wission hopes to
have Dutch gold in Allied pool - 5/25/40
176
British Embassy warns against collection of private gold
hoards and exportation by Germany - 5/27/40
290
Neutrality Laws: Violations within jurisdiction of Treasury -
procedure to handle established - 5/24/40
43
Norway: See har Conditions: Airplanes (Norwey)
Purchasing Mission: Vesting Order: Official sales of
British-owned dollar securities - 5/27/40
316
Shipping: Situation reviewed in Harris memoranda - 5/27/40
292,293
South Africa: Reserve Bank asks Federal Reserve Bank of
New York to accept gold for safe-keeping - 5/27/40
314
Ll
- Y - (Continued)
Book
Page
War Conditions (Continued)
Strategic Materials:
HMJr and Marshall confer - 5/25/40
266
85
Smokeless Powder:
Johnson asked by HMr concerning continued delay
on delivery to Allies in spite of FDR's orders -
5/24/40
1,5
a) Johnson memorandum - 5/24/40
39
Leroy-Beaulieu discusses creation of one or two
corporations in United States to own powder
plants for the Allies; can he sit on Board as
representative of French Government notwithstanding
status as accredited French Attache?- 5/25/40
180
Tin: Memorandum on smelting in United States - 5/24/40
81
Sweden: See War Conditions: Airplanes (Sweden)
U.S.S.R.: Bank balances reported by Chase National Bank
to Federal Reserve Bank of New York - 5/27/40
311
United Kingdom:
Sterling Exchange: (1) Exports from British area and
possibly entire sterling area hereafter to be paid
for in dollars; (2) sale of securities by non-residents
prohibited; (3) transfer of interest and dividends out
of England at official rate permitted - 5/24/40
64,160
a) Copy of Chancellor of Exchequer's message
162
i) Treasury reply - 5/28/40:
See Book 267, pages 116 and 117
Bank of England accounts with Federal Reserve Bank of
New York: Treasury asked to initiate change to
"His Britannic Majesty's Government Account" for
protection against Germany - 5/27/40
268
1
May 24, 1940
9:03 a.m.
H.M.Jr:
Louie?
Louis
Johnson:
Yes, good morning.
H.M.Jr:
How are you?
J:
Pretty fine.
H.M.Jr:
Louie, there are two things that are kicking
around which I think you are the only fellow
that can finally seal them up. What 18 this
powder
deal for the Allies which has been
kicking around -- the President ordered his
Cabinet to be done in twenty-four hours last
Friday and it isn't done yet; and the other 18
these machine guns for the -- Colt machine guns,
which I think you told me a week ago
J:
Yeah, we cleared it as far as the Army was
concerned.
H.M.Jr:
Well, would you be
......
J:
I'm in a staff meeting, it'll last about an hour
and a half and I'll get into that the minute I get
out of it.
H.M.Jr:
All right. Well, now, when could you see Philip
Young, who's following this for me?
J:
When can I see him?
H.M.Jr:
Yeah.
J:
About these things?
H.M.Jr:
Yes, because he has the details from my end.
J:
No point in seeing him until I find out what the
fly 18. We've cleared it.. The trouble isn't
Army, BO I've got to find out what it 18 and I'll
call him then.
H.M.Jr:
Well, you're wrong, because it 18 the Army, and
we can't get by and they're just stalling, and
the President has said three times now he wants
Regraded Uclassified
- 2 -
2
it done.
J:
Well, I don't believe -- I think you're wrong.
I don't think it's the Army because
.......
H.M.Jr:
Well, supposing you find out Louie before you're
80 sure. Now supposing you find out -- we can't --
where the fault 16.
J:
Well, I'll do that just as soon as I can get out
of this staff meeting.
H.M.Jr:
And if it isn't the Army, all right, but this Colonel
McMoreland, I mean, we haven't got an answer and
the President keeps telling me he wants it done.
He told Woodring and he told Edison last --
Compton -- last Friday he wanted it done. He told
Marshall and he told Admiral Stark two days ago
he wanted it done. I don't care if Army gets
hell this afternoon in Cabinet. I'm trying to
see that the Army and Navy don't catch hell this
afternoon and -- but it's all right with me if
they do, I'm going to report at two o'clock it's
not done.
J:
And I'm going to tell them that I cleared, and I'm
going to find out now what's bucking it -- where
it's held up.
H.M.Jr:
I wish you would.
J:
I'll do that.
H.M.Jr:
I don't want any rows in Cabinet, if I can help it.
J:
Yeah.
H.M.Jr:
Thank you.
J:
Right. Good-bye.
Regraded Uclassified
3
May 24, 1940
9:14 a.m.
Guy
Vaughn:
Hello,
Operator:
This 18 Treasury.
V:
Hello.
H.M.Jr:
Mr. Vaughn?
V:
Good morning.
H.M.Jr:
How are you? Morgenthau talking.
V:
Yes, I understood 80.
H.M.Jr:
Mr. Vaughn, I wondered whether you could come down
Tuesday afternoon to see me here at Washington.
V:
Tuesday afternoon.
H.M.Jr:
Yes.
V:
I'd be very glad to.
H.M.Jr:
Say three o'clock?
V:
Tuesday afternoon at three o'clock in your office.
H.M.Jr:
Do you want to bring with you the head of the
Wright Engine?
V:
I think that would be advisable.
H.M.Jr:
Mike -- what's his name?
V:
Gordon.
H.M.Jr:
Mike Gordon.
V.
That's right.
H.M.Jr:
Right. Well, then if you and Mr. Gordon -- I could
remember his name was Mike, but I couldn't remember
his last name. (Laughs)
V:
(Laughs) Well, everybody knows him AB Mike.
H.M.Jr:
Well, if you'll come down at three o'clock Tuesday,
I think we'll know better where we are at.
Regraded Uclassified
4
- 2 -
V:
All right, well, you can count on our being there.
H.M.Jr:
Thank you 80 much.
V:
All right, sir.
H.M.Jr:
Good-bye.
5
May 24, 1940
10:28 a.m.
H.M.Jr:
Hello.
Operator.
Mr. Johnson. Go ahead.
H.M.Jr:
Hello.
Louis
Johnson:
I was calling you to get Young. I got him direct
and he's down here.
H.M.Jr:
Who's that? This 1s Henry Morgenthau.
J:
Louis Johnson.
H.M.Jr:
What?
J:
This 18 Louis Johnson.
H.M.Jr:
Yes, Louie.
J:
I was calling you back to get Young because I find
that on that powder thing, it was held up -- not
anything here, but at the suggestion of the Allied
Purchasing Commission itself, as communicated
officially from them.
H.M.Jr:
Now which 18 this, powder or machine guns?
J:
That's powder.
H.M.Jr:
They are holding it up?
J:
It was held up at their request. Young's here,
and I'm bringing the people in and letting him
get the story direct.
H.M.Jr:
Good.
J:
So you'll find out there hasn't been any blocking
down here or any balking either one.
H.M.Jr:
And that goes for machine guns, too?
J:
On the machine guns, those people will be in there
to talk while Young's here too. We cleared on &
program which postponed our delivery of machine
guns for the one of our planes that was directly
Regraded Uclassified
6
- 2 -
assignable to fighting units now about four months.
H.M.Jr:
I see.
J:
It's the first thing we've really done, but that
was on the basis of a plant expansion that would
take care of both of us.
H.M.Jr:
Yes.
J:
Now where the nigger in the woodpile 18 -- they
didn't know here, but they are bringing the people
in -- we'll find out. But it isn't any of our
group. We'll get the real story for Young while
he is here.
H.M.Jr:
Well, if you can do that, you'll be doing me a
service.
J:
We'll get that for you, and I think you're going
to find that -- no trouble down here.
H.M.Jr:
Thank you 80 much.
J:
Right, good-bye.
7
May 24, 1940
10:30 a.m.
Operator:
Go shead.
H.M.Jr:
Hello.
General
Brett:
Good morning, sir.
H.M.Jr:
Hello, General.
B:
You can do me a tremendous favor. I have been
fighting for & week trying to get some sort of
an approved program so that I can give, for
instance, Dr. Mead, estimates on engines.
H.M.Jr:
Yeah.
B:
Now the Air Corp, I understand, has submitted
one. of course, it has to go through General Staff,
up to you, and so forth and BO on. Can you do me
8 favor by asking that the Air Corp at the War
Department submit a program which would be a guide
80 that I'd have something to shoot at?
H.M.Jr:
If you'll make it B. little bit plainer -- you've
got to give me a little more detail.
B:
Well today, sir, we're working under a 5500 plane
expansion program. We added to that, in accordance
with the President's measage, a total of 2200
trainers and 200 additional heavy bombers.
H.M.Jr:
Yeah.
B:
Now they're talking about 7, 8, 10, any number of
airplanes, I don't know. I have no approved program
whereby I can sit up and say that I need 300 of a
certain type additional; I need 500 of another type
additional, combat planes; I need 1,000 of this type
additional. Now I also have to have that information
in order to be able to furnish Dr. Mead with any
information as to possible requirements on engines
over a period of two or three years.
H.M.Jr:
Well, now, I tell you what I'm going to ask you to
do -- would you meet me in General Watson's office
at five minutes of eleven?
B:
Yes, sir.
H.M.Jr:
General Watson's office
Regraded Uclassified
8
- 2 -
B:
Yes, sir.
H.M.Jr:
......
five minutes of eleven and could you have
something on a piece of paper each of what you
want me to get for you, even if it's in ink, I'll
take it, or pencil.
B:
Yes, sir, I'll have that ready for you at five
minutes to eleven and I'll be there.
H.M.Jr:
You be there and I'll get you what you want.
B:
Yes, sir.
H.M.Jr:
But, I'll have to do it through General Watson,
you see.
B:
Yes, sir.
H.M.Jr:
So if you're there -- the reason I want you to
meet me, it saves everybody's time if you'll
explain it to me in his presence, you see?
B:
Yes, sir.
H.M.Jr:
Then he'll call up whoever is necessary and you'll
be protected, I mean, and that he will
......
B:
Yes, sir, well, I'll be there at five minutes to
eleven.
H.M.Jr:
Watson will protect you BO that you won't get
into trouble with any superior.
B:
O. K.
H.M.Jr:
Be there five minutes of eleven.
B:
Yes, sir.
S
May 24, 1940
6:39 p.m.
Bob
Hinckley:
Bob Hinckley.
H.M.Jr:
Good evening.
H:
I have Colonel Gorrell here. He flew over from
Chicago to see you today.
H.M.Jr:
I don't know who he 16.
H:
He's president of Air Transport Association on
these D. C. 3's the air lines have on order.
H.M.Jr:
Oh, yes.
H:
Would you rather see him tomorrow?
H.M.Jr:
Bob, I'm absolutely dead drunk on my feet, I mean,
punch drunk, not dead drunk.
H:
Well, I can understand that.
H.M.Jr:
I'm just -- I couldn't do it physically.
H:
Yeah, all right, Now, I meet in the morning --
I don't know whether that will take all morning
or not, but I start at 9:30, with Colonel Knox
and his group to see if I can get them ironed out
and
H.M.Jr:
Well, now does this fellow control these things?
H:
No, he speaks for all the air lines.
H.M.Jr:
Well, hell; 18 it yes or no?
H:
(Pause) Well, I can meet with him and find that out.
H.M.Jr:
Well, that's all he's got to do 18 you meet with
him and let him say yes or no and you give me a
ring and that settles it, or send me over a little
note.
H:
Yeah.
H.M.Jr:
I'm not going to plead with him.
H:
Yeah.
10
- 2 -
H.M.Jr:
Could you meet with him and just Bay -- I mean,
I'm not going to give the fellow a sales talk.
H:
Yeah, all right.
H.M.Jr:
What?
H:
All right. I'll meet with him tonight then.
H.M.Jr:
What?
H:
I'll meet with him tonight
H.M.Jr:
I'm just shot -- I admit it frankly. I just came
back from the White House -- I've been there since --
started over there at two and I was over there for
an hour this morning.
H:
Yeah.
H.M.Jr:
Hello
H:
All right, sir.
H.M.Jr:
and if you would meet with him in the
morning and just ask him would he say yes or
no and then send me over a little note.
H:
Yeah, all right.
H.M.Jr:
I -- you're doing me a great kindness.
H:
Well, all right, sir.
H.M.Jr:
Thank you.
H:
You bet.
Uclassified
11
I
Cabinet may 24 1940
funitain Hoppins.
THE WHITE HOUSE
WASHINGTON
m. Morgenthan
When do you
think >on will
graduat from this crun
Dont Don understand
the Proferm - you
have been taking this
Cours for 87 ears!
Better do run home
funk with Prof Perhin
P.S. No sleep HOH
11 12
May 24, 1940.
Dear Randolphs
Thank you very much for your letter of
May 26th, which enclosed a memorandum giving
the names of feur sex whom you suggest as of
possible use in our expansion program. I are
presiste your letting me have this information.
Sincerely,
Henry
Dr. W. Handelph Burgese,
Vice Chairman of the Beard,
The National City Bank of New York,
New York, New York.
GEF/dbs
13
May 24, 1940.
Dear Randolph:
Thank you very much for your letter of
May 26th, which enclosed a memerandum giving
the names of fear em whom you suggest as of
possible use in our expansion program. I ap-
presiste your letting - have this information.
Sincerely,
Henry
Dr. V. Rendelph Burgese,
Vice Chairman of the Board,
The National City Bank of New York,
New York, New York.
GEF/dbs
NO 14
F 1940, I
Dear Randolphs
Thank you very such for your letter of
May 26th, which exclosed a memerandum giving
the names of fear - whom you suggest as of
possible use in our expension program. I up>
presiste your letting - have Shis information.
Sincerely,
Henry
Dr. V. Rendelph Burgess,
Vice Chairman of the Beard,
The National City Bank of New York,
New York, New York,
GEF/dbs
Regraded Uclassified
15
4 G.
The National City Bank
of New York
ESTABLISHED 1812
New York May 24, 1940.
OFFICE of
THE VICE CHAIRMAN
or THE BOARD
Dear Henry:
Following our conversation I attach herewith
the names of a few people on whom Jim Perkins, Gordon
as
Rentschler, and I are agreed are people who might be
very useful in the government organization at this time.
I will send you additional names as they may occur to us.
These, of course, represent a combing out of a consider-
ably larger list.
Sincerely yours,
Randosh
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
WRB.H
encl.
In
16
John M. Hancock - 57 years old. Partner Lehman Brothers. Officer
and director of a number of industrial companies.
Governor of New York Stock Exchange. During World
War did quite remarkable job as officer in charge
of navy purchases. Awarded Navy Cross. A person
of great intelligence and energy. Is listed as
Republican but, as far as I know, not connected
with politics.
Robert T. Stevens - about 45 years old. Head of J. P. Stevens &
Co., textiles. Director of the Federal Reserve Bank
of New York. Served on one of Harry Hopkins' com-
mittees. A good executive, able, energetic, gets
on well with people. No political commitments.
Robert M. Hanes - 50 years old. drother of John Hanes, President
Wachovia Bank & Trust Co., Winston-Salem. President
of American Bankers Association. Officer and d1-
rector of industrial companies, including cotton
mills, the Southern Railway, etc. Member of North
Carolina legislature 1929-31-33. Major in World
War. Democrat. Very able person who commands
confidence and cooperation and could fill EL large
sized job. He completes his term as president of
the American Bankers Associ ation in September, but
we doubt if that would stand in the way of essential
service in Washington.
Curtis E. Calder - 50 years old. Brought up in Texas. President
American and Foreign Power Corporation. Director
National City Bank of New York, and various other
companies. A very able person with lots of incisive-
ness and driving power. No political connections,
as far 88 I know.
ANDARD FORM No. 14
PROVED BY THE PREMIUM
MARCH 10, 1525
FROM
Treasury Denartment
17
BUREAU
TELEGRAM
CHG, APPROPRIATION Contingent Expenses,
OFFICIAL BUSINESS-GOVERNMENT RATES
Treasury Department, 1940.
- - -
10-1783
COPY
May 24, 1940.
(Send telegram to names listed
on attached sheet)
PLEASE SEND BY AIRMAIL SPECIAL DELIVERY on SATURDAY, MAY 25, TABLES SHOWING
(1) NAGER 07 AIRPLANES FOR WHICH ORDERS VERE RECEIVED EWRING THE PERIOD
MAY 1 TO MAY 23, INCLUSIVE, AND (2) NUMBER OF AIRPLANES THAT WAS ACTUALLY
DELIVERED DURING TEAT PERIOD. EXCLUDE U. S. ARMY AND U. S. NAVY ORDERS AND
CELIVERIES AS THESE WILL 3E OBTAINED DIRECTLY FROM THOSE DEPARTMENTS.
PLEASE CLASSIFY ORDERS AND DELIVERIES BY THE FOLLOWING FOUR GROUPS OF
PURCHASERS: (1) II. S. COMMERCIAL, (2) FRENCH AND BRITISH GOVERNMENTS,
INCLUDING THE BRITISH DOMINIONS, (3) SOUTH AMERICAN PURCHASERS, (1:) OTHER
POREIGN PURCHASERS. ALSO CLASSIFY ORDERS AND DELIVERIES TO EACH OF THESE
GROUPS OF PURCHASERS BY TYPE OF AIRPLANE INCLUDING IN EACH CASE THE
IDENTIFICATION NUMBER. IN ADDITION, PLEASE MAKE FOR EACH NEW ORDER All
ESTIMATED DELIVERY SCHEDULE BY MONTHS, CLASSIFIED AS ABOVE BOTH BY PURCHASER AND
3Y TYPE OF AIRPLANE. ADDRESS REPLIES TO GEORGE C. HAAS, DIRECTOR OF
RESTARCH AND STATISTICS, TREASURY DEPARTMENT, WASHINGTON.
HENRY MORGENTHAU, JR.,
SECRETARY OF THE TREASURY.
WA
Regraded Uclassified
16
Aircraft
Regraded Uclassified
Mr. George c. Roseley, President,
Rr. Franch is Genshl, President,
Darkley-Grov Aircraft Carp.,
Fleetwings, Inc.,
13210 French Road,
Bristol, Pennsylvania.
Detroit, Michigan.
Mr. L. R. Grunman, President,
Mr. Walter E. Beach, President,
Grumman Aircraft Bagineering Corp.,
Beach Aircraft Corp.,
Bethpage, long Island, New Tark.
Wichita, Kansas.
Mr. J. C. Parker, President,
Mr. Lawrence D. Bell, President,
Howard Aircraft Corp.,
Dell Aircraft Corp.,
5301 West 65th Street,
2050 Elmood Avenue,
Chicago, Illinois.
Buffalo, Bev York.
Mr. Howard 1. Raghes, President,
Mr. G. M. Bellanca, President,
Bughes Aircraft Co.,
Bellanca Aircraft Corp.,
Union Air Terminal,
New Castle, Delaware.
Durbank, California.
Mr. P. G. Johnson, President,
Mr. Robert 1. Gross, President,
Beeing Aircraft Co.,
Lockheed Aircraft Corp.,
Georgetown Station,
Burbank, California.
Seattle, Washington.
Mr. Glean L. Martin, President,
Mr. James Work, President,
Glenn L. Martin Co.,
Brewster Aeronentical Corp.,
Baltimore, Maryland.
Brewster Building.
Long Island City, New York.
Mr. J. R. Kindelberger, President,
North American Aviation, Inc.,
Mr. V. J. Burnelli, President,
Inglewood, California.
Burnelli Aircraft Corp.,
Keyport, Bev Jersey.
Mr. W. Vallace Kellett, President,
Republic Aviation Corp.,
Mr. R. H. Fleet, President,
Farmingdale, Long Island, New York.
Consolidated Aircraft Corp..
Lindbergh Field,
Mr. T. Clauds Ryan, President,
San Diego, California.
Ryan Aeronantical Corp.,
Lindbergh Field,
Mr. 6. V. Vaughan, President,
San Diago, California.
Curtiss-Wright Corp.,
30 Rockafeller Plass,
Mr. J. 3. Schaefer, Vice President,
New York City.
Stearman Aircraft,
Division of Boeing Airplane Co.,
Mr. Donald V. Douglas, President,
Vichita, Kensas.
Douglas Aircraft Os., Ino.,
3000 Ocean Park Boulevard,
Mr. V. A. Mara, Vice President,
Sents Menica, California.
Stinson Aircraft Division,
Aviation Manufacturing Corp..
Mr. Shorman Fairchild, President,
Nashville, Tennessee.
Fairchild Ingine & Airplane Corp..
ROA Building,
Nov York City.
- 2 -
19
Mr. & 1. Indwisk,
Mr. Richard V. Millar, President,
Aviation Corp.,
Valtes Aircraft, Inc.,
420 Lexington Avenue,
Devany, California.
New Tark City.
Mr. c. J. Brokner, President,
Mr. 1. V. Clark, Vice President,
Vace Aircraft Co.,
Vought-Sikersky,
Trey, Ohio.
Divisba United Aircraft Corp.,
Bridgeport, Com.
Mr. 1. 4. Rearvin, President,
St. Louis Aircraft Corporation,
Rearvin Aircraft and Engines, Inc.,
St. Louis, No.
Fairfax Airport,
Kansas City, Kansas.
Mr. Nac Short, President,
Vega Airplane Co.,
Mr.V. G. Skelly, President,
Burbank, Calif.
Sparten Aircraft Co.,
Box 2649,
Mr. Dwans L. Vallace, President,
Tules, Okla.
Cessa Aircraft co.,
Vichita, Kansas.
Mr. 1. 1. Porterfield, Jr., President,
Porterfield Aircraft Corp.,
1720 Wabash Avenue,
Kansas City, No.
Poaradod
ANDARD FORM No. 18
PROVED BY THE PRESIDENT
MARCH 10, 1525
FROM
Treasury Department
20
BUREAU
TELEGRAM
CHG. APPROPRIATION Contingent Expenses,
OFFICIAL BUSINESS-GOVERNMENT RATES
Treasury Department, 1940.
-
I
10-1793
May 24, 1940.
(Send telegram to names listed
on attached sheet)
PLEASE SEND BY AIRMAIL SPECIAL DELIVERY ON SATURDAY, MAY 25, TABLES SHOWING
(1) NUMBER OF AIRPLANE ENGINES FOR WHICH ORDERS WERE RECEIVED DURING THE
PERIOD MAY 1 TO MAY 23, INCLUSIVE, AND (2) NUMBER OF AIRPLANE ENGINES THAT
WAS ACTUALLY DELIVERED DURING THAT PERIOD. EXCLUDE U. S. ARMY AND U. S. NAVY
ORDERS AND DELIVERIES AS THESE WILL BE OBTAINED DIRECTLY FROM THOSE DEPARTMENTS.
PLEASE CLASSIFY ORDERS AND DELIVERIES BY THE FOLLOWING FOUR GROUPS OF
PURCHASERS: (1) U. S. COMMERCIAL, (2) FRENCH AND BRITISH GOVERNMENTS, INCLUDING
THE BRITISH DOMINIONS, (3) SOUTH AMERICAN PURCHASERS, (4) OTHER FOREIGN
PURCHASERS. ALSO CLASSIFY ORDERS AND DELIVERIES TO EACH OF THESE GROUPS OF
PURCHASERS BY TYPE OF AIRPLANE ENGINE INCLUDING IN EACH CASE THE IDENTIFICATION
NUMBER AND HORSEPOWER. IN ADDITION, PLEASE MAKE FOR EACH NEW ORDER AN ESTIMATED
DELIVERY SCHEDULE BY MONTHS, CLASSIFIED AS ABOVE BOTH BY PURCHASER AND BY
TYPE OF ENGINE. ADDRESS REPLIES TO GEORGE C. HAAS, DIRECTOR OF RESEARCH AND
STATISTICS, TREASURY DEPARTMENT, WASHINGTON.
HENRY MORGENTHAU, JR.
SECRETARY OF THE TREASURY.
UA
Regraded Uclassified
21
Ragine Namifacturers
Mr. 0. 1. Kreasser, President,
Mr. Villiam 0. Varner, President.
Allison Ingineering Co.,
Varase Aircraft Carp.,
Division of General Metore Corp.,
20263 Noover Avenue,
Indianapolis, Indiana.
Detreit, Nichigan.
Mr. c. J. Reese, President,
Mr. B. 3. Robinson, President,
Continental Motors Corp.,
Kinner Motors, Inc.,
Maskegon, Nichigan.
635 V. Colorado Blvd.,
Glendale, Calif.
Mr. 8. A. Guiberson, Jr., President,
Guiberson Diesel Engine Co.,
Mr. 2. A. Rearvin, President,
1000 Forrest Avenue,
Rearvin Aircraft and Engines Inc.,
Dallas, Texas.
Fairfax Airport,
Kansas City, Kansas.
Mr. J. Story Smith, President,
Jacobs Aircraft Engine Co.,
Pottstovn, Pennsylvania.
Mr. V. I. Cooper, General Manager,
Lycoming Division,
Aviation Manufacturing Corp.,
Williamsport, Pennsylvania.
Mr. A. I. Shelton, President,
Nenasco Manufacturing Co.,
6917 McKinley Arease,
Los Angeles, California.
Mr. J. c. Vard, Jr., General Manager,
Pratt & Whitaey Aircraft,
Division United Aircraft Corp.,
East Hartford, Coan.
Mr. Duncan 3. Cox, Vice President,
Ranger Ingineering Corp.,
Farmingiale, Long Island, New York.
Mr. Guy W. Vaughan, President,
Vright Asrenautical Corp.,
Paterson, New Jersey.
Regraded Uclassified
22
COPY TO
THE SECRETARY OF THE TREASURY
Per ets from
23
Regraded Uclassifi
1/25/40
May 24, 1940.
MEMORANDUM FOR
THE SECRETARY OF WAR
THE CHIEF OF STAFF
Please let no have on Monday the
program of requirements in airoraft by
types which will be ordered as soon as
possible as a result of the new legis-
lation. I understand that the Army has
placed orders for all of the 5,500 planes
under last year's expansion program. I
understand that the now legislation
authorises the purchase of 3,400 ad-
ditional planes.
I understand that such a program
of requirements by types has been
initiated.
It 10 of the utmost importance that
no contracts be entered into from now on
either for planes or engines or for the
development of new types of planes or
engines without coordinating this with
the general program as a rule.
For the time being, until the final
machinery is set up, this coordination
will be cleared through the Secretary of
the Treasury to me as Commander-in-Chief.
Please ⑉ that this is carried
out in toto.
F. D. R.
Returnte
GCM/MY
24
Personal and
Strictly Confidential
May 24, 1940.
My dear Mr. Welless
With further reference to your personal and confidential
note to me of May 22d, which you handed ae yesterdays I am returning
herewith the copy of the telegram signed BULLITT, dated "MAY 21, 1940,
received at 6148 P.M."
Referring to your question, I am not informed as to the
President's wishes regarding the manner in which matters of this sort
should be brought up for discussion. With regard to yesterday's question
regarding the number and varieties of materiel which the Allied Pur-
chasing Mission wish to obtain, he directed me to take that particular
matter up with you. I understood that he wished to have the opinion of
the State Department on the legal and international involvments in such
a transaction.
I understood from your comments yesterday that the direct sale
of these munitions by our government would be contrary to the Neutrality
Act and to international law, and that at the moment you had in aind no
method for circumventing those barriers.
I hope to talk over these matters with you in the next few days.
Faithfully yours,
Chief of Staff.
Honorable Summer Welles,
The Undersecretary of State.
delivered in person by Major Adems May 25/40
encl.
Regraded Uclassified
25
THE UNDER SECRETARY OF STATE
WASHINGTON
May 22, 1940
Personal and
Strictly Confidential
Dear General:
As you know, Mr .Bullitt has been sending a great
many telegrame in recent days asking questions of the
President and of the Department and transmitting re-
quests from members of the French Government for mate-
riel including ships, munitions, and airplanes.
The telegram which I enclose, and which I wish you
uld be kind enough to return to me when you are done
with it, is a case in point. In the first paragraph,
in addition to the question of the 75 millimeter cannon
which has been answered today, there is also raised the
question of 97 millimeter cannon and 155 millimeter
short rifle cannon and supplies of munitions from our
army stocks.
In cases of this kind, in order to avoid a delay
in replying, I should like to know whether the Presi-
dent desires to take these questions up himself directly
with the War Department, or whether he desires me to
take them up with the War Department and then submit the
War Department's recommendations to him for his decision.
Up to now it had been my thought that the President pre-
ferred to take these matters up himself directly. I
should like, however, to be sure what his wishes may be
and I shall appreciate it if you will let me know.
Believe me
Yours very sincerely,
Enclosure:
No. 800, May 21, 11 p.m.,
from Paris.
Ally
General George C. Marshall,
Chief of Staff,
2027 Munitions Building,
Washington, D. C.
26
THE WHITE HOUSE
C
WASHINGTON
0
P
May 24, 1940
Y
B
per
also
many
&
Pus
MEMORANDUM FOR
THE SECRETARY OF THE NAVY
I understand that practically all
orders under the 1939 airplane expansion
program have been placed. The new
Congressional authorization provides
for the acquisition of many new planes.
Please let'me have the program
requirements in aircraft and engines by
types by Monday next.
It is of the utmost importance
that no contracts be entered into from
now on either for planes or engines or
for the development of new types of
planes or engines without coordinating
this with the general program as a rule.
For the time being, until the final
machinery is set up, this coordination
will be cleared through the Secretary of
the Treasury to me as Commander-in-Chief.
Please see that this is carried
out in toto.
F. D. R.
27
Memorandum of Conference of the President
held at The White House at 4:30 p.m., May 24, 1940.
Present: The President
Secretary Morgenthau
William H. McReynolds, Administrative Assistant to the
President
The Secretary presented to the President the attached memorandum
from Mr. Foley with respect to the appointment of B "Board on Mobiliza-
tion of Industries Essential for Military Preparedness". The President
discussed et some length his own feelings with respect to such a plan
as compared to his own proposel to reconstitute the Council of National
Defense and to create an Advisory Commission to operate in connection
with it. He stated that be felt unwilling to take the alternative of
a Mobilization Board because of the possible interpretation of the
implications of imminence of war mentioned in the first part of the
statute.
Be then discussed with the Secretary at length the wording of
Section 1 of the proposed rules and regulations of the Council for
National Defense. The discussion resulted in some revision of the
wording of the section and a tentative agreement with respect to the
individuals he would ask to become Members of the Advisory Commission.
These names were -
Mr. Keller of Chrysler
Advisor on Industrial Production
ltr. Stettinius
Advisor on Industrial Materials
Mr. Lubin
Advisor on Labor Supply
Mr. Davis
Advisor on Agricultural Problems
Mr. Henderson
Advisor on Price Stabilization
Mr. Hoan
Advisor on Consumer Protection
Mr. Budd
Advisor on Transportation
The President indicated that he would not ask for further legis-
lation to add additional Members to the Council of National Defense.
Be stated that be would not expect the Council to be very active in
any event and that the burden of the work would rest on the Advisory
Commission.
He asked Secretary Morgenthau to consult with Secretary Hopkins
on Saturday and directed that Secretary Morgenthsu, Secretary Hopkins
and Mr. McReynolds come to the White House for EL further conference
on this subject with him at two o'clock on Saturday.
Regraded Uclassified
May 23, 1940
28
MEMORANDUM
The parent body of the various administrative agencies created to
control industry during the World War was the Council of National Defense.
This Council is composed of six cabinet Secretaries as follows: War, Navy,
Interior, Agriculture, Commerce and Labor. It is my opinion that an amond-
ment to the Act creating the Council of National Defense would be required to
add additional representation on the Council. I understand that this opinion
1a also shared by the Department of Justice, and the Director of the Budget
has been informed of this interpretation. Therefore, if the President
proposes to add the Secretary of the Treasury, the Director of the Budget
and others to the Council of National Defense it will be necessary to obtain
authorization from Congress.
The National Defense Act of 1916 (39 Stat. 166 at 214) authorizes the
President, in his discretion, "to appoint a Board on Mobilization of Industries
Essential for Military Preparedness, nonpartisen in character, and to take all
necessary steps to provide for such clerical assistance as be may deem neces-
sary to organize and coordinate the work hereinbefore described." While this
authority is contained in a section which gives the President the right of
eminent domain over industrial plants in time of war or when war is imminent,
nevertheless I believe that the power to appoint the Board may now be
exercised. This power 18 contained in a separate paragraph which I believe
is entirely independent of those powers contained in the section which may be
exercised only in war time or when war is imminent. In this connection it 1a
interesting to note that the power of the Secretary of War to make a complete
list of all private-owned plants in the United States equipped to manufacture
Regraded Uclassified
29
- 2 -
arms or ammunition is contained in the same section, and this also my be
exercised at any time. This authority would seem to give the President the
elasticity insofar as appointment of members 1s concerned which is not afforded
to him in the Act creating the Council for National Defense. The advantage
of using this power at this time is that the President could select his own
committee without regard to number or office and without going to Congress for
additional authority.
I understand that the Department of Justice agrees with this conclusion.
However, for reasons of public relations it might be undesirable to employ a
provision so closely related to war time mobilization of industry. On the
other hand, as the General Staff Corps represented to Congress in 1916 when
the legislation was under consideration, the appointment of such a Board is
"a long step toward preparedness." (Senate Doc. No. 447, 64th Cong., 1st Sess.
P. 17)
(Signed) E. H. Foley, Jr.
Regraded Uclassified
uk
AND REGULATIONS
COUNCIL OF NATIONAL DEFERES
+ir
Vader authority of Section 2 of the Act of August 29,
1916 (39 Stat. 649), the Council of National Defense adopts,
subject to the approval of the President, the following
rales and regulations for the conduct of its work:
Section 1. The Advisory Commission provided for in
Section 2 of the Act of August 29, 1916 (39 Stat. 649),
shall be composed of an Advisor on Industrial Production;
us Advisor on Industrial Materials; an Advisor on/Laber Employment
Fermal that
Supply; an Advisor on as Advisor
on Price Stabilization; an Advisor on Transportation; and
an Advisor on Consumer Protection. Bach of such advisors
shall be in charge of and responsible to the Council for
investigation, research, and coordination in his designated
field.
Section 2. The Administrative Assistant to the
President in charge of the office for Emergency Management
in the Executive Office of the President is hereby desig-
nated as Secretary to the Council and to the Advisory Com-
mission.
Section 3. The Secretary to the Council shall provide
suitable end necessary personnel, supplies and facilities
for the Advisory Commission and its several members and for
meah experts, special advisors, or other subordinate bodies
as the Council may from time to time employ under the pro-
visions of said Section 2 of the Act of August 29, 1916;
and be shall perform such other daties as the Council my
direct.
Regraded Uclassified
31
ADMINISTRATIVE ORDER
ESTABLISHING THE OFFICE FOR EMERGENCY MANAGEMENT
IN THE EXECUTIVE OFFICE OF THE PRESIDENT AND
PRESCRIBING EXCULATIONS GOVERNING ITS ACTIVITIES
Whereas, I find there is & threatened national emergency)
Now Therefore, By virtue of the authority vested in me by the
Constitution and the Statutes and in pursuance of Part I of Executive
Order No. 8248 of September 8, 1939, it is hereby ordered as follows:
Section 1. There is established in the Executive Office of the
President an office to be known as the Office for Emergency Manage-
ment which shall be under the direction of one of the Administrative
Assistants to the President, to be designated by the President.
Sec. 2. The Office for Emergency Management shalls
(a) Assist the President in the clearance of information
with respect to neasures necessitated by the threatened
emergency;
(b) Maintain liaison between the President and the Council
of National Defense and its Advisory Commission, and with
such other agencies, public or private, as the President
may direct, for the purpose of securing naxima utilization
and coordination of agencies and facilities in meeting the
threatened emergency;
(c) Perform such additional duties as the President may
direct.
OK
Regraded Uclassified
VM
32
May 23, 1940
FEMORANDUM
The parent body of the various administrative agencies created to
control industry during the World War was the Council of National Defense.
This Council is composed of six cabinet Secretaries as follows: War, Navy,
Interior, Agriculture, Commerce and Labor. It is my opinion that an amend-
ment to the Act creating the Council of National Defense would be required to
add additional representation on the Council. I understand that this opinion
is also shared by the Department of Justice, and the Director of the Budget
has been informed of this interpretation. Therefore, if the President
proposes to add the Secretary of the Treasury, the Director of the Budget
and others to the Council of National Defense it will be necessary to obtain
authorization from Congress.
The National Defense Act of 1916 (39 Stat. 166 at 214) authorises the
President, in his discretion, "to appoint a Board on Mobilization of Industries
Essential for Military Preparedness, nonpartisan in character, and to take all
necessary steps to provide for such clerical assistance as he my deem neces-
sary to organize and coordinate the work hereinbefore described." While this
authority is contained in & section which gives the President the right of
eminent domin over industrial plants in time of war or when war is imminent,
nevertheless I believe that the power to appoint the Board my now be
exercised. This power is contained in a separate paragraph which I believe
is entirely independent of those powers contained in the section which may be
exercised only in war time or when war is imminent. In this connection it is
interesting to note that the power of the Secretary of War to make a complete
list of all private-owned plants in the United States equipped to manufacture
Regraded Uclassified
- 2 -
33
arms or amminition is contained in the same section, and this also may be
exercised at any time. This authority would seem to give the President the
elasticity insofar as appointment of members is concerned which is not afforded
to him in the Act creating the Council for National Defense. The advantage
of using this power at this time is that the President could select his own
committee without regard to number or office and without going to Congress for
additional authority.
I understand that the Department of Justice agrees with this conclusion.
However, for reasons of public relations it might be undesirable to employ a
provision 80 closely related to war time mobilization of industry. On the
other hand, as the General Staff Corps represented to Congress in 1916 when
the legislation was under consideration, the appointment of such & Board is
"a long step toward preparedness." (Senate Doc. No. 447, 64th Cong., lat Sess.
p. 17)
E.H Faley R.
med
Regraded Uclassified
34
May 24, 1940
Based on this memo of Brett's, the
President dictated an order to Secy of War
and Secy of Navy putting all aircraft
under me. I said to the President,
"What you need is a Minister for Air
with all the oowers that go with it,
but without the public knowing it."
A. c. 312-Wright Field 9-28-39-10M
ADDRESS REPLY TO
WAR DEPARTMENT
AIR CORPS
35
MATERIEL DIVISION
Washington, D. C.,
May 24, 1940.
MEMORANDUM FOR - The Honorable Mr. Henry Morgenthau,
The Secretary of the Treasury.
1. In order to forecast requirements in aircraft and engines,
propellers and accessories there must be a program. Today we have
the 5500 Airplane Expansion Program on which all orders have been
placed. Today we have coming, as a result of the President's message,
an authorization for 2400 additional planes.
2. Other than the above I have nothing to work toward. I should
have a program of requirements in aircraft by type on which I would
base my estimates for money, for production, and for deliveries.
3. Such a program has been submitted to the War Department.
It has not been approved to my knowledge. I suggest some action be
taken which will give me as a procuring-officer a program in order to
answer your questions.
GEO. H. BRETT,
Brig. General, Air Corps,
Chief, Materiel Division.
36
Washington, D. G.,
May 24, 1940.
MEMORANDUM FOR - The Honorable Mr. Henry Morgenthau,
The Secretary of the Treasury.
1. In order to forecast requirements in aircraft and engines,
propellers and accessories there must be 6. program. Today we have
the 5500 Airplane Expansion Program OD which all orders have been
placed. Today we have coming, as a result of the President's message,
an authorization for 2400 additional planes.
2. Other than the above I have nothing to work toward. I should
have a program of requirements in aircraft by type on which I would
base my estimates for money for production and for deliveries.
3. Such a program has been submitted to the War Department.
It has not been approved to my knowledge. I suggest some action be
taken which will give ne as a procuring officer a program in order to
answer your questions.
GEO. H. BRETT,
Brig. General, Air Corps,
Chief, Material Division.
Regraded Uclassified
Jouis Johnson asked
One to tell you 37
if machine gune
are given to allies
on their basis we
shall have no guno
of larger calibre
for our oun planes
now being currently
produced and no
guns will be
available for doubling
present firepower
to match fire
power of german
planes. P.M.
36
WAR DEPARTMENT
OFFICE OF THE ASSISTANT SECRETARY
WASHINGTON,D.C.
May 24, 1940.
MEMORANDUM TO: Secretary Morgenthau,
Treasury Department.
SUBJECT:
Machine Guns and Powder Requirements for
the Allies.
MACHINE GUNS
A contract WEB about to be signed by the Anglo-French
Purchasing Board with the Colt's Patent Fire Arms Manufacturing
Company when the company was asked by the War Department to de-
lay signing because additional machine guns would be needed by
the War Department. The contract contemplated by the Board
would require all of the unobligated capacity of the Colt Company
for caliber .50 machine guns from December, 1940 through the year
1941. It also called for B. donation of approximately $450,000
new capital by the Allies to create additional capacity.
On or about April 5, 1940, the Army informed the Colt Com-
pany of its probable future requirements. This was prior to the
development of our own augmented preparedness program, now pend-
ing. Owing to the need for installation of larger and more
numerous machine guns on our own conbat airplanes on hand and on
order, the requirements of the United States for caliber .50 guns
in particular, will be vastly increased for the period from
January to December, 1941. However, to accommodate the Board,
the Mar Department under date of May 16, 1940 made a concession by
advising the Colt Company that it is willing to defer deliveries
on guns intended for our own program during the critical period
early in 1941 provided that the Board pays for creation of a new
plant costing approximately $2,500,000. The question here posed
is whether there is any moral obligation on the part of our Govern-
ment to permit the Board to sign the contract as originally nego-
tisted with the Colt's Patent Fire Arms Manufacturing Company, and
a decision must be rendered whether the Army must sacrifice its
claim on capacity during the early part of 1941 so as to allow all
of the existing capacity to be used by the Allies during that
period. If all of the existing capacity is conceded, the Army will
then have to create additional capacity to meet the needs of its
own program with an indeterminate delay until such time as the
additional capacity can be created.
Regraded Uclassified
39
POWDER
The Navy Department recently made a concession to the Board of
capacity in the DuPont powder plant at Carney's Point, which involves
a release for one year equivalent to 200,000 pounds a month beginning
in October, 1940. The Board now desires that this release be set
forward to the beginning of June, and that 400,000 pounds a month be
conceded for a period of five months. If this concession is made
from capacity contracted for by the Army, the loading program of the
Army under current and augmented programs would be delayed 20% of the
total loading program for a period of five months. If the original
concession made by the Navy is allowed, then the Army program would
be delayed 10% for a period of ten months.
If the President directs that concessions be made, the War De-
partment will gladly make the necessary arrangements.
LOUIS JOHNSON,
The Assistant Secretary of War.
+
40
May 24, 1940.
REMORANDUM TO: Secretary Morgenthau,
Treasury Department.
SURJECT:
Machine Guns and Powder Requirements for
the Allies
MACHINE GUNS
A contract about to be signed by the Angle-French
Purchasing Board with the Colt's Patent Fire Áras Manufacturing
Company when the company WILS asked by the for Department to de-
LAY siguing because additional machine guns would be needed by
the The Department. The contract contemplated by the Board
sould require all of the unobligated capacity of the Colt Company
for caliber .50 mehine guns from December, 1940 through the year
1941. It also called for as donation of approximately $450,000
new capital by the Allies to create additional capacity.
On or about April 5, 1940, the Army informed the Colt Coo-
pany of its probable future revirements. This 968 prior to the
development of our OWELL augmented preparedness program, now pend-
ing. Oring to the need for installation of larger and more
numerous mehine guns on our own combat airplaces on band and OR
order, the requirements of the United States for caliber .50 guns
in particular, will be vantly increased for the ;eriod from
January to December, 1941. However, to accomolate the Board,
the Far Department under date of May 16, 1940 made & concession by
advising the Colt Company that it 10 willing to dafer deliveries
on guns intended for our own program during the critical period
early in 1941 provided that the Board pays for creation of D new
plant costing approximately 12,500,000. The question here pored
is whether there is any noral obligation on the part of our Govern-
ment to permit the Board to sign the contract as originally nego-
tisted with the Colt's Patent Fire Arms Manufacturing Company, end
4b decision must be rendered whether the Army must sucrifice its
claim on expecity during the early part of 1941 DO no to allow all
of the existing capacity to be used by the Allies during that
period. If all of the existing capacity 1s conceded, the Army will
then have to create additional capacity to neet the needs of its
own program with an indeterminate delay until such time as the
additional capacity can be created.
Regraded Uclassified
41
2000
The Navy Department recently made a concession to the Board of
capacity in the DuPont powder plant at Carney's Point, which involves
a release for one year equivalent to 200,000 pounds a month beginning
in October, 1940. The Board now desires that this release be set
forward to the beginning of June, and that 400,000 pounds a month be
conceded for & period of five months. If this concession is made
from capacity contracted for by the Army, the loading program of the
Army under current and augmented programs would be delayed 20% of the
total loading program for a period of five months. If the original
concession made by the Navy is allowed, then the Army progrem would
be delayed 10% for a period of ten months.
If the President directs that concessions be made, the War Der
partment will gladly make the necessary arrangements.
LOUIS JOHNSON,
The Assistant Secretary of Far.
+
copy what r
this young
TREASURY DEPARTMENT
42
PROCUREMENT DIVISION
ICE OF THE DIRECTOR
WASHINGTON
May 24, 1940.
MEMORANDUM FOR THE SECRETARY
Mr. Van Dusen of Lockheed Aircraft phoned me this afternoon that
Major Fleet, President of Consolidated Aircraft, proposes to
organize a subsidiary air craft manufacturing corporation to be
known as the Consolidated Eastern Airciaft Corporation to build
a production plant in Texas and to take over fixed assets, organ-
isation and designs of Hall Aluminum Aircraft Corporation. He
further stated that Consolidated Aircraft proposes to contribute
proven designs and sub-contracts for the manufacture of parts,
assemblies and complete airplanes as the new company develops.
The capital required is estimated at $1,000,000 for plant,
$1,000,000 for machinery and $1,000,000 working capital, which
will provide a well equipped plant of approximately 500,000
square feet BO designed as to permit of the rapid expansion to
meet any emergencies. To avoid the time which they considered
would be lost by public financing they propose to borrow
$3,000,000 from the R.F.C. for a period of five years to finance
this project. He stated further that this entire matter has
been explained to both the War and Navy Departments.
Mr. Van Dusen also pointed out the necessity of prompt action in
order to avoid the dissipation of the Hall Alumimm Aircraft
Corporation who will in the near future complete existing Coast
Guard orders,
Mr. Van Duzen requested me to pass this information on to you and
stated that any support that the Treasury Department could con-
sistently give would be very much appreciated.
Regraded Uclassified
House
43
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 24, 1940
TO
The Secretary
Mr. Gaston
FROM
wrs
The following emended plan will be made effective at once for-
(a) The circulation of information in regard to suspected
violations of the Neutrality Laws coming within the
jurisdiction of the Treasury Department, or in regard
to events or circumstances pointing to the possibility
of such violations; and
(b) For the conduct of any investigations of such violations
which may be considered desirable.
Information from Customs Sources
1. Reports of Customs officers in the field will be transmitted
to the Bureau of Customs at Washington.
2. The Bureau of Customs will immediately transmit copies:
(a) To Coast Guard Heedquarters; and
(b) To Mr. Frank Rose, Assistant to Assistant Secretary Gaston
Information from Coast Guard Sources
3. Reports of Coast Guard officers in the field will be transmitted
to Coast Guard Headquarters at Washington.
4. Coast Guard Headquarters will immediately transmit copies to
Mr. Rose.
Transmittal of Information to Agencies
Outside the Treasury Department
5. Upon receipt of significant information from Coast Guard or
Customs field officers, as above provided, and after Mr. Rose has been
advised, Coast Guard Headquarters will immediately notify the proper
Naval authorities and the State Department. When it is necessary to
consult the State Department or any other Department as to a course of
action to be followed in Neutrality matters, this will be done by Mr.
Geston or by his direction.
- 2 -
Urgent Matters by Telephone
6. When information of an urgent character, indicating the
need for prompt action is received by any agency, it should be com-
minicated immediately by telephone to Mr. Gaston or Mr. Rose and a
memorandum thereon should follow through the usual channels.
Transmittal of Information to the Secretary
and Other Interested Officers of the Treasury Department
7(a). Mr. Rose will immediately transmit to Mr. Gaston, Mr.
Harris, Mr. Foley and Mr. Irey all information received from Coast
Guard Headquarters and from the Bureau of Customs, as above provided,
end Mr. Gaston will be responsible for laying it before the Secretary,
or, in the absence of the Secretary, the Under Secretary. In the event
of Mr. Gaston's absence, Mr. Rose will tranamit such information to
the Secretary or the Under Secretary in Mr. Gaston's stead.
(b). Important information received by Coast Guard Headquarters
out of office hours will be communicated to Mr. Gaston, or, should Mr.
Caston be insccessible, to the Secretary direct.
Office of the General Counsel
8. Mr. Rose will specially refer to the General Counsel, or
his designated representative, any report or information which appears
to raise a legal question, or with respect to which 5 legal opinion
is desired.
Investigations
9. If special investigations by Treasury agencies other than
Coast Guard and Customs should be considered necessary as the result
of information received from field officers, such investigations will
be handled under the direction of the Coordinator, Treesury Agency
Services, and no such investigations will be undertaken by field
officers other than officers of Customs and Coast Guard except as
he may direct. This is not intended to preclude follow-up and routine
investigations by field officers of the Coast Guard and the Customs
Service, nor the usuel interchange of information among the field
services of the Treasury Department.
DWB
his
Mgl
Regraded Uclassified
in
Chart Showing Flow of Information
under Coordination Scheme
Field Offices
Bureau Headquarters
Department
Customs
Customs
Rose
Coast Guard
Coast Guard
Harris
Gaston
Foley
Irey
To Naval Intelligence and/or to White House
and/or
Secretary
State Department
May 24, 1940.
NUMBER OF BLAST FURNACES IN THE U.S.
/
Distribution by Districts
NOWT
-
See
/
wis
- -
e
per
men
-
Wee
-
-
Date
-
that
-
-
-
w7
team
-
10%
-
- -
THERE
VII
il
=
164
IN
Child
00000000
-
1
=
Il
1
Pare
-
/
N
II
N°
wheeling
e
:
sans
quio
-
!
-
ve
44g
All
-
DALA
-
TEXAS
ARE
-
-
se
NA
was
-
LA
PLA
LEGEND
Furnance in b/ost
Furnance die
Furnance blown in this -----
B
As of May 24.1940*
Furnance biown out the ----
Total Furneces in Blast - 164
Each dos represence - -
Total Furnaces /d/a - 72
Prafeminely
(This are be limary
-
C-341
Regraded Uclassified
47
Treasury Department
TELEGRAPH OFFICE
4w
WAG29 M 63 DL
1940 MAY 24 AM 11 24
TE CLEVELAND OHIO MAY 24 1940 949A
HON HENRY MORGENTHAU JR
SECRETARY OF TREASURY
FOLLOWING MEMBERS OUR COMMITTEE ON COOPERATION GOVERNMENT DEPARTMENT
WILL BE AT YOUR OFFICE 1100AM MONDAY, MAY 27TH:
CLAYTON R BURT, PRESIDENT, PRATT AND WHITNEY, HARTFORD. Chun
CHARLES J STILLWELL, PRESIDENT, WARNER AND SWASEY, CLEVELAND.
HOWARD W DUNBAR, VICE PRESIDENT, NORTON CO., WORCESTER.
NORMAN D MACLEOD, PRESIDENT, ABRASIVE MACHINE TOOL CO., providence.
JOHN E LOVELY, VICE PRESIDENT JONES AND LAMSON MACHINE CO.
SPRINGFIELD VT
NATIONAL MACHINE TOOL BUILDING ASSN
TELL BERNA
1118A Sin mgv.
Regraded Uclassified
Treasury Department
TELEGRAPH OFFICE
22w
END MAY + PM I 07
WY136 FO 16 SER
WUX DETROIT MICH MAY 24 1940 1244p
PHILIP YOUNG
CARE SECRETARY HENRY MORGENTHAU JR WASHNDC
LETTER GIVING OUR REPORT MAILED LAST NIGHT 930 SHOULD BE YOUR
HANDS THIS MORNING. BEST REGARDS
K T KELLER CHRYSLER CORP
106P
Regraded Uclassified
49
CONFIDENTIAL
May 24, 1940
To:
The Secretary
From:
Mr. Young
COLT
Mr. Purvis has advised me through Ballantyne
that the Colt contract on the basis of the $2,500,000
will be signed tonight or tomorrow.
DU PONT
The Anglo-French Purchasing Board will be
delighted to get powder on the basis of 200,000
pounds per month, beginning October 1, 1940. This
contract will be signed as soon as possible.
PRATT & WHITNEY
The letter of intention to Pratt & Whitney was
signed by both the British and the French last Wed-
nesday and returned to the Purchasing Board last
night signed by Pratt & Whitney. (The contract must
be signed within 30 days.)
ALLISON
I understood from Mr. Ballantyne this afternoon
that you had told Mr. Purvis he could have the five
Allison engines. I learned tonight from Ballantyne
that Colonel Jacquin had phoned Allison and asked that
the five engines be shipped immediately. Allison
replied that the French could have only one engine.
P4.
Regraded Uclassified
50
7.0hr Phil your
TREASURY DEPARTMENT
PROCUREMENT DIVISION
FFICE OF THE DIRECTOR
WASHINGTON
ts
May 25, 1940.
sma
J5/27/40
MEMORANDUM FOR THE SECRETARY
At 11:50 this morning the Minister of Norway called,
having been referred to me by the State Department,
stating that he was in receipt of a cable from his
home Government asking that immediate steps be taken
to ascertain whether or not it would be possible to
purchase from the Army approximately 70 pursuit ships
of an old type. Memorandum per attached copy was for-
warded to General Gregory for action.
Reforms
51
May 25, 1940.
MEMORANDUM FOR GENERAL GREGORY
the Minister of Norway called at 11:50 this morning and stated
that be was in receipt of a cable from his Government request-
ing that an imadiate inquiry be made as to the possibility of
purchasing from the Army approximately 70 older pursuit planes
for use of the Norwagians in repelling attacks of German bembers.
He was informed that it was not believed there was any law under
which the sale of such planes could be effected. Be requested,
nevertheless, that this matter be submitted to the War Department
imediately in order that it might be learned whether or not any
procedure could be effected through which these pursuits might
be acquired by the Norwagian Government.
It would be appreciated if there might be furnished as soon as
possible any information which will permit of & reply being made
to the Norwagian Minister. The submission of this memorandum in
advance of the receipt from him of a letter is done at his par-
ticular request. He promised to have formal application for these
planes in my hands by Monday, immediately upon receipt of which
it will be transmitted to you,
Regraded Uclassified
52
May 25, 1940
On May 25th, when H.M.Jr. saw the President be-
tween 5:00 and 6:00, the President discussed various people
whom he intended to appoint.
The President suggested Ralph Budd for railroads.
For agriculture, the President's suggestion was M. L. Wilson
and H.M.Jr.'s suggestion was Chester Davis. Consumer, the
President suggested Hoan who was ex-Mayor of Milwaukee.
H.M.Jr. suggested for labor, Lubin. The President
suggested as assistant secretary of labor Phil Murray and Dan
Tobin.
On prices, H.M.Jr. suggested Leon Henderson. H.M.Jr.
also suggested Keller and Stettinius. The President suggested
Hillmag, Jim Forrestal and Admiral Leahey for administrative
assistants.
53
may 25 5-6 P.M.
A
Pres. office
THE WHITE HOUSE
WASHINGTON
RR. Ralph Budd
agr. 1st suggestion a.L. Wilson
2nd cheater Davis
(my mission)
Consumer Hoan
milwakee
Labor-Lubin North
Phil Him many } as Lath tec. ine
Price Hong = Leon Henderson
Ang Ingested Keller
Settemines
(over)
Hillman 38UOH THW adm arot
Jun Forestal SPIT adm asst ast
admiral Leahy adm
Knudsen and Stettinius
Head Defense Commission
President Roosevelt today Transportation-Ralph Budd, chau-
named a seven-man national de-
man of the Chicago, Burlington and
fense commission. He appoint-
Quincy Railroad.
ed William S. Knudsen of Gen-
RAW materials and price stabilization
-Leon Henderson, member of the se-
eral Motors and Edward R.
cúrities and exchange commission.
Stettinius Jr. of U. S. Steel to
Advisor on consumer protection-
supervise industrial production
Harriet Elliott, dean of women at the
and material.
University of North Carolina and ex-
pert DO price trends in consumer mar-
The board. created under the old 1916
kets.
National Defense Act. will meet Thurs-
day to begin work with Mr. Roose-
velt. Its technical name will be the
Advisory Commission to the Counsel of
National Defense.
Mr. Hillman
Mr. Henderson
William R. McReynolds, one of the
president's three executive assistan
will serve as secretary of the commis-
Mr. Knudsen
Mr. Stettinius
aion, along with his other dittes, Add -
lionally, Mr. Roosevelt said un the ned
Mr. Roosevelt, piedging not to disor- day or so he will name two additional
ganise normal processes of American executive assistante to assist the three
life in the rearmament drive, assigned 10,000-a-year men already in such
these five persons to kep posts on the posts.
board:
The seven members of the defense
Employment-Sidney
Hillman,
vice-
commission, the President mid, will
president of the C.I.O. and president of
serve without pay.
the Amalgamsted Clothing Workers.
Mr. Stettinius, supervising Industrial
Farm Products-Chester C. Davis,
&
materials, and Mr. Knodsen. supervis-
BOYOTHER of the federal reserve board
me industrial production, will have full
Classe jobs facting them immediately
ipm their arrival here. the President
aid
Regraded Uclassified
55
MAY 2 4 1940
Dear Nandolphs
1 have your letter of the 9th with your comments on the proposed
Inter-Amorican Bank. It was good of you to take the trouble of
writing at such length. As you are probably sware, the response of
the Latin American countries for the signing of the convention was
quite encouraging, and it looks now as if a useful device for inter-
American cooperation may evolve.
I agree with you that the Bank will require capable leadership
from the very start and that it may have to feal its my slowly into
the fields where it can be nost useful. The questions of the choice
between a central banks' bank and an inter-governmental bank, and
the danger of creating competition for existing institutions, areae
early in the drafting process and have been thoroughly debated both
by the Letin Aserican representatives and by our own people here.
Xg are convinced that the inter-goverumental approach is a far prefer-
able Insurance of promoting the desired objectives.
There appears to be general agreement that the Inter-American
Dank is designed to complement rather than to replace existing bank-
ing institutions. It was deened desirable to state the powers in
broad terms in order to provide the Bank with adequate flaxibility to
adjust its activity to the different conditions and different degrees
of (inancial development in the 21 countries involved. However, such
provisions as the four-fifths mjority requirement, the vato power
that can be acquired under the voting system, and the check on opera-
tions in a country when that country naises timely objection, should
wake it possible to limit the activities of the Bank to the desired
sphere. For example, Article 5, Section 5(7), contains a suitable
sefeguard against undesired competitions
"In order to carry out the foregoing purposes, the Bank
shall have specific power to - # - Accept demand, time,
and custody deposits and accounts from others, including
participating governments and fiscal agencies, central
banks, political subdivisions and nationals thereof
unless the participating government makes a timely
objection . - '.'
Regraded Uclassified
56
Mr. W. Handelph Dargess - 2
You are quite correct in stressing the desirability of coopera-
tion of commercial banks and central banks. I feel that it will be
to their interest, ⑉ well as to the public interest, lifethie
cooperation so attained.
Statembly,
(Signed) H. Morgesthau, Jr.
Secretary of the Treasury.
File to Mr. Thompson
Mr. 1. Randelph Burgess,
Vice Chairman of the Board,
The National City Bank of in York,
New York, New York.
sons no and
5/17/40
57
lw
GRAY
Paris
Dated May 24, 1940
Rec'd 2:31 p.m.
Secretary of State
Washington
869, May 24, 6 p.m.
FOR THE TRFASURY.
In an arrave published in today's JOURNAL OFFICIEL
the Linister of Finance designated the banks and bank-
ing houses with which French owned American and Canadian
securities are to be deposited or to which the American
or Canadian dollar exchange held abroad by French
nationals and French "moral persons" is to be trans-
ferred (please SEE my telegram No. 796, May 21, 7 p.m.).
The list COVERS all of principal banking setablishments,
houses in France and French possessions and includes
the French branches of Morgan and Company, Guaranty
Trust, National City Bank, Chase and the American
Express Company.
(END SECTION ONE)
BULLITT
DDM
58
JT
GRAY
PARIS
Dated May 24, 1940
Rec'd 2:48 pelle
Secretary of State,
Washington'.
869, Hay 24, 6 pame (SECTION TWO)
A second arrete introduces certain modifications
in the decree of May 20 regarding vast surrender or de-
posit of American and Canadian bank notes (please SEE
above reference). French or foreign residents of France
need not turn such notes over to the Foreign Exchange
Office 07 deposit them in a dollar account if the amount
held by them is less than the Equivalent of 2000 francs.
As from June 16 any resident of France who is returning
from abroad must surrender all the American or Canadian bank
notes carried by him to the Foreign Exchange Office. The
arrete also names the banks authorized to purchase dollars
in behalf of the Foreign Exchange Office and to carry
dollar accounts for their clients. The list is somewhat
smaller than that mentioned above but includes all the
branches in France of American banks and the American
Express Company,
BULLITT
CSB
Regraded Uclassified
VRH
GRAY
59
Paris
Dated May 24, 1940
Rec'd 2:49 p.m.
Secretary of State,
Washington.
869, May 24, 6 p.m. (SECTION THREE)
In a notice published today the Foreign Exchange
Office calls the attention of its intermediaries to
the fact that refugees from Belgium, Luxembourg and
The Netherlands are considered as residents of France
insofar as the exchange control officials are concerned.
Accordingly the French bank accounts hEld by such
individuals may no longer bE considered as "foreign
accounts in francs" and thus the francs contained in
them cannot bE freely sold on foreign markets.
A decree adds various industrial chemicals in
factories and butter and Eggs in cold storage warehouses
to the list of commodities which may bE insured against
risks of war.
Little activity took place on the Bourse today.
Rentes with the EXCEPTION of the Exchange guarantee issues
were generally firm. Franch stocks declined fractionally.
Internationals
60
-2- # 869, Lay 24, 6 p.m., from Paris
Internationals were lower Suez losing 750 francs.
(End of message)
BULLITT
CSB
TREASURY DEPARTMENT
61
INTER-OFFICE COMMUNICATION
DATE May 24, 1940.
TO
Secretary Morgenthan
FROM
Mr. Cochran
CONFIDENTIAL
The foreign exchange market vas quiet today. Sterling, after advancing
from an opening rate of 3.19 to 3.22 at noon, eased during the afternoon
session to close at 3.19.
Sales of spot sterling by the six reporting banks totaled 1469,000,
from the following sources!
By commercial concerns
I 189,000
By foreign banks (Europe and Far East)
I 280,000
Total
I 469,000
Purchases of spot sterling by these banks and by the Federal Reserve Bank
of New York amounted to 1425,000, as indicated below:
By commercial concerns.
1 135,000
By foreign banks (Far East, So. Amer., Europe & Near East)
1 280,000
By the Federal Reserve Bank of New York (for Belgium)
1 10,000
Total
I 425,000
The following reporting banks said cotton bills totaling 143,000 to the
British Control on the basis of the official rate of 4.02-1/2:
I 33,000 by the Guaranty Trust Company
8,000 by the National City Bank
1,000 by the Bank of Manhattan
1,000 by the Bankere Trust Company
1 43,000 Total
Development in the other important currencies were as follows:
The movement of the French franc rate was similar to that of sterling,
although no exact relationship between the two currencies was maintained
here. The franc moved up from .0180-3/4 at the opening to .0182-1/4 at
noon, then returned to .0180-1/2 at the close. The final cross-rate was
176.73 france per pound.
The Swise franc was steady all day. It closed at .2242.
The Canadian dollar had a steady tone most of the day, but just before
the close it weakened on some small selling. The final discount of
22-1/16% equalled the record low established for that currency a few days ago.
Regraded Uclassified
CONFIDENTIAL
62
- 2 -
The Italian lira closed at an offered rate of .0505. It has remained
unchanged at this figure since September 25. 1939.
The Reichamark closed at .4000.
The yuan in Shanghai was unchanged in terms of sterling at 4-1/80. Against
the dollar, it moved off 1/16# to 5-1/24.
The Cuban peso, which has remained steady at a discount of 10-1/4% since
May 10, today improved to 9-15/16% discount. The Mexican peso has remained u.
changed at .1672 since January 3.
We purchased $512,000 in cold from the earmarked account of the National
Bank of Belgium.
The Federal Reserve Bank of New York reported the following shipments of
gold:
$ 1,600,000 from Spain, shipped by the Spaniah Institute of Foreign Exchange,
Madrid, for its own account to the National City Bank, New York.
192,000 from England, shipped by Samuel Montagu & Co., London, to the
Irving Trust Company, New York.
$ 1,792,000 Total
The two shipments listed above will be sold to the U. S. Assay Office at New York.
The State Department forwarded to ne a cable stating that the National Bank
of Tugeslavis, Belgrade, vas making a shipment of gold coin valued at $11,883,000
and a shipment of gold bare valued at $2,119,000 to the Federal Reserve Bank of
New York. The disposition of these shipments is unknown at the present time.
The quotation for gold received from Bombay was $37.37. This is 50# above
yesterday's price.
The Bombay spot silver quotation worked out to the equivalent of 46.36#.
up 1/8/.
In London, the prices fixed for spot and forward silver both advanced 5/84
to 22-7/164 and 22-1/4d respectively. The report received from London stated that
the volume of business transacted in silver was very small. Today's improvement
in the prices was attributed to local speculative buying. The U. S. equivalents,
calculated at the open market rate for sterling, were 32.18# and 31.66#. On the
basis of the official sterling-dollar rate, the spot price was equivalent to 40.794.
Handy and Harman raised its settlement price for foreign silver to 35-1/4c
today. The Treasury's purchase price for foreign silver was unchanged at 350.
There were no purchases of silver made by us today.
2MS.
Regraded Uclassified
63
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 24, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Stone of Secretary Hull's office just phone me at 2:45 this afternoon
to let me know that a cablegram had been received from Ambassador Phillips at
Rome, reading as follows:
"I an informed that departure of several Italian vessels in-
cluding Neptunia and Rex postponed for several days with intimation
that further postponements may be expected."
BM/S.
STRICTLY
CONFIDENTIAL
TREASURY DEPARTMENT
84
INTER-OFFICE COMMUNICATION
DATE May 24, 1940
TO
Secretary Morgenthau
FROM Kr. Dochran
Mr. Pinsent telephoned me at the Treasury last night at 7 o'clock that
his Embasey had received a cablegram to stand by to receive a message for
delivery to the Secretary of the Treasury forthwith. I told Pinsent to got
in touch with me whenever it might come in.
At five minutes until 12 last night Mr. Pinsent telephoned me that the
massage had just arrived and was being decoded. He said that the three main
points seemed to be:
(1) that all exports from the British area, and possibly
from the entire sterling area, will hereafter have
to be paid for in dollars;
(2) that that sale of securities by non-residents will be
prohibited;
(3) that permission to transfer interest and dividends
out of England at the official rate will be permitted.
At 9:10 this morning, Mr. Pinsent telephoned from his homethat this
message wes being typed up and is of considerable length. He would like to
bring it to the Treasury this morning and present it personally to the
Secretary. I told him that I would let him know at 10 o'clock whether the
Secretary could receive him, I stressed the fact that the Secretary was 8%=
trenely busy on Cabinet day.
I really see no need for the Secretary to receive Mr. Pinsent personally.
The message is important, but it is nothing that we would desire to comment
upon immediately. If the terms are as summarized above, it will mean that
free sterling will be available for few purposes, and will probably decline
further. On the other hand, if exporte are not permitted in free sterling,
this causes no danger to our market. It really eliminates any conceivable
danger of dumping, Finsent explained that the second measure was obviously
temporary. There may be some complaints from Americans holding securities in
England because they cannot sell them, but the third provision permits them to
obtain interest and dividends at the official rate, so they do not suffer as
Far as their income is concerned. Obviously, the British are endeavoring to
prevent a flight of capital from England and a dumping of securities as invasion
threatens.
BMP
Regraded Uclassified
65
JR
GRAY
Milan
Dated May 24, 1940
Rec'd 1:43 p.m.
Secretary of State,
Washington.
39, May 24, 5 p.m.
Referring to Department's telegram of May 22, 5 p.m.,
index for May 4, 251.67; May 11 245.87; May 18 226.27;
May 20 227.70; May 21 221.43. Today's index 216.70.
Volume 100,800.
RENEWED selling pressure weakened prices throughout
active session probably due nervousness over political
situation.
SHOLES
HTH
66
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
May 24, 1940
MEMORANDUM TO THE SECRETARY:
Dr. Feis of the State Department
called today to say that they had an extended
conference in the office of the Secretary of
State on the question & freesing Chinese
balances in this country. He had been requested
to advise me that it was the Secretary's opinion
that nothing should be done to freese these
balances at this time. He said he saw no reason
why further discussions should not be carried on,
but that no action should be taken at this time.
Secretary Hull wanted me to convey this
information to you.
rub
67
JR
PLAIN
London
Dated May 24, 1940
Rec'd 1:31 pame
Secretary of State,
Washington.
1357, may 24.
FOR TREASURY FROM BUTTER/ORTH.
1. lir. Craven-Ellic, member of Parlicment and chairman
of the so-celità Monetary Committee of Parliament, has
supplied the Embassy with = copy of the following
telegram he is sending to Senator Lundeen.
"It 1c gratifying to DEE America becoming conscious
of her obligation to the CAUSE now being strenuously
contested by the Allies. America can give immediate
help in the fight for liberty and freedom by settling
the Alliso purchases by loans. The present method of
payment must undermine the sconomic structure of
America's best customer to her ultimate disadvantage."
2. The crucial immediacy of the moment referred to
in my 1304, May 21, 3 p.m., continues to overshadow all
monetary and financial questions. HOWEVER changes in
these fieldo the past two WEEKS are worth mentioning.
Although the new allied monetary group has not yet
been regularized by concluded agreements, their foreign
exchange
68
-2- 71357, May 24, from London.
Exchange problem is immediately somewhat Eased. Of
EVEN greater importance than the Allied purchases of
raw materials in the Dutch and Belgian Empires and the
previous high cost of Norwegion, Danish, Dutch and
Balgion shipping now under Allied control, will bE the
dollars and other foreign Exchange earned by these
assets, while Dutch, Belgian Danish and Norwegian
gold and other foreign assets not left behind in German
occupied territory materially increase the already
substantial Allied resources. "ith all the world's
colonial possessions EXCEPT those of Italy and Portugal,
and with practically all the world's merchant shipping,
EXCEPT that of the United States, Japan and Italy, now
within the Allied orbit, the potential Allied resources
are such as to render their staying power and their
bargaining power of immense significance. But this
dominance of potential strength with all its implications
to the United States SEEMS for the time being of hardly
more than accdemic interest in the face of the over-
whelmingly more difficult and vital military and supply
problems of the moment.
3. Replying to a question in Parliament suggesting
that the official rate of exchange which has prevailed
since
69
-3- #1357, May 24, from London.
since the outbreak of the war should no longer bE
maintained, the Chancellor of the Exchequer stated that
hE is "convinced that it would bE most undesirable in the
national interests to adopt this suggestion".
4. A new instruction to banks io designed to prevent
a practice whereby both a United Kingdom buyer of
imported goods, and C. sterling area buyer to whom hE may
substquently stll the goods, could obtain dollars from
their respective controls, In future where goods imported
into the sterling area for payment in foreign currency
are re-sold within the sterling area, the contract may bE
expressed in foreign currency, but payment must bE made
in sterling converted at the appropriate London rate of
exchange. Where exports subject to reg. 5b (DEE my 594 of
March 9, noon) are sold within the sterling area,
settlemento must not bE in currency and deals are subject
to an undertaking to fulfill the requirements of the
regulation. No applications for foreign Exchange on
behalf of sterling area residents in favor of other
residents will be granted. by the Bank of England SAVE in
Exceptional circumstances.
KENNEDY
CSB
12286
ATP
PLAIN
70
Shanghai via NR
Dated May 24, 1940
Rec'd 6:10 pm
Secretary of State
Washington
NOT TO BE DISSEMINATION WINDOW:
452, May 24, 5 PM.
THE
uza
FROM COMMERCIAL ATTACHE.
WEEKLY Financial. Shanghai open market foreign
Exchange rates Eased last few days from high reached
May twentigth due reported continued purchases by Anglo
Chinese Stabilization Committee and some uneasiness
regarding status Shanghai in CASE of further Extension of
European war, but market healthier due absence of either
large overbought or oversold positions it present and selling
is mainly by hoarders for profit taking. Inter-bank
selling spot this morning around five one holf and four
one eighth having high during WEEK of five SEVEN Eights
and four one quarter and a low of five five sixteenths
and three fifteen sixteenths, May delivery same ns spot
having 2 high of five three quarters and four SEVEN
thirty seconds and a low of five three sixteenths and three
twenty nine thirty seconds, June delivery around five
one quarter and three fifteen sixtemths having a high
of five one half and four one sixteenth and a low of
four fifteen sixtemths and three SEVEN Eighths.
Chinese financial circles believe that control has so
far recouped nearly two million pounds sterling since
Extension
Regraded Uclassified
⑉2⑉
May 24,
6:10 pm from Shanghai
71
Extension war in Europe. Other quotations this morning
gold bars yuan five SEVEN Eight naught having 1 high
during week of yuan six one hundred and a low of yuan five
two three naught, WE1 Wah cash discount rate around twelve
percent, Bank Japan notes further weakened yen one for Chinese
yuan one point naught Eight, military scrip yen one for
Chinese yuan one point two five, Hun Hsing yuan one for
Chinese yuan one point fifty, custons gold unit for
Chinese yuan twc point SEVEN naught SEVEN or United States
dollar naught point five two one Eight SEVEN five,
Tientain exchange rates four SEVEN Eighths and three
twenty one thirty seconds, Tientsin Shanghai remittance
chn rge one two point five percent, Tientsin Federal
RESErVE banknotes at par with Chinese yuan. Yesterday's
closing quotations: Chinese domestic logns average
five one point five one, Shanghai general stocks slumped
during week due war developments unfavorable to allied
powers average two four SEVEN point nine Eight
representing decline more than twenty percent from one
also
week agg, Shanghai rubber shares / slumped during week
average one SEVEN two point six two representing decline
over forty two percent from one week ago. Canton customs
prohibit passengers leaving for Macao or Hong Kong
tó carry away more than yuan two hundred in Chinese
national currency each person.
INFORM COMMERCE.
Repeated to Chungking and Peiping.
BUTRICK
NPL
Regraded Uclassified
72
THE WHITE HOUSE
WASHINGTON
May 24, 1940
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
In regard to payment on Finland's
debt, I suggest we take no further action
at this time. The situation in Europe is
80 cloudy and 80 unpredictable even from
week to week that I think this whole matter
can be deferred for awhile.
F. D. R.
keel got phytostant
or Pres news 6/5/40 only
73
OFFICE
of
TREASURY DEPARTMENT
WASHINGTON
THE
SECRETANT
May 22, 1940
My dear Mr. President:
You will recall early in December you publicly announced
that the payment to be received from Finland on December 15.
1939, in the amount of $234,693. on account of its indebted-
ness to the United States would be held in suspense and that
you would recommend to the Congress such amount be used for
the benefit of the Finnish people. Following your announce-
ment, and at your direction, I instructed the Treasurer of the
United States to hold the amount received on December 15, 1939
from Finland in 8. suspense account, without formal covering
into the Treasury. Upon receipt of the funds from the Finnish
Minister I made reference to your instructions to hold the pay-
ment in a suspense account pending your recommendation to the
Congress.
In your letters of January 16, 1940, to the President of
the Senate and the Speaker of the House of Representatives
reference was made to your directions to hold the Finnish
December 15. 1939 payment in a separate account pending such
action, if any, as the Congress might desire to take with
respect to it, and after briefly reviewing the Finnish situa-
tion and Finland's need for assistance, it was suggested that
the most reasonable approach would be action by the Congress
authorizing an increase in the revolving fund of the Export-
Import Bank to enable it to finance exportation of agricul-
tural surpluses and menufactured products, not including
implements of war. As 8. result of this recommendation the
lending powers of the Export-Import Bank were increased.
However, no action has been taken by the Congress with
respect to the amount received from Finland on December 15, 1939
or additional amounts which are due semiannually on the relief
indebtedness which was incurred in 1919 and 1920. In the event
74
- 2 -
you desire to take further action with respect to this matter
I shall be glad to prepare the necessary draft of legislation
and letters of recommendation for your signature to the Presi-
dent of the Senate and the Speaker of the House.
It would be appreciated if you would indicate whether you
desire to:
1. Take no further action at this time;
2. Recommend the return to Finland of the
payment made on December 15th last; or
3. Recommend the return of the December 15th
payment and the postponement of all payments
due from Finland within the next two or three
years.
Faithfully,
The President,
The White House,
Washington, D. C.
75
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Shanghai, China.
DATE: May 24, 1940, 11 a.m.
NO.: 448.
Please refer to my telegram no. 414 of May 13, 6 p.m.,
and to the Department's telegram no. 210 of May 16, noon,
and Department's telegram no. 212, May 16, 5 p.m.
I am informed by the Consul General of the Nether-
lands that it is feared by the manager of the Neder-
landische Handelsbank that & desperate situation will
ensue shortly unless balances of the Dutch banks in the
U.S. are unblocked, to some extent at least. The Minis-
ter of the Netherlands at Washington, D. C., has been
80 notified. I shall appreciate being informed of any
new developments regarding this situation by the Depart-
ment.
This telegram has been repeated to Chungking and
Peiping.
BUTRICK
EA:MSG
85(a)
FEDERAL RESERVE BANK
76
OF NEW YORK
TIVE CORRESPONDENCE
DATE May 24, 1940.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L. I. Knoke
BANK OF ENGLAND.
I called Mr. Bolton at 4120 P.M. today in connection
with his cable #472/40 quoting the Royal Netherlands Government
Treasury Department's message to us through the Treasury Depart-
ment in Washington. I asked whether in their reference to de
Nederlandsche Bank Dollar account they had not intended to refer
to de Nederlandsche Bank Dollar Account F. Was the ommission of
the letter apa possibly due to an oversight? Mr. Bolton replied
that it was his impression that the whole message dealt with "p"
accounts and promised that he would confirm this tomorrow.
I then inquired as to the manner in which the specimen
signatures of the two gentlemen mentioned in the message had been
mailed to us and had they been authenticated. Mr. Bolton did not
know but thought they were sent by sirmail and assumed that they
had been authenticated. I hinted that he might suggest to the
Dutch that they might wish to arrange far suthentication through
our London Embassy with the request that the latter forward their
specimens to us through the State Department. Maybe even Mr. Kennedy
wight wi sh to confirm to the State Department by cable that he had
received the signatures and that he considered them authentic.
I asked whether we could, for the time being, cable to
the Dutch Government in London in our code with the Bank of England.
with reference to the situation in England, Bolton saids
Regraded Uclassified
SC. 3.2 6054 4-40
FEDERAL RESERVE BANK
77
OF NEW YORK
FFICE CORRESPONDENCE
DATE May 24, 1940.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L. W. Knoke
ROM
BANK OF HEGLAND,
2
"People here are very grin and determined.
It is going to be a terrible business but I
think we shall pull through. We are fully pre-
pared to be bombed to smithereens in London but
it won't make any difference."
LWK.KW
28.8 MA = BZ were
78
ATP
PLAIN
OSIO
Dated May 24, 1940
Rec'd 6:41 peme
Secretary of State
Washington
367, Twentyfourth.
Norsk Engelsk Tobakkfabrikk Oslo desires
settle indebtedness Universal Leaf Tobacco Company
Richmond $12,347.13 and Austin Company Incorporated,
Greenville, TENNESSEE $8,134.94 through National City
Bank and Andresens Bank Oslo when license granted un-
blocking funds of latter. Can Department facilitate?
COX.
NPL
79
COPY
No. 3054.
Rio de Janeiro, May 24, 1940.
SUBJECT: The Brasilian Government Expects to Study the
Possibility of Permitting Domestic Trading
in its Foreign Bonds.
Original and Three Copies by Airmail -Confirmation Copy by Steamer.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to report, for the Treasury Department also,
that the Ministry of Finance expects shortly to study the possibility
of facilitating domestic sales of the dollar bonds and other foreign
currency bonds of the Brazilian Government and political sub-divisions.
This has been prompted by numerous inquiries received from holders
of Brazilian foreign currency bonds regarding the possibility of
obtaining the interest on them, or the principal, in milreis to be
used for travel expenses within Brasil. At present 16 is not pos-
sible to do this in any way. However, the Ministry of Finance will
be
try to work out a plan that would permit the holders of such bonds
to sell them here against payment in milrois to be used for travel
oT
IMEVINUA BECEIVED DESTRIBERED
expenses. The plan would envisage the establishment of & regular
market for the bonds here and trading in them in the Brazilian
stock exchanges. At the present time there is no trading in
Brasilian foreign currency bonds in the local exchanges.
Respectfully yours,
For the Ambassador:
VA/MVJ
Ware Adams,
Pile 851.
Second Secretary of Embassy.
80
No. 3055.
Rio de Janeiro, Hay 24, 1940.
SUBJECT: Negotiations for Payments Agreements between Brazil and
Great Britain and France.
Original and Three copies by Airmail---Confirmation Copy by Steamer
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to report, for the Treasury Depart-
ment also, that the negotiations for payments agreements
between Brasil on the one hand and Great Britain and France
on the other, covered by my despatch No. 3024 of May 20,
1940 and previous despatches. are still being carried on.
At present the British are endeavoring to exclude
Canada, which has a favorable balance of trade with Brasil.
while including other dominions and colonies that have
on
unfavorable balances. The French are seeking recognition
for the gold clauses in Brazilian gold frane bonds. The
Brasilian authorities have no idea of acceding to either
an TI
of these denands. They think that it may be possible to
conclude an agreement with the British in the near future
but that the French negotiations will be drawn out for
same time yet.
Respectfully yours,
WA/MVJ
For the Ambassador:
File 631
Ware Adams,
Second Secretary of Embasay.
Regraded Uclassified
81
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 24, 1940
TO
Mr. White
FROM
Mr. Ullmann
Subject: Tin smelting in the United States
1. The maximum domestic consumption of tin in recent years was 90,000 tons
(1937). (Average annual consumption for the 1935-1938 period was
approximately 70,000 tons.)
2. Two domestic companies operate tin smelters on a small scale.
(a) The American Metal Co., Ltd. has a small plant which can produce be-
tween 600 and 1200 long tons annually. It plans to build an addi-
tional plant which will increase its capacity to 2400-3600 tons per
year, using Bolivian ore and concentrates.
(b) The Phelps Dodge Company also operates a small smelter of unknown
capacity. It, too, is planning a new smelter.
(c) Tin was smelted domestically during the first World War. In 1920,
almost 16,000 long tons were produced in domestic smelters, which
apparently have been dismantled.
3. Available information indicates that approximately one-third of our
peacetime requirements is currently supplied by the recovery of
secondary tin.
In 1937, 27,000 tons of secondary tin were recovered in the United States:
As Metal
In Chemicals and Alloys
By detinning companies
2,500
1,500
By other companies
4,900
18,200
Total
7,400
19,700
Source: U. S. Bureau of Mines
4. Some of the recovering capacity can be diverted to smelting ore.
(a) According to the Bureau of Vines commodity specialist, domestic
detinning companies can smelt ore. As an example, the commodity
specialist points out that the Vulcan Detinning Company wishes to
be listed as a purchaser of available ore,
(b) It is believed, furthermore, that some of the other recovering firms
can smelt ore.
(c) There is a likelihood, moreover, that smelters in other metallic
industries may be used to smelt tin ore, since some of them already
are able to separate tin from other metals in their smelting process.
82
WAR DEPARTMENT
OFFICE OF THE CHIEF OF STAFF
WASHINGTON, D.C.
May 25, 1940.
MEMORANDUM FOR MR. MORGANTHAU:
Subject: Allied Purchasing Agents requests.
Allison Engines:
Of the five engines desired, one has been delivered and
they are searching for four more, and will pull them out of
planes if necessary.
Pratt-Whitney Engines:
One has already been delivered and no trouble is antici-
pated in locating the four remaining required This is being
proceeded with at the present time.
Mrs Klotz
Minoray Chief of Staff.
Copy to Phil Young
(Dent 5/27/40)
Hon 2
Accumer Wells 5.00P.M
Grand Transfer may 25, Dras said to touble 1
/ nivate mant
and then
to resell
Pres smysso
(Surplus munitions)
tt general
Marolal Sunday
said he could sell
the consumition but
/
not the grens asked
said he roomed of
this understand
to carry load an
MISS CHAUNCEY:
84
SEVERAL LETTERS AND MEMORANDA
ARE REFERRED TO IN THIS TRANSCRIPT.
P. MANNEN
85
RE STRATEGIC MATERIALS
May 25, 1940
10:15 s.m.
Present:
General Marshall
H.M.Jr:
He wants this Committee with a Cabinet of six
and underneath he is going to put on a Council
of seven. That 18 the way he is proposing to
do it. Now, I still think that my advice to
him to build up this Munitions Board is the
first step and then put on a couple of civilians
and let them work directly on the Army and Navy
Munitions Board and press a button and - if I
want something, It 18 General Brett; 1f I want
a machine tool, it is somebody else. I am just
doing those two. For anything else it 1s all
coordinated and all set up and whoever comes
down on the Council is going to be floundering
all over the lot. It is going to take them a
hell of a long time to learn their business and
they are not going to do what I am doing for
the President on aviation. I have just burned
myself out physically getting this thing licked.
They are just not going to do it, but he seems
to have his mind set. We are having a meeting
with him on it at 2:00 o'clock this afternoon.
We met with him for an hour and a half yester-
day.
Mershall:
You see, what he overlooks very much, I think,
is that when we start to do these things there
is sort of 8. re-education here and there, but
these people would be - that enlarged Munitions
Board would be immersed in those things and
they would know the generalities more than our
individual specimens here and there, but as it
is now you just start from scratch every time
you turn around. I am perpetually trying to
educate myself on this phase and that phase,
but those men would sit there and be at it. I
don't know just what is the right thing, but
all of my instincts would be to accept some-
thing that has been studied over and studied
over.
E.M.Jr:
I think so, but I don't think he is going to
do it that way.
Marshall:
I barged in there, but I thought - I was trying
to say what you were saying, but I was trying
86
- 2 -
to make it clear that they had to do something
and do it quick.
H.M.Jr:
He is going to do something and I think he 1s
going to make it part of his speech Sunday night.
Marshall:
I have only got about eight balls in the air right
now and one of those is his speech Sunday night.
H.M.Jr:
You are in on that, too?
Marshall:
I guess everybody 1s. Here is this thing.
H.M.Jr:
That is good.
Marshall:
Now, there will be a telephone message over here
to me in a few minutes about the Colt factory
and its engines.
H.M.Jr:
Colt?
Marshall:
Well, there is a question of getting them to go
ahead and sign & contract.
H.M.Jr:
I think that was settled.
Marshall:
I think it 18, too, I think that is all straight,
but I have urged them over the jumps. I wasn't
quite conclusive enough, but I think it is all
straightened out, but I wanted to make certain.
I would like you to read this before we go any
further.
Now, the memorandum isn't there. I have returned
it.
H.M.Jr:
Well, after all, we have got the whole thing set
up. We have got this committee in Procurement.
Marshall:
Well, what this was - I went over there, you see,
in compliance with the President's instructions,
to take up the question of all these various items
of ordinance and he had already prepared that letter
and he had attached to that letter a highly con-
fidential report which you may have seen from
Mr. Bullitt about the destruction of all these
plants that the Germans had control of, and this
and that, and then it referred to the things they
87
- 3 -
had to have and the gravity of the situation,
80 what Mr. Welles seemed to be questioning
1s, how are these going to be handled.
I certainly wasn't the one to tell him, because
as a matter of fact you and I had started on
the thing over here. Then he got this memo-
randum from the President. Meanwhile, we had
gone through the details of this plot. Now, I --
H.M.Jr:
Well, foreign purchases up to last night were
still with me, but --
Marshall:
He was confused over this, so --
H.M.Jr:
Yes, that is all right.
Marshall:
Now, to go into the details of the thing. I
went over each one of them with Mr. Welles
and his reaction to the whole thing, as I have
said, was that it was contrary to law, contrary
to international law, and that he would have to
discuss the thing with the President to see if
there was anything we could do about it.
Meanwhile, I had drawn up what I might possibly
be able to use as an argument that these items
were, all of them, bona fide surpluses, which
is pretty hard for me to fix up. I went into
the ammunition thing, following the tip that
Admiral Stark gave me and I find that in all
probability - they have had preliminary nego-
tiations with the two ammunitions manufacturers -
we can actually profit by the procedure here
which puts us on a firm foundation politically
by - under the law turn back our ammunitions,
and then get out of that some number of rounds,
say between four and six hundred thousand, de-
pending on the sale price of the ammunition we
turn over to the manufacturer, which he is
going to sell to the Allies.
of course, they don't want the ammunition unless
they get the weapons and at the present time
they are up against the legal prohibition on
the weapons.
Regraded Uclassified
88
- 4 -
Now, General Wesson has gone over the details
of that with these people. He hesitated to
have them work out the whole plot. It cost
them 8. considerable sum of money to do it -
unless we knew we were going to be able to
send weapons --
(Mrs. Klotz entered the conference with a
document)
H.M.Jr:
This is statistics,
Klotz:
It says in accordance with your verbal request.
I thought you might have asked for that yester-
day.
H.K.Jr:
This is part of the thing that begins to go
to George Hass.
Klotz:
I see, Mr. Morgenthau, do you mind if I take
these out?
H.M.Jr:
Not B. bit.
(Mrs. Klotz left the conference)
We have lost the memorandum from the President
and this will go to George Haas. Did you ever
do that? I had the queerest thing happen. It
1a a very important memorandum, two of them,
from the President. One of them - I knew I
was to get the two. When I came in, there it
was on my bed, no envelope, nothing. One I
forgot and the other one I had. No one in
the office knows we received it and no one
knows how it got on my bed. There it was when
I went to bed.
Marshall:
Well, working under the pressure you work under,
one would do strange things. I get so absent-
minded, I have to have somebody just watch what
I am doing.
H.M.Jr:
You and me both.
Marshall:
They come in and search me all over like a tailor's
dummy to see what I have got in my pocket.
Regraded Uclassified
89
- 5 -
Wesson didn't wish to push the cartridge people
on that unless we were pretty certain we were
going to be able to get over the barrier on
the actual sale of the weapon, because they
don't want the ammunition unless they get the
weapon. But the point is, the minute the weapon
thing is decided, I can go ahead on the basis
of - I am quite certain that I can go ahead on
the basis of turning in the hundred million
rounds to the two cartridge manufacturers, they
having their own understanding about the sale
to the Allies and they give us back in manu-
facture the other ammunition.
H.M.Jr:
How about the guns?
Marshall:
The gun question is purely a matter of getting
by the legal barriers, which are just flat-footed
at the present time, of the Neutrality Act and
the international law.
(General Marshall received a telephone call)
Marshall:
It is just what I said. That is all being taken
care of in the conference today. I wanted to
make certain of the final word on the thing.
At the moment we are to pause until we find out
how to get by the legal part on the sale of all
these weapons, but I can manage the amunition
within the law and perfectly safe.
H.M.Jr:
Well, you don't mind if while you are here I
call up Summer Welles and tell him for God's
sake to give us an answer on this gun business?
Why not call up Mr. Hull?
Marshall:
I beg pardon?
H.M.Jr:
What should I tell Mr. Hull? I can call him up.
That we have this request for guns which you can
spare? Who has it? Welles has it.
Marshall:
Welles had the knowledge and the facts and he
W3.8 to go ahead and see if he could find a
basis for it, not a particular specific weapon --
90
- 6 -
H.M.Jr:
How long ago did you see him?
Marshall:
Our conversation was the morning after the
Presidential - yesterday morning.
H.M.Jr:
Let me call him and I can tell him I am handling
this thing at the same time.
Marshall:
We are just up against it flat. Maybe he can
find some way out.
H.M.Jr:
Well, I will just take a minute or two. What
is the next one?
Marshall:
The next one gets around to the question of
planes and the method of meeting some of their
requests. Their requests should be met in some
form. Now, as to the sale of the actual plane
that is in the process of manufacture, I can't -
I cannot make any statement regarding that,
other than one of the same nature I did on
the others, because that would be just - it would
put ourselves in an impossible situation. The
question then is, to what degree can we help
them and I mentioned the other day the proposi-
tion of the large orders and he brought up the
question of the follow-up orders on the engines.
It now becomes a technical question and here is
Brett's outline as he can best make it.
(Telephone conversation with Sumner Welles
follows:)
91
- 7 -
Marshall:
This is an example of what we were talking
to the President about. The thing gets
this scattered.
H.M.Jr:
He said he would be glad to do it, because
most of Bullitt's cables are unanswered.
Marshall:
Well, what he said was roughly, I guess,
what I have got.
H.M.Jr:
He said this, that Mr. Hull is going to take
it up with the President himself and 1f he
gets an answer, he will let us know.
Marshall:
I understood from your comments yesterday the
direct sale would be contrary to the Neutrality
Act of the international law. Do you want
me to leave this and send it back to me some-
time?
H.M.Jr:
Yes. I will make a note to send it back.
Marshall:
Now, I am going to turn over to you the unsigned
document here from the head of my supply outfit
where he proposes the reasons that might be
given on each one of these headings under the
law to declare a thing surplus.
H.M.Jr:
I see.
Marshall:
And I can't accept all these reasons, but for
the moment it is a good outline of a plot and
all the items and it is just for your con-
venience rather than this rough list we have
here.
I spoke to you about the exchange in the small
arms and ammunition. The Colt matter has been
settled. That is all I have, sir.
Regraded Uclassified
May 25, 1940.
My dear Admiral Royest
I would greatly appreciate it if you would send,
by Secret Code, the following message to Ambassador
Kennedy.
Quote - Congratulations on getting Rolls Royce
plans. Would it be feasible to send
these plans on board the first battle-
ship or destroyer that is going to
Halifax, care of the Air Attache,
British Embassy, Washington. If it is
not feasible, my second choice would be
to put them on the United States steam-
ship PRESIDENT ROOSEVELT which is on its
way to Ireland. On what basis can United
States government get license to manu-
facture Rolls Royce. Would appreciate
prompt answer to this question.
The British Government has been fooling
around for the last couple of months in
regard to placing orders for powder. Arthur
Purvis unable to get authority to place order
for 20,000 tons in the United States and
14,000 tona in Canada. The trouble seems to
be that his orders have to clear through Ottawa.
Perfectly ridiculous that he is unable to deal
directly with some authority in England. If
you could use the example of powder to clear
up the handicap under which Arthur Purvis is
working you would be doing a great service.
Sincere regards. Henry Morgenthau, Jr. - Inquote
Sincerely,
(Signed 1 8. Morgenthau, Jr.
Rear Admiral Leigh Noyes,
Director, Naval Communications,
Room 2622, Navy Department,
Washington, D. C.
Regraded Uclassified
93
OFFICE OF
THE UNDERSECRETARY
DEPARTMENT OF STATE
WASHINGTON
May 25, 1940
Personal and Confidential
For the Secretary of the Treasury only.
Dear Henry:
In accordance with our conversation on
the telephone this morning, I am sending you
a paraphrase of a telegram received this
morning from Bullitt.
Believe me
D Yours very sincerely Malls
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
94
PARAPHRASE OF TELEGRAM
FROM AMERICAN EMBASSY, PARIS
May 24, 1940
I received this afternoon Dautry, Minister for
Armament, who said that he had already been deprived of
80% of French steel production because of the German
advance. Therefore, it has become urgent and vital that
steel from the United States be obtained.
In addition, the factories which made the armament
for the French tanks had been lost. It 1s therefore his
desire to send to the United States on & Clipper Renault,
head of the Renault Automobile Works, to enter into 1mme-
diate negotiations for the manufacture of the heavy
French tanks which weigh 30 tons with Bethlehem Steel,
Baldwin, and other great corporations.
The magnitude of the orders he desires to give is
such that at the end of seven months American factories
would be turning out fifty of these tanks per day. In
accordance with his request, I am attempting to obtain
passage for Renault and his assistant on a Clipper.
Dautry also requested that the President receive Renault
upon his arrival in Washington. Renault, he went on to
say, was a most remarkable man who understood the indus-
trial problems of this war as well as any other human
being and he believed the President would find it most
valuable to have a conversation with him.
95
-2-
My reply was that I would ask that Renault be re-
ceived by the President.
In reply to Dautry's inquiry whether I had received
any reply with regard to the French 75s now in the stocks
of the American army, I said that the President in &
direct message to me had said that he could not consider
sales of these guns to France. This information was a
blow to him. The single weapon that proved to be effec-
tive against the German General WAB the French 75s of
which they had only a few more weeks supply. I was 1m-
plored to ask again that 1000, or even 500, 75s be shipped
to France immediately. Continuing, he said that he was
certain that careful inspection would show defects in many
of these guns which had been manufactured in France at the
close of the last war. For instance, one would have 8.
defective brake, another a defective wheel. Perhaps it
would not be impossible for the President to have these
guns carefully inspected and have those which were defec-
tive sold, either as assembled unite or in parts, to
France at once.
This question, I said to him, I would submit at
once and I hope most heartily that some of them may be
found imperfect.
At the present moment Dautry enjoys Paul Reynaud's
absolute confidence.
as
-3-
Therefore, importance should be attached to his views on
the future. The French army, he thought, should fight
on without hesitating to defend every inch of ground, even
though the Belgian, British and French armiee in Belgium
should be compelled to surrender within the next week.
The line of the Seine and the Marne could and, he was
sure, would be made 8. strong line of defense.
Of course, Paris, in that case, would be completely
destroyed. Of what importance Wa8 that? On what basis
could the French nation be asked to rebuild its existence
as a nation and to reclaim its soul if France, in order
to protect the monuments of Paris, should give up Paris
to the enemy? The line of the Seine could be held for
two months, he thought. A retreat to the line of the
Loire, the Rhone and the Saone might then be necessary.
After that, a retreat to the Massif Central (Central
High Plateau) and finally, B. retreat to the line of the
Garonne, might be necessary. The French armies should
go on fighting however far they might be pushed.
Although these orders for tanks which he desired to
place now could not possibly be delivered before next
January, he WAB convinced that the people of France
would be still fighting for the liberties of their
country and the liberties of the world next January.
Extremely efficient fighting weapons have been
Regraded Uclassified
97
-4-
found in the heavy French tanks which Renault proposes
to manufacture in the United States. It 1s hardly
necessary for me to add that I consider that the manu-
facture of these tanks at the earliest possible moment
in the United States is of the utmost importance.
Should the French armies be defeated before their com-
pletion, we at least should have something with which
to fight and it will be needed.
98
CONFIDENTIAL
May 25, 1940
To:
The Secretary
From:
Mr. Young
M
COLT
Mr. Ballantyny has informed me that the Colt
contract was to be signed at 1:10 P.M. Standard
Time today.
DUPONT
The letter of intention contracting for the
200,000 pounds of powder per month, beginning
October 1, 1940, was signed by the British and
French last night and mailed to du Pont.
Negotiations between the AFPB and du Pont
on the new powder plant are progressing speedily
and the contract should be signed next week.
Mr. Ballantyne will have for me Monday morning a com-
prehensive memorandum outlining the present status of the
complete powder situation. As soon as I receive this, I shall
investigate any causes that there may be which have created
delay.
Mr. Purvis is evidently still attempting to secure more
blanket authority from the British Government, plus a line
of direct responsibility between the Purchasing Board and the
British and French Governments. At the present time, instruc-
tions and reports are still worked through Ottawa. It is very
possible that direct or indirect pressure abroad might expedite
the securing of extraordinary powers for the Purchasing Board
in this country. Lack of authority and official red tape are
the major stumbling blocks for the Purchasing Board at this time.
Py.
39
May 25, 1940
9:59 a.m.
H.M.Jr:
Well
Operator:
Dr. Karl Compton.
H.M.Jr:
Thank you.
Operator:
Go ahead.
H.M.Jr:
Hello.
Dr. Karl
Compton:
Hello.
H.M.Jr:
Mr. Compton.
C:
Yes.
H.M.Jr:
Mr. Compton. Morgenthau.
C:
Yes, good morning.
H.M.Jr:
How are you? Well, we've gotten off to a
good start with some of your people and I
wondered if you could come down to Washington
yourself for a day or 80. I've got a lot of
people, engineers and different people, who
are volunteering their services. I don't know
how competent they are, and if you could sit
around with me for a day or two and sort of
advise me on some of these people, it would be
very helpful to me.
C:
Well, when would that be?
H.M.Jr:
Well, I'd love to have you here Monday.
C:
Yeah. (Pause, laughs) This 18 a very crowded
time right now.
H.M.Jr:
I see.
C:
Ah -- let's see. I could come down Monday.
H.M.Jr:
Is it going to -- would you rather make it
......
C:
I don't see how I could possibly stay until
Tuesday. There is one thing that's coming up --
100
- 2 -
we're trying to arrange a meeting of our
corporation Committee on the Aeronautical
Engineering in order to see what we can do
here to make our own facilities more
accessible, partly in the way of a training
program -- an intensive summer training
program.
H.M.Jr:
Well, let me
.......
C:
We are calling a meeting of that Committee
which will possibly be on Tuesday.
H.M.Jr:
Well, let me put it this way. I don't know
what -- do you fly?
C:
Yes.
H.M.Jr:
Well, how -- I'm free Sunday evening.
C:
Yes. Well
H.M.Jr:
Which would be better for you?
C:
Well, Sunday evening would be fine. I could
fly down Sunday.
H.M.Jr:
Could you fly down?
C:
I could fly down Sunday and stay over Monday,
but I ought to get back here Tuesday.
H.M.Jr:
All right. Well, now I tell you -- could you
say come to my house around about six o'clock
and we could stay for supper?
C:
Yes. I'd be glad to.
H.M.Jr:
We're on standard time here.
C:
Yes.
H.M.Jr:
It's 2211 Thirtieth
C:
2211 Thirtieth Street.
H.M.Jr:
......
and we're off Massachusetts Avenue.
101
- 3 -
C:
Yes. All right.
H.M.Jr:
That would be fine for me.
C:
All right, I'll be there.
H.M.Jr:
2211 Thirtieth, off Massachusetts.
C:
Yes.
H.M.Jr:
Thank you 80 much.
C:
Now, Mr. Secretary, shall I come down
prepared to dress for dinner or informal?
H.M.Jr:
Oh, no.
C:
All right.
H.M.Jr:
No, just informal.
C:
All right, I'll be there.
H.M.Jr:
Thank you.
C:
Good-bye.
102
May 25, 1940
9:39 a.m.
Louis
Johnson:
Mr. Secretary.
H.M.Jr:
Louis, I want to tell you how much I appreciate
the cooperation you gave us yesterday.
J:
Well, we did our best. I'm glad you
......
H.M.Jr:
Yes you did and I told -- ah -- I'm taking your
recommendation a hundred percent. I told the
Allies to close on the powder as of October 1st
and to put up the $21 million on the machine guns
and like it.
J:
That's grand, Mr. Secretary.
H.M.Jr:
And they said they'd do both of them last night.
J:
Well, I'm awfully glad that's the way it 1s.
H.M.Jr:
Yes. We Just took it and we're not going to
fuse around.
J:
Well, you didn't have to argue about it at
Cabinet meeting then.
H.M.Jr:
I, ah
J
Phil Young thought it
......
H.M.Jr:
What's his name -- ah -- Edison gave a memorandum
on powder. See?
J:
Yeah.
H.M.Jr:
And I said I talked to him afterwards so I killed
it. I didn't want to discuss it then.
J:
That's grand.
H.M.Jr:
So he wanted to discuss powder and this and that
and I said do you want to let it go and
......
J:
Well, if you'll let us know on these things, we'll
get you the right answer if it's humanly possible.
103
- 2 -
H.M.Jr:
Well, I've been around Washington seven years
and I still don't know who to go to.
J:
(Laughs) Well
H.M.Jr:
But I may learn. Give me time.
J:
All right, Mr. Secretary.
H.M.Jr:
Thank you.
J:
Thank you.
104
May 25, 1940
9:29 a.m.
Operator: Go ahead.
H.M.Jr:
General Marshall?
General
Marshall:
Good morning, Mr. Secretary.
H.M.Jr:
Good morning. How are you?
M:
I was going to call you up and ask you if I
could see you, but
H.M.Jr:
Ah, ha. Do you know what I'm calling you for
M:
Well, I rather imagine I do.
H.M.Jr:
(Laughs) All right, when are you going
M:
Well, what's convenient to you?
H.M.Jr:
Well, I have an appointment at eleven, and I'm
pretty well tied up after that. Could you come
before?
M:
Yes, indeed. When's the most convenient time?
H.M.Jr:
Ah
M:
Ten o'clock?
H.M.Jr:
Let's say ten-fifteen.
M:
Fine. I'll be there at ten-fifteen.
H.M.Jr:
Now, let me ask you before you come. You gave
me that letter about where the Allies are making
it difficult for you
M:
Oh, well, I really shouldn't have sent you that.
H.M.Jr.
Well, that's all right. Now what I want to ask
M:
I just thought it was rather amusing.
H.M.Jr:
Now, what I'd like to do is to show it to the
Military Attache at the British Embassy.
- 2 -
105
M:
Yes. Well, I thought afterwards that I
shouldn't have
H.M.Jr:
No, no, no!
M:
......
worried you. I was rather amused by the
darn thing. Well, I'll speak to you about it when
I get over there.
H.M.Jr:
Well -- you want me to wait on that then.
M:
Well, I don't care. You can show it to him, yes.
H.M.Jr:
Well, I won't do
......
M:
But I didn't -- I shouldn't -- I wasn't putting
it up as an irritant but more as an amusing
example of the vicissitudes of this game.
H.M.Jr:
Well, it's not 80
......
I'd like to show it
to the Ambassador because they ask BO damn many
things of me and they just haven't learned yet
how to come through themselves.
M:
I mean they're pretty good on the criticism, but
they're not 80 hot on the cooperation.
H.M.Jr:
Well, I'm going to use it at my discretion.
M:
All right. But I apologize for irritating you.
H.M.Jr :
No, no, no! You didn't irritate me. Now the
other thing -- you will have theanswer on things
like those five Allison engines, etc., etc.
M:
Yes, sir. They've already gone ahead on that.
They are digging it out right now to do it.
H.M.Jr:
Well
M:
Well, I'll be over there.
H.M.Jr:
Oke, ten-fifteen.
M:
Yes, sir. Thank you.
H.M.Jr:
All right.
Regraded Uclassified
106
May 25, 1940
10:10 a.m.
Operator:
There you are.
H.M.Jr:
Hello. Hello.
Operator:
Hello, Mr. Sloan.
Alfred
Sloan:
All right.
Operator:
There you are.
H.M.Jr:
Hello.
S:
Hello, Mr. Secretary.
H.M.Jr:
Talking.
S:
This 18 Alfred Sloan, General Motors.
H.M.Jr:
Good morning.
S:
Good morning. I want to have a word with
you just for a minute over the phone,
Mr. Secretary. I think it's quite important,
and that 18 this. You understand fully my
position regarding the importance of all these
things we're trying to do, but I wanted to make
this point
H.M.Jr:
Please
S:
to get to the message I want to give
you. I think it's also important to do every-
thing we can to keep the economy going while
we are trying to do those things.
H.M.Jr:
Right.
S:
I'm sure you subscribe to that, don't you?
H.M.Jr:
Surely.
S:
Well, all right. Now I heard the other -- that
you were going to have a conference Monday with
the machine tool people.
H.M.Jr:
That's right.
Regraded Uclassified
- 2 -
207
S:
And the question arises 88 to the machine
tool commitments that have now been made to
the automobile manufacturers with regard to
what we call our 141 program.
H.M.Jr:
Yes.
S:
Now the .41 program, Mr. Secretary, 16 largely
finalized, that 1s, in our case we spent
something like $25 million already to get our
141 models out and everything will be finished
in another thirty days.
H.M.Jr:
Yeah.
is
Now, there can't be many machine tools involved
in the completion of the 141 program, and if
anything was done to disturb that, it would have
a tremendous effect upon the ability of the
industry to keep going and to support the
economy while we're doing some of these other
things, and I Just wanted to call that to your
attention. Now when it comes to the 142 program,
that begins around in September and October and
involves a lot of machinery end a lot of tooling.
H.M.Jr:
Yeah.
is
I think we could well consider whether that ought
not to be suspended, but I think we could
probably discuss that further nearer the time
when we see what the picture 1s at that particular
moment.
H.V.Jr:
Well, do you go into the 142 one?
S:
Well, we don't -- we commence the 142, Mr. Secretary,
about October or November.
H.M.Jr:
I Bee.
8;
And that involves -- that would involve maybe --
just taking all the manufacturers together --
that might involve $60 or $70 million worth of
tooling, but simply tooling that it might involve
350 million worth of machine tools. That would
be a subject that would have to be very
carefully considered with regard to the
Regraded Uclassified
108
- 3 -
rearmament program and any other situation
that Was before the economy and before the
country at that time. But I again point out
that that doesn't need to be considered until
September or October.
H.M.Jr:
Well
S:
But the 141 program, that's the one I've
specifically talked about. We go into pro-
duction on :41 cars in July or August and
the time 18 BO near and the job 1s 60 nearly
completed that I can't conceive that anything
that we might want to do in the way of re-
armament, considering the time that it takes
to get ready to do it, and make the plans,
I'm quite certain that the decke would be
completely cleared of the 141 program long
before we could make any decision as to what
we ought to have with regard to the rearmament
plans.
H.M.Jr:
Well, Mr. Sloan, you don't know me very well.
Hello
S:
Yeah.
H.M.Jr:
I say, you don't know me very well, but I
don't go off half cocked.
S:
Yes, well, I was kind of worried about it
because I know you don't, Mr. Secretary, but I
just wanted to try to give you that 1dea, because
not -- I hope you'll appreciate I'm not talking
selfishly. I'm talking purely from the stand-
point of the sincere belief that we muet keep
the economy going while we're trying to do these
other things
H.M.Jr:
Well
S:
one into the other intelligently and
consistently 80 that there will be the least
interference as possible.
H.M.Jr:
Well, you and I aren't thinking apart one
iota.
S:
I see. Well, that's fine. Now if any time
you want to talk to me about this before --
Regraded Uclassified
109
- 4 -
I take it that I'm going to see you about
that other matter some time next week.
H.M.Jr:
That's right.
3:
All right. We can talk -- I thought I'd
take the liberty of calling you and I hope
I may when anything comes up.
H.M.Jr:
Please do, but I can't always come to the
phone right away.
S:
That's all right. I appreciate that and if
I call and you are busy, then I can call again.
I'd like to work with you.
H.M.Jr:
And I'd like to work with you.
S:
Thank you very much. That's all and I'll
hear from you when you want me to come down
to consider that British matter.
H.M.Jr:
Right.
S:
Thank you very much, Mr. Secretary. Thank you
very much.
110
May 25, 1940
10:31 a.m.
Operator:
Mr. Welles.
H.M.Jr:
Hello.
Operator:
Mr. Welles.
H.M.Jr:
Right.
Onerator:
Go shead.
H.M.Jr:
Hello.
Sumner
Welles:
Good morning, Henry.
H.M.Jr:
Good morning, Sumner. Sumner, General Marshall
is here with me now
W:
Yes.
H.M.Jr:
......
and we're discussing all these foreign
orders. Requests have come in to me which I
asked him to review. Now I understand he has
seen you or written to you about whether under
the International Law we can or cannot do this.
W:
That's right.
H.M.Jr:
When do you think you can give me an answer?
W:
Why I gave the answer to General Marshall and
I can give you the same answer.
H.M.Jr:
What's that?
W:
A direct sale by the United States to &
belligerent is a violation of our neutrality
under International Law and would also be
counted in the terms of the existing
Neutrality Act.
H.M.Jr:
I see.
W:
And as I said to General Marshall, it's a
question of high policy which the President
himself will have to determine. In other
words, Congress would have to take action,
as I see it.
Regraded Uclassified
111
- 2 -
H.M.Jr:
Then it needs Congressional action.
W:
Absolutely.
H.M.Jr :
O. K.
W:
I understand from what General Marshall
tells me that there are certain instances
among the things that he has in his list where
we could avoid that by turning them over to
private manufacturers and then the private
manufacturers could sell and then, of course,
there would be no violation of any law.
H.M.Jr:
Well
......
Well, then we might juet as well
forget about it.
V:
Well, I wouldn't forget about it because I feel
very strongly that it ought to be done, and I
think it ought to be done by the Congress
knowingly and knowing what the implications
are.
H.M.Jr:
Well, who's going to take it up with the
President?
W:
I've asked Mr. Hull to take it up with the
President and I'll take it up myself.
H.M.Jr:
And as soon as you know anything, would you
let me know?
W:
Yes, indeed.
H.M.Jr :
And if any of these cables of Bullitt's of
requests for munitions or something, if they
would be sent over to me because I get all the
stuff of the Allies Purchasing Mission.
W:
Yes. Well, I'll be very glad to do that
because in many of these cases, Bullitt's
requests have been left unanswered.
H.M.Jr:
Well if you'd send any of them to me if they
have to do with purchasing or buying by the
Allies then I can try and keep it coordinated.
V:
I'll be very glad to do that, Henry.
H.M.Jr:
Thank you, Summer.
W:
All right, good-bye.
Regraded Uclassified
Copy of this sent to Mr. D. W. Bell 112
instructions of Mrs. Klotz.
McH
May 25/40
113
May 25, 1940
10:36 a.m.
Operator:
Go ahead.
H.M.Jr:
Hello.
J. Edger
Hoover:
Hello, this 18 Hoover talking, Mr. Secretary.
I just want to let you know that I just got
a flash from New York that the German Consul
contacted the Marine Midland Bank and in-
formed them that he was expecting & cablegram
remittance from Italy in the amount of
$9 million, which 18 to be received at the
end of this next week, and 18 to be immediately
checked out.
H.M.Jr:
Yeah.
H:
Now, of course, we will try to cover It
up there also but I thought you might want
to have that.
H.M.Jri
Now, wait a minute. This 18 $9 million
H:
$9 million as B cablegram remittance from
Italy.
H.M.Jr:
From Italy.
H:
It's to go to the Marine Midland Bank.
H.M.Jr:
Well, maybe we can find some way to freeze it.
H:
Well, it might be helpful if we could -- that's
what I thought you might want to consider.
H.M.Jr:
We're holding up 3500 lbs. of toluol in
New York on a phony -- that's going to Italy --
on a phony excuse.
5.
Is that 80? Well, now this is a cablegram
from Italy to the German Consul in New York
City - that 18, it's re the remittance for
the Marine Midland Bank.
H.M.Jr:
I'll -- thanksfor the tip -- I'll
H:
I just thought you'd like to have that.
H.M.Jr:
Definitely. I thank you.
Regraded Uclassified
114
- 2 -
H:
Very fine.
H.M.Jr:
Thank you very much.
H:
Good-bye.
115
May 25, 1940
4:50 p.m.
Operator:
Go ahead, please.
H.M.Jr:
Hello.
Dr. George
Mead:
Hello. Yes?
H.M Jr:
Mr. Mead, Morgenthau speaking.
M:
Yes, sir.
H.M.Jr:
I'm sorry I couldn't talk to you yesterday
but life has been even more hectic than it was
when you were here, if that's possible.
M:
Well, I'm sorry for you.
H.M.Jr:
Well, I'm all right. I'm cheerful and I'm
alive and still want to work. Let me ask you --
tell you this, which 18 the only news I have.
One, Keller wrote me a letter and as much as
said he's not interested in Rolla Royce. I
don't know whether you know that.
M:
Well, I heard rumors. I'm glad of it in a way.
H.M.Jr:
You are.
M:
Yes, because of the start that this other
group had.
H.M.Jr:
You mean -- the other company.
M:
Right.
H.M.Jr:
O. K. Now I just had word from Mr. Kennedy
that they put all the plans in the big truck
and they're going to come over to United
States -- all the plans and specifications.
M:
Well, that's fine. I think they're playing
ball, don't you?
H.M.Jr:
Oh, definitely, I mean, Kennedy said he'd
broken every English precedent under the sun
in order to get this.
Regraded Uclassified
116
- 2 -
X:
Well, I think Hines, the manager, would go a
long way for it.
H.M.Jr:
Well, he's done that and the other thing 18
this, that -- well, that the Keller and that's
the Rolls Royce. Now, I've got nothing else.
I wondered if you wanted to tell me how you
felt about -- I take it you're not where you
can talk.
M:
Well, I can talk a little bit about this.
H.M.Jr:
I mean
M:
and I went to Dayton, I'm in Indianapolis
now, and
F.M.Jr:
I take -- you're in the Allison plant.
M:
The situation to me 18 much more serious
than we thought it was, not from a delivery
standpoint but from a design standpoint.
H.K.Jr:
At Allison.
Mt
Yes, and I'm just now talking to Mr. Evans
and we're trying to see what 18 the best program
and he's a very cooperative person and I think
we'll end up by coming to a mutually satis-
factory agreement.
H.M.Jr:
Yes.
5
Meanwhile, instead of kidding ourselves any
more, I've got started on engines running at
Wright Field that won't be on any standard
Army test. They're on a test that we've used
for years as a way of finding weaknesses quickly,
and one engine 18 going over there by truck
tonight.
H.M.Jr:
From where?
M:
Another engine there has to be brought back
from the West Coast, but we'll shortly know
what the solution must be in order that we can
safely put these engines out.
H.M.Jr :
Yeah. Now
Regraded Uclassified
- 3 -
117
M:
I haven't had a chance to look at the shop yet
80 I don't know anything about that.
H.M.Jr:
Well, are you
X:
When we were pushing the shop, we were pushing
out something we could use.
H.M.Jr:
Are you standing this racket all right,
physically?
M:
Well, I was up at four this morning. I was
trying to get a little ahead of you.
H.M.Jr:
Yeah. What did you do that for?
M:
Well, it Beems to me a pretty serious situation
and the only thing we can do is put our best
foot forward on it
H.M.Jr:
How are you coming back?
M:
very cooperative and I have all the
information from them and I didn't bring any
of them over here.
H.M.Jr:
How are you coming back?
X:
Well, I couldn't get any Army transportation
BO I don't know how I'm coming back. I'm
coming back when I get through and be there
Monday morning some how.
H.M.Jr:
Well, I can tell you what I can do. I don't --
where 1s there Army transportation?
M:
Well, I sent to -- I, unfortunately, didn't
do it while I was in Washington because I
didn't expect any trouble -- but I sent through
a request for Dayton to Arnold thinking that he
could give me a Army blanket order that would
cover transportation. But they said it had to
go up to the President and that's where it has
gone -- into the waste paper basket I guess.
H.M.Jr:
Well, I mean, how do you want to get back
tomorrow -- when do you want to leave
Indianapolis?
118
- 4 -
M:
Well, that's the unfortunate part, you see.
Until we have gone over this ground, which
may take hours yet, I can't tell. So don't
you bother about me, I'll get there.
H.M.Jr:
Well, I'll tell you what I'll do. I'll start
my -- will you be there overnight, in
Indianapolis?
M:
Well, I thought if I got through here in any
time to take a night train, I'd come as far
East as I could to get some sleep and then
get off and take a plane. We'll be in
Pittsburgh that way in the morning, but
H.M.Jr:
Well, if you want why don't you get a good
night's sleep where you are and I'll send my
own plane out. I'll start it out either
immediately or early tomorrow morning 80 it
will come to Indianapolis?
M:
Well, the trouble with that 1s, the weather
18 very bad out here.
H.M.Jr:
Oh.
M:
So I thought the surest thing to do was to
take a train tonight and I can get to Pittsburgh
probably.
H.M.Jr:
I see.
M:
If there's any way that I can send a message
to somebody in case we get stuck in order to
get in there Monday morning, but
H.M.Jr:
Call Lieutenant MoKay.
M:
Lieutenant McKay on our regular number.
H.M.Jr:
On DIstrict 2626. I'm still at the Treasury
and I'll tell him if he hears from you --
I have my own plane, & Lockheed, and I can
send it out for you.
M:
All right. Well, that might help us tremendously
if we get off the train and find that there's
no air service at that place.
119
- 5 -
H.Y.Jr:
You call Lieutenant McKay through DIstrict 2626
and any time you went, he'll send this Lockheed
out for you.
M:
All right.
H.M.Jr:
It's Coast Guard, it's very good -- two pilots,
E. mechanic and radio operator.
M:
Well, I'd feel safe in that.
S.M.Jr:
And it's the best crew we have and their tops
BO
X:
You didn't get a definition on our 50,000
planes, I take it.
H.M.Jr:
(Laughs) My God! This 1e strictly between
us. Brett came over to see me and he can't
get a clearance on his program so he doesn't
know where he 18.
Well, I'm glad I raised the question.
H.M.Jr:
But I've got it fixed now through an order
from the President. He's ordered both the
Army and Navy -- don't mention this to a
living soul -- to put their plans on his desk
Monday morning. What they want -- hello
M:
Yes.
H.M.Jr:
and then he sende it over to me.
Good! Fine:
H.M.Jr:
Now
how can men start to work on that.
H.M.Jr:
Well, the President had to send them a stiff
order -- they're -- I know Navy's God damn
sore about it but it doesn't make any difference.
Did you went me to do anything special about
seeing the people from South Bend? I told
H.M.Jr:
See who?
Regraded Uclassified
120
- 6 -
M:
Mr. Moore and Vance and various people from
Studebaker who had talked to the Allied Com-
mission and you had told them, apparently, to
see me.
H.M.Jr:
Well, I just -- anybody who wants to build an
engine for the Government, I send them to you
just automatic.
M:
What I was getting at was, if there wasn't
anything too pressing I'd put them off a day
or two than to have them come in Monday.
H.M.Jr:
No. I'd like you, if you could get some rest,
and then we'll get together the first thing
Monday morning.
M:
All right.
H.M.Jr:
Now ...... hello.
M:
Yes.
H.M.Jr:
I'll be available at, I'll say, from,9:15 on
Monday morning.
M:
Fine. I'll be there.
H.M.Jr:
See? And don't hesitate -- I'll even say 9
o'clock, Mead.
M:
All right.
H.M.Jr:
And I'll save an hour then and then don't
hesitate to ask for this plane.
M:
I won't.
H.M.Jr :
And it does take a little time to get out
there but
......
M:
When I know what time we're leaving here, I
oan telegraph McKay as to what
......
H.M.Jr:
It's phone, don't telegraph, it's too slow.
M:
I'll call him up.
121
- 7 -
H.M.Jr:
Just telephone him and in the meantime I'm
going to send a word to Lieutenant Burke, my
own pilot, to stand by for orders.
M:
Thank you very much.
H.M.Jr:
So he'll be ready to take off in an hour from
the time he hears from you.
M:
All right. Thank you.
H.M.Jr:
And are you discouraged on the Rolls?
M:
Not a bit.
H.M.Jr:
Oh, not a bit.
M:
No.
H.M.Jr:
Not a bit.
M:
Not a bit.
H.M.Jr:
Well, that's good. My cable 1s going now
to Kennedy. But you're not discouraged on
the Rolls?
M:
No.
H.M.Jr:
But you are on the Allison?
M:
I'm not discouraged on the Allison because I
think Mr. Evans, who's sitting right across the
table from me, will do any reasonable thing with
it.
H.M.Jr:
How about the Continental?
M:
Well, that's away behind.
H.M.Jr:
Away behind.
M:
That's not a possibility.
H.M.Jr:
So we've only got two bets, the Rolls
and Allison.
M:
That's right.
- 8 -
122
H.M.Jr:
That's of the liquid-cooled.
M:
That's right.
H.M.Jr:
Have you got this Taylor with you?
M:
Oh, yes. Taylor and Kern -- I picked up
another member of my family.
H.M.Jr:
Kern?
M:
Kern -- yes. He was an ex-Britisher -- did
a lot of work for the Air Ministry during the
last war and has been here with the Air Corps
and then with Ethyl Gasoline Corporation. He
18 a fuel expert for one thing -- knows more
about cylinders and combustion and certain
parts of the engine than anybody I know of.
H.M.Jr:
Dr. Compton 18 spending Sunday night with me.
M:
Oh, good.
H.M.Jr:
And I want to talk -- I had hoped that you
would be here, but he's coming for supper.
If by any chance, you're around -- he's coming
to the house at six and have supper -- you're
invited.
M:
Oh, thank you.
H.M.Jr:
If by any chance you're there, he's coming
to the house at six and we're going to have a
talk. If by chance you're there and you're
alive and not too tired, we'd love to have you
at six and then stay at the house for supper.
M:
Well, thank you 80 much. I'll try and be
there.
H M.Jr:
Well, now, my house is
......
M:
...... you'll know it's because I couldn't.
H.M.Jr:
You'd better write down my address.
M:
Just a moment.
H.M.Jr:
2211 Thirtieth Street, off Massachusetts
Avenue.
- 9 -
123
M:
2211 Thirtieth Street, off Mascachusetts. All
right.
H.M.Jr:
Now, one other question. I can borrow the
services of Colonel E. S. Gorrell.
X:
Yes.
H.M.Jr:
Do you know him?
M:
Yes.
H.M.Jr:
Just think it over, whether we want him on
to follow up any of the manufacturers.
M:
All right, I'll do that.
H.M.Jr:
You know him.
M:
Yes. I don't know him well -- I know who he 18.
H.M.Jr:
Well, he's been recommended by General Marshall,
but I won't do anything on it until I talk to
you.
M:
All right. Now we don't know anything further
about our English license, do we, whether
they are going to be willing to license it.
H.M.Jr:
No. They're sending all the plans over to me,
80 I take it that that's -- means they're
coming, I don't know.
M:
Yeah. I didn't want to go too fast with this
unless we knew that we were sure of getting a
license and under some reasonable basis.
H.M.Jr:
Well, I'll put that into the cable.
M:
All right.
H.M.Jr:
Thank you. Good-bye.
M:
Thank you. Good-bye.
Regraded Uclassified
Note:
124
This was taken over personally by
Lieut. McKay at 5:30 P.M., on May 25th.
It was signed for by A. C. Roessler.
(See our receipt book of May 25, 1940.
McH
5/25/40
May 25, 1940.
My deer Admiral Moyest
I would greatly appreciate it if you would send,
by Secret Code, the following message to Ambassador
Kennedy.
Quote - Congratulations on getting Holls Royce
plans. Would it be feasible to send
these plans on board the first battle-
ship or destroyer that 1a going to
Halifax, care of the Air Attache,
British Embassy, Washington. If it is
not feasible, my second choice would be
to put them on the United States steam-
ship PRESIDENT ROOSEVELT which is on its
way to Ireland. On what basis can United
States government get license to manu-
facture Rolls Royce. Would appreciate
prompt answer to this question.
The British Government has been fooling
around for the last couple of months in
regard to placing orders for powder. Arthur
Purvis unable to get authority to place order
for 20,000 tons in the United States and
14,000 tona in Canada. The trouble seems to
be that his orders have to clear through Ottawa,
Perfectly ridiculous that he is unable to deal
directly with some authority in England, If
you could use the example of powder to clear
up the handicap under which Arthur Purvis is
working you would be doing a great service.
Sincere regards. Henry Morgenthou, Jr. - Unquote
Sincerely,
(Signed) H. Morgenthau Jr
Rear Admiral Leigh Noyes,
Director, Naval Communications,
Room 2622, Navy Department,
Mashington, D. C.
Regraded Uclassified
Regraded Uclassified
May 25, 1940,
they dear Admiral Noyest
I would grestly appreciate it if you would send,
by Secret Code, the following message to Ambassador
Kennedy,
Quote - Congratulations on getting Rolls Royes
plans. Would it be feasible to send
these plans on board the first battle-
ship or destroyer that is going to
Halifax, care of the Air Attache,
British Embassy, Washington. If it is
not feasible, my second choice would be
to put them on the United States steam-
ship PRESIDENT ROOSEVELT which is on its
way to Ireland, On what basis can United
States government get license to SAME-
facture Rolls Hoyee. Would appreciate
prompt answer to this question.
The British Government has been fooling
around for the last couple of months in
regard to placing orders for ponder. Arthur
Purvis unable to get authority to place order
for 20,000 tens in the United States and
14,000 tons in Canada, The trouble seems to
be that his orders have to clear through Ottawa,
Perfectly ridiculous that he is unable to deal
directly with some authority in England. If
you could use the example of powder to clear
up the handicap under which Arthur Purvis is
working you would be doing a great service.
Sincere regards. Henry Norgenthau, Jr. - Unquote
Sincerely,
(Signed) H. Morgenthau, h
Rear Admiral Leigh Boyes,
Director, Naval Communications,
Room 2622, Navy Department,
Washington, D. C.
May 25, 1940,
My dear Admiral Noyest
I would greatly appreciate it if you would send,
by Secret Code, the following message to Ambassador
Kennedy.
Quote - Congratulations on getting Rolls Royce
plans. Would it be feasible to send
these plans on board the first bettle-
ship or destroyer that is going to
Halifax, care of the Air Attache,
British Embassy, Washington. If it is
not feasible, my second choice would be
to put them on the United States steam-
ship PRESIDENT ROOSEVELT which is on its
way to Ireland. On what basis can United
States government get license to
facture Rolls Royce. Would appreciate
prompt answer to this question.
The British Government has been fooling
around for the last couple of months in
regard to placing orders for powder. Arthur
Purvis unable to get authority to place order
for 20,000 tons in the United States and
14,000 tons in Canada. The trouble seems to
be that his orders have to clear through Ottawa.
Perfectly ridiculous that he is unable to deal
directly with some authority in England. If
you could use the example of powder to clear
up the handicap under which Arthur Purvis is
working you would be doing a great service.
Sincere regards. Henry Morgenthau, Jr. - Onquote
Sincerely,
(Signed) H. Morgenthau, Jr.
Rear Admiral Leigh Noyes,
Director, Naval Communications,
Room 2622, Navy Department,
Washington, D. c.
Regraded Uclassified
128
THE SECRETARY OF THE NAVY,
WASHINGTON.
25 May 1940
Dear Henry:
The attached copy is
evidently intended for you, al-
though it came in an envelope
addressed to me.
Also attached is a copy
of my answer to the President.
Sincerely,
Charlis Can
Hon. Henry Morgenthau, Jr.
The Secretary of the Treasury.
Enc.
129
25 May 1940
CONFIDENTIAL
MEMORANDUM FOR THE PRESIDENT:
The instructions contained in your memo. of
May 24, 1940, regarding the airplane expansion program,
will be cerried out.
In the interests of coordination, may I say
that it might be well for you to suggest to Henry that
he be 0. little more careful in checking his facts with
informed sources before disturbing you with poorly
assembled information.
The Navy is leaning over backward in attempting
to keep things in the proper groove, and it 1e dis-
appointing to be spanked unfairly, as in the 0888 of
the plane engines yesterday and the English powder
situation the day before.
CHARLES EDISON
Regraded Uclassified
130
May 24, 1940.
MEMORANDUM FOR
THE SECRETARY OF THE HAVY
(alsopent to
Recy of war)
I understand that practically all
orders under the 1939 airplane expansion
program have been placed. The new
Congressional authorisation provides
for the acquisition of many new planes.
Please let me have the program
requirements in aircraft and engines by
types by Monday next.
It is of the utmost importance
that no contracts be entered into from
now on either for planes OF engines or
for the development of new types of
planes or engines without coordinating
this with the general program as a rule.
For the time being, until the final
machinery is set up, this ocordination
will be cleared through the Secretary of
the Treasury to as as Commander-in-Ohief.
Please ... that this is carried
out in toto.
F. D. R.
Regraded Uclassified
131
May 25, 1940
My dear Mr. Secretary:
It gives as great pleasure to enclose herewith
copies of statements showing sirplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Angle-Prench Purchasing Heard.
Sincerely,
(Signed) H. Morgeathau, Jr
The Monorable,
The Secretary of the Havy.
Přibj Py.
Regraded Uclassified
132
May 25, 1940
My dear Mr. Secretary:
It gives as great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charte showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-Prench Purchasing Beard.
Sincerely,
(Signed) E Morganthau, Jr.
The Nonorable,
The Secretary of the Havy.
PY:bj
Regraded Uclassified
133
May 25, 1940
My dear Mr. Secretary:
It gives as great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Angle-Prench Purchasing Board.
Sincerely,
(Signed) H. Morgenthau. Jr.
the Nonorable,
The Secretary of the Havy.
PT:bj
134
May 25, 1940
My dear Mr. President:
It gives me great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charte showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-French Purchasing Board.
Faithfully yours,
(Stgned) H. Morgesthau, Jr.
The President,
The White House.
Dy.
Ff:bj
Regraded Uclassified
135
May 25, 1940
My dear Mr. President:
It gives me great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charte showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Board.
Faithfully yours,
(Signed) H. Morgenthau
The President,
The White House.
Pr:bj
Regraded Uclassified
136
May 25, 1940
My dear Mr. President:
It gives no great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charte showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Board.
Faithfully yours,
(Signed) H. Morgenthau. Jr
the President,
The White House.
Fribj
Regraded Uclassified
137
May 25, 1940
My im Mr. Secretary:
It gives me great pleasure to emplose herewith
copies of statements showing airplane orders and
deliveries to the British and French Goveraments
from May 18 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Heard.
Sincerely,
(Signed) 1. Morgesthau, Jr.
the Honorable,
The Secretary of State.
PT:bj
P.
Regraded Uclassified
138
May 25, 1940
My dear Mr. Secretary:
It gives me great pleasure to enclose herevith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the bagis of figures submitted by
the Anglo-French Purchasing Board.
Sincerely,
(Signed) H. Morgenthau, Jr.
the Monorable,
The Secretary of State.
PT:bj
Regraded Uclassified
139
May 25, 1940
My dear Mr. Secretary:
It gives me great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-Prench Purchasing Board.
Sincerely,
(Signed) H. Morgenthau, Jr
The Honorable,
The Secretary of State.
Fftbj
Regraded Uclassified
140
May 25, 1940
My dear Mr. Secretary:
It gives see great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-French Purchasing Board.
Sincerely,
(Signed) H. Morgenthau .7-
The Honorable,
The Secretary of War.
Fribj
P.M.
Regraded Uclassified
141
May 25, 1940
My dear Mr. Comptons
It gives me great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-Prench Purchasing Board.
Sincerely,
(Signed) 1 Morganthan, Jr.
The Honorable Lovis Compton,
Assistant Secretary of the Havy,
Washington, D. 0.
Ff:bj
Py.
Regraded Uclassified
142
May 25, 1940
My dear Mr. Compton:
It gives - great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Board.
Sincerely,
(Signed) H. Morgenthau. Jr.
The Nonerable Levis Compton,
Assistant Secretary of the Havy,
Vashington, D. 0.
PY:bj
Regraded Uclassified
143
May 25, 1940
My dear Mr. Compton:
It gives me great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Anglo-Prench Purchasing Board.
Sincerely,
(Signed) E. Morgenthau. Jr
The Honorable Levis Compton,
Assistant Secretary of the Havy,
Vashington, D. 0.
Fribj
Regraded Uclassified
144
May 25, 1940
My dear Mr. Johnsons
It gives no great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department OR the basis of figures submitted by
the Angle-French Purchasing Board.
Sincerely,
(Signed) H. Morgenthau. Jr.
The Monorable Louis Johnson,
Assistant Secretary of Var,
Weshington, D. o.
Ff:bj 704.
Regraded Uclassified
145
May 25, 1940
My dear Mr. Johnsons
It gives no great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material vas compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Board.
Sincerely,
(Signed) H. Morgenthan .7-
the Honorable Louis Johnson,
Assistant Secretary of Var,
Washington, D. c.
FY:bj
Regraded Uclassified
146
May 25, 1940
My dear Mr. Johnsons
It gives no great pleasure to enclose herewith
copies of statements showing airplane orders and
deliveries to the British and French Governments
from May 16 to May 22, 1940, and charts showing
scheduled deliveries through December, 1941.
This material was compiled by the Treasury
Department on the basis of figures submitted by
the Angle-French Purchasing Board.
Sincerely,
(Signed) E. Morgenthau, Jr.
the Honorable Louis Johnson,
Assistant Secretary of War,
Washington, D. c.
Fribj
Regraded Uclassified
147
Memorandum of Conference of the President
held at the White House at 2:00 p.m., May 25, 1940.
Present: Secretary of the Treasury Morgenthau
Secretary of Commerce Hopkins
ltr. McReynolds, Administrative Ameistant to the President
Mr. Smith, Director of the Budget
The President explained his ideas with respect to setting up an
Advisory Commission in connection with the statutory Council of No-
tionel Defense, and stated that it was his thought to limit the
activity of the Council itself very definitely by fixing infrequent
periods for meetings, the thought being that such meetings could be
combined with the regular Cabinet meetings.
Secretary Morgenthau and Secretary Hopkins stated their hesi-
tance to approve the setting up of 80 much machinery with the ape-
cific responsibility being fixed for the accomplishment of tangible
results and suggested the alternative of substituting a "Board on
Mobilization of Industries Essential for Military Preparedness",
which is authorized by the National Defense Aot of 1916 (39 Stat.
166, 214) and presented to the President a draft of an Executive Order
which would accomplish this purpose. The President finally decided
that he would prefer to adhere to the program which he had already
outlined. His reason was his feeling that public reaction to the
setting up of the Mobilization Board was that such Board were author-
ized in the statute providing for the declaration of a state of war
or the imminence of war.
The names of the seven persons to be placed on the Advisory Com-
mission were agreed upon. Their names and the designations of their
several fielda of activity are outlined in the attached explanatory
memorendum dictated by the President.
Secretary Morgenthan then raised the question as to what would
be required in connection with the debt limit. He suggested that
the President clear with the "Big Four* the question of whether debt
limit logislation should be enacted at this session. The President
stated he preferred not to raise that question with the "B18 Four*
for reasons which he gave. He asked whether actual expenditures
prior to next February 1, or possibly January 20, would exceed the
present debt limit. Secretary Morgenthau stated that be would have
the best possible information compiled on that by next Monday and
if he found this question could not wait for action by the next
Congress, he would be glad to undertake, subject to the President's
approval, to discuse with Senator Harrison and other Congressional
leaders the question of direct legislation increasing the debt limit
to be immediately enacted. Be expressed the belief that if the mat-
ter was presented as a necessary part of the Preparedness Program,
the Congress would be willing to pass such a law. The President said
he would like to have the Secretary undertake such clearance over the
week-end. This the Secretary said he would do.
Regraded Uclassified
148
EXECUTIVE ORDER
APPOINTING A BOARD ON MOBILIZATION OF INDUSTRIES
ESSENTIAL FOR MILITARY PREPARKINESS AND PROVIDING
FOR ITS FUNCTIONS.
By virtue of and pursuant to the authority vested in me by
the last paragraph of section 120 of an Act entitled, "An Act for
making further and more effectual provision for the national
defense, and for other purposes", approved June 3, 1916 (39 Stat.
166, 214), I hereby appoint a Board on Mobilization of Industries
Essential for Military Preparedness consisting of
, Chairman:
;
;
;
;
:
;
;
(herein called the "Board") and authorize the Board to perform
functions under said Act as hereinafter provided:
1. The Board shall prepare, organize, direct, and otherwise
effectuate a. comprehensive program of national defense, with a
view to increasing quickly the production and procurement of
essential equipment and material needed for such program, and
shall take all necessary steps to provide for such clerical
assistance as my be necessary to organize and coordinate such
work.
2. The Board may establish committees end subcommittes
to advise and to aid it in carrying out its functions by furnishing
Regraded Uclassified
149
such information, material, and technical assistance, as the
Board may request; and the Board may reimburse the members of
any such committee or subcommittees for their actual expenses
of travel and subsistence, including the expense of attendance
at meetings of the Board.
3. In carrying out its functions the Board 1e authorized
and directed to avail itself of the services of departments,
bureaus and agencies of the Government, and to accept voluntary
and uncompensated services of such departments, bureaus and
agencies or to pay the administrative expenses incurred thereby.
All accounting and administrative functions of the Board shall
be performed by the Department of the Treasury.
4. The Board shall have power to make rules and regulations
to carry out the purposes of said Act and this Order and to do
all other things reasonably necessary to perform its functions.
THE WHITE HOUSE,
May , 1940.
Copied: NMS
Regraded Uclassified
150
MEMORANIUM
Under the law of 1916 and without the necessity for any further
legislation, the President has set up an Advisory Commission for the
Council of National Defense of seven members. These members and the
subjects assigned to them are as follows:
Mr. William 8. Knudsen,
Advisor on Industrial Production
President, General Motors
Corporation
Mr. Edward R. Stettinius, Jr.,
Advisor on Industrial Materials
Chairman, Board of Directors,
United States Steel Corp.
Mr. Sidney Hillman,
Advisor on Employment
President, Amalgamated Clothing
Workers of America
Mr. Chester C. Davis,
Advisor on Farm Products
Member, Board of Governors of
the Federal Reserve System
Mr. Leon Henderson,
Advisor on Price Stabilization
Commissioner, Securities and
Exchange Commission
Mr. Ralph Budd,
Advisor on Transportation
Director, American Railway
Engineering Association
Miss Charlotte Carr,
Advisor on Consumer Protection
Head Resident of Hull House
The President has set up in the White House, in accordance with
the Executive Order of September 8, 1939, the Office of Emergency
Management and has appointed William E. McReynolds in charge of that
office. Mr. McReynolds will also act as Secretary of the Council of
National Defense and of the Advisory Commission.
The Council of National Defense itself, which has been in con-
tinued existence since its creation by law in 1916, will continue to
consult with the President whenever desirable. That Council being
composed exclusively of Members of the Cabinet, it is probable that
matters pertaining to all this work will be taken up at the regular
Cabinet meetings. The Advisory Commission, therefore, will be, in
effect, the principal body for the menagement and coordination of
the program for expending industrial production.
Copied: new
Regraded Uclassified
151
RULES AND REGULATIONS
COUNCIL OF NATIONAL DEFENSE
Under authority of Section 2 of the Act of August 29,
1916 (39 Stat. 649), the Council of National Defense adopts,
subject to the approval of the President, the following
rules and regulations for the conduct of its work:
Section 1. The Advisory Commission provided for in
Section 2 of the Act of August 29, 1916 (39 Stat. 649).
shall be composed of an Advisor on Industriel employment Production;
an Advisor on Industrial Materiels; an Advisor on in tor
7arm Products
Supply an Advisor on Agricultural Problems; an Advisor
on Price Stabilization; an Advisor on Transportation; and
an Advisor on Consumer Protection. Each of such advisors
stell be in charge of and responsible to the Council for
investigation, research, and coordination in his designated
field.
Section 2. The Administrative Assistant to the
President in charge of the office for Emergency Management
in the Executive Office of the President is hereby desig-
nated as Secretary to the Council and to the Advisory Com-
mission.
Section 3. The Becretary to the Council shall provide
suitable and necessary personnel, supplies end facilities
for the Advisory Commission and its several members end for
such experts, special advisors, or other subordinate bodies
as the Council may from time to time employ under the pro-
visions of said Section 2 of the Aot of August 29, 1916;
and he shall perform such other duties as the Council may
direct.
Regraded Uclassified
Draft
152
the the Pres.
RULES AND REGULATIONS
COUNCIL OF NATIONAL DEFENSE
Under authority of Section 2 of the Act of August 29,
1916 (39 Stat. 549), the Council of National Defense adopts,
subject to the approval of the President, the following
rules and regulations for the conduct of its work:
Section 1. The Advisory Commission provided for in
Section 2 of the Act of August 29, 1916 (39 Stat. 649),
shall be composed of an Advisor on Industrial Production;
an Advisor on Industrial Materials; en Advisor on Labor
Supply; en Advisor on Agricultural Problems; an Advisor
on Price Stabilization; an Advisor on Transportation; and
an Advisor on Consumer Protection. Each of such advisors
shall be in charge of and responsible to the Council for
investigation, research, and inquiry in his designated
field.
Sec. 2. The Administrative Assistant to the President
in charge of the office for Emergency Management in the
Executive Office of the President is hereby designated as
Secretary to the Council and to the Advisory Commission.
Sec. 3. The Secretary to the Council shall provide
suitable end necessary personnel, supplies and facilities
for the Advisory Commission and its several members and for
such experts, special advisors, or other subordinate bodies
as the Council may from time to time employ under the pro-
visions of said Section 2 of the Act of August 29, 1916;
Regraded Uclassified
153
- 2 -
and he shall perform such. other duties as the Council
may direct.
Sec. 4. The Secretary of the Treasury and the Director
of the Bureau of the Budget may attend all meetings of the
Council, and shall be notified of such meetings by the
Secretary to the Council.
154
my dear User Resident.
Last might the group word
Igot frim
my engineers that they
had found trouble in with
the design of the allism
engine. they could not
give me any Hetails as
they there Wilephing
to the allison plant.
allian has an ader
In the allies for
450 to 60 dylla,
and a carge who
and deline have in fleate, fallens dow
% us. allerg
Regraded Uclassified
154
Please hold off
inviting Mr Kindor
to Washington until
I see you time Minday
will 134 that have full I
details an the troubles
with Simply alliom
(The m not
have been may 26/60)
dated It may
D à 'NOLONIHSYM
2211 THIRTIETH STREET
155
MAY 25 1940
Dear Seremet
Thank you for your letter of
May 24 about Floyd Odlum,
Sincerely yours,
15/ Henry
Nonerable Serome N. Frank
Chairman
Securities and Exchange Commission
Washington, D. c.
EHF18 5/25/40
156
MAY 85 1940
Bear Seremes
Thank you for your letter of
May 24 about Playd odlum.
Sincerely yours,
15/ Henry
Seasuable Sereme . Presis
Shairman
Securities and Exchange Commission
Washington, D. c.
REF:# 5/25/40
Regraded Uclassified
157
MAY 25 1940
Bear Jeremes
Thank you for your letter of
May 24 about Floyd Odlum.
Sincerely yours,
15/ Henry
Neasrable Serone 1. Fresk
Chairman
Securities and Rushange Commission
Bashington, D. 6.
INFID 5/25/40
9.14 76
Regraded Uclassified
SECURITIES AND EXCHANGE COMMISSION
158
WASHINGTON
OFFICE OF THE CHAIRMAN
May 24, 1940
CONFIDENTIAL
The Honorable
Henry A. Morgenthau, Jr.,
Secretary of the Treasury.
Dear Henry:
In view of something I heard yesterday I want
to quote to you the following which I sent to the
President on May 18:
"I would like respectfully to suggest
that consideration be given to using Floyd
Odlum in some important position. I know
from conversations with him last fall that
he would be willing to drop his business
and do anything to help in the crisis.
"He is one of the most imaginative
financial men in the country. He is not
an operating utility man, but he had a
lot to do, first as B. lawyer and then as
financial man, with building up some of
the utilities.
"Perhaps a good place for him would
be on the National Power Policy Committee,
assuming that it is to play an important
part in expanding and coordinating power
production. His ingenuity in helping to
finance such a program would be invaluable."
That is the only recommendation made by me as
to the use of Odlum by the government. After I sent
that memorandum I was asked whether I thought Odlum
could be helpful to the government in connection with
the aviation industry. I replied that, from what I
knew of him, I thought his ingenuity would be useful
anywhere.
153
- 2 -
I did not, however, try to force him on you
or anyone else -- with respect to aviation or
anything else.
My views 88 to his usefulness to the government
have not been altered by his proposed deal in connec-
tion with the Curtiss-Wright Company. As I understand
that proposal, it was negotiated between Odlum on be-
half of Atlas, on the one hand, and the officers of
Curtisa-Wright, on the other hand. If anyone asserts
that it was unfair to any of the security holders of
Curtiss-Wright -- 8. subject on which I do not care to
express an opinion -- it would be difficult for him
to maintain that that unfairness (assuming, for the
salce of discussion that it existed) disclosed any
impropriety whatever on the part of Odlum. The most
that could be said by anyone who felt that there was
any unfairness to any Curtiss-Wright investors is
that Odlum, in an arm's-length bargain, was trying
to drive a good bargain for the investors in his own
company. His proposition was accepted by the Curtiss-
Wright officials, subject to & vote of their stock-
holders, and was subsequently abandoned by mutual
agreement. I fail to 366 that that reflects on Odlum's
abilities or integrity.
Sincerely yours,
Jenn Jerome N. Frank
Chairman
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
TEO
INTER-OFFICE COMMUNICATION
DATE May 25, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Pinsent, Financial Counselor of the British Embassy, called on me
yesterday noon, and handed me the attached communication, dated May 24, 1940,
conveying a message from the Chancellor of the Exchequer to the Secretary
of the Treasury. This is the message of which Mr. Pinsent had given me a
summary at midnight, Thursday, May 23, and which I summarized to the Secretary
in a memorandum written at 9 o'clock on May 24. I had had an opportunity to
discuss this memorandum with the Secretary at 10 o'clock yesterday morning.
I had explained to the Secretary that the original plan had been for the
British Ambassador to ask to see the Secretary in order to present the official
document, but that Pinsent was acting in the Ambassador's stead, since the
document was puraly technical. The Secretary instructed me to receive Mr.
Pinsent. From the summary as we had received it, the Secretary saw nothing
to which the Treasury could object.
Mr. Pinsent had some oral explanations to make when he delivered the
official document to me. I explained the Secretary's inability to receive him,
but arranged for Under Secretary Bell to receive the two of us. Mr. Pinsent
repeated to Mr. Bell the remarks which he had made to ne in explanation of the
document, and to supplement it. The principal point not mentioned in the docu-
ment vas the concern of the British Government lest there might be a move in
the United States to restrict the sale of United States dollar securities on
this market by the British and French Governments if Great Britain should take
the proposed action toward stopping the sale on the British market of securities
owned by non-residents, The British requested Secretary Morgenthau's assurance
that he would oppose any such action on the part of the United States if the
question should be raised. The British had preferred not to put this metter in
writing.
I told Mr. Pinsent that several points in the message would have to be
brought to the attention of the State Department before any reply could be given
by the Secretary of the Treasury. He understood this.
I also noted that paragraph 9 raised a question which I did not think
could be resolved in advance. I suggested that the Secretary's answer cover
only thoseparagraphs prior to number 9, and that we simply undertake to go into
the question of the quotation of the free rate with the Federal Reserve officials
after an answer may have been made to the communication. Ee seemed catisfied
with this idea.
After Mr. Pinsent's departure, Messre. Foley. White and Bernstein studied
the document with Mr. Bell and myself, and we then were received by the Secretary.
It was agreed that the State Department's views should be solicited, and that the
Preasury had no objection to the document as received.
Regraded Uclassified
161
- 2 -
Yesterday afternoon I sent three copies of the message to Mr. Livesey
in the Department of State and gave an explanation by telephone of the circum-
stances attending its receipt, and of the consideration which had been given
it by the Treasury Department. I told him that we would not comment thereon
to the British Embassy until we might have some message from the State Depart-
ment. Mr. Livesey was sure the communication would be of great interest to the
officers in his Department, including Secretary Hull.
B.M.S.
(Handed to Xr. Cochran by Mr. Pinsent at 12:00, May 24
TC2
Please give following message from
Chancellor of the Exchequer to Mr. Morgenthau.
We have et no time since imposition of
exchange control sought to obtain a competitive
advantage for our exports by trading at 8 depre-
cisted free rate. We have now decided to take
steps with a view to conducting whole of our trade
on the basis of official rate of exchange.
2.
It was with this object that we concluded
payments agreement with Argentine, Canada (?) and
other countries.
Apart from our trade with
sterling area, our trade with French franc area and
with countries with whom we have concluded payments
agreements, is conducted on basis of official rate,
and we have now decided to take step designed to
place remainder of our trade on basis of official
rate.
3.
We assume that United States Government
would not wish to conclude e bileteral payments
agreement with the United Kingdom, and accordingly
we intend to invoice all exports from the United
Kingdom, and if possible from the whole of the
sterling erea, to United States and dependencies:
(a) in sterling bought against dollars at the
official rate from our exchange control,
or
(b) in dollars.
4.
with other countries, and perticularly
with exchange control countries, our policy will
Regraded Uelassified
be that sterling area exports to those countries
should be paid for in sterling accruing from their
exports to sterling erea; rate of exchange between
London and those countries would be based on official
price of gold in London.
5.
The decision that exports from the sterling
area should be no longer paid in free sterling, if
it stands alone, must tend to have a depressing
effect on free rete. This in turn might well lead
to evasion, so that pert of sterling ares exports
would continue clandestinely to be paid for in free
sterling. In order to minimise this danger we
regard it as an essential part of measure which we
propose to take that we should do whet we cen to
reduce supply of free sterling at the seme time as
we reduce demand.
"Ye recognise that in present
circumstances rate is bound to be governed by
political fectors cuite as much 28 by finencial and
economic fectors.
6.
We have therefore decided that we must
prohibit sale in this market of securities owned
by non-residents. We take this temporary measure
with the greatest regret but 85 we see it the only
alternatives would be: 1. Danger of 5 very consid-
erable further depreciation of free rate;
2. The
unrestricted transfer into foreign exchange of
sterling obtained by non-residents through sale of
securities.
Such transfer might constitute most
serious drain on our stock of cold end foreign
exchange whion would imsit nur our effort to en
Regraded Uclassified
209
164
extent which, under present conditions, we cannot
contemplate.
7.
As 8 further messure to reduce supply of
free sterling we shell give foreign exchange at
official rates for current financial payments due
to the United States, including dividends, interest,
etc.
B.
Chancellor of the Exchequer feels
confident that Mr. Morgenthau will understand the
necessity for these measures. Chancellor of the
Exchequer hopes that Mr. Morgenthau will feel able
to give him an essurance in this sense.
9.
We hope that when these measures have been
taken the United States Government will be able to
assist us by arranging official rate to be quoted
and for no quotation of free rate to be published
in the United States. Once trade between the two
countries - and indeed the whole or 8 lerge part of
the trade of the sterling area - is conducted on the
basis of official rate, and current financial
transfers are effected At that rate, any so-called
free market rate would apply to B very narrow range
of transactions (legal or illegal).
24th May 1940.
Regraded Uclassified
REFER TO FILE No.
165
TREASURY department
WASHINGTON, D. C.
OFFICE OF THE CHIEF
U.S. SECRET SERVICE
May 25, 1940
Memorandum for the Secretary
From Chief, Secret Service
The letter dated May 8, 1940, to you from Director
Hoover, relating to alleged donations by A. P. Giannini
to the Bund in order to "get Morgenthau" WILS based upon an
interview of F.B.I. Agents with Max Rozan and Henry Unschuld.
Director Hoover's letter stated that the interview took place
on April 6, 1940, and you called my attention to the fact
that 32 days had elapsed before the matter was called to your
attention.
I now find that the date April 6th appearing in that
letter was an error and it should have been May 6th. This
error was discovered in studying the file of papers regarding
this matter, which file WB.S turned over to this office by the
F.B.I. A detailed report is in the file dated May 6, 1940,
signed by Agent J. F. Pryor, which indicates that Max Rozan
called at the local F.B.I. office at 11:00 A.M. on May 6th.
Another report in the file is dated May 7, 1940, and relates
to the reference of the matter by Agent J. F. Pryor to Field
Agents E. L. Nichols and C. F. Lanman, who called at the May-
flower Hotel on the afternoon of May 6th to interview Max
Rozan and Henry Unschuld. An Inquiry by an Agent of my office
has confirmed the registration of Rozan at the Mayflower Hotel
from May 2, 1940, to May 7, 1940, and that he was not registered
there at any other time during the past year.
The file indicates that Henry Unschuld has a very bad
reputation; that he probably entered this country prior to 1913,
in which event he could not have been a German U-boat commander
during the World War as alleged; that he was indicted at Chicago
on November 16, 1934, for making a false oath before a. natural-
ization examiner, which indictment was dismissed on April 29,
1935; that on July 31, 1926, he was convicted in Minnosota of
Regraded Uclassified
166
- 2 -
embezzling $15,000 and sentenced to from one to ten years, serv-
ing almost five years; and that he has been involved in several
other alleged frauds. In view of his extremely bad record, it
is believed that his unsupported statements should receive no
credence.
I am having the entire matter investigated at Los
Angeles and at Chicago, and have requested that same be expe-
dited. You will be promptly advised upon receipt of reports
from the field.
1902
187
Regraded Uclassified
May 25, 1940
Memorandum for the Secretary
From Chief, Secret Service
The letter dated May 8, 1940, to you from Director
Hoover, relating to alleged donations by As P. Ciannini
to the Bund in order to "get Morgenthau" was based upon an
interview of F.B.I. Agents with Max Rosen and Heary Unschuld.
Director Hoover's letter stated that the interview took place
on April 8, 1940, and you called my attention to the fact
that 32 days had slapsed before the matter was called to your
attention.
I now find that the date April 6th appearing in that
letter was an orrer and it should have been May 6th. This
error was discovered in studying the file of papers regarding
this matter, which file was turned over to this office by the
F.B.I. A detailed report 10 in the file dated May 6, 1940,
signed by Agent de F. Pryor, which indicates that Maz Recem
called at the local P.B.I. office at 11,00 A.M. on May 6th.
Another report in the file is dated May 7. 1940, and relates
to the reference of the matter by Agent J. P. Pryer to Field
Agents 1. L. Nichola and C. F. Lansan, who called at the May-
flower Hotel 00 the afternoon of May 6th to interview Max
Rosan and Henry Unschuld. An inquiry by an Agent of By office
has confirmed the registration of Rosan at the Mayflower Hotel
from May 2, 1940, to May 7. 1940, and that he was not registered
there at any other time during the past year.
The file indicatos that Henry Unschuld has a very bad
reputation, that he probably entered this country prior to 1913,
in which event he could not have been & German U-boat commander
during the World War as alleged, that he vas indicted at Chicage
on November 16, 1934, for making & false oath before a natural-
isation examiner, which indictment was dismissed OR April 29,
1935; that on July 81, 1926, he was convicted in Minnesota of
168
- 2 -
embessling $15,000 and sentenced to from one to ten years, cerr-
ing almost five years; and that he has been involved in several
other alleged frauds. In view of his extremely bad record, it
is believed that his unsupported statements should receive no
oredence.
I - having the entire matter investigated at Les
Angeles and at Chicago, and have requested that same be expe-
dited. You will be promptly advised upon receipt of reports
from the field.
Regraded Uclassified
169
HSM
GRAY
Milan
Dated May 25, 1940
Rec'd 10:10 a. me
SECRETARY of State,
Washington.
41, May 25, 3 P. me
Today's merket index 210.47. Volume 83,350.
Market weak and prices declined materially on
news latest political developments.
SHOLES
GW
170
ITALIAN STOCK PRICES
(Milan)
Dec. 31, 1927 # 100
Weekly
Daily
1939
1940
1940
JULY
AUG,
SEPT.
OOT,
NOV,
DEC
JAN.
FEB.
MAR,
APRIL
MAY
JUNE
APR.
I
MAY
JUNE
JULY
PER
6
13
20
27
4
11
18
25
B
15
22
PER
PER
TUIN
PER
CENT
CENT
CENT
CENT
210
210
170
170
200
200
165
165
190
190
160
160
180
180
170
170
155
155
160
160
150
150
150
150
145
145
140
140
SHARES
SHARES
THOUSANDS
THOUSANDS
200
Volume
200
130
130
100
100
120
120
110
110
0
o
JULY
AUG.
SEPT.
ocT.
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
6
13
20
27
4
11
18
25
1
8
15
22
1939
1940
APRIL
MAY
JUNE
1940
*DAILY FOR LATEST WECK ONLY
Office of the Sucretary of the Treasury
FO - 141 - 1A
Drum é hand and Stalistics
Regraded Uclassified
171
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: May 25, 1940, 5 p.m.
NO.: 882
FOR THE TREASURY.
Today Rueff and the Counselor of the Embaesy had
lunch together. Rueff told the Counselor that although
the note circulation had now reached 162,000,000,000 he
was not worried about that phase of financial affaire. How-
ever, the unsatisfactory attitude of the British with
regard to exchange control was a source of worry to him.
He said that he might go to London tomorrow to try to
persuade the British to adopt a more firm policy on the
"free" rate of sterling. In his opinion it 18 unfortunate
that the franc should continue to be tied to the pound.
He said that there 18 positively no good reason for the
franc being quoted at other than the official rate in
New York. Should there be adopted a more realistic policy
detached from the wavering hesitation pursued by London
during the past few months, then within a week the rate
abroad of 55 france to the dollar could be corrected to
43.70.
END SECTION ONE.
BULLITT.
EA:LWW
Regraded Uclassified
172
MT
GRAY
Paris
Dated May 25, 1940
Rec'd 2:50 p.m.
Secretary of State,
Washington.
(SECTION TWO)
882, May 25, 5 p.m.
HE said that obviously when there is as great a
margir as at present between the official and free rates
of the franc the temptation to commit fraud on the part of
various and sundry speculators is strong.
Rueff also feels that the amount of franc Exchange
available abroad should bE restricted.
HE added with a chuckle that since the decline of the
franc on "free" markets to 55 the demand for gold
wedding rings in France had quadrupled thereby indicating
either an improved social trend or simply that the present
Exchange policy is considered unsound.
Rueff mentioned one or two side lights in connection
with the present tragic situation which he said quite
frankly is the result of years of bad government in
France. (END SECTION TWO)
BULLIT
PEG
Regraded Uclassified
173
JR
GRAY
Paris
Dated May 25, 1940
Rec'd 2:50 p.m.
Secretary of State,
Washington,
882, May 25, 5 pem. (SECTION THREE)
HE visited lE Havre and Rouen yesterday and described
the pitiful condition of the thousands of refugees with
their meager possessions marching painfully along the
roads. HE had learned that the manager of the Bank of
France branch at Lills had been ordered by the prefect
to leave on two hours notice in connection with the
general evacuation. The manager had one truck at his
disposal and succeeded in removing to RENNES all of the
bank notes in the branch and most of the essential
records but was obliged to leave some items because of
reasons absolutely beyond his control. HE felt himself
disgraced end committed suicide after his arrival at
RENNES.
Rueff said that thus far about two billion Belgian
franco have been sold in France by the refugees.
(END SECTION THREE)
PEG
BULLITT
174
MT
GRAY
Paris
Dated May 25, 1940
REC'd 5:50 p.m.
Secretary of State,
Washington.
882, May 25, 5 p.m.
(SECTION FOUR).
The banks Bontinue as before to accept them at the
rate 32 144 French francs for 100 Belgian francs, but
undoubtedly many unfortunate individuals have accepted
sacrifice rates at the hands of small tradesmen where
they were unable to obtain bank facilities or because
of the restrictions on the amount of Belgian francs the
banks may exchange for individuals or families (please
(796?)
SEE Embassy's telegram No. 696, May 21, 7 p.m.).
The Bank of France has instructed the Paris banks to
remain open this afternoon to aocommodate clients desiring
ACCESS to their safe deposit boxes and to Enable Belgian
refugees to change their money into francs. Skelston
staffs will bE on duty tomorrow. Pearce of the National
City Bank said that no orders were received advising the
banks to bE ready for any Emergency. (END OF MESSAGE).
BULLITT
NK
175
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Naples, Italy.
DATE: May 25, 1940, 11 a.m.
NO.: 103.
Reference is made to the Department's telegram
no. 95 of April 27, noon.
FOR THE TREASURY.
The following changes have been made in the
schedule of sailings of Italian steamers from Naples
for New York:
June 11 - Rex.
June 13 - Augustus.
June 24 - Conte di Savoia.
June 27 - Roma.
BOWMAN
EA:MSG
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
176
INTER-OFFICE COMMUNICATION
DATE May 25. 1940
TO
Secretary Morgenthan
FROM Mr. Cochran
Mr. Leroy-Beaulieu called on me yesterday at 1 o'clock. He was particularly
Interested in the question of stopping the imports into and supervising the sale
in the United States of any securities which might be seized in invaded countries.
I told him that ve had been studying this question actively and that a meeting
of our officials with the S.E.C. group was to be held yesterday afternoon to go
into the matter further.
Leroy-Beaulieu also mentioned to me the interest of the Allied Purchasing
Mission in New York in seeing that some one outside of the Netherlands will have
authority to draw on the gold socount of the Netherlands Bank in this country.
Obviously. the Purchasing Commission hopes to have the Dutch gold put into the
Allied pool. I told Leroy-Beaulieu that the question of authority to draw on the
accounts of the Netherlands Bank was one which concerned the Federal Reserve Bank
of New York directly, and that I understood the Minister of the Netherlands was
in direct contact with the New York bank on the general subject of funds of the
Vetherlands in that bank.
B.M.R.
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
177
INTER-OFFICE COMMUNICATION
DATE May 25, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Dr. Leo Pasvolsky has telephoned me from the State Department that a
small committee is to meet in his office, Room 296 in the State Department,
at 3 o'clock on Monday, May 27, and that I am expected to be present. I
told Dr. Pasvolsky that I was not aware that I had been named to any joint
committee. He said this matter had been discussed by Secretaries Morgenthau
and Hull and that he understood Dr. Harry White and I were the two representa-
tives to come from the Treasury Department. Is this correct?
B.M.S.
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
178
INTER-OFFICE COMMUNICATION
DATE May 25, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
Dr. Feis telephoned me yesterday to learn whether we had spoken to the
French and British in regard to their gold. He said this was almost as im-
portant as the British navy. I told Feis that this question had come up in
my conversation with Pinsent and that his Embassy had broached the subject to
the Government in London, but had had no reply to the message. Pinsent was
under the impression that a considerable amount of gold had been convoyed to
Canada and that the British would be entirely alert toward removing both gold
and securities if a crisis should threaten. As for the French, we are aware
from the cablegrams that steps have been taken to remove gold from Paris and
the banks have been duly warned with respect to securities, etc.
Feis asked me to bring this matter to the attention of Secretary Morgenthau,
and he said he would, in turn, speak again to Secretary Hull in the premises.
BMR
STRICTLY CONFIDENTIAL
179
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 25, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Knoke told me by telephone yesterday that the Federal Reserve Bank
of New York had paid $260,000 to the Chase Bank for the account of the Italian
Exchange Institute, representing proceeds of gold sales made by the Bank of
Italy.
Mr. Knoke added that the Guaranty Trust had received instructions from
the Italian Exchange Institute during the last few days to sell French francs
and sterling. The Chase Bank was also carrying out orders from Italy to sell
francs on this market. Hungary was selling both sterling and francs here.
Xr. Knoke stated that the Federal Reserve Bank had received a cable from the
National Bank of Rumania to credit $1,113,000 to the Bank of Italy, for the ac-
count of the Italian Exchange Institute. The Bank of Italy has, in turn, asked
that the sun be paid to the Chase Bank.
Mr. Knoke referred to B. conversation which he had had with the Bank of
England, quoting Bolton as saying that they were prepared to be bombed, but
that they thought this would not transpire.
A.M.S.
Regraded Uclassified
TREASURY DEPARTMENT
380
INTER-OFFICE COMMUNICATION
DATE May 25. 1940.
TO
Secretary Morgenthau
FROM
Mr. Cochran
Mr. Leroy-Beaulieu, Financial Attache of the French Embasay, telephoned
me this morning from New York. He referred to the plan for creating one or
two corporations in this country to own powder plants for the Allies. He
asked the specific question as to whether the State Department would have any
objection to him, Leroy-Beaulieu, sitting on this Board as a representative of
the French Government, notwithstanding the fact that he is an accredited
French Financial Attache and enjoye diplomatic status. I told Leroy-Beaulieu
that I would take this matter up at once with the State Department and give
him a quick reply, since he considered the question urgent. He told me that
he thought Mr. Purvis had already let the State Department know, most likely
through the Treasury Department of the general plan for establishing one or
two corporations for the above mentioned purposes.
After clearing with Phil Young, I telephoned Mr. Moffat in the Department
of State andposed the question.
At 12:15 Mr. Stanley Woodward, Assistant Chief of the Protocol Division
of the Department of State, telephoned me in regard to this matter, which had
been referred to him by Mr. Moffat. Mr. Woodward stated that he had consulted
several officers, and the general opinion was that there would be no objection
to Mr. Leroy-Beaulieu serving as 8. director. It was requested, however, that
this question be submitted in writing through the French Embassy to the
Department of State. for a formal decision,
At 12:25 I endeavored to reach Mr. Leroy-Beaulieu by telephone in New York,
but he had left his office. I left word for him to telephone me on Monday
morning.
H.M.S.
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
ECI
INTER-OFFICE COMMUNICATION
DATE May 25. 1940.
TO
Secretary Morgenthau
FROM
Mr. Cochran
Mr. Pinsent, the Financial Counselor of the British Embasay, told me this
morning by telephone that he had been talking with his Ambassador in regard to
the situation rising from the fact that their official sales of dollar securities
are at a standstill, as a result of the stock market situation in this country.
Be said this may naturally result in the necessity for increased sales of gold.
Pinsent said the question naturally came to his as to whether there might
be the possibility of borrowing against this dollar securities as collateral
if it might become physically impossible to get gold out of England sufficiently
repidly to meet the need for dollars in this country. He reminded no that con-
tracts for British purchases on this market require cash payment. He was con-
cerned lest this question might possibly become acute after Congress adjourns,
and when it might be difficult for any action to be taken in the absence of
congressional authorization or approval. I told Pinsent that I thought his
question might be just & little far fetched, since I thought the British, under
present circumstances, would take all precautions to ship enough gold out of
their country to & safe place to meet all possible amergencies, and to preserve
this store of wealth against any happenings. Pinsent is not aware as to how
such gold the British have shipped to Canada or how much is now being convoyed
out, He wants to know whether his Embassy should raise the question of borrowing
against securities with the Secretary, or whether this would be inopportune.
B.M.
Regraded Uclassified
TREASURY DEPARTMENT
32
INTER-OFFICE COMMUNICATION
DATE May 25, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
In light trading, sterling advanced from an opening rate of 3.19 to a high
of 3.20-3/8 late in the morning. The closing quotation was 3.19-5/8.
Sales of spot sterling by the six reporting banke totaled L162,000, from
the following sourcest
By commercial concerns
1 16,000
By foreign banks (Europe)
L146,000
Total
L162,000
Purchases of spot sterling amounted to L166,000, as indicated below:
By commercial concerns
L 3,000
By foreign banks (Far East)
L163,000
Total
L166,000
The Guaranty Trust Company reported that it had sold cotton bills totaling
25,000 to the British Control on the basis of the official rate of 4.02-1/2.
Developments in the other important currencies were as follows:
The French fraue improved from .0180-1/2 at the opening to .0181-3/4.
The final quotation was .0181-1/4.
The Swies franc moved off to a. low of .2239 in a very this market.
It subsequently improved to close at .2242.
The Canadian dollar continued to weakon today, touching & new record
low of 22-1/4% discount in the midmorning. The closing discount was
21-7/8%.
The lira and the reichsmark were unchanged all day, closing at .0505
and .4000 respectively.
The year rates received from Shanghai were 4-1/84 and 5-1/24. These
were unchanged from yesterday's quotations.
The discount for the Cuban peso nerrowed further to 9-3/4%. The Mexican
peso vas unchanged at .1672.
There were no gold transactions consumated by us today.
CONFIDENTIAL
183
- 2 -
According to communications forwarded to us today by the State Department,
the following gold shipments are being made:
$ 56,000 from England, shipped by Johnson Matthey, London, to Barclays Bank
D. C. & O., New York.
46,000 from Thailand, shipped by the Litcho Gold Mine Society, South Thailand,
to the Chase National Bank, New York.
$102,000 Total
The above shipments will be sold to the U. S. Assay Office at New York.
The dollar equivalent of the Bombay gold price today was $38.48. representing
an advance of $1.11 over yesterday's price.
The Bombay spot silver quotation rose the equivalent of 11/16# to 45.07#.
R.M.R.
104
ITALIAN STOCK PRICES
(Milan)
Daily*
Weekly
1940
1940
APRIL
MAY
JUNE
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
6
13
20
27
4
IT
18
25
I
8
15
22
PER
PER
PER
PER
CENT
CENT
CENT
CENT
SATURDAY FIGURES
270
270
300
300
260
260
260
280
250
250
240
240
260
260
230
230
240
240
220
220
210
210
220
220
200
200
200
200
190
190
160
180
180
180
SHARES
SHARES
THOUSANDS
THOUSANDS
200
Volume
200
160
160
100
100
o
140
140
0
6
13
20
27
4
11
18
25
1
8
15
22
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
MAY
JUNE
APRIL
1940
1940
*SATURDAY FIGURES PRIOR TO MAY 20.
Office el The Secretary of the Treasury
F0-141-2
Diverse of - and
Regraded Uclassified
185
I
Sunday May 26.1800
2211 THIRTIETH STREET
WASHINGTON, D.C.
Called Roy Blaugh told
luin to get Many filming
10% Ala fo Defense Jay and 100
-10 tring sany to House ad/2,
I
186
May 26, 1940
This is HM, Jr's program on the taxes, when
he had Blough and Tarleau at his house, Sunday night,
May 26th.
collect within year 1940
/
individual
10% increase " on 1939 income Jax Liabilities #90, 100m
10%
" corp Jax
Increase Bur from 500 to >00
50.
" liques from 2,25 1300
50
nerease georline fime 14 to 3
170
$460
2
m need wants to
pt that part of cable
granting Geense Roya 187
engine No ? ! ! !
NAVAL MESSAGE
(NAVY DEPARTMENT)
ALUSNA LONDON 261345CR219
From
ACTIO
OPNAV
Released by
Augum
26 MAY 1940
Date
To
NITE to
TELETYPE
INFORMATION
Write ACE. after address
ROUTINE to
requiring
PRIORITY to
(DO NOT WRITE 474 THIS SPACE)
NOEE: A RECEIPT MAS BEEN SIGNED FOR THIS SECRET DISPATCH BY
WHEN NO LONGER NEEDED IT SHOULD BE RETURNED
TO THE NAVY DEPARTMENT COMMUNICATION OFFICER (ROOM 2623) FOR
DESTRUCTION AND RETURN OF RECEIPT. THIS IS THE ONLY COPY OF THIS
MESSAGE BEING DISTRIBUTED.
TEXT
FOR SECRETARY OF THE TREASURY MORGANTHAU:
EXPECT FORWARD PLANS ON ENGLISH DESTROYER APPROXIMATELY 30 MAY,
AND HAVE BEGUN WORK ON POWOER SITUATION. PLEASE FURNISM SPECIFIC
STAILS ON ANY ADDITIONAL HOLOUPS. NOW WORKING ON OUTSTANDING
BOMBERS: STERLING AND MALIFAX WILL ADVISE TOMORROW OR LATER.
DESIRE TO KNOW YOU If SH PLANS OR NURRICARE AND SPIFIRE
WHICH ARE MUCH DESIRED, AND I WOULD TRY TO GET PLANS WITH THE
ROLLS ON 30TH.
LORD BEAVERSROOM, WHO 8 NOW IN CHARGE OF THE MANUFACTURING of
AD CRAFT, INFORMED ME THAT NE CONS DERS THAT THE UNITED STATES
IS LICENSED TO PROCEED WITH MANUFACTURE OF ROLLS WITHOUT
CHARGE, WHEN THELPLANS AND SPEDIFICATIONS ARE SURPLIED, OK THE
BASIS THAT LICENSE IS TURNED OVER WHEN THE PLANS ARE SUPPLIED.
IT WILL BE ENTIRELY OPTIONAL WITH as, SHOULD ENGLAND BE VICT-
ORIOBS AT CONCLUSION OF WARL TO REMUNERATE THEM IF THEY 80
REQUEST, AND THEN TO ONLY THE EXTENT TO WHICH WE DESIRE.
KENNEDY
DISTRIBUTION:
SEC. OF TREAS
ACTION
MOIEL, DELIVERED BY DEFICER MESSENGER
nication Watch Officer in person. (See
An 76(4), Navy Regulations.)
Regraded Uclassified
FOR PAGES 189, 190, AND 191, SEE BOOK 272, PAGES 12-A AND 98-A
192
PARAPHRASE OF TELEGRAM RECEIVED
London
Dated May 25, 1940
rec'd. 10:38 a. n.
Secretary of State,
Washington.
RUSH
1374, May 25,
PERSONAL AND SECRET FOR SECRETARY MORGENTHAU AND
SECRETARY HULL.
I have just again seen some of the Rolls Royce
personnel and Lord Beaverbrook. The Rolls Royce Company,
with the approval of Prime Minister Churchill, which I
believe will be granted today, is ready to deliver to
me personally on May twenty-seventh all the specifica-
tions and plans of the company. Heavy motor truck will
be filled by them and I wonder if you have any ideas for
forwarding them home. Their importance 1s tremendous,
as I am sure you can well imagine. Do you want anything
else?
They have made, I believe, an enormous concession
and I think we should quickly avail ourselves of it.
Your instructions are awaited.
KENNEDY
193
Sunday, May 26, 1940
7:00 p.m.
(At Secy's House)
Admiral Towers of the U. S. Navy, General Arnold
and Major Lyon of the U. S. Army, and Dr. George Mead
collaborated with me in drafting the following message:
To Ambassador Kennedy
Amembassy, London
I am delighted with the progress made by you.
I am very anxious to obtain the plans for the
Spitfire and Hurricane. These plans should include
complete details and specifications on the armor
guns fire control equipment and the method of leak
proofing for the two planes mentioned above.
I also would like the plans and specifications
for the Frazier-Nash aircraft gun turret including
control mechanism for this turret.
I also would like the plans and specifications
for the magnetic mine detonator as carried on air-
craft.
In addition to this I would like captured
material including the Junkers engine used on the
German Junkers plane JU88 and the DB model 601
German aircraft engine with hydraulic supercharger
and fuel injection.
Regraded Uclassified
194
- 2 -
It is highly important that the plans and
specifications for the Rolls Royce engine and all
other plans and specifications are of the most recent
and proven design.
Please send for Major F. 0. Carroll and Lieut.
Col. Grandison Gardiner and after showing them this
message determine from them whether or not there are
any additional items or information which could be
used by our Navy and Army Air Corps.
Thank you for your invaluable assistance in
this matter.
Kind regards,
H.M.Jr.
Regraded Uclassified
Prepared Sunday 5/26 140
195
Tentative revenue estimates under the
proposed Special National Defense Tax provisions
: Estimated additional revenue
: which will be received:
: in the period :during the full
Source
: July 1, 1940 : fiscal year
:
through
: 1941 (July 1,
: December 31,
: 1940 through
:
1940
: June 30, 1941)
(millions of dollars)
10 percent super tax on 1939 income tax
liabilities of corporations 1/
117
117
10 percent super tax on 1939 income tax
liabilities of individuals
91
91
Distilled liquors (rate increase from
$2.25 to $2.75 per gallon, with floor
tax) 3/
35
59
Beer (rate increase from $5.00 to $6.50
per barrel) 3/
35
67
Tobacco (rate increase from $3.00 to
$3.25 per 1,000 cigarettes with propor-
tionate increases on other tobacco
products) 3/
20
41
Gasoline (rate increase from 16 to 36
per gallon) 3/
197
398
Total
495
773
Treasury Department,
May 26, 1940.
Division of Research and Statistics.
1/ The super tax is to be imposed on income tax liabilities for the
first taxable year beginning after December 31, 1938, and is to
be payable during the calendar year 1940, the exact date yet to
be determined.
2/ The super tax on individuals shall not exceed 10 percent of net
income remaining after deducting the existing Federal income tax.
3/ The proposed increased rates are to be effective for one year
beginning at July 1, 1940. It is anticipated that by December 31,
1940 six months collections of the liquor, beer and tobacco taxes,
and five months collections of the gasoline taxes, will have been
received at the increased tax rates.
136
ESTIMATE OF PUBLIC DEBT POSITION OH VARIOUS DATES
(In millions of dollars)
Estimated balance of borrowing authorisation 1/
June 30,
December 1,
January 1,
February 1,
1940
March 1,
1940
June 30,
1941
1941
1941
1941
1. Budget estimate (revised by
Treasury based upon deficit of
$2,550M) excluding $700M recap-
ture from credit agencies and
excluding additional taxes of $460M
1,700
290
235
15
- 295
- 810
Estimated working balance
950
1,195
1,075
880
840
735
2. Budget estimates as under No. 1 above
and adding $750M additional expendi-
tures for national defense and $300M
for relief
1,700
290
235
15
- 295
- 810
Estimated working balance
950
960
770
490
365
- 315
3. Budget estimates as under No. 1 above,
including $700M recapture from credit
agencies but excluding additional
taxes
1,700
290
235
15
- 295
- 810
Estimated working balance
950
1,895
1,775
1,580
1,540
1,435
4. Budget estimates as under No. 1 above,
and including $700M recapture from
credit agencies and adding additional
expenditures of $750M for national
defense and $300M for relief
1,700
290
235
15
- 295
- 510
Estimated working balance
950
1,660
1,470
1,190
1,065
385
Note: Assumes credit agencies will finance their own requirements in 1941 and not draw on Treasury working balance
Assumes $500M new money borrowed in September, 1940.
Regraded Uclassified
197
RDS
GRAY
Calcutta
Dated May 26, 1940
Rec'd 10:24 a.m.
Secretary of State
Washington.
May 26, 11 a.m.
Referring to Department's telegram of May 24, 4 a.m.:
and May 25, 12 noon.
List of restricted goods includes those covered
under the following item numbers of the Indian customs
tariff: 5 (2) 8 17 17 (2) 17 (3) 20 22 (2) 24 24 (1)
24 (2) 25 (7) 28 (14) 29 (1) 30 (7) 32 32 (1) 32 (2)
36 (2) 38 39 (1) 40 (2) 42 46 (3) 48 48 (4) 50 (7) 55
56 56 (1) 58 59 (2) 59 (3) 59 (4) 59 (5) 60 (3) 61 (1)
61 (4) 61 (8) 61 (9) 61 (10) 63 (29) 71 (3) 73 (4)
75 (1) 75 (3) 75 (5) 78 80 (1) 80 (2) 81 82 (1) 84 85 (1).
List also includes the following: canned or bottled
fruit, proprietary and patent medicines, stationery as
defined in tariff, lace embroidery apparel, haberdashery,
millinery and drapery not otherwise specified in tariff,
tiles other than glass, earthenware, porcelain tiles,
sheet and plate glass, tableware, unset pearls, gold
plate and gold manufactures all sorts not otherwise
specified
198
-2- May 26, 11 a.m., from Calcutta.
specified in tariff, domestic hardware and stoves, motor
vans and motor lorries imported complete, talking machines
and parts theref and records for talking machines and
buttons other than metal.
GROTH
WSB
TWT -
is = OR 12:00 5 sur 20 10, 20
YEAR
3
199
May 27, 1940
11:42 a.m.
H.M.Jr:
Hello.
Operator:
Ready with General Wood.
H.M.Jr:
Thank you.
Operator:
Go ahead.
H.M.Jr:
Hello.
Gen. Robert
E. Wood:
Hello, Mr. Morgenthau.
H.M.Jr:
How are you?
W:
Fine, thank you.
H.M.Jr:
General Wood, I'm calling up about Edward
Brooks and I want to know whether I can
borrow him.
W:
Say, Mr. Morgenthau, he couldn't -- you know
I'd do anything I could in this emergency
but he's a new officer, he's just on his job
and he's just a fellow I can't replace at the
present time.
H.M.Jr:
Oh.
W:
Now, Don could come down for awhile.
H.M.Jr:
Don who?
W:
Don Nelson.
H.M.Jr:
Could he? Could he come down?
W:
I think he could come down for awhile.
H.M.Jr:
What do you call awhile?
W:
Well, how long do you want?
H.M.Jr:
(Laughs) I don't know. I'd like to leave it
open ended.
!
- 2 -
200
W:
Well, if you want me to, I'll talk to him
tonight, as far as the firm 18 concerned.
H.M.Jr:
Would you do that?
W:
I think we could arrange it.
H.M.Jr:
I'll have to plead a little ignorant. I know
about Mr. Nelson, but I don't know just what
end of the business he's been doing for you.
W:
Well, he's been on the Advisory Council. He
was the man, you know, the President wanted
to get as National Wage and Hour Administrator.
H.M.Jr:
Oh, yes.
W:
He's the one man that capital and labor could
agree on.
H.M.Jr:
I see.
W:
He's -- he was also down there with
Williams on the N.I.R.A. and acted as
receiver for the N.I.R.A.
H.M.Jr:
Oh, yes.
W:
He's also a chemist. He's our Executive
Vice President and, well, any one of your
associates in the Government could tell you
all about him.
H.M.Jr:
Good.
W:
Hopkins, the President, or any of them.
H.M.Jr:
I see.
W:
He is a very top notch man.
H.M.Jr:
I wanted somebody -- the reason that I happened
to strike on Brooks was I wanted somebody a
little bit with the engineering background.
W:
Well, Nelson has got a scientific education.
H.M.Jr:
He has.
201
- 3 -
W:
He started in our laboratory.
H.M.Jr:
I see.
W:
Originally.
H.M.Jr:
I see.
W:
So he has got a scientific background.
H.M.Jr:
Well, I know he enjoys a very fine reputation
but, if -- let's put it this way -- if he's
willing and your firm being willing, do you
suppose he could be here Wednesday morning
to see me?
W:
Well, I'll ask him and phone you back.
H.M.Jr:
Pardon?
W:
I say I'll ask if he's in the building and I'll
get hold of him and phone you back this after-
noon or wire you back.
H.M.Jr:
Will you wire me?
W:
Yeah, I'll wire you.
H.M.Jr:
And -- but the other man 1s out of the
question.
W:
The other man is out of the question at the
present time.
H.M.Jr :
All right, well then if Nelson 18 interested
and you see the thought is this -- a good
part of his time will be contacting the
Allied Purchasing Board and assisting them
in their contact with the Army and Navy and
other with other manufacturers. Well, now do
you think
W:
no better man that you could get than
Nelson.
H.M.Jr:
No better man.
W.
And if he wouldn't serve, personally, I would
lead those things up. I would put it, the firm
can spare you if you're willing to go.
Regraded Uclassified
202
- 4 -
H.M.Jr:
Right.
W:
But if he isn't willing to serve himself --
there is no man that has a wider knowledge
of American industry than Don Nelson.
H.M.Jr:
Well, that's what I need, a knowledge of
American industry.
W:
......
and who could recommend to you a man
if he couldn't do it himself.
H.M.Jr:
You see how he feels
------
W:
......
I'll see him this after -- this noon
and wire you this afternoon.
H.M.Jr:
He sounds good.
W:
All right.
H.M.Jr:
Thank you.
W:
You're welcome.
203
May 27, 1940
3:40 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Hinckley.
H.M.Jr:
Hello.
Robert
Hinckley:
Hello.
H.M.Jr:
Hello, Bob?
H:
Yes, sir.
H.M.Jr:
I got your message about Colonel Gorrell.
H:
Yes, sir.
H.M.Jr:
I haven't seen him since he was in here with
you and I will not see him again.
H:
Yes. Well, now, the thing that concerned me, some
of the boys notified me that he was planning to
take the Administration apart in a speech that
he would make here Wednesday at this Aviation
Forum on our Administration's policy on aviation.
See.
H.M.Jr:
I see.
H:
And I don't think that we have to do business
with that kind of people.
H.M.Jr:
I know we don't. There are & lot of people
around crazy to help.
H:
Yeah. that's correct.
H.M.Jr:
So
H:
Well, I Just wanted you to know everything that
I knew
H.M.Jr:
Well, I asked you your advice.
H:
That's right.
H.M.Jr:
He was recommended to me by General Marshall.
Regraded Uclassified
204
- 2 -
H:
Yeah. Yeah.
H.M.Jr:
So ......
H:
Well, I got that story and I thought you should
have it.
H.M.Jr:
I thank you and we will not use him.
H:
Fine. How are you feeling?
H.M.Jr:
Oh, I'm all right.
H:
Are you getting better or worse?
H.M.Jr:
Am I getting better?
H:
Yeah. (Laughs)
H.M.Jr:
I'm getting better.
H:
That's fine.
H.M.Jr:
I get better as the times get worse.
H:
All right.
H.M.Jr:
Thank you.
H:
More power.
H.M.Jr:
Thank you.
H:
Good-bye.
205
May 27, 1940
4:04 p.m.
John
Sullivan:
Hello, Mr. Secretary.
H.M.Jr:
Who do I look to on a question of contracts
with Pratt, Whitney and Curtiss? You or
Foley?
S:
I can take of it now that I'm here, sir.
I'm working with Chuck Kades, who is Foley's
fellow, of course.
H.M.Jr:
Well, let's be -- think it over. Let's be
honest with each other, with this other thing
coming along.
S:
I think it would be well to let Chuck handle
it. He has it very well in hand.
H.M.Jr:
Well, then, I mean, if it's Chuck, then I'd
better talk with Foley, hadn't I, John.
S:
I think 80.
H.M.Jr:
Because, evidently -- is that a hundred percent
agreeable?
S:
It is entirely, sir.
H.M.Jr:
A hundred.
S:
Entirely.
H.M.Jr:
Now if it isn't, say BO.
S:
No, sir. I'm perfectly agreeable.
H.M.Jr:
I think this other thing coming now --it's
going to be a full-time job and I want you on
that, and I'm going to hold you on that.
S:
Yes, sir.
H.M.Jr:
Well, then, I think that if something should
come up that Mead wants to talk to somebody,
I'll tell him to talk to Foley.
S:
Yes, I -- that's strictly a legal Job.
206
- 2 -
H.M.Jr:
All right. Well, then if that's agreeable to
you I'll
......
S:
It 18 entirely. Now am I going to have a
chance to see you for a minute this afternoon?
H.M.Jr:
Ah, yeah. Tell McKay and I'll remember it
myself, but tell Mac will you.
S:
Thank you, sir.
H.M.Jr:
Right.
207
May 27, 1940.
4:10 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Hoover.
H.M.Jr:
Hello.
J. Edgar
Hoover:
Hello, Mr. Secretary.
H.M.Jr:
How are you?
H:
Fine -- hope you are the same.
H.M.Jr:
I'm all right. Mr. Hoover, here may be
another wild one, but I want you to look
into it.
H:
Be glad to.
H.M.Jr:
The whole program of the United States Army
for pursuit ships 18 built around the
Allison Engine.
H:
Yes.
H.M.Jr:
I mean, everything 18 dependent on the
Allison Engine.
H:
Yes.
H.M.Jr:
We're having all kinds of trouble out there.
H:
That's at Indianapolis.
H.M.Jr:
Yeah.
H:
Yes.
H.M.Jr:
And I'd like you to look into the thing.
The top fellow's name 18 Evans.
H:
Evans.
H.M.Jr :
And the next highest name is Kreuser.
H:
Kreuser?
208
- 2 -
H.M.Jr:
K-r-e-u-s-e-r.
H:
K-r-u-s-e-r.
H.M.Jr:
And then the chief engineer, Hazen.
H:
Hazen.
H.M.Jr:
H-a-z-e-n.
H:
Yes.
H.M.Jr:
Now there is something wrong out there.
H:
Yes.
H.M.Jr:
Ah -- as of the moment, we've had to stop
everything.
H:
I see.
H.M.Jr:
And the engine looks as though it is a flop
and our whole pursuit program 18 around that
one engine.
E:
I see. Well now that fits in, Mr. Secretary,
with information that we'd had. We didn't
have these names that you had, but we've had
information that conditions out there were
very bad. So much so that we were planning
to put in there this week an undercover agent
from our Bureau to work in the factory.
H.M.Jr:
Well, haven't you got anybody there?
H:
We've -- we've made the plant survey, but we
haven't had one inside that particular factory.
H.M.Jr:
Well, this thing -- there's nothing -- I can't
stress the importance too great that after all
if this engine 18 a flop, we have no pursuit
ships.
H:
I understand. Yes.
H.M.Jr:
And these are the three top men in the order
in which I've given them to you. Now this
isn't a question of workmen.
H:
Yes.
Regraded Uclassified
209
- 3 -
R.M.Jr:
Now Evans for twelve years was the general
manager of the
Works in Germany.
H:
Yes. Yes, that's very significant.
H.M.Jr:
Eleven years. Now he lived there for eleven
years in charge of
Works and he may have
become inculcated with some of this Nazism.
H:
That's entirely possible. Yes.
H.M.Jr:
And ......
H:
We'll check all three of those men very
thoroughly right away.
H.M.Jr:
Will you? It may be nothing, but the condition
with this engine and the whole Air Corps'
pursuit ship program tied up, I'm terribly
worried.
H:
Well, I'll have that started right away and
we'll also get somebody into that factory right
away also.
H.M.Jr :
Thanks a lot.
H:
We'll work from both ends.
H.M.Jr:
Well, I'd get several men in there.
H:
Yes, we will.
H.M.Jr:
Fine. Thank you.
H:
Thank you very much. Good-bye.
210
May 27, 1940
4:57 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Welles.
H.M.Jr:
Hello.
Sumner
Welles:
Hello, Henry.
H.M.Jr:
Yes, Summer.
W:
Henry, the Norwegian Minister came in this
afternoon with Berht Balchen.
H.M.Jr:
Who?
W:
Berht Balchen, the flier, you know, who's gone
down to the Anarotic with
H.M.Jr:
Oh, yes, I remember.
W:
.......
Dick Byrd, and this is what he wanted
to take up. He had been referred to me by
Captain Collins -- messages that the Norwegian
Government has asked to purchase, if possible,
from 75 to 100 used pursuit planes from the
American Army or Navy. The planes may be of
somewhat older type, for instance, the
Curtiss P-36. They must be fully equipped
with arms and accessories. Such types of
planes as mentioned will well serve Norwegian
purposes even if in the United States they are
considered old models. Payment will be made
in cash on delivery. It 18 of the utmost
importance for the defense of Norway to get
these planes with the least possible delay.
I called the Minister's attention to the
Neutrality Act and to our neutral position
under International Law. He said that he had
been given to understand that in certain cases
these planes could be turned back to the
factories and exchanged for newer planes and
that then the factories could sell directly.
I told him that he was asking me questions that
I couldn't possibly answer
H.M.Jr:
Well, I can.
Regraded Uclassified
- 2 -
211
W:
......
and I tried to get in touch with you
but you were tied up.
H.M.Jr:
Well, I can -- we went through exactly the
same thing for the Allies. I put the thing
up to General Marshall and he gave me a
formal memorandum on these very same P-36's
saying why he couldn't do it
W:
I see.
H.M.Jr:
......
that the Army cannot spare a single
plane they now have and the President 1s
satisfied that they also cannot spare anything.
Now this 18 practically the same proposition
that we had from the French. General Marshall
gave me a formal memorandum turning them down.
W:
Yes.
H.M.Jr:
The Army cannot spare a single plane at this
time because we need it for our own pilot-
training program.
W:
Exactly. Well, I don't see any reason for you
to take your time to see the Minister. I'll Just
give him your message.
H.M.Jr:
Well, you can tell him that
W:
Yes.
H.M.Jr :
there's no use my seeing him because
that's the situation. Marshall and I went over
it and spent a long time on it. He gave it
very careful consideration and then turned it
down.
W:
Yes.
H.M.Jr:
It's desperate, but we haven't got
We have nothing on hand now that we can give
them in the way of planes and we can't give
up any of the orders that we have on hand.
W:
Uh-huh.
- 3 -
212
H.M.Jr:
Ah -- because we've got BO few orders on the
books and for your own very, very confidential
information, all of our pursuit planes are
built around the Allison engine. I had my own
engineers out there Saturday and we have
grave doubts as to the success of the Allison
engine.
V:
Really.
H.M.Jr:
As a matter of fact, for the moment, they've
sent the engines back to Dayton Field for new
tests, and until we hear what those tests are
-- ah -- they've Just had to stop.
W:
Yes, exactly.
H.M.Jr:
And the situation, Sumner, as to our own
plane situation -- it's just desperate, and
I'm working day and night trying to find B.
solution for it.
W:
Yes.
H.M.Jr:
But if there's anything that I can do, I mean,
for the Norwegians or the Allies, I'd give
my undershirt.
W:
Naturally.
H.M.Jr:
Our own plane situation to you I'm saying
it's just desperate. Of course, I've got
some very, very capable people who are advising
and are recognized in the industry as the
outstanding people, and we're just working
day and night with the Army and Navy and with
the whole industry trying to get the solution.
W:
Yes.
H.M.Jr:
So that ......
W:
Well, that's very clear. I'll take care of
this for you.
H.M.Jr:
Now the other thing, that message you gave me,
I saw General Marshall Sunday and gave him the
message about these -- ammunition and the 75's.
He said he could sell them the ammunition but
- 4 -
213
he had not yet got a solution on selling
them the guns.
W:
I see.
H.M.Jr:
I just got a message from him an hour ago
saying that he had not yet had a solution
but he hoped to have something in the morning.
W:
Good. Well, maybe that will do some good.
H.M.Jr:
But you know where my sympathies are, but
......
W:
Why, of course.
H.M.Jr:
......
but everybody will all have the same
idea that we're all about five years late.
W:
You bet. All right, Henry. Thanks a lot.
H.M.Jr:
Thank you.
W:
Good-bye.
Received 4. P.M. may 27
Hm2
THE UNDER SECRETARY OF STATE
214
WASHINGTON
May 27, 1940
Personal and
Read
Strictly Confi dential
Dear Henry:
In accordance with our telephone conver-
sation of the other day, I am sending you here-
with a telegram just received from Bullitt. I
shall appreciate it if you will let me know what
reply to make.
Believe me
Yours A very sincerely
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
215
RDS
This telegram must be
Paris
clossly paraphrased be-
fore being communicated
to anyone. (D)
Dated May 27, 1940
Rec'd 1:40 p.m.
Secretary of State,
Washington.
RUSH
894, May 27, noon (SECTION ONE)
PERSONAL AND SECRET FOR THE PRESIDENT AND THE
SECRETARY OF THE TREASURY.
Laurent-Eynac Minister of Air asked to call on me
urgently this morning and when I received him made B
formal request which he wrote with his own hand at my
desk in the following terms.
OnE. An order for 200 Curtiss pursuit plants
P-40-S is now being delivered to the American army. Is
it possible to obtain all or a part of this order for
France?
Two. 144 Vultet plants are bEing manufactured in
the United States on order of the Swedish Government.
Could the American Government either by diplomatic action
or by Exercising its right of priority obtain the trans-
fer of these plants to France?
Three. Many Pratt and Whitney, and Curtiss Vright
motors as well as 150 Glenn Martin and 200 Douglas plants
BIE being manufactured for the American ermy. Can all or
a part of these be obtained for Frence?
DDM:RR
BULLITT
Regraded Uclassified
216
RDS
This telagram must bE
Paris
closely paraphrased be-
fore being communicated
Dated May 27, 1940
to anyone. (D)
Rec'd 1:20 p.m.
Secretary of State,
Washington.
RUSH
894, May 27, noon (SECTION TVO)
The Minister pleaded with me in moving terms to
obtain favorable answers to these requests. HE described
the fighting at the front where the superiority in numbers
of the Garman air force is proving the decisive factor.
In conclusion he praised in the highest terms the
work of Colonel Jacquin and the French air mission in
the United States and added that the Baron de la Grange
had requested him for some sort of authority over this
mission but that hE had flatly refused. HE added that
de la Grange had not only no authority over the mission
but no authority to conduct nagotiations on behalf of
the Franch Minister for Air or the French Government.
The Minister for Air asked me to obtain the most
rapid possible answer to his requests and I promised to
attempt to do SO. (END OF NESSAGE)
BULLITT
DDM:RR
Regraded Uclassified
217
PARAPHRASE OF TELEGRAM RECEIVED
Paris
Dated May 27, 1940
Rec'd 1:40 p.m.
Secretary of State,
Washington.
RUSH
894, May 27.
SECRET AND PERSONAL FOR THE SECRETARY OF THE
TREASURY AND THE PRESIDENT.
When I received the Minister of Air, Mr. Laurent-
Eynac, this morning at his urgent request, he wrote me
the following formal questions sitting at my desk:
First. Is it at all possible for France to obtain
all or any part of the order for 200 P-40-8 pursuit
planes (Curtiss) now on delivery to the Army of the
United States?
Second. On order by the Swedish Government the
United States is manufacturing 144 Vultee planes. Could
these planes be transferred to the French by the United
States Government either through the exercising of its
right of priority or by diplomacy.
Third. Can all or a portion of the following planes
under manufacture for the American Army be obtained for
the
218
-2-
the French: 200 Douglas and 150 Glenn Martin planes,
as well as the many Curtise Wright and Pratt and Whitney
engines.
With very moving words Laurent-Eynac implored me
to obtain favorable replies. He outlined the war situa-
tion, in which the greater numbers of German planes are
proving to be decisive.
He was most complimentary, in concluding, about
Colonel Jacquin's work, together with that of the French
Air Mission. Baron de la Grange had asked for authority
over the Mission but the request was turned down flatly
and he added that this gentleman had no authority what-
soever over the Mission or to negotiate in any way for
the Minister for Air or Government of France.
In accordance with his request I assured him I
would endeavor to obtain the most urgent possible reply
to the above.
BULLITT
Regraded Uclassified
219
I
may 27,1940
THE WHITE HOUSE
WASHINGTON
Purincalled me
at 7.00 P.M.
May 27,1940
to say Canada -
manted 2000
1330 H.P. Jacob
lugines.
220
House
TREASURY DEPARTMENT
WASHINGTON
May 27, 1940.
MEMORANDUM FOR THE SECRETARY:
There will be shipped on the Norwegian Steamship GRAN,
due to sail from New York May 29th, 15,557 pigs of aluminum to
Marseilles, France.
On the Greek Steamship NIKOLINA MATEOVIC, which sailed
from New York on May 23rd, there were 178 drums and 880 barrels
of molybdenum concentrates for Marseilles, France.
Danil thanis
Regraded Uclassified
221
May 27, 1940
Dear General Vatson:
On May 22, 1940, Dr. Deorge J. Mend vas
appointed Assistant to the Secretary to take charge
of the procurement of aircraft and aircraft engines,
Ae Dr. Head's work will require traveling on
short notice and on matters where time any be an
important factor, vill you secure an order from the
Var Department stating that Dr, Head, and any nosis-
tants accompanying him, may use United States Army
planes where necessary to cerry out his duties.
Sincerely,
(Sagned) H. Morgenthan, Jr.
General Edwin M. Vatson,
Secretary to the President,
The White House.
By Messeager 10 45am 45
PY:WJ
File to Mr. Thompson
Regraded Uclassified
222
RE MACHINE TOOLS
May 27, 1940
10:30 a.m.
Present:
Mr. Young
Captain Almy
Mr. Lind
Major Soderholm
Mr. Warhus
Commander Henning
Colonel Rutherford
Mr. Burt
Mr. Stillwell
Mr. Dunbar
Mr. MacLeod
Mr. Lovely
Mr. Berner
Mr. Schwarz
Rutherford: I have this statement for you, Mr. Secretary,
from the Army-Navy Munitions Board on the
machine tool requirements.
H.M.Jr:
This is by the Machine Tool Committee of the
Army and Navy Munitions Board. You have the
estimated output per men on the machinery
tool manufacturing industry and the War Depart-
ment purchases of machine tools, 13] million
dollars. This is new, I take it, under B.
Rutherford: No, sir, it has been running for the past year
but this - we expect to get an additional
appropriation and part of it will go for addi-
tional machine tools.
H.M.Jr:
The two together come to 721 million, is that
right?
Rutherford: Yes, sir. That 1s based on an appropriation we
expect to get this year, Army and Navy, and we
endeavored on the second page to break it down
into classes. We were unable to break it down
by companies. We broke it down by classes on
the second page.
H.M.Jr:
Did you give Mr. Lind a copy of this? Do you
have an extra copy for Mr. Lind?
Rutherford: Yes. That 1a the data. Of course, that second
page is simply the breakdown of the first page.
On the third page we endeavored to make an
estimate from rather uncertain data as to what
Regraded Uclassified
223
- 2 -
would be needed in expanding the aircraft
industry.
H.M.Jr:
And that 1s for 130 million?
?utherford: Yes, sir. Most of the data came from the
plans the Army and Navy Munitions Board had
been making with the aircraft industry for
many years and we just expanded it, based on
this 50,000 units, and arrived at that --
3.2.Jr:
Well, that is just what I asked for, with one
exception. It doesn't give it to me by com-
panies.
Rutherford: No, sir. We have been unable to get that by
companies. We don't know the companies our-
selves, sir. The business would probably be
placed on EL competitive basis, certainly to
some extent, and we don't know what companies
would get the business. Then much would de-
pend upon the capacity of the various companies
to produce. The whole problem is one of adjust-
ment that we had hoped that the coordinating
committee we were speaking about under the
President would be able to assist us on in
solving priority problems and the detail that
will have to be solved as this program 1s put
into effect.
H.M.Jr:
Mr. Lind, do you see what I am trying to do?
I want to give the machine tool people some
1dea of what we want of them. We have seen
the airplane people and we didn't see them.
Could we give them some idea of what the
Government's program and demands would be on
the industry? I have asked these gentlemen
to prepare this and they have prepared this
excellent memorandum. Over in Commerce - what
contribution do you think Commerce could make,
your department, in assisting us on this?
Lind:
Right now?
H.M.Jr:
Right now. Do you mind? I mean, telling me
just what you do over in Commerce. There is
Regraded Uclassified
224
- 3 -
a division of machinery, 1s that what you call
it?
Lind:
Yes, sir.
H.M.Jr:
Just what do you do over at Commerce? Is it
all export or is it domestic?
Lind:
The main part of it is export. We keep very
close track on the monthly exports of machine
tools under about 22 divisions and can tell
after about three and B. half weeks, up to the
end of the month, how many tools of each of
those 22 classes went to any given country and
of course the total.
For example, we now know that in April machine
tool exports were 211 million dollars to all
countries. We can get those by countries now
and by classes. On total production of the in-
dustry, the only really accurate information is
every other year in the biennial census. We
have made very informal estimates of the monthly
production, but in a turbulent time like this
we can't tell whether they have gone awry or
not in the last year.
H.M.Jr:
Well, when it comes - the thing that I am trying
to do for the President is this: When it comes
to, for instance, getting these people to in-
crease their production and so forth and so on,
does Commerce work on that?
Lind:
We probably would be able to help in various
details of it, Mr. Secretary.
H.M.Jr:
Or 18 your thing largely a matter of keeping
track of exports?
Lind:
So far it has been.
H.M.Jr:
Now again, for instance when the Navy wants to
get hold of certain special machine tools that
are going to certain special countries, or the
Army, if we knew a certain kind of tools we
wanted, do you know while they are in the
process or only when they leave the country?
Regraded Uclassified
725
- 4 -
Lind:
Only when they leave.
H.M.Jr:
So you couldn't, for instance, pull out of
your desk a list of machine tools which are
in the process of being manufactured for
Japan or Russia?
Lind:
Not by types, no. We could only, for example,
assume on the basis of past shipments to Japan
or Russia the approximate aggregate value of
machine tool exports in the future. That would
merely be 8 guess that they would continue more
or less in the future as they have in the past.
H.M.Jr:
Then you really get your figures through Customs,
don't you?
Lind:
Yes, sir.
Rutherford: We have had very good contacts with the machine
tool industry in the past, Mr. Secretary, and
have had a great deal of confidential information
of the nature you speak of. We could get it
if we asked them for it. I am certain any one
else in the Government --
H.M.J.:
I think the Navy 1s getting it, aren't you!
Almy:
That 1s true for both the Army and Navy Munitions
Board.
H.M.Jr:
Well, I - my immediate thing I am worrying about
is - I think it is in good hands now - but I am
thinking purely of the question of increased
capacity and I was trying to find out whether
Commerce worked along those lines and I gather
that you don't.
Lind:
Just our estimates.
H.M.Jr:
In other words, it is largely statistical with
you.
Lind:
Yes,
H.M.Jr:
If it isn't - If you feel you could help, I wish
you would tell me. I am doing my homework now
Regraded Uclassified
226
- 5 -
before these men come in.
Lind:
Yes, We have worked pretty closely with the
Army and Navy officers in the past and they
might even admit we have helped them on these
details.
H.M.Jr:
If they are kind and generous enough.
Rutherford: No question about it.
H.M.Jr:
Well, I was just trying to get everybody to-
gether. Now, can somebody tell me what is
the total production in dollars last year for
machine tools so I can get an idea of what
proportion is 200 million dollars? How much
did the industry turn out?
Rutherford: The latest was something like 350 million.
Henning:
That is the present rate.
Rutherford: Present rate.
Henning:
Present estimated rate, 385 million.
Soderholm:
Census reports for 1937 give roughly 260 million
for the dollar value of the industry entirely.
That is from the data we have collected and it
seems to check 80 it falls almost on 8. straight
line in the graph - there are differences of
opinion, but we are taking this at the moment -
and many of the industries that I have talked
to are willing to take it with me. We are
running today at 385 million, sir, annual
dollar volume.
H.M.Jr:
How much?
Soderholm:
385 million.
H.M.Jr:
As against what last year?
Soderholm:
I don't have that, because we didn't have any
Census report. I just took the last one, 1938,
and now this is projected on our graph to try
Regraded Uclassified
227
- 6 -
and evaluate at any one time. I used a
Department of Labor index and from that de-
rived this volume of the industry.
H.M.Jr:
of 385?
Soderholm:
Yes.
H.M.Jr:
What would you make & guess it was last year?
Rutherford: Go back on your curve there. What was it in
'37?
Soderholm:
I would have to have a Department of Labor
employment index in order to do that. That
data I don't have.
Henning:
Don't you think 300 million would be an approxi-
mation?
Soderholm:
It would be around 300 million, yes, sir.
H.M.Jr:
Then 220 on top of that is a hell of an increase,
isn't it?
Rutherford: It means priorities, curtailment of some demands,
possibly embargo on certain exports, which 18
being provided for by legislation if the Presi-
dent wishes to exercise it.
Henning:
We still feel they have a potential capacity
beyond the rate at which they are working now
which would absorb & considerable portion of
these new requirements.
Rutherford: Well, their potential capacity --
Soderholm:
They could go to about 450 or 480 million. My
estimate was 450 and our actual survey totaled
up 488 million.
H.M.Jr:
By doing what?
Soderholm:
By increasing their labor, more fully staffing
their plants. That is existing capacity. But
Regraded Uclassified
228
- 7 -
we mustn't be misled, Mr. Secretary. In some
of the items that are of most moment for muni-
tions manufacturers, they are already at
capacity.
H.M.Jr:
Well, wouldn't this be the thing, would it be
agreeable to you - could I give this to Tell
Berner?
Rutherford: That is quite all right. We have been working
very closely with him and we are glad to let
him have it.
H.M.Jr:
Then would there be any reason why I couldn't
say, "Well, here is confidentially this memo-
randum and what we would like the industry
to do is to come back -" in a week? - "and tell
us what steps they are prepared to take to
meet this program."
Rutherford: Yes, sir. I don't think we ought to give them
a week if we can do it in less time.
H.M.Jr:
All right. The trouble is, I think they are
having a conference Tuesday. Tell them to
come back Friday morning?
Rutherford: Yes, sir, they are having a conference in the
city here. They might set up a committee to
do the job and then get it done in a few hours.
H.M.Jr:
I will ask them. Hell, it sounds good to me
to have a fellow push me and say I am taking
too long. Atta boy!
Rutherford: This is a very critical picture, Mr. Secretary.
Soderholm: They are having their meeting that you referred
to, Mr. Secretary, on Tuesday, but I think
many of these things they planned to discuss
at their meeting.
H.M.Jr:
I think this would be very useful to them, but
I will put it this way: How long, by working
overtime, would it take them to give an answer
to the Government on what they would propose
325
- 8 -
to do to meet this program and what do they
need from the Government in the way of help
and which particular companies and which
particular branches of this are up to
capacity, and 80 forth and so on. That is
the thought that I had in mind. What do
you think of that?
utherford: Yes, sir. We have given them the problem
there. They will have to give us the answer.
And set up & committee, maybe, to work out the
details, but they ought to be able to give us
something in the way of an answer pretty
promptly, I should say.
H.W.Jr:
What GO you think, Captain? Would that be the
way to approach it?
samy:
I think all they will need from us is to know
what our demands are and what our priorities
are, We feel that they have now the immediate
potential capacity to just about meet this
problem. Don't you feel that way?
Soderholm: Yes, they have. Our study, Mr. Secretary, shows -
Just applying the industry to our own needs,
385 million with the possibility of 450 to 480 to
meet our own needs, our own war plans. Their
capacity except in a few lines is ample. They
can supply our own needs faster than our indus-
try has shown itself able to tool it, train
men for it and absorb it, but 1f we must keep
on shipping on the average of 180 million abroad,
that 18 at an angle rate of today, then we must
impose restrictions upon this unusual foreign
demand and it makes a problem, so they come right
back - those I have talked with in the prepare=
tion of this study over here - and say, "But
must we send all this abroad or will not priority
devote some of it to our own needs first?" So
that priority is of prime importance before ve
can decide which ones of these types of machines
the capacity isn't ample or ought to be expanded
for.
By the way, you didn't shoot that officer Priday,
did you?
Regraded Uclassified
230
- 9 -
Soderholm: I wasn't here Friday.
H.M.Jr:
What happened to him?
Rutherford: Major Hauseman was a pinch-hitter.
H.M.Jr:
But you didn't shoot him?
Rutherford: No, sir, he passed that information on and
Major Soderholm was heading it up.
H.M.Jr:
I was just curious. I looked around and suddenly
realized he wasn't here.
Rutherford: Major Soderholm's statement, I think, Mr. Secretary,
emphasizes the need of this coordinating committee
under the President on this particular subject.
H.M.Jr:
Well, for the time being I am it.
Rutherford: Well, there will be many problems on priority
between Allied demands and our own that I am
afraid will come to your desk.
H.M.Jr:
That is all right. For the moment we can take
1t, but just - I have no ambition to be on the
machine tools and I am not very anxious for
that but for the moment he has asked me to do
machine tools, so 1f you gentlemen will cooperate
with me - and I have had this experience with
the machine tool people on this airplane thing
before and on the foreign thing, and I think
that - could Commerce, even if we had the history,
give us which countries the stuff has been going
to for the last 12 months and what they have
been buying? Have you got the breakdown?
Lind:
I have got the total figures, all machine tools,
by the main countries. I could show it to you
right now, Mr. Secretary.
H.M.Jr:
Can I take & look at it? But how many of these
things that the Army and Navy today are needing
are going out of the country?
Lind:
Right here, sir.
Regraded Uclassified
231
- 10 -
H.M.Jr:
This is what, by months?
Lind:
The months for 1940. England and France are
buying very heavily, but those two, Russia
and Japan, are quite heavy, too.
9,8,77:
That doesn't sound like a lot of money. Five
and a half million to England, seven million
to France, three million four to Russia and
two million eight to Japan. Could you look
and see the things that Russia and Japan have
been buying, how many of those things are on
the list which these gentlemen gave me today?
Lind:
A great many of them, Mr. Secretary.
B.E.Jr:
You could take that list and then go back, see,
and over the last 12 months how much of the
stuff they have been getting is on this.
Lind:
I can get it. I couldn't get it from my brief
case right now.
H.R.Jr:
Oh, no, but you can get it fairly soon. And then
furnish it to Philip Young and then he will see
that everybody in this room gets 8. copy of 1t,
Mr. Lind.
Almy:
Is that actually exported or figures on ordera?
Lind:
Exported.
U.M.Jr:
If you give it to Philip Young, he will see that
everybody in this room gets e copy of it. Wouldn't
that be helpful, if he takes this list which I
got this morning and then looks at the Japanese
and the Russian and the Italians, they have been
buying quite a lot, and sees how much over the
past 12 months of the things they have been buying
are the same as the things these gentlemen say
they need?
Soderholm:
I can say offhand that most of it, sir, the over-
whelming portion of it, has been purchased for
munitions and is identical for the type of
machinery which we in turn would call for with
the initiation of this program.
Regraded Uclassified
232
- 11 -
H.M.Jr:
Well, we will just have to do something about
it soon.
Soderholm: That is why I stressed the priority. Take
Kearney and Trecker who have this French con-
tract, have expanded their plant with French
capital. Now, there is evidence that even for
the English and the French there is & propor-
tion - it is hard to put your finger on it -
of machinery bought for stock.
Right off the bat, the question comes up, will
we allow that or will we squeeze that a. little
and got them not to be quite 80 anxious?
H.M.Jr:
We went all through that with them once and
they told us they had stopped.
Soderholm:
I had & specific instance of an American con-
cern whose engineers recommended that B. certain
product could be completed with 34 machines
in the line and were ready to give them a
floor-to-floor guarantee. The British Com-
mission purchased seventy-some, the plea being
that they didn't think they were as efficient
as we and they wanted to be safe.
H.K.Jr:
How long ago was that?
Soderholm:
I got that last week, sir, from one of the
machine tool builders.
H.M.Jr:
That is terrible.
Soderholm:
I would be violating confidence if I told you,
but he showed me the specific order on his
books and he gave me that in answer to my
question to them of why are they buying 80
much machinery when our detailed studies show
that we are not going to need anywhere near
as much, even recognizing the greater magni-
tude of American installed industry.
H.M.Jr:
Y wish you would stay behind and talk a little
bit to Philip Young, because he is my contact
Uclassified
933
- 12 -
with the Allied Purchasing Commission. Would
you do that?
Soderholm:
I will be glad to.
6.M.Jr:
Let me just ask you one thing which I think -
1f we could make B. statement along the follow-
ing lines it would be very reassuring. The
autonobile industry, in fact, Mr. Sloan, called
me up very much disturbed for fear we might
interfere with his tools for his '41 model.
He says he will be through and out of the
woods in B. month, finished. Are we going to
have to interfere with the automobile industry?
Soderholm: No, sir. Our orders cannot be developed in
time and that is not all, sir. Most of the
tools are single-purpose or at least so highly
specialized that they are being made by con-
cerns who will not carry the load for the
standard equipment that is needed for the
munitions game,
H.W.Jr:
Are you in agreement with that, Captain?
Almy:
Pardon me?
S.M.Jr:
Could we give reassurance to the automobile
industry that they could complete their tooling
up for the '41 model, that we would not inter-
fere with that?
Almy:
I don't believe I could say for the Navy Depert-
ment on that.
Well, think it over. I can say at this moment
we don't envisage that we would have to do 90.
Soderholm: Yes.
Henning:
Captain, don't you think If it is only B. month's
time that we could state that we don't antici-
pate any interference in that sort of thing?
Almy:
I don't know how much the airplane engine ie
going to come in and interfore with them, if
at all,
Regraded Uclassified
234
- 13 -
H.M.Jr:
Well, when I was doing machine tools for
Curtiss-Wright and Pratt & Whitney, we found
that the automobile tools, the tools that
went into these airplane engines, were in
very few instances the same.
Soderholm:
Very few conflicts, wasn't that 80?
H.M.Jr:
Very few.
Soderholm:
That is what my study bears out.
H.M.Jr:
Well, I won't say anything - think it over,
gentlemen, but if we could tell that to the
automobile industry, we could assure them -
they have got the jitters, you see.
Rutherford: I think on our side we would be perfectly
willing to tell them that anything they
would require within a month would not inter-
fere with our program. There may be just an
odd and end here and there, but I feel that
our program will not get underway quickly
enough to be helped by depriving them within
one month of their machine tools.
Almy:
I am not sure.
Henning:
Captain, don't you think it would be an advan-
tage to tell them we would let them alone for
that month but quid pro quo they ought not to
contemplate too many models for next year or
too many model changes next year to take up
machine tool capacity?
H.M.Jr:
Sloan said himself, "If you would tell us on
the first of July you don't want us to change
any models next year, we won't do it." He
will go further than you. He said, "If you
will leave us alone now, because we are prac-
tically finished and we have got a 25 million
dollar refueling program, we won't be getting
ready to do that until October or November
next fall for the next year, that 1s when we
start, and if you will tell us along in Septem-
ber that you don't want us to have another
model in 142, we will just lay off and we
won't do a thing about it."
Regraded Uclassified
35
- 14 -
Henning:
Captain, I would urge that. I would even go
so far as to urge the Navy Department to make
their compromise.
Almy:
Well, we are going to need such a quantity
of certain kinds of tools 1f we go into this
airplane engine thing, of air hammers, steam
hammers, milling machines --
H.M.Jr:
Well, think about it.
Soderholm:
Very few of them conflict with that.
Henning:
I think we ought to do it, Captain.
Almy:
I am just saying that I am not prepared to
state on it. I haven't seen their set-up yet.
H.K.Jr:
Well, think about it. I wouldn't say anything.
Henning:
Captain, they couldn't get their projects ready
in that time.
Soderholm: That is not what is meant. They just want to
be left alone for B. month.
Almy:
What they get deliveries on, you mean.
E.M.Jr:
What they have got on order now for & month.
Almy:
That is not very much. We won't interfere with
them.
Henning:
I would like to see them told that, sir.
Almy:
I would be inclined to say yes, but there might
be certain reservations that would be necessary
to be made.
Henning:
Could we say as far as we can see?
Almy:
That 18 all right.
H.M.Jr:
I will put it even less firm. "We will try to
leave you alone."
236
- 15 -
Rutherford: I would rather go a little further than that,
Mr. Secretary, and say that we see every oppor-
tunity of their being able to complete their
programs without interference from us,
Soderholm: You take milling machines, Captain. Ingersoll
will handle most of them. They won't be
loading down Kearney and Trecker or Cincinnati
or Brown and Sharp, because they are not buying
that kind of stuff in order to do fast production.
I don't think you need be concerned at all
about a conflict in a month or month and a
half with the orders they now have on hand.
I think you can be quite firm about the assurance
to them.
Rutherford: This group could set up 8. small committee with
which we could talk down here instead of getting
the whole industry together.
B.M.Jr:
I have limited it to six people this morning.
I told - I said, "Well, in 8. pinch you could
bring seven, but I said to limit it to six
or seven people. I wouldn't go through what
I did again last Monday for a million dollars,
so there shouldn't be more than six or seven.
Chick, see how many there are outside. Then I
will do just that suggestion. They have a com-
mittee that can work with you and then you
gentlemen can come back and report back to me.
Rutherford: A couple that can speak for their industry.
H.M.Jr:
I have gotten along very well with them, you
know.
Soderholm:
We have, too.
H.M.Jr:
I will tell them.
Rutherford: Do you wish us to stay here?
H.M.Jr:
Definitely. I need you badly.
(Mr. Dunbar, Mr. Lovely, Mr. Berner, Mr. Burt,
Mr. Stillwell, Mr. McLeod enter the conference)
Regraded Uclassified
237
- 16 -
H.M.Jr:
Well, you all look very prosperous. Gentlemen,
when we met once before in connection with
aviation, at that time I told you that if
there would be any program or anything else,
we would have the machine tool industry sit
in at the first table. I think you remember
it. That is, first because we need you and
second because we like you.
I asked, in preparation for this meeting, the
Army and Navy Munitions Board to prepare a list
of machine tools that the Army and Navy would
require, 8.8 far as they could tell, and this
is rough, for the present program and it totals
$225,000. Now, what we want to ask you gentle-
men is this: We are going to give this to
you. Who is here - who 18 the boss?
Stillwell: I believe Mr. Burt is the boss.
H.M.Jr:
Are you the boss?
Burt:
Thank you, Mr. Secretary.
H.M.Jr:
Now, the thing we want to ask you gentlemen is
this, then you can discuss it or ask us ques=
tions, whether you could have this group today,
maybe, meet with the gentlemen that are here
representing the Army and Navy and Mr. Lind
of the Department of Commerce and tell us how
you are going to go ahead and meet this program.
That boils it right down, see. I have got a.
couple of extra copies here. You understand
we are giving you this in confidence?
Burt:
Quite right.
H.M.Jr:
We trust you gentlemen, so please treat it
confidentially.
Did I give you something to put your teeth into?
Burt:
You are quite right. Mr. Secretary, can you
give us any idea as to when this equipment 1s
going to be required and when it will be
ordered?
238
- 17 -
H.M.Jr:
Well now, after all, we have got to do a
little guessing and let's say that the bill
will pass in a week or ten days. How soon
after that will it start for the Navy?
Almy:
As far as the Navy is concerned, we will place
about - first we are prepared to commandeer
the stuff that 18 on order, ready for delivery
or contracted for delivery to certain foreign
countries and we can place those orders most
any time. Our regular tool program we expect
to place before July 1, probably before June 15,
orders for about six million dollars worth of
equipment. We expect to place our remaining
14 million in this particular program by about
July 15. That will apply both to that same -
that same proportion will apply to the total
Navy program. I am just speaking definitely
for one Navy Yard's needs. That same plan
will apply both to Ordnance and aviation re-
quirements.
Burt:
That includes the Ordnance Department as well
as the Navy, does it?
Almy:
Yes, Our last orders will be placed probably --
Burt:
A total of what? You said six million by
July 1.
Almy:
That is over and above the stuff we commandeer
out of foreign orders.
Burt:
26 million is the total? May I ask B. question
about this commandeering on these foreign
orders? Just how do you intend to handle that?
H.M.Jr:
Would you just pospone it one minute, because
I would like the Army to answer the same question.
Then we will come back to that question.
Rutherford: Mr. Secretary, on page one of the memorandum up
at the top left there, we have E. total of 16
million. The substantial portion of that, 13}
plus the one million, would be placed within
a month or probably at the outside a month and
235
- 18 -
B. half after the appropriations become avail-
able. Now, the remaining part of that program,
the two million, would go 8. little bit slower
and the part of purchases by industry at large
under educational orders and armament orders
would probably lag, well, three or four months,
because we have to place the orders with industry
for the armament first and then industry places
the orders for machine tools to make that arma-
ment.
P.M.Jr:
There is one thing which I don't think - maybe
you have included it. There would be a tremen-
dous demand, after all, for these small air-
plane engines for this training program. Now,
you haven't included that at all, the Civil
Aeronautics one.
Rutherford: No, sir, these are fighting planes.
Gentlemen, on top of this there is going to be
this b18 demand for small planes for these
men and that is not included in that and those
engines are going to have to be built and machine
tools will have to be supplied for that, so
that 1a over and above everything that is in
here. I don't know, they may want ten or twenty
thousand planes to train these boys under this
CAA program. Now, did you (Almy) answer his
question?
Burt:
About the commandeering of these machines that
are on foreign order, we would like you to ex-
plain how that 1s to be handled.
Imy:
There 10 B. law now that has passed the Senate
and 18 before the House. It has been accepted
by the Committee but it has not yet passed. It
reads that the President through the Secretary
of the Navy may purchase without competition
all materials of war. It doesn't say exactly
that word, but that is what it means. It means
machine tools and equipment and materials and
building ships and whatever we have to do, guns
or anything like that, And there is B further
provise stating that such orders shall take
Regraded Uclassified
240
- 19 -
priority over any of this material or equip-
ment for export, which in effect blocks export
and obtains first priority for these orders.
Rutherford: Our legislation is a little bit broader. It
gives the Army priority over any civilian or
domestic order or foreign order. It 1s a little
broader and of course it would depend on how
it is applied, regarding what countries would
be involved in it.
Burt:
Would this eliminate any orders that are now
scheduled for England and France? Does it
apply to just Russia, Japan and Sweden, and
80 forth? I am asking this because we are in
an awkward position here, already having con-
tracts.
H.M.Jr:
The reason I am smiling 1a that Captain Almy
has a wonderful answer. He is absolutely
neutral.
Almy:
I have certain definite orders from the Secretary
of the Navy through the President to commandeer
certain machine tools for two countries and I
proceeded with that. I have actually purchased
the machines that are now ready for shipment or
are on their way, intercepted them. The Presi-
dent has directed that no interference be made
with orders to the Allies. Orders to some other
countries like Sweden and Norway, we haven't
done anything about them yet, but Customs are
cooperating with us and knowing nothing is
leaving the country and when this law passes
we will just take these over.
H.M.Jr:
They even take the food out of the fellow's
mouth. They have a car right alongside the
boat and they just back it right up. These
Navy fellows are tough.
Surt:
Yes, they get them coming and going.
Almy:
One of these tools, just as a matter of interest,
had left Philadelphia, B. large, valuable tool,
and had been shipped some two weeks before and
241
- 20 -
we got word that it was on the dock in South
Brooklyn at the Erie Basin, so we tried to
locate it. We finally found it in the hold
of a foreign ship and I was asked whether we
should get it or not and I said no, that was
a token shipment, but Customs was perfectly
willing to find some reason to haul that out.
I thought it was probably - it is our agreement
with the State Department that all of this work
will be without discrimination, you understand,
so we will make token shipments to certain coun-
tries of stuff we don't want and we will also
grab something from other countries that we
don't want to interfere with and stuff they
don't want, probably. Not very badly, at
least.
H.M.Jr:
I told you he had a good answer.
Burt:
Very good.
Stillwell: May I ask a question, Mr. Secretary? Does the
law provide, Captain, that you can take material
of that kind after it has passed into the owner-
ship of 8 foreign country?
Almy:
Yes. All of these - very fortunately, these
purchasing firms are incorporated under American
laws and although they are acting for foreign
governments, they are actually a U. S. concern,
so we are not disturbed about them.
Berner:
Captain Almy, let me ask you a question. Do
our legal minds concur that you have done that,
that you have no liability, whether it 18 a
contract with a foreign buyer, or is he under
the legal obligation of completing that contract
by again building that machine?
Almy:
I haven't discussed this in detail with them, but
in thinking it over myself and just on general
policy, it seemed better not to consider this
failure to deliver as terminating contract. In
other words, keep up the idea of good will and
say, "We are sorry, gentlemen, we can't deliver
this particular tool, because it is commandeered
by the Government, but if you want to lay down
242
- 21 -
another tool, we will be glad to carry out
this contract." One reason for that is that
most of these orders have been accompanied
with B. substantial advance and the machine
tool builders, as I understand it, are con-
cerned with the good will feature. That
seems to be the best way to take care of that.
However, there is something that looks to me
like it 1s up to them to determine, whether
they want - it 1s probable that Amtorg and
such people want to cancel these contracts
because they will feel it is unfriendly.
Surt:
There is one point you haven't mentioned. I
think it 18 quite important to this industry
in that we have some contracts and many com-
panies in our industry have substantial orders
with penalty clauses for non-delivery. I think
it is going to be rather difficult to cancel
those unless by some mutual agreement.
H.H.Jr:
Well, may I suggest this, please? These gentle-
men are available for further conference today
and I think if you would sit down and talk with
them about some of these things - I am delighted
to find this Army and Navy crowd is pushing me,
so I said something about having an answer and
maybe next week and they said, "What 1s the
matter with this afternoon?" So if you people
are here in town and are available to talk
further with representatives of the Army and
Navy, the Army and Navy 1s available, and these
sort of things - I think you could go into
greater detail and I am available and I would
like to meet with you again when you are ready
to tell me, is the industry ready to meet this
program and this is really - there will be
still more, because the requests which are
beginning to come in from the Allied Purchasing
Commission are going to be something stupendous,
so you fellows have just got to sit down and
come back and say, "Mr. Morgenthau, this, that
or the other thing," and we can be as frank
8.8 we were on the other business. We got along
all right that time, 50 what I would like to
T13
- 22 -
suggest is - where would the Army and Navy
like to continue this meeting? We can give
you B. room right down stairs or would you
like to adjourn to your own offices? We
have got a conference room immediately under
this room here.
Parts
I think that would be 8. good suggestion, that
we 80 right down there. I am not too sure
that we can definitely give you the answer
today on this. %e are holding a meeting of
our members tomorrow, a regularly scheduled
meeting. I assume that we probably would like
to discuss some things with other members.
Would somebody from the industry give me &
telephone call when you are ready to report
back?
Almy:
It doesn't appear to me, Mr. Secretary, that
this is anything they can give an immediate
answer on. I think it is something they will
have to study and have B. further conference
with us or with you to determine just what
their program for meeting this --
surt:
Would it be satisfactory to you, Mr. Secretary,
if we meet again here next Monday, because
this is quite a big program and we would like
to come back with some sort of B. definite thing.
Could you do it Friday?
Purt:
Yes, I think we could arrange it Friday.
Rutherford: We can come over to my office. Me have an
assembly room over there. I expect there may
be some detailed information we will want to
refer to in our files.
M.M.Jr:
When do you want to meet again? That is the
only thing as far 88 I am concerned.
Surt:
I am quite sure that Friday is too short. We
would like to make it Monday. That will give
us over the week-end to get all this --
Regraded Uclassified
244
- 23 -
Rutherford: Can we meet in a preliminary way before that
while the group is still here 80 that we are
clear what we are driving at?
Burt:
We will meet with you for the rest of the
afternoon. Then we would like to get our
members together and line up the whole schedule
and be back here on Monday to meet with the
Secretary, 1f that is satisfactory.
H.M.Jr:
Is 11:00 o'clock a good time?
Burt:
11:00 o'clock Monday morning.
H.M.Jr:
And then if Colonel Rutherford and Captain Almy
could report to me what progress they have made
during the day - you two gentlemen (Almy and
Rutherford) could report to - send me a little
written memorandum tomorrow morning.
Almy:
Yes.
Burt:
This is quite confidential, you mentioned. How
much of this can you give out to our various
members?
H.M.Jr:
These gentlemen of the Army and Navy will have
to answer that.
Almy:
I will speak for the Navy. We have no objection
at all to its release to the offices of any
machine tool firms that may be in it. We would
not like to have it given any publicity.
Burt:
As far as we are concerned, we are not particularly
anxious to have any publicity as far as this
meeting 1s concerned, because we just don't
know what we are going to do and we don't want
to discuss anything. Some fellows were trying
to get some statements from me this morning.
H.M.Jr:
Well, at least you have got something to get
your teeth into. Then I will put it down for
10:30 Monday with the Army and Navy and I will
meet with the machine tool industry at 11:00
and then if you gentlemen could give me a
245
- 24 -
memorandum of what happens during the day, so
I could have that in the morning and if for
some reason something should happen during
the day that you did want to see me, I would
make myself available.
Burt:
Thank you very much, that is fine.
H.M.Jr:
Thank you all for coming down.
246
ARMY AND NAVY MUNITIONS BOARD
MUNITIONS BUILDING
WASHINGTON, D.C.
May 27, 1940.
EMORANDO!! For the Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury.
SUBJeCT: Data for Machine Tool Requirements of the Army
and the Navy.
1. Attached hereto are data requested by you in connec-
tion with the estimated output demand upon the machine tool menu-
facturing industry occasioned by the 1941 appropriations, plus sup-
plemental appropriations, for the War end Navy Departments.
2. An estimate covering the machine tool requirements
and possible distribution arising from expansion of the aviation
industry from its present base is shown on page three.
3. This estimate was prepared by the Machine Tool Com-
mittee of the Army and Navy Munitions Board. Any further informa-
tion will be gladly furnished by this same Committee.
For the Army and Navy Munitions Board:
Marthing,
CHARLES HINES,
Colonel, I. S. Army,
Secretary.
1 Incl.
Regraded Uclassified
247
25 May 1940
ESTIMATE OF OUTPUT DEMAND UPON THE MACHINE TOOL MANUFACTURING INDUSTRY
OCCASIONED BY 1941 - APPROPRIATIONS - PLUS SUPPLEMENTAL APPROPRIATIONS
ARMY
NAVY
(a) War Department Purchases:
Navy Yard & Stations $ 14,000,000
Machine Tools
$ 13,500,000
Ships
1,000,000
Powder (Hyd) Presses
1,000,000
Naval Ordnance Plants
9,000,000
Air Corps Bases
2,000,000
Naval Aviation Bases
2,000,000
Sub Total
$ 16,500,00
(b) Purchases by Industry at large:
Educational Orders
10,000,000
Armament Orders
20,000,000
Sub Total
$ 30,000,000
TOTAL
$46,500,000
TOTAL=....$ 26,000,000
GRAND TOTAL - $72,500,000
+
248
25 May 1940
POSSIBLE DISTRIBUTION BY CLASSES OF MACHINE TOOL DEMANDS ARISING FROM
ARMY and NAVY 1941 APPROPRIATIONS - PLUS SUPPLEMENTAL APPROPRIATIONS
CLASS
ARMY
NAVY
TOTAL
Bending
$ -
$ 670,000
$ 670,000
Boring
1,674,000
2,400,000
4,074,000
Broaching
186,000
8,000
194,000
Cut-off
-
286,000
286,000
Drilling
2,790,000
1,511,000
4,301,000
Filing
-
9,000
9,000
Forging
3,534,000
912,000
4,446,000
Gear Outting
232,000
480,000
712,000
Grinding
5,208,000
1,705,000
6,913,000
Honing
232,000
8,000
240,000
Lapping
-
44,000
44,000
Lathes
15,438,000
9,630,000
25,068,000
Millers
9,114,000
3,535,000
12,649,000
Planers
884,000
2,301,000
3,185,000
Polish & Buff
-
21,000
21,000
Presses Mech.
2,092,000
82,000
2,174,000
Presses Hyd.
2,558,000
144,000
2,702,000
Punching
-
85,000
85,000
Riveting
-
13,000
13,000
Shapers
884,000
954,000
1,838,000
Shears
-
330,000
330,000
Slotters
-
507,000
507,000
Threading
1,674,000
365,000
2,039,000
$ 46,500,000
$ 26,000,000
$ 72,500,000
&
243,
25 May 1940
ESTIMATED MACHINE TOOL REQUIREMENTS AND POSSIBLE DISTRIBUTION ARISING FROM
EXPANSION OF AVIATION INDUSTRY FROM PRESENT BASE (12,000 units per year)
TO 50,000 UNITS PER YEAR
CLASS
TOTAL
CLASS
TOTAL
Bending
$ 1,053,000
Milling
$ 20,033,000
Boring
6,331,000
Planers
299,000
Broaching
390,000
Polish & Buff
208,000
Cut-off
611,000
Prosses, Mech.
1,196,000
Drilling
13,455,000
Presses, Hyd.
3,159,000
Filing
26,000
Punching
104,000
Forging
3,042,000
Riveting
169,000
Gear Cutting
4,875,000
Shapers
1,118,000
Grinding
24,115,000
Shears
1,040,000
Honing
637,000
Slotters
455,000
Lapping
988,000
Threading
4,901,000
Lathes
40,729,000
Electric Welding
1,066,000
TOTAL - $ 130,000,000
SUMMARY
Aircraft Expansion Program
$ 130,000,000
Army Program
46,500,000
Navy Program
26,000,000
GRAND TOTAL $ 202,500,000
E. R. Henning, Commander U. S. Navy
W. H. Soderholm, Major U. S. Army
Machine Tool Committee
ARMY-NAVY MUNITIONS BOARD
-3-
Regraded Uclassified
File 250
WAR DEPARTMENT
OFFICE OF THE ASSISTANT SECRETARY
WASHINGTON, D.C.
May 27, 1940.
MEMORANDUM FOR THE HONORABLE HENRY MORGENTHAU, JR.,
SECRETARY OF THE TREASURY.
The information called for in Memorandum
from the President, dated May 24, 1940, regarding
the program for procurement of aircraft is being
submitted to you by separate memorandum of May 25,
-filed 5/4
1940.
date Pres
Supplementing the foregoing, I as glad
sentitte
to inform you that the necessary contracts are
Home
being prepared and will be ready for my signature
within an hour after funds have become available
and the program has received the coordinating
action contemplated by the President's memorandum.
Louis Johnson,
The Assistant Secretary of War.
Copy to georg Alvad
Regraded Uclassified
Hmf hus not Alle
only copy
ANGLO-FRENCH PURCHASING BOARD
P.I.
NEW YORK:
WASHINGTON:
15 BROAD STREET
725 15th ST., N.W.
251
This letter from
May 27th, 1940
Dear Henry,
1/20/4
C.D. Howe had just arrived in my office
ES you telephoned this afternoon. He had ith him
two or three of his men from the Ministry of Munitions
and Supply (he is also Minister of Transport) having
brought them down to talk over various Canadian problems
with our organisation.
I asked him about the situation in regard
to aircraft ExD and must compliment you on your Intelligence
Service! The information was not cuite accurate but
it was much more accurate than I would have thought
possible. However, it seems that their new programme
of purchase here to which your approval 1s desired
(see attached memorandum) and which had been developed
between 12 noon and 5 p.m. to-day, fits in with the
idea you expressed on the telephone in that it is for
Jacobs 330 h.p. engines and should bulli up the t manu-
facturer's potential considerably.
Mr. Howe is anxious to place the order
tomorrow, Tuesday.
As regards the nitrocellulose powder plant:
the minute the authority came from across the Later
we proceeded along the lines of authorising contractors
(pending completion of contract documents) to maite
such substantial expenditures as may be necessary to
develop the maximum building speed possible. Our people
are in Wilmington this week, endeavouring to button up
the contract terms and details.
Yours sincerely,
Henry Morgenthau, Jr., Esa.,
Secretary of The Treasury,
arthur
Washington, D.C.
Regraded Uclassified
BRITISH PURCHASING COMMISSION
252
MEMORANDUM FROM Mr. J.B. Carswell
Reeds.
Claim
TO
Mr. Arthur B. Purvis
27th May
194 0
Re British Commonwealth Air Training Plan.
As you know, on Saturday a very disturbing
cable arrived from England advising the Canadian Government
that the delivery of Anson planes to Canada - being the
aritish contribution towards this general scheme - would
heye to cease for a period of two months. The Hon. C.D.
Howe is very much afraid that the delay may be even more
serious and consequently action had to be taken at once.
:-:
This morning a meeting was arranged with
Canadian governmental representatives and the British Pur-
chasing Commission in this office, to explore the possible
avenues through which this deficiency could be obviated.
3.
On the telephone we spoke to a great many
sources of aircraft supply and finally it was decided, late
this afternoon, subject to your approval, to purchase some
3,000 engines, type L.6MB from the Jacobs Aircraft Engine
Coupany. These engines are rated at 330h.p., delivery to
be completed December, 1941.
4. will meet one side of our difficulty only. The second
If this arrangement can be carried out it
difficulty will be the shortage of complete aeroplanes
sinilar to the Harvard Trainer type N.A.66. We have slrendy
-labed orders, ES you know, for delivery late next summer
(1941) but the absence of deliveries from England puts us
10 urgent need of 500 Harvard Tr-iners of this type. We
understand from North American Aviation that they are turning
out at the rate of 7 per day these machines for the United
States Government. Would it be possible to ask Washington's
assistance in giving us priority on these machines to the
above extent?
5. six twin-engine flying boats PBY type. These also were to
Canada will now also be in urgent need of
have come from England, We believe these machines could be
made available to Canada with Washington's permission. Your
assistance in this matter will be highly appreciated.
Ligison Officer
Department of Munitions and Supply.
Regraded Uclassified
253
May 27, 1940
My dear General Yount:
Thank you for your letter of May 21st
reporting on deliveries of aireraft and
aircraft engines during the period January 1
to April 30, 1940.
Yours sincerely,
(Signed) E. Morgenthatt. Jr.
General 3. X. Yours,
Brig. General, A. c.,
Asst. Chief of the Air Corps,
War Department.
Regraded Uclassified
254
May 27, 1940
My dear General Younts
Thank you for your letter of May 21st
reporting on deliveries of aircraft and
aircraft engines during the period January 1
to April 30, 1940.
Yours sincerely,
(Signed) R. Meegenthau, Jr.
General 3. K. Yount,
Brig. General, A. C.,
Asst. Chief of the Air Corps,
Yes Department.
Regraded Uclassified
255
May 29, 1940
My dear General Younts
Thank you for your letter of May 21st
reporting on deliveries of airemft and
aireraft engines during the period Jamary 1
to April 30, 1940.
Yours sincerely,
(Segned) E Morgesthau. Jr.
General 3. K. Yours,
Brig. General, 4. c.,
Asst. Chief of the Mr Corps,
Mar Department.
Regraded Uclassified
CONFIDENTIAL
256
originalty Dr Hoae 5/27/40
May 21, 1940.
The Monorable,
The Secretary of the Treasury.
Sir:
In accordance with your verbal request, there is
transmitted hereadth a report of the deliveries of aircraft
and aircraft engines during the period January 1 to April
30, 1940.
Respectfully,
For and in the absence of
The Chief of the Air Corps,
1 Incl.
B.K. Yount, Brig. General, A. C.,
Tabulation
Assistant Chief of the Air Corps.
CONFIDENTIAL
92
CONFIDENTIAL
DELIVERIES OF COMPLETE AIRPLANES
January 1, 1940 to April 30, 1940
Jan,
*
Feb. *
Mar, *
April
Ultary
krey
66
89
79
110
Mary
7
7
23
43
Foreign (exports)
227
162
167
232
17
37
54
27
Total
317
295
323
412
DELIVERIES OF COMPLETE AIRCRAFT ENGINES
January 1, 1940 to April 30, 1940.
Jan. *
Feb. *
Mar.
*
April
Army
196
154
298
190
Envy
43
54
99
46
Persign (exports)
343
312
260
338
Commercial
81
249
443
79
Total
663
769
1100
653
Revised to include factory deliveries of airplanes to the Air Corps
and export clearances of foreign aircraft.
Includes 5 commercial airplanes powered with engines in excess of
200 h.p.
Estimated
Regraded Uclassified
258
May 27, 1940
3:35 p.m.
FOR THE SECRETARY:
General Marshall called and said he was to
give you information on sales of weapons abroad.
He has not found the solution yet but believes he
is on the trail of a method which will solve the
matter and will have the information for you
tomorrow morning.
D.E.M.
Regraded Uclassified
official COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
259
DEPARTMENT OF STATE
WASHINGTON
May 27, 1940.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses one copy of telegram No. 1388 of May 27 from
the American Embassy, London, reporting on certain
difficulties of importers of American machine tools.
Enclosure:
No. 1388 of May 27
from London
22
260
RD3
CRAY
London
Dated May 27, 1940
Rec'd 8:50 a.m;
Secretary of State,
Washington.
1388, May 27, 2 p.m.
American Consul, Birmingham reports that machine
tool importers distributors Birmingham area state they
WERE warned by British Air Ministry that orders for
American machine tools placed after midnight of Sunday
May 26 would not (repeat not) bE filled. Similar reports
current London. Very large orders accordingly placed by
cable but trade fears that serious results for British
industry will follow if in fact no further orders can bE
accepted by American manufccturers. Request cable 2.8 to
whether any Embargo or other. impediment to fulfilling
further British orders placed after May 26.
KENNEDY
KLP
261
May 27, 1940
Major Lyon called at 8:55 a.m. and gave me
the following information which he received from
Chapline:
"Mr. Donald Martin, the Wright Aeronautical
licensee in Canada, initiated the request
through Chapline for the additional training
engines for Canada.
"The Minister of Transportation (Mr. Howe)
with Mr. Duncan, Mr. Sanderson Keil and two
officers of the Canadian Airforce arrived
in New York last evening or early this
morning for the purpose of going into
American production of training engines."
D.E.M.
TREASURY DEPARTMENT
262
INTER OFFICE COMMUNICATION
DATE May 27, 1940
TO
Secretary Morgenthan
FROM
Dr. George J. Mead
The situation at Allison is far from satisfactory. To
begin with, the precise type of engine now on order has not passed
an official Army test. Furthermore, several important features
of the design are still questionable. Finally, production has not
yet really gotten under way.
The reasons for this situation are briefly as follows:
The production order was placed on the showing of a
prototype engine which passed an Army test some three years ago.
This engine, however, had a lower rating and was a sea-level engine.
To facilitate deliveries the Army authorized Allison to proceed
with shipments upon the understanding that the engine still must
pass an official test and that Allison be responsible for correct-
ing defects in all engines shipped prior to the satisfactory com-
pletion of such a test.
The weakness in design comes about through the fact that
Allison has persistently ignored failures on test and at the same
time has not been diligent in carrying through the development of
the engine.
The production situation is due to management without
adequate aviation experience and to the lack of skilled labor ao-
customed to this sort of work. The latter is a perfectly normal
condition in starting up B. new plant,
263
Secretary Morgenthan
-2-
The situation is serious and I have personally discussed
with Allison definite steps that should be taken looking toward
correcting the engineering difficulties. I propose forthwith to
discuss these steps with Brigadier General G. H. Brett of the
Air Corps of the Army. Meanwhile, I an working on other angles of
the problem which I will wish to discuss with you shortly. I think
it is essential that all these matters be cleared through the Air
Corps and that that organization be the agency for administering
this whole project. I strongly recommend that no publicity be
given the matter at the present time, nor that you become unduly
concerned regarding it.
mean
264
May 27, 1940.
8:37 a.m.
H.M.Jr:
Hello.
Operator.
Mr. Secretary, I'm afraid I can't locate
Mr. Lessing Rosenwald. Can you tell me with
what department he is up there?
H.M.Jr:
Hello. Well call up Sears Roebuck there.
He isn't in the Treasury.
Operator:
No, I know.
H.M.Jr:
Call up Sears Roebuck up there and ask them
where he can be located.
Operator:
All right, sir.
H.M.Jr:
Sears Roebuck, Bee?
Operator:
Yes. Thank you.
8:40 a.m.
H.M.Jr:
Hello.
Lessing
Rosenwald:
Good morning, Lessing Rosenwald.
H.M.Jr:
How are you, Lessing?
R:
Fine, thank you.
H.M.Jr:
Good for you. Lessing, I've been looking
for a man to come down here and help in the
Procurement Section. It sounds like 33.
Dr. Compton, of M.I.T., recommended Edward
Brooks, Vice President of your company.
R:
Yes.
H.M.Jr:
And he said he thought he came an near answer-
ing the description of what I gave him as he
knew. I wanted your very frank opinion as to
Mr. Brooks, and second, whether there was any
possibility of borrowing him as a Dollar-a-year.
Regraded Uclassified
265
- 2 -
1:
Yeah. Well, let me -- I'll answer those in
two section.
10.M.Jp:
Please.
The first one -- he's a wonderful fellow. He
has a fine knowledge, he has a wonderful
training and he's got a perfectly grand
personality.
Yeah.
He's the highest type man you could possibly
want -- he's & younger men, I imagine, in
his early forties, but a man who 18 absolutely
too notch as to character, a very pleasing
individual and a man whom I have known for
several years and admire tremendously.
1.8.Jr:
Yeah.
So from that angle I don't think you'd be
making any mistake whatsoever. He's just
one grand fellow and I'm sure you'd fall
for him.
Yes.
The second thing 18 this, I'm in no position,
Henry, to give you any information about
Brooks because I'm not actively connected
with the company, you know.
I know. But I thought that you could tell
me yes or no on Brooks, you see, on a personal
basis.
Yes.
You're telling me just what I want to know
as to
R:
Yes, well that's why I answered the second
part last. I don't mean to say by that that
I wouldn't do anything about it, I'm just not
in a position to do it and I think you'd have
to take the second part up with General Wood
or Tom Carney or one of the officials of the
company.
266
- 3 -
H.M.Jr:
Well, who 18 the president of the company,
now?
R:
T. J. Carney.
H.M.Jr:
T. J. Carney. Well, would he be the man to
call?
R:
Either call him or General Wood.
H.M.Jr:
Well, I'd a little bit prefer to call Carney
if you think that's just as effective.
R:
Why certainly.
H.M.Jr:
What?
R:
Just as.
H.M.Jr:
Well, I'll do that.
R:
But as far as the man himself is concerned,
you wouldn't be making any mistake at all.
H.M.Jr:
I understand he has an engineering background --
that's what I asked for.
R:
Yes, he has. He's an M.I.T. man. He's had
more or less, well really had charge of all
the factories in which we have a financial
interest.
H.M.Jr:
So I understand.
R:
And also had a position of supervising many
of the factories where we don't have an
interest but where we have a very large per-
centage of their output.
H.M.Jr:
But you personally know him and think I
couldn't go wrong.
R:
Absolutely. I know him intimately and I
think as & man he's a fine man and I think
he has a great deal of ability.
H.M.Jr:
Well, thanks ever 80 much, Lessing, and I'll
call up Mr. Carney and ask him.
267
- 4 -
R:
All right. I hope to see you some of these
days.
H.M.Jr:
Well, if you're ever coming this way, give me
24 hours or 48 hours notice and come in and
have lunch or supper with me.
R:
Thanks ever 80 much.
H.M.Jr:
I really mean that invitation.
R:
All right. Thank you ever so much.
H.M.Jr:
Thanks, Lessing.
R:
Good-bye.
(Handed by Mr. Pinsent, Financial Counselor of the British Embassy, to
Mr. Cochran in the Treasury at 7 p.m., May 27.)
AM.
268
MEMORANDUM
His Majesty's Government has had under
consideration the safeguerding of funds belonging to
that Government, which may be deposited from time to
time in banks in the United States of America, from
the risk that actions might be started by German
interests for the attachment of these funds in respect
of debts due to Germany.
The most important case in question is
that of the accounts in the Federal Reserve Bank, New
York, standing in the name of the Bank of England.
While these accounts do, in fact, represent funds
belonging to His Majesty's Government, it would appear
that there is no absolute protection in the present
state of affairs against some attempt to attach these
funds in respect of debts owed by the Bank of England
to, e.g., the Reichsbank, which were frozen on the
outbreak of war as B result of the Trading with the
Enemy provisions.
His Majesty's Government have taken legal
advice on this matter and understand that the only
certain protection would be to convert these Bank of
England accounts at the Federal Reserve Bank, New
York, definitely into British Government sccounts, with
the title in each case of "His Britannic Majesty's
Government Account".
The Benk of England has been in communi-
cation on the subject with the Federal Reserve Bank,
end
Regraded Uclassified
269
- 2 -
and it is understood that the initiative for a
change of this kind should come from the United
States Treasury.
His Majesty's Government
would be grateful if the United States Treasury
would give early consideration to their request
that this change should be made.
If the matter is agreed in principle
the necessary technical instructions will be
sent by the Bank of England direct to the
Federal Reserve Bank.
British Embassy,
Washington, D.C.
27th May 1940.
270
May 27, 1940
MEMORANDUM TO: Mrs. Klots
Conference held at the Secretary's home Sundey, May 26th
at 12 noon.
Present: Secretary Morgenthou, Mr. Tarlssu, Mr. Blough,
Mr. O'Donnell.
Mr. Blough showed the Secretary several alternative schedules
to obtain additional tax revenues by February 1, 1941. The Secretary
said that he wanted Mr. Sullivan to be called and notified to be back
in Washington on Monday morning. The Secretary then examined the
schedules and said that he doesn't like any new form of taxation to
be used at this time, but would rather use achedules calling for
more femiliar types of texes. Therefore, he did not care for the
schedule imposing an excise tax on dividends, rente and salaries.
The Secretary then asked for figures on tax collections if a
10% tax on 1939 income tax liabilities of corporations and individuals
VBS to be imposed. Mr. O'Donnell said that that would result in ap-
proximately 90 millions from corporations and 100 millions from in-
dividuals. The Secretary said that he wanted this to be collected
sometime before the first of January.
The Secretary then asked what the Treasury would secure if ve
increased the tax on distilled spirits from $2.25 to $2.75 per gallon
with an accompanying floor stock tax. Mr. O'Donnell said ve would
reise by January 1 about 50 millions. Then an increase of the tax
on beer was discussed, the tax to be increased from $5.00 to $7.00
per barrel. The Secretary was informed that we would raise 50 millions
by January 1.
An increase of gasoline taxes from 1# to 3#. Mr. O'Donnell
extimated, would raise en additional 170 millions by January 1.
The Secretary then totaled these tax increases and they amounted
to $460 million. The Secretary seid that this seemed to fill the bill
because it corresponded with the amount of additional revenue the
President had asked for earlier this year in order to meet national
defense needs,
Regraded Uclassified
271
- 2 -
The Secretary then asked for a schedule to be prepared which
would show the increase in taxes discussed and would show their yield
between July 1, 1940 and December 31, 1940, and also the yield between
July 1, 1940 and June 30, 1941,
The Secretary then said that no mention had been made of an in-
crease in tobacco taxes. He said that in his opinion tobacco should
share increased taxes with gasoline and liquor. Mr. Blough and
Mr. O'Donnell agreed with him that it would be safer not to load the
increased taxes solely on gasoline and liquor but to spread it over
tobacco products as well,
The Secretary then asked for the $100 million which vas to be
secured from distilled liquors and from beer to be spread, one-third
distilled liquors, one-third to beer and one-third to tobacco.
The Secretary said he wanted the schedule in his hands by 9:00
Monday morning because at that time he was going to consult with
Mr. Doughton, Mr. Cooper and Senator Herrison. He also said that
he was going to have Mr. Magill available for consultation on Monday.
The Tab
Thomas Tarleau
Legislative Counsel
Regraded Uclassified
May 27, 1940
KENDRANDOM 701 Mrs. Flots
Conference held at the Secretary's home Sunday, May 26th
at 12 moon.
Present: Secretary Morgeothmi, Mr. Tarleen, Mr. Blough,
Mr. O'Dennell.
Mr. Blough showed the Secretary several alternative schedules
to obtain edditional tax revenues by February 1, 1941. The Secretary
said that he wanted Mr. Sullivan to be called at notified to be back
is Vachington or Monday seraing. The Secretary than exemined the
schedules and said that be doesn't like any new form of taxaties to
be used at this time, but would rather use schedules calling for
more familiar types of taxes. Therefore, he aid not sare for the
schedule imposing an exclse tax es. dividends. rents and ealaries.
The Secretary them asked for figures on tax cellections if a
10% tax on 1939 income tax liabilities of corporations and individuale
vas to be imposed. Kr. O'Dennell said that that would result in 4P
proximately 90 millions from cerporations and 100 millions from 12-
dividuals. The Secretary said that he wanted this to be collected
sometime before the first of January.
The Secretary then saked what the Treasury would secure if -
increased the tax on distilled spirite free $2.25 to $2.75 per gallen
with an accompanying floor stock 123. Mr. O'Dennell said ve would
raise by Jamuary 1 about 50 millions. Then an increase of the iss
on beer was discussed. the to to be increased from $5.00 to $7.00
per barrel. The Secretary use informed that we would raise so millions
by Jamery 1.
in increase of gaseline taxes from If to 34. Mr. O'Demnell
astimated. would raise - additional 170 millions by January 1.
The Secretary then totaled these INI increases and they amounted
to $460 million. The Secretary said that this securd to fill the bill
because it corresponded with the mount of additional revenue the
President had asked for earlier this year in order to neet national
defense neede.
Regraded Uclassified
273
- 2 -
the Secretary them asked for a oshedule to be propared which
would show the increase is issue discussed and would show their Field
between July 1, 1940 and December n, 1940, end also the yield between
July 1. 1940 and I'm so, 1941.
The Secretary then said that M membion had been unle of - 10-
crease is tobacco tames, Be said that in de epinten taken should
share increased taxes with gaseline and liquer. Mr. Blough at
R. 0'Dennell agreed with his that 11 would be safer not to load the
increased taxes solely - gueeline and liquer but to spread 11 over
tobacco products as wall.
The Secretary then asked for the $100 million which vas to be
secured free distilled liquers and from beer to be spread, eme-third
distilled liquare, eac-third to beer and one-third to tobacco.
the Secretary said be vanted the schedule is his hands w 9100
Monday seraing because at that time he vas going to consult with
Mr. Drughten, Mr. Cooper and Senster Harrison. Be also said that
he voe going to have Mr. Magill available for consultation on Nonday,
Thomas Tarlesa
Legislative Counsel
TT/afe 5-27-40
Regraded Uclassified
May 27, 1940
274
MEMORANDUM
TO:
Mrs. Klotz.
Meeting in the Secretary's office Mondey, May 27th et
8:20 2. m,
Present: Mr. Deniel Bell, Mr. John L. Sulliven, Mr. Guy Helvering,
Mr. Roy Blough, Mr. Tarleau, Mr. O'Donnell, Mr. Roswell
Magill arrived at about 8:55,
The Secretary said that he and the President had agreed that it
would be advisable to determine what action the Congress would be
willing to take at this time with regard to raising the debt limit
and with regard to additional taxes. The Secretary seid be had asked
Senator Harrison, Mr. Doughton and Mr. Cooper to meet with him at 9
o'clock so that he could ask them to find out the temper of the Congress
and to report back to him tomorrow morning.
The Secretary said that he personally felt strongly that e. national
defense tax should be imposed. Ee said that he had felt so for some
time and that the Gallup Poll indicated that the public believed in the
necessity for additional taxes.
Mr. Bell asked how much a tax on soft drinks would bring.
Mr. Sullivan said about $75,000,000. It vas pointed out that that
figure was not based on a tax of 1/ a bottle but on the basis of the
elé soft drink tex which was a tax of 8. percentage of the value.
The Secretary then esked Mr. Sullivan how he felt About the sched-
ule which Mr. O'Donnell handed to those present. Mr. Sullivan said he
418 not like the 10% additional tax on 1939 tex liabilities because it
418 not fit in with the future program of taxation and because it yes
retroactive. The Secretary pointed out that this tax wss along the line
of the President's suggestion. He then asked Commissioner Helvering how
lie felt about it. Commissioner Eelvering said that be didn't like the
retroactive feature either.
The Secretary then asked Mr. Sulliven how additional money was
to be received prior to January 1 if this method was not adopted.
Mr. Sullivan showed the Secretary another schedule. The Secretary
said this schedule ie unsatisfactory because it vas composed entirely
of consumers taxes and that the tax on gasoline in that schedule wes
too high. The Secretary then said, really the question was whether
Regraded Uclassified
275
- 2 -
a tax bill vas wanted at this time and that he would merely discuss
that question with the leaders and would not go into any details. He
assured Mr. Sullivan that he would withhold showing the schedule pre-
pared by Mr. O'Donnell until an agreement was reached within the
Treasury. The Secretary said that he felt that the 1939 tax liability
was a fair index of the taxpayers ability to pay some additional tax
and that he did not care to have the entire amount raised by means of
consumers' taxes.
At this point Mr. Magill came in and Mr. Sullivan gave him the
substance of what had already transpired.
May n. 1940
KINORANIUM TO: Mrs. flots.
Meeting in the Secretary's effice Montry, May 27th ob
0130 a. 1.
Present Mr. Daniel Bell, Mr. John L. Sullivan, Mr. Guy Holvering,
Mr. Boy Blough, Mr. Tarlean, Mr. O'Dennell. Mr. Rewell
Magill arrived at about 8155.
The Secretary said that he and the President had agreed that 11
would be advisable to determine what action the Congress would be
villing to take at this time with regard to raising the dobt limit
and with regard to additional taxes. The Secretary said he had naked
Senator Harrison, Kr. Doughton and Mr. Cooper to meet with his at 9
e'clock se that he could ask then to find out the temper of the Congrees
and to report back to his tomorrow morning.
The Secretary said that he personally felt strongly that a national
defense tax should be Luposed. Re said that he had felt 90 for some
time and that the Gallup Pell indicated that the public believed in the
necessity for additional taxes.
Mr. Bell saked how such a tax on soft drinks would bring.
Mr. Sullivan said about $75,000,000. It vas pointed out that that
figure vas not based on a tax of 1/ a bottle but on the basis of the
old soft drink tax which vas & tax of a parcentage of the value.
The Secretary then asked Kr. Sullivan how be felt about the sched-
ule which Mr. O'Dennell handed to those present. Mr. Sullivan said he
aid not like the 10% additional tax on 1939 tax liabilities because it
d14 not fit in with the future program of taxation and because it was
retroactive. the Secretary pointed out that this tax was along the line
of the President's suggestion. Re them asked Commissioner Helvering how
be felt about it. Commissioner Helvering said that he didn't like the
retroactive feature either.
The Secretary than asked Mr. Sullivan how additional money vse
to be received prior to January 1 if this method vas not adopted.
Mr. Sullivan showed the Secretary another schedule. The Secretary
said this schedule is unsatisfactory because it vas composed entirely
of consumers taxes and that the tax 08 garaline in that schedule was
bee high. The Secretary them cald. really the question vas whether
Regraded Uclassified
277
- 2 .
a tax bill was wated at this time and that he would nerely disease
that question with the leaders and would net " into any details. No
assured Mr. Sullivan that be would withheld showing the schedule pro-
pared by Mr. O'Dennell until an agreement vas reached within the
Treasury. The Secretary said that he felt that the 1939 tax liability
vas a fair index of the taxpayers ability to pay come additional tax
and that he did not care to have the entire amount raised by sease of
consumers' taxes.
At this point Kr. Magill case in and Mr. Sullivas gave his the
substance of what had already transpired.
TT/afa 5-27-40
Regraded Uclassified
20 the
5/27/80. 275
featative 7079014 estimates under the also due was with
propered Openial National Befores faz provisions farrisa & Corper
9105 5/27/40
I Noticated additional revenue
I
I is the period I during the fall
Searce
I July 1, 1940
#
fiscal year
#
I
# 1961 (July 1.
# December a.
I 1940 through
I
1940
1031
(millions of dollars)
10 persent empor tax on 1930 Income tax
liabilities of corporations
119
117
10 persent exper tax on 1939 income tax
liabilities of individuals w
n
91.
Distilled liquers (rate increase from
$2.25 to $2.75 por callen, with fleer
tax)
so
-
Bear (rate increase free $8.00 to $6.80
per barrel)
=
5
`shases (rate increase from $3.00 to
43.50 per 1,000 cigarettes with proper-
tionate increases on other tobacco
products)
20
4
Gasoline (rate increase from 16 to -
per callen)
197
296
Total
495
773
Treasury Department,
MAI 26, 1940.
Division of Research and Statistics
V The super faz to to be Expect 02 latens tax liabilities for the first terable
year beginning after Desember a. 1930, and is to be payable during the
calendar year 1940, the amet date yet to w determined.
the exper tax es individuals shall net ensed 10 persent of net issues remain-
lag after defusting the existing Federal issue tax.
The propeed increased rates are to w effective for cas year beginning at
July 1, 1940. It to auticipated that m December si, 1940 six seaths
collections of the liques. beer and tabacco taxes, and five sumber collections
of the gaseline same, will have been reseived at the increased tax rates.
JO'DIVE 5-29-09
Regraded Uclassified
79
Tentative revenue estimates under the
propesed Special National Defense Yes provisions
Regraded Uclassified
1 Notimated additional Invoice
I
which will be received.
I is the period
# during the full
Seurce
1 July 1, 1940
I
fissal year
I through
I 1941 (daly 1,
I December a.
I 1940 through
I
1940
I June 20. 190)
(milliens of dollars)
10 percent equar tax on 1928 income las
liabilities at corporations 2/
119
119
10 percent super tax on 1920 Income las
liabilities of individuals 1/ il
n
n
Distilled liquero (rote increase free
$2.25 to $3.75 por galles, with floor
tax)
.
E
Dear (rate increase free $5.00 to $6.00
per barrel)
n
5
observe (rate increase free $3.00 to
43.00 por 1,000 sigarettes with propor-
tienste increases $8 other tobacco
products)
20
e
Gasoline (rate increase from 16 to as
per gallen)
y
197
390
Total
490
793
Treasury Department,
May 26, 1940.
Division of Research and Statistics
w The super tax is to be Imposed es income tax liabilities for the first taxable
year beginning after December as, 1938, and is to be payable during the
salendar year 1940, the emet date yet to be determined.
3/ the super las on individuals shall mi emeet 10 persent of not income remain-
lag after delecting the existing Federal income tax.
3/ The proposed increased rates are to be offective for one year beginning at
July 1, 1940. It to anticipated that by December sh, 1940 siz maths
collections of the ligmer, hear and tabacco taxes, and five menths collections
of the gasoline taxes, will have been reseived at the increased tax rates.
AJO'DIVE 5-16-40
balance of terroring y
June 30,
December 1,
Jamary 1,
Fobruary 1,
March 1,
James
1940
1940
1941
1941
1941
1941
1. Defiget estimate (revised by
Treasury based upon deficit of
$2,550M) excluding $700M recept
taxe from eredit agencies and
smalning additional taxes of $460m :
1,700
290
235
15
- 295
- 810
Retinated working balance
950
1,195
1,075
880
sho
735
1. Dudget extimates as under No. 1 above
and adding $750M additional expendi-
tares for national defense and $300M
for relief
1,700
290
235
15
- 295
- 810
Settuated vorking balance
950
960
770
490
365
- 315
3. Budget estimates as under No. 1 above,
indulating $700M recapture from credit
agencies but excluding additional
tasse
1,700
290
235
15
- 295
- 810
latiented working balance
950
1,895
1,775
1,580
1,540
1,435
4. height estimates as under No. 1 above,
and including $700M recapture from
credit agencies and adding additional
expendi tures of $750m for national
defence and $300M for relief
1,700
290
235
15
- 295
- 810
Retionted working balance
950
1,660
1,470,
1,190
1,065
385
Assumes $500M DEV -borrowed in September, 1940.
Date: Assumes credit agencies will finance their own requirements in 1941 and not draw on trekeor ded Uc assified
281
May 27, 1940
In my conference vith Harrison and Cooper I was
nisazed to find that Senator Harrison completely reversed
himself. He now not only favors increasing the debt
limit, but also a tax bill. So does Jerry Cooper.
The interesting thing 18 that when I asked the
President, late Saturday, would he talk to the so-called
"31C Four" about the debt limit, he 8818, "No, he did not
went to." I said, "Well, let me make & survey" and he
said, "Go shead and do it." I only talked about the debt
limit.
Over the week-end, entirely on my own, I decided
we Also our,ht to have & tax bill and I called in Roy
Blough and Tarleau and we worked out A memorandum, a copy
of which Harrison and Cooper took with them in confidence.
I don't know how the President feels about a tax
bill, but he said that he would be in favor of increasing
everybody's taxes by 10 percent.
The amusing thing that happened was that Sullivan
WAE opposed to this 10 percent increase on the 1939 income
corporation tax and Harrison and Cooper both like that, but
they completely hit the ceiling when they saw the increase
in the as tax and that 1s where Sullivan wanted to retmost
of the money from and I whispered to Sullivan, "After all,
I LAVE not been here for seven years for nothing".
Regraded Uclassified
282
MEMORANDUM
May 27, 1940.
TO:
Secretary Morgenthau
FROM: Mr. Sullivan
CONFERENCE: Undersecretary Bell, Commissioner Helvering, Mr. Magill
and Mr. Sullivan present.
It is the unanimous opinion of this group, the first 2 items
on the tentative revenue estimate prepared yesterday which provide for
& 10% super tax on 1939 income tax liabilities of corporations and
individuals should not be enacted. It 10 our feeling that it would
seriously deter the desired expansion of industrial facilities, it would
have a. further unfortunate effect upon the market as a result of the
selling of securities that would be required in many instances that would
be necessary to meet this additional increase and would create in the
minds of the public an uneasiness and uncertainty which would be most -
desirable.
For the year 1938 the average tentative declaration by American
corporations was 73% of the net incomes. We have encouraged and we will
continue to encourage corporations to pay out as large a percentage of
net income as possible. The danger of future imposition of just such
taxes as are included in this schedule will tend to influence corporations
to retain additional reserve for unseen tax continuance.
In lieu of the tentative revenue estimates shown to Senator
Harrison and Congressman Cooper this morning, we are presenting an addi-
tional memorandum which provides for the present enactment of tax legis-
lation to become effective July 1st, which will raise the necessary
revenue and would also provide for substantially increased collection
of taxes starting March 15th. It is the unandmous opinion of this group
that the passage of the proposed new tax bill should be accompanied by
an Act raising the debt limit $5 billion dollars.
411
Regraded Uclassified
283
Tentative revenue estimates enticipating the
enactment of the entire following legislation
prior to July 1, 1940
: Full year : Fiscal :July 1, 1940
Source
: collec-
:
year
:
to
: tions
: 1941 :Feb. 15, 1941
(millions of dollars)
Distilled liquors (rate in-
creased from $2.25 to $3.00
per gallon, with floor tax)
75
91
64
Beer (rate increased from
$5.00 to $6.50 per barrel)
67
67
42
Tobacco (rate increased from
$3.00 to $3.50 per thousand
cigarettes with proportionate
increase on other tobacco
products)
77
77
48
Admissions (reduction of ex-
emption limit from 406 to 206)
60
55
34
Soft drinks (16 per bottle and
equivalent rate for sirups
and extracts)
95
87
51
'anufacturers' excise taxes,
excluding gasoline (increase
10%)
20
18
11
Gasoline (rate increased from
16 to 26 a gallon)
222
206
130
Increased revenue due to in-
creased Bureau personnel
....
68
68
42
Reduced personal exemptions to
$1,500 and $750 and increase
normal rate from 4% to 8% and
increase surtax rates in
accordance with attached
Schedule A (effective on
calendar year 1940 incomes 1,000
600
390
Increases of 1, 11 and 2% in
present corporation income
tax ratee
137
67
0
Repeal exemption of interest
on State end municipal securi-
ties (effective on calender
year 1940 incomes) 2/
126
73
40
Total
1,947
1,409
852
Treasury Department, Division of Research and Statistics.
May 27, 1940.
1/ Excluding floor tax, amounting to $16,000,000
in fiscal year 1941.
Individual returns to be filed by February 15, 1941.
Regraded Uclassified
284
SCHEDULE &
Comparison of present individual surtax rate
schedule with proposed schedule
#
Amount of surtax
Rate of Tax
: Amount of surtax on higher
I
net income
1 amount of surtax net income
-
(In thousands)
Present # Proposed 2
Present
:
Proposed
I
0 - $
4
-
-
-
-
$ 4 -
5
4%
4%
$
40
$
40
5 -
6
4
5
80
90
6 -
8
8 -
no
8
180
250
10
12
300
490
10 -
12
7
16
440
810
12 -
14
8
20
600
1,210
14 -
16
9
24
780
1,690
16 -
18
11
28
1,000
2,250
18 -
20
13
33
1,260
2,910
20 -
22
15
38
1,560
3,670
22 -
24
17
42
1,900
4,510
24 -
26
17
46
2,240
5,430
26 -
28
19
46
2,620
6,350
28 -
32
19
50
3,380
8.350
32 -
34
21
50
3,800
9,350
34 -
38
21
52
4,640
11,430
38 -
40
24
52
5,120
12,470
40 -
44
24
53
6,080
14,590
44 -
48
27
53
7,160
16,710
48 -
50
27
54
7.700
17,790
50 -
56
31
54
9,560
21,030
56 -
62
35
55
11,660
24,330
62 -
64
39
55
12,440
25,430
64 -
68
39
56
14,000
27,670
68 -
72
43
56
15,720
29,910
72 -
74
43
57
16,580
31,050
74 -
80
47
57
19,400
34,470
80 -
90
51
58
24,500
40,270
90 -
100
55
59
30,000
46,170
100 -
150
58
60
59,000
76,170
150 -
200
60
61
89,000
106,670
200 -
250
62
62
120,000
137,670
250 -
300
64
64
152,000
169,670
300 -
400
66
66
218,000
235,670
400 -
500
68
68
286,000
303,670
500 -
750
70
70
461,000
478,670
750 - 1,000
72
72
641,000
658,670
1,000 - 2,000
73
73
1,371,000
1,388,670
2,000 - 5,000
74
74
3,591,000
3,608,670
-
5,000 and over
75
-
75
Regraded Uclassified
MEMORANDUM
May 27, 1940.
TO:
Secretary Morgenthau
FROM: Mr. Sullivan
CONTERENCE: Present: Secretary Morgenthau, Senator Harrison, Congress-
man Cooper, Undersecretary Bell, Commissioner Helvering,
Mr. Magill, Mr. Sullivan.
The Secretary asked Senator Harrison and Congressman Cooper to
make a survey of Congress to determine its attitude on the tax bill at
the present session. Senator Harrison immediately started to interro-
gate Mr. Bell on his figures relating to the debt limit. Congressman
Cooper had the figures which he had taken dom on May 17th. Vr. Bell's
revised figures indicated that in the event that we recapture 5700
million from various agencies on February let, we will have a working
balance of $1,190,000,000 and a balance of borrowing power of 315 million.
The Secretary stated that he believed the country was ready for
a tax bill and spoke of the Gallop Foll, in which apparently Senator
Harrison and Congressman Cooper had no confidence. They both apoke of
the statement that had been made during the past week as to adjournment
before June 15th. Senator Harrison stated that he thought it would be
preferable to increase the national debt. He seemed to be afraid to
some extent of the LaFollette proposal to reduce exemptions and much
more disturbed by the Lee plans. However both he and Congressman Cooper
agreed that the present psychology demanded that something be passed at
this session. The Secretary suggested that if the debt limit is raised
we should abandon the attempt to recapture the 700 million.
Congressman Cooper stated that the Ways and Means Committee has
5 understanding that they will not attempt to do anything until the
President, the Secretary of the Treasury, Senator Harrison and Congress-
man Doughton have agreed on a program. The Secretary said he would be
glad to ask the Senate and the House what they want, and then he will
cause to be drafted whatever Harrison and Cooper suggested.
Senator Harrison stated that in his opinion the country was more
serious and more confused than it was in the early months of 1917, yet
despite this fact there seemed to be political angles to the situation
as evidenced by the letter of Senator Vandenberg, criticizing the
Democratic members of the Senate for introducing no tax bill. Senator
Regraded Uclassified
286
- 2 -
Harrison stated that he had complete confidence in Senator McNary and
intended to consult him about this matter. Senator Harrison stated
that McNary might have trouble in his ranks with that group who want
to make the war pay for itself by an exceptionally high tax on those
concerns manufacturing munitions. The Senator disapproved the idea
of putting & tax of 10% or 15% on the regular tax after it has been
determined. He thought in many instances it would be too high. Neither
does Senator Harrison like the excess profits tax. Apparently his
preference is a manufacturers sales tax or an increase in the tax rate
on corporations and perhaps on individuals.
Congressman Cooper stated that he was for the super tax, but he
did not think it would produce much revenue. However on Congressaan
Doughton's return, he will call & meeting of the Democratic members of
the Ways and Means Committee.
In regard to the Schedule which was submitted to them and of
which he took away a copy, Senator Harrison was opposed to the retro-
active features, whereas Congressman Cooper favored them. Both object
to the increase of tax on gasoline. They both hope that this can be
thought of as & National Defense tax rather than as a Deficit Tax.
Senator Harrison suggested that in our Schedule we raise the tax on
liquor to $3 and reduce it on beer to $6 per barrel. Senator Harrison
then stated that he was in favor of increase of taxes 10% and in this
way avoid specialized lobbies. He then stated that he thought he would
call a meeting of his entire Committee.
Senator Harrison asked if the Secretary would want to increase
the debt limit if Congress gave him these taxes at the present session.
The Secretary said that he thought this should be done in the present
session and that they could get an increase of $5 billion in the debt
limit.
la they were leaving, Senator Harrison stated that he thought we
should have both a tax measure and an increase in the debt limit. He
believed that $5 billion was too much of an increase, although they
eventually think it would be inadequate. His suggestion was to increase
the taxes now by about $700 million and raise the debt limit 2* to 3
billion dollars.
Both Senator Harrison and Congressman Cooper appeared to favor
an increase of 10% on all taxes.
The meeting adjourned with an understanding that they were to
meet again tomorrow morning at 9 o'clock.
TLS
Regraded Uclassified
731
UNITED STATES TREASURY DEPARTMENT
May 27, 1940.
OFFICE OF
THE ATTACHE
CONFIDENTIAL MEMORANDUM
GANOHAL
To the Secretary:
With B view to a more afficient prosecution of economic
worfare and in order to remedy the existing deficiencies in adminis-
tration Chieng Kai-shek proposse to create a central control board to
be called the War Economic Commission or acms other appropriate name
with bimself as president and T.V. Soong as vice president. At pre-
sent the various organizations in charge of the execution of the policy
of export control and economic blockade of the occupied areas are sub-
ject to the authority of different ministries. The consequences of
such lack of unified control have been inefficiency, confusion, delay
and ever arising new porblems over which the existing organizations
have no jurisdiction or centrol,
One of the outstanding problems which is draining the N-
sources of the central government and slowly but surely undermining
the prestige of Chiang Kai-shek and the loyalty of the people is the
extensive smuggling that has been going on from the free area into the
occupied area and abroad. In many instances the smiggling activities
have been undertaken under protection of local military authorities aid-
ed and abetted by the gang of aharpshooters following in the train of
persons in high political places in Chungking. The extent of this
smuggling and consequent drainage of resources is evident by the fact
that according to statistics the four government banke last year ec-
quired foreign exchange to the equivalent of only twenty one million
Chinese dollars.
The cause of such wide spread smiggling has been the discre-
pancy between the price of goods concerned in the world market and that
Regraded Uclassified
2
puid to the domestic producers or to the merchants whose export bills
are required to be sold to the government banke at the arbitrary rate
of seven pence to the dollar while exporters in the enemy occupied area
con sell their bille to the banks around three to four pence to the
dollar. The producers and merchants are thus penalized and placed in
a disadvantagsous position as compared with those in the occupied area.
A feeling of resentment and restiveness has been created which tende
to discourage production and exports and force producers to abandon
their own field of production and go into other more reminerative pur-
auits.
Under existing arrangements the purchase and disposal of
wood oil,tea, bustles and metals (tin and wolfram), which are official-
27 tied up with barter and export credit agreements can only be made
by specially designated governmental organs such as the Foreign Trade
Commission (thru the Foe Hua Company, the Chine Vegetable 011 Company
and the China Tea Company), The Central Trust Company and the National
Resources Commission. Each of these organizations has sequired con-
siderable experience in their respective field of operation but here
again there is no central authority or coordination body to formulate
and enforce 8 uniform policy. Even these officially controlled pro-
ducts are not free from amaggling as witness the large consignment of
wood oil shipped from Hongkong to e private concern in New York several
months ago.
Further as a result of the official restrictions on the free
outward movement of banknotes from the free China area enforced with
a view to minimizing the unnecessary pressure on the exchange market
the national currency is st 8 beevy discount in the free China area
amounting to between forty and fifty percent. This large disparity
in the value of the currency within and without the free area is natural-
ly an inducement to muggling of notes, by provincial banks and to some
Regraded Uclassified
283
extent by travellers from interior centers, to Hongkong and Shanghai.
Sometimes with but more often without the necessary permission of the
Ministry of Finance. Sometimes the movement of notes is undertaken
by commercial banks as cover for exchange transactions in occupied
area centers. This condition existe not because of lack of control
machinery but rather to the imperfect working of said machinery.
At the present time Chieng Kai-shek maintaine full control over
military and political affairs, but economic and financial matters ssem
to be completely out of hand. In order to gain the necessary control
of the economic situation he now proposes to esteblish a control board
under his personal supervision with T.V. Soong doing the heavy work.
Whether the latter will accept the commission unless full power to
formulate and administer lows and regulations, necessary to efficient
handling of such a ticklish job, is centralized in him is doubtful.
That be would be ruthless in the application of any power conferred
upon him is the foregone conclusion of those who know him - but that
a ruthless hand is needed at the helm at this stage of China's affaire
1a fast becoming 8 conviction.
However, the proposed plan will not be easy of execution.
It will involve great effort on the part of Chiang Kai-shek to bring
certain government divisions under one head. Such 8. move will be
vigorously opposed by the hungry horde of Chinese patriots infesting
Chungking, who are waxing financially fat at the expense of their
country and their government.
Regraded Uclassified
(Handed by Mr. Pinsent, Financial Counselor of the British Embassy, to
Mr. Cochran in the Treasury at 7 p.m., May 27.)
230
1.
We understand that in addition to part
of their gold reserves substantial quantities of
gold are privately hoarded in Holland and Belgium
mostly in coin or very small bullion units.
Amount has been privately estimated at anything
from fifty to one hundred million pounds.
2.
There is clearly serious danger that
this gold will be collected and exported by
Germany.
3.
Please approach Mr. Morgentheu on the
matter and enquire of him whether he would be
prepared to scrutinise the gold imports with 8
view to rejecting those suspected of German
origin.
4.
It has been suggested that remelted
gold can be distinguished by experts but this
can probably not be relied upon. The possibility
of requiring certificates of origin counter-signed
by 8. Central Bank hes also been suggested to us
but ways round this might also be found. If
Mr. Morgenthau is willing to accept in principle
the United States experts would no doubt consider
most effective method of putting it in practice.
s/le
Regraded Uclassified
291
PARAPHRASE OF TELEGRAM RECEIVED
London
Secretary of State,
Washington.
1401, May 27, noon.
SECRET AND PERSONAL FOR THE SECRETARY OF STATE
Kingsley Wood talked with me about the gold today
and they are starting to send some over. While the
Treasury feels that gold and American securities should
be sent to Canada, they cannot obtain Churchill's consent
because of his fear that any such step might cause England
to believe that there 18 panic in the Government and that
8. terrific mess would result. I shall follow the situation
closely, however, and inform you as soon as anything turns
up.
KENNEDY
Regraded Uclassified
292
May 27, 1940
MEMORANDUM FOR THE SECRETARY:
Pecific Coast Situation
Confusion and doubt still continued to dominate the Pacific
Coast freight and charter market last week. There was, of course, the
reactions to the new turn of events in the European war, but these
were not manifested in panic or hysteria, such as gripped the stock
market, but rather were productive of extreme bewilderment on the
part of both shippers and operators.
Business in all directions, excepting the United Kingdom
which under strict control, was softer. Buying interest lagged,
with the consequent easing of the demand for space and ships. Rates
on time charters were softer at between $4.50 and $5. The demandof
charterers was mainly for American bottoms. Two American-Hawaiian
vessels were fixed at undisclosed rates for the Far East, delivery and
redelivery Atlantic ports.
In the trans-Pacific trade to the Orient business was uneventful,
and theberth lines were getting a fair volume of cargo. Chartering rates
softened somewhat on light offerings. A vesselvas fixed for a cargo of
crude salt to Japan at $13, which was $1.75 off from the previous fixture
on this type of business. No time fixtures were reported for the trade,
but it W68 thought that $5 still could be done for & handy vessel. It was
reported that there was some inquiry for petroleum products in drums for
Bangkok, and business was said to have already been offered at $16. Some
charters for petroleum products were noted a week ago at $16 and $18.
Scrap prices were down end demand for space was easy. Scrap rates, however,
were quoted by berth carriers at $16 for rails and $17 for melting. No
scrap fixtures were reported.
Business to Australia was reported as quite soft, and the lines
were understood to be having difficulty filling. Even lumber, the mainstay
cargo, was said to have been scarce. The last rate was $35, but ideas
declined to nearer $30 during the week. General cargo interest was dead
due to the severe restrictions on imports imposed by the Commonwealth
Government.
Intercoastal business continued to weaken, bearing out predic-
tions of about a month ago. General cargo offerings in both directions
were moderate, and the lines were able to meet most demands except those
for lumber space.
Banil Karris
Regraded Uclassified
House
27
233
MAY 24, 1940.
MEMORANDUM FOR THE SECRETARY:
Shipping Situation.
The records of the Association of American Railroads
disclose that there is a slight upward trend discernible in the
movement of export freight through the Port of New York.
On May 16th the number of cars loaded on lighters
for delivery to export steamers was 676 and on May 23d 767.
The cars on hand awaiting unloading and delivery by
lighter were 3196 on May 16th and 3486 on May 23d.
On May 13th there were 4236 carloads of export freight
in storage in railroad terminals and on May 20th 4325.
The
space occupied is only one third of that available.
On May 23d there were 74 lighters with export freight
on demurrage.
The grain in railroad cars, elevators and boats
remains at about one and a quarter million bushels.
Carloadings registered a small decrease in the week
ending May 18th, due principally to a falling off in the movement
of grain, coal and ore.
The movement of steel for export continues heavy.
One third of the total production of some steel companies represents
export business. The British Government's priority list calls for
the lifting of 170,000 tons of steel in June from North Atlantic
and Gulf ports.
Regraded Uclassified
294
-2-
French Government orders for steel will be moving
to the ports for export in the near future and, like the British,
the ships under the control of the French Maritime Commission
will probably be sailing down to their marks but with space not
utilized.
Chartering on either time or net form basis is extremely
limited. Rates in practically all trades are softening.
Due to the large number of Norwegian, Dutch and Belgian
ships available to the British and French Ministries of Shipping,
there is every likelihood that instead of there being a glut of
cargo to be moved, the lines not under the control of the respective
Ministries may have difficulty in obtaining full cargoes -
particularly of the better paying freight.
Baril thanis.
Regraded Uclassified
285
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE
May 27, 1940.
TO
Secretary Morgenthau
FROM
Mr. Haas DA.
Subject: The Business Situation,
Week ending May 25, 1940.
Conclusions
(1) Statistical data BO far available show but little
adverse reaction, aa yet, to the severe price declines of the
past two weeks, partly because of the favorable psychological
influence of our own rearmament program and of increased Allied
buying.
(a) Our index of new orders for the week ended May 18
has increased to the highest level, with one exception,
since last November. Orders for steel, textiles, and
"other products" all showed increases over the previous
week.
(b) Department store sales for the country as a whole
were slightly lower than in the previous week but better
than the average of the previous four weeks.
(2) No important contraction in consumer buying seems in
prospect 80 long as industrial production and payrolls continue
to rise. Led by a strong expansion in steel production on en-
larged domestic and foreign buying, industrial production, 88
estimated from the New York Times index for the week ending
May 18, has increased to an FRB index level of 106 or higher,
which compares with 102 in April.
(3) Activity in the steel industry, according to press
reports, has been given greater impetus during the past week
by increased orders and inquiries from the Allies, 26 well aB
from Italy. Steel operations this week will be 76.9 per cent
of capacity as compared with 73.0 per cent last week. Plant
expansion in various industries and increased buying of railroad
equipment are providing additional support to steel activity.
Regraded Uclassified
33
Secretary Morgenthau - 2
New buying well maintained
The sharp break in commodity and security prices which
accompanied the recent drastic shift in the war outlook has
not yet disturbed the improving trend of new orders, Judging
from figures BO far available, although in B few industries
new buying 18 reported to have slackened. Our index of new
ordere for the week ended May 18 rose to the highest figure,
with one exception, since the third week of November. (See
Chart 1) Orders in all three main groups improved over the
previous week.
It 18 probably inevitable that the price break should
cause some postponement or curtailment of buying, particularly
for durable consumers' goods. Yet automobile buying, which
should be among the first to reflect any severe shock to con-
sumer confidence, has apparently shown no more than the usual
seasonal decline during the period May 11 to 20 in the country
BB a whole, on the basis of preliminary data for 15 leading
makes as reported by the Wall Street Journal, Total retail
sales of cars and trucks in that period were substantially
lower than in the first period of the month, but this was
largely due to one less working dey in the period. Daily av-
erage retail sales were reduced to approximately 12,500 units,
AB compared with 12,700 in the first period of the month, rep-
resenting about a normal seasonal reduction. According to the
same source, however, the important Eastern markets are re-
ported to have shown large sales declines.
No significant reduction 1e shown in department store
sales on the average. Sales in the week ended May 18 were
5.0 per cent above those of the comparable period last year,
While this maken B. less favorable comparison than the 7.4 per
oent increase of the previous (Mother's Day) week, it is some-
what better than the average 4.5 per cent increase of the pre-
vious four weeks. In the Kansas City district, however, sales
for the week ending May 18 declined 15 per cent 88 compared with
an increase of 16 per cent in the preceding week. Some observ-
ere associate this with the psychological influence of the
decline in wheat prices,
Private heavy construction awards, on the other hand, show 8.
décline. This may reflect in some degree the postponement of new
commitments, but one week's change in this erratic series should
not be considered conclusive. Private awards for heavy projects
in the week ended May 23 declined 27 per cent from the previous
Regraded Uclassified
Secretary Morgenthau - 3
237
week, and for the first time in 8 weeks were below the previous
year's level. Residential awards for the period May 1 to 15,
given by F. W. Dodge figures, continue well maintained,
Industrial activity advances further
It 16 difficult to foresee more than minor adjustments
in consumer buying 80 long as industrial activity, payrolls,
and consumer incomes continue well maintained, (See Chart 2)
In the week ended May 18, the New York Times index rose to an
FRB equivalent of 106, and further gains are indicated by the
figures on steel and automobile production for the following
week.
The improving trend of business activity 1s supported by
a substantial increase in new orders during April and May.
Our monthly index of new orders in April, according to com-
pilations just completed, rose to the equivalent of 112 in
terms of the FRB index. (See Chart 3) Since the actual un-
adjusted FRB index in April was 104, unfilled orders have been
substantially increased. Our estimate of unfilled orders at
the end of April (lower section of chart), based on the oumulated
difference between new orders and production, rose as compared
with unfilled orders at the end of March. Unfilled orders at
the end of April were the equivalent of 31 points on the FRB
index, as compared with 23 points a month earlier.
During May, our weekly index of new orders indicates that
new buying has shown a further substantial improvement. (Refer
to Chart I)
Although less improvement in the basic situation 1a indi-
cated by our index of basic demand and our index of sales for
April, both remain sufficiently above the April FRB index of
102 to indicate a favorable outlook. (See Chart 4) Our basic
demand index in April declined 1 point to 107, and our sales
index (due to the seasonal adjustment) declined 8 points
to 111.
Steel activity speeded UD
The increase in steel production in recent weeks has
restored approximately one-half of the entire decline since
last December. The rate for the week beginning May 27, as
Regraded Uclassified
298
Secretary Morgenthau - 4
reported by the American Iron and Steel Institute 16 76.9 per
cent of capacity as compared with 73.0 per cent in the preced-
ing week. (See Chart 5) The currently rising volume of or-
ders from both domestic and foreign sources has led trade ob-
servers to view the steel outlook with optimiem for the next
several months. Increasing confidence 18 reflected in the
iron. number of new blast furnaces being blown in to supply pig
New orders of the United States Steel Corporation for
the week ending May 16, totaling 236,000 tons, were at the
rate of 70 per cent of capacity. (Shown on Chart 5) This
represents an increase of 10,000 tons over the previous week,
and the highest volume since November 30. Operations of this
corporation have risen in recent weeks to about the same rate
8.6 that of the independent companies, a6 they usually do when
heavy steel products are being produced in large volume.
War buying increasing
The initial effect of the invasion of the Low Countries, ao-
cording to press reports, has been to step up Allied purchasing
of steel in this country during the past two weeks, this buying
now being concentrated in types of steel in the more advanced
stages of manufacture. A large share of the buying, however,
is reported by the Journal of Commerce to have been placed with
options permitting cancellations if the war should end within
a stated period of months. Despite this uncertainty, American
producers appear willing to book orders for semi-finished steel
or for ingote, but less willing to book orders for unusual
specifications which would be difficult to re-sell if orders
should be cancelled. Italy has also been a purchaser of both
steel and scrap.
The increased export demand and the impending volume of
orders for national defense, which threaten delivery difficul-
ties later in the year, have led to an advancing of railroad
equipment buying programs. New orders for freight cars amounted
to 1,210 unite during the week ended May 18. Nine new locomo-
tives were ordered last week, and inquiries have been put out
for 34.
The railroads, however, are in & much better position to
handle freight traffic than they were last fall, when & short-
age of cars was threatened. During the first four months of
1940, Class I railroads put 27,809 new freight cars into use,
the largest number in any comparable period since 1930.
Regraded Uclassified
299
Secretary Morgenthau - 5
New orders for machine tools continue to increase, par-
ticularly from aircraft makers, and delivery dates are being
set further ahead each week, according to reports from the
Cleveland and Cincinnati districts. The two large airplane
engine builders on the Eastern coast are already making heavy
machine tool commitments in connection with recent contracts
placed by the Anglo-French Purchasing Commission.
Because of the delivery situation on new machine tools,
the American Car and Foundry Company (in connection with its
recent shell contract) 18 concentrating at Buffalo all equip-
ment suitable for shell work that 18 not in use at other plants.
It is also inquiring for used machine tools, the prese reports.
Automobile production has started its summer decline.
Production last week totaled 96,810 units as compared with
99,030 in the previous week, elightly less than the usual
seasonal reduction. A sharp decline 18 in prospect for next
week, since the week includes a holiday falling on Thursday,
which will doubtless mean & complete shutdown in most plants
for the remaining days of the week.
Commodity prices reflect adverse war news
Commodity prices averaged substantially lower last week,
but showed strength at the end of the week. The movements were
irregular as traders oscillated between favorable and unfavorable
interpretation of war news. Food prices declined for the fourth
week in succession, while raw material prices cancelled the pre-
vious week's gain. (See Chart 6)
Current business news
Continuation of the recent upward turn in business activity
is evidenced by & further gain of .8 in the New York Times index
of business activity for the week ending May 18. As a result
of this third successive advance the index stood at 95.5 in the
week mentioned.
A substantial contra-seasonal gain in steel ingot pro-
duction again was the principal factor in the rise, although
a greater than seasonal increase in electric power production
and a contra-sessonal rise in miscellaneous freight carloadings
helped materially. On the other hand the favorable implications
of the rise in the combined index above mentioned were somewhat
Regraded Uclassified
300
Secretary Morgenthau - 6
offset by the fact that three components, "all other" car-
loadings, cotton mill activity and lumber production, showed
fairly noticeable declines. The decline in "all other" car-
loadings was due largely to a drop in loadings of coal.
The trend shown by the New York Times index was again
confirmed by Barron's index of business activity which rose
to 103.5 in the week ending May 18 from 102.3 in the previous
week.
Preliminary data thus far available for the week ending
May 25 reveal a slightly less than seasonal decline in auto-
mobile production and a continuation of the recent marked
contra-seasonal rise in steel ingot production which it is
now estimated will cause the adjusted index of steel produc-
tion to rise about 5.5 points.
TOE
INDICES OF NEW ORDERS
Chart
Combined Index of New Orders and Selected Components
1938
1939
1940
PERCENTAGE
POINTS
100.
160
150
150
140
140
130
130
Total (combined Index)
1036 - 100
120
120
110
110
YOU
100
DC
90
3
BO
70
70
to
60
Total excluding Steel and Textiles
Au
50
6
40
Steel Orders
30
20
TO
Textile Orders
À
o
%
D
N
D
J
,
M
A
M
J.
J
A
I
o
N
D
J
,
M
A
M
J
J
A
.
o
N
D
1938
1939
1940
BY los Tragery
His -
I as - C
Regraded Uclassified
WEEKLY ESTIMATES OF F.R.B. INDEX OF INDUSTRIAL PRODUCTION BA6ED
ON N.Y. TIMES INDEX
1923 . 25 = 100, ADJ.
1939
1940
J
F
M
A
M
J
J.
A
$
o
N
D
J.
F
M
A
M
J
A
$
0
N
D
PERCENT
PERCENT
130
130
125
125
120
120
115
115
110
110
F.R.B.
INDUSTRIAL PRODUCTION,
105
MONTHLY
105
100
WEEKLY ESTIMATES
100
95
95
90
90
85
85
80
80
J
F
M
A
M
J
J
A
S
0
N
D
J
F
M
A
M
J
J
A
5
o
N
D
1939
1940
MONTHLY ESTIMATES OF INDUSTRIAL PRODUCTION, BASED ON N.Y. TIMES
1937
1938
1939
1940
PERCENT
PERCENT
130
130
120
120
ESTIMATES
110
110
100
100
90
90
F.R.B.
INDUSTRIAL PRODUCTION
80
80
70
1937
1938
70
1939
1940
Regraded Uclassified
Chart 3
CONFIDENTIAL
INDICES OF NBW ORDERS AND INDUSTRIAL PRODUCTION
SHOWING APPROXIMATE UNFILLED ORDERS
303
1923 . '25 : 100
1932
1933
1934
1935
1936
1937
1938
1939
1940
YE*
PER
CENT
CENT
150
150
140
140
150
130
NEW ORDERS,
IN
PRODUCTION EQUIVALENT
120
110
110
100
100
90
90
60
80
2
70
F.R.B. INDUSTRIAL PRODUCTION,
E
60
UNADJUSTED
so
50
1932
1933
1934
1935
1936
1937
1938
1939
1940
PROCENTAGE
PERCENTAGE
POINTS
POINTS
Approximate Unfilled Orders
100
COMULATED DEVIATIONS BETWEEN
100
NEW ORDERS AND PRODUCTION
60
2
60
8
40
40
20
J2
o
-20
-40
+4,
-60
1934
1935
1936
1937
1938
1939
1940
1932
1933
#
Secretary of the Trainury
C. C 286
- - and -
Regraded Uclassified
Chart 4
CONFIDENTIAL
INDICES OF BASIC BUSINESS TRENDS COMPARED
304
WITH INDUSTRIAL PRODUCTION
1923 - '25 # 100, SEASONALLY ADJUSTED
PLK
CENT
PER
CENT
130
130
120
120
ESTIMATED BASIC DEMAND
110
110
100
100
90
90
INDUSTRIAL PRODUCTION, F.R.B.
80
80
70
1936
1937
1938
70
1939
1940
140
140
130
130
120
120
INDEX OF SALES
110
110
100
100
90
90
INDUSTRIAL PRODUCTION,
F.R.B.
60
BO
70
70
1936
1937
1938
1939
1940
"ALPRESENTS "OFFTAKE" OF MANUFACTURED GOODS, 10 PHYSICAL VOLUME
Office of The Secretary of the Treasery
Them of and -
C - 245 - A
Regraded Uclassified
305
STEEL INGOT PRODUCTION AND U.S. STEEL CORPORATION ORDERS
Chart 5
CONFIDENTIAL
1938
1939
MAY
JULY
SEPT.
NOV.
MARY
JAN.
1940
MAR,
MAY
JULY
10%
NOV,
JAN.
MAR,
MAY
JULY
SEPT.
NOV,
PER
GCNT
U.S. Steel Orders and Total Steel Output
160
(EXPRESSED in PERCENT or CAPACITY)
140
B
120
ORDERS, U.S. STEEL CORPORATION
IN TERMS OF U.S. STEEL CAPACITY
100
100
00
BO
TOTAL STEEL OUTPUT
is
60
40
40
20
JAI.
HM.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
20
MAY
JULY
SCPT.
NOV.
1938
1939
1940
lie
100
5teel Output
(EXPRESSED IN PERCENT OF CAPACITY)
a
ao
INDEPENDENT COMPANIES
8
60
40
$
U.S. STEEL CORPORATION
to
20
MAS.
MAY
JULY
SEPT,
NOV
JAN.
MAR.
MAY
JULY
sept.
NOV,
JAN.
MAR.
MAY
JULY
SCPT.
NOV4
1938
1939
1940
y
ITEM -
Treasury
1-48-8
Regraded Uclassified
30G
BUSINESS ACTIVITY AND PRICES OF RAW INDUSTRIAL MATERIALS AND FOODSTUFFS
e
1940
1939
1940
FEBRUARY
BARCH
APRIL
MAY
SEPT
HGV.
JAN.
MAN.
MAY
JULY
SEPT.
4
Il
18
25
3
10
17
24
31
7
14
21
28
3
12
19
26
PER
...
TT
PER
PER
PER
cove
CENT
DENT
CENT
(RUSTHESS)
(PRICES)
106
Weekly
152
Daily
124
124
106
148
BUSINESS ACTIVITY
NN.Y. TIMES, EST. MORMAL - 100 ADJ.
104
144
122
122
102
140
120
120
100
136
PRICES of Fisa INDUSTRIAL NATERIALS
PRICES OF
U.L.S. AUS. 1939 - 100
98
RAM INDUSTRIAL MATCRIALS
132
118
B.L.S. AUS. 1939 - 100
118
96
128
116
116
94
124
of
120
114
114
PRICES or FOODSTUPPS
90
6.6.5. AUG. 1939 - 100
116
112
112
BE
112
PRICES or FOODSTURES
AVG. 1939 - 100
66
108
110
110
64
104
ICE
106
a
100
00
SEP1.
96
106
NOV,
106
JAM.
MAI.
MAY
JULY
SEPT.
4
11
19
1939
25
3
10
17
24
31
7
14
21
26
5
12
IS
20
1940
FEBRUARY
MARCH
APRIL
MAY
1940
*rive DAY AVERAGE FOR PRICES
(Miling % Servebry of the Treasury
- States
C 310
Regraded Uclassified
TREASURY DEPARTMENT
307
INTER-OFFICE COMMUNICATION
DATE
May 27, 1940
TO
Secretary Morgenthau
FROM
Mr. Haas MA
Persons employed by the Work Projects Administration
totalled 1,970,000 during the week ended May 15, 1940, repre-
senting a decrease of 38,000 from the 2,008,000 persons
employed during the week ended May 8, 1940.
Attachments
308
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Weekly
United States
Week Ending
1939-40
Number of Workers
October 4
(In thousands)
October 11
1,834
October 18
1,875
1,899
October 25
1,902
November 1
1,901
November 8
1,929
November 15
1,961
November 22
1,987
November 29
2,024
December 6
2,075
December 13
2,123
December 20
2,144
December 27
2,152
January 3
2,160
January 10
2,190
January 17
2,222
January 24
2,244
January 31
2,266
February 7
2,288
February 14
2,306
February 21
2,319
February 28
2,324
March 6
2,324
March 13
2,319
March 20
2,312
March 27
2,288
April 3
2,204
April 10
2,162
April 17
2,118
April 24
2,093
May 1
2,059
May OR
2,008
May 15
1,970
Source: Work Projects Administration.
309
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Monthly
United States
Number of Workers
1937
(In thousands)
July
1,569
August
1,480
September
1,448
October
1,476
November
1,520
December
1,671
1938
January
1,901
February
2,075
March
2,445
April
2,582
May
2,678
June
2,807
July
3,053
August
3,171
September
3,228
October
3,346
November
3,287
December
3,094
1939
January
2,986
February
3,043
March
2,980
April
2,751
May
2,600
June
2,551
July
2,200
August
1,842
September
1,790
October
1,902
November
2,024
December
2,152
1940
January
2,266
February
2,324
March
2,288
April
2,093
Source: Work Projects Administration.
Monthly figures are weekly figures for the latest
week of the month.
They include certified and noncertified workers.
Regraded Uclassified
3.0
WORK PROJECTS ADMINISTRATION
Number of Workers Employed
United States
Monthly U.P.A. Employment
1936
1937
Wookly W.P.A. Employment
1938
1935
1940
41
1939
1940
or
MILLIONS
MILLIONS
MAA.
MAY
1941
WAY
AIRL
any
JAN
MAR
MAY
Way
REPT.
MORE
MAR,
-
If
TTT
or
WILLIONS
MARKERS
BORRERS
or
3.4
3.4
1.2
3.2
3,3
3.3
3,2
3,2
3,1
7.8
3.1
2.8
3.0
3.0
2.9
2.9
7.4
2.4
2.8
2.0
2.7
2.7
2.0
2.0
2.6
2.8
2.5
2.5
1.6
1.6
2,4
2.4
2.3
2.3
1.2
2.2
2.2
1-2
2.1
2.1
2.0
2.0
di
di
1.9
1.9
1.8
1.8
A
A
1.7
1.7
1.6
1,6
0
J
&
o
1.5
1.5
-
.
.
.
,
E
e
6
-
.
=
-
.
J
E
.
-
-
.
-
3
.
di
-
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAR.
-
MAY
JULY
SEPT.
NOV.
JAM.
NAM,
1333
1536
1937
1936
1039
1940
141
1939
1940
1941
source: MCAL PHOJECTS ADMINISTRATION
or % al Use Transary
- of - of -
1-221-82 B2
Regraded Uclassified
TRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO Secretary Morgenthan
FROM Mr. Cochran
Mr. Knoke telephoned 26 at 12 noon. He stated that as of May 27 the
Chase reported the following balances:
State Bank of Russia, cash account, $7,300,000
State Bank of Russia, letter of credit account. $5,500,000
Antorg. cash account, $1,000,000
Amtorg. letter of credit account, $1,600,000
Since speaking with me last, Mr. Knoke stated that there had been
four items of interest insofar " the Russian account was concerned. On
May 17. the National City Bank had paid $700,000 to the Chase for the ac-
count of the Russian State Bank, by order of the Crechoslovak National Bank
of Bratislava. Another payment of $500,000 had been made into the Russian
State Bank account with the Chase, by order of the Union Bank of Switserland,
Payments of this sort have frequently been made in the past, and are believed
to have been connected with Russian gold transactions, that 1a, the Swies
have bought gold from Russia and credited the proceeds to the Russian account
to this country, The Federal Reserve Bank of New York transferred $2,300,000
to the Bussian State Bank account with the Chase, by order of the B.I.S. The
principal out-payment WEB one of $1,000,000. representing a cable transfer to
the Skandinaviaka Bank, Stockholm.
With respect to Italian accounts. the principal item of interest today is
the fact that the Credito Italiano in New York drew a check on its account with
the Guaranty Trust and asked for payment in $100 notes. This is the first in-
stance of this kind reported with respect to Italian banking transactions. It
May be significant that funds in form for quick export are thus being obtained
in the form of United States currency. The check was for $250,000.
I mentioned to Mr. Knoke that Mr. McKeon's report for the week ended
May 15 showed an increase of $1,386,000 in German banking deposits in this
country. This resulted from a gain of $1,507,000 in the German deposits with
the Yokohama Specie Bank, against small decreases with other institutions.
Inoke stated that he had looked into the matter of German accounts this morning,
and found that the level was around $10,000,000, to which it had gradually de-
clined recently.
BMP
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
312
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
On Saturday, May 25, the Swedish Minister, accompanied by his Commercial
Counselor, Mr. Erickson, came in to see me. They mentioned the report that
appeared two days earlier in the New York Times in regard to German deposits
in the United States being transferred to Sweden. The Minister told me that
he had reported this matter to his Government, and had received a denial there-
of.
The Minister has today provided me with the attached copy of a memorandum
on this subject.
10ml.
LEGATION OF SWEDEN
WASHINGTON, D.C.
By wireless correspondence from Stockholm, Mr.
Otto D. Tolischus has reported to the New York Times that
Germany has liquidated most of her bank balances in the
United States, amounting to between 15 and 20 million
dollars, and has transferred them to the credit of Swedish
benks. The correspondence appeared in the New York Times
for May 23, 1940, under the headline "Nazi Bank Deposits in
U.S. Go to Sweden". According to official information received
from Stockholm, the Swedish Minister is authorized to say
that this statement is incorrect. The canital movemente from
and to Sweden have, since the beginning of this year, been
subjected to a. strict control, and no transfer, or tendency
thereto, of German capital from America to Sweden except of
& normal nature has been noticed during the last month.
Washington, D. C., May 25. 1940.
DUPT
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
314
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
Mr. Knoke telephoned me at 12 o'clock in regard to the attached cable-
gram dated May 25 from the Governor of the South African Reserve Bank, which
message had just been telephoned down from Mr. Knoke's office.
I told Mr. Knoke that my first reaction was that we should refuse to
purchase gold from the South African Reserve Bank delivered and held in South
Africa, pending shipment to the United States. Mr. Knoke presumed that we
would consequently continue to follow this policy, as established some months
ago at the outbreak of the war, but he submitted the question since circum-
stances were constantly changing. As we were speaking, the Secretary came in
my office and I posed the question to him. He confirmed that we should not
accept the gold in South Africa. Consequently, I advised Mr. Knoke to give &
reply, insofar as the purchase of gold was concerned, that the policy of the
Treasury was only to purchase gold delivered in the United States. I referred
him to earlier cablegrams of this type for the wording.
B.M.P.
315
CABLE
From: Pretoria
To: Governor, Federal Reserve Bank
of New York
Date: May 25, 1940
#19.
(1) We have often thought of sending you some of our
gold for safekeeping to be used in case of emergency
but out of consideration for other central banks we
have allowed them preference over limited shipping
space available.
(2) Should we require to lay down U. S. dollar exchange would
you be prepared to buy gold from us to be held earmarked for
your account pending shipment earliest suitable opportunity
if so what would be your terms?
(Signed) Postmus South African Reserve
Bank
(Rec'd. by phone from Mr. Knoke's Office
May 27. 1940 - ek)
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
316
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Official sales of British owned dollar securities under the vesting
order effective February 19:
No. of Shares
$ Proceeds of
Nominal Value
$ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
May
20
Nil
Nil
Nil
Nil
21
N11
Nil
Nil
Nil
22
Nil
Nil
Nil
Nil
23
Nil
Nil
Nil
N11
24
Nil
Nil
Nil
Nil
25
Nil
Nil
Nil
Nil
TOTAL FOR WEEK
Nil
Nil
Nil
N11
Sales from
February 22 to
May 18, incl.
1,312,630
45,946,097
1,407,500
1,173,286
TOTAL FEBRUARY 22
TO MAY 25. INCL.
1,312,630
45,946,097
1,407,500
1,173,286
Mr. Pinsent has heard from Mr. Gifford that sales of non-vested securities
for the week ended May 12 amounted to $2,500,000 and for the week ended May 19
to $1,500,000.
B.M.S
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
717
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Dr. Pnevolaky, Special Assistant to the Secretary of State, telephoned
no at 10 o'clock this morning in regard to the memorandum of May 24, from
the British Embassy, conveying a message from the Chancellor of the Exchequer
to Secretary Morgenthau. Dr. Pasvolaky discussed this communication with me,
since he vas to speak with Secretary Full shortly about it.
At 10:30 this morning, Kr. Pinsent telephoned me that another cable had
been received from London, saying that in view of the extreme urgency of the
catter, the Chancellor of the Exchequer would be grateful to know when he
can expect a reply to his message. I at once telephoned Pasvolsky again and
reiced him to expedite the matter as soon as possible in the State Department.
Pinsent hopes to hear from us today, and would still like to see the Secretary
of the Treasury, if at all possible. The principal purpose in seeing the
Secretary would be to receive from him personally the assurance that the
Secretary would oppose any move in this country to stop the sale by the British
and French Governments of dollar securities, if such a step be threatened in
retaliation for the British action in probibiting the sale of securities by
foreigners.
NM.8
Regraded Uclassified
THE SECRETARY OF THE TREASURY
WASHINGTON
May 27. 1940
MEMORANDUM TO THE PRESIDENT:
On June 15, 1940, the Treasury has a. maturity of $353,000,000
of 3-3/8 per cent bonds. It 1s getting close to the time when we
should begin to consider the refunding of this maturity as it 1e
not possible to pay it off in cash. Our working balance in the
general fund amounts at this time to $1,227,000,000, and on June 30
will be down to approximately $950,000,000. In view of the present
state of the market it would not be advisable to attempt a refunding
of this security into bonds. I suggest, therefore, that it be
refunded into a note maturing between three and five years. We have
outstanding a one per cent note maturing March 15, 1944, and 8 one
per cent note naturing September 15, 1944. It may be possible to
reopen one of these issues and offer the holders of the 3-3/8
per cent bonds the privilege of exchanging them for such notes. If
it does not seem advisable to reopen one of these issues, it will be
necessary to offer a new issue maturing within the five-year period.
I should like to got your approval to proceed with a refunding
program along these lines, a formal recommendation on account of
which will be made to you early next week.
Regraded Uclassified
319
Estimated working balance of the Treasury, amounts
of Treasury securities maturing, and balance of
borrowing authorization for period ending December 31.
(In millions of dollars)
Estimated
Treasury
Balance of
Working
Securities
Borrowing
For Month Ending
Balance
Maturing
Authorization
(within the month)
May 24th
$1,227
---
$2,050
June 30th
950
$ 353
1,703
July 31st
896
-
1,492
August 31st
906
---
1,191
Sept. 30th 1/
1,349
---
664
October 31st
1,139
---
576
November 30th
961
---
290
December 31st
769
737
235
1/ Includes $500M new money for September fifteenth.
Note: These figures do not include any estimate on recapture
of capital funds from corporations and credit agencies,
nor anything for nov taxes.
May 27. 1940
MEMORANDUM TO THE PRESIDENT:
On June 15, 1940. the Treasury has a maturity of $353,000,000
of 3-3/8 per cent bonds. It If getting close to the time when ve
should begin to consider the refunding of this esturity as it is
not possible to pay it off in cash. Our working balance in the
general fund amounts at this time to $1,227,000,000. and on June 30
will be down to aporoximately $950,000,000. In view of the present
state of the market it would not be advisable to attempt 6 refunding
of this security into bonds. I suggest, therefore, that it be
refunded into a note maturing between three and five years. To have
outstanding a one per cent note maturing March 15, 1944. and a one
per cent note maturing September 15, 1944. It may be possible to
reopen one of these issues and offer the holders of the 3-3/8
Der cent bonds the privilege of exchanging them for such notes. If
It does not coon advisable to recpen one of these issues, it will be
necessary to offer a new issue naturing within the five-year period.
I should like to get your approval to proceed with B. refunding
program alone these lines. a formal recommendation on account of
which will be made to you early next -
swfr
Regraded Uclassified
321
Estimated working balance of the Treasury, accunts
of Treasury securities naturing, and balance of
borrowing authorization for period ending December 31,
(In millions of dollars)
Estimated
Treasury
Balance of
Vorking
Securities
Borrowing
For Month Ending
Balance
Maturing
Authorization
(within the month)
May 24th
$1,227
I
$2,050
June 30th
950
$ 353
1.703
July 31st
896
I
1,492
August 31st
906
---
1,191
Sept. 30th 1/
1,349
I
664
October 31st
1,139
-
576
November 30th
961
I
290
December 31st
769
737
235
1/ Includes $500M new money for September fifteenth.
Note: These figures do not include any estimate on recapture
of capital funds from corporations and credit agencies.
nor anything for new taxes.
key 27. 1940 swid
Regraded Uclassified
322
HSM
GRAY
Batavia
Dated May 27, 1940
Rec'd 10:34 a. m.
Secretary of State,
Washington.
May 27, 2 P. m.
One. Director of Economic Affairs last night
announced exchange arrangements made as a result of
the Dutch East Indite adherence in principle to the
Anglo-French monetary agreement. Telegraphic transfer
rates Effective today fixed as follows: pound sterling
buying 7.55 selling 7.65 guilders; American dollar buying
1.875 selling 1,895 guildera; Japanese yen buying 437
8th selling 451 5th guilder cents. These rates are based
on the official pound value of dollars
4.02 and not on the "black pound" value of about $3.25.
In order to avoid depreciation of the guilder by trens-
actions in "black younds" it 15 forbility to possess,
deal in or quote exchange rateo for such pound. The
monetary agreement is to apply only to exports and imports
for their own use between countries belönging to the
agreement.
Two. The director stated that the measures were
taken to prevent the flight of capital, to Enable the
country
323
hsm -2- May 27, 2 P. m., from Batavia
country to utilize its capital strength and to put its
financial resources at the disposal of the Allies. More-
over, the Netherlands Indies Export position 1s ao strong
that maintenance of the Exchange value of the Netherlands
Indian guilder in relation to all currencias presents
no difficulty. Income from shipping now accruing to the
Dutch East Indies is another important factor. Local
experts have conferred with British authorities at Singa-
pore regarding through routing of cargoes in order to
prevent the agreement disturbing direct commercial rela-
tions with third parties in non-sterling countries.
Three. Ordinances will bE issued as soon as possible
to put arrangement into full Effect. Translations will bE
forwarded by air mail.
DICKOVER
RR
Regraded Uclassified
324
lw
GRAY
Berlin
Dated May 27, 5 p.m.
Rec'd 4:27 p.m.
Secretary of State
Washington
1531, May 27, 5 p.m.
My No. 1443, May 21, 2 p.m.
FOR TREASURY FROM HEATH AND ALSO FOR THE INFORMA-
TION OF THE DEPARTMENT.
Official German quotations of rates for Dutch
and Luxemburg currency have recently been resumed.
The rate on May 25 for the Dutch guilder was 1.327
marke and for the Luxemburg franc 10.45 pfennigs
(both the same ae on May 9 the day before the invasion).
Quotations for Belgian currency have not been resumed.
Exchange quotations for Danish and Norwegian currencies
had been discontinued for only one day, April 9.
The Norwegian Central Bank according to an announorment
in the German press is continuing operation in the
Norwegian area occupied by the Germane. Its banknotes
which are legal tender in that ATER are officially quoted
in Berlin at 56.82 pfennige for one crown as compared
with
Regraded Uclassified
325
lw -2- No. 1531, May 27, 5 p.m. from Berlin
with 56.65 on April 8. The above exchange rates of
Norwegian, Dutch, and Luxemburg currencies which apply
to ordinary business transactions with Germany differ
considerably from the rates for Reichskreditkassen
script (BEE my telegram under reference). The latter
are rounded off for convenience sake and apply only
to Reichskreditkassen script which may bE used by
German troops, military, and administrative authoritise
only for expenditures within the occupied areas.
HEATH
NPL
326
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: May 27, 1940, 6 p.m.
NO.: 907
FOR THE TREASURY.
Reference - telegram of May 25, No. 882 from the
Embassy, containing Rueff's remarks.
As the Embassy has reported in previous telegrams,
there 1s a considerable amount of bitterness in certain
financial circles in France because of the way the
control of exchange 1s being handled by the British.
The French are of the opinion, and there 18 much justi-
fication for it, that the bond between the franc and
primarily
sterling is/responsible for the appreciable margin between
the free and official rates of the franc.
END SECTION ONE.
BULLITT.
EA:LWW
Regraded Uclassified
327
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 4:35 p.m.
Secretary of State
Washington
907, May 27, 6 p.m. (SECTION TWO )
It is therefore significant that Frsideric Jenny devoted
his article yesterday in the sgim-official LE TEMPS to a
discussion of the possibility of severing the link between
the free market quotations of the franc and the pound and
to the measures which might bE taken to prevent the
depreciation of the franc on free markets.
HE commences by pointing out that the franc and the
pound which had fluctuated together on free markets by
from thirteen to fourteen percent below the official rate
dropped together by about twenty percent at the time of
the German invasion (this decline hE attributes to specu-
lation rather than to any real weakness in the currencies).
"On May 22, however, a curious phenomenon occurred: the
rate of the franc on NEW York dropped from 1.80 cents to
1.77 while the pound rose from 3.19 dollars to 3.211 dollars.
(END SECTION TWO)
BULLITT
3FL
Regraded Uclassified
328
RDS
GRAY
Paris
Dated May 27, 1940
Rec'd 5 p.m.
Secretary of State,
Washington.
907, May 27, 6 p.m. (SECTION THREE).
As a result of this divergent Evolution the pound franc
parity on the free market rose to 181.63 francs EVEN
though the official parity is fixed as WE know at 176.625
francs." This disparity was crased the following day and
hence "was not of great importance." "Nevertheless, it
showed that the rate of the pound Expressed in terms of
francs could differ abroad, at least temporarily, from
the fixed of ficial rate adopted by the authorities in
Paris and London; that in other words the Existence of
this fixed rate was not sufficient to Enforce a strict
parallelism between the free rates for the two currencies."
Jenny then points out that the British authorities
undoubtedly realize that the "monetary solidarity" Estab-
lished by the French and British Governments on official
grounds "must not prevent one or the other from following
with respect to the free market an exchange policy which
it considers to be best suited to the national interests
involved." (END SECTION THREE)
BULLITT
NPL
Regraded Uclassified
329
CK
GRAY
Paris
Dated May 27, 1940
REc'd 4:37 p.m.
Secretary of State
Washington
907, May 27, 6 p.m. (SECTION FOUR).
"Supposing that this theory is rational -- and at first
glance nothing would indicate that it is not -- it would
not bE very difficult for each of the two governments to
do away with the strict agreement between the respective
fluctuations of their currencias in relation to the dollar".
"This is meraly a question of prvention arbitrages -- in
other words Exchanges -- of francs against pounds or the
reverse from automatically adjusting the parity of the free
Exchanges at NEW York, the most important of the fore' in
markets, to the official parity. For these arbitrage are
only possible if the authorities of one of the countries
place no restrictions on the delivery of their national
currencies against those of the other."
Such a practice Jenny feels would not bE contrary to
the Franco -- British monetary agreement. The French require
pounds and the British francs for the settlement of commercial
operations.
BULLITT
EMB
Regraded Uclassified
330
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 4:27 p.m.
Secretary of State
Washington
907, May 27, G p.m. (SECTION FIVE)
There is little danger that the francs and pounds thus far
obtained will be offered on the free market and sold against
dollars or other "strong" currencies. "This denger only
Exists when neutrals holding English or French currencies
try to exchange one for the other in Paris or London at
the official rate". The Bank of England he considers "is
not inclined to lend itself to operations of this type
for example to furnish a Swiss or an American Bank with
pounds against francs at the rate to 176.625 francs". HE
asks, however, whether the French policy is not EXCESSIVELY
liberal," If so the pros and cons of such a policy must bE
weighted with care."
BULLITT
E.G
Regraded Uclassified
331
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 4:30 p.m.
Secretary of State
Washington
907, May 27, 6 p.m. (SECTION SIX)
Having established the feasibility of divorcing the
free market quotation of the franc from that of the sterling
and having shown that this would not involve a contravention
of the monetary agreement Jenny turns to the problem of
preventing a depreciation of the "free" franc.
"The question of knowing up to what point the res-
pective monetary tactics carried on in Paris and in London
in regard to foreign markets should agree and in what
measure it is to their interest that they remain independent
of Each other forms, however, only one aspect of the more
general problem of the defense of the free exchange".
After summarizing the dangers involved in the depreciation
of the franc on the free market he says that there is only
one way to combat this decline. "It is necessary to impede
the supply of national currency flowing to NEW York or at
least to reduce the volume in every way possible."
BULLITT
EMB
Regraded Uclassified
332
MP
GRAY
Paris
Dated May 27, 1940
Rec'd 4:41 P. m.
Secretary of State,
Washington
907, May 27, 6 P. me, (SECTION 3EVEN).
HE asserts that "necessary payments must be made
with foreign Exchange furnished by the Foreign Exclange
Office and not with francs since the latter might sub-
sequently be sold on the NEW York market or Elsewhere by
those receiving them".
Jenny states that with respect to settlements in
non-compensation agreement countries, "an apparently
rational regime was conceived and made Effective by the
arrete of November 30 which established foreign accounts
in francs" (1.E., franc balances of non-resident foreigners).
"The francs deposited in such accounts were properly speak-
ing External francs which could bE converted into foreign
currencias at the official rates through the Fortign
Exchange Office.' II Jenny points out that such conversions
could bE Effected without difficulty so long as the free
rate remained stable and only slightly below the official
rate.
BULLITT
EMB
Regraded Uclassified
333
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 6:45 p.m.
Secretary of State
Washington
907, May 27, 6 p.m. (SECTION EIGHT)
"But after the franc dropped on NEW York with the pound
apparently another policy was adopted". Persons holding
the External francs which had been transferred to these
foreign accounts Encountered more and more difficulty in
attempting to convert them into foreign Exchange at Paris
and accordingly adopted the custom of selling their franes
in NEW York. These france finished by being convertible
in theory alone. They are now merely transferable and hence
more and more of them are being offered on the free markets.
"HE siys that although these External francs cannot bE
converted without permission of the Foreign Exchange
Office" this provision was merely introduced to prevent
any abuse in the system. HOWEVER, refusals to grant permits
"which ought to bE the Exception have become almost the
rule".
BULLITT
EMB
Regraded Uclassified
334
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 6:30 pam.
Secretary of State
Washington
907, May 27, 6 p.m. (SECTION NINE)
HE feels that foreign accounts in francs are only
advantageous when the francs contained in them may actually
bE converted into foreign Exchange at the official rates
for them they will not bE sold on the free market. When
"convertibility" no longer exists foreign accounts in
franos are actually disadvantageous since they are a
source for the sale of francs on the free markets and
henoe lead to the depreciation of the franc on successor
markets.
In conclusion Jenny states thattwo solutions of the
problem are possible. The authorities may either revert
to the original policy regarding foreign accounts in francs
or they may suppress such accounts after having reabsorbed
the several billion francs now in them. The adoption of
either policy he feels would lead to 9. rapid disappearance
of franc sales on foreign markets. (Rueff told the Counselor
of Embassy yesterday that the amount of francs on the free
market approximates three billion).
BULLITT
EMB
Regraded Uclassified
335
CK
GRAY
Paris
Dated May 27, 1940
Rec'd 5:05 pam.
Segratory of State
Washington
907, May 27, 6 p.m. (SECTION TEN)
A decree published in yesterday's Journal Official
provides that the "property rights and interests" in
France or French possessions belonging to Balgian nationals
residing in Enemy or occupied territory must be declared
and authorizes the government to sequestrate such holdings.
Similar measures have already been introduced with respect
to Dutch, Luxemburg and Norwegian holdings (please SEE
Embassy telegram No. 796, May 21, 7 p.m.) and to those of
Polish, Denish and Caschoslovak nationals (please 3EE
Embascy's telegram No. 542, April 29, 6 p.m.).
Deposits in ordinary (private) savings banks during the
period April 16 -- 30 totaled 140,000,000 francs and with-
drowals 27,000,000. Since January 1 deposits in these banks
EXCEEDED withdrawals by 1,227,000,000.
The only outstanding feature of the market today was
the weskness of internationals, Suez losing 850 points.
French securities showed fractional goins and losses.
(END OF MESSAGE)
BULLITT
EMB
Regraded Uclassified
336
RDS
GRAY
Milan
Dated May 27, 1940
Rec'd 1:30 p.m.
Secretary of State,
Washington.
42, May 27, 5 p.m.
Market index 208.60. Volume 98,200.
Quotations fluctuated during session but closed
below Saturday levels under continued selling pressure.
SHOLES
RR
TREASURY DEPARTMENT
337
INTER OFFICE COMMUNICATION
DATE May 27. 1940
TO
Secretary Morgenthan
FROM Mr. Cochran
CONFIDENTIAL
The foreign exchange market was quiet today. Sterling, after opening
at 3.19, moved within a narrow range all day and closed at 3.19-1/4.
Sales of spot sterling by the six reporting banks totaled £403,000.
from the following sources:
By commercial concerns.
& 94,000
By foreign banks (Europs, South America and Far East)
£ 309,000
Total
E 403,000
Purchases of spot sterling amounted to £328,000. as indicated below:
By commercial conserns
£ 50,000
By foreign banks (Far East)
R 248,000
Total
& 328,000
The following reporting banks sold cotton bills totaling £22,000 to the
British Control on the basis of the official rate of 4.02-1/21
& 19,000 by the Quaranty Trust Company
2,000 by the Bankers Trust Company
1,000 by the National City Bank
e 22,000 Total
The Bank of Manhattan reported that it had purchased £17,000 for spot
delivery from the British Control at 4.03-1/2. The funds will be used to pay
for shipments of rubber.
Developments in the other currencies were as follows:
The French franc moved within e narrow range and closed
at .0181.
The Sviss franc vas steady and closed at .2242.
It closed at & discount of 20-1/2%, as compared with Saturday's
The Canadian dollar experienced an improvement today.
closing quotation of 21-7/8%
Regraded Uclassified
333
- - CONFIDENTIAL
The lira and the reichmark closed at .0505 and .4000
respectively. showing no change from Saturday's final rates.
The yuan quotations received from Shanghai vere unchanged
at 5-1/21 against the dollar and 4-1/8d in terms of the British
pound.
The Guban poso improved further to 9-5/16% discount. The
Mexican peso vas unchanged at .1672.
For the first time since May 9. the Bank of England published official
buying and selling rates for the Jeva guilder. Today's quotations wore based
on a middle rate of 7.60 Java guilders to the British pound. It will be re-
called that this was the rate made public last Thursday by Dr. Loudon, Nether-
lands Minister, in his announcement that the Netherlands Government had joined
the British-French monetary agreement. According to a United Press despatch
received today from Java, the Office of Economic Affairs announced that the
Dutch East Indian Wave guilder" vas pegged at 1.57-1/2 to the U. 8. dollar,
equivalent to 53-1/30. This rate vss also contained in Dr. Loudon's statement
of last vesk.
There vere no gold transactions consumnted by as today.
The Federal Reserve Bank of New York reported that the Guaranty Trust
Company, London, shipped $507.000 in gold from England to its head office at
New York, for sale to the U. S. Assay Office.
The State Department forwarded to us cables stating that the following
gold shipments would be made:
$ 6,374,000 from Anstralia, shipped by the Commonwealth Bank of Australia,
Sydney, to the Federal Reserve Bank of San Francisco.
203,000 from Australia, chipped by the Bank of Yes South Value, Sydney,
to the American Trust Company, San Francisco.
28,000 from England, shipped by the Westminster Bank, London, to the
Irving Trust Company, New Tork.
$ 6,605,000 Total
The two shipments coming from Australia vill be sold to the U. 8. mint at
San Francisco, and the one being sent from Ingland will be sold to the U. 8.
Assay Office st In York.
The gold price in Boabay today worked out to the squivalent of $35.99.
up 51%
The Bonbay spot silver quotation advanced the equivalent of 3/44 to 45.86#.
at the quotation market vas rate for sterling, were 32.08# and 31.12 respectively. vm equivalent On
forward In London, 21-13/16d, off 7/16d. The U. 8. equivalents, calculated
the price fixed for spot silver use 22-5/164, off 1/8d. The
the basis open of the official sterling-dollar rate, the spot price
to 40.564.
Regraded Uclassified
339
- 3 - CONFIDENTIAL
Handy and Harman's settlement price for foreign silver was 35-3/84. up
1/8# from Friday's quotation. The Treasury's purchase price for foreign
silver vas unchanged at 35#. It vas reported that Handy and Harman purchased
200,000 ounces of silver from & Canadian concern at 35-1/24.
The only purchase of silver made by us today consisted of 175,000 ounces
from the Bank of Canada under our regular monthly agreement. 80 far this
month. we have bought 1,135,000 ounces of silver from that source, as compared
with the agreed monthly limit of 1,200,000 ounces.
In a report from the Federal Reserve Bank of New York showing deposite
for the account of Asia as reported by the New York agencies of Japanese banks
on May 22, such deposits totaled $51,322,000, a decrease of $227,000 since the
last report as of May 15. Included in this total were $28,460,000 in deposite
with the Tokohama Specie Bank, New York, made by its branches in China, and
deposite of $13,474,000 made by the head office and Japanese branches. The
overdraft of the head office and Japanese branches on the books of Tokohama's
New York agency vas $96,361,000. an increase of $4,536,000 since May 15.
76.ml
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
340
INTER-OFFICE COMMUNICATION
DATE May 27, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Knoke asked me by telephone today if I could assist him in sending
confidential messages in regard to "cable tests" to the National Bank of
Belgium in Paris; the Bank of France in Paris; The Netherlands Government
in London; the Bank of England in London: and the National Bank of Switzerland
at Bern.
I talked with Mr. Harry Havens of the State Department, who has agreed
to permit these messages to go in sealed envelopes addressed to the respective
banks, provided Mr. Knoke addresses a letter either to the State or Treasury
Department. explaining the contents of the envelopes. The envelopes would
then be forwarded through diplomatic pouch to Paris and London, with appropriate
instructions to their Ambassadors in those cities.
D.M.P.
Regraded Uclassified
GROUP MEETING
May 27, 1940
341
2:30 p.m.
Present:
Mr. Gaston
Mr. Schwarz
Mr. Young
Mr. Foley
Mr. Graves
Mr. Haas
Mr. Harris
Mr. Sullivan
Mr. White
Mr. Viner
Mr. Cochran
Mr. Daniel Bell
Mr. Charlie Bell
Mrs. Klotz
H.M.Jr:
I have a very important cable here, secret,
so I wish you would be very cautious about
it.
"Madam T. V. Soong, accompanied by her children,
named Maryjane and Kathryn, left for the United
States via the Clipper from Hong Kong, on May 24.
They will transfer at Honolulu to the Matson Line
Steamer "Lurline". T. V. Soong would appreciate
your aid in keeping the arrival of his wife and
children secret upon their arrival at Honolulu
and San Francisco. He is very anxious to escape
publicity. Mrs. Soong's name on the passenger
list is "Laura Chang", but the passport of herself
and children is in the name of Soong."
What I want to know is, do two Soong's make a
White?
Sullivan:
What I want to know is if the name of the second
is Kathleen.
H.M.Jr:
Kathryn. Seriously, who wants to be nurse to
the two Soong children?
D. Bell:
How old are they?
H.M.Jr:
Seriously, who wants to play nurse?
Gaston:
In preventing publicity?
H.M.Jr:
Is it shipping?
Gaston:
Yes, I think it 18 shipping. I think it is
Basil Harris.
Harris:
I will be glad to.
Regraded Uclassified
342
- 2 -
Haas:
You can look up the age afterward.
H.M.Jr:
Well, Merle, it is 8. Foreign Department thing.
See what you can do about it.
D. Bell:
It is a stabilization problem.
H.M.Jr:
This thing here about Dr. Mead -- not yet. Did
that thing go all right on the machine tools?
Schwarz:
Fine. They are making it on a 100% cooperation
basis. Mr. Burt, as he went out, used that
phrase.
H.M.Jr:
What phrase?
Schwarz:
100% cooperation was offered by the industry to
the Government.
H.M.Jr:
I see he also said he was going to put his teeth
into it.
Schwarz:
Right, which he learned from you.
E.M.Jr:
I hope his teeth are as good as mine. I mean, I
hope his teeth are his teeth.
Klotz:
Yes, not store teeth.
H.M.Jr:
That is what I was trying to get over.
Oh, Dan, what a razzing I took from the President
on this memorandum of yours. Oh babyl He said
he was going to call me 6. liar, but then he saw
I didn't sign it 30 he said he couldn't call me
that. He said I was smart not to sign it. He
claims we can't drop as much as you claim we can,
$1,227,000.00 down to $950,000.00. Fe thinks
that you forgot the June 15 tax returns.
D. Bell:
No, I didn't. The U. S. Savings Bonds are in
there, too. That is & net picture.
H.M.Jr:
We can go ahead and prepare for a refunding note
for note providing conditions are OK. I will
keep this, but he did give me an awful razzing.
I an serious in trying to get somebody to go
into Procurement and take the place of Collins,
who 1s resigning on the first of June. I can
get the services of Don Nelson of Sears Roebuck. Now,
343
- 3 -
Don Nelson -- I don't know him but they say he
was the only man that C.I.O. and A.F. of L.
would agree on when the President offered him
the job of --
Foley:
Conciliator?
H.M.Jr:
Head of the Labor Board or something.
D. Bell:
Chairman.
H.M.Jr:
Something. A few people could inquire around
town about Don Nelson, would you all inquire?
He was here -- he liquidated NIRA. McReynolds
1s already asking Leon Henderson, so that source
1s covered. He is Executive Vice President of
Sears Roebuck.
D. Bell:
Larry Martin ought to know him real well.
H.M.Jr:
Would you people sort of -- do you know anybody
out in Chicago?
Viner:
Yes. He is a well-known person in town. I
don't know him, but I know of B. great many
persons who will know him, and I can get 8.
line on him.
H.M.Jr:
I am to hear this afternoon whether he is willing
to come.
No. 1 Bell on the roll, I mean this Bell
(Charles Bell), what have you got?
c. Bell:
Everything is in order, Mr. Secretary.
H.M.Jr:
How about friend Norman?
C. Bell:
We are keeping one jump ahead of Dr. Mead and
his staff.
H.M.Jr:
Somebody has taken very good care of him, and I
guess it is you. Mr. McReynolds went out of his
way to say that he is working purely on this
other stuff and you have been running this shop
and he said some very nice things about you,
which I have no reason to contradict. Norman
will be back next Monday?
C. Bell:
June 3rd.
H.M.Jr:
Have you heard from him?
C. Bell:
No, sir, not directly.
Regraded Uclassified
344
H.M.Jr:
This thing in Hot Springs must be some place.
The other Bell has been down there. Now
Norman Thompson went down there. Did you
send Norman Thompson down there?
D. Bell:
I suggested it to him. I didn't send him, but
I heard from the people who run the place that
he was there.
H.M.Jri
I'm going to get everything off my chest. It
would be unfair to give you fellows -- a little
birdie tells me you have run into a snag with
Pratt & Whitney. I am trying to look cross-eyed.
Foley:
We are not getting much cooperation from them.
We have written up the agreements insofar as
Curtiss-Wright is concerned and their lawyers
have OK'd it, and when Mr. Vaughan comes down
tomorrow --
S.M.Jr:
He isn't coming tomorrow because I am not ready
for him.
Foley:
Whenever he comes, I think he will tell you that
the agreement is all right. of course, it is
necessary to determine certain things, but we
can't do that as lawyers. They will have to be
negotiated, and they can be inserted, B. few
blanks in the contract. Now, the other people
haven't cooperated at all. They have sent us
a letter which 18 very inconclusive and the
lawyers have refused to come back. They say
there is B. Board meeting today and they have to
be present at the Board meeting and all that
stuff.
8.M.Jr:
That is true.
Foley:
But they don't need their lawyers at the Board
meeting. We are going ahead and writing the
agreement the best way we can without their help.
Well, I didn't know that. If I had known that,
I would have let them come down tomorrow as 1s,
I think we had better close up that licensing
thing and let them come on down, do the licensing
thing 8.5 of tomorrow.
Regraded Uclassified
345
- 5 -
H.M.Jr:
Now, I told the President -- this was my idea,
not his -- that inasmuch 88 other Government
agencies will follow this form, I would like
Bob Jackson to see this form.
Foley:
Well, I have down here to ask you if it would be
all right for us to invite representatives from
the Judge Advocate General's Office to come in
because of the Army and Navy.
H.M.Jr:
Swell, and somebody from --
Foley:
Somebody from Justice.
H.M.Jr:
Done. But have a little meeting before we meet
with the Curtiss-Wright people so we don't have
an argument beforehand.
Foley:
I will call them as soon as I leave here.
H.M.Jr:
Here is the point. You know what has happened
in the case of the British, the licensing. "It
18 yours, and when the war is over, we will talk
to you about it, but in the meantime, when you
receive the plans, the license is yours.'
Sullivan:
On the Rolls-Royce?
H.M.Jr:
Yes. The fact -- when the plans are put in your
hands, you have the license for the Rolls-Royce.
Sullivan:
I think when Pratt & Whitney get down here they
will be talking Packard.
H.M.Jr:
I am not in any frame of mind to bargain with any
of these fellows. I want the licenses, and I am
not going to bargain.
Sullivan:
Just the bare licenses can be gotten all right.
H.M.Jr:
Well, I want the licenses; and naturally if they
say they want Packard and Packard works out all
right -- but I am not going to have them tell me
to whom to reissue the license.
Sullivan:
I don't think they want to do that.
Foley:
Well, they need instructions from above. The
lawyers do, because --
H.M.Jr:
Well, we will have these fellows down tomorrow.
Wilson is at eleven and Vaughan at three.
Regraded Uclassified
346
- 6 -
Now, Harold?
Harry, anything?
White:
None of it has to be answered, and I am afraid
that you will have to make the decision as between
two, because only you know all the facts on this.
H.M.Jr:
You flatterer, you.
White:
They are not such important facts as to be flattery.
D. Bell:
He took it back.
White:
This is the answer to Grady. I think this will
simplify it. This is the one that I approved and
the one that I think Jake Viner approved, and I
don't know how Danny stands on both of these.
You can read them both.
H.M.Jr:
Has Danny seen both of them?
White:
Yes.
D. Bell:
This is the basis that we discussed in Cabinet
the other day, as I understand it, and the
President said that he wanted to purchase a lot
of strategic war materials, and he wants Jesse
Jones to handle them and he didn't want any
gold or any agricultural products tied up with
it. Now, I understand that Wallace has seen the
President, and he has probably changed his mind.
H.M.Jr:
Harry Hopkins was on the boat last night.
D. Bell:
You think so?
H.M.Jr:
He tucked the President in bed.
D. Bell:
You think he won, then?
H.M.Jr:
I think so.
D. Bell:
I don't know which side Harry is on.
H.M.Jr:
Well, I have agreed with Hopkins to go the
Hopkins way.
D. Bell:
Which is that?
7
247
S.K.Jr:
Well, I don't know. The Hopkins way is the
opposite from the Wallace way. Now, which
is the Wallace way?
Klotz:
You are a help.
D. Bell:
It is the short letter, I think, that you want
to sign in that case. My objection to the long
letter is that it 18 a typical agricultural
letter where they try to get the President to
commit himself on B. program which I am not sure
he wants to be committed on.
H.M.Jr:
Why do I have to write to Grady at all?
White:
Grady's letter to the President WAS sent to you,
and what complicates the matter is that he sent
instructions to Secretary Hopkins and Secretary
Wallace to contact the Treasury to get what
apparently is & joint agreement on an answer
and Agriculture and Commerce were down here,
and I think that Commerce is reconsidering their
position, because Commerce feels that maybe
Agriculture is correct in the statement that
Agriculture's position doesn't in any way hinder
Hopkins' program. It is something additional.
S.M.Jr:
Look, I have got ten minutes to EO around the
ròom, and I can't assimilate it.
White:
Then there is another suggestion in that, and
then with your permission let's not answer this
letter at all. That is another alternative.
W.M.Jr:
That has happened before.
White:
Let's just postpone it.
I am for that.
D. Bell:
You weren't signing this, it was the President's
letter.
White:
But we were to draft a letter for the President.
If wa just postpone the thing, it may iron itself
out.
H.W.Jr:
I am sure it will. I think your third letter is
the best one.
D. Bell:
I agree with that.
Regraded Uclassified
348
- 8 -
White:
With your permission, I would also like to tell
both Agriculture and Commerce that the thing 18
on the table for awhile.
H.M.Jr:
No, don't tip your hand. Don't tell them anything
White:
Well, it isn't very fair with them. They have
been right with us on this, and they are supposed
to have collaborated in the preparation of this
letter.
H.M.Jr:
Why not tell them I am & neutral? Say I em
studying the matter. How is that? Is that
being fair?
White:
Yes, I take it you are.
H.M.Jr:
Anything else!
White:
That is all.
H.M.Jr:
Okay. All right, Harry, I'm glad you are feeling
so well. Did you have a little tennis yesterday?
White:
No, the fields weren't open.
Foley:
Fields?
White:
I mean the tennis courts. I play the way I --
did you ever see a good chess player playing
on five or six boards at the same time? That
is the way I play tennis.
Harris:
We will have an American ship in Galway on the
fourth of June. We think we will have another
ship in Bordeaux about the eighth or ninth of
June. Those are probably the last two American
ships that will come out; and if for any reason
you have got records or gold or possessions or
anything you want to get out, they might do it
at bargain prices.
H.M.Jr:
What ships are these?
Harris:
Well, one is the "Roosevelt" and the other isn't
settled yet. It may be B. larger ship.
H.M.Jr:
Have you got a memorandum for me on that?
Harris:
No. I have three other memos that just pertain
to --
Regraded Uclassified
349
- 9 -
H.M.Jr:
What are those two ships? I want to carry it in
my mind.
Harris:
One is the "President Roosevelt".
H.M.Jr:
She has gone to Ireland, hasn't she?
Harris:
She left Friday. The other one is going to
Bordeaux. They haven't determined just what
ship it will be, but it may be one of the
largest ships.
H.M.Jr:
That is what Feis is fussing about. Can they
get any gold over to Ireland?
Cochran:
They could.
Harris:
Whose gold would it be?
H.M.Jr:
England's.
Harris:
I don't think they would touch it.
H.M.Jr:
Why?
Harris:
I don't know. I think the State Department would
object to taking anything on there that isn't
American property.
Viner:
American Government property.
H.M.Jr:
Well, I will buy it.
Harris:
That is all right.
H.M.Jr:
Well, Mr. Hull called me. I haven't had a chance
to work with Mrs. Klotz because she has been so
busy. I have got a lot of memoranda here. One
of the things Mr. Hull called about, he is fussing
about this gold. I don't know what we can do.
D. Bell:
That is the English gold?
H.M.Jr:
Yes.
Cochran:
I believe it will have to be convoyed.
H.M.Jr:
Okay.
George?
- 10 -
Hlots:
You have just got five minutes.
Harris:
I will ive you a memorandum on that second boat
as soon as it 18 fixed, Mr. Secretary.
Right.
Dans:
You got excellent response to your wires.
1.1.Jr:
You mean on the --
Has:
Engines and the planes. There is only one place
I am held up, and you probably couldn't guess.
1.5.00
What is that?
Eeas:
The Army Air Corps. I just got word from them
that I couldn't get the deliveries for last week.
They wouldn't be available until June lst, so I
got hold of this Colonel Powell over there, and
it 1s incredible. They said they had sent a
teletype out to Wright Field, and they sent B.
message back that it wouldn't be available. I
asked him who ran Wright Field. lie has had to
bear down on them & bit. I don't know whether
he is giving me the run around or whether I ELIM
going to get it when I get back in the office
or not.
require
Didn't Glenn Martin come through?
hasst
All the big plants, but the full reports -- and
the sad part is I could have gotten it direct
from the company, but they told me the would ret
it for me 80 I said in the wires to the companies
to omit the Army and Navy Contracts.
8.V.Jr:
If there 18 any trouble, Louie Johnson is coming
over to see me at four. If you haven't got It by
four, give something to McFay by five minutes to
four.
linea:
Just as I left the office he promised to get 1:.
M.W.Jr:
Philip?
Young:
No problems.
T.N.Jr:
How are machine tools, Chick?
Schwarz:
Doing fine.
Regraded Uclassified
351
- 11 -
H.M.Jr:
All right. Do you know one machine tool from
another? That Department of Commerce fellow
was a great fellow, wasn't he?
Schwarz:
They got their statistics from Customs, all right.
H.M.Jr:
I thought Commerce had a machinery division so
we had the head of it over here, and he can tell
you, by golly, the third week in every month
every machine toolthat left this country, but
could he tell what is in the process and what
is being done? No, they just get their statistics
from Customs, that 1s all. But those Army and
Navy fellows, they were good.
Schwarz:
They were fine. Especially the number two men,
Major Soderholm, etc.
H.M.Jr:
That is the way it usually is. It 18 that way in
Treasury, too, you know.
How is Canada, Viner?
Viner:
They think they have been a little too slow in
getting ready for the war.
H.M.Jr:
Did anybody talk to you about their methods of
buying up there?
Viner:
Yes. Everybody up there was talking to me.
H.M.Jr:
Bad?
Viner:
Well, I don't know what you have in mind.
H.M.Jr:
I mean slow.
Viner:
Slow, yes.
H.M.Jr:
I don't mean crooked, I mean slow.
Viner:
And one of the things is they announce weekly
what they have ordered, and people are beginning
to ask why, for instance, they should order
$55,000.00 worth of uniforms at a time, whether
they are not giving out the orders in driplets,
instead of getting mass production. But in terms
of American figures, they are spending at the
rate of what would be equivalent here to 8%
billion dollars a year. They are complaining
about the slowness, but it might be useful for
us to know what the slowness is in & war if you
Regraded Uclassified
752
- 12 -
figure that they are complaining about that,
although they are spending at that rate.
Jake, just one thing while you are here. Mr. Hull
is very much worried about the French and English
gold. Would you put your old bean on 1t and 286
if you have any ideas? Just think about it, ask
me about 1t, will you? Stir these fellows up a
little.
Vinor:
Well, what they might have in mind -- because
I notice that in Canada it is very much in their
psychology -- I think they are very much worried
about the future, but they won't talk about their
worries on the ground that it's defeatist talk,
the same way with shipping the gold down.
S.N.Jr:
Well, would you just, you know, do a little --
well.
Merle?
Cochran:
I have nothing.
Sullivan:
Mr. Bell and Mr. Helvering and Mr. Magill and I
drafted a memorandum for you this morning, and
the figuring is just being done on it and I wi 11
have it in leter in the afternoon.
M.M.Jr:
Send it up to the house, will you?
Sullivan:
I think you might want to look at it before you
go, and in case you don't like It we will do
another one tonight.
H.M.Jr:
The President was very much pleased with my report
of the meeting this morning. He was very much
surprised and very much pleased. Senator Harrison
was right in the room here and Mr. McDonald, and
they completely reversed themselves, and they are
now talking about giving me my debt 11mit increase
and the National Defense Tax Bill. Wasn't it
amazing, Dan?
D. Bell:
Quite different from what it was a week ago.
Jr:
Amazing.
Ed?
Regraded Uclassified
353
- 13 -
Foley:
Do you want us to give to Berle the draft of that
Import-Export Bank legislation that we have? He
called up and asked for it.
H.M.Jr:
Sure.
White:
Do you mean the Inter-American Bank?
Foley:
Yes, I mean the Inter-American Bank. They would
also like to have our help.
H.M.Jr:
No, the President has said twice now that it's
Jesse Jones.
Foley:
That is what I understood.
H.M.Jr:
I believe that Welles or somebody over there or
Mr. Hull asked that Jesse Jones be permitted to
do it. Now let Jesse do it. Give him what we
have got and then just forget about it. Some-
body over there definitely asked that Jones do
it rather than -- that Jesse do it rather than
Treasury, and let Mr. Jones do it.
D. Bell:
I think they are interpreting that in the
State Department as more or less floor manager,
that Jesse would get the thing through Congress
but it 18 drafting the bill, Berle thinks, that
ought to be done through 8. coordinating --
H.M.Jr:
Well, let Mr. Berle do it.
Foley:
Bob Hinckley called and said that he understood
you were considering putting on a Colonel Gorrell.
H.M.Jr:
That is right.
Foley:
He thinks that it would be & mistake.
H.M.Jr:
I see,
Foley:
Because Gorrell was very active in connection with
McCarran resolution on the fourth plan. He said
very reprehensible things about the administration
and made claims that we had bought up the Senators
and that they would get things that --
H.M.Jrs
That is Hinckley's advice?
- 14 -
354
Foley:
He wanted me to pass this on to you. He said
he brought it to you only in connection with
the release of those thirty transport planes
that the companies have on order, and he wasn't
vouching for him, and when he heard that you
were considering bringing him in --
H.M.Jr:
He heard it from me.
Foloy:
He wanted to get this word to you, that he thought
it would be a mistake.
H.M.Jr:
Tell him I have not seen Mr. Gorrell since he was
in the office here with me, and he can rest on
that one.
Poloy:
Okay.
M.M.Jr:
And incidentally, that -- I will call him. lie
has been terribly cooperative. I will tell him
I got your message.
Poley:
All right. Here is that letter to McKeller,
Captain Kraus has also initialed it.
That action that Rudolph Hecht is bringing
against the Universal Trading Corporation in
the Supreme Court, you remember we refused to
answer voluntarily the interrogatories. Now
Ziegler, Counsel for Hecht, has made an appli-
cation to Supreme Court up there in New York
for an order to compel you to answer. Now, I
have talked with Eddie a little bit on the
telephone about it, and if it is agreeable with
you, I will write to the Attorney General and
say that we want to resist the granting of the
order. I think that we will be successful.
There may be e little publicity, but I don't
think we have to worry about it at all.
H.N.Jr:
I like publicity.
Foley:
All right. Then we will cooperate with Justice,
probably send somebody up there to appear and
object on the ground that they have no juris=
diction over you as Secretary of the Treasury,
and anyway the matters are confidential and
involve this Government and its foreign relations
with another soverign power.
P.M.Jrs
I am five minutes overdue now, and I have got to
give Gaston some time.
Regraded Uclassified
355
- 15 -
Gaston:
I will telk feat. We have been working with the
Civil Service Commission on giving them some help
in building up 8. staff to investigate personnel
in connection with enlarged defense program. We
had a meeting this morning, and we are proposing
to let them have Harry Dengler, and also to
transfer twenty-five of the personnel agents
of the Intelligence Unit to them in return for
money by which we can hire some new junior agents
and Dengler is to help them organize their
investigative staff.
H.M.Jr:
That is Internal Revenue.
Quaton:
No.
H.M.Jr:
Dengler?
Gaston:
Dengler works for the coordination. This
proposition --
H.M.Jr:
But the twenty-five fellows you are lending tirem
is Internal Revenue.
Gaston:
That is right.
1.V.Jr:
Well, I don't know. With the Income Tax and the
thing that you are talking of about extra agents,
you have got to get -- Sullivan comes in and
wants thirty-five or forty million dollars more
so he can raise some more money. He was crying
about it this morning.
Gaston:
This 18 the thing we planned, of course, to put
up to Mr. Sullivan and the Commissioner; and we
would under the plan et more money out of this
than the new men would cost us.
8.M.Jr:
You have got to get by Sullivan and Helvering.
Okay. If it is all right, don't bring It back,
but -- if it is all right with Helvering and
Sullivan, it is okay with me. Is that what
McReynolds was doing all morning?
Gaston:
No, Mac wasn't in on this this morning at all.
I talked to him about it several days ago. Irey
and I and Flemming were there, and we haven't
made any final decision or arrangements with
them. I was just telling you the outline.
Francis Biddle has called e meeting this afternoon
Regraded Uclassified
I
356
- 16 -
to talk about coordination of investigative work
over the Border in connection with their taking
over the Immigration Patrol.
H.M.Jr:
I told Bob Jackson to 860 you.
Gaston:
Well, Elmer and I are going over there, and I
spoke to Mr. Harris about letting someone go
along.
Harris:
Mr. Secretary, do you think we ought to give
consideration to pulling our Treasury agents
out of France and England?
H.M.Jr:
Do whatever the State Department does with them.
Harris:
I don't see that they can accomplish anything
there now, and some of them are in pretty
dangerous sectors.
H.M.Jr:
I don't see why they should come out any more than
a consular agent. I think they have to do
whatever the -- what does Agriculture do?
Cochran:
Leave it to the discretion of the Ambassador.
H.M.Jr:
I think it is up to the discretion of the
Ambassador or the State Department.
Harris:
I just didn't want them to be forgotten.
Gaston:
I just wanted to mention to you that the Camel
18 being held up.
orm 3806 (Rev. Jan. 21, has)
(POSTMARK OF)
eceipt for Registered Article No. 171651
Fee
Registered 15 48 tigesPost Office BY licated las, the Postmage
paid
SEAL
çents Class postage
Jer.
nun yurcharge paid. I
STATEMENT
Return Smipt fee Spl. Del'y fee
Delivery restricted to adgressee:
LISTING
15
in person
or feder
Accepting employee will phone # Anitiale in space
indicating restricted dellares,
POSTMASTER,
Moling Ref paid
MAILING 5p OFFICE
The worder sive A write the time of the address on NAME von - an identification. l'reserve
and - this peelpt in - of asquiry of application for
Englating Fe and Indemnity Donestic registry fees callen from 15 rente for indemnity tris
exceding Her to #1 for in wante nin excention $1.000 The to for on domestic registered matter
without value set for which - bitt and is is cente, Consult postmaster as to
the agenté domentie english Irem and and y M the registry less chargeship on registered
per package for foreign countries. Free on Amentie registered C. ou D. mail cange from
25- - - $1.20. Indemnity claine cast le Net within - year (C.O. D. else months! from date
of malling,
0.1. GOVERNMENT PRINTING OFFICE
57-
MAY 27 1940
Dear kr. Kallers
I have your letter of May 23.
lines you make it clear that you are no longer interested
in "the Rolls-Royee job," which I have discussed only with you,
I want you to know that I intend to explore the possibilities
with other manufacturers, Your letter makes plain that you will
entertain no objection to this course.
Insefer as the Continental engine is concerned, I note
that you see possibilities in producing this engine. I shall be
happy to continue our talks about this matter when you are ready,
or course, our discussions concerning the production of
this motor are preliminary and tentative as other Departments of
the Government, as well as Continental Motors, are vitally con-
carned. I an sure you understand that I AM not authorized to
take any definitive action or to make any commitments on behalf
of the Government.
Your expression of cooperation is greatly appreciated.
Very truly yours,
(Signed) H. Mongesthall
Becretary of the Treasury
L. 1. Kaller, Esq.
President
Caryalar Corporation
Detroit, Nichigan
Registered Return maint Mail requested
KHP10 5/27/40
Enth
Regraded Uclassified
753
MAY 27 1940
Dear Mr. Kellers
I have your letter of May 23.
Nince you mis it clear that you are no longer interested
in *the Rolls-Reyee job," which I have discussed only with you,
1 vast you to know that I intend to explore the possibilities
with other menufacturers, Your letter makes plain that you will
entertain no objection to this course,
Insufar as the Continental engine is concerned, I note
that you - possibilities in producing this engine, I shall be
happy to continue our talks about this matter when you are ready.
or course, our discussions concerning the production of
this noter are preliminary and tentative as other Departments of
the Government, as well as Continental Motors, are vitally -
earned. I am sure you understand that I as not authorised to
take any definitive action or to make any commitments on behalf
of the Devernment.
Your expression of ecoperation is greatly appreciated.
Very truly yours,
(Signed) H. Merganihau, Jr.
Secretary of the Treasury
E. T. Keller, Beq.
President
Carysler Corporation
Detrait, Michigan
safis 5/27/40
Regraded Uclassified
SAUCY 27 1940
Dear Me. Collers
I have your letter of May 23.
Since you make it clear that you are no longer interested
in *the Rolls-Boyee job," which I have discussed only with you,
I want you to know that I intend to explore the possibilities
with other manufacturers. Your letter makes plain that you will
entertain no objection to this course.
Insofer 0.0 the Continental engine is conserned, I note
that you 840 possibilities in producing this engine. I shall be
happy to continue our talks about this matter when you 470 ready.
of course, our discussions concerning the production of
this motor are preliminary and tentative as other Departments of
the Government, as well ss Continental Motors, are vitally 000-
cerned. I am sure you understand that I as not authorised to
take any definitive action or to make any commitments on behalf
of the Government,
Your expression of cooperation is greatly appreciated.
Very truly yours,
(Signed) B. Morgenthau, Jr.
Secretary of the Treasury
5. Y. Kallar, Req.
President
Chryslar Corporation
Detroit, Michigan
HPLe 5/27/40
Regraded Uclassified
361
THE SECRETARY OF THE TREASURY
WASHINGTON
Dear Mr. Keller:
((opt)
I have your letter of May 23.
Since you make it clear that you are no longer interested
in "the Rolls-Royce job," which I have discussed only with you,
I want you to know that I intend to explore the possibilities
with other manufacturers. Your letter makes plain that you will
entertain no objection to this course.
Insofar as the Continental engine is concerned, I note
that you see possibilities in producing this engine. I shall be
happy to continue our talks about this matter when you are ready.
Of course, our discussions concerning the production of
this motor are preliminary and tentative as other Departments of
the Government, 86 well as Continental Motors, are vitally con-
cerned. I am sure you understand that I an not authorized to
take any definitive action or to make any commitments on behalf
of the Government.
Your expression of cooperation is greatly appreciated.
Very truly yours,
Secretary of the Treasury
K. T. Keller, Esq.
President
Chrysler Corporation
Detroit, Michigan
5ym 9.14.7L.
Regraded Uclassified
Copy given group
SBL
CHRYSLER CORPORATION
Detroit Michigan
May 23, 1940
Honorable Henry Worgenthau, Jr.
Sworebary of the Treasury
monington, D. C.
by dear Mr. Secretary:
Since our conference with you in Washington last Monday we have been
sornestly studying the problems incidental to undertaking the production of
airplane motors. This is an entirely new field to us, and prior to your re-
quest that we do so we had never given any serious consideration to engaging
in this line of business. Our reliminary studies confirm the opinion already
expressed to you that, as we are presently set up, both our facilities and our
personnel will need extensive reorganization and amplification if we are to
ixcome & substantial and satisfactory source of supply to the government for
airplane engines.
However, we do possess unusual facilities for engineering research,
and our organization has a background of experience with production problems.
Yesterday and today we had a group of our ablest engineers and production men
at Wright Field in Dayton, as well as Mr. Hutchinson and myself, and I can not
speak too highly of the consideration and cooperation which we received at the
hands of the gentlemen there. Ne were given every facility to make a prelimi-
nary survey of the Rolls-Royce engine, and we reviewed briefly the developments
much have taken place with the Continental engine. We also had an ortunity
to look over casually the Allison job.
The greater part of our time was spent on the study and analysis of
the Rolls-Rayce job. One of the two samples had been disassembled and spread
out for inspection, permitting us to take weights and measurements of various
component parts, and greatly facilitating our study of the probable processes
of annufacture if we were to undertake the production of this engine in this
country,
The longer we studied the Rolls-Royce job the less we liked it as
a manufacturing proposition for American production. It is our opinion that
it would take at longer time to get into production on the Rolls-Royce engine
than on En American designed engine. lie foresee difficulties in getting and
understanding details of construction, tooling, drawings, specifications, etc.,
etc., correlating them with U. S. standards and practices, developing neces-
sury sources of required materials and accessories, all of which would be
greatly mitigated and facilitated if an engine of American design were to be
substituted.
Regraded Uclassified
|enorable Herry Morgenthau, Jr.
alay 80, 1940
We were greatly intrigued by the account given us of the develop-
ments to date on the Continental engine. From the inspection of the test
regords, the examination of the sample single cylinder and piston, and parti-
cularly from the reports given us by the Wright Field engineers of their
etidies on the preliminary development of this engine, we believe it to be E
good msis on which to proceed to design and build a twelve cylinder engine
is what we understand the requirements of the military authorities may
be.
We were advised that such & twelve cylinder inverted V type engine
2.0W below laid out by the Continental engineers, and is expected to be
eximited for test within a ninimum of seven months' time.
The feel that if the experience and background of the wright Field
ingineers were actively and sympetheticelly coordinated with the facilities
HIAL resources of our organization, the time required to design and build, say,
four test sample engines based upon the Continental single cylinder data could
La shortoced.
Machinery specifications, production studies and tool design could
roceed simultaneously with the engine design and parallel to it. This aspect
of tille preparation for quantity production is just as big $ job as the design
of the engine itself. Important and long-time machine tool requirements should
specified and ordered N.S soon as preliminary design decisions have been sade
W the information is available. Studies of material requirements and sources
staúd be begun in ediately with 8 decision to go ahead.
If this undertaking should be assigned to Chrysler Corporation, it
Ls our opinion that the factory for producing these engines should be located
in the Detroit area. Our recommendation would be that the initial tooling
should be on the basis of 200 engines ,er month on e one shift 40 hour week
operation. After training the first shift, further capacity could be obtained
- additional shifts. We consider the top production on this program of this
productive unit would be 500 engines per month.
While the production of some parte for this program could be handled
in existing Chrysler plants, we believe a new building of 8. roximately
50,000 square feet would be required for production purposes, with necessary
wating facilities in eddition.
As we have previously stated, the development and production of uir-
¡Zane engines is not our chosen field, and would not be considered by us exce,t
for your request under present circumstances. However, we fully recognise the
gravity of the situation, and we are prepared to go forward with a program
which fits the need of the military authorities, and which we in our judgment
fiel we can undertake with a reasonable expectancy of cerrying through to a
receiveful conclusion. I leve no hesitation in pledging to our country through
you the loyal, entimsiastic and diligent effort of our entire organization.
Regraded Uclassified
364
Honorable Henry Morgenthau, Jr.
May 23, 1940
Since we are approaching this problem from a patriotic rather than a
commercial angle, and have some grave doubts as to what, if any, position we
might wish to occupy in the commercial aviation engine field once this emer-
gency is passed, we would like to avail ourselves to the fullest of your
suggestion that the government would undertake the load of financing the under-
taking, and that the compensation to our stockholders could be arranged on the
basis of some sort of management fee for the supervision we would give it.
If there seems to you to be some basis in the foregoing for further
development, we will be most happy to meet with you or anyone you may designate
for further discussions.
Very truly yours,
CHRYSLER CORPORATION
Kakeller K. T. KELLER
KTK:JT
President
DYIK
BECEIAED V
DIAT
- 3 -
Regraded Uclassified
CHITSLES CORPORATION
Detroit, Michigan
May 3, 1940
Honorable Henry Morgenthan, Jr.
Secretary of the Treasury
Washington, D.C.
By dear Mr. Secretary:
Since our conference with you in Weshington last Monday we have been
earnestly studying the problems incidental to undertaking the production of
airplane motors. This is ea entirely new field to us, and prior to year 70-
quest that ve do so ve had never given any serious consideration to engaging
in this line of business. Our preliminary studies confirm the opinion already
expressed to you that, as we are presently set up, both our facilities and our
personnel will need extensive reorganization and amplification if ve are to
become & substantial and satisfactory source of supply to the government for
airplane engines.
Novever, 90 do possess unusual facilities for engineering research,
and our organization has a background of experience with production problems.
Testerday and today we had . group of our ablest engineers and production --
at Wright Field in Dayton. ⑉ well as Mr. Sutchinson and myself. and I cad not
speak too highly of the consideration and cooperation which we received at the
hands of the gentlemen there. We were given every facility to make a prelimi-
nary survey of the Bolle-Royce engine, and we reviewed briefly the developments
which have taken place with the Continental engine. No also had AB opportunity
to look over casually the Allison job.
The greater part of our time was spent on the study and analysis of
the Rolls-Rayce job. One of the two samples had been disassembled and spread
out for inspection, penmitting us to take weights and measurements of various
component parts, end greatly facilitating our study of the probable processes
of manufacture if we core to undertake the production of this angine in this
country.
The longer we studied the Rolle-Royce job the loss we liked it as
a manufacturing proposition for American production. It is our opinion that
11 would take e longer time to get into production on the Rolls-Royce engine
than on en American designed engine. 10 foresee difficulties in getting and
understanding details of construction, tooling, drawings. specifications, $10.,
etc., correlating them with U.S. standards and practices, developing neces-
sary sources of required materials and accessories, all of which would be
greatly miligated and facilitated if an engine of American design were to be
substituted,
Regraded Uclassified
Manarable Eary Morgenthem, Jr.
May 23, 1940
Be vere greatly intrigued by the account given us of the develop-
ments to date on the Continental engine. From the inspection of the test
records. the examination of the sample single cylinder and piston, and parti-
cularly from the reports given us by the wright Field engineers of their
studies on the preliminary development of this engine. we believe 11 to be a
good basis 05 which to proceed to design and build a twelve cylinder engine
to net) what " understand the requirements of the military authorities may
be.
To were advised that each a twelve cylinder inverted V type engins
10 now being laid out by the Continental engineers, and is expected to be
submitted for test within a minimum of soven months' time,
To feel that If the experience and background of the Bright Field
engineers were actively and sympathetically coordinated with the facilities
and resources of our organization, the time required to design and build, any,
four test sample engines based upon the Continental single cylinder date could
be shortened.
Machinery specifications, production studies and tool design could
proceed simultaneously with the engine design and parallel to 11. This aspect
of the preparation for quantity production is just as big a job as the design
of the engine itself. Important and long-time machine tool requirements should
be specified and ordered as soon 48 preliminary design decisions have been made
and the information is available. Studies of material requirements and sources
should be began immediately with a decision to go shead.
If this undertaking should be assigned to Chrysler Corporation. It
is car opinien that the factory for producing these enginee should be located
in the Detroit area. Our recommendation would be that the initial tooling
should be on the basis of 200 engines per month on 4 one shift 40 hour week
operation. After training the first shift, further capacity could be obtained
by additional shifts. No consider the top production on this program of this
productive unit would be 500 engines per month.
While the production of SOME parts for this program could be hendled
is eristing Chrysler plants, we believe . nev building of approximately
500,000 square feet would be required for production rurposes, with necessary
testing facilities in addition.
As we have previously stated, the development and production of air-
plans engines is not our chosen field, and would not be considered by DE except
for your request under present circumstances. However, we fully recognise the
gravity of the situation, and vá are prepared to go forward with a program
which firs the need of the military authorities. and which ve in our judgment
feel ve can undertake with a reasonable expectancy of carrying through to -
successful conclusion. I have no hositation in pledging to our country through
you the loyal, outhosisatle and diligent effort of our entire organisation.
- 3 -
Regraded Uclassified
367
Menerable Heary Morgenthem, Jr.
May 23, 1940
Since we are approaching this problem from & patriotic rather them a
commercial angle, and have seas grave doubts as to what, if say, position we
might wish to occupy is the commercial aviation engine field once this mor-
gency 10 passed, we would like to avail ourselves to the fullest of year
suggestion that the government would undertake the load of financing the under-
taking. and that the compensation to our stockholders could be arranged on the
basis of some sort of management fee for the supervision we would give 1t.
If there seems to you to be some basis in the foregoing for further
development, we will be most happy to meet with you or anyone you may designate
for further discussions.
Very truly yours.
CHRYLSER CORPORATION
K. 2. Keller (Signed)
X. 1. KELLER
ITK:JT
President
- 3 -
Regraded Uclassified
368
CHRYSLER CORPORATION
Regraded Uclassifi
Detroit, Michigan
May 25, 1940
Homorable Beary Mergentham, Jr.
Secretary of the Treasury
Washington, D.C.
My dear Mr. Secretary:
Since our conference with you in Washington last Monday VI have been
earnestly studying the problems incidental to undertaking the preduction of
airplane motors. This is all entirely now field to us, and prier to your N°
quest that 16 do 00 ve had never given any serious consideration to engaging
in this line of business. Our preliminary studies confirm the opinion already
expressed to you that, as we are presently not up, both our facilities and our
personnel will need extensive reorganization and amplification if 10 are to
become a substantial and antisfactory source of supply to the government for
airplane engines.
Novever, wa de possess unusual facilities for engineering research,
and our organization has a beckground of experience with production problems.
Testerday and today we had a group of car ablest engineers and production -
at Wright Field in Daytem, as well as Mr. Ratchinson and myself, and I can not
speak too highly of the consideration and cooperation which 10 received at the
hands of the gentlemen there. To were given every facility to make a prelimi-
mary survey of the Relle-Royee engine, and we reviewed briefly the developments
which have taken place with the Continental engine, Ye also had an opportunity
to look over casually the Allison job.
the greater part of our time was spent on the study and analysis of
the Rella-deyee job. One of the two samples had been disassembled and spread
out for inspection, permitting us to take weights and measurements of various
component paste, and greatly facilitating our study of the probable processes
of manufacture if we were to undertake the preduction of this engine is this
country.
The lenger vo studied the Rolle-Royee job the less ve liked 10 as
a manufacturing proposition for American production. It is our opinion that
it would take a longer time to got into production on the Rolls-Royce engine
than on as American designed englas. To foresce difficulties in getting and
understanding details of construction, tooling, dravings, specifications, 010.,
ere., correlating then with U.S. standards and practices, developing neces-
sary sources of required materials and accessories, all of which would be
greatly mitigated and facilitated if an engine of American design were to be
substituted.
Memorable Heary Horgenthen, Jr.
May 23, 1940
Ne vare greatly intrigued by the account given us of the develop-
neats to date OD the Continental engine. From the inspection of the test
records. the examination of the aample single cylinder and piston, and parti-
cularly from the reports given us by the Wright Field engineers of their
studies on the preliminary development of this engine, we believe 11 to be -
good beeis on which to proceed to design and build a twelve oylinder engine
to meet what we understand the requirements of the military authorities may
be,
20 were advised that such a twelve cylinder inverted 1 type engine
is new being laid out by the Continental engineers, and is expected to be
submitted for test within - minimum of seven months' time,
No feel that If the experience and background of the tright Field
engineers were actively sad sympathstically coordinated with the facilities
sad resources of our organization, the time required to design nad build, say,
four test sample engines based upon the Continental single cylinder date could
be abortened.
Machinery specifications, production studies and tool design could
proceed simultaneously with the engine design and parallel to it. This aspect
of the properation for quantity production is just as big 6. job as the design
of the engine itself. Important and long-time machine tool requirements should
be specified and ordered as BOOM as preliminary dosign decisions have been made
and the information is available. Studies of material requirements and scuross
should be began immediately with a decision to go ahead.
If this undertaking should be assigned to Chrysler Corporation, 11
is car opinien that the factory for producing these engines should be located
in the Detroit area. Our recommendation would be that the initial tooling
should be on the basis of 200 engines per month on - one shift 40 hour week
operation. After training the first shift, further copecity could be obtained
by additional shifts. No consider the top production on this program of this
productive unit would be 500 engines per month.
While the production of some parts for this program could be handled
is existing Chrysler plants. we believe a new building of approximately
500.000 square feet would be required for production purposes. with necessary
testing facilities in addition.
As TO have previously stated, the development and production of Mr
plane sagines is not our chosen fleld, end would not be considered by us except
for your request under present circumstances. However, wé fully recognise the
gravity of the situation, and " are prepared to & forward with a program
which firs the need of the military authorities, and which " in our judgest
feel we cas undertake with & reasonable expectancy of carrying through to a
successful conclusion. I have no hesitation in pledging to our country through
you the loyal, enthmeiastic and diligent effort of our entire organisation.
- 2 -
Regraded Uclassified
370
Nonorable Heary Morgenthan, Jr.
May 23, 1940
Since we are approaching this problem from a patriotic rather them s
commercial angle, and have some grave doubts as to what, if any, position we
might wish to occupy in the commercial aviation engine field once this mor-
gency is passed, we would like to avail curselves to the fullest of your
suggestion that the government would undertake the load of financing the under-
taking, and that the compensation to our stockholders could be arrenged on the
basis of some sort of management fee for the supervision we would give 1t.
If there seems to you to be some basis in the foregoing for further
development, we will be most happy to meet with you or anyone you may designate
for further disoussions.
Very truly yours,
CHRYLSER CORPORATION
K. T. Keller (Signed)
K. T. KELLER
KTX:JT
President
- 3 -
Regraded Uclassified
371
May 27, 1940
5:00 p.m.
Arthur
Purvis:
Good afternoon, sir. How are you?
H.M.Jr:
Oh, I'm all right, Arthur. How are you?
P:
Very well, thank you. Very well.
H.M.Jr:
Look
:
I was rather looking forward to having a
talk when we can both get a few minutes to
do it. I think you must have been up to --
up to your eyes.
H.M.Jr:
I have been. Now, I sent word abroad that
they should make up their minds about powder,
see?
P:
Yes.
H.M.Jr:
And you may hear anything any day.
P:
Well, now, we have authority to act there,
you know.
H.M.Jr:
You have?
P:
And what we're doing, to be perfectly frank
with you, we had this situation and we are
proceeding, I mean, we've had men sitting in
Canada and in DuPont and in Wilmington with the
DuPont people with lawyers by their side trying
to complete contracts. But what we have said
18, if it takes two or three days to get the
final form of contract out on what is rather
a complicated matter, proceed by letters of
intention authorizing the contractor to go
full speed ahead, and that has been done.
They -- for instance, take DuPont. The minute
our broad authority came in, I arranged with
DuPont, went down there myself, as you know,
about ten days ago, and I found that the Memphis
site had to have its water tested, and therefore
we authorized the expenditure of the necessary
money at our expense to do that because that
was the thing that was holding them. Now we
are proceeding along the line that nothing
will hold us at any point while the contract
18 being completed.
Regraded Uclassified
372
- 2 -
H.M.Jr:
Ah, well, that other thing, did you know
that the Minister of Transportation of Canada
is in New York?
P:
He 18 in my office at this time.
H.M.Jr:
Well, now, well, then this idea of his trying
to go and buy 3,000 trainer engines and all
that, if he's going to do anything along those
lines I wish he'd -- you'd talk to me about
it because we're in the midst of our own
program now and we want the whole thing
dovetailed.
P:
Oh, yes. Frankly, that 18 just an absurdity.
The situation that has arisen 1s a very
different one from that. They need some
engines, if they can get them because the
supply of trainers for the air program
scheme has been -- from England -- has been
cut off unexpectedly for a couple of months.
But that has been something that I was
using -- that we were using this morning --
that list you were good enough to give us of
private owners with the idea that out of that
might come something that could be used.
H.M.Jr:
Well, now look, Arthur, BO you and I will
understand each other.
P:
Yes.
H.M.Jr:
Anything now on a 1,000 horse or under
P:
Yes.
H.M.Jr:
that anybody's going to place, I want
you to talk with me first.
P:
Oh, absolutely.
H.M.Jr:
Because we want to keep Curties Wright and
Pratt Whitney going on the big engines.
P:
I fully understand.
H.M.Jr:
And we don't want Curtiss Wright or Pratt
Whitney to take any more amall-engine business.
Regraded Uclassified
373
- 3 -
P:
I know that and, frankly, we weren't -- they
weren't thinking 80 much in terms of engines,
what they were thinking in was in terms of
planes which they could get immediately which
could be utilized
H.M.Jr:
Oh. Well, I had the story they were in the
market for 3,000 Curtise Wright engines.
P:
It's just poppycock.
H.M.Jr:
O. K.
P:
(Laughs) But I will predict this, before
Mr. Howe leaves, I will cover this ground
with him fully, but you can take it from
me it's poppycock.
H.M. Jr:
Yeah. Now you may like to know that the
British Government has licensed me on Rolls
Royce.
P:
Good.
H.M.Jr:
I've got the license.
P:
Good.
H.M.Jr:
And we're going along nicely on that.
P:
Good.
H.M.Jr:
And I wish also when you get ready to talk
about the Bristol engine and the French are
talking about the Gnome Rhone engine, that
you talk with us on that.
P:
Yes. I haven't yet been in touch with
What happened at the talk which you had with
him? I hadn't
H.M.Jr:
I told him to wait
P:
Yes.
H.M.Jr:
that we didn't want them to do anything
for the moment, until we knew more ourselves.
Dar
374
- 4 -
P:
Yes, I see.
H.M.Jr:
And We've asked him to wait.
P:
Yes, all right. That fits in pretty well
because our people are rather changing their
view on things. They're going at this in a
much broader way now.
H.M.Jr:
Yeah.
P:
I've got a cable from the other side which
I'd like very much to show you and to --
because It's a re-crientation over there which
I think 18 very satisfactory insofar as approach
is concerned.
H.M.Jr:
Well, in this cable which I'll show you, I
asked Ambassador Kennedy -- I said, for God
sake, get somebody that Arthur Purvis can
talk to and get answers direct. And I sent
that Friday.
P:
Well, fine. It's very essential in the
British end.
H.M.Jr:
Yes.
P:
You see, Monnet can't do it all. Monnet is
grand for the coordination end but he's -- ah -
I have put over a scheme of reorgenization
on that other end.
H.M.Jr:
Good.
P:
And Monnet says he thinks he can push it
through now.
H.M.Jr:
Well
P:
Well, this cable will probably help it.
H.V.Jr:
Well, just -- on the engines particularly
if you people do anything from now on, please
talk to me first.
a
I'll tell Mr. Howe how much importance you
attach to it.
Regraded Uclassified
375
- 5 -
H.M.Jr:
Yes, until -- until we get -- until we see
daylight, I mean, otherwise we're going to get
all messed up.
P:
Henry, there's one thing there -- in the case
of the, of the -- their trainer difficulty,
it's a case probably of a few hundred planes
which may not be'the ideal thing, but which
might come out of that Civil Aviation list
of private owners, if that fits in with your
idea
......
H.M.Jr:
Oh, that's -- any existing plane -- it's the
new orders
P:
It is.
H.M.Jr:
new orders.
P:
Yes. Well, new orders I think they would
want to do in Canada probably. Yes.
H.M.Jr:
Well that's, I mean, if they had any large
order in mind if they'd work through you it
would be -- because we're just in the midst
of our own thing.
P:
And you want to synchronize it with yours.
H.M.Jr:
We want to synchronize yours in with ours.
P:
Naturally, yes.
H.M.Jr:
See?
P:
Well, now you can be sure that that 3,000
engines from Curtiss Wright is not an --
it's just poppyoock.
H.M.Jr:
O. K. All right.
P:
Fine. Well, when could I see you?
H.M.Jr:
Any time you want to, if you give me B. little
notice. Thursday's a bad day. If you're
going to do it you'd better do it Wednesday.
P:
All right. May I plan to be there Wednesday,
then.
Regraded Uclassified
376
- 6 -
H.M.Jr:
What's that?
P:
Any time that suits you?
H.M.Jr:
Yeah, I'll tell you now -- let's see --
supposing we say 11:00 o'clock.
P:
11:00 a.m. Wednesday. Splendid!
H.M.Jr:
Yes.
P:
I'll have something interesting for you.
I think.
H.M.Jr:
We'll make that Purvis day.
P:
(Laughs) All right, thank you.
H.M.Jr:
All right.
P:
Is there any -- ah -- chance of that equipment
-- that thing that Marshall was going to see.
H.M.Jr:
I got word -- I talked to Marshall yesterday,
I got word from him again today, he hopes to
have an answer for me tomorrow morning.
P:
Oh, good. Well, then if you would -- I shall
hear from you if you want me there before
Wednesday.
H.M.Jr:
I talked on Saturday, Sunday and today and
Marshall has promised me an answer tomorrow
morning.
P:
Good for you. Thank you ever BO much.
H.M.Jr:
O. K.
P:
Right. Good-bye.
H.M.Jr:
Good-bye.
.