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Volume 331, November 15 – November 26, 1940
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Volume 331, November 15 – November 26, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 331
November 15 - 26, 1940
- A -
Book Page
Aeronautical Chamber of Commerce of America
See War Conditions: Airplanes
Argentina
See Latin America
Australia
See War Conditions
- B -
Bailie, Earle
Death reported to HMJr in Jamaica - 11/15/40
331
45
Bank for International Settlements
See War Conditions
Business Conditions
Haas memorandum on situation for week ending
November 16, 1940
68
- C -
China
See War Conditions: China: Gold
Churchill, Winston
See War Conditions: United Kingdom
- G -
Germany
See War Conditions: Foreign Funds Control
Gold
See War Conditions
- H -
Hamburg American Line
See War Conditions: Germany
- I -
Italy
See War Conditions: Foreign Funds Control
- J -
Japan
See War Conditions: Gold; Japan
Regraded Uclassified
- L
Book Page
Latin America
Argentina: Financial delegation received by Bell:
Cochran memorandum - 11/20/40.
331
171
- 0 -
Ordnance
See War Conditions
- P -
Phillips, Sir Frederick
See War Conditions: United Kingdom
Purvis, Arthur B.
See War Conditions: United Kingdom
- R -
Ravenue Revision
Tax Avoidance: Five loopholes described by Sullivan
for HMJr in Jamaica - 11/19/40
126
Doughton informs Treasury that FDR wants conference
immediately after HMJr's return - 11/20/40
184
a) FDR announced he could write a tax bill
in two hours
b) FDR invites HMJr, Doughton, Cooper, George,
and Sullivan to supper November 29, 1940
188,189
1) Sullivan and Blough asked to fly to
Miami with material
195
a) Suggested tax program
271
- S -
Switzerland
See War Conditions: Foreign Funds Control
- T -
Tax Avoidance
See Revenue Revision
- U -
U.S.S.R.
See War Conditions: Foreign Funds Control
United Kingdom
See War Conditions
Regraded Uclassified
Book
Page
War Conditions
Airplanes:
Aeronautical Chamber of Commerce of America
memorandum: "Preliminary Control of Foreign
Sales Negotiations" - 11/15/40
331
29
Priorities in Army-Navy-British program discussed
in memoranda from and to Treasury and Patterson -
11/26/40
27?
a) Knudsen memorandum.
280
Australia: Request that Federal Reserve Bank of New York
open and maintain dollar account - 11/26/40
314
Bank for International Settlements: Federal Reserve Bank
of New York procedure in effecting payments discussed -
11/15/40
18
China:
Burma Road traffic from February 1939 to end of
October 1940 - 11/15/40.
15
Burma Road to be closed for six months: Report from
American Consulate, Rangoon - 11/22/40
220
Exchange market resume' - 11/15/40, etc
1,79,98,
179,203
Export Control: Exports of petroleum products, scrap
iron, and scrap steel from United States to Japan.
Russia, Spain, and Great Britain as shown by departure
permits granted for week ending November 23, 1940
272
Foreign Funds Control:
Germany: Transactions with Chase National Bank and
National City Bank - 11/15/40, etc
5,95,162,172,
176,208,209
Italy: Transactions with Chase National Bank and
Federal Reserve Bank of New York - 11/15/40, etc.
3,94,96,173,
175.205.207.210
Switzerland: "Unique financial situation and its
significance for the United States": Swiss Legation
memorandum left with Cochran - 11/26/40
283
U.S.S.R.: Transactions with Chase National Bank -
11/20/40
177
France:
Report by American Friends Service Committee - 11/25/40
262
Cochran, Pehle, and Financial Counselor of French Embassy
confer with Berle at State Department - 11/26/40
289
a) French West Indies, Martinique, St. Pierre-Miquelon,
etc., discussed
Germany: Hamburg American Line: Working agreement with NYK
Line to collect all passage fares in American dollars
reported to Treasury by State Department - 11/18/40
82
Gold:
China: Gold production in unoccupied China will show
increase for 1940: Report from American Embasay,
Chungking - 11/15/40
13
Refugee governments' sale of gold against blocked sterling
discussed by British Embassy and Cochran - 11/16/40.
51
Japan's Gold Position: American Embassy, Tokyo, report -
11/22/40
216
Allied Gold Reserves: British Embassy memorandum - 11/25/40 260
Regraded Uclassified
- W - (Continued)
Book Page
War Conditions (Continued)
Japan: Possible heavy withdrawals of Japanese funds
from American banks reported in message from American
Embassy, Tokyo - 11/15/40
331
11
Military Planning:
War Department bulletins:
Soviet Mechanized Materiel for Winter Warfare -
11/19/40
111
Miscellaneous Technical Developments in Great
Britain - 11/19/40
116
Ordnance: Basic British needs covered in Young memorandum
to HMJr - 11/26/40
281
Purchasing Mission:
Vesting Order: Official sales of British-owned dollar
securities - 11/20/40, 11/22/40
181,215
Federal Reserve Bank of New York statement showing
dollar disbursements - 11/22/40
212
Shipbuilding: British Purchasing Mission requests clearance
on construction of sixty ships and capital assistance
of approximately $9 million: Young memorandum to HMJr -
11/26/40
276
United Kingdom:
Purvis letter of gratitude to HMJr on eve of sailing -
11/15/40
44
Churchill asks Lothian to express to HMJr his deep
appreciation for aid to Britain - 11/25/40
273
Phillips (Sir Frederick) sails for further discussion -
11/26/40
295
1
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 15, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£195,000
Purchased from commercial concerns E 54,000
Of the sterling sold, £193,000 was purchased by an insurance company.
In the open market, sterling was again quoted at 4.04 all day. Trans-
actions of the reporting banks were as followe:
Sold to commercial concerns
£7,000
Purchased from commercial concerns £3,000
The other currencies closed se followe:
Canadian dollar
13% discount
Swies franc
.2321
Swedish krons
.2386
Reichemark
.4005
Lira
.0505
Argentine peso (free)
.2365
Brasilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-1/8% discount
There were no gold transactions consummated by us today.
No new gold engagemente were reported.
The Bombay gold price was 30 lower at the equivalent of $33.79. Silver
was priced at the equivalent of 43.57#. off 1/40.
In London, the price fixed for both spot and forward silver was 23-1/4d.
off 1/16d in each case. The dollar equivalent of this price is 42.22#.
Handy and Harman's settlement price for foreign silver was unchanged at
34-3/4*. The Treasury's purchase price for foreign silver was also unchanged at
354.
Regraded Uclassified
2
- 2 -
We made four purchases of silver totaling 175,000 ounces under the Silver
Purchase Act. all of which consisted of new production from foreign countries. for
forward delivery.
PMP.
CONFIDENTIAL
i
3
Miss
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 15, 1940
to
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the transactions, on the
tatement attached, in Italian accounts maintained with the Chase National Bank,
lew York.
pm.8.
Cost
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
13
a 55.000
Banca de America
Civine National Bark, N.Y.,
et d'Italia, Rome
for account of Banca
Commerciale Italiana, E.Y.,
for account oi Banca
Commerciale Italiana, Rome
Nov. 14 : 55,000
Panca Nazionale
Chase National
del Lovero, Rome
Bank, E.Y., by
order of Banque
Federale, Geneva
by order end for
account of Moira
Forbes, Turin
Regraded Uclassified
5
TREASURY DEPARTMENT
Mias
INTER OFFICE COMMUNICATION
DATE November 15. 1940
to
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transactions in
German accounts maintained with the Chase National Bank, New York,
Date
Amount Debited
Account Debited
Paid To
November 14
$ 300,000
Reichsbank, Berlin
Chase National Bank,
Rockefeller Branch, N.Y.,
for account of Standard
011 Co. of N.J., N.Y.,
by order of Konversionkasse
fur Deutsche Auslandsschul-,
den, Berlin on behalf of
Pan Foreign Corp., N.Y.
35,000
#
Irving Trust Co., N.Y.,
by order of Export Credit
Bank, Berlin
300,000
#
Chase National Bank, N.Y.,
for account Yokohama Specie
Bank, N.Y., for account of
Yokohama Specie Bank,Tokio
200,000
#
Chase National Bank, N.Y.,
for account of Deutsche
Golddiskontbank, Berlin
150,000
#
Chase National Bank, N.Y.,
for account of A/B Svenski
Handelsbanken, Stockholm,
for account of Reichsbank,
Berlin
Smq
6
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.G.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
A 862.51/4836
November 15, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of a paraphrase of telegram no. 217 dated
November 9, 1940 from the American Legation at Bern,
replying to the Department's inquiry of October 28
concerning purchases of German bonds in the United
States for German accounts.
Enclosure:
From Bern,
November 9.
It
7
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Bern,
DATE: November 9, 1940, 5 p.m.
NO.: 217.
Reference 16 made to your 196 of Oct. 28, 7 p.m.
Legation has inquired into the matter and discussed
it with the directors of several of the banks, who state
that there has been a great deal of activity in German
dollar bonds in the Zurich market for some time past.
About B. month ago the Reichsbank sent a commission to
Zurich to look into the situation here regarding these
and other foreign loans of Germany. This action by the
Reichsbank aroused great interest, particularly among
members of the large German colony who are said to have
been given a tip to purchase such securities which had
reacted favorably to summer successes of the German army.
It has also been reported that the Reichsbank has taken
part in these purchases in the markets of Switzerland,
Apparently the aim of the Reichsbank has been to
buy up and repatriate German loane in foreign currencies
which are held abroad. It appears that Swiss brokerage
firms were authorized to make purchases on the stock
exchange for New York calling for delivery in Lisbon to
be repatriated to Germany eventually. The identical
procedure was used in making purchases through Swedish
brokerage houses calling for delivery to Stockholm to
be
S
-2-
be transferred to Germany from there. Some purchases
which were made in the U.S. have also been delivered to
South America and Mexico where they are to be kept for
safekeeping until such time as they can be transferred
to Germany safely. Due to the danger of sending these
securities through Great Britain's blockade, the Reichs-
bank has found it necessary to place the securities in
other countries of the Western Hemisphere for safekeeping.
There have been set forth many reasons for these
heavy purchases of German foreign loans, which it 18
possible to purchase at around 1/6th of the issue price.
One reason is the problem of German prestige and the
wish to build up an international money market in Germany
to some extent. Another reason 1s the desire to even-
tually secure new loans in foreign markets which will
be needed for purposes of reconstruction if Germany is
able to set up the continental system which it proposes.
The following 18 strictly confidential.
In confirming the above, Rossy of the National Bank
stated that should U.S. authorities frown on these pur-
chases for German account by Swiss banking houses he
would be obliged to take appropriate measures to dis-
courage such purchases. He feels, however, that it would
not be fair to restrict Swies brokers 80 long as German
purchases can be made directly in New York,
EA:MSG
9
DEPARTMENT OF STATE
Washington
In reply refer to
November 15, 1940
EA 862.51/4838
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of a paraphrase of telegram no. 219 of November 12,
1940 from the American Legation at Bern, a further report
in reply to the Department's recent inquiry about current
large purchases of German bonds in this market for German
account.
Enclosure:
No. 219, from Bern,
November 12. 1940.
eh
COPY
10
PARAPHRASE OF TELEBRAM RECEIVED
FROM: American Legation. Bern, Switzerland
DATE: November 12. 1940, 4 p.m.
NO. # 219
Reference is made to telegram of November 9. No. 217 from the
Legation.
Instructions were also received by the British Legation here
to report to its Government on the developments described in
telegram of October 28, No. 196 from the Department. The findings of
the British Legation correspond with mine, and emphasize the probable
desire of Germany to build up. as part of its proposed European
economic and financial system centering in Berlin, a. maneuverable
mass of dollar securities.
I em also informed by the British Legation here that recently
the Director of the Berlin Central Finance Department of I. G. Farben
Industry. Mr. Rong. vas in Basel at the time the Luscher Bank received
an order to buy all available shares of the Koster Konsern on the New
York market. Many transactions for the I. G. Farben Industry have
been handled recently by the Luscher Bank. Lazard Freres and H. Hents
and Company are the New York representatives. Hans Diticheim. who
formerly worked with Rong in Bucharest, 18 a Jew of Swise nationality
and one of the partners of the Luscher Bank.
The British Legation also said that instructions have been given
to the Luscher Bank by the Lander Bank of Berlin to pay the sum of
114,977 francs into the Bank of Sturzeneger and Company of Basel. The
Lander Bank, I was told, is the chief source of payment of the
Propaganda Ministry of the Reich. The Lander Bank was also formerly the
private bank of I. G. Farben Industry, it is understood.
HARRISON.
EA:LWW
eh
COPY
11
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embasey, Tokyo, Japan.
DATE: November 15, 1940, 3 p.m.
NO. : 1150
There have been reliably reported to the Commercial
Attache developments which it 16 believed should be brought
immediately to the Department's attention and to the atten-
tion of the Federal Reserve Bank, ag there are indications
that in the near future heavy withdrawals of Japanese funds
from American banks may occur.
It is reported that negotiations for the early conclu-
sion of a trade agreement by Germany and Japan are under way.
However, the financing of German importe remains an unsolved
problem. It is said that the Germans have been unwilling to
consider Japanese requests for immediate credit for sterling
funds which were advanced to German manufacturers for goods
immediately prior to the outbreak of the war. The Germane
are said to be insisting that all new orders which may be
placed must be paid for in advance in marks. The Germans are
understood to have suggested that the Japanese utilize their
commercial dollar credits in the United States (amounting to
nearly $125,000,000, not including Japanese Government credits)
such funds to be transferred to Germany through Swedish firms,
Russian firms in the United States and German firms in South
America.
Some agreement along the lines indicated would not appear
improbable
Regraded Uclassified
12
-2-
improbable in view of German pressure and present relations
between the United States and Japan.
The Japanese authorities are understood to have informed
exporters on November 14 that in the future all export bills
covering shipments to Sweden must be presented to the
Yokohama Specie Bank and paid in yen currency. Formerly, it
was customary for Swedish interests to open dollar credits
through American banks in New York and such bills were pur-
chased locally by American branch banks the resulting funds
being transferred back to the United States. It is possible
that the procedure is directed against American banking
business in Japan, but it is believed to indicate an inten-
tion to reduce holdings of dollars in the United States.
Until satisfactory arrangements have been made to
liquidate American credits frozen in Japan it 18 hoped that
the withdrawal of Japanese credits from the United States
will not be permitted.
GREW
EA:GL
(COPY:FE:HNS)
EMBASSY OF THE
13
UNITED STATES OF AMERICA
NO. 698
Chungking. November 15, 1940
Subject: Gold Production in Unoccupied China.
Air Mail
The Honorable
The Secretary of State,
Washington, D. C.
Siri
I have the honor to report that the Gold Mining Administration recently an-
nounced an expected increase in gold production in unoccupied China for the year
1940.
Summary
By the end of December of this year the total productions of gold
1a expected to reach 350,000 ounces valued at approximately $200,000,000,
Chinese national currency. The Gold Mining Administration is trying to
increase the production of the metal by granting financial assistance to
private companies, establishing bureaus and fitting out prospecting
parties. Lack of funds seriously handicap the Administration and the
lack of modern machinery ie also a. disadvantage to the private companies.
According to a Government decree all gold must be sold to government
banks but some is held back by the companies and sold in the "black
market".
The total production of gold is expected to reach 350.000 ounces for the
year ending December 31, 1940. This represente a 700 per cent increase as com-
pared with prewar figures. The present official rate for gold is $560. Chinese
national currency, an ounce which will mean e.n. increase of almost $200,000,000.
Chinese national currency, to the nations income.
Of the total output over 95 percent comes from alluvial mining. During the
nest year new deposits. believed to amount to 100,000 ounces were found at Hweitung
in western Hunan. Another discovery was made at Kiangtsing near Chungking where
the alluvial soil is thought to contain 50,000 ounces.
The Gold Mining Administration is taking an increased interest in gold mining
and is engaging in the production of the metal. A cooperative arrangement has been
made with the Sikang authorities and a joint gold mining administration has been
formed. Half of the $1,200,000 capital of the Mo L1 Gold Mining Corporation has
been provided by the Gold Mining Administration and the rest subscribed from the
banks and private interests. Sikang is now able to produce 100 ounces of gold per
month and it is expected that the capacity will soon be increased.
The province of Szechuan has a monthly output between 400 and 500 ounces.
Hunan province is producing about 300 ounces each month but after tapping Hwaitung
reserve the production will increase.
The Gold Mining Administration in addition has established bureaus in Chinghai
and Honan and prospecting parties in Tunnan.
Regraded Uclassified
14
- 2 -
As a further means of increasing production the Administration has encouraged
alluvial mining by private interests. The Administration is greatly handicapped by
its limited annual budget of only $4,000,000, Chinese national currency, but govern-
ment banks are offering to assist by granting loans of $3,000,000, Chinese national
currency. to private concerns.
Another handicap is the lack of modern machinery and the difficulty of in-
porting it. Administration officials are optimistic and state that between 50 and
60 tons of machines have been ordered and are now on the way to Chungking.
All gold mined, according to & Government decree, must be sold to government
banks through agents who are stationed in all production centers. This is rather &
difficult decree to enforce and it is believed that some of the concerns hold back
3 certain amount of their production since they can obtain as much as $900 to
$1,000, Chinese national currency, an ounce for gold on the "black market".
Respectfully yours,
NELSON TRUSLER JOHNSON
riginal (by air mail) and
five copies to the Department
Copy to Peiping
Copy to Shanghai
863.4
JJM:MCL
LD THE
LYSA
LECHNIC IVH1
eh:copy
00 DEC a more
DEWISTRENT
RECEIVED
No. 379
Rangoon, Burns, November 15, 1940.
:5
IDENTIAL
SUBJECT: Statement of Chinese Government traffic over the Burma Railways from
the time of the opening of the Burma Road in February 1939 to the end
of October 1940.
T- DONORABLE
THE SECRETARY OF STATE,
WASHINGTON, D. C.
STR:
I have the honor to report that survlies for the Chinese Government
carried by the Burma Railways from Rangoon to Lashio from the time of the
oraning of the Yunnan-Burma highway (Burma Road) in February 1939 to
October 28, 1940, amounted in weight to 96,808 long tons, exclusive of
2,669 motor trucks, which were also forwarded by rail.
All of the supplies and all of the trucks were shipped by the South-
rest Transcortation Company, the Chinese concern in general control of
Government shirments over the Burma Road. The figures are exact, and they
cover all Chinese Government traffic from Rengoon to Lashio, except occasional
shipments made to retid, some in new trucks en route to China, and & few rail
shipments made by other Chinese Government agencies.
The total of 96,808 tons of surplies included 24,911 tons of arms and
Ammunition, and 5,385 tons of explosives. Other items were 23,715 tons of
ensoline, 1,203 tons of motor-venicle and airplane parts, 2,056 tone of
machinery, and 39,538 tons of miscellaneous materials.
That China has obtained only very limited quantities of war materials
from overseas countries in recent months is indicated by the traffic figures,
which show shipments of only 831 tons of explosives and 552 tons of erms
and amminition since Aeril 1, 1940, Most of these explosives and more than
a third of the other war sunblies were shirmed in the month of April.
Practically all materials and supplies for the aircreft factory of the
Central Aircraft Manufacturing Company at Loiwing, China, have been shipped
from Rangoon by river, but relatively little other freight destined for China
nas gone by that route.
to Rupees 4,753,589. or annfoximately $1,236,436 at the average rate of exchange
provided by the Southwent Transportation Company in the period stated amounted
Payments to the Burne Railways for the Chinese Government traffic
for that period.
Resrectfully yours,
Austin C. Bredy
American Consul
Distribution:
i. In quintuplicate to Department.
2. Coty for Embeesy, Chungking,
3. Cory for Consulate, Kunming.
800
shicopy
ACB/ep
Regraded Uclassified
16
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 835.51/1341
November 15, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
a copy of & paraphrase of telegram no. 238 of October 10
to the American Embassy at Buenos Aires, regarding the
proposed visit of representatives of the Argentine
Minister of Finance to Washington.
Enclosure:
To Buenos Aires,
October 10, 1940.
rs
Regraded Uclassified
17
PARAPHRASE OF TELEGRAM SENT
TO:
American Embassy, Buenos Aires.
DATE: October 10, 1940
NO.: 238.
Department has advised the Argentine Ambassador
that there is nothing to stand in the way of the
representatives of the Minister of Finance coming here
immediately to hold discussions with the Secretary
of the Treasury and other United States Government
officials.
HULL
(SW)
835.51/1341
EA:MSG
Regraded Uclassified
18
COPY
FEDERAL RESERVE BANK
OF NEW YORK
November 15, 1940
Bernard Bernstein, Esq.
Assistant General Counsel,
Treasury Department,
Washington, D. C.
Dear Mr. Bernstein:
I enclose herewith a copy of & letter dated September 20,
1940 which we received from the Bank for International Settlements
in the matter of our procedure in making payments to the debit of
that bank's dollar accounts and making sales of gold from its Gold
Account No. 2 in view of Executive Order 8389, as amended, together
with a copy of our proposed reply to such letter. I shall appreciate
receiving any comments you may care to make respecting our proposed
reply.
Very truly yours,
(signed) T. G. Tiebout
T. G. Tiebout
Assistant Counsel
Encl.2
copy; joa
Regraded Uclassified
19
COPT
BANK FOR International SETTLEMENTS
BASLE
(temporarily at Chatesu-d'Oex)
20th September 1940,
Federal Reserve Bank of New York,
New York.
Dear Sirs,
We wish to refer to your cable No. 427 of June 29th
by which you informed us that you have received a licence from the
U.S. Treasury authorising you to effect payments from our account
which you consider normal transactions,
It is our understanding that the decision whether &
particular operation has to be considered as normal remains with
you and for this reason we venture to spproach you with a view to
obtaining some information as to the principles ruling your decisions.
Going over our records we find that in some instances our instruc-
tions were executed at once, on the strength of the general licence
granted to you, whereas in identical cases you have applied for a
special licence from the Treasury.
You will find attached B. list of all payments which we
have asked you to make from our account since June 29th - when you
obtained the general licence covering normal transactions - with
those payments specially marked for which special licences have
been asked.
No realise of course that many difficulties are raised
by the new legislation and that time must pass before steps to
improve its practical administration in the light of experience
can be taken. Still we mist point out that the present arrange-
ments do constitute a serious interference with the daily business
of this institution. In the hope of securing some improvement in
this connection we asked you in our cable No. 372 of August 30th to
open in your books a new socount "C" in our name, in which we should
maintain a sum equivalent to the dollar balances we hold for the
countries named in Executive Order No. 8389 and amendments. Tie are
grateful for your willingness to open such an account which has
already shown its utility in giving us the occasion to transfer to
it on receipt of Executive Order 8484 the equivalent of dollar
balances held for the account of the central banks of the Baltio
States. Your cable No. 538 of August 29th to the effect that both
accounts require the same treatment under the Treasury ruling has
been noted.
With the two accounts as they now stand we can assure you
Regraded Uclassified
20
Federal Reserve Bank
-2-
20th September 1940.
that transactions passing through Account "B" are such 88 we believe
could be carried out by an American bank without application for a
special licence, and no hope that this assurance will enable you to
regard them almost without exception as falling under the general
licence which has been granted to you in our favour.
We are somewhat at sea in connection with sales of our
own gold from Account No. 2 to the U. S. Treasury (our cables No. 333
of July 23rd and No. 381 of September 13th). Such transactions
have been customary for years, but apparently you are not able to
regard them as falling under the general licence. Would you be good
enough to let us have your views in this connection, as it is
important for us to pe able to gauge the time necessary for pro-
ceeds of gold sales to become available? Nine days were required to
obtain the licence for the sale requested in our cable No. 333.
We fully appreciate that your hands are not free in
these matters and feel sure that you will go as far as you can to
assist us.
I am, dear Sirs,
Yours faithfully,
T. H. McKittrick
President.
Encl,
copy:jba
21
COPY
DRAFT No. 4 (November 15, 1940)
TGT:AS:HMG
Mr. T. H. Mokittrick, President,
Bank for International Settlements,
Basle, Switzerland,
Dear Mr. McKittrick:
We have your letter of September 20, 1940, with the
enclosure therein mentioned, in the matter of our procedure in
making payments to the debit of your dollar accounts and making
sales of gold from your Gold Account No. 2, in view of Executive
Order 8389, as amended.
In your letter you refer to the general license issued
to us to make payments, transfers and withdrawals from accounts in
your name in those casss which we do not have reason to believe
involve other than normal transactions, and you state that in going
over your records you find that in some instances your instructions
were executed at once, "on the strength of the general license",
whereas in identical cases we applied to our Treasury Department
for a special license.
Upon reviewing our records we find that those payments
which appeared to you to have been effected by us under the general
license and which were similar to other cases in which we applied
for a. special license, were actually executed by us under a special
license. In cases in which no obtained a special license on the day
on which we received your cabled instructions to make the payment
we merely advised you by cable that the transaction had been com-
pleted or that the payment had been made. It was therefore natural
for you to assume that these transactions had been effected under
the general license. In the other similar cases the special
Regraded Uclassified
22
-2-
license for which we applied was not received before the close of
business on the day our application was filed, and we then informed
you by cable that we were applying to the Treasury for a license.
It has been this difference in our procedure, we think, rather than
B real difference in the treatment of similar cases which has
occasioned your question.
As to sales of your own gold from your Gold Account No. 2
to the United States Treasury, while it is true that such sales
have been made from time to time over a period of years, we have
not considered that they were intended to be included within the
score of our general license as constituting "normal transactions".
It is, as we are sure you will appreciate, & difficult matter to
formilate any general rule as to what may be said to constitute a
"normal transaction", and it is inevitable that the application of
the rule should at times seem arbitrary.
To appreciate that the delays incident to applying for
licenses to make payments from accounts which have been "blocked"
pursuant to Executive Order 8389, as amended, may well cause incon-
venience, and bearing this in mind, we have given careful considera-
tion to each payment order which we have received from you to
determine whether we could not properly execute the order under the
general license. You may be assured that we shall continue to give
cur prompt and careful consideration to each case, and will try to
avoid any unnecessary delays.
Very truly yours,
copy;joa
Regraded Uclassified
23
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, London, England
DATE: November 15, 1940, 1 p.m.
NO.: 3471
TRIPLE PRIORITY.
FOR TREASURY.
On Saturday November 16th an order will be issued by
the British Treasury, which is not to be made public until
November 19, Tuesday, under which there will be vested in
the British Treasury American securities which should have
been vested under the orders of February and April but
were not because the owners had not registered them, and
because those vesting orders were applicable only to
securities actually on the books of the Treasury.
An intermittent flow of registrations of such securities
has come to the British Treasury since the dates of the
above-mentioned orders, coming from people who did not
comply with the first order for registration through
inadvertence or for other reasons. Since that time the
British Treasury has been awaiting an appropriate time
to issue another vesting order to take care of these cases.
At the time the Low Countries and France were invaded,
they did not issue the order because of the slump then on
the Stock Exchange in New York, since it would have been
unfair to the owners to have the securities vested.
It was at least two weeks ago that a tentative decision
was
24
- 2 -
was reached to select this period but the order was delayed
80 that decision could be reached on the means of dis-
tinguishing in the operation of the order between those
registrants coming into the ownership of securities by
inheritance from American owners, and those registrants
who were late by their own fault or negligence.
END OF MESSAGE.
JOHNSON.
21 5561
EA:LWW
25
PAW
PLAIN
LONDON
Dated November 15,1940
Rec'd 12:44 p.m.
Secretary of State
Washington
3752, Fifteenth.
FOR TREASURY
An announcement of the League Loans Committee states
that: "the suspension of transfers in foreign exchange
for the SERVICE of Bulgarian external loans still con-
tinues and that in consequence no funds have been received
by the paying agents of the above-named loan either to
provide for payment of the interest coupon due 15th
November 1940 or for sinking fund purposts. The committee
have been informed that the equivalent in leva of the
monthly installments of interest due under the arrange-
ment of February 1940 is being regularly paid by the
Bulgarian Government to the credit of a special account
at the National Bank of Bulgaria which has been opened
for the purpose in the name of the bondholders. If
JOHNSON
CSB
25936
26
EH
PLAIN
Stockholm
Dated November 15, 1940
Rec'd 10:33 p.m.
Secretary of State,
Washington.
1038, Fifteenth.
Preliminary total Swedish defense loan 795,000,000
crowns. Bank syndicate issuing for Stockholm 30 year loan
for 30,000,000 crowns at 97% bearing 4% interest, public
subscriptions first day fairly large. Loan to Goteborg of
14,000,000 crowns EXPECTED soon. Trade negotiations with
Italy broken off 2 months ago now being resumed, Swedish
Delegation including head of Clearing Board leaving for
Rome. NEXT WEEK negotiations will bE entered into with
Germany for renewal of trade agreement expiring December 31,
negotiations of utmost importance as Germany is Sweden's
only remaining Export market of consequence but negotiations
will bE more complicated than last year's as Swedish trade
with occupied countries is now under German control Germany's
credit balance in Swedish-German clearing smaller than year
ago owing to larger German purchases of lumber, woodpulp,
Et cetera. September industrial production index 105 many
industries showing marked drops from previous month. In
million
27
EH -2- 1038, November 15 from Stockholm.
million crowns national debt October 4487, Riksbank
November 7 metallic reserve 640, loans discounts 706,
foreign Exchange reserves 768, note circulation 1394.
REfer our 1016, November 4, metallic reserve should read
630. Government asking for additional appropriation current
year 32,000,000 crowns for starting construction 2 light
cruisers. October bankruptcies numbered 127, protested
bills 2827, totaling 1,900,000 crowns. Finland's recon-
struction loan with Swedish Riksbank was raised by 5,000,000
crowns to provide for certain cutstanding items previously
overlooked. Undetermined amount dollar Exchange sold in
Sweden fEW days ago for foreign account.
INFORM TREASURY COMMERCE.
STERLING
JRL
28
WAR DEPARTMENT
OFFICE OF THE CHIEF OF STAFF
WASHINGTON
November 15, 1940.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Morgenthau:
Thank you very much for the following reports,
which you sent me this date:
Part I - Airplanes
Deliveries of and New Orders for Airplanes,
June 9 - November 9, 1940; Unfilled Orders
and Estimated Deliveries on November 9, 1940.
Part II - Airplane Engines
Deliveries of and New Orders for Airplane
Engines, June 9 - November 9, 1940; Unfilled
Orders and Estimated Deliveries on November
9, 1940.
Faithfully yours,
Chief of Starf.
AERONAUTICAL CHAMBER INCORPORATED OF COMMERCE OF AMERICA
29
SHOREHAM BUILDING 15TH EH STREETS, N.W.
WASHINGTON.D.C.
EXPORT BULLETIN NO. 78
GENERAL
TU:
ALL MANUFACTURING MEMBERS.
November 15. 1940.
PRELIMINARY CONTROL OF FOREIGN SALES NEGOTIATIONS
The explanation which follows has been prepared in collaboration with
the Interdepartmental Committee for Coordination of Foreign and Domestic Mili-
tary Purchases,
I. HISTORY
The President, on December 6, 1939, notified the Secretary of the
Treasury, the Secretary of Mar, and the Acting Secretary of the Navy that
ne had created an informal liaison committee, hereinafter called the Inter-
departmental Committee for Coordination of Foreign and Domestic Military Pur-
chases, to represent the United States Government in all matters relating
to the purchase of military or naval supplies, materials, and equipment in
the United States by foreign governments. The scope of the Committee's activi-
ties has now been enlarged to include export transactions relating to all
strategic materials, including machine tools, commercial and private aircraft
and other seronsutical products.
II. FUNCTIONS AND OBJECTIVES
This Committee serves as the exclusive liaison with reference to pro-
curément matters between the United States Government and interested foreign
governments. The requirements of such foreign governments for supplies, equip-
ment, and materials are considered by the Committee in relation to (a) availa-
bility of the desired articles, (b) priority, and (c) prices. An important
part of the Committe's function is to prevent conflict between such foraign re-
quiraments and the requirements of the United States Government and its citi-
zens in American markets.
The Committee also protects the manufucturer by assuring him that, if
preliminary approval to negotiate is granted, he will, if circumstances are not
altered
(1) experience no difficulty in securing export licenses (where re-
quired) or in shipping the material from the United States.
(2) be able to make deliveries as scheduled under the terms of the
contract since the contract will have been negotiated with full
knowledge and approval of all the interested parties in the
United States Government. (To protect export orders the Com-
mittee is moking recommendations to the Priorities Board for
the assignment of priority numbers to all foreign contracts.
The plans for this procedure have not been completely worked
Regraded Uclassified
30
Export Bulletin No. 78 - Page 2.
out; however, we will advise you upon their completion).
In summary, it may be stated that the Committee's chief functions are:
(1) To establish liaison between the United States Govern-
ment agencies (State, Mar, and Navy Departments, and
the Advisory Commission to the Council of National De-
fense), foreign purchasers and; indirectly, interested
manufacturers.
(2) To prevent the possibility of embarrassment to manu-
facturers who might make commitments which they would
later find impossible to fulfill.
III. ORGANIZATION
The Committee is composed of Mr. Philip Young (Treasury Department),
Rear Admiral Ray Spear (Navy Department), Major General J. H. Burns (War De-
partment) and, in an advisory capacity, Colonel Russell L. Maxwell, Administra-
tor of Export Control.
In certain British Negotiations there is associated with the Inter-
departmental Committee the Army - Navy - British Purchasing Commission Joint
Committee composed of the following:
Air Commodore G.B.A. Baker, British Purchasing Commission
Mr. C.R. Fairey, British Purchasing Commission
Major General George Brett, Acting Chief of the Air Corps, U.S.A.
Major General R. C. Moore, U. S. Army
Rear Admiral John H. Towers, Chief, Bureau of Aeronautics, Navy
Captain Walter W. Webster, U. S. Navy
Mr. Philip Young, Interdepartmental Committee
The Army - Navy - B. P. C. Joint Committee is also known as the Stand-
ardization Committee. Under the Standardization Committee is the Allocation Sub-
committee composed of the following:
Dr. A. E. Lombard (Chairman)
)National Defense Advisory
(Vacant)
)
Commission
Mr. C. R. Fairey
)
Air Vice Marshall Cave-Browne-Cave)
British Purchasing Commission
Major E. M. Powers
)
Major E. E. Longmead
United States Army
Captain D. C. Ramsey
Lieut. G. N. Anderson
3
United States Navy
Mr. J. C. Buckley
Interdepartmental Committee
Regraded Uclassified
31
Export Bulletin No. 78 - Page 3.
The Standardization Committee and Allocation Subcommittee concerned
with British Purchases are charged with the following duties:
(a) Reconciling the technical differences between aircraft
and engines about to be constructed or ordered by the
United States and British Governments. (The ironing
out of these technical differences will allow speedier
production of a greater number of units than heretofore
contemplated.)
(b) Allocating such increased production of units as re-
sult from the speading up of delivery (made possible
by either the Standardization Committee's work or
other means.)
(c) Allocating any production that might be made available
through erection of new plants or expansion of exist-
ing units.
IV. POLICY
The Interdepartmental Committee functions as a coordinating group
with respect to preliminary negotiations for purchase by foreign governments
or private buyers of strategic materials or equipment produced for export
in the United States. Where the intended purchase of such materials totals
one thousand dollars or more (all aeronautic items are considered strategic
materials) the foreign buyer ia expected to report his intention to conduct
such negotiations to the Committee. However, it should be noted that while
the Committee desires such notification of intent to negotiate, there is no
legal authority to enforce it and actual compliance is voluntary.
V. PROCEDURE
The general procedure followed in advising the Committee of inten-
tion to carry on negotiations for the foreign purchase of strategic materials
totaling one thousand dollars or more is as follows:
General Procedure:
After the prospective foreign purchaser* has held exploratory and edu-
cational conversations with different manufacturers to determine what makes and
types of equipment (planes, engines, parts, etc.) he would like to buy, he then
files, with the Interdepartmental Committee, a "Report of Preliminary Purchase
Negotiation" (copy attached and hereinafter referred to as a P.N.R.).
*The Interdepartmental Committee will only recognize, as negotiators, such
non-diplomatic agents of foreign governments who have been registered with
the State Department in accordance with the provisions of the Espionage Act
(Title VIII), June 8, 1917 (40 stat. 226).
Regraded Uclassified
32
Export Bulletin No. 78 - Page 4.
The Committee on receipt of the P. N. R. (11 copies to be filed by
British and 7 for other countries) will move in accordance with the procedure
outlined in Section 6 entitled "Routine". Upon completion of its inquiry the
Committee will notify the applicant thats
(a) The P. N. R. has been approved, 1,e., the negotiations
may proceed.
(b) The P. N. R. has been rejected and further negotiations
are discouraged.
(c) The P. N. R. has been partially approved, and an alter-
native or compromise plan should be worked out before
negotiations proceed further.
British Procedure:
Procedures, now in force, are described below:
There are the three following methods of working through the Inter-
departmental Committee in the purchase of aircraft and engines by the British;
in the second and third methods it is the foreign buyer (British Purchasing
Commission) which approaches the Committee.
(1) The first method does not call for a P.N.R. since it covers the
British military aeronautical production quota which has already been author-
ized and provides for delivery of a definite number of units and types during
the period from July 1, 1940 to July 1, 1942. Negotiations within the pre-
scribed quota limits may be freely entered into; however, at least seven days
before the signing of a formal contract for the delivery of any aircraft or en-
gines already provided for in this British military quota, a report known as
the "Seven Day Advice Form" (see attached copy) should be filed with the Com-
mittee. (Upon receipt of this "Advice Form" it is sent directly to the Nation-
al Defonse Advisory Commission.)
(2) The second method, which involves a P.N.R., applies to the con-
templated purchase of strategic materials (such as commercial and military air-
craft or engines) by any British Dominion or Crown Colony. If the P.N.R. is
upproved for these purchases, a "Seven Day Advice Form" must be filed prior to
signing a formal contract.
(3) The third method calls for both a P.N.R. and a "Seven Day Advice
Form". It applies to all military aircraft, engines and propellers which are
produced in excess of the quota referred to under method (1),
It should be noted that the "Seven Day Advice Form" is filed by the
British Purchasing Commission for British purchases only.
Non-British Procedure:
In other than British cases where & private individual or firm is the
purchaser (such as private airlines, civil pilots, or aeronautical firms) the
Amarican manifacturer (seller) may prepare and file with the Interdepartmental
Regraded Uclassified
33
Report Number
Date
TO:
PRESIDENT'S LIAISON COMMITTEE
FROM:
REPORT OF PRELIMINARY PURCHASE NEGOTIATION
1. MATERIAL
(a) Full description and identification -
(b) British or American specification? -
(c) Mark -
(d) Navy, Army or Air involved? -
2. APPROXIMATE QUANTITY
3. APPROXIMATE TOTAL VALUE
(a) Purchase Price -
$
(b) Capital assistance divided between:
1. plant -
$
11. equipment -
$
111. other assistance -
$
4. SUPPLIERS
(a) Name
(b) Plant used (If unknown, ao
state)
5. REMARKS
Regraded Uclassified
34
Advice Number
Date
To:
Liaison Committee
From:
Advice of Intention to Place an Order under
14,375 Airplane Program
1. Order covered by this advice:
Seven days hence, we propose to place the following order:
QUANTITY
DESCRIPTION
2. Proposed delivery schedule:
2. Status of Orders for this item:
4. Action by Advisory Commission:
5. Remarks:
Regraded Uclassified
35
Export Bulletin No. 78 - Pege 5.
Committee the P.N.R. or D. letter containing the essential information. If
the purchaser wishes, he may have some official in his Embassy or Legation
at Washington handle the P.N.R. or letter. (In such cases the foreign embussy
or logation will receive prior notice.) However, & P.N.R. should be filed
in all cases when the purchase involves large quantities of strategic mater-
jals.
VI. ROUTINE
The Interdepartmental Committee proceeds an follows in the hundling:
of a P.N.R.:
(a) A check up is made with the State Department to ascer-
tain if there is any foreign policy reason which might
proclude strategic materials shipments to the country
in question.
(b) The P.N.R. is sent simultaneously by messengers to A
liaison officer in the National Defense Commission and
to the Interdepartmentol Committee members in the War
and Navy Departments. In the Defense Commission in
the case of ceronautic material the P.N.R. is referred
to the Aviation Division. Through the War or Navy Do-
partments copies are brought to the attention of the
Joint Aeronautical Board, Bureau of Asronauties and
other interested offices or divisions in those Depart-
ments. After these several offices have made their
recommendations, they are sent to the Defenge Commission
for coordination. Then the final complete recommendation
is sent to Mr. Young's office.
(c) When the recommenation, whether favorable or not, is
received from the Defense Commission, the Interdepart-
mental Committee will send written notifications to
both the foreign applicant and the American manufao-
turers concerned that the P.N.R. has or has not been
approved.
(a) It is expected that the War and/or Navy Departments
will arrange to send written notifications to their
inspectors or procurement officers in the plants
affected by approval of P.N.Ra.
(e) The time normally required to have a P.N.R. acted
upon varies from two (2) to seven (7) days.
VII. CONCLUSION
None of the foregoing information Is to be construed as applying to
the sule of used equipment nor are negotiations relative to sales to the
Regraded Uclassified
36
Export Bulletin No. 78 - Page 6.
non-contiguous territories of the United States subject to the procedure set
forth in this bulletin.
This bulletin contains only the essential descriptive details of a
system of prior control which directly concerns the prospective buyer from
abroad, but is of considerable interest to the manufacturers. The organiza-
tion and procedure can be no more static than the conditions which they pro-
pose to control. The Chamber will follow developments closely and supplement
this bulletin as required.
Nothing in this bulletin is meant to imply any change in the export
release policy of the Aeronautical Board nor of the export licensing require-
ments and procedure of the Department of State (Division of Controls).
I. H. Taylor
Manager, Export Department.
Regraded Uclassified
CONFIDENTIAL
37
Parapherase of Code Cablagram Incoived at the
War Department at 9:10 A.M., Nevember 15, 1940
Burlin, Filed November 14, 1940.
German any dispositions are stated by a seures which onn
be considered fairly reliable to be in part as follows:
Area
ADMY COMMANDER
Burdeaux
Dellam
# Divisions.
Anstria-Bavaris-
Redeberma
16 Divisions
Boharda.
(colonial equipment)
Ruania-Burry-
Blaskwits
16 Divisions
Slovakia.
the center of gravity of the any of General Elaskewits
is shifting stealily southeastward.
The navy should be informed of these dispositions.
PETTON.
Distribution:
Military Mde to the President
Secretary of Ver
State Department
Secretary of Treasury
Aset. Secretary of Mar
Chief of Staff
upd
OHI
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
38
Paraphrase of Code Radiegram
Received at the Ver Department
at 7055 A.M., November 15, 1940.
Belgrade, filed Nevember 13, 1960.
Until Christmas the weather senditions in Threes will
be faverable, and remeuvering in that area will be easier than
in Albenia.
The German dispositions remin generally mehanged,
except for their treep movements into Rumain. To date their
strength in this area. can be estimated at 30,000 troops.
The 6-8 of the Yugeslav Army states that as a result
of the Meleter visit it is probable that a combined Garman
Bulgarian Army will seen ⑈ into notion. This officer correctly
prodicted an Italian offensive against Greese this autum, and
that Certury would postpons deboushing from Rumania until its
rearward lines of communication between Rumania and Germany were
i
FORTIER
Distribution:
Military Aide to the President
Secretary of May
State Department
Secretary of Treasury
Asst. Secretary of Mar
Chief of staff (2)
War Plans Division
Office of Navel Intelligence
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
39
Faraphrase of Code Cablegram
Reseived at the Bar Department
at 6:20 P.M., November 15, 1940
Lendon, filed 16,00, November 15, 1960.
1. The Bomber Command conducted no daylight operations en
Thursday, November 16. That night it was planned to dispatch a
total of 186 benbers, 45 against Berlin, 17 against easy railroads,
eight against parts, 11 against airfields, eight against oil tar-
gets, and 37 against Ital ian targets. In spite of an electrical
storm and severe ising conditions over Germany, the bombing results
during the night of November 13-14 were good. There ware 72 sorties,
with two planse lest and three crashed - landing. That night
Wellington bombers of the Royal Air Force supplemented the recent
attack by the Fleet Air Are by dropping too teas of bombe on Taranto.
Operations of the Coastal Command were routine, with 48 patrol nic-
sions, 22 corties and 20 canvey esserts. The Fighter Command opera-
ted 627 planse on 114 patrols.
3. Daylight operations of the German Air Perce an November 14
consisted mostly of attacks against shipping and recommaissance mis-
sims, That night a large scale attack, ariginating from Demark,
Holland and France, was made on Coventry. There were science attacks
elsewhere.
3. Six British airdrams were attacked, but the only damage
CONFIDENTIAL
Regraded Uclassified
40
CONFIDENTIAL
was at - field where a crater so feet wide and 25 feet does was
mde. Five fields are reported either whelly w partially
able. Coventry suffered major damage from the effects of high w
pleaive books, nines up to eight feet in length, and - 100
emilary bonks. It is reported that there are at least 200 fires
and a shortage of water. Rail and telephone service is badly dis-
organized. It is considered invoitable that & considerable musber
of important multions plants, public services and public utilities
suffered great damage. Greemwish also suffered major damage, with
reports that mero them 100 houses were demelished. Damages clas-
where were minor.
4. The British lest me planes; while German lesses were 20
confirmed, eight probable and nine damged.
LEE
Distributions
Military Also to the President
Secretary of War
State Department
Secretary of Treasury
Asst, Secretary of Mar
Chief of staff
Her Plans Division
Office of Naval Intelligence
CONFIDENTIAL
11
CONFIDENTIAL
Paraphrase w Code Reflegree
I the I s a
at 12:42 P.M. November 15, 1940
Belgred, filed 25:50, Nevember 15 (7), 1940.
In Serbia occret mobilisation extiments despite fall
of Nedic. Today 6 active divisions of 3rd and 9th -
plete their mobilisations. 3rd Any funes Alberta and sub
watches Bulgaria. the too andos are throwing off their to-
serve divisions in varying degrees. within the andes 14-
grouping of functions appoars to be in progress. It is w
lieved w may Tegaslew officers and military attaches that
I I 2 I $ I I I I
were and that the present government will continue
to Germany.
FORTINE.
Distribution:
Military Aide to the President
Secretary of Ver
State Department
Secretary of Treasury
meet. Secretary of War
Chief of Shaff
War Plans Division
Office of Noval Intelligence
CONFIDENTIAL
Regraded Uclassified
42
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 15, 1940.
No. 246
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. Air Force Operations.
Weather conditions were excellent.
During daylight of the 14th the German Air Force was
active over southern England. Dive bombers are said to have been
employed in some instances and to have sustained heavy casualties.
German night activity was on an exceedingly heavy scale. While
some bombs were dropped in the London area, the focus of attacks
was over the Midlands. Coventry, site of many aircraft engine
plants, was subjected to particularly long and heavy raids. The
Germans claim to have dropped 500 tons of bombs here and the Brit-
ish authorities estimate that about 1,000 casualties were caused.
The R.A.F. raided Berlin last night, where consider-
able resistance seems to have been met. Other raids, apparently
widely dispersed, were made on 26 German occupied airdromes and
harbors. These included points in Norway.
II. Greek Theater of War.
Greek counterattacks continued. They were apparently
local in nature. Air activity was widespread but the forces em-
ployed seem to have been small.
III. Mediterranean and African Theaters of War.
No reports of ground or aerial operations available.
RESTRICTED
43
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 16, 1940.
No. 247
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. Air Force Operations.
During daylight of the 15th the German Air Force con-
ducted widespread raids, mostly by small elements over England. Last
night their operations centered over London. The raids were very
heavy, involving about 500 planes and lasted from dark to 7:00 A.M.
There were some minor night attacks elsewhere in England; Coventry
was attacked again on a small scale.
Last night the R.A.F. made a relatively heavy attack
on Hamburg, where docks and oil facilities were bombed. Airdromes
and ports in German-occupied territory were also raided.
II. Greek Theater of War.
The Greeks report advances by their ground troops all along
the front. It is still uncertain whether this represents a Greek
offensive movement or merely the occupation of ground evacuated by
the Italians in the course of the reorganization of their forces.
Aerial activity on a small scale was widespread throughout the theater.
III. Mediterranean and African Theaters of War.
No ground operations and only minor air activity reported.
RESTRICTED
Regraded Uclassified
44
150 CENTRAL PARK SOUTH
havember 161
Dear Henry,
my "Cupper has
been delaged a week
& consequently is is
one lodes the 15 that
we appear to be fetting
If. Even now I shall
have my fingers Crossed
in case we get held
-up ab Bermude
Before Ifo I wank
to thank you for are
the consideration and
heep you have fiven the
Regraded Uclassified
personally during a hore time to Dep chart
Course. meantime
trying year - que
your b from jous
again a thousand thanks
as you thow so
two hon to the Cause
for I have nob said
But for that I think
ang thing officials Le
Some times I might has
Mannet, his before
Proken entreg as
having, and because I
administrative work
am leaving, I have hald
have heavily on my
Young he may be in
touch with him X other
body V Foul ! from
how on Ishall
(epts during my abence
as you know he was
be organised - in fact
dent 6 me with the
an 1015 organised
highest word fro m
20 that Such administrate
Condon to be part of
work Lice be on
my organization I
hatend to cheel on
others Houlders V
their russ carefully
Therefore there Shaned be
while kam over,
Regraded Uclassified
Lesses is excellen
I think, & & would have
Hown down to Jamaie
to Lee you lather than
these gon. I like his
sproach & Espe. Between
ruselves I pathes they
are all a little Sorried
alout the "Beaver"
I am hoping to
accomplish Some they
towards more understand
in London! Phillip
is staging Ger her I
Reb here tarie then
leave immediates
again to very much
appreciation of are you
have done to case my
bard, twith my
to you Y mrs
ar ther
Regraded Uclassified
45
PASTRY DEPARTMENT
U.S. COAST GUARD
U. a.
Rept. 1930
OFFICIAL DISPATCH
transmit
16 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
LTCOMDR D E MCKAY CASABLANCA HOTEL MONTEGO BAY JAMAICA
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
PLEASE INFORM SECRETARY THAT EARLE BAILIE DIED LAST
NIGHT GREAT SHOCK TO ALL
HENRIETTA KLOTZ
OPERATOR'S RECORD
INITIALS OF "RELEASING" OFFICER.
OFFICIAL BUSINESS.
. a. - - -
3-18417
Regraded Uclassified
46
ASURY DEPARTMENT
U.S. COAST GUARD
U.S. COART GUARD
Sept. 1900
OFFICIAL DISPATCH
transmit
16 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
YOUR LETTER RECEIVED X DICK WRITING IN DETAIL X YOU ARE
CORRECT 500 NUMBER 5 PURCHASED OCTOBER 30. EFM NOW HAS
1800 NUMBER 5 AND DICK WILL BUY 200 MORE X MOORE BOUGHT
1000 NUMBER 5 AT 22-1/2 3/8THS FOR TRUST YESTERDAY
HENRIETTA KLOTZ
OPERATOR'S RECORD
OFFICIAL BUSINESS.
INITIALS OF "RELEASING" OFFICER.
& - - - 9-18417
Regraded Uclassified
Mrs. Klotz
47
November 16, 1940
Radio to Secretary Morgenthau
Kingston, Jamaica
Forrestal planning visit to Beeing, Douglas and
Lockheed starting in Settle November 25th. Have advised
British but do not consider Treasury representative
necessary unless you insist as no serious problems exist
currently at these plants. Expect to take next week off
but Buckley who has been away this week will be on job.
Our pleas will be adjusted to meet situation if you insist
on West Coast trip but strongly advise against asking
anyone to fly northwest route this time of year. Please
advise.
Philip Young
Copy to Mrs. Klots
Regraded Uclassified
F
48 11 - 16 - 40
FOR
CONNECTION MEXICAN
G X
EGRETS REQUEST SULLIVAN ONE
0 ERNMENT INVITATION SEND OUR
X
TUESDAY AND SEND
AIRMAIL HALF DOZEN MOST GLAR,
/ INSTANCES TAX EVASI LOOPHOLES
OR INEQUALITIES X
EACH,POPULAR EXPLANATIO WHICH
zharaxkn
STANCES WHICH NILL STRIKE MAGIN
A ANNOUNCI NG CONGRESS
WOULD ASKED ABOLISH TAX
AE AG ViA
sexxern
nahe X
..... $ 1,40
.......
CAN USE AND UNDERSTAND OVER RADIO
FIRST WEEK DECEMBER X WISH IN-
strice
EXEMPT X CHECK FOR DATE AND TIME
02:12A
sepay.
Wanatzo
ZAUUU
AKRUVT3
97407702
463734 . z o x n b
049
ON AIG WITH BELL AND WHEN IT 15
DEFINITE CABLE ME
SIGNED BEST RE-
GARDS
H M JR
*
"A16" JUST AS RECD
Regraded Uclassified
49
n°5
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 16, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L88,000'
Purchased from commercial concerns
I 9,000
In the open market, sterling held steady at 4.04. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
I 3,000
Purchased from commercial concerns
L11,000
Closing quotations for the other currencies:
Canadian dollar
13% discount
Swiss franc
.2321
Swedish krona
.2386
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2360
Brazilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-3/16% discount
We sold $800,000 in gold to the Central Bank of the Uruguayan Republic, to be
added to its earmarked account.
No new gold engagements were reported.
The Bombay gold price was equivalent to $33.75, off 4$, and silver was 1/84
higher at the equivalent of 43.71#.
10.m.8.
50
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 16, 1940
TO
Secretary Morgenthau
FROM Kr, Cochren
STRICTLY CONFIDENTIAL
Dr. Somary, the Swine economist who has been acting for several months as
financial counselor to the Swiam Legation, called on me yesterday morning at 11 o'clock.
Dr. Somary le concerned lest the United States might, even without entering the war,
trice some steos to stop payments to Germany and Itely, which might be extended in some
form to other European countries, most likely those touching upon the two above-mentioned
states. Dr. Somary cited the example of Canada which under date of September 20, 1940,
had issued orders to bar all payments to continental Europe, unless they are made with
the specific approvel of the Canadien Exchange Control. Dr. Somery stated that any
such application by the United States of control over financial transactions with
Switzerland would be extremely detrimental to the latter country. Re thought it
návisable to give us arguments against such a step in advance of any possible applica-
tion thereof, rether than wait until such action may take place. and then endeavor to
have Füll exception made for Switzerland.
I told Dr. Somary I thought that both the State and Treasury Departments were
"ully EMETS of the reasons which his country, and also Sweden, had advanced on several
Jocasions, principally through their Legations in Washington, against the imposition
of any control which would apply to their two countries. I told Dr. Somery, however,
that if he desired to proceed with a memorandum such B.S. he proposed, I would, of
course, accept such a document for the Secretary's confidential and personal informa-
tion, Likewise, 1 thought such 8 document would be accepted by Dr. Feis for the
Secretary of State, Dr. Somary will therefore, I understand, proceed with the prepara-
tion of 8 brief, informal memorandum in the premises. He will point out that Great
Britain has seen fit to give Switzerland exceptional treatment, this being the only
country in Murope to be treated on the same basis 8.8 the United States under British
paying regulations. Furthermore, Italy 98 well B.O. Great Britain, is granting special
dispensation to the Swiss to permit the delivery to Switzerland and export from
Switzerland of goods carried in steamships chartered by the Swins from Greece. Dr. Somary
stressed as hie main noints, however, the fact that Switzerland is the remaining Tri-
pertite partner of the United States. under the monetary accord of 1936, and is the one
country in Europe which is being faithful to D gold policy similar to and cooperating
vità our OVD,
Dr. Somery does not expect the war to go into a third winter. His wife had Just
arrived from Switterland via Soaln and had described to him the appalling poverty which
now obtains in Sonin. Dr. Sonary feels that the cost and destruction of the wer 88
vaged at present and the resulte of blockedes will be 60 heavy that some conclusion to
the var must be reached within the next twelve months. Be stressed the degree to which
this 11 e. VAT of nerves. He is of the opinion that England is suffering much more
severe punishment than Germany 1a the my of bombings. but he is heartened by the
oral and military resistance that the British have shown.
BMP
Regraded Uclassified
November 16, 1940
Acting Secretary Bell
Mr. Dechran
STRICTLY CONFIDENTIAL
When Mr. Fineent, Financial Counseler of the British Robaccy. called on 06
at 12:35 noon, November 14, be raised with - again the question M to vasi our MM-
tude would be If the British Treasury success in negotiating with certain refuges
governments is London for the sale to them of gold against blocked storling. The
question would aries with as when 11 wight be a matter of disposing of gold held
under earmark in the United States.
I sold Pincent that I had subsitted this matter to Decretary Margesthan
briefly before the Secretary departed for the West Indion. I 1st Pinsent have ⑉-
fidentially that the Secretary es first glames secued to see no objection that might
arise on ear part. Ve vero, beverer, fully exere of the technicalities involved.
When Pineent pressed so, in his usual fashion, for a definite comminent on the part
of the Treasury that w would licemes the contemplated transactions when funds are
involved of countries ever which ve sev have control I definitely refused to give such
- commitment. I stated that I had explained the matter briefly H the Secretary, but
24 latter had not had opportunity to make any 0650 study thereof, or to call is his
assistants for consultation. I vas net villing to take the miter up with the
Secretary by cablegram daring his holiday. Purthermare, I 414 not think it correct
to seek 5 commitment from Acting Secretary Bell in the I advised Mr.
Pineent that this matter should be hold entirely is aboyance until Bir Frederick
Phillips arrives is this country. The latter may shen, if be desires, take up this
or any other prepesitions directly with the Secretary of the Treasury. Vas Pinsent
then insisted that seal of " from the Treasury and his Rubeacy sight pet together
in the mentine no study various planse of the question, I again refused. 1 sold his
that he was not yes able to report my progress made is Lendon toward yarchasing the
gold mosots against sterling. If there is my preliminary work to be done, I thought
it vas with the British. I know that 0200 their proposal val put to the Secretary,
YO could give speedy consideration thereto. The understanding vas that Pineent would
advise his people is Lenden that the Treasury desired that this question be not
raised prior to Phillips' arrival, unless Pinsent heard from as to the centrary after
1 had talked with Asting Decretary Bell later in the day. Mr. Pinsent telephoned M
yesterday morning and I told his that Mr. Bell had supported by position entirely.
Voes this matter come up for sensideration ve anturally shall have to give
attention to various aspects of the problem. There is, first, the serious quostion
as to whether the Federal Reserve Bank of Box York would w disposed so honor
instructions from the refuges governments is Leadon for the utilization of gold ench
as that hold under earmark for the Notherlands 3mk, naless and until the legislation
Regraded Uclassified
52
- 2 -
advessted w the Federal Receive to protect the in this field is adopted. It to
4 understanding that - financial Lawyers is Bev York consider this proposed bill
understitutional and will recommend to their banks against expecting themselves to
damages which night result from carrying out transactions in the light of a law which
wight be declared unconstitutional within a paried vbareta slaims sould be más
against the bealth. Purthermere, is 11 to ver interest that the gold receive of
these sountries which have been invelved should w turned is 16 the British for sterling
which BAS only to used in the sterling areat Veuld 11 be more to our interest for the
gold in question to be sold directly to BE and 11 to left to the British and the
representatives of the refuges governments to work out - subsequent transmetions
charoby dollars sight be máse available to the British against sterling?
Mr. Pincent lot se have that a further vesting order was to be taken by bis
Severament toward taking over securities which had net been registered is time for
vesting under provious orders. That 10, this nov order will simply claim up the
residues of coearities already rested, and will 0414978 only these same committes.
Sixes having this word from Pincent, we have received & schlegrom from the Tabancy is
Lendon reporting the transaction. This cable is No. 3471. dated Bevember 15, 1940.
Mr. Pinsent stated that a problem had arison as to bev to facilitate the
business of the United States officials and their personal and employees visa any be
in British pessessions is this heal sphore for the paryest of sotublishing and sporating
eral bases. That is, come scheme met be verbed out se that these people will net be
manyered by British exchange centrol regulations. Placent premised to cand &
separate upon this subject.
BMS
ENC:dm:11.18.40
Regraded Uclassified
53
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Paris) Vichy, France
DATE: November 17, 1940, 5 p.m.
NO.: 966
FOR THE TREASURY DEPARTMENT FROM MATTHEWS.
I was visited this morning by Couve de Murville
who was here for a day. He spends most of his time now
between Paris and Wiesbaden. Couve spoke frankly and
made no secret of the fact that he is opposed to the
so-called policy of collaboration between France and Germany.
He said that it is possible to carry out such collaboration,
but only at the expense of complete loss of independence
for the French. He does not think it likely that there
will be any immediate important material benefite to his
country. I told him in confidence that the Marshal has
decided to inform the Germans that the French can no longer
continue payment of the daily amount of 400,000,000 francs
to the Germans, and Couve seemed to be surprised and pleased
at this. However, he told me, no communication to Wiesbaden
has as yet been made to such effect. The Germans do not
seem to fully realize as yet the dangerous potentialities
of serious inflation; on the other hand he has seen no
indication that monetary inflation 18 desired by the Germans.
Couve said that the Germans are beginning to use part of
the huge sums accruing to their credit in their Bank of
France accounts for the purpose of making heavy purchases
of industries in France.
A great
Regraded Uclassified
54
- 2 -
A great deal of interest 1s being shown by the
Germans in French dollar balances in the United States
and the possibilities that such balances might be
utilized. No formal demand has been made of the French
that they make efforts to have the balances unblocked
by some means or another; however, the Germans would like
to see these balances utilized for substantial purchases from us
of cotton and petroleum by the French, of course for the
use of the Germans.
French gold is of less interest to the Germans,
although they knew where it was located and the possibilities
of obtaining the stock which the RICHELIEU took to Dakar.
Couve told me that the figure is 30 billion france - which
18 the first time I had heard the amount.
In view of the severe provisions of the recent anti-
Jewish law, I asked Couve what would happen to Rueff's
position in the Bank of France. It was not yet sure, he
said, but he hoped very much that they could find a way
to keep him with the Bank.
END OF MESSAGE.
MATTHEWS.
EA:LWV
55
25995
MH
GRAY
Berlin
Dated November 16, 1940
Rec'd 10:30 a.m.
Secretary of State,
Washington.
4728; November 16, noon.
Today's morning press (#) the inauguration of a
clearing system for payments between Germany (including
the protectorats) and France (including the French
Colonies, protectorates, African mandated territories
and Syria, Lebanon). Payments for commodities SERVICES
as well as certain capital payments may bE made OVER the
clearing system. The rate of exchange provided is one
mark twenty francs.
Inform Treasury and Commerce.
MORRIS
ROW
(#) Apparent omission
56
ADDRESS THE CORRANDANT. F & COAST -
- - TO no.
TWATEISEA UNDINHORT
10 THE
TREASURY DEPARTMENT
OFFICE $
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON
16 November, 1940.
-
SECRET
From:
Spagent, Shanghai, China.
To :
Mr. Dietrich.
Message from Mr. Nicholson.
Thanks for your message of November 9th. I see
no objection to the procedure outlined and have acted ac-
cordingly. Best regards.
Note: This message refers to cable sent to Mr. Nicholson in
connection with Executive Order No. 6560 as amended
and Executive Order No. 8389 as amended.
FD
CONFIDENTIAL
57
Puraphrase of Code Radiogran Reseived at the
Yes Department on November 17, 1940.
London, Filed 20,05, November 16, 1940.
1. The Dember Daylight carried out ne daylight operations an
Saturday, November 17th. That right it w planned to disputch a
total of 109 benbers, x against German infustrial plants, 35 against
airdromes and 22 against railreads. the operations of this Command
during the night of November 14-15th ware extremely successful.
Thirty boabers dropped 17 tax of high explesive bashs, 4,000 insu-
diary bembs and six 1,500-1b. bonks. Other were very well
executed. These included 13 tome of bembe, three of which ware
1,000-lb. bombs, dropped on - eil plant in Hunburg. This Commi
carried out a total of 124 sertice that night, with ten planes mis-
sing, two last in the sea and - cresiting on landing. the Coartal
Command operations by day and might were entinfastory, with 44 patrol
nissions, 92 serties and 13 convey courts. no planes on either side
were lest. the Fighter Commend operated 738 planse - 107 nissions.
2 Daylight operations of the German Air Force - November 16
emailsted metly of four essept by fighter formations, by about 30,
60, 30, and 40 planse, respectively, over South and Southeart
England. In addition, recommissmos nisal.ens were none About
350 Issue planes was platted.
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
58
3. Seven British airtreases MN reported attacked. Seven
planes were damaged at che field and - buildings end trucks were
hit at mother; otherdes there were minor damages only. Eight air-
fields are either whally or partially out of Parashmte
bombs in Landon seriously damaged a musber of buildings at 2 pointe
and set & p tank on fire. There were many other facilities damaged
in the London area and a sonsiderable muber of fires, including these
in & tire plant and an ordumes fastory. Two railreed stations sere
danaged. Piccedilly Street opposite Green Park was hard hit, to in-
slude may hotels and clubs. the Oxford area suffered a sizilar fate,
the bombs in this district felling but three blooks from the Embasay.
One arater neasured 90 feet in diamster and 50 feet in depth. It appears
that both sides are going in for heavier bashing.
4. Oursum plane losses way 19 confirmed, two probable and four
damaged. The British lest - plans with its pilot. In the Eastern
Madi terranem the British lost two planes and the Italians nme.
so During the night of November 14-15th the Fighter Command had
119 patrols and 123 sorties in the air and aucessed in knowledge down
one German bomber. This is the largest right fighter effort made to
date by the British. They are extremly hopeful that their scientifis
interception development, if it is successful, will go far is deciding
the final outoms of the were
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
59
6. There is no new information of the Molotov visit.
7. The German air raid at Coventry was apparently carried
out by 430 planes, of which about 340 were long range bombers.
This is very likely a maximum German effort.
LEE.
Distribution:
Military Aide to the President
State Department
Secretary of Treasury
Asst. Secretary of Mar
Chief of Staff
War Plans Division
Office of Neval Intelligence
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
60
Brief of Paraphrase of Code Radiegrum Received
at the MP Department an November 17, 1940.
London, Filed 20:05, November 16, 1940.
1. During the night of November 14th-15th the Number
Command dropped 30 teas of high explosive banbs, to include six
1,500-1b. bombe. Other operations restine.
2. Owner sir operations www nerml, but extensive
damages and fires resulted in Lendon. Heavy bombs, - of which
made a crater 90 feet wide and 90, feet deep, mm dropped.
3. Da England the Germans last 19 and the British -
plane. In the Eastern the British lest tao and the
Italians me planes.
4. One night recently the British putil23 fighter planes
in the air and destroyed and German bomber. They hope that their
night interesption system will have decisive results.
5. The Germane used 340 long range bembers and 90 other
planes in their heavy attack - Coventry) apparently their medium
effort.
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
61
Brief of Paraphrase of Code Radiogram Received
at the War Department an November 17, 1940.
London, Filed 20,05, Hovember 16, 1940.
1. During the night of November 14th-15th the Boober
Command dropped 30 tons of high explosive bombs, to include six
1,500-10. bombs. Other operations routine.
2. German air operations were normal, but extensive
damages and fires resulted in Lendon. Heavy bombs, coe of which
made a erater 90 feet wide and so feet deep, were dropped.
3. In England the Germans lost 19 and the British one
plane. In the Eastern Meditteremean the British lest two and the
Italians no planse.
4. One night recently the British put 123 fighter planse
in the air and destroyed one German bomber. They hope that thair
night interception system will have decisive results.
5. The Germane used 340 long range beabers and 90 other
planes in their heavy attack on Coventry) apparently their maximum
effort.
CONFIDENTIAL
Regraded Uclassified
62
ASURY DEPARTMENT
U.S. COAST GUARD
U.S. COAST GUARD
Sept. 1980
OFFICIAL DISPATCH
transmit
18 NOVEMBER, 1940
DATE
ROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
to (FOR ACTION)
ACKNOWLEDGE
HON HENRY MORGENTHAU CASA BLANCA HOTEL MONTEGO BAY JAMAICA
PRIORITY
INLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
O (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
SINCE NOVEMBER 5 THROUGH NOVEMBER 18 1050 CARTONS CORTLANDTS
SOLD TO A. AND P. BALANCE OF 239 NUMBER ONE CARTONS LEFT IN
COLD STORAGE X BEST REGARDS
MRS KLOTZ
OPERATOR'S RECORE
OFFICIAL BUSINESS.
INITIALS OF "RELEABING" OFFICER.
a. - - - 3-15417
63
November 18, 1940.
MEMORANDUN
TO:
Mr. D. W. Bell
FROM: Mr. Gaston
I have talked both to Berkeley of nac and to
Harry Butcher of Columbia. Butcher will have to con-
cult his headquarters before letting - know. Berkeley
said, however, that they would be very glod to have
the Secretary for 6 fifteen-minute period in the week
beginning December 2d. I told him I thought that if
the Secretary decided to make the speech be would
probably prefer Tuesday evening, December 34, between
9:00 and 10:00. Berkeley said he felt reasonably sure
they could provide the time from 9:45 to 10:00, or the
time from 10:00 to 10:15; that the latter would perhaps
be preferable on account of the Pacific Coast.
I did not make any definite engagement.
Copy to Mrs. Klots.
HEG/r
64
November 18, 1940
TO:
COAST GUARD COMMUNICATIONS
FROM: H. S. KLOTZ
Please send the following message, in code, to Secretary
Morgenthau:
We are following instructions contained in your cable of
Monday, November 18. However, we are in great doubt about the
wisdom of your making a radio speech during the first week of
December on the subject you have indicated. Our reasons are
as follows:
(1) We fear that until there is accord with the Congressional
tax leaders as to the coming tax program, unfortunate complications
may result from Treasury public statement on taxes.
(2) We feel that any radio statement at this time having
anything to do with dangers of inflation may cause harm, unless
it includes definite proposals for prentive measures of a fiscal
or monetary character, including tax measures.
(3) In any case, we feel that a radio speech on that
subject by yourself 1s 80 important that there should be more
than B few days for you personally to work on it.
(4) We are of the opinion that a more appropriate vehicle
for the first of the talks you have in mind 1s a speech before
some suitable organization. You will receive an invitation to
attend a dinner of the Accountants Association in Washington for
December 9. This may provide a proper occasion. It may be
possible to have the speech broadcast.
With respect to radio time - NBC representative feels
sure he can arrange for fifteen minutes on December 3rd between
9:45 and 10:15 p.m.
D. W. Bell
Regraded Uclassified
65
20mg 11/10/10
We are following instructions contained in your cable of
Monday, November 18. However, - are in great doubt about the
wisdom 02 your making B. radio speech during the first week of
December on the subject you have indicated. Our reasons are as
follows:
until
(1) We fear that unless there is accord with the Congressional
tax leaders as to the coming tax program, unfortunate complications
may result from Treasury public statement on texes.
(2) We feel that any radio statement at this time having any-
thing to do with dangers of inflation may cause only harm, unless
it includes definite proposals for preventive measures of a fiscal
or monetary character, including tax measures.
(3) In any case, we feel that a radio speech on that subject
by yourself is so important that there should be more than a few
days for you personally to work on it.
(4) We are of the opinion that a more appropriate vehicle
for the first of the talks you have in mind is a speech before
some suitable organisation. You will receive an invitation to
attend a dinner of the Accountants Association in Washington for
December 9. This may provide a proper occasion. It may be
possible to have the speech broadcast.
radio
With respect to the of time on the radio
nBC representation falls sure he
fiftern menutes on
Can arraugs for Dir 3rd the Twon
9:45 and 10:15 frun.
Regraded Uclassified
66
ADDRESS THE u. s. COAST GLABD
- - TO Mi.
TREASURY DEPARTMENT
UNITED STATES COAST GUARD
HEADQUARTERS
CRYPTOGRAPHIC MESSAGE
WASHINGTON
18 November, 1940.
SECRET
From:
Secretary of the Treasury Morgenthau.
To :
Mrs. Henrietta Klotz.
(Attention Young and Buckley)
Have ready for me on my return the most glaring
examples of lack of coordination and design of both engines
and planes as between Army and Navy and English. Consult
with Admiral Towers and anyone else you can trust.
Have
this report in such shape that I can give it to the President
immediately upon my return.
Best regards,
H. M. Jr.
SECRET
67
EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL
FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN
AS SHOWN BY DEPARTURE PERMITS GRANTED
Week ended November 16, 1940
:
:
:
:
JAPAN
RUSSIA
SPAIN
GREAT BRITAIN
:
:
:
:
ROLEUM PRODUCTS
uel and Gas 011 (including
Diesel 011)
229,322 Bbls
I
-
-
rude -
Blended or California
High Octane Crude*
19,895 Bbls.
--
All Other Crude
262,837 Bbls.
--
asoline -
---
I
Gasoline A
Gasoline B
90,021 Bbls.
81,500 Bbls.
---
73,000 Bbls.
All Other Gasoline
---
---
abricating Oil -
Avintion Lubricating Oil
...
1,309 Bbls,
-
-
63,000 Bbls.
All Other Lubricating Oil
110,177 Bbls.
1
-
4 Bbls.
---
---
straethyl Lead ...
I
---
Boosters", such as Iso-
Octane, Iso-Hexane, or
Iso-Pentane
!
I
AP IRON AND SCRAP STEEL
unber 1 Heavy Melting Scrap
--
!
---
1,588 Tons
11 Other Scrap
---
---
1,915 Tons
-
ice of the Secretary of the Treasury, Division of Research and Statistics.
November 18, 1940.
roet Office of Merchant Ship Control, Treasury Department.
Any material from which by commercial distillation there can be separated
more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon
mixture - President's regulations of July 26, 1940.
Aviation Gasoline,
As defined in the President's regulations of July 26, 1940.
68
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
CONFIDENTIAL
DATE November 18, 1940
TO
Secretary Mergenthau
FROM
Mr. Haas MA
Subject:
The Business Situation,
Week ending November 16, 1940
Summary
(1) Speculative optimism and inflation talk subsided some-
what during the past week, as evidenced by some recession in
stock prices and in the volume of trading in the stock market.
However, the commodity markets continued to display a strong
undertone, with rising tendencies apparently developing in re-
sponse to rising industrial demand and other fundamental
factors.
(2) The FRB index for October has been revised upward to
A record high of 128, comparing with 125 in September and 121
in the previous 3 months.
(3) Weekly indicators of business activity, such as the
New York Times and Barron's indexes, continue to make a good
showing, with preliminary data for the early part of the cur-
rent month showing gains over October's high levels.
(4) New contract awards for heavy construction, in connec-
tion with the defense program, remain at a high level. Resi-
dential construction contracts on & seasonally adjusted basis
have shown some decline, but still are not far from the best
levels of the year.
(5) The textile industry has been operating at a high
rate. Cotton consumption by domestic mills in October was
the second highest on record; production of rayon yarn this
year will probably reach a new record high; and the woolen
industry has benefited from a huge volume of Government buying.
Regraded Uclassified
69
Market activity slackens
Commodity buying continued strong in the early part
of lest week, but at 6. somewhat moderated pace compared with
the vigorous price increases and the substantial volume of
buying in the preceding week. The level of prices and volume
of treding in the stock market showed some recession. By
the end of last week, speculative sentiment in both commodity
and securities markets showed some unsettlement ae a result
of foreign developments. Nevertheless, the maintenance of
If high level of activity in various important industries,
such PB steel, construction, automobiles, and textiles, con-
tinues to be a factor of underlying strength in commodity
buying. Defense orders are gradually being reflected in
new of activity, with reports of increased demand, for
example, appearing last week in the chemical and building
material industries (particularly for paint materials).
Agricultural products took the lead in the commodity
-rice rise last week. Prices of basic foodstuffs increased
2.7 points to en index of 111,2 (Auguet 1939 = 100). Indus-
trial material prices also rose, but by a smaller amount.
(See Chart 1.)
The increases for the week in tallow, butter, cotton-
seed 011, and lard reflect increased demand for fate and
oils, although the rise in butter prices 18 partly seasonal.
heat, barley, and corn moved upward together, while hoga
and steers declined. A rising trend in wheat and cotton
prices has resulted from tightness in available supplies
due to Government loan operations.
Among the industrial materiale, the increased prices
of shellac, rosin, and flaxseed arose from an increased de-
mand for paint materials. A decline in quoted spot prices
for wool resulted from 8 change in the basis of trading and
18 not of market significance. As a matter of fact, wool
tor futures showed a strong increase for the week.
Cost of living index lower
In spite of the rising trend of sensitive commodity
prices, no further advance in the cost of living hae devel-
oped. The National Industrial Conference Board reports a
decline of 0.1 point in the cost of living index, to 85.5
in October, owing to lower food prices, All other items in
the wage earners' budget either increased or remained un-
changed, however.
Regraded Uclassified
- 3 -
70
Steel orders show further rise
New business continues to pour into the steel industry
in Menvy volume. New orders received by the U. S. Steel
Corporation during the week ended November 7 rose to 123
nor cent of capacity from 105 per cent in the previous week,
thus reaching the highest level since the week ended
August 22. Iron Age reported that incoming steel orders in
Movember have been 20 per cent or more above the correspond-
ing period of October.
During the past week, the operating rate for the indus-
try showed an advance of only 0.1 per cent from the previous
week. The shutting down of some open hearths for repairs 18
reported. to have prevented a larger advance, although any
really substantial further gain cannot be expected in view
of the present near-capacity rate. The scheduled rate for
the current week shows a further advance of 0.5 to 96.6 per
gent of capacity,
The Tennessee Coal and Iron Company (a U. S. Steel sub-
sidiary) announced last week that it would immediately start
on an 18-month program to expand its ingot capacity by a
little more than 400,000 tons or 20 per cent. It should be
ointed out, however, that this expansion will increase the
nation's steel producing capacity by only about one-half of
one ver cent.
An increase in the price of beehive coke to B. range of
5.00 to 35.25 a ton, an advance of nearly 10 per cent, will
increase further the costs of merchant pig iron producers.
The Iron Age expects the higher price of coke to hasten the
use of additional ooke ovens.
Heavy construction. awards higher
The increased activity in heavy construction, which has
Deen on important contributing factor to the high level of
operations in the steel industry, shows no signs of abating,
on the basis of latest available data released by the Engi-
neering llews Record. Thus, new contracts awarded for
engineering construction during the week ended November 14
totaled $139,000,000, and after allowing for the shorter
week due to Armistice Day jumped to the third highest figure
of the year. (See Chart 2, upper section.) Among the more
important construction projects contributing to the week's
increase were ammunition and shell loading plants, barracks,
cantonments, and defense housing. The largest contract for
Regraded Uclassified
71
private construction covered coke ovens and a reduction mill
to be constructed for the American Rolling M111 Company in
Ohio at E. cost of more than $5,000,000.
Reference to the lower section of Chart 2 will disclose
some decline thus far in November in lettings of structural
steel from October levels, although the most recent figure
covering the week ended November 12 16 still 57 per cent
above the corresponding period in 1939. The most important
order included in the total for the week mentioned was one
of 6,000 tons for a Douglas Aircraft Company plant to be
erected in California.
In contrast to heavy construction, residential building
declined slightly in October (see Chart 3, upper section),
while FHA mortgages selected for appraisal (dotted line) held
steady in contrast to a rise in October last year. Mortgages
selected for appraisal have tended downward during the early
eart of November, affected by the Election Day holiday and
seasonal influences. (See Chart 3, lower section.)
With the outstanding mortgages insured by FHA approach-
ing their limit of $3 billions, the limit was raised to
4 billions last week. This assures further insurance opera-
tions which otherwise would have had to be discontinued early
next month, according to the Federal Loan Administration.
Binoe the FHA handles about 75 to 80 per cent of all homes
built in industrial areas, insurance operations are import-
ant, especially because of the outlook for more winter build-
ing than usual this year as the defense program gets under
way,
Business activity continuing at high level
The FRB index for October has been revised upward to a
record high of 128, as compared with 125 in September and
121 in the previous 3 months.
The very high level of business activity which charac-
terized the month of October appears to have carried into
November. As measured by the New York Times index of busi-
ness activity (Bee Chart 4), a further noticeable gain occurred
in the early part of the month. The gain in the latest week,
however, VAB entirely due to less than seasonal declines in
total and miscellaneous freight car loadings, and some ata-
tistical inaccuracies also may have developed in allowing
for Election Day influences. Reference to Chart 4, lower
section, will disclose that miscellaneous and LCL loadinge
are not declining A6 abruptly as last year, while total
Regraded Uclassified
- 5 -
72
loadings are holding around year-earlier levels despite A
1088 in coal traffic, which 18 likely to be temporary,
Automobile production at new high
Stronger evidence of the sustained high level of busi-
need activity may be seen in a further moderate rise in
outomobile production during the past week. Reference to
Chart 4 will show that an uninterrupted rise has been in
progress since the week ended August 10. Furthermore, re-
norte of retail sales of new cars on the whole have been
very good. For example, General Motors sales to consumers
in the United States during October not only set a new
record for that month Lut were also the best for any month
since April 1937. As a result of the showing to date, ear-
11er trade estimates of production for the remainder of the
year have been raised upward somewhat, although the peak in
production in all likelihood was reached during the past
were.
Textile industry active
Reference to Chart 4 will disclose that 8 rether sharp
resction occurred in the New York Times adjusted index of
cotton mill activity during the first we k in November.
However, in view of the heavy cotton goods buying in the
letter part of that week, this reaction 18 likely to be only
temporary. The recent high level of operations in the cotton
textile industry is evidenced by figures just recently re-
leased by the Census Bureau, showing that cotton consumption
by domestic mills in October was the highest on record, with
the single exception of the month of March 1937. In the
posT-election spurt of buying, trade commentators indicated
that the volume of cotton goods buying was very large, although
this has not been reflected 88 yet in our reports from indi-
vidual companies.
The rayon industry has been very active, and a.B a result
DI o 19 per cent gain in shipments of rayon yarn in October
over September figures, stocks held by producers dropped to
The lowest level since the end of 1939 and amounted to only
sbout one week's production. It 18 now estimated that ship-
nents of rayon yarn for the year 8.8 B. whole will reach a new
record high.
In the woolen industry, many mills are solidly sold up
: nd 5 months shead. According to trade reports, daily
001 consumption in the next few months may be the largest
inco late 1935, with mills operating close to capacity.
Escklogs of unfilled orders are estimated et 66,000,000
Regraded Uclassified
73
- 6 -
yards, or about 6,000,000 yards more than at this time last
year. More than 50 per cent* of the orders have come from
the defense services. The price of wool top futures ad-
vanced strongly again last week, in spite of the fact that
Army contracts no longer require domestic wool. Apparently,
there will be continuing pressure for this season's clip
even if producers are free to use wool of foreign origin;
the unavoidable necessity of securing a sufficient amount of
fine wool 18 in itself a restriction, and the dates of de-
livery called for in Army contracts make it impossible to
postpone purchases until next season's clip becomes available.
The status of the silk industry 1s much less favorable
than the other divisions of the textile industry. However,
mill takings of silk have expanded considerably from the 20-
year low touched last July.
New orders still high
Our new orders index for the week ended November 9 re-
mained high (see Chart 5), although below the previous
week's level, which has now been revised even higher. The
steel component showed a substantial increase, the primary
decline being in textiles, while the total excluding steel
and textiles was also lower.
Weekly business indexes
Due to a substantially less than seasonal decline in
freight car loadings, the New York Times index of business
activity during the week ended November 9 rose 1.4 points
to 111.1. As a result the index stood at the highest level
since the week ended August 14, 1937.
Other factors contributing to the rise were a less than
seasonal decline in lumber production and an unchanged level
of steel ingot production at a time when some decline 1e
normal.
On the other hand, the adjusted indexes of automobile
production and cotton mill activity were sharply lower. The
adjusted index of electric power production showed a slight
decline, although actual electric power output stood at the
second highest level on record.
Barron's index of business activity for the week ended
November 9 confirmed the trend shown by the Times index,
rising to 119.5 from 118.8 in the previous week.
Regraded Uclassified
74
MOVEMENT OF BASIC COMMODITY PRICES
AUGUST 1939 e 100
1939
1940
OCTOBER
NOVEMBER
DECEMBER
JANUARY
é
5
e
N
D
4
,
-
*
M
-
-
A
.
o
N
D
5
12
19
26
2
9
16
23
30
7
14
21
25
4
11
:
PLA
PER
PER
CLAST
Weekly Average
CENT
CENT
CENT
Daily
130
130
128
128
16 RAM INDUSTRIAL
125
MATERIALS
125
124
124
16 RAW INDUSTRIAL
120
120
MATERIALS
120
120
115
115
116
116
no
110
112
112
105
105
12 FOODSTUFFS
12 FOODSTUFFS
108
108
100
100
95
104
9
16
23
30
7
14
21
26
4
11
104
gs
A
$
a
-
a
&
F
M
A
M
di
ed
A
E
a
a
D
LA
12
19
26
-
1939
1940
OCTOBER
NOVEMBER
DECEMBER
JANUARY
1940
Percentage Change for Individual Commodities, August Low to November 8, and to November 15, 1940
FEX
PER
CENT
CENT
16 HAW INDUSTRIAL MATERIALS
HISES
12 EUGOSTUFFS
WOOL
40
40
35
35
TALLOR
MIGHT
30
30
BUTTER
25
MOSIA
25
LEAD
20
20
SARLET
STEEL SCRAP, DOB:
0000A
ZIND
BURLAP
PRINT CLOTH
15
creess
15
PLANNED
-
COMPER
10
10
COTTONBLED 916
BHELLAD
DOFFEE
erea SCRAP, EXP.
in
5
2018
LAB
SILE
0
:
o
word
5
La
Aug. LOW
NOV.6
Nov.15
Aug. LOW
NOV.B
Nov.15
al - Secretary of the Transary
- BASIS OF QUOTATIONS CHANGED NOV. 15, 1940
F - 187 F
- of - - -
CONSTRUCTION AND STRUCTURAL STEEL ORDERS
:
JAN,
MAR,
MAY
JULY
SEPT.
NOV.
DOLLARS
DOLLARS
WILLIONS
MILLIONS
.
1
Heavy Engineering Contracts
Eng. News Rec., Daily Ave.
40
40
35
35
30
30
25
25
1940
20
20
1939
15
15
10
10
5
5
SEPT.
NOV.
JAM.
MAR.
MAY
JULY
TONS
TONS
THOUSANDS
THOUSANDS
Structural Steel Orders
80
80
The
60
50
1939
40
40
20
20
1940
o
0
MAR.
MAY
JULY
SEPT.
É
JAN.
.
INCLUDING OUTLYING POSSESSIONS of THE U.S.
75
Office of the Secretary of the Treasury
Division of Research and State
Regraded Uclassifi
Chart 2
RESIDENTIAL CONTRACT AWARDS AND F.H.A. MORTGAGES
1936
1939
1940
M
e
1
à
M
A
5
o
-
D
J
F
-
A
a
J
$
o
-
D
-
-
M
0 %
DOLLARS
DOLLARS
MILLIONS
MILLIONS
(AWARDS)
(MONTSARES)
Mortgagee Selected for Appraisal
138
and F.W. Dodge Awards
132
Monthly
126
120
114
110
102
100
90
90
78
80
F.W. DODGE AMARDS
70
66
MORTGAGES SELECTED FOR
APPRAISAL. F. H. A.
54
60
42
50
30
40
18
30
J
F
M
A
M
J
J
A
$
o
N
D
J
F
M
A
M
J
J
A
$
o
N.
D
J
F
a
A
M
J
J
A
5
o
.
D
1938
1939
1940
DOLLARS
JAN.
MAR,
MAY
JULY
SEPT.
NOV.
DOLLARS
MILLIONS
MILLIONS
40
Mortgages Selected
40
for Appraisal, F.H.A.
Weekly
35
35
30
30
-
25
25
19394
20
20
IS
IS
1940
1938
10
10
5
5
o
o
JAM.
MAR.
MAY
JULY
SEPT.
é
76
Office of the Secretary of the Treasury
C - 260 - A
Division of - - -
Regraded Uclass
CHAT
SELECTED BUSINESS INDICES
BUSINESS ACTIVITY
PER
CENT
Seasonally Adjusted
Est. Normal 100
120
110
w
100
"29
90
Y28
80
N. y Times
70
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
AUTOMOBILE PRODUCTION
COTTON MILL ACTIVITY
CARS
PER
THOUSANDS
U.S. and Canada
CENT
Est. Normal = 100, Adjusted
150
160
NO.
125
NO
140
100
120
75
29
30
3%
100
50
80
25
38
Ward's Est.
NY Times
o
60
JAN
MAR.
MAY
JULY
SEPT
NOV.
JAN
MAR
MAY
JULY
SEPT.
NOV
FREIGHT CAR LOADINGS
CARE
CARS
THOUSANDS
Total
THOUSANDS
Merchandise L.C.L. and Misc.
900
29-
550
800
wo
40
n
700
450
600
38
350
28
500
An Ry Assn
Am By Agen
400
250
JAN.
MAR
MAY
JULY
SEPT
NOV.
JAN
MAR
MAY
JULY
BEPT
NOV.
77
Office of the Secretary of the Treasury
Divider - - - -
C-364
Regraded Uclass
Chart 21.
82
INDICES OF NEW ORDERS
Combined Index of New Orders and Solected Components
1939
PARCENTAGE
wind
POINTS
2/V
200
190
160
170
160
IX
156
140
140
150
130
Total (combined Index
1936 - 100
120
120
110
100
100
%
90
ou
BO
70
60
Total excluding Steel and Textilse
50
40
Steel Orders
30
20
to
Textile Orders
o
,
o
N
D
J
F
-
A
a
J
J
A
$
o
M
D
J
,
E
A
M.
J
J
A
I
o
#
o
1938
1939
1940
4 the
1 - - -
1-85-C
79
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 18, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
1106,000
Purchased from commercial concerns
6 27,000
In the open market, sterling was quoted at 4.04 during the morning. It moved to 4.03-3/4
in mid-afternoon and closed at that level. Transactions of the reporting banks were as
follows:
Sold to commercial concerns
1 2,000
Purchased from commercial concerns
&
There was a slight improvement in the Canadian dollar. Às compared with Saturday's
closing discount of 13%, that currency was quoted today at 12-7/8%.
The other currencies closed as followe:
Swiss franc
.2321
Swedish krons
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2360
Brazilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-1/8% discount
Tie purchased $45,000 in gold from the earmarked account of the Central Bank of
Ricaragua.
The Federal Reserve Bank of New York reported that the following gold shipments
were being consigned to it:
-
9,096,000 from Canada, shipped by the Bank of Canada for account of the Government of
Canada, for sale to the U.S. Assay Office at New York,
512,000 from Peru, shipped by the Central Reserve Bank of Peru for its own account,
disposition unknown,
$ 9,608,000 Total
80
-2-
No gold or silver quotations were received from Bombay by the New York banks
(00mg.
In London, the price fired for spot silver was 23-3/16d, off 1/16d, The forward
price MOS unchanged st 23-1/4d. The dollar equivalente were 42.10d and 42.22#
respectively.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/4#.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
Te made four purchases of silver totaling 225,000 ounces under the Silver Purchase
Act, all of which consisted of new production from foreign countries, for forward
delivery.
The report from the Federal Reserve Bank of New York listing deposite for the
account of Asia BS reported by the New York agencies of Japanese banks on November 13,
showed that such deposite totaled $106,773,000, an increase of $8,020,000 since
November 6. Included in this total were $36,809,000 in deposits with the Yokohama
Specie Bank, New York, made by its branches in China, an increase of $660,000 from the
figure of November 6. and $58,449,000 in deposits made by Japanese banks in Japan and
Aschuris, up $7,038,000. The increase in deposits may reflect in part B rise of
13,690,000 in the Yokohama agency's loans to Japanese banks in Acia, which were placed
$36,123,000 as of November 13, and the sale of $3,100,000 worth of imported Japanese
id to the San Francisco mint. From additional figures submitted by Yokohama's
lice York agency, relating to its liabilities to and claims on Asia as of November 13,
-e learn that Japanese banks in Ásia held, in addition to their deposits with New York
agencies, approximately $29,174,000 in U.S. Treasury bills and short-term commercial
paper expressed in dollars at the Yokohama agency. As for claims on Asia, we understand
that, besides its loans to Japanese banks in Asia, the Yokohama agency reported other
dollar claims totaling $25,102,000, consisting almost wholly of Japanese import bills.
She accord's liabilities and claims expressed in foreign currencies were negligible.
70ml
CONFIDENTIAL
Regraded Uclassified
81
EH
GRAY
Caracas
Dated November 18, 1940
Rec'd 7:45 p.m.
Secretary of State,
Washington.
176, November 18, 5 p.m.
Import control regulations published as of November
16 implement existing and future exchange control.
Imports will be permitted in three groups, i.e., prime
necessities, secondary necessities, luxuries. Lists of
items in each group will be published as determined and will
be subject to change. Import licenses are divided into
three classes. The first is for payment after goods have
been received; the second is for goods paid by established bank
guarantee, and the third is for goods paid for in advance.
In the first case, a copy of import license must be presented
to the Venezuelan Consul at port of shipment and then for-
warded, together with consular invoice, to Veneruelan importer
or his authorized agent.
CORRIGAN
00
NK
C
0
P
Y
MOORESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
82
DEPARTMENT OF STATE
WASHINGTON
November 18, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
a copy of a Departmental memorandum dated October 18, 1940
recording reported financial arrangements of German and
Japanese steamship lines regarding the acquisition of
dollars in the United States.
Enclosure:
Memorandum.
A
COPY
83
DEPARTMENT OF STATE
Visa Division
October 18, 1940
Confidential Memorandum:
Mr. Walter Plaut of the Plaut Travel Agency called
today and gave me the following information.
It appears that there is B. close working agreement
between the Hamburg American Line and the NYK line whereby
there is & strong attempt to collect all passage fares
on the NYK line in American dollars being made by Hamburg
American Line through its branches in the United States.
Apparently the NYK line is reimbursed either in marke or
in barter goods for the price of their passage and the
Hamburg American Line thus receives American dollars.
Furthermore various welfare and other organizations
in Germany, including the Hamburg American Line, have,
according to Mr. Plaut's experience, advised interested
persons in this country that transportation to the United
States, regardless of what line involved, must be collected
by the branches of the Hamburg American Line in this
country, representations even being made that otherwise
the American consuls would not be satisfied with trans-
portation arrangements made.
Mr. Bromberg of the American Express Company has
privately confirmed to me the fact that he has had personal
experiences identical to those outlined above.
JCF
Regraded Uclassified
84
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 868.51/1614
November 18, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
8. copy of telegram no. 305 dated November 14, 1940 from
the American Minister to Greece, reporting & conversation
in which the Greek Minister of Finance discussed with
the Minister the possibility of extension of dollar
credits to Greece.
Copies of the telegram are also being sent to the
President of the Export-Import Bank of Washington and
to the Federal Loan Administrator.
Enclosure:
No. 305, November 14,
from Legation, Athens.
COPY
inc
GRAY
85
Athens
JE
Dated November 14, 1940
Rec'd 9:40 S.M., 15th.
Secretary of State,
Washington.
305. November 14, noon.
The Minister of Finance called on me last Saturday
in connection with the possible extension of dollar credits
to Greece. I advised him that such a matter might better
be taken up directly with the Department through the Greek
Minister at Washington and this I understand is being done.
He has also, however, addressed me a five page appeal which
he requests that I forward together with a favorable report
of my own.
Briefly summarised his appeal states: While the
British have already extended an initial credit of
5,000,000 pounds it may be used only for purchases within
the British Empire or for internal needs through the issue
of drachma notes against cover in pounds. Consequently
British credits will take care of only a fraction of
Greece's urgent needs since such items as wheat, sugar,
wool, iron, tires, sanitary materials, motor vehicles,
etc., must be purchased from the United States or from
other countries which demand payment in dollars. Since
Greece's
Regraded Uclassified
86
-2- $305, November 14, noon, from Athens.
Greece's supply of dollar exchange is no longer being
replenished her reserves will thus be quickly exhausted.
American assistance is, therefore, implored in supplying
the necessary credits or money or the goods themselves.
If that extension of credit for the sale of military
goods is impossible under American lawe then the supply
of non military items or the granting of open credite
available for purchases of the latter either in the United
States or, in cases of emergency, in other countries,
becomes a question of imperious necessity. The Minister
mentions the recent transfer of $100,000 against interest
due this month on the American (T) refugee loan as the
latest evidence of Greece's determination to honor her
obligations; and, citing the example of the United States'
assistance to Finland, he appeals to American generosity
and philhellenism in extending similar financial aid to
Greece. Ee adds that the Greek Minister at Washington
will approach the Department with regard to specific
needs.
I an aware that the direct extension of credit to
Greece is impossible under the terms of the Johnson Act.
Furthermore, I have suggested to the Minister of Finance
as well as the King and the Prime Minister, in previous
conversation
87
-3- #305, November 14, noon, from Athens.
conversation that they might do well to handle the question of
supplies from the United States through the medium of their
British ally. However, Greece's need appears to be as urgent
as her cause is just, and I hope that every possibility of the
extension of indirect assistance will be explored with generous
consideration.
MACVEAGH
DDM
copy
88
ATP
PLAIN
LONDON
Dated November 18,1940.
Rec'd 1:10 p.m.
Secretary of State,
Washington
3773, sighteenth,
FOR TREASURY
(1) À Bank of England notice to banks enlists the
Exchange Control Administration in assisting in preventing
the Enemy from obtaining goods by SEA. Applications on
form E.2 for approval of credits will not bE approved when
applying to shipments by SEA unless the goods are to DE
carried in an quote approved ship unquote, namely; (A)
a VESSEL sailing under a flag of the British commonwealth
of nations (excluding Eire) Norway, Poland, Holland, Belgium,
Sweden or U.S.A. or (B) a VESSEL chartered to the Ministry
of Shipping or a national of the British commonwealth of
nations (excluding Eire) or (c) a VEBSEL holding a ship
warrant. The scheme put into Effect on August 23rd last
grants ship warrants to ship-owners and charterers wherever
their shipe are trading, on their undertaking to refrain
from carrying on trade injurious to the allied war effort,
in particular when they (A) obtain a navicert wherever
applicable and (B) furnish required information regarding
voyages and cargoes. The TIMES city editor points out that
though
Regraded Uclassified
89
-2-
3773, November 18,
from London
though primarily designed to prevent enemy trade by sea,
the ruling will also result in the receipt of increased
foreign currency for shipping SERVICES since it should
induce shippers to USE British or British controlled tonnage,
(2) Two notable developments have been announced by
Lyttelton, the new president of the Board of Trade, the
restriction of supplies to the home market reported in
no 1549 of June 7th, are to be Extended to new articles,
and the percentages of goods allowed to retailers under the
July restrictions are in some Cases to bE further curtailed.
In export policy an important change of emphasis 1s
apparent in views EXPRESSED by LyttElton in a statement in
which he implied that exports of non-EssEntials to the
sterling area and also to Canada are not desirable, while
exports to these areas of products they would otherwise
have to obtain for dollars is desirable. Though this
distinction BEEMS obvious, it has not heretofore been made
in the export drive fostered by the government, That it
must bE accompanied by consumption restrictions on non-
Essentiale in the dominions - lest the dominions replace
such British exports by purchases in the United States
is possibly the reason for BO belated an announcement of
policy.
JOHNSON
WSB
Regraded Uclassified
20
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Bern, Switzerland
DATE: November 18, 1940, 5 p.m.
NO.: 227
CONFIDENTIAL
at the British Legation
My British colleague and I had luncheon/with 8.
local Swise banker who had visited Germany. He told us
that title had been acquired by Germany to one-half of
the National Bank of Belgium's gold, in the amount of
700,000,000 Belgien gold francs (which 1s now at Dakar).
The other half of the gold belonging to the Bank 1s in
New York.
I WAB told by the British Minister that on previous
occasions he had found our informant to be reliable, and that
he would communicate the foregoing information to his
Government.
HARRISON.
EA:LWW
Regraded Uclassified
91
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 18, 1940
Secretary Morgenthau
TO
FROM E. H. Foley, Jr.
For your information:-
I thought you would be interested in having for your files the attached
telegram and the reply concerning the water project of the City of San Diego.
9.15th.
Attachments (2)
92
P Y
POI M 71 NL 5 EXTRA
1940 NOV 16 am 8 35
SANDIEGO CALIF NOV 15 1940
HON E E FOLEY
GENERAL COUNSEL
WILL YOU PLEASE ADVISE CITY OF SANDIEGO AT YOUR EARLY CONVENIENCE THE
BASIS OR BASES UPON WHICH THE APPROPRIATE FEDERAL LOAN AGENCY CAN
MAKE AVAILABLE TO THIS CITY BY GIFT, LOAN OR OTHERWISE, APPROXIMATELY
SEVEN AND ONE HALF MILLION DOLLARS TO BE USED IN CONSTRUCTION OF PROJECT
TO BRING WATER FROM ALL AMERICAN CANAL TO SANDIEGO STOP SIMILAR INQUIRY
IS BEING SENT TO HONORABLE FRANK KNOX
P J BENBOUGH MAYOR
WALTER W COOPER CITY MANAGER.
824a
Regraded Uclassified
93
National Defense
Washington, D.C.
November 18, 1940
in P. do Benbough, Mayer
m Walter T. Cooper, City Manager
San Diego, California
Retal November 15 suggest you comminate with John of M. Carnedy, Federal Works
delaistrator and also with Bail Behram Chairman/Board Directors Reconstruction
Finance Corporation conserning construction of aquadnet from All American Canal
to Sam Diego. I have discussed this project briefly with Carmedy and Schren
these being the appropriate agencies to which San Diago should apply for funds.
(Initialed)
& 1. Folsy, Jr.
E.H.F. Jr.
Comeral Counsel
Treasury Department
CLX18
11-18-40
Regraded Uclassified
94
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Mies Chaunces
DATE November 18, 1940
TO
Secretary Morgenthau
4°
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following credit to the account
of Sveriges Riksbank, Stockholm by order of the Banca d'Italia, Rome.
Date
Amount Credited
Account Credited
Received From
November 16
$ 300,000
Sveriges Riksbank, Stockholm Banca Commerciale
Italiana, N.Y., by
order Banca d'Italia,
Rome
juid
95
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
jor /
DATE November 18, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
German accounts maintained with the Chase National Bank, New York.
Date
Amount Debited
Account Debited
Paid To
November 15
$ 250,000
Reichsbank, Berlin
Central Hanover Bank and
Trust Co., N.Y., for account
of Banco de la Nacion
Argentina, Buenos Aires, for
account of Reichsbank, Berlin
60,645
Deutsche Golddiskont-
Irving Trust Co., N.Y., for
bank, Berlin
account of Carl Marks
96
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Chaupoon
DATE November 18, 1940
Secretary Morgenthau
TO
FOR
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the transactions, listed on the
attached statement, in Italian accounts maintained with the Chase National Bank of
New York.
juil
Chase National
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 14 $ 70,399
Banca Commerciale
Banca Commerciale
Italiana, N.Y.
Italiana, N.Y.
(3 checks drawn by
Lunham & Reeve, Inc.
N.Y. on N.Y. Trust
Co.,N.Y.)
50,000
II
Banca Commerciale
Italiana, N.Y.
(Cashier's check
of the First Nat-
ional Bank,N.Y.)
29,463.53
II
Banca Commerciale
Italiana, N.Y.
(Miscellaneous
checks)
Nov. 16 165,000
II
Chase National
$165,000
Credito Italiano,
Chase National Bank,N,Y., for
Bank, N.Y.,
N.Y.
account of Banca Commerciale
by order of Credito
Italiana, N.Y., for account
Italiano, N.Y.
Banca Commerciale Italiana,
Rome.
100,000
Banca Commerciale
Check to order of National
Italiana, N.Y.
City Bank, N.Y.
300,000
=
Check issued by order of
Banca Commerciale Italiana,
N.Y., to order of Federal
Reserve Bank of N.Y. in
Federal Reserve Funds
97
Regraded Uclassi
98
Chanaday
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 19, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L59,000
Purchased from commercial concerns
£12,000
The Federal Reserve Bank sold £3,700 in registered sterling to a non-reporting
bank.
Open market sterling remained at 4.03-3/4 throughout the day. Transactions of
the reporting banks were as follows:
Sold to commercial concerns
1 2,000
Purchased from commercial concerns
L11,000
The Argentine free peso, which has remained in the neighborhood of .2360 during
the past several days, opened at .2345 this morning. It remained steady at that
figure until mid-afternoon, and then recovered somewhat, to close at .2350. Only a
small amount of business was reported to have been transacted in that currency.
Closing quotations for the other currencies were as follows:
Canadian dollar
12-7/8% discount
Swise franc
.2321
Swedish krona
.2386
Reichsmark
.4005
Lira
.0505
Brazilian milrois (free)
.0505
Mexican peso
.2070
Cuban peso
8-1/8% discount
We sold $5,000,000 in gold to the Java Bank, to be added to its earmarked account.
The Federal Reserve Bank of New York granted the Central Bank of El Salvador
a three-month loan of $25,000 yesterday, setting aside as collateral $26,294 in gold
from the Salvadorean bank's earmarked account. The total of such loans now outstanding
amounts to $847,000, secured by $947,075 in gold.
The Federal Reserve Bank of New York reported that the Bank of Canada shipped
$4,357,000 in gold from Canada to the Federal for account of the Government of
Canada, for sale to the New York Assay Office.
-2-
99
The report of November 13 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 $11,087,000.a
decrease of $1,385,000 in the short position. Most of the reduction took place in
sterling commitments, with one leading New York bank lowering its short position in
that currency by more than $1,000,000. The net changes in the positions are as
follows:
Short Position
Short Position
Decrease in
Country
November 6
November 13
Short Position
England*
$ 2,153,000
$ 898,000
$1,255,000
Europe
4,234,000
3,915,000
319,000
Canada
38,000
198,000
160,000 (Increase)
Latin America
369,000
346,000
23,000
Japan
4,471,000
4,472,000
1,000 (Increase)
Other Asia
1,227,000
1,274,000
47,000 (Increase)
All others
20,000 (Long)
16,000 (Long)
4,000 (Decrease in
Long Position)
$12,472,000
$11,087,000
$1,385,000
No gold or silver quotations were received from Bombay by the New York banks
today.
In London, the prices fired for spot and forward silver were both unchanged,
at 23-3/16d and 23-1/4d respectively. The dollar equivalents were 42.10# and 42.22#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Tressury's purchase price for foreign silver was also unchanged at 35#.
We made one purchase of silver amounting to 50,000 ounces under the Silver
Purchase Act. This silver consisted of new production from foreign countries, for
for forward delivery.
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
100
Paraphrase of Code Cablegram
Received at the Yes Department
at 2:00 A.M., November 18, 1940
London, filed 18:05, November 18, 1940.
1. There were no operations of the Bonber Command on Sunday,
November 17. That night it vis planned to dispatch so benbers,
mostly against oil targets, On the previous night half of the
beachers attacking Hanbring failed to locate their assigned targets
because of elends and ising conditions. Bewever, 00 of the planes
dropped w tans of high explosive plus may incondiary bmbs. Out
of the total of 142 serties, three planes were lest and five creahed
on landing. The Coastal Command carried out its normal missions and
attached nearby easuy airdramss, dispatching 87 patrol missions, se
benbing serties, and 20 enervey occurts. One plane was lest. The
Fighter Command dispatched 519 planes on 94 patrols.
2. Daylight operations of the German Air Perso en November 17
consisted of recommaisence adasions, attacks on shipping in the
Themes River and English Chamnel, and two mejo of fighters of about
110 and so planes, respectively. A total of about 270 planse were
plotted. German aircraft were over England throughout that night
in considerable foree but with no apparent definite objective.
3. or the six Reyal Mr Force airdromse attached - w
put out of commission by an unexploded bash, A naval air station
suffered slight damage. In London the Batterson per station and
CONFIDENTIAL
Regraded Uclassified.
CONFIDENTIAL
101
- other your plants ware slightly damaged bet not sufficiently
to stop operations. AN Southport high explosive and insenting
banks and six land dines caused major damages, two hundred becaus
| respond 1 0002 E 1 & E
18 killed and as injured. Mt emother team there ware bad fires in
6 reilread yard and production wes stayped in a musitions factury.
Casmlties in Landon a November 18-13 ware 187 killed and as
seriously injured widle the fallowing my n MM billed est as
injured. Cusualties at Coventry have new been first at approximate-
ly $50 killed and several hundred
4. German plans Issues were 15 confirmed, five probable ml
GIVER damaged. the British lest five planes and - pilet. m the
Middle must the British lest two planse and the Italians -
8. In the matern there was the nowel air
activity, to include a night atrink by 11 benbers a Dard a November
16 with good recults and a atmak a Brindish the preseding might.
4. German long renge gas fired & total of w reads a Dever,
of which all bet too fell in the cooss. three shape are damgal.
1. AM air attack a the inbount coursey a Nevember 18 sak
- 9,300-tem ship. Three outbound conveys, totalling 184 vessels,
cleared the British Iales surely.
s. - Office intelligence reports indients that about 80,000
German troops of all entegaries are IN in Humain and that 190
inforcements are creasing into Mangary at the rate of - division
1 1
CONFIDENTIAL
102
CONFIDENTIAL
9. Air Chief Marshal Dowding, at present commaning the
Fighter Command, is slated to proceed to the United States where
he will represent Lard Beaverbrook, Minister of Aircraft Production,
on design and production problems,
10. The Air Ministry today announced a reskuffle in the high
command which includes the establishment en December 1 of -
additional command to be called the Any Ce-Operation Commond. It
will be charged with securing cooperation between the Air Fores
and the Army. Air Marshal Barratt will head this Commi, a smier
Army officer will be chief of staff, and the reminder of the staff
will be más up of Air afficers and Army afficers in equal propertions.
This Command will have the function of organizing, training, and ⑉
perinenting with all forms of eccparation in the Air Force and the
Army. The exployment of the squadrons in land operations will be
under the eautrel of the Army unit commisters emeerned. This is a
belated nove to restify conditions which have been a great source of
werry to Army heads but which has had to be deferred while the Reyal
Air Foree was conserned with the defeat of the It is w
lieved that this recorganisation is a direct result of the observations
of Mr. Man, Secretary of State for wr, on his recent ter of the
Middle East,
LES
Distribution:
Military Aide to the President
Secretary of war
State Department
Secretary of Treasury
Asst. Secretary of Mar
Chief of staff
CONFIDENTIAL
MP Plans Division
+
Office of Naval Intelligence
Regraded Uclassified
102-A
CONFIDENTIAL
Paraphrase of Code Rediegram Received of the
Mr Department 11:14, November 17, 1940.
Landon, filed 2:30, November 16, 1940.
1. 20 - to - that the war is about halfway through the
first place. This initial please - for has constrted of the proliminary
clashes of the senttered unly furnes and 20 is the present endor
of the British to stabilise the variare a - position. If they -
not up a appreciate equilibrium along - 19ne, they - mixtain
& bleckade of the Continemt and behind it may up the sectioned out-
lying positions and, reinfureed by sush assistance M the United States
is able to using swailable, mabilise the full Name of the Brittish
Expire.
2. A correspending phase of the World for in 1984 entreased
the German invesion of France and Belgion, the First natile of the
Marrie, and the rese of the andes to the sen. At that the the
belligerents recrgandsed and resuperated behind a lime entirely a land
extending from the North See to the Selse beeder, and later along the
Alps eastend from Switswrland and, in a discomected - through
the Balkans to the Dardenalles, themes through Turkey and to Palastine.
Is the min this line was hald w land arrise.
3. In the present war all of this is a a vaster scale. If
hritain is in her present sperations, the line will extend
fres the my of Meny along the frontier and through
the Bes to Istental in Turtury. The creation of for
polate of mypert in for pas and sir operations
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
102-B
against the may by the addition of Crete to Halts, Gillwalter and
Cyprus greatly embances the hope of the British that they - hold the
Mediterrunson. If the British - hold this line they can then operate
against Italy propor, guarsates the safety of the loss Canal, at off
the Italian forces in Ethiopia and Libya, and continue the support of
Cresse. The ability to criablish this line in large part depends upen
Spain remaining nextral and upon saining Crete promptly, for which
operation the memory troops are hard to first, It remains to be
- whether British leaders have sufficient authority to mine a regd&
shift of adopte forms from Egypt w the British Isles to carry our
the compation of Crote, the insestimble advantage of these four
points of support in the is that they en out of reach
of the German land foreve, the one may wasper with which Britain at
present is unprepared to espe. the successful air operations against
the Italian Mary at and near Taranto during the last two days greatly
valuages the possibility of a Britdsh assess,
4a the fast that this line of equilitrium will be held
almost entirely by air and N puner is a nevel facture, This facts
leaves to the Brittish land - the task far the winter of eleming
- Ethispia and Libya in addition to guarding the fortres of the
British Isles, If this line is supersafully it so & distinst
possibility that and Tuals will assedo from the Visty -
und, at least, preslain s state of neutrality. If this attempt is
unwer and the British lass control of the they
will have to drop back to a line creating Africa south of the Sabare
Desert, Unils such a line would be imprograble to - easy attack, my
attempt to lamoh - attack from it would be lilmise hopelees.
CONFIDENTIAL
Regraded Uclassified
102-C
CONFIDENTIAL
5. haved - the enemption that the British - establish this
line, the question of primary interest to the United States is whether w
net the Britdsh will have at their disposed. the military frees of all
Made Memory to maintain it and at the - time to met all other
obligations. (In discussing this subject with Britdah officials they
result to take it for granted that the situation in the Par East - be
net only by pressure from China and the United States).
6. n to w optation that the my Department should devote
great attention w the problem of the ability of the British to establish
the Rediterrement position, to hald 10 and to advance from 10 in the
future. It is a envellary this problem that should the strength of
the British alone be inadequate for these - & embination of
emotions R events night load - - country to take a hand to seciet
har. The for Department should give considerable advance staty w the
situation before the United States tabes over - an the operation.
Under mah conditions the American commission should be given the w
clusive responsibility ml - for the entire area taken over and
for all operations therefore
III
Distributions
Military Adde to the President
I r
state Department
Secretary of Treasury
Securetary of MP
Chief x staff
we
ONE
CONFIDENTIAL
LW
102.
Pursphaness of Code Dispute
Reselved sh the Ver Department
at 20:00, Nevember 19, 3040
CONFIDENTIAL
Leaden, filed 16:25, November 27, 1940.
MAINE
2. an November 17-18th British air operations was
normal. The night before 44 teme of bonks were dropped a Handwarg.
2. German sir attacks were light.
3. One British air station w totally destroyed. Other
damages were light but hits - a bus and an air raid shelter caused
45 carculties.
4. One German plane - shet down by a beder and another
by antiaireraft. The British lest three planes at has and - in
Gresse.
5. Unesnfirued reports from Russian sources indicate
that Hitler at the Berlin confurence waste Russian aircraft badly.
If true, this indicates that Certify is short of aircraft, that
British boulding of General aircraft fasteries has been successful,
and that Certify is apprehensive of the American aircraft progres.
LEE
CONFIDENTIAL
Regraded Uclassified
102-E
Parapherene of Code Dispatch
Reserved at the le Department
as 20:00, November 18, 1940
CONFIDENTIAL
Leader, filed 16:15, Nevember 17, 1940.
1. Deylight operations of the Benber Commind - Dentry,
November 17th were negligible. That night it - planned to die-
patients 127 planes against Numbers, 14 against energy cirfields, and
tear against - ports, a total of 145. During the night of
Imbe 15-16th, 129 benbers ware disputabed. Heaburg - #
tasked heavily with 49 planse dropping 4 temp of high explesive
at - inconding benbs. Twenty airéroms in Transe and the
Low Contries ware sussessfully benbed with the reralts wall +
served. Other attache ware also malisfactory. One plane -
lost and mother crashed a landing. One German fighter w w
streyed. the Coastal Commend consenterated - German sirfields
with mostain results, operating w patrol nissions, 75 bealding
certify and 17 convey excerts. Two planes were last. The Fighter
Commend operated 306 planse a n patrols.
2. Deyligish operations of the German Mr Turee a
November 17th - at a miximum, consisting of about so planes a
recommaisance minstons and week attacks a shipping. the Comma
planse refused That night may aparakiess - in a no
dured seale, with Lenden thair primary objective.
2. the Reyal Air Force staties at Coventry was totally
destroyed. Seven other - abtacked but suffered no
I 1 5 1 Intite I 8 << I
emplotely out of commission, - being vaterleged and ⑉ w
- of the presence of - unexploded book, and four are partially
CONFIDENTIAL
Regraded Uclassified
102-F
CONFIDENTIAL
out of comission due to construction wark. Your Landon - rell-
read lines suffered mine damage and a - supply w interrupted.
In Landon as multions plant and n other points was his. the
west instances was 30 carnalities when & - - destroyed and
15 enrualties then - six raid shelter - hit. Twenty housen
$ and 1 estated ! as E
damages and heavy carnalties. A made refireed line w body
damged.
4. Ensept for ⑉ German plane shot dem w antials-
creft fire, there ware me German . British planes last ever
Britain. the British lest and benber in Gresse.
5. Although there is little Incm of the anbject of
the Derlin conference, too independent seurces, - of which is
class to the Russian intimate that Mitler to any anders
to seeme large reinforments of adreveft from Russia and that he
is even willing to build aircraft factories - Runsian seil. If
this is correct it signifies (a) a current chartage of aircraft)
(b) that British attacks a the Corner aircraft injurtry have been
reseonaful, and (e) that the American unmafacturing program has
consed the Cornamo to be apprehensive.
E
Ristribution:
Military Ade to the President
Secretary of War
State Department
I I r
Met. Secretary of to
Chief of staff - 2
- Plane Division
Office of Noral Intelligence.
CONFIDENTIAL
103
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 18, 1940.
No. 248
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. Air Force Operations.
The German Air Force was normally active by day and
night on the 17th and 18th. There was considerable air fighting
incident to daylight operations. London and Liverpool were the
main objectives of night bombardment. The German air effort against
shipping at sea continues.
On the night of the 16-17 the R.A.F. Bomber Command
concentrated on Hamburg, last night on Gelsenkirchen, About 100
planes were used against Hamburg. There were minor raids against
German occupied territory and against the Ruhr.
II. Greek Theater of War.
Greek offensive efforts, probably in small strength, con-
tinue in the Koritsa area. Elsewhere the front appears to have sta-
bilized. There have been widespread Italian air attacks over Greece
by relatively small formations.
III. Mediterranean and African Theaters of War.
No ground operations and only minor aerial operations re-
ported.
RESTRICTED
104
CONFIDENTIAL
TENTATIVE LESSONS BULEETIN
MILITARY INTELLIGENCE DIVISION
No. 67
WAR DEPARTMENT
G-2/2657-235
Washington, November 18, 1940.
NOTICE
The information contained in this series of bulletins will
be restricted to items from official sources which are reason-
ably confirmed. The lessons necessarily are tentative and in
no sense mature studies.
This dooument is being given an approved distribution, and
no additional copies are available in the Military Intelligence
Division. For provisions governing its reproduction, see
Letter TAG 350.05 (9-19-40) M-B-M.
MISCELLANEOUS TECHNICAL DEVELOPMENTS IN GERMANY
SOURCE
Information contained in this bulletin was furnished by
a high British official source, except as otherwise noted,
CONTENTS
1. GUNS AND MORTARS
a. Long Range Gun
b. Light Guns Carried in Aircraft
C.e 81-mm. Mortar
2. INCENDIARY BOMBS
a. General
b. One-Kilogram Incendiary Bomb
3. AVIATION EQUIPMENT
a, Combat Aviation Drug
b. Aircraft Message Container
0, Apparatus of Undetermined Use
4. LIGHT MEDIUM TANK
5. MAGNETIC MINE DETECTOR
6, POSSIBLE NEW GASES
CONFIDENTIAL
CONFIDENTIAL
105
1. GUNS AND MORTARS
B, Long Range Gun
Fragments of some of the shells which have fallen on the
southeast coast of England have been recovered and examined, and while
it is not yet possible to state the caliber with certainty, it appears
to be about 305 no. It seems probable that the shells are all of the
same caliber and that they were fired by B. high velocity gun.
The design of the shell is unusual, The wall thickness
is less than would be expected in a 305-mm. shell, and five or six
keys of ferrite, set in longitudinal underout slots at an angle of
about five degrees in the body of the shell, appear to take the place
of the normal driving band arrangement. At the moment there is in-
sufficient evidence for a full understanding of the design.
b. Light Guns Carried in Aircraft
The possibility of producing a fun made almost entirely
of light alloys has been investigated, and it is considered technical-
ly possible to produce a super-light gun of a caliber up to 150 mm,
On & gun of this caliber, 6. reduction in weight of approximately 50
per cent could be effected. Consequently, the German heavy Infantry
gun, 150 m., which normally weighs 1,6 tons, could possibly be pro-
duced at less than one ton.
0, 81-mm. Infantry Mortar
Although this is not B. new weapon, it is outstandingly
efficient. Reports received from units in France, Belgium, and Norway
agree that this weapon can be brought to bear quickly on the target,
cân maintain B. high rate of fire, and is accurate up to a range of
3,000 yards. A considerable quantity of ammunition appears to be
available even when the weapon is used in forward positions. A feature
of the mortar is the very small report of discharge and the very loud
report of burst, This report is said to have considerable effect on
morale, but the fragmentation and the damage done by the bomb are not
as great as might be expected with a weapon of this caliber. Char-
acteristics are as follows:
Caliber
81 mm,
Mounting
Base plate and bipod;
trigger fired.
Total weight in action
56.7 kg. (125 lbs.)
Maximum range with light
bomb
4,600 yards
Maximum range with heavy
bomb
2,100 yards
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Minimum range
66 yards
Maximum rate of fire
45 r.p.m.
Practical rate of fire
10-12 r.p.m.
Weight of heavy bomb
14.3 lbs.
Weight of light bomb
8.8 lbs.
2. INCENDIARY BOMBS
a. General
The following 18 a brief description of a German liquid-
filled incendiary bomb as reconstructed from fragments by the British
Research Department:
(1) General Characteristics
The bomb is of sheet iron containing about 14 gal-
lons of an inflammable liquid which is scattered and simultaneously
ignited by a charge of 2.8 pounds of T.N.T. Since inflammable liquide
are not usually ignited by detonation of high explosive, the flash
from the T.N.T. is reinforced by a quantity of charcoal and magnesium
contained in two tubes of tinned iron. The bomb is of the same size
as the German 250-kg. high explosive bomb, Its overall length is 5
feet, 3 inches, its diameter 142 inches, but its weight is only about
100 kilograms (246 pounds), including the empty body, filled steel
container and fuse, etc., which weigh altogether about 60 kilograms.
The liquid filling is presumed to weigh about 50 kilograms.
(2) Materials
(a) The black composition in the two tubes gave
the following results on a preliminary analysis:
Fine magnesium powder
77.7 per cent;
Charcoal
14.7 per cent;
Aluminum and iron
1.0 per cont;
Water soluble material
5.0 per cent.
(b) The T.N.T. setting point was 80.05.
(o) The wood wool on which the T.N.T. WELS cast was
from a white or yellow deal, 0.6. spruce.
(d) The inflammable liquid filling extracted from
the earth in the crater of one or two bombs consisted of crude solvent
naptha. The liquid found in the crater of the other bomb, sent sepa-
rately to the Research Department, was B. clear liquid colored pink with
an azo-dye and W8.8 found to be a mixture of approximately 50 per cent
gasoline and 50 per cent solvent naptha.
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There is another report, however, concerning
the liquid obtained from E bomb dropped elsewhere. This liquid was
& black oil, the boiling range of which corresponded to that of a
mixture of gasoline with either spent lubricating oil or fuel oil.
It is considered that this bomb should allow of the use of various
types of inflammable liquid provided there is a certain amount of
volatile material present.
(3) Markings
These bombs may be painted green on B. red under-
coat, red, or possibly camouflage red and green. The suspension ring
of the nose casting and the light alloy tail ring are painted bright
blue.
The markings on the two bombs were as follows:
First Bomb
Second Bomb
Tail Vanes
VO
vo
3 J
01
1940
4A
01
1940
Light Alloy
Tail Ring
KC
250
GB
3
J
VO
01
40
Nose Casting
KC
250
GB
On Screwed
Steel Cap of
T.N.T. Container,
17624
17638
in Small Letters
b. One-Kilogram Incendiary Bomb
Of the various types of incendiary bombs which have been
dropped on England, the most common is the one-kilogram incendiary.
It consists of a thick-walled tube, nine inches long and two inches in
diameter, made of an alloy of magnesium and filled with 8. priming com-
position of the thermit type, which is fired by means of an igniter
situated either in the nose or the rear end of the tube. With the ex-
ception of a few ounoes in the tail and the igniter, there is no dead
weight, the whole being incendiary material.
The bomb does not explode. It functions through the melt-
ing of the magnesium tube on account of the heat generated by the
thermit composition. The latter burns for 40 to 50 seconds at a tem-
perature of about 2,500° C., and melts and ignites the magnesium, which
burns for 10 to 15 minutes at a temperature of about 1,300° C. It
may remain active for as long as 20 minutes, and will set fire to any-
thing inflammable within a few feet.
During the first 60 seconds or so, while the priming com-
position is still burning, the bomb looks very violent. Jets of flame
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are emitted from vent holes, and pieces of molten magnesium may be
thrown 0,5 far as 50 feet. After the first minute the bomb becomes
less active because the magnesium tube melts and the pressure within
is released.
3. AVIATION EQUIPMENT
a. Combat Aviation Drug
An unconfirmed report from an American press representa-
tive who is generally believed reliable, states that the German Air
Force is issuing a drug known 88 "Pervetine" to aircraft combat crews.
It is reported that this drug has a strong stimulating effect but EL
rather severe let-down, with the result that a considerable number of
landing accidents have occurred when crews were returning to home
bases after completing combat missions.
b. Aircraft Message Container
The following is B. description of B. message container
taken from a Me. 110,
The apparatus consists of a metal cylinder painted red;
length 14 ₫ inches and diameter 2 inches. The cylinder is hollow for
half its length. The hollow end contains the message, and is closed
by a cap on a bayonet- joint Pastener. The other end, which is marked
by e, yellow ring, is & smoke flare container, and is surmounted by B.
small knob,
The message end is marked as follows:
UNGEFAHRLICH
(Not dangerous)
WICHTIGE MELDUNG
(Important message)
SOFORT EITERGEBEN
(Hand on immediately)
At the smoke flare end is & label marked as follows)
Message container (land). F1 24575.
Method of use, lleight for throwing out, 100 nm.
(1) After inserting the message shut bayonet
cap firmly.
(2) Unscrew the red fuse knob and pull out
lengthways,
(3) Then immediately throw the apparatus overboard.
Fuse delay one second.
c, Apparatus of Undetermined Use
A piece of apparatus recently found appears to have been
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jettisoned from a German aircraft over England. It was severely
damaged by impact with the ground.
It appears to have consisted of B. cylinder made of ply-
wood about 7 feet 6 inches long and 3 feet 6 inches in diameter, and
may have been fitted with fine on the tail, It has not yet been pos-
sible to determine the precise purpose of this apparatus, but certain
reports have referred to auxiliary fuel tanks which can be carried by
aircraft and jettisoned after use,
4. LIGHT MEDIUM TANK*
Recent photographs show that some of the German light medium
tanks (Pz. Kw. III) have been fitted with squat fixed turrets with
what appear to be 75-mm. guns, As this gun has a field of fire to
the front only, it is thought that the converted vehicle may be in-
tended for the destruction of antitank obstacles.
Photographs also show the unconverted Pz. Kw. III fitted
with a rack behind the turret to take twelve extra gasoline cans of
about five litres capacity each, making the total extra gasoline car-
ried by the tank approximately fourteen gallons.
5. MAGNETIC MINE DETECTOR
A free-hand sketch recently received shows a type of magnetic
mine detector in use. The detector is mounted on small wheels so that
the under side appears to be about six inches from the ground, and is
pushed along by an operator by means of two handles similar to those
on a mowing machine.
Notes accompanying the skotch explain that the magnetic de-
tection device is contained in the lower portion of the machine. A
device is also incorporated for iting chalk on the road to mark
the positions where mines have been spotted. The body of the appara-
tue is also said to contain sufficient explosive to destroy it in case
of it fulling into enemy hands,
Three dials connected to the magnetic device are mounted on
the handle and move in the direction of the mine-field when approach-
ing & mined area. It is explained that the device is only sensitive
to 2Pm objects.
Magnetic mine detectors are not unknown, but in this case the
drawing appears to indicate an unnecessary bulk for the device; this,
Source: American official obsorver. G-2.
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amongst other disadvantages, makes it impossible to push the
apparatus into wire entanglements where mines are frequently laid.
It would not seem that the provision of the chalk and explosive
would compensate for the disadvantages due to this bulkiness.
It is not considered likely that the reference to the three
diala moving in the direction of the mine-field is accurate. On the
other hand, it is possible that one of the three dials is illuminated
when nearing 5. mine and that the illuminated dial indicates whether
the mine is left, right or center.
With regard to range of detection, it has been found that
the detectability of a metal object with an apparatus such as this
varios as the inverse fourth power of the distance, so that at EL dis-
tance between five and six yards it is only one thousandth of what
it is at one yard, Consequently, an instrument sensitive enough to
indicate a mine at five yards would react violently to a very small
piece of metal at one or two yards. Therefore, unless the detector
works on some principle unknown to the British, its effective range
is not likely to be more than five or six feet.
6. POSSIBLE NEW GASES
An unconfirmed report from a new and untried source states
that in the dyeworks at Leverkusen a new gas of the blue cross type
has been developed which decomposes in contact with the charcoal of
the respirator to liberate carbon monoxide and prussic acid.
It is further stated that after the addition of a special
stabilizer, chosen after EL long series of tests, the liquid is stored
in glass vessels until required, when it is mixed with the blue cross
gas in thin walled bombs coated on the inside with zinc.
The same source reports that experiments are being made with
mixtures of cacodyl oyanide and metallic carbonyls.
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TENTATIVE LESSONS BULLETIN
MILITARY INTELLIGENCE DIVISION
No. 69
WAR DEPARTMENT
0-2/2657-235
Washington, November 19, 1940.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intel-
ligence Division. For provisions governing its reproduction,
see Letter TAG 350.05 (9-19-40) M-B-M.
SOVIET MECHANIZED MATERIEL FOR WINTER WARFARE
SOURCE
The information contained in this bulletin is based upon
the report of an official American observer at Helsinki late in
May, 1940.
CONTENTS
1. ARMORED SLEIGHS
2. MOTOR SLEIGHS
3. STEEL SHIELDS MOUNTED
ON RUNNERS
4. FLAME PROJECTOR TANKS
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1. ARMORED SLEIGHS
During the greater part of the Soviet-Finnish War, the
Soviet Infantry seldom followed tanks after the latter had been
exposed to the effective fire of the Finns. It was possible for
the Finns to separate Infantry from tanks by fire, and, after
neutralizing the Infantry attack, to repel the tank attack.
Towards the end of the war, however, the Soviets employed
armored sleighs to establish closer cooperation. These sleighs,
which compelled Infantry to follow tanks, were of two types-those
pushed in front of tanks and those drawn by tanks,
The pushed sleigh was about 3 meters long and 70 centi-
meters wide, with a parapet about 30 centineters high. It was
equipped with a machine gun protected by armor, and its probable
mission was to protect the tank from combustible bottle and anti-
tank mine attacks.
Drawn sleighs were of two types-personnel carriers and
demolition carriers, Personnel cerriers were of two sizes, with
capacities of 10 and 20 men, respectively. Explosives intended
for destruction of concrete were transported on the demolition
carriers.
For purposes of reducing concrete emplacements and
similar structures, the following method was employed, although
not with good results:
After the approach of tanks, the riflemen and pioneers,
who were carried in armored sleighs and on top of the tanks them-
selves, advanced beyond the emplacement under cover of fire from
supporting riflemen, tanks, and machine guns on sleighs. Having
taken up positions behind the emplacement, the pioneers then ad-
vanced upon it and, still under cover of fire, attempted to blow
it un, Effective recults were not obtained in any instance.
2. MOTOR SLETOMS
Motor sleighs employed on the eastern shore of Lake
Ladoga had the following characteristics:
Motor: 100 h.p.
Gasoline consumption: 25 kilograms per hour.
Gasoline tank capacity: 100 kg.
Speed: 20-70 kilometers per hour.
Since the sleigh was intended for evacuation of the
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wounded, red crosses mere painted on its outer walls, but the
Soviete also employed it for combat. Its chassis was entirely
covered. Armament consisted of one Degtyarev quick firing rifle
with three druns of anmunition, one rifle with sixty rounds of
ammunition, one Nagan revolver, and four hand grenades. The crew
consisted of a driver and a nechanic. Some of the sleighs were
equipped with two stretchers, while others had seats for six men.
The sleighs belonged to the 8th Motor Sleigh Unit, which
comprised three sections of seven sleighs each and an additional
sloigh to carry two gasoline druns. The unit commander was a
major.
3.
STEEL SHIMLDS MOUNTED 0% RUNNERS
Steel shields mounted on runners were used for protec-
tion of machine guns, quick firing rifles, and riflemen. The
individual soldier could either push forward under the protection
of such a sleigh or dig in behind it, but he mist be aware of
possible annihilation by flanking fire, since the shield did not
protect the lower part of his body,
Shields were of great assistance to soldiers following
tanka which were attacking over a wide front, and they aided con-
miscrably in holding terrain.
4.
FLAME PROJECTOR TANKS
During combat on the Kerelian Isthmus, a Finnish strong
point was attacked by a Soviet detachment reinforced with 16 tanks,
two of which were equipped with flane projectors. These two tanks
were in the front line with other tanks.
One of the tanks moved along EL trench at a distance of
10 to 15 meters projecting both flame and a burning liquid which
produced intense black smoke. The burning liquid stuck to the
revetment of the trench and continued burning. It did not char
the revetment, which consisted of timber without bark, although
burned spots were sooty and greasy. The tank traveled about 150
neters with its flanc projector in operation before it was de-
stroyed within the Finnish position by an antitank mine.
The other tank crossed the front trench, advanced
abreast of the nearest machine gun emplacements, and directed its
flame against a number of trees which were covered with hoar-frost.
The branches of the trees pointing toward the Soviets were turned
black with soot and became clearly distinguishable from their sur-
roundings. It is assumed that the object of this procedure was to
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mark the location of the machine gun emplacements in order to
facilitate conduct of artillery fire.
The flame projector tank destroyed within the Finnish
position was a light Vickers model of about six tons with armor
which seemed to be lighter than that of other light tanks, The
flame projector was located on the right side of the tank and
about half a meter from it T/as a machine gun. A fairly powerful
searchlight was located on the left side. The end of the flame
projector pipe was equipped with metal pins, and as the liquid was
projected through them, it was probably ignited by electric cur-
rent passing through the pins. Two compressed air cylinders and
a container holding about 250 to 300 liters of liquid were located
inside the tank behind the searchlight. The length of the flame
projected was about 20 meters and the height about five meters.
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M.I.D., W.D.
November 19, 1940.
No. 249
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. Air Force Operations.
During daylight of the 18th the Germans raided along
the south and southeast coasts of England. Last night London was
bombed and Liverpool received a short, rather heavy, attack. Gen-
erally speaking the level of activity over England was low. There
were some attacks on shipping.
The R.A.F. attempted a minor raid against Levna last
night. Their communique did not mention any other operations.
II. Greek Theater of War.
Greek ground pressure of undetermined extent continues
against Koritsa. Main Italian air effort now appears to be directed
against ground forces.
III. Mediterranean and African Theaters of War.
No ground operations and only minor air activity reported.
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TENTATIVE LESSONS BULLETIN
MILITARY INTELLIGENCE DIVISION
No. 68
WAR DEPARTMENT
0-2/2657-235
Washington, November 19, 1940.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intel-
ligence Division. For provisions governing its reproduction,
see Letter TAG 350.05 (9-19-40) M-B-M.
MISCELLANEOUS TECHNICAL DEVELOPMENTS IN GREAT BRITAIN
SOURCE
These notes, except for Section 1, were furnished by a high
British official source in August, 1940. Section 1 came from the
report of an American official observer in October, 1940.
CONTENTS
1. SAFETY PRECAUTIONS AGAINST GERMAN AERIAL MINES
2. METHODS OF DEALING WITH THE ONE-KILOGRAM INCENDIARY
BOMB
3. AUTOMATIC SPRINKLERS IN FIRES RESULTING FROM BOLBING
ATTACKS
4. PENETRATION OF PROJECTILES AND SPLINTERS ON VARYING
CONCRETE SPECIFICATIONS
5.
EFFECTIVENESS OF NAILS, SPIKES, AND BROKEN GLASS
AGAINST PNEUMATIC TIRES
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1. SAFETY PRECAUTIONS AGAINST GERMAN AERIAL MINES
The following information has recently been published by
the Office of Pritish Home Security in view of the German trend
towards dropping large caliber aerial mines by parachute over Lon-
don and other populated areas:
Two of the risks involved in detonation of mines dropped
by enemy sircraft result from the magnetic operation of the mines
and from the effects of vibration. As regards the former, it is
important that small steel or iron implements, such as shovels,
hammers, chisels, screw drivers, and steel helmets, be kept at a
distance of at least four or five yarda from the mine. Detonation
depends upon a clock which may be stopped when the mine is falling
or as it comes to rest. Very slight vibration, however, may set
it going again. For example, a mine was hanging in a warehouse with
its nose on the ground, and the footfall of those approaching it
set it going. Thus, when barriers are to be crected around a mine,
it 1s inadvisable to drive stakes into the ground. If use of stakes
is unavoidable, the barrier must be erected not less than 50 yards
from the mine.
The blast from serial magnetic mines has been felt as much
as two miles away, and windows have been broken at a distance of a
mile. Blasts which break windows may tear off inside doors and
affect persons in adjoining passages or rooms. Such effects have
been felt at a distance of about 150 yards. On the other hand, in
the case of well constructed houses, damage would probably not be
great at a distance of about 100 yards, and even at lesser distan-
cea it might be neutralized where other buildings gave complete
physical intervention.
For the purpose of clearing houses in the vicinity of an
unexploded mine, greater distances should be taken than for an
unexploded bomb of 500 kilograms in view of the more extensive range
of blast.
2. METHODS OF DEALING WITH THE ONE-KILOGRAM INCENDIARY BOMB
The one-kilogram incendiary is more frequently encountered
than any other type of incendiary bomb which has been dropped on
England. It has been fully described in TENTATIVE LESSONS BULLETIN
flo. 67, Paragraph 2b. A number of conclusions have been reached re-
garding measures to be taken in dealing with this type of homb.
There are, generally speaking, two principal means of ex-
tinguishing fires-by cooling and by snothering.
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The thermit composition in these incendiary bomba contains
110 om oxygen and this cannot be extinguished by smothering. The
however, must get its exygen from the air or surrounding
materials in order to burn; this it can do Crom most materials upon
which it may full, even if air be excluded from it.
Smothoring ydll not, therefore, normally extinguich the
bowb, although it will tend to localize its effects. If, because
of lack of water, it becomes necessary to resort to smothering,
sand should be used. Extinguishing materials in powder form are
no better for this purpose than sand, and they have the dissivan-
tage of requiring close approach, which is necessary for success
but not always possible, Sand and special powders have no cool-
ing properties.
There is nothing more effective for cooling than water,
and there is no known material of practical use which vill deal
2016 effectively with a magnesium incendiary bomb.
The first consideration should always be control of the
fire callsed by the bonb. Dealing with the bomb itself is a 38-
condary matter. Ordinary fire fighting methods are applied to
localize and control these fires.
The action of water on A. marnesium Bomb is to accelerate
combustion, If an excessive volume is applied, soceleration of
combustion vill be such that burning magnezium will be violently
antered in all directions. Water should therefore only be
molied in the form of a fine spray. On the rare occasions when
0 homb can be tacliled within the first few seconds of its landing,
the application of mater to the magnosium tabe will cool the latter
sufficiently to prevent its melting and taking fire as a result of
the action of the thermit.
As a general rule, liquid chemical extinguishers are not
recommended. In particular extinguiphers expelling special liquids-
usually carbon tetrachloride--or glass hand grenades filled with such
liquids, while excellent for dealing with oil fires or fires in the
open, should not be used for dealing with incendiary bombs in confined
sproes, since there is a danger from poisonous fumes. They should not
be used on the incendiary bomb itself unless a respirator is worn.
The heat causes a generation of phosgene.
Extinguishers expelling water can be used to deal with fires
caused by incendiaries, but they are not particularly suitable for
dualing with the incendiary bomb itself. The water is expelled in
the form of a jet, and if it is used at a distanue of less than 12
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feet, there is a risk from flying particles of burning metal. The
risk is increased if the operator is forced to lie with his face
near the ground. About 3/4 of a gallon of water in necessary to
deal with the bomb itself, and with most extinguishers of this
type, only about 14 gallons would remain for use on the resulting
fire.
Special solutions have been put on the market for extinguish-
ing incendiary bombs through use in a chemical extinguisher or through
application by hand pumping. In no instance are they more effective
than water, and in some cases they are less effective.
3. AUTOMATIC SPRINKLERS IN FIRES RESULTING FROM BOMBING ATTACKS
It is known that automatic sprinklers provide a safeguard of
very high order. Considerable insurance rebates and certain types of
waivers are allowed for sprinklers in many classes of risk, There is
little doubt that a sprinkler system is vulnerable, both in connection
with and apart from possible damage to the main sources of water supply.
However, it is considered far better to be equipped with such unques-
tionably efficient protection than to dispinse with it because of
possible risk to the water supply system during a raid.
Sprinklers almost certainly extinguish or hold in check fire
caused by an incendiary bomb. If spray from a sprinkler head fell on
the bomb, the effect would be not unlike that of the spray from a
stirrup hand pump. However, unless the bombs were within about three
or four feet of a sprinkler head operating at 155° F., the usual
operating temperature in England, sufficient hent would not be given
off to open the sprinkler, although the resulting fire would soon do
so,
Enemy action on a garrison town or camp BY result in the
opening of so many hydrants that pressure on power mains will fall
very considerably. The primary supply to a sprinkler system will
probably be furnished by the town's water mains with usually an
auxiliary supply in addition. If the latter is from a static source,
the supply will generally be almost unlimited, although failure of
the electric supply may cause a breakdown if the purp 19 electrically
driven. If the secondary supply is from a pressure or elevated tank,
the quantity will be limited, and if many sprinkler ds have opened,
duration of operation may be curtailed to a dangerous gree. Pres-
sure tanks are, generally speaking, much to be profert to elevated
tanks, for they will deliver water at a much higher pressure than
the latter.
Although the system has not been used in England, a special
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fire brigade connection has been made available elsewhere to pump
the water into the sprinkler system. By this means, water will reach
the seat of fire at once, but it may be some time before lines of
hose are getting water into a similarly favorable situation. This
special connection is, therefore, to be recommended, but it should
be made above the main stop valve and should itself be provided with
EL stop valve and back pressure valve.
Sprinkler valves should never be closed as a precaution
against water damage through fracture of one of the sprinkler pipes.
The essential feature of the sprinkler system is that it will work
automatically at the inception of the fire. It should not be made
to depend on the fires being spotted by personnel inside or outside
the building.
4. PENETRATION OF PROJECTILES AND SPLINTERS ON VARYING CONCRETE
SPECIFICATIONS
a. Mechanical Strength of Aggregate
Tests show that the depth of penetration and the volume
of the crater vary little over a wide range of aggregate crushing
strengths. Aggregates varying in crushing values from 11.7 (B.S.S.
No. 882/1940) to 72.8 were used in the tests and the depth of craters
with various projectiles varied only from 2.8 to 5 inches.
b. Mix Proportions
For a specific ratio of cement to total aggregate, an
increase in ratio of fine to course aggregate results in a decreased
resistance to penetration and, on the whole, to a decrease in the
amount of crater material removed by the projectile. Decrease in
cement content results in increased penetration and in increased
creter volume, but the changes are not important unless the mix is
very weak. It would also seem that badly graded mixes do not offer
as good resistance to penetration ao the well graded mixes, and, in
particular, under-sanding is a source of weakness in this respect.
C. Water-Cement Ratio and Consequent Strength of Concrete
The conclusions reached from tests is that no very sig-
nificant difference either in penetration or in crater volume results
from such changes in strength as are due to changes in the water-
cemant ratio. Variations in strength were appreciable, but penetra-
tion figures were comparatively little affected.
d. Maximum Aggregate Size
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There is not much data on this subject available, but
Lt would seen that, provided the grading is satisfactory, the reals-
tance to penetration increases as the size of aggregate increases.
This is probably not true for very weak aggregates, but may be so
for ordinary types.
e. Thickness of Concrete Required to Give Protection
Against Splinters
Tests were taken on concrete made with Ham River sand
and ballast 28 days old. A projectile weighing 1$ oz. and having
a striking velocity of approximately 4,650 feet per second was used.
From these tests and other results, it was concluded that 12 inches
of structural quality concrete would provide the degree of protection
required. The minimum crushing strength for this quality of concrete
to 2,250 pounds per square inch at 28 days. Ordinary concrete, how-
ever, requires a thickness of 15 inches.
5. EFFECTIVENESS OF NAILS, SPIKES, AND BROKEN GLASS AGAINST
PMEUMATIC TIRES
It is known that the Germans have in the past considered that
four-pronged spikes, three inches long and scattered in the road formed
an effective block against pneumatic tired notor vehicles. Tests have
recently been cerried out to determine to what extent spikes of this
type, as well as nails and broken glass, destroy rubber tires, and to
what extent such obstructions in the road would hold up the movement
of motor transport.
The results of these tests have shorm that nails and spikes
will cause immediate and serious punctures in unprotected commercial
tires, but glass will not present any danger provided the tires are
in good condition. In the latter case, however, it is recommended
that immediately after Class has been traversed, the tires be examin-
ed and brushed with a steel brush 50 that pieces of glass picked up
in the treads or slightly embedded in the rubber will be removed and
not allowed to work their way into the cover,
Military tires of the "run flat" type will not, of course,
be affected by punctures.
Tests were also carried out with commercial tires protected
by means of linings, and with a second tire cover whose bead had been
removed slipped over the normal cover. In this case the trials were
very severe. The test vehicle was allowed to bump onto broken bottles
and 2-inch nails. The car was also started and stopped violently and
skidded on the obstructed surface for about 15 minutes without any
RESTRICTED
-b-
Regraded Uclassified
122
RESTRICTED
outward sign of a punctured tire on the front or rear wheels. Subse-
quent examination, however, showed that the nails had caused punctures,
which, in turn, had caused the tire concerned to go flat, but not until
the car had been subsequently driven 10 miles.
RESTRICTED
-7-
CONFIDENTIAL
123
Paraphrase of Code Cablegram Received at the
Har Department 80 Movember 19, 1940.
tandon, Filed 15:20, November 19, 1940.
1. The operations of the Bomber Command during the night of
Wyember 18-19th were satisfactorily executed. A total of n sorties
were dispatched and one plane was lost. Operations the previous day
were negligible due to bad weather conditions. The Coastal Commind
operations were normal, with 43 patrol missions, 62 bombing sorties
and 16 convey ascorts. The Command lost one plane and destroyed one
anazy plane certainly, two probably, and destroyed one. The Pighter
Command dispatched 210 planes on 69 patrol missions.
2. Daylight operations of the Oerman Air Force on Monday,
lovember 18, were on & small seals, totaling about 70 planes. There
were country wide raids that night in fair members.
3. Three airdroms were attacked. The Overseas Airways Com-
poration suffered seriously, with its station wreeked and with one
flying bont seriously and two alightly damaged. Dorbs falling in
the working class districts in southern porte resulted in najor
damages with 60 casualties. An Army barracks north of Landon was hit
and 27 troops were killed and 35 wounded, In Birndagham & margarine
factory and & gas tank suffered adnor damages. During the night of
November 15-16 camualties in London were 95 killed and sao injured
and in Bournemouth were 33 killed and 16 injured.
CONFIDENTIAL'
Regraded Uclassified
121
CONFIDENTIAL
4. there WIN m plane losses at have or in the Middle East.
5. Two destroyers were damaged and a trader revecled w a
collision on the Clyde. & destroyer at Alamandria was damaged by
an air attack. A boah striking its engines dischled a ship in a Theme
convey.
6. A fire shief of the New York Fire Department spent three
days in Coventry and reports that the center of the tom proper,
which covers two square riles, has been flattened out but that the
factories around the tom are practically unleased. A British Army
general has been given about 10,000 Engineer troops, in addition to
civilien laborers, to some the work of classing may the produce
in London.
7. British eraisers have arrived at Piresus, rear Athens,
carrying troops from the Middle East. The Greeks continue to take
many prisonars. The 47th Battalion Mivision has moved Valons,
Albenia to the Pindus sector in Greese.
8. A radiogram from Ribralter states that five automobiles
of German photographers have arrived in that area and are stopping
in LaLinee (Just outside (libralter - 0-2). These are the - boys
that appeared in Belgins, Holland and France just before the -
invaded those places.
si
Distribution:
Military Aide to the President
Secretary of Var
State Department
Secretary of Treasury
Asst. Secretary of me
Chief of Staff
CONFIDENTIAL
NPD
CINCI
Regraded Uclassified
125
THE M. 5. COAST QUARD
AND - TO -
STATE
TREASURY DEPARTMENT
nes
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON
(11-19-40)
For rs. Klotz
Attention Bell, Gaston, Whits
I wish to convince public that Treasury is pre-
pared to fight inflation; therefore prepare for me when I return the 27th pros
and cons regarding continuance domestic and foreign silver purchase program,
as well as arguments for each side concerning continuation of President's
various emergency monetary powers.
7ish Treasury to publish history of gold commencing in 1932. Warburg,
Harrison, Williams, Day, Sprague, Tugwell, Moley, Pearson, Warren, and Presi-
dont Roosevelt should be consulted and requested for their records.
(Signed)
Best Regards
Regraded Uclassified
126
TREASURY DEPARTMENT
Washington,
SECRETARY
November 19, 1940.
by dear Mr. Secretary:
In accordance with your cable request I an enclosing
herewith a memorandum giving 8. short discription of five
loopholes which permit legal tax avoidance and two tax in-
equities and inequalities in favor of the Government.
I realize that these are probably far less dramatic
than you had desired. In 1937 most of the more striking
examples were cured: personal holding companies, use of
foreign holding companies, incorporated yachte, and inter-
family losses (sales of securities from husband to wife and
vice versa). The only loophole remaining which lends itself
to both intellectual and emotional attack is the tax exemp-
tion of Government securities. Four addresses on this are
in process of preparation and will be ready for you on your
return. If you would care to have these sooner, we will be
glad to speed their completion and mail them to you.
The "examples" illustrating the advantage taxpayers are
taking of some of these opportunities for avoidance are
actual cases in our files.
With kindest personal regards to Mrs. Morgenthau and
yourself, I remain
Yours sincerely,
the
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
of the United States,
c/o The American Consul,
Kingston, Jamica,
Regraded Uclassified
127
SELECTED INEQUALITIES AND TAX AVOIDANCE
OPPORTUNITIES UNDER THE FEDERAL
ESTATE, GIFT AND INCOME TAXES
I. ESTATE AND GIFT TAXES
(1) Exemptions
(2) Powers of appointment
II. INCOME TAX
(3) Capital gaina
(4) Community property
(5) Percentage depletion
(6) Expenses incurred in the
production of income
(7) Deductions for bad debta
and worthless stock losses
(8) Tax-exempt securities (examples)
Regraded Uclassified
139
I. ESTATE AND GIFT TAXES
(1) Exemptions
Taxes on the transmission of wealth from one generation
to the next - inheritance, estate and gift taxes - afford
one of the very few opportunities we have for assessing
taxes in accordance with individual ability to pay them,
However, despite the universal acceptance of estate and
gift taxes and despite the vast amount of property which
18 transferred by individuals during their lifetime and at
their death, the estate and gift taxes are comparatively
small revenue producers in our fiscal system, During this
fiscal year the Federal taxes on estates and gifts will
yield less than $400 million. They will yield only about
half as much as either the liquor or tobacco taxes.
One of the reasons for the inadequate revenue yield of
the estate and the gift taxes is the multiplicity of
exemptions and the lack of coordination between them. Our
present laws provide four different and independent
exemptions which can be utilized in minimizing property
transfer taxes. The estate tax provides a $40,000
exemption. It exempts an additional $40,000 in the form
of insurance on the decedent's life payable to specified
Regraded Uclassified
129
- 2 -
beneficiaries. The gift tax also provides a. $40,000
exemption. In addition, each year individuals are
permitted to distribute free of tax $4,000 gifts to each
of any number of individuals.
As a result of this multiplicity of exemptions,
individuals can transfer to their heirs $120,000 or more
of their wealth, without paying any Federal estate or gift
taxes. For instance, an estate of $280,000, including
$40,000 of insurance, can be transferred to one's wife
and three children, tax-free by gift distributions over
a period of ten years and & transfer of the remainder at
death. For the Federal Government to provide the means
for exempting family fortunes of such size from transfer
taxes, in the light of present Federal revenue needs,
seems inadvisable.
Aside from the revenue significance, these numerous
exemptions raise also problems of tax equity. Consider,
for instance, the $40,000 insurance exemption. While the
practice of providing a liquid fund for one's family is
socially desirable no valid reason can be presented why
insurance should be singled out for especially favored
treatment. The beneficiary of & $40,000 insurance policy
Regraded Uclassified
120
- 3 -
has no less taxpaying ability than the heir to a $40,000
bank account. Under present laws the bank account 18
taxable but the insurance 1s exempt.
These exemptions together with the veriations between
the estate and gift tax rates and tax bases produce great
disparities in the amount of Federal taxes imposed on
property transfers under different conditions. For
example, the $500,000 estate of an individual who retains
title to all his property until death, will under present
tax rates be liable to a tax of $88,440. However, if this
name individual 18 able to make systematic property
distributions to his wife and three children during the
ten years before his death he can reduce that tax liability
to $18,856. In other words, he can out the tax bill by
79 percent. At the same time, his income taxes are also
reduced.
The inequity is accentuated by the fact that many
individuals cannot take advantage of the use of gifts to
minimize their transfer taxes. For business and other
reasons they find it necessary to retain control of their
property in their own hands until death.
Regraded Uclassified
131
(2) Powers of Appointment
It 18 the object of the Federal estate tax to impose
a tax on property that 18 left by BL deceased person to his
heirs. When in the course of time these heirs die and in
turn leave their property to their heirs, the estate tax
properly seeks to tax the property passing upon second
death. Consequently, under ordinary circumstances, the
property 1s taxed once in each generation. However, certain
legal devices which are permitted under the Internal Revenue
Code have been used as a means of transferring property for
several generations without the imposition of an estate tax,
no matter how greatly the property has increased in value.
One of the most common means of effectuating the passage
of property without tax through more than one generation is
by the use of so-called limited powers of appointment. For
example, e father by his will may leave his property to his
son to be enjoyed by the son during the son's life and also
give the son the power to leave that property at the son's
death to such of the son's children 8.6 the eon wishes to.
In such an instance, under the Federal estate tax as it now
stands, B. tax 18 imposed when the father dies, but there ie
no tax imposed when the son dies and leaves the property to
the grandchildren. Thus, by the use of such powers, a tax
may be postponed until the death of the grandchildren, which
may not take place for scores of years thereafter.
Regraded Uclassified
132
II. INCOME TAX
(3) Capital gains
The individual income tax 1s intended to give
application to the universally accepted principle that
individuals should contribute to the cost of government
in accordance with their taxpaying ability; that those
with larger incomes should pay higher rates of tax than
those with lesser incomes. With this objective in view
our income tax rates are steeply graduated, rising from
4.4 percent to 81.1 percent (including the present
defense levies).
The steeply graduated income tax rates notwithstanding,
the objective of progression 18 only partially attained
and in some instances is not attained at all. This 1s due
to the favoritism shown several kinds of income under our
tax laws. Profits realized from the sale of stocks, bonds,
real estate, or other forms of property - so-called capital
gains - are a case in point.
Under our present laws profits realized from the sale
of stocks, bonds, etc., which have been held by the
taxpayer for two years or more are segregated from other
income and accorded special treatment. In the first place
only half of such capital gains are taken into account.
Regraded Uclassified
- 2 -
133
Secondly, the maximum tax rate imposed on the one-half
of the capital gains which 18 taken into account 1a
limited to 33 percent. This means that in effect,
regardless of the size of the taxpayer's total income,
the rate of tax on his profits from the sale of capital
assets can in no instance exceed 161 percent. If he
derived the same amount of income from business operations,
dividends, or from salaries, the tax rate can be as high
as 81.1 percent.
This favored treatment of capital gains defeate
the principle of ability to pay and undermines the
progressive feature of our income tax, The damage is
particularly great because it 80 happens that capital
gains are relatively far more important in large incomes
than in small ones. Moreover, those in the high income
groups are at times in a position to take their profits
in the form of capital gains rather than in fully taxable
corporate dividends. Wealthy stockholders may be able to
induce their corporations to accumulate earnings which
would normally be paid out in the form of fully taxable
dividends and take them instead in the form of appreciation
on their stocks. In doing 80, they can accomplish
substantial tax savings.
Regraded Uclassified
- 3 -
134
The tax statistics for the period since the adoption
of this special treatment of capital gains clearly reveal
the extent to which the progressiveness of the income tax
18 being undermined. In 1938, for example, those with
incomes of $5,000,000 or more, paid on the average only
a 30 percent tax, whereas in the absence of the special
capital gains treatment they would have paid a tax in
excess of 75 percent. Perhaps even more damaging is the
result that while the average tax rate paid by individuals
increased progressively up to the $1,000,000 income level,
it declined thereafter. In other words, those with two or
three million dollar incomes actually paid & lower rate of
tax than those with smaller incomes. The principle of
progression has been turned upside down.
Regraded Uclassified
- 4 -
135
EXAMPLES
(In presenting these examples it 1s not intended to
imply that equitable taxation of capital gains requires
their taxation at the same rates and in the same manner
8.8 other income. The purpose is rather to show how much
the discrepancy 1s between full taxation and taxation
under the present provisions. This discrepancy is believed
to be much too great for equity.)
1. In 1938 a certain individual realized a total
capital gain of $15,355,000, all on assets held more
than two years. His net income from other sources was
$250,000. If the total income had been taxed at the
regular rates, his tax would have been $12,141,000.
The tax actually assessed was $2,430,000, or 80.0
percent less.
2. In 1938 a certain individual had income of
$15,687,000 including capital gains and losses in full.
Net income entirely excluding capital gains and losses
was $270,000. The tax liability if the capital gains
had been subject to tax in the same manner as other
income would have been $12,209,000. The actual tax
liability was $2,454,000, or 79.9 percent less.
Regraded Uclassified
136
(4) Community Property
In most situations an individual pays income tax on
All of his earnings. In a few States, however, income
earned by a husband is treated under the property laws of
those States 28 belonging one-half to the husband and one-
half to the wife. As a consequence, in these States the
husband is taxed under the income tax only upon one-half
of his earnings, the other half being taxed to his wife.
This difference in local rules of property causes serious
inequality in tax treatment. For example, & husband living
in one of these States and earning $20,000 a year will pay
a Federal tax of $660.00 on $10,000; his wife will pay a
tax of $660.00 on the other $10,000. In the vast majority
of States, however, where the so-called community property
laws do not apply, a husband earning $20,000 e. year will
pay a tax of $2,336.40 on the full $20,000. Thus, A family
living in a community property State will pay 40 percent
lees in total income taxes than a family having the same
income but living in a non-community property State.
We should revise our income tax law in order to eliminate
this inequality of treatment.
Regraded Uclassified
137
- 2 -
EXAMPLES
1. In 1938, & certain husband and wife in one of
the community property States reported combined net
income of $289,000, practically all of it salary, which
apparently was earned by the husband. If a joint return
had been filed or if separate returns had been filed in a
State not having a community property law, the tax would
have been $154,000. Actually the combined tax was
$121,000, or 21.4 percent less.
Regraded Uclassified
139
(5) Percentage depletion
Our tax laws properly provide that where an owner
uses property for business purposes, he 18 permitted to
deduct from his gross income, before arriving at income
to be taxed, the cost of the property used up or worn out.
An owner of a garage or a store, for instance, may write
off that fraction of the cost which it 18 estimated has
been lost through wear and tear or obsolescence during
the year. If, however, a person or B corporation owns an
oil well or a mine, or an interest in B. well or a mine,
he is not limited by the above general rule. Instead,
regardless of the cost of the property to him, the law
permits him to deduct an amount equal to a certain fraction
of his gross income. It permits him to make that deduction
year after year, go long as he receives income from the
property. Operators of oil and gas wells may deduct
271 percent, operators of sulphur mines 23, metal mines
15 percent and coal mines 5 percent of their gross income
before being subject to tax. As a result, a taxpayer may
recover several times the cost of a well or mine before
he is required to pay tax on the income received.
The injustice to other taxpayers who must make up
the revenue lost by reason of this provision in the law,
Regraded Uclassified
139
- 2 -
18 recognized by many -- and has been complained of even
by some of those who benefit from it. As an illustration,
8 man bought a lot in Oklahoma City for $500 and built on
it a house, which he rented. Subsequently, oil was
discovered on his property and under the percentage
depletion allowance he recovered each year many times the
cost of the lot, The man finally wrote to the Department
to make sure that he had the authority under the law to
do this because, to use his own words, "it was not right."
Our illogical laws, however, make it right.
EXAMPLES
1. In 1934 a certain oil corporation took percentage
depletion of $3,652,000 whereas the depletion necessary
to return the cost would have been $1,453,000. As a.
result of the percentage depletion, the corporation had
no income subject to tax, whereas if only the depletion
necessary to return cost had been allowed, the tax would
have been $202,000.
2, In 1936 a certain sulphur company took percentage
depletion of $4,267,000 whereas the depletion necessary
to return the cost would have been $614,000. As a result
of the use of percentage depletion the Government lost
revenue of $557,000.
Regraded Uclassified
140
- 3 -
3. In 1934 a certain oil corporation took percentage
depletion of $2,118,000 whereas the depletion necessary
to return the cost would have been $139,000. As a result
of the use of percentage depletion the Government lost
revenue of $272,000.
Regraded Uclassified.
141
(6) Expenses incurred in the production of income
In the situations mentioned above, the tax laws
discriminate unfairly in favor of limited classes of
taxpayers and against the Government, and therefore
against the vast majority of taxpaying citizens.
There the remedy is to broaden the tax laws BO that they
reach these limited groups and require them to pay as much
tax as 18 paid by others in the same economic position.
However, while we are revising our tax structure in order
to eliminate unfair advantages enjoyed by & few at the
expense of all, we must at the same time rectify those
situations in which our present tax laws discriminate
inequitably against certain limited classes of taxpayers.
In these cases the remedy is to relieve such taxpayers of
the burden unfairly borne by them.
An example of discrimination against a limited class
of taxpayers is the case of a taxpayer who incure expenses
in the production of income which is not connected with A
trade or business. Such expenses are not deductible, since
the law permits the deduction from gross income only of
those expenses which are incurred in connection with a
trade or business. Thus, a salary paid to an employee in
the taxpayer's regular business is deductible in determining
142
- 2 -
the income from the business which 1s subject to tax.
On the other hand, a salary paid to a person who manages
some of the taxpayer's nonbusiness property 1s not
deductible in ascertaining the taxable income from that
property. A widow whose sole source of income is from
property left by her deceased husband and who lacks the
necessary experience to manage that property 18 thus
taxed upon the entire income from the property without
deduction of any of the expenses which she must necessarily
incur for advice and counsel in the management of her
property. At the same time, another taxpayer deriving the
same amount of income from a business conducted by him
will only be taxed upon the income from that business
remaining after deduction of the necessary business
expenses. Taxpayers who are entirely dependent upon
income from property or investments are thus taxed more
heavily than are other taxpayers. Consideration might
well be given to relief provisions equalizing the effect
of the income tax in such cases.
Regraded Uclassified
143
(7) Deductions for Bad Debte and Worthless Stock Losses
The provisions of the income tax laws concerning the
deduction of losses from bad debts have long been the object
of criticism. This criticism is directed at the conditions
governing the allowance of the deduction. A taxpayer can-
not deduct a bad debt from his gross income unless he both
ascertains that the debt became worthless during the tax-
able year for which he seeks to take the deduction and
charges it off within that year.
Frequently it 18 difficult to ascertain exactly when
a debt becomes "bad" and this question of fact has given
rise to much litigation. As an example of the way in
which these requirements may deprive e, taxpayer of a deduc-
tion let us suppose that a taxpayer learns facts which lead
him to think that B. certain debt owed to him will never be
paid, He charges the debt off as worthless on his books and
seeks to take St deduction on account of the bad debt for
that year. The Bureau of Internal Revenue, however, may
have reason to conclude from all the evidence available that
the debt had not yet become worthless. The case may be
carried to the Board of Tax Appeals and the courts and
several years may elapse before it 18 definitely settled.
Let us suppose that the court decides in favor of the
Bureau and rules that the taxpayer charged off his debt too
soon. For two reasons the taxpayer may then be debarred
Regraded Uclassified
144
- 2 -
from claiming any deduction on account of the bad debt.
The statute of limitations may have run with respect to
the year in which the debt actually became worthless,
making it now too late for the taxpayer to claim a deduc-
tion for that year. Or it may be that the taxpayer had
failed to charge off the debt in the year in which,
according to the court, it actually became worthless, in
which case he would not be allowed a deduction even
though the statute of limitations had not barred a claim
for a deduction for that year.
Somewhat similar difficulties exist with respect to
the deduction for losses sustained upon stocks which have
become worthless. While the charge-off requirement does
not apply to such losses, the statute of limitations may
operate to deny a taxpayer a loss to which he 18 legiti-
mately entitled. The equity of the income tax would be
materially increased if the difficulties which often
operate to prevent the deductions for bad debts and worth-
less stock losses could be eliminated.
Regraded Uclassified
145
(8) Tax-exempt securities: Examples
1. In 1938 e. certain taxpayer reported net income of
$353,000. He reported in addition, $1,345,000 fully tax-
exempt interest. If this interest had been subject to
tax, he would have had a tax liability of $1,078,000,
whereas his actual tax liability was $100,000, or 90.8
percent less.
2. In 1938 & certain individual reported net income
of $236,000 in addition to which he reported $1,340,000
of wholly tax-exempt interest received on reported holdings
of $44,000,000. If the tax-exempt interest had been subject
to tax, his tax would have been $1,125,000. H18 actual tax
was $120,000, or 89.3 percent less than he would have paid.
3. In 1938 8. certain taxpayer had net income of
$3,525,000. In addition he had fully tax-exempt interest
of $2,852,000 on $122,244,000 of tax-exempt securities.
If this interest had been taxable, his tax would have been
$4,798,470. It was actually $2,562,000, or 46.6 percent
less.
Regraded Uclassified
146
HSM
PLAIN
London
Dated November 19, 1940
Rec'd 1:10 p. D,
Secretary of State,
Washington.
3737, November 19.
FOR TREASURY,
The Treasury order referred to in my No. 3741 of
November 15, 1 P. m. is announced in the press today.
The price listed in the order for each security 18 based
on a quotation on November 16 or the price stated in the
original vesting order, whichever is the lower. Distino-
tion between those who failed to register their securities
and those who have acquired them through inheritance from
an American owner since the original registration order,
is made by the quotation of alternative higher prices
where the present price is the higher. This price will
apply in CASES where "it appears from information given
to the Bank of England that at the date of the original
order no person was under obligation to register the
securities.". The present order COVERS the securities
included in the two vesting orders of February 17 and
April
Regraded Uclassified
147
hsm -2- No. 3787, November 19, from London
April 13 relating to American securities but does not
include Canadian securities the acquisition of which was
the subject of separate vesting orders.
JOHNSON
CEB
Regraded Uclassified
Devember 19, 1940
Acting Secretary Bell
Mr. Coohran
STRICTLY CONFIDENTIAL
Reference 10 made to by of Sovember 16 in which I reported that
b. Pincest, Financial Counselor of the British Robassy, had let as know that his
people had 1403 the Argentine financial delegation at the Shoreham Notel os November
15. the day after the delegation had been received in the Treasury.
Then in my office yesterday noos, Mr. Pineent gave a 119010 more detailed
account of the British meeting with the Argentines. Be said that this meeting had
subled the British to learn something of the nagotiations which were under vay
between the Argentine and British Governments. lie said that those negotiations
sericaged the British buying 440,000,000 storling of Argentise products during the
second year of the var, The Argestines think they could purchase 439,000,000 sterling
from the sterling area during that year. At present Argention has built w with
Great Aritain a sterling balance of 17,000,000. part of which say to liquidated through
current commercial transactions. The first securities which Argentise would contem-
plate buying back from the British would be railvey equities. It looks as If there
vould not be enough sterling on head for this, # Argentina might appeal to no for
(llare to facilitate such a transaction.
Pinsent stated that Clayton confirmed the 1dea advanced by Secretary
Mergestham, namely, that come arrangement seald be worked out whereby the United
Mates would lond to Argentina against British securities M sollateral. (I corrected
Placent a little on his quotation of the Scoretary's reserve ⑉ this subject.)
Plasent also stated that Clayten favored the 14th of funds which the United States
make available to Argentisa being at least partly free for payments for British pre-
dute. Pinsent stated that his Group had gained quite a bit of information from the
Argustines and the latter had commed pleased so have contact with the British, stating
that they had acquired a better understanding of the American attitude toward thes.
Placent remarked that no specific figures had been mentioned insefer as Argentine's
requests for American aid are involved.
I received the above information without my comment upon the propriety
of the diseassion by the British with the Argestise delegation of American negotiations
vith that delegation.
MP
ENC:da:11.19.40
109
Regraded Uclassified
Servicer 19. 1940
Asting fearetary Dell
Dr. Cochres
Mr. Pinemt, Financial Commesler of the British Roberty, salled on IN yesterday
at 12:30 by appointment. Mr. Pincent showed to no. but 414 not leave with NO. a -
shat carbled code meenge which be had received from Lendon en the subject of banking
services for the United States Doverment as the bases is this heal syhere which our
deverament is asquiring free the Brittsh. The impressies is London comed to be that
our allitary and Havy people vere alroady is conversations or negotiations with those
banks. The British deverament throught that this might compliente the situation and
spperently decired to disease these matters with M in Landon.
In anover to Pineout's inquiry. I told his that the Treasury had been apprenched
w the representatives of practically all of the Brittsh and Canadian banks having
offices is cas or more of the bases. Ve had received such information as those repro-
centatives volunteered and had, constitute through & fairly form letter. requested assi-
tiemal factual information for our guidance If and when the time my - for the frese-
7 to choose depositaries for formal funds is the bacoo. I seld Pineest that the
selection of such depositaries was strictly a Treasury matter, and not one for negatic-
ties. While Pinsent vas still at of desk I was to Mr. Dell's effice and should his
the message. Mr. Bell confirmed that the information which I had gives, as above set
forth, vas in accordance with his understanding of the situation. No also permitted no
to tell Mr. Placent that in selecting depositaries the Treasury would give proference
to banks locally expitalized.
Is surver to Pineent's further question. I sold his that a United States Neval
Commission had already been visiting the bases is question and eight conseivebly have
been obliged to each cheetre at local banks. It was entirely possible that en moh
occasions there right have been conversations as to the facilities which the banks
wight offer. I reiterated that, tasefor as the Treasury was subje, there bed been 10
formal discussions with banks at the bases. I was met villing to check of with the
Noval Commission as to what 19a matere my have done on their recent triye.
The assuage which Pinsent had was quite indefinite as to what points the Brittsh
desired to disemse with American representatives. with Rr. Bell's approval. I told
Mr. Fineent that if the British Deversment loss have any points with respect to -
reacy rates and regulations. etc., which they desired to disease with as. each de-
oussions should be with the Treasury efficials is Washington. rather than with our
lubancy is Leadon. I reminied Pincess that Sir Proterick Phillips and Mr. BeeLey are
expected within the and for vooks and their visit sight provide as apportunity for
struightening or any problems which my astet. I atted that the conding of any
important unler of - from the Valted States to the BBV lucve is not imediately
imminest, and that there would com to be as rack in sondag to definite declaime with
import to the formaly and exchange problems that may be involved.
150
- 2 .
Pincent agreed to limiting Me telegraphic report to Leader to the fact that
the interested banks had been is touch with the Treasury est that the Treasury would
voleese any discussions which the British Government night decire to institute have
to Washington with us.
pmp
DeC:lap-11/19/40
Regraded Uclassified
181 26316
ER
PLAIN
Stockholm
Dated November 19, 1940
Rec'd 10:15 p.m.
Secretary of State,
Washington.
1045, Nineteenth.
Riksbank November 15 metallic reserve 650 foreign
exchange 777 loans discounts 700 circulation 1367 additional
appropriations 22 requested for defense purposes October
imports 139 point 4 exports 103 all million crowns. Thole-
sale price index up 6 points in October to 154.
INFORM COMMERCE, TREASURY,
STERLING
NPL
Regraded Uclassified
152
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 19, 1940
to
Secretary Morgenthau
FROM Mr. Cochran
We received from the Federal Reserve Bank of New York the following informa-
tion regarding the transactions listed on the attached statements in German accounts
mintained at:
Chase National Bank
National City Bank
Federal Reserve Bank
BMR
Regraded Uclassified
Chase Neti
sak
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 18
$ 50,000
Reichwbank, Berlin
Chasse National Bank, N.Y. for
account of Skandaniviska
Banken, Stockholm, for account
and by order of Reichsbank,
Berlin
200,000
a
Chase National Bank, N.Y. for
account of Stockholm Enskilda
Bank, Stockholm for account
and by order of Reichsbank,
Berlin
67,666
If
Corn Products Refining Co.,N.Y.
Head office account by order
of Konversionkasse fur
Auslandsschulden, Berlin
120,000
Chase National Bank, N,Y, for
account of Rigge National
Bank, Washington, D. C. to be
paid to German Embassy,
Weshington, D. 0. by order of
Foreign Office, Berlin
National City Bank
$100,000
Reichsbank, Berlin
National City
100,000
Reichsbank, Berlin
Chase National Bank, N.Y.
Bank, N.Y. by
order of Banque
50,000
1
Federal Reserve Bank, N.Y.
Nationale Suisse,
Zurich
50,000
-
Guaranty Trust Co. N.Y.
100,000
n
National City Bank, N.Y. for
account StockholmeEnskilda
Bank for account of
Reichsbank
Regraded Jclassified
Federal Reserve Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 18 $ 50,000
Reichsbank, Berlin
National City
Bank, If. Y. by
order of Reich-
sbank, Berlin
154
Regraded Uclassified
STRICTLY CONFIDENTIAL
CONFIDENTIAL
(CONFIDENTIAL)
155
PARAPHRASE
The following is the substance of telegram no, 40,
dated November 19, 4 p.m., which has been received from
the American Consul at Hanoi:
A French and Indochinese delegation, which will
number about twenty persons, headed by Robin, former
Governor General of Indochina who is now in France, will
at the end of November go from Indochine to Japan for
the negotiation of permanent economic relations. The
group will include Cousin, Director of Financial Control,
Marty, Director of the Economic Section, des Rouveaux,
Chief of the Mining and Industrial Supplies Section, and
Ganney, Inspector General of the Bank of Indochina. I
have been informed by the Director of the Economic Section
(Marty) that a new customs tariff upon an ad valorem basis
has been formulated for Indochina. In connection with
this, he said that the Japanese are asking for preferential
treatment as regards certain classes of imports and that
negotiations concerning this question will without doubt
be protracted and attended with difficulty. M. Got, a high
official of the Bank of Indochina, has told me that before
long he will go to Japan to open in Yokohama a branch of
the Bank of Indochine and that concurrently branches of
the
Regraded Uclassified
156
CONFIDENTIAL
-2-
the Yokohama Specie Bank will be opened at Haiphong or
Hanoi or both. The opening of these banks is understood
to have been envisaged in the agreement between the
Japanese and the Vichy Governments which was signed last
August. Closer relations in commercial and economic
fields may be indicated by closer bank relations.
CCFY
157
EMBASSY OF THE
UNITED STATES OF AMERICA
No. 704
Chungking, November 19, 1940
SUBJECT: BOMBING OF CENTRAL AIRCRAFT MANUFACTURING COMPANY
AT LOIWING, YUNNAN ON OCTOBER 26, 1940
STRICTLY CONFIDENTIAL
AIRMAIL
The Honorable
The Secretary of State,
Weshington, D. C.
Sir:
I have the honor to enclose for the confidential information of the
Department 51 cony of B. report (without specified mark which were not avail-
able) which 1 have obtained from the local American representative of the
Central Aircraft Menufacturing Company, Mr. 3. Pawley, in relation to the
boobing of the Loiwing (Yunnan) factory of the Central Aircraft Manufacturing
Company by Japanese airplanes on October 26, 1940.
Summary of report: The factory was bombed by 36
Japanese planes on the afternoon of October 26, 1940.
There was no preliminary alarm since the planes came
from the direction of Burma. Approximately 150 bombe
of various types and sizes were dropped. One bomb
fell well within Burmese territory. As a result of
the attack 40 persons were killed on the factory grounds
and at least 60 injured. The power house, final assembly
building, employment office, transportation building
and various houses suffered varying degrees of damage.
Three planes were burned and eight others were damaged.
Other damage was negligible.
Mr. Pawley, who witnessed the raid, orally informed an officer of the
Submery that the 40 Americans at Loiwing all had miraculous escapes from
death or injury and he averred that the toll of native employees would have
been much greater if the Company had not previously instituted precautions
by closing the plant daily between 10 a.m. and 3 p.m. He said that the damage
caused by the Japanese raiders was in fact not heavy, but the Company was con-
tent to let the impression get abroad that the plant had been severely damaged.
De Company had made no announcement of the bombing and did not intend to do
no, Mr. Pawley said.
*See Running's telegram of November 1, 7 pame to Chungking, which was repented
to the Department In Chungking's November 3, 12 noon.
Regraded Uclassified
158
The informant declared that the British authorities were fully aware of
the action of the Jananese planes in flying across the territory of Burna and
that he personally was cognisant of the fact that the British authorities
had investigated the bombing of the factory as well as of the dropping of one
bomb in Burmese territory. He asserted that he was not informed whether the
Britlah authorities had lodged B. protest with the Japanese Government in re-
spect of the violation of the territory of Burma: he seemed rather inclined
to doubt whether the British had done BO.
Mr. Pawley said that work was continuing at the factory and denied that
there was any intention of ceasing work or of removing the factory. He said
that all Americans now domiciled at the factory, who with dependents DOW number
about 40, are remaining at or near the factory and have no intention of with-
drawing notwithstanding the advice of the American Government to do 80. Be
said that in the future the majority of the personnel planned to cross well
into Burnese territory when alarms were sounded. Mr. Pawley said that the raid
of October 26 was the first experienced by the factory, although what appeared
to be Japanese reconnaissance planes had flown over the factory previously on
two or three occasions and had even scouted as far as Bhamo in Burma.
Mr. Pawley did not indicate whether the Central Aircraft Manufacturing
Connany intended to lodge a. protest in regard to the bombing in question, but
he asserted that the New York office of the Company was "in close touch with
the Department of State" in regard to various affairs of the Company (the
status of which was believed to be the subject of correspondence between the
Department and the Consulate General at Hankow in the early monthe of 1938).
Mr. Pawley emphasized that he was supplying the Embasty with a copy of his re-
port for its confidential information and not for any other purpose.
Respectfully yours,
NELSON TRUSLER JOHNSON
Nelson Trusler Johnnon
Inclocures:
1/Coty of report AB above.
Original (to airmail) and four copies by pouch (through Hong Xong)
Copy to Xunning
Copy to Rangoon
EFD/wr
Regraded Uclassified
159
[Soolosure no. 1 to desratch no. 704 dated November 19, 1940 from American
Embassy at Chungking)
(COPY)
Report of Bombing of Loiwing
by Jopanese Planes
The Loiwing factory area was bombed by Japanese planes on October 26th,
1940, st 1130 P.M. Loiwing time. The bombers came in a group of 27 planes
followed at approximately a one mile interval by 9 others, making a total of
36 planos. No preliminary alarm was sounded since no advice concerning enezy
planes WHE received from the usual radio network, which consists of stations
at Kunming, Chuching, Yunnany 1 and Paoshen. This absence of 8. preliminary
alara may be accounted for by the fact that the enemy planes came to Loiwing
across Burnan, thereby avoiding the network. Hoyever, about 3 minutes before
our urgent alars was sounded our listening post, which is localed six miles
out, had reported by telephone to Air Defence Headquarters that they heard
planes. These were then believed to be several Chinese Government trainers
which were being flown by military ferry vilots preparatory to flyaway. A
smort urgent alarm was sounded about 5 minutes before the arrival of the
hinnes, their presence having been definitely detected by the CAMCO listening
post when the planes actually came within their range of vision.
The Japanese planes were first seen over Burma approaching Loiwing. The
direction from which the planes arrived is indicated on the large may attached
liereto marked Exhibit "A". The entire complement of approximately 150 bombs
was dropned almost salvo, there being practically no clear lull between ex-
closions.
An examination of bomb craters indicates that various sized bombs were
were ranging in size and type from incendiaries and fregmentation un to 500
1hs. demo] ition. Of the total number, 5 or 6 dude have been located.
After the hombs had been dropped the planes made B. turn to the South over
like extreme West edge of CAMCO and straightened out over Burms.
Before reaching the mountain range to the South the entire group re-formed
10 that the 9 trailing planes joined un with the leading 27. The flight reth
of the planes on leaving is shown on Exhibit "A". This direction Is obtained
from innumerable competent witnesses. It is verified by the fact that after
leaving Loiwing one of the planes dropped a bomb which fell in Burns about
8-1/2 miles from the China Burma border. The location of the Burna bomb
erater is about 3/8th of one mile South of Loi Nun, about 3-1/2 miles South of
Namkham. The exact location is marked on Exhibit "A".
We understand that the bomb crater has been inspected by British Burms
officials. It has also been inspected by two Americans connected with CAMCO.
Insir report states that the bomb landed near the top of a very steep hillside
which almost completely encircles a small rice paddy. The point at which the
Regraded Uclassified
160
bomb struck the hill is approximately 150 feet above paddy level. The
exylosion of the bomb was sufficiently powerful to dislodge many cubic yards
of toy noil and underlying sandstone which WAS blown into B. small ravine
leading toward the rice paddy. The force of the explosion also removed the
tone from «11 surrounding bamboo trees and other small growth. The indications
are that the bomb must have been about 200 lbs in size.
The locations of bomb hits are shown on Exhibit "B". It will be noted
that the approximate sizes and types of bombs are indicated on Exhibit "B".
AS el result of this bombing 35 CAMCO employees and members of their
immediate families and one staffman have died. The bodies of five unidentified
natives not employed by CAMCO were found. Approximately 60 individuals were
admitted to the hospital for treatment of injuries. The majority were killed
or injured while running from the sheds and houses out into the open fields.
It must be understood that the factory was working from 7 to 10 A.M. and from
3 to 8 P.M. in order that the working area would be free of personnel during
toe time when bombing raids might be expected to occur. All personnel had been
cautioned to avoid large groupings and hold themselves and families in readi-
ness to evacuate in the event of an alarm. This measure saved a great many lives.
The following lint gives B. general idea of how these casualties occurred.:
Three women, two children and three workmen were buried in a dugout at
the corner of the class "B" houses as indicated by "A" on Exhibit "B". This
ingout was constructed by a group of workmen on their own initiative and although
of suitable construction to afford protection against shrapnel it was not strong
enouch to withstand the direct hit it received.
use workman, three women and five children were burned to death in the
Tire that Inveloped and destroyed the Market area and the B & C married workmen
quarters 03 Indicated by "B" on Exhibit "B". This fire was the direct result
of incondiary bombs.
One silitary guard was killed by the bomb which struck the entrance to the
factory es indicated by "C" on Exhibit "B" and the second guard vas killed by
the bomb which directly behind the power house as indicated by "D" on lx-
hinis "3". Both guards were on duty and were killed at their posta.
One staffman who was stationed in the power house in connection with air
raid slarm system was killed by the bomb BB indicated by "D" on Exhibit "B".
This man was responsible for sounding the urgent alarm which warned the civilians
of the approach of the bombers. It was not until after a complete alarm was
sounded and the electrical power shut down that this staffman retired from the
nower house toward a dugout located behind the power house, placed there for his
safety. He was killed before reaching his dugout, the bomb as indicated by
"II" falling directly in his path.
Material damage any be summed up as follows:
Loiwing Market area burned out completely.
Fower house building suffered serious damage to non-
structural parts but the damage to equipment and
machinery was negligible.
Regraded Uclassified
+:-
161
Last end of final assembly building directly hit and
100 feet of this building demolished or severely
damaged. 400 feet of this building undamaged.
One Condor airplane burned on runway.
One Ryan trainer burned on runway.
Two Ryan trainers damaged on runway but repairable.
One Ryan trainer burned in final assembly.
Five Ryan trainers damaged in final assembly.
The last five of these Ryans contain salvageable parts
including engines and equipment.
One Sikorsky amphibian damaged in final assembly by
shrapnel and concussion. This plane can be re-
built.
One truck (owned by contractor) containing cases of
aluminum sheet burned.
One staffman house completely demolished by direct
hit ("E" on Exhibit "B").
The number 2 houses on Exhibit "B" all suffered some
damage such as shattered glass and plaster and
roof damage due to concussion and shrapnel.
Employment office directly hit, completely demolished.
Some damage was done to sensitive instruments at
various places in the plant due to concussion.
Transportation building and some other buildings
suffered some non-structural damage.
Aside from the specific items mentioned above, the damage done to
buildings, equipment, machinery, materials and tools was negligible.
Regraded Uclassified
(CCPT:FE:16F)
STRICTLY CONFIDENTIAL
162
No. 145
AMERICAN CONSULATE
Kunming (Yunnanfu), China, November 20, 1940.
SUBJECT: Japanese Bombing of Plant of Central Aircraft Manufacturing
Company at Loiwing, Yunnan.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to transmit herewith for the
Department's information a copy of a memorandum on the
above subject prepared by Vice Consul Stephen C. Brown
of this office, who visited the plant of the Central
Aircreft Manufacturing Company during a recent trip to
Burma.
Respectfully yours,
TROY L. PERKINS,
American Consul.
Enclosure: -
1/ Memorandum prepared by
Vice Consul Brown dated
November 20, 1940.
In quintuplicate to the Department.
original and one copy by air mail.
Copy to Embasay, Peiping.
Copy to Embassy, Chungking.
800
SCB:Epy
Regraded Uclassified
Enclosure to denpetch no. 145 deted November 30, 1940 from Cousul Troy L.
163
Kunming, China, to the Department of State, entitled: "Jepaness
Sombing of Plant of Central Aircraft Manufacturing Commany et Loiwing,
Funnan.
MORANDUM
November 20, 1940.
While in Lashio I hired a car and visited the plant site of the
Central Aircraft Manufacturing Oo. at Loiwing, arriving there on
November 18 and remaining until 11.40 A.M. November 19. 1 VEI shown
over the plant by an American employee of the firm.
According to the reporte of the Americane who were at Ldwing
on the day of the Japanese bombing (October 26, 1940), thirty-six
ameared over the plant at 1:27 P.M. and immediately com-
senced bombing. No advance warning was given, and employees of the
commany, including the American employees, had only about three
stoutes in which to evacuate the scene before the bombs began to
erglode.
The Japanese came in from the east, flying a course almost
stallel to the Shweli River, which here flows in an approximately
weet to east direction and forms the boundary with Burma. The first
bonies dropped in 8. paddy field just east of the plant site, end the
20mb battern WAS placed from that point on in a elightly off-center
position with reference to the factory site. The last bomb dropped
just beyond the western end of the landing strip of the sirfield, a
few hundred yards from the area in which the ouarters of American
employees were located.
Bo far 88 could be determined only one direct hit was scored
on the factory itself, e. heavy bomb striking the eastern end of the
main assembly building end causing heavy damage there. The power
lant, which WAB located near this point, was untouched, wlthough
liberally sprayed with bomb fragments. The center of the pattern WELE
pleced on the workmen's quarters, located across the landing strip
from the factory: the strip itself WAS also heavily bombed.
Katerial damage to the factory itself wen slight. Although
ell the machinery had been removed when I visited it, I WAR informed
that practically all of it was saved. This I can easily believe. AS
there was no evidence of any serious demage to the buildings except
for the end of the ascembly building mentioned above.
At the time of the bombing five recently-completed Ryan train-
Ing clanes and e Sikorsky belonging to the Aeronautical Commission
were stored in the part of the building destroyed. The Ryans were
completely demolished, but it is stated that the Sikorsky can be
repaired, the chief damage being to the ekin end fusalage. A Condor
transport plane belonging to the company, which was standing on the
field when the Japenese came in, was totally destroyed. Two other
recently-finished Ryans were in the air being test-flown at the time
end secaped.
Casualties
Regraded Uclassified
164
2
Cesualties among the workmen totalled about forty;
many of their houses were badly damaged or destroyed. No Americans
were burt. The Americane have since evacuated their quarters and
have set up temporary quarters on the Burna side at Manwing and
Pankham. It should be noted that many of them have no permits to
reside in Burna, but RD attempt is being made to arrange for them in
Rangoon.
I was informed that the present plan is to set up the plant
again in China, in isolated units strung out along a sixteen mile
front. Some of the Americans with whom I talked were not very
hoveful that this would reduce the danger of air raids very much,
while it 18 obvious that it will hamper and elow down production.
At the present time practically nothing is being done, the company's
efforts being directed entirely toward the problem of reorgenizing
along the new lines. I vas told that the morale of the workmen has
not been greatly shaken, and that they now work from 5 P.M. to 10 P.M.
in the evenings. They also have evacuated their quarters and now live
In small villages on the Chinese side.
Às mentioned above, practically all the machinery has been
removed already with the exception of one dieselelectric plant
which LA furnishing lighte for the factory site. The machinery is
Acid to be stored in various places throughout the area.
Opinion among the Americans differs as to whether the
Jananese made a deliberate attempt to avoid bombing their quarters.
Some seem to think that they released their bombs too soon for this
reason; others, and apparently the majority, believe that it was
merely an example of poor markamanship and timing. It was said that
had the raid come about five minutes later it would have caught
the entire American personnel crossing the airfield, returning to
the fectory after their lunch hour.
(initialed) SCB
eh: 77
Regraded Uclassified
165
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 20, 1940.
No. 250
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. Air Force Operations.
The German Air Force was only lightly committed over
England during daylight of the 19th. Last night's operations were
heavy and were concentrated on Birmingham, where apparently great
damage was inflicted. London and another Midlands town were also
bombed.
Last night the R.A.F. attacked a number of objectives
in Germany, including Berlin.
II. Greek Theater of Nar.
Greek ground forces made limited advances in Albania and
captured the village of Ereek, thus cutting the Koritsa-Melissoplere
road. The road Koritsa-Tirana apparently is still available to the
Italians. The Italian Air Force attacked Greek troops and cities in
northern Greece.
III. Mediterranean and African Theaters of War.
Nothing to report.
RESTRICTED
Regraded Uclassified
CONFIDENTIAL
16S
Paraykrase of Code Rediegram
Received at the Mar Department
at 9:54 And, November 20, 2040
Rome, filed 15.80, November 20, 1940.
Large north to south navements of troops with equipment
to seaports in the authern Adriatic are reported. There has been
indefinite suspension of air service to Spain and Pertugal and
many other air lines have also suspended. This is to make treep
troops
transports to Albania evailable at the rate of 2,800/daily. It le
stated that four commercial planes are all that are still in
visa and that only four areas are available for them. Ivery other
plans has been requisitiened and converted. AS I a. 18-plane
parachurte equaren is being altered to night before. Italian exp-
plies in Albania suffice only for 50,000 - during & six months'
period, severding to an unsenfirmed report. Same course says Italy
can ship additional supplies with great difficulty and irrogularity
at best, because of activity of Creeks and British in the Adristis
Sea. All to real situation a Greek front, definite information is
country, but securecy of Creek commiques is indicated by all No
parts. Musselini is said to be rahid at Italian finase in Grosse
and has given erders for a strong al imediate offensive. badeglie's
resert visit be Cermuny, trusteerthy my, was due to demany's
damad for & wified - under & Comma afficer, if Garnam
CONFIDENTIAL
Regraded Uclassified
167
CONFIDENTIAL
assistance against Greece was to be expected. that this equivance
led to is not known.
PAINE
Distribution:
Military Aide to the President
Secretary of Mr
State Departments
Secretary of Treasury
Asst. Secretary of Was
Chief of Staff
lar Plans Division
Office of Neval Intelligence
confidential
Regraded Uclassified
CONFIDENTIAL
168
Paraphrase of Code Gablagrem Received at
the tar Department on November 20, 1940.
London, Filed 17:00, November x, 1940.
1. All daylight operations of the Bomber Command 40 Tuesday,
November 19, were abandoned on account of the weather, that night
1% was planned to dispatch a total of 108 bankers, 47 against odl
targets, 24 against Berlin, 15 against railroads, 11 against atm
fields and 11 against factories in Emept for 12
plans, of which nine successfully attached Lean, Pressis, the -
Lng missions planned for the preseding night ware smeelled B
secount of local weather conditions. Operations of the Coastal
Command were routine, with " patrol missions, 47 bashing sorkies
and 14 convey assorts. No planes were lost. The Fighter Commend
operated 393 planse on 95 missions.
2. Daylight activities of the Gerean Air Force on November 19
were wild, with a total of about 150 planse plotted. That night
heavy attacks were delivered, especially against Mrangham and the
Midlands area by German benbers free bases in France, Demark and
the Low Countries. & total of about 350 planes operated against a
wide area.
3. Two British airfields were attached and one of the is
now unserviseable due to the Large eraters furned. In addition
four other fields are either whelly w partially out of comission
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
169
due to the weather and other seuses. Twelve important mitims
fasteries at Birsingham were hit but reports initiate that damages
are not smien. However, the railroads were badly mashed and
blocked. Three plants are reported destroyed at Lalesster. 20
London the considerable night boalding damaged hospitals, & railread
bridge and such wall known land marks as the Convent Garden, the
Savey strand, the Palace Retal and the Ministry of Supply. Casual-
ties in the city for the night of November 16-17 vere " billed and
155 seriously wounded. Revised reparts from Coventry as of November
16th indicate that the heavy bembardment of that city destroyed -
factory, seriously damaged one, and that hits on four others pet
them partially out of production, All factories are handi.esped in
their operations by crippled utilities.
4. Knopt for five Gerum planes brought dom by striking
cables of the ballom barrage, 200 planse very lest - d ther cide.
5. The Creeks are reported advancing along the Ferneti Read
and asress the Kalamas River.
6. It appears that the Gurnans have finally rembered the
principles of mass and economy of force. If they continue to use
all the beabers available to comentrate an - place after mother,
their air attacks will begin to get results. Damage will begin to
must ups but the marale of the people 10 still atrong and degged.
the solution of the problem of might interesption daymin larguly
upon British anterial.
CONFIDENTIAL
M
Regraded Uclassified
CONFIDENTIAL
170
Distributions
Military dide to the President
Secretary of The
state Department
Secretary of Treasury
Asst. Secretary of the
Chief of Staff
War Plans Division
office of Naval Intelligence
Air Corps
0-3
CONFIDENTIAL
Regraded Uclassified
170-A
of Code Rediagram
Reserved as the for Department
at 9:54 A.M., Nov. 20, 1940
CONFIDENTIAL
Balaport, filed 11:55, Nev. 20, 1940.
the Italian Military Attache in Budgest states that
there are - 30 German divisions in Austria and is addition 2
I 3 1 1 I 3 I E 8
short notices also that the Insulance have neved four infentry
and - mechanized caralry division from the Consumer return
them from the reserve of 35 divisions northeast of Kiev. This
increases the 12 divisions at present in Desearabia to 17.
This information - also cabled by his government to
the Turkish Military Attache have who is - quite eptimistic
over the position of Terkey.
The Swedish Military Attache at Im declares that the
1 Alpine, 3 infantry and 1 mechanized divisions stationed is
Albenia ware deabled - the outbreak of - and that this force
is being further increased.
All these efficers estimate the Cerman feree in Hummis
and Sulgaria to be 300,000. w estimate is 100,000 with repid
increase to 300,000 in the institute future and fallowed prosptly
by a more to ensircle Grosse where Italians are making me progress.
PARTRIDGE
Distributions
Military Aide to the President
Secretary of New
State Department
Sourchary of Treasury
Anot. Secretary of Yor
Chief of Staff - 2
for Plans Division
Office of Novel Intelligence
CONFIDENTIAL
Regraded Uclassified
171
Revember 20, 1940
Files
Mr. Cechina
AS 11:00 a.m. November 14 Mr. Bell reserved is Me office the Argestine financial
Asiagation. presented W imbussator Empil, and housed by General Manager And Problems
of the Argestine Central The other Argentine members of the delegation -
Nearro. New franksh and Reberte Terrier. Accompanying the was Rr. Christian
Anrolal. Record Secretary of the Asserian Beloway at Bannes Aires. who had mate the
trip from Brath incries to thinkington with the delogation. Mr. Collate also -
- free the Department of State, and Receive. miss. Ose and Cookren of the Treasury
Department were present.
b. Dell valored the delegation is the abomas of Secretary and
amprossed the latter's regret at not being procent. M Mr. Holl's suggestion,
W. Problems gave a general picture of the Argustice situation. Be stressed the
dilma which confrests his security in procest was involving a tentency
for Argentine to by mere of products free areas with which a balance of funds has boen
will - as a result of cigarts to ench areas paid for is the importere' exchange.
M also a assessity for cartailing imports from constries of whose enchange Argustine
has a deslining and incofficient anount. Great Britain was the specific comple is
the find instance, and the United States is the socond. Mr. Problem 414 net give
detailed figures as to the estent to which Argantime's trade has dealized as 6 result
of the w.
It ni the regrestion of Mr. Bell that the Argentines drew - a - setting
forth their position and their decires is - detail. IS valid agreed that this would
be presented to Mr. Bell by Nonday, feraler 18. The Treasury and other interested
departments and agencies of the Government could then have - basic for their staties
of the corporation which 012 Government 207 be able to estent be argention.
MC:lap-11/20/40
Regraded Uclassified
172
TREASURY DEPARTMENT
-
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
German accounts maintained with the Chase National Bank, New York.
Date
Amount Debited
Account Debited
Paid To
November 19
$ 300,000
Deutsche Golddiskontbank,
Chase National Bank, N.Y.,
Berlin
for account of Reichsbank,
N.Y.
30,000
Reichsbank, Berlin
Chase National Bank, N.Y.,
for account of German
Consulate General, N.Y.,
17 Battery Place, N.Y.
30,000
German Consulate General,
Cash withdrawal
N.Y.
9,625
Reichsbank
Chase National Bank,
Rockefeller Center Branch,
N.Y., for account of
Standard Oil Co. of N.J.,
N.Y., by order of
Konversionkasse fur
Deutsche Auslandsschulden,
Berlin on behalf of Pan
Foreign Corp., 30 Rocke-
feller Plaza, N.Y.
70ml
173
you - of
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the transactions, listed on the
attached statement, in Italian accounts maintained with the Chase National Bank of
New York.
mm
Chase National
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 19 $ 50,000
Credito Italiano,
Credito Italiano,
$ 25,000
Banca Commerciale
Cash Withdrawal
N.Y.
N.Y. (Check drawn
Italiana, N.Y.
on Chase National
Bank, N.Y., by
$ 50,000
.
Check to order of Credito
Banca Commerciale
Italiano, N.Y.
Italiana, N.Y.)
2,825
#
Credito Italiano,
N.Y. (Miscellaneous
checks)
174
Regraded Uclass
175
TREASURY DEPARTMENT
w
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transaction in the
account of Credito Italiano, New York, maintained with the Chase National Bank,
Yes York.
Date
Amount Debited
Paid To
November 20
$ 65,000
Certified check to order of
Central Hanover Bank and Trust Co.,
N.Y., account Banco de la Nacion,
Argentina, Buenos Aires
70ml.
176
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transaction in the
account of the Reichsbank, Berlin, maintained with the National City Bank of New York.
Date
Amount Debited
Paid To
November 20
$ 200,000
National City Bank, "New York,
for account of Skandinaviska
Banka, Stockholm
Jine
Regraded Uclassified
177
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
Russian accounts maintained with the Chase National Bank,
Principal changes in the State Bank of Russia's dollar account during the
period November 15 to November 20, inclusive, were as follows:
Amount
Amount
Date
Credited
Received From
Debited
Paid To
Nov. 15
$170,000
Antorg Trading Corp.
$ 91,650
Mellon National Bank,
Pittsburg, Pa., for
account of Mesta
Machine Co., Pittsburg,
Pa., by order of Machine
Import. Moscow
88,567.14
Commercial Letters of
Credit
Nov. 16
399,869.75
#
Nov. 18
57.079.16
if
Nov. 19
1,000,000
Amtorg Trading Corp.
70,410
Chase National Bank,N,Y.,
for account of One
Hundredth Bank, Tokio
(exchange contract for
300.000 yen)
lov. 20
58,358
Chase National Bank,
294,592.95
Commercial Letters of
N.Y., by order of
Credit
Skandinaviska Banka,
Stockholm
450,000
Chase National Bank,N.Y.
by order Stockholms
Enskilda Bank, Stockholm
550,000
Chase National Bank, N.
for account of
Skandinaviska Banken,
Stockholm
Regraded Uclassified
178
-2-
On November 20 the balances of the State Bank and the Amtorg Trading Corporation
were as follows:
State Bank of the U.S.S.R. Amtorg Trading Corporation
Cash Balance
$ 12,643,300
$ 1,231,400
Cash commercial Letters of
Credit
14,421,800
2,156,900
?ime deposits
10,300
-0-
Total
$27,075,400
$3,388,300
Changes in total since
November 13
- $ 2,180,800
- $ 212,400
jule
Regraded Uclassified
179
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 20, 1940.
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£66,000
Purchased from commercial concerns £10.000
The Federal Reserve Bank sold £2,500 in registered sterling to & non-reporting
bank.
In the open market, sterling vas first quoted at 4.03-1/2. It moved to 4.03-3/4
around noontime and remained there for the rest of the day. Transactions of the
reporting banks were as follows:
Sold to commercial concerns
£24,000
Purchased from commercial concerns R 2,000
Closing quotations for the other currencies were as followe:
Canadian dollar
13% discount
Swins franc
.2321
Swedish krons
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2355
Brasilian milreis (free)
.0505
Mexican peso
Holiday
Ouban peso
8-1/5% discount
Ve purchased $50,214,000 in gold from the earmarked account of His Britannic
Majesty's Government.
The Federal Reserve Bank of New York reported that the Bank of Canada vas
shipping approximately $50,000.000 in gold from Canada to the Federal, to be ear-
marked for account of His Britannic Majesty's Government.
For the third consecutive day, no gold or silver prices were received from
Bombay. It is believed that trading in the Bombay markets has been brought to a.
virtual standetill as B. result of India's political situation.
Regraded Uclassified
180
- 2 -
In London, the price fixed for spot silver vas 23-1/4d, up 1/16d. The forward
quotation was also fixed at 23-1/4d, unchanged. The dollar equivalent of this price
is 42.22#.
Handy and Harman's settlement price for foreign silver vas unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
We made two purchases of silver totaling 100,000 ounces under the Silver Purchase
Act, all of which consisted of new production from foreign countries. for forward
delivery.
CONFIDENTIAL
Regraded Uclassified
181
TREASURY DEPARTMENT
Secretary Mist Morgenthau
INTER OFFICE COMMUNICATION
DATE November 20, 1940
TO
Mr. Cochran
FROM
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
November 4
21,465
630,382
4,500
4,048
5
H
o
1
1
d
a y
6
6,875
278,514
Nil
Nil
7
35,600
1,446,605
18,000
14,026
8
28,300
833,324
61,000
48,060
9
16,835
683,918
1,000
412
109,075
3,872,743
84,500
66,546
Lales from
February 22 to
November 2
1,824,394
64,260,939
5,242,000
4,073,608
TOTAL FEBRUARY
22 TO NOVEMBER 9
1,933,469
68,133,682
5,326,500
4,140,154
Mr. Pinsent reported sales of non-vested securities for the week ended
November 2 totaled $750,000.
70ml
Regraded Uclassified
Treasury 26890
182
Paraphrase of confidential telegram
of November 20, 1 p.m., from the
American Consul General at Calcutta.
According to unofficial information which I have received
on a strictly confidential basis, importers of steel are being
required to report, in detail, to Delhi, their imports of the
last three years. Presumably this is preliminary to the
establishment of restrictions on imports effected for commercial
purposes. In this connection arrangements have been made, it
is said, between the British, Indian and American authorities
under which, from January 1, the United Kingdom will be re-
placed by the United States as the supplier of steel for the
Supply Department. Most requirements will be rerouted through
the Supply Department and payment will be effected by the
Reserve Bank. An additional drain on supplies of dollar
exchange are suggested by this arrangement, which also supports
rumora that effective January 1, further restrictions on
imports are also possible.
COPY
amen
Regraded Uclassified
183
OFFICE
OF
TREASURY DEPARTMENT
WASHINGTON
THE SECRETARY
November 20, 1940
Dear Mr. Secretary:
I am sorry that my arrival coincided
so exactly with your departure, but I hope that you
have been enjoying your vacation as much as I have
my return here.
After talking with a number of people
here, I leave today for my home in New Orleans
(3914 Prytania Street) and geedless to say I merely
await word from you to return to Washington to see
you.
Please remember me most kindly to Mrs.
Morgenthau.
Sincerely yours,
The Honorable
The Secretary of the Treasury
184
November 20, 1940.
Congressman Doughton telephoned me at 2:40 re his meeting
with the President this morning. He said that the President
wanted a meeting held as soon as possible on the pending tax bill.
Congressman Doughton said we should have a conference just as soon
as Secretary Morgenthau returns and as soon as he can arrange it
with Senator Harrison, either to attend or to have his representa-
tive attend. Mr. Doughton suggested Friday evening, November 29,
but I reminded him that the 29th was the day after Thanksgiving
in some States. He said yes, he knew that, and he thought it
probably would be difficult to have a meeting on that date. How-
ever, he said the date was not definite. General Watson is to
advise Doughton and he will let me know when the meeting is called.
Mr. Doughton said the President did most of the talking
and that he just listened. The President said be could write a
tax bill in two hours covering no more than two pages, which
would raise all the money necessary to raise. Doughton replied
that the President must have had some tax experience that he
(Doughton) had escaped.
Mr. Doughton informed the President that it was extremely
important to enforce some economies in the unnecessary spending
that was now being done and asked the President to send Congress
a message to that effect. Mr. Doughton said he could not give me
the reply the President made, but subsequent inquiries on my part
indicated that he did not know whether the President would send
such a message.
Vr. Doughton said he was leaving town tomorrow, but that
he would return for the meeting whenever it is to be held.
Regraded Uclassified
U.S. COAST GUARD
185
U. 8.
Sept. 1990
OFFICIAL DISPATCH
TRANSMIT
20 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
PLEASE CABLE EXACT DATE YOU WANT VINER AND STEWART IN
WASHINGTON X IS IT DECEMBER THIRD X JOAN LEFT FOR
NORTHAMPTON TODAY IN GAY SPIRITS X EVERYTHING AT HOUSE
RUNNING SMOOTHLY X MRS LEACH WIRED THAT MRS MORGENTHAU
WAS ELECTED TO COSMOPOLITAN CLUB TODAY X BEST REGARDS
HENRIETTA KLOTZ
OPERATOR'S RECORD
INITIALS OF "RELEASING" OFFICER.
OFFICIAL BUSINESS.
. a. - - - 9-1417
Regraded Uclassified
Treasury Department
TELEGRAPH OFFICE
PO. 2 16 VIA IMPERIAL XCI
MONTEGOBAY JCA 20 NOV 1940
1940 NOV 21 AM IO 16
LC MRS KLOTZ
WASHN
YES WANT VINER STEWART WASHINGTON DECEMBER THIRD, BEST REGARDS.
MORGENTHAU
1015A
Regraded Uclassified
187
ADDRESS THE COMMUNICANT. U.S. COAST GUARD
AND NODI TO No.
TREASURY DEPARTMENT
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON
20 November, 1940.
From:
Secretary of the Treasury Morgentham.
To :
Mrs. Henrietta S. Klotz.
(Attention: Undersecretary Bell)
If President expects to leave Washington on the
night of the 27th, I will surely come back from Miami in
time to see him. Please try and find out at Cabinet from
Prosident where he will be from November 27th to December 2nd,
inclusive. Suggest if he is leaving Washington on the 27th
I would like to have lunch with him. Try and get a definite
appointment and wire me whatever information you have.
Best regards,
H. M. Jr.
Regraded Uclassified
188
November 20, 1940
TO:
CODE ROOM, COAST GUARD
Room 316, Liberty Loan Annex
FROM:
H. s. KLOTZ
Please send the following message in code to
the Secretary:
The President wants you to have supper with him
along with Congressmen Doughton and Gooper,and Senator
George in Harrison's absence, on Friday evening, November
twenty ninth at the White House at seven thirty to discuss
tax matters. John Sullivan has also been invited. Best
regards.
Regraded Uclassified
189
ADDRESS THE COMMANIANT, F 1. COAST GUARD
AND ROVER TO No.
TREASURY department
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON
21 November, 1940.
SECRET
From:
Secretary of the Treasury Morgenthau.
To :
Mrs. Henrietta S. Klotz.
Please inform the President that I accept the
Friday supper invitation. Does this invitation have any-
thing to do with my request via Bell for an appointment
with the President for next Wednesday? Stop sending
mail to me after Saturday. Please have Luther Gulick
of New York at my office Friday morning, November 29th.
Please mail to me Saturday two most recent issues of
New Republic and Time Magazines.
Best regards,
H. M. Jr.
Department of Treasury copy
190
PARAPHRASE
Telegram no. 597. from Rio de Janeiro, November 21.
We hear that the Bank of Brazil may receive $10,000,000 for
deposit on Japanese account.
RA:Walmsley:MES
eh:copy
191
MR
GRAY
VICHY
(Paris)
Dated November 21, 1940
Rec'd 2 p.m.
Secretary of State,
Washington.
996, November 21, 10 a.m. (SECTION ONE)
The text of the Franco-German Compensation Agree-
ment of November 14 was published in last night's JOURNAL
OFFICIEL. All payments between the two countries other than
those for which special arrangemente have been made are to
be effected by means of compensation. The Compensation
Office at Berlin will open two accounts in the name of the
French Compensation Office: "A" for debts payable in
occupied France, and "B" for those payable in the unoccupied
zone, Similar accounts will be maintained by the French
Compensation Office in the name of its German equivalent.
(SND SECTION ONE)
MATTHEWS
PEG
Regraded Uclassified
192
MR
GRAY
VICHY
(Paris)
Dated November 21, 1940
Rec'd 1:55 p.m.
Secretary of State,
Washington.
996, November 21, 10 p.m. (SECTION TWO)
The conversion rate for German debts payable in
French currency and French debts payable in German currency
is fixed at 1 reichsmark equal to 20 francs. However, French
debte which fell due before June 25 and payable in francs will
be paid in Germany at the rate of 1 reichsmark equal to 16.27
france. The loss resulting from such operations will be borne
by the French Compensation Office. Four percent interest is
to be paid on French debts which fell due before June 25.
The compensation agreement will be in force for the
duration of the Armistice convention.
(END OF MESSAGE)
MATTHEWS
PEG
of
Regraded Uclassified
CONFIDENTIAL
193
Pursphrase of Code Cablegres Reselved at the
War Department, November 21, 1940.
London, filed 14:50, November n, 1940.
1. Daylight operations of the Beaber Command on Wednesday,
November 20th were nagligible. That night it as planned to disputed
86 beabare, 50 against the railroads in the Rubr, 18 against submrias
bases in Transe, and 18 against energy airfialds. The previous night a
total of 63 besters - disputabed against the targets previously
indicated with satisfastory results. Three planes were lost and too
erashed - landing. The operations of the Coustal Command were nermal
with 25 patrol sissions, 41 banking serties and 15 currey courte. No
planes was lest. The Fighter Commend operated 266 planes - 60 patrols.
2. Daylight German air operations - November 20th were
restricted to recommaisance and threats against energys. That night
there visi dirty wather but there were heavy, wide-spread raids,
chiefly against provincial cities, employing about 175 planes.
3. Five British airtress ware reported attached back -
were crippled and there me little damage. Removed attacks against
Birningham were loss arrore that the preseding night. Bits short
dom one fastory an assess of unsupleded bembs, not - fires, and
destreyed 40 notes based. The final - of the attack - Birsingham
on Invoice 19-20th disclosed that 19 factories were affected, of which
five - getrod by fire, - 479 out of production two a month, case
Inc responded operations as account of unexpleded and - plant
of the fimall Are Derporation has had the production reduced
by about 50%,
CONFIDENTIAL
Regraded Uclassified
191
4. 48 home the Germans lost - plane and the British zone.
5. British fighters sperating from Tribbals (50 ailso east
of Junian, Grass) - I 19th pesitively destroyed nine Nalian
planes and probably too others. A British pilot m injured. One
British being m lest is Grown and mother is Mm.
6. a November 19th the Crecks were mapping up the north
motor. Creasing the fruntier amth of these cities,
they expirated and not a fire Berove and Break and out the north-areth
read at Lesterik, Alvania. They also scrupted Visani and held the
bridge assess the River at
7. British shipping is still using the Channel and the
Thansa
IN
Distributions
Military Aide to the President
Secretary of May
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
War Plans Division
Office of Neval Intelligence
Air Corps (2)
0-3
Regraded Uclassified
195
ADDRESS THE COMMANDANT, u. a. COAST GUARD
AND REFER TO No.
a
TREASURY DEPARTMENT
nos
CRYPTOGRAPHIC
UNITED STATES COAST GUARD
MESSAGE
HEADQUARTERS
WASHINGTON
22 November, 1940.
SECRET
From:
Secretary of the Treasury Morgenthau.
To :
Mrs. Henrietta S. Klotz
(Attention Assistant Secretary Sullivan)
I suggest Sullivan and Roy Blough, providing
he has no objection to flying, meet me in Miami next
Tuesday at 5:00 p.m. My plane can be used if it is
back in time. Bring material to prime me for my meeting
with the President, particularly how much revenue has
been produced by tax laws passed this year. Please mail
to me two copies of Dies White Paper.
Best regards,
H. M. Jr.
Regraded Uclassified
MASURY DEPARTMENT
U.S. COAST GUARD
196
t. 4.
Sept. 1880
OFFICIAL DISPATCH
transmit
22 NOVEMBER, 1940
DATE
FROM
CODE
COAST GUARD HEADQUARTERS
CIPHER
TO (FOR ACTION)
ACKNOWLEDGE
SECTREAS
PRIORITY
UNLESS DESIGNATED OTHERWISE TRANSMIT THIS DISPATCH AS NITE.
ROUTINE
TO (FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
MAIL TO
TELEPHONE TO
MESSENGER TO
OUTGOING HEADING
TEXT
GULICK CAN BE IN WASHINGTON FRIDAY MORNING NOVEMBER 29 BUT
MST LEAVE AT ONE PM FOR IMPORTANT APPOINTMENT IN NEWYORK
THAT EVENING PERIOD HE PREFERS COMING DOWN DECEMBER 3 OR
4 BEST REGARDS
HENRIETTA KLOTZ
OPERATOR'S RECORE
INITIALS OF "RELEASING" OFFICER.
OFFICIAL BUSINESS.
. . - - -
Regraded Uclassified
0
01
197
Miss Chauncey
Mr. Young says reply to this
telegram is not necessary.
bj
12/2/40
MR. YOUNG
Regraded Uclassified
198
Treasury Department
W 34 WP 175 114 OL
TELEGRAPH OFFICE
SANDIEGO CAL 1227P NOV 22 1940
SECRETARY OF THE TREASURY WASHNDC
PRESS REPORTS VULTEE STRIKE BEING SETTLED BY TWENTY FIVE PERCENT
INCREASE IN LABOR RATES AND OTHER CONCESSIONS. IF REPORT IS CORRECT
WE ESTIMATE IT WILL BE NECESSARY TO INCREASE OUR CONTRACT PRICES
AT LEAST TEN PERCENT AND WE ASK YOUR COOPERATION IN WORKING OUT
THIS PROBLEM. BOTH ON ALL CONTRACTS WITH YOUR DEPARTMENT AND ON ALL
OUR CONTRACTS WITH BRITISH PURCHASING COMMISSION. WHILE LABOR RE-
LATIONS ARE MOST HAPPY IN THIS COMPANY AT PRESENT, WE HAVE BEEN
ALREADY ADVISED BY THE BUSINESS AGENT REPRESENTING THE COLLECTIVE
BARGAINING AGENCY IN THIS PLANT THAT WE WILL HAVE TO MATCH CONCESS-
IONS GRANTED AT VULTEE INSTANTLY.
Regraded Uclassified
199
Treasury Department
W 34 WP 175 114 DL
TELEGRAPH OFFICE
(SHEET TWO)
WE BELIEVE THIS CONDITION WILL EXIST GENERALLY IN AIRCRAFT INDUSTRY.
ARRIVING WASHINGTON MONDAY.
CONSOLIDATED AIRCRAFT CORPORATION.
522p
Regraded Uclassified
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 22, 1940.
No. 251
SITUATION REPORT
12:00 E.
This military situation report 16 issued by the Military
Intelligence Division, General Staff. In ylew of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
1. Western Theater of War.
1. Air Force Operations,
On the 20th and 21st German daylight operations were on
a small scale. On the night of the 20th-21st the German air effort
contered over the Midlands and was fairly heavy. There was little
activity last night, probably due to bad weather.
On the night of the 20th-21st the S.A.F. heavily bombed
the inland port and communications center of Duisburg-Ruhrort and also
attacked a number of airdromes in German occupied territory. Last
night apparently no offensive operations wore under Laken.
II. Greek Theater of Mar.
The Greek counterattacks have developed into 8 counter-
offensive. Italian forces (2 divisions) have evacuated Koritza and
occupied B defensive line west of the city. The Greeks have pushed
up the valley toward Argyrokastron, cutting the road between Porto
Edda and Koritza at Gyorgunsati (Georgoutsades). The air forces on
both sides are operating in close support of ground troops and are
also hombing communications in rear areas,
III. Mediterranean and African Theaters of War.
No ground operations. A sharp aerial engagement between theaters pur-
sult took place in North Africa on the 20th. Ilsewhere in the
there have been numerous minor bombing raids.
RESTRICTED
Regraded Uclassified
CONSTDENTIAL
201
Regraded Uclassified
Paraphrase of Code Cablegram
Received at the war Department
November 22, 1940.
London, filed 15:60, Borember 21, 1940.
1. On Thursday, November 21, the Bember Command carried out
very affective attacks on French airfields and the part of Flushing.
The preseding might 25 tons of bomba were dropped - the inland
porte of Deisburg and Ruhrert in Prussia and other attacks were
reasonably sussessful. he bombers were lost. Operations of the
Constal Command were routine with 24 missions dispatched. The
Fighter Count operated 63 patrols.
1. German daylight activity - November a1 was on . mall
scale with about 80 planes plotted. That night easay activity IM
minor and intermittent.
3. There was the usual air activity in the hiddle last but
no plans losses. Fridently the loss of nine benbers yesterday took
the starch out of the Italians in Albania and this apparently -
plains the rapid advance of the Greek Army.
4. Personnel casualties in Lendon during liovember 18-19 were
three injured but the following night 26 were killed and 20 seriously
injured. This - night 193 were killed and 892 seriously injured
in Biraingham and ss killed and 101 injured in Leisester.
6. Many reliable reports are coming in of the heavy damage
inside Germany done by British bambers.
202
CONFIDENTIAL
6. your vessels have been torpedned off Freetom, sierra
Leese, (em the west coast of Africa - 0-2) during the last five
days. One trander was such in the Yorth Sea and a cervey in the -
area who attached by air resulting in one Genera plane being shot
down and a second damged, Dive benbers attacked mother owner in
the Themes but there me m damage.
To Three interesting points then the difficulty of foremat-
ing the developments of a redern war,
as The total muser of casualties in all of Great Britain
sinse the var started have been loss than the daily casualties
for which hospitalization was prepared in Lenden.
be The lesses in British night benhers from crashes an
taking off and landing are about three times the leases from all
other campos.
" the property lesses from fire have boen mush greater than
these from high explesives " far, but this probably would not
have been true if land nines had been used from the start.
LEE
Distribution:
Military Adde to the President
Secretary of The
state Department
Secretary of Treasury
Amot. Mar
Chief of Maft
Mar Plane Division
2f'00.96
1
Intelligence
CONFIDENTIAL
203
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 22, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£98,000
Purchased from commercial concerns £34,000
The Federal Reserve Bank sold £5,000 in registered sterling to a non-report-
ing bank.
From an initial quotation of 4.03-1/2. open market sterling moved to 4-03-3/4
around noon and remained at that level during the rest of the day. Transactions of
the reporting banks were as follows:
Sold to commercial concerne
£6,000
Purchased from commercial concerns £7,000
The Cuban peso, which has been quoted for several days at 8-1/8% discount,
vancened today to 8-9/16%.
The other currencies closed 86 follows:
Canadian dollar
12-7/8% discount
Swine franc
.2321
Swedish krona
.2386
Heichanark
.4005
Lira
.0505
Argentine peso (free)
.2355
Brazilian milreis (free)
.0505
Mexican peso
.2070
Ye sold $10,000.000 in gold to the Bank of Java. to be added to its sermarked
account.
The Federal Reserve Bank of New York reported that the Bank of the Colombian
Republic shipped $3,334.000 in gold from Colombia to the Federal for its own account.
disposition unknown.
The State Department forwarded to us a cable stating that Samuel Montagu & Do..
London, shipped $85,000 in gold from England to the Guaranty Trust Co.. New York,
for sale to the U. S. Assay Office at Yes York,
Regraded Uclassified
- 2 -
204
A gold price equivalent to $33.76 was received from Bombay today, up 1# from
the November 16 quotation. Silver in Bombay was priced at the equivalent of 43.57#.
off 1/84 from November 16.
In London, a price of 23-1/8d vas fixed for both spot and forward silver, in
each case 1/8d lower than the quotation of November 20. The dollar equivalent of
23-1/8d is 41.99#.
Handy and Harman's settlement price for foreign silver vas unchanged at
34-3/48- The Treasury's purchase price for foreign silver was also unchanged at
354.
We made four purchases of silver totaling 300.000 ounces under the Silver
Purchase Act, all of which consisted of new production from foreign countries,
for forward delivery.
BMP
confidential
205
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 22, 1940
Secretary Morgenthau
TO
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transactions in
Italian accounts maintained with the National City Bank of New York.
Date
Amount Debited
Account Debited
Paid To
November 7
$ 28,410.14
Banco di Napoli Trust Co.,
National City Bank, N.Y.,
N.Y.
for account of Credito
Italiano, N.Y.
32,000
Banco di Napoli Trust Co.,
National City Bank, N.Y.,
N.Y.
for account of Credito
Italiano, N.Y.
Forenber 9
28,000
Credito Italiano, Rome
National City Bank, N.Y.,
for account of Credito
Italiano, N.Y.
400,000
Banco di Napoli Trust Co.,
Check to order of Banco d1
N.Y.
Napoli Trust Co., N.Y.,
deposited with the Federal
Recerve Bank of N.Y.
November 12
364,325
Banca d'America e d'Italia, National City Bank, N.Y.,
Genos
for account of Credito
Italiano, N.Y.
November 13
30,000
Banca d'America e d'Italia, Chase National Bank, N.Y.,
Genoa
in favor of Banca d'America
6 d'Italia, Centro
Raccolta, Rome
120,000
Credito Italiano, N.Y.
Irving Trust Co., N.Y.,
for account of Credito
Italiano, N.Y.
75,000
Credito Italiano, N.Y.
Chase National Bank, N.Y.,
for account of Credito
Italiano, N.Y.
67,000
Credito Italiano, N.Y.
Guaranty Trust Co., N.Y.,
for account of Credito
Italiano, N.Y.
Regraded Uclassified
206
- 2 -
Date
Amount Debited
Account Debited
Paid To
November 13
$ 30,000
Banco di Napoli Trust Co., Banca Commerciale Italiana,
N.Y.
N.Y.
30,000
Banca Commerciale Italiana, National City Bank, N.Y.
N.Y.
November 14
150,000
Banca Commerciale Italiana, Chase National Bank, N.Y.
N.Y.
50,000
Credito Italiano, N.Y.
Irving Trust Co., N.Y., for
account of Credito
Italiano, N.Y.
November 16
45,000
Credito Italiano, N.Y.
Guaranty Trust Co., N.Y.,
for account of Credito
Italiano, N.Y.
B.M.S.
Regraded Uclassified
207
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Secretary Contacter,
DATE November 22, 1940
TO Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following credits in the
account of the Banca Commerciale Italiana, New York, maintained with the Chase National
Bank, New York.
Date
Amount Credited
Received From
November 20
$ 290,144.20
Banca Commerciale Italiana, N.Y.,
(Two cashier's checks of the
National City Bank, N.Y., to order
of Banca Commerciale Italiana account
of the European American Trade
Development Corp.)
60,000
Banca Commerciale Italiana, N.Y.,
(Check of the American Express Co.,
N.Y., to order of Banca Commerciale
Italiana, N.Y., account of Banca
d'Italia)
13,069.16
Banca Commerciale Italina, N.Y.
(Miscellaneous checks)
pmp
Regraded Uclassified
208
TREASURY DEPARTMENT
MISS -
INTER OFFICE COMMUNICATION
DATE November 22, 1940
Becretary Morgenthau
TO
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in the
socount of the Reichebank, Berlin, maintained with the Chase National Bank, New York,
Date
Amount Debited
Paid To
November 20
$ 125,000
Chase National Bank, N.Y., for
account of State Bank of the
U.S.S.R. for account of
Reichsbank, Berlin
141,000
J.P. Morgan and Co., N.Y., by
order of Konversionkness fur
Deutsche Auslandsschulden,
Berlin
100,000
Chase National Bank, N.Y., for
account of Union Bank of
Switzerland, Zurich
100,000
Chase National Bank, N.Y., for
account of Stockholms Enskilda
Bank, Stockholm
73mm
Regraded Uclassified
209
FOR Miss Chauncey
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 22, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in the
account of the Reichsbank, Berlin, maintained with the National City Bank of New York.
Date
Amount Credited
Received From
Amount Debited
Paid To
November 22
$ 100,000
National City Bank,
$200,000
Guaranty Trust
N.Y., by order of
Co., N. Y., for
Banque Nationale
account of
Suisse, Zurich
Reichsbank,
Berlin
$250,000
Chase National
Bank, N.Y., for
account of
Reichsbank,
Berlin
Juie
210
Chaunces
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 22, 1940
Secretary Morgenthau
TO
Mr. Cochran
FROM
The Federal Reserve Bank of New York reported the following transaction
in the account of the Bance Commerciale Italiana, New York, maintained with the Chase
National Bank of New York.
Date
Amount Debited
Paid To
November 22
$200,000
#
Federal Reserve Bank of N.Y., for
account of Sveriges Rikebank,
Stockholm, by order of Banca
d'Italia, Rome
2ml
211
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
November 22, 1940
Secretary Morgenthau
TO
Mr. Cochran
FROM
STRICTLY CONFIDENTIAL
At 4:50 this afternoon Mr. Latchford telephoned me from the Department of
State. He said that the Pan American Airway officials have reported that they are
trying to arrange for the two British officials (Sir Frederick Phillips and Mr. Bewley)
to depart for the United States on the clipper sailing either November 26 or November
25, and are very hopeful that such an arrangement will be possible. This should land
the two Treasury men here around December 1. I thanked Mr. Latchford for his assistance
in the premises and for letting us know the results of his efforts.
Just
Regraded Uclassified
212
FEDERAL RESERVE BANK
OF NEW YORK
November 22, 1940.
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. Merle Cochren
Pursuant to Mr. Cochran's request, I enclose our compilation
for the week ended November 13, 1940, showing dollar disbursements out
of British Empire and French accounts at this bank and the means by
which these expenditures were financed.
You will note that we are now analyzing the accounts main-
twined at this bank by the Bank of Canada and the Commonwealth Bank of
Australia, in addition to those of the British and French authorities.
Aside from a somewhat different classification of the debits and credits,
the procedure followed in compiling these new figures is the same as in
the case of England and France.
Faithfully yours,
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosures
Regraded Uclassified
213
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
Strictly
(In Willions of Dollars)
Week Ended Nov. 13, 1940.
Confidential
or ENGLAND
FANK
07
FRANCE
CHEDITS
DEFITS
CHEDITS
LPHITS
Other
Net Incr.
Prosports
Net Intr.
of Salxi of
(incl.
Cov't
Total
Other
(*) or
Der. (-)
Total
n°
Doy't
Total
Other Tntal
adjuct-
Expend-
Cold
Expend-
Drive
(+) or
Door.(-)
PERIOD
Cold
(Est.)(a)
Sterling(b)
monts)
Itures(e)
tn Polaned
Sales
Stures(d)
to
1939
Anute 31 - Sopt. 29
207.0
185.4
33.6
13.4
-
-11.2(e)
24.3
3,6
90.7
+113.5
11.3
I
11.3
19.4
6.0
- 8.1
Sept.20 - Hav.
3
140.0
3.8
52.6
I
86.2(f)
106.7
5.8
100.9
. 35.8
V6.2
35.0
41.2
88.6
1
61.8
105.4
- 18.4
Nov. = - 29
105.8
57.8
25.0
1
23.0
101.7
8.9
182.8
- 85.9
82.9
55.1
19.6
78.6
1
- 4.3
llov. 30 - Jan.
3
75.2
50.6
14.2
-
10.4
97.7
8.7
80.0
- 22.5
109.3
93.5
15.3
86.8
28.1
587
. 82.4
1940
Jen. 4 - 31
43.4
20.5
17.8
-
5.0(m)
54.8
18.P
38.0
- 11.4
56.0
80.1
5.8
61.5
31.5
30.0
- 5,6
Feb. 1 - 26
108.3
56.7
17.0
-
33.7
124.7
15.4
104.B
- 15.9
71.5
B4.B
16.9
V5+7
3%F
30.0
- 1.2
For. 29 - Apr.
3
94.0
60.9
71.5
-
1.6(h)
110.5
14.5
101.0
- 11,5
100.0
70.4
20.6
99.6
35.9
63.7
. 5.4
Mr.
4 - May
1
86.4
16.8
13.4
-
26.2(i)
13.4
26.1
87,3
- 17.0
78.7
60.7
18.0
84.8
20.4
55.4
- 6.1
May a - 29
126.2
93.2
7.1
100.9
23.6
* 25.3
140.4
196.2
19.2
101.4
57.0
44.4
. 14.0
-
25,9
77.3
May
30 - July
3.
319.3
301.3
11.1
12.9
283.2
145.3
137.0
. 36.1
345.1(g)
235.6
-
9.5(J)
156.7(j)
127.3(j)
29.4
(188.4
July 5 - 31
225.0
212.2
P.O
2.8
8.0
249.7
156.7
93.0
- 14.7
3.5
3.0
0.2
7.3
6.3
1.0
- 4,1
Aug. 1 - 28
294.8
267.4
1.0
2,4
24.0(x)
261.1
180.2
80.9
- 33.7
10.9
10.4
0.5
8.9
0.5
6.4
T 1.0
First year of war
1,008.2
1,356.1
211.3
5.7
1255.7
1,793.2
605.6
1,187.6
. 35.0
1,095.3
900.2
195.1
866.3
416.6
449.7
1229.0
Aug. 29 - Oct.
-
300.9
271.5
6.0
1.1
30.3(1)
316.8
144.3
72.5
- 7.9
1.3
I
1.3
8.6
4.4
4.2
- 7.3
Oct. 3 - 30
198.5
160.5
6.0
0.3
31.7(m)
196.7
167.8
28.9
+ 1.8
0.5
-
0.5
0.5
0.3
0.2
-
Oct
1 - Nov.
27
Nov - Dec. 31
ISEK ENDED:
Oct. 23
61.3
52.1
2.0
0.1
7.1
58.3
50.9
7.4
+ 3.0
-
-
-
-
-
-
-
30
58.0
50.1
2.0
5.9
40.6
31.5
9.1
+17.4
0.1
I
0,1
0.1
0.1
-
-
-
Nov. 6
61.2
47.2
6.0
0.1
7.9
55.4
47.7
7.7
+ 5.8
0.2
-
0,2
0.4
0.1
0.3
- 0.2
13
76.5(n) 62.2
4.0
0.1
10.2(0)
74.6(n)
62.8(n)
11.8
+ 1.9
0.1
-
0.1
-
-
-
+ 0.1
Average weekly expenditures einne outbreak of war:
Transfers from British Purchasing Commissino to
France
(through June 19)
219.6 million
Bank of Chnada for French secount:
Deek ended November 13
-
million
(Sée Postnotor on reverse
Bagland 1 through June 19)
27.6 million
England since June 19)
60.8 million
Cumulation from July 26
386.8 milliva (revised)
(a) Through June 19, these figures represent total sules of American securities in Second District reported for account of the United Kingdom.
(Proceede of those sales, however, may not have boon crodited to the Bank of England's account in all sages.) Beginning with the wook
ended June 26, the figures represent transfers from the Bank of Montroal, New York Agency, which is justodiun for requisitioned American
securities held in this country. The transfers apparently refloct procoeds of official security males, including three handled through
privote deals. From June 17 to July 19, transactions in securities payable in specified threign currencies, including dollars, by United
Kingdom recidents were prohibited.
(b) Includes proceeds of salos of "rogistered" sterling in this cartent only.
(=) Includes payments for account of British Punchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control,
and Ministry of Shipping.
(
Includes payments for account of Fronth Air Commission and French Purchasing Commission.
(e) Includes adjustment for (a) above,
(f) About $85 million transferred from amounts of British authorized banks with New York banko.
(g) About 211 million transferred from cimunts of British authorized banka with Nov York banks.
(h) About $8 million transforred from assounts of Eritish authorized banko with Nov York banks.
(1) About $10 million transforred from accounts of British authorized banke with New York banks.
(3) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the inllowing day.
(k) About 22 million transferred from accounts of British authorized bunks with New York banks.
(1) About $2 million transferred from accounts of British authorized banks with New York banks.
ARV
THE
01
TECHNIC
(m) About $4 million transferred from accounts of British authorized banks with llew York banks.
211
(n) Adjusted for $5.6 million paid out and subsequently returned to the British Purchasing Commission.
81 6 W & NON ove
(o) About 34 million transferred from accounts of Empire authorized banks with New York banks.
DEPARTMENT
RECOVED
214
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
Strictly
(In Millions of Dollars)
Week Ended November 13, 1940.
2008 Mential
BANK
OF
CANADA
COMPONWEALTH BANK OF AUSTRALIA
DEBITS
CREDITS
DEBITS
CREDITS
Transfers
Transfers
to
Proceede Transfers from Official
Net Inor.
to
Proceede
Net Irer.
Total
Official
Other
Total
of
British N/O
Other
(4) or Total
Official
Other
Total
of
Otter
(+) or
Debits
British
Debite
Credits
Gold
For Own
For French
Credits
Door. (-) Debits
British
Debito
Credits
Cold
Credito
Door, (-)
PERIOD
N/C
Sales
A/C
A/C
In Balance
A/C
Sales
in Balance
1939
Aug. 31 - Sept. 29
17.5
0.6
15.9
21.8
15.1
0,8
I
5.9
+ 4.3
-
-
-
-
,
-
I
Sept.29 - M.V.
1
9.6
0.3
9.3
16.7
7.3
2.1
-
7.3
. 7.1
I
-
-
-
!
-
I
Nov. 2- 29
9.9
0.7
9.2
14.4
13.3
#
1
1.1
+ 4.5
-
-
1
1.9
1.9
I
4. 1.º
Nov. 30 - Jan.
3
30.0
I
30.0
22.8
15.3
3.0
-
6.5
- 7.2
2.5
-
1,5
5.6
5.8
-
+ 3.3
1040
Jan. 4 - 31
23.5
-
23.5
25.7
21.1
I
-
4.6
+ 3.2
5.2
0.3
4.9
3.3
3.0
0,3
- 1,9
Fob. 1 - 26
23.1
-
23.1
17.0
16.1
-
I
0.9
- 6.1
3.3
0.1
3.2
2.4
8.8
0.2
- 0,9
job. 29 - - Apr. 3
42.3
-
42.3
29.5
29.3
-
-
0.2
- 12.8
3.0
0.3
2.7
2.2
1,6
0.6
- 0.8
Apr. 4 - May
1
38.2
-
23.2
42,9
24.8
15.0
-
3.1
+ 4.7
2.3
-
2.3
2.0
1.8
0,2
- 0.3
May 2 - 29
37.9
15.0
37.9
50.2
50.0
-
-
0.2
+ 18.3
1.2
0.2
1.0
2,6
1,7
0,9
+ 1.4
May
30 - July
3
44.1
-
44.1
73.5
72.2
-
-
0.3
+ 28.4
P.S
I
2.3
5.9
4.4
1,5
+ 3,6
July 4 - 31
38.2
-
25.2
117.5
95.3
-
19.2
2.1
+ 99.4
4.5
-
4.6
5.0
4,2
D.B
a 0.4
AUG. 1- 25
16.7
-
18.7
73.6
53.9
-
19.5
0.2
+ £4,9
G.B
-
6,8
5.0
3.4
1.6
- 1,8
First year of war
323.0
16.6
306.4
504.7
418.7
20,9
38.7
38.4
+181.7
31.2
0,9
30.3
36.1
30.0
6.1
+ 4.9
Ang. 29 - Oct.
2
44.3
-
44.3
43.9
16.4
-
27,3
0,2
- 0,4
8.7
-
8.7
8.0
6.7
1,3
- 0.7
Det 3 - 30
26.7
-
26.7
28.6
14.0
-
14.3
0.3
- 1.9
10.1
7.5
2.6
7.9
6.5
1.4
- 2.2
Od
31 - Nov.
27
28 Deo. 31
WEEK ENDED
Nov. 6.
10.2
-
10.2
22,0
15.5
-
6.4
0.1
+ 11.8
0.8
1
0.8
0.1
-
0.1
- 0.7
13
4.6
-
4.6
3.5
3.5
-
-
-
- 1.1
0.1
0.1
-
2.6
2.1
0.5
+ 2.5
'ookly Average of Total Detite Since Outbreak of War (Canada)
Through November 13
$6.5
million
215
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 22, 1940
Secretary Morgenthau
TO
Mr. Cochran
FROM
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
lovember 11
H o 1
1
d B. y
12
25,900
669,887
Nil
Nil
13
23,900
739,603
11,000
10,182
14
51,649
1,721,485
49,000
29,516
15
23,155
771,527
5,000
3,632
16
2,030
128,529
20,000
14,182
126,634
4,031,031
85,000
57,512
cales from
February 22 to
Tovember 9
1,933,469
68,133,662
5,326,500
4,140,154
TOTAL FEBRUARY
22 TO NOVENHER 16
2,060,103
72,164,713
5,411,500
4,197,666
Mr. Pinsent reported sales of non-vested securities for the week ended
Govember 9 totaled $500,000.
75ml
Regraded Uclassified
Tokyo, November 22, 1940
No. 5168
216
SUBJECT: JAPAN'S GOLD POSITION
The Honorable
The Secretary of State
Washington
Sir:-
I have the honor to submit herewith an analysis of Japan's gold position
as of November 1, 1940. This analysis has been largely based on estimates
as scent official information on gold production has been available for the
past two years.
According to the Finance Division of the Bureau of Foreign & Domestic
Commerce's letter of February 8, 1939, gold stocks at the end of 1938
In Kilos
amounted to
129.797
Estimated exportable gold collections from people during 1938.
15,000
Total
144.797
Estimated domestic use of gold for industrial purposes during
1938 based on normal consumption of 10 tons per annum for
1935 and 1936
8,000
Actual stocks January 1, 1939
136,797
Production estimated 1939
Japan Proper
30,000
Korea
27,000
Formosa
4,000
Manchuria
10,000
Total
71,000
Estimated exportable gold collections 1939
10,000
Total gold resources during 1939
217,797
Estimated domestic consumption 1939. 5,000
Actual exports 1939
149,902
Total
154,902
Balance on hand January 1, 1940
62,895
Regraded Uclassified
217
- 2 -
In Kilos
Estimated production 1940, 77,000 kilos,
which gives for Jan-Oct. 1940
period
65,000
Estimated gold collections Jan-
Oct. period
2,000
Total
67,000
Total resources Jan-Oct period
129,895
Entimated domestic consumption
Jan-Oct
3,000
Exports Jan-Oct period
53,118
Total
56,118
Stocks on hand e.a of November 1, 1940.
1
(Equivalent to Yen 353,314,000 or
$83,028,750).
The report appearing in the Japan Times of December 19, 1939, and several
days thereafter giving the Bank of Japan's gold holdings in Japan at Yen
369,780,000 vas undoubtedly a correct report. for shipments between December
19th and December 30th amounted to Yen 23,300,000 leaving a balance of Yen
346,480,000 at the end of the year, which 18 only Yen 6,834,000 below our
figure of Yen 353,314,000 for November 1, 1940. This error could well appear
in our calculations on domestic consumption, collections and production.
Furthermore an error only this large gives considerable credence to our figures.
Another consideration is the fact that gold shipments of Yen 53,119 kiloe
for the first ten months of this year must approximate total production, esti-
sated at 65,000 kilos, plus collections, estimated at 2,000 kiloa, and less
domestic industrial consumption, estimated at 3,000 kilos, or B. total of
64,000 kilos. The difference of 10,881 kilos would represent gold mined but
not yet refined or ready for shipment. Undoubtedly Japan has been rushing
shipments to the United States during the past few months as a result of the
disturbed international situation.
POSITION
It is believed the following tabulation fairly accurately indicates the
merchandise position as of October 31, 1940:
Regraded Uclassified
- 3 -
218
Kilos
Million Yen
Dold shipments 1939
149,902
661
Import merchandise balance with
foreign currency countries for
1939
405
Credit balance January 1, 1940
256
cold shipped January-Oct. 1940
53,119
252
Flus credit balance January 1,
1940,
256
Total
508
Invort merchandise balance as of
Oct. 31, 1940 with foreign
currency countries
763
Debit balance October 31, 1940
255*
Note:- *Yon 255,000,000 ecuivalent to
$59,925,000.
In the Department's Despatch No. 1894, dated February 5, 1940 relative
to Janam's gold position, mention 1s made of B. sum of around $200,000,000
which Janan had in the United States in January, 1940 in the form of inter-
national realizable assets. The above figures show that such funds were
not necessary to finance Japan's international trade up to the end of 1939.
For the first ten months of this year, however, Japan has B. debit balance
in her merchandise trade and gold position of Yen 255,000,000 or the equi-
valent of $60,000,000. It would seem logical to conclude that such inter-
antional assete or commercial credits as have been built up must have been
reduced by this amount as of November 1, 1940. it is believed that the
merchandise import balance for November and December of this year will run
to something 11ke Yen 60,000,000 each month, or Yen 120,000,000 for the two
months. This is the equivalent of $27,200,000. For November and December
gold production is estimated at 12,000 kilos net, worth approximately
$13,384,000. The difference between these two figures - $13,816,000 -
represents la further debit balance, which, added to the $60,000,000 debit
de of November lat, gives a total of $73,816,000 to be taken from commercial
Regraded Uclassified
219
- 4 -
assets by the end of 1940. Considering the current trend of Japan's foreign
trade, import excesses vill continue to accumulate during 1941, but probably
not to the extent experienced this year for the reason that Japan cannot
now buy American ecrap iron, machine tools, certain kinds of machinery,
certain grades of oil and non-ferrous metale used in alloys. Cotton and
pulp will not be needed for the next six months. Japan must, however, buy
cunntities of pig iron, iron ore, oil, rubber and tin. However, she will
likely obtain the last two items from French Indo-China on a "credit basie".
It is, therefore, believed that the commercial assets in the United States
vill be sufficient to see Japan through for at least another year or more
if these assets are not frozen or voluntarily reduced or withdrawn.
Respectfully yours,
For the Ambassador
File 863.4
George 1. Makinson
First Secretary of Embassy
Distribution:
Original and 2 copies to
Department
Copy:alm
Regraded Uclassified
(CONFI DENTIAL)
220
CONFIDENTIAL
PARAPHRASE
The following 18 the substance of a confidential
telegram dated November 22, 1940, from the Consulate at
Rangoon:
For a period of six months the Burma road is to be
closed to all traffic originating in Burma save that of
the Chinese Government. This decision was made by the
Chinese Government and applies, of course, only to that
section of the highway under its control. The Chinese
Customs are already holding up at the frontier commercial
shipments, according to official information received at
Rangoon.
It is understood that this step was taken as a result
of representations by the Southwest Transportation Company
to the effect that government shipments were being delayed
by competition from commercial goods for railway and truck
facilities. Although the British and Burma Governments
have been informed of the Chinese move, they have not as
yet given approval.
While officials here appear to be sympathetic toward
the Chinese wish for accelerated transportation into China
of Chinese Government supplies, they seem to be reluctant
to concede arbitrary control of traffic beyond Lashio
by the Southwest Transportation Company. No action 18 being
taken at Rangoon until probable adjustments have been made.
High
Regraded Uclassified
221
CONFIDENTIAL
-2-
High freight rates for transportation from Lashio
by truck and congestion on the Burmese railroad have
resulted from marked increase in commercial traffic to
Yunnan and other parts of China.
222
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Calcutta, India
DATE: November 22, 1940, 5 p.m.
Under Rule 92, sub 1, of Defense of India Rules,
the holders of dollar bank balances, whether such balances
are held in India or abroad, are required as of the
twenty-third of November to offer them within one month
for sale to the Reserve Bank against the rupee equivalent
at the current buying rate for transfers by telegraph.
This provision does not apply to persons who are not
His Majesty's subjects or who are subjects of an Indian
state who in the Reserve Bank's opinion are resident of
India for business purposes only. Nor does the regulation
apply to persons whom the Central Government has authorized
under Rule 92, Subdivision 4 - 1.e., authorized dealers
in exchange and those requiring balances for reasonable
requirements of business. Persons are liable to prosecution
if they do not instruct New York banks to effect delivery
of dollar bank balances which they may hold before
December 23 to the Reserve Bank or its nominees.
WILSON.
EA:LWW
223
AS
PLAIN
London
Dated November 23, 1940
Rec'd 12:17 p.m.
Secretary of State,
Washington.
TRIP.C PRIORITY.
3816, twenty-second.
FOR TREASURY.
The British Treasury will announce tomorrow
further amendments to the defence (finanos) regula-
tions clouing two more loopholes, perhaps not of major
importance, but nevertheless deemed by the British
Treasury to be worth while. It may bE significant that
the terms of such a possible order have been under con-
sideration since last April, a considerable part of the
delay being attributed to difficulties in satisfying law
officers of the Crown on various points. Tomorrow's
press release will read as follows:
"The Treasury announce that an Order in Council,
the text of which is published as S.R. & P. 1940, No. 1989
has been made bringing into force further amendments in
the defence (finance) regulations, 1939.
A new
Regraded Uclassified
234
AS-2- No. 3816, 22nd. FOR TREASURY, from London.
A new regulation Empowers the Treasury, when grant-
ing permission to make any payment to a non-resident to
make that permission conditional upon payment being made
to a blocked account with a banker authorized to hold such
accounts. The purpose of this regulation is to prevent
the transfer into foreign currency of certain capital pay-
ments to non-rosidents, of which cash legacies, the redemp-
tion proceeds of securities (other than 3 per cent defence
bonds and national savings certificates) and the proceeds
of sales of real estate are typical txamples. Suma 80
paid to blooked accounts may be inves Ed in scourities speci-
fird in & list to be published by the Treasury, and interest
on such securities will be dealt with in the same marner 88
interest on other securities held by a non-resident. This
is in furtherance of the policy already Examplified by the
regulation of 18th May (S.R. & O., 1S40, No. 709) which pre-
vented the sale of securities owned by non-residents unless
Permission was granted by the Treasury. The purpose of the
new regulation is not to place further restrictions upon
sterling already in the hands of non-residents nor to dis-
turb the procedure by which permitted transfers are made.
Another new regulation deala with companies BET up
outside the starling area but under the effective control
of
Uclassified
225
AS-3- No. 3816, 22nd. FOR TREASURY, from London.
of persons in the United Kingdom. The persons in question
are called upon to EXERCISE this control so that the com-
pany abroad shall notify to the Bank of England any gold,
specified fortign currencies or American and other specified
securities it may possess, with a VIEW to their being
offered to the Treasury for sale. Any persons who control
such companies abroad are warned that they may be committing
an offence if they allow such companies to part with or
pledge any asset except with Treasury consent.
This regulation does not apply to United Mingdom com-
panice whose share or loan capital is quoted on any TECOg-
nized stock exchange in the United Kingdom; unless the
Treasury specifically direct otherwise, such companies are
not required to take any action with regard to subsidiaries
which they may control outside the starling area.
The object of this regulation ia to SECURE for the
State resources in gold and foreign exchange which ATE at
the disposal of persons in the United Kingdom, but have
hitherto escaped the regulations owing to their being
technically owned by a non-resident corporation. Many per-
sons have already acted voluntarily in the BENGE now pre-
soribed by the new regulation, and it is not considered
Equitable that others should Escape, by means of a
technicality,
Regraded Uclassified
236
AS-4- No. 3816, 22nd. FOR TREASURY, from London.
technicality, obligations imposed on all residents".
As far as legacies BIE concerned, the British Treasury
informs the Embassy that the first regulation will apply
EVEN to legacies under pre-September 3, 1939 wills or trusts
and the British Treasury feels that there is no derogation
of vested rights involved, because the obligation ie in
nearly all CASES for the payment of sterling and the British
Treasury has it within its power to fix restrictions on the
use of thz sterling from the date of payment. (Legacies
or trusts payable in dollars are of course not affected).
The British Treasury emphasizes in this connection that there
is no blocking of txisting sterling balances owned by non-
residents and that the new regulation only applies to new
balances created in the manner specified in the order.
The British Treasury informs the Embassy that the en-
forcument of the second new regulation is, of course, to be
directed personally against the individuals in the United
Kingdom, and the British Treasury realizes that it will not
be in a position to impose a sanction in any CASE unless
the individual in question has it legally within his power
to do what the regulation requires. In other words, if a
company organized under American law, being involved in
receivership or other legal procerdings, is ordered by or
enjoined
Regraded Uclassified
227
AS-5- No. 3816, 22nd. FOR TREASURY, from London.
enjoined from doing a certain act by a competent American
court such court order would remove compliance with the
regulation from the power of the person in the United
Kingdom and thus exempt him pro tanto from complianos with
the regulation.
The British Treasury also realizes that there will be
difficulty in enforcing this regulation in cases of family
companies in which the effectively controlling person lives
in the United Kingdom but members of the family in the
United States hold legal power aa directors which place
power over the corporation in their hands as for as the law
is concerned. The other CASE in which the British Treasury
EXPECTS difficulty is that of & company controlled by
trustees resident in the United States EVEN though the bene-
ficiary is in the United Kingdom.
The text of the order will contain in substantially
the following words this definition of the corporate bodies
affroted: "the said bodies corporate are any bodies corpo-
rate incorporated outside the United Kingdom in the CASE of
which any of the following conditions is fulfilled (A) that
the body corporate is by any means managed or controlled
(whether directly or indirectly) by persons in or resident
in the United Kingdom; (B) that more than half of the sums
which,
Regraded Uclassified
223
AS-6- No. 3816, 22nd. FOR TREASURY, from London.
which, on a liquidation thereof, would be receivable by
holders of share or loan capital would be receivable
directly or indirectly by or for the benefit of persons in
or resident in the United Kingdom; (c) that more than half
of the assets which, on a liquidation thereof, would be
available for distribution after the Payment of oreditors
would be receivable directly or indirectly for the benefit
of prrsons in or resident in the United Kingdom; (D) that
more than half (I) of the interest payable on its loans and
loan capital; or (II) of the dividends payable on its
preference share capital, if any; or (III) of the dividends
payable on its share capital, if any, not being prefurence
share capital, is receivable, directly or indirectly, by or
for the benefit of persons in or resident in the United
Kingdom." Exemption from the second regulation mentioned
in the penultimate paragraph of the press announcement is
intended to avoid interference in the business of bona fide
foreign branches of United Kingdom corporations.
With regard to interest payments on securities in which
legacy funds may bE invested, reference should be made to
=nclosure number one with despatch 5388, June 10, 1940.
It should also be noted that the first new regulation
will cancel the general rule BET out in the second and third
Paragraphs of enclosure number three with despatch 5588 of
July 12, 1940.
CSB
NOSNHOT
200
Treasury Department
TELEGRAPH OFFICE
11w
wyll M CABLE
....
DUPLICATE OF TELEPHONED TELEGRAM
1940 NOV 23 AM 8 38
MONTEGOBAYJA 51 22/1425
LC MRS KLOTZ
TREASURY DEPARTMENT
WASHN-DC
PLEASE TRY MAIL ME SATURDAY PAMPHLET ENTITLED ECONOMIC
MOBILIZATION REFERRED TO NEWYORK TIMES NOVEMBER
EIGHTEENTH PAGE FOUR BY TURNER CATLEDGE WANT TO
CONSULT GULICK BEFORE SEEING PRESIDENT so HE HAD
BETTER COME FRIDAY FORENOON WE ARE FEELING WELL.
HOPE YOU ARE ALSO. BEST REGARDS.
MORGENTHAU.
B14A
Regraded Uclassified
230
OFFICE
OF
TREASURY DEPARTMENT
WASHINGTON
THE SECRETARY
November 23, 1940
To:
Coast Guard Communications
from:
H. 3. Klotz
Please send the following message to
Secretary Morgenthau:
"Dr. Stewart now finds he
cannot come on December third,
fourth or fifth. What other
date would suit you.
Best
regards.
(Signed) H. S. Klotz
Regraded Uclassified
231
AS
PLAIN
London
Dated November 23, 1940
Rec'd 10:27 a.m.
Secretary of State,
Washington.
3830, twenty-third.
FOR TREASURY.
Embassy's 3816, November 23.
(1) A detailed list of payments to non-resi-
dents, henceforth permitted to DE made to blocked
starling account only, is announced today as follows:
"(1) sterling proceeds of securities drawn for repay-
ment or maturing after the date of this notion, or
surrendered after the date of this notice for encash-
ment before maturity. (This ДОЕВ not apply to National
Savings Certificates, 3 per cent Defence Bonds, or
Treasury Bills); (3) amounts to be distributed follow-
ing the sale or winding up of companies or the disso-
lution of partnerships; (3) legacies and similar
payments; (4) capital payments arising out of settle-
ments; (5) proceeds of the sale of real estate, furni-
ture, pictures, jewellery or other movemble assets
situated
Regraded Uclassified
232
AS-2- No. 3830, 23rd. FOR TREASURY, from London.
situated in the United Kingdom other than goods imported
for sale in the ordinary course of trade."
(2) The banks authorized to open blooked accounts
are as follows: Bank of Scotland, Barclays, British Linen
Bank, Clydesdale Bank, Commercial Bank of Scotland, Coutts
and Company, District Bank, Glyn Mills and Company, Lloyds,
Martins, Midland, National Bank, National Bank of Scotland,
National Provincial Bank, North of Scotland Bank, Provin-
cial Bank of Ireland, Royal Bank of Scotland, Union Bank of
Scotland, Westminster Bank, Williams Deaoons Bank, and in
Northern Ireland Bank of Ireland Belfast Banking Company,
Hibernian Bank, Munster and Leinster Bank, National Bank,
Northern Bank, Provincial Bank of Ireland, Ulster Bank.
JOHNSON
DDM
PARAPHRASE OF TELEGRAM RECEIVED
233
FROM: American Embassy, Vichy.
DATE: November 23, 1940, noon
NO.: 1012
FROM MATTHEWS FOR THE TREASURY.
I had lunch with Rueff, who told me in confidence
that now the Germans have demanded that they be given the
Belgian gold which 18 now at Dakar. Rueff could not inform
me RB to when the gold would probably be transferred or
the means by which it would be transported. However,
he presumed that the gold will be transported by air.
There has been no similar request for the French gold at
Dakar. Rueff believes that at least a large part of the
money being deposited to the German account in the Bank
or France (400 million francs per day), only one-third
of which the Germans continue to spend, will be used for
buying foreign securities. Rueff said that the Germans have
now categorically demanded that the banks furnish immediately
the information asked for regarding foreign securities
held by the banks in the unoccupied territory which
belong to banks or individuals domiciled in the occupied
territory. Reference: telegram of November 13, 9 p.m.,
No. 947 from the Embassy. It is my understanding
that up to the present no American bank has complied
with this instruction, but 8 number of other banks have
done 80,
Rueff
Regraded Uclassified
234
- 2 -
Rueff told me that he does not believe any great
quantities of shares in French industries have as yet been
purchased by the Germans, mainly because the Paris bourse
does not quote them, and to a great extent they are located
in the unoccupied territory. Reference: remark by Couve
de Murville, telegram of November 17, 5 p.m., No. 966 from
the Embassy.
Rueff said that the Bank of France circulation continues
to be approximately 210,000,000,000 france.
END OF MESSAGE.
MATTHEWS.
EA:LWW
Regraded Uclassified
235
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 23, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Kr, Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
124,000
Purchased from commercial concerns
1 3,000
In the open market, sterling was steady at 4.03-3/4. Transactions of the
reporting banks were as follows:
Sold to commercial concerns
1 2,000
Purchased from commercial concerns
1 1,000
Closing quotations for other currencies.
Canadian dollar
12-7/8% discount
Swies franc
.2321
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2350
Brasilian milreis (free)
.0505
Mexican peso
.2070
Ouban peso
8-5/8% discount
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported the shipment of $1,008,000 in
gold, from Canada, by the Bank of Canada, Ottawa, to the Irving Trust Company, New
York for the account of Banque Mellie Iren.
The State Department forwarded to 110 a cable stating that the following gold
shipments were made from Bombay:
$2,337,000 representing two shipments by the National City Bank to the National City
Bank, New York.
850,000 shipped by the National Bank to the Chase National Bank, New York,
494,000 shipped by the Chartered Bank of India, Australia and China to its New
York branch.
433,000 shipped by the French Bank to the Chase National Bank, New York.
$4,114,000 Total
11 of the gold abipmente reported by the Federal Recerve Bank and the State Department
vill be sold to the U. 5. Assay Office at New York.
Regraded Uclassified
236
- 2 -
The equivalents of the Bombay gold and silver prices were $33.76 and 43.66#.
7.M.P.
CONFIDENTIAL
237
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 23, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
In my memorandum of November 22 relative to Italian accounts maintained with
the National City Bank of New York, there is a debit of $400,000 to the account of
the Banco di Napoli Trust Company, New York, representing 8 check to that Bank's order
deposited with the Federal Reserve Bank of New York. When this transaction was
reported it was not clear as to why the deposit should be made at the Federal. An
incuiry was made of Mr. McKeon at the Federal regarding this deposit, and he now
informa us that the Banco di Napoli Trust Company, New York, maintains with the
deral a non-member clearing account in which this amount was credited. Such an
account is usually used by non-members of the Federal Reserve System in connection
with Clearing House balances and for payments in Federal Reserve funds. This morning
the account had $2,400,000. which includes the $400,000 referred to.
As this account is an Italian account for which we have not previously
received reports, I have requested Mr. McKeon to have & transcript of the account
cade from November first up to and including today, which he 1a to forward to me.
I have also arranged with him that transactions in this account in the future be
reported to us.
10.918
Regraded Uclassified
238
Missu
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 23, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
We received from the Federal Reserve Bank of New York the following informa-
tion regarding the transactions listed on the attached statements in Italian accounts
maintained at:
Chase National Bank
National City Bank
N.M.P.
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov.23
$190,000
Banca Commerciale
Chase National Bank, $300,000
Banca Commerciale
Check of Chase National Bank,
Italiana, N.Y.
N.Y., by order of
Italiana, N.Y.
N.Y., in Federal Reserve Funds
(for account of
Banco de la
to the order of Federal
B.C.I.Direction
Provinciale de
Reserve Bank of New York
Centrale in Milan)
Buenos Aires
150,000
#
If
National City Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov.18
$ 25,000
Banca Commerciale
Chase National Bank, N.Y.,
Italiana, N.Y.
for account of Italian
Lines, N.Y.
19
150,000
#
Banco di Nepoli Trust Co.,
N.Y.
20
100,000
#
=
239
Regraded Uc
240
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 23, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following credits to the
account of the Banca Commerciale Italiana, N.Y., maintained with the Chase National
Bank, N.Y.
Date
Amount Credited
Received From
November 22
$50,000
Banca Commerciale Italiana, N.Y.,
(check of Banco di Napoli Trust
Co., N.Y., on National City Bank,
N.Y.)
45,000
Banca Commerciale Italiana, N.Y.,
(check of Credito Italiano, N.Y.,
on Guaranty Trust Co., N.Y.)
24,943.07
Banca Commerciale Italiana, N.Y.,
(miscellaneous checks)
H.M.S.
241
TREASURY DEPARTMENT
Missa
Miss
INTER OFFICE COMMUNICATION
DATE November 23. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported to us the following transaction
in the account of the Sveriges Riksbank, Stockholm, maintained with the Federal Reserve
Bank of New York.
Date
Amount Credited
Received From
Hovember 23
$300.000
Bance Commerciale Italiana,
N.Y., by order of Banca
d'Italia, Rome
B.W.
Regraded Uclassified
242
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 23, 1940
Secretary Morgenthau
10
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transactions in
accounts maintained with the Chase National Bank, New York.
Date
Amount Debited
Account Debited
Paid To
November 22
$490,610.19
Deutsche Golddiskontbank,
Chemical Bank and Trust Co.
Berlin
N.Y., for account of and
by order of Themis and Zug.
Switzerland, according to
arrengement Kollmar
22,095
Reichsbank, Berlin
Mitsubishi Shoji Kaisha,
120 Broadway, N.Y., by
order of Mitsubishi Shoj1
Keisha, Berlin
14,912
Deuteche Golddiakontbenk,
Irving Trust Co., N.T.,
Berlin
for account of Carl Marks
end Co., N.Y.
91,620
Deutsche Golddiskontbenk,
Irving Trust Co., N.Y.,
Berlin
for account of Carl Marks
and Co., N.Y.
490,610.19
Reichebank, Berlin
Chese National Bank, N.Y.,
for account of Deutsche
Golddiskontbenk, Berlin
B.M.S.
Regraded Uclassified
243
AC
PLAIN
Stockholm
Dated November 23, 1940
Rec'd 6:04 a.m., 24th
Secretary of State
Washington
1051, twenty-third.
Government financial requirements still urgent and
large issues of ten year 4 per cent Treasury notes expected
this month and December: Government also planning new state
loan for January next. Money market strained following
unprecedented demands state loan recently closed Stockholm
city loan selling very slowly and issuance Gothenburg loan
15,000,000 postponed indefinitely. French franc rate
adjusted downward 1 point 20 per hundred to agree with new
mark-franc rate, Export price index October 150 import 199
this further increasing spread against Swedish goods.
Automotive registration October passenger care 162, of which
American 127, trucks 816, of which American 167. Factories
reported closing down or curtailing operations with further
rise in unemployment.
INFORM COMERCE. TREASURY.
STERLING
NPL
COPY
mg
Regraded Uclassified
244
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 23, 1940.
No. 252
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. Air Force Operations.
On November 22nd German daylight air activity was con-
fined to southeastern England and was light. Last night the Germans
conducted heavy raids over the Midlands, concentrating on Birmingham
and Coventry. London, Bristol and Southampton also were attacked.
The R.A.F. attacked targets in western France and west-
ern Germany last night, including Duisburg-Ruhrort, Channel ports and
airfields.
II. Greek Theater of War.
The Italian force driven out of Koritza has been forced back
25 miles to Pogradec (southwest corner of Lake Ochrida). Greeks re-
port large captures of materiel. The Greeks are advancing with cau-
tion into the Argyrocastro plains where Italian mechanized units may
prove effective. Aerial operations were principally directed against
ground forces.
III. Mediterranean and African Theaters of War.
No ground operations and only minor air activity reported.
RESTRICTED
Regraded Uclassified
244.M
CONFIDENTIAL
Paraphrase of Code Cablegram
Received at the Har Department
at 2,45 P.M., November 23, 1940.
London, filed 15,30, November 23, 1940.
1. Unfavorable weather conditions caused the daylight activity
of the Bomber Command on Friday, November 22, to be confined to a. few
mill attacks on essay airdromes. All missions for the proceding
night were cancelled for the same reason. Operations of the Coastal
Command were routine with no statistics of missions available. The
Pighter Command operated 90 planes.
2. Weather conditions restricted the daylight operations of
the German Air Force on November 22 to eight single plane raids and
some reconnaissance flights. About 75 planes were glotted. That
night the moderate activity of the enemy centered principally on Birming-
has and the Midlands.
3. One British airdrome was rendered unserviceable. Four 110
fineries were damaged to an unknown extent and about one kilomater
was broken in each of two pipelines. Railroad communications were
slightly damaged which will result in slowing up oil shipments about
one week.
4. The British lost no planes and the Germane two confirmed and
CODE damaged.
s. The Australian 9,870-ten aruiser AUSTRALIA and & nim emepar
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
274.8
collided, sinking the latter. An armed drifter sunk when it struck
A mine in the North Sea. On the East Coast two conveys ware attacked
on November 21, with one ship only damaged. There are at least three
and possibly five German raiders abroad.
6. Reports from Sidi Barrani as of November 19 credit the
British with a viotory with elight leases against heavy Italian
casualties.
7. There has been no change in the disposition of the German
forces during the past week. This includes the motorised division
being held in readiness on the Franco-Spanish border and along the
boundary between Austria and Tugeslavia.
8. The British are anxious over the present Japanese troop -
centrations. They fear that the Japanese may push to the south, pos-
sibly in the direction of Borneo, while they are still in a poor position
to send reinforcements to the Par East.
2. Additional British intelligence reports indicate that the
production of Rumanian oil is disappointingly smil.
10. As a result of the wide publicity given the success of British
bamb disposal squads, the Germans have changed their fuse mechanisms
and codo colors on delayed action bombs. The result is that the method
of disarming these bembe used today will detanate these to be used to-
BOTTON, This emphasises the importance of secrecy.
CONFIDENTI AL
Regraded Uclassified
CONFIDENTIAL
244-C
11. The following is an abstract of the information the Russian
Ambassador Maisky gare a. sustral friend yesterday,
"All speculation regarding the resulted the visit of
Meletev to Berlin is purely guess work because nothing was definitely
cettled or signed.
"The Russian Government will continue its policy of safe-
guarding its - interests and national integrity. At this time
it feels sure that the British are incapable of defeating Germany
in land warfare due to the vast sise of Hitler's army) while they
further believe that Germany is unable to defeat the British Havy
and Air Force. Russia discredits the value of American assistance,
feeling that it will prove disappointing because of its small
scale and slow speed. Maisky himself .... little prespect for
anything but sa eventual stalemts.
"The umber of German planes is not as great as the British
believe and as the Germans claim.
"The sonstant repetitien of the air tacties followed in at-
tasking Birmingham and Coventry is certain to make things diffi-
oult for the British.
*It is considered probable that the concern of Germany over
the Russian aviation industry was because it was necessary for
Germany to increase its Air/Force which had suffered because of
the devestating drouge inflicted an its aircraft injustry by
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
244-D
British benber attacks.
"In the existing circumstances Russia's 'bensvolent
neutrality' will be most helpful to Britain but this attitude
is most difficult to maintain because the British diplomacy has
consisted of nothing but blunders during the past four months."
LEE
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff (2)
War Plans Division
Office of Naval Intelligence
Air Corps (2)
0-3
CONFIDENTIAL
Regraded Uclassified
245
INFIDENTIAL
Paraphrase of Gode Radiogram
Received at Was Department
at 5:45 P.M., Nevember 24, 1940
London, filed 13:25, November 24, 1940.
1. The Boober Command carried out no daylight operations
on Saturday, November 23. The results of the operations during the
preceding night were very satisfactory. The Bonher Consand made
ainer attacks on November 23 and earried out routine operations -
sisting of 47 patrol missions, 80 boarding acrties, and 20 convey -
corts. Two planes are missing. The Fighter Command operated 692
planes on 141 adasions. During the night of November 22-23 British
night fighters operated 100 planse in 96 patrols.
2. The German Air Fores took advantage of the good westher
on November 23 and operated about 300 sorties on reconnaissance de-
alons, attacks en shipping, and four high altitude fighter -
sisting of about 60, 50, 70, and 40 planes, respectively. The record
sweep consisted in part of Italian biplanes. An attack by British
fighters resulted in enemy plane losses of 11 confirmed, four probable
and three damaged, all of which were Italian except one. the British
lost no planse. After the fighter attack the rest of the formation
desamped. That night the principal German activity was sin laying.
Although the weather wes fuverable the only attack in force was in
the are. The whole emery was clear after
1,00 A.M.
CONFIDENTIAL
Regraded Uclassified
246
CONFIDENTIAL
3. A statement last night by the Army Director of Mill-
tary Intelligence indicates that there is a growing optinism over
the British position in the Mediterrument. Be considers that n
Dues's speeches indicate that the latter is mare of the lask of
enthusiass in Italy for the war and for the Ands.
-
Distribution:
Military Aide to The President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff - 2
War Plans Division
Office of Naval Intelligment
0-3
Air Corps - 2
CONFIDENTIAL
- 2 -
Regraded Uclassified
247
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate, Dakar.
DATE: November 24, 1940, 11 a.m,
NO.: 73.
FOR THE TREASURY.
much
Apparently there 1s a/greater amount of Belgian
Central Bank gold than Polish in French Weat Africa.
4,944 cases of gold belonging to the Belgian Central
Bank and 1,208 cases of the Polish Central Bank's gold
were loaded at Lorient, not at Brest. It 18 reported
that the Polish cases are larger in size than the Belgian
cases.
Officials keep the greatest secrecy with regard to
the gold in French West Africa.
WASSON
EA:MSG
Regraded Uclassified
248
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 25, 1940.
No. 253
SITUATION REPORT
12:00 M.
This military situation report is issued by the !!ilitary
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. Air Force Operations.
German daylight activity on the 23rd and 24th was
light. On the night of the 23rd-24th the Cermans attacked South-
ampton heavily and on the 24th-25th an equally heavy attack was
made on Bristol.
The R.A.F. on the night of the 23rd-24th bombed a num-
ber of objectives scattered over western Germany, the occupied areas
and Italy. The Vichy Government claims that Marseilles also was
bombed, Last night the British attacked Hamburg, a number of other
objectives in western Germany and several ports and airdromes in
occupied territory. Apparently the intensity of the German attacks
on cities such as Birmingham, Bristol and Coventry is compelling the
British to direct more of their night effort against hostile air-
dromes in France.
H. Greek Theater of War.
The Greeks have taken Moskopoli, ten miles west of Koritza,
and are approaching the outskirts of Pogrades, 20 miles beyond Korit-
za, astride main highway to Tirana. Italians are expected to organize
a third defensive line along Shkumbi River (non-fordable) below El-
basan. Premeti, in the center, 15 miles within Albania, is still in
Italian hands but Greek troops have passed it on both sides, and may
soon threaten it with artillery. Little activity in the Argyrokas-
tron valley, where the Greeks are holding their positions. Air opera-
tions were minor in the Greek theater.
III. Mediterranean and African Theaters of War-
No ground activity reported. A considerable number of minor
bombing raids along the Mediterranean Coast.
RESTRICTED
Regraded Uclassified
CONFIDENTIAL
249
Paraphrase of Code Cablegram
Received at the Var Department
November 25, 1940.
Lendon, filed 17,00, November 25, 1940.
1. There were no daylight operations of the Bomber Commad
on Sunday, November 24. In spite of the foul weather the attacks
on all objectives the previous night were considered quite satie-
factory. These included 29 planes against oil targets, 16 planes
against Berlin and 10 against an arsenal in Turin. One plans was
lest, Berlin and Turin were both hard hit. The bombing program
for the night of November 24-25 was kept secret. The Coastal Com-
mand dispatched 87 patrols as well as photographic and convey excert
missions. The Fighter Command operated 122 patrols.
1. In the fairly bad weather an November 24 the German Air
Perce staged three sweeps over Southeast England of about 20, 13,
and 60 planes, respectively, and carried out light reconnaissances.
A total of about 150 planes were plotted. The principal attack
that night was on Bristol, but It does not appear that this THE
carried out on a mdea scale. In addition there was mine laying
and speradie bombing. All was clear after 1:00 A.M.
3. Damage reparts for the night of November 24-25 are art
available. The sivilian casualties in Londen for November 18-25
ware six killed and 18 seriously injured. Purther reports of the
attack a Birmingham have been reseived. The utilities, especially
CONFIDENTIA
Regraded Uclassified
CONFIDENTIAL
250
the water system, was hard hit but the damage to fasteries THE
less severe than estimated at first. The casualties are -
estimated to be 100 killed and 900 seriously injured. The raid
on Southampton a the night of November 28-24 resulted in slight
damages to Flest Air Arm and Admiralty atores end caused casualvies
of w dead and 180 injured.
4. The Germans lest four planes and the British none.
5. Insury submarines sunk two Norwegisn ships, totalling about
5,000 tens, in - econoy, and two British vessels, totalling about
15,400 tens, in another. A 3,700-ton British ship was sunk by a
mine.
LEE
Distribution:
Military Aide to the President
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of war
Chief of Staff (2)
War Plans Division
Office of Naval Intelligence
Air Corps (2)
0-5
CONFIDENTIAL
Regraded Uclassified
251
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 25, 1940
Secretary Morgenthau
TO
CONFIDENTIAL
FROM
Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
- 99,000
Purchased from commercial concerns
135,000
In connection with the sterling purchased, a few of the Bew York banks stated that
they had received overnight instructions from London to pay out small amounts of
registered sterling to several American concerns, which the beneficiaries sold back
to the banks, It 1s possible that these transfers represented liquidation of American-
owned sterling balances, brought about by the fear that such balances might be blocked
by the British authorities. It will be recalled that the British Government, over the
past weekend, enacted B new regulation stipulating that certain capital payments to
non-residente be made in blocked funds.
The Federal Reserve Bank of New York sold 620,000 in registered sterling to &
non-reporting bank, and purchased 62,500 from another non-reporting bank.
Open market sterling remained at 4.03-3/4 throughout the day. Transactions of
the reporting banks were as follows:
Sold to commercial concerns
é 11,000
Purchased from commercial concerns
is 3,000
The Cuban peso discount. which widened to 8-5/8% at the end of last week,
marrowed to 8-7/16% today.
The other currencies closed as follows:
Canadian dollar
12-7/8% discount
Swine franc
2321-1/2
Swedish krona
.2386
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2353
Brarilian milreis (free)
.0505
Merican peso
.2070
There were no gold transactions consumnated by us today.
No new gold engagements were reported.
Regraded Uclassified
252
-2-
The New York banks stated that they had received no gold or silver prices
from Bombay today.
À price of 23-1/16d was fixed in London for both spot and forward silver,
1/16d lower than Friday's quotation in each case, The dollar equivalent of this
price is 41,58d.
Handy and Harman's settlement price for foreign silver WBE unchanged at
34-3/40. The Treasury's purchase price for foreign silver was also unchanged at
354.
We made six purchases of silver totaling 300,000 ounces under the Silver
Purchase Act, all of which represented new production from foreign countries, for
forward delivery.
Sind
CONFIDENTIAL
Regraded Uclassified
253
26681
HIS
PLAIN
STOCKHOLM
Dated November 25, 1910
Rec'd 9:25 p.m.
Secretary of State,
ashin ton.
1054, Twentyfifth.
According to study just published yield of income and
property taxes during current fiscal year will bE higher
than budgeted but this will be more than offset by smaller
yields of indirect taxes. Hog cholera again breaks out
in central Sweden. Quarterly food inventory as of December
second ordered ov government. Butter and margarine produc-
tion combined now at rate of only about one quarter kilo
DED week per capita or about 60 percent of 1939.
INFORM COMMERCE, AGRICULTURE.
STERLING
NPL
Regraded Uclassified
ACORESS OFFICIAL COMMUNICATIONS TO
254
THE SECRETARY or STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
November 25, 1940
EA 012.3/2661
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury, and transmits
for his consideration copies of telegram no, 557, dated
October 22, 1940, from the American Consul General at
Amsterdam together with a relevant letter from the
Secretary of War, dated November 14, 1940, concerning
certain payments said to be due in Amsterdam to the Italian
Line in relation to the steamship CONTE BIANCAMANO.
Enclosures:
1. From American Consul General,
No. 557,
October 22, 1940.
2. From Secretary of War,
November 14, 1940.
28
Regraded Uclassified
COPY
255
WAR DEPARTMENT
WASHINGTON
November 14, 1940
The Honorable,
The Secretary of State,
Dear Mr. Secretary:
In reply to your letter of October 28th regarding
the present status of the Italian steamship Conte Biancamano,
I have the following information from the Canal Zone under
date of November 5, 1940.
The status of the Conte Biancamano is unchanged. The
vessel 18 lying in the stream at Cristobal under attach-
ment of the U. S. Marshal. Mr. L. R. Deutekom, B. Dutch
citizen, is the general agent of the Royal Netherlands Steam-
ship Company for both the Canal Zone and Panama. The company
has no American agent in the Canal Zone.
Sincerely yours,
HENRY L. STIMSON
Secretary of War.
Regraded Uclassified
256
RDS
PLAIN
AMSTERDAM
Dated October 22, 1940
Rec'd 5:15 a.m., 23rd
Secretary of State,
Washington.
557, Twentysecond.
FOLLOWING TELEGRAM TRANSMITTED ON BEHALF LOCAL AGENT,
ITALIAN LINES, WITH REQUEST THAT IF DEPART ENT HAS NO
DEJECTION IT INFORM TELEGRAPHICALLY PROPER JURISDICTIONAL
AUTHORITIES AT CRISTOBAL, INFORMING ME OF ACTION AND
TELEGRAPHIC CHARGES.
"Controversy between Italian Line and American agent
of KNSM presumably court Cristobal Canal Zone and conce-
quent confiscation steamship CONTE BIANCAMANO allegedly
under pretext non-payment in United States of America of
Italia 5 A N to KNSM her share freight on through cargo
transshipped Central American ports. Evidence in form
of authenticated letter dated October 21st from manage-
ment KNBM, Amsterdam, received by Italian Line agent here
containing confirmation terms agreement between the two
steamship companies concerned according to which settle-
ment of freight question 18 to be made in Amsterdam. Duly
authenticated letter follows."
I
Regraded Uclassified
257
-2- No. 557, Twentysecond, from Amsterdam.
I have no comment whatever to make in this connection
but the authenticsted letter referred to was presented at
Consulate General and reads in part as follows:
"According to the agreement between our two companies
you have to pay us in Amsterdam our chare in the freight
on through cargo carried ex and per your
and our steamers and we expect payment of same in due course.
Provided that the figures stated by you, which have
still to be checked by us, have been found correct you
279 United States dollars United States of America
sixtyeight thousand one hundred fortyone and twentyone
cente and pounds sterling two thousand eight hundred
seventeen shillings seven and peace two.
We agree to you paying us the equivalent of the
above amounts in Dutch currency at the rate of exchange
on the date of payment.
Trusting you will be in a position to obtain the
permit required for this transaction and kindly requesting
you to accelerate the settlement as much 88 possible,
for which we thank you in advance, we remain." Il
LEE
EMB
Regraded Uclassified
258
AS
PLAIN
London
Dated November 25, 1940
Rec'd 1:05 P.m.
Secretary of State,
Washington.
3839, November 25.
FOR TREASURY.
Under headlines such as "Britain's gold and
security holdings used up" (FINANCIAL NEWS). "Lord
Lothian's appeal-finance problem urgent" (MANCHESTER
GUARDIAN). "America may give us cash" (DAILY MAIL).
"United States credits for Britain-Lord Lothian BEEB
President" (TELEGRAPH). "WE may ask United States for
credite" (DAILY EXPRESS). "ROOSEVELT to discuss oredite
for Britain" (DAILY HERALD). This morning's press DE-
ports Lord Lothian's press interview, the following phrases
appraring in most accounts: "Referring, 33 B. subsequent
sentence clearly showed, to our available gold and securi-
ties Lord Lothian told America that Britain is beginning
to COME to the end of her financial resources". Follow-
ing the report of the interview the TELEGRAPH and DAILY
HERALD state that the President returned from Hydr Park
presumably
Regraded Uclassified
259
AS-2- No.3839, Nov. 25. FOR TREASURY, from London.
presumably for a discussion of the subject and all paprrs
carry the statement that questions will be asked in Parlia-
ment this week about Lord Lothian's statements. The DAILY
HERALD and the NEWS CHRONICLE feature the fact that gold
and securities are likely to be exhausted in six to twelve
months while the other newspapers tend to convey & more
immediate exhaustion of resources. In this connection the
ECONOMIST of November 23 infers from the most recent VEST-
ing order (reported in my No. 3741, November 15, 1 p.m.)
that "sinoe WE have now begun to scrape this particular dish
it is fairly clear that our available reserves of really
marketable securities have been considerably encroached
upon". But after analyzing movements of the tap Treasury
bill issue and taking into account sterling area gold pro-
duction, loans in terms of sterling of dollar credits of the
empire, purchases and borrowing of private gold holdings in
London, diamond sales and the assets of the Dutch and Bel-
gians, concludes that "our gold and dollar resources will
keep us going for several months yet". The following NEWS
CHRONICLE editorial is typical of comment: "Whatever means
are adopted to get OVEr or around the legal obstacles which
stand in the way of American financial help WE can be sure
of one thing-the supplies will go on. America has no in-
tention of letting Hitler win this war".
JOHNSON
WSB
Regraded Uclassified
(Handed by Mr. Pinsent of the British Embasey to Mr. Cochran in the Treasury
at 5:45 p.m., November 25, 1940.)
260
0
STRICTLY CONFIDENTIAL
?
y
Extract from Memorandum dated 4th November 1940.
ALLIED GOLD RESERVES.
Norway holds L13 millions in Canada and perhaps L6 millions
10 the U.S.A.
Holland holds 122 millions in Canada, which we vested in our
Custodian of Enemy Property and subsequently released to the Dutch,
and some L94 millions in the U.S.A. or South Africa.
Belgium owne 187 millions in the custody of the Bank of
England, and B. further 142 millions in the U.S.A., which 1e at present
blocked. Belgium also has I46 millions at Dakar.
Crecho Slovakia holds 172 millions which 1e in the custody
of the Bank of England.
Poland has about 120 millions at Dakar.
(Int.) G.H.S.P.
British Embassy,
25th November 1940.
Copy:alm
Regraded Uclassified
Date 11/25/40 261
10: Miss Charnecy
Room 285
B.L. Temmors
From: FOREIGN FUNDS CONTROL
262
UNOCCUPIED FRANCE
and the
AMERICAN FRIENDS SERVICE CONMITTEE
Neutral observers with long experience in relief
work are in unanimous agreement that the unoccupied zone of
France will be the most critical area in Europe these next
six months. A number of factors have contributed to the
real dangers of starvation. France as a national unit was
nearly self-sufficient. The zone now "in occupation" ie e.
productive agricultural country, and includes important in-
dustrial cities. All grain stores are in this sone, as are
available supplies of meat and milk. Unoccupied France, on
the other hand, is primarily vineyard country.
The present unocompied sone has, in the months
since May, fed a surplus population of more than 7,000,000
refugees. At least E. million of these homeless people still
remain and new thousands are arriving daily from Alsace and
Lorraine. Unoccupied France has supported and continues to
support homeless refugees, despite the fact that my fields
were untilled because the sen were in the army and that the
actual crop yield in 1940 was under normal. Supplies have,
therefore, been depleted beyond safety.
Peacetime economy has not been resumed, due to the
lack of raw materials. Factories are idle, ports empty, and
men are being demobilized from the army to unemployment.
Regraded Uclassified
263
- 2 -
THE QUAKER ORGANIZATION IN FRANCE: The American Friends
Service Committee has 56
representatives in unoccupied France. Full maintenance of
these workers is paid by our Committee, the average monthly
allowance approximating $100 per person. A list of this
personnel is attached hereto.
THE TASK: Since May, when refugees from Belgium, Holland,
and the northern departments of France sought
haven in the South, the American Friends Service Committee
has maintained field offices at Toulouse, Montauban, Perpignan,
Auch, and more recently at Mareeille, These emergency ser-
vices included the purchase of beds, blankets, medical
equipment for the hostels for women and children, and large-
scale feeding operations in all of these cities,
Toulouse, where the lergest relief service was main-
tained, fed 5,000 & day in & canteen, in addition to daily
food distributions to the nearby villages and distribution
of clothing and food to 85,000 Belgian boys who, although
under military age, were subject to Belgian military authori-
ty. The Toulouse services were further extended in mid-July
to assist in the feeding of a million refugees. who had
started north and, because bridges were out and roads in
passable, had been stopped at the line between the two sones,
As this country is extremely poor, with barely enough food
Regraded Uclassified
264
- 3 -
for its own population, emergency service was essential. As
indicative of the scope of the Toulouse service, it may be
stated that in one two-month period 600 tons of food were
distributed,
The Montauban service has maintained a canteen,
feeding 1,000 women and children two meals daily, and is al-
80 directing the work for 1,000 mutilated men, who are not
only being fed and housed, but are also learning new skills
and trades. A day mirsery for 120 children is also maintained,
The Perpignan office, serving three departments in
the South, has provided clothing, food, and medicines to some
20 refugee hostels in the area, in addition to a dry food
packet service, distributed in the cities of Montpellier and
Sete. This office has continued to work in the concentra-
tion camps, and is providing supplementary food for 1500
Spanish children in camps, as well as school materials. A
small hospital has been built and equipped in the camp of
Bram. Food, medicine, blankets, books, and some clothing
have been distributed to all the concentration camps in
southern France.
In Anoh clothing distributions have been made to
children and a canteen for 500 women and children has been
in operation.
The Marseille office, in addition to directing
Regraded Uclassified
265
- 4 -
the field services, is the purchasing unit for the entire
Quaker relief service, and administers nine children's
colonies for 606 children. A refuge for women and children
has been in operation and a special feeding program for in-
fants and school children has been undertaken,
PURCHASE OF SUPPLIES: The American Friends Service Committee
has since June attempted, as far as
possible, to do its purchasing outside of France, in order
not to deplete the already low food stores of the country.
Regular monthly shipments of three thousand cases of milk,
five tons of cheese, and two tons of canned meat have come
from Switserland. 011 and sardines have been purchased in
Portugal; dried fruits and some grain from North Africa and
from Greece and Bulgaria. Warm clothing and shoes, which
are urgently needed, have been purchased in France, but it
is increasingly difficult to make these purchases in any
quantities,
Dearaded
266
- 5 -
URGENT NEEDS:
Cost per Day
Estimated
Service
per Person
Monthly Cost
Milk for 10,000 needybabies in
Marseille, Perpignan, and
Nontpellier
10#
$30,000
Supplemental feedings for 20,000 school
children by provision of rice,
cocoa, and milk
2#
12,000
Colony care for 604 children in
Quaker housee scattered over
southern France
25#
4,600
Care of 1,000 mutilated men
21#
6,300
Distribution of children's clothing,
warm clothes for mothers,
layettes for newborn babied
1,000
Food packet service to approximately
675 needy families to permit
mothers to cook at home
6¢
5,000
Concentration camp visiting: for
clothing, medicines, provision of
books, toothbrushes, wood for bede,
and supplementary food for 1500
children
8,000
Individual case work with refugees "in
transit," including some tempor-
ary help until they are able to
procure funds from relatives over-
2,000
0086.
Personnel
$100 per
month
5,600
Transmissions for Minnonite Central
Committee to support child feeding
stations at Cerbere, Banyuls, and
1,000
Perpignan
TOTAL AMOUNT MEEDED PER MONTH
$75,500
Regraded Uclassified
267
- 6 -
DIVIDENDS IN DEMOCRACY: To the workers in the Quaker service
in France, it has been increasingly
evident that an American relief organization which functions
at this critical time does more than give material assistance.
It is a hand of friendship, a faith in the spiritual and
democratic values of France which, as an expression of the
goodwill of this democratic nation, gives France renewed con-
fidence in the democratic way.
Regraded Uclassified
268
PERSONNEL IN FRANCE
(As revised November 5, 1940)
Marseille
-
29 Boulevard d'Athenes
Howard B. Kershner, Director, A.F.S.C. Relief Work
Gertrude Kershaer
Colony program, canteens
Allen Bonnell, American
Statistics and Accounting
Benjamin Gerchenovitch
Assistant to Mr. Bonnell
Dorothy Bonnell, American
Publicity, some interviewing
Herbert Lagler, American
Personal assistant to H.E.K., has
charge of all permits, official
papers.
William Frey, Swiss
Refugee case work,
Dr. Bessie Strongman, Ameri-
In charge, rest home for women
can
and children,
Burns Chalmers, American
Refugee case work,
Josiah Marvel, American
Refugee case work.
Una Mortished, Irish
Office, negotiator and contract
person in interviews with officials.
Mrs. Caroline Hill,American
Inspection work in milk distribution,
Miss BecQ
Office worker
Miss Millescamps
Office worker
Mrs. Cavilllon, French
Telephone Operator
Albert, Uruguayan
Chauffeur and general handy man.
Isabel Needham
Colony director
Edna Ramsayer
Colony director
PERPIGNAN
30 Avenue des Balcares
Mary Elses, Irish
Directrice Perpignan Office, in
charge of work in Departments of
Pyrenees Orientalies, Herault and Ande
Rosa Poy, Spanish
Stationed in Montpellier (Herault)
Three Spanish office workers, one French assistant; also warehouse
staff.
Regraded Uclassified
269
TOULOUSE
1 Place St. Scarbes
Helga Holbek, Danish
Directrice, Toulouse Office
Toot van Oordt, Dutch
Refugee case work
Harriet Marple, American
Visiting surrounding villages, re-
ported on need and distribution.
Alice Resch, Norwegian
Nurse, assists with colony at La
Rade, Refugee case work, and in
charge of canteen.
Seraphine Lieven, Latvian
Investigations and general assistant
to Miss Holbek,
Henry Wiens ) American
Direct warehouse, motor equipment
Ernest Bennett) Mennonitës
Antonio Gartner
Driver
Madame Serrie, French
Assistant and secretary to Miss
Holbek,
Ten or fifteen Spaniards complete the staff in Toulouse.
M. et Mme. Dubois, Live in Toulouse office, belong to Service
Civil and collaborate with A.F.S.C.
MONTAUBAN
Celina Rott de Neufville,
Co-Directrice Montauban
American citi-
sen, French born
David Blickenstaff, American
Co-Director case work.
Miss Rott is assisted by a number of French and Spanish people
in this area,
AUCH
Donald Stevenson, American
Director
Madame de Beylier
Co-Director
BORDEAUX
47 Rue de Verginand
Arthur Gamble, American
In charge occupied territory.
Barbara Watkins, American
Aide to Arthur ble.
270
Personnel in France
- 3 -
PARIS (Ve)
12 Rue Guy de la Grosse
Henry van Etten, French
Friends Centre
Marguerite Csarnecki
Friends Centre
Relief Office - 30 Rue de Gramont
(No personnel)
BIARRITZ
28 Avenue Republique
(Colony office only)
Regraded Uclassified
271
SUGGESTED TAX PROGRAM
1. Announcement by the Secretary of the Treasury stating
that no further taxes will be imposed on 1940 incomes
or profits, and warning that unnecessary retention of
OK.
1940 profits is subject to the penalty tax of Sec. 102.
2. An immediate drive to secure the repeal of tax exemp-
tion of the interest on future issues of Federal,
ok.
State and local securities, -- this to be the first
tax bill and a separate one.
3. Revision of the tax laws to eliminate certain inequities
and administrative difficulties, -- this bill to include
an amendment to the general relief provision of the
excess profits tax. Such revision of the tax laws
?
should not be confused with the "general revision" so
often requested by those who seek general reduction.
4. Additional revenue, if required, to be raised from
among the following sources:
Increase in the personal surtax
rates on surtax net incomes
&
between $0 and $16,000
$250,000,000
Increase in the rates of the
estate and gift taxes
200,000,000
oK.
(excluding top brackets)
Special excise taxes on
Soft drinks
$95,000,000
C hecks
45,000,000
Admissions (reduc-
tion in exemption
to 10 cents)
25,000,000
Transportation
250,000,000 415,000,000
Revision of the excess profits tax
(to be attempted after 1940
returns are filed and studied)
?
5. Opposition to the imposition of general sales taxation
to be continued.
Javen the by fullivan & Blough
on new 26, 1940
11-25-40.
272
EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL
FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN
AS SHOWN BY DEPARTURE PERMITS GRANTED
Week ended November 23, 1940
:
:
JAPAN
RUSSIA
:
SPAIN
GREAT BRITAIN
:
:
:
:
SILEUM PRODUCTS
Fuel and Gas 011 (including
Diesel 011)
162,639 Bbls.
---
90,300 Bble.
45,700 Bble.
trude -
Blended or California
Eigh Octane Crude .
342,335 Bble.
i
--
il
All Other Crude
171,029 Bbla.
---
I
---
involine -
---
---
---
Gasoline A **
Gesoline B
*
165,714 Bble.
---
---
All Other Gasoline
!
---
1,200 Bblo.
[phricating 011 -
Avistion Lubricating Oil ***
1,744 Bbls.
---
---
643 Bbls.
All Other Lubricating Oil
51,669 Bbls.
---
---
17 Bbla.
---
---
!etraethyl Lead ***
---
---
"Boosters", such as Iso-
Octane, Iso-Hexane, or
---
---
108,148 Bble.
Iso-Pentane
I
IRON AND SCRAP STEEL
--
I
1,272 Tons
Number 1 Heavy Melting Scrap
---
---
!
3,135 Tons
All Other Scrap
---
fice of the Secretary of the Treasury, Division of Research and Statistics. November 25, 1940.
urde: Office of Merchant Ship Control, Treasury Department.
Any material from which by commercial distillation there can be separated
more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon
sixture - President's regulations of July 26, 1940.
Aviation Gasoline.
As defined in the President's regulations of July 26, 1940.
Regraded Uclassified
273
BRITISH EMBASSY,
WASHINGTON, D.C.
November 25th, 1940
Dear Mr. Secretary,
When I was in England the Prime
Minister asked me to give you a special
message to say how deeply he appreciated the
way in which during the past year you had
worked indefatigably to secure for Great Britain
the aeroplanes and other minitions she 80 badly
needs in her struggle against Hitlerism. He
has heard from Purvis and other people how
invaluable your help has been and asked me
particularly to express to you his gratitude.
Believe me,
Dear Mr. Secretary,
Yours sincerely,
Ldinion
The Honourable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
(Secretary called from Miami, Florida).
274
November 26, 1940
3:35 p.m.
H.M.Jr:
Hello, Mrs. Spangler.
Mrs.
Spangler: Yes.
H.M.Jr:
After that let me talk to the house.
S:
All right, fine.
Dan Bell:
Hello there. How are you?
H.M.Jr:
Hello, Dan.
8:
Well, nice to hear your voice.
H.M.Jr:
I'm all right.
B:
Are you feeling good?
H.M.Jrt
Feeling fine.
B:
Sunshine down there hot?
H.M.Jr:
Very hot.
B:
Uh-huh. Have you seen Sullivan yet?
H.M.Jr:
Yeah. He's outside.
B:
Well, that's good. Well, I've got the whole
crew here: Gaston, Haas, Cochran, Foley, and
White.
H.M.Jr:
Good.
B:
Anything you want?
H.M.Jr:
No, no.
a:
When are you coming back?
H.M.Jr:
Well, I can't tell yet. I'm going to send a
telegram as soon as I know. They say the weather
north of Jacksonville 18 bad.
B;
Uh-huh. Well, it's terrible here. It's raining
and it's very cold. Looks like snow.
Regraded Uclassified
275
a I I
H.M.Jr:
Gosh.
B:
You really want to be careful when you approach
Washington.
H.M.Jr:
Well, I've got nothing.
B:
Well, everything 1s kind of quiet here - have a
lot of matters to take up with you when you get
here, but they can wait.
H.M.Jr:
All right, Dan.
B:
0. K.
H.M.Jr:
Give my regards to everybody.
3:
All right, and we'll see you tomorrow sometime.
H.M.Jr:
That's right.
B:
All right. Good-bye.
Regraded Uclassified
276
CONFIDENTIAL
ACTION REQUIRED
November 26, 1940
To:
The Secretary
From: Mr. Toung
Ra: Shipbuilding Program
The British Purchasing Commission has now filed B.
request for clearance on its merchant shipbuilding program
involving the construction of sixty (60) ships and capital
assistance of approximately 9 million dollars. Again, as
in the case of the airplane program and the ordnance program,
if it is the policy of this Administration to finance this
shipbuilding capacity as essential to national defense. the
RFC should make the necessary fund available for this purpose.
I have been advised informally that the Navy Department
will be glad to certify that this production capacity 16
essential. I have also been informed that the British
Purchasing Commission will probably wish to duplicate this
capacity and order a total of one hundred twenty (120) ships.
The plant facilities to be provided under this ship-
building program can be used for any type of ship. merchant
or naval, up to at least 450 feet long and would thus provide
yards for building ships of the C-1, C-2, and possibly 0-3
types now on the program of the Maritime Commission. Such
facilities could also be used for the building of destroyers,
naval tenders, tankers, and possibly the smaller cruisers.
Py.
Regraded Uclassified
277
Judge Patterson recommends that formal
instructions be issued to the Advisory
Commission to the Council for Nat. Defense,
the Army, Navy, and any other governmental
departments involved to require that all
matters affecting priorities or allocation
of productive capacity of aircraft indus-
try be coordinated with the Army-Navy-
British Purchasing Commission Joint
Committee.
278
November 36, 1940
By dear Mr. Secretary:
In the absence of the Secretary of the Treasury,
say I thank you for your letter of November 20th
concerning the Aray-Navy-British Purchasing Commission
Joint Committee on aircraft standardisation.
The subject of priorities and allocations for
foreign governments other than the United Kingdom is &
matter which has been receiving serious consideration
for several vooks. A procedure is now being established
BO that priorities on orders for foreign account say be
handled directly between the President's Limison
Committee, which has the initial responsibility for
such priorities, and Nr. Donald Belson, Administrator
for the Priorities Board.
Concerning the allocation of productive capacity
of the aircraft industry, all requests for such ospacity
by foreign governments other than the United Kingdom
should be coordinated with the Army-Navy-Dritish Joint
Committee. I would like to raise the question. however.
as to whether the British should have any formal vote
is the allocation of airoraft production to other
foreign countries.
I shall be delighted to talk with you about this
problem at your convenience and will also call the
matter to the attention of the Secretary upon bis return
to Washington.
Sincerely yours,
(Signed) Phillin Toumt
Philip Toung
Assistant to the Secretary
the Nonorable.
The Secretary of Var.
PTIDE
Regraded Uclassified
CONFIDENTIAL
279
WAR DEPARTMENT
WASHINGTON
WD 452 (11-15-40)M
NLV 20 1940
Honorable Henry Morgenthau, Jr.,
Chairman, President's Limison Committee,
Washington, D. C.
My dear Mr. Morgenthaus
AB you know, I appointed 22. Joint committee on Septem-
ber 13, 1940, with the concurrence of the authorized represen-
tatives of the several agencise involved, for the purpose of
coordinating the matter of standardization and with authority
to make decisions affecting deliveries and plans for future pro-
ductive capacity of the aircraft industry.
This committee ie now functioning end has already made
considerable progress.
It has been brought to my attention that several agen-
clea are involved in the matter of granting priorities and al-
locations, affecting the functions of this committee. The
matter of allocations to foreign governments other than the
United Kingdom has come up.
In order to interlock the functions of the several
agencies now concerned with these matters, it is recommended
that formal instructions be issued to The Advisory Commission to
the Douncil of National Defense, the Army, the Navy, and any
other govermmental departments involved, to require that all
matters affecting priorities or the allocation of productive
capacity of the aircraft industry be coordinated with the Army-
Mavy-British Purchasing Commission Joint Committee.
Sincerely yours,
Copy tos
ActingSecretary of War,
Secretary of Navy.
CONFIDENTIAL
Regraded Uclassified
280
CONFIDENTIAL
ACTION REQUIRED
November 26, 1940
To:
The Secretary
From
Mr. Young
Re: Additional Aircraft Program
Mr. Enudsen has attempted to evolve El method whereby
croital assistance required for additional aircraft
production capacity can be prorated between the United
States and the British. In this scheme, Mr. Knudsen
proposes to give the British credit for capital essistance
already paid to aircraft companies. A checkup on the
amounts of capital assistance actually paid by the British
to airplane and airplane engines companies is now being
made.
The problem involved in this situation Le simply that
it is my belief Mr. Knudsen will not let the British place
orders for the additional 12,000 planes until the detailed
financing plan has been worked out. As in the case of the
ordnance program, if it 1e the policy of this Administration
to finance such additional capacity as essential to the
national defense, then the approximate amount of money re-
quired for this extended aircraft program should be set
sside by the RFC for that purpose. If that can be done,
then it should be possible for the British and the United
States to go ahead and place orders, leaving the detailed
financial mechanice to be worked out subsequently.
Py.
Regraded Uclassified
281
CONFIDENTIAL
ACTION REQUIRED
November 26, 1940
To:
The Secretary
From: Mr. Young
Re: Ordnance Program
For the first time I have received from the British n.
basic ordnance urogram which includes ordnance and ammuni-
tion itemo on order, those items now under negotiation. those
items to be negotimted, and, in addition, B so-called A and B
program presented by Sir Walter Layton and concurred in by
the War Department. This schedule represents the complete
British ordnance requirements AS of the present time, and a
copy ia attached for your information.
Res
There are three problems in connection with the program:
1. Financing
2. Timing
3. Deliveries
la Financing.-This ordnonce program in conjunction with
the United States Army ordnance program will necessitate certein
plant expansion, the total cost of which will amount to E. sub-
stantial sum. A rough estimate of the dollar amount required
should be available today or tomorrow. It must be determined
if it is the policy of this Administration to finance,
presumably through the RFC, sufficient plent capacity to take
care of the British program B.B. well 8.6 the United States program
on the basis that the extra capacity is essential to the
national defense.
Because of the large dollar amount involved and the great
variety of the sources of supply for the many ordnance items,
the most feasible way to approach the financing would seem to
be meeting at which the Secretary of the Treasury, the
Secretary & of War, and the Federal Loan Administrator would certain dis-
cuse the matter from the point of view of earmarking B
sum of money to be used as directed by the War Department for
Regraded Uclassified
283
- a -
the financing of this production capacity. If such a fund
could be made available for this purpose. the War Department
1e ready to negotiate and place orders both for iteelf and
on behalf of the British. Of course, the British share of
cepital assistance would be ultimately paid BR an additional
charge incorporated in the unit price which would be payable
upon delivery of the specific item. (The general method
which has been employed in the case of the Continental enginee
and other similar contracts.)
2. Timing.--An a result of the conversations between Sir
Walter Layton and Secretary Stimson, the Leyton "B" program is
to receive precedence in timing and deliveries over other
British ordnance requirements. In fect, it is my understanding
that Secretary Stimson has consented to give the Layton "2"
program a priority over United States Army orders. but with the
exception that it will not interfere with the United States
Army training program. The Layton "B" program is designed to
equip ten British divisions with United States equipment, and
this scheme includes maintenance for those divisions in the
future. The problem involved in timing the "3" program 60
that deliveries under it con meet British requirements is this
question of conflict with the United States training program - É
question which the General Staff must determine.
3, Deliveries. In a number of instances it will be
necessary for the War Department to defer deliveries on United
States Army contracte already placed in fnvor of British If
the delivery schedules under the Layton "B" program are to be
met. This deferment of deliveries involves certain legal
probleme which might conceivably require additional legislation
to resolve. This question is being studied by Colonel Greenbaum.
Kr. Arthur Palmer. and others,
Note: The problems mentioned above of timing and
deliveries will more OF less automatically
take care of themselves provided that it be
determined as a policy that this Administration
will finance sufficient production capacity to
meet current United States Army and British
requirements.
Py.
Regraded Uclassified
283
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Souse days Ago I welcomed the idea advanced by Dr. Somary, the Swice economist
who is acting n.6 financial adviser to the Swiss Legation, that he submit e memorandum
setting forth his ressons why Swine monets in the United States should not be blocked
if the United States Government decides to extend its present control to assets of
Jermany, Italy end perhaps other countries. At 9:45 yesterday morning Dr. Sonary
called, by annointment, and submitted to me the attached memorandum, with the request
that it be brought to the Secretary's personal and confidential attention. Dr. Somary
1014 me that he planned to call later in the day at the Department of State, for the
purpose of handing one copy of the memorandum to Mr. Dunn and one to Dr. Feis for
Secretary Hull.
Dr. Somary stated that there were two points which he hoped we would consider in
formulating our policies, but which he could not out down in writing, The first of
these is that Switzerland 18 now liquidating the small Nest organizatione in that
country. This will inevitably arouse resentment on the part of these groups within
Switzerland and on the part of Nazi organizations outside of Switzerland. For the
next month or so it is, therefore, specially important for Switzerland to be strong
olitically. Dr. Somary feels that the extension of our freezing control to Switzerland,
even though ve might be generous in our licenses, would be a most serious blow to
Swine political, AS well as financial, strength. In the second place. Dr. Somary
volunteered that if the United States desires to block German and Italian assets,
Switzerland would gladly cooperate with us. This might best be done through e secret
committee in Washington consisting of representatives of the Treasury and State Depart
cente and the Swies Legation. The Swiss Legation would communicate to its Government
the sims and purposes of our control, and would obtain from the competent Svice
authorities full cooperation toward the same end. In this connection Dr. Somary pointed
out that there is an undue amount of criticism of Switzerland's financial transactions
Vith Germany at the present time. It 18 wrong, to his opinion, to condemn B Swime
tanker for one side of a transaction involving German funds which is legal both in
Switserland and the United States, and where the second party to the transaction is an
imerican bank.
to the predominance over of Swiss funds in the holdings in the United States designated bank no
In reading Dr. Somary's memorandum I was struck by the statement in regard
Iwine. Dr. Somary insiste that ninety percent of such holdings. including both
deposite and securities, are actually the property of bonn fide Swine citizens or
concerns. He estimates eight percent of such holdings as of French ownership. and
Yes wuch less than He said that it 1. now possible for Switzerland
two to three percent of various ownerships. He said that the German proportion therein to
arrive at rather one percent. estimates in this connection as a result of their clearing
agreements. which accurate show coupons cashed, securities transferred, etc. Somary astimated
Regraded Uclassified
284
- 2
between $1,400,000,000 and $1,500,000,000 the amount of the above-designated Swise
holdings it on the American market. He said that the French had moved into Switzerland
during recent years a considerable amount of valuables which had been placed in safe
deposit boxes. These had consisted, however, principally of bank notes and jewelry.
Some of the bank notes are Swiss currency of large denomination. There has been no
transfer to the United States from Switzerland of the contents of these safe deposit
boxes. Thus the French valuables in Switzerland which attracted considerable atten-
tion et the time French citizens were carrying them into Switzerland do not actually
figure in the assete held in the United States. In describing the importance of
Sviss financial interests, Somary pointed out that Switzerland is second only to
Great Britain in investmente in Shanghai. The United States comes third. The prin-
cinal Swiss holdings there are in electric and silk concerns. Switzerland has had
four billion marke invested in Germany alone,
Regraded Uclassified
285
LÉGATION DE SUISSE
WASHINGTON, D.C.
SWITZERLAND'S UNIQUE FINANCIAL SITUATION AND ITS
SIGNIFICANCE FOR THE UNITED STATES.
Of the 45 countries which at the beginning of the
first world war adhered to the gold standard, and of the
remaining six which concluded the Tripartite Agreement a
few years ago, only two maintained the gold standard -
the United States and Switzerland.
The exceptional standing of these two countries in
international trade and finance was emphasized by the Bri-
tish Government in granting in its war regulations to these
two countries, and these two countries only, special exchange
conditions.
The maintename of the gold standard by the United
States is a matter of course: based on the shifting of the
political importance and on the development of the incompa-
rable economic resources of this country. The other country,
however, singled out in the British regulations together
with the U.S.A. is by nature one of the poorest countries
in Europe, with no raw materials of her own, no access to
the sea, without political power, with fewer inhabitants than
Colombia, and in size smaller than any of the Central American
countries.
Switzerland owes her position in international finance
to the natural thrift of her people and her methodical in-
vestment in foreign countries extending over a period of
more than three generations. There is no other country where
Regraded Uclassified
286
- 2 -
the standard of living is so dependent on the fluctuations
of the American market as in Switzerland, and the investment
in American securities infiltrates into the remotest valleys
of Switzerland. Since New York took over the position of
London as financial world center, a good part of the currency
reserves of Switzerland were centered in the U.S.A. A rough
estimate shows an average investment in the United States of
almost $ 1000 per Swiss family, a figure without comparison
to any other country in the world. On the other hand research
has proved that the assertion to the effect that a considerable
part of the Swiss holdings in the U.S.A. represent foreign -
i.e. non-Swiss investments is actually unfounded.
These large foreign holdings, spread over all classes of
the Swiss population, enable the country to balance her foreign
trade liabilities, even in times lacking assets derived from
tourist traffic, insurance and bank transactions. This permits
the upkeep of a comparatively high standard of living among
the lower middle class and labor, thus counteracting the
radicalisation so strongly and effectively enforced in other
countries. While most of the other states of the world will,
upon termination of the war, be confronted with the alternative
of either basing their economic life on an international barter
trade or requesting long term credits from the United States,
Switzerland will not only be in a position to support herself
financially, but will most probably be able to participate
in rendering financial support to those countries in need of
capital for reconstruction. All this will be possible for her
Regraded Uclassified
287
- 3 -
in spite of the set back suffered through the loss of one
billion dollars in Germany alone during the past decade and
in spite of the war expenditures, the comparatively large
amount of which will hardly be surpassed by any other country.
Switzerland has called to the colors not less than 15% of
her population. The extraordinary war expenditures during
the first year of war reached a total of no less than $ 700.-
per family.
There is no other country in the world where there 1s
such contrast of natural poverty on one side and so comparatively
high a standard of living on the other. This is the result
of incessant hard work, peaceful international trade relations
and full confidence extending over the past century. Once
destroyed, this foundation could hardly be rebuilt.
The financial power of Switzerland is of particular im-
portance to the United States. Switzerland can be considered
her partner in the maintenance of the gold standard and its
manifold consequences. The opinion so often expressed, that
the maintenance of the gold standard is practically impossible
for any other state than the U.S.A. is contradicted by the fact
that a country without natural resources and without colonies
is still in a position to fulfill the requisites of adhering
to the gold standard, thereby setting an example for the pos-
sibility of future rehabilitation. It may prove important for
the United States to have a partner after the war to help solve
these difficult problems of reconstruction, a partner not only
experienced, but capable of financial participation, even though
Regraded Uclassified
288
4 -
to a limited extent only - as a matter of fact, the only
potential partner, since financial power in Western Europe
suffered a collapse.
There have circulated many rumors about hemispheric
politics and an economic or even a financial blockade of
the entire European continent. From a purely administrative
point of view, it may appear as a tempting simplification
to make no exceptions while proceeding in this direction. But,
since Switzerland is defending her exceptional position as
a free economy country against all contrary influences, she
has a right to demand this position to be respected. A blocking
of the Swiss assets in the United States, even in form of only
temporarily restrictive measures, would not only inflict irre-
parable damage to the economic standing of Switzerland, but
would also destroy the gold standard and with it the independence
of the Swiss currency and the so hard defended international
solvency. It is the firm hope of people and government of
Switzerland that such catastrophal and undeserved developments
can be prevented and both shall do their utmost to cooperate
in this direction, with the U.S. Government. Switzerland will
remain in the future what she was in the past, but this
is only possible if her financial status remains untouched.
---
50 RUN
Regraded Uclassified
Revember 26, 1940
Files
Mr. Ceahran
AS the request of instatant Secretary Berls, Mr. Peble and I wat to the State
Department for a orderences yesterday seraing at 11 c'oleck. Ressre. Atherten us!
Liveray were with Mr. Borlo as representatives of the State Department. Mr. Alphand,
Financial Counseler of the French Balancy, was accompanied by First Secretary Imaine
and the nev Naval Attache, Captain de la
Mr. Alphand seited if 067 Severment vas propared 10 give monthly licenses for
the provisioning of the French Weet Indies. b. Berlo replied in the negative. No
stated that a development had NY securred which caused the Department of State to
hositate to approve the monthly lisensing system until certain questions are cleared
up. AN Mr. Berle's request, Rr. Atheries explained this situation. Athertes remarked
that Mairal Robert, is command of the French saval unlis in Martinique, apparantly
had supplanted the civilian authorities is centrol in that island. This resulted is
he United States having & foreign savy installed on its flank. Since naval authority
ad been instituted in Martinique, this Deverament had seem fit to sont & naval observer
to that island to be is touch with the Fresch Admiral. Our observer had reported this
past week that Admiral Rebert had given his notice that If he did not receive oil
supplies from the United Mates within tventy-fear hours he would quit the island with
cold - beard his ship. Athertes stated that our Government did net understand this
neve. Is pointed out that the State and Treasury Departments were approving French
requests for feed and other supplies for Martinique, and that arrangements had been
unde with the Standard 011 Company to transport 1,000 tens of sil to Martinique
This nove of the French Admiral gave rise to the question as to whether be is
a. detached authority responsible only to himself, and not se the Viehy deverment.
Atherton remarked that the French Ambassador was sening to ... Under Secretary Velles
yesterday aftermeen and that this question of Matral Robert's authority and actions
would be discussed. It is also possible that this night be the subject of discussions
between Admiral Leaky, our sev and the Viehr Deversment. Until the matter
is straightened at, bevever, Mr. Athertes thought that so monthly licenses should be
pleased for Nartinique and Oundeloppe. Is and Mr. Borle offered M objection. beverer,
to the institution of a monthly license system for st. Pierre-Miqualem.
Both Alphand and the Noval Attacho endorsered to advance vhat they thought sight
have been the reasons of the French Admiral for his action of last week. They thought
that he had become alaraed ever his inability to obtain fuel oil for his ships and
STOP the possibility of being without sufficient sil - hand to operate such ships.
Communicatly. the Admiral probably bel is desperation decided that the only alternative
wight be for his to pais Martinique while he 04211 had enough fest oil se reach the -
Martinique eache to acquire the oil, They die not feel that a direct threet had been
Seath American part and take along with his to such a part refficient gold from
allo by the Mairal but thought that be had probably diseased the alternative If MB-
Regraded Uclassified
290
- 2
diviens were and ancliorated. It - apparont, beverer, that neither of the Preech
afficials vas sufficiently familiar with the 0000 to give a corrinsing emplanation.
Br. Bevie vest over with the (PVI) certata Items for which the French are emply-
Inc. and to which approval has not yet been given. Be was quito sympathetic with the
make of the Martinique unjur industry and of the Do. fishing flost.
It vas agreed that the Department of State would provide the Treasury Department with
& regly to the latter's letter of October 17. This would clear up several items for
Martinique and st. Pierre-Migualon, and would also enggest a seathly license grates
for the latter area. The Treasury Department La to consider outstending syplications
from the French for supplies for the Fronch dabilles, and colleit the views of the
Department of State thereon.
AN the alese of the conference. Mr. Alphant accepanted Recers. Feble and Declarem
to the treasury Department. No presented to the the attached draft of a document
which be planned to statis to the British, processbly Mr. Finnest, for forwarding to
Lendon, with the hope that the British Deverament my give 100 agreeal to certain
engarie free uncompted France to the States. It VM Alphand's desire that us
societ in same arrangement which sight help the French is convincing the British that
the proceeds of each exports will be blocked is this country. This -
shilited to our Control drosp meeting yesterday afternoon and 11 vas understood that
ve should proceed with s stady of Potal 2 theremier to (44) if 10 our be of any service
. the premises.
70ml
HMC:lap-11/26/40
Regraded Uclassified
291
(Mended W Mr. Alphand, Financial Commeter of the Treach to Mocore.
Fable and Cookres is the Treasury of 12:30 p.m. November 25. 1940.)
C
0
7
I
New Yerk, Devember 22, 1940.
se regards exports from France towards the Waited States, the fellowing
procedure is suggested:-
1). the American importers of French goods is the 143
scrapied seas would be adviced by the French exporters that they met
deposit the anount of their debte is a special Viscked account is the
- of the French devernment. these deposits would constitute payment
is full".
2). In order to centrol the contralisation of the product of those
French experts is the French deverment special account mentioned above,
the goods seall not be cleared through the customs values the payment had
been made to this assess, of unless the American importers promised to
depeait the product of their yerchasee to this access.
3). The French exporture wald receive through the Exchange Centrol
Office the equivalent is france of the - is dellars for which the
French Government would have been credited for their account.
Navicerts would be delivered is order to permit the shipment to the
United States of the goods exported under these conditions.
Capyrole
Regraded Uclassified
292
Degart est of Treasury copy
PARANTRASE
no. 60% from Rio de Janeiro, November 26.
The Benk of Brasil states that it has received for credit
to Italian benking institutions in the Vew York account of the Bank
of Brazil, the BUT of 3,531,398 bringing to $8,502,980 the transfers
of Italian financial com anies to the Brezilium Bank rince the entry of
Itely 1:to the War. The two and one-half illion dollars in C° sh,
itten it is recelled was recently crrried to Brazil by Italinn "couriers".
1e included in neither of the foregoing sums,
RA:Walmsley:MES
ehicopy
Regraded Uclassified
293
PARAPHRASE OF TELEGRAM
No. 184, November 26, 1940
150 from Name, Line.
The Embassy has learned from the Ministry of Finance
that Beltren is now negotiating with a view to obtaining
a credit from the Expert-Import Bank to support exchange.
The amount of the credit was mentioned as $13,000,000.
The Minister of Finance stated that reserves now amount
to $1,800,000 over and above the $2,000,000 credit grented
last June and that he believed it would not much longer
be possible to maintain the sel at its present rate. with
exports dealising sharply, especially since the Japanese
have stopped buying cotton, he said there were no sources
of exchange likely to relieve the situation. He believes
accordingly that the situation will continue to decline
but that the credit he is seeking would secure, until the
latter part of 1941, the present level of the sol.
I ... no reason for hasty action with respect to this
request for such a large credit, considering that the
reserve fund nov amounts to the appreciable total of
$1,200,000 over and above the $2,000,000 credit which has
not been touched. Last June, at a time when circumstances
were as uncertain as they are at present, it will be Pt-
called that the Minister of Finance's request for $5,000,000
was catisfied w the great of $2,000,000.
Air mail report fellows.
MONURE
Regraded Uclassified
Sevenber 26, 1940
Acting Secretary Bell
Mr. Coolures
Mr. Livesey telephoned se lost night from the Department of State, Be said
that Kr. Dolbears, the American advisor to the Government of Thailand, had telephoned
the Department of State last week is regard to the desire of that Government to obtain
a lean against the $10,000,000 of gold hold with the Federal Reserve Bank at Nov York.
Is una thought that such a. loan eight be given by the Expert-Import Bank, the Federal
Reserve, or private banks. the Department of State told Delbeare that this question
would be studied and that be would H given the Government's reaction. Livesey
particularly wanted to know how the treasury felt about the third alternative. I
reminded Livesey that when ve had discussed this matter previously I had told his
that I did not want to suggest this possibility to Dolbears unless the Department of
State vas clearly in favor of it being utilised. I explained again that we had refused
to permit the National City Bank to lead to Thailand against gold held with the
Federal Reserve Bank in September 1939. Ve had subsequently developed the idea is the
Treasury of permitting loans by commrcial banks against gold held with the Federal
but when the first opportunity for such a loan arose, is the case of Spain, ve solicited
the opinion of the Department of State, and learned that the latter 414 not desire
wash a loan to be made considering the Spaniah attitude toward Agerican investments,
particularly those of the 1.9.7. It vas conceivable to - that the State Department
would NOW desire to consider the political factors is commetion with Thailand. 1
told Mr. Livesey, therefore, that ve would not take any action toward facilitating .
loan by private bankers against gold hold by the Federal unless his Department might
tall us definitely that they favored such 4 transaction. Mr. Livesey promised to
opinion in his Department and call - bank.
7502
EMC: dm:
Regraded Uclassified
295
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Horgenthau
STRICTLY CONFIDENTIAL
PROM Vr. Cochran
Mr. Jinnent, Financial Counselor of the British Embasey. called on me yesterday
evening nt 5 o'clock. Ee handed to me the two attached envelopes, for delivery to
Secretary Morgenthau AR soon AS the latter returns. Finsent stated that one of these
Initers M.S.E en explanation which Lord Lothian thought he should make to the Secretary
of his statement given out at New York upon his arrival last weekend in regard to
Britteh need of financial aid from the United States.
Fingent stated that he had received n cablegram from London indicating that
Sir Prederior Philline would probably leave London today, November 26, and would take
the first evailable plane from Lisbon for the United States. London find cabled in
regist to - TITEES release, suggesting that no announcement be made before Phillips
actually denerts from Lisbon. This pressution is for reasons of safety. Pinsent nub-
itted the following draft of a release for our consideration:
"In continuation of the discussions which took place in
July, Sir Frederick Phillips has arrived in order to Vlace the
latest available information before the United States Treasury, II
Vr. Pingent would like our resction to this draft AR early as nossible, in order
that he may cable London for R simultaneous release there of such communique AP may
jointly be e greed unon.
Finsent stated thet he wes working on certain date, together with London and the
ritish Purchasing Mission pt New York, which he honeo to have available for considers-
tion by the Secretary. at loast by the date of Sir Prederick's arrival.
When Pinsent esked me what the Treasury's resction had been to Lord Lothien's
Attenent in regard to need for financial help, I told him that there was no official
resction to report. I remarked that the press, including 3-.tish procre, suparently
her been somewhat surprised by the Ambassador's announcement of British need for
!inancial aid, Pinsent said that he also had been surprised by the statement, and
and talked it over with the Ambassedor when be arrived in Washington Saturday night.
Pincent was of the impression that the Ambessedor thought it was probably best for him
10 wite such a statement immediately upon his arrival here rather then wait until he
and been In contact with American officials. This way it would come 0.6 B. purely
British move. Pinsent admitted that it might focus much more attention and publicity
on Sir Frederick Phillips' coming trip to the United States, Furthermore he realized
that the Purchasing Mission might have some increased difficulty in making contracts
with American concerns which may be alarmed over the ability of Great Britain to pay.
Referring to oossible Congressional action. Pinsent asked me whether it would be
for Congress to be given full information in regard to Great Britain's
Regraded Uclassified
296
- 2 -
financial position. This, he said, would make the British position known to the enemy.
I told him that I had never heard of a secret session of Congress, and I presumed that
Congress would want full information before taking any action.
10mg.
297
Missc
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Morgenthau
FROM Kr. Cochran
At 5:15 this evening Mr. Pinsent, Financial Counselor of the British Embassy,
telephoned me that a cablegram had been received from London to the effect that
"our friends" will leave London tomorrow, November 27, weather permitting, on the
first leg of their trip, that is, to Lisbon. Pinsent thinks that it will not now
be possible for the British officials to reach here before late next week. It is
his understanding that a Treasury man named Playfair will be accompanying
Sir Frederick Phillips in Bewley's place.
K.M.
298
DJ - 10:55 a.m. - November 26, 1940
Denies Britain Discussed Return to Gold Standard
LONDON - In reply to question in the House of Commons,
Chancellor of the Exchequer Sir Kingsley Wood denied that a
recent discussion between United States Secretary of the Treasury
Morgenthsu and a British Treasury official included a proposal
that British return to the Gold standard. Sir Kingsley Wood
added that, subject to exigencies of the war, British monetary
policy remains as stated in the second paragraph of the Tri-
Partite Monetary Agreement of September 1936.
299
HSM
PLAIN
London
Dated November 26, 1940
Rec'd 2:10 p. m.
Secretary of State,
Washington.
3853, November 26.
FOR TREASURY.
1. Today's press devotes much prominent space and
editorial comment to Britain's dollar financing problem.
The second thoughts of those newspapers which yesterday
reflected surprise at the immediacy of the question
indicate a realization that Lothian was giving notice
well ahead of actual exhaustion and devote considerable
space to quoting Congress members and United States press
views and proposals and to Secretary Hull's press con-
ference of yesterday. The DAILY MAIL features a special
interview with William Allan White outlining the probable
contents of the plan "submitted to lir. Horgenthau". In
discussing estimates the FINANCIAL NEWS alone mentions
direct investments 8.8 suoh referring to them as "the third
line of dollar resources which represent in the main
wholly owned Unit Ed States corporations, trust funds and
estates
300
hsm -2- No. 3853, November 26, from London
estates" estimating the figure at around 1,000 million
dollars adding this to 600 million dollars of gold, 900
million dollars (present values of negotiable seourities
held in August 1939 and annual gold production at 750
million dollars. Though it does not mention direct invest-
ments as such the FINANCIAL TIMES quotes the article in
the October 5 Department of Commerce Foreign Trade Review
showing British investments at 2,803 million dollars
1,180 million of which represent readily marketable
securities. The MANCHESTER GUARDIAN notes the significance
of the recent registration of the securities order in
India and refers also to Canadian assets in the United
States. Lothian's frank statement of the situation is
universally approved, the concluding sentence of the
FINANCIAL TIMES aditorial being typical: "The prepara-
tion of plans for the future is no more than a matter of
ordinary business prudence and common SENSE". Incidentally
the FINANCIAL TIMES' Washington report states that "Treasury
officials are reported to have said that there 1s no move
in Washington to freeze British assets in the United States
8.8 had been reported in SOME circles". This evidently
refers to the FINANCIAL NEWS' comments last WEEK on the
reported proposal to freeze all non-Western Hemisphere
foreign assets in which Einzig pointed out that such
action would not only paralyze the external financial
activities
Regraded Uclassified
301
hsm -3- No. 3853, November 26, from London
activities of the Axis powers but would also be useful
as a method of blocking undeclared British assets in the
United States.
2. The Bank of England today publishes a list of
139 foreign securities, dealings in which between United
Kingdom residents will now bE allowed subject to prior
approval om Form 8.2. The prohibition of dealings dates
from June 18, as reported in the Embassy's No. 1713,
June 18, 6 p. n. Sales to non-residents have been per-
mitted in certain circumstances since July 18 (BEE tele-
gran No. 2287, July 19). The present list comprises
stocks in which deals ATE normally rare omitting such
active securities as Canadian Pacific, International
Nickel and Brazilian tractions, but dealers hope that
with the principle established the list will soon be
extended to the more popular securities.
JOHNSON
WSB
302
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vosting order
effective February 19:
No, of Sharea $ Proceeds of Nominal Value $ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
November 18
21,861
779.751
15,000
10,598
19
25,245
1,006,590
28,000
19,205
20
6,423
143,993
2,000
783
21
H
o
1
1
d
a
y
22
4,545
100,014
Nil
Nil
23
1,846
31,189
Nil
Nil
59,920
2,061,537
45,000
30,586
Ven from
truary 22
to November 16
2,060,103
72,164,713
5,411,500
4,197,666
TOTAL FEBRUARY 22
:0 NOVEMBER 23
2,120,023
74,226,250
5,456,500
4,228,252
Mr. Pinsent reported sales of non-vested securities for the week ended
%ovember 16 totaled $500,000.
me
Regraded Uclassified
303
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Morgenthau
FROM Mr. Cochren
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
6123,000
Purchased from commercial concerns
1 19,000
The Federal Reserve Bank of New York sold 14,000 in registered sterling to à
non-reporting bank.
Open market sterling was steady at 4.03-3/4. Transactions of the revorting
banks were 83 follows:
Sold to commercial concerns
L 5,000
Purchased from commercial concerns
1 3,000
There WBS virtually no movement in quotations for the other currencies, and
closing rates were as follows:
Canadian dollar
12-7/8% discount
Swiss frane
.2321-1/2
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2353
Brazilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-1/2% discount
le sold $600,000 in gold to the Central Bank of the Uruguayan Republic, to be
added to its earmarked account.
The Federal Reserve Bank of New York reported that the following gold shipments
wore being consigned to it:
$50,000,000 from Canada, shipped by the Bank of Canada, to be earmarked for account
of His Britannic Majesty's Government.
12,428,000 from Canada, shipped by the Bank of Canada for account of the Government
of Canada, for sale to the New York Assay Office.
1,400,000 from Portugal, shipped by the Benk of Fortugal, to be earmarked for its
account.
$63,828,000 Total
Regraded Uclassified
304
-2-
The report from the Federal Reserve Bank of New York listing deposits for the
account of Asia 8.6 reported by the New York agencies of Japanese banks on November 20,
showed that such deposits totaled $118,763,000, an increase of $11,990,000 since
November 13. Included in this total were $37,745,000 in deposits with the Yokohana
Specie Bank, New York, made by its branches in China, $936,000 higher then the figure
of November 13, and $69,083,000 in deposits with the Yokobema agency made by Japanese
banks 10 Japan and Manchuria, up $10,634,000. The latter increase is exclained in
yart by the sale of $6,195,000 worth of imported Javanese gold to the San Francisco
sint. The Yokohama agency also stated that it had received approximately $5,000,000
from New York banks, which it credited to the account of the head office according
to the latter's instructions. In addition to their deposits with New York agencies,
Jamagese banks held, on November 20, about $30,130,000 in U.S. Treasury bills and
short-term commercial paper expressed in dollars at the Yokohama agency, up $956,000
from November 13. The Yokohame agency reported that its loans to Japanese banks in
Asia smounted to $32,783,000 on November 20, a decrease of $3,340,000, while its other
dollar claims on Asia, consisting mainly of Japanese import bills, totaled $28,599,000,
AD increase of $3,497,000 since November 13.
Sombey gold and silver prices for both yesterday and today were received by the
See York banks this morning. Yesterday's quotation for gold wan equivalent to $33.86,
the gain of 10# over Saturday's level being attributed to speculative buying, Today,
gold was priced at the equivalent of $33.84. Silver advanced 1/8# over last weekend
to the equivalent of 43,774 yesterday, but then returned to 43.66£ today.
In London, a price of 23-1/16d was fixed for both spot and forward silver, un-
immged from yesterday's quotation. The dollar equivalent of this price is 41.88/.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Tressury's purchase price for foreign silver was also unchanged nt 35d.
le made four mirchases of silver totaling 200,000 ounces under the Silver Purchase
Act, all of which represented new production from foreign countries, for forward
delivery.
CONFIDENTIAL
Regraded Uclassified
305
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
Jerman accounts maintained with the Chase National Bank, New York.
Date
Amount Debited
Account Debited
Paid To
Nov. 25
$ 85,545.96
Reichsbank, Berlin
Chase National Bank, N.Y.,
for account of DuPont
dividend marks by order of
Konversionkasse fur Deutsche
Auslandsschulden, Berlin
20,000
German Consulate
Cash withdrawal
General, N.Y.
15,818.75
Deutsche Golddiskontbank, Irving Trust Co., N.Y.,
Berlin
account of Vongibara
BMP
Regraded Uclassified
-
306
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
We received from the Federal Reserve Bank of New York the following information
warding the transactions listed on the attached statement in Italian accounts
sintained at:
Chase National Bank
National City Bank
Aml
Chase National Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 25
$ 587,500
Credito Italiano,
Check in favor Bankers
N.Y.
Trust Co., N.Y., for
account of Banco do
Brazil, Rio de Janeiro
National City Bank
:
1,500,000
Banco di Napoli
Banco do Brazil, Rio
Trust Co., N.Y.
de Janeiro, for account
of National Institute
of Exchange
307
Regraded Uclassifie
30S
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
We received from the Federal Reserve Bank of New York the following information
regarding the transactions listed on the attached statement in Italian accounts
mintained at:
Chase National Bank
National City Bank
NMP
Regraded Uclassified
Chase National
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 23
$ 50,000
Credito Italiano,
Check in favor Banco
N.Y.
di Napoli Trust Co.,
N.Y.
Banca Commerciale
Banca Commerciale
169,781
"
Chase National Bank for
Nov. 25 $550,000
Italiana, N.Y.
Italiana, N.Y.
account Banco Esperito
Check drawn by Banco
Santo Commerciale de
di Napoli Trust Co.,
Lisboa in Lisbon by
N.Y., on Federal
order of Credito
Reserve Bank, N.Y.
Italiano in Rome
50,000
#
Banca Commerciale
50,000
Banco Nazionale
Federal Reserve Bank,
Italiana, N.Y.
del Lavoro, Rome
N.Y., for account of
Check drawn by Banco
Sveriges Riksbank,
di Napoli Trust Co.,
Stockholm
N.Y., on National City
Bank, N.Y.
113,000
Banca Commerciale
Check in favor Chase
Italiana, N.Y.
National Bank for
26,471.48
.
Banca Commerciale
account and by order of
Italiana, N.Y.
Banca d'Italia, Rome
Miscellaneous checks
400,000
#
Certified check in favor
500,000
Credito Italiano,
Banco di Napoli Trust
of Irving Trust Co.,N.Y.
N.Y.
Co., N.Y. by order and
for account of Italian
500,000
Banco di Napoli
Credito Italiano, N.Y.,
Institute of Emhange
Trust Co., N.Y.
for account and by order
of Italian Institute of
219,355.01
If
Credito Italiano, N.Y.
Exchange
Check drawn by Post and
Flagg, N.Y., on Bank of 149.873
Banca d'Italia,
Chase National Bank,N.Y.,
Manhattan Co., N.Y.)
Rome
for account Banco
Esperito Santo e
30,000
#
Credito Italiano, N.Y.
Commerciale de Lisboa,
Check drawn by Banca
Lisbon
Commerciale Italiana,
N.Y., on Chase National
Bank, N.Y.
309
Regraded Uclassit
Chase National Bank
Amount
Amount
Date
Credited
Account Credited
Received From
Debited
Account Debited
Paid To
Nov. 25 $ 1,941
Credito Italiano,
Credito Italiano, N.Y. $500,000
Banco di Napoli
Chase National Bank,
N.Y.
Miscellaneous checks
Trust Co., N.Y.
N.Y., by order
Banca de Italia e Rio
1,044,602.90
Banca Napoli Trust
Banca de Napoli
de La Plata, Buenos
Co., N.Y.
Trust Co., N.Y.,
Aires, by order of and
Certified check drawn
for account of Italian
by C. J. Devine & Co.
Institute of Exchange,
Inc., N.Y., on Central
Rome
Hanover Bank and Trust
Co., N.Y.
National City Bank
Nov. 23
35,000
Banca d'Italia,
National City Bank,
Rome
N.Y., for credit
Banca Commerciale
Italiana, N.Y.
50,000
Banco di Napoli
Check in favor of
Trust Co., N.Y.
Banca Commerciale
Italiana, N.Y.
310
Regraded Uclassit
(CONFIDENTIAL)
311
CONFIDENTIAL
PARAPHRASE
A telegrem (no. 1307) of November 26, 1940, from
the American Consul General at Shanghai reade substan-
tielly as follows:
Mr. Chow Fu-hai returned from Japan, according to
reports in Chinese banking circles, and on November 25
went to Nanking by airplane. Mr. Chow reported informa-
tion to the effect that he and the Jepanese Minister of
Finance had exchanged opinions in regard to the new
central bank and other matters relating to financial
cooperation between Chinese and Japanese. Therefore,
the conclusion of the Abe-Wang agreements and the open-
ing of the new bank with its own issue of currency is
expected soon by Chinese bankers in Shanghai. The
indications are for a compromise in regard to the Japa-
nese military script and the relative position of the
new notes. In the Shanghai market on November 26 the
rumor prevails that the head office of the bank 18 to
be located in Nanking (branches being set up at Shanghai,
Hangchow, Saochow and Pengpu) and that December 1 is the
day set for the opening of the bank.
Regraded Uclassified
312
0-2/2657-220
RESTRICTED
M.I.D., W.D.
November 26, 1940.
So. 254
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.
1, Western Theater of War.
1. Air Force Operations.
Unfavorable weather prevailed in the theater.
The German air force operated at a very low level on
the 25th and last night when it reconnoitered and did some bombing
over Bristol.
The R.A.F. raided Kiel and the Hamburg area last night-
Some pilcts could not find their primary targets and bombed Dutch
sirdromes.
II, Greek Theater of War.
Severe fighting has been confined to the extreme east and
west. The Greeks are reported to have taken Pogradec and Leanica.
Greek troops landed from boate behind the Italian flank opposite
Corfu in an attempt to cut Italians in the Argyrckastron area off
from the base at Pòrto Edda. The Italians claim to have repulsed
them. British reports say that the Greek force penetrated beyond
Philiates (Filiate) and cut off Porto Edda. Greek reconnalssance
has reached a point 12 miles west of Moskopolis (Voekopoje).
Air activity was limited on both sides.
III. Mediterranean and African Theaters of War.
Minor ground and aerial activity only.
RESTRICTED
Regraded Uclassified
313
ADDRESS THE COMMANDANT. F s. COAST QUARD
STATE
SEAL
40 REPER TO No.
UNITED
CAMP
TREASURY DEPARTMENT
1790
UNITED STATES COAST GUARD
CRYPTOGRAPHIC
HEADQUARTERS
MESSAGE
WASHINGTON
26 November, 1940.
SECRET
From:
Secretary of the Treasury Morgenthau.
To :
Mrs. Henrietta S. Klotz
(Attention: Harry White)
I want Thursday the latest balance sheet of
English assets for the President.
TREASURY DEPARTMENT
WASHINGTON
MARCH
November 26, 1940.
Bear Sirs:
Enclosed is a copy of a letter dated November 23, 1940, from the
Secretary of State to the Secretary of the Treasury, trensmitting the
request of the Government of the Commonwealth of Australia that the
Federal Reserve Bank of Now York open and maintain a dollar account and
* securities custody account in the name of the Government of the Common-
wealth of Australia, together with one of its enclosures, a certified
photostatic copy of a letter to the Secretary of State from the Minister
of the Commonwealth of Australia to the United States.
The Treasury Department would be pleased to have the Federal Reserve
Bank of New York open and maintain accounts as requested by the Government
et the Commonwealth of Australia on the same basis that the Federal Re-
serve Bank of New York handles other foreign accounts. Accordingly, I
request and authorize the Federal Reserve Bank of New York, as fiscal
Agent of the United States, to open and maintain a dollar account and a.
surities custody account as requested by the Government of the Common-
alth of Australia DEL the same basie that the Federal Reserve Bank of
New
York handles other foreign accounts.
Very truly yours,
swifree
Acting Secretary of the Treasury.
Federal Reserve Bank of New York,
New York, Now York.
Inclosure.
Regraded Uclassified
15
HITE HOUSE
THE SECRETARY OF THE TREASURY
WASHINGTON
November 25, 1940.
MEMORANDUM FOR THE PRESIDENT:
The Australian Government desires that certain funds
and securities hold in the Federal Reserve Bank of New York in
the name of the Commonwenlth Bank of Australia be transferred
to accounts in the Federal Reserve Bank of New York in the name
of the Australian Government.
The proposed transaction is similar to those recently
executed et the request of the Netherlands, British and Canadian
governments, which transactions you approved. As I indicated in
menorchda to you concerning the latter transactions, it is my
opinion that the President and the Secretary of the Treasury
have the power to authorise the Federal Reserve Bank of New York
to hold accounts for foreign governments.
Accordingly, if you approve, I propose to send the
annexed letter to the Federal Reserve Bank of New York authorising
the Bank to open accounts as requested by the Australian Govern-
ment. If you approve the foregoing, kindly indicate at the
foot hereof.
DwBree
Acting Secretary of the Treasury.
APPROVED:
Mucrish
November 25/740.
Regraded Uclassified
COMMUNICA TIME -
ETARY or STATE
METON, O.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
Eu
November 23. 1940
My dear Mr. Secretary:
There are enclosed herewith two certified photo-
etatic copies of a letter which this Department has
received from the Minister of the Commonwealth of
Australia to the United States containing the request
of the Government of the Commonwealth of Australia
that the Federal Reserve Bank of New York open and
maintain a dollar account and B. securities custody
account in the name of the Commonwealth of Australia,
and that the Federal Reserve Bank of New York transfer
to such account from accounts with it in the name of
the Commonwealth Bank of Australia, upon the receipt
of instructions from the Commonwealth Bank of Australia,
certain dollar funds and certain securities, which are
the property of the Commonwealth of Australia.
The
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
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The Department of State recognizes the Right
Honorable Richard G. Casey, who executed such letter,
as the duly accredited Minister of the Commonwealth
of Australia to the United States. The Department also
recognizes that such Minister 18 duly authorized and
empowered to execute and deliver such letter on behalf
of the Government of the Commonwealth of Australia;
that the requests, instructions and representations
set forth in such letter emanate from and are the re-
quests, instructions and representations of the Govern-
ment of the Commonwealth of Australia; and that the
Commonwealth Bank of Australia is duly authorized and
empowered to manage and operate the accounts thus re-
quested to be opened in the name of the Commonwealth of
Australia with the Federal Reserve Bank of New York.
The foregoing 18 transmitted to you for your infor-
mation and in order to enable you to give such advice in
the premises to the Federal Reserve Bank of New York as
you may consider appropriate.
Sincerely yours,
Acting Kalls Secret IT:
Enclosures:
From Minister of
Australia (two
photostat copies).
Regraded Uclassified
No. 6169
United States of America
DEPARTMENT OF STATE
all to whom these presents shall come, Greeting:
I Certify That the document hereunto annexed is a true copy
the files of this Department.
In testimong whereof, 1.
SUMNER NELLES,
ORDER Secretary of State, have hereunto caused the Seal of the Department of
State to be affixed and my name subscribed by the Director of Personnel
of the said Department, at the City of Washington, in the District of
Columbia, this
22nd
day of
November 1940
Licenses wells
Acting Secretary of State,
By Edward yardley
Director of Personnel.
MIN
OFFICE
17988
Regraded Uclassified
319
AUSTRALIAN LEGATION,
WASHINGTON, D.C.
November 14th, 1940
Sir,
1 usve the honour to say that I have been instructed
end authorised by my Government to advise you that my Government
desires to have the Federal Reserve Bank of New York open and
maintain e. dollar account and a securities custody account in the
name of the Commonwealth of Australia, and to request that you
be good enough to transmit to the Secretary of the Treasury and
to the Federal Reserve Bank of New York the following requests,
instructions and representations:
1. A. That a dollar account be opened and maintained
with the Federal Reserve Bank of New York in the
name of the Commonwealth of Australia, and that
accounts constituting part of such dollar account
be designated as follows:
Commonwealth of Australia - Ordinary Account
Commonwealth of Australia - Special Account
B.
That e securities custody account be opened and
mintained with the Federal Reserve Bank of New
York in the name of the Commonwealth of Australia,
and that such account be designated 88 follows:
Commonwealth of Australia - Securities Account Custody
c. That the Commonwealth Bank of Austrelia is authorised
by the Commonwealth of Australia to designate other
accounts with different designations which shall also
constitute part of such dollar account and such
securities custody account.
Honourable
Cordell Hull,
Secretary of State of the United States,
Washington, D.C.
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320
AUSTRALIAN LEGATION,
WASHINGTON, D.C.
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2. That the Federal Reserve Bank of New York transfer to
and receive in such accounts all funds and all securities
which the Commonwealth Bank of Australia has instructed
or will instruct the Federal Reserve Bank of New York to
transfer thereto from accounts with the Federal Reserve
Bank of New York in the name of the Commonwealth Bank of
Australia.
3. That all funds and securities which may be thus transferred
to such accounts in the name of the Commonwealth of Australia,
and all other funds, securities and other property which may
in the future be transferred, deposited or placed in such
accounts are, and will be, the funds and property of the
Commonwealth of Australia.
4. That the Government of the Commonwealth of Australia has
authorised the Commonwealth Bank of Australia to make
payments and withdrawals from and deposits in, and otherwise
to manage and operate, the dollar account and the securities
custody account to be opened with the Federal Reserve Bank
in the name of the Commonwealth of Australia, and in
connection therewith to give all manner of orders, instructions
and advices relating to said accounts, including instructions
to designate other accounts with different designations which
shall also constitute part of such dollar account and such
securities custody account, and authorises and requests the
Federal Reserve Bank of New York to accept and act upon any
orders, instructions or advices of the Commonwealth Bank of
Australia with respect to such accounts, and agrees with the
Regraded Uclassified
AUSTRALIAN LEGATION:
WASHINGTON D.C
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Federal Reserve Bank of New York that such orders, instructions
and advices will be binding upon the Commonweelth of Australia.
5. That the Government of the Commonwealth of Australia authorises
end requests the Federal Reserve Bank of New York to accept
and act upon any cablegram, radiogram or telegrem relating to
such accounts, which is received by the Federal Reserve Bank
of New York in the name of the Commonwealth Bank of Australia
and which conforms to arrangements agreed upon between the
Commonwealth Bank of Australia and the Federal Reserve Bank
of New York with regard to the authentication of cablegrams,
radiograms or telegrame by the use of test numbers, and agrees
that all such cablegrams, radiograme or telegrams will be
binding upon the Commonwealth Bank of Australia and the Govern-
ment of the Commonwealth of Australia and will have the case
effect as letters signed in behalf of the Commonwealth Bank
of Australia by officers who are authorised to sign corros-
pondence and documents containing instructions or other commi-
cations such as are contained in the cablegrams, rediograms
or telegrams.
I should be grateful if you would be good enough to direct
that copies of this letter be transmitted to the Secretary of the
Treasury and to the Federal Reserve Bank of New York.
I have the honour to be,
With the highest consideration,
Sir,
Your obedient servent,
Regraded Uclassified