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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 317
October 1, 1940
- A -
Book
Page
Argentina
See Latin America
- C -
Capital Issues Committee, 1918
Report prepared by Leon Henderson - October 1940.. 317
231
Caribbean Area
See Var Conditions
- y -
France
See War Conditions: Foreign Funds Control: Gold
- G -
Gasoline (Aviation)
See War Conditions: Export Control
Germany
See War Conditions: Foreign Funds Control
Gold
See War Conditions
- I -
Italy
See War Conditions: Foreign Funds Control; Italy
- J -
Japan
See War Conditions: Export Control (Aviation Gasoline
and Scrap); Japan
- L -
Latin America
Argentina:
Credits discussed by Jones and HMJr - 10/1/40.....
184
Mexico:
Chief of Staff resume' - 10/1/40.
190
Liaison Committee
See War Conditions: United States
- M -
Book Page
Mexico
See Latin America
- P - -
PANAMANIAN, SS
See War Conditions: Export Control (Gasoline)
President's Liaison Committee
See War Conditions: United States
- R -
Rubber
See War Conditions: Export Control
- S -
Ship Movements
See War Conditions
Shipping
See War Conditions
Stimson, Henry L.
Resentment at HMJr's inclusion on plane production
plans, etc., detected - 10/1/40.
317 123
Sweden
See War Conditions
Switzerland
See War Conditions: Foreign Funds Control
- T -
Tanks
See War Conditions
Tietjens, Norman 0. (Assistant General Counsel, Treasury)
Goes to Saranac for a year - 10/1/40
15
- U -
U.S.S.R.
See War Conditions
United Kingdom
See War Conditions: Military Planning
Regraded Uclassified
- V -
Book
Page
Var Conditions
Airplanes:
Conference with Stimson and Patterson on planes
and engines - 10/1/40.
317
6,114
a) Abandonment of all commercial plane
building suggested
1) Knudsen feels three months notice
should be given
272
b) Bombers (additional) for England promised
c) Delivery schedule
143
d) HMJr and Knudsen discuss results of
conference with Stimson and Patterson
146,154
1) Purvis told by HMJr he doesn't know
what Knudsen was talking about
166
Engines: Delivery maintenance for British absolutely
imperative - discussion between HMJr. Young,
Purvis, Fairey, Gray, and Mansell; Brett
and Lyon present at second conference - 10/1/40
47,126
a) Delivery schedule
143
Caribbean Area: Chief of Staff memorandum on
situation - 10/1/40.
190
Exchange market resume' - 10/1/40
180
Export Control:
Gasoline (Aviation):
SS PANAMANIAN: Gasoline carried - report of test.
194,197
See Knox-HMJr conversation: Book 318, page 65
# FDR-HMJr
.
#
#
# 128
# HMJr-Hull
-
#
#
-
129
Agnew report confirms opinion that Japan is
obtaining United States materials from which
she can manufacture aviation gasoline - 10/1/40.
212
Tetraethyl lead: Reserve stock in Japan
227
Rubber: $325,000 shipment from Saigon to Vladivestok:
Application for financing by Chase National Bank
discussed by Cochran and State Department -
10/1/40.
178
Scrap: Report on exports
213,217
Foreign Funds Control:
Extended additional area considered by HMJr, Bell,
Foley, Cochran, Pehle, White, Riefler, Berle,
and Grady - 10/1/40,
16
a) Tie-in with export control discussed
18
b) Exchange control rather than blocking of
funds now necessary
18
o) Russian situation discussed
22
d) Latin American situation discussed
23
1) Argentina.
24
2) American Embassy, Buenos Aires, memorandum
on situation
37
Documents pertaining to foreign funds control as
of October 1, 1940,
48
- W - (Continued)
Book
Page
War Conditions (Continued)
Foreign Funds Control (Continued):
France: Release of funds for French Government
requested by Embassy - 10/1/40
317
201
German and Italian transactions with Chase
National Bank - 10/1/40
176
Italy:
Transfer of dollars from Switzerland to
United States on Italian account
221
Transfer to South America
222
Switzerland: Rumor of extension of control to
include Switzerland causes unrest - 10/1/40
228
Gold:
Summary of transactions with central banks and
governments of foreign countries and with
Bank for International Settlements during
September
182
France: Warship RICHELIEU reported at Dakar
with $240 million worth of Bank of France
gold.
229
Italy:
HMJr predicts end of Italy if United States
can get bombers to Inglish - 10/1/40
204
Japan:
Reports from Nicholson - 10/1/40
85
a) Increasing discontent
b) Plans for expeditionary force to
Indo-China and Dutch East Indies
c) Intrigue around puppet Chinese government
Liaison Committee:
See War Conditions: United States
Military Planning:
Report from London transmitted by Lothian -
10/1/40
317
President's Liaison Committee:
See War Conditions: United States
Purchasing Mission:
Vesting Order: Official sales of British-owned
dollar securities - 10/1/40.
177
Summary of orders, deliveries, and additional
requirements as of October 1, 1940
205,206
Dollar disbursements (from British and French
accounts): Special report compiled by
Federal Reserve Bank of New York - 10/1/40
208,210
a) Advisory Commission, Council of National
Defense, requested this information
Security Markets (High-Grade):
Hass memorandum on developments - 10/1/40
162
Shipping:
Losses (Allied and neutral) during World War
and present var - 10/1/40
193
Regraded Uclassified
- W -
Book Page
War Conditions (Continued)
Strategic Materials:
Scrap: See War Conditions (Export Control)
Sweden:
Kreuger loan to Germany: American Legation,
Stockholm, reports on status - 10/1/40
317
161
Tanks:
Financing discussed in Young memorandum -
10/1/40,
275
U.S.S.R.:
Imports of manganese ore from U.S.S.R., 1937
through August 1940
84
Anglo-Soviet negotiations reported by Cochran
to State Department - 10/1/40
226
United States:
Liaison Committee: Report on foreign purchasing
other than British, July 1 - - October 1, 1940..
278
1
GROUP MEETING
October 1, 1940
9:40 a.m.
Present:
Mr. Foley
Mr. Young
Mr. Thompson
Mr. Schwarz
Mr. Haas
Mr. Cochran
Mr. White
Mr. Graves
Mr. Bell
Mr. Riefler
Mr. Pehle
Mrs Klotz
H.M.Jr:
We have got a new member, Mr. Pehle. In-
cidentally, I had a meeting scheduled at
10:00 on Money to Embassies, and Mr. Berle
asked whether it could be switched to Foreign
Funds, as he is bringing Feis and Grady, so
Bell and White and Pehle will stay, and
Cochran.
Bell:
And Foley.
H.M.Jr:
And Foley. Mr. Thompson, is that all right?
I don't see any announcement on our bonds.
Bell:
I have it here.
H.M.Jr:
I thought you were going to do it for this
morning's paper.
Bell:
No, I thought we would release it this morn-
ing after you got here.
H.M.Jr:
Well, we will see whether Chick can give a
little stump speech, won't we?
Bell:
Sure.
H.M.Jr:
Or do you want to do it?
Regraded Uclassified
- 2 -
2
Bell:
I will let Chick do it.
H.M.Jr:
I think I would let the boys see Bell.
Schwarz:
We have one to make up for, one of 78%. That
was that old one.
Bell:
Oh, that is a bond issue. It is a lot different
from a note.
H.M.Jr:
If I was going to do it, I would do it right
after this - let him do it right after 10:00
o'clock.
Bell:
It ought to get out right away. I don't think
we need to see him unless you particularly
want to.
Thompson:
I finally got the funds from the Public Works
Administration for the magnolias which you wanted
in the west gardens of the Treasury, and also
for the boxwoods to fill in the spaces in the
south court.
H.M.Jr:
Wonderful.
Thompson:
If we can just find the trees now.
H.M.Jr:
Grand.
Thompson:
Mr. Helvering will be absent all this week.
H.M.Jr:
Okay.
Dan?
Bell:
You were going to see Admiral Waesche some
time.
H.M.Jr:
2:45. Do you want to sit in on that?
Bell:
Not particularly, I just wanted to remind
you.
H.M.Jr:
Yes. I gave him 2:45.
Regraded Uclassified
3
- 3 -
Bell:
I have got a number of things. Shall I do
it now or come in later?
H.M.Jr:
I would rather do it after Berle leaves.
How is that?
Bell:
That is all right.
H.M.Jr:
Right after Berle leaves?
Bell:
All right.
H.M.Jr:
Harold?
Graves:
You asked me some days ago to see what might
be done to expedite that Scalise case. Such
evidence as we had in that case - and it was
substantial evidence of income tax evasion -
was sent over to the Department of Justice
last week, and they are sending an attorney
to New York today to deliver the case to the
United States Attorney and they will at once
seek an indictment against Scalise. In the
meantime, our investigation will be continued
and completed.
H.M.Jr:
Will that go to Cahill?
Foley:
Yes.
H.M.Jr:
Can't he sort of have it put in his lap, per-
sonally?
Foley:
He is down helping Forrestal now.
H.M.Jr:
Did he come down to help Forrestal?
Foley:
Not officially, but he is down here most all
the time now. He is here today.
H.M.Jr:
Well, I think if --
Regraded Uclassified
4
- 4 -
Foley:
If you want me to talk to him about it, I
will be glad to.
H.M.Jr:
I think so.
Graves:
Here is this memorandum on it. That is all
I have.
H.M.Jr:
Will you sort of - you know, one of those
timely things.
Foley:
Right.
H.M.Jr:
How much do you think he owes?
Graves:
I have no idea.
H.M.Jr:
Harry?
White:
A --
H.M.Jr:
What happened on that message to the Argentine?
White:
It's a matter that has to be taken up with
you this morning, and a decision has to be
made on rather an important aspect. They
are pushing very hard.
H.M.Jr:
Well, isn't it Berle who is pushing?
White:
No, not to my knowledge.
H.M.Jr:
Well, why not --
Bell:
Did you talk to Jones at all over the week-end
on the phone about it?
H.M.Jr:
No.
Bell:
You see, we have a cable here that gives a
statement which Pierson wants to make to the
5
- 5 -
Finance Minister before he goes tomorrow. He
thought there was an indication that Jones
had talked to you over the week-end.
White:
That is what I was given to understand.
H.M.Jr:
Unless he was the man who called me up and
wanted to buy some MacIntosh --
Bell:
We told Larry Duggan we thought it ought to
go over today and if Jones --
H.M.Jr:
Why not bring it up when Berle is here? Isn't
he handling it?
White:
I don't think he is, but I am not sure.
Bell:
I think it is Welles.
White:
He knows about it and has been in on it at
one stage of the game.
H.M.Jr:
Those of you Foreign Funds fellows who are
interested in that can stay behind, I mean
after Berle leaves.
Bell:
Well, it is White and Cochran.
H.M.Jr:
Well, we will excuse Pehle and Foley. After
Foley leaves, we will just tell them to get
the hell out.
Bell:
I don't mind them staying, but it isn't a
Foreign Funds matter, it is Export-Import
Bank.
(Telephone conversation with Secretary Stim-
son follows:)
Regraded Uclassified
6
October 1, 1940
9:49 a.m.
Operator:
important.
H.M.Jr:
He can't?
Operator:
He says it's important.
H.M.Jr:
Go ahead. Hello.
Henry
Stimson:
Hello, Henry. I'm sorry to bother you but
this is important.
H.M.Jr:
You haven't bothered me yet.
S:
I'm ready to seal and close up that flying
fortress matter and I'm also ready with
Judge Patterson to Bee you on another matter
for expediting planes which is very important.
H.M.Jr:
Well, now here's the situation. Patterson
called me up Saturday and said he'd like to
see me on a matter of expediting
.....
S:
That's the same matter.
H.M.Jr:
.....
and I advised him to come over for lunch.
Have you a lunch date?
S:
I don't think 80, but I'm sorry it has to be
at lunch. I've got - well, I have a date - let
me see. 12:15 - no I haven't any lunch date.
H.M.Jr:
Well, I mean, do you want to make it 1 or
1:15.
S:
Make it 1 o'clock.
H.M.Jr:
1 o'clock and then both you and Patterson
.....
S:
Yes, if you'll give me another good lunch.
Well, I tell you, you can come up to my house,
I'll give you a lunch back. I think it's
pretty nearly my turn.
H.M.Jr:
Could I do that some other time or some
evening? (Laughs).
7
- 2 -
3:
(Laughs). You can do it any time.
H.M.Jr:
Well, I mean, this takes a little bit less
time.
S:
Yes.
H.M.Jr:
What?
S:
Yes.
H.M.Jr:
May I take a rain check on that?
S:
All right.
H.M.Jr:
Well, then I'll see you and Patterson both.
S:
Yes.
H.M.Jr:
Would it be agreeable if I have Philip Young
present because he has the details.
S:
Oh - yes. (Pause)
H.M.Jr:
Is that all right?
S:
But it's -- yes, certainly that's all right.
H.M.Jr:
Then I'll look forward to seeing you and
Patterson.
S:
All right. 1 o'clock.
H.M.Jr:
Thank you.
S:
Thank you very much.
8
- 6 -
H.M.Jr:
He says he is ready to talk on the flying
fortresses, and he says Patterson is ready
to talk on engines, so seeing they are both
in the same department, I didn't think it
would do any harm to get them together.
You (Young) are invited, too.
Young:
What is that, lunch today?
H.M.Jr:
Yes. I didn't want to go up to his house
because it takes too long.
Harry, why don't you stay behind after that
meeting, when we get through with Berle?
White:
Well, I have several things. Shall I take
them up then?
H.M.Jr:
Well, the Argentine we will take up with the
group later.
White:
All right.
H.M.Jr:
What else? Anything else?
White:
I have several things. If you haven't time
now, it will have to be done later.
H.M.Jr:
All right.
White:
You have time, haven't you?
H.M.Jr:
I have not got time.
White:
You have not?
H.M.Jr:
Let me go around and we will see.
George?
Win, I would like you to sit in with us at
10:00 o'clock this morning.
Regraded Uclassified
9
- 7 -
(Mr. Haas handed report to Secretary)
H.M.Jr:
Oh, marvelous. Isn't that wonderful?
Allison turned out 80 engines last week.
Haas:
There is 8. sheet there where I put the whole
month on.
H.M.Jr:
That is marvelous. I am going to call them
up and congratulate them.
Haas:
Mr. Secretary, there is another development
in connection with the reports that you get
from the airplane industry and the Air Corps
and so on. If I get a chance, I would like
to talk to you about it. There was a meeting
yesterday.
H.M.Jr:
All right. That was a nice story that Kintner
and Alsop wrote on the Allison engines. I
wonder where they got it. It is fairly accurate.
Did you (Foley) talk to them?
Foley:
No.
H.M.Jr:
I mentioned something to him the day he was
here. I said not to say more than - not to
use the figure 60 engines. I said, "Make it
over 50," because if he said 60, it would
be too accurate. I thought it was a good
story.
Schwarz:
It was well handled.
H.M.Jr:
Yes.
Pehle?
Pehle:
Nothing.
H.M.Jr:
You stay at 10:00 o'clock. What is the score
today?
10
- 8 -
Pehle:
About 900.
H.M.Jr:
Too many.
Philip?
Young:
The State Department has suddenly taken an
active interest in shipholding activities.
H.M.Jr:
Shipholding?
Young:
Yes. I just found out that they okayed ten
dive bombers to go to Siam last month and
they have changed their minds since, so they
want to take the planes off the ship at Manila
and bring them back here for the Air Corps.
H.M.Jr:
What did you say to them, Philip?
Young:
They wanted me to find out whether or not we
could use the planes.
H.M.Jr:
What?
Young:
If the Air Corps could use the planes; so
General Arnold told me he would love to have
them in the Philippines for the Air Corps
there.
I will give you a report on this foreign
business a little later in the morning, be-
fore lunch. That does not include the British,
by the way. It is just the other foreign busi-
ness.
H.M.Jr:
Who is holding this Panamanian ship down at
Port Arthur, Texas? Who is going to tell me
about that?
Foley:
I will.
H.M.Jr:
All right.
Regraded Uclassified
11
- 9 -
Anything else, Phil?
Young:
No.
Riefler:
Nothing.
Schwarz:
I have nothing.
H.M.Jr:
Merle?
Cochran:
Nothing, sir.
H.M.Jr:
Ed?
Foley:
The representative of the company was in
yesterday and said that they would like to
know one way or the other. She is down in
Galveston and she has got 50,000 drums of
high-test gas. We don't know whether it
is real airplane gas or not. We are looking
at it now, but he says it is an expensive
ship and he would like to know just as soon
as possible. We told him that we would try
and let him know today.
H.M.Jr:
Well, let's talk that over with - at 10:00
o'clock.
White:
We have got a few more things.
H.M.Jr:
That is all right. Let's bring that up, be-
cause you know what happened at Cabinet.
Foley:
No.
H.M.Jr:
The President first said to lower it from
87 down to 85. I understand this is 86 octane,
isn't it?
White:
It is probably 86, because they are just try-
ing to get in under the wire.
Regraded Uclassified
12
- 10 -
Foley:
It is just under high-test gas. I don't
know what the quantity is.
H.M.Jr:
And then the President, taking Knox' sugges-
tion - Knox says, "Why don't you make the
gas the same as standard gas in a car, which
is 65?"
White:
I didn't know it was as low as that.
H.M.Jr:
I think SO. Regular gas is 65. Everybody
thought that was swell, with the exception
of Mr. Hull.
Foley:
Well, I think this fellow representing his
company told Huntington - I think that is
where it came from - that the Japs didn't
care. They could take just the cheapest
grade of gasoline and treat it and use it
for airplane purposes, that they had some
kind of a chemical they used and it was good
enough for their planes.
H.M.Jr:
Well, that I doubt, but we will take a look
at it. Let's bring it up with Berle, because
I am holding it at the direction of the Presi-
dent. I can't hold this thing indefinitely.
Foley:
No, and they have asked to be told one way
or the other. They will abide by the decision.
The other thing is on the tax bill, Mr. Secre-
tary. The conference report has been agreed
upon. It will be submitted to the House today
and the Senate probably tomorrow. We will
have to get ready our report to the President.
Do you want to make a favorable recommendation?
H.M.Jr:
Factual.
13
- 11 -
Foley:
Well, I spoke to John about it last night.
I thought the factual thing, too, but John
feels quite strongly that we ought to recom-
mend approval of the bill.
H.M.Jr:
Then he ought to stay here.
Foley:
Well, he says he will come back.
H.M.Jr:
I would send it over factual. You can call
him up and tell him if he wants to argue with
me he can call me up on the phone.
What was your first hunch?
Foley:
Well, I told the boys to prepare it factually
and then I called him, and I haven't changed
instructions, and that is what they are doing
over in the Bureau, but John seemed to think
that we weren't keeping faith with the people
down on the Hill if we didn't recommend
approval of the bill. He said that the Presi-
dent had told the people that he wanted a tax
bill and it was up to them to write it any way
they wanted to.
H.M.Jr:
That is all right. You can call up Sullivan
and tell him I agree with you. If he wants
to talk to me, he can, but otherwise it goes
over factually. What do you think, Dan?
Bell:
Well, I think the President is entitled to
a recommendation. Why can't you say that it
isn't quite the tax bill you expected, but
you recommend its approval.
H.M.Jr:
Well, you don't mind if I disagree with you?
Bell:
No, not at all.
H.M.Jr:
Factual.
Anything else?
Regraded Uclassified
14
- 12 -
Foley:
Interior has prepared a bill authorizing the
issuance of bonds up to 200 million dollars
similar to the way the Boulder Dam is to be
refinanced, for Bonneville. Now, we have a
say as to the form of the bonds and how they
are to be issued and all the rest of it, but
we have no say as to the amount, within the
200 million dollars. Now, I certainly think
that that amount should be determined by the
Treasury, since the credit of the United
States is pledged, and if it is all right
with you, we will say that to the Budget in
our report to Congress.
H.M.Jr:
Do you agree, Dan?
Bell:
Yes. I would like to take a look at it.
What do you mean, similar to Boulder Dam?
Foley:
Well, the legislation that we worked on in
connection with Boulder Dam.
Bell:
That wasn't introduced.
Foley:
No, but we drafted it and this follows that.
Bell:
That was after we worked on that --
Foley:
General self-liquidating.
Bell:
Do they still want to go through with that
capitalizing all of those?
H.M.Jp:
I do.
Bell:
You do?
H.M.Jr:
Yes, definitely.
Bell:
They are very small.
15
- 13 -
H.M.Jr:
I thought it was good last year and I think
it is good now. I haven't changed.
Foley:
Well, the letter will be ready tomorrow,
Dan. I will show it to you, but I wanted
to clear that point.
H.M.Jr:
I haven't changed.
Is that all?
Foley:
That is all.
One of our Assistant General Counsels, Norman
Tietjens, has tuberculosis and he has to go
away for a year.
H.M.Jr:
I would like to see him before he goes, unless
he has gone.
Foley:
Well, he is leaving to go to Seranac tomorrow.
I don't know whether he will be in or not,
Mr. Secretary, before he goes. If he does
come in, I will bring him around.
H.M.Jr:
Stop by. And you should talk to me about it,
anyway. Will you?
Foley:
Yes.
H.M.Jr:
Who is Philip Buck?
Foley:
Buck is attorney for the Alcohol Control Ad-
ministration. He is resigning.
H.M.Jr:
He wants to come in and say goodbye to me.
I can't refuse, can I? It is all right.
Okay.
16
October 1, 1940
10:00 a.m.
RE EXCHANGE CONTROL
Present:
Mr. Bell
Mr. Foley
Mr. Cochran
Mr. Pehle
Mr. Riefler
Mr. Berle
Mr. Grady
Mr. White
H.M.Jr:
We are at your service.
Berle:
Mr. Secretary, we have been canvassing
the situation in the State Department as
a result of recent developments. It is
the consensus of the Department that the
time has arrived when we ought seriously
to consider whether or not a general blocking
order on control of funds ought not to be put
into effect covering a very extended additional
area. For the purpose of discussion, we might
suggest covering everything outside of this
Hemisphere, for instance. We don't have a
very definite decision on the matter except
that it looks as though some considerable
addition of control were indicated. We
wish to propose the question for discussion.
I think the State Department 18 in a frame
of mind to support a very large widening
of the measures now in effect with such
modifications as might be appropriate to
do some of the things that we want to do
here.
H.M.Jr:
Well, could you do this for me, because I
haven't been thinking about it for some time.
Could you give me the pros and cons?
Berle:
Yes.
17
- 2 -
H.M.Jr:
Give me the pros and cons.
Berle:
Mr. Grady can probably supplement it in
some places.
First, we are now in a position where we
are quite frankly directing our economics
where they will do the most good and with-
holding them where it might be more dangerous.
The financing of that 1s an integral part
of that direction. In fact, it is probably
easier for us in the existing state of
affairs to use that form of direction than
the more direct control which they undoubtedly
may have to put in later on. It 1s a thing
we can do now.
In the second place, that gives us the
information and by consequence the control
over certain movements of funds in this
Hemisphere and in this country, over which
we do not exercise any control at the moment
and which we have reason to feel would give
us some concern.
In the third place, we are aware of certain
grave leaks in the movement of trade and
funds which I think you are perfectly aware
of here.
On the contrary side, there are a number of
considerations. In the first instance, it
does involve a frank discrimination. That
weighs with us less now than it would have
& short time ago, because the discriminatory
quality of the world 1s now quite obvious
and there 18 no reason why we shouldn't simply
accept the situation as we find it.
In the second place, it does mean 8. much
larger administrative machinery than we
have yet had. The job is a huge job.
In the third place, fundamentally the job
can't be done unless we rig up the machinery
which is the equivalent of a ministry of
economic defense or whatever you choose to
18
- 3 -
call it, of which, of course, this 1s only
one area, because eventually that would
have to tie into your export control, which
you now have and conceivably ultimately your
import controls and to some extent your war
purchasing and 80 forth, 80 that we obviously
are traveling along on the road toward the
rigging up of a full economic defense
machinery. Of course, we don't have that
machinery yet rigged up and so far as I know
no crystalized plan for working it out, so
in a sense you are doing half a thing with
the whole thing still ahead. However, that
doesn't strike me 8.8 insuperable.
Finally, there will be difficulties which
will be extreme in handling the Hemisphere,
because we are quite anxious not to break
up the unity of the 21 countries which has
been integral in our thinking right along,
and the imposition of license controls
which might affect them might easily create
irritations.
On the other hand, to leave them out
necessarily means A certain leakage in
the machinery, Bo those are some very tough
and difficult questions lying right in there
and finally, of course, you have to have
machinery that will not impede the work we
are now doing in connection with our funds
overseas.
I personally don't regard any of those as
insuperable, but they all raise some awfully
tough questions. In any case, those diffi-
culties are probably much better known to
this department than they are to ours.
Grady:
Just to supplement that very briefly,
Mr. Secretary, and put it a little differently
than Adolph put it, the matter of blocking
funds ha 6 developed in one country after
another, and we are wondering if the time
hasn't come to think in terms of exchange
control rather than blocking of the funds
of the particular countries. We have the
19
- 4 -
situation of Switzerland and Sweden, whose
funds are not blocked, I understand, and
Portugal and Spain. I don't know if Spain
is blocked or not.
Cochran:
No.
Grady:
You have those four countries, all of which,
while the British blockade has stopped their
trade and our cooperation on the Spanish
situation can keep things from getting into
Spain, still I suppose, and we have been
led to believe, that Germans, through their
dominance over Sweden and Switzerland in
particular, may manioulate funde in such &
way that they can build up credits. In
other words, that would be the loophole on
the oure matter of blocking funds. You can
go ahead and block the funds for all those
countries, but it might be more irritating
to them, more objectionable, then a straight
exchange control program.
On the objection side, of course the effect
it had on our trade wouldn't be very much
with Europe, but if we extended the matter
to the rest of the world and had 8. complete
exchange control setup, it would have a
pretty far reaching effect on our commerce
in a sense of adding to the complexities and
difficulties regarding our international
trade.
H.M.Jr:
Well, I unhesitatingly am for A policy. It
is 8. constant source of irritation to me,
the half-hearted way in which we are attempting
from day to day to apply economic sanctions.
Let's call it by the right name. That 1s what
we are talking about. I can give an example.
The thing I want to talk about before you
leave, at Cabinet on Friday I reported that
this ship, the Panamanian, was loading with
gasoline for Japan. Also, we said the ship
would not return and would be sold for scrap
in Japan, and that was a new way they were
going to get the scrap iron. I reported at
Cabinet that the gasoline, they think, 1a
Regraded Uclassified
20
- 5 -
86% instead of 87 grade. One point below,
yes. And what was their pleasure?
Well, Colonel Knox made the suggestion that
one of the easiest ways would be to drop it
to 65, which is standard gasoline, but
Mr. Hull didn't seem to like that on account
of the situation in the Dutch East Indies.
Well, in the meantime, the President turns
to me and says, "Hold the ship." Well, I'm
holding it. I can't hold it indefinitely.
I have got to get some kind of directions.
The ship owners are down and say, "Tell us.
We will unload or not."
Grady:
Is it an American ship?
H.M.Jr:
No, it 18 a Panama ship. It is one of the
old Dollar Lines, but they think the company
1s really controlled by the Japanese. Are
my facts correct?
Foley:
That 1s right. She is in Galveston, Texas.
She has a thousand drums of gasoline on board
and the owners have asked us to tell them
one way or the other whether she is to be
allowed to sail or whether we are going to
hold her, because it 1s an expensive cargo
and they are going to unload her. She is
not going to be permitted to sail.
H.M.Jr:
There 1s a case in point. And then, of
course, the other thing 1e, it is terribly
hard for us to explain to people that we
won't let them send money to these other
countries but they can send money to Germany.
This 1s, of course, a very important move,
and inasmuch as you have braght it up, if
State would write a memorandum on it or have
something or other which Mr. Hull approved
of and then if he would ask the President
to get a half dozen of us in who are fooling
around with this stuff and find out how the
President felt and what he wanted to do.
But there are about a half dozen people now
who have something to say.
21
- 6 -
We have a ship movement thing under Coast
Guard and there is also Colonel Maxwell.
We have the funds, Foreign Funds Control.
You people do the relicensing. Of course,
the Army and Navy have something to say.
Berle:
We have been rather careful BO far not to
state our views as to what policy should be
stated.
H.M.Jr:
If I knew in what direction Mr. Hull wanted
to go or if he wanted to call a meeting or
I could go over to his office and see if we
could have B. meeting of the minde and then
we could go to the President. I don't know
of anything more important.
Bell:
Is it your idea to set up immediately in
effect this economic ministry, or is it your
idea to put on the Exchange Controls first
which would generally lead to it?
Berle:
No, my reference to what you call an economic
ministry was really the realization that we
had spare parts all around and I can't imagine
but what at some stage of the game they will
have to come together in some fashion, but
that I merely posed 8.8 the difficulty in
taking the finance and segregating it from
some of the rest of the things.
H.M.Jr:
If the State Department - if Mr. Hull will
call a meeting and I could have 8. little
memorandum in advance which he has agreed
to, which I could study, just give me a
couple of hours' notice and I will be glad
to come over.
Berle:
I think Mr. Hull would be very glad to do it.
I may say that I think his position is
perfectly clear, because certainly we had
& staff conference of perhaps three hours
and my request for this meeting 1s the result
of that. We wanted to find what the views
of the Treasury were before we got too far
in, because this 18 peculiarly the field in
which the Treasury is interested.
Regraded Uclassified
22
- 7 -
Grady:
He wants to stop the leaks, such as they are.
H.M.Jr:
It 1s just a question of how far does he want
to go and if the President asks me, I would go
the whole way, I wouldn't do it in any more
bites.
Berle:
I think that 18 the answer, possibly with a
reservation about the South American situation.
H.M.Jr:
Well, you have your leaks there.
Bell:
We recommended one time the whole way and
then we recommended all of Europe one time,
with relaxation to Great Britain. In this
picture, if you go the whole way and treat
our friends liberally, what are you going to
do about Russia? Where do they fit in?
Berle:
Since that is one of the great open question
marks, since neither they nor the Germans
have quite solved it, perhape you will forgive
me if I don't answer that for the moment. At
least we can guide our forces as our best
advices are. As far as we were advised, the
Russians were notified of the German-Japanese
Pact in 80 short a time that there was no
consultation. Whether a dicker is possible
now which will bring them into the clear
remains an open question. I take it until
there is some resolution there, you can't
perfectly guide your course.
H.M.Jr:
I have eliminated myself from talks with the
Russians, but for us not to give them a small
order for manganese now when they have offered
it to us after a lapse of a year, at this time
I just think it is the height of stupidity,
but there it is end they offered 800,000 tons
to the State Department 8 year ago and it was
turned down. Now they have come through and
said, "We will sell you some more."
White:
The administrative difficulties which would be
much increased are, of course, quite sub-
sidiary to the larger policies involved but
I think what you say 18 cuite correct, that
Regraded Uclassified
23
- 8 -
if you left out the rest of the South American
republics, there would be a good deal of leaks.
It is none the less true that you can reduce
those leaks and extend your area of control
without including Latin America if you have
control over the other funds, RS we are doing,
and that is particularly the case in view of
the possibilities that exist of State Depart-
ment cooperative action. Most of those
countries have exchange control already.
Argentine has Foreign Funda Control. The
others have Exchange Control, 80 you can work
in that direction even in the area which 1a
left.
Berle:
I didn't mean to pre-judge the area. Merely
as a mark to shoot at, I suggested that as
one way to consider it. It might very well
be that you could work out a complete Exchange
Control with an extreme liberality of licenses
for those countries or something of that kind.
H.M.Jr:
May I interrupt you? If, for instance, we
did all of Europe or all the rest of the world
except South America and found due to the leaks
we had to put them on, it would be sort of
singling them out and just as a horseback
opinion, I would rather do the whole world,
letting South American countries know in
advance that we are going to give them special
treatment.
Grady:
That certainly --
H.M.Jr:
Letting them know in advance that we would
give them special treatment, because take this
question - - I don't know how familiar you
gentlemen arewithis Argentinian thing. They
had 36 million dollars, roughly, due them from
France inpayment for goods, which I think had
been sold, hadn't it?
Cochran:
Yes, sir. It was all due, yes, sir.
H.M.Jr:
Had it been delivered?
Cochran:
Yes, sir.
24
- 9 -
H.M.Jr:
And we agreed that that money could be
transferred to the Central Bank of the
Argentine and after the Ambassador came
down here very much excited about it -
and the last I heard was that the French
wouldn't agree to it. Is there any change
in that?
Cochran:
Not yet.
H.M.Jr:
We agreed to it, but the French haven't
released it.
Then the other thing which I put on the
President's - in front of him at Cabinet,
he said he didn't have time enough - he
took it - was this whole Argentinian thing,
bringing up a million and a half dollar
loan for a new purchase of meat to be used
in the prison camps, which we don't like,
but I put the thing on his desk. It 1s
around 31, isn't it?
Cochran:
3.7.
H.M.Jr:
That is close enough for me. It 1s 3.7 and
8. million and a half that 18 on his desk,
but I am just citing these things and then
the night we agreed with our great friend
Felipe, he beat his breast and we had asked
his information and he said we should take
his word and we subsequently got the in-
formation. The next morning he put on
Exchange Control and then, of course, sub-
sequently he said it was all a misunderstanding,
but I happened to sit through that one meeting
and that is why I say I think if we did the
whole thing and then say to each of these
countries, "Look, this doesn't mean you," -
of course, this is all just thinking very
much out loud.
Grady:
Well, that 16 one phase of the thing,
Mr. Secretary. We give them every encourage-
ment to go ahead and such countries that
haven't got Exchange Control in Latin America,
we have operated fairly and nondiscriminately
Regraded Uclassified
25
- 10 -
as far as they are concerned, but they
might not, as far as we are concerned.
We run into powers of that kind 60 easily
abused. It becomes & question of trading
then, and there 1s a good deal of confusion.
Berle:
I can put up a tolerable defense of the
Argentinians, but that 1e a subsidiary
question.
H.M.Jr:
I thought Herbert Feis was going to be here.
Berle:
I thought so too, but he was tied up fixing
up some British deal with Jesse Jones and he
thought he had to etay through it.
H.M.Jr:
I see. This is down his alley.
Berle:
I had asked him to be here, but I thought it
would be a little bit later and he had this
half hour with the men in his office.
H.M.Jr:
Well, let's leave it this way. If you
gentlemen will give me or Mr. Hull will
give me a piece of paper telling me what
way he wants to move on this thing BO I can
study it, and then on a couple of hours'
notice I will be delighted to come over
with my staff and sit down in his office
and discuss it.
Berle:
All right. I think --
H.M.Jr:
But I would like a memorandum from him in
advance.
Berle:
I think in handling that, what State would
probably want to do would be to put down
the objectives they want to obtain. The
technique, of course, lies over here. We
wouldn't want to try to suggest very much
on that, because you are the fund of in-
formation on the technical methods of that
kind of thing. We could clearly state the
objectives we hope to accomplish.
H.M.Jr:
Well, we might 8.8 well face the thing, and
Regraded Uclassified
26
- 11 -
it is going to be the whole thing and if it
18 going to be real economic sanctions and
everything that goes with it, I think that
1s a pretty big --
Grady:
It 1s & serious departure.
H.M.Jr:
It 1s a big thing.
Grady:
Especially to take in everything.
White:
We would have to be openly discriminatory
because it would be an impossible administrative
task unless you issued general licenses to those
countries you wanted to exclude.
Berle:
I might say to that, surprising as it may seem,
one result of the diplomatic announcement last
week probably gives us leeway that we did not
have before.
H.M.Jr:
On the scrap?
Berle:
Well, on the discriminatory treatment. We
no longer have to deal with & situation in
which we have an alliance which in form,
at least, 1s directed against us.
H.M.Jr:
How does this hit you, Win?
Riefler:
I agree with you. I think it is probably
overdue.
H.M.Jr:
How do you feel about - you are a friend of
South America. How do you feel about it?
Would you do it in two bites?
Riefler:
I think you are right. I think I would make
it universal and work very carefully to Bee
that it doesn't get in between us and the
countries we are dealing with.
H.M.Jr:
Well, do you want to say anything, Dan?
Riefler:
I think your approach is absolutely correct.
South America 1s always difficult to deal
with, and if you find later you have got to
27
- 12 -
do things to stop leaks, it will be pointed
at them specifically and they will resent it
and it will resound much more up and down the
whole continent than if it 1s 8. general measure
with exceptions. Exceptions can be dealt with
more delicately and can be flexed to the
situation at any time.
H.M.Jr:
We are handling the licenses for money now, I
think, with a minimum of friction. I don't
know whether you get complaints, but we get
very few complaints. We try to keep it down
to the minimum.
White:
The bulk of complaints have all been on the
same point and which we can do nothing about,
which 1s the remittance problem.
Grady:
There would be nothing inherently discriminatory
in control of this kind. We have got, of
course, our trade agreements guaranteeing
fair treatment on exchange.
hite:
But they would regard it as they have given
evidence of 80 regarding it, as something that
1s quite undesirable if it is applied to them
at all, if they have to request licenses at
all, 80 that I think both for administrative
reasons and possibly for political reasons
you would have to give them practically a
general license in which it wouldn't apply
to them at all.
Bell:
How does it affect the other countries under
your trade agreements?
Grady:
Well, European countries - I think it 1s a
theoretical question 8.8 far as --
Bell:
How about Switzerland? They have been asking
about this matter now for the last three months,
and they are scared to death they are going to
be brought under it.
Grady:
Switzerland and Sweden both have agreements
with us which - our position with regard to
that 1s simply that they would get their fair
28
- 13 -
share of any allocation of exchange based on
what their trade had been. Well, if you out
down the total, you out them down proportionately.
I should think it could be administered in such
a way that there wouldn't be any violation of
the agreement, because we have rather wide
power under war conditions and that is one
point under this whole thing. It would be
interpreted as practically recognizing A war
emergency and 80 interpreted by our opposition
and 80 on if it happened before election.
White:
Your thought would be that in the granting of
licenses, the principle in the case of Switzerland
and Sweden would be different, would be based
upon nondistriminatory treatment rather than
the criterion which we would apply in the other
countries?
Grady:
The point 1s that the British pretty well control
the thing through the blockade, A8 far as trade
is concerned, 80 I don't think we ourselves
would be blamable for any actual discrimination
as long as we didn't hold up any of their ex-
change that we didn't have 8 right to.
H.M.Jr:
Let me use this opportunity. Didn't you (White)
have something elee?
White:
If you went to go into oil --
H.M.Jr:
No, but let me get these gentlemen's advice.
What 1s this meesage you wanted me to send
to the Argentine?
White:
Duggan just sent a message. I think he thought
this meeting might deal with that.
H.M.Jr:
How does it stand now?
Bell:
This 1s on the Argentine. Mr. Pierson wanted
to deliver & message to the Minister of Finance
who is flying tomorrow morning to Rio de Janerio,
and they wanted the Treasury to give them -
State Department wanted the Treasury to give
them approval of this message. I can explain
it. It is quite long. You really ought to
read it.
Regraded Uclassified
29
14 I 1
H.K.Jr:
Let me read it out loud.
This 18 Pierson?
Bell:
I think if we addrove that message there
wouldn't be much use of that delegation
coming to Washington for negotiations.
They would be practically completed.
a.M.Jr:
Have you read that?
Grady:
I have read it.
H.K.Jr:
Have you?
Merle:
No.
M.K.Jr:
Let me read it out loud.
"Mr. Pierson has given careful consideration to
the statements of the Minister of Finance with
respect to the difficulties of Argentina's
economic situation and has perused with interest
the Central Benk's memorandum particularly
its estimate of minimum imports over the next
twelve months. It 1s noted that the Bank
setimates that Argentina's unfavorable balance
of payments with the United States will amount
to sbout ninety seven million six hundred thousand
dollars and points out as alternatives the following
means of coping with the situation: (1) to find
additional export outlets: (2) to reduce imports
drastically; (3) to borrow dollars; or (4) to
ship gold in amounts that would seriously de-
plete the Argentine reserve."
Five million dollars worth of gold came in
today.
(Two) "As exolained orally Mr. Pierson's purpose
in coming to Argentina was to discuss the economic
situation with a view to observing some form of
assistance. He 1s perticularly desirous that
such suggestions shall be practical, constructive
and not open to serious criticism on either economic
or political grounds. He 1s inclined to believe
therefore that a balanced combination of all four
meane would probably be for the best and is disposed
to propose the following to his Government:"
Regraded Uclassified
30
- 15 -
Who signs this anyway?
Bell:
The Minister of Finance.
H.M.Jr:
I see.
(Three) "It is realized that by far the most
desirable and effective form of assistance for
both countries would be the purchase of some
Argentine product, and the Minister 1e informed
in confidence for the present that Mr. Pierson
16 prepared to recommend that an agency of the
United States Government buy outright for war
stock purposes outside the usual commercial
interchange ten million pounds of Argentine
wool during November and December, such purchase
to be made when the state of the market warrants.
Since such wool would be stored 88 Government
war stocks and would be purchased with public
funds primarily to assist in the disposal of
export surpluses in the present emergency, it
would manifestly be in the interests of both
Governments to carry out the transaction at
the most favorable rate of exchange thus in-
creasing the volume of produce absorbed and
avoiding criticism that would otherwise result.
For example if dollars destined for this
purpose are converted at the higher official
selling rate for dollars, namely about 4.23
pesoa to the dollar, the proceeds in pesos
which would be deposited in local banks until
utilized in the purchase of wool at the market
price, would buy over twenty-five percent more
wool, with resultant benefits to a correspondingly
greater number of Argentine producers than would
be the case if the conversion were to be effected
at the official buying rate of about 3.35 to the
dollar; and the fact that the wool would be
bought by the Government and held as a reserve
stock would prevent the operation from upsetting
world prices. A further important advantage would
be that no part of the funds made available for
this purpose would be absorbed 88 an exchange
profit. Needless to say it would be difficult
if not impossible to defend the Government's
action if 8 considerable part of the pesos
obtained or obtainable for such funds 8.8 might
Regraded Uclassified
31
- 16 -
be made available for political purchases
were to be shown to represent an exchange
profit to the Government benefited, since
such a profit would be interpreted as tentamount
to an export tax."
(Four) "Mr. Pierson realizes the seriousness of
the situation caused by the temporary loss of
markets and 18 accordingly prepared to recommend
immediately further credits in the amount of
$30,000,000 to be made available in convenient
installments over a period of twelve to eighteen
months with interest at 4% per annum; and to be
repaid within six years from the date of each
advance, with amortization commencing within two
years. As in the case of the $20,000,000 loan
already announced it 1s understood that the
dollar exchange 1s to be made available ex-
clusively to cover purchases in the United States
within categories and amounts approved by the
Export-Import Bank."
(Five) "It is readily understood that Argentina
will probably be obliged to limit imports from
time to time during the existing emergency but the
Minister will appreciate that since both purchases
and loans in this case would have 8 political
character the United States Government would be
subjected to serious public censure if such
limitations were to be applied to American
imports while like imports are admitted from
competing countries without & corresponding
limitation. An assurance would accordingly be
appreciated that the Argentine Government will
include the United States in the group of
most-favored-nations and that whenever it 18
necessary to restrict imports, 88 will no
doubt be (*)
(S1x) "If the foregoing meets with the Minister's
approval and the present emergency should be
prolonged or the measures proposed are found
insufficient for other reasons, sympathetic
consideration will be given to rendering further
cooperation."
apparent omission.
Regraded Iclassified
32
- 17 -
"Pierson agrees with the foregoing but he is
prepared to recommend to Mr. Jones that there
be approved new credits of up to $50,000,000
limited to not exceed $5,000,000 in any
one month. The obligations of the Central Bank
under guarantee of the Government and repayable
over a period of six years.'
What does Duggan say?
White:
Duggan says they just received B. telephone
message from Pierson in which he repeats that
Pinedo was to fly at four and he would very
much like a statement to be able to make before
he leaves. There is one point there.
The second point was, he wanted to know whether
Mr. Jones had gotten in touch with you about that
and I said he hadn't and he said he had spoken
to Jones about it and Jones said he WAS not
ready to make any statement to Pierson, though
he might be later in the day.
.M.Jr:
Well, I am here.
hite:
Well, it appears to me that the only answer that
1s required for that statement 1s merely that
he doesn't have to make any statement to him.
The discussion 88 to how this financing 1s
going to be handled up here 1s something that
we ought to discuss in some detail among our-
selves later.
.M.Jr:
Well, this 1s the first I have heard about it.
I don't know under what instructions Mr. Pierson
is sailing. I don't know what instructions he
received before he left. Certainly I had no
chance to see him before he left. I think it
18 8. matter of - purely in the hande of Mr. Jones
and the State Department.
Bell:
I do think we are interested, Mr. Secretary.
We have asked, the State Department has asked,
a delegation to come from Argentina to iscuss
the stabilization matters. It involves the
Stabilization Fund. It seems to me if the
Export-Import Bank is going to grant a credit
Regraded Uclassified
33
- 18 -
to Argentina and we are going to take some
action on the Stabilization Fund, they must
be coordinated; and I think if he makes that
statement, I don't believe there is any
necessity for the delegation to come from
Argentina.
H.M.Jr:
I agree with you, but I also sent a message
to Mr. Hull, Saturday. Did you (White)
deliver that message?
White:
Yes. I haven't heard anything from it beyond
the fact that it has been considered.
H.M.Jr:
To whom did you tell it?
White:
Larry Duggan. Mr. Berle was out of town.
Berle:
I was there Sunday and Monday.
H.M.Jr:
Do you know what the message was?
Berle:
No.
H.M.Jr:
Repeat it, please.
White:
The message was 8 request that the agenda
which was somewhat altered from the draft
which you saw by the deletion of one of the
items should be approved by Secretary Hull,
and that the State Department should notify
the Argentine Government if Secretary Hull
did approve of the agenda, and secondly,
that it was the Secretary's thought --
H.M.Jr:
This Secretary.
White:
Secretary Morgenthau's thought that it might
be better to postpone the negotiations until
November because Secretary Morgenthau was
quite skeptical that anything would be consummated
before then, and by virtue of the number of things
involved, it might mean they would just be hanging
around a few weeks longer than necessary.
Berle:
As to Number 1, I can't conceive that there
Regraded Uclassified
34
- 19 -
would be any difficulty about approving the
agenda, because certainly the original agenda
was discussed and went right back.
As to the other point, I would like to make
one remark. So far ae the Argentine is
concerned, this isn't a long-range job. They
are pretty well up against the gun barrels
now. Henry 1s more closely acquainted with
the statistics than I am, but I get the picture
that that Argentine situation isn't a thing
to keep on negotiating about very long without
some kind of repercussions. They eren't as
explosive as Chile or Bolivia, but that new
ministry has got its own row to hoe and this
18 a new situation. They have been moving
toward it and they have been telling us con-
sistently that they were moving toward it
for months now, 80 I can imagine Pierson down
there feels he 18 under some pressure to do
something now instead of holding out merely a
hope that some time in the future some arrenge-
ment will be reached.
H.M.Jr:
Well, I am supposed to give these answers
within two minutes, and here 1s a thing that
Pierson 1s down there carrying on negotiations
for. I agree entirely with Mr. Bell if these
go through I think it is silly to have this
man come up here and I think Mr. Hull and
Mr. Jones had better get together and decide
what they want to do. Let the two of them
get together. Mr. Hull is Secretary of State
and Mr. Jones has got the Export-Import Bank.
If the two of them will get together and
simply say, "This 18 what we want," it will
make life easier and sweeter for me. So if
you would mind telling - just go back to
Saturday. Whatever the State Department
decides, should the Minister of Finance or
his representative come up here and should
Mr. Pierson make that statement.
Berle:
Let's see if I get it. Your view 18 that if
Mr. Pierson makes that statement there 1s no
reason for his coming North.
White:
I would agree with Dan completely. He 1s
35
- 20 -
committing himself to an arrangement which
obviates the necessity of examining the whole
situation. He is committed to a step before
he even comes here.
Cochran:
We don't want to get any competition between
the Export-Import Bank and the Fund. If they
think that 1s A.8 far as the funds ought to go
to Argentine now, that is Be far 8.8 it should
go.
H.M.Jr:
Don't think I mind the competition. I like
it and cheerfully withdraw in favor of
Mr. Pierson.
rady:
Just for a little background, the Argentine
Government have been trying to have us send
people down for the whole time to check over
the situation end tell them what we could do
to help them and there are some reasons why
we didn't want to send an official delegation,
and finally it worked out that Pierson planned
to go down anyhow and that he should make B
survey to Bee what we can do to help them,
BO that 1s the basis of this statement. He
has to tell them what he 18 going to do to
help them.
.M.Jr:
Of course, this thing has its humorous side,
and I never try to lose my sense of humor.
When Mr. Hull and Berle were down in Havana,
and White, they asked me for a statement on
the Fund and they worked me up into a state
of enthusiasm, and I gave you the kind of state-
ment you needed, didn't I?
erle:
That is right.
.M.Jr:
And I haven't changed my mind a bit. Now,
White 1s doing his damndest - I understand
Welles is very much interested in the same
thing - to get me to do something on this Fund,
and White has done a beautiful job. He never
leaves me alone, day or night, and he gets me
up to about this point where I am nibbling,
you eee, and I still stand by my Havana statement
36
- 21 -
and along comes this Pierson thing and it
just says there 18 no excuse for me to do
anything and I am 80 appreciative I am thinking
of calling up Pierson on the telephone and saying,
"Thank you."
Berle:
Well, all I can say is that we have still got
to hold the Hemisphere on the line.
H.M.Jr:
And I still say I wish that well, I am here,
my telephones work, and I will be very glad
to hear. But the decision evidently rests
with both Mr. Hull and Mr. Jones.
Perle:
Right. Well, what it really comes to 1s
this, before we spar on the points: The real
decision 1s whether the program, 80 far as
the Argentine Government 1s concerned, 1s
then remitted to Jesse and Pierson with whatever
guidance they want or will accept from the
State Department, rather than in the Treasury,
that is what it will really work out as.
H.M.Jr:
That 1s right.
Grady:
If it meets with the approval of the National
Defense. That fite in there, 80 there 1s no
difficulty there.
H.M.Jr:
And if Mr. Hull decides that, then I agree with
Bell and White it is silly to bring these people
up here.
Berle:
The determinate problem 1s the need for action
there. He can understand what they are driving
at. They have just weathered a difficult
political crisis. They came through it nicely
and they have now for the first time a pro-
American Government against what has been
previously a pro-British ministry. That whole
crowd naturally want to get away on something
like this program. They have had this difficult
situation.
H.M.Jr:
Thank you for coming over.
37
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Rubesty, Buenos Aires, Argentina.
DATE: September 29, 1 p.m.
NO. I 453
The Argentine Government, the Minister of Finance
has indicated, would like to obtain credits exclusive
of the $20,000,000 loan already announced of up to
$100,000,000, the funds to be made available in installments
and the loan to be reyaid within a period exceeding five
years. Mr. Pierson stated that he thought the amount
rather high and the terms Long but that he would take the
subject up with this Government. Be believes that in
addition to the $20,000,000, $30,000,000 night be offered
at 4 percent, to w made available over a period of
twelve or eighteen months is installments, and repaid within
not to exceed six years from the date of each advance.
It would be of advantage to lisk this with an
Announcement (which for the present could be confidential
If necessary) of en intention to nequire & certain amount
of weel as 001 forth in the Department's cable no. 224
of September 27, 5 p.s. Since Dr. Pinedo leaves for Rie
de Janeiro early in the serning of Wednesday, October 2,
Mr. Pierson will have his last opportunity to ...
Dr.
Regraded Uclassified
38
Dr. Pinado on Tuesday, October 1, end he would be grateful
If he could be given an idea os that date of what will be
recommended and # for " possible what will be approved.
is as such as it is believed decirable to take cour safe-
geards in accordance with the considerations set forth is
the Naturay's tolegram as. 436 of September 25, 8 p.m.
there are submitted for consideration w the Department
several pointe to be precented to it. Pineds on Tuesday,
subject naturally to specific approval in each case w the
Department. the paragrayhe are susbered serially for
convenient reference and follow:
(one) *Mr. Fiorsen has given careful consideration to
the statements of the Minister of Finance with respect to
the difficulties of Argentium's economic situation and has
perused with interest the Control Bank's nesorandum par-
ticularly its estimate of winimum importe over the next
twelve months. It is noted that the Bank estimates that
Argentina's unfavorable balance of payments with the United
States will amount to about sinety sette million siz hundred
thousand dollars and pointe out as alternatives the follow-
ing seans of coping with the situations (1) to find
additional export outlets: (2) to reduce importe drastically;
(3) to berrew dollars: or (4) to ship gold in amounts that
would seriously deplete the Argentine reserve".
Regraded Uclassified
39
(two) "As explained orally b. Finreon's purpose in
coming to Argention use to discuss the economic situation
with a visa to observing poso form of maristance. the is
particularly desirous that such suggestions shall be
practical, constructive and not open to serious criticies
on either economic or political grounds. to is inclined
to believe therefore that a belanced combination of all
four mass would probably be for the best and is disposed
to propose the following to his Governments"
(Three) "It is realized that w far the most decimble
and effective form of assistance for both countries would
be the purchase of - Argentine product, and the Minister
is informed in confidence for the present that Mr. Vierson
is prepared to recommend that an agreey of the United States
Government buy outright for var stock purposes outside the
usual commercial interchange tea million pounds of Argentine
weel during November and Secember, such purchases to be
made who the state of the misket varrasts. Since such
weel would be stored as Government war stocks and would
be yarchesed with ymbile funds primarily to seciet is the
disposal of export surpluses is the present coorgency,
11 would manifestly be is the interests of both Governments
to earry out the transaction at the most favorable rate
of exchange time increasing the volume of produce absorbed
and avoiding criticien that would otherwise result. Per
Regraded Uclassified
40
example If dellare destined for this purpose are converted
at the higher efficial solling rate for dollars, manely
shout 4.25 posse to the dollar, the proceeds is yeses
which would be deposited in local banks ustil utilized
in the purchase of weel at the market price, would buy over
twenty-five persent more vool, with resultant benefits to a
correspendingly greater number of Argentine producers them
would to the case If the conversion were to be effected at
the official buying rate of about 3.35 to the dollars and the
fact that the weel would be bought w the Covernment and hold
as a reserve stock would provent the operation from up-
setting world prices. & further important advantage would
be that no part of the funds mis ovailable for this
purpose would be absorbed as an exchange profit. Readless
to say it would be difficult If not impresible to defend
the Government's estion if a considerable part of the peace
obtained or obtainable for such funds " night be sisite
available for politionl purchases were to be shown to
represent an exchange profit to the Government beacfited,
since such 8. profit would be interpreted as tastement to
as expert tax."
(Four) - Pierson realizes the seriousness of the
situation caused by the temperary loss of markets and to
accordingly propared to researced invodiately further
credits the the amount of $20,000,000 to be made available
in convenient installments over a period of twolve to
Regraded Uclassified
+
41
eighteen months with interest at 4% por sanue, end to be
repaid within six years from the date of each advance,
with amertization commensing within two years. As in
the case of the $20,000,000 lean already announced 10 is
understood that the dollar exchange is to be made available
exclusively to cover purchases in the United States within
categories and amounts approved w. the Expert-Import Dank."
(Five) *It is readily understood that Argentisa will
probably be obliged to limit importe from time to time
during the existing energency but the Sinister vill appro-
ciate that since both purchases and loans in this case
would have a political character the United States Government
would be subjected to serious public consure if such
limitations were to be applied to American importe while
like importe are admitted from competing countries without a
corresponding limitation. An sesurance would accordingly
be appreciated that the Argentine Government will include
the United States in the group of mest-favered-nations and
that whenever 10 is necessary to restrict imports, as will
no doubt be (*)
(Siz) "If the foregoing meets with the Minister's
approval and the present energency should be prolonged or
the reasures proposed are found insufficient for other
reasons sympathetic consideration will be given to rendering
further cooporation."
.
opparent exission.
Regraded Uclassified
42
Pierson agrees with the foregoing but he to propared
to recomend to Mr. James that there be approved - credite
of up to $50,000,000 livited to not to exceed $6,000,000. ta
any ⑉ meath. the obligations of the Central Desk under
guarantee of the deverament and repeable over a period of
als years.
2
Regraded Uclassified
43
UNITED STATES TREASURY DEPARTMENT
WASHINGTON: OCTOBER 1, 1940
DOCUMENTS PERTAINING TO
FOREIGN FUNDS CONTROL
Executive Orders and Regulations Relating to Transactions In Foreign
Exchange, Transfers of Credit, Payments, and the Export or Withdrawal
of Coin, Bullion and Currency, and Transfers, Withdrawals and Exporta-
tions of, or Dealings In, Evidences of Indebtedness or
Ownership; and to Reports of Foreign Property
Interests in the United States;
and
General Rulings and General Licenses under such
Orders and Regulations.
UNITED STATES TREASURY DEPARTMENT
WASHINGTON: OCTOBER 1, 1940
DOCUMENTS PERTAINING TO
FOREIGN FUNDS CONTROL
Executive Orders and Regulations Relating to Transactions In Foreign
Exchange, Transfers of Credit, Payments, and the Export or Withdrawal
of Coin, Bullion and Currency, and Transfers, Withdrawals and Exporta-
tions of, or Dealings In, Evidences of Indebtedness or
Ownership; and to Reports of Foreign Property
Interests in the United States;
and
General Rulings and General Licenses under such
Orders and Regulations.
Regraded Uclassified
CONTENTS
EXECUTIVE Owners
No. asso, January 15. 1934
No asno, April 10, 1940
No. 8405, May 10, 140
No. 8446, June 17, 1940
No 8484, July 15. 1940
No 8493, July 25, 1940
REGULATIONS
Approved November 12, 1934
Approved April 16, 1940
@
For convenient use, Executive Order No. 8389, dated April 10, 1940,
Approved May 10, 1940
AB amended, amending Executive Order No. 6560, dated January 15,
AMENDMENT TO REGULATIONS
Approved June 17. 1940
1934, regulating transactions in foreign exchange, transfers of credit
Approved July 15, 1940.
and export of coin and currency, the Regulations of the Secretary of the
GENERAL RULINOS
No I Term "Denmark" not applicable to Iceland
Treasury issued pursuant thereto, and General Rulings and General
Il
No 2 Transfer of stock certificates and custody of securities
a
Licenses issued by the Secretary of the Treasury under said Order and
No. 3 Transactions regarding securities registered or inscribed in name of a designated foreign camely
or national thereof
D
Regulations, as amended, which were unrevoked as of October 1, 1940
No. 4 Definitions of terms used in rulingx, Scenses, etc.
14
are here reproduced. In the interests of brevity, the formal headings
No. 5 Cuotrol of imported securities
No. 6 Delivery of imported securities by Federal Reserve Banks to certain banking institutions
a
of the General Rulinge and General Licenses as issued by the Secretary
Nn. 7 Securities coming from the Philippine Islands and the Panama Canal Zone
No. 8 Certain payments to designated foreign countries and nationals thereof
of the Treasury and their designations as parts of the Code of Federal
14
GENERAL LICENSES
Regulations have been omitted. The eatch line inserted immediately
No I Payments to affected accounts
the
preceding each General Ruling and General License is not a part thereof
No 2 Debiting affected accounts for certain charges due banking institutions
IF
No 3 Payments of checks and drafts drawn or issued prior to April 8, 1940 from accounts of Norway
ns issued by the Secretary of the Treasury and should be diaregarded
and Denmark and their nationals, and of checks and draits drawn or issued prior to May 30,
1940 from accounts of Netherlands, Belgium and Lusembourg and their nationals
If
in determining or interpreting the meaning of any provision thereof.
No. 4 Sale of securities on a national securities exchange
II
Official copies of the documents reproduced herein, except Executive
No. 5 Payments to the United States
No. 6 Payments from accounts of Government of the Netherlands
Order No. 6560, dated January 15, 1934 and the Regulations of the
No 7 Payments from accounts of Government of Belglum and Banque Nationale de Belgique
II
No. 8. Payments from accounts of certain Netherlands banks
Secretary of the Treasury dated November 12, 1934, are printed in the
No. 9 Commodities futures contracts
Federal Register. Executive Order No. 6560 is printed as Part 127
No. 10 Payments from accounts of certain Belgian banks
B
No. 11 Payments for living, traveling and similar personal expenses in the United States
and the Regulations of November 12, 1934 are printed as Part 128 of
No IN Access to wafe deposit boxes
Title 31 of the Code of Federal Regulations. Reference should be
No 13 Payments from accounts of certain Netherlands banks
2
No. 14 Payments from accounts of certain lanks in Netherlands West Indies
made to the Federal Register for additional Orders, Regulations,
No. LI Letters of credit respecting trade between Netherlands East Indies and the United States
a
General Itulings and General Licenses issued subsequent to October 1,
No. If Extension to France of certain general licenses
No. 17 Payments of checks and draits drawn or listed prior to June 19, 1940 from accounts of France
1940, and for revocations of or amendments to those printed herein.
and its nationale
No LA Payments from accounts of French American Banking Corporation
Additional copies of this publication may be procured from the
No. 19 Payments from accounts of certais Netherlands banks
No. 20 Payments Jodica or from West accounts Indies of United States citizens domiciled or residing in Netherlands East
Treasury Department, Washington, D. C, or from any Federal Reserve
il
No. 21 Payments from Accounts of Netherlands Trading Society East, Ltd., and Netherlands Trading
Bank.
Society East, Inc
No 22 Payments from accounts of Banque Belge pour l'Eiranger, Overseas, Ltd
a
No. No. 25 Extension to Latvis, Estonia and Lithuania of certain general licenses
24 Payments of checks and drafts drawn or issued prior to July 10, 1940 from accounts of Catrin
Estonia and Lithuania and their nationals
Na 25 Effect of attachment of Form TFEL-2 to securities
a
No. 27 Redemption or collection of securities
No. 26 Transactions in ortain American Depositary Receipts and Amtrican Shares
21
No. No. 29 28 Transactions by certain United States citizens who are "sationals" of designated foreign countries
Application No. 6 of certain general licenses to accounts referred to in paragraph (4) of General Reling
No. No. 20 и Payments from and transactions in the administration of, sertain estates
No Collection of oripons from termin accorities bearing stamps of designated traits and foreign countries.
3
No 13 12 Remittances by certain United States residents to their relatives or dependents
5
Certain remittances to United States citizens in foreign countries
1
2
Iclassified
EXECUTIVE ORDER NO. 6560
REGULATING TRANSACTIONS IN FOREIGN EXCHANGE, TRANSFERS OF CREDIT,
AND THE EXPORT OF COIN AND CURRENCY
411) ad amended by Section 2 of the Act of March 9, 1933, entitled "An Act to Provide Relief in the Exist- L
By virtue of the authority vested m me by Section 5(b) of the Act of October 6, 1917 (40 Stail
EXECUTIVE ORDER NO. BRA9
ing National Emergency Do Banking and for other Purposes", I, FRANKLIN D, ROOSEVELT
PRESIDENT of the UNITED STATES OF AMERICA, do declare that à period of national -
(Fanvative Order No essy, haved April 10. 1940, anterited Exective Order No Addu. Same January DA 1934, by
limit sections, sumbared 9 to 12 insulve Sur Excessive Order Nis 2389 - by Exemine
gency contínues to exist, and by virtue of said authority and of all other authority vested in me, do
addive MOS, dured May 10, 1940, printed immediately below, the original lost of Cheder No. 00 or
hereby prescribe the following regulations for the investigation, regulation, and prohibition of trans
Over No. amendments to Executive Order No 8387 are net forth on pages / and 0.)
actions in foreign exchange, transfers of credit between as payments by banking institutions 14 herein
defined, and export of currency or silver coin, by any person within the United States or any place
EXECUTIVE ORDER NO. naos
subject to the jurisdiction thereof:
SECTION 1. Every transaction in foreign exchange, transfer of credit between any banking instite
AMENDMENT OF EXECUTIVE ORDER NO. 8389 OF APRIL 10, 1940, AMENDING
liga within the United States and any banking institution outside of the United States (including any
EXECUTIVE ORDER NO. 6560, DATED JANUARY 15, 1934.
principal, agent, home office, branch, or correspondent outside of the United States of & banking instite
Uon within the United States). and the export or withdrawal from the United States of any currency
Recentive Order No. 8389 of April 10, 1940, la amended to read as follows:
OF silver coin which is legal tender in the United States, by any person within the United Sexter is
"AMENDMENT OF EXECUTIVE ORDER NO 6560, DATED JANUARY 13, IVM, REGULATING TRANSAC-
hereby probilited, except under liceuse therefor issued pursuant to this Executive Order: provided,
TIONS IN FOREIGN EXCHANGE, TRANSFERS OF CREDIT, AND THE EXPORT OF COIM AND
however, that, except as prohibited under regulations prescribed by the Secretary of the Treasury,
CURRENCY.
foreign exchange transactions and transfere et credit may be carried out without a license for (a) normal
commercial or business requirements, (b) reasonable traveling and other personal requirements or
"Dy virtue of the authority vested in me by section 5(b) of the Art of Ortober 4, 1917 (40 Star
(r) the fulfillasent of legally enforceable obligations incurred prior to March 9, 1933.*
411), as amended, and by virtue of all other authority vested in I, FRANKLIN D. BOOSEVELT,
SECTION 2. Pursessions of the United States. Except as prohibited in regulations prescribed by the
PRESIDENT of the UNITED STATES OF AMERICA, do hereby amend Executive Order No 6500,
Secretary of the Treasury, transfers of crulit between banking institutions in the continental United
dated january 15, 1934, regulating transactions in foreign eschange, transfers of credit, and the expirt
States and banking institutions in other places subject to the jurisdiction of the United States (include
of coin and currency by adding the following sections after section 3 thereof:
ing principals, agents, home offices, branches, or correspondents in such other places, of banking teagi-
tulions within the continental United States), may be carried out without a license
SECTION 9. Notwithstanding any of the provisions of sections 1 to 8, inclusive, of this Order,
Section 3. Licenses The Secretary of the Treasury, acting directly or through any agencies fist
all al the following are prohibited, except as specifically authorized in regulations or licenses issued
he may designate, and the Federal reserve banks acting in accordance with such rules and regulations
by the Secretary of the Treasury pursuant to this Order, if involving property in which Neway
44 the Secretary of the Treasury may from time to time prescribe, are hereby designated as agraus
00 Denmark or any national thereof has at any time un or since April 8. 1940, had any interest of
for the granting of licenses as hereinafter provided, Licenses may be granted authorizing such trans-
any nature whatsoever, direct or indirect, or if involving property in which the Netherlands,
actions in foreign exchange, transfers of credit, and exports of currency (other than gold certificates)
Belgium or Lasembourg or any national thereof has at any time on or since May 10, 1940, had
or silver coin in such specific cases LIF classes of cases TL9 the Secretary of the Treasury may determine
any interest of any nature whatsoever, direct or indirect:
in regulations prescribed hereunder and rulings made pursuant thereto.
"A. All transfers of credit between any banking institutions within the United States:
SECTION 4. Reports, The Federal reserve banks shall keep themselves currently informed - to
and all transfers of credit between any banking institution within the United States and any
foreign exchange transactions entered into or consummated, and transfers of credit made between hank
banking institution outside the United States (including any principal, agent, home office,
ing institutions outside of the continental United States and banking institutions, in their districts. and
heanch, or correspondent outside of the United States, of a banking institution within the
report to the Secretary of the Treasury all transactions in foreign eschange and all such transfers of error
United States):
not permitted under Sections 1 us 2 hereof which are effected or attempted in their districts without &
"R. All payments by or in any banking institution within the United States:
license.
'C All transictions in foreign exchange by any person within the United Statest
SECTION 5. Regulations, The Secretary of the Treasury is authorized and empowered to prescribe
from time to time regulations to carry out the purposes of this Order, and to provide in such regula-
Dr The export or willfulrawal from the United States or the earmarking of gold or
ligne or by rulings made pursuant thereto, the conditions under which licenses may be granted by the
silver coin or buttion ur currency by any person within the United States:
l'ederal reserve banks and by such other agencies as the Secretary of the Treasury may designate:
E Att transfers, withidrawals or exportations of or dealings to any evidences of indellst-
and the Secretary of the Treasury may require any person engaged in any transaction, transfer, export,
einess or evidences of ownership of property by any person within the United States and
or withdrawal referred to in this Executive Order to furnish under eath complete information relative
thereto, including the production of any books of account, contracts, letters, OF other papera, in consto
'F. Any transaction for the purpose or which The the effect of evading or avoiding the
tion therewith in the custody or control of such person either before or after such transaction, transfer
foregolog probibitions.
report, or withdrawal is completed.
SECTION fi Penaltier. Whoever willfully violates or knowingly participates in the violation of any
Section 10. Additional Reports.
provision of this Executive Order (IF of any license, order. rule, or regulation issued or prescribed here
"A" Reports under oath shall be filed on such forma at such time or times and from time
under, shall be subject to the penalties provided in Section 5 (b) of the Ait of October 6, 1917, at
to time, and by such persons, as provided in regulations prescribed by the Secretary of the
amended by Section 2 of the Act of March 9, 1933.
Treasury, with respons to all property of any nature whatsoever of which Norway, Denmark,
SECTION 7. Defanitions. As used la this Executive Order the term "United States" messa the
the Netherlands. Belgium or Luxembourg or any national thereof is or www the nwnes, or in
United States and any place subject to the jurisdiction thereof; the teral "continental United States"
which Norway, Denmark the Netherlands, Belgium or or any national thereof
means the States of the United States. the District of Columbia, and the Territory of Alaska the MTD
has OF liad any interest nf any nature whatsoever. direct or indirect, and with respect for any
"gerson" mesos an individual, partnership, association, or corporation. and the term "banking inititr
sequisition. transfer, disposition. or any other dealing in such property.
tion" includes any person engaged primarily or incidentally in the business of banking, of granting of
transferring credits, or of purchasing and selling foreign eschange or procuring purchasers and with
"A. The Secretary of the Treasury may require the furnishing under oath of additions?
thereof, as principal or agent) wed, for the purposes of this Order, each home office, branch. principal
and supplemental information, including the production of any books of account, contrasts.
agent, or correspondent of any person Mi engaged shall be regarded as a separate "banking institution
letters or other papers with respect to the matters concerning which reports are required to
SECTION 6. Service is of the Executive Order of August 28, 1933, Relating to the Hearding Export
be Glod under this section
and revoked. Earmarking of Cash Com, Unition, or Currency and to Transactions to Foreign Eschange -
"'Section 11. Additional la to the defunitions contained in within 7.
modthed or revoled at any time.
This Executive Order and any reles, regulations or lionomes prescribed OF issued bereunder may be
the following definitions are prescribed
A The terms "Nerway" and "Dennrk", supertively, eman the State and the Govern-
Tax Write House
FRANKLIN D. ROOSEVILY
mmt of Norway and Denmark on April a. 1940, the terms "the Metherlands", "Meigium", and
lanuary 15,
5w of November 12 5954 which Are of prior
"Laxembourg", mean the State and the Government of the Netherlands, Belgium and Laoren-
bourg on May 10, 1940, and any political subdivisions, agencies and instrumentalities of any
of the foregoing, including territories, dependencies and possessions, and all persons acting or
purporting to net directly or indirectly for the benefit or on behalf of any of the foregoing.
The terms "Norway". "Denmark", the Netherlands", "Belgium" and "Luxembourg" respect
EXECUTIVE ORDER NO. 8446
tively, shall also include any and all other governments (including political sobdivisions.
agencies, and instrumentalities thereof and persons acting or purporting to act directly DE
AMENDMENT OF EXECUTIVE ORDER NO. 8389
indirectly for the benefit or un behalf thereof) to the extent and only to the extent that such
governments exercise or claim to exercise de jure or de facto sovereignty over the area which,
OF APRIL 10, 1940, AS AMENDED
on April 8, 1940, constituted Norway and Denmark and which on May 10, 1940, constituted
the Netherlands, Belgium and Lacembourg.
By virtue of the authority vested in me by section 5(b) of the Act of October 6,
"B. The term "national" of Norway or Denmark shall include any person who has been
1917 (40 Stat. 411), as amended, and by virtue of all other authority vested in me,
or whom there is reasonable cause to believe has been domiciled in, or a subject, citizen or
I, FRANKLIN D. ROOSEVELT, PRESIDENT of the UNITED STATES OF
resident of Norway or Denmark at any time un or since April 8, 1940, but whalt not include
AMERICA, do hereby amend Executive Order No. 8389 of April 10, 1940, as amended,
any individual domiciled and residing in the United States on April 8, 1940, and shall also
ao as to extend all the provisions thereof to, and with respect to, property in which
include any partnership, association, or other organization, including any corporation organ-
France or any national thereof has at any time on or since June 17, 1940, had any inter-
ised under the laws of, or which on April 8, 1940, had its principal place of business in Norway
est of any nature whatsoever, direct or indirect; except that, in defining "France" and
or Denmark or which on or after such date has been controlled by, or a substantial part of
"national" of France the date "June 17, 1940" shall be substituted for the dates appear-
the stock, shares, bonds, debentures, nr other securities of which has been owned or contrulled
by, directly or indirectly, one or more persons, who have been, or whom there is reasonable
ing in the definitions of countries and nationals thereof.
cause to believe have been, domiciled in, or the subjects, citizens or residents of Norway DE
FRANKLIN D. ROOSEVELT
Denmark at any time on or since April &, 1940, and all persons acting or purporting to act
Time WHITE House,
directly or indirectly for the benefit or on behalf of the foregoing.
June 17, 1940
"C The term "national" of the Netherlands, Belgium or Lusembourg shall include any
person who has been or whom there is reasonable cause to believe has been domiciled in, or
& subject, citizen or resident of the Netherlanda, Belgium or Laxembourg at any time on or
since May 10, 1940, but shall not include any individual domiciled and residing in the United
States on May 10, 1940, and shall also include any partnership, association, or other organiza-
tion, including any eurporation organized under the laws of, or which on May 10, 1940, had
its principal place of business in the Netherlands, Belgium or Luxembourg, or which on or
after such date has been controlled by, or a substantial part of the stock, shares, bonds,
EXECUTIVE ORDER NO. 8484
debentures, or other securities of which has been owned or controlled by, directly or indirectly,
one or more persons, who have been, or whom there is reasonable cause to believe have been,
domiciled in, or the subjects, citizens or residents of the Netherlands, Belgium or Luxem-
AMENDMENT OF EXECUTIVE ORDER NO. 8389
bourg, at any time on or since May 10, 1940, and all persons acting or purporting In act
OF APRIL 10, 1940, AS AMENDED
directly or indirectly for the benefit or on behalf of the foregoing.
"D. The term "banking institution" as used in section 9 includes any person engaged
By virtue of the authority vested in me by section 5(b) of the Act of October 6,
primarily or incidentally in the business of banking, of granting or transferring credita, or of
1917 (40 Stat. 411), as amended, and by virtue of all other authority vested in the
purchasing or selling foreign exchange or procuring purchasers and sellers thereof. as principal
1, FRANKLIN D. ROOSEVELT, PRESIDENT of the UNITED STATES OF
or agent, are any person holding credits for others as a direct or incidental part of his business,
AMERICA, do hereby amend Executive Order No. 8389 of April 10, 1940, as amended,
or brokers; and, each principal, agent, home office, branch or correspondent of any person so
any as to extend all the provisions thereof to, and with respect to, property in which
engaged shall be regarded as a imparate "hanking institution",
Latvia, Estonia or Lithuania or any national thereof has at any time on or since July
10, 1940, had any interest of any nature whatsoever, direct or indirest: except that, in
"Saction 12. Additional Regulations. The Regulations of November 12, 1934, are hereby
defining "Latvia", "Estonia", "Lithuania" and "national" thereo( the date "July 10,
modified insolar as they are Inconsistent with the provisions of sections 9 to 11, inclusive of this
Order, and except as so modified are hereby continued in full force and effect. The Secretary of
1940" shall be substituted for the dates appearing in the definitions of countries and
the Treasury la authorized and empowered to prescribe from time to time regulations to carry out
nationals thereof.
FRANKLIN D. ROOSEVELT
the purposes of sections 9 to 11, inclusive, of this Order as amended, and to provide in redi regular
tions or by rulings code purviant thereto, the moditions under which licenses may be granted by
Time Were House,
each agencies as the Secretary of the Treasury may designate"
July 15, 1940
FRANKLIN D ROOSEVELD
Ten Water Home
May (i) 11MO, 7:55 A.M., RST
6.
Regraded Uclassified
EXECUTIVE ORDER NO. 8493
TREASURY DEPARTMENT
AMENDMENT OF EXECUTIVE ORDER NO. 83R9
Office of the Secretary,
OF APRIL 10, 1940, AS AMENDED.
November 12, 1934.
By virtue of the authority vested in BIT by section 5(b) of the Act of Ortober G 1917 (40
Stat. 411). as amended, and by virtue of all other authority vested in me, 1. FRANKLIN D.
REGULATIONS
ROOSEVELT. PRESIDENT of the UNITED STATES OF AMERICA, do hereby assend
Exventive Order No. 8389 of April 10, 1940, as amended, amending Executive Order No. 6560
Relating to Transactions in Foreign Exchange, Transfers of Credit,
of January 15, 1934, by adding the following sections after section 12 thereof:
and the Export of Coin and Currency
"Section 13 A. The following are probibited except as specifically authorized by the
Secretary of the Treasury by means of rulings, regulations, instructions, licenses, or
Article 1. These regulations are prescribed and issued under authority of Sec-
tion 5 (b) of the Act of October 6, 1917 (40 Stat. L, 411), as amended by Section 2 of the
otherwise:
Act of March 9, 1933, and the Executive Order of January 15, 1934, Regulating Trans-
"(1) The acquisition, disposition or transfer of, or other dealing in. or with
actions in Foreign Exchange, Transfers of Credit, and the Export of Coin and Currency.
respect to, any security or evidence thereof on which there is stamped or imprinted.
or to which there is affixed or otherwise attached, a tax stamp or other stamp of a
Article 2. Licenses may be granted, and e general license is hereby granted, to
foreign country designated in this Order, or a notarial or similar seal which by its
all individuals, partnerships, associations, and corporations, authorizing any and all
contents indicates that it was stamped, imprinted, affixed or attached within such
transactions in foreign exchange, transfers of credit, and exports of currency (other than
foreign country, or where the attendant circumstances disclose or indicate that such
gold certificates) and silver coin. The general license herein granted authorizes trans-
a stamp or seal may, at any time, have been stamped, imprinted, affixed or attached
actions to be carried out which are permitted by the Executive Order of January 15,
thereto.
1934 under license therefor issued pursuant to such Executive Order; but does not
"(2) The acquisition by, or transfer to, any person within the United States ol
authorize any transaction to be carried out which, at the time, is probibited by any other
any interest in any security or evidence thereof if the attendant circumstances dis-
order or by any law, ruling, or regulation.
close or indicate that the security or evidence thereof is not physically situated within
the United States.
Article 3. In order that Federal reserve banks may keep themselves currently
informed as to foreign exchange transactions and transfers of credit, as required in Sec-
"B. The Secretary of the Treasury may Investigate, regulate, or prohibit under
tion 4 of the Executive Order of January 15, 1934, every person engaging in any trans-
such rulings, regulations, or instructions as be may prescribe, by means of licenses or
action, transfer, export, or withdrawal referred to in Section I of such Executive Order
otherwise, the sending, mailing, importing or otherwise bringing, directly or indi-
shall furnish to the Federal Reserve bank of the district in which such person has his
rectly, into the United States, from any foreign country, of any securities of
principal place of business in the United States complete information relative thereto
evidences thereof or the receiving or holding in the United States of any securities
upon report forms prescribed by the Secretary of the Treasury, except that reports are
or evidences thereof so brought into the United States The provisions of General
not required to be furnished by (1) persons not earrying during any part of the report-
Ruling No. 5 of June 6, 1940, and all instructions issued pursuant thereto, are hereby
ing period, accounts afroad or accounts in the United States for non-residents therent,
continued in full force and effect, subject to amendment, modification or revocation
or (2) persons whose aggregate transactions, transfers, exports, or withdrawals for their
pursuant to the provisions of this Order.
own account and the account of others do not exceed $5,000 during any seven-day period.
5uch information shall be furnished on a weekly basis except as the respective Federal
"C In the case of any transaction covered by this section, un application for
Reserve banks permit the information in certain cases or classes of cases to be furnished
license may be filed in the männer indicated in the Regulations of April 10, 1940. as
on the basis of longer intervals.
amended, issued parment to this Order,
"D. The Regulations of November 12, 19.4, are hereby modified in 10 far as they
These regulations and the general license herein granted may be modified or revoked
are inconsistent with the provisions of this section.
at any time.
"Section 14. The Secretary of the Treasury may require any person to furnish under
HENRY In
with, complete information relative to any transaction referred to in this Order, or with
Secretary of the Trademy.
respect to any property in which any foreign country designated a this Order, or any
national thereof, has any interest, including the production n° any books of account, con-
APPROVED: November 12, 1934.
tracts, letters, or other papers, in connection therewith. in the entody or control of such
person, either before or after rech transaction is completed."
FRANKLIN D. ROOSEVELT
FRANKLIN D. ROOSEVELT
Tux WHITE House,
July 25, 1940.
9
america, unle und by the Secretary of the Tennury MIT Mar HI, 1946. The amminiment dered May to 1999 . la
[The Regularine of the Secretary at the Treasury April 10, 1040 under Executive Order Na KWI), dated 1 18.
"SACTION 1504. Reports of Proparty Intervite of Normay, Domark, the Bilgiam, Lovemburg
- immediately below and therefire, the original text of the Regulations April 10, 1940, is celled Information -
Nationals Thereof,
fine are (nth 8 pupe [2]
CODE OF FEDERAL REGULATIONS
TREASURY DEPARTMENT
the information called for in such Form, with respect to all property situated in the United States on April 8,
"(a) On or before May 15, 1940, reports shall be filed on Form TUR-100, duty executed under codi, contain-
Title 11-Main and Finance: Treasury
Chapter 1-Monetary Offices, Department of the Treasury
Office of the Secretary
May 10, 1940.
Part 130
interest 1910. of any nature whatever, direct or indirect. Wishin thirty days of the publication of these regulations in
ing in which Norway or Denmark or any national thereof has at any time on or since April 8. 1940, had any
AMENDMENT TO REGULATIONS
Federal Register, reports shall be filed on Form TFR-100, duly executed under outh. containing the information
The regulations of April 10, 1940, are amended to read as follows:
called de fur m such Form, with respect to all property situated in the United States an May 10, 1940, in which the
Nesberlands, Belgium or Luxembourg or any national thereof has at any time on or since May 10, 1940, hail any
"REGULATIONS
interest of any nature whatsoever, direct or indirect. Such reports shall be filed by:
"Relating in Transactions in Foreign Exchange, Transfers of Credit Payments, and the Export de Wills
drawal of Com. Bellion and Currency, and Tranders, Withdrawals and Exportations of, or Dealings in
"(1) Every persod in the United States directly or indirectly holding, or having title 10, or cartoity,
Evidences of Indebtriness or Ownership; and to Reports of Foreign Property Interests in the United States
control or possession of such property incluiting, without any limitation whatsoever of the foregoing, every
partnerships association, or corporation organized mider the laws of the United States or any Itsle or territory
"Sieviow 130.1. Authority for regulations. These regulations are prescribed and issued under authority of
of the United States or having its principal place of business in the United States, in the shares of where stock
Section 3(6) of die Ao of October 6, 1917 (40 Stat. 411), as amended, and Executive Order No 6560,
(if la whole debentures, nutes, bonds, compuses, or other obligations or securities Norway or Denmark or any
January 15, 1934, a amended.(*)
estional therept has at any time ING or since April B, 1940, had any interest of any nature whatsoever, direct
or indirect, or in which the Netherlands, Belgiver, ot Luvenlourg OF any national thereof has at any time on
"Secrion 130.2. Definitions.
or saxe May 10, 1940, had any interest of any nature whatsoever, direct or indirect; and
"(a) The terra Order' shall refer in Executive Order No. 6560, of January 15, 1934, as amended.
"(2) Every agent or representative in the United States for Norway, Demunk, the Netherlands, Belgium
"(b) The term 'regulation' shall refer to these regulations.
or Currenbourg or any national thereuf having any information with respect to any such property.
"(e) The terms 'penperty' and 'jiniperty interest' or "property interests' shill include, beit not by way of Nonita-
then, money, checks drafts, bullion, bank deporiti, savings accounts, any deLta, indebtedness or obligatims,
"Provided, That no report on. Form TFR-100 und be filed where the total value of all property interests to be
ascurities cummonly dealt in by bankers, brokers, and investivent houers, notes, debentures, stocks, bonds,
reported is less than $250.
hankers' acceptances, enertgages, pledges, liere or other right in the nature of security, warehouse receipts, bills di
"(b) Reports shall be executed and filed in triplicate with the Federal Reserve bank of the district or the
fulling. trust receipta, bills of sale, any other evidences of title, ownership or indebtodness, goods, waren merchandise
Governor or High Commissioner of the territory or pourssion of the United States in which the party filing the
chattela, stocks on hand, ships, goals una ships, real estate mortgages, vendors' sales agreements, land metrada, mil
report reddes or has his principal place of business DE principal office or agency, or IE such party has no legal
estate and any interest therein, leaseholds, ground rents, optsons, negotiable instruments, trade acceptances, royaltin,
residence or principal place of besiness or principal office or agency in a Federal Reserve district or a territory or
book accounts, accounts payable, judgments, paterits, trade-marks, expyrights, insurance policies, safe deposit baxe
possession of the United States, then with the Federal Reserve Bank of New York. A report shall be deemed to have
and their contents, annuities, et odera.
lem lited when it is received by the proper Federal Reserve bank or other agency or withen it is properly addressed
"(d) Sufe deposit boxes shall be deemed to be in the "custody" not only of all persons having access theres
and multed and bears a postmark dated prior w midnight of the date upon which the report is due. The Federal
Inc also of lbs leson of such boxes whether or not rach lessura have access to such The foregoing shall not È
Reserve hank and other agencies shall promptly forward two copies of every report filed with it to the Secretary of
any way be regarded - a limitation upon the meaning of the term 'custody'.
the Treasury.
"(e) For the meaning of other terms reference should be made to the defmitions contained in the Order.(*)
"(c)(1) All spaces in the report must be properly filled in. Reports found not to be in proper form, or lacking
"Surrior 130.3. Licenses to angage in foreign exchange transactions, etc. Applications for licenses engage
is essential details, intrall not be deemed to have been filed in compliance with the Order.
foreign exchange transactions, transfers of credit, payments, the export or withdrawal from the United States et the
(2) Where space in the report form does not permit full answers to quertions, the information required
carmarking of gold or silver coin or bullion or currency, or the transfer, withsdrawal is expiration of, or dealing
may be set forth in supplementary papers incorporated by reference in the report and submitted therewith. Supple-
any evidences of indehte/loess of evidences of ownership of property, involving property in which Norway or Denrouk
membry documents and papers must be referred to in the principal statement in chronological or other appropriate
or any national thereof has at any time on or since April 8, 1940, had any interest of any nature whatsoever, direct =
order and bei described in inich manner that they can be identified
indirect, or in which the Netherlands, Belgium or Eusemberg est any national thereof los at any time on DE since
May 10. 1940, had any interest of any nature whatsoever. direct or indirect, shall be filed in duplicate with the
"(d) A separate report under eath must be filed by esch person required to file a report except persons
Federal Reserve bank of the district or the Governor or High Commissioner of the terrisory or presence of the
holding property jointly may file a joint report.
United States in which the applicant resides or has his principal place of Instiness or principal office or agency, IN
"(e) The Sectetary of the Treasury may, in his discretion, grant auch estensuras of time as be deems advisable
with the Federal Reserve Bank of New York if the applicant has no legal residence or principal place of business of
for the making of any or all of the reports required to these regulations.
principal office or agency in a Federal Reserve district or a territory or pression of the United States Application
"(f) Report Form TFR-100 may be obtained from any Féiteral Reserve bank, mint or assay office and the
forms may be obtained from any Boderal Reserve lunk, mine or usay office, or the Secretary of the Treasury
Washington, D.C. Applications shall be escented under onth before an officer authorized to administer reths, or il
Secretary of the Treasury, Washington, D. C.(*)
excented ontside of the United States, before a diplomatic or consular officer of the United States. The applicant dall
"Section 130,5. Section 5(b) of the Act of October 6, 1917. as amended by Seraion 2 of the Act
furnish such further information 38 shall be requested of him by the Secretary of the Treasury or the Feieral Reserve
of March 9, 1933, provides in part:
hank or other agency at which the application is filed Licenses will le issued by the Secretary of the Treasury, una
Whoever willfully violates any of the provisións of this subdivision or of any license, under, rule or
directly or through any agencies de lie may designate, and by the Federal Reserve hanks acting in accordance ein
regulation issued theremder, statt, upon conviction. be fined not more than $10,000, or, a a natural person, may
words rules, regulations, and instruction as the Secretary of the Treasury may from time to time prescribe in 1
be imprisoned for pink PHONE tisan len years. or body: and any officer, director, of agent di any corporation who
class or classics of cases as the Secretary of the Treasury any determine in rules, regulations, and
knowingly participates in such violation may be pusished by a like fine, imprisonment, or both. As used in this
prescribed by him. The Federal Reserve bank or other agency at which an application is filed will advist the applic 1
subdivition the - "peraral" useans so individual, partnership, association, or corporation." (*)
one of the granting or dental of the linesue Licenses for the export or withdrawni of currency or gold in vilver
or bullion or evidences of indebtedntse or evidences of ownership of projecty, after Ferving better circulied By
"SECTION 130.0. Modification or Revocation These regulations and any Forms is instructions lassed hero-
collector of customs or the pormayer through which the exportation or withdrawal was made, may be recorred
with collector of customer UT postmaster to the license Appropriate forms for applications and License will
under any be modified or revolied NE any time (*)*
Herrey It
prescribed by the Secretary of the Treasury. Licenses may be required to file reports upon the consummation
APPROVED: May to, 1940, 7.55 A: M. E.S.T.
Security of aller Treasury,
the Investions The decision of the Secretary of the Treasury with respect to the approval or disapproved of
application shall be (*)
PAANKLIS D. Rousever
(*) Sections 130.1 le 5(h), 40 Stat. ats and 900. MIC. 2 4R Sus I: Public Resolusion: No. is, 70th Clagress 12 050
11
The Ex. Onle 6040, Jam. 1!, Ex: Unlet ESM, April 10. 1440; Ex. Order 540% May It, 196.
10
CODE OF FEDERAL REGULATIONS
Title 11-Manry and Finance: Treasury
TREASURY DEPARTMENT,
GENERAL RULINGS
Chapter 1-Mouetary Offices, Department of the Treasury
Office of the Secretary,
Part 130
June 17, 1940.
ISSUED UNDER EXECUTIVE ORDER NO. 8389, APRIL 10, 1940, AS AMENDED, AND
REGULATIONSISSUED PURSUANT THERETO, RELATING TO TRANSACTIONS
IN FOREIGN EXCHANGE, ETC.
AMENDMENT TO REGULATIONS*
TERM "DENMARK" NOT APPLICABLE TO ICELAND
The Regulations of April 10, 1940, as amended (Sections 130.1 to 130.6), are further
amended so as to extend all the provisions thereof to, and with respect to, property in
General Ruling No. 1
which France or any national thereof has at any time on or since June 17, 1940, had any
The Secretary of State has advised me as follows:
interest of any nature whatsoever, direct or indirect; except that reports on Form TFR.
"Denmark and Iceland are two separate political entities. Acting under the authority of .
100 with respect to all property situated in the United States on June 17, 1940, in which
provision of the leelandie Constitution the Icelandie Parliament has within the past few days
France or any national thereof has at any time on or since June 17, 1940, had any inter-
passed . resolution stating that since the King of Iceland is not now in a position to carry
est of any nature whatsoever, direct or indirect, shall be filed by July 17, 1940.
out his Constitutional duties with respect to Iceland, the Icelandic Government has assumed
for the time being the exercise of the Royal prerogatives and the entire control of Icelandie
H. MORGENTRAU, Jr.
foreign relations.
Secretary of the Treasury.
APPROVED: June 17, 1940.
"In view of the foregoing it would not appear that Iceland falls within the definition of
the term 'Denmark' in Section 11 of the above-mentioned Executive Order."
FRANKLIN D. ROOSEVELT
In view of the (oregoing, the Treasury Department construes the term "Deumark" as hard
Sertions 130.1 to 1305:-Sec 5(6), 40 Stat. 415 and 965; See. 2. 48 Stat. 1: Public Resolution Mn 69,
in the above-mentioned Executive Order and Regulations as not applying to Iceland.
70th Congress: 12 9. c. 95a: Ex. Order 6560, Jan. 15, 1934; Ex. Order 8389, April 10, 1940; Ex.
Order 6405, May 10, 1940; Rx. Order 8445, June 17, 1940.
[Tround April 15, 1940.1
TRANSFER OF STOCK CERTIFICATES AND CUSTODY OF SECURITIES
General Ruling No. 2
Inquiry has been made as to whether the following are prohibited by the Executive Order and
CODE OF FEDERAL REGULATIONS
TREASURY DEPARTMENT,
the Regulations issued thereunder except under license:
Title 31-Munty and Finance: Treasury
Chapter I--Monetacy Offices, Department of the Treasury
Office of the Secretary,
(a) The transfer by a banking institution within the United States of stock certificates from
Part 130
July 15, 1940,
or into the names of "nationals" of Norway or Denmark: and
(b) The delivery out of custody Accounts or the receipt to castody accounts, by a banking
institution within the United States, of securities held or to be held in custody for "nationals" of
AMENDMENT TO REGULATIONS*
Nerway or Demmark
The Regulations of April 10, 1940, as amended (Sections 1.30.1 to 130.6), are further
The Treasury Department construes the Executive Order and Regulations as prohibiting such
amended BG as to extend all the provisions thereof to, and with respect 10, property in
transactions, except under license.
which Latvia, Estonia or Lithuania or any national thereof has at any time on or nince
[Lassed April 19, 1940.)
July 10, 1940, had any interest of any nature whatsoever, direct or indirect, except that
reports on Form TFR-100 with respect to all property situated in the United States
TRANSACTIONS REGARDING SECURITIES REGISTERED OR INSCRIBED
IN NAME OF A DESIGNATED FOREIGN COUNTRY OR NATIONAL THEREOF
on July 10. 1940, in which Latvia, Estenia of Lithuasia of any national thereof has at
any time on or since July 10, 1940, had any interest of any nature whereoever, direct or
General Ruling No. 3 as Amended
Indirect, shall be filed by August 10, 1940.
The attention of banks, brokers, transfer agents, registrate and all other persons and banking
H. MORRENTRAY, In
institutions in the United States is invited to the fact that the Treasury Department construes
APPROVED) July 15, 1940:
Secretary of a Treasury
Executive Order No. 0389, April 10, 1940, M amended, and the Regulations lesued pursuant thereto
as prohibiting the acquisition, transfer, disposition, resuportation, importation exportation, or
FRANKLIN D,
withdrawal of, or the endorsement or guarautee of signatures on, or otherwise dealing In, or with
respect to, any security (or evidence thereof) registered or inscribed as the name of any country
Sections 1831 e 5(b), 40 Sur 415 and = 4d Stal 1: Public Resolution No 49,
76th 12 U.S. C. 95a; Ex. Order 5550, Jun. 15, 1934: Ex. Order REST, April 10. THI: Ex
designated in Executive Order No. 8389, April 10, 1940, all amended, or any national thereof,
Order was May 10, 1940; Ex. Order 8446, Issue 12, 1240; Ka, Order HH, July 15, INC
except pursuant to a specific license, irrespective of the fact that at any time (either prior to, on, or
subsequent to April 10. 1940) the registered or inscribed owner thereof may lusve, or appears to
have, assigned, transferred or otherwise disposed of any such security. Applications for licenses
whould be made in the manner provided in the Regulations issued under Executive Order No. RIMO,
April 10, 1940, as amended.
Issued June 3, 1940; amended June 17, 1940,)
IV
13
DEFINITIONS OF TERMS USED IN BULINGS, LICENSES, ETC
DELIVERY OF IMPORTED SECURITIES BY FEDERAL RESERVE BAXKS
TO CERTAIN BANKING INSTITUTIONS
General Ruling No. 4
General Ruling No. 6 Supplementing General Ruling No. 5
Except as otherwise apecifically indicated, all definitions appearing a Executive Order No
8359, of April 10, 1940, as amended, and the Regulations issued thereunder, shall apply to the terms
(1) The provisions of General Ruling No. 5 of June 6, 1940, and all instructions issued pur-
employed Regulations. in all rulings, licenses, instructions, etc., issued pursuant to such Executive Order and
mant thereto, are hereby continued in full force and effect, Provided, That any Federal Reserve
Bank to whom securities ot evidences thereof (hereinafter referred to as securities) have been for-
lissued June 3, 1940]
warded under such General Ruling may, as fiscal agent of the United States, deliver the securities,
at any time, under appropriate arrangementa with the addresses of the securities, to a bank or trust
company incorporated under the laws of the United States or of any state, territory or district nf
the United States, or to . private bank subject to supervision and examination under the banking
laws of any state, or to any other banking institution authorized for that purpose by the Treasury
Department.
CONTROL OF IMPORTED SECURITIES
(2) Prior to such delivery by I Federal Reserve Bank of any such security a complete
description of the security shall be made or received, and retained by such Federal Reserve Bank,
General Ruling No. S
and in any case in which a security bears a stamp, scal or other mark not lending itself to precise
description, a. photostat of such mark shall be made at the expense of the addressee and retained
The sending, mailing, importing or otherwise bringing into the United States, on and after
by such Federal Reserve Bank. This requirement may be dispensed with la any case in which
June 7, 1940, from any foreign country, of any securities or evidences thereof or the receiving
appropriate arrangements are entered into for furnishing such Federal Reserve Bank with this
or holding in the United States of any securities or evidences thereof to brought into the United
description within a reasonable time after such delivery,
States is prohibited, except on condition that such securities and evidences thereof be immediately
delivered for examination to a Federal Reserve bank as fiscal agent of the United States Such
(3) Upon the delivery of any such security by a Federal Reserve Bank to any such institu-
Federal Reserve bank, as fiscal agent of the United States, shall hold such securities and all
tion, such institution shall execute such form of receipt as may be prescribed by the Secretary of
evidences thereaf until the Treasury Department is satisfied as to whether or not any of the
the Treasury.
countries oscued in Executive Order No 8389, as amended, or any national thereof has at any
(4) Any institution to which any such security shall be delivered by a Federal Reserve Bank
time ou or since the dates specified in such Order, as amended, bad any interest of any nature
shall place such security in an account in such institution, from which payments, transfers, or with-
whatsoever, direct or indirect. in such securities or evidences thereof. Proof as to whether or not
drawals may be made only in accordance with & license issued pursuant to Executive Order No.
any of such countries or any national thereof has had any such interest may be submitted to the
8389, 23 amended. In the event that any such security NO held by such institution is sold or other-
Federal Reserve bank building such securities or evidences thereof.
wive dealt with under a license the proceeds therefrom shall be held by such institution under the
Castoms officers and postal employees are instructed to deliver any such securities or evi-
same enditions 31 those under which the security was held, and such proceeds shall be placed in
dentes thereof to a Federal Reserve bank Any articles arriving from any foreign country on or
an account in such institution in the same name in which the security sold or otherwise dealt
after June 7, 1940, which To the opinion of enstoms officers or postal employees contain such
with was held, from which payments, transfers or withdrawals may be made only in accordance
securities or evidences thereof, shall be subjected to customs inspection in accordance with the
with a license issued pursuant to Executive Order No. 8389, as amended.
Custome Regulations of 1937. If any article opened by nn addresse OF his agent in the present
(5) Federal Reserve Banks shall release any security referred to in paragraph (1) hereoi, or
or under the supervision of 8 customs officer or postal employee is found to contain such securi-
shall authorize the release of the contents of Any account referred to in paragraph (4) hereof, if
ties OF evidences thereof, such securities or evidences thereof shall be surrendered forthwith to
and when the Treasury Department is fully satiafied that no foreign country designated in Execu-
such vided. customs officer or portal employee for delivery to a. Federal Reserve bank, as above pro-
tive Order No. 8389, of amended, or any national thereof, had, at any time, on or since the dates
specified in such Order, as amended, had any interest of any nature whatsoever, direct or indirect,
[leanied Jose 6, 1940 On June 7, IMG. the Secretary at the Treasury insured that, and further motice,
in such security or in such account.
- encurities Be forwarded reming to bite % Prieral the United Zuies from Grat Britain, France, Canada, Newfoundland or Bermade need
minrilles of Jame 7, 1940, the Beire Servetary hank of the for Treasury studenced under General on Imi Baling 17, 1940, No. 5. that, Supplementing mill further his - and
(fassed Angus a 1940.]
last for - latu ender the United General Sam Reling on or No also 11 June 17 from France most be forwarded to a Federal Runn
11
GENERAL LICENSES
ISSUED UNDER EXECUTIVE ORDER NO. 8389, APRIL 10, 1940, AS AMENDED, AND
SECURITIES COMING FROM THE PHILIPPINE ISLANDS AND THE
PANAMA CANAL ZONE
REGULATIONS ISSUED PURSUANT THERETO, RELATING TO TRANSACTIONS
IN FOREIGN EXCHANGE, ETC.
General Ruling No. 7
PAYMENTS TO AFFECTED ACCOUNTS
The provisions of General Ruling No. 5, as supplemented by General Ruling No. 6, have been
extended to securities or evidences thereof coming from the Philippine Islands and the Panama
Canal Zone into any other part of the United States.
General License No. I as Amended
[Insued September IN, 1940.]
A general license is hereby granted authorizing payments and transfers of credit to accounts in
banking institutions within the United States in which Norway, Denmark, the Netherlands,
Belgium, Luxembourg, France, Latvia, Estonia or Lithuania, or a national thereof has a property
interest within the meaning of the Executive Order of April 10, 1940, as amended, and the Regula-
tions issued thereunder; provided that the payments or transfers of credit are not made from
accounts in which Norway, Denmark, the Netherlands, Belgium, Luxembourg, France, Latvia,
Estonía or Lithuania or a national thereof has a property interest within the meaning of such
Order and Regulations.
[Issued April 30, 1940: amended May 10, 1940; amended by General License No. 16. June 17, 1940; amended
by General License No. 23, July 15, 1940. The acope of General License No. 1 was extended by General License
CERTAIN PAYMENTS TO DESIGNATED FOREIGN COUNTRIES AND
No. 29.]
NATIONALS THEREOF
General Ruling No. 8
DEBITING AFFECTED ACCOUNTS FOR CERTAIN CHARGES
DUE BANKING INSTITUTIONS
Inquiry has been made as to whether the following is prohibited, except under license, by
Executive Order No. 8389, as amended, and the Regulations issued pursuant thereto:
General License No. 2 as Amended
United States to a bank or other person in a foreign country other than one person of the countries
A request or authorization made by or on behalf of a bank or other within the
A General License is hereby granted authorizing banking institutions within the United States
designated in Executive Order No. 8389, as amended, as 4 result of which request or authoriza-
to debit accounts with such banking institutions in which Norway, Demmark, the Netherlands,
tion such latter bank or person makes a payment or transfer of credit either directly or
Belgium, Luxembourg, France, Latvia, Estonia or Lithuania or a national thereof has a property
indirectly to one of the foreign countries designated in the Executive Order, as amended, or
interest within the meaning of the Executive Order of April 10, 1940, as amended, and the Regula-
A national thereof.
tions issued thereunder, in payment or reimbursement for interest due to such banking institutions,
cable, telegraph, telephone charges, or postage costs, enstody fees and service charges, including
prohibiting such a transaction except under license.
The Treasury Department construes the Executive Order, as amended, and Regulations as
but not by way of limitation minimum balance charges, account carrying charges and reference
books, notary and protest fees, photostats, credit reports, transcripts of statements, registered mail
insurance, stationery and supplies, checkbooks and other similar items, provided that all banking
(Inced September 18, 1540.]
institutions making any such debits shall file promptly with the appropriate Federal Reserve bank
weekly reports showing the details of such debits.
[Issued May 10, 1940; amended by General License No. 16, June 17, 1940; amended June 19, 1940; amended
by General License No. 21, July 15, 1940. The scope of General License No. 2 was extended by General License
No 29.1
PAYMENTS OF CHECKS AND DRAFTS DRAWN OR ISSUED PRIOR TO APRIL 8, 1945
FROM ACCOUNTS OF NORWAY AND DENMARK AND THEIR NATIONALS, AND OF
CHECKS AND DRAFTS DRAWN OR ISSUED PRIOR TO MAY 10. 1940 FROM ACCOUNTS
OF NETHERLANDS, BELGIUM AND LUXEMBOURG AND THEIR NATIONALS
General License No. 3 Revoked
[Issued We 16, 1940; May 17, 1940: revolved June 15, 1940.)
16
17
SALE OF SECURITIES ON A NATIONAL SECURITIES EXCHANGE
PAYMENTS FROM ACCOUNTS OF GOVERNMENT OF BELOIUM
AND BANQUE NATIONALE DE BELGIQUE
General License No. 4. as Amended
A general license is hereby granted anthorizing the home fide sale of securities on - national
General License No. 7 Revoked
securities exchange by banking institutions within the United States for the account, and pursoant
[Insued May 13, 1940: revolved June 26, 1943.1
to the authorization, of nationals of Norway, Deumark, the Nether/ands, Belgium, Lasembuerg,
France, Latvis, Estonis or Lithrania, and the making and receipt of payments, transfers of credit
and transfers of soch securities which are necessary incidents of any such sale, provided that:
(a) the proceeds of the sale are credited to an account in the name of the national for whose
PAYMENTS FROM ACCOUNTS OF CERTAIN NETHERLANDS BANKS
account the sale was made and in the banking institution within the United States which held the
securities for such national: and
General License No. 8 Revoked
(b) this general license shall not be deemed to authorize the sale of any security registered or
[Inned May 13, 1940; revolved May 16. 1940.)
inseribed in the name of Norway, Denmark, the Netherlands, Belgium, Luxembourg, France,
Latvia, Estonia or Lithuanis, or any national thereof, irrespective of the fact that of any time
(whether prior to, do, or subsequent to April 10, 1940) the registered or Inscribed owner thereif
COMMODITIES FUTURES CONTRACTS
may have, or appears to have assigned, transferred or otherwise disposed of the security.
Each banking institution making any sales herein authorized is required to file promptly with
General License No. 9 as Amended
the appropriate Federal Reserve bank weekly reports showing the details of the transactions,
including a description of the securities sold, the dates of sales, the persons for whose account the
A general license is hereby granted authorizing the buna fide purchase and sale of commodi-
sales were made, and the prices obtained.
ties furores contracts and of evidences of ownership of actual commodities by banking institu-
This amendment of General License No. 4 shall not be deemed to prevent the completion os
tions within the United States, (or the account of nationals of Norway, Denmark, the Netherlands,
or prior to June 6, 1940 of purchases and sales, which were made prior his June 4, 1940 purioant to
Belgium, Luxembourg, France, Larvia, Estonia or Lithuania, within the meaning of the Executive
General License No. 4, of securities other than securities registered or inscribed in the name of
Order of April to, 1940, as amended, and the Regulations issued thereunder, pursuant to the
Norway, Detimark, the Netherlands, Belgium, Luxembourg, France, Latvia, Estonia or Lithmanta,
instructions of such nationale, and necessary transfers of credit and payments between accounts
or any national thereof.
in banking institutions within the United States as required in connection with such purchases
or ule or because of ductuation in the market value of the commodities covered by such con-
by: General License No. 23, July 15, 1940; amended Agnut &, 19411 The scape of General Licrose No. amended 4 was
[Issued May 10, 1940 amended Juné 1, 1940: amroint by General License No. 16, June 17, 1940;
tracts or evidences of ownership, provided that:
estended by General License No. 20.]
(a) in the case of the purchase of commodities futures contracts or evidences of owner-
ship of actual commodities, the contracts or evidences of ownership purchased are held in an
account in a banking institution within the United States in the name of the national of
Norway, Denmark, the Netherlands, Belgium, Luxembourg, France, Latria, Estonia or
Litheania, whose account was debited in connection with such purchase
PAYMENTS TO THE UNITED STATES
(b) in the case of the sale of commodities futures contracts or evidences of ownership
General License No. 5 as Amended
of actual commodities, the proceeds of the sale are credited to so account in a banking Insti-
Aution within the Voited States in the name of the national of Norway, Denmark, the Nether-
A general license is hereby granted authorizing the payment to the United States and
lands, Belgium, Luxembourg, France, Latvis, Estonis or Lithuania for whose account the
United States and agencies and instrumentalities thereof from accounts in which Norway,
agencies and instrumentalities thereof of taxes, lees, charges, and other Items payable to the
sale was made.
Denmark, the Netherlands, Belgium, Laxembourg, France, Latvia, Estonia un Lithuania or $
Each banking institution making such a purchase or sale is required to file promptly with the
national thereof. has a property interest within the meaning of the Executive Order of April 10,
appropriate Federal Reserve hank weekly reports showing the details of the transactions includ-
1940, as amended, and the Regulations issued thereunder,
log a description of the commodities futures contracts or evidences of ownership of actual com-
(Issed 15, 1940. May 10, 1940: amended by General License No. 16, June 17, 1949; General License Na
mudities purchased of sold, of the person for whose account the purchase as sale was made, and
a July The Kope of General Livense No. 5 was extended by General License amended No. by 29.)
the price at which the purchase or isle was made.
[Treat May 14. 1540, amended by General License No. 16, June 17, 1040; amended by General License No
21, July 15, 1940)
PAYMENTS FROM ACCOUNTS OF GOVERNMENT OF THE NETHERLANDS
PAYMENTS FROM ACCOUNTS OF CERTAIN RELGIAN BANKS
General License No. 6 Revoked
General License No. 10 Revoked
(Inead May 13, 1940: revuled May 16. total
[Trused May 14, 1940. ausended May 20. 1940; revelied Just 25, 1940.1
is
19
PAYMENTS FROM ACCOUNTS OF CERTAIN NETHERLANDS BANKS
PAYMENTS FOR LIVING, TRAVELING AND SIMULAR PERSONAL EXPENSES
Di THE UNITED STATES
General License No. 13 as Amended
General License No. 11 as Amended
A general license is hereby granted acthorizing banking institutions within the United States
A general license is hereby granted authorizing payments and transfers of credit in the United
make all payments, transfers and withdrawals from accounts in the name of any of the follow-
States from securits la banking institutions within the United States in which & national of
DI the head offices in Java of the Javaiche Bank, Nederlandsche Handel Mestschappij,
Norway, Deumark, the Netherlands, Belgium, Lusembourg, France, Latvia, Estonia or Lithuseis
Nederlandsch lag= Indische Handelsbank and Nederlandsch Indiache Escompto Mantachapplj, the
has a property interest within the meaning of the Executive Order of April 10, 1940, as amended
branch offices in Kobe, Shanghai, Amoy, Hongkong. Manila, Singapore, Bombay and Calcotta of
and the Regulations issued thereunder, to or upon the order of the person in whose name the
the Nederlandsch Indische Handelsbank and the branch offices in Kobe, Djeddab, Shanghai,
account is held, provided that (a) the banking institution making any each payments or trans-
Hongkong, Singapore, Penang, Rangoon, Calcutta and Bombay of the Nederlandsche Handel
(ero of credit satisfies itself that such payments and transfers of credit are needed for living
traveling and similar personal expenses in the United States. (b) such payments and transfers
Mastichappij. Banking Institutions within the United States making such payments, transfers or with-
of credit by such banking institution do not exceed $500 in any DDE month to or for the account
trawals shall file promptly with the appropriate Federal Reserve Bank weekly reports showing
of any one depositor, and (c) each banking institution making any such payments or transfers
the details of the transactions during such period.
of credit shall file promptly with the appropriate Federal Reserve bank monthly reports showing
(Insued May 31, 1940; assended August 8, [940.]
the details of such payments and transfere of credit.
(Insued May 13, 1940; amended by General License No. 16, June 17, 1040: amended by General License No.
23, July IS, 1941. The serve of General License No. 11 was extended by General License No 29.)
PAYMENTS FROM ACCOUNTS OF CERTAIN BANKS
IN NETHERLANDS WEST INDIES
General License No. 14
ACCESS TO SAFE DEPOSIT BOXES
A general license is hereby granted authorizing banking institutions within the United States
General License No. 12 as Amended
to make all payments, transfers and withdrawals from accounts in the name of any of the follow-
A general License is hereby granted authorizing access to safe deposit bases leased by Norway,
log: Curacaosche Bank, Willemstad, Curacao; Maduro & Cariel's Bank. Willemstad. Currean;
Denmark, the Netherlands, Belgium, Luxembourg, France, Latvia, Estonia or Litbuania or 0.
Edwards Henriquez & Co., Willemstad, Curacao; and Aruba Bank, Oranjestad, Aruba.
national thereof within the meaning of the Executive Order of April 10, 1940, as amended, and
Banking institutions within the United States making such payments, transfers, or with-
the Regulations issued thereunder, or containing property in which any of the foregoing has an
drawals shall file promptly with the appropriate Federal Reserve bank weekly reports showing
interest of any nature whatsoever, direct OF indirect, and the deposit therein or removal there-
the details of the transactions during such period.
from of any property, but in each case only on the following terms and conditions:
(Essued June 4, 1940.]
(1) Such access shall be permitted only in the presence of an authorized representative
of the lessor of such bux;
LETTERS OF CREDIT RESPECTING TRADE BETWEEN METHERLANDS
(2) In the creat that any money or evidences of indebtedness or evidences of ownership
EAST INDIES AND THE UNITED STATES
of property are to be removed from such box, such access shall be permitted only in the
presence of an authorized representative of a banking institution within the United States,
General Liceuse No. 15
which may be the lessor of such box, which receives into its custody immediately пров
removal from such box the money of evidences of indebtedness or evidences of ownership
A general license is hereby granted authorizing banking institutions within the United States:
of property removed from such box and which holds the same subject to the Executive Order
(1) To issue, confirm or advise import letters of credit in favor of exporters in the
of April 10, 1940, as amended, and the Regulations issued thereunder, for the account of the
Netherlands East Indies to finance imports therefrom into the United States, and accept and
lessee of such bos and subject to the property interests therein as of April 8, 1940, of Norway
pay drafts drawn by such exporters under neh letters of credit; and
or Denmark or any national thereof, or subject to the property interests therein al of May
(2) To issue, confirm or advise export letters of credit in favor of exporters within the
10, 1940, of the Netherlands, Belgium or Luxembourg or any national thereof, or subject to
United States to finance exports therefrom to the Netherlands East Indies: to accept and pay
the property interests therein as of June 17, 1940, of France or any national thereof, BF sub-
drafts drawn by such exporters under such letters of credit) and to reimburse such banking
ject to the property interests therein sur of July 10, 1940, of Latvia, Estonia or Lithearis or
institutions for payments under wisch letters of credit.
any ostional thereof;
The issuance and transfer of documents of title in connection with such import or export letters
(3) In the event that any money or evidences of indebtedness or evidences of ownership
of credit in accordance with the instructions of the persons entitled to issue such instructions are
of property are removed from such box the banking institution which receives into its eastody
also hereby authorized.
any money or evidences of indebredness or evidences of ownership of property removed from
Banking institutions Imming, confirming of advising letters of credit or accepting or paying
such box shall file promptly with the appropriate Federal Reserve bank a report showing the
details of the transactions: and
drafts drawn, and all persons (including banking institutions) issuing or transferrieg documents
of title pursuant to this general license, shall file promptly with the appropriate Federal Reserve
(4) The lessee of such box or other person granted access to such box shall farnish to
back weekly reports showing the details of the transactions during soch period
the lessor of such bos a certificate in triplicate, one copy of which shall be executed under
oath, that he has filed or will promptly file . report on Form TFR-100 with respect to such
For the purpose of this general license the Netherlands East Indies shall be deemed to include
box and the contents thereof; and the lessor of such has shall deliver the swarn copy of
the following: Java and Madora, Somatra, Blouw-Lingga archipelago, Banka, Billiton, Celebes,
such certificate, and one conformed copy thereof, to the appropriate Federal Reserve bank
Borneo (West, South and East Divisions), Timor archipelago, Bali and Lambok, Lesser Sanda
Ilsound May 20, 1940; amended by General Licesse No 16. June 17, 1940; amended by General License No
Islands and Dutch New Guinea.
15, July 15, 1540.)
[Issued June 4, 1946.1
21
20
EXTENSION TO FRANCE OF CERTAIN GENERAL LICENSES
PAYMENTS FROM ACCOUNTS OF UNITED STATES CITIZENS DOMICILED OR RESIDING IN
NETHERLANDS EAST INDIES OR WEST INDIES
General License No. 16
General Licenses Non. 1. 2, 4, 5, 9, 11 and 12, as amended, issued under Executive Order No
General License No. 20
8389 of April 10, 1940, 45 amended, are hereby further amended ses that as of the date hered there
A general license is hereby granted authorizing banking institutions within the United States
stall be substituted for the words "Norway, Denmark, the Netherlands, Belgium or Luxemburg",
make all payments, transfers and withdrawals from accounts in the name of any individual who
wherever they appear in such General Licenses, the words "Norway, Denmark, the Netherlands
or is a citizen of the United States and who is domiciled to, or resident of, the Netherlanda East
Belgium, Lecembourg or France".
Indies or the Netherlands West Indies; provided that no foreign country named in Executive
General License No. 12, issued under Executive Order No. 8389 of April 10, 1940, as amended,
Order No. 8389, as amended, or any national thereof (other than such citizen of the United States)
is hereby (urther amended by substituting à comma for the semi-colon at the end of subdivision
has or has bad as any time (whether prior to, OIL, or subsequent to April 10, 1940), any interest
thereof and adding thereafter the following:
of any nature whatsoever, direct or indirect, in such account.
"or subject to the property (nterests therein as of June 17, 1940, of France or any national
Banking institutions within the United States making such payments, transfers or with-
thereof:"
drawall shall file promptly with the appropriate Federal Reserve bank weekly reports showing
[Taqued June 17, 1940. The teat of each General License referred to in General Litense No 14, as set forth in
the details of the transactions during such period.
this publication, has bren revised to give effect to the amendorents set forth in General Licrose No 16.)
For the purpose of this general license the Netherlands East Todies and the Netherlands
West Indies shall be deemed to include the following. respectively:
Netherlanda East Indies Java and Madura, Sumatra, Riourw-Lingga archipelago, Banka, Billiton,
PAYMENTS OF CHECKS AND DRAFTS DRAWN OR ISSUED PRIOR TO JUNE 17, 1940
Celebes, Borneo (Weit, South and East Divisions), Timor archipelago,
FROM ACCOUNTS OF FRANCE AND ITS NATIONALS
Hali and Lombok, Lesser Sunda Islands and Dutch New Guines.
Netherlands West Indies-Dutch Guiana, Dutch St. Martin, Curacao, Bonaire, Araba, St.
General License No. 17 Revoked
Eustatius and Saba.
(Issued Two 17, 1940; amended July 20, 1940; revoked August a, 1940.)
[Issued June 19, 1940.]
PAYMENTS FROM ACCOUNTS OF FRENCH AMERICAN BANKING CORPORATION
PAYMENTS FROM ACCOUNTS OF NETHERLANDS TRADING SOCIETY EAST, LTD.
General License No. 18
AND NETHERLANDS TRADING SOCIETY EAST. INC
A General License is hereby granted authorizing banking institutions within the United States
General License No. 21 an Amended
to make all payments, transfers and withdrawals from accounts in the name of the French Ameri-
can Banking Corporation, New York City.
A General License is hereby granted authorizing banking institutions within the United States
Banking institutions within the United States making such payments, transfers or with-
to make all payments, transfers and withdrawals from accounts In the name of the Netherlands
drawals shall file promptly with the appropriate Federal Reserve bank weekly reports showing
Trading Society East, Ltd., London and the Netherlands Trading Society East, Inc., Delaware,
the details of the transactions during such period.
Banking institutions within the United States making such payments, transfers or withdrawals
shall file promptly with the appropriate Federal Reserve bank weekly reports showing the details
(Lourd June 18, 1040.]
of the transactions during each period.
[Tword June 21, 1940; amended July 20, [940.]
PAYMENTS FROM ACCOUNTS OF CERTAIN NETHERLANDS BANKS
General License No. 19 as Amended
PAYMENTS FROM ACCOUNTS OF BANQUE BELGE POUR L'ETRANGER,
A general license is hereby granted authorizing banking institutions within the United States
OVERSEAS, LTD.
to make all payments, transfers and withdrawals from accounts in the name of any of the follow-
General License No. 22
ing: Banco Holandes Unido, Buenos Aires, Argentina, Caracas and Maracailo, Venezuela: Bener
Hollandez Unido, Rio de Janeiro, Santos and Sao Paulo, Brazil: the branches of the Hollandsche
A general license is hereby granted authorizing banking institutions within the United States
Bank-Unie in Willemstad, Ceracao and Oranjestad, Aruba; Holland Bank Union. Hails. Pales
to make all payments, transfers and withdrawals from accounts to the name of the Banque Belge
time and Istanbul, Turkey.
pour l'Etranger, Overseas, Ltd., including its New York agency.
Banking institutions within the United States making such payments, transfers of with
Banking institutions within the United States making such payments. transiers, or withdrawals
drawals shall file promptly with the appropriate Federal Reserve bank weekly reports showing
shall file promptly with the appropriate Federal Reserve bank weekly reports showing the details
the details of the transactions during ench period.
of the transactions during such period.
[Ined June 18, 1940; amended Imm D, 1940; amended July 6, 1940.]
(Tround June 27, 1940,1
N
22
EXTENSION TO LATVIA, ESTONIA AND LITHUANIA
REDEMPTION OR COLLECTION OF SECURITIES
OF CERTAIN GENERAL LICENSES
General License No. 23
General License No. 27
General Licenses Nos. I, 2 4, 5, 9, 11 and 12, as amended, issued under Executive Order No.
A general license is hereby granted authorizing banking institutions within the United States
8389 of April 10, 1940, as amended, are hereby further amended so that as of the date hereof there
shall be substituted for the words "Norway, Denmark, the Netherlands, Belgium, Luxembourg of
present securities (including coupons) to the proper paying agents within the United States
France", wherever they appear in such General Licenses, the words "Norway, Denmark, the Nether-
to for redemption or collection for the account and purouant to the authorisation of nationals of any
of the foreign countries designated TO Executive Order No. 8389, as amended, and to perform
lands, Belgium, Luxembourg, France, Latria, Estonia or Lithuania".
such other acts, and to effect such other transactions, as may be necessarily incident to any such
General License No. 12, as amended, issued under Executive Order No. 8389 of April 10, 1940,
redemption or collection, provided that:
as amended, is hereby further amended by substituting a comma for the semi-colon at the end of
(a) the proceeds of the redemption or collection are credited to an account in the name
subdivision 2 thereof and adding thereafter the following:
of the national for whose account the redemption or collection was made and in the banking
"or subject to the property interests therein as of July 10, 1940, of Latvia, Estonia or Litter
institution within the United States which held the securities for such national; and
ania or any national thereof:"
(b) this general license shall not be decmed to authorize the presentation for redemp-
July 15, 1941 The text of each General Lleense referred TO in General License No. 25. as set forth in
this publication, has been revised to give effect to the amendments net forth in General License No. 22.1
tipo of any security registered or inscribed in the name of any of the foreign countries desig-
nated in Executive Order No. 8389, as amended, or any national thereof, irrespective of the
fact that at any time (whether prior to, on, or subsequent to April 10, 1940) the registered
PAYMENTS OF CHECKS AND DRAFTS DRAWN OR ISSUED PRIOR TO
IIF inscribed owner thereof may have, or appears to have, assigned, transferred or otherwise
JULY 10, 1940 FROM ACCOUNTS OF LATVIA, ESTONIA AND LITHUANIA
disposed of the security.
AND THEIR NATIONALS
Each backing institution making any presentations for redemption or collection herein author-
General License No. 24 Revoked
used is required to file promptly with the appropriate Federal Reserve Bank weekly reports
[Issued July 15, 1940: resoked August 25, 1940.]
showing the details of the transactions, including a. description of the securities presented lor
redemption or collection, the dates of presentations, the persons for whose account the presenta-
tiens were made, and the amounts collected.
EFFECT OF ATTACHMENT OF FORM TFEL-2 TO SECURITIES
August a, 1940. The scorpe of General License No. 27 was extended by General License No. 29,)
General License No. 25
A general license is hereby granted under section 13A (1) of Executive Order No. 8389, of April
10, 1940, as amended, authorizing the acquisition, disposition or transfer ol, or other dealing in, HE
with respect to, any security or evidence thereof, to which Treasury Department Form TFEL-2
has been previously attached or affixed by, or under the direction of, the Treasury Department:
TRANSACTIONS BY CERTAIN UNITED STATES CITIZENS WHO ARE
"NATIONALS" OF DESIGNATED FOREIGN COUNTRIES
provided, that this general license shall not be deemed to authorize any transaction prolibited by
reason of any provision (or ruling or regulation thereunder) of such Order other than section 13A
General License No. 28
(1)
[Issent July 25, 1940.]
A general license la hereby granted authorizing any individual who is a citizen of the United
States and residing therein and who is . "national" of any of the foreign countries designated in
Executive Order No. 8389, as amended, within the meaning of such Executive Order, as amended.
TRANSACTIONS IN CERTAIN AMERICAN DEPOSITARY RECEIPTS AND
to engage in any transaction which would not be prohibited under the provisions of such Execu-
AMERICAN SHARES
tive Order, as amended, such resident citizen were not a "national" of any of the foreign coun-
General License No. 26
tries designated in such Executive Order, as amended. All banking institutions within the United
A general license is hereby granted under section 13A (2) of Executive Order No. 8389, of
States are hereby authorized to engage in any transaction involving property in which such resi-
April 10, 1940, as amended, authorizing the acquisition by, or transfer to, any person within the
dent citizen has an interest, to the same extent, and under the same circumstances, as if such real-
United States of any interest In any American Depositary Receipt or American Share physically
dent citizen were not a "national" of one of the foreign countries designated in each Executive
situated within the United States representing any security or evidence thereof not physically
Order, as amended
situated within the United States which Receipt or Share was admitted to dealings on à national
This general license shall not be deemed to affect securities or evidences thereof delivered, or
securities eschange on and prior to July 25, 1940; provided, however, that this general liceose shall
required to be delivered, to a Federal Reserve Bank under the provisions of General Reling No. 5,
not be deemed to authorize the issuance of American Depositary Receipts or American Shares
as supplemented, or to authorize payments, transfers or withdrawals from accounts referred to in
against the deposit after July 25, 1940 of any security or evidence thereof not physically situated
Paragraph (4) of General Ruling No. 6.
within the United States: and, provided that this general license shall not be deemed to authorise
any transaction prohibited by reason of any provision (or ruling or regulation thereunder) of such
[Tasted Avenued 9, 1940.]
Order other than section UA (2).
[Tassed August 2 1940.]
24
8
APPLICATION OF CERTAIN GENERAL LICENSES TO ACCOUNTS
REMITTANCES BY CERTAIN UNITED STATES RESIDENTS TO THEIR
RELATIVES OR DEPENDENTS
REFERRED TO IN PARAGRAPH (4) OF GENERAL RULING NO. 6
General License No. 29
General License No. 32
The provisions of the following General Licenses, as amended, are hereby made applicable, as
of the date hereol, to all accounts of the type referred to in paragraph (4) of General Ruling No 5,
A. general license is hereby granted authorizing remittances by individuals resident in the
issued under Executive Order No. 8389, as amended, to the extent that heretolore such General
United States to their relatives or dependents within Any of the foreign countries designated in
Licenses have not been applicable by reason of their specifying accounts of certain designated
Exerctive Onler No. 8389, as amended, through any lank, and any such bank is authorized to
effect soch remittances, providing the following terms and conditions are emmplied with;
countries. or nationals thereof:
General License No. 1
(1) such remittances are made only by individuals who have continuously resided in the
General License No. 2
General License No. 4
United States for one year or more immediately preceding the date hereol and who had been
General License No. 5
making similar remittances to the same payees for at least six months prior to April 8, 1940;
General License No. 11
(2) such remittances do not exceed $50 per month to any payee except that additional
General License No. 27
annis not exceeding $10 per month may be paid for each additional member of the payee's
[Tuard August 9, 1942.)
family, provided that in no case shall a sum in excess of $100 per month be paid to any one
family residing in any such foreign country:
PAYMENTS FROM, AND TRANSACTIONS IN THE ADMINISTRATION
(3) such remittances are made only for the necessary living expenses of the payme and
OF, CERTAIN TRUSTS AND ESTATES
the payee's family:
General License No. 30
(4) such remittances are not made from funda in which a national of any of the foreign
A general license is hereby granted authorizing any bank or trust company incorporated under
countries designated in Executive Order No. 6389, as amended, has any interest whatsoever,
the laws of the United States or of any state, territory or district of the United States, or any private
direct or indirect
hank subject to supervision and examination under the banking laws of any state of the United
States, acting as trustee of any trust administered in the United States or as legal representative
Any bank effecting any such remittance shall satisfy itself that the foregoing terms and conditions
of any estate administered in the United States, in which trust or estate one or more persons who
are complied with.
are nationals of one of the foreign countries designated in Esecutive Order No. 8389, as amended,
Banks are authorized to establish and maintain free dollar accounts if necessary, and only to
have an interest, beneficial or otherwise, or are co-trustees or co-representatives, to engage is the
the estent necessary. to obtain the foreign exchange required to effect such remittances, Foreign
following transactions
exclunge acquired pursuant to this general license may not be used for any other purpose.
(a) payments of distributive shares of principal or income to all persons legally entitled
thereto who are not nationals of any of the loreign countries designated in such Executive
Banks through which any such remittances originate shall file promptly separate reports in
Order, as amended and
triplicate on Form TFR-32 with the appropriate Federal Reserve Bank. In addition, the bank
(b) other transactions arising in the administration of such trust at estate which might
ultimitely transmitting abroad (by cable or otherwise) the payment instructions for any such
be engaged in is no national of any of the foreign countries designated in such Executive Order,
remittances strall file weekly reports with the appropriate Federal Reserve Bank setting forth tat
as amended, were 4 beneficiary, co-trustee or co-representative of such trust or estate:
detail (1) the amounts of foreign exchange acquired in eirver of such remittances and the price paid
provided, however, that this general license shall not be deemed to authorize such trustee or legal
therefor, (2) the sources from which such foreign exchange was acquired, (3) the amount of free
representative to engage in any transaction at the request, OF upon the instructions, of any bene-
dollar credits, if any, established or maintained as a result of the acquisition of any each foreign
liciary, -trustee or co-representative of such trust or estate or other person who Es a national of
exchange, and (4) the names and addresses of the institutions for whose account any such free
any of the foreign countries designated in each Executive Order. as amended.
dollar credits have been established or maintained
[Terend August 14, 1940.]
As used in this general license the term "bank" shall mean any bank or trust company incorpo-
rated under the laws of the United States or of any state, territory or district of the United
COLLECTION OF COUPONS FROM CERTAIN SECURITIES BEARING
States, or any private bank subject to supervision and examination under the banking laws of say
STAMPS OF DESIGNATED FOREIGN COUNTRIES
state, and also any other tanking institution specifically authorized by the Treasury Department to
be treated as a "bank" for the purpose of this general license.
General License No. 31
A general license is hereby granted authorizing banking institutions within the United States
[Lasued August 30, 1940.]
to detach expons from securities of the type reierred to in section L3A (1) of Executive Order
No 8389, as amended, when such securities have been in the custody or possession of such bank
ing institutions continuously since July 25, 1940; to present such coupons for collection; and to
perform such other acts and to effect such other transactions as may be necessarily incident in
such collection, notwithstanding the fact that Treasury Department Form TFEL-2 may not have
been previously attached To the securities from which such coupons are detached.
This general license shall not be deemed to authorize any transaction prohibited by reador
of any provision (or ruling or regulation thereunder) of such Order other than section 13A(1).
(Tassed August 26, 1940.)
26
CERTAIN REMITTANCES TO UNITED STATES CITIZENS IN FOREIGN COUNTRIES
General License No. 33
States to citizens of the United States within any of the foreign countries designated in Executive
A general license is hereby granted authorizing remittances by persons within the United
Order No. 8389, as amended, or to citizens of the United States who have departed from any such
designated foreign countries and are within any other foreign country, through any bank, and any
such bank is authorized to effect such remittances, providing the following terms and conditions
are complied with:
(1) such remittances do not exceed $250 per month to any payee and are made only for
the necessary living expenses of the payee and the payee's family except that one additional
sum not exceeding $250 may be remitted if such sum will be used for the purpose of
enabling the payee and the payee's family to return to the United States;
(2) such remittances are not made from funds in which at national of any of the foreign
countries designated in Executive Order No. 8389, as amended, has any interest whatsoever,
direct or indirect.
Any bank effecting any such remittance shall satisfy itself that the foregoing terms and conditions
are complied with.
Banks are authorized to obtain foreign exchange, to the extent necessary, on the same terms
and conditions as those prescribed in General License No. 32 in order to effect the remittances
herein authorized.
Banks through which any such remittances originate shall file promptly separate reports in
triplicate on Form TFR-32 with the appropriate Federal Reserve Bank indicating therein that the
payee is a citizen of the United States. In addition, the bank ultimately transmitting abroad (by
cable or otherwise) the payment instructions for any such remittances shall file weekly reports
with the appropriate Federal Reserve Bank setting forth in detail the same information required
in such reports under General License No. 32. This weekly report may be combined with the
weekly report required under General License No. 32.
As used in this general license the term "bank" shall mean any bank or trust company incon-
porated under the laws of the United States or of any state, territory or district of the United
States, or any private bank subject to supervision and examination under the banking laws of any
state, and also any other banking institution specifically authorized by the Treasury Department
to be treated as a "bank" for the purpose of this general license or of General License No. 32.
[Issued September 10, 1940.]
28
44
RE BRITISH PURCHASING PROGRAM
October 1, 1940
11:00 a.m.
Present:
Mr. Purvis
Mr. Fairey
Mr. Gray
Mr. Mansell
Mr. Young
Mrs Klotz
Fairey:
I thought you would like to meet Commodore
Mansell. He is just over from England. He
is in the Royal Air Force.
H.M.Jr:
R.A.F.?
Fairey:
Yes.
H.M.Jr:
Have you been in the air?
Mansell:
No, I haven't. I have been on the adminis-
trative side.
H.M.Jr:
I see.
Mr. Fairey, can you prepare me for what I am
going to get at lunch today? Did Mr. Purvis
tell you?
Fairey:
Yes. He didn't tell me enough, though, Mr.
Morgenthau. Can you give me the particulars,
and I will very soon prepare you?
H.M.Jr:
Well, evidently they are trying to put over
a deal via me on engines. That is all that
I know. I thought if you could tell me what
talks, if any, you have had with the Army,
whether they have been trying to get some
engines from you, I could be prepared.
Fairey:
Yes, they are. They are trying to get some
Wright 1820 motors from us and I have sent
them ten 8. month 8.8 a gesture. They asked
for ten in particular and I think they asked
for 120 in all.
45
- 2 -
H.M.Jr:
Wright 1820? That is the number, isn't it?
Fairey:
That is a type number.
H.M.Jr:
How much horse is that?
Fairey:
The horsepower of that engine is about -
I will have to ring you. It is about 1300
horsepower.
H.M.Jr:
Could you (Gray) call up your office outside?
And you (Fairey) have given ten to the Army?
Fairey:
I have sent ten to the Army from our stocks.
H.M.Jr:
Stuff that you had on hand?
Fairey:
Yes, but we wanted them badly. I had to
ground five of my own machines for them.
H.M.Jr:
What five?
Fairey:
Hudsons.
H.M.Jr:
Oh, really?
Fairey:
Yes.
H.M.Jr:
That is, no fooling, as they say?
Fairey:
No, we are sending Hudsons without engines.
H.M.Jr:
You see, you haven't got a memorandum prepared
on this.
Fairey:
I didn't know what it was about, you see,
Mr. Morgenthau. I will have a memorandum
over to you in half an hour.
H.M.Jr:
We will have to do it now because I asked
him --
Regraded Uclassified
46
- 3 -
Fairey:
Yes, I know, but Mr. Purvis couldn't give
me any information, you see. I was in
New York last night. I hurried here this
morning. Directly I have what you want,
I will give you a memorandum on the whole
thing.
H.M.Jr:
Five Lockheed Hudsons to England without
engines. Now, does that take care of Boeing?
Do you know whether they are taken care of
on the bombers?
You see, Mr. Purvis said you (Fairey) had a
memorandum which you didn't give me last
week.
Fairey:
That is on the whole question. I sent that
over.
H.M.Jr:
I haven't got it. That is the one he said
he wasn't going to give me.
Fairey:
I have a copy here but I sent it over this
morning.
H.M.Jr:
To whom?
Fairey:
Mr. Gray sent it over. There is one from
Mr. Purvis on the whole question of engines.
H.M.Jr:
Is there one in your office, Philip?
Young:
Pardon me?
Klotz:
Shall I go see?
H.M.Jr:
Have you got anything for me? This is Aide-
Memoire for me?
Fairey:
Sent it over about half an hour ago.
Young:
I don't think it is in my office. I haven't
seen such & memorandum.
47
- 4 -
H.M.Jr:
I have got to discuss this with you, sentence
by sentence. That is what I asked for. Let
me discuss this thing.
Fairey:
Certainly.
Gray:
(Returning to conference after calling office)
Twelve hundred, sir.
H.M.Jr:
Thank you. Now, let me just read this.
"It is vital for the success of the war effort
that deliveries of airplane engines against
British orders should be maintained and indeed
that every means should be taken to accelerate
those deliveries.
"At the time of the French collapse, fresh
British airframe orders were placed in the
United States so as to utilize a proportion
of the engines available as B. result of the
French assignment agreements. At that time,
upon instructions from London, the remainder
were allocated for airframes to be built or
building in the United Kingdom. These air-
frames will be delivered during 1941."
Let me stop there. How many engines of the
French order were assigned for airplanes in
this country and how many for England?
Fairey:
That is & big question, Mr. Morgenthau. I
will see what I can do.
H.M.Jr:
That is the question they are going to ask
me. Do you want to make notes?
Fairey:
Yes.
H.M.Jr:
You say here, "fresh British airframe orders
were placed.
Well, how many, and to take
care of how many engines?
48
- 5 -
Fairey:
I can give you the figures that are required
for four types of engines for the next six
months.
H.M.Jr:
No, it doesn't interest me.
Fairey:
What figure do you want, Mr. Morgenthau? I
will give it to you.
(Mr. Purvis entered the conference)
H.M.Jr:
Hello.
Purvis:
My regrets. London made it very insistent.
H.M.Jr:
That is all right. Now look, I got the memo.
Purvis:
Yes.
H.M.Jr:
Catch your breath. I was just asking some
questions here. In this paragraph, At the
time of the French collapse Incidentally,
not only Mr. Patterson is coming, but Mr.
Stimson called up to say, "I am ready on the
bombers." I said, "Well, do you know about
Patterson?" He said, "Yes," and I said, "Why
not let's all eat together?" So we are eating
together at lunch. He is ready on the bombers.
Purvis:
Good.
H.M.Jr:
So it is all the more important that I be
prepared.
Purvis:
Quite.
H.M.Jr:
We had just gotten to the place where I was
asking embarrassing questions.
Purvis:
That is the spirit.
Regraded Uclassified
49
- 6 -
"At the time of the French collapse, fresh
British airframe orders were placed in the
United States --" I say, "How many?"
Purvis:
1350, wasn't it?
Fairey:
I didn't give the answer, because I wasn't
certain. Mr. Morgenthau wants the total.
I have the figures here that cover six months,
but I haven't the figures to cover the total.
H.M.Jr:
Well, you make the statement, "fresh British
airframe orders were placed, and I asked how
many.
Purvis:
My recollection was 1344.
Fairey:
It is about that, but I haven't the information
more than six months ahead.
Purvis:
No, but we placed actual orders, I think that
is the point.
Fairey:
You see, Mr. Morgenthau, you can't make a
simple answer because there are a great many
types of engines, different types of aircraft.
H.M.Jr:
My dear Mr. Fairey, don't make the statement
if you can't give me the answer. You say,
"fresh British airframe orders were placed
in the United States," and I say, "How many?"
Fairey:
I can find out for you quickly, but I haven't
the information on me now.
H.M.Jr:
Well, you see, I am fighting time trying to
do a job, and I think there must be a round
figure here, something like --
Purvis:
I believe it is 1344. Mr. Gray, if you left
the meeting now, could you check that 80 as
to get the information?
Regraded Uclassified
50
- 7 -
Gray:
Yes, sir.
H.M.Jr:
Just a minute, Mr. Gray. I am going to ask
the next one. And, "a proportion of the engines
available as a result of the French assignment
agreements If I am asking how many engines.
Purvis:
Yes. How many engines went with the number
of planes that were ordered at that time.
H.M.Jr:
If there were 1300 - I would like to start
with this, because this is what they are going
to try to do. I want to start with, one, how
many engines did you take over, the total
figure. That is number one. Two, you make
the statement that you ordered so many air-
frames to take care of "X" number of engines.
Purvis:
Yes, that is right.
H.M.Jr:
I want the number of airframes and the number
of engines, and that leaves --
Purvis:
We shall have no difficulty, I think, about
the United States end. We will not be able
to give you accurately the extra airframe
orders that were placed in the U.K.
H.M.Jr:
I am not going to ask that.
Purvis:
It is the United States you are particularly
interested in.
H.M.Jr:
Let's just say for round figures there were
2,000 engines made available. 1300 of them
were used for so many frames and the balance
of 700 went to the English.
Purvis:
That is right.
H.M.Jr:
Now, that isn't asking an impossible thing,
and then of that, how many of - using 2,000
Regraded Uclassified
51
- 8 -
or 5,000 or whatever it is - how many have
left the country and how many of them have
already gone into airframes, leaving a net
of "so many still available that they are
going to argue about.
Purvis:
Yes.
H.M.Jr:
I mean, I think that is what they are going
to do.
Purvis:
Yes. Mr. Gray, is that clear to you?
Gray:
Yes, sir.
Purvis:
How many French engines we took over; this
is the French engines, as distinct from the
orders on hand for the British; number of
airframes placed in the United States; number
of engines therefor; how many have left the
country since, both as regards planes and
as regards engines; and therefore, a net figure
of the French engines still in question and
approximately the delivery date over which
it is spread.
H.M.Jr:
That is right.
Purvis:
Divided perhaps, if possible, up to the 30th
of June, which is a cut-off figure for us,
and beyond.
H.M.Jr:
That is right.
Purvis:
Not necessarily too particular --
Fairey:
We have taken this to the end of March.
Purvis:
Then to the end of March, to the end of June,
and beyond.
H.M.Jr:
In all of my discussions, for your benefit,
Regraded Uclassified
52
- 9 -
with the Army, I am using July 1st. I am
using everything June 30.
Purvis:
There is no harm in throwing in March 31st
as an extra figure, but you must have a
June 30.
H.M.Jr:
It is not useful to me. On the PBY-5, you
are to get every other one until June 30.
Everything I am talking about is until
June 30.
Purvis:
Now, Mr. Gray, I think you can do a first-
class job for the Secretary.
Fairey:
You will get the particulars of the first
question. It will have to come from New
York. This is a very large statement, but
you can get the total. You will get this
on the French orders placed - well, if he
can't give you that, refer it to Sir Henry
Self. Then the other two will follow, but
you will have to divide it into types. If
you will get busy on that, when I come over
I will --
H.M.Jr:
Philip, you never have had this, have you?
Young:
These figures?
H.M.Jr:
Yes.
Young:
No, we never have had these figures.
H.M.Jr:
Isn't this what they have been asking for -
Knudsen?
Young:
Well, there have been several interpretations
and sets of figures showing that there never
was any surplus, but there is a surplus, and
that may be half and half.
53
- 10 -
H.M.Jr:
Am I right or am I wrong, that this is what
the whole argument is about?
Young:
Basically, I think it goes back to that, yes.
H.M.Jr:
It certainly doesn't do any harm for me to
have that in my key pocket.
Purvis:
No. You want to be prepared for whatever is
coming, and those figures look as if they
would be useful in any discussion that they
raise.
H.M.Jr:
I think so.
Young:
I think what happened was simply this, that
the Army - of course, the British placed
orders to take care of the French engines,
as soon as they got them. The Army, when
they went to work outlining their program,
decided that the British couldn't use all
the French engines, so they placed orders
for frames, counting on the fact they might
be able to get the French engines, so you
have got two sets of orders for the same
engines.
H.M.Jr:
If I could get the figures for what is a
very clear statement in this paragraph --
Purvis:
That is - I think your (Fairey's) hesitation
there, if I understand it correctly, is that
you are afraid of giving a figure which
would spread over to - you are thinking in
terms of the discussion you have had with
the Army people here up until March 31st
and you don't want to get outside the area
of that area. Am I right?
Fairey:
Yes, because the allocation of engines is
subject to shift-about between one type
and the other.
Regraded Uclassified
54
- 11 -
Purvis:
Whereas, what the Secretary --
Fairey:
I will give Mr. Morgenthau an over-all figure.
Purvis:
What he is asking is the simple figure, how
many airframe orders did you place under
that paragraph on such a date, and I am al-
most sure that is the 1344 that we discussed
with Knudsen and Morris Wilson.
Fairey:
It is 8. great deal more than that in total.
H.M.Jr:
Well, let me get along, anyway. Now, I made
a note here that they gave them ten of these
1820 Wright engines for the Boeing which
necessitated sending five Lockheed Hudsons.
Fairey:
Will necessitate; they are not shipped yet.
H.M.Jr:
"At about the same time, a breakdown in the
production of Taurus and Hercules engines
manufactured in the U.K. (as a result of
unexpected technical difficulties) created
& still further dependence upon the French
engine orders from the United States.
"In the face of the above situation, it appears
that the engine allocation as now planned for
the period of seven months to March 31, 1941
will result in approximately 950 engines being
diverted to the needs of the United States
Army and Navy despite the fact that that diver-
sion will produce a deficiency of about 425
engines in relation to available British air-
frames."
You are giving up 950 of the French engines?
Fairey:
Yes, but that figure was worked out last week.
I just wanted to modify that a bit. Since
then, the Army have modified their demands
a little. They have asked for less of two types.
Regraded Uclassified
55
- 12 -
They have asked for less of one type, and
more of another type, so those figures are
only approximate.
Purvis:
But they are approximately right?
Fairey:
No, it is about now - it is about 300 too
much.
Purvis:
You mean that we are only asked to give up
650, as distinguished from that?
Fairey:
Yes. I mean that when those figures were
gotten out last week for your memorandum,
they were exactly right. Since then, we
have had another talk with the Army and
they have reduced their demands for the
Pratt & Whitney 1820 by 181 engines, and
there appears to be a much larger supply
of the Pratt & Whitney 1340's.
H.M.Jr:
Just a minute, you are talking about some-
thing I have never heard about before. You
have lived and slept with it and I haven't.
Where does the thing stand? What is the
Army asking of you? That is what they are
going to mention at lunch. The Army is
asking what, as of today? What are they
asking? You wanted from now until the
31st of March?
Fairey:
That is all the figures I have.
H.M.Jr:
Up until --
Young:
The Air Corps is working on that date.
H.M.Jr:
Up until March 31st. Now, what are they
asking?
Fairey:
Up to the minute - because there is this
unknown quantity of what the production will
Regraded Jclassified
56
- 13 -
be of the Pratt & Whitney of the 1340, at
the minimum, they are asking for 445.
H.M.Jr:
What are they asking for?
Fairey:
Pratt & Whitney 1830's.
H.M.Jr:
181?
Fairey:
Pratt &* Whitney 1830's.
H.M.Jr:
How many?
Fairey:
181.
H.M.Jr:
Yes.
Fairey:
Pratt & Whitney 1340 is the unknown quantity.
They haven't stated properly their demands
yet. They did ask for 141.
H.M.Jr:
Question mark. What is next?
Fairey:
Wright R-2600.
H.M.Jr:
What number.
Fairey:
R-2600-A, 236.
H.M.Jr:
And --
Fairey:
The Wright 1820, again a question mark, but
at the moment the figure stands at 68. We
have had 8. further request for 120.
H.M.Jr:
I will put 68. Anything else?
Fairey:
Well, that is all the engines so far dealt
with by the allocation committee.
H.M.Jr:
Now, the 1830's, 181, do you know what use
they are going to make of those?
57
- 14 -
Fairey:
No, I know what use we are, but not what
they are.
H.M.Jr:
What do you use them for?
Fairey:
We use them for the Hudson, the LB-30, the
Grumman, and in England, we use them for
the Beaufort, which is a type of bomber.
H.M.Jr:
And the 1340's?
Fairey:
1340's are used for the Harvard Trainer.
H.M.Jr:
And the Wright 2600?
Fairey:
For the British Sterling Bomber.
H.M.Jr:
That goes overseas?
Fairey:
That is the most vital --
H.M.Jr:
And the R-1820's?
Fairey:
Parallel to the 1830 for the Grumman and the -
the Grumman fighter, and the Hudson.
H.M.Jr:
Well now, in this, you see, there are none
of these for the Boeing engines.
Fairey:
Yes, these 1820's.
H.M.Jr:
Oh, 1820's. Are you (Young) familiar, be-
cause you are going to be there at lunch.
Are you familiar with all these initials
and things? I mean, the figures like R-18 --
Young:
Yes, I can bring most of them.
Fairey:
Would you like to chat with me before and
let me leave you a copy of this statement?
I can coach you in this in ten minutes.
58
- 15 -
Young:
All right.
H.M.Jr:
Have you seen this before?
Young:
No.
Fairey:
No. I got this out for myself.
H.M.Jr:
Do you know about this allocation committee?
Young:
Just in a general way.
H.M.Jp:
You had better soak it up between now and 1:00.
Let me put it this way. Supposing they ask
for these 500 engines, how do you feel about
releasing them?
Fairey:
Well, Mr. Morgenthau, we are being pressed
every day from England to send them over
and for the reasons given in your Aide-Memoire
there, our own engine production on the two
parallel types, the Taurus and the Hercules
have broken down and we are desperately in
need of these engines.
For another reason, although we can't absorb
them all in the next six months in airframes
built here or in airframes built in England,
the following six months is a pit in the de-
ficiency. We want to hold those engines left
over for the next six months.
H.M.Jr:
Deficiency where?
Fairey:
In every class of engine for the next six
months.
H.M.Jr:
Six months beginning when?
Fairey:
March 31st.
Regraded Uclassified
59
- 16 -
Purvis:
Both for the United States and the U.K.
Felrey:
Yes, an over-all deficiency in engines after
this six months. The present surplus is due
to ours and the French orders only.
H.R.Jr:
Well, I'm not going to agree to anything at
lunch today.
Purvis:
No, it is an exploratory talk.
H.M.Jr:
I can't, but there may be something like
where they need ten engines for the Boeing,
I mean some special situation, a thing which
seems to be bothering General Marshall, and
as I understand, if I remember rightly,
General Marshall said, "Well now, if I can
have those certain number of engines --"
I thought it was 50 or 60. He agreed to
give us the first six of the Consolidated
four-engine bombers that came off the line.
Fairey:
Yes. Well, I would be glad to. In the com-
mittee when we are dealing with the details,
you know, of this engine and that, I would
be glad to trade engines, to hand them out
where they are helpful and so on, once I know
where I stand, you see, what engines we have
got, because at the moment the Knudsen com-
mittee rather takes the view that all these
engines are in El pool.
Purvis:
I think this is a point for the luncheon,
perhaps, that Fairey is confronted when he
gets into the committee by what he - in every
advice he has from London, he has to treat
as a false assumption. There seems to be a
starting point at which they don't argue.
They simply say, "This is a pool of engines,"
whereas in fact what it is, We happen to
own, by various actions, certain engines
in this country. It wasn't bought for a
pool. They were bought for the fighting
Regraded Uclassified
60
- 17 -
needs. Now, they may in practice become to
some extent a pool, but if they start from
that point, they don't feel they have to
ask for anything, they simply assume that
it all belongs to everybody, that it is a
common pool, whereas the assumption in London
is that they all are going to them for their
fighting needs and it is a very radically
different assumption. I think from what
Fairey tells me of these discussions, that
he is faced always by an assumption on Knud-
sen's part that this is not something that
we have bought particularly, it is a pool
that happens to be there and it is a question
of how you allocate it.
H.M.Jr:
Let me just refresh my memory. Let me just
talk with Phil Young & minute. As I under-
stand, this is what is in Knudsen's mind,
that they agreed that the English would have
14,000 engines. Is that what it was?
Young:
In this program? 14,375 by April of 1942.
Purvis:
Airplanes.
H.M.Jr:
Airplanes, and how many engines?
Young:
Engines to go with them, plus spares.
H.M.Jr:
And that on a month to month basis, unallocated
engines each month would be allocated. Isn't
that what is in his mind?
Young:
Yes. My original understanding, which Knudsen
agreed with at that time and since has changed
his grounds on is this --
H.M.Jr:
He has changed his grounds?
Young:
Yes. He doesn't admit it, but he has. I hate
Regraded Uclassified
61
- 18 -
to argue with him about it. In that July 17
conference, it was agreed that the Army and
Navy would get 19,000 planes and the British
would get 14,000. That is where this original
19-14 ratio developed, up until April 1942,
and spare engines. Engines over and above
that program - or rather, as that program went
along - engines would be allocated to waiting
airframes. There would be no engines put in
boxes and shut up in the warehouse in storage,
even if it is a British engine and they had
no waiting frame. It would go into an Army
frame if it was waiting for that engine.
Where Knudsen and I disagree --
H.M.Jr:
Is that what you understand?
Purvis:
That is exactly what I understand.
Young:
Where Knudsen and I disagree is that included -
and I have a written statement which was filed
in his office that day - that engines would
be shipped to England for placing in British
airframes, so that the question of allocation
only came up when you had a waiting British
frame here or a waiting Army frame and a wait-
ing frame in England.
H.M.Jr:
Now, I have got to be honest. The last state-
ment, I have no recollection of.
Young:
I will show you a note on it.
H.M.Jr:
I would like to see it. I have no recollection
of it. I think it is important.
Young:
He says no, that the allocation was solely
between frames on this side of the water.
H.M.Jr:
I don't remember, so if you have such a thing -
use my phone.
Regraded Uclassified
02
- 19 -
Young:
I will get it.
J will wait a minute. The will just mark
time while you ask for it. Have somebody
bring that letter in, because I don't re-
member.
There is a further point, if I may raise
it, Er. Morgenthau. That is, assuming there
were not enough engines for any one side
and both sides hao waiting frames, we'd
assumed from the meeting of July that engines
to our contracts would first CO into our
frames. Mr. Knudsen takes the point of
view that the total engines would be divided
between the two parties in the ratio of 19
to 14, 19 engines to U. S. Army and Havy and
14 to U. K., despite the origin of the engines,
whether they were our contracts or not. That,
of course, seriously cripples us.
Say that again for Young's benefit.
Entrey:
I say, disregarding the other aspects of it,
take a case where there were not sufficient
engines to meet the empty airframes in this
country, both sides have sufficient air-
frames but not sufficient engines. Our view
was that if the engines were to our contracts,
then our airframes, built in the United States,
had priority. No export - I am not thinking
of export.
Mr. Knudsen takes the view that the available
engines are distributed between the two parties
in the ratio of 19 to 14.
Purvis:
I think the intent of Secretary Stimson at
the meeting was, he rather accepted, I thought,
the idea that frames, wherever we had frames
ready here to get into the air, that our
Regraded Uclassified
63
- 20 -
engines would be available to get them into
the air, because they were needed for fight-
ing needs.
H.M.Jr:
Well, I go back much further than that. I
go back to the basic policy which the Presi-
dent of the United States laid down, namely,
that anything that we had here was to be
superimposed over and above the orders which
you had here, and that is the thing that I
an going on, and at no time has he indicated
anything to change my sailing orders. Those
are my orders and nothing has happened.
Now, it looks to me, and I am talking very
frankly in the room, as if Mr. Stimson and
Mr. Patterson evidently want to try to sit
down and make a deal with me today, feeling
that it is their responsibility. Now, natur-
ally, I haven't yet sold you down the river
and I don't think I will today, but personally,
I wouldn't give up an engine. I mean, yes, in
an extreme case where ten might make General
Marshall feel happy or - he has told me this
story so often now about the Boeing planes
having to be flown down to San Diego some
place and then the engine shipped back and
then they fly down another frame and then
the frames lie there idle - some tale like
that which is too fantastic, but I mean --
Purvis:
Well, Fairey has been going along, ploughing
through his committee, trying not to come to
you, trying not to come to me, and finally
last week he and I got together in the office
one night and we decided the time had come
when we had to come to you.
H.M.Jr:
I didn't seek this meeting. Judge Patterson
called me at home Saturday and asked for it,
and then Mr. Stimson called ne and asked
Regraded Uclassified
64
- 21 -
for a meeting today. I want to get one
thing over which these gentlemen can give
me now. In passing, I think it is terribly
important that we get Knudsen straightened
out, because to him word of mouth is so
important.
Purvis:
That is right.
H.M.Jr:
It is terribly important to him, and he
has dropped a remark a couple of times,
"Have my English friends changed?"
Purvis:
Not intentionally.
H.M.Jr:
Granted, but when the time comes, I think if
we come to some understanding with them to-
day, I think it might be good for you to
sit down quietly with him alone, so that
there is no possible misunderstanding of
good faith.
But just for a minute, I want to get some-
thing into my head. Can you (Fairey) tell
me - these four engines, Consolidated bombers,
that you have got on order, I mean are they
up to date in armament, et cetera? Are they
the last word?
Fairey:
The --
H.M.Jr:
The four-engine Consolidated bombers which
you have on order.
Fairey:
I believe, Mr. Morgenthau, and I must confirm
this, that ours are, those on order for us.
I believe they are different than those on
order for the U. S. Army. I believe we put
in armor.
H.M.Jr:
Are these good, that is what I am trying
to get at?
Regraded Uclassified
65
- 22 -
Fairey:
Yes.
H.M.Jr:
Are you sure?
Mansell:
Well, I am going over to see them tonight.
I haven't seen the ship yet, so I can't
speak with authority.
Fairey:
Now, my impression --
H.M.Jr:
Will you be there in the morning?
Mansell:
I will be there tomorrow.
H.M.Jr:
I am talking about the four-engine Consoli-
dated.
Mansell:
Yes, B-24.
H.M.Jr:
But you are going to Consolidated tonight?
Mansell:
I am going over to Consolidated tonight,
yes, sir.
Purvis:
I have understood from our people in general
that that is a desirable plane, from our
view.
H.M.Jr:
You see, what I have in mind, I think -
Phil, get this - I think there is a possi-
bility of making a real deal whereby I
might be able - it is just a possibility -
of taking over the entire four-engine pro-
duction of Consolidated for the English
by giving them enough engines for their
Boeings. Now, before I enter into that --
Purvis:
You want to make quite sure you have things
right.
H.M.Jr:
That is right. Do you see?
Regraded Uclassified
66
- 23 -
Purvis:
Could we not get from New York, Baker's
statement of that situation?
Fairey:
I can give them our deliveries.
Purvis:
But I mean our estimate of the value of the
machines.
Fairey:
Well, there is no question of the estimates.
It is the only big bomber we have got on
order.
Purvis:
So we must think it is good.
H.M.Jr:
It is the LB-30.
Purvis:
That is not your American --
H.M.Jr:
This is yours. You have got 180 on order.
Purvis:
That is it.
H.M.Jr:
But you had better take a look at both the
English and the U. S. one, because you are
certainly going to get some of those U. S.
ones, you see, definitely, and also with
the Sperry bomb sight. I mean, how far along
are they, are they along too far to stick
those things in it?
Mansell:
Well, the American planes will have them
in.
H.M.Jr:
Yes, but not the Sperry.
Mansell:
Not the Sperry?
H.M.Jr:
No, they will not; pardon me, I am quite sure
they will not. They will have the other one.
So I mean, as I understand, you have got to
start putting those things into the frame
pretty early.
Regraded Uclassified
67
- 24 -
Purvis:
That is right, they are built right into
the automatic pilot.
H.M.Jr:
How many of these are equipped with auto-
matic pilots and how far along are they -
could they still take the Sperry bomb
sight?
Mansell:
They will all have automatic pilots.
H.M.Jr:
Will they?
Mansell:
Yes, that is standard equipment.
H.M.Jr:
I see. But you had better - if you could
go to Consolidated first - I should think
you could call up and find out what your
specifications are.
Purvis:
We can get that from Baker, can't we?
Fairey:
I can get that from New York.
H.M.Jr:
Could you get it, and give this to Young
before 1:00 o'clock? You don't want the
Boeing. You certainly don't want the 17-C.
Purvis:
There have been three cables dispatched to
London in the last week trying to draw that
from them in relation to the Consolidated
bomber, and you haven't yet got your reply.
Fairey:
I sent another cable on Saturday.
Purvis:
You see, Beaverbrook has been cabling, asking
for these - to be perfectly frank, Beaver-
brook has been asking for flying fortresses.
On what that situation is based, I don't think
we are quite sure, because our technical
fellows have very definite suspicions in
the B-17 class.
Regraded Uclassified
68
- 25 -
Fairey:
He wants them, I suspect, for long-range
bombing operations, but we have considered
the differences between the new ones coming
out in April and the present ones.
H.K.Jr:
I don't think you want the 17-C's. I think
there is a good chance of getting these Con-
solidated ships and getting the first ones,
and I think that is the place to do a little
swapping, and if you people --
Mansell:
That is my view, too. I don't think we want
the 17-C.
R.E.Jr:
And that is why, if the Army is so keen on
them, let them keep the 17-C's. They have
still got 60 out of 68 to go, as I remember,
and let them take those, but if - and I am
hopeful we can make 8. deal to get accelera-
tion on the Consolidated for the British.
Purvis:
Apart from the six?
H.M.Jr:
Oh, definitely. At least one and one, and
maybe even more.
Purvis:
Which might make & very strong difference.
H.M.Jr:
Oh, yes.
Purvis:
I think if we could get a technical estima-
tion so far as even Baker is concerned - it
may not be London's answer, but a technical --
Fairey:
London has been pressing us to send to them.
Quantity now is more important than quality
and that is the reverse of what they usually
say. We have cabled back that there is a
vast difference between the ships and have
asked them to consider it on those grounds.
Regraded Uclassified
69
- 26 -
Purvis:
Entirely apart from that again, there is
a further thing and that is that you will
get your Consolidated just as quickly.
You are not losing speed in getting air-
planes. It is simply that they are Con-
solidated planes instead of flying for-
tresses and the question is whether Con-
solidated is better from our viewpoint,
especially às the Army likes the flying
fortress.
H.M.Jr:
Those two sheets, will you (Young) bring
them down to lunch?
Young:
Yes.
Fairey:
I could make my mind up. My trouble is
to get London to make theirs up.
H.M.Jr:
Maybe it will be simple because - well,
they can't get the Boeings, see. They
might just as well forget about it. And
then if you find it isn't such a good
plane, the refusal tastes sweeter, so you
might as well be able to find out for
England so as to say, "Well, you were
lucky you didn't get it."
Purvis:
That is right.
Fairey:
I agree with that.
H.M.Jr:
To say, "You are well out of this."
Purvis:
We are faced with a condition --
H.M.Jr:
It is a Model "A" Ford. It is just out of
date. You don't want it.
Purvis:
When we are through with airplanes, I have
some other things that I think might be
raised with you by Mr. Stimson.
Regraded Uclassified
70
- 27 -
H.M.Jr:
Just one minute. Philip Young asked me
to read this.
"Air Commodore Mansell has just arrived
in Washington."
Fairey:
This is him.
H.M.Jr:
Just a little humor, so we don't get too
tense.
"He is fully acquainted with the British
pilot training system."
That is not what you wanted me to read, is
it?
Young:
No, you don't need to read that. It is
like the flying fortresses.
Purvis:
It has no engine in the tail.
Fairey:
Is there any information you want on the
pilot training program? There is the man
to answer your questions.
H.M.Jr:
I can't get to him today, because I am
soaking this thing up and if he is going
out tonight, I think it is very important -
maybe he could come back.
C. D. Howe didn't have his press conference,
did he?
Purvis:
He had his press conference, but it didn't
seem to register.
Young:
Somebody told me last night it was in the
paper, but I haven't seen it.
H.M.Jr:
I tell you who has an article today, Hanson
Baldwin of the New York Times, on the
Canadian situation.
Regraded Uclassified
71
- 28 -
Purvis:
He gave it that morning, there was no
question about that, but when I asked
him how it had gone in the hurried moment
I saw him, I thought he hadn't the feeling
that the reception was so good.
H.M.Jp:
Do I have to bring up the bomb sight at
lunch?
Young:
No, I don't think SO.
H.M.Jr:
Is that going along nicely?
Purvis:
Yes, I think so.
H.M.Jr:
If I don't - send this to the house, and I
won't attempt to read it now, please.
Now --
Young:
The only other point is the --
H.M.Jr:
You fed me something on the Republic, and I
told you to give it to me in my hand.
Young:
I have got it right here.
H.M.Jr:
Here is my hand.
"Last Friday morning, Colonel Flickinger of
Republic Aircraft dropped in to see Oscar
Cox and me at my request. Colonel Flickinger
stated that 172 planes had been ordered
originally by the Swedish Government, of which
120 were EP-1's (single pursuits) and 52
were 2-PA's (two-seater training and recon-
naissance planes). Of these, 60 EP-1's and
20 2-PA's have been shipped, leaving a balance
of 110. Of this balance, 30 of each type
have been completed leaving about 50 to be
produced at an approximate rate of one plane
per day.
Regraded Uclassified
72
- 29 -
"The planes which have been completed are
already boxed for export shipment and are
stored at the Republic plant at Long Island
City. These planes are all bought and paid
for and the Swedish Government has title.
Colonel Flickinger stated that Republic
could not break its contract with the Swedish
Government for two reasons: first, because
the Swedes already had title to the planes
and Republic had no claim on them, and, second,
because the finished planes include accessory
equipment, radio, camera, etc., which had been
furnished by the Swedes and was not part of
Republic contract.
"Thus, the Republic situation is distinct from
the Vultee situation where planes had not been
completed and did not include any extra equip-
ment. As Republic stated point-blank that
it would not cancel its contract, and as the
Swedish Government is taking the stand that
it wants delivery of the planes, if it cannot
sell them to the Air Corps, there would seem
to be three possible courses of action: first,
let the Air Corps take over the planes from
the Swedish Government and then trade back
part of them to Republic for sale to Canada
(it is assumed that the Air Corps would be
interested in single pursuits only); or second,
let the Air Corps take over the planes and
release a different batch of planes for ulti-
mate sale to Canada; or, third, to take over
the Republic planes in exchange for flying
fortresses.'
In other words, they are stuck on Republic?
Young:
We can't make the Vultee deal in the case
of Republic.
H.M.Jr:
Do you think this might be a little sweetening?
Regraded Uclassified
73
- 30 -
Young:
Well, we have still got our hands on them.
Purvis:
It seems a shame to have those Republics
lying around after all the work that has
been done in this particular branch.
H.M.Jr:
If you gave these up, what would you like
the most in place of them?
Fairey:
Curtiss Hawks.
H.M.Jr:
The 76?
Fairey:
No, the 81-A.
H.M.Jr:
What is that?
Fairey:
The P-40.
H.M.Jr:
Oh, now have & heart.
Fairey:
You asked me.
H.M.Jr:
Wait a minute, have a heart. Do you know
that Allison completed 80 engines last
week?
Fairey:
I am told they are getting up to 8 and 9 a
day now.
H.M.Jr:
80 engines, 221 delivered. The British
received 146 and the Army 56, so I think
you are doing fairly well.
Fairey:
We are doing very well with the Allisons?
You heard the results of your dealing with
the Allisons? We are to get 170 machines
by October. Thank you very much.
H.M.Jr:
If I can do as well on Consolidated, and
the thing - the reason I like the idea,
74
- 31 -
you have got the flying boats and the Con-
solidated. Now sit down with the fellow
and say, "Here are the orders, what can
you do to increase your production 30 or
40%?"
Fairey:
I would like to go over and see them myself,
directly the situation is clear.
H.M.Jr:
I would like to go also.
Purvis:
Could we make it unanimous?
H.M.Jr:
Are you busy?
Klotz:
Not at all.
H.M.Jr:
All right.
Fairey:
May I ask one more question on engines?
H.M.Jr:
Go right ahead.
Fairey:
If you could clear the situation for me, I
think we can get right away to it because
we have now got a joint standing committee,
you know, the Army and Navy and British
Purchasing Commission, where we are supposed
to sit in a huddle around the table and deal
on these engines. I can't do my dealing
until I know who owns the engines or who
they belong to. Mr. Knudsen takes the view
that they are a pool. My hands are tied.
If you will give a ruling on the matter, I
can help out the Army quite a bit where
we have got a few spare engines, and so
on, and we can do some deals and we can
get both programs along.
Purvis:
And you don't dare accept what London has
told you you can't accept, that they don't
75
- 32 -
belong to you, and yet you would do some
trading if you got recognition of the fact
that they are your engines.
Fairey:
That is right, because I can watch both
programs. I can watch our own program
here and in England and I can help the
Army out when they are in a jam and they
could help us a bit and we could do some
useful trading in small numbers, but I
can't do any while I haven't got any
engines, if they are all in the pool.
H.M.Jr:
Who represents the Army?
Fairey:
General Brett, on the committee.
H.M.Jr:
And the Navy?
Fairey:
Admiral Towers.
H.M.Jr:
Well, they are friends of mine.
Fairey:
Yes.
H.M.Jr:
Who sits in for Knudsen, Mead?
Fairey:
Mead, yes.
Purvis:
Underlying this situation, there is also
another one.
H.M.Jr:
I understand. I will let you know after
lunch what happens.
Young:
I found this original note of Knudsen's.
Want me to read it?
H.M.Jr:
If you please.
Young:
Although it isn't signed, it could only
emanate from one source.
76
- 33 -
"It is understood and agreed --" This is
dated July 23 and was written out on a
yellow sheet of paper in pencil by Knud-
sen.
H.M.Jr:
By whom?
Young:
Knudsen.
"It is understood and agreed that all planes,
American and British, get priority on engines
and that optional and unallocated engines
are distributed in accordance with the above
understanding.
"It is understood also that specifications
for spare engines for Great Britain manu-
factured planes will be submitted as soon
as possible and will be considered on the
same basis."
H.M.Jr:
Say that last sentence again.
Young:
"It is understood also that specifications
for spare engines for Great Britain manu-
factured planes will be submitted as soon
as possible and will be considered on the
same basis."
H.M.Jr:
Then I think he is right, Phil.
Young:
Knudsen?
H.M.Jr:
Yes.
Young:
In what way?
H.M.Jr:
Just what that says. Read that again.
Young:
"It is understood also that specifications
for spare engines for Great Britain manu-
factured planes will be submitted as soon
Regraded Uclassified
77
- 34 -
as possible and will be considered on the
same basis."
H.M.Jr:
I think he is right, don't you?
Purvis:
I am not quite sure that I understand the
shade of difference between - that is
being --
Fairey:
Well, the same basis would mean that they
would --
Young:
Put them in American frames. All three frames
would rank on an equal basis.
Purvis:
And how is his interpretation now?
Young:
He says just American planes.
Purvis:
Oh.
Fairey:
No, his interpretation goes much further than
that, I suggest. It goes that they are all
in the pool, that we divide them up, 19 for
us and 14 for them.
Purvis:
And ours come first?
Fairey:
No, 19 to 14.
H.M.Jr:
As I get that, it is that the engines for the
unallocated frames in England would be allocated
in this country on the same basis that you
are now allocating pooled engines. In other
words, the engines which would go to England
for unallocated frames, but go into an Ameri-
can pool.
Young:
Yes, that is right, but he recognizes in
the sentence that there is such a thing
as a waiting British airframe, which has
a call on an engine.
Regraded Uclassified
78
- 35 -
H.M.Jr:
I don't get it.
Purvis:
Awaiting British U. K. frames.
H.M.Jr:
Read that again.
Purvis:
I get that, too.
Young:
"It is understood and agreed that all planes,
American and British, get priority on engines
and that optional and unallocated engines
are distributed in accordance with the above
understanding.
"It is understood also that specifications
for spare engines for Great Britain manu-
factured planes will be submitted as oon
as possible and will be considered on the
same basis."
Purvis:
That means, then, that U. S. and U. K. frames
in the United States and U. K. frames in the
U. K. will all receive similar treatment,
so far as these unallocated engines are con-
cerned.
Young:
That is the way I read it.
Fairey:
Does that clarify it, that at the time those
agreements were made, there were no specifi-
cations of British frames available? I have
since obtained them. So at the time he pro-
bably - on the one hand, he was confronted
with schedules required for a plane and on
the other hand the British schedules. I
have since procured those from England.
Young:
He put in that last sentence because I asked
him to, at the time.
H.M.Jr:
I think without a doubt that I could see he
Regraded Uclassified
79
- 36 -
could misunderstand it either way, I mean
misunderstand it, depending upon what was
in his mind at the time he wrote it. I
think there is great - but you have that.
I am going to listen to you gentlemen at
lunch. They both have a proposition. I
have been trying to bring myself up to
date with stuff I am not familiar with,
which I have done.
You have got another hour to work on Philip
Young and then after - some time this after-
noon I will get in touch with you.
Purvis:
Very good.
C
0
P
80
Y
CONFIDENTIAL
FOR YOUR INFORMATION
September 30, 1940
To:
The Secretary
From:
Mr. Young
Re: Republic Planes on Order for Sweden.
Last Friday morning, Colonel Flickinger of Republic Aircraft
dropped in to see Oscar Cox and me at my request. Colonel
Flickinger stated that 172 planes had been ordered originally
by the Swedish Government, of which 120 were EP-1's (single pur-
suits) and 52 were 2-PA's (two-seater training and reconnaissance
planes). Of these, 60 EP-1's and 20 2-PA's have been shipped,
leaving & balance of 110. Of this balance, 30 of each type have
been completed leaving about 50 to be produced at an approximate
rate of one plane per day.
The planes which have been ompleted are already boxed for
export shipment and are stored at the Republic plant at Long
Island City. These planes are all bought and paid for and the
Swedish Government has title. Colonel Flickinger stated that
Republic could not break its contract with the Swedish Govern-
ment for two reasons: first, because the Swedes already had
title to the planes and Republic had no claim on them, and, second,
because the finished planes include accessory equipment, radio,
camere, etc., which had been furnished by the Swedes and was not
part of Republic contract.
Thus, the Republic situation is distinct from the Vultee
situation where planes had not been completed and did not include
any extra equipment. As Republic stated point-blank that it would
not cancel its contract, and as the Swedish Government is taking
the stand that it wants delivery of the planes, if it cannot sell
them to the Air Corps, there would seem to be three possible courses
of action: first, let the Air Corps take over the planes from the
Swedish Government and then trade back part of them to Republic for
sale to Canada (it is assumed that the Air Corps would be interested
in single pursuits only); or, second, let the Air Corps take over the
planes and release a different batch of planes for ultimate sale to
Canada; or, third, to take over the republic planes in exchange for
flying fortresses.
PY:bj
Regraded Uclassified
81
AIDE-MEMOIRE FOR MR. MORGENTHAU
It is vital for the success of the war effort that
deliveries of aeroplane engines against British orders
should be maintained and indeed that every means should be
taken to sccelerate those deliveries.
At the time of the French collapse, fresh British
airframe orders were placed in the United States so AE to
utilize 6. proportion of the engines available as B. result
of the French assignment agreements. At that time, upon
instructions from London, the remainder were allocated for
sirframes to be built or building in the United Kingdom.
These mirframes will be delivered during 1941.
At about the same time, 8. breskdown in the production
of Taurus and Hercules engines manufactured in the U.K.
(no 8. result of unexpected technical difficulties) created
A still further dependence upon the French engine orders
from the United States.
In the face of the above situation) it appears that the
engine allocation as now planned for the period of seven months
to March 31, 1941 will result in approximately 950 engines
being diverted to the needs of the United States Army and
Navy despite the fact that that diversion will produce a
deficiency of about 425 engines in relation to available
British airframes. At the same time, appreciable allocations
of available engines are being made for other foreign and for
commercial purposes. It is true the above figures embrace a
temporary surplus of one type of aeroplane engine during the
period in question in relation to available British airframes
(either of U. S. or of U.K. manufacture). Unfortunately, however,
in the subsequent period there is a deficiency of engines in
relation to all sirframes. It 1s of the utmost importance,
therefore, to the fighting effort in the Spring of next year
that these British engines be reserved for the British airframes
which become available in the later months.
In the light of the above situation, we urge that all
British orders, including the French assignments, for aeroplane
engines, be left undisturbed. Indeed, we are enxious to 200 that
efforts be concentrated on an acceleration of production to
provide for additional allocations to U.K. fighting needs in the
Spring and Summer of 1941.
A.B.P.
Regraded Uclassified
2.
82
Whilst these figures are approximate and may change with
actual production performances, any such changes do not affect
the basis of our case.
New York
September 28, 1940
a3
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Press Service
Tuesday, October 1, 1940.
No. 22-23
Secretary of the Treasury Morgenthau today announced that re-
ports from the Federal Reserve Banks indicate that $724,847,900 of
Treasury Notes of Series C-1940, maturing December 15, 1940, have
been exchanged for 2 percent Treasury Bonds of 1953-55.
Subscriptions and allotments were divided among the several
Federal Reserve Districts and the Treasury as follows:
Federal Reserve
Total Subscriptions
District
Received and Allotted
Boston
$ 15,348,000
New York
452,610,900
Philadelphia
19,477,600
Cleveland
15,494,300
Richmond
45,117,800
Atlanta
14,004,500
Chicago
100,937,900
St. Louis
12,914,300
Minneapolis
11,310,500
Kansas City
12,263,900
Dallas
6,475,600
San Francisco
18,061,200
Treasury
831,400
Total
$724,847,900
-000-
84
Imports of Manganese Ore from the U.S.S.R.,
1937 - 1940 (8 months)
Quantity (ore)
Quantity (Mn content)
(In long tons)
Value
(Long tons)
1937
383,949
209,144
$3,960,000
1938
166,043
90,354
2,662,000
1939
151,472
72,147
2,204,000
1940 (6 months)
206,606
100,000 1/
2,697,990
July
26,859
11,588
$ 364,908
August
93,067
45,199
667,856
1940 - 8 months
326,532
156,787
$3,730,754
Treasury Department, Division of Monetary Research.
October 1, 1940.
1/ Estimated.
Regraded Uclassified
TREASURY DEPARTMENT
85
INTER-OFFICE COMMUNICATION
DATE October 1, 1940.
Secretary Morgenthau
TO
Mr. White
FROM
Subject: Summary of Nicholson's Reports Received on
September 26, 1940
A. Japan
1. There is a report that the Japanese are planning to
disguise the increase in their navy by transferring some of the
older ships to the puppet Chinese government.
2. There has been an increase in discontent among the
working classes in Japan. Even the official figures show a
rise in strikes in spite of severe repression. Agitation 1s
growing among all classes. This 1s based on & report in a
Japanese newspaper. The Japanese press is much perturbed by
the interest shown by Moscow in the subject.
3. According to a report of August 9, the Japanese are
withdrawing some of their best troops from China to stiffen
the newly trained troops in Japan and for organization into
an expeditionary force for Indo-China and the Dutch East Indies.
As a result, the Japanese will have to abandon some of their
planned actions in China.
B. China
1. The puppet government of Wang Ching Wei 18 experiencing
considerable difficulties. Although negotiations have been
going on for about a year, no definite agreement has as yet
been concluded with the Japanese. The Japanese have become
unenthusiastic about Wang Ching Wei's regime.
2. There 1s much intrigue around the puppet government.
Admiral Waji, a leading Japanese Special Service official, has
been opposing Wang Ching Wei in cooperation with several leaders
of the "New Kuomintang". This group has drafted peace terms
to be presented to Chungking which are reported to have the
endorsement of a majority of the senior Japanese government
officials. Briefly, the terms provide for the abolition of
Regraded Uclassified
86
Division of Monetary
- 2 -
Research
wang Ching Wei's government, the withdrawal of Japanese troops
from all areas except North China, the entrance of China into
the axis bloc, economic cooperation of China and Japan with
progress to be achieved "by means of advancing southerly".
3. Wang Ching Wei has not been able to carry out many
of his projects. An attempt to secure a commercial agreement
and recognition from Spain was blocked by the Japanese. He
has not been allowed to organize a strong military force of
his own. The North China, South China and Hankow regimes have
been kept out of his direct control.
4. The Japanese and Wang are busy recruiting underworld
elements. The Japanese have organized the pirates of the South
China coast to prey on all except axis shipping. The looting
of the British liner "Shenghua" was carried out by these gangs.
Wang Ching Wei's puppet forces around Shanghai finance them-
selves to some extent by organizing kidnappings. This serves
also the purpose of raising trouble in the foreign concession.
5. The Japs and the puppet government are actively en-
gaged in trying to buy over the staff and leaders of the muni-
cipal police in Shanghai.
rde
TO:
87
Re second paragraph:
Carbon black is used in
the manufacture of
tires.
UNITED STATES TREASURY DEPARTMENT
88
OFFICE OF
CONFIDENTIAL MEMORANDUM
THE ATTACHÉ
SKANOHAI
August 12, 1940
ONG
To the Secretary
JAPANESE TACTICS TO INCREASE THEIR NAVAL FORCE
AO E AOE 19
As recently reported, Mr. Wang Ching-wei is preparing to
abandon the Ministry of Navy of his Puppet Nanking Government.
Admiral Shimada (
#
), Commander-in-Chief of the Third
Japanese Fleet, stationed in the China Sea, strongly rejected Mr.
Wang's plan to abandon the Navy on the ground that the real purpose
of Jepan is to maintain a Puppet Navy to enlarge the Naval force
of the Island Empire. Being restricted by the International Naval
Treaty, Japan finds herself unable to totally ignore the Treaty and
expand on a large scale. So they have been planning to assist the
Nenking Puppet regime to build a strong Chinese Naval force in China
for their own use. By doing this, Japan thinks she will consider-
ably strengthen her sea power, and Great Britain and the U.S.A. will
not be in a position to interfere with the project.
Japan 1a now prepared to sell part of her old style warships
to the Nanking Government, and the money thus derived will be totally
devoted to building new man-of-war for Japan. Thus, in appearance,
the Naval tonnage of Japan will not be increased, but, in reality,
the situation will be just the reverse.
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
89
August 15, 1940
etary
AFTI-WANG GROUP MAKES PEACE OFFER
concerning the enti-Weng Ching-wei compried sponsored
we31
(
3, important Jepanese Nevel Special
Total, and Mr. Ho Shi-tsong
(
I. and Mr.
), lenders of the New Kuominting, it
learned that these enti-Wang elements have recently
indomental peace terms to be presented directly to Chung-
las purpose of seeking real poece and upsetting Vr. leag's
148
ture of these peace terms are described 85 follows:
Tast Mong Ching-wei's Government be abolished from the
Think and Japan shall cease fighting.
That Chins and Japan shell not be held responsible for
food by the two countries during the hostilities.
Thet e Sino-Japenese economic cooperative body be formed
trede and resources of each by morne of advencing southwardly.
That Chins enter the Axis bloc. But China shall be ellowed
27 American debt to Avoid U.S.A. interference in connection
CRIZOT.
Tirst, with the exception of North Chine, Jabanese troops
ao Chine 3011 shall be withdrewn.
16) Tast Japan help China to take over her foreign-lessed
9.9 and abolish extm-orritorial rights of foreigners, end
vasid +11 British, American, and Freuch spies in the interior of
including Missionsry schools and hospitele).
That development of China's Comminist party shall be
Regraded Uclassified
90
prevented. (In order to avoid pressure from U.S.S.R., stringent
measures shall not be adopted to cope with the Communist party, but
development 26 shall be prevented).
THEMTS) REALIST
2EB
It is learned that the above-mentioned terms have already been
endorsed by a majority of senior Japanese Government officials
(2% ( t/c i)*).
W
The leaders of the New Khomintang are endeavoring to solicit the
10
Chinese elders of the Chungking Government to participate and support
this peace campaign.
M.R. Wilson
-
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
91
OFFICE or
THE ATTACHÉ
CONFIDENTIAL MEMORANDUM
SHANGHAI
August 16, 1940
To the Secretary
BRITISH STEAMSHIP ROBBED BY JAPANESE SPONSORED PIRATES
It is reported the Japanese Navy has lately been buying over
so-called Chinese bandits from the coastal provinces of Chekiang and
Fukien on a large scale for the purpose of haressing the peace end
order of the water region along these two provinces. The Liaison
Departments of the Asia Development Board in Shanghai and Amoy were
designated to undertake this business. It is understood the Japanese
have already succeeded in recruiting and organizing a Chinese bandit
troop of more than 5,000 men in the southern part of Fukien Province.
These bandits were divided into a combination of three armies
called the "Peace and National Salvation Army", which 18 different from
the Peace and Netional Salvation Army of Weng Ching-wei, as it is not
under the command of the Nanking Puppet Government. The Japanese declare
there is no relation between this army and the Nanking Government.
It is reliably reported that this bandit army has been carrying
out extensive operations along the Fukien coest. The pirates who
robbed and rensacked the British steamship "Shenghua" ( the & )
at Sankiangkow 1 : i2 R), off Hinghus ( - rx ). a few
days ago belong to the First Combination Army of this Japanese sponsored
bandit army. The Commander-in-Chief of this army is Chang Yih-chow
( 1/1/2 2. 12) ), who 18 a native of Hinghus and 18 quite femiliar
with the geographical outley of that harbor region.
m. R. Viderla
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
92
Regraded Uclassified
OFFICE OF
THE ATTACHÉ
CONFIDENTIAL MEMORANDUM
SHANGHAI
August 19, 1940
To the Secretary
GENERAL AEE'S VIEW ON THE PRESENT NANKING-JAPAN TREATY
Information secured from puppet inside sources is to the
effect that negotiations between Wang Ching-wei and the Japanese
representatives at Nanking regarding the problem of "Readjustment of
Sino-Japanese Relationship" are still under way. The principles dis-
cussed during the past five months were limited to so-called "Sino-
Japanese Military Cooperation", "Sino-Japanese Economic Cooperation",
and the "Reformation of China's Politics." Up to the present, no
definite decisions have been reached between the two parties con-
cerned.
Regarding the situation, Wang Ching-wei recently told his
subordinates, "We really don't know what our future fate will be
in case these fundamentel problems can not be satisfactorily solved."
Meanwhile, the attitude of Gen. Abe, Japenese Ambassador to
the Nanking regime and Chief of the Japanese Representatives to the
Treaty Talks, toward the negotiations is as stubborn as usual. He
remarked to some friends that, "There never have been negotiations
like these in the history of the world." He emphasized, "The war is
still in progress, and we are now talking peace in the rear with those
who are not responsible for the war. In the eyes of the world this
will seem like a ridiculous and silly procedure." "However", be added,
"the details of these negotiations may be kept in reserve to be used es
a reference if and when - negotiate with the Chungking Government in
the future."
m. ve. audulen
UNITED STATES TREASURY DEPARTMENT
93
OFFICE or
CONFIDENTIAL HEHORANDUM
THE ATTACKE
SHANONAI
August 19, 1940
To the Secretary
WHAT THE JAPS ARE SAYING
Gen. Chan Yu Lin, also known as Chang Sian Pu, or Yan Tu Lin,
errived in Shanghai from Nanking for a few days stay. Se is one of
the important North China leaders who has always been in opposition
to Gen. ChangKni-shek and the Kuominteng. Yu Chan Chang, Commender
of Chinese troops of the Nanking Puppet Government, accompanied him.
Gen. Chang Yu Lin gave an unofficial dinner at which three
Russien neutral persons wore present. These Russians are old sequain-
tences of Chan Yu Lin. Many opinions were offered during the dinner
65 to the situation in the Far East and Chine. The following is a
resume of the conversations which took place at the dinner:
1. Gen. Chan Tu Lin often sees Wang Ching-wei and is well in-
formed about all political news in Nanking. He stated that the peace
negotiations between Wang Ching-wei and Gen. Abe will be completed
soon. There were some disagreements between the Japanese and Chinese but
compromises were found at last. Japanese backed down on some of their
demands and moderated their appetites. New Chinese Government couregeous-
ly stands for its independence in the organization of the New Order.
Nanking's inner politics will be independent but the outside polities
will have to be coordinated with Japan and the block of Asistic countries.
The colleboration will be in spirit as well no in economics and politics.
All advantages of trained instructors and advisers will be furnished
the Japanese.
2. The new Government intends to give wide scope to foreign
capital in the work of reconstruction in China. The Japanese insist that
Regraded Uclassified
94
-8-
the monopoly eyetem must be adopted, with Japanese, Chinese and
foreign financiers participating. Because of the animosity which the
United States end England feel toward the New Order, serious attention
will be paid to collaboration with the Axis bloc countries for the
exchange of goods. Organization of large concerns is already planned,
based on Chinese, Japanese and German capital and on the exchange of
rew material. Gold will play DO part in the organization of the New
Order in Asia.
3. Gen. Chan Yu Lin 1a e likely candidete for the post of Military
Leader of New Chine and will no doubt be appointed to the post of Minister
of Mr. Wang Ching-wei will be the political leader; Chan Yu Lin, Mill-
tery; and Gen. Yu Chan Chang is slready commender of the new Chinese
Army consisting of 100,000 men, who are acattered throughout different
provinces. Part of this Army is now fighting, together with Japanese,
under leadership of Japanese military instructors. Many agents are sent
to regions which are now under Chingking's control. These agents are
sent to Gen. Chan Yu Lin's friends and former pupila who are now in
command of different parts of the Chungking Army, and have been instructed
to contact these commanders, entreating them to abendon the struggle OD
the side of Chungking and join Nanking. In many cases promises have
elready been given as many Chinese commenders are not content with
Chieng Kni-shek's cooperation with Chinese red armies, which are trying
to get Eliomintang under their influence. No agreement is possible be-
tween the red ermies and Nanking, eays Nenking.
4. In military undertakings Nanking will be in cooperation with
Japan and Manchukuo, and also with anti-Communist legion which is going
to be formed under the leadership of Atoman Semenoff and will consist
of Russians. It is supposed that after Chungking's capitulation the
strife will be continued with the red Chinese armies until they are
wholly destroyed. An incident with U.S.S.R. is believed to be possible.
Regraded Uclassified
95
5. Then the European war 10 ended and a New Order established there,
the question as now to change the Communist regime in Russia will be raised.
If this can not be carried out by peaceful means, it will be done by combined
efforts of the countries of the Aris bloc. Russia will become e totalitarian
country together with all other countries in Europe end Asia.
6. One of the first sims of the How Order in Asia will be the abolition
of foreign concessions and settlements, as they are humilating to Chine.
If this can not be done with the good will, cooperation of the countries
maintaining these concessions, then force will be resorted to. The Nine
Power Treaty signed in 1921 is regarded as having lost its force and effect.
7. the New Order will include all the people of Asia and work in
this direction is going on in every country of Asia, including the South
See Islands and India. In line with this policy TO shall eliminate the
control and guardianship of England, France, and the United States.
B. Eastern morals and eastern religions will be the base for new
education of the countries, and the meterialistic culture of the West will
be entirely excluded.
9. Nenking is well informed B.O to incidents in Shanghsi. After the
agreement will be reached between Gen. Abe and Weng Ching-wei, the Manking
Government will take measures and will establish order in all foreign
colonies in Shanghei, Russien included. The latter will have their OWN
governing organization and will cooperate with the Mayor of Greater Shanghai,
where the special foreign department will be installed.
The staff of the Japanese High Command will not consent to the transfer
of the sectors of the International Settlement of Shanghei, formerly guarded
by English troops, to the American Marines, judging by the commications
received from Tokyo. the question of guarding these sectors by Magicipal
Police will be raised. Japanese Gendermarie consider they have the right w
control all districts in Shnngbei in order to put an and to terror and
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
97
OFFICE OF
CONFIDENTIAL MEMORANDUM
THE ATTACHÉ
SHANONAI
August 19, 1940
To the Secretary
NANKING REGIME TO ESTABLISH SHANGHAI GARRISON
BEDEINED
E0 [ M9 as 932 one
OLLICE
НИСУГ
HEADQUARTERS
THE IVS
To strengthen their grip on Shanghai, the authorities
of the Puppet Nanking regime are now planning to set up a
"Shanghai Gerrison Headquarters" in this city. In addition
to commanding Weng Ching wei's troops here, the Headquarters
will undertake to recruit and reorganize bandit bands in the
environs of Shanghai.
The head of the "Shanghai Garrison Headquarters" has
not yet been decided, but it is generally believed that Mr.
In Ying Form X ), now Director of the Police Bureau of
the Shanghei Special Municipality, will be appointed to the
post.
M. R.
Regraded Uclassified
98
UNITED STATES TREASURY DEPARTMENT
OFFICE OF
THE ATTACHÉ
CONFIDENTIAL MEMORANOUM
SHANGHAI
August 19, 1940
To the Secretary
WHAT THE JAPS ARE SAYING IN TOKYO
5
Excited discussion is being held regarding a long article
50
recently appearing in the Moscow newspaper "Pravda", dealing with
the condition of working classes in Japan, pointing out that as the
exploitation of workmen is intensified, the strike movement grows
more and more. That during the first days of the war, Japanese
Police, in order to ensure "peace in the rear", made wholesele
arrests of labor agitators, and, during the three years of war,
have disbanded about 200 professional labor unions.
The "Prevda" states "that though conditions are naturally very
difficult in time of war, strikes in Japan are taking place all the
time, developing each time and becoming more and more organized.
According to Japanese official reports, the number of strikes occur-
ing in the year, 1938, we 1050, involving 56,000 persons; and in
the first 10 months of 1939, 955 strikes were registered, involving
60,000 participants. In 1940 the movement was intensified. The
Japanese Press does not hide its anxiety, alleging '1t is increasing-
ly difficult to stop the growth of discontent emong the working
classes'. Says the Japanese newspaper 'Asahi' - 'such serious and
dangerous situation 1a unprecedented in the life of our country. The
agitation among all classes of our population is also unprecedented.
If this dangerous situation continues to grow, we shall have to 12-
prison a large part of our population. Jepan will not be able to
avoid trouble. 10
m. R. Widerla
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
99
OFFICE OF
CONFIDENTIAL MEMORANDUM
THE ATTACHE
SHANOMAI
August 9, 1940
8Eb
2HT OT
To the Secretary
WHAT THE JAPS ARE SAYING IN TOKYO
SO
THAT
LI. end
To push their "south advance" policy, the Tokyo military
inch Indo-
Chise
authorities are now beginning to secretly recall their crack troops
from the China fronts to Japan for reorganization into a strong
force for the contemplated invasion of the Netherland East Indies
and French Indo-China. According to the plan, part of the Japanese
troops not stationed in strategic places in China will be recalled
to Japan for this purpose.
Communications received reveal the fact that the source of
trained soldier supply in Japan has considerably dried up, end the
number of crack troops is decreasing day by day. Hence the measure
for recalling part of the soldiers from China fronts to strengthen
newly-trained troops.
After the United States placed an embargo on the sale and
shipment of oil and iron to Jepan, the Japanese authorities decided
it was necessary for them to seize the Metherland East Indies and
French Indo-Chine. They believe that it is necessary to employ 6
strong army force to help the navy in their fortheoming drive;
otherwise, the work can not be successfully done.
The withdrawnl of certain troops now in China will be effected
in the near future. It 10 reliably learned that part of the Japanese
troops belonging to the Teuchihashi Detachment ( (1 tip P321.
now stationed in Bangehow, is even now preparing to withdraw to Japan.
Therefore the Japanese drive on East Chakiang, where they have had
considerable losses, will be abandoned for the present.
m. R. Widwilson
Regraded Uclassified
100
UNITED STATES TREASURY DEPARTMENT
OFFICE of
CONFIDENTIAL MEMORANDUM
THE ATTACHE
SHARGHAI
August 22, 1940
To the Secretary
PUPPET TROOPS ENGAGED IN KIDNAPPING
The Nanking puppet troops now stationed in Nantao (Chinese
City of Shanghai) and West Shanghai (so-called Bad Lands), under
the command of Ting Shih-shan ( T As 14 :. are composed of
bendits who were active in Pootung (across the Whangpoo River) in
the past. Since they were recruited and reorganized by the Japaness
Special Service Organization into the so-called "Peace and National
Selvation Army", they have become deeply hated and feared by the
Chinese people for their depredations.
Investigation conducted reveals the fact that the leaders of
this gang have established several secret organizations on Tu Tuen
Road (Bad Lands) for the sole purpose of recruiting the great and
small rescals of this city to eot as their agents.
It is learned that many of the kidnapping cases of recent
occurrence in the International Settlement and French Concession
were plenned and executed by these puppet gangs. They usually con-
fine the abducted persons in their Yu Tuen Road headquarters and
later secretly transport them to Pootung, where they either demand
exorbitent sums of money for their release or just viciously murder
them. As a precautionary measure against truth leaking out, which
would, of course, spoil the prestige of the puppet army of Weng Ching-
mi, the kidnappers usually Hill the abducted men even after their
families have paid the demanded sum of money for their release.
m. R hidslan
Regraded Uclassified
101
UNITED STATES TREASURY DEPARTMENT
OFFICE OF
THE ATTACHE
CONFIDENTIAL MEMORANDUM
SHAWOMAI
August 22, 1940
To the Secretary
ADDITIONAL FACTS CONCERNING PIRACY OF THE
S.S."SHENGHWA"
Recently details concerning the piracy of the British steamship
"Shenghwa ( 200 $ ) off Hinghwa Harbor ( the 162 All it ) of Fukien
Province were reported. Further inquiries reveal the fact that
Japanese were involved in this case.
As previously reported, the Japanese Neval authorities have been
organizing bandits and pirates along the Fukien coast, and the number
of men recruited has been increasing day by day. Rations and pay for
these men are to be supplied by the Japanese, the cost of which is
estimated at 300,000 Chinese Dollars per month. As the Japanese Nevy
does not have such an important sum of money at its disposal, these
bandit troops are permitted to rob and loot all foreign vessels, except
those flying the German end Itelian flags. The pirates are allowed to
retain 75% of the loot obtained from their raids in lieu of rations and
pay, and at the same time will so terrorize foreign shipping that navign-
tion along the China coast will become hezerdous and unprofitable.
A Chinese passenger, was kidnapped on the 9.8."Shenghwa" and
subsequently released and returned to Shanghai, stated that the Japanese
were the chief perpetrators in this piracy. He stated that he observed
Japanese, disguised as Chinese bandite, engaged in directing the Chinase
Regraded Uclassified
102
leaders of these bandit troops while he was detained in the bendit's
stronghold. There Japanese have been active in the coastal regions
of Fukien and Amangtung for a long time, and therefore speak the
10cal dialects fluently.
3H 07
RECEIVED
M9 as 9
THE PL EIDE
m. R. videolson
00 E
THAT2188A
-
in
Regraded Uclassified
103
UNITED STATES TREASURY DEPARTMENT
OFFICE of
CONFIDENTIAL MEMORANDUM
THE ATTACHE
CHANGHAI
August 24, 1940
To the Secretary
WHAT THE JAPS ARE SAYING
In a communication from Tokyo it is stated that the work of
organizing the "One Party Government" 16 progressing slowly but
successfully. Prince Konoye will make 6 public announcement at the
end of August, 1940. After the "Dictetorship" Government 18 fully
completed it will be turned over to one of the Princes of the Imparial
Household in order to forestall internal opposition and strife. A
committee of 30 persons has been organized to perfect the details of
the "One Party Government". This committee is divided into sections:
Political, sconomical, parliamantary, cultural, youth, propaganda,
etc., and is composed of the following personnel:
Representative of Government - Prince Konoye
Minister of Inner Affairs -
Yasui
Minister of Justice -
Kasakaye
President of Planning Board - Hoshino
Sec. Gen. of the Cabinet:-
Tomits
Director of the Law Dept. -
Muresse
Rep. of Diplomatic Bureau -
Fusanosuki Kuhara
Vakuhei Nakadzime
Onedzo Meeda
Kioshi Akita
Kiutaro Nagai
Kloashi Adzabu
Rep. of Economics -
Toyotaru Tuki
Djindjiro Fudzinare
Regraded Uclassified
104
+
Rep. Scientific Bureau -
Druen Hotzumi
2Eb
Hiroshi Nassu
03VI2038
Rep. Industrial Bureau -
Iotaru Sengoku
Takuo Godo
EN
Rep. cultural Bureau -
Nagakage Okabe
Ennosuke Furuno
00
Rep. Outside Bureeu -
Nobumessa Suezugu
Thuhissa Fudzuo
Tossio Shiratore
Ruosuke Goto
Count Ioriassu Arima
Five representatives of the Army and Navy will also be attached to
the Committee.
hi.R. william
would
Regraded Uclassified
105
UNITED STATES TREASURY DEPARTMENT
OFFICE of
CONFIDENTIAL HEMORANDUM
THE ATTACHE
SHARSHAI
August 24, 1940
TO the Secretary
SIGNIFICANCE OF THE ASSASSINATION OF CHEN KUO-LIANG
Mr. Chen Kuo-liang ( ). technical expert of the
Ministry of Communications of the puppet Nanking Government, who was
assessinated at his residence, House 4, Lane 419, Yu Yuen Road, on the
morning of August 18th, was considered lacking both in knowledge and
technique. Although he was a returned student of Germany, since his
return to China from Germany he has not succeeded in any undertaking
commensurate with his education and training. For several years he was
em minor politician connected with gangsters engaged in blackmail as 8
means of livelihood. As a result he lost his standing in Chinese
circles and was despised even by his evil associates. Finally be went
to Hongkong where he lived a "hang-dog" existence for 8. considerable
length of time.
As soon as Wang Ching-wei started his Peace Campaign, Chen Kho-liang
lost no time in joining the traitor. Because of his eloquence, be won
the trust of Wang and was subsequently given B. post in the Nanking
regime as "technical expert" in the Ministry of Communications. However,
he did not actually work in the Ministry, but was assigned by Weng to
undertake the recruiting of gangsters for Nanking.
Some three or four months ago Chen convinced Wang Ching-wei that
he was able to penetrate into Kwangsi and buy over the important
military leaders of that province to join the Peace Campaign. Weng
gave him some $30,000 and sent him to South China to carry out his
activities there.
Regraded Uclassified
106
+2-
It was true that Chen was at one time a sort of protege of both
Gen. Lee Chung-jen and Gen. Pai Chung-hsi. But owing to his corrupt
practices and unreliability, he had long ago forfeited the friendship
of these Kwangsi leaders. Consequently, after spending several months
of luxurious living in Hongkong and Kwangtung, Chen returned to Shanghai
broke and without any tangible results for the large expenditure of money.
Weng Ching-wei became furious at his duplicity and secretly instructed Lee
Shi-chun ( 1 $ I Pot ), Director of the Political Police Bureau, and
gangster in chief of the "Badlands", at 76 Jessfield Road, to mirder Chen.
The assassination was successfully accomplished and in order to em-
barress and attack the Shanghai Municipal authorities, they shifted the
responsibility of this crime to the local Chungking Special Service offi-
cers. As a means of camouflaging the crime, the local Central China Daily
News, Wang's mouthpiece, devoted much space in this newspaper to the assass-
ination of Chen and Lee Shi-chun advertised a reward of $30,000 for the
apprehension and delivery of the assassin to the Political Police Bureau.
It is evident that Wang Ching-wei is determined to assassinate dis-
honest followers in the foreign areas of this city with a view to shifting
the responsibility to the authorities of the International Settlement and
French Concession as a further excuse to seize the two foreign areas in
the future.
m. R. Wilson
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
107
OFFICE OF
THE ATTACHÉ
CONFIDENTIAL MEHORANDUM
SHANGHAI
August 26, 1940
To the Secretary
WANG CHING-WKI'S STEPS AGAINST THE NEW ELUMINTANG
Admirel Weji 172 30$ ), important Japanese Special Service
official, and the leaders of the"New Khomintang Party, "Dr. Ho Shi-tseng
and Mr. Chen Chung-fu( 19 & If ), have been cooperatively
opposing the anti-Weng Ching-wei regime and Peace Movement. This opposition
has been developing day by day arousing great resentment and resction on the
part of Weng Ching-wei. It is understood that Wang's group has recently
decided to take the following stops against the "New Khomintang Party" (Now
Peoples Party).
1. To disclose to the Japanese Government authorities and various
circles that Ho Shi-tseng and Chen Chung-fu have been secretly connected
with the Chungking Government and have been plotting to commit acts unfavor-
able to Japan.
2. To secretly instruct Mang's Special Service Organizations to murder
the important members of the "New Ruomintang Party" and shift the responsi-
bility of the crime to Chungking agents.
3. A telegram will be dispatched by Weng directly to Promier Prince
Konoye asking him to help in preventing the Japanese and Ho and Chen from
carrying on their enti-Wang activities.
4. To order the Director of the Political Police Bureau in Shanghai,
Mr. Lee Shi-chun t ET), gangster chief, to consult the Japaneso
Gendarmarie about the question of proventing the activities of this enti-
Wang group, and supervise the movement of its important members.
5. When necessary the Central Recutive Committee of the Receintang
of Nanking will officially issue a proclemation denying the existence of
the New Micmintang in the Nanking Government.
Regraded Uclassified
108
+
6. Efforts must be made to win over the lower rank officials
of the New Kuomintang. They should be installed in positions with
the Nanking Government and paid high salaries so as to differentiate
that group.
7. To closely watch the movement of the important leaders of
the Reformed Government group of the Nanking Government, such as
Chen Chun ( РФ #1 ), Liang Hung-chi (if ( 13 & ). etc.,
who are alleged to be secretly connected with the New Examintang.
Observers believe that Wang's group will suffer a severe blow
in their conflict with the New Khomintang. Moreover, it is predicted
that the Nanking regime will possibly collapse within one or two
months time.
he R. Widerla
remail
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
109
OFFICE OF
CONFIDENTIAL MEMORANDUM
THE ATTACHE
SHANOHAI
August 28, 1940
TO the Secretary
JAPANESE AND WANG CHING-WEI CONTEMPLATE SEIZURE OF
LOCAL FOREIGN AREAS
It is reported from puppet inside sources that the Japanese and
Weng Ching-wei are now positively devising ways and means to heress
the peace and order of the International Settlement and French Conces-
sion in Shanghei. In addition to secretly buying over the staff members
of various ranks of the two minicipal police organizations, they are
now endeavoring to buy over the important leaders of the two municipal
police departments at a high price. The police leaders thus bought
over will be expected to orgenize the petty officials, constables and
detectives, under their respective command, into small groups to facili-
tate control of their activities.
The Japanese and Wang Ching-wei are planning to utilize these
police leaders to carry out the following functions after the above
scheme is accomplished.
1. To instigate the policemen to collectively surrender their
sime when required.
2. When conducting assessinations and kidnappings on the streets
or in the victims' houses, the assessins and kidnappers of Wang's group
may freely commandeer the pistols of the policemen stationed in the
nearby regions.
3. If the demands of the Puppet regime, which will be presented
through Fu Sino-en, Mayor of occupied areas of Shanghai, are not accepted
by the foreign municipal authorities, the Chinese staffs and patrolmen
Regraded Uclassified
110
&
of the municipal police will be incited to stage a large-scale strike,
thus causing the utmost confusion in the two foreign areas, and thus
provide the Puppets with an excuse to seize both the International
Settlement and French Concession.
It is learned that the plot of the Japanese and Weng, as above
mentioned, has been developing satisfactorily and repidly.
Reliable information from another quarter reveals the alarming
fact that the Nanking Government has already dispatched 500 plain
clothes men, under the commend of Jen Yuan-tao ( the ),
Commander-in-Chief of the Puppet Pacification Army of Kiengsu, Chekieng
and Anhwei, to be secretly stationed along the boundery regions of the
local foreign areas, from West Shanghai to Nanteo. It is reported that
these plain clothes men will be utilized by Wang Ching-wei's force to
invade the foreign areas.
have. videolam
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
111
RIE No
SIT
OFFICE or
THE ATTACHE
CONFIDENTIAL MEMORANDUM
SHARGHAI
8 IV 5
August 29, 1940
now
YRA
To the Secretary
ROUTING OF CARGO FOR GERMANY
Cargo from the United States and other parts is now being
routed to Germany via Deiren to Manchouli instead of to Vladivostok,
via Kobe, as formerly. Reason given is "that there is no rolling
stock available at Vladivostok." The real reason for change of
routing is claimed to be on account of deliberate interference by
Japs in Kobe; there being hundreds of thousands of tons of cargo,
booked through to Vladivostok, now tied up in Kobe. It is even
claimed that the Japs are diverting some of this cargo to their own
use.
Recently the steemer "Collingsworth" arrived at Shanghei from
the United States with approximately 200 tons copper ingots for
trensshipment to Deiren. The Dairen market normal yearly requirement
for copper 18 50 tons. The steamer "Aquarius" recently arrived in
Shanghai from the United States Gulf ports with 870 cases "Cerbon
Black", also for trensshipment to Dairen. There 1s no market in Dairen
for imported "Carbon Black", which is used in the manufacture of gas
masks.
On August 26th Moscow cabled their agents in Manila to expedite
offers for vessels of B to 9,000 tons to load copre at Cobu. Today,
August 29, 1940, Moscow cabled agents in Shanghai to use their utrest
endeavors to obtain offers for vessels for prompt loading of 7,000
tons of sugar at Puerte Chicana (Peru) for Vladivostok. "Bugar" in
this case probably means copper. Evidently there is a shortage of
"tonnage" throughout the world shen it becomes necessary for Moscow
to seek offers in Shanghai for South American cargo. M. k hiderlson
Regraded Uclassified
UNITED STATES TREASURY DEPARTMENT
12
OFFICE or
CONFIDENTIAL MENORANDUM
THE ATTACHE
August 29, 1940
To the Secretary
THE SORROW OF WANG CHING-WKI
According to puppet inside circles, Weng Ching-wei 1a now
extremely possimistic over his present career because of the follow-
ing reasons:
1. No result has yet been reached in the so-celled "Sino-Japensee
negotietions", which have been taking place in Nenking during the past
five months. Wang Ching-wei told his friends that the terms presented
by the Japanese representatives, during the discussions, were so
severo that he dare not accept them. Ha said the attitude of Gen.Abe,
Jeponese Ambassador to the Nenking regime, is as strong es ever. It
is interesting to note that after Prince Konoye became Premier of the
Japanese Cabinet, Wang's group wes exceedingly optimistic, in the belief
that the negotistions of the Sino-Japanese pact would be greatly sim-
plifiod. But, to the disappointment of Weng, the now Japanese Premier
appears to be not as sympethetic toward Wang's group 88 heretofore.
Mereover, Konoye expressed regrets that be had promoted the establish-
ment of the Nenking Government in the past because he is now convinced
that Wang's group has so far done nothing for Japan end is more of e
handicap then 8. help in their efforts for real peace between the two
countries. Therefore, Premier Konoye has been purposely prolonging the
Sino-Jepenese negotiations in Nanking.
2. The various parties of the Nanking Government have been com-
peting with each other in trying to secure more power in the Puppet set-
up. In fact, the officials of various yuens and ministries of the
Nanking Government have been devoting more of their time and efforts
to competing for power end influence than in the performance of their
Regraded Uclassified
113
-2-
official work. Before he assumed the leadership of the Manking regime,
1022 thought he could score gigantic results as beed of the Puppet Govern-
ment. But he finds the atmosphere entirely different. He discovers that
there 10 no chance for him to "do hie stuff."
3. Wong's group originally desired to organize a strong military
force se e mesus of maintaining their position after the Sino-Japanese
conflict is concluded and peace restored. But, up to the present, due to
the opposition of the Japanese, Weng's dream in this regard has not come
true.
4. In addition to depending on Japan, the fundamental international
policy of Wang's regime has been pro-Cerman, Italian and Spanish, and anti-
British, American and Russian, which is, more or less, also the foreign
policy of Japan. But, owing to the fact that Jepan has not been able to
conclude the Chine incident, she has not yet made cleer her foreign policy,
thus causing Weng's Government to hesitate in adopting its stand. Wang was
enrious to negotiate a commercial treaty with the Spenish Economic Inspection
Mission which arrived in Nanking on August 2nd. Be was prepared to offer
Spein every opportunity to trade in China to induce Germany, Italy end
Spein to enter into diplomatic relations with the Nenking Government. But
this project was rejected by the Japanese and Wang's scheme ms, therefore,
frustrated.
The above are the chief reasons which cause Wang's pessimium. Further-
more, there are still many factors causing him considerable sorrow; such as
the enti-Wang Ching-wei movement recently leunched by some of the Japanese
military leeders, the deficit of his Government's exchaquer, and the
bopelessness of attaining direct control over the North China, South China,
and Hankow regimes. Lately, Wang's group has been informed that Japan and
Chungking are now secretly initiating peace negotiations in Bongkong. Though
this information could not be confirmed, yet it has caused greet anriety
in the ranks of Wang's regime.
m. R.
Regraded Uclassified
114
October 1, 1940
2:40 p.m.
H.M.Jr:
Arthur.
Arthur
Purvis:
Yes, Henry.
H.M.Jr:
The meeting was much simpler than what I
thought it would be.
P:
Good.
H.M.Jr:
The part that concerns you was and this is -
the first part I'd like you to keep a secret
or there'll be a hell of a bust about it -
they want to stop all commercial building of
transport planes, which would be good.
P:
Yes.
H.M.Jr:
That's No. 1. No. 2, on the Consolidated
4-engine bombers - have you got a pencil?
P:
Yes.
H.M.Jr:
Hello.
P:
Yes. Well, just one second, I've just got
to get a bit of paper.
H.M.Jr:
Right. (Pause)
P:
Hello.
H.M.Jr:
During October and November they are proposing
to give you 6 B-24's.
P:
Good.
H.M.Jr:
Then from November to April an additional
20 80 as near as I can make out that gives
you better than one-and-one. I've got the
figures here.
P:
Anyway it's substantial.
H.M.Jr:
Hello.
P:
Anyway it's very substantial.
115
- 2 -
R.2.Jr:
Now what they want in exchange are 120 Wright
Cyclone engines.
PL
120 Wright - do you know the number?
8.2.Jr:
They didn't give it.
a
Well, Cyclone is probably enough.
S.V.OF:
Well, General Brett will be here at 3:30,
and this 1s B memorandum from General Marshall
and has all their approval and then they're
doing a hendeome thing for you on the bomb-
sights. They're going to make available 40
Sperry bomb-sights which are on hand and the
other 97 which are on order.
Another 97 on order.
8.1.Jr:
Yeah and they'll take the more recent ones,
so I think it's a pretty good deal.
9!
That sounds pretty good, I agree.
E. .Jr:
What?
31
That sounde pretty good, I agree.
R.M.Jr:
I think it sounds damn good.
E:
I quite agree.
H.K.Jrt
Well, you take a look at it. Brett will be
here and I'á like to give him a yes or no
when we meet. You can ask him more details,
but 88 near as I can make it out my figures
show that on the 4-engine bombers the Army
was to get 53 between now and June 30th.
Hello?
=
Yes.
8.9.Jr:
And they're giving you 26 of those.
P:
Yes, that's pretty good.
H.M.Jr:
And they're giving you six right away.
Regraded Uclassified
116
- 3 -
P:
Yes, quite. I think that's splendid.
H.M.Jr:
Hello.
P:
Splendid.
H.M.Jr:
30 you get your own beside, I mean, if I
understand it correctly and I think if it's
the way it seems on the surface, my recommen-
dation is I'd take it.
Pt.
Yes. Yes, it looks right. It looks absolutely
right. I'd like to have a word with Fairey
but I think it looks excellent.
H.W.Jr:
And they ask nothing else, none of the other
engines.
is
Good work!
H.M.Jr:
So that's all they've asked for.
P:
Well, I don't think we can object to that
at all.
H.M.Jr:
No, and you get 137 Sperry bomb-sights.
P:
Yes. I mean, after all, it seems to carry
on its face on its own recommendation. It
sounds excellent to me.
E.M.Jr:
Take a look at it and be ready at 3:30.
P:
Thank you very much.
H.M.Jr:
Thank you.
117
October 1, 1940
2:55 p.m.
H.N.Jr:
Hello.
Operator:
Secretary Knox.
R.M.Jr:
Hello.
Frank
Knox:
Hello, Henry.
H.M.Jr:
How are you?
1:
Fine.
E.M.Jr:
Frank, in regard to this Coast Guard Cutter
going to Liebon, one of your officers got in
touch with Admiral Waesche Saturday and there
seemed to be a change as to who was to give
our orders, and he got the impression that
the Navy had sort of withdrawn from the
picture and I wondered whether that was right
or
.....
K:
The Navy had withdrawn?
H.M.Jr:
Yeeh.
X:
Oh, no. Now, let me get shold of Stark and
see. I gave him the instructions as soon as
I got back from the Cabinet meeting.
H.N.Jr:
Well, Admiral Ingersol was the man who
talked with Waesche.
K:
And what did Ingersol say?
H.M.Jr:
Well, I got the impression that we were to
E° over on our own and that the Navy sort of
washed its hands of it.
K:
Well, let me get hold of Ingersol and call
you back, Henry.
H.M.Jr:
Could I just make this suggestion?
K:
Yes.
it
Regraded Uclassified
119
October 1, 1940
3:16 p.m.
H.M.Jr:
Hello.
Operator:
Congressman Doughton.
H.M.Jr:
Hello.
Robert
Doughton:
All right.
H.M.Jr:
Bob?
D:
Yes, sir.
H.M.Jr:
Well, I just want to tell you I think you did
a swell job.
D:
Did pretty well for a man who had sold out to
Clay Williams, didn't I?
H.M.Jr:
(Laughs). Well, I hope you don't hold that
against the Treasury.
D:
I don't hold that against you nor the Treasury
either. That was a dirty job of somebody -
I don't know who, but I want you to know that,
Mr. Secretary, it'd take a great deal to
disturb relations of the kind - friendly,
affectionate relations that have always
existed, and they're in existence at this
time, between you and me.
H.M.Jr:
Well, that's the way I feel and it'll take
more than a story like that to come between
us.
D:
Yeah, I'd have to know something myself and
it'd have to be the truth, which I never expect
to know. If you have any complaint to make
of me, I should expect you to send for me
and
H.M.Jr:
Well, I don't think that day will ever come.
D:
I don't think 80 either. Well, I think we
got by fine. It was the hardest job though.
That was the most difficult task that I have
ever encountered, I want to say that. It had
80 many difficulties at every turn of the way.
120
- 2 -
H.M.Jr:
Well, I don't know what we'd have done without
you.
D:
Well, I thank you. I did keep the boys at
work and try to keep down discord . - tried to
adjourn and blow up two or three times and
throw it out the window, you know, and every-
thing else.
H.M.Jr:
Yeah. Well, it took a wise old head like
yours.
D:
Well, I thank you - not so wise, but I tried
to do - I've done my best, given the best I
had and I want to assure you it has in this
case, as in all others, been a real pleasure
to work and cooperate with you and your
staff. Sullivan's fine. I don't always
agree with him perfectly, but he's a man of
character and he's a man of fine ability and
he's just all right. And Tarleau was just as
good as he could be. Your boys are all all
right down there.
H.M.Jr:
Well, thank you. I hope to see you soon.
D:
All right, thank you very much. Thank you
for calling.
H.M.Jr:
Good-bye.
D:
Good-bye.
121
October 1, 1940
3:25 p.m.
H.M.Jr:
Hello.
Operator:
Congressman Cooper.
H.M.Jr:
Hello, Jere?
Jere
Cooper:
Hello, Henry. How are you?
H.M.Jr:
I'm fine. I Just didn't want to let the day
pass without telling you how much I appreciated
what you've done for months.
C:
Well, thank you, Henry. That's very kind.
H.M.Jr:
I swear if it hadn't been for you, we'd of
been all washed up and through.
C:
Well, thank you. That's very kind. I worked
mighty hard on it, Henry.
H.M.Jr:
I've followed it from hour-to-hour and the
boys say that you've been a tower of strength
and that if it hadn't been for you why we'd
of just been washed up and finished.
C:
Well, thank you. That's very kind and I
appreciate your kindness in calling me. I
worked mighty hard.
H.M.Jr:
I mean that from the bottom of my heart.
C:
Well, I know that and I do appreciate it,
Henry.
H.M.Jr:
The boys say you were perfectly magnificent.
C:
Well, by the way, I want to tell you now
that I've worked with lots of representatives
from your Department, but I've never found &
man yet that was more valuable to me than
John Sullivan.
H.M.Jr:
Well, I'm glad to hear it.
C:
He's done a wonderful job, and Tarleau and
Blough and all those boye worked with him
and you're fortunate and the country is
fortunate in having them there.
122
- 2 -
H.M.Jr:
Well, Sullivan felt pretty low there about
8 week ago.
C:
Yes, I know it. We've had a hard fight,
just a hard, hard fight, but he's done a
wonderful job.
H.M.Jr:
Well, we were kind of all of us, that is,
you and the Treasury - - at least, we were
sort of out on the end of a limb and we
didn't know from hour to hour where we were.
C:
That's true.
H.M.Jr:
But I guess that considering everything we
got a pretty good bill.
C:
I tell you I'm mighty well pleased. It's far
better than I thought we'd ever be able to get
and the only way in the world we did get it,
we just absolutely held the line and just
kept fighting every inch of the way.
H.M.Jr:
Well, you were in charge of the front line
trenches.
C:
Well, thank you. That's very kind.
H.M.Jr:
Hope to see you soon, Jere.
C:
Hope to see you, Henry. Appreciate your
calling. Thank you so much.
H.M.Jr:
Good-bye.
C:
Good-bye.
123
October 1, 1940
Stimson gave me the attached memo today. I told him
that I thought it was all right but that I wanted to study
it, and I would have the English over here at 3:30 if he
could send General Brett.
For the second or third time, Stimson did something
which I wasn't very crazy about. When I suggested that we
get together as often as difficulties come up between the
English and the Army and Navy, he seemed to resent it.
Be said that he had had Sir Walter Layton at his house,
who was intimate enough with him to be one of the two
outsiders at his seventieth birthday in England, and that
Layton said he couldn't go into the whole situation with
him because the President told him to take it up with
me. This seemed to rub him a little bit the wrong way.
When I made my offer of meeting with them as often
35 necessary, he seemed to back away, so I said, "Now
look. I have lots to do but the President has asked me
to do this thing, and if you feel I can't be helpful
I would be delighted to drop out of it." He said, "No,
quite the contrary. You have been very helpful not
only along these lines but also on other questions."
But this is the second or third time he has acted like
that.
Stimson then said it wasn't me who bothered him so
much but he felt the President went off half-cocked, and
that he didn't give General Marshall and some of the
other Generals a chance to be heard. So I piped up and
said, "Well, you know General Marshall remarked Friday
when I SBW him that he hadn't seen me in some time."
I said that I used to see General Marshall quite frequently
but I added, "Since you have been Secretary of War I don't
feel that I want to go around you.'
He finally said that he really didn't mind 8 lot but
he would like to be present at the conferences. So I said,
"Fine." I said I wished he had been present this morning
when General Strong gave his report on the situation in
Regraded Uclassified
124
- 2 -
the world as he saw it. Patterson also said that he wished
that I would continue. So finally I said, "If I can't make
things easier for you, I don't serve any purpose, and I
want to again remind you that I have plenty of other things
to do."
125
CONFIDENTIAL
Get Brast
HEAVY BOMBERS
& BOMB SIGHTS
BOMBERS
During October & November,
lie defer:
Delivery of 6 B-24's to the British.
We get:
19-200-1204.P
120 Wright Cyclone engines with which we can power approximately
20 B-17's, which would otherwise be in storage due to engine
shortage.
From November to April,
We defer:
Delivery of 20 additional B-24's as follows:
Approximate delivery ratio
US to British
B-24's
All types
Month
No. deferred
U.S. B
Heavy Bombers
Nov
2
1 to 1
2 to 1
Dec
3
1 to 1
4 to 1
Jan
3
4 to 3
4 to 1
Feb
4
1 to 1
32 to 1
Mar
4
1 to 1
2% to 1
Apr
4
1 to 1
1½ to 1
BOMB SIGHTS
We make available:
40 (old design Sperry) from stock - - obsolete. - to be traded for more
modern type.
97 (old design Sperry) on order - - to be deferred for more modern type.
We get:
Improved sights after November 1941. If additional facilities
are provided these deliveries can begin in April 1941.
Note:- After April 1941 a new adjustment on delivery of heavy bombers &
bomb sights can be made, depending upon the existing situation at
that time.
CONFIDENTIAL
126
October 1, 1940
3:30 p.m.
RE BRITISH PURCHASING PROGRAM
Present: Mr. Purvis
Mr. Fairey
Mr. Gray
Mr. Mansell
General Brett
Major Lyon
Mrs. Klotz
H.M.Jr:
I had lunch today with the Secretary and
Assistant Secretary of War, and he gave
me this memorandum, which I think I under-
stand. This is what I started with, General,
and I may be wrong. The so-called B-24,
four-engine bomber, my figures which were
88 of September 14, showed that the Army
would receive 53 up to and including June 30
and that the English would receive up to and
including that period, 41. Their first one
would come out on the first of February.
Brett:
Yes, we have those figures. We have the
figures right here.
H.M.Jr:
Now, just taking those figures, can I super-
impose this onto my table? How would you do
that?
Brett:
Well, except that your figures don't correspond
with ours.
H.M.Jr:
Oh.
Brett:
That 1s where the trouble 1e. In other words,
our figures under our deliveries, you 880,
don't quite correspond with the figures that
you show in your charts.
B.M.Jr:
Well, could you do it for me this way? Let
Regraded Uclassified
127
- 2 -
me start with the Army under this proposal.
You are down for three in September. Have
you got that there?
Brett:
Except there weren't three in September.
H.M.Jr:
All right. In October, how many under this
program would the Army get?
Brett:
Under the proposal how many would actually
be delivered for the Army?
E.M.Jr:
Well, let's talk of actual deliveries.
Brett:
We expect to get three B-24's in October.
H.M.Jr:
And how many for the English?
Brett:
And --
Lyon:
Excuse me just a minute. This is our present
combat plane. This is a cumulative figure.
H.M.Jr:
Phil, supposing you sit over next to
General Brett.
Purvis:
You and I will change places.
H.M.Jr:
Phil, look over their shoulders, if he doesn't
mind.
I am waiting for you boys to get together.
Lyong:
The reason for this, Mr. Morgenthau, our
schedules have been changed very recently
as a result of certain accelerated schedules
or accelerated provisions, that have been put
in the present contract.
H.M.Jr:
Well, just in October, how many does the Army
propose?
Brett:
The total production, sir, 1s three. In
October the English get all three.
H.M.Jr:
Now, wait a minute. On this line the English
would get three?
Regraded Uclassified
128
- 3 -
Brett:
Three in October.
H.M.Jr:
And the Army would get --
Brett:
We would get none.
H.M.Jr:
Okay.
Brett:
And in November. --
H.M.Jr:
Excuse me. That three in September you didn't
get?
Brett:
We didn't get those, no. In November the total
production is seven. Of the seven, we get two.
H.M.Jr:
Two.
Brett:
And the English get five.
H.M.Jr:
Five.
Brett:
In December the total production 1s six, of
which we get three and the English get three.
Now, by December, that gives the English &
total of 11 airplanes, cumulative.
H.M.Jr:
That is right.
Brett:
And we get a total of five.
H.M.Jr:
That 1a right.
Brett:
In January the total production 1s seven,
of which we get two and the English five.
No, wait a minute, of which we get four in
January and the English get three. In
February the total production is eight of
the B-24, of which we get four and the English
get four.
Now, in addition to that, they get one LB-30.
That 1s their equivalent to the B-24.
During the month of February they would get
a total of five of these large airplanes.
Regraded Uclassified
129
- 4 -
H.M.Jr:
Now, I have got to change this. They would
get five and you would get four?
Brett:
Yes, sir.
H.M.Jr:
Is that right?
Brett:
We would get four of the B-24 and they would
get four of the B-24 and one of the LB-30.
In March, the total production of the B-24 18
eight, of which we get four and the English
get four. In addition thereto, there is the
total of the LB-30, which will go to the
English.
H.M.Jr:
So they would get seven?
Brett:
Yes, sir, they would get four of the B-24 and
three of the LB-30.
H.M.Jr:
So they would get seven?
Brett:
Yes. Now, in April the total production of
the B-24 1s 8, of which we get four and the
English get four. Then there are seven LB-30's
manufactured that month, all of which go to
the English.
H.M.Jr:
That would be eleven.
Brett:
That gives them at the end of April a total
of 26 B-24's plus their own eleven LB-30's,
giving them a total of 37 of the large airplanes.
H.M.Jr:
Well, putting it another way, through that period
you are actually giving up how many?
Brett:
We are actually giving up --
Purvis:
Twenty-six.
Brett:
We are actually giving up 26 B-24's and we are
only getting 21 B-24's.
H.M.Jr:
Up to that point - you are getting 21?
130
- 5 -
Brett:
Yes, sir. That 1s to the end of April.
H.M.Jr:
And they are getting --
Brett:
Twenty-six. In addition to that, they are
getting eleven of their own airplanes.
H.M.Jr:
Twenty-six and eleven?
Brett:
Yes, sir.
H.M.Jr:
They are getting 26 that they wouldn't have
gotten if this proposal didn't go through?
Brett:
That is right.
H.M.Jr:
And then after April they go to their own
production, which would be 14 and 16, 18 that
right?
Brett:
Yes, sir.
Lyon:
Well, Mr. Morgenthau, those figures are correct
as scheduled.
H.M.Jr:
In May they would get 14 and you would get 10.
Lyon:
Yes, sir.
H.M.Jr:
And in June you would get 10 and they would get
16.
Lyon:
That 1s correct.
Purvis:
In both cases, ours being LB-30's.
Lyon:
Yes, str.
H.M.Jr:
But in this proposed deal, they get 26 more
planes between now and the first of May than
if the deal doesn't go through. Right?
Brett:
That is right, according to our figures.
Purvis:
That 1s right.
Regraded Uclassified
131
- 6 -
H.M.Jr:
And in exchange for which you are asked to
release 120 Wrights. I don't know which one
it is.
Brett:
It is the Wright G-200.
Fairey: 1820.
Brett:
1820, G-200.
H.M.Jr:
Which equals how much horse?
Lyon:
It 18 a thousand horsepower class, 1,150.
Gray:
We called it 1,200 this morning.
H.M.Jr:
Well, there is your proposal, gentlemen.
Purvis:
Now, Mr. Fairey --
H.M.Jr:
I mean, that makes it perfectly --
Fairey:
Done.
Young:
Make it 120 instead of 110. They just gave
them ten.
Brett:
The ten are part of the 120.
H.M.Jr:
That shows they are gentlemen.
Brett:
We asked for a rush on that because we had these
B-17's lying idle.
Purvis:
We tried to respond to the rush.
Fairey:
How does this react to the rest of our situation?
H.M.Jr:
Just one second. Now, do I understand that
Mr. Knudsen knows about this?
Brett:
My understanding is, sir, that he does. This
has been worked right through Mr. Stimson's
office and Mr. Patterson's office. There may
be a little further dicker on some 1830's.
H.M.Jr:
What is that?
132
- 7 -
Brett:
That is another type of engine.
H.M.Jr:
But this is the official data on this?
Brett:
Yes, sir.
H.M.Jr:
In other words, for 110 engines, you people
give up 26 of the so-called B-24 between now
and May 1st?
Brett:
The deal 1s on 120 engines, of which they have
very kindly shipped us ten.
H.M.Jr:
Before we go on another deal, your anewer is
yes?
Fairey:
Yes. It is more than yes, it 1s yes, thank you.
Purvis:
I have been waiting for that.
H.M.Jr:
It looks to me as if with this thing going
through now you have got everything that you
have asked for for the moment.
Brett:
As Mr. Fairey knows, we are still dickering.
He 1s trying to help us out on some 1830's
that we are talking about with an 1dea of
slight conversion or shifting of engines between
airplanes 80 that we could get - make up a
shortage that hits us right after the first
of the year.
H.M.Jr:
Do you want to talk about that now or not?
Fairey:
If I know what engines I have to dicker with.
H.M.Jr:
Well, Mr. Fairey, all I can tell you 18 that
I had lunch with Mr. Stimson and Mr. Patterson
and as far Ag they know, there isn't snything
else that the Air Corps wants right now.
Brett::
Well, we are worried about these - as I say,
I still keep on pressing that point too. %
are very worried about a shortage of 1830's
which we anticipate will come into the picture
shortly after the first of the year.
Regraded Uclassified
133
- 8 -
H.M.Jr:
That evidently hasn't reached Mr. Stimson.
Purvis:
Is there any number in your mind on that,
General?
Brett:
About 269.
H.M.Jr:
What do you want to give them in exchange for
that?
Brett:
Well, that is R part of this general dicker,
sir.
H.M.Jr:
It is not on this paper.
Brett:
Well, we are kind of holding this 8.8 --
H.M.Jr:
No, I am going to call up Patterson now and
Stimson and tell them this 1s closed.
Brett:
Well, we were hoping through our extreme
liberality in this connection that we were
going to get e. little help on these 1830's
later on. I don't know what Mr. Stimson has
arranged on this.
H.M.Jr:
This was his proposal for these engines, and
I am going to call him up now, but what I did
tell Mr. Stimson was this, and Mr. Patterson:
I said, "Now, look, in time the Army has a
difficult proposal. I am authorized to say
that if they will sit down with the English
representative, they will do everything they
can to meet them more than half way." That
was the result of our talk this morning. If
you need A special thing to get you over, they
are ready to talk. Is that right?
Purvie:
That 18 the answer.
H.M.Jr:
Isn't that right?
Purvis:
That is the answer.
H.M.Jr:
Am I overetating it?
Purvis:
No, certainly not. We recognize that this is
Regraded Uclassified
134
- 9 -
8. peculiarly good adaptation of the idea.
H.M.Jr:
Now, Brett, they will sit down and talk with
you.
Brett:
We never had any difficulties.
H.M.Jr:
Let me call up Mr. Stimson. He 1s very much
interested in this.
And naturally, everything they offer on the
bomb sight, you will take?
Purvis:
Yes. I hardly dare to even mention it.
H.M.Jr:
Well, I think they are being very generous on
the bomb sights.
Purvis:
So do I.
H.M.Jr:
You are going to pick that right up, aren't you?
Purvis:
Yes.
H.M.Jr:
What they are offering is what they call the
old design Sperry from stock, obsolete, to be
traded in for more modern types and the 97 old
design Sperry on order, to be deferred for the
mar e modern types.
Purvis:
May we know what deliveries the 97 have, roughly?
Brett:
I have no idea. I think they begin in rather
heavy quantities right after the first of the
year. That is my remembrance.
H.M.Jr:
If I may make a little request, Just so big, I
would like very much to see these bomb sights
go into these four-engine bombers. I mean,
for every four-engine bomber you get, I would
like to reserve one of these Sperry bomb sights,
because that 1s what my whole conception originally
was.
Purvis:
That 1s right. I remember you said that right
at the beginning.
Regraded Uclassified
135
- 10 -
H.M.Jr:
I very much want to see this Sperry bomb sight
go into the four-engine bomber. Do you think
you could accede to that?
Purvis:
Mr. Mansell, is that --
Mansell:
Yes, that would be excellent.
Purvis:
That sounds the sensible thing.
Mansell:
That is the right answer. That 1s the type of
bomber we wanted them for.
H.M.Jr: It 18?
Mansell: Yes.
Brett:
That scheduled delivery on those bomb sights --
(Telephone conversation with Secretary Stimson
follows:)
136
- 11 -
H.M.Jr:
He said at lunch, "I have got on my war paint.
I don't want to talk anything about when do I
get my engines." Somebody certainly sold him
a bill of goode about flying these boats down
there, taking the engines down, sending them back
to Seattle, and it pretty near had Stimson crying.
Brett:
He should cry, because that is what they have
been doing, Mr. Secretary.
H.M.Jr:
Maybe he did it once.
Brett:
No, sir, we have three planes sitting down there
without & eign of an engine in them.
H.M.Jr:
And you flew them down --
Brett:
We flew them all the way from Seattle to
Sacramento. We then pulled the engines, put
them in a transport, took them back to Seattle,
and flew the other airplanes down the same way,
and we have done that three times.
H.M.Jr:
Why do you take them down there?
Brett:
Because we have no storage space at Seattle.
Oh, this 18 true.
H.M.Jr:
It 1a a good story, anyway.
Brett:
The delivery on those 0-1 bomb sights, we anticipate
the entire 97 will have been delivered by the end
of January.
Purvis:
Thank you very much. That is 1941, is it?
H.M.Jr:
No, January, 1941.
Purvis:
Thank you very much. It was 80 good I thought
it might be 1942.
(Telephone conversation with Mr. Knudsen follows:)
137
- 12 -
H.M.Jr:
He says if you are happy, he is happy.
Purvis:
Good work.
H.M.Jr:
So everybody is satisfied and seriously, while
you have got these fellows here in the room,
have you got anything else?
Brett:
Well, Mr. Fairey knows very well we have a very
bad situation on the 1340's, the trainers.
Fairey:
Well, I gather that has got to be bettered.
Brett:
Yes, sir. I think it 1s working up a little
bit. That 1s why I mention it. It is 8. very
pressing situation, but I think we are working
on that now.
Fairey:
I was waiting to see the final figures, but
I gather it 1s a lot better.
H.K.Jr:
Coming back to the bomb sight, 1s that agreeable
to you (Mansell) to put this bomb sight in the
four-engine bomber?
Maneell:
That is what we wish to do. We were reserving
them, if we could get them, for these bombers.
H.M.Jr:
It gives you plenty of bomb sights, but you
will reserve them for that?
Mansell:
For this purpose.
H.M.Jr:
The other thing, might I take the liberty of
suggesting that the Army and Navy and English
mission try to do a job on Consolidated similar
to what you did on Curtiss-Wright in Buffalo,
now that you know what you are going to get,
that you try to get them to step up production?
Brett:
Mr. Secretary, we have a very active committee
right now that is working on that.
H.M.Jr:
On production?
Brett:
On standardization.
138
- 13 -
H.M.Jr:
Well, look what happened in Buffalo and look
what you are getting there. You are getting
magnificent results. I don't know any other
place you are getting anything like it.
Brett:
It was, of course, the Buffalo idea that made
us suggest that it be carried through on all
types of equipment.
H.M.Jr:
Granted, but the point is Major Fleet comes in
here and 6.006 Phil Young and he has four things
that he wants. Now, 8.8 far as I know, he didn't
get any one of the four. I don't know Major
Fleet. I have never met him, but is there a
chance of giving him some help 80 that he can
put on more people?
Brett:
I don't know, sir. The Navy handles Fleet.
H.M.Jr:
Is it the Navy?
Brett:
He is a Navy concern, sir.
Purvis:
That is the Consolidated?
Brett:
That 18 a Navy facility and Navy contract.
H.K.Jr:
Except that you have got - then 18 it all right
88 far as the Army 18 concerned if I try to get
the Navy and the English to go to try to step
up production with Consolidated?
Brett:
Yes, sir. We pay for accelerating our deliveries
from the standpoint of overtime, but it 18 a
Navy facility contract. The Navy 18 responsible
for the increased facilities.
H.M.Jr:
Well, I -- when you get out there, have you got
any introduction to whoever the Navy officer 16
in charge of Fleet?
Mansell:
No, I haven't.
H.M.Jr:
Well, Philip, fix it up 80 that when he gets
there - are you going tonight?
Mansell: I am going out tonight, yes.
139
- 14 -
H.M.Jr:
To Los Angeles?
Mansell: Yes.
H.M.Jr:
Well, when you get there call up Forrestal and
tell him - will he be authorized to talk, on
the question of stepping up production?
Purvis:
Mr. Fairey, you can answer that better than
I can.
Fairey:
Oh yes.
H.M.Jr:
Or would you rather wait until you go yourself?
Fairey:
I think Commodore Mansell could do some valuable
preliminary work and if necessary I will go myself.
But as he 1s going this evening, I will authorize
him to talk on it.
H.K.Jr:
Can I arrange a meeting which I would like to
sit in on between you and Knox where we take
Consolidated and see if we oan't push this thing?
Fairey:
With the greatest pleasure.
H.M.Jr:
I talked about it.
Fairey:
Thank you very much.
H.M.Jr:
I talked about it but I have gotten nowhere.
Purvis:
I think a program like that would be simply
splendid in all these companies.
Fairey:
It certainly worked with Buffalo.
H.M.Jr:
Well, I think it is a very good meeting. I am
delighted, aren't you?
Purvis:
Very definitely 80.
H.M.Jr:
Do you want to ask General Brett anything else?
Purvis:
No, I merely want to thank him.
H.M.Jr:
What is your command going to be?
Regraded Uclassified
140
- 15 -
Brett:
I get one of these districts, Mr. Secretary.
H.M.Jr:
Which one?
Brett:
I am looking for 8. gentleman's Job. I think it
1s the Southwest. It takes in everything south
of San Francisco, including San Francisco, and
comes East as far 0.5 the Mississippi.
H.M.Jr:
Sounds very nice.
Brett:
Thank you.
Purvis:
Are you leaving?
Brett:
Oh yes, I have just been promoted, Mr. Purvis.
Fairey:
Congratulations. Does it mean we are going to
lose you?
Brett:
I am afraid BO.
Fairey:
From that point of view, I am very sorry, but
from other aspects, I am very glad for you.
Brett:
There was one other question I wanted to bring
up, Mr. Secretary. That 1e the question - I
don't want to put any fly in the ointment of
this B-24 situation, but we are racking our
brains trying to find some way BO that General
Marshall can meet the requirements of the law
on & certificate which he has got to sign as
to the necessity for those airplanes from the
standpoint of national defense. Now, if anybody
over here could have any idea - he has to sign
a certificate to the effect that these airplanes
are not required for the national defense.
H.M.Jr:
Well, it 1s kind of late --
Brett:
It 18 a law that was just passed on September 12.
H.M.Jr:
I understood that this memorandum, according to
Mr. Stimson, was from General Marshall and he
was delivering General Marshall's memorandum to
me.
Regraded Uclassified
141
- 16 -
Brett:
Yes, sir. That shows what we can do and what
we are perfectly willing to do.
H.M.Jr:
Well, I don't know anything about any certificate.
Brett:
And I just wonder, because we are working very
hard on that legal phase in connection with that.
H.M.Jr:
I will lend you Mr. Cox to help you.
Brett:
There must be some way.
Lyon:
We would appreciate it.
H.M.Jr:
Do you know Cox?
Brett:
Very well.
H.M.Jr:
Do you like him?
Brett:
Yes.
H.M.Jr:
We will lend him to you. But this deal is
closed now, isn't it?
Brett:
Yes, sir, ag far as we're concerned.
H.M.Jr:
Because this is what Mr. Stimson said. "General
Marshall promised you a memorandum on Tuesday."
Mr. Stimson says, "I am delivering it to you
because General Marshall can't be here."
Brett:
Well, we have got to find the ways and means.
Purvis:
It 1s procedure, and it doesn't affect the deal.
Brett:
No, it is just purely procedure.
H.M.Jr:
Well, I called up Mr. Stimson and this was his
proposal. Now, they have accepted it in toto.
Can they tell their home office the deal 18
closed?
Brett:
As far as I can tell, sir. Mr. Stimson gave
you the memorandum.
H.M.Jr:
That 18 right, from General Marshall.
Regraded Uclassified
142
- 17 -
Brett:
Now we have got to find a way to do it and we
are having an awful time, and I imagine we need
a little legal help.
H.M.Jr:
Well, we will give you a little help.
Purvis:
I am going to cable.
Klotz:
Quick.
Purvis:
I am going to cable.
H.M.Jr:
Do you want Cox to come over to your office?
Brett:
I think he had better be over to see Major Lyon.
H.M.Jr:
Will you get them together?
Lyon:
Yes, sir.
(CONFIDENTIAL)
143
HEAVY BOMBERS & BOMB SIGHTS
BOMBERS
During October & November,
We defer:
Delivery of 6 B-24's to the British.
We get:
120 Wright (G-200 - 1200 H.P.) Cyclone engines with
which we can power approximately 20 B-17's, which
would otherwise be in storage due to engine shortage.
From November to April,
We defer:
Delivery of 20 additional B-24's as follows:
Approximate delivery ratio
US to British
B-24's
All types
Month
No. deferred
U. S. B
Heavy Bombers
Nov.
2
I to 1
2 to 1
Dec.
3
1 to 1
4 to 1
Jan.
3
4 to 3
4 to 1
Feb.
4
1 to 1
31 to 1
Mar.
4
1 to 1
21 to 1
Apr.
4
1 to 1
to 1
BOMB SIGHTS
We make available:
40 (old design Sperry) from stock - obsolete - to be
traded for more modern type.
97 (old design Sperry) on order - to be deferred for
more modern type.
We get:
Improved sights after November 1941. If additional facili-
ties are provided these deliveries can begin in April 1941.
Note:- After April 1941 8. new adjustment on delivery of heavy
bombers & bomb sights can be made, depending upon the existing
situation at that time.
Regraded Uclassified
144
October 1, 1940
3:51 p.m.
H.M.Jr:
Hello.
Operator:
Secretary Stimson.
H.M.Jr:
Hello.
Henry
Stimson:
Yes.
H.M.Jr:
Henry talking.
S:
Yes.
H.M.Jr:
I have the gentlemen here and they're simply
delighted with the proposal and accept it
and will be glad to make the 120 engines
available.
S:
Fine.
H.M.Jr:
Hello?
S:
Fine.
H.M.Jr:
General Brett on his own says that the 10
that they made available Friday are part of
the 120.
B:
That the what?
H.M.Jr:
You know they made 10
.....
S:
The 10 odd that you told me about.
H.M.Jr:
Yeah, that would be part of the 120.
S:
That's all right.
H.M.Jr:
And of course they're simply delighted over
bomb-sight and they wanted me to thank you
very much and I think Mr. Purvis will want to
call on you and thank you himself.
S:
The President?
H.M.Jr:
No, Arthur Purvis.
Regraded Uclassified
145
- 2 -
S:
Oh, yes.
H.M.Jr:
He'Il want to call on you himself and thank
you.
S:
All right.
H.M.Jr:
They're simply delighted.
8:
We'll smoke the pipe of peace.
H.M.Jr:
Well, we smoke it continuously don't we?
S:
Sure.
H.M.Jr:
You can take off the war paint now.
S:
I can wash my face.
H.M.Jr:
O.K. Good-bye.
S:
Good-bye.
6
146
October 1, 1940
3:53 p.m.
H.M.Jr:
Hello.
Operator:
I had Mr. Knudsen but he hung up. I'll get
him right back.
H.M.Jr:
Oh, he hung up?
Operator:
Yes, he did.
H.M.Jr:
I'm sorry.
3:54 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Knudsen.
H.M.Jr:
Hello.
Wm. S.
Knudsen:
Yeah.
H.M.Jr:
Bill, Henry talking.
K:
Yes.
H.M.Jr:
Mr. Stimson and Patterson were here for
lunch and brought over a proposal that the
English give up 120 Wright Cyclone G-200
enginee and in exchange get a prior delivery
on 26 of these B-24's.
K:
Yeah.
H.M.Jr:
Patterson said he cleared it all with you,
but on account of my working 60 closely with
you I wanted to do you the courtesy of calling
you myself.
147
- 2 -
K:
Well, that's very fine.
H.M.Jr:
Is that all right?
K:
Yes, it's
......
H.M.Jr:
Well, the English are delighted and they
naturally are going to take the B-2
and give up the
.....
K:
If they are happy about it 80 am I.
H.M.Jr:
They're very happy about it.
K:
All right, sir.
H.M.Jr:
And it's a deal.
K:
Thank you very much.
H.M.Jr:
But you're satisfied.
K:
Yes, sir.
H.M.Jr:
Thank you, Bill.
K:
All right.
148
October 1, 1940
4:13 p.m.
Frank
Knox:
Henry.
H.M.Jr:
Yes, Frank.
K:
That's all fixed. I had a talk with Ingersol
and an order will go to Waesche right off
giving him all the instructions and everything.
H.M.Jr:
And it will be under
.....
K:
Under the Navy, yeah.
H.M.Jr:
Well, was I right that there was some mis-
understanding.
K:
No, you and I understood it exactly right
but evidently I didn't give my instructions
correctly.
H.M.Jr:
Oh.
K:
Because whenever I find a man doesn't do
what I told him to, I think it's my fault,
see?
H.M.Jr:
Well, I guess you're generous.
K:
(Laughe). All right.
H.M.Jr:
Frank.
K:
Yes.
H.M.Jr:
Well, I'll tell that to Waesche then.
K:
All right.
H.M.Jr:
Now while I've got you can I just have 8.
minute?
K:
You bet.
H.M.Jr:
We have just finished, confidentially, a deal
with the Army whereby they're giving 26 of
English between - that 18, 26 that they wouldn't
these 4-engine Consolidated bombers to the
get between now and the 1st of April - lst of
May.
Regraded Uclassified
149
- 2 -
K:
Yeah.
H.M.Jr:
.....
in exchange for which the English are
giving up 120 engines. The English are very
happy and the Army is very happy.
K:
Good.
H.M.Jr:
But those engines go into their Boeings,
the ones that Stimson eaid he had no engines
for.
K:
Yeah.
H.M.Jr:
But now this gives the English a big slice
of Consolidated both through PDY-5's and
these 4-engine bombers, and I'm very anxious
to see whether through the Navy and the
English they couldn't step up production there.
K:
Well, I was out there and talked to this
fellow, Fleet, and he's a ball of fire. He
could do it if anybody could.
H.M.Jr:
Well, here's the thing. Now, the English
have certain people here. How can I get you
and them together 80 we cen talk over what
they can do because Fleet has been telling
us the things that he needs and I don't
think he's gotten them.
K:
Well, now, wait a minute, Henry. I'm going
to meet you at your office at 8:30 tomorrow
morning.
H.M.Jr:
Are you?
K:
Well, that's what I'm told. I'm reminded I
have an appointment at 8:30 Wednesday morning
with Secretary Morgenthau in his office to
discuss the question of priority.
H.M.Jr:
Well, that's news to me.
K:
(Laughs). Well, I'll have to check on that.
The memorandum just came to me a few minutes
ago. I was going to suggest that if that was
true, if you find that I'm right, why don't we
have 8. meeting of this bunch at 9?
Regraded Uclassified
150
- 3 -
H.M.Jr:
Well, we have no meeting for tomorrow. I
have nothing on my calendar. I don't know
where you got that from.
X:
Well, Forrestal gave it to me.
H.M.Jr:
Well, that was - we were going to - oh.
Well, let me check a minute with Patterson.
I don't think he wants a meeting tomorrow
but if he does - can I call you back?
K:
Sure. And listen, you make a date tomorrow
for this bunch of British and I'll adjust
myself to it.
H.M.Jr:
Well, would 9 o'clock be O. K.?
K:
It'd be O.K. yeah.
H.M.Jr:
Irrespective of the other meeting.
K:
Yeah. We'll get through with the other one
by 9 if we have it.
H.M.Jr:
Well, I'll have the British here at 9, and
will you come?
K:
I'll be there.
H.M.Jr:
And with the 1dea of doing something to
expedite Consolidated.
K:
All right. Do you want me to bring Towers
with me?
H.M.Jr:
Who?
K:
Towers, my aviation man.
H.M.Jr:
I think it'd be swell.
K:
All right. I'll get Towers and bring him
along.
H.M.Jr:
Thank you.
K:
All right, Henry. Good-bye.
151
October 1, 1940
4:18 p.m.
H.M.Jr:
Hello.
Operator:
Patterson.
H.M.Jr:
Hello.
Robert
Patterson:
Hello.
H.M.Jr:
Henry Morgenthau.
P:
Yes, Henry.
H.M.Jr:
Everybody is calling up about this meeting
for tomorrow at 8:30. Do you want a meeting
at my office tomorrow?
P:
No.
H.M.Jr:
No. All right.
P:
I'll respond to any that's called, but of
my own initiative I have nothing to bring up.
H.M.Jr:
Well, then why not let's wait until we have
something.
P:
Right.
H.M.Jr:
0. K.
P:
Yes, sir.
H.M.Jr:
I told Harry Stimson that the English accepted
the proposal and were enthusiastic about it.
P:
Fine.
H.M.Jr:
Very much obliged and they're giving 120
engines, 10 of which they gave last Friday,
which are going to Brett.
P:
Yeah. I think that's very constructive.
H.M.Jr:
They're simply delighted and now anything
else like that where I can be helpful, let
me know.
152
- 2 -
You bet.
P:
H.M.Jr:
But the English are delighted.
.
P:
Fine.
H.M.Jr:
Thank you.
P:
Good-bye.
153
October 1, 1940
4:19 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Knudsen.
H.M.Jr:
Hello.
Wm. S.
Knudsen:
This is Bill again.
H.M.Jr:
Hello, Bill.
K:
We are going to build some more engines, you
see.
H.M.Jr:
You're going to do what?
K:
We're going to build some more engines.
H.M.Jr:
Good.
K:
We're going to build 10,000 - 5 of them will
go to Studebaker and the other 5 will go to
Buick.
H.M.Jr:
What make?
K:
What's that?
H.M.Jr:
What kind of engines.
K:
Oh, the Pratt-Whitney engines.
H.M.Jr:
The 2,000 horse.
K:
Well, the Studebaker engine is the 2600,
you know that.
H.M.Jr:
I see.
K:
And the other one is the 1830. Now that's
what we are short. The British will get
about half of these engines, see.
H.M.Jr:
Half of this deal?
K:
Yeah.
H.M.Jr:
This is all news to me.
154
- 2 -
K:
Yeah, we're short. They've been dickering
back and forth, they were going to tell us
how many they wanted and we Just got sick
and tired of waiting 80 we're going to start
two plants for 5,000 engines each. Then
they'll get half of them.
H.M.Jr:
You'll let them have half of them.
K:
Yeah. Now what are we going to do abcut the
plant?
H.M.Jr:
How do you mean?
K:
Are they going to put out some dough for the
plant?
H.M.Jr:
I don't know. This 1s all news to me.
K:
Is this going to be another Packard deal?
H.M.Jr:
(Laughs). I don't know, Bill, you are moving
BO fast I can't keep up with you.
K:
Well, of course, you know we have been fiddling
around with this engine thing and we get
deeper in a hole all the time - we begin to
swap 10 or 15 at a crack, see, and now we are
going to get enough, see. We know we can
take care of these engines.
H.M.Jr:
Can I do this? Purvis is in town, now what
time could you see him tomorrow and you can
ask him direct.
K:
Yeah. I can't see him tomorrow because I'm
going to leave at 7 o'clock. I'm going up
to Curtiss Wright and to Pratt-Whitney, see.
H.M.Jr:
Do you want to see him tonight?
K:
Yes, I'll see him tonight if I can.
H.M.Jr:
What time?
K:
Any time you say.
H.M.Jr:
Well, you fix the time and I'll have him there.
Regraded Uclassified
155
- 3 -
K:
Well, supposing he come over here at 6
o'clock.
H.M.Jr:
At your office.
K:
Yeah.
H.M.Jr:
6 o'clock.
K:
I can have a talk with him, see.
H.M.Jr:
I'll have him there.
K:
All right.
H.M.Jr:
Thank you.
K:
Thank you.
156
October 1, 1940
4:53 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Purvis.
H.M.Jr:
Who?
Operator:
Purvis.
H.M.Jr:
Oh, yes. Hello.
Arthur
Purvis:
Hello.
H.M.Jr:
Arthur, Knudsen called me up and frankly
I don't know what the hell he's talking about.
He told me that he's just placed an order
for 10,000 more engines - airplane enginee -
that he's sick and tired sitting around wait-
ing to hear from you people and then he
said, is this going to be another Packard
deal and how much money are you going to put
up. So I said, Bill, I don't know what you
are talking about.
P:
Neither do I. I never heard of it. And on
the Packard deal, after all, every bit of
waiting that was done was what we did.
H.M.Jr:
Well, he meant on the plant - the money, you
see.
P:
Yeah.
H.M.Jr:
So I said, how about tomorrow, can you see
Purvis. He said no, he was going away. I
said well how about tonight. He said well
I can see him at 6.
P:
Yes.
H.M.Jr:
Can you go .....
P:
I'd be very happy to see him. I haven't the
remotest idea what he is talking about but
I can no doubt find out. I hadn't heard - 1e
it airplane engines, do you know?
157
- 2 -
H.M.Jr:
10,000 more airplane engines and he wants to
give you half.
P:
Well, I mean, I can - it's a queer day when
I hear of a quantity of airplane enginee
that we're so much anxious to get that I've
never heard of before, but I mean whenever
there's 5,000 engines going, I shall be there.
At 6?
H.M.Jr:
Well, I don't know. Between us, I don't know
what's happened but he seems to be in a -
recently getting more and more in a bad humor.
I don't know what it's all about.
P:
It's curious, that, ien't it?
H.M.Jr:
And I made - I don't know what it is but
anyway I think - I just sent for Philip Young
and I'm going to ask him to arrange with you
to go over with you.
P:
I wish he would. I think I might take Fairey
over too because this muet be something that
has been started somewhere, but I don't under-
stand not hearing about it.
H.M.Jr:
Well, I said, Knudsen, I just can't keep up
with you.
P:
No.
H.M.Jr:
I can't keep up with you and I don't
.....
P:
It's entirely new to me. (Laughs). Well,
I'll go and find out and I'd be delighted
if Young could come. It'd make it much
easier.
H.M.Jr:
I think 80. Now, the other thing, I spoke
to Knox. He'd like very much to meet with
you and Fairey and myself tomorrow morning
at my office at 9
P:
Yes.
H.M.Jr:
and Admiral Towers.
.....
P:
Oh, excellent.
Regraded Uclassified
158
- 3 -
H.M.Jr:
And the talk will be what we can do to
increase production of Consolidated.
P:
Yes. By the way, when we're doing that -
I haven't yet been able to find - and I don't
think Young has - what exactly 1s involved
in the way you dragged it out this afternoon
on Consolidated. I haven't yet been able to
learn what is exactly involved in the PDY-5's
you got the other day by months, and I'm
terribly anxious to send that over to London.
Whether tomorrow morning 18 a good time to
settle that item-by-item as you did today I
don't know, but Young might be able, if they're
coming over, to develop the possibility there.
H.M.Jr:
I'll tell Young to get in touch with Admiral
Towers
P:
Thank you 80 much.
H.M.Jr:
and when he comes over to let you have
it on a piece of paper.
P:
That will be simply splendid. London 1s
terribly anxious about the flying boats, as
you know.
H.M.Jr:
Well, what it means on a monthly basis.
P:
Yes, that's it, because they really want the
details. They're going, to lay their war
strategy on that. That's another very
important contribution.
H.M.Jr:
Now, I don't - yeah. What kind of a bomb-
sight goes with it - well, that 1sn't a
bombing plane.
P:
No, that's a reconnaissance - all over the
waters, you know.
H.M.Jr:
Right.
P:
This other thing 18 simply excellent, of course.
H.M.Jr:
Well, you and Philip Young go and Bee Knudsen
at 6 tonight and Fairey - if you don't mind my
making these appointments for you.
159
165
- 4 -
P:
Oh, not a bit. 9 a.m. tomorrow at your office.
H.M.Jr:
And at 9 o'clock also with Fairey at my
office and Colonel Knox and Admiral Towers
will be here.
P:
Excellent. I shall be there.
H.M.Jr:
Thank you.
P:
Thank you.
st.
160,
PARAPHRASE
From Buenos Aires, no. 457. October 1, 4 p.m.
Prebisch and Grumbach now plan to return to
Buenos Aires from Rio de Janeiro on Monday, October 7.
owing to desire to study the agenda, before departing
for Washington by airplane direct will remain in
la
Buenos Aires for about eight days.
to the
OFFICE TECHNICYT
HECEINED
TUCK
RA:AND
COPY
eh
Regraded Uclassified
161
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Stockholm, Sweden
DATE: October 1, 1940, 5 p.m.
NO.: 931
One hundred sixty-eight million crowns of the Kreuger
loan to Germany in the amount of one hundred twenty-five
million dollars in 1930 was taken up yesterday, mainly
from the Skandinaviska Bank in Stockholm, at the same rate
at which it was (omission) 1933 - at forty. A large
block was also disposed of by the L. M. Ericsson Telephone
Company. As & result there has been a sharp rise in the
local stock market, particularly shares of the Skandinaviska
Bank. There has been no effect on other bank shares.
I have been informed that details have been telegraphed
by the Swedish Foreign Office to its Legation in Washington
for transmission to the United States Treasury Department,
to Mr. Cochran.
Please instruct this Legation if you desire further
details from us.
STERLING.
EA:LWW
Prepared by: Mr. Turner
Mr. Murphy
162
Mr. Base
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION CONFIDENTIAL
DATE October 1, 1940
TO
Secretary Morgenthau
FROM
Mr. Haas SCA -
Subject: Developments September. in the High-grade Security Markets During
SUMMARY
(1) Prices of all classes of Treasury securities rose on balance
during the month of September (Chart I). The average yield
of long-term Treasury bonds decreased by 7 basis points net
during the month (Chart II). Weekly reporting member bank
holdings of Treasury direct and guaranteed obligations de-
clined by $190 millions in the four statement weeks ended
September 25 (Chart III).
(2) At the close on Wednesday, September 25, the first day of
trading, the premium on the new 2 percent Treasury bonds of
1953-55 was 1-30/32. This was 14/32 more than the "rights
value" of the December notes at the end of August, before
it was known into what type of security they would be re-
funded (Chart IV). The new bonds are selling at & price
to yield considerably less than might be expected from a
comparison of other issues in the same maturity range
(Chart V).
(3) Both high-grade corporate and municipal bonds reached new
record highs in September (Charts II and VI). The volume of
new bond offerings in the New York market during September
WBB about $142 millions, an increase of $50 millions over
the August total. Most of the month's new issues were well
received.
(4) Further declines in dividend rates on mutual savings deposits
occurred during the year ended July 1, 1940. Only 20 percent
of the $10.6 billions of mutual savings deposits were bringing
8. return of more than 2 percent on July 1, 1940, as compared
with nearly 40 percent two years earlier.
(5) British Government internal securities declined in the Aecond
week of September. but are now back almost to the level at
which they stood at the end of August (Chart VII). Japanese
and Italian dollar bonds declined sharply last week.
Regraded Uclassified
163
Secretary Morgenthau - 2
I. United States Government Securities
Prices of United States Government securities rose on
balance during the month of September. Treasury bonds with
15 years or more to earliest call date gained more than a
point, almost regaining their high for the year reached on
April 6, just before the Scandinavian invasion. Price
changes are shown, by maturity classes, in Chart I and in
the following table:
Average price change
month of September
(Decimals are thirty-seconds)
Notes:
1 to 3 years
+.01
3 to 5 years
+ .07
Bonds:
5 to 15 years to call
+ .21
15 years and over to call
+1.01
The average yield of long-term Treasury bonds decreased
from 2.22 percent at the end of August to a low of 2.14 per-
cent last Wednesday, but increased again to 2.15 percent at
yesterday's close (Chart II).
The holdings of Treasury direct and guaranteed obligations
by weekly reporting member banks in leading cities declined by
$190 millions in the four statement weeks ended September 25
(Chart III). Holdings of bills decreased by $93 millions, of
notes by $57 millions, of bonds by $34 millions, and of guaran-
teed securities by $6 millions. More than half of the total
decline occurred in the last week of this period. Weekly re-
porting banks in New York City accounted for the greater part
of the decrease in holdings of bills and notes, while banks
outside of New York City accounted for the entire decline in
holdings of Treasury bonds.
Regraded Uclassified
Secretary Morgenthau - 3
II. Adjustment of the Market to the
New 2 Percent Treasury Bond
The "rights value" of the December notes rose 10/32 last
Tuesday, September 24, after the preliminary announcement that
A refunding offer of & long-term bond was about to be made,
end gained an additional 5/32 on Wednesday after the details
of the offering had been made known and the subscription books
opened.
At the close on Wednesday, the premium on the new 2 per-
cent Treasury bonds of 1953-55 was 1-30/32. This was 14/32
more than the "rights value" of the December notes at the end
of August before it was known into what type of security they
would be refunded (Chart IV). This 1s the highest premium on
such a refunding offer in the period covered by the chart. The
excess of the premium on the new issue over the "righte value"
of the maturing notes at the end of the preceding month has not
been equalled since the finanoing of December 1937.
Chart V shows, as of yesterday's close, the yields of
Treasury bonds with 2-year, 3-year, and 5-year call periods,
which bear coupon rates of less than 3 percent. It will be
seen that the new bonds are selling at a price to yield con-
siderably less than might be expected from a comparison of
other issues in the same maturity range.
III. Other Domestic High-grade Securities
High-grade corporate bonds rose in price during September
reaching new record highe in the last days of the month. Our
average yield of such bonds, moving inversely to prices, de-
creased 12 basis points from the end of August to 2.68 percent
on Saturday September 28, but closed yesterday at 2.70 percent
(Chart II).
Municipal bonds also have reached new highs during Septem-
ber. The Dow-Jones average yield of twenty 20-year bonds
decreased 10 basie points during the month (Chart VI).
New bond offerings to the public in the New York market
during the month of September amounted to about $142 millions.
This represents an increase of $50 millions over the amount
reported for August and 18 only alightly below the average for
the first nine months of 1940 ($153 millions). of this sum of
8142 millions, about $98 millions consisted of corporate secu-
rities - including about 844 millions of railroad equipment
trust issues.
Regraded Uclassified
165
Secretary Morgenthau - 4
The principal corporate offerings during the month were
two groups of debentures of the Dow Chemical Company, total-
ing $15 millions, and $30 millions of first mortgage bonds of
the Southern California Gas Company. The Dow Chemical issues
consisted of $7.5 millions of ten-year debentures priced to
yield 2.08 percent and $7.5 millions of one- to ten-year
serial debentures, priced to yield from 0.35 percent to 2.05
percent according to maturity. The Southern California Gas
Company bonds were 30-year 3-1/4's, priced at 103-1/2 to yield
3.07 percent to maturity. This latter issue, offered on the
same day as the new 2 percent Treasury bonds, went to & pre-
mium of about 2 points over the offering price.
Several of the month's corporate offerings were released
from SEC registry in less than 20 days under the recent amend-
ment to the law which permits the Commission to shorten the
waiting period.
Four large municipal offerings accounted for about two-
thirds of the month's municipal total. Included in this
group were $5.8 millions -- the final block of an authorized
840.8 millions -- of Pennsylvania Turnpike 3-3/4 percent
bonds maturing in 1968, which were priced to yield about
3.52 percent to maturity; and $5.9 millions of California
Toll Bridge Authority, 3 percent 1- to 15-year serial bonds
priced to yield from 0.20 percent to 1.45 percent. The City
of Detroit sold $9.7 millions of 1- to 21-year serial bonds
bearing various coupons at prices to yield from 0.40 percent
to about 2.98 percent, at a net interest cost to the city of
2.91 percent. The New York City Housing Authority awarded
$8.0 millions of 1- to 20-year serial bonds bearing various
coupons, which were offered at prices to yield from 0.25 per-
cent to 2.85 percent. The net interest cost to the Authority
was 2.71 percent. A bid involving an interest cost of
3.01 percent had been rejected earlier in the month.
IV. Decline of Mutual Savings Bank Dividend Rates
Further declines in dividend rates on mutual savings
deposite were revealed in the data on the 540 mutual savinge
banks in the United States, made public recently. In the
two years ended July 1, 1940, the volume of deposits receiving
dividende of 2-1/2 percent or more has been reduced by almost
50 percent. Only 20 percent of the $10.6 billions of mutual
savings deposits on July 1, 1940, were bringing a return of
more than 2 percent. This is revealed in the following table:
Regraded Uclassified
Secretary Morgenthau - 5
166
Percent of Total Mutual Savings Deposits
Drawing Various Dividends
:
:
Dividend Rates
:
July 1, 1938
July 1, 1939
July 1, 1940
3.5%
+3
.3
.3
3.0%
6.7
3.9
1.8
2.5%
30.2
27.1
17.6
2.0%
61.8
67.4
69.7
1.5%
.9
1.1
7.7
1.0%
.1
.2
2.9
That this trend 1s continuing 1s evidenced by the press
report, today, that four more banks in New York City with ag-
gregate deposits of $333 millions on January 1, 1940, have
reduced their rates from 2 percent to 1-1/2 percent, effect-
ive for third-quarter dividends.
Rate statistics do not reveal additional dividend reduc-
tions made without lowering rates. At least eleven New York
banks in the mutual savings group are requiring money to be
on deposit longer than previously required before being
eligible for dividends. Several of these banks have also
shifted from quarterly to semiannual compounding.
Such dividend reductions should make the 2.9 percent*
return on United States savings bonds increasingly attractive
to those who are normally depositors in mutual savings banks
-- especially since a shift from savings deposits to savings
bonde involves no sacrifice of liquidity or convenience.
Although the total number of accounts and the volume of
mutual savings deposits increased slightly in the past year,
+
This return is, of course, available only on bonds held
for the whole 10-year period. The return on bonds held
2-1/2 years or over exceeds 2 percent, however.
Regraded Uclassified
167
Secretary Morgenthau - 6
a suggestion of the possible effect of continued dividend re-
ductions may be found in the experience of New Jersey. Since
July 1, 1939, when a legal maximum rate of 1 percent was
established in that State, deposits in the twenty-two New
Jersey banks have decreased by $14 millions, or about 4 per-
cent. This compares with an increase of about 2 percent in
the deposits of all mutual savings banks during the same
period.
V. Foreign Government Securities
British Government internal securities declined during
the second week of September, but are now back almost to the
level at which they stood at the end of August. British
2-1/2 percent consols closed yesterday at 74, equivalent to a
yield of 3.39 percent, as compared with 74-1/4 at the end of
August (Chart VII).
Japanese and Italian dollar bonds broke sharply upon the
announcement of the new world-wide axis. Japanese 5-1/2's of
1965 fell from their high for the month of 61-1/2 reached on
September 19 to 51-1/2 on September 30, while Italian 7's of
1951 declined from 49-1/2 to 45-1/4 during the same period.
Australian bonds also participated in the break, but have
since recovered nearly half of their loss.
Attachments
168 168
Chart I
CHANGES IN THE PRICES OF U.S. SECURITIES
Points Plotted Represent the Difference from April 6, 1040 Price of Bach Maturity Class
1940
1940
1941
AUGUST
SEPTEMIES
OCTOBER
JULY
MPT.
NOV.
JAM.
MAR.
MAY
MAY
3
10
17
24
31
7
14
POINTS
21
20
5
12
19
26
POINTS
(NET CHANGE)
POINTS
(NCT CHARGE)
Saturday Quotations
+18
Daily
(NET CHANGE)
-16
+4
:
+1
+1
+1
+3
+
+3
+
+)
+2
+2
7
++
o
0
of
at
+
NOTES
NOTES
1-3 Yes.
3-5 Yes.
NOTES
+
1-3 Yes
o
o
+
+
7
+
+1
-1
-1
NOTES
-1
3-5 Yes.
-16
7
-2
-16
-11
-1j
-3
-3
-If
Domes,
-18
Boxes, 5-15 Yes,
5-15 Yas.
TO CALL
TO CALL
4
7
1
1
-2%
+
Downs, Over 15 Yes
Bomps,
TO CALL
4
Over 15 Yes.
4
-2/
TO CALL
+
-24
-26
Y
9
-3
?
-7
-M
-7
-$6
<>
-$)
-0
4
-If
-N
1
1
+
9
7
7
-10
-10
7
7
MAY
JULY
MPT.
NOV.
JAM.
MAR.
MY
3
10
17
24
31
7
14
21
20
5
12
19
26
1940
1941
AUGUST
SEPTEMICA
OUTDRER
1940
- of the Servary of the Treasury
- , - al /
169
Chart II
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
1939
FEB
MAR
APR
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV.
JAN
DEC.
1940
JAN
1940
FEE.
MAR
APR.
II
.
a
is
e
18
,
T
MAY
is
JUNE
If
a
D.
JULY
AUG.
SEPT.
OCT.
NOV
DEC.
JULY
AUG
SEPT.
III
n.
19
6
E
1
ET
-
14
n
B
*
.
#
19
a
or
.
34
a
.
-
#
#
R
1
-
e
a
4
-
,
is
,
a
inversed Scale
Inverted Scale
Inverted Scale
PER CENT
PER CENT
PER CENT
WEEKLY. Saturday Quotations
DAILY
2.0
2.0
2.0
Long Term
Treasury
2.2
2.2
2.2
2.4
2.4
2.4
Long Term Treasury
(12 years a more to services cell dirta)
2.6
2.6
2.6
Corporate
2.8
2.8
2.8
3.0
3.0
3.0
Corporate
3.2
3.2
3.2
14
3.4
3.4
3.6
3.6
3.6
3.8
3.9
18
PER
PER
PER
CENT
CENT
CENT
100
1.00
1.00
so
80
.80
Spread Between Long Term
Treasury and Corporate
Spread
40
60
40
40
40
40
20
20
20
o
o
o
$
=
-
.
-
E
a
,
#
If
=
4
.
#
a
I
#
.
⑉
-
JAN - - FEB # as MAR . " . APR - MAY - ANE If JULY - - AUS SEPT. OCT NOV . DEC - JAM. IF FEB - MAA. IF APR. a - MAY - JUNE - - JULY # of AUG. M SEPT. THE OCT. NOV. DEC.
JULY
AUG.
SEPT.
1939
1940
1940
"Change - compartion - Lang Them Theasury average
a the Secretary d'te Treasury
- -
#
Chart III
U.S. GOVERNMENT SECURITY HOLDINGS, WEEKLY REPORTING MEMBER BANKS
Cumulative Net Change from December 6, 1930
1939
1940
DEC.
JAM.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
6
20
3.
17
31
14
26
13
27
10
24
b
22
5
19
3
17
31
14
26
11
25
DOLLARS
DOLLARS
MILLIONS
MILLIONS
New York City
600
600
400
400
BONDS
200
200
GUARANTEED
0
o
NOTES
-200
-200
TOTAL
-400
-400
BILLS
-600
-600
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
600
600
All Other
400
400
BONDS?
122
200
200
ABILLS
TOTAL
0
0
QUARANTEED
-200
-200
NOTES
-400
-400
-600
-600
DEC.
JAN.
FCB.
MAR.
APR.
MAY
JUNE
JULY
AUMI.
SEPT.
1000
1000
All Cities
800
800
BONDS
500
600
400
400
TOTAL
200
200
SUARANTEED
o
D
BILLS
-200
-200
NOTES
-400
-400
<600
6
20
3
17
31
14
28
13
27
10
24
a
-600
22
5
19
3
17
31
14
28
11
25
DEC,
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
1939
1940
of Secretary Trustry
171
Chart IV
"RIGHTS VALUES" COMPARED WITH PREMIUMS ON NEW ISSUES
Exchange Offerings on Treasury Note Refundings, 1934 to Date
PRICE
PRICE
ABOVE PAR
ABOVE FAR
is 32NDS.
IN 32NDS.
70
70
"RIGHTS VALUE"
PREMIUM ON NEW ISSUE
8
60
50
50
40
40
30
30
20
20
10
10
o
o
APR.
JUNE
MAR.
JUNE
DEC.
MAR.
JUNE
SEPT.
DEC.
MAR.
SEPT.
DEC.
MAR.
JUNE
SEPT.
DEC.
MAR.
JUNE
NOV.
DEC.
MAR.
SEPT.
1934
1935
1936
1937
1938
1939
1940
40
40
Excess of Premium Over "Rights Value"
30
SECURITY OFFERED IN EXCHANGE
30
NEW
NEW
20
NOTE
BOND
2000
ADDITION TO
OUTSTANDING ISSUE
20
10
10
0
JUNE
MAR.
JUNE
DEC.
DEC.
MAR.
SEPT.
SEPT.
MAR.
JUNE
NOV.
MAR.
o
APR,
5
MAR.
JUNE
SEPT.
DEC.
MAR.
JUNE
DEC.
DEC.
SEPT.
-10
-10
. 20
20
- 30
30
1934
1935
1936
1937
1938
1939
1940
. RIGHTS VALUES ARE AS or THE DD or THE PRECEDING MONTH; PREMIUMS ARE AS or THE CLOSE OF THE FIRST DAY or TRADING;
INCH MORE THAN ONE NEW ISSUE WAS OFFERED THE HIGHEST PROMIUM is SHOUN.
Office el the Secretary of the Treasury
Drawn el frank and Statistics
F - 143
YIELDS OF TREASURY BONDS WITH 2 YEAR, 3 YEAR AND
5 YEAR CALL PERIODS*
Based on Closing Bids, September 30, 1940
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
PERCENT
PERCENT
5 YEAR CALL
2.4
2.4
2.2
2.2
3 YEAR CALL
2.0
2.0
10
1.8
0
NEW ISSUE
1.8
1.6
1.6
1.4
1.4
2 YEAR CALL
1.2
1.2
1.0
1.0
.8
.8
172
.6
.6
1942
1944
1946
1948
1950
1952
1954
1956
1958
1960
1962
.
EXCLUDING ISSUES WITH If OR HIGHER COUPONS
Other of the - of the Transury
- - -
F-161-0
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S TREASURY
AND Dow-JONES AVERAGE OF MUNICIPAL BONDS
Yields Based on Saturday Quotations
M939
1940
JAN FEB MAR APR MAY JUNE JULY AUG BEPT OCT NOV DEC JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC
as
ET
11
is
AF
If
Inve/ted Scale
:
:
Inverted Scale
PER CENT
PER CENT
20
Long Term Treasury" (18 years or more to earlizat cell dotal
20
2.2
22
2.4
2.4
2.6
2.6
2.0
2.6
3.0
3.0
Twenty 20-Year Municipal Bonds
32
3.2
3.4
1.4
PER
PER
CENT
CENT
60
$
60
40
40
Differential
20
20
173
o
as
*
10
.
.
.
is
24
:
"
IS
:
.
or
.
19
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=
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is
"
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=
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=
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H
"
=
⑉
#
o
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
AUG.
SEPT.
OCT.
NOV
DEC.
JAN
FEB.
MAR.
APR.
MAY
as
JUNE
as
JULY
AUG.
1939
SEPT.
OCT.
NOV.
DEC.
1940
"from - line indicates change - composition of Lang Term Treasury average.
Office di the facretary el the Treasury
- di - - -
F-134-A
Regraded Uclass
174
CA
Chart VII
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
BONDS AND U.K. 2½% CONSOLS
1939
1940
1941
1940
MAT
JULY
SEPT.
NOV.
JAN.
MAR
MAY
JULY
SEPT.
NOV.
JAN.
MAR
AVG.
SEPT.
OCT.
NOV.
#
M
...
#
e
=
-
-
:
e
,
:
-
-
IN
a
-
la
Inverted Scale
inverted Scale
inversed Scale
PER CENT
PER CENT
Daily
PER CENT
WEEKLY. Friday Quotations
12
2.2
22
2.4
2.4
Long Term Treasury
2.4
1.6
2.6
26
Long Term Treasury
2.0
(na years - more a cell date)
2.8
2.8
3.0
3.0
3.0
3.2
3.2
3.2
U.K.2% Consoles
3.4
1.4
3.4
U.K. 2&% Console
3.6
1.6
3.6
New Minimum
New Minimum
3.8
3.8
s.a
4.0
4.0
4.0
Pricess et Minimum
4.2
4.2
4.2
PER
PER
PER
CENT
CENT
CENT
1.4
1.6
1.6
1.4
1.4
1.4
Differential
12
1.2
1.2
1.0
Differential
1.0
1.0
8
a
.
&
.6
&
4
4
4
-
2
2
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.
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.
-
.
#
.
1
-
.
*
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-
.
.
=
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-
JULY
SEPT
NOV
JAN
MAR
MAY
JULY
SEPT
NOV
JAN
MAR
AUG
SEPT.
ocr
BOY.
1939
1940
1941
1940
Change - completer of Long form Thersury everage
/ I a Kenny if ! 1
Find - farms of Bef verves - forms of y/o/de
I E 1 I
M
175
AS
PLAIN
Panama via N. R.
Dated October 1, 1940
Rec'd 7:15 p.m.
Secretary of State,
Washington.
169, October 1, 4 p.m.
President Arnulfo Arias took office this morning at an imposing
ceremony held in the Panama Stadium.
In his rather brief insugural message he referred to and reiterated
his previous statement to the effect that a true friendship with the
United States, lessees of the Canal Zone, is not only desirable but
necessary for Panama just 8.8 the friendship and cooperation of Panama
are desirable and necessary for the United States.
In discussing the foreign debt he said "Panama has shown its
good faith and its desire of complying with its obligations by putting
forth plans and initiating negotiations for the settlement of the
foreign debt but owing to the lack of cooperation of the bondholders
it has not up to the present attained its objective. Our Government
will spare no effort to seek a solution for this difficult and serious
problem provided that the solution does not entail obligations which
may prove prejudicial to the interests and needs of the country."
In advocating a new constitution in harmony with present conditions
he said that the constitutional reforms south would be inspired in
"our lofty republican and democratic principles".
WWC
DANSON
of
copy
Regraded Uclassified
176
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
to Secretary Morgenthau
FROM Mr. Cochran
Mr. McKeon of the Federal Reserve Bank of New York gave us the following
information regarding the transfers listed below from German and Italian accounts
maintained with the Chase National Bank.
German
Date
Amount Debited
Account Debited
Paid To
September 26
$ 85,000
Reichsbank, Berlin
Mitsubishi Shoji Kaisha
(by order Mitsui Co.
Limited,
Berlin)
120 Broadway,
New York, N. Y.
Italian
Date
Amount Debited
Account Debited
Paid To
September 30
$950,000
Banca Commerciale
Federal Reserve Bank of
Italiana,
New York for account
New York.
of the Bank of Sweden
September 30
86,000
Banca Commerciale
Swise Bank Corporation,
Italiana,
New York.
New York.
R.M.P.
177
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
Secretary Morgenthau
TO
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
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
September 23
16,595
717,852
77,000
46,385
24
11,750
364,331
65,000
38,767
25
4,150
203,787
50,000
34,248
26
1,800
46,628
5,000
3,897
27
20
2,362
Nil
Nil
28
710
30,995
Nil
Nil
35,025
1,365,955
197,000
123,297
Sales from
February 22 to
September 21
1,521,478
52,510,605
4,502,000
3,624,421
TOTAL FEBRUARY
22 TO SEPTEMBER 28
1,556,503
53,876,560
4,699,000
3,747,718
Mr. Pinsent reported sales of non-vested securities for the week ended
September 21 totaled $550,000.
A.M.S.
178
October 1, 1940
Mr. Pehle
Mr. Cochran
After our Group Control Meeting yesterday evening, and is accordance with
its decision, I telephoned Mr. Mamilton, Chief of the Par Bastern Division, and
described to him the application made by the Chase National Bank for financing
$325,000 worth of rubber to be shipped from Saigon to Vladivostock, to the charge of
the State Bank of Russia. Mr. Hamilton was such interested in this problem, but pro-
ferred that I take it up with Dr. Feis, to whom he transferred m. Dr. Feis thought
it vas too important a matter for his to decide yesterday evening. He preferred to
await the outcome of the conference which vas to be hold this morning between State
and Treasury representatives. Following that meeting this moraing I have sent over
to Dr. Feis a copy of the portinent paragraphs of the application, for his considers-
tion. I have made the point that if, in view of pelitical circumstances, it is
advisable to grant the license, the Treasury could if desirable stipulate that the
proceeds of the sale must be placed in a blocked account.
Jul
VMC:dm:10.1.40
Regraded Uclassified
179
G-2/2657-220
RESTRICTED
M.I.D., W.D.
October 1, 1940.
No. 208
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I.
Western Theater of War.
1. No ground operations.
2, Air Force Operations.
There was relatively heavy air fighting over southern
England during daylight, September 30th. The British described
these operations as the repulse of five large formations, and ad-
mitted damage at Bexhill and Hastings.
German night operations focussed again on London and
Liverpool.
The R.A.F. on the night of the 30th-lst attacked the
"Invasion Ports" and many places in western Germany. Berlin had a
five-hour alert. Five inland freight yards were attacked.
According to news reports daylight raids are continu-
ing over England today.
II. Mediterranean and African Theaters of War.
No ground operations reported. The air forces of both
sides raided communications along the Mediterranean littoral.
RESTRICTED
Regraded Uclassified
180
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
to
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
The reporting banks' transactions in registered sterling were as follows:
Sold to commercial concerns
£90,000
Purchased from commercial concerns & 5,000
The Federal Reserve Bank sold 22,430 in registered sterling to two non-
reporting banks.
From an opening of 4.04-1/2, open market sterling eased to 4-03-1/2 at the
close. Transactions of the reporting banks were as follows:
Sold to commercial concerns
£30,000
Purchased from commercial concerns £19,000
The Svise franc continued strong, and today's advance carried the rate to
a new high of .2301, where it closed. It was reported from Zurich that the
Swiss National Bank again raised its selling rate for Swiss france, from .2293-1/2
to .2299.
Although the Canadian dollar discount narrowed to 13-3/8% this morning, it
subsequently reacted to close at 14-1/8%, unchanged from yesterday.
The other currencies closed as follows:
Swedish krona
.2383
Reichsmark
.4000
Mexican peso
.2049
Argentine peso (free)
.2325
Brasilian milreis (free)
.0505
Ouban peso
8-9/16% discount
Lira
.0505
There were no gold transactions consummated by us today.
181
CONFIDENTIAL
The Federal Reserve Bank of New York reported that the following gold ship-
sents were consigned to it:
$16,500,000 from Argentina, representing four shipments by the Central Bank of
the Argentine Republic for its own account, disposition unknown.
4,325,000 from Canada, shipped by the Bank of Canada for account of the
Canadian Government, for sale to the U. S. Assay Office at New York.
$20,825,000 Total
The report of September 25, received from the Federal Reserve Bank of New York
giving foreign exchange positions of banks and bankers in its district, revealed
that the total position of all countries was short the equivalent of $10,386,000.
a decrease of $1,802,000 in the short position. The net changes in the positions
are as follows:
Short Position
Short Position
Decrease in
Country
September 18
September 25
Short Position
England*
$ 1,275,000
$ 542.000
$ 733.000
Europe
5,647,000
4,171,000
1,476,000
Canada
229,000 (Long)
10,000
239,000 (Increase)
Iatin America
488,000
403,000
85,000
apan
3,958,000
4,202,000
244,000 (Increase)
Other Asia
1,037,000
1,114,000
77.000 (Increase)
All Others
12,000
56,000 (Long)
68,000 (Increase in
Long Position)
Total
$12,188,000
$10,386,000
$1,802,000
*Combined position in registered and open market sterling.
The Bombay gold price declined the equivalent of 40 to $33.97. and silver
vas unchanged at the equivalent of 44.61#.
The London spot and forward silver prices were again fixed at 23-7/16a and
23-3/8d respectively. The dollar equivalents were 42.56# and 42.44.
Handy and Harman's settlement price for foreign silver was unchanged at
34-3/44- The Treasury's purchase price for foreign silver was also unchanged at
354.
We made ten purchases of silver totaling 1,437,000 ounces under the Silver
Purchase Act. Of this amount, 1,212,000 ounces consisted of new production from
foreign countries, for forward delivery, and 100,000 ounces represented & sale
from inventory. The remaining 125,000 ounces vsa purchased from the Central Bank
of China, and represente part of 5. shipment recently made by that bank to this
country.
BMS
Regraded Uclassified
182
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
Mr. Cochran The Secretary
TO
FROM Mr. Hawkey
1. There follows & summary of the gold transactions effected by us with the
central banks and governments of foreign countries and with the B. I. S. during the
month of September:
Purchased From
Sold to
Afghanistan
$ 1,750,000
Colombia
$ 2,313,000
England
248,266,000
Java
5,000,000
Mexico
5,350,000
Sweden
5,082,000
Switzerland (B.I.S.)
564,000
Uruguay
2,015,000
Total
$263,590,000
$6,750,000
In order to replenish our cash balances with the Federal, we sold $217,589,000
of our gold holdings to the U. S. Assay Office during the month under review.
2, England's gold holdings at the end of September may be estimated at $777.8
million. Since July 1, when the British placed their own holdings at $1,444.0 million,
England has been losing gold at the rate of $222.1 million & month. If this continues,
she will own only $555.7 million at the end of October.
a) British Estimate as of July 1, 1940
-$1,444.0 million
Sales
So, African
Net
to U.S.
Production
Loss
July
$262.0
$40.0
$222.0
Aug.
262.9
40,0
222.9
- 666.2 million
Sept.
261.3
40.0
221.3
)
b) End-of-September Holdings
$ 777.8 million
3. France's gold holdings at the end of September may be placed at $1,915.6
million. The British estimated French holdings to be $1,920 million as of mid-July.
Since then, the only known changesconsisted of B withdrawal of $2 million from French
gold at the Federal( this was transferred to the Bank of Poland's gold account on
July 25), and a transfer of $2.4 million on September 20 from a French gold account
at the Federal to the Swiss National Bank's account.
7m/p.
Pt
Regraded Uclassified
183
October 1, 1940
2:30 p.m.
Jesse
Jones:
Hello.
H.M.Jr:
Hello.
J:
Hello, Henry.
H.M.Jr:
Hello. How are you?
J:
All right. How are you?
H.M.Jr:
Oh, I'm alive. Had a 98% conversion on our
notes .....
J:
98%.
H.M.Jr:
Yeah, which is almost as good as Ivory soap.
J:
That's pretty good, isn't it?
H.M.Jr:
I think 80.
J:
When was your closing time?
H.M.Jr:
Well, we closed Friday night.
J:
I see.
H.M.Jr:
And the figures are slow in coming in.
J:
98%. That's remarkable. Was there any new
money in it?
H.M.Jr:
No, no, but this leaves us in very nice shape
and we can go now until November or December
thout having to go to the market unless we
want to, which is very nice.
J:
Well, now any time you want us to do a little
for us why you name the time.
H.M.Jr:
0. K., Jesse.
J:
Now, I want to talk with you & little bit
about Brazil and about Argentina.
H.M.Jr:
Go ahead.
Regraded Uclassified
184
- 2 -
J:
Piereon is down there end they are wanting
8 substantial amount of credit and Mr. Hull
said you were - he thought - either Welles
or Hull or somebody thought that you had been
talking with them something about your
Stabilization Fund - helping them in some way.
R.M.Jr:
No. Let me tell you what happened. I swear -
I meen, this thing with the State Department -
I don't know. Along lest week Welles or Berle -
I don't know who, I think it was Welles - put
the heat on me to invite the Minister of
Finance from the Argentine to come uo here
or his representative. Well, I didn't particu-
larly want it but they were very, very insistent
80 we sent them over a memorandum Saturday to
Berle saying the things that they wanted -
what we would talk to them - we sent it over.
But I said two things. In the first place if
he'e to be invited up here he must be invited
by Mr. Hull, not by me, and No. 2, that I
thought it was a mistake to have him come uo
here before election because they wouldn't
talk about things like Argentine beef and
the kind of things that they wanted to do
business on.
4:
Yeah.
H.M.Jr:
So I thought it was a waste of time, but
whatever Mr. Hull decided was all right by me
but it was up to him to do the inviting. Well,
that was that. Now this morning Berle was
over here and brought over a 4-page memo-
randum that Pierson wanted O.K.'d on what
Fierson was supposed to say to the Minister
of Finance of the Argentine, see?
It
Yeah.
H.M.Jr:
So I said, well, I don't know anything about
it and If Mr. Hull and Mr. Jones can get
together, and whatever they decide - what
they want to do with the Minister of Finance
of the Argentine is 0. K. by me. Now that's
just the way it stands.
2:
Uh-huh.
Regraded Uclassified
185
- 3 -
H.M.Jr:
I have no interest in it other than what the
State Department would like to do.
J:
I see. You don't contemplate using any of
your Stabilization Fund.
H.M.Jr:
Well, I've never talked with the fellows.
Welles - I believe it's Welles, either Welles
or Berle - has been hell-bent for us to make
such a loan. See?
J:
Un-huh.
H.M.Jr:
And we never have gotten down and talked to
anybody about it and so I just feel - I mean,
I don't think it's me, Jesse, but there are
eo many people over in the State Department
that are dealing with the Argentine and every
other country, I can't keep track of it.
J:
Yeah.
H.M.Jr:
I don't know how it 18 with you.
J:
Well, do you think it would be - well, I'm
just trying to get heads and tails out - in
fact I haven't seen the memorandum that Berle
took over to you.
H.M.Jr:
Well, it's - I don't know whether Berle - there
were three people here. Berle, Assistant
Secretary Grady and Harry White, and between
them they produced a 4-page memorandum from
Warren Pierson. Now just who produced it I
don't know.
J:
Well, I'm rather surprised that I hadn't
seen a copy of it.
H.M.Jr:
Well, I'm not surprised.
J:
You're not, huh. (Laughs).
H.M.Jr:
No, I'm not - (Laughs) - they're not treating
you any better or worse than they treat me.
J:
That's right.
H.M.Jr:
But you'd never seen it?
Regraded Uclassified
186
- 4 -
J:
No, I've never seen it. No.
H.M.Jr:
Well, they wanted me to say yes and I said
I wouldn't think of saying yes until Jesse
Jones discussed it with me.
J:
0. K. Well, now I tell you what I'll do then,
Henry. I'd like to have - I want to see what
that 4-page thing is and then maybe have a
visit with you a little while.
H.M.Jr:
I'm at your service.
J:
I'll call you.
H.M.Jr:
But listen, old man, let's get Cordell in
on it 80 that he doesn't say afterwards he
never heard of it.
J:
O. K. Would you as soon have Welles?
H.M.Jr:
No, I'd like
J:
You'd rather have Cordell.
H.M.Jr:
I want Cordell because I don't want to hear
afterwards that he didn't know anything about
it.
J:
I see. All right, we'll work that way then.
H.M.Jr:
Now may I ask you something?
J:
Yes, sir.
H.M.Jr:
Anything doing with T. V. Soong?
J:
He haen't gotten back from New York. He was
in New York Saturday and Monday and they said
he'd be back Monday and then they said he'd
be back Tuesday and 80 I've left word for him
to call me.
H.M.Jr:
Well, if you happen to think of it after you've
talked to him I would appreciate it if .....
J:
Well, I was going to call you. As a matter of
fact I think I was going to call you before I
talked to him and see if you had any suggestions.
187
- 5 -
H.M.Jr:
Well, the only suggestion I have 18, if
there ever was a time to make 8 little gesture
towards Russia, now is the time.
J:
Yeah. All right, I'll call you immediately
I see him.
H.M.Jr:
Thank you.
J:
0. K. Henry.
H.M.Jr:
Yeah.
J:
We could very well, if we wanted to do it,
take over - give you 125 million and take over
that stock.
H.M.Jr:
(Laughs). What a man! And I'll lose the
interest on it.
J:
You'd lose the interest.
H.M.Jr:
Yeah, you'll have to buy me a lunch before
I do that.
J:
0. K.
H.M.Jr:
All right, good-bye.
CONFIDENTIAL
188
Paraphrase of Code Radi.ogram
Received at the Mar Department
at 12:42 P.M., October 1, 1940
London, October 1, 1940.
1. During Monday, September 30, the Fighter Command of
the Royal Air Force dispatched 168 patrols that were involved in
1,173 sorties. The Coastal Command operated 109 planes cn normal
missions. During the night that followed the Bomber Command sent
out 104 planes against their usual targets.
2. The German Air Force made four attacks during daylight
hours of the 30th, two in the morning and two in the afternoon, opera-
ting about 650 planes. All attacks were dispersed and beaten off.
About 275 aircraft flow over England during the night, of which about
175 reached London.
3. In London there was the usual damage that did not
seriously affect military objectives or production. Two main water
supply lines were broken in Impton. In Unbridge 138 high explosive
bombs damaged about 450 houses, killed 13 and injured 106. There THE
200 damage to airdromes.
4. German plane leases ware 46 confirmed, 32 probable, and
29 damaged. The Royal Air Force lost 20 planes and eight pilots.
5. A earvey of 11 ships srrived today from Frestown, Sairra
Imm. A 1,100-ten ship that was bombed, machine-gumed and ast on
fire in the North Atlantic is again underway.
CONFIDENTIAL
Regraded Uclassified
189
CONFIDENTIAL
6. There is no additional information of an invasion.
7. Production is being held up at the Standard Motor
Works, Coventry, by & strike headed by two Communist shop stewards.
IEE.
Distribution:
Military Aide to the President
Secretary of Mr
State Department
Secretary of Treasury
Asst. Secretary of Mar
Chief of Staff
Mar Plans Division
Office of Naval Intelligence
CONFIDENTIAL
+
Regraded Uclassified
190
0-8
JM/ARH
G-2/2657-236
CONFIDENTIAL
October 1, 1940
MEMORANDUM FOR THE CHIEF OF STAFF:
Subject: Situation in the Caribbean Area, No. 5.
1. Maxing.
The increased political tension which developed about
September 1st has senewhat abated. President Cardenas has in-
dorsed the Mexican Congress prenoment that General Cameho
is the elected President of Maxico. This resulted in in Alassan
rump Congress preelaiming Cardemas deposed and General Lapon all
tesperary President, to serve until 1 December, 1940, when
General Almasan would take office.
General Alassan, now sejourning in the United States,
has denounced President Cardense' attitude but is reported to
have contioned his supporters both in and out of Mexico to pro-
coed in strictly legal advocasy of his claims.
Minor speradie armed clashes have courred in northern
Maxico since September let but none has developed strength.
It appears that Almasan's cause 10 lesing strength.
President-elect Camacho's recent assouncement that be is 5
Cathelie has ensouraged conservative elements to believe that his
edministration will be divested of existing Communication influmess
and that a regins more favorable to property rights throughout the
country my be expected.
1 of
The new President of Panema, Dr. trmilfe Arine, -
office today, October 1st. Priction between Penna and the
United States my be expected to develop in the need future.
Dr. Arias w formarly Minister to Italy. No 10 -
what anti-Amerism. President-alect Arias claims that the present
posted of strong Mari w Fascior leanings and is reputally -
"unerual International situation between the United and
Passma, wherein the Panamentans play & suberdinate rale in their
CONFIDENTIAL
Regraded Uclassified
191
CONFIDENTIAL
- country, is the result of having had Presidents of Panama
who were too weak to stand up for their country's rights". From
various sources, it has been reported that Dr. Arias will stand VP
for shat be thinks are his country's rights. Se has stated "thes
during his first your in office be will make or break the Republic
of Penams". is Armulfo Arias is head-strang, stubbern and net
bleesed with too many brains, a bad situation in Panama may result.
3. Cuba.
The insuguration of President-elest Natists was scheduled
for October 10, 1940. However, due to certain legal technicalities,
the insuguration my be postponed. In the meentine, Cuba 10 quieseant,
and it is expected that it will remain so in the imediate future.
he Colembia-
The political situation in Colombia has become consider-
ably clearer in the past tap months. The President Iduardo Santos,
leader of the Right Liberal Party, is losing ground steadily due
to his week and vacillating polities. The Left Liberal Party is
headed by Ex-President Alfense Lepse and this party has gained se
considerably that 11 - logical it will elect the next president,
in case a legal election is held in 1941.
The Conservative Party is the group that 10 being not
closely watched. This Party is strongly anti-United States.
Leuresne Goass 10 the leader of this party and he 10 known all &
strong personal leader who with Nasi help my attempt a coup d'etat
to attain his mis. the Masis have quietly and steadily increased
their position and are taking full advantage of the three-cornered
political fight.
5. French Orders and Martinique.
The political sentions in these colonies is divided.
The Governor and French officials are leyal to the Petain Covernments
while the natives are metly in favor of De Osalle and desire the
protection of the United States. The soments situstion and outlook
are bad.
6.
a A report from Japan stated that one of the urguments
used by Germany to induce Japen to join the Ands military alliance
- that, at a given mont, Cermany could cases so - trouble in
Labin America that the United States would be forced to detach part
of its Facifie flest to handle the situation.
CONFIDENTIAL
+
Regraded Uclassified
192
CONFIDENTIAL
be The above sergement to undoubtedly emaggerated, -
posially with respect to the Caribbean countries. Newever, very
strong Mast organisations are - to exist is practically all
Latin American contrice. These organizations actually de have
& gress naissance value even in the Carihben (Notes
In other countries, outh M thrography and southern Breail, the Hand
1 THE e
SHERMAN MILES,
Brigadier General, U. a. Anny,
Acting Assistant Chief of Staff, 6-2.
fk
CONFIDENTIAL
⑉3⑉
ALLIED AND NEUTRAL SHIPPING LOST DURING WORLD WAR
AND PRESENT WAR
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
GROSS TONS
GROSS TONS
THOUSANDS
THOUSANDS
800
800
700
700
600
600
1917
500
500
400
400
1916
1918
300
300
1940
200
200
1939
100
100
1915
1916
1914
o
o
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
Office of the Secretary of the Treasury
193
Division of Besearch and
Z - 276
194
October 1, 1940
4:00 p.m.
RE SHIP MOVEMENTS CONTROL
Present: Mr. Foley
Mr. Cairns
Mr. White
H.M.Jr:
What I want to say to you gentlemen is
this: In connection with this Panamanian
thing, I am counting on you people to see
that I am personally not liable on this
thing. I want you to look after my own
interests in this matter. I have just
read this thing here and this looks all
right. The Assistant Collector at Galveston --
have you seen this? Have you got a copy of
this?
Foley:
I haven't.
Cairns:
I haven't either.
H.M.Jr:
I think if you boys will read it, that will
save time. That 16 good news. While you
are doing that, I will put in a call for
Knox.
On that thing, we could still stall another
day, couldn't we?
Cairns:
Oh yes. A counsel for the line is sitting
outside my office now.
(Mr. White entered the conference.)
H.M.Jr:
Well now, do I have to do anything tonight?
Cairns:
No.
White:
Not in the light of this.
195
- 2 -
H.M.Jr:
That 1s a good memo.
White:
of course, I don't think that we ought to
stop that kind of gasoline, because that
is the kind of gasoline that the State
Department has been letting by all the time,
and if they are letting it go by, why should
you stop the shipments.
H.M.Jr:
I will tell you why. Because the President
of the United States ordered me.
White:
Well, some 1s going and some isn't.
H.M.Jr:
All right, find some other place where similar
gas is going and I will get them to stop it.
White:
Japan. Here this last week --
Cairns:
This is Japan.
White:
This just went last week.
H.M.Jr:
Find out other places where it 1s sailing.
Foley:
That may have been the same shipment, Harry,
because they have issued a license on this
and we have revoked it.
H.M.Jr:
The way to bring this thing to a head and
get it off me 18 to get out a memorandum
for ship movements, what licenses have been
issued on gasoline, which is similar to this
for Japan, and I will get hold of the President
and say, "Now look, I am holding this ship and
here are some more shipments. How many of
these things do you want me to hold?" Okay?
That 18 the way to bring it to a head. And
if we do enough of it, Cordell Hull will get
excited about it and make up his mind one way
or the other in writing.
Cairns:
There was an additional element in this case,
I think, that perhaps caused you to focus on
it, that the vessel was to be sold for scrap.
White:
That was the complaint the English made to us,
you know.
Regraded Uclassified
196
- 3 -
H.M.Jr:
This same vessel?
White:
No.
H.M.Jr:
The way to bring this to a head and get it
off me, find out what other shipments are
in process for gasoline for Japan. I will
send the list over to the President and say,
"Look here, Bose, here 1s one out of ten.
What the hell do you want me to do with the
other nine?"
Foley:
If he wants them held indefinitely, he has
got to change that order to give you a legal
basis. You can stall for a little while.
H.M.Jr:
But if instead of one I can have ten cases,
it will get 80 hot that the State Department
will say to the President to let them go or
they will change their order.
Now, I think that is the way to put the heat
on the State Department to make them fish or
cut bait. Am I right or am I wrong?
Foley:
That is right.
H.M.Jrf
I am right.
Regraded Uclassified
197
September 30, 1940.
MEMORANDUM
To: Secretary Morgenthau
From: Lieutenant Commander Richmond
we
Supplementing the memorandum of Mr. Gaston of September
27, 1940, re Panamanian Steamship PANAMANIAN, the Assistant
Collector at Galveston reports that while the official report
of the test of the gasoline carried by the PANAMANIAN is not
yet available, he 1a sure that the octane content of the cargo
will average about 86.4. The analysis is being made by
Saybolt Company, independent petroleum chemists and samplers
at Galveston. Their report will be forwarded immediately
upon receipt. Mr. Zinn, the Assistant Collector, is taking
additional samples of the cargo, which he 18 forwarding to
Washington. Further investigation in New York and in
Galveston indicates that the last paragraph of the previous
memorandum is in error in that the Companie Transatlentique
Centro Americano, S.A., is still the owner of the vessel and
the General Atlantic Steamship Corporation are the agents
therefor. Lloyd's register lists the Companie Transatlantique
Centro Americano, S. A., as an Arnold Bernstein Shipping
Company interest.
The Assistant Collector at Galveston reports that the
PANAMANIAN has had trouble with the local seamen's union
which picketed the vessel. In the resulting crew trouble
it is further reported that fourteen members of the crew quit.
The vessel is now anchored in the stream but the Assistant
Collector did not believe that it would be ready to depart for
some time.
Regraded Uclassified
TREASURY DEPARTMENT
198
Office of the Secretary
Technical Assistant to the Secretary
D.
Date 10/3/40
1
TO: Societary
Room
of interest
for tomortons
meeting with
the French
NM
From: MR. COCHRAN
199
DEPARTMENT OF STATE
Washington
October 1, 1940
In reply refer to
Bu
The Secretary of State presents his compliments to the
Honorable the Secretary of the Treasury and encloses a copy
and translation of a note of September 25, 1940 from the
Ambassador of the French Republic regarding a project which
the French Government is now studying. in accord with the
International Committee of the Red Cross, with the possibility
of obtaining food supplies from South America for former French
prisoners of war, and in connection with which the Ambassador
requests a release of a credit of one million, five hundred
thousand dollars.
Enclosures:
From the Embassy of the
French Republic, September 25.
1940. with its translation.
P.T.C.
(Copy)
ek
Regraded Uclassified
0071
(TRANSLATION)
200
EMBASSY
OF THE FRENCH REPUBLIC
IN THE UNITED STATES
Washington, September 25, 1940
Mr. Secretary of State:
The French Government is now studying, in accord with the International
committee of the Red Cross and with the Red Cross committees of the principal
countries of South America, a'project the urgent character of which cannot
escape Your Excellency since it is intended to provide immediate relief to
French prisoners of war.
Indeed, it is a matter of buying in South Ameri CB canned food, the trans-
portation of which, as well as that of the gifts made by the South American
Red Cross Societies, will be effected, should the occasion arise, on board a
French steamer now at La Plata.
It would be necessary, in order to get this project under way, for the
American Government to authorize the freeing of the sum of one million five
hundred thousand dollars taken from French funds now blocked in the United
States. The sum in question will be exclusively affected to the purchase in
South America of the goods sent to the French prisoners of var and used solely
for the benefit of the latter. The extra food supply thus obtained for them
will, in fact, be forwarded to the camps by the French Red Cross with the help
of the International Committee of the Red Cross.
I have the honor to call Your Excellency's special attention to this
initiative, while expressing, on behalf of my Government, the very sincere hope
of seeing the Government of the United States lend its assistance to an under-
taking of humanitarian relief, the urgent necessity of which is unfortunately
evident, by authorizing the unblocking of a credit of one million five hundred
thousand dollars.
Please accept (etc.)
HENRI-HAYE
His Excellency
The Honorable Cordell Hull,
Secretary of State of the United States,
Tr:Ca:HSF
Washington, D. 0.
dm
201
COPY
DEPARTMENT OF STATE
Washington
In reply refer to
October 1, 1940
Bu
The Secretary of State presents his compliments to the Honor-
able the Secretary of the Treasury and encloses a copy and trans-
lation of a note of September 25, 1940 from the Ambassador of the
French Republic requesting the release of funds for the French
Government to provide for various activities of the French Govern-
ment.
Enclosure:
From the Embassy of the
French Republic, September 25,
1940, with its translation.
COPY
dm
COPY
202
(TRANSLATION)
EMBASSY OF THE FRENCH REPUBLIC
IN THE UNITED STATES
Washington, September 25. 1940,
Mr. Secretary of State:
In the course of the conversation which I had the honor to have with Your
Excellency on September 11 last, I drew your attention to a question which is, at
this time, a source of worry for me. Of French assets now blocked in the United
States, is the American Government disposed to release the amounts necessary to
the French Government to provide for:
1. The operation of the Embassy and of Consulates of France in the United
States:
2. The operation of our diplomatic and consular services in Central America,
South America and certain European countries;
3. The service on the 1939-4 per cent md the 1937-4 1/2 per cent loans;
4. The settlement of purchases made during the war in Portugal, Argentina,
Chile and Uruguay?
I indicated, at the time of my interview with Your Excellency, that my Govern-
ment was afraid that there would be established in the United States, under cover
of a general measure for financial protection, a control procedure which would not
fail, in the long run, to impair the very prerogatives of its national sovereignty.
You were good enough to assure me that you would place before the Secretary
of the Treasury the reasons which I had just explained to you with a. view to reach-
ing a just and lasting solution of the problems just stated.
Since then I have been informed by the Financial Attache of the agreement con-
cluded with the Treasury with respect to the disposal of the funds intended, on
the one hand, for the operation of this Embassy and of the Consulates in the United
States and, on the other hand, for the service of the 1939-4 per cent and the 1937-
4 1/2 per cent loans.
This solution is, unfortunately, only technical and temporary in character.
I nevertheless express to you my sincere gratitude for your intervention.
search for a settlement which would permit the unblocking of funds intended for
I beg to point out to Your Excellency the urgent character, however, of 5.
the operation of our diplomatic and consular services in South America and in
not authorized the release of any credit for this purpose and, for nearly two
various European countries. Since the month of August, in fact, the Treasury has
months, the Financial Attache has not been in a position to supply funds to the
Chanceries of our Embansies, Legations and Consulates.
203
- 2 -
Such a situation, which is capable of seriously injuring our national inde-
pendence and dignity, has become critical for most of our posts abroad and it is
to be feared that, at the end of this month, our representatives may cease to
find the credit facilities which they have so far been able to enjoy with the
local banks.
I should be grateful to Your Excellency if you would be good enough to
give serious consideration to the facts set forth above and to draw the attention
of the Secretary of the Treasury to the imperious necessity for the representation
of France abroad of an unblocking of the funds necessary for the operation of
diplomatic and consular services.
Please accept, Mr. Secretary of State, (etc.)
HENRY HAYE
Tr:AVA:HSF
His Excellency
The Honorable Cordell Hull,
Secretary of State of the United States,
Washington, D. C.
dm
204
October 1, 1940
If we can get these long distance bombers now
to the English to knock hell out of Italy, I think Italy
would quit within three months.
205
10-26-40
Summary of British Government Orders, Deliveries, and Additional
Requirements, as of October 1, 1940
The attached two tables summarize British Government orders
placed in the United States, deliveries thereon, and additional
requirements, as of October 1, 1940. Table I presents data in
terms of physical units, and covers selected important products.
Table II presents data in terms of dollar values and covers all
products, classified by commodity groups.
The tables cover British Government orders placed through
the British Purchasing Commission and certain additional orders
for which the Commission handles payments. The tables do not
cover orders of the Dominions.
Contracts assumed from the French Government are excluded
from the dollar figures (Table II) because complete details are
not available. As of October 12, such French contracts had been
reported to the extent of $319 millions and an additional amount
of roughly $200 millions was still to be reported.
The figures showing additional requirements, which were
taken from the tables submitted by Mr. Purvis on October 17,
carry through to April 1942 for airplanes and airplane engines
(and include the proposed 1,500 per month airplane program) and
to late 1941 or early 1942 for other products. The quantities
shown for ammunition and machine guns may be increased, depending
upon military developments.
Regraded Uclassified
Table I
206
Sumary of British Government Orders, Deliveries,
and Additional Requirements. by Selected Products
M of October 1, 1940
(In physical unite)
Mdi-
Total of
Total
Total
Unfilled
tional
unfilled ordere
Commodity group and product
Unit of measurement
orders
deliv-
orders
orders
and additional
placed
ories
not yet
orders not
placed
yet placed
Airplanes
Medium and heavy bombers
Unite (including spares)
2,166
197
1,969
2,950
4,919
Asconnaissance and dive bonbers
2,604
403
2,201
3.300
5,501
.
Fighters
4,462
403
4,059
3,100
7,159
Flying boats
109
-
109
250
359
Trainers
.
2,024
796
1,228
1,400
2,628
Total airplanes
.
11,365
1,799
9,566
11,000
20,566
airplane engines (Both installed
and exported)
Radial - large
Unite (including ( spares)
14,418
2,846
11,572
17,500
29,072
Radial - small
2,977
1,476
1,501
2,000
3,501
Allison
.
3.576
147
3,429
7.500
10,929
Rolla Royce (Packard)
6,000
-
6,000
-
6,000
Total airplane engines
26,971
4,469
22,502
27,000
49,502
Explosives and propellante
Rifle powder
Thousands of pounds
35,000
10,000
25,000
-
25,000
Cannon powder
56,500
2,000
54,500
-
54,500
TNT
.
72,000
22,800
49,200
-
49,200
Tetryl
200
-
200
1,200
1,400
Ammunition
Shelle and solid shot
Thousands
5,530
39
5,491
20,000
25,491
Aerial boobe
380
3
377
-
377
20 so. amunition
Millions of rounds
20
-
20
25
5
.50 ammunition
27
2
25
130
155
-303 ammunition
.
474
19
455
660
1,315
.30 ammunition
.
450
150
300
-
300
Pietol calibre ammunition
#
279
60
219
160
379
Ordnance equipment
Field gune
Number (excluding spares)
895
895
-
1,800
1,800
Medium gune
-
-
-
300
300
Anti-aircraft gune
.
-
-
-
10,300
10,300
Tank and anti-tank guns
#
500
-
500
12,000
12,500
Anti-aircraft spare barrels
Number
3,620
20
3,600
6,700
10,300
Aircraft cannon
Number (arcluding spares)
-
-
-
5,000
5,000
Machine gans .50.
31,200
400
30,800
12,000
42,800
Machine gune .30
.
96,000
$5,900
10,100
36,000
46,100
Submachine gune
Thousands (excluding spares)
61
12
49
50
99
Revolvere
173
49
124
25
149
Difles
890
890
-
1,200
1,200
Tanks and tank equipment
Tanks
Number (excluding spares)
500
-
500
2,500
3,000
Ingines for tanks
3,500
-
3.500
-
3,500
Iron and steel
Commercial carbon steel
Thousands of gross tona
3,743
2,243
1,500
6,000
7,500
Alloy and special purpose steel
201
51
150
750
900
Pig iron
.
670
420
250
920
1,170
Steel and iron scrap
.
1,192
842
350
800
1,150
hips
Nov marchant ships
Number (excluding spares)
-
-
.
60
60
Heall boats
62
11
51
60
111
Marine enginee
570
320
250
1,000
1,250
Office of the Secretary of the Treasury, Division of Research and Statistics.
Prepared October 26, 1940
Boures: British Purchasing Commission.
Excludes 50,000 rounds from United States priorities.
Regraded Uclassified
207
Table II
Summary of British Government Orders, Deliverise,
and Additional Requirements, by Commodity Groups
As of October 1, 1940
(In millions of dollars)
Total
Total
Unfilled
Additional
Total of
orders
orders not
unfilled orders
Commodity group
placed
deliveries
orders
and additional
yes placed
orders not
yes placed
1. Airplanes
546.8
14.7
532.1
2. Airplane engines
278.0
7.7
{
Detail combined
270.3
in group 14 below
}
3. Airplane accessories
29.3
1.5
27.8
4. Total aircraft products
854.1
23.9
830.2
1,200.0
2,030.2
5. Machine tools.
34.8
10.2
24.6
4.0
28.6
6. Chemical varfare materials
-
-
-
-
-
7. Explosives and propellants
20.1
3.0
17.1
5.0
22.1
8. Ammunition
89.5
2.2
87.3
415.0
502.3
9. Ordnance equipment
66.0
5.6
60.4
420,0
480.4
10. Tanks and tank equipment
57.7
.4
57.3
200.0
257.3
11. Motor vehicles
13.1
2.6
10.5
-
10.5
12. Iron and steel
265.0
150.0
115.0
335.0
450.0
13. Non-ferrous metals
46.4
19.8
26.6
-
26.6
14. Textiles and clothing
1.5
is
.6
-
.6
15. Foodstuffs and tobacco
4.2
4,0
.2
-
.2
16. Petroleum products
.
.
-
-
-
#
17. Animals
-
-
-
-
-
16. Ships
12.4
4.7
7-7
100.0
107.7
19. Communications equipment
4.0
.4
3.6
-
3.6
20. Timber
-
-
-
-
-
21. All other
11.6
1.7
10.1
-
10.1
22. Total non-aircraft products
626.5
205.5
421.0
1,479.0
1,900.0
23. Total commodities
1,480.6
229.4
1,251.2
2,679.0
3,930.2
24. Capital
119.9
560.0
25. Grand total
1,600.5
3,239.0
Office of the Secretary of the Treasury, Division of Research and Statistics.
Prepared October 26, 1940,
Source: British Purchasing Commission.
-
Lass than $50,000.
Regraded Uclassified
COPY
208
FEDERAL RESERVE BANK
of NEW YORK
October 1, 1940,
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. E, Merle Cochran
Pursuant to & telephone conversation between Mr. Cochran and
Mr. Rozell of this bank, we are enclosing a special compilation analysing,
by months since the outbreak of the war, dollar disbursements out of the
British and French accounts at this bank and the means by which these
expenditures have been financed,
Recently we received an inquiry from a member of the staff of
the Advisory Commission to the Council of National Defense asking whether
it would be possible to obtain information on British policy in connection
with the use of British gold, with particular reference to the extent to
which sales of gold have been used to finance British purchases of war
material. In answer to this inquiry, ve orally advised the Commission
that we would, of course, be quite willing to give it whatever data we
have which might help it to analyze British policy, but that we could not
release figures directly to it, which ve hold in confidence. We then com-
municated with Mr. Cochran and suggested that we place any pertinent ma-
terial at the disposal of the Treasury Department. Mr. Cochran agreed
and suggested that we tell the Advisory Commission to the Council of Na-
tional Defense that we had passed their inquiry on to the Treasury for its
consideration.
Whether or not it is decided to make this data available to the
National Defense Council, the enclosed tabulation may be of use to the
Treasury. By way of explanation, the total debite for both British and
French account represent all payments out of the accounts maintained at
this bank, excluding, of course, all debits arising from the trensfer of
funds from one British account to another or from one French account to
another. British "Government Expenditures," which have accounted for
$800,000,000 of the total of $2,050,000,000 since the start of the var,
represent all payments made out of Account "A" and other payments which
can be identified as expenditures on behalf of various British Ministries
or agencies, These expenditures are associated directly with official
British purchases of aircraft and other var supplies and, of course, include
advance payments made to American concerns. The remainder of the payments
out of the British accounts at this bank 10 composed largely of transfers
to banks in this country (usually for the account of British banks) to cover
other types of transactions where the British authorities are called upon to
supply dollar exchange. During the early months of the war considerable pay-
sents were made to cover naturing forward contracts entered into during the
Regraded Uclassified
209
- 2 -
summer of 1939. More recently these expenditures represent largely payments
for American exports and other current account items for which the British
authorities will make dollars available.
"Government Expenditures" for France are composed of outlays which
can be identified as having been made either by the French Air Commission or
the French Purchasing Commission. In this connection, it should be remembered
that since the capitulation of France last June certain dollar payments have
been made by the British Purchasing Commission to the Canadian authorities,
who are holding these funds for French account as reimbursement for pay-
ments made on contracts placed by the French but subsequently assumed by
the British. Payments made on these contracts, therefore, are included
in both the British and French outlays.
Although some of the data, particularly the credits arising from
security sales, is only estimated, the figures contained in the attached
tabulation should offer some basis for determining both the character and
extent of British and French dollar expenditures since the outbreak of the
war.
Yours faithfully,
(Signed) Allan Sproul
Allan Sproul,
First Vice President
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
dra
0031
210
ANALYSIS OF BRITISE AND FEENCH ACCOUNTS
Hiricily
(In Millions of Dollars)
Veek Inded Sept. 25
Confidential
BANK
OF
ENGLAND
BANK OF FRANCE
CHEDITS
DEBITS
CREDITS
DEBITS
Other
Net Incr.
Proceeda
Net Incr.
Proceeda of Sales of
(incl.
Gev't
(+) or
of
Gor't
(4) or
Total
Securities
"Registered"
adjust-
Total
Expend-
Other
Decr.(-)
Total
Gold
Other
Total
Expend-
Other
Deor. (-)
PERIOD
Gold
(Est. (a)
Sterling (b)
ments)
itures(c)
in Balance
Sales
itures(d)
in Balance
1939
me. 31 - Sept. 27
207.8
185.4
33.6
-
-11.2(e)
94.3
3.6
90.7
+ 113.5
11.3
-
11.3
19.4
6.0
13.4
- 8.1
Nov. 1
142.0
3.2
52.6
1
86.2(f)
106.7
5,8
100.9
+ 35.3
76,2
35.0
41.2
88.6)
61.8
105.4
- 12.4
JOY. 2- 29
105,8
57.5
25.0
-
23.0
191.7
8.9
182.6
- 65.9
82.9
55.1
27.8
78.6
+ 4,3
lov. 30 - Jan. 3
75.2
50.6
14.2
-
10.4
97.7
8.7
89.0
- 22.5
109.2
93.9
15.3
86.8
25.1
58.7
+ 22.4
1940
4 31
43.4
-
30.
20.6
17.8
5.0(g)
54.8
16.8
38.0
- 11.4
55.9
50.1
5.8
61.5
31.5
30.0
- 5.6
10b, 1- 28
108.3
56.7
17.9
-
33.7
124.2
15.4
108.8
- 15.9
71.5
54.8
16.7
72.7
32.8
39.9
- 1.2
Feb. 29 - Apr. 3
94.0
60.9
21.5
-
11.6(h)
115.5
14.5
101.0
- 21.5
105.0
75.4
29.6
99.6
35.9
63.7
+ 5.4
pr. 4- May 2
66.4
46.8
13.4
-
26.2(1)
113.4
26.1
87,3
- 27.0
78.7
60.7
18.0
84.8
29.4
55.4
- 6.1
laz 2- 29
126.2
93.2
7.1
-
25.9
100.9
23.6
77-3
+ 25.3
145.4
126.2
19.2
101.4
57.0
44.4
1 44.0
by 30 - July 3
319.3
301.3
5.1
-
12.9
283.2
145.3
137.9
+ 36.1
345.1(d)
335.6
9.5(1)
156.7(J)
127.3(J
29.4
+ 188.4
his 5- 31
225.0
212.2
2,0
2.8
8.0
249.7
156.7
93.0
- 24.7
3.2
3.0
0.2
7.3
6.3
1.0
- 4,1
lag. 1- 25
294.8
267.4
1.0
2.4
24.0(k)
261.1
160.2
80.9
+ 33.7
10.9
10.4
0.5
8.9
0.5
8.4
+ 2.0
29 - Oct. 2
Dear 3 - 30
Oct. 31 - Nev. 27
In. 25 - Dec. 31
VIII REDED:
Sept. 4
59,8
55.9
-
0.3
3.6
55.8
33.5
22.3
+ 4.0
0.2
-
0.2
1.7
0.1
1,6
- 1,5
11
6.7
0.1
2.0
0.2
4.4
54.6
42.0
12.6
- 47.9
0,2
-
0,2
0.6
0.1
0,5
- 0.4
15
123.6
112.6
2.0
0.3
8.7
46.2
32.2
14.0
1. 77.4
-
-
-
1.9
0.2
1.7
- 1.9
25
60.2
50.8
2.0
0.1
7.3(1)
98.0
86.1(m)
11.9
- 37.8
0,3
-
0.3
0.4
002
0.2
- 0.1
iverage veokly expenditures since outbreak of MARI
England (through June 19) $27.6 million
Transfers from British Purchasing Commission to
France (through June 19)
19.6 million
Bank of Canada for French Account:
England (through Sept. 25)
$36.6
million
Week ended September 25
- $ 0.2 million
Oumulation from July 26
- 55.0 million
(See footustae DO reverse side.)
4a
211
(a) Through June 19, these figures represent total sales of American securities in Second District reported for account of the United Kingdom.
(Proceeds of these sales, however, say not have been credited to the Bank of England's account in all cases.) Beginning with the week
ended June 26. the figures represent transfers from the Bank of Montreal, New York Agency, which is custodian for requisitioned American
securities held in this country. The transfers apparently reflect proceeds of official security sales, including those handled through
private deals. From June 17 to July 19. transactions in securities payable in specified foreign currencios, including dollars, by United
Kingdom residents were prohibited.
(b) Includes proceeds of sales of "registered" sterling in this market only.
(c) Includes payments for account of British Purchasing Commission. British Air Ministry, British Supply Board, Ministry of Supply Timber Control
and Ministry of Shipping.
(d) Includes payments for account of French Air Commission and French Purchasing Commission.
(e) Includes adjustment for (a) above.
(f) About $85 million transferred from accounts of British authorized banks with New York banks.
(g) About $11 million transferred from accounts of British authorized banks with New York banks.
(h) About $8 million transferred from accounts of British authorised banks with New York banks.
(1) About $10 million transferred from accounts of British authorized banks with New York banks.
(J) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day.
(k) About $2 million transferred from accounts of British authorized banks with New York banks.
(1) About $2 million transferred from accounts of British authorized banks with New York banks.
(a) Of which about $39 million paid to Packard Motor Car Co.
da
212
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
TO
Mr. White
FROM
Mr. Ullmann
Subject: Export Control of Aviation Gasoline
The attached communication, received from Sir Andrew Agnew, merely
dated 9-26 card biled
confirms our opinion that Japan is obtaining in the United States
that
materials out of which she can readily make aviation fuel.
date)
In this connection, the State Department informed me, earlier in
September, that it is refusing export licenses only on finished aviation
gasoline - not on materials out of which aviation gasoline can be made,
This information has been noted in three previous memoranda, copies
of which are attacheds
1. My memorandum to you, dated September 3, 1940, quoting the
State Department.
2. My memorandum to you, dated September 10, 1940, noting the
shipment of 69 octane base (86 octane leaded) gasoline,
which might be used at 86 octane, or might be improved
with additional treatment.
3. My memorandum to you, dated September 10, 1940, quoting a
custom agent's statements that he has no check, other
than an exporter's statement, that products are what they
are declared to be.
He recommended that exports be supported by certifi-
cates of analysis from independent petroleum chemists.
These shipments have been reported by the Treasury's Office of
Merchant Ship Control. In the week ending September 21, 1940, it is
reported that there were shipped to Japan the following products
out of which high octane aviation gasoline can be made:
Blended or High Octane Crude
175,118 barrels
High grade gasoline
159,229 barrels
213
September 3, 1940
Mr. White
Mr. Vilman
Subjects Exports of Number 1 scrap and of controlled petroleum products
1. Exports of No. 1 scrup and of regulated petroleum products (aviation
gasoline, high octane orders, etc.) have been continuing since the President's
proclemation of July 26.
2. According to reports of the Office of Morchant Ship Control (Treasury,
exports of these products to Japan have been increasing steadily in recent
weeks
Exports to Janan
No. 1 Screp
Aviation gasoline
High
arades
Week ending Aug. 10
450 toma
-
-
.
-
Aug. 17
2,341
.
-
-
.
-
Aug. 24
4,448 #
931355 bbl.
-
-
-
Amg. x
12,168
#
18,857
#
106,529 bbl.
Total 4 weeks
19,407 -
22,012 .
106,529
Seares: office of Marchant Ship Control
3. According to the State Department, licenses are being granted for the
export of Number 2 scrup and for high cetane cruise. This licensing 10 based
on an administrative decision of Colonel Maxwell (Administrator of Export
Control).
permitted under the administrative regulations. The State Department claims
Hower, exports of finished aviation gasoline are not supposed to be
to have issued no permits for the export of aviation gasoline. Japan.
4. last wook's shipment to Japan of 18,857 barrels of aviation gasoline -
licensed under Export Permit No. EA-1022, dated August 16, 1940 (shipped on
a Norwagian freighter, 5. s. Minerva, sailing from Houston, Texas about
August 30).
Regraded Uclassified
Division of Honetary
- 2 -
Research
According to the State Department, this pormit vas pranted 9D the
shipper's guarantee that the gaooline did not exceed 87 octane, but that
- peradt was necessary since it could be refined into 87 octone [asoline.
This single permit licenses the shipment of almost 50,000 barrels of
this gasoline to Japan, of which the 18 thousand is only 4. part.
5. Additional similar abi,ments of evistion gasoline have been mide
recently. 81,000 barrels to the 0.6.S.R. (August 26th), and 77,400 harrels
to the United Kingdom in the week ending August 24th. (The Soviet shipment
E/D nade on the S.S. Vacuus, under export license NO. S.A. 359.)
The state Department explains the persits for these shipments on the
25% basie as the shipments to Japan 1.0. the shipper's guarantee that
the anterial did not exceed 87 octane.
t. The New York Times dispatch from Austin, Texas, (September 1)
states that permits have been granted on the export of 1 million barrels
of aviation gasoline to Japan, of which 18,300 barrels (770,000 gallons)
have been loaded. (The loaded portion referred to in the dispatch may be
last week's shipments to Japan.) It is possible that the dispatch referred
to export permits for his outans crude oils, suitable for refining into
aviation gasoline. For, since exports of these crudee ATO being permitted,
the State Department has approved export licenses to the extent of "several
million" gallons, possibly totalling a willion barrels.
The Customs Collector et Nonaton knows of no such contemplated shipments,
but will check with Corpus Christi to determine whether or not shipments
are leing loaded there.
7- Attached tables indicate shipments of scrap iron and petroleum products
to Japan, england, and the U.S.S.R. for the last weeks of August ND reported
by the Office of Marchant Ship Control. According to these figures, exports
of potroleum products and of scrap are higher in August than in recent
months. Scrap exports ATO almost double the June shipmente.
Attechments
Williash
9/3/40
Regraded Uclassified
215
September 10, 1940
Mr. White
Mr. Ullusm
Subjects Aviation Gasoline for Japan
In further reference to last week's lieu Tork Times article
describing shipments of aviation gasoline to Japan, there is
now available an analysis of the actual shipment exported on the
5.8. Vinarya.
the gasoline in question 189 69 cetane base, which when
leaded with , 06 (per (allon) of tetracthyl lead would be 86 octine.
It TAB not technically, therefore, svistion gasolino. -
over, by the addition of small quantities of blending agents or
of tetracthyl lead, it could probably be raised to 87 detane quality.
/urthermore, it is likely that the Japanese might be able to use
86 octans if they have been getting along with 87 octane.
VIU:lre
9/10/40
Regraded Uclassified
216
September 10, 1940
Mr. 2. D. White
Mr. Vilum
Subjects Export Centrel of Aviation Caseline
In a letter dated September 5, 1940, H.S. Creighten (Supervising
Customs Agent at Houston, Teams) comments an the following:
1. in exporter - ship regular run gaseline without a license,
and there 10 20 provision against the exporter's shipping
aviation gaseline by declaring it to be regular 700 gasaline.
Mr. Creighten suggesta that all gaseline experte be supported
w certificates of analysis from independent petrolem chemists,
in order to insure against the substitution of artation
geseline for ordinary gueeline.
state the Treasury (Custome) is responsible for enforcement
of expert central-insefar as actual shipments are concerned-
18 might be advisable to adopt Mr. Creightem's recomendation.
2. Be writes:
"The Surehant Ship Centrol, State Department, to
dessing licenses to expert to the United Kingdom
thousands of barrels of iso-pentane, which, when
combined with regular run gaceline, makes -
suitable for use in airplanes. Also, thousands
of harrels of alkylate, H.A. estanos, and S.A.
estylenes are also being licensed for export to
the United Kingdom."
Willsian
Regraded Uclassified
217
Aide-Memoire for Mr. Morgenthau
Scrap
The following cable has just been received from
London:
"There is some anxiety here as to whether
the interval of the next fortnight before
refusal of the licenses for export of iron
and steel scrap to Japan may be used to import
heavy quantities either direct or through
other countries such as Central and South
America. This apart from impairing the effect
of intended embargo might also prejudice
supply elsewhere including to us. Please
explore with Mr. Morgenthau possibility of
effective steps to secure that there are no
abnormal shipments in the next fortnight."
An illustration of exactly what London has in mind
came to our notice an hour before their cable came in
(I mentioned this to you at the end of this morning's
meeting). Mexico has available for sale 150,000 tons of
scrap iron. Mr. Elliot of our Iron and Steel Section has
an option on this quantity until tomorrow at $17 per ton.
The U. K. cannot take advantage of the option owing to
lack of the right shipping schedules. They have been trying
to get Canada to take up the option; in general Canada wants
scrap, but she also finds it difficult to handle the partic-
ular parcel. It was suggested to the Bethlehem Steel Com-
pany they might be willing to take the parcel off the
market, but they are not enthusiestic since the price is
82 per ton higher than they expect to have to pay when the
embargo is in effect.
I do not know whether anything can be done in getting
this particular parcel from Mexico taken off the market,
but the matter does seem both important and urgent: this
apart from the general question raised in London's cable.
aBP
À B P
Washington
October 1 1940
Regraded Uclassified
<18
Aide-Memoire for Mr. Morgenthau
Scrap
The following cable has just been received from
Londont
"There is some anxiety here as to whether
the interval of the next fortnight before
refusal of the licenses for export of iron
and steel scrap to Japan may be used to import
heavy quantities either direct or through
other countries such as Central and South
America. This apart from impairing the effect
of intended embargo might also prejudice
supply elsewhere including to us. Please
explore with Mr. Morgenthau possibility of
effective steps to secure that there are no
abnormal shipments in the next fortnight."
An illustration of exactly what London has in mind
came to our notice an hour before their cable came in
(I mentioned this to you at the end of this morning's
meeting). Mexico has available for sale 150,000 tons of
scrap iron. Mr. Elliot of our Iron and Steel Section has
an option on this quantity until tomorrow at $17 per ton.
The U. K. cannot take advantage of the option owing to
lack of the right shipping schedules. They have been trying
to get Canada to take up the option; in general Canada wants
scrap, but she also finds it difficult to handle the particu-
lar parcel. It was suggested to the Bethlehem Steel Company
they might be willing to take the parcel off the market,
but they are not enthusiastic since the price is $2 per
ton higher than they expect to have to pay when the
embargo is in effect.
I do not know whether anything can be done in getting
this particular parcel from Mexico taken off the market,
but the matter does seen both important and urgent: this
apart from the general question raised in London's cable.
& B P
Washington
October 1 1940
Regraded Uclassified
219
2:00 p.m. - 29 - 6 when
Port
Name of Vessel
Amount of Gascline
Port Arthur
85 FLORENCE LUCHENBACH NO. 1
60,000 barrels (The Culf 011 Corp.
reports this is under 87 octane and
under 35 of such otherwise.)
Galveston
88 PANAMANIAN
52,248 barrels
On outstanding licenses same class gasoline: Galveston - 57,376
drums, Houston - 12,500 druns, Corpus Christi - 83,570 drume.)
Los Angeles
Japanese Tenker TUYUMA MARU
31,548 barrels
3 not healt
3:45 D.R.
-
from 01.4
Galveston
Add 105,000 druns on outstanding licenses, not laden.
San cleveland a
American 88 DOCTOR LYKES due
October 5
49,000 dreams
Regraded Uclassified
220
4:00 p.m.
Port
Name of Vessel
Amount of Gasoline
New Orleans
88 LAFAYETTE
Intending to lade two shipments of
8,707 and 23,810 barrels respectively
SAGAMI MARU
Sailed today with 31,050 barrels.
(Handed by Mr. Stopford of the British Embasay to Mr. Cochran in the Treasury at 1 p.m., October 1, 1940.)
Transfer of Dollars from Switzerland to U.S.
on Italian Account
Amount
Date
Swiss
New York
Receiving Bank
Received
Paying Bank
Paying Agent
in New York
for a/c of
1,950,000
16th Sept.
Credit Suisse,
Banco Commerciale
B.C.I.
Zurich
Italiano
(B.C.I. were to credit $2,300,000 to Istcambi, after receiving $250,000 from B.C.I., Milan
and $553,000 from Banco di Napoli, Rome.)
72,518
16th Sept.
Credit Suisse
Credit Suisse
Credito Italiano
Rome office
473,565
16th Sept.
Swies Bank Corp.
S.B.C.
Credito Italiano
If
If
Basle
705,846
16th Sept.
Swies National
"
II
-
#
Bank
(Credito Italiano were to oredit Istcambi with $2,190,000 after receiving $397,000 from the
Banco di Nepoli, Rome.)
371,742
16th Sept.
Swiss Bank Corp.
Banco di Napoli
#
#
Baele
Trust
494,154
16th Sept.
Swiss National Bank
#
#
#
If
#
1,200,000
18th Sept.
Credit Suisse
Credito Italiano
.
If
2,150,000
18th Sept.
Swice National Bank
S.B.C.
If
#
#
If
2,150,000
23rd Sept.
Swies National Bank
(7) Credit Suisse
#
.
#
.
1,016,000
23rd Sept.
Banca della Suissera, (1) Credit Suisse
Banco Commerciale
#
"
Italiana
Italiano
1,784,000
23rd Sept.
Sviss National Bank
Swiss Bank Corp.
Credito Italiano
If
-
950,000
23rd Sept.
#
.
#
#
#
#
Banco di Napoli
#
#
Trust Co.
$13,317,825
COPY
221
lap
Regraded Ucla
222
Transfers to South America
1.
On 9th September Credito Italiano, Rome, instructed their
New York office to pay Bankers Trust Company $709.852 in favour
of Banco de Brasil, Rio.
2,
On 12th September Banco Commerciale Italiano, Rome, advised
Banco de Brasil, Rio, that they were crediting them by wire with
$655,168 at Bankers Trust, New York, to be placed at the dis-
posal of Istcambi.
3.
On 13th September Credito Italiano, Rome, advised the Banca
d'Italia y Rio de la Plata, B.A., that they would receive from
Chase Bank, New York, $463,733. to be held at the disposal of
Istcambi, Rome.
4.
On September 18th Banco di Napoli, Rome, advised Banco di
Napoli Trust Company, New York, that they would receive $743,000
from the Swiss Bank Corporation, at Basle, and instructed them
to pay $611,832. to Irving Trust Company, New York, for account
of Banco de Brasil, Rio, debiting Banco di Napoli (Head Office)
Naples.
COPY
lap
223
HSM
PLAIN
London
Dated October 1, 1940
Rec'd 12:28 De n.
Secretary of State,
Washington.
3281, First.
FOR TREASURY FROM BUTTERWORTH.
The more important recent changes in the British
Exchange control regulations are as follows::
1. Prohibition on dealings in "restricted" securities
imposed as reported in ny 1713, June 18, to cover the
movement to Canada after the French debacle has now been
lifted, since "the sorting and checking of securities
shipped to Canada is nearing completion". A Stock
Exchange notice published today on procedure in Effect-
ing delivery of securities in the Montreal depository is
being forwarded by despatch. Incidentally it discloses
that in the rush securities owned by non-residents were
Erroneously included and that the British Treasury now
agrees to return them at its own risk.
2. Banks are notified by F. E. 94 to do no business
in United States dollars with Brazil "unless confirmation
has first bem obtained from the Bank of Brazil by the
Brazilian
Regraded Uclassified
224
ham -2- No. 3281, October 1, from London
Brazilia n importer to the Effect that United States
dollars in reimbursement will bE forthcoming".
3. Under S.R. & O. 1732 of September 27, (a) the
importation of bearer securities 18 prohibited EXCEPT
with Treasury consent. "Special arrangements have been
made for securities imported from the sterling area,
Canada, Newt'oundland and Hong Kong". (b) The Treasury
is empowered to direct any creditor to whom a debt in
one of the designated currencies is oving to expedite
collection thereof. The Treasury 1s also enabled to take
an assignment of the debt. (c) The time limit for
institution of summary prosscutions for Exchange control
violations is extended to one year from offense and three
months from date when EVIDENCE becomes available.
KENNEDY
TFV
Regraded Uclassified
225
THE SECRETARY OF THE NAVY
WASHINGTON
October 1, 1940
Dear Mr. Secretary:
Thank you for your note of September 27 and
for the confidential table attached. I was very glad
to have the information which it contains.
Yours sincerely,
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D. C.
SERVEIMENT
040001'S MI â
BECUEIVEA Ot
DELICE
226
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Livesey telephoned me at 5:30 this evening. He stated that the British
Embasy had informed the Department of State that the British Government was
negotiating with Soviet Russia on various matters. The British had asked whether
the United States would have any objection to Great Britain relinquishing its
blocking of Baltic States funds as a concession on the part of Great Britain to
Russia in these negotiations. Livesey told ne that the State Department would not
oppose such unblocking, but desired the views of the Treasury Department in the
premises.
I told Livesey that Mr. Stopford of the British Embasay had mentioned such
negotiations to me some time ago and had related that the question had been raised
by his Embassy in a conversation with Mr. Atherton. My understanding of Stopford's
story was that the State Department's attitude had not been sympathetic. I expressed
the purely personal opinion that our position in holding the funds of Latvia,
stonia and Lithuania under block in this country would be easier if the British
continued to freeze such funds in London. When I mentioned this conversation to
Livesey and asked definitely whether the opinion which he was passing on to me was
the official State Department view, he told me that Mr. Dunn had asked Dr. Feis to
ask him to communicate this message to the Treasury Department.
In answer to my further question, Mr. Livesey did not know what the other
factors entering into the Anglo-Soviet negotiations were.
Since the Department of State originally favored our blocking of the Baltic
States funds, and since that Department is now thinking in terms of a much wider
blocking. is it desirable that we should risk seeing our Baltic case perhaps weak-
ened through British action? Incidentally, the B.I.S. has refused to yield gold
deposited with it by the Baltic Central Banks to the State Bank of Russia upon
requests similar to those submitted to us when Russia vas absorbing Latvis, Estonia
and Lithuania. In my opinion the Baltic case is the best instance of duress. and
perhaps the only positive case of duress, with which our Control has had to deal.
3ml
Regraded Uclassified
otrar 1, 10.
-
1-57°C
1921
The
(3)
itus
La
Blue
You
3
of
is
36.18
of
to:
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Regraded Uclassified
228
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 1, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Swiss Minister called me by telephone at 10:45 yesterday morning, upon
his return from a few days spent in New York. He looked into the question of Swies
funds on this market. He stated that some money had recently gone back to Switzerland.
Part of this resulted from small Swiss firms, which had brought most of their funds to
New York at the height of the war scare in Switzerland,
now requiring some of this
money to meet their current operating expenses at home. Furthermore, the rumor con-
tinues to recur that the United States will extend its control to include Switzerland;
& definite forecast to this effect had been cabled to Switzerland last week from New
York, and action over the wook end was anticipated. With our relations with Japan
having worsened, the belief obtains that it will become more difficult for other
foreign countries to withdraw their funds from the United States.
Toward noon yesterday Mr. Robert Younga, of Dominick and Dominick, telephoned
se, He wanted to inform me that & cablegram had been received yesterday morning from
witzerland which had caused quite a bit of excitement. This was the repetition to
Sew York of the message which Swies bankers had received last week end, to the effect
that our funds control Vas to be extended to Switzerland, Mr. Youngs reported that
selling orders from Swiss holders of securities and dollars on the American market
had increased.
Vice President McKoon of the Federal Reserve Bank at New York telephoned as
at 5:30 yesterday ovening that there had been considerable unrest evident on the
market yesterday, because of the above-described rumors with respect to our probable
control of Sviss assets. Mr. Lichtenstein of the Swies Bank Corporation told McKeon
that the report vas that Washington would consider blocking certain Swins assets.
Lichtenstein had orders from Switzerland to sell dollars, but only succeeded in die-
posing of $200,000 or $300,000. During yesterday McKeon reported that the Swiss
National Bank had transferred $18,000,000 of its funds with private banks in New York
to its account with the Federal. From the Chase Bank the Swins National Bank trans-
Terred $2,000,000; from the Quaranty, $3,000,000; from Bankers Trust, $2,000,000; from
Swice Bank Corporation, $4,000,000; from Morgane, $1,000,000; from National City,
$3,000,000; from Credit Suisse, $3,000,000.
The report for sale of domestic stocks executed on September 30 for account
of foreigners revealed sales from Switzerland amounting to $616,000. against purchases
of $71,000, leaving net sales amounting to $545,000.
Regraded Uclassified
229
TREASURY department
INTER OFFICE COMMUNICATION
DATE October 1, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
At 11 o'clock this morning Mr. Clark of the State Department telephoned me
that the Near Eastern Division of the Department of State had drafted a. cablegram to
the American Consul at Dakar, Senegal, stating that information, the source whereof
was not indicated, had been received to the effect that the French warship Richelieu
in Dakar had $240,000,000 worth of Bank of France gold thereon. The Consul was
requested in this draft message to submit any information thereon which he might be able
to obtain. I muggested that the draft leave out any reference to the Bank of France.
I reminded Clark that we suspected that certain Belgian and Polish as well as French
Central Bank gold had been taken to French West Africa. I recommended, therefore,
that the Consul be asked to identify the ownership of the gold if possible, and to
make only very discreet inquiries. Mr. Clark promised to give me any information that
may be received from Dakar.
3.mg
Regraded Uclassified
230
TREASURY department
INTER OFFICE COMMUNICATION
DATE October 1, 1940
TO
Secretary Morgenthau
STRICTLY CONFIDENTIAL
FROM Mr. Cochran
The Bank of France representative in New York has today received the necessary
authority from Vichy and has instructed the Federal Reserve Bank of New York to
make the transfer of $3,751,000 from the Bank of France account to the account of
the Central Bank of Argentina, which matter was the subject of the Secretary's
recent conversation with the Argentine Ambassador.
Just
231
Sent you by Leon Henderson
232
PRICE STABILIZATION DIVISION
DEFENSE FINANCE SECTION
THE CAPITAL ISSUES
COMMITTEE OF 1918
OCTOBER! 1940
233
TABLE OF CONTENTS
THE CAPITAL ISSUES COMMITTEE, 1918
1. Origin and Organisation
a. The Federal Reserve Capital Issues Committee (Feb. 1 to May 17, 1918)
b. The Act of April 5, 1918
c. The Capital Issues Committee (May 17 to Dec. 31, 1918)
2. Policies and Procedures
a. Scope
b. Befunding Issues
c. New Investment Issues - General Principles
(1) The Importance of the Proposed Issue
(2) The Timing of the Proposed Issue
(3) The Manner of Distributing the Proposed Issue
(4) The "Soundness" of the Proposed Issue
d. New Investment Issues - Special Problems
1) Roads
2) Foreign Issues
3) "Involuntary" Issues
e. Enforcement
3. Accomplishments of the Committee
Regraded Uclassified
11
234
LIST OF APPENDIXES
A Act of April 5, 1918
B Personnel of Capital Issues Committee
C Members of District Committees of Capital Issues Committee
District No. 1 -- Boston
2 - New York City
3 - Philadelphia
4 - Cleveland
5 - Richmond
6 - Atlanta
7 - Chicago
8 - St. Louis
9 - Minneapolis
10 - Kansas City
11 - Dallas
12 - San Francisco
D
Capital Issues Committee of the Federal Reserve Board
I
Case 666
Tungsten Products Co. Case
235
The Capital Issues Committee, 19181
1. Origin and Organization.
Formal control of capital issues was not introduced in the United
States until the ninth month of the World War. Although no search has
been made of Treasury or Federal Reserve Board files, there is no appar-
ent evidence of even informal capital issues control until after the pub-
lication of the Annual Report of the Secretary of the Treasury for 1917,
issued on December 3, 1917. In this report, Secretary McAdoo pointed out
the importance of restricting capital issues for non-essential purposes.
It is known that, following this statement, numerous persons intending to
issue securities voluntarily solicited the advice of the Treasury or the
1/ Sources: This memorandum is based chiefly on a study of the Policies
and Procedures Files of the Capital Issues Committee, and a small sample
of the 3670 cases passed on by the Committee. The records of the Com-
mittee are now in the custody of the Federal Trade Commission.
In addition, the following sources were used:
65th Congress, 3d Session, House Document 1485: Report of
Capital Issues Committee
65th Congress, 3d Session, House Document 1836: Report of
Capital Issues Committee
Willoughby, W. "The Capital Issues Committee and War Finance
Corporation", John Hopkins University; Studies
in Historical and Political Science, Series
LII, No. 2.
Capital Issues Committee "Rules and Regulations"
(Circular No. 1)
U. S. Senate, Committee on Finance, 65th Congress, 2nd
Session, Hearings on S. 3714
U. S. House of Representatives, Committee on Ways and
Means, 65th Congress, 2nd Session, Hearings
on H. R. 9499.
Regraded Uclassified
- 2 -
Federal Reserve Board as to the compatibility of such issues with the
236
financing plans of the Treasury and the national campaign for economy.
Within a few weeks Secretary McAdoo asked the Federal Reserve Board to
assume the entire function of answering these requests for advice, and on
Jenuary 11, 1918 made his action public in a statement urging general
cooperation with the Board.
a. The Federal Reserve Capital Issues Committee (Febr. 1 to May 17,1918)
The Federal Reserve Board designated three of its members, P. M.
Warburg, C. S. Hamlin, and F. A. Delano, to constitute a Capital Issues
Committee. This Committee was assisted in its work by an advisory Com-
mittee of three bankers and by a sub-committee in each Reserve District.
The Board's Committee was without legal status and had no legal power
to compel an issuer either to submit his issue for approval or to abide
by the Committee's decision.
b. The Act of April 5, 1918
The Capital Issues Committee was given legal status by the War
Finance Corporation Act of April 5, 1918. As introduced the Act provided
that the function of passing upon capital issues should be exercised
by the War Finance Corporation, which would be closely controlled by
the Secretary of the Treasury. However, opposition was raised to this
provision in Congress, partly because of the feeling that the power of the
Secretary of the Treasury should not be further augmented. The Act as
passed created an independent Capital Issues Committee.
The original bill had also provided that no person should offer
for sale any issue of securities in excess of $100,000 except in accord-
ance with rules and regulations prescribed by the War Finance Corporation,
- 3 -
237
"nor, when required by such rules and regulations, except as permitted
by licenses granted by the Corporation". Any person failing to abide by
this requirement was liable to fine or imprisonment. This legal power
to require adherence to the orders issued did not appear in the Act as
passed. Secretary McAdoo and Mr. Warburg argued before the House and
Senate Committees that despite the large neasure of compliance obtained
on a voluntary basis legal power would surely be necessary in some cases.
The contrary verdict of Congress seems to have been based on the following
evidence and arguments:
1) The published statement of the Investment Bankers Association
that "under an informal plan, the Board could more readily meet
changing conditions"
2) The argument that it was unwise to grant 50 vast a power
to 8 government agency. It was maintained by the same persons
that complete compliance could be secured on a voluntary basis
and that authority to compel compliance would be an excessive
grant of power.2/
3) The apparently successful experience of the voluntary
system in England and under the Federal Reserve Board Committee
in this country.
Sections of the Act of April 5, 1918 relating to the Capital
Issues Committee are presented in Appendix A.
1/ Investment Bankers Association of America Bulletin, Vol. VI, No. 4.
P. 64.
3/ See remarks of Senator Smoot, Senate Finance Committee Hearings on
S. 3714, 65th Congress, 2nd Session, P. 76 et 50q.
Regraded Uclassified
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238
C.
The Capital Issues Committee (May 17 to December 31, 1918)
As constituted by the Act of April 5, the Capital Issues Com-
mittoe consisted of seven members, appointed by the President, three of
whom, pursuant. to the law, were members of the Federal Reserve Board.1/
In each Federal Reserve District there was a sub-committee, appointed by
the Capital Issues Committee, presided over by the Federal Reserve Agent
The sub-committees' function was advisory, except in cases involving is-
Chef of less than $100,000, where its decision was final. The central
Cormittee on November 15, 1918 had 38 employees, of whom four were desig-
noted "examiner and analyst".1/
2. Policies and Procedures
B., Scope
The Federal Reserve Board Committee originally confined its jur-
isdiction to issues by a single issuer in excess of $250,000 in the case
of municipal issues and $500,000 in the case of corporate issues. These
limite were gradually reduced to $100,000 for all issues and this minimum
was set in the Act of April 5. The district committees were, however,
advised to use what influence they might have to discourage non-essential
issues below the minimum.
In principle the province of the Committee included bank loans
in excess of the minimum amount, hut no action was taken in this field
except to request bankers to restrict loans for non-essential purposes.
The question of adopting a more formal procedure to handle bank loans
1/ For personnel of the Capital Issues Committee see Appendix E.
For composition of District sub-committees see Appendix C.
Regraded Uclassified
- 5 -
239
was under continuous discussion, and the Committee had taken some steps
towards devising a system when the Armistice terminated its activities.
Securities of railroads under the control of the President were excluded
from the Committee's jurisdiction.
b. Refunding issues
The Committee said in its first statement of policyl/ that it
would approve issues to refund maturing obligations entered into before
February 5, 1918, except where it found that the obligations should be
met out of the applicant's cash resources, The Act of April 5, 1918
gave the Committee no authority to disapprove the refunding of any ob-
ligation incurred before the date of the Act. The Committee requested
that every proposed refunding issue be submitted so that it could deter-
rine whether or not the issue was actually for the purpose claimed.
That the Committee may have felt under compulsion to approve
the refunding of obligations incurred even after April 5, 1918 is indi-
cated by the Instructions to the Subcommittees. The Subcommittees were
asked to discourage the assumption of obligations for non-essential pur-
poses which might later put the Committee into the position of having to
approve an issue to prevent default. The Committee also recognized that
by the funding of bank debt the borrower might subsequently be enabled
to increase his bank debt without the Committee's approval. In at least
one case the Committee approved the funding of bank debt on the condition
that no additional bank debt be incurred during the War.3/
1/ Letter to District Committees, Febr. 7, 1918, See Appendix D.
3/ Case 274.
- 6 -
240
The Committee followed the policy of approving security issues
for exchange, stock dividends and other purposes which absorbed neither
cash nor resources.
C. New investment issues - general principles
(1) The Importance of the proposed issue
The basic principle upon which the Committee operated with
respect to new issues was that approval would be given only to issues
which contributed to the prosecution of the war or were essential to the
nublic health or welfare. For its determination of whether or not an
issue met this standard the Committee relied upon:
a) The claims of the applicant, supported by such
evidence as contracts with War Agencies.
b) The opinions of interested Government agencies,
such as the War Industries Board, the Fuel Admin-
istration and the Food Administration, as to the
desirability of the issue.
c) The knowledge and investigations of the District
Committees.
As was natural, greatest reliance was placed upon the opinions
of the other Government agencies but this procedure had important defects.
a) Apparently the agency interested in increasing the supply
of the applicant's product was usually asked for its opinion,
but not the agency interested in conserving the resources which
would be used in expanding the applicant's capacity. Thus,
the Food Administration was asked whether more meat packing
capacity WBS needed, but the appropriate agencies were not
asked whether labor and materials could be spared to build a
packing house. The opinions received may, therefore, have
Regraded Uclassified
- 7 -
241
been more favorable to the applicant than if a more complete
investigation had been made.
b) The opinions of the Government agencies generally cast no
light on the relative desirability of expanding capacity as com-
pared with the alternatives of restricting non-essential uses
of the product. The problems of the purchasing agencies were,
of course, simplified when private firms expanded their capacity.
c) The purchasing agencies were loathe to commit themselves
on the competence of the applicant and the adequacy of his plans.
Opinions given were in terms of the general situation of the
industry.
d) The. Committee was in no position to determine the relative
importance of different projects each considered desirable by
different agencies.
e) The Committee was unable to determine on the basis of a
succession of opinions in individual cases whether it was ap-
proving more expansion than was justified.
All of these observations may be resolved into the fact that the
Committee was unable to consider each project in terms of the alternative
uses to which the resources which would be absorbed by the new expansion
might be put. The Committee and the other Government agencies were not
sufficiently coordinated to deveop and apply a consistent and complete
schedule of the relative importance of alternative uses of resource.
- 8 -
242
An example of the failure to consider alternatives is the case
of an application to raise funds for the expansion of a razor factory
to meet Army orders. The applicant's existing output was divided approx-
imately evenly between the Army and civilian purchasers. The applicant
maintained that his civilian sales enabled him to supply the government
at a lower price. The Committee approved the application without appar-
ently considering the possibility of diverting his civilian production
to the Army. In this case the Army presented a contrary opinion which
was received too late to influence the Committee's decision.
(2) The timing of the proposed issue
In addition to the restriction of what it considered non-essential
issues, the Committee undertook the function of controlling the timing
of issues to minimize competition with Liberty Loan campaigns. The Com-
mittee publicly announced that it would consider no applications, except
the most urgent, (such as the refunding of irminent maturities) during
the Third and Fourth Liberty Loan campaings.
(3) The manner of distributing the proposed issue
Legally the jurisdiction of the Capital Issues Committee covered
both privately issued and publicly issued securities. There can be no
doubt, however, that the Committee was more favorably disposed towards
private issues than towards public issues. In numerous cases issues were
approved on the ground or with the condition that they would not be of-
fered to the public during the war but would be taken up by a small group
of subscribers In at least one case approval granted on the represent-
ation that no public offering would be made was rescinded when an attempt
1/ E.g. Case 449, 546,
Regraded Uclassified
- 9 -
243
at public sale was discovered.
No explanation of this policy of the Committee has been found,
but indirect evidence suggests R probable interpretation. The Committee
seemed to conceive of its function as the conservation of the securities-
purchasing capacity of the country, and a public issue might be a greater
drain upon that capacity than a private issue. Actually, so long as
Federal Reserve policy encouraged borrowing on Liberty bonds, the secur-
ities-purchasing capacity of the nation presented no problem. What was
important was to restrict private investment in general and the use of
certain resources in particular. From this standpoint, there was no dif-
ference between public and private issues.
The Compittee's concern with conserving bond-purchasing capacity
rather than with conserving resources is shown by one case in which an
issue was approved on the condition that it be sold at 96 or higher.
The explanation given was that at a lower price the security would be
unduly attractive as compared to Liberty Bonds. This decision was made
in October, 1918 and the correspondence indicates that no such stipulation
had been used before that time.
(4) The "Soundness" of the proposed issue
The Committee was at great pains to inform the public that its
approval of an issue carried no implications as to its value or legality.
Advertisement of approved issues was required to contain the statement:
"Passed by the Capital Issues Committee as not incompatible with the na-
tional interest, but without approval of legality, validity, worth, or
security." But it would be too dogmatic to say that the Committee never
1/ Case 426.
Regraded Uclassified
- 10 -
such questions. Certainly the Committee received evidence that
issues were worthless and certainly such issues were disapproved.
this concern with worthless issues may have been due to the desire
bond-purchasing capacity. It is also evident that the Committee
such issues te be wasteful, although it was of the essence of
that only a very small amount of resources would be used.
knly that the strong interest of the Committee in the pro-
ruarant investors, so clearly manifest in its reports to Con-
world have been entirely absent from their decisions.
Inveral cases may be cited in which the Committee's decision
3
rased orr its opinion of the value of the proposed issue.
the Committee disapproved an issue to develop an iron mine,
favorable opinion of the Geological Survey, on the grounds
written would probably not he profitable, that the issuer was
and that the stock was to be offered at "inflated" value
case the Committee rejected an application for the exploitation
deposits as highly speculative, although the Government was
in the production of tungsten. An application for a
to refinance and furnish an apartment hotel T23 rejected because
int or the issue exceeded the value of the property as appraised
-stect consulted by the Committee
i, 65th Inngress, 3d. Session House Documents 1485 and 1836.
005. See Appendix E.
Products Co. See Appendix E.
729.
Regraded Uclassified
- 11 -
245
The desire to protect investors probably motivated the Committee
in imposing a restriction on distribution costs as B. condition of approv-
al in several cases.V
d. New Investment Issues - Special problems
The following special problems are set forth here more as an
indication of the nature of the problems encountered than because of
the significance of the decisions reached:
1) Roads
The original draft of the first policy statement of the
Committee3 stated that the Committee and the Department of
Agriculture were in agreement that no roads should be built
except in cases of military or economic necessity. At the
request of the Secretary of Agriculture this statement was
modified to extend only to roads to be financed out of bond
issues.
The Committee soon found itself in the awkward position
of disapproving bond issues for roads while obviously less
important roads were being constructed out of taxes, and
with Federal grants-in-aid. This problem was met by the
establishment on June 8, 1918 of the U. S. Highway Council,
composed of representatives of the Departments of Agriculture
and Mar, the War Industries Board and the Fuel Administration.
The Council requested states and municipalities not to construct
any roads without its approval, regardless of the source of the
1/ Cases 595, 616.
2/ Dated February 5, 1918. See Appendix D.
- 12 -
246
funds. Decisions of the Council were supported by the
action of the Capital Issues Committee, the Fuel Admin-
istration and other Government agencies.
2) Foreign issues
The Allied governments agreed to seek the approval of
the Committee before permitting any of their nationals to
make a public offering in this country. With regard to
individual subscriptions to foreign securities not publicly
offered here, the situation was somewhat different. The
Federal Reserve Bank of New York informed the Committee of
every request for exchange to be used in the purchase of
foreign securities, and the Committee's approval was asked.
Why the Committee should have concerned itself with this
problem is not clear in view of the control exercised over
foreign trade and exchange by other agencies.
3) "Involuntary" issues
A number of cases arose in which street railway companies
were required by the terms of their franchise to make certain
extensions or improvements. The companies were in general -
willing to undertake such work during the war, perhaps because
of the prevailing high prices. The Committee followed the
policy of disapproving applications made under these circum-
stances.
e. Enforcement
The Committee, as has been pointed out, had no legal authority
either to require submission of issues for approval or compliance with its
Regraded Uclassified
247
- 13 -
decisions. The first reliance of the Committee was upon the voluntary
cooperation of the issuers, but the power of the Committee was not 11-
mited to the area where compliance was voluntary. The following addition-
al means of enforcement were available.
1) The Investment Bankers Association agreed that none of
its members would underwrite or distribute any unapproved
issues.
2) The New York Stock Exchange, and other exchanges, agreed
not to list any unapproved issues.
3) The public was urged not to purchase any unapproved issues.
4) The cooperation of State officials - public utility com-
missioners, bank commissioners, and administrators of State
blue-sky laws was sought to prevent unapproved issues.
5) The Committee attempted to secure the cooperation of
Government agencies which controlled the allocation of resources-
War Industries Board, etc. - to deny resources to recalcitrant
issuers.
This was potentially the strongest weapon which the Com-
mittee possessed, but how far the Committee was able to use it
is uncertain. The Railway Administration refused to allow the
Committee to announce that issuers who did not have the Commit-
tee's approval would be denied railroad facilities, on the
grounds that such an announcement would be inconsistent with
its position as a common carrier. It was also argued that the
use of such a threat would undermine the basis of voluntary
248
- 14 -
cooperation upon which the Committee was 80 dependent.
Im September 1918 the Committee established an enforcement di-
vision in Washington, aided by "Economic Vigiliance Committees" in each
Federal Reserve District which reported on unauthorized issues. These
Vigilance Committees consisted, in general, of one person in each town
of 5,000 people with a larger number in larger towns. The enforcement
division handled 525 cases of non-compliance during the four months of
its existence. In 412 of these cases the issuer voluntarily complied
when reminded of his failure to do so. The remaining 113 cases were clas-
sified 89 "recalcitrant", and the division attempted to invoke some kind
of pressure against them. How successful these attempts were has not been
recorded.
3. Accomplishments of the Committee
From February 1 to December 31, 1918 the Capital Issues Committee
considered 3670 issues amounting to $4,255,771,000. Of this total
$982,824,000 or about 23% was disapproved. A more revealing picture is
obtained if refunding, exchange, bonus, stock dividend, etc., issues are
subtracted from the issues considered and approved. This is possible
only for the period of the independent Committee, May 17, 1918 to December
31, 1918. During this period 55% of the issues other than for refunding,
etc., were disapproved. The percentage of applications for "new" issues
disapproved, by class of applicant, was
1/ For details, see Table II.
Regraded Uclassified
249
- 15 -
Class of Applicant
Percentage of "new" issues disapproved
Development (real estate,
78%
prospecting, etc.)
Commercial and Financial
62%
Manufacturing
60%
Municipals
35%
Public Utilities
13%
Charitable and Miscellaneous
5%
Further details concerning the Committee's work are shown in
Tables I, II, and III.
The volume of work handled in a period of eleven months testifies
to the speed and efficiency with which the Committee performed its func-
tion as it conceived of it. With a staff of less than fifty persons, in-
cluding stenographers and clerks, the Committee undertook a task which
was without precedent in American history. While the District Committees
served as intermediaries between the applicant and the central Committee,
the work of gethering information and making decisions was almost entire-
ly done in Washington. Although it was largely dependent upon the volun-
tary compliance of the business community, there is no evidence that the
Committee compromised with its principles to secure that compliance.
Neither does the record suggest that the decisions of the Committee were
at all influenced by the numerous letters received from Congressmen
endorsing particular applications. That the Committee covered the capital
issues market fairly completely is suggested by the fact that it considered
a volume of issues which exceeded by $2,000 million the estimated volume
of issues in this country in any of the years 1913 to 1917.
Further details concerning the Committee's work are shown in
Tables I, II, and III.
Regraded Uclassified
250
- 16 a
TABLE I
Work of Capital Issues Committee, Febr, 1 to May 17, 1918 1/
($000 omitted in money columns)
Muni-
Public
cipal
Utility
Industrial
Total
Number of issues considered
192
62
107
361
Amount considered
86878
172070
219510
478459
Total approved
67087
166070
179610
412767
"refunding" approved
21392
125860
111412
258664
"new" approved
45695
40210
68198
154103
Total disapproved
19791
6000
39900
65691
1/ Federal Reserve Bulletin, June 1918, p. 494.
Regraded Uclassified
- 17 -
TABLE II
Work of Capital Issues Committee May 17 - Dec. 31, 1918 1/
($000 omitted in money columns)
Classification of applicants
States &
Public
Manuf-
Develop-
Commercial
Charitable
Subdivisions
Utilities
acturing
ment
& Financial
& Misc.
Total
No. of
applications
595
364
916
751
672
11
3,309
Amount
applied for
244,885
810,348
1,370,697
610,594
738,156
2,633
3,777,313
Approved
Const.& equip,
122,173
173,104
115,765
71,669
25,659
2,100
510,470
Working capital
5,610
7,295
105,487
15,432
80,143
-
213,967
Refunding
37,150
279,045
258,368
54,120
116,024
305
745,012
Exchange, etc.
10,746
323,267
553,630
155,645
347,335
108
1,390,731
Total approved
175,679
782,711
1,083,250
296,866
569,161
2,513
2,860,180
Disapproved
69,206
27,637
337,447
313,728
168,995
120
917,133
Percentage distribution of amount applied for
Applied for
100,0
100.0
100.0
100.0
100.0
100.0
100.0
Approved
Const. & equip.
49.89
21.36
8.45
11.74
3.48
79.76
13.5
Working capital
2.29
.90
7.70
2.53
10.86
-
5.7
Refunding
15.17
34.44
18.85
8.86
15.72
11.58
19.7
Exchange, etc.
4.39
39.89
40.39
25.49
47.05
4.10
36,8
Total spproved
71.74
96.59
75.38
48.62
77.11
95.44
75.7
Disapproved
28.26
3.41
24.62
51.38
22,89
4.56
24.3
251
Reports of Capital Issues Committee, 65th Cong. 2nd Session, House Document 1485, po5,
and House Document 1836, p. 4.
Regraded Uclassi
252
- 18 -
TABLE III
Applications for approval of Capital Issues
by Federal Reserve Districts
Number
Amounts (millions)
Boston
274
$ 195.1
New York
972
2,069.6
Philadelphia
182
139.8
Cleveland
427
206.0
Richmond
162
139.3
Atlanta
a)
a)
Chicago
641
588.1
St. Louis
283
92.4
Minneapolis
373
a)
Kansas City
a)
a)
Dallas
250
50.0
San Francisco
543
410.1
4,107
3,890.4
a) Not given
1/ From Federal Reserve Board Annual Report, 1918. Includes some issues
under $100,000 not acted upon by Capital Issues Committee.
Regraded Uclassified
<53
Appendix A
Act of April 5, 1918
Title II.-Capital Issues Committee
Sec. 200. That there is hereby created a committee to be known BB
the "Capital Issues Committee," hereinsfter called the Committee, and to
be composed of seven members to be appointed by the President of the
United States, by and with the advice and consent of the Senate. At
least three of the members shall be members of the Federal Reserve Board.
No member, officer, attorney, agent, or employee of the Committee
shall in any manner, directly or indirectly, participate in the determina-
tion of any question affecting his personal interests, or the interest of
any corporation, partnership, or association in which he is directly or
indirectly interested. Before entering upon his duties, each member and
officer shall take an oath faithfully to discharge the duties of his
office. Nothing contained in this or any other Act shall be construed to
prevent the appointment as a member of the Committee, of any officer or
employee under the United States or of a director of a Federal reserve
bank.
The terms during which the several members of the Committee shall
respectively hold office shall be determined by the President of the
United States, and the compensation of the several members of the Committee
who are not members of the Federal Reserve Board chall he $7,500 per annum,
payable monthly, but if any such member receives any other compensation
from any office or employment under the United States the amount so re-
ceived shall be deducted from such salary, and if such other compensation
is $7,500 or more, such member shall receive no salary as a member of the
Committee. Any member shall be subject to removal by the President of the
United States. The President shall designate one of the members as chair-
man, but any subsequent vacancy in the chairmanship shall be filled by the
Committee. Four members of the Committee shall constitute & quorum for
the transaction of business.
Sec: 201. That the Committee may employ and fix the compensation of
such officers, attorneys, agents, and other employees as may be deemed
necessary to conduct its business, who shall be appointed without regard
to the provisions of the Act entitled "An Act to regulate and improve the
civil service of the United States," approved January sixteenth, eighteen
hundred and eighty-three (volume twenty-two, United States Statutes at
Large, page four hundred and three), and amendments thereto or any rules or
regulations made in pursuance thereof. No such officer, attorney, agent,
or employee shall receive more compensation than persons performing services
of like or similar character under the Federal Reserve Board.
Sec. 202. That all the expenses of the Committee, including all neces-
sary expenses for transportation incurred by the members or by its officers,
attorneys, agents, or employees under its orders in making an investigation
Regraded Uclassified
254
or upon official business in any other places than at their respective
headquarters, shall be allowed and paid on the presentation of itemised
vouchers therefor approved by the chairmen.
The Committee may rent suitable offices for its use, and purchase
such furniture, equipment, and supplies as may be necessary, but shall not.
expend more than $10,000 annually for offices in the District of Columbia.
The principal office of the Committee shall be in the District of
Columbia, but it may meet and exercise all its powers at any other place.
The Committee may, by one or more of its members, or by such agents as it
may designate, prosecute any inquiry necessary to its duties in any part of
the United States.
Sec. 203. That the Committee may, under rules and regulations to be
prescribed by it from time to time, investigate, pass upon, and determine
whether it is compatible with the national interest that there should be
sold or offered for sale or for subscription any issue, or any part of
any issue, of securities hereafter issued by any person, firm, corporation,
or association, the total or aggregate par or face value of which issue and
any other securities issued by the same person, firm, corporation, or assoc-
istion since the passage of this Act is in excess of $100,000. Shares of
stock of any corporation or association without nominal or par value shall
for the purpose of this section be deemed to be of the par value of 8100
each. Any securities which upon the date of the passage of this Act are in
the possession or control of the corporation, association, or obligor 10-
suing the same shall be deemed to have been issued after the passage of
this Act within the meaning hereof.
Nothing in this title shall be construed to authorize such Committee
to pasa upon (1) any borrowing by any person, firm, corporation, or associ-
ation in the ordinary course of business as distinguished from borrowing
for capital purposes, (2) the renewing or refunding of indebtedness existing
at the time of the passage of this Act, (3) the resale of any securities
the sale or offering of which the Committee has determined to be compatible
with the national interest, (4) any securities issued by any railroad corpor-
ation the property of which may be in the possession and control of the
President of the United States, or (5) any bonds issued by the War Finance
Corporation.
Nothing done or comitted by the Committee hereunder shall be construed
as carrying the approval of the Committee or of the United States of the
legality, validity, worth or security of any securities.
Sec. 204. That there is hereby appropriated out of any money in the
Treasury not otherwise appropriated, for the remainder of the fiscal year
ending June thirtieth, nineteen hundred and eighteen, and the fiscal year
ending June thirtieth, ninsteen hundred and nineteen, the sum of $200,000
for the purpose of defraying the expenses of the establishment and mainte-
nance of the Committee, including the payment of the salaries and rente
herein authorized.
255
Sec. 205. That the Committee shall make a report to Congress on the
first day of each regular session, including a detailed statement of
receipts and expenditures, and also including the names of all officers
and employees and the salary paid to each.
Sec. 206. That this title shall continue in effect until, but not
after, the expiration of six months after the termination of the war, the
date of such termination to be determined by a proclamation of the President
of the United States, but the President may at any time by proclamation
declare that this title is no longer necessary, and thereupon it shall
cease to be in effect.
Title III.-Miscellaneous
Sec. 303. That the term "securities," as used in this Act, includes
stocks, shares of stock, bonds, debentures, notes, certificates of in-
debtedness, and other obligations.
406649
256
Appendix B
Personnel of Capital Issues Committee
Washington Office
Nov. 15, 1918
Members of Committee
C. S. Hamlin,
F. R. Board (Chairman)
F. H. Goff
Cleveland Trust Co.
H. C. Flower
Fidelity Trust Co., Kansas City, Missouri
J. B. Brown
National Bank of Commerce, Louisville
J. S. Drum
San Francisco
J. S. Williams
Comptroller of Currency
F. A. Delano
F. R. Board
Counsel
Bradley Palmer, Chief counsel
Sherman Woodward, Assistant counsel
Executive Secretary, - S. L. Selden
Assistant Executive secretary -
H. W. Beebe
Thornton Cooke
Secretary - Dudley Cates
also
4 examiners and analysts
1 statistician and supply agent
14 stenographers
10 file and docket clerks
4 messengers and mail clerks
406649
<57
Appendix C
Members of District Committees
of Capital Issues Committee
District No. 1-Boston.
Frederic H. Curtiss, chairman; Chas. A. Morse, vice chairman;
Francis R. Hart, John E. Oldham, Robert Winsor, Charles Francis Adams,
Henry B. Day, Henry G. Bradlee, Philip Cabot, Allen Curtis, Robt. W.
Huntington, Jr., Allan Forbes, Arthur M. Heard, James F. Jackson,
Frank W. Metteson, Edmund R. Morse, H. M. Verrill.
District No. 2-New York City.
Pierre Jay, chairman; Benjardn Strong, vice chairman; Frederick
Strauss, vice chairman; Franklin Q. Brown, John R. Morron, Chas. A.
Stone, Martin Vogel, S. Reading Bertron, Harry Bronner, Newcomb Carlton,
Walter P. Cooke, George B. Cortelyou, Allen B. Forbes, W. T. Graham,
George E. Hardy, Alvin 1. Krech, Thomas W. Lamont, Edwin G. Merrill,
E. H. Outerbridge, Chas. V. Rich, Walter T. Rosen, Charles H. Sabin,
Wm. L. Saunders, Mortimer L. Schiff, Arthur Sinclair, Jr., Oscar S.
Straus, Henry R. Towne, James N. Wallace, Albert H. Wiggin.
District No. 3-Philadelphia.
Richard L. Austin, chairman; E. P. Passmore, vice chairman;
Clarence M. Clark, John Gribbel, Albert A. Jackson, Lewis Lillie,
Howard 8. Graham, John Brooks, Robert W. Daniels, Charles Fearon,
Geo. H. Frazier, A. C. Dinkey, Thomas 8. Gates, Charles C. Harrison, Jr.,
Walter C. Janney, Horatio G. Lloyd, W. S. Maddox, Benjamin E. Mann,
John S. Newbold, George K. Reilly, G. W. Reily, Ferdinand W. Roebling, jr.,
H. B. Schooley, F. B. Snyder, L. Scott Townsend, Ira Vaughn, Joseph
Wayne, jr., Charles W. Welsh.
District No. 4-Cleveland.
D. C. Wills, chairman; E. R. Fancher, vice chairman; A. E. Adams,
J. A. House, H. C. McEldowney, J. R. Nutt, John Sherwin, William V.
Bell, Edward H. Cady, Charles W. DuPuis, F. R. Huntington, C. N. Manning,
H. B. McGraw, Baird Mitchell, Corliss E. Sullivan, C. B. Wright.
Districe No. 5-Richmond.
Caldwell Hardy, chairman; George J. Seay, vice chairman;
E. I. Bemiss, Herbert W. Jackson, John M. Miller, jr., S. T. Morgan,
Frederic W. Scott, John L. Dickinson, John Joy Edson, Col. F. H. Fries,
3. H. Griswold, Jr., Geo, A. Holderness, John A. Law, Waldo Newcomer,
R. G. Rhett, E. B. Thompson, Coleman Wortham.
Regraded Uclassified
258
- 2 -
District No. 6-Atlanta.
V. B. Wellborn, chairman; Joseph A. McCord, vice chairman;
W. H. Kettig, Frank Hawkins, Hollins N. Randolph, Roby Robinson,
James E. Zunts, A. M. Baldwin, Jas. E. Caldwell, F. B. Gunter,
L. M. Pool, T. R. Preston, T. C. Taliaferro, H. V. Watkins.
Henry Hall, W. H. Hassinger, Edward W. Lane, Otto Marx, T. F. McCauley,
District No. 7-Chicago.
W. A. Heath, chairman; J. B. McDougal, vice chairman; Frank 0.
Wetmore, Rufus C. Dawes, E. D. Hulbert, Joy Morton, E. J. Buffington,
Simon Casady, Emory W. Clark, B. A. Eckhart, Louis A. Ferguson,
S. A. Fletcher, Oliver C. Fuller, Chauncey Keep, John J. Mitchell,
John J. O'Brien, George y. Reynolds, B. E. Sunny, James Simpson.
District No. 8-St. Louis.
William McC. Martin, chairman; Rolla Wells, vice chairman;
W. K. Bixby, W. R. Compton, Walker Hill, F. O. Watts, Breckenridge
Jones, S. T. Ballard, Benjamin Gratz, William E. Guy, W. L. Hemingway,
N. A. McMillan, J. &. Omberg, M. 8. Sonntag, Embry L. Swearingen,
Festus J. Wade.
District No. 9-Minneapolis.
John H. Rich, chairman; Theodore Wold, vice chairman; George D.
Dayton, William A. Durst, J. L. Record, John R. Mitchell, W. J. Dean,
George W. Burton, Walter Butler, F. A. Chamberlin, Isaac Lincoln,
C. B. Little, A. M. Marshall, Allan F. Rees, Sam Stephenson.
District No. 10-Kansas City.
Asa E. Ramsay, chairman; J. 2. Miller, Jr., vice chairman;
H. T. Abernathy; P. W. Goebel, George S. Hovey, W. T. Kemper,
H. P. Wright, J. R. Burrow, Dorset Carter, J. S. Cosden, c. L. Davidson,
Luther Drake, John Evans, D. N. Fink, A. H. Marble, Charles W. Oswald,
R. C. Peters, J. G. Schneider, 0. C. Snider.
District No. 11-Dallas.
W. F. Ramsey, chairman; R. L. Van Zandt, vice chairman;
Edward Gray, Howell E. Smith, W. C. Stripling, E. 0. Tenison,
D. C. Waggoner, W. R. Grim, Lewis Hancock, John W. Poe, B. Rotan,
John Sealy, L. C. Shattuck, H. W. Smith, J. 0. Terrell, R. D.Wilbor.
District No. 12-San Francisco.
John Perrin, chairman; James K. Lunch, vice chairman; George K.
Batchelder, I. W. Hellman, sr., C. K. McIntosh, J. F. Sartori, George
K. Weeks, J. C. Ainsworth, V. F. Backus, R. B. Burmister, A- M. Chaffey,
Regraded Uclassified
259
- 3 -
District No. 12-San Francisco (Cont'd)
James J. Fagan, Herbert Fleishhacker, L. H. Farnsworth, John
Henderson, Jos. G. Hooper, F. F. Johnson, I. W. Helliman, jr.,
Henry W. Keller, Frank B. Anderson, A. L. Mills, John D. McKee,
Ralph 8. Stacy, Clifford J. Shephard, D. W. Twohy, I. B. Newton.
406649
APPENDIX D
260
CAPITAL ISSUES COMMITTEE
X-706
OF THE
FEDERAL RESERVE BOARD
WASHINGTON
February 7. 1918.
To the
Chairman of the Sub-Committee on Capital Issues
of Federal Reserve District No.
Dear Sir:
The Sub-Committees of the Capital Issues Committee at Wash-
ington will, no doubt, wish to be informed as to the principles and
policies to be adopted in dealing with applications and requests for
information addressed to them.
It is not possible to give at this time more than general
outlines. A more definite policy will be developed, and the Sub-Com-
mittees kept informed as to the same, as soon as it becomes possible
to secure from the various Government Departments a. more definite ex-
pression as to their own policies and requirements. A better under-
standing of the situation and the policies to be adopted will be de-
veloned as soon as concrete cases shall have been submitted to the re-
spective Departments and will have formed the basis for comprehensive
discussion with them.
I. POLICY: The Central Committee and the Sub-Committees
are guided in their deliberations by the thought that only by sub-
ordinating local and personal interests to the public welfare and
by enforcing the most rigid economy in matters of personal expenditure
can the United States hope to bear its part of the financial burden of
the war and to release sufficient labor and materials for war purposes
without depletion of our own resources. From this point of view the
X-706
261
- 2 -
Committee has adopted it as its policy that during the period of the
war favorable action should be taken only where State, county, municipal,
corporate, or individual financing involve projects which will contribute
to the successful prosecution of the war or which are essantial to the
public health and welfare. The Sub-Committees will assist the Central
Committee not only by investigating the cases submitted to them, but
they may, in addition, render most important service by watching closely
and keeping the Board advised 0.6 to questions arising in their own die-
tricts, both with respect to such securities as should come into the
market without the previous approval of the Capital Issues Committee,
and with respect to appropriations and committments that are being made
and which it is most important to stop at the source.
It is hoped that in the very near future the Central Commit-
tee may be able to make a. direct appeal to those in charge of State and
municipal administrations. For the time being, however, it is essential
that the Sub-Committees use their local influence in presching the gospel
of economy in their communities and to invite cooperation wherever they
can. As far as can be seen the Committees may count on the wholehearted
and patriotic response on the part of all concerned. All evidence points
in that direction.
The Central Committee reserves the right, of course, to deal
with each individual case on its own merits, but an expression as to
policy is given as illustrative of the main purposes the Committee
has in mind.
262
X-706
- 3 -
(1) The Central Committee will consider favorably applion-
tione 8 ubmitted to it involving the refunding of m-
turing obligations.
(2) The Central Committee will consider favorably applica-
tions submitted to it involving the funding of capi-
tal expenditures incurred prior to February 1, 1918;
Provided, however, that the Central Committee may deviate
from this policy if available cash assets reasonably may
be used for the payment of such debts in whole or in
part or excessive cash distributions to shareholders
are contemplated, or in cases where the requirements
of the corporation may be met in some manner without
undue risk or hardship.
It must, of course, not be understood that funding of bank-
ing indebtedness incurred after February 1, 1918, will not be permitted.
Close investigation may establish cases where such funding may be proper.
What is to be avoided, however, is that those intending to apply for
permission to issue securities first running into debt, conceivably
for purposes not compatible with the public interests, and then asking
for permission to fund the banking indebtedness already incurred.
(3) As a general basis for its conclusions the Central Com-
mittee is inclined to adopt the policy that the sale of only such new
securities ought to be considered favorably as will finance projects
likely to bring results within the calendar year 1918. Exceptions will have
to be granted in cases where Government Departments advise that as matter
of military or economic protection work ought to be undertaken extending
263
- 4 -
I-706
over the year 1918, or where so much money has already been invested
that the amount necessary to complete the work may be considered as in
relevant as compared with the money already hasarded in the undertaking.
(4) With respect to the question of road building and new develop-
ment of arable lands, 60 far as they are to be financed by new bond
issues, the Committee adopted as its policy that, in passing upon issues
for road construction or for irrigation or drainage projects, covering
lands not heretofore under cultivation, favorable consideration should
be given only to those of great economic or military importance and from
which definite results can be secured in time to be of assistance in
meeting the present emergency. In dealing with these cases, the Committee
acts in close touch with the Department of Agriculture, and has received
assurance of the hearty cooperation of that Department, from which advice
is sought concerning the facts and merits of each individual case.
Each of the Sub-Committees on Capital Issues will do well to keep
the Board fully advised as to projects for road building in their dis-
tricts and to use their influence with local communities wherever they
find that appropriations are being made or sought for roads which are
not of essential value either from an economic or military point of view.
As to whether or not the roads have any such value, the Central Committee
will seek advice in both cases at headquarters and will be guided by such
advice.
(5) With respect to building operations, Secretary McAdoo made the
following statement:
264
- 5 -
I-706
"Because of the interest of the Treasury Department
in the conservation of capital and credit during the period
of the war, I have received several inquiries as to whether
building operations of one kind and another should be dis-
couraged. With regard to plans for public buildings under
the control of this Department, I have stopped letting con-
tracts except in cases where they were absolutely necessary.
"Home building is an excellent thing in normal times, but
at present, unless there is a real shortage of houses for war-
workers, I strongly advise that materials, valuable labor and
credit be not utilized for this purpose. Whether homes should
be built should be determined strictly by the urgency of the
need."
From this statement, it is desirable that building operations
ought to be suspended at this time as far as possible without direct detri-
ment to health or war work. The statement of the Secretary may be used
to advantage in dealing with plans on the part of municipalities and State
governments to continue or to provide for new construction at this time.
II. METHOD OF PROCEDURE: With respect to their own procedure the
Federal Reserve Board's Committee and the Advisory Committee, acting as a.
Central Committee sitting in Washington, have adopted as a definite policy
that no member will vote or advise in & matter in which he may be interest-
ed, directly or indirectly, and it is understood as a matter of course,
that the Local Committees will act in a like namer.
The Federal Reserve Agent is expect to serve as chairman and
the Governor as vice-chairsen of the Standing Committee of five, and
the Committee will always be in a position to call upon one or more
members of the Auxiliery Committee to "sit in" on special cases or to
assist the Committee in securin export information.
It is hoped that all members of Local Committees will cooperate
in spreading the gospel and in making effective the work of the committee
in their districts.
Regraded Uclassified
265
- 6 -
I-706
It is suggested that the Sub Committees use the style "Sub-
Committee on Capital Issues, Federal Reserve District No.
As to all necessary expenses of members of committees, for ex-
ample, traveling expenses, the Federal Reserve Board thinks it
proper that such expenses should be refunded by the Federal Reserve
Banks and that all out-of-pocket expenses of the committees should
be carried in a special item and it will be decided later on whether
they should be carried as an expense by each bank or refunded by the
Federal Reserve Board.
It may be necessary for the Central Committee, particularly
in cases where prompt action is desired and where there is no need
for & local investigation, to act without consultation with the lo-
cal committee. In certain cases where the situation is clear pro-
vided that the statement of facts can be accepted as correct, the
Washington Committee, in order to save time, may decide to execute
the letter of approval or disapproval, ae the case may be, and send
such letter to the local committee for transmission to the applicant
provided that the facts upon which the Central Committee based its
conclusions are substantiated by the local committee. In all cases,
however, it is the plan of the central committee to keep the local
committees advised as to applications and as to the decisions reach-
ed so that they shall be fully advised as to the situation in their
districts.
The Central Committee at Washington will appreciate it if in any
case (even where action has already been taken by said comittee)
266
- 7 -
I-706
the local committees will give it the benefit of any comment that might
appear to them helpful. The central committee is most anxious to reach
a fair and just conclusion in all cases, and it must count on the 00-
operation of the entire organization to bring about the best under-
standing of the problem.
Please express, on behalf of the central committee, to
all members of the standing committee, as well as of the auxiliary com-
mittee, the Federal Reserve Board's sincere appreciation of the willing-
ness of the members to help in this work.
Very truly yours,
(Signed) PAUL M. WARBURG.
Chairman,
Capital Issues Committee.
406649
267
Appendix E
Case 666
Letter of St. Louis District Committee to Capital Issues
Committee:
"Our Committee feels ... that there is not sufficient
cash in the Corporation to give it a reasonable prospect of
success and that in order to sellstock to the general public
as proposed, it will be necessary to stress the fact that the
sale of the stock has been approved by the Capital Issues Com-
mittee. It is true that the Capital Issues Committee does not
vouch for the validity of the issue, its value or integrity,
but at the same time under the urgent necessity to sell, the
approval of the Capital Issues Committee might be presented in
such a way as possibly to mislead."
In a letter to the applicant, after disapproval of the
issue, the Capital Issues Committee stated:
"The National stress makes it inopportune to put out
inflated issues."
Tungsten Products Co. Case
Letter of Chairman Hamlin of Capital Issues Committee
to Senator Thomas. (Underlining supplied)
Capital Issues Committee,
National Metropolitan Bank Building
Washington, September 20, 1918.
Hon. Charles S. Thomas,
United States Senate, Washington
Dear Senator Thomas: My attention has been called to your re-
marks during the discussion of the mineral-products bill in the Senate,
as reported on page 10185 of the Congressional Record, in which you
refer to the Capital Issues Committee, stating that -
"Speaking broadly and generally the Capital Issues Committee will
not sanction the issuance of securities to companies designed to pro-
mote and develop minerals of the several sorts mentioned in the bill.
*** My colleague and I had occasion to go with a couple of our
constituents from Boulder County to the Capital Issues Committee
within the past two weeks. The gentlomen are engaged in the produc-
tion of tungsten, one of the materials mentioned in that bill. ***
The proposition was turned down upon the ground that the industry
contemplated in the enterprise was of a speculative character."
-2-
268
Appendix E (Cont'd)
From my recollection of the matter referred to-the application of
the Tungsten Products Mining Co.-I was confident that the case had
not been decided on the grounds indicated by your statement, for the
reason that it is no part of the policy of the Capital Issues Committee
to disapprove an issue of securities solely because an enterprise 1a specu-
lative in character. However, I have since consulted the file in this
case and refreshed By memory by discussing the matter with Mr. J. S.
Drum, a member of the committee, and I should like to correct what I
believe to be your misunderstanding of the matter.
Practically every application that comes before this committee No-
specting the issuance of securities by a development company presents
two distinct aspects-the economic and the financial. The former is con-
cerned with the need of increased output of a given product and the
latter with the methods of obtaining and using the necessary capital.
In other words, the economic necessity of increased production is not
the only factor to be considered in determining whether any issue of
securities is compatible with the national interest; the financial struc-
ture and methods must be sound in order to avoid waste and loss.
The application of the Tungsten Products Mining Co. related to the
sale to the general public of not less than $750,000 of the capital stock
of this company to obtain money with which to buy and develop addi-
tional tungsten-ore bodies and to provide working capital. It was not
shown that the incorporators, although reliable, substantial, and highly
trained men, were investing any substantial amount of their own
capital in the enterprise in which they were asking the public to put its
money. The committee can not approve the sale of stock to the general
public under these conditions, regardless of the purposes for which the
proceeds will be used.
It appeared also that the newly organised mining company was ex-
pected to finance the Tungsten Products Co., which is owned by the in-
corporators of the mining company. In the opinion of the committee,
there secms to be no urgent reason at the present time, from the point
of view of the national interest, for the incorporation of the mining
company to take over the ore properties and refining plant of the prod-
ucts company or to finance the latter, especially in view of advices we
received from the Bureau of Mines, Department of the Interior, to the
effect that there is & surplus of tungsten refining capacity in the
country.
I an sorry, indeed, that you had to leave the conference with Mr.
Drum, which you attended in company with Senator SHAFROTH and represent-
stives of this company, because Mr. Drum tells ne that be had not
finished his discussion of the factors involved and that this probably
accounts for your understanding that the application was disapproved
because it was speculative in character. Many necessary enterprises are
inherently speculative in character but are passed favorably by this
committee nevertheless when there is need for increased output of the
product in question and when the financial structure is such as to give
proper assurances to the committee that economic waste will not result.
Very truly yours,
C. S. HAMLIN.
406649
269
November 20, 1940.
Dear Mr. Handersons
On behalf of the Secretary I vast to
thank you for the amernatur entitled,
The Capital Issues Condition of 1928".
Mr. Norgenthau 10 any from the city, but
I shall be glad to hold 10 to his study
as his return.
I
(Signed) H. S. Klotz
& s. Blots,
Private Secretary.
Hemorable Less Remistram,
the Advicevy Commission to the
Council of National Defense,
Federal Reserve Building,
Vashington, D. c.
GEF/dbs
270
November 20, 1040.
Deal Mr. Hondersons
on behalf of the Secretary I vast to
thenk you for the nonormation entitled,
The Capital Issues Connittee of 1918".
Mr. Norgentham is away from the city, but
I shall be diad to hold 10 for his study
as his return.
Sincerely yours,
(Signed) H. S. Klotz
& s, Note,
Private Secretary.
Memerable Leen Hunderson,
the Advisory Commission to the
Council of National Defense,
Federal Receive Building,
Vackington, D, 0.
GEF/dbs
Regraded Uclassified
271
Revember an, 1040.
Dear Mr.
Os behalf of the Secretary I wast be
thank you too the entitled,
The Ompital Issue Consittee of 1930".
Mr. Notigentions to any tre the city, but
I shall to dat to hold 10 for me abuly
as Me return.
I
(Signed) H. S. Klotz
no 8, Note,
Private necretary.
Imarable Roan Memberson,
the Advinory Commination to the
Countril of Intired Defense,
Federal Receive Building
d s
GEF/dbs
Regraded Uclassified
272
October 1, 1940
Assistant Secretary Patterson gave me the
attached memo, and I told him that I would be
glad to go along with him on it. He said that
he showed it to Knudsen this morning, and that
Knudsen thought that three months' notice should
be given before production is stopped on planes
for the commercial air lines. He said he found
Knudsen a little bit commercial minded. I
suggested that he ought to talk to Bob Hinckley
on this before he went too far.
273
A-1
September 28th, 1940.
IREDIATE INCREASE IN AIRPLANE PRODUCTION.
No now have about 1600 combat planes in
the Army, and about the same number of training planes -
3200 altegether. Many of the combat planes are not of the
latest type. It is unnecessary to elaborate on the inadequacy
of this force, in view of the dangers facing us from Europe
and from the Far East. The shortage is also a serious impedi-
ment in training pilots. Our deliveries are now running behind
schedule, both as to planes and as to engines. Large-scale ex-
pension of our manufacturing plants will not make itself felt
for many months. The immediate and pressing needs of the Army
and the Navy, as well as the immediate and pressing needs of
Great Britain for planes to be manufactured here, make it in-
perative that every possible step be taken to make the ut-
most use of our present productive capacity. The situation is
too urgent to admit of compromises or half-way measures.
The following steps should be taken without
delays
(1). All plants should be put on three shift
basis. Some are already on three shifts, but it is By understand-
Regraded Uclassified
274
ing that others are not. Additional Regitimate cests to be -
pensated for by change orders when necessary.
(2). The utmost in standardisation for our planse
and for British planes should be required. A beard is already at
work on standardisation. This is a continuous process and con-
siderable progress has already been made, Increased offorts
should be applied.
(3). All construction of commercial planes of the
larger type should be deferred, and the machinery and non new -
paged in such work should be put into production of combat planes.
the work being done on large airliners in a number of plants so
& serious impediment to the building of airplanes for national de-
fense. No construction of commercial planes of the larger type
should go forward without specific approval of the War Department
and the Havy Department.
(4). The production of small commercial types of
sirplanes should be subordinated to military planes when the santi-
facturing plants can be utilized for parts and sub-acseablics for
military planes.
(5). The production of planes for foreign countries
other than Great Britain should be stopped. The number 10 mill,
Nevertheless, these planes are a drain on our productive espacity
and will not be of decisive importance if seattered about.
Regraded Uclassified
275
October 1, 1940
MEMORANDUM
To:
The Secretary
From: Mr. Young
Re: Financing the Tank Engine Program
On September 21, 1940 the British Purchasing Commission
signed a contract with Continental Motors Corporation for 3,500
tank engines, culminating a series of negotiations which began on
August 26. No capital contribution for machinery and equipment
will be required from the British, although their order will
utilize new facilities which will cost about $5,000,000.
This contract establishes a pattern for financing which can
be followed in all cases where it is in the interest of national
defense to create productive facilities in excess of those required
for current Army and Havy orders if the following steps be taken:
Certification as to the productive capacity for & particular item
considered essential to national defense is given to the Reconstruction
Finance Corporation by the Defense Commission and by the War or Havy
Department. On the basis of this certification the Defense Plant
Corporation (RFC) arranges to purchase the equipment necessary to
provide the productive capacity certified as essential, and agrees
to lease it to B. private manufacturer or manufacturers. To the
extent that current orders for the Army and Navy do not utilize
this entire capacity, a balance remains which can be taken up by
British orders.
The orders for tank engines provide a specific example of
this pattern in operation. They were worked out as follows:
1.
On September 9 the Army signed a contract
with Continental Motors for 1,000 tank engines,
delivery to begin in October 1941 at the rate of
200 per month. This contract contains an option
for an additional 1,000 engines to be delivered
at the same rate, beginning in March 1942.
2.
To provide capacity for the production of
these engines, the Assistant Secretary of War
certified to the Reconstruction Finance Corpo-
ration on September 13, 1940 that:
"The creation of manufacturing capacity
capable of producing 20 Medium Tank
Regraded Uclassified
- 2 -
<76
engines per day by the Continental
Motors Corporation of Detroit, Michigan
is essential to the national defense of
the United States."
A similar certification was issued to the Reconstruction
Finance Corporation by Mr. William S. Knudsen of the
National Defense Commission on September 11, 1940,
who said:
".....in my opinion the establishment
of a Continental Motors Company plant
in the city of Detroit, Michigan for
the manufacture of engines for military
tanks at the rate of 20 per day is neces-
sary in the interest of national defense."
3.
On the basis of these certifications a contract
was signed between the Defense Plant Corporation
(RFC) and Continental Motors Corporation on
September 21, 1940. It provides that the Defense
Plant Corporation buy machine tools to a total
value of $8,000,000 and lease them to the
Continental Motors Corporation for the production
of tank engines. This leasing agreement terminates
on September 30, 1943, but Continental is given the
privilege of extending it to September 30, 1947.
The rental charge is to be sufficient to amortize
the cost of the equipment over 5,500 engines. after
which there will be no further rental charge for the
use of the machinery.
4.
A contract was then signed on Sentember 21 between
the British Purchasing Commission and Continental
Motors Corporation providing for the purchase of 3,500
engines with delivery to begin within 8 months, or
within 90 days after the last machine tools are
installed, whichever be sooner. It is estimated by
Continental that they will be in production by
February or March 1941, thus giving the British the
total production of the plant until October 1941,
when the Army deliveries begin. By that time it 10
estimated that the British will have received about
1,900 engines, after which they will get about 250
engines per month, and the Army 200.
Under this agreement the British put up no
collateral to guarantee amortization of the pro-
duction facilities, since they are simply using
- 3 -
277
excess United States capacity, which may be
called upon at any time to fill United States
needs in case of an emergency. The British
are providing the necessary working capital
for their order by making advance payments
on engines in accordance with the following
schedule:
$3,000,000 when the contract is signed
560,000 on or before 30 days from the date of the contract
560,000
If
#
If
60
560,000
#
#
90 #
1
#
#
#
If
1,120,000
120 If
#
#
Il
#
1,120,000
#
-
#
150
#
If
#
If
560,000
.
#
180 #
#
#
#
#
560,000
#
#
210
#
#
If
If
#
#
If
560,000
#
#
#
240 a
If
.
#
.
#
560,000
#
270 #
If
#
If
#
#
$9,160,000 in total
Credit for the advance payments will be received
as engines are delivered.
This agreement gives the British an option
to purchase additional engines in blocks of
1,500 for delivery at the rate of 400 per month
through June 30, 1947. They will, however, pay
rent (amortization of machine tool investment)
only on the first 3,500 engines.
hy
/
10-1-40 10 -
278
Report of the
PRESIDENT'S LIAISON COMMITTEE
on
Foreign Purchasing Other Than British
July 1 - October 1, 1940
On December 6, 1939, the President created what is known as
the Liaison Committee to represent the American Government in its
contacts with the interested foreign Governments in all matters
relating to the purchase of war materials in the United States.
The President's Liaison Committee was to serve as the
exclusive liaison with reference to procurement matters between
this Government and the interested foreign Governments. It was
to hold frequent sessions at which it would receive an accredited
representative of the embassy of any interested foreign Government
for the purpose of giving consideration to the requirements of
such Government for supplies, equipment and materials in relation
to: (a) availability of the desired articles; (b) priorities,
and (c) prices.
The original membership of this committee consisted of the
Director of Procurement, Treasury Department; the Quartermaster
General of the Army; and the Paymaster General of the Navy. In
June, 1940, the membership was amended to provide for the executive
279
- 2 -
assistant to the Assistant Secretary of War in place of the
Quartermaster General of the Anny, and in July it was again amended
so that an assistant to the Secretary of the Treasury would take
the place of the Director of Procurement. In addition, the Admin-
istrator of Export Control was included as a member without vote.
During June and the first part of July, active steps were
taken by the Committee to make it a functioning organization, its
primary purpose being to coordinate the activities of the British
Purchasing Commission with the United States defense program.
Routine reports and procedures were instituted, close contact was
established and maintained with the British Purchasing Commission,
and internal procedures were initiated with the State Department,
the War Department, the Navy Department, and the Advisory Commission.
The Liaison Committee provides the focusing point for all
contacts between the United States Government and foreign Governments,
with respect to the purchase of war materials. The work of the
Committee has become increasingly significant as the defense program
has developed and as other foreign Governments have become active
purchasers of aircraft and war supplies in the United States.
In times past certain war supplies have been made available to
foreign purchasers from Army and Navy surplus stocks. This situation
has now changed, partly because surplus stocks have been depleted and
280
-3- - -
partly because items which had been declared surplus have been
removed from this category in view of our own domestic require-
ments.
Prior to June, 1940, the placement of orders for foreign
account was a relatively simple matter. Because of the demands,
however, of the United States defense program on the production
capacity of this country, it became imperative that all foreign
purchasing of war supplies be coordinated with our own Army and
Navy programs. This coordination has called for the adjustment
of foreign orders already placed with United States manufacturers.
It has necessitated export control over essential war supplies
including machine tools as well as finished goods and critical raw
materials. It has required the allocation of production capacity
for war materials between domestic demands and foreign needs.
Standardization of aircraft, tanks, guns and amminition has been
vital to the securing of coordinated expansion. Methods of
financing for large foreign purchasers as well as for United
States defense programs have had to be evolved where expansion
of production capacity was necessary. In all of these fields
the Liaison Committee has taken an active part and cooperated
with the Advisory Commission, the War Department, the Navy Depart-
ment, the Administrator of Export Control and the State Department.
Regraded Uclassified
281
- 4 -
In order that control might be exercised over the placement of
foreign orders, a system of Preliminary Negotiation Reports was
established. This system provided that & foreign purchaser receive
clearance through the Liaison Committee before any formal contracts
could be signed for the production of war materials by United
States manufacturers. This system, originally instituted for the
British purchasing program, has since been extended to include the
Wetherlands, Brazil, China and Eire. Preliminary Negotiation
Reports are filed on standard forms which give details concerning
the items to be purchased, as well as the suppliers or manufacturers
to be used. These reports, when received by the Liaison Committee,
are transmitted to the Advisory Commission, to the War Department
and the Navy Department for consideration. Recommendations of
each Department are made to the Liaison Committee which, in turn,
gives the foreign Government a coordinated reply with respect to
its request.
In many instances where a foreign purchaser may not be acquainted
with a source of supply for a specific item, or where the suppliers
listed may be completely booked with United States Government orders,
an effort is made by the Committee to suggest alternate sources which
might be available and which would not conflict with Army and Navy
programs.
Regraded Uclassified
282
- 5 -
In addition to Preliminary Negotiation Reports, the Liaison
Committee has, in certain instances, insisted that foreign Govern-
ments contemplating extensive purchases file complete programs for
specific fields. The best example of this is the British aircraft
program, which was worked out through negotiations extending from
July 17th to September 27th. A similar aircraft program was also
established for the Netherlands, and other programs are being con-
sidered for machine guns, heavy ordnance, machine tools, tanks,
and optical instruments.
Due to the confusion arising in the minds of domestic manu-
facturers as to the priorities which Army and Navy contracts may
assume, the Liaison Committee has adopted the practice where
necessary of notifying American manufacturers when foreign orders
have been cleared by the interested Government agencies. Vanu-
facturers have fully cooperated with the Committee by notifying
foreign purchasers that clearance for orders must be obtained
before contracts could be signed.
In the matter of export control, the Liaison Committee has
worked closely with the Administrator and with the State Department.
Numerous conferences have been arranged with foreign purchasers for
the purpose of expediting licensing arrangements and clearing up
misunderstandings over export regulations. The Committee, in
283
- 6 -
cooperation with the State Department, has been surveying and
analyzing export licenses issued for aircraft and other war
supplies. Many of these have been outstanding for some months
and must be reexamined in the light of the United States defense
programs.
In all instances the Liaison Committee has endeavored to
be of service to foreign Governments desiring to purchase war
materials in the United States and at the same time to be of
service to the interested United States Government agencies by
correlating foreign purchasing requests and submitting them
for recommendation in a standardized and uniform fashion.
Regraded Uclassified
284
Argentina
The Committee received its first direct communication from
representatives of this government in February, 1940, when a request
was received for the names of companies that manufacture optical
instruments for general ordnance use. This request was answered
directly by the Navy Department.
There were no other requests of any significance and apparently
no direct contact with representatives of the Argentine Government
until August 20, 1940, when the Committee received a request for
clearance on 50 units of material for Curties Hawk 75-A airplanes to
be shipped knocked down. Clearance on this request was forwarded on
September 4, 1940.
No other significant requests have been cleared, but as of
September 30, 1940, the following requests were pending:
1. A request for clearance on 3,000 bombs, which was
filed on September 21.
2. A request for clearance on 15 North American trainer
airplanes, which was filed on September 26.
3. A request for clearance on the purchase of a manu-
facturing license for North American trainer air-
planes, which vas cleared on September 26.
If the requests for clearance show any marked increase, it is
contemplated that a system of Preliminary Negotiation Reports similar
to that used by the British Purchasing Commission will be established.
The Committee deals with the Naval Attache at the Embassy in
Washington on naval purchases, and with an aeronautical mission in
New York City on aircraft and related items. These operate
independently.
285
Brasil
The Committee received its first direct communication from
representatives of this Government early in August. Previous to
that time, the Brasilian Government apparently had direct contact with
the War Department, but its requests did not flow through the
Committee.
Since the requests have been flowing through the Committee,
the following items have been released:
1. 16 5"/38 guns complete with mounts on August 29.
2. 616 bombs of various sizes on September 21.
At the present time requests for clearance are pending on the
following items:
1. 680,000 machine gun cartridges of .30 and .50 caliber.
2. 30,000 .50 belt links.
3. A small amount of fire control equipment.
4. $30,000 worth of spare parts for Wright airplane engines.
To expedite handling of requests for clearance, a system of
Preliminary Negotiation Reports similar to that used by the British
Purchasing Commission has been instituted and the first report was
filed on September 26.
In addition to clearances on specific items to be purchased,
the Committee has assisted the representatives of this Government
to get information on sources of supply for fire control equipment,
demolition bombs, belt links, mines and cartridges: and on firms
capable of cleaning gun sights.
286
Brazil - 2
The Committee deals with a military commission, which has its
headquarters in Washington, D. C., and an aeronautical commission,
which has its headquarters in New York City. These missions operate
independently.
Status
287
Chile
The Committee received its first direct communication from
representatives of this Government in March, 1940, when a conference
vas held with them to discuss the procurement of various war materials
in this country. At that conference a. list of information desired
was submitted and this information was supplied soon thereafter.
Since that time there have been about half a dosen clearances
on specific items, all of a rather minor nature. During the three
months ended September 30, 1940, the following clearances were
released;
1. Information on 90 m. A.A. guns on July 13.
2. Information on animal ambulances on July 15.
3. Information on anti-aircraft equipment available in
surplus stocks on September 16.
4. Information on 4 Pack Howitzers on August 2.
As of September 30, 1940, no requests were pending which required
action by the Liaison Committee.
If the requests for clearance show any marked increase, it is
contemplated that a system of preliminary negotiation reports similar
to that used by the British Purchasing Commission will be established.
The Committee deals with the Chilean Ambassador and also with
the Naval Attache of the Chilean Embassy in clearing these requests.
288
China
On two occasions the Liaison Committee has been contacted by
the Chinese Ambassador as well as by the Financial Advisor to the
Republic of China. The subject of these discussions was the desire
of China to purchase certain aircraft which had been ordered in
the United States by the Swedish Government and for which export
licenses had been revoked or rejected.
The Chinese Ambassador was informed that that was a matter to
be taken up. with the representatives of the Swedish Government.
It was requested, however, that the Liaison Committee be informed
as to any negotiations that transpired.
In addition to the foregoing, it is understood that China
contemplates a purchasing program in the United States, and in order
to expedite the handling of these requests the representatives of
China have been asked to file Preliminary Negotiation Reports in
accordance with the customary procedure.
At the present time China has unfilled orders for 6 Beech
training planes, 1 North American trainer and 6 Vultee attack bombers,
all to be delivered by December 1, 1940.
Doaradod
289
Dominican Republic
The Committee received its only direct communication from
representatives of this Government in the form of a letter received
from the Minister June, 1940, requesting clearance on, and assistance
in, the purchase of 3,000 Springfield rifles. The Committee advised
the Minister on June 17, 1940, that he probably could not get any
kind of rifles from manufacturers at this time, but that he could
get 3,000 Enfields from surplus stock if his application were filed
promptly. There is nothing in the files of the Committee to indicate
whether this suggestion was followed.
290
Eire
On June 7. 1940 the Minister of the Irish Free State filed a
request with the President's Lisison Committee for the release of
war material from United States Government stocks. This request listed
25 airplanes, rifles, scout cars, field guns. anti-tank guns, radio
sets and ammunition. After this matter had been considered by the
interested Government departments, the Irish Minister was notified on
June 21st that this request could not be complied with.
On July 19th a further request was received by the President's
Liaison Committee in which the Irish Government stated that it would
like to purchase three destroyers from Havy surplus stocks. This
recuest was taken un with the Navy Department and the Irish Minister
was informed on August 9th that there were no destroyers available
for sale at the present time.
In addition to the foregoing, a request was made for the release
of 20,000 Lee Enfield rifles, with ammunition, to be secured from
United States Army stocks. As all surplus Lee Enfield rifles had
been sold, however, none were available for sale to Ireland. It was
suggested that the Irish Minister might be able to purchase some
rifles from the British. A transaction for 20,000 rifles was
subsequently concluded between those two parties.
At the present time, Eire has an unfilled order with the Douglas
Aircraft Company for one DO-3 transport to be delivered before the
end of September, 1940. As the Liaison Committee has been informed
that the Government of Eire is contemplating further purchase of war
materials in the United States, the Eire representatives have been
requested to use the Preliminary Negotiation Report system.
Regraded Uclassified
291
Finland
The Committee received its first direct communication from
representatives of this Government in February, 1940. There was a
considerable number of requests for clearance during the Russian
invasion. Since that time, there have been very few requests, and
those which have come in have been of a very minor character.
During the three months ended September 30, 1940, four requests
were received, of which three were approved in whole or in part and
one was disapproved. Only one of these was for a. particular product
(ignition wire), the others being for drawings, specifications, or
instruction manuals.
At the present time there is one request from the Government
of Finland pending with the Committee. This was filed on September 21,
1940, and covers five sets of specifications for U. S. Army parachutes
and for silk for U. S. Army parachutes.
The Committee deals with the Military Attache and the Assistant
Military Attache at the Legation in Washington.
292
Greece
On July 24, 1940 the Chancellor of the Royal Greek Legation
called upon the Liaison Committee to secure information about aircraft
and aircraft engines for training purposes. The Greek Government
wished to place an order for fifty trainers and demanded quick
delivery.
The Chancellor's request was transmitted to the Advisory
Commission, the War Department, and the Navy Department. On August 13,
the Greek Chancellor was advised that it might be possible to place
an order for fifty training engines without interference with U. S.
Government programs, and advice was given as to what companies would
offer the best possibilities.
On August 27th the Secretary of State transmitted to the
Secretary of the Treasury a copy of Dispatch #4275 of July 2, 1940,
from the American Legation at Athens, Greece. This dispatch contained
& copy of a letter from the State Aircraft Factory of Greece request-
ing American specifications for aircraft.
On August 30th the Secretary of State was requested to secure
more detailed information concerning the specifications wished by
the State Aircraft Factory, inassruch as it was impossible to release
any appropriate information on the basis of the original dispatch.
It was suggested that the Greek Legation communicate directly with
the Liaison Committee for further information.
On September 17. 1940 8. letter WBS received by the Lisison
Committee from Namstrad, Incorporated, governmental contractors,
293
Greece - 2
making a request for the War Ministry of Greece. This request was
for the purchase and quick delivery of fifty or more airplane engines,
together with suitable pursuit planes. Namstrad, Incorporated, was
advised that this type of request should be made directly by the
official representatives of the Greek Government in Washington.
294
Indo-China
On June 28, 1940 the Liaison Committee was notified by the
State Department that a purchasing mission was being sent to the
United States by the Governor General of French Indo-China. The
State Department was assured by letter, July 11, that the President's
Liaison Committee would be delighted to cooperate with this mission
upon its arrival in this country. Subsequently the Department of
State informed the Indo-China Mission that it should contact the
Lisison Committee for the purchase of war materials in the United
States. No communications ever passed between the Indo-China
Mission and the Liaison Committee, and no conferences were ever held
with that mission.
On September 16th the Assistant Secretary of State transmitted
to the Lisison Committee & list of materiel and ammunition necessary
to the defense of Indo-China, which had been submitted by the Indo-
China Purchasing Mission. This liet contained a request for about
140 sirplanes of varying types, as well as guns of various sizes,
together with ammunition, and several boats.
This request was transmitted informally to the War and Havy
Departments, both of which stated that none of the items requested
were available from surplus stocks, that it vas doubtful if any
priorities could be granted from United States Government deliveries,
and that it would take many months before any of the items could
be obtained from United States manufacturers. This information vas
duly transmitted to the Assistant Secretary of State.
Regraded Uclassified
295
Iran
The Liaison Committee was notified on April 2 that an Aviation
Mission representing the Government of Iran was in the United States.
It was not until July 18, however, that the accredited representatives
of the Legation of Iran called upon the Liaison Committee with a
request for certain information on pursuit planes and bombers. In ad-
dition, it was desired to get certain data as to performance and cost,
as well as to the possibility of securing foreign manufacturing licenses
for American planes.
These matters were taken up with the Mar Department and The Advisory
Commission to the Council of National Defense. Subsequently on August 3,
the Air Attache of the Legation of Iran was given the information
requested.
On August 19 a further conference was held as the representatives
of Iran had had certain difficulties in securing specifications and
information from domestic manufacturers with respect to certain aircraft.
These aircraft manufacturers were advised by the Liaison Committee
to transmit to the Iranian representatives those specifications which had
been officially released by the Government for export and every effort
was made to secure the additional information which the Iranian repre-
sentatives wished at that time.
On September 3 approval was secured from The Advisory Commission,
the War Department and the Navy Department for the Iranian representatives
to negotiate for the purchase of Boeing and Consolidated four-engine
Regraded Uclassified
- 2 -
296
bombers, for the purchase of 30 Curtiss P-40-D Pursuit planes, and
for the issuance of a manufacturing license by the Curtiss-Wright Corpor-
ation to the Government of Iran for the manufacture of Hawk 75A airplanes,
less engines. As a condition of this approval, it was requested that a
final clearance of the proposed sales be secured prior to the actual
signing of any contracts.
Because of the fact that delivery on the aircraft mentioned above
could not be secured without long delay, the representatives of Iran called
upon the Liaison Committee and asked its help in securing a quicker
delivery of either of the planes referred to, or of comparable types.
This request was taken up with the War Department, the Navy Department
and The Advisory Commission, as well as with certain of the aircraft and
aircraft engine manufacturers. At the present time this matter is still
under consideration.
In this connection, it should be noted that Iran has, as of
September 14, 1940, unfilled orders in the United States for 10 Curtiss
Hawk 75A pursuit planes and 25 Rearwin trainers, all of which will be
delivered by February 1941.
In addition to the aircraft program, the Minister of Iran requested
the Liaison Committee on August 29 for clearance on an order for spare
parts for the maintenance of certain Colt machine guns which had been pur-
chased previously. After complete information had been secured from
the Minister, this matter was taken up with the interested Government
departments and clearance secured for this order.
297
Mexico
The Committee has had no direct communications from representatives
of this Government. It is understood, however, that a representative
of this Government attempted to negotiate with the Colt Patent Fire Arms
Company for the purchase of a large quantity of heavy machine guns for
infantry use.
298
Netherlands
The President's Liaison Committee has cooperated closely with
the various purchasing missions of the Netherlands since April 1940.
Although a purchasing mission had been operating in this country for
seven months prior to that time it had been interested solely in the
purchase of commercial items as distinguished from the purchase of
war materials.
After the capitulation of Holland, many of the orders which
had been placed for that country in the United States were assumed
by purchasing missions for other parts of the Netherlands Empire.
Although by far the largest part of war supplies are on order for
the Netherlands East Indies Government, orders have also been placed
for the Royal Netherlands Navy, for Surinam, and for Curacao.
The Netherlands purchasing program has been handled by three
different purchasing missions in addition to the Royal Netherlands
Legation. These three missions are the Royal Netherlands Navy
Purchasing Commission, the Royal Netherlands Indies Ordnance
Commission and the Royal Netherlands Arsenal. Negotiations for the
purchase of miscellaneous items have also been conducted through
export firms and agents in the United States.
The Liaison Committee, because of the difficulties arising from
the decentralization of Netherlands purchasing has emphasized the
need for a centralized Netherlands purchasing agency as Netherlands
orders, taken as a unit, constitute the second largest foreign
purchasing program.
Regraded Uclassified
299
- 2 -
In order to secure an adequate picture of the Netherlands program
and to expedite the placement of Netherlands orders, the Liaison Committee
has taken three steps to secure the necessary coordination.
First, because of the pressing need on the part of the Netherlands
for aircraft, information was secured as to aircraft orders already placed
in the United States as well as potential orders which the Netherlands
desired to place. This aircraft program was treated as a unit and has
already been coordinated with the production schedules established by
the Advisory Commission to the Council of National Defense for the
allocation of U. S. aircraft production up to April, 1942.
The second step to coordinate the Netherlands Purchasing program was
the establishment of a Preliminary Negotiation Report system. Preliminary
Negotiation Reports have been used for the clearance of British orders for
some time and the procedure was easily adapted to meet the needs of the
Netherlands. In brief, this system requires the Netherlands missions to
get clearance through the Liaison Committee, before orders are placed
and contracts signed for war materials in the United States. The Committee
does not take action until it has received the recommendations of the
Advisory Commission, the War Department, the Navy Department, and, in
certain instances, the State Department. This procedure prevents use for
foreign orders of United States production capacity which may be needed
for national defense purposes.
The third step to secure coordination was to ask the various Netherlands
purchasing missions to compile complete data on all orders already placed
and outstanding. The fulfillment of this request is now in process and
Regraded Uclassified
- 3 -
300
should be completed shortly. At the present time the best indication
of orders outstanding may be secured from the State Department records
of export licenses issued.
In addition to and distinct from the foregoing are those instances
where the Netherlands has purchased war materials from United States Army
or Navy surplus stocks.
As indicated above, complete information on orders already placed
and outstanding for the account of the Netherlands has not yet been se-
cured. Detailed information is given below on the Netherlands aircraft
program, on the orders for other materiel as reflected by the Netherlands
Preliminary Negotiation Reports since August 29, 1940, and on the
Netherlands purchases from U. S. Army and Navy surplus stocks.
Regraded Uclassified
301
he AIRCRAFT PROGRAM
On May 15, 1940, the Liaison Committee was first apprised of the
intention of the Netherlands to purchase aircraft. Subsequently a
series of unrelated requests were filed for the purchase of 370 airplanes,
consisting of pursuits, trainers, two-engine bombers, dive bombers and
military transports. These were considered by the War Department and the
Navy Department but it soon became apparent that, if the Netherlands were
to receive planes without considerable delay, engines would have to be
diverted from United States Government orders.
Because of the confusion over these individual requests the Liaison
Committee insisted that the Netherlands representatives file a complete
aircraft program showing orders already placed, orders under negotiation
and orders to be negotiated. Further, it had been brought to the attention
of the Committee that the Netherlands representatives were placing aircraft
contracts with domestic manufacturers without receiving clearance from the
Advisory Commission or the War and Navy Departments. Finally an aircraft
program was compiled with the cooperation of the Netherlands representatives
and the interested U. S. Government agencies showing the aircraft and
related items on order and to be ordered.
As of August 20, 1940, the Netherlands had on order 72 Brewster pursuit
ships, 108 Brewster dive bombers, 24 Curtiss interceptors, 64 Ryan trainers,
and 2 Vought-Sikorsky amphibians. Of the 320 aircraft engines of various
types required for these planes, 31 had originally been ordered by the
Dutch Navy, 12 ordered by the Royal Dutch Airlines, and 30 ordered by the
Dutch Army, leaving a balance of 247 engines to be procured from whatever
United States engine production capacity was available. These orders for
302
- 5 -
both planes and engines were approved and cleared by the War Department,
the Navy Department and the Advisory Commission to the Council of National
Defense on September 4, 1940.
In addition to these orders, the Netherlands representatives wished
to place additional orders for 72 Brewster pursuit ships, 54 Brewster
dive bombers, 48 Consolidated PBY flying boats, 36 Curtiss Falcon pursuits,
24 Curtiss P-36 pursuits, 20 Lockheed transports, 6 Lockheed trainers and
24 Ryan trainers. These were duly considered by the Advisory Commission,
the War Department, the Navy Department and the Aeronautical Board. On
September 4th, clearance and approval from the interested Government agencies
was secured for the 36 Curtiss Falcon pursuits, the 20 Lockheed transports,
the 24 Ryan trainers and for 36 of the 48 Consolidated PBY flying boats.
Thus of the total of 288 aircraft which the Netherlands wished to buy,
clearance and approval was given on a total of 116. Approval and clearance
could not be given on the balance of 172 because engine production capacity
was not available.
In those instances where clearance was given, the Netherlands already
owned or had on order, 85 engines which had been acquired from the British,
24 engines originally ordered by the Dutch Navy and 18 engines which have
been bought second-hand from United States airlines. The Netherlands
representatives were warned at the time the clearance was given on these
orders that the quantities of collateral materials to be purchased, in-
cluding guns, bombs, propellers, spare parts, etc., should be reduced to
correspond with the mumber of planes given clearance.
Regraded Uclassified®
-6- - -
303
In this connection, it should be noted that the Netherlands has
already ordered approximately 1500 machine guns to be used with the
planes itemized above as well as 14,000 aircraft bombs of various sizes
and types.
Since this aircraft program was filed and considered, the Netherlands
representatives have requested clearance on additional orders for 20 Ryan
trainers and 54 Lockheed bombers. These requests are now receiving con-
sideration by the interested Government agencies.
7 -
304
B. PRELIMINARY NEGOTIATION REPORTS
In August, 1940 the various Netherlands purchasing missions were
asked to file Preliminary Negotiation Reports for all items which were
to be ordered. The first of such reportswas filed on August 29. This
system, which is the same as that used by the British, greatly expedites
the handling of clearances for orders to be placed as the channels of
procedure are already established. By using Preliminary Negotiation
Reports the Netherlands secure a reasonable insurance against cancellation
and deferment of orders which might be placed without such clearance, as
well as some indication that there is no objection on the part of the
United States administration to the export of the item to be ordered at
the time the order is placed. Further, in many cases where a request
for clearance is received for a specific source of supply, it has been
found that the manufacturer was already completely booked with United
States orders. In such cases arrangements have been worked out for
suggesting through the Liaison Committee other sources of supply which
might be made available and which would not conflict with the United
States defense program.
Twenty-four Preliminary Negotiation Reports were received between
August 29 and September 21, 1940. Two of these were cancelled at the
request of the Netherlands representatives. At the close of business
on September 21, 14 of the remaining 22 had been approved in an average
elapsed time of 15.2 days, and 8 were still pending. Fifty percent of
the 14 which had been approved were held in abeyance for several days
in order to allow for the coordination of the Dutch program with the
British and United States programs. There is attached herewith a de-
Regraded Uclassified
- 8 -
305
tailed analysis of the status as of September 21, 1940, of reports
filed since that date.
Since September 21st a large number of additional Preliminary
Negotiation Reports have been transmitted to the Liaison Committee and
are now under consideration. It is contemplated that, in addition to
the Reports which have been filed for ammunition, bombs, guns, mines,
motor vehicles, searchlights, tanks and textiles, there will be still
larger orders for all ordnance items.
306
- 9 -
C. PURCHASES FROM SURPLUS STOCKS
On June 14, 1940 the Royal Netherlands arsenal filed a list of
ordnance items which it wished to secure from United States Govern-
ment surplus stocks, if possible, consisting of various sizes and
types of anti-aircraft guns, rifles, batteries of field guns, anti-
tank guns, coast defense guns, all kinds of amminition and T.N.T.
If the Netherlands could not secure these items from surplus stocks,
it was their desire to have them manufactured in United States
Government arsenals. Subsequently it was pointed out in reply that
there was no authority to make available the production facilities
of United States Government arsenals to manufacture the armament
desired and, further, that none of the items requested were avail-
able from surplus stocks.
From that time to August 29th, when the Preliminary Negotiation
Report system was established, a great number of uncoordinated
requests for guns, ammunition, bombs, and fuzes of all types and
sizes were received by the Liaison Committee. In every case it
was pointed out that these items were not available from United
States Government stocks and, where it was possible, commercial
sources of supply were suggested. The establishment of the
Preliminary Negotiation Report system has for the first time
brought these miscellaneous requests into concrete form so that
the extent of the Netherlands program as a whole may be determined.
Regraded Uclassified
- 10 -
307
On August 16th the President's Liaison Committee was
notified by the Navy that it was considering the disposal of
80 4 inch and 7 inch guns to be released from its surplus
stocks, as well as a number of projectiles without powder for
these guns. The Liaison Committee was given to understand by
the Royal Netherlands Navy Purchasing Commission that the
latter would like to purchase 20 7 inch guns and 60 4 inch guns
with as many shells as possible. It is probable that these
guns may be made available to the Royal Netherlands Navy Pur-
chasing Commission by domestic manufacturers.
On August 29th the Royal Netherlands Indies Ordnance
Commission also inquired as to the availability from surplus
stocks of 50,000 Enfield rifles, 196,000,000 .30 calibre cartridges,
39,000,000 .30 calibre armour-piercing cartridges and 45,000,000
.30 calibre tracer cartridges for use by the Royal Netherlands
East Indies Army. This request was taken up with the interested
Government agencies and the Royal Netherlands Indies Ordnance
Commission was advised on September 18th that none of the items
requested could be made available.
308
Norway
At the present time, the Norwegian Government has on order
36 Curtiss-Wright Hawk 75A Pursuit planes; 16 to be delivered in
December, and 20 in January 1941. In addition, it has on order 41
Dougles A17A Attack planes which will be delivered between September
1940 and February 1. 1941; 6 Fairchild preliminary trainers to be
delivered over the next two months, and 24 Northrop bombers to be
delivered between October 1940 and March 1941.
Norway has already received delivery on 4 Fairchild trainers
for use at the Toronto airport which it has leased from the Canadian
Government.
All of these orders were placed early in the spring, prior to
the national defense program, with the exception of the order for
Fairchild trainers, which the Liaison Committee was instrumental
in getting placed in such a manner that it would not conflict with
U. S. Government programs.
In addition to the aircraft program, the Norwegian Government
requested on June 28, 1940 certain guns and ammunition to equip 16
whale-catchers for patrol work. The list of items desired covered
various size guns, rifles, submachine guns and pistols, but none of
these items were available from Army or Navy surplus stocks.
As a result of several conferences with the Royal Norwegian
Legation and representatives of the Norwegian Shipping and Trade
Mission about the middle of August 1940. a revised list of ordnance
items was compiled and transmitted to The Advisory Commission, the
War Department and the Navy Department.
Regraded Uclassified
309
Norway - 2
Subsequently the Navy Department advised the Liaison
Committee that it was considering the disposal of 21 4 inch
guns from its surplus stocks. As the Norwegian Government
wished to buy a quantity of these guns for the purpose of
outfitting whale-catchers and whaling ships, the Liaison Com-
mittee suggested that it contact those firms which the Navy
Department planned to use for the disposal of these surplus
items.
In addition to the foregoing, the Liaison Committee has
been helpful to the Norwegian Government in securing certain
plans and specifications dealing with gun foundations, etc.
As a result of the conferences held between the Liaison
Committee and representatives of the Norwegian Government, a
compilation of all contracts placed in the United States was
secured. This statement lists contracts executed prior to
April 9, 1940, contracts executed after April 9, 1940, contracts
under negotiation, and includes, in addition, a list of the
material desired for which no negotiations have yet been initiated.
Included in this compilation are: searchlights, clothing, radio
equipment, & small number of anti-aircraft guns and ammunition,
aircraft bombe, rifles, parachutes, signaling devices, machine
guns, cameras, revolvers and gas masks. The quantities involved
of each item are not great, and fairly prompt delivery has been
secured in most instances where contracts have been placed.
310
Sweden
As of September 14, 1940, Sweden had on order in the United States
70 Republic pursuit planes to be delivered between September and December,
1940, and 156 Vultee pursuit planes to be delivered between September,
1940 and July, 1941, together with appropriate engines. In addition, orders
were outstanding for 211 Pratt and Whitney aircraft engines and 33 Wright
aircraft engines, as well as certain aircraft spare parts. Due to the fact
that practically all outstanding export licenses to Sweden for aircraft,
aircraft engines and other war supplies were revoked and subsequent appli-
cations rejected, approximately 60 Republic pursuit planes are now completed
and stored in the United States. The Liaison Committee has been given to
understand that the British Purchasing Commission has made a contract with
Vultee Aircraft, Inc., for the purchase of the Vultee pursuits which were
on order for Sweden. It is also understood that the Swedish Government
would like to secure actual possession of all planes and war supplies on
order in the United States even though export licenses cannot be secured
immediately.
In addition to the aircraft engines and accessories, there is also on
order for the Swedish Government in the United States 4300 Smith and
Wesson 9mm. automatic light rifles and 22 million rounds of 9mm- parabellum
cartridges, of which 2 million rounds had been shipped to Sweden before
the export licenses were revoked. An export license is still outstanding
and valid for 7,250,000 of these cartridges. This would leave an approximate
311
- 2 -
balance of 12 million rounds on order in the United States for the account
of Sweden, for which there is no export license. With respect to the
4300 light rifles, Smith and Wesson has informed the Liaison Committee that
it intends to cancel its contract with the Swedish Government, returning
all moneys paid thereon and to divert the delivery of these guns to the
British Purchasing Commission, which had a contract for the same model.
In addition to the foregoing, the Swedish Trade Delegation has in
storage in New York 2,050,000 rounds +45 caliber cartridges which had been
procured from the Remington Arms Corporation. These cartridges had been
delivered to the Trade Delegation at the time the export license was
revoked.
Further, the Swedish Government has on order 1,000 unloaded depth
charges as well as 1,010 detonator fuzes to be used with the depth charges.
Application for an export license for the depth charges has been refused.
On August 29th the President's Liaison Committee received from the
Department of State a request of the Swedish Government for permission to
conclude a contract with the United Aircraft Corporation for the manufacturing
rights of the Twin-Wasp aircraft engine. This request was transmitted to
the Advisory Commission, the War Department and the Navy Department, and is
still under consideration.
Regraded Uclassified
312
Thailand
The Committee received its first direct communication from
representatives of this government in the middle of August when the
Minister came in to discuss the procedure in securing clearances.
Since that time three requests have been filed, two of which
are still pending, and one of which was denied.
The request which was denied covered twelve Lockheed Model 212
airplanes, twelve Beachcraft Model AT18 airplanes, and twelve Barkley-
Grow Model T8P airplanes. This request was filed with the Committee on
August 20, and disapproval was sent to the Minister on September 9. At
September 14, 1940, Thailand had the following unfilled airplane orders
which had been placed previously:
Unfilled Orders
Manufacturer and model
at September 14, 1940
Delivery Schedule
Fairchild F-24 Cabin
5
September 15 - 30
North American NA-44 Dive Bomber
1
September 15 - 30
North American NA-50A Fighter
7
October
The orders for the North American planes were placed prior to the advent
of the Advisory Commission to the Council of National Defense and 80 did
not come under the present clearance procedure. The order for Fairchild
airplanes, however, appears to have been placed since the present procedure
was in effect, yet no request for clearance was made to the Liaison Committee.
Regraded Uclassified
313
- 2 -
Requests which are still pending and the dates on which they
were filed are as follows:
1. 150 machine guns, filed on August 23.
2. 20 to 50 tanks and 20 to 50 armored cars, filed on September 5.
If the requests for clearance show any marked increase, it is
contemplated that a system of preliminary negotiation reports similar
to that used by the British Purchasing Commission will be established.
All the contacts with this government on purchases have been through
the Minister.
314
Turkey
On July 3, 1940 permission vas requested by the Turkish Ambassador
for the purchase of 30 dive bombers. Evidently negotiations had been
carried on with Douglas Aircraft Company, which had advised the Turkish
representatives to communicate with the Liaison Committee. This request
was transmitted to the Advisory Commission, the Havy Department and the
War Department, but no action could be taken until the Turkish Ambassador
furnished more specific information about the type of plane which his
Government wished to purchase.
During this same period the Liaison Committee was in contact with
Mr. G. M. Bellanca, President of the Bellanca Aircraft Corporation,
concerning a request which that company had received from the Turkish
Government for information concerning Bellanca fighters. The
Bellanca Aircraft Corporation vas instructed to ask the Turkish Ambas-
sador to file a formal request with the Liaison Committee,
On September 16th a request was received from Namatrad, Incorporated,
evidently an agent for the Sumer Bank of Ankara (a Turkish national bank
acting for the Turkish Government), for rifles, automatic pistols, heavy
guns, aircraft detectors, range finders and miscellaneous equipment.
This request has been referred to the Turkish Embassy pending formal
consideration.
Regraded Uclassified
315
Venezuela
The Committee received its first direct communication from
representatives of this government in July when a small list of
items was submitted with & request for assistance in locating sup-
pliers. A list of possible suppliers was prepared by the Army and
Navy Munitions Board and forwarded to the Military Attache of the
Veneruelan Legation on July 30.
Since that time only one definite request has been received. It
covered two Lockheed Electra Model 10-A airplanes for the Veneruelan
Postal Airline, This was received on August 8 and clearance was forwarded
on August 26.
During August a representative of the Venesuelan Havy came in with
a substantial list of items which he wished to buy for their ship yards.
Assistance was given in securing names of potential suppliers of this
material, and the representative of the Veneruelan Havy proposes to
forward to the Committee for clearance any of these items which are
arms, ammunition, or materiel of war.
If the requests for clearance show any marked increase, it is
contemplated that a system of preliminary negotiation reports similar to
that used by the British Purchasing Commission will be established.
The Committee's contacts have been almost entirely with representatives
from the Embassy.
-316
see page 7
Nethorlands Best Indice
Analysis By Product of Status of Prolisinery Negotiation Reports
as of September 21. 1940
Timpsed
Fumber
Item
Capital
Date
Value
Date
Blapsed
the
Pending
Assistance
Suppliers
Received
Notified
Time
(Days)
(Dego)
1. Ammunition:
I-2
80,000 Rounds for 37 - guns
1-3
560.000
- o -
5,000 75 a. shells complete
Aner. Armans Dorp.
8/29
9/20
22
,
I
- o
Approved
5,400
15 ca. shells
Ruster Mrg. Co.
8/29
9/12
14
.
147,500
- o -
3-7
1, V. 311es Co.
5,400 15 a. cartridge cases
8/29
9/20
22
.
N-24
205.200
- o
5,400
15 on. (6*) shells (Loading,
Morris Stamping & Mfg. Co.
6/29
9/20
22
.
456,300
- -
fusing and assembling)
Amer. Arments Carp.
9/16
5
M
38,000 Explosive rounds for 20 -
210,000
- 0 -
Burgess Go., Inc.
Hispano-Buisa guns
8/29
9/20
22
Approved
1-6
10,000 Inerte rounds for 20 m.
Hispano-Buisa guas
60,000
- o -
8-25
Burgess Co., Inc.
500 Depth Charges - unloaded
8/29
87,000
9/12
14
.
- 0 -
York Safe & Lock Co.
9/16
5
2. Bonbs
N-9
1,080 600 1b. demolition bombe
292,680
- 0 -
N-10
540 100 lb.
Anez. Armansas Corp.
.
9/4
.
9/20
16
Approved
33.523
- o -
.
.
.
9/4
9/20
16
.
3. Quan
N-1
40 37 - guns
288.800
- o -
Aner. Corp.
8/29
9/20
22
Approved
4. Missa
X-6
1,000 Anteans misse
951,000
- o -
Amer. Arassant Corp.
9/4
9/13
9
Approved
5. Mator Vehicles
8-14
285 Tractors for A. A. guns
1,466,800
- -
Marson-Harrington Co., Inc.
N-15
45
.
9/10
.
11
artillery
314,650
- o -
.
N-16
9/10
11
50 Command cars
66,000
- o
.
N-17
9/10
135 lage solo motorcycles
11
40,850
- 0 -
Harlay-Davidada Motor Co.
N-18
9/10
11
240 740 motorcycles with side cars
112,750
- o -
.
.
.
.
I-20
9/13
9/21
8
Approved
300 Model 540 motordycles
100.000
- o -
Indian Motorcycle Co.
II-21
9/13
Cancelled 9/17
250 Model 340 motoroycles
128,750
- o
.
.
II-22
9/13
Cancelled 9/17
50 Model 540 motorcycles
11,500
- o -
.
.
.
9/13
9/21
5
Approved
6. Franklishis
I-19
12 Searchlight units
193,800
- o -
General Are Lighting Co., Inc.
9/13
9/20
7
Approved
7- Tanks
8-12
200 2-man combat tanks
4,685,000
o -
Marmon-Herrington Co., Inc.
9/10
11
I-13
120 3-man combat tanks
3,669,000
- 0 -
.
.
9/10
11
8. Textiles
5-11
10,940 yda.Flighter Airplane Tabric -
Jrade "A"
7.702
- o
Aviation Equipment & Report, Inc.
9/5
9/16
11
Approved
317
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
October 1st, 1940.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Lokican
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
318
Telegram from London dated
September 29th 1940.
1. Military.
Libya.
The enemy column referred to in
the summary of September 28th reached Giarabub
in the early morning of September 28th; on
September 27th our garrison opposite Modalena
withdrew to a line about 25 miles to the south
cast.
2. Royal ir Force.
Our bombing attacks on enemy shipping
were very effective on the night of the 27th -
28th. Considerable damage was caused at Lorient
where weather was clear; dockyard, wharves and
buildings were hit and large fires started. it
Le Havre large fires and explosions were started
in the docks and damage caused to warehouses.
Ostend, Boulogne and Calcis were also bombed on
45 lighter scale. in enemy seaplane base was
attacked from e very low altitude and 2 large
fires were started. Fires were also caused et
2 reilway targets. weather prevented mine
laying operations.
During September 28th all our medium
bombers/
Regraded Uclassified
319
- 2 -
bembers despetabed an offensive reconneissance
returned safely but the majority could not emplete
their tasks owing to unfavourable weather. The
dooks at Ostend and oil cisterns et Dunkirk were
ottacked without observed result.
During the night of September 28th - 20th
122 aircraft were sent to the following objectives:
power stations and @as works at Borlin. nickel
works near Frankfurt, e. power station near Kascel,
oil stores at Frenkfurt, mireraft factory at
Ansterdem, the Ima Canal Aqueduct, railway targets
in north west Germany. shipping and dooks in the
Channel ports (30 heavy and medium bombers). and
gun emplacaments opposite Dover. In addition 5
sivereft were detailed to lay mines. 8 heavy bombers
and one medium are missing.
5. German Air Force.
Night of September 27th - 28th,
Further report states that a magazine
at a brench of Vickers Armstrong containing commercial
detenators was exploded. It is expected to resume
norm) production on September 50th.
September 28th.
At 9.50 tigle about 160 enery aircraft
crossed the Kent coast. 30 of them flow towards
Louisa and 6 penetrated to the inner ATON. Another
40 want west towards the Themes estuary and the
remaining 90 stayed over the Kent coust. At 1.30
of
Regraded Uclassified
320
- 3
a similar raid of 150 circreft again crossed the
Kent coast, These seattered rapidly and none
penstrated to the London area. In the afternoon
about 90 aircraft approached the Portsmouth erea
but being sighted by four of our squadrons they
did not cross the cocat st any point and jettinesed
their bombs into the sen. Later on boulding by
single circraft WILD reported from senside towns
on the south east const. During these roids
bombing was reported in south-cestern London
area and et Heatings. There 10 no report of
serious damage.
Stemsley of airoraft camuelties.
Destroyed. Probably. Demaged.
by our fighters:
Fighters:
6
3
Unidentified
I
1
-
Bomber
-
-
1
Totals
4
4
1
British 16 aireraft (seren pilots sare.)
Three bombers missing.
During the night of September 28th - soth
openy notivity was on a account increased scale
and/
Regraded Uclassified
321
- 4 -
and was again directed principally against London
and the coast. No interruption of traffic is report
ed, though there were several incidents chiefly
affecting the Southern Reilway. Damage was caused
to 8 factories end at 2 others an interference
with work on account of unexploded bombs has been
notified. Many fires were started but none were
extensive and all are under control. A hospital
at Barnes W&B damaged and Selfridge's was hit
by high explosive. Outside the London area little
damage W&B reported, none of it industrial or
military.
4. Shipping casualties.
By submarine: 1 British ship (5,700 tons)
outward bound in ballest we sunk September 28th
in north western approaches.
A convoy of 16 ships from Canada including
one tanker and 6 oargoes of iron and steel has
arrived sofely.
5. Middle Boot.
September 27th our medium bombers attacked
a concentration of mechadoel transport and also
the fort at Gierabub. Fires and explosions were
caused among the nochanioal transport. One enemy
fighter and one of our airoraft were shot down.
Suden.
September 26th - 27th the enemy attacked
from the air our forward positions in the dallabat
area end also Bure in Kenya without causing
damage/
Regraded Uclassified
322
ID # *
damage or casualties.
o
Ethiopie.
September 28th 6 medium bombers from
Aden dive bombed an Italian aerodrome and
obtained direct hits on e. hangar and & barracks
compound. An enemy bomber and fighter on the
ground are believed to have been damaged.
Regraded Uclassified
323
CONFIDENTIAL
Parephrase of Code Radiegram Received at the
har Department 6123 kothey October 1, 1940
Issue, Filed October 1, 1940
It has been reported by the Military Attache of the
Turid.ch Embassy that there is an excessive concentration of German
trosps plus 6,000 planes on the frontier of the U.S.B.R. He pro-
dieted that Germany will males excessive desends of on economic
nature on the U.S.B.R. or will attack the latter country during
the next three months.
TEATON
Capies to: Military Ade to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
CHI
UPD
CONFIDENTIAL
Regraded Uclassified