Volume 347, January 13 – January 14, 1940

DIARY Book 347 January 13 and 14, 1941 4 I 1 Book Page Acheson, Dean See State Department Allison Engineering Company See Mar Conditions: Airplanes (Ingines) en I I Bank Holding Company Legislation Rocles' letter to BV: protesting lack of cooperation on the part of Treasury is not consulting Federal Beserve Board concerning new legislation - 1/13/41 347 152 Book of Knowledge Incx consults HWr concerning bona fide nature of gift planned for III - 1/13/41 1 Business Conditions I has menorandum on situation for veek ending January 13, 1941 138 - : - Danaña See Var Conditions: Purchasing Mission China See War Conditions Doast Guard For account of escaped French prisoners, See War Conditions: France Donvicts See War Conditions: France A , I Defense Savings Bands, United States See Financing, Government M -- # I Rocles, Marriner S. See Bank Holding Company Legislation - 1 - Federal Bureau of Investigation Class memorandum - 1/13/41 182 Financing, Government Defense Savings Bonds: Odagard on vider distribution of among small investors - 1/14/41.. 388 France See VEZ Conditions Regraded Unclassified - S - Book Page Germany See Var Conditions Greece See Var Conditions: Airplanes - I - E Housing Palmer's appointment discussed by ENJr and Benderson - 1/13/41 347 78 a) McReynolds believed responsible Sungary See Var Conditions: Foreign Funds Control - 1 - Latin America Rockefeller report - 1/13/41 126 Var Supplies, Purchase of: Young arranges for conference with interested parties - 1/13/41 81 Lend-Lease Legislation See Var Conditions - P. - Palmer, Charles See Housing Philippine Islands See Var Conditions - $ - - State Department Acheson, Dean: Appointment to State Department discussed by Frankfurter and BNr - 1/14/41. 242 - U- U Unemployment Relief Work Projects Administration report for week ending January 1, 1941 133 United Kingdom See Var Conditions: Military Planning - T- - Vanderbilt, Harold See War Conditions: Airplanes (Greece) Regraded Unclassified Book Page Var Conditions Airplanes: Employment in Aviation Manufacturing Industry: Base memorandum - 1/14/41 347 349,358 Engines: Allison Engineering Company: Deliveries and shipments - 1/13/41 97,98 Greece: Conference; present: HMJr, Greek Minister, Admiral Towers, Lieutenant Anderson, and Young - 1/13/41 74.77 a) Greek Minister asked for official letter expressing satisfaction if provided with 30 P-36A planes from Great Britain and accordingly United States will be asked for none - 1/13/41 76 b) Harold Vanderbilt to be asked to arrange for "Panama Hattie" to be put on for Greek relief China: Central Reserve Bank report after one week of operation - 1/13/41 90 Traffic report - 1/14/41 370 Exchange market resume' - 1/13-14/41 130,366 Export Control: Exports of petroleum, scrap iron, and scrap steel from United States to Japan, Russia, Spain, and Great Britain as shown by departure permits granted for week ending January 11, 1941 135 Foreign Funds Control: Over-all control: Conference in Attorney General Jackson's office; present: representatives of Justice, Berle, Ginsberg (Counsel to Henderson), Foley, and Bernstein - 1/13/41 106 a) Jackson and Berle state objections: See Book 348, page 96 Frankfurter suggests to HMJr that he and Hull discuss entire matter with FDR - 1/14/41 242 Hungary: Transactions with Guaranty Trust Company - 1/13/41 137 France: Vichy told United States "desires to protect in every possible way American property in safe- deposit boxes in occupied territory" - 1/13/41 91,92,93 French convicts (escaped) who were being deported to Martinique now aboard Coast Guard cutter: Gaston memorandum in reply to telephone call from Mrs. FDR - 1/13/41 103 a) Discussion at 9:30 meeting - 1/16/41: See Book 348, pages 111 and 299 b) Housed at San Juan district jail; maintenance paid for by Immigration Service - 1/18/41: Book 349, page 73 Regraded Unclassified - V - (Continued) Book Page Var Conditions (Continued) Germany: Municipal dollar bonds - memorandum on prices sent to FDR - 1/13/41 347 99 Lend-Lease Legislation: Foley gives resume' - 1/13/41 7 Alsop-Kintrer article - 1/13/41 157 HMJr's testimony before Congress discussed at conference at home; present: HMJr, Mrs. HKJr. Stewart, Young. Cochran, Kuhn, Bell, White, Foley, Cox, and Pinsent - 1/13/41 158,275 a) Testimony discussed in Hull's office: Stimson, Knox, Feis, and Hackworth also present - 1/14/41 233 1) HMJr repeats conversation to Treasury group 252 b) Can't use statement as now written - BO HMJr tells White, Kuhn, and Foley - 1/14/41 289,324 c) Mrs. HMJr's suggestions with regard to statement - 1/14/41 341 Military Planning: Reports from London transmitted by Butler - 1/13-14/41 224,396 Philippine Islands: Transfer of funds to United States at increasing rate reported by Sayre to FDR a) HMJr's comment on memorandum - 1/14/41 374 Price Control: Wool: Agriculture asked for information concerning 250 million pounds Australian wool being sent here for storage for British Government under a December 1940 agreement - 1/13/41 66 HMJr's letter to Marahall, Secretary, National Wool Growers' Association - 1/21/41: See Book 349, page 285 Henderson to be sent copy of HMJr's press conference stating his opinion that "Henderson is doing an excellent job under difficult circumstances" - 1/13/41 78 Purchasing Mission: See also War Conditions: Lend-Lease Legislation Contracts with value of $10,600,000 involving additional amount for capital assistance of $700,000, or total of $11,300,000 (this excluding a ship contract), placed since December 19 - 1/13/41 85 Canadian help by repatriating British-held obligations and allowing her sterling balances to rise set forth in Phillips' sesorandum - 1/13/41 95 Regraded Unclassified - V - (Continued) Book Page Var Conditions (Continued) Purchasing Mission (Continued): Assets: Foreign exchange assets and requirements w presented to representatives of Var, Savy, Defense Council, and State": Copies sent to Bull - 1/13/41 347 106 Investment bankers' assistance in sales again discussed by HMJr, Schenker, Bell, Foley, Bunker, Bellany, and NoGrath - 1/14/41 309 a) Wellington Fund, Camden, Yes Jersey asks to participate - 1/22/41: See Book 350, page 144 3) Schenker memorandum on recent developments - 1/23/41: Book 350, page 235 Shipping: Losses - British, Allied, and neutral - 1/13/41 155 Wool See War Conditions: Price Control Work Projects Administration See Unemployment Relief Regraded Unclassified 1 January 13, 1941 12:04 p.m. H.M.Jr: Hello. Frank Knox: Hello, Henry. H.M.Jr: How are you? I: Fine. Say, Henry, a fellow was in here the other day with what looked to me very much like a racket. He wanted me to subscribe for a $200 book of some book of knowledge which was going to be presented with an inscription by me on the first page to the President, and it looked to me like a high- class book agent's racket. He said he had you and Hull and two or three others already agreed to it. H.M.Jr; That's right. K: I'm afraid of it, Henry. H.M.Jr: Well, I tell you what we did: the person 18 Mrs. McAllister. ::: What? H.M.Jr: Mrs. McAllister is behind it. I: Who is she? H.M.Jr: Well, up to very recently she was Chairman of the Women's National Democratic Committee. She's on the level and ..... I: Well, she may be getting fooled. H.M.Jr: No, I tell you what we did: before Mrs. Morgenthau would do anything - I was opposed to it just the way you are - she had MacLeish, the Librarian, look into it and he sent the thing to two experts and he says that they are worth that and more too. So then they took the thing up with Miss LeHand to find out whether the President would really want them, and he said yes, he would like them. 2 - 2 - K: I see. H.M.Jr: Now, I had the same reaction that you did. I didn't want to touch it but then Mrs. Morgenthau went into it further with MacLeish and he says that they are worth it. Now that's the ...... K: Well, I'm perfectly agreeable to joining anything that is bona fide but I didn't want to be a sucker. H.M.Jr: Well, neither did I and that's why I insisted on somebody - you know MacLeish. K: Yeah, sure I do. H.M.Jr: The Librarian of Congress. K: Yeah, I know him. H.M.Jr: Well, he sent this to two experts and they say the binding alone is worth $200. K: Uh-huh. All right. H.M.Jr: I didn't like it at all, Frank, and my own reaction was not to touch it but the books are worth the money and Mrs. McAllister is the person who is behind it and she is on the level, and Miss LeHand says the President would be glad to receive them, so there you are. K: All right. Then that's O. K. H.M.Jr: What? K: Much obliged. H.M.Jr: Now, wait a minute, wait & minute. While you're giving books away, how about a few planes for the Greeks? K: Well, all right. I've issued the orders and they're going to take 30 of the planes off the wharves and send them up to New York whenever you tell me to. Regraded Unclassified 3 - 3 - H.M.Jr: Well now look, the Greek Minister is coming in at quarter of five. You couldn't get me a little memo or something that I could tell him what you're doing. K: Well, yes, or I can have somebody from our Aeronautical Department meet with you if you want me to. H.M.Jr: Well, that would be wonderful. K: All right. I'll get hold of Towers and see that somebody comes up there to meet with you. H.M.Jr: Have him here a little bit before quarter of five. K: At your office? H.M.Jr: Yeah. Have him here at 4:30. K: All right. 4:30 your office. H.M.Jr: My office. K: All right. I'll either have Towers there or somebody he sends. H.M.Jr: Fair enough. K: All right. H.M.Jr: Thank you. K: All right, Henry. 4 January 13, 1941 12:20 p.m. H.M.Jr: Listen, did anybody take your bag this time you went up to New York? James Forrestal: Well, as long as you aren't going on the same train I'm safe. H.M.Jr: You took 8 bodyguard with you from the Treasury, I hear. F: That's right. The only way to handle that situation is to join the Treasury. H.M.Jr: What? F: The only way to protect yourself now is to join the Treasury. H.M.Jr: Sure, join us. F: Yeah. (Laughs). H.K.Jr: Right. F: Henry, did you know that Maxwell has prepared some sort of a similar directive in connection with export control. H.M.Jr: I knew he had one and had had one for several weeks. I don't know that it's anything very new, is it. F: I don't think it's new, no, but it's along the same lines. H.M.Jr: Yeah. F: Yeah. Well, I just wanted to be sure you knew about it. H.M.Jr: Thanks for the tip but somebody else told me that and that he was very ambitions about it. F: Yeah. 5 - 2 - H.M.Jr: Well, I suppose by now he's seen the one that the President has. F: Yeah, I imagine SO. H.M.Jr: Of course, Bob Jackson is in it now, too, and he's set up a committee with the President's approval on this whole question of listing foreign properties and everything 80 just where it will end I don't know. F: Yeah. H.M.Jr: But I think irrespective of where export control goes, I think the Administration is very vulnerable, and Martin Dies knows it, on all of this money which is going abroad. F: No question of it. H.M.Jr: And the first thing we're going to find 18 that Martin Dies is going to force our hand and nobody likes that. F: Yeah. H.M.Jr: So irrespective of the other thing I do think that this money that 18 going to Germany and Italy - sooner or later we're going to be publicly criticized. P: No question about that, but ien't he going to act today on your H.M.Jr: Oh, I don't think 90. No, he won't do anything until tomorrow and the more time that Hull has the more the people work on him on the freezing end...... F: That's right. H.M.Jr: I mean, on the freezing, and the less he likes 1t. Not on this other thing, you know, but just on the straight freezing. F: Yeah. H.M.Jr: So I'm very much worried about it because I think we're very vulnerable and all Regraded Unclassified 6 m I I of this money which 1s being used for propa- ganda purposes, we could control it overnight if we froze, and that's where Dies comes in on the thing. F: I wonder if anything that - when the Boss gets back I suppose he'll be up to his neck in appointments. H.M.Jr: You nean the President? :: Yeah. H.M.Jr: Well, the President knows about it. Se said he was going to take it up Tuesday and Hull has talked to his about it. Hall now puts it on the basis of the Japanese-Bussian thing that is 80 ticklish. F: Yeah. H.M.Jr: This would aggrewate it. Well, a week ago, ten days ago, he told ae everything was all right, but the whole group in the State Department don't want us to freeze. They still think that you can appease Japan. F: Oh, Jesus! H.M.Jr: So there are a lot of cross-currents, but I appreciate your telling ne about this other thing and as I say there re an awful lot of cross-currents and I put it in the President's lap and of course what we're doing here is - all of our energies are going on this bill, Aid to Democracies. : Yeah. H.M.Jr: And what I'm doing on that 1s, I'm trying to get the President to take it out of By lap and give it to Bull because it's foreign relations, and I haven't been able to get his to do that, so that's the way she goes. F: 0. K., Henry. H.M.Jr: Thank you. :: Right. Regraded Unclassified 3 January 13, 1941 12:30 p.m. GROUP MEETING Present: Kr. Bell Mr. Gaston Mr. Young lr. Haas Mr. Graves Mr. Sullivan Mr. Stewart lr. Schwars M. Kuhn Mr. Cochran Mr. Wiley Mr. White Mr. Pehle M. Thompson lr. Foley lirs. Klots H.N.Jr: Ed, being in charge of the thing that interests ne most at the moment, bring us up to date on where the bill of aid to democracies stands. Foley: Well, I have been down talking to the Speaker and to Sol Bloom. They were going to vote in 8. few minutes on the committee jurisdiction matter, but Martin has indicated to Sam Rayburn that he will support his reference of the bill to the Foreign Affairs Committee, and they think they have the votes to keep it in Foreign Affairs. New, Bloom would like to start tomorrow, if he can, and he would like to have Hull first and then you. He thinks that he could take care of the two most important witnesses in one day. (Fr. Bell entered the conference) 8 - 2 - Foley: I asked him if Hull could be ready tomorrow, and he said he didn't know, but if he couldn't he would go ahead with you and I thought that would be & mistake because this was & Foreign Affairs Committee matter, and it would be much better to start off with Hull, and he said he would go over until Wednesday if it was neces- sary because Hull couldn't get ready. (Mr. Gaston entered the conference) Foley: Bloom wants to have somebody sit with him all the time and Sam Rayburn also said that the departments should get together down town and designate one fellow that can stay with this, sit in the executive sessions, stay in the hearings, and live with it right straight through. I.V.Jr: Well, I agree with you. You know, I talked to the President last night and suggested to the President inasmuch as it was Foreign Affairs and Foreign Relations, that Mr. Hull should watch the thing from now on the way we have, and the President said that he would take it up Tuesday when he got back. I have had & call in for Hull ever since I came back, and I have been unable to talk to him, but I an very anxious to talk to him, and I an trying to get an early morn- ing appointment with him. I don't want you, see - I don't want to be in the position - if it is Foreign Relations, I think Hull should do it. I think he should do it, but I want a clean-cut understanding with him whether he will or won't. Foley: Well, they are kind of - both Bloom and Rayburn are kind of looking to us because we have been in on the thing so far, and they want one of us to be down there all the time. H.M.Jr: You take the old man's advice. Regraded Unclassified 9 - 3 - Foley: I know it. H.M.Jr: I have reasons. Foley: I know it. H.M.Jr: And I think they are good ones. (Mr. Young entered the conference) (Telephone conversation with Secretary Hull follows) Regraded Unclassified 10 January 13, 1941 12:30 p.m. H.M.Jr: Hello. Operator: Secretary Hull coming on. H.M.Jr: Hello. Cordell Hull: Hello. H.M.Jr: Good morning, Cordell. How are you? H: All right. H.M.Jr: How is Mrs. Hull? H: Well, thank you, she is improving still. H.M.Jr: Is she still at the hospital? H: She got up last evening. H.M.Jr: Oh, I'm glad. H: Yeah. Thank you. H.M.Jr: I'm glad. Cordell, you remember I told you that before I went on the Hill I wanted to have a chance to go over what I was going to say with you. H: Yes. H.M.Jr: And I wondered if the first thing tomorrow morning I could come and see you and 8° over what I propose to say. H: Yes. When will they be ready for you to go? H.M.Jr: Well, as I understand it, they are voting now on the question of jurisdiction and they seen to think that they have the vote. H: Yes, I imagine they will. H.M.Jr: And they are talking in terms of starting the hearing either Tuesday or Wednesday. Regraded Unclassified 11 - 2 - in Yes, I see. B.M.Jr: I also understand they want to start the hearing with you. in Well, you and Sol Bloom framed that up, didn't you! E.M.Jr: that's that? in You and Sol Bloom fixed that up, didn't you? E.M.Ir: 1:. in Sol said be was going to talk to you about it. E.M.Jr: I haven't talked to Sol Bloom. in Ob, haven't you? H.M.Jr: No. in Vell, anyhow, if idea WSS - I don't care when I 80 and my idea was to discuss the course of international affairs and our policies and the conditions we have to deal with that have led up to these developments of danger and the need for every possible effort here and through Britain to protect ourselves against it. E.N.Jr: Yeah. in I would go over all those things and then say that I have had - that naturally I have not undertaken to follow the accounting situation, none of the figures or statistics or contracts or any of those things. The technical side of the whole business is something that has been handled very ably and capably through the Treasury ..... H.M.Jr: Thank you. in ..... and that you people will deal with the mechanics of the bill and that I will discuss everything that shows need for the bill and need for the maximum help to Britain. I'll P into that mostly, and so on, without going into these particular mechanics because I haven't studied those things any. Regraded Unclassified 12 m , I H.M.Jr: I see. H: In fact, I've never seen anything of it. It wasn't my place, you know, to keep up with those things. H.M.Jr: Well, of course, we had a meeting here and you will remember you were represented by Summer Welles and Herbert Feis. H: Yes, I know, but they didn't bring back any figures of any kind - no paper of any kind. H.M.Jr: Oh, we gave them figures. H: They said you gave them off hand but didn't give them copies of anything. But I'm not complaining, you understand, because that was not primarily my ..... H.M.Jr: Well, it 18 easy enough to rectify that. H: That makes no difference with me except that as that 18 a good reason why I wouldn't be expected to discuss all of that - the needs of the British of different kinds, what kinds and the terms of payment and all those kind of things. H.M.Jr: Well ..... H: I still think you people are meking a mistake on the other matter, but that's your business. H.M.Jr: What is that? H: I said to Mr. what's-his-name - Phillips - I said if you people have in mind to do anything in the way of payments on any of this five and a quarter billions during the next twelve months or so, why now would be the accepted time for some kind of a general statement on that. It would help us out tremendously politically and, I said, I'd be willing to make a gift of $20 millions to you as far as the merits of the thing is concerned on this war, but all I'm concerned about 18 winning the war. Right now I'm not discussing the other thing at all. 13 - 4 - H.M.Jr: Yeah. H: At any rate that's a. matter with you and Phillips. H.M.Jr: Well, did you have a good talk with Phillips? H: No, he didn't talk any. I did the talking. He never talks you know. H.M.Jr: I see. H: I got nothing out of him that was worth a pewter nickel. H.M.Jr: I see. H: Not a figure of any particular point. I think you'll have to deal with Britain through somebody else, just privately speaking, when you get down to real dealing. H.M.Jr: I see. Well, now, Cordell, I still would like to come over to see you. H: Oh, yes. H.M.Jr: The first thing tomorrow morning. How early can you see me? H: Well, I can be down here around 9:00 o'clock if you want. H.M.Jr: Well, 9:15? H: 9:15, yes. H.M.Jr: Is that convenient? H: That's all right. H.M.Jr: Well, I'll come over at 9:15 and then at that time I'd like to go over what I propose to say. Now one other thing: you and Bloom have come to an understanding about your testifying? H: Oh, we didn't have any understanding. He called me just informally and I told his Regraded Unclassified 14 - 5 - that you people had drafted the bill and were handling it because it vas primarily a matter pertaining to supplying Britain like you've been supplying her, and that I would discuss - I'd be available if and when meeded to discuss the need for all this thing, which includes all phases of our foreign policy leeding up to it. H.M.Jr: Well, I feel very, very strongly that you should lay the foundation first before anybody talks. H: Well, that's all - of course if I give then information that they'd really need most, it"d have to be Executive and still I don't like to go without having - I don't like to open the thing without the public getting 8 somewhat elaborate manuscript. H.M.Jr: Because you know how enthusiastic I WBS when you went up there. H: Well, I know, but this 1s - you see, the whole thing, Henry, is going to be on your private list, not don't get that out of your sind. The whole argument practically is going to be on this bill - the mechanics of it. That'll be based on these different things about restricting and about collateral and SD on and 80 on. H.M.Jr: Well, that ..... H: I'm not going to worry particularly about By part of this thing. H.M.Jr: Well, if you don't sind, I think you're wrong. I think that on what you say the bill will be a success or not, and I think it will be a success. E: II won't agree with you on that because they're already up on that part there. H.M.Jr: Well, they haven't heard you in sose time. Regraded Unclassified 15 9 I I in At any rate you may find it very desirable and proper to open on the bill and I wouldn't foreclose my mind if I were you. H.M.Jr: Well, I'll never foreclose it but I still think that after the experience I went through with on the bill - the Stabilization Fund - - if you would do it first ..... in Well, that was an entirely different situation. H.M.Jr: Well, don't ..... in You come over in the morning. H.M.Jr: Right. in Yeah. Regraded Unclassified 16 - 4 - H.M.Jr: Will somebody tell me why, if he wants some figures - how long is it since Welles has been here and Feis - that they can't - has either Welles or Feis or anybody else in the State Department called up anybody and asked then what the figures are? Cochran: The only request I have had as just after Sir Frederick had been in here the other morning and Feis called me, and I said, Well, Phillips is coming over, and he is trying to get an appoint- ment today, and I gave Feis two figures then on which he was uncertain, and when I asked Phillips just a while ago, he said that he had seen Mr. Hull, and he told me Saturday night that he had seen him. I said, "Did you have a good talk?" He said, "Mr. Hull did all the talking. I didn't get a chance," but he said that he had asked him for some more figures and asked if it was all right to give them in writing, and I told him to give anything that he asked for. H.M.Jr: Well, when you leave this room, will you call up Herbert Feis and tell him - better yet, I think the thing to do is to get over to Herbert Feis today or this norning, within & couple of hours, whatever the figures are that we have and put them in his hands and say, "Please get these to Mr. Hull," or better yet-- Cochran: You (White) gave him that table that day, didn't you? H.M.Jr: I thought we gave him some figures. Bell: No, they weren't passed around. White: Well, there was one. H.M.Jr: There were two meetings. White: At the first meeting we passed around tables, and Regraded Unclassified 17 - 5 - at the second me, to said let's in at I to hoard, but the first neeting ini the fire with, I take it, they the mt interested in, mmly, what are the various types I und with they have and ntst E29 their mind mounts, and I seem to rember idinitaly lés comenting = the. U.A. Teell, anyhow, I mut 1 latter penel in Inj larry, see. It meit to be my - Y in Dordell: I E enclosing breiti the letest figures that E have = the financial date 22 furnished to IS by the lritish E that he can't P ID III the II end ET tot be doesn't how. in is just ES at ES ant to ay that. Immg: You sent Secretary hill that the inck 12 the three British future programs in it. LA lbs. Clots, aill JUL lave sume me E time and see what I have sent M in witing inving the lest two nonths at either britisi triers = British finances, Just see? Gestom: In you want to add that these are the figre that The showed to lessrs. Telles end Fair Et our mesting 00 such and such & date Cochrant Tip, because sume you will give are strept to that. LLM I im't think so. Thitac I think the figures to give the EN mij to which the British have given II. Smi etista = the have made a 02 R limit 5 mile to the, the SEDE as they are to IS. That statement is December I, fat IIIE de Thite: If their income and outga, per. is = in to tast. Regraded Unclassified 18 6 E.V.Jr: M I think if R could have an inventory, say, "I have sent you the following things. Now, in via of DUP telenhone conversation, I EX sending pm this other thing." I raght to get it over to him this afternom. You CER see he doesn't and to bendle the hill. You can see also what happened as far as Phillips went. I don't get the whole thing. Foley: Tell, I im't get it either, b. Secretary, but I it think it would be orininal if you let this a E E. E.L.Jr: Ja me is guing to às that. Don't worry about that. White: Int it possible to have two men, State Depart- net eni Treasury net there? by should the Treasury be the mly une to carry the ball on this? E.K.Jr: Te wmn't àn it. It is the penalty I have paid 30 often for doing E. job too well in Washington. It happens regularly. When you à E job really well, somebody is always jealous. with the help r Fulley and his people and everybody else - I ISEL, the thing TES just dame absolutely on time end ime faster than it M.S ever done before, the President didn't have to lift his little finger, E didn't even bother him with the changes. Iou renember Full said, "Can you do this without showing it to the President?" I sii, "Ier, I will take the responsibility." To maie half E inren changes. When I came to the President and laid it on his desk and said, "Here is the bill," and be looked at me and it SEWRE his all this warry. The must have made st last 1 half inser important changes. Well, dm"t Marry about 4 letting go. The bull's eye is there end I CET see it day and night. Well,-- Bell: Floom äil call 2 Saturday. Regraded Unclassified 19 - 7 - Foley: And I promised them I would see then just as soon as this vote was over and outline the presenting and so forth. H.M.Jr: Don't change one bit, see, until we get E chance to see the President and see this thing. Foley: Now, the may it shapes up, I should think it would be better to wait until we had to start these hearings. H.N.Jr: Oh, yes. Foley: Because I don't think we will all be ready tomor- row. H.M.Jr: No. Foley: The Speaker said it was impossible to hold joint hearings on this bill, it would hurt the bill to do it that may, and he says he can act much faster than they can over on the Senate side. The Senate may drag this thing out a month. He will get it out - he said he could get 8. votethis week, but he doesn't think it would be good to do it because then they would say we were railroading the thing and we were putting - he said the one thing that Martin wanted to know was whether or not there would be full hearings on this. He told Martin that there would be plenty of oppor- tunity for the members to talk to you and to Hull and to Knox and Stimson and Knudsen, but they weren't going to call in Tom, Dick, and Harry from the outside. Martin said that is all he wanted. That was perfectly all right, and he would go along with the program. H.N.Jr: Well, tonight I wish the following people would hold themselves in readiness for ne and that is Bell, Foley, Walter Stewart, Cochran, Kuhn, and White at eight-thirty, subject to any change, at which time I will go - I would like you to 20 - 8 - listen, Bell, in case I got sick or anything, so that you can carry on. Don't you think so? Bell: Yes. H.M.Jr: I mean, I am going to carry the brunt of it, but just in case - you know, something happened. Bell: I will be available. Foley: Well, Ferdie and Oscar Cox yesterday outlined-- H.M.Jr: Well, you can bring Oscar with you. Foley: ....dimensions of what they thought you ought to say, and they have been working with Philip Young and Harry. H.M.Jr: Well, bring Philip Young and bring Oscar Cox, and bring the Stenotype. Bell: You have an engagement Wednesday morning which I assume you want to shift to the aftermoon. H.M.Jr: What is that? Bell: Open market. H.N.Jr: Well, let's wait and see. Bell: It will be all right just SO you don't change days because they are coming from out of town. H.M.Jr: If we had somebody sit, who is your candidate to sit for Treasury? Foley: Cox. They will have Beaman in there, too. H.M.Jr: It is 8 funny situation. Tie can carry it. The have carried it so far. Foley: Sure we can do it. 21 - 9 - H.M.Jr: I suppose it is a financial matter, I don't know. Bell: I think so. White: They dm't have to have anybody important, but they certainly ought to have somebody, even if Cox carries the ball. Foley: This is what I would like to see happen, Harry. I would like to see State, Treasury, Mar, and Davy agree on somebody to represent then all, and then be could clear with their representa- tives the changes, but only have one fellow that the chairman of the committee has to work with and have him in the executive sessions. You can't have too many people in the executive sessions. The committee doesn't like it. White: Are two too many? Foley: Well, I think we could have two. H.M.Jr: (To Mr. Mclay) Suggest to Mr. Stimson that when I come at 9:15 tomorrow morning, - I nean to Yr. Hull, that he have Mr. Stimson and Knox present. I would like Know and Stimson present when I an there at 9:15 tomorrow morning. Schwarz: Could you get anybody representing the White House? H.M.Jr: No. They never do that. White: I don't think you can, by any stretch of the inagination, say that this isn't as such the responsibility of the State Department as it is the Treasury. There are problems of interna- tional law involved which they are raising. There are problems of foreign policy. I don't think it is only theirs, but I certainly think it would be & tactical error from our own point of view not to have then have somebody, it Regraded Unclassified 22 - 10 - doesn't atter how unimportant he is, but they should have somebody sitting with a Treasury MI in it. Foley: Well, it is $ joint process. There isn't any doubt about it. E.L.In: I planted the seed last night, and I think the President is going to take care of that. We have got to see that Full goes up there first. You renember how, atil the last minute, he tried not to 20 there first on the Chinese thing. Foley: Yes. LLM And ze just shoved him into it. Foley: Bloom says be will àn anything you want, but he doesn't want any mistakes. I an just positive Bull should go first. Foley: Bloon says, "im't think that I know anything about it, because I don't, and I want you to tell me. Don't emsider ay feelings at all. I don't ant to make enymistakes at all, and you just tell le what you went me to do. I don't need anybody there. Full should go on first. I can't understand this false nodesty on his part, that be doesn't want to do it. I just can't understand it. Now, while we are waiting, I don't know who does the job, but we only have their balance sheets as of December 1, and I went it LS of January 1. Who does that for ne? lite: Well, I was getting it, but we will need some figures from Phil Toung and some from George. There are several sources of data that we need in order to get up the statement. It will be easy to get = the statement after we get up Regraded Unclassified 23 - 11 - the figures. Bell: Harry got up the last one. White: Well, it was a joint product. H.M.Jr: Well, who-- Bell: Harry carried the ball on it, but the other two collaborated. White: It is & simple task if we have the figures. H.M.Jr: I an serving notice that I want it. White: We have already begun. (Telephone conversation with Secretary Stimson follows) Regraded Unclassified 24 January 13, 1941 12:50 p.m. H.M.Jr: Hello. Operator: Secretary Stimson. Henry L. Stimson: Hello, Henry. H.M.Jr: How are you? S: All right. H.N.Jr: Harry, I've asked Cordell Hull to see ne and you and Frank Knox at 9:15 tomorrow morning. S; What's that? H.M.Jr: I've asked Cordell Hull whether he would see you, Knox and me at 9:15 tororrow morning. Hello? S: Yes. H.M.Jr: Can you hear me? S: Yeah. H.M.Jr: The reason is this - he's given me the time already, see. Cordell is taking a very definite stand that the English must put up collateral. See? S: Yes. H.M.Jr: I disagree with him. Hello' S: Yes. H.M.Jr: In the first place they haven't got any collateral except collateral on - outside of the United States, and I don't think it 1e the kind of thing we ought to ask anyway. Now I don't know how you feel but I wanted you there to express your own opinion the way you always do. Hello? s: Yes, I'm on. I'm listening hard. Regraded Unclassified 25 - 2 - H.M.Jr: Because By own feeling is to go up and tell a straight story - this is what we've got, this is what the English tell us we've got, and not insist on collateral as though we were running a pawn shop. S: Yes, well of course you know By opinion but it doesn't help in the parliamentary situation. My, I would go much further than any of you. I think that an immediate alliance would be the best thing possible, but that doesn't help. H.K.Jr: No, but Cordell has got it in his head - I've tried my best to have Herbert Feis get it out and Herbert tried to - that the English have $18 billions worth of securities and Herbert has been working on it to try to get that figure out of his head. S: Bow such does he think they have? H.M.Jr: $18 billions. S: $18 billions? B. H.M.Jr: Yes, $18 billions. S: Well, of course I don't know the facts about that at all, but I should have thought that it was preposterous. H.M.Jr: Well, we have the facts ..... S: But I don't know. I couldn't stand cross- examination 8 minute on that. H.M.Jr: Well, I can, and it is preposterous. But the point is, it's the method of approach and frankly I'm asking you in to say whatever you think because he's - it's going to be ay testimony, I'll settle and say what I have to but, naturally, Cordell having a different opinion I told him I'd come over and listen. S: All right. Well, does he want me there? H.M.Jr: Well, I've asked to have you there and I'm sure that you'll get a telephone call. Regraded Unclassified 26 M I I S: Well, of course, I'll come ..... H.M.Jr: But I wanted to explain to you what it is: it's what attitude I should take in regard to what we should ask for England in return in connection with this bill. Now I don't feel we should ask them for anything other than to pay for the orders they already have on hand, and after that I think it should be on a lend-lease basis or any basis that they want. S: Yes. H.M.Jr: And personally where I differ with Cordell, I don't think that Congress gives a damn and he says that he thinks it is the kernel of the whole thing. S: Yes. Well, I don't think it is the kernel of the whole thing at all. H.M.Jr: I don't either. S: It may be one of the kernels that is entering into the opposition in the Congress and the question would come up there but I think it would probably, if they put in anything that was at all like a rigid necessity for collateral, it would probably defeat the whole purpose of the bill. H.M.Jr: Well, anyway, I've asked Hull to get word to you to be there and I hope you can come because I'd like the benefit of your advice. S: I was going to tell you one thing to forestall any apprehensions I fear on your part, but I don't think that after next week it'll be necessary but I'm so anxious not to have you troubled by anything that I'm doing. I was invited by Purvis to come to dinner with him tonight. to talk over things. H.M.Jr: Good. I'm delighted. S: Is that all right? Regraded Unclassified 27 - 4 - H.M.Jr: Yes. He told me he was going to do it, and I'm delighted. S: Well, you know I'm not going to trench on your property anyhow. H.M.Jr: You can't. It's impossible. S: All right. H.M.Jr: I'm delighted. S: All right. I'll be there tomorrow. H.M.Jr: Thank you. Regraded Unclassified 28 - 12 - H.M.Jr: He says, "How I feel, I would just sign an alliance with him, that is all." He is a grand fellow. Cochran: Phillips had dinner with Jones last night. H.M.Jr: You know where all these dinners come from, the arrangements and all? Cochran: Yes, I know. H.M.Jr: I mean, I told Phillips to get busy and go out and do some selling. I have gone as far as I could. I told him he should see Hull, Stimson, Knox, and Jones, and he is doing it, but I say I have gone as far as I could and Full has this 18 billion dollar thing in his head, and then T called up Herbert Feis and tried to get him to dynamite it, and Herbert said he had had the most disagreeable half hour he had elmost ever had since he had been in the State Department with Mr. Hull, trying to get the figure out of his head, but I told Phillips - I an not telling all of these people - it was ay suggestion, but it sort of spoils the flavor of being invited to the British Embassy, but they are going there tonight so that finishes it. He will have seen all four of them by tonight. Well, anyway, you people can see some of the troubles. I haven't given anybody & chance to unburden themselves. Again I caution you, please be careful. Beware of the columnists hiding behind the columns. I have noticed 2. distinct improvement in Kintner and Alsop's articles the last week, the fact that they don't seem to have their facts right. I an looking right up at the ceiling. (Laughter) They know there is an Executive order around, but they haven't got it quite straight. Didyou read it? It is very funny. They know there is one to Knox, and they have just - Maxwell - they haven't quite got it right, and they just kind of - you know, around. Regraded Unclassified 29 - 13 - Bell: New York called this morning and said that they had & rumor from Brazil, China, and Sweden, that the United States was going to freeze the rest of the world. H.M.Jr: Well, if any of you fellows hear that I am having lunch or supper with Martin Dies, don't be sur- prised. He is the only pal I have got in town. I will take care of Knox, and if any of you want to see me, I will be available today or tomorrow, but I wanted you to know what I was doing, so if I don't see you at least you won't think I am loafing. O.K.? Cochran: The British have given us some more material. I will bring it in this afternoon. H.M.Jr: Right. Well, Merle, at 2:30 Sir Frederick is coming and I want White and I want Walter Stewart here and Bell, if he is not busy. 30 January 13, 1941 12:57 p.m. H.M.Jr: Hello. Operator: Secretary Knox is at lunch with Mr. Forrestal in Mr. Forrestal's office. Want me to call him there? H.M.Jr: Yes, call him there. Operator: Right. 1:00 p.m. H.M.Jr: Hello. Frank Knox: Hello, Henry. H.M.Jr: Frank, I hate to bother you when you're eating pig knuckles and sauer kraut. K: Well, it's no trouble at all. H.M.Jr: I'll be enappy. I've asked for an appointment, and I have it, tomorrow morning with Cordell Hull at 9:15, and I asked him to have you and Stimson there. The purpose of the meeting is this: I want to rehearse my testimony on this bill, and Hull and I have 8. fundamental difference. He wants me to ask for collateral and I don't, and I want to air the whole thing before the three of you and get the benefit of your advice. K: All right. Did he tell you that both Stimson and I were going to meet him at 9:30 anyway? H.M.Jr: He did not. K: We have a meeting at 9:30 Tuesday morning with him. H.M.Jr: Well, he must have forgot it. Regraded Unclassified 31 - 2 - K: All right, I'll be there. 9:15 tomorrow morning, Henry? H.M.Jr: That's what the appointment 18, yes. K: At Hull's office. H.M.Jr: At Hull's office and the purpose is I'm going to rehearse my testimony. K: I see. H.M.Jr: You see? K* Yeah. H.M.Jr: And Hull disagrees. He wants me to ask for collateral and I don't. K: Well, I'm afraid I - - as you may have guessed from our conversation the other day - I rather sympathize with Hull's point of view. H.M.Jr: Well, I want to listen. That's what I'm going over there for. K: All right. H.M.Jr: Thank you. K: All right, Henry. Good-bye. H.M.Jr: Good-bye. Regraded Unclassified 32 January 13, 1941 2:32 O.E. H.M.Jr: Schenker. David Schenker: Yes, Mr. Morgenthau. H.M.Jr: Now what I can't seem to get straight - your message to Harry White. S: Yes, I can explain that in 8 moment. The Quinn group, Cy Quinds group, have prepared to come down today, tomorrow and start doing business immediately. Then you're got the Arthur Bunker group who have E little difficulty with the Quinn set-up, who would like to talk to you about It and, if I may make the suggestion, I think you ought to see him for a few minutes and listen to them. I think we're got it straightened out. Now you don't went the group that is ready to do business, do you, tomorrow? H.M.Jr: No, because I don't know whether the English are ready. S: Yeah. Well, then I'll have the other group down tomorrow just for a few minutes. May I? H.K.Jr: Sure. You think I ought to see them? in Yes, I think 80. H.K.Jr: 3:00 o'clock tomorrow? S: Yes. Thank you. H.M.Jr: Thank you. Regraded Unclassified 33 January 13, 1941 3:15 p.m. RE AID TO BRITAIN Present: Mr. Young Mr. Purvis Mrs. Klots H.M.Jr: Everything is going along all right. Do you want to tell me on the record or off the record some of the things that you have been doing behind the scenes? I can't remember these things. Purvis: As a matter of fact, here is 8. thorough indica- tion. I don't think that should go on the indiscretion record (handing paper to Secretary). H.M.Jr: Good. May I read it now? Purvis: Yes, please. I got on my horse and went.... H.M.Jr: Now look, I haven't got the time, but there are some things in here that I don't agree with. Purvis: I would like very much to get them, but I thought that-- H.M.Jr: I want you to have that, and I'll tell you what I would like you to do. I would like you to - if you are not busy - to come to lunch tomorrow at one o'clock. Purvis: That would be fine. I wanted to show you this because I - don't forget, I have got a very difficult situation over there. I an trying to Regraded Unclassified / 34 - 2 - break through it first. There are some things there that-- H.M.Jr: Yes, very definite, that I would like to talk to you on. Purvis: Isn't this the my to play it? H.M.Jr: Yes, but you are going to have to go further, at least in a gesture. Purvis: Are you talking about direct sales, because please remember that sale of & hundred million dollars now or something of that kind - are you speaking of that? Because this was one dable. all Phillips sent it off and I had sent it before I made this out, another, in which he says that Purvis insists, and I agree with him, that the Secretary's view in regard to the sale of a sub- stantial measure of the direct investments be done and done immediately. (Discussion off the record) H.M.Jr: Let me tell you, this is what I am going to say on the Hill, and this isn't what my people tell me. In round figures, you people have nine hundred million dollars worth of direct invest- ments. Purvis: Yes. H.M.Jr: - In this country, you see. You have got in round figures 6 hundred million dollars worth of our securities, or a billion and a half. Those are the securities which I have in mind, which are here to pay for the orders you already have placed. Purvis: Correct. H.M.Jr: You see? Regraded Unclassified 35 - 3 - Purvis: Correct. I get you. H.M.Jr: Do you see. Purvis: That is right. H.M.Jr: After all, they are going to sey - and by the my, Mrs. Klotz, Mrs. McHugh was working on that stuff up until five o'clock Saturday. Klots: That is all finished. B.N.Jr: I should have that for tonight. Nots: Home? H.N.Jr: Yes. If I get 8 chance, I will look at it before, but I doubt it. Nots: Do you want the stuff pulled out or went the index? H.V.Jr: Just the index. And I just want to ask here on one particular date that I asked for. Klots: I will go out and get it. H.M.Jr: There was one particular date that I served notice, and if you could get that date. Blots: Yes. I.I.Jr: Now, I EIL not going to say - I will say those are direct investments, you see. "Tow, gentle- nen, the American manufacturer is amly IPO- tected on the orders that he has on hand." That has nothing to do with your cash balances, your gold, or anything else, you see. Te also figure that outside of the United States it - the best figure is approximately 10 million dollars. That is the figure I an using. Regraded Unclassified 36 4 Purvis: That are they? H.V.Jr: Larguly sterling securities, the gold, the Canadism stuff and all that, but I hope they wn't ask for the breakdown because I don't unt to show the Canadian gold and all of that. Purvis: In the Empire as a whole, it is as much as that? H.V.Jr: Oh, yes. Now, that is the picture, gentlemen. Now, as to their cash picture, they have enough out of this billion and a half for taking the gold here and taking advance payment on their wool and this and that and the other, to get along all right. Purvis: And if you will fill what they have already contracted for. H.M.Jr: Yes. But as to the future, the things that we are talking to them about are the 10 million dollars outside. Now, whether they can sell their stocks or whether they are going to put up: anyting of what they hold in the Malay Straits and South Africa and the rest of it, what good is it to us? If they lose, how are we going to collect on a gold mine in South Africa or a tin factory in Malay if they lose? If they win and the stuff has been advanced, all of this helps them do business to pay us back afterward, but I an for leaving them that be- cause if they lose we can't collect anyway. Purvis: It is their working capital and their journey- men's tools. H.M.Jr: I den't ant to go down below that, and I have tolà Phillips he has just got to trust me. Now, Full keeps using a figure of 18 billion, and so what is the difference if they put up two or three billion collateral. Now, what I told Phillips, and I think I en right, I don't think Regraded Unclassified 37 - 5 - that Congress is interested in this. What they are interested in, should Mr. Roosevelt have this power or shouldn't he. Purvis: Oh, I think that is very penetrating. H.M.Jr: See? That is what they are interested in and all the rest of this is - they may say to me, "Well, how could you let them buy this stuff when you knew they didn't have the money?" Purvis: And that is where you have to be & guardian. H.M.Jr: And that is where I an going to say, "Well, there is a billion and a half dollars in the United States, which is worth B. billion and a half-- Purvis: Yes, and therefore - I think that is a sound line. H.M.Jr: But that doesn't take into account the cash which you have here, private balances, Government bal- ances, and all the other balances which are 8. part of your insurance and all the rest of the stuff, you see, but I want to explain that to them. Klotz: This is the index. This is the date on which you first served notice. (Referring to Press Conference dated October 14, 1940) Then again here. (Referring to transcript entitled "British Purchasing Program," dated October 28, 1940) And then a third time. (Referring to transcript entitled "British Purchasing Program," dated October 29, 1940) H.M.Jr: Which is the first? Klots: Oh, that is & Press Conference, Mr. Morgenthau, at which you mentioned it. Regraded Unclassified 38 - 6 - H.M.Jr: Did I? Klots: Yes, you must have. I remember that myself. H.M.Jr: Will you find it? Klots: Yes. H.M.Jr: I don't remember that one. I remember this. (Referring to transcript entitled "British Purchasing Program," dated October 29, 1940) You see, I went on record on October 29, Ameri- can standard equipment, with Knudsen and Stimson. So you see, I am in & good position. Klotz: (Reading from Press Conference dated October 14, 1940) The only comment I have on this and so forth. H.M.Jr: I don't remember that. This is what I want. (Referring to transcript entitled "British Purchasing Program," dated October 29, 1940) Klotz: Yes. H.M.Jr: This is all right. These two. Klotz: Well, I will read this and I will see. H.M.Jr: Well, so let's do this again because I want you to know what my mind is. Te are not quite eye to eye on this thing. Purvis: I am interested to hear that. If it were the hundred million of demonstration, willingness, I think I have succeeded on that, but that was in a separate cable where I was quoting. H.M.Jr: That is all to the good, and I got word from the SEC that this one investment group are stand- ing by, ready. Phillips served notice - I told Regraded Unclassified 39 - 7 - him they are ready to do business, and I said, "Get in touch with them and tonorrow и will have a second group. Purvis: Good. Llr: So that is started. Purvis: That is fine. That is on the marketable securi- ties 07 the direct investments? Direct. Purvis: So we have there straightaway which you want to be sble, as I understood it, to say to the com- mittee, "This an evidence of the my it is being treated." That is right. Purvis: I have gone after it. They first turned you down? Purtis: Oh, yes. I went into this first, you see. On Friday I got Phillips first to make his series of cables. Ee has got a cable there which quotes ne very strongly on this question of giving you mist you feel is the thing, a demonstration sale to show that the thing is being done. That has since, with same difficulty, found its place, and I take it that Phillips has tald you that, basn't he? Lt. Well, be didn't tell ne his troubles. You know Phillips. All he told ne mes, be is ready today and that they are ready to sell 50 to & hundred million dollars. Purvis: That is as recent as eleven o'clock this morning. Ll.lr: They are ready to sell 50 to $ hundred million Regraded Unclassified 40 - 8 - dollars worth of securities and I told him the investment group are ready to buy and I got ay notice at 2:30 that they are ready to buy. Purvis: I think we have broken through. H.M.Jr: Sounds good to me. Now, what I would like to do at this stage is bring Philip Young in. He is desperate about something that he needs my help on. Purvis: Yes. I think we have got to orientate it, and I think it needs getting the War Department into it. H.M.Jr: I don't has what Phil has. Purvis: I think we are in & somewhat difficult situation in that the War Department is asking our men to go over and talk about this balance of 230 million dollars. We are sending word across to Phil Young saying, "we have been asked to go over. Are you going to have a representative there? What would you like?" He is telling us to go ahead across. My men are then coming back to me and saying, "We can't tell the Mar Department anything because we don't know what the finan- cial negotiations are that you have with the Treasury, but this is what we are talking about and I an scared about it. I would like to see the feeling - have the feeling that the Treasury and Lovett and Forrestal, whatever it is, or McCloy, whatever it is, were coming in so that we are dealing with it with our combined brains, and I would rather hope that we could then pre- sent to you some recommendations that would save your time, but I mean it is not our affair. It is the- H.M.Jr: Well, the thing. let me - let Phil do whatever is the easy one first. (Mr. Young entered the conference) Regraded Unclassified 41 - 9 - H.M.Jr: What is the particular thing, Phil, you said you needed, something about engines? Young: Yes. This norning the lar Department is putting the heat on. A joint program has been worked out in both the case of Studebaker and Buick, as you know, for building Wright and Pratt and Whitney aircraft engines, the large size. That has been going on since about September or October when we first started talking about working out the deal. Jesse Jones has gone ahead and arranged the plant facility contracts for the expansion of Buick and Studebaker. The Army is ready to sign up its contract. The British have their contracts all negotiated, as I understand it, and they are practically ready to sign. Purvis: Yes. Young: Studebaker, they are ready. Buick will be ready shortly. H.N.Jr: How much horsepower is the Studebaker engine going to be? Young: That will be the Wright 2600, which is the big engine. They are about the biggest engines. E.V.Jr: The biggest engines? Young: Yes. H.M.Jr: Both Wright? Young: No, the Buick is Pratt and Whitney. H.M.Jr: But the largest horsepower? Young: Yes, they are the big engines. H.M.Jr: They are over two thousand horse. Regraded Unclassified 42 - 10 - Toung: Yes, sir, they are the two thousand size. 3.1.20: All right. Toung: The War Department is putting the pressure on because both Studebaker and Buick say they can't go ahead and nake firm commitments for their suppliers, who in turn may have to have in- creased plant expansion, for a certain number of parts, & certain number of forgings,et cetera, unless they can get & fin comitment on the part of the British with the contracts signed. I talked to Mr. Curtice, who is the President of Buick, over there this norning and he feels very strongly that they can't go thead unless they can get 8 contract signed with the British. The British are in a position where, despite the fact that these negotiations started quite sometime ago, they cannot sign 8 contract under the present instructions. E...Dr: What are the instructions? Purvist Sign no contracts. 1.1.Jr: From whom? Purvis: They can negotiate contracts up to the point of signing. Toung: Those are your instructions? Say that again. loung: Negotiating contracts up to the point of signing, but not signing then. Purvis: When I can back, I can into that situation. Young: Which was your December 19 Press Conference. Both of those contracts for those engines were included in the general aircraft program which Regraded Unclassified 43 - 11 - you want to get underway. Purvis: Yes. Withacapital commitment of 46 and 36 mil- lions or something of that kind. Young: Yes. The down payment that the British would be required to put up on both of these contracts, calling it 8. third down, would run about 38 to 40 million dollars. E.N.Jr: Just do it another may. How many engines will Studebaker make altogether and how many for the Army and how many for the English? Young: Studebaker is six thousand engines, four thousand for the British and two thousand for the Army. H.M.Jr: And-- Young: And on Buick, I think it is three thousand and two thousand, 2. total of five thousand. H.M.Jr: Well, the answer is very simple. The answer is very simple. It is up to the Army to order then. Young: The Army hasn't got the money to order the addi- tional number of engines. H.M.Jr: Well, it is just too bad, that is all. Young: How, the Havy has somewhere between 50 and & 100 million dollars which can be returned. H.M.Jr: Can be what? Young: Which is unexpended appropriation for aircraft, and they have got a similar amount unexpended for ordnance, so I found out this morning. Whether or not that could be made available and the lary could order these specific engines, I don't know. 44 - 12 - H.M.Jr: Well, what I would do is, if you can get - have you found whether you can get any action out of Lovett? Young: On these engines? H.M.Jr: On anything. Young: Oh, yes, he has been very cooperative. H.M.Jr: All right then, I would say this to Lovett, that you have talked to ne on the present status and we are not far enough along, that the Eng- lish could do this sort of thing, but isn't there some may, possibly, that the Navy can do this thing, do you see, with the understanding that when this bill passes that the Army will take this contract over because some of these engines are for the British anyway. Young: The Army will take them over from the Navy. H.M.Jr: Yes, and reimburse them. Young: I think that is the only possible chance at the present time because that is the only place there is any noney. H.M.Jr: And there is no particular reason why the Navy shouldn't order them for the British anyway, just as much as the Army should order them. That is my answer. I am not going to ask the British to - put up. how much? Young: About 40 million dollars. H.M.Jr: Well, even if they had it - I mean, here is the Army, got this scheme whereby they are trying to cancel contracts and take them over and get you (Purvis) back some money, you know. Purvis: That is right. Regraded Unclassified 45 - 13 - H.H.Jr: Now, this leads up to this point, and then if I haven't satisfied you, you come back again, Phil. I mean, if I haven't given you a satis- factory answer, you come back. This leads to this point. This is what is happening, as I get it. What the Army is doing is, they are pushing for those things which they are short of. They are not pushing for the things that you need the most. Purvis: That is right. E.V.Jr: Right? Young: Yes, I am sure of it. I.I.Jr: Now, that is what I sensed. Therefore, I said to you (Purvis) this morning and I say it to you again, tell me what are the things, standard, American things, not the non-standard ones, but the standard, American things, which you need the worst which take the longest to build? Purvis: Yes. H.M.Jr: Then what you ought to do is ask for a meeting. I would start with Knudsen, which I can start here if you want to. I would be glad to say, "Now look, Bill, let's talk turkey. The Army is doing so and so," which I an sure he doesn't know. They are pushing for things which they need the most. "But this is what the English need and you heard the President. You were there Thursday. I wouldn't let it go too long. You were there Thursday." As to what the English need, we should go ahead and Jones should build the plants and get ready, pending what action should take place, and that was - I had this feeling, that it was very difficult, but we did get that out, and present were Stinson, Knox, Jones, Knudsen, and myself. So let - by having Regraded Unclassified 46 - 14 - Inle here and letting to 2000 st the N is doing - most likely the first time 36 the out about this horse trading the is de on, which is rettin: the 4 in the X - they meed 50 caliber if, 30 they LN perfectly willing to have the contract tanceled and take it over. Aris Imetly. Son that AN the things that 700 medi Purti: Zes. 12 you could say to 28, Look, tuese are tas things that 75 rant, in riez of the 28 President sald Thurstay, Cos, will 100 take this thing AND carry the call for us,' see, at: think you will be will is Purvist e have TAPES difficultier, 2. is seel Eas, see your point. Co, ranted to give - and this brings out this - thin you SEE. It would : â doe to àt this engine thing. If the in wants It 38.17 enough and they need these enrines billy - would force their hand = it. I mean p. not in one minute 5&7 you late:'t not - this is only for is own record - enouch money to NY their bills on Monday unless 7: the the credit 107 this gold today, et the next tule; SET, Eow much of these : contracts - in do they require! Insure Party million dollars dom. Regraded Unclassified 47 - 15 - Purvis: Well, it doesn't matter. It is a very sub- stantial sun. Young: It is about that. One is 65 to 70 million. That is Studebaker, and I think the Buick is around 50. H.M.Jr: Well, you shouldn't do it. Purvis: We are not doing it. There are three diffi- culties ze are in. H.M.Jr: Without saying everying that is in my mind, I think you can read it. Purvis: Yes. (Laughter) H.M.Jr: What are your three difficulties. Purvis: Our difficulties are this. Our men are being asked to see the War Department at 9 o'clock tomorrow norning. They have been in there at eleven. They are getting very embarrassed be- cause they feel they are playing a hand which is not frank down there, and they come to me for guidance. When - their problem is number one. There are the payments against existing contracts which are going on from day to day. There are the payments required for new product to keep existing capacity alive, which is a problem that Self particularly is worried sick of because there is capacity for certain air- planes but we can't place the orders and it is really an impasse. Then we have the things that require new capacity, every day's delay in which means a loss of time in the war, and these are the ones that I take it are particu- larly in question with what you are talking about. H.M.Jr: New capacity is what I am talking about. 48 - 16 - Purvis: But actually The have got three problems, first, the payments against existing contract; record, the orders that should be placed to tike 11- vantage of existing capacity; al third, the ones the require new caracity, and in each the of those groups there are terribly important items. R.S.Jr: You have got to save ne ES nuch ES you E. Purvis: Yes, I have-- E.M.Jr: You have got to save ne as much as possible because I just-- Purvis: You can't do it all. E.C.I.: I can't do it 211, but are the then vizere we have capacity and which are not taken III, which : brought to Lovett's attention : that comes before everything else. Care Curtiss is maning out of - las vilitimi capacity coming in in April, for instance- Survis: So much so that Self didn't include or Item in that 568 million dollars me filed the other day for nez capacity. Es only included the that had to come ahest for existing reperity. If : - nitt surgest, = think list miss Its, where American factories are runing = tl orders, and when = say out of orders - the now and the first of July - is that too storti Young: No, I don't think SO. Purvis: Six months is & pretty fair thing. In zsei tis months for most factories to look and :: last. S.L.Jr: You can say from now until September 1. : tim is any factory that is running out ni production Regraded Unclassified 49 - 17 - between nov and the first of September, that is eight months, I would like that to be brought to my attention first. Partis: Yes. U.S. And I think, second, there you need additional plant capacity, the things that you want, Ameri- DEI standards, that ougit to be brought imedi- ately to b. Inudsen's attention and let him take it up with b. James. = don't see thy I have to sit in on that. In can work it out with Fhil. hris: The difficulty there is that the her Department and the Navy Department haven't any funds which are available for these things lying in their jurisdiction. Is that right U.S. Iio, the thought that they had us that ES the new capacity, it would be EPC. hris: see. And that would be entirely Impisen and lir. Jones, subject to the lar and Havy giving the appropriate thing. S. I can EST them all over here. I would just as lief start it here. Imp: Iou ão run into one aôded difficulty here, which is the situation you late in these Studebaker engines, where they can't 80 ahead and place their sub-contracts unless they have got E firs order. is Phil, the only BY to do this thing, and I can't ño it today, is to do what I ET telling you to ño. Throw it back into Lovett's lap, this Studebaker thing - Buick thing, you see, and then get enough of these cases - I mean, you see, I don't know - I haven't got & list where it takes E. new capacity, additional capacity to Regraded Unclassified 50 - 18 - take care of the English orders. If we had that, I could call them in one meeting and say, "Now, gentlemen, here is the thing, and here are all of the troubles that the English have pending this legislation. Here is all that 1 has of." And get some of these cases - one type is this Studebaker that you are talk- ing about. Another type is where they know they need nore tanks 07 machine guns, new factories, that would be another thing, and then the other thing sould be where you know existing plants are going to run out of orders, you see. b. Secretary, taking-- 3ut : think if you bei = good example of each-- That ze as give you very readily. Give 26 E good example of each. But this is going to be difficult, and I say 7 can only do $0 zi to help it. I can call then in 2 neet- ing end have you people sit in. I think Te should do = little preparatory work first. I you have to. has le have got most of it done, but there is still more to be done. Could you give ze a little ad- vice in what should our nen GO opposite the AP Department? They are being called across. They don't with to spoil their good will. These fellows have to 20 over at nine tomorrow norning. I sonder whether Lovett or samebody - supposing we were to put some lists forward? Could he and Forrestal and Phil Young or somebody work up something for you SO that the basis for the zeet- ing is-- I don't know what the meeting is about. Regraded Unclassified 51 - 19 - Purvis: No? H.M.Jr: Who is calling the meeting? Purvis: Well, it is the Har Department. They have had one this morning, apparently, with two of our war fellows, Campion and Tatham. They had one on Saturday morning. I think we sent advance notices because I put a claim in to see that you get advance notices of all these meetings. H.M.Jr: McCloy is supposed to keep Young posted. Young: Mr. Purvis called me and said they had called this neeting, and he asked Mr. Durand and Captain Tatham to come over and give me & report on it afterward, which I haven't yet received, but that was because I had to go down-- H.M.Jr: In order to keep this thing - let him go over there and let's work this thing out in a day or two. Let them go. Don't keep then away. Purvis: No, I see. Let them carry on as best they can. H.M.Jr: And you and Phil whisper in each others ears three times a day what is going on, and let's just see what happens, but I would certainly let them go. Don't you (Young) agree? Young: Yes. I think you are just looking for trouble if you try to do anything else at the moment. H.M.Jr: Let them go, and then let's see if we can't pick this thing up. Purvis: Yes. In the meantime, we have still got 8. little more - I told our men at the meeting this morning you haven't quite given me what you want. If you don't give me what you want, I can't give you what we want. I would like to sit down with Young now. Regraded Unclassified 52 - 20 - H.M.Jr: Are you busy now, Phil? Do you want to talk to him now? Purvis: I will go along now if it suits him. You have no specific sum of RFC money in your mind? H.M.Jr: Oh, they have got unlimited funds. Purvis: I see. H.M.Jr: I just want to ask you a personal question. Young: May I ask you one other point? George is work- ing again on steel statistics. Can George show two people in the Advisory Commission the British programs, one, two, and three, so that they can help him estimate how much that means in terms of steel industry? H.M.Jr: The answer is yes. Regraded Unclassified 53 January 13, 1941 3:30 p.m. Present: Mr. Bell Mr. White Mr. Cochran Mr. Playfair Sir Frederick Phillips Mr. Pinsent Mr. Stewart Phillips: I got the word on the direct investments. We understood that Mr. Peacock would be ready at Lisbon on Tuesday. The State Department and Mr. Cochran have been in touch with Pan-American, and the first plane they can get him on leaves on Sunday. H.M.Jr: Which Sunday? Phillips: Next Sunday. H.M.Jr: Oh, I can do better than that. Phillips: Then it is up to you. H.M.Jr: Peacock? Phillips: Sir Eaward Peacock. There is a fellow with him called Hanbury-Williams coming with him on the mission. H.M.Jr: Do you want both of them? Phillips: Yes. 54 - 2 - H.M.Jr: No good one without the other? Phillips: Well, if there is only one it should be Peacock. Cochran: The were in touch with New York, and they got Pan-American yesterday and there isn't a plane before Thursday or Friday. That is the earliest plane, and they weren't sure that that would 20 and today they told us that they would take him on Sunday, on the 19th, and then when we had the other name up, they said they would do everything possible to get -- H.M.Jr: The are you working through Cochran: Latchford, who is the Communications man in the State Department. He has been in touch with Pan-American here. I got Mr. Hull's office and I told them if it would help any you would speak directly to Mr. Hull about it because you had asked personally for that man to come over. H.V.Jr: Bell, I will just tell them. We will do it 8. different way, but it is all right. (To Yr. McKay) McKay, after Mr. Cochran goes out of here, ask him what he has done. There is 8 Yr. Peacock that I am interested in getting over here. what is his correct name* Phillips: Sir Edward Peacock. H.M.Jr: And who travels with him? Phillips: Eanbury-Williams. H.V.Jr: the will get the right name and find out what Regraded Unclassified 55 - 3 - Mr. Cochran has done. He has done it through the State Department. You get in on it besides, will you? Phillips: And let me know anything that happens, because remember London is six hours off from this time and if there is anything earlier than that, we must know 30 they can get them down to Lisbon. H.M.Jr: You might start on it, but Mr. Cochran has been working - find out first what he has done. You see, Coast Guard, of which McKay is an officer, we patrol - the cost is about a million dollars 8. year to give these - it takes six cutters to maintain this weather station between the Azores and Bermuda, and we have two cutters on patrol there all the time just to give these people the weather, 80 when Coast Guard gets in on it, it means something. I very rarely do it. But I mean it costs a little over 8. million dollars a year to maintain those two ships to give them the weather. If I ever got up and had a bad day of it, there would be no cutter - no plane would go, if I withdrew those cutters. There would be no plane without the weather report. But I mean, that is the - I have no influence other than that Coast Guard is in the Treasury and they like to get their weather reports. Phillips: Well, when I heard this Friday -- H.M.Jr: Most likely I can't do anything other than what Cochran has already done, but I just wanted to make doubly sure, that is all. It looks like he has done more than I can do. Phillips: Well, when I heard this Sunday night, I got onto London again to make quite sure they had no objection if Peacock is not here for some days for Gifford to do any preliminary work that can be done. 56 - 4 - H.V.Jr: I see. Phillips: They agreed. H.V.Jr: Good. Phillips: Then they gave me certain assurances to give you which I will just read out. H.V.Jr: Please. Phillips: They are as anxious as you are to do with these investments, direct investments, all that is in the joint interest of the two countries. Second, they wish the discussions about these investments to be realistic. H.M.Jr: Really what? Phillips: Realistic, and thirdly, that an unreasonable attitude on the part of anyone concerned would not be allowed to block an equitable transaction. H.M.Jr: What does that mean? Phillips: Well, to be sure that the price offered is a fair one. H.M.Jr: Oh, I see. Well, that is encouraging. Now, I just got word before you came from Mr. Schenker of SEC that this first group of investment trusts are organized and ready to do business, so whoever the British Treasury wants to - they are ready to begin talking now, and tomorrow he is bringing over Mr. Arthur Bunker of Lehman Brothers, who wants to see ne; and, of course, he says he has another group. well, if he has, that gives you a little competition, which is good; but the first group, the one headed by Quinn, they are ready right now as of today, so will you -- Regraded Unclassified 57 - 5 - Phillips: I will let Gifford know that. H.M.Jr: Let cifford know that, that they are ready. Phillips: Now, one last point, sir. They want to give out statement in London because they have not to account for Peacock disappearing, you see. Do you wish to see the notice? I have instructions to show it to you if you wish. B.Y.Jr: I would be glad to see it. Do you mind if I read it out loun? Phillins: Not st all. S.V.Jr: "In the light of statements made publicly by the President of the United States, it may DOW be freely published that His Majesty's Government have realized and disposed of a very great proportion of their gold holdings, and are steadily realizing American securities owned by their nationals at every opportunity. Relying on the guiding principle proposed by the President and continuing to do 30. A more difficult problem is presented ty invest- ments such as business in the United States and United States companies controlled by commanies in this country whose shares are not quoted on the stock market. His Majesty's Government resolve to make the best possible use of them, and with this end in view, they requested Sir Edward Peacock, who has great experience in such matters, to go over to the United States and examine the possibilities on the spot. Sir Edward Peacock will be leaving for America immediately." Well, I have got two suggestions, if you don't mind. I don't like the first paragraph, and the second, I think I would wait to give out this statement until - when you know he has Regraded Unclassified 58 - 6 - cleared Bermuda, he is about to arrive. Once he has cleared Bermuda, you know he is about to get here, and I would do it but I don't like the first part of it, bringing in the President twice. I think it might be misunder- stood. I mean, it wouldn't help any over here and it might do some harm. Phillips: Of course, they have drafted this with their own public in view. H.M.Jr: Well, it might do some harm. Phillips: That second reference, relying on? H.M.Jr: well, it - "can realize and dispose of great -" no, "in the light of statements made publicly by the President, which now may be freely published." In other words, you were doing this before the President said anything, but now that the President has said it, you feel that you can say this out loud. I tell you, if I might make this suggestion, it just doesn't hit me right. If you had time when you left here to talk with Mr. Kuhn who is here helping me just on this - whom you know, don't you? Phillips: Yes. H.M.Jr: I won't even say anything, but I think he might be helpful. Phillips: Right. I will have a word with him then. H.M.Jr: You know him? Phillips: Yes. H.M.Jr: Did you know him in London? Phillips: I don't think I met him in London, no. Regraded Unclassified 59 - 7 - H.M.Jr: I think if you could have a word with him. Do you like this, Walter? Stewart: I think Kuhn is a lot better judge than I will be. H.V.Jr: I think if you could step down. I will find out if he is there before you leave, but I am not crazy about it and I certainly wouldn't do anything until you know that he has cleared Bermuda. Phillips: well, of course that is 8. week ahead, maybe. H.V.Jr: Yes. Cochran: It will be a week before he gets there. Bell: Has he left London yet? Phillips: Well, he was going to leave London today, but since there is no plane until Sunday, we held him up. Bell: If he could get a plane Wednesday, when would he leave London? Phillips: If he got a plane on Thursday he could leave London Tuesday night, tomorrow night. H.M.Jr: There is no trouble on the planes out of London, I gather? Phillips: No, not unless something went wrong. The plane on Thursday will certainly get him to Lisbon in time to catch it Sunday. H.M.Jr: Now - but you are not going to wait until Peacock gets going, you are going to -- Phillips: They wanted to do something before he left. Regraded Unclassified 60 - 8 - H.M.Jr: Well, this group is ready. I nean, the so- called, for a better name, the Juinn Group, which represents at least a dozen or 18 or more investment trusts. Phillips: Yes. I also made sure - to make quite sure I asked them to send out to Gifford a list building up something like that figure, 50 to a hundred million dollars, to give Gifford something to go on, do you see, which they say they are doing. E.M.Jr: Fifty to a hundred million dollars of direct investments? Phillips: That was what that group was mentioning. They didn't make any condition. They simply said they didn't want the individual names used. H.M.Jr: That is all right. What else have you got" Phillips: Now, you asked me about that - making advance statements under strategic reserves. H.M.Jr: Yes. Phillips: Well, I sent Cochran a letter in which I pointed out the first big thing is & quantity of wool, Australian wool, which it has already been agreed shall be sent from Australia and is being shipped with the intention of storing it in this country. If it was possible for any United States organization to buy that wool and the agreement for storing does contain a provision under which they might buy, that means a sum, a new amount - we haven't considered it before - as near as we can judge of between 130 and 150 million dollars. H.M.Jr: That is a tidy sum. Regraded Unclassified 61 - 9 - Phillins: That is as big sum. Then there were those tin and rubber contracts where the point was rather different; namely, that you thought it might be possible to make down payments now instead of waiting until the goods were delivered. I haven't got you any good figures there, because I found I can only get the figures by going to this International Tin and International Rubber Committee in London, which would have loaded the gaffer rather badly but I think Mr. Cochran is getting some figures from the corporations and our rough guess was that there might be in it 8. total - the total deliveries still to be made might perhans be of the order of 8. hundred and twenty million dollars, but you have got to allow for the fact that part of that is Dutch. You don't buy only from us, you buy from the Dutch, so the maximum sum there, I should guess, is 50 or 60 million dollars, something of that kind. I have got together one or two other items. The first of those was lead. The could give you an hundred thousand tons of lead from Australia at about $80.00 a ton, roughly, and the other things are all quite small. I went into them all. There is mica and that sort of stuff, but they don't amount to anything in dollars worth talking about. Then finally, there were two other suggestions. One was that we were ready and could look into the question of a further shirment of tin, if you wanted any more tin; and there is still another transaction about cross bred wool. It is rather complicated, and I think you had much better get on with the ordinary wool propositions, first, the one I mention to you, the wool which is coming here for storage anyhow. E.V.Jr: Who in our Government handled the wool for storage? White: Council for the Defense. Regraded Unclassified 62 - 10 - H.M.Jr: Who? White: Under the Council for Defense. H.M.Jr: Not Jones? White: I think he advanced the money to pay for the storage and the shipment. H.M.Jr: Well, wouldn't the Secretary of Agriculture know? White: He would know about it, but I don't think it was under his arrangement. Bell: Harry, this was British wool, wasn't it? White: Australian wool. Bell: Well, the British took it off their hands and were going to store it here. The United States Government haven't any interest in it, have they, except the possibility of taking it off the British hands. White: Well, the arrangement was made with the Government and that is where they got the shipping costs, 10 million dollars, I think. H.M.Jr: Why don't I talk to Wickard? White: He would certainly know about it. H.M.Jr: He could find out about it. I will call him. He is the Secretary of Agriculture. Phillips: The purchase would be, I take it, on behalf of the War Department, wouldn't it? Bell: Yes. "It might go through one of these corporations of Jesse Jones'. 63 - 11 - White: One of the reserve corporations. H.M.Jr: Well, Nickard could look into it anyway. White: If he is out, the MI who would know about it is Lester Wheeler. Be would hos. Bow meh of that wool is - has arrived, much of it, in you hanven to know? Phillips: I think the agreement WAS dated December 4, wasn't it? It is probably just being shipped. They are just beginning to ship it. B.M.Jr: well, you would buy it in transit, isn't that the idea Who could he talk to for the British Government if Nickard said - Phillips: Chalkley. Bell: That is a high grade wool, isn't it, st that price? Phillips: Yes. It is used for making cloths and 50 m. It isn't blankets and so on. It is very good wool. Bell: The amount of money you have got in there implies it is a pretty high price. It is sixty cents & pound or something like that. Phillips: there is no price hamed there. It is imply storage. Te could give you the quality, 85 far as we could judge. H.M.Jr: Did that go through there? Cochran: Yes. H.M.Jr: How much was it? Cochran: A hundred and forty-two. That revresents 95% Regraded Unclassified 64 21 I I Mr. For, what about this rubber reserve? That is = and the tin. The does that over in Tatirnal Defense, anyway? They have changed $0 much. Philling: There are two senarate corporations. There is t tin corporation and 8 rubber corporation. U.S. That is over with Jones. Fell: Jimes has the corporation, tut somebody passes III it in the first instance in national defense, im"t they" Thite: I think they do. It is the Metal Reserves -crotration that advances the money. E.V.Ir: What is the rutter thir? ("elerhome conversation with Mr. Olmstead follows:) Regraded Unclassified 65 January 13, 1941 2:58 p.m. H.M.Jr: Hello. Operator: Secretary Wickard is out of the city until the end of the week. H.M.Jr: Well, give me Paul Appleby. Operator: Right. I 2:59 p.m. H.M.Jr: Hello. Operator: Mr. Appleby is at home with a cold. We could reach him there if you like, or Mr. Olmstead, his assistant, 1s in the office. H.M.Jr: Who? Operator: Mr. Olmstead, his assistant. H.M.Jr: Well, put him on. Operator: Right. (Pause) Mr. Clastead. H.M.Jr: Hello. Ralph V. Olmstead: Hello. H.M.Jr: This is Mr. Morgenthau talking. O: Yes. H.M.Jr: Olmstead? 0: Yes. H.M.Jr: I want to get this information from Mr. Wickard or Mr. Appleby and I'd like Regraded Unclassifi 66 - 2 - if I could to have it the first thing tomorrow morning. Hello? 0: Yes. H.M.Jr: The United States Government purchased - no they didn't, now let ne start over again. The British Government is sending 250 million pounds of Australian wool here for storage under a December, 1940 agreement. Hello? 0: Yes. H.M.Jr: Now, I don't know who did it, who's handling it or all the rest of it, but I'd like to find out from your office just who is handling it, you see, with this in mind - of the possibility of advancing to the British the dollars for this wool in transit or even before it leaves Australia, you see, to make this additional money available to them. 0: Yes. I understand the R.F.C. is handling it, but I'll have to check to get it precise. H.M.Jr: You think the R.F.C. 1s. 0: Yes, but by tomorrow morning I can give you a detailed report on it. H.M.Jr: I Bee, but you think that's an R.F.C. trans- action? 0: Yes. H.M.Jr: Well, could you find out and let me know in the morning? 0: Yes, indeed. H.M.Jr: Thank you. O: You're welcome. Regraded Unclassified 67 - 13 - H.M.Jr: Dan, supposing I have this letter copied, you see. Bell: It is copied. H.M.Jr: And on the rubber, which is Rubber Reserves, and tin, which is Metal Reserves, supposing you get in touch with Jesse, see, and find out what the status is. You night also ask about wool and tell him what we are interested in and what are the chances of getting this money to these people right away. Pell: I will do this just as soon as I get out of here. H.M.Jr: Will you? Phillips: Might I also suggest about lead, sir? I know your lead stock is very low, and the amount I suggest, a hundred thousand tons, wouldn't bring your stocks up to any abnormal figure. Bell: I will look it over. H.M.Jr: Would you? Tell Jesse just what is the idea and has he any surgestions, you see. Phillips: Then that was all I could find that looked like strategic reserves, but of course, there are a lot of other things. There is jute and stuff, burlap, which is really manufactured jute, and cocoa, and all these things where we have got massive supplies, far more than you could possibly want; but if you want to place any fresh orders, there the stuff is. H.M.Jr: Supposing we try rubber, wool, tin and lead and see where we get. If are can do one, we can do the rest. How would that be? Regraded Unclassified 68 - 14 - Phillips: That would be all right. H.W.Jr: Put the idea in Jesse's head about advancing the money. Bell: Yes. H.M.Jr: Right away. Bell: It sounds more like the Chinese. White: That was exactly what that bill was prepared for with the note for the other problem which Foley raised of the Neutrality Act. Bell: He said as long as it wasn't a credit. White: Then there is no question. Bell: The advance payment for something to be delivered within a reasonable time. H.V.Jr: Well, this really falls under Jones, I think. White: Yes, he is -- Bell: He would have to furnish the money. White: He is the head of that corporation. Bell: He would have to furnish the money. H.M.Jr: Now, what else have you got there? Phillips: I have nothing else. There was a small proposition about Canada, but I really can't ask you to consider it now. H.M.Jr: All right. I want to ask you one thing personally. That is all. Regraded Unclassified 69 THE UNDER SECRETARY OF THE TREASURY WASHINGTON January 13, 1941 to THE SECRETARY: la you suggested, I conferred with Jesse Jones regarding the purchase by the United States of some of the commodities set out in Sir Prederick's letter of January 10. 1941. His comments regarding each commodity were about as follows: Wool: Be said that the President had allocated to his the sum of $12,000,000 for the purpose of paying transportation and storage charges on the Australian wool which the British had acquired to be stored is the United States. He said that he had turned the $12,000,000 over to the Defense Supply Corporation, which will use it to pay only the costs of shipment in excess of what the British would normally pay to transport the wool to Great Britain, and it will also pay the storage costs in the United States. The Defense Supply Corporation gets for these expenses BD option to buy any part of this wool which the United States BA7 need. At the time this transaction vas UD, it was necessary for Chester Davis to pacify certain Western Senators. Be got them to agree net to object to it if we had the option to buy only in case the United States actually needed the wool. I understand that there will be between forty and fifty shiploads of this wool and that two are now on the water and five are loading. These seven ships will carry between twenty million and twenty-five million pounds of this wool to the United States. Rubber: Mr. Jones said that out of the 150,000 tons of rubber which were to have been delivered prior to December 31, he believes that we have received, or there is on the way, approximately ninety thousand toos, of which we have already paid in dollars for approxi- mately seventy thousand tons. He said that he had agreed to take not only the 180,000 tons for shipment during 1941 as specified in Sir Prederick's letter, but he had agreed to take another 100,000 tons in the calendar year 1941. He said that they had had some difficulty in getting delivery on rubber as ships were not available. Also, there T&S some question about going into full production. He said when they first started negotiating with the British, production was only running about equal to consumption requirements, but since then they have in- creased their production until it is about twice normal consumption requirements. En said he thought if the British could find means whereby the rubber could be stored in warehouses in the British Empire, he could make payment for it imediately. This also applies to the other commodities listed is this memorandum. Regraded Unclassified -2- 70 fist & said that be will be (Lai to by 50,000 additional - of tis over and above the 75,000 tues agreed upon by the Metal Benerves Company. Be said the British 29 my slow in getting this the an its my bet If they will produce the the be will be glad to by its Le called 4 attention to the patin also raised by Sir Producick in his letter and that is that the nine and tis come only in part H THE all M my i a all I R I àld # be attention al 19 realized that the british would net get all of the dollars. Le suggested that the Britist sight mize BOBS arrangments wherely the Datch or other interest will accept starling is payment for these commodities and the bitis mult sall it to IS for inllan. I told his R would have this losked into. Lead: I asked Er. Jam If be throught be could by 100,000 to of lead as Sir Predarick bat ngestal that be sight have that partify svailable. Be called burill to ask his if - could the a substantial amount of leads b. Burrinan suit that it m not treatment for defense purposes, but b. Imm self that be was quite certain be could get a letter from the President authorizing his to by this - tional stock of lead and be would be willing to to that if me decided the British needed the 20047 impliately. Be also said that - night Lank into the question of rine. Mr. Barrinan suggested R sight by - additional quartities of the if it is available my place. Ms commity vu not antional in Sir Frederick's list. " should look tate this. Mr. Jones said that be wold like to have a copy of the list of commodities given in Sir Prelarick's letter mi that be would look the stocks of those commodities in this country to see if W could by some of them. I have given his B. cigy of Sir Frederick's letter. Mr. James also and that be will sk his lawyers just have the be wight B in asking airance payments to the British for these various commodities. Be said his personal opinion w that the comodities should be delivered as dock or to 8 murchanse before advance payments are made. Be did not feel that be mght to make atrance payments before production without taking it up with Impress. Be said that be had ind time with the British last evening of had gase over their problem. & sit be die not feel that it - M urgat as they had put it all be - quite certain that R wald lase the President's bill through Angrem within the next to vesite al the N could begin to work out or ppm. I tald kis that we falt in the Treasury that it - quite urgent al 10 throught wrery - ought to be tabe to provide the kitis with dellare M seca as they and the # out waiting for their entire balances to be exhausted. ?1 3 i sill be bad suggested to Purvis - - upo that the British or the pility of putting - collateral the M of thair contracts of patting up cash. in thought that the they had run out of si tag will have already established the visitile of depositing milminal, et would be E important step They refund, - to lbo this. È still feels, be sit, tat the British should ML - the babit of putting RD: collateral for - of these things, six the transactions that will the place miler the Lend-Lease HIL = asted his where be thought they wall If the collateral. i all they have E: interest in my things throughout the world, - of et of mot be of miss value, but the to that that they have IN the <00 the United States would in = transmendous effect on = n nemile and de = = Congress. - y 1 a 141 a .a dut Inc. as I a E 8 # BE mill it = the airence payment its. = eight that If you P to the Thite lase = distribe this matter et to President, you consider taking b. lass << you. AWB Regraded Unclassified 72 brittle Many, I - - Mill I EMB I I in will result that the neeting this wroting the - the - relati date - findd relief and w ensured through tarethate yours) the - ⑉ the steeting KPM be be enstred w the 1.1. the following Income - to MI- W MII, w I.A. - of 790,000,000 lb. not to to deral is the - States under the Heings igreed signal to - I 900 1945. w I. s. I le provided to to Mde great. - to - the mine of this - - be - ap to - sillions. the leating of the used for dir to the Mittel Name has remily - la matrolls. M yes - the bills - - perchased the air minis & a I $ i 2) - failure been - agreed be perchase 150,000 - - Im No. for - plan to home 31st. W - minimi that has - you les completed. the - agroad to a further - of 10,000 tase to direct twing 1941, - of with be 1 pet ten chipped. the uls of the first 100 of the - price - about 167 millions. at that of the - lot NO. silliam. w m. Batale - - apred in July 1940 to persions 75.000 - of the m w A LLI. LL Parto, total win belag - - millions. I delivery w special be be - plated - the end of MR. NO that - I part if a I 2 s 1 E b - - that tax them include the best - to as Immitte application of the - Mm to the to be - is - tag the financial - of the tabeto period. I im other to to - - the le a program of fisher w a m treat to B forte 9.m - if the and mm/y - If - order - to to. be particular W be that all the Pollowing with in to member is the posting A el Mari Regraded Unclassified 73 . 2 . w - - - entere which 9.8. Departmento ⑉ Limity to plane to as. to to me, hourse, for hav to they are regarded as rs a I 14. I I minh states Egythes listen vegables and na ette. j I need not resial you that reliter and the ⑉ only is part I a 1 I I Inc. I 8 B I e correquating part of the proceeds. It seens to se that vest My r visa, potat I state I Toure (Signed) 9. Millips I of of á I I I I I Regraded Unclassified 74 Notes on Conference is the Secretary's office, 4:35 P.M., Monday Jamuary 13, 1941. Those present at this meeting vere, Secretary Korgesthan, the Greek Minister, Admiral Towers, Lieutenant Anderson, ni Philip Young. Secretary Morgenthan opened the conference by stating that the needs of Greece had received earnest consideration and had been seriously discussed at the last Cabinet Meeting. In the course of that discussion it had developed that the Arty had no planes which could be released for the sid of Greece, but Secre- tary of the Navy Knox had suggested the release of certain Hary planes which were being replaced by planes of a more mdern type on United States naval aircraft carriers. Because of this no- gestion made by Secretary Inox, Secretary Morgesthan had asked Admiral Towers, Chief of the Bureau of Aeronautics, Jary Depart- ment, to attend the present meeting and explain to the Greek Minister just what planes were available. Admiral Towers explained that it had been the policy of the Savy before the present serious world situation arose to replace Navy planes in service with new planes every five years. The planes so relessed after their five-year service period vere them utilized for training purposes. Admiral Towers stated that there vere certain Havy planes which were currently being released after five years of service which might be unde available to the Greeks; however, these planes were five years old and vere based = designs seven years old. At this point the Greek Minister inquired as to whether the planes in question were hydroplanes or land planes. Admiral Tovers replied that they were land planes which were 20V in service on naval aircraft carriers but about to be replaced by DEV planes. Be said they were in good material shape but that they were actually of an obsolete design. He added that the planes had a speed of 233 miles per hour and carried two machine - one 50 calibre and one .30 calibre. Admiral Towers expressed serious doubt as to whether they would serve the purpose of the Creeks. The Greek Kinister questioned Admiral for more specifically as to their use and age, and Admiral Towers replied that the planes had been in service for five years already at that the Inty vas planning to use them for training purposes in the future. Secretary Morgenthau asked Admiral Tovers as to whether these planes vould be Regraded Unclassified 75 Regraded Unclas the fighting planes which the Jury would the today if the United States vere in a state of E. Admiral fevers replied that practically all of these clates hai already been removed from the aircraft carriers and sent to training fields or VISI is the process of being overtazled. The Greek Minister asked Admiral Tovers as to the placement of the guis, that is, IS to whether they vere nounted in the fuselage or in the vings, si, further, as to whether there was my protection for the pilst, specifically in the event of a rest attack. Mairal lovers remonded that these planes had neither armor nor leak-proof taxics and could not be considered as date for fighting purposes. Adairal Towers further inquired of the Greak Kinister as to whether there was an Air Attache st the Greek Legation viso could talk over the technical specifications. The Greek Minister replied that be wes sorry, but that be W a Military Attache wbo vould & to see Admiral Tovers. In the mentime, it YES the Minister's intention to cable Athens, and be edded. that, despite the great need of Greece for planes, it vas his personal spinion that these particular Inty planes would not be desirable. The Greek Minister stated that he had thought Secretary Margenthan vas going to speak to him about the offer of the British to furnish thirty P-36A planes and concerning which be had same additional information. Secretary Morgenthau asked his to explain the situation, the freek Einister said that there had been cop- siderable discussion about the release of thirty Defiants by the British, but that the Greak Government had advised his on the Elst of December that it YES not interested. Purther, in conversations with the State Department, the Greek Minister had been atvised that the United States vas defi- nitely going to fulfil its promise of micing planes evailable to Greece, Shartly thereafter, the British Babansy had notified the Greek Minister that the British would release to the Greeks thirty P-36A's imediately from London or from Egpt. Only a few days ago, the Minister edied, the State Department had been advised that the Greeks would accept this offer. It appeared, however, that there were certain difficulties with respect to the transportation of the planes, Part of the deal vas that the United States should replace the thirty P-36A planes released to the Greeks by giving the British thirty P-400)'s which vould be shipped as at Amrican ship to lears, the Creak Exister 76 - 3 - had been advised by the State Department that it vas insivisable for an American ship to transport these planes, so that the Minister, after proper consultation with his Government, had arranged for the planes to be shipped from the United States to SASTA on Greek ships. Secretary Morgenthau asked the Greek Minister to give him an official letter, over the Greek Minister's signature, stating that Greece vas entirely satisfied and happy to receive the thirty P-36A planes from Great Britain, and that the Greek Government did not look to the United States for anything. Purther, Secretary Morgenthan suggested that the Greek Minister tell the President that be vas happy about the deal and then let Secretary Morgenthau bandle the British end of the transaction. The Creek Minister replied that he did not feel free to nake such a statement as the State Department had given some indication in the past that sixty rather than thirty planes would be furnished the Greeks. Secretary Morgenthau pointed out that Admiral Towers had just been offering the Greeks thirty additional planes from the Jary. At this point Admiral Towers reminded the Greek Minister that the thirty Havy planes were at least a full 100 miles per hour slover the the P-36A's which night be released by the British. The Greek Minister said that he would cable Athens immediately, but that he would like to know how the thirty Savy planes would be shipped. Secretary Morgenthau replied that they would be sent to Iev York where they could be loaded on Greak ships. P.O. 00000 Regraded Unclassified n like n a # Secretary's office, 5:00 P.M., liming, January 13, 1941. Those present at this neting very, Secretary The Greek Minister, and Philip Young. H.M.,Jr.: The President is greatly interested is belying Greece. Last year be vas interested in Finland, At that time a play vas brought to Washington for relief purposes. By don't m bring a play bee to Washington to be put 02 Intry right, Belruary 16th. the is your relief = in Jer Teld I cas't think of his Minister: Harold Tanderbilt. H.H.,Jr.: Yes, he is the N. Lov, bestites, : have a 16- ticular play called Enttie" which pm CELL put on for Greek relief. In tell E. Twichilt about it. It is a maical may ni both the President and Mrs. Hoosevelt would - Minister: For var relief? That would be wnierful, H.M.,Jr.: Have Mr. Tanderbilt telephone 2009 = Prilip Young for details. Could be yet 02 st the National Shestre. Minister: Yes would organize? H.M.,Jr.: Vanderbilt would have to to it all. So arrengments have been unde, It would fill the Shestre BE the President would be there. Minister: The President would be there - is that right? H.K.,Jr.: Yes, the President would 0. Engle you cruld raise $5000 or $10,000 but leave the details - to the Grook ver relief. The President's being them will who It a success, Minister: Please thank the President for 20. ky entry at I greatly appreciate his interest m. his help. H.M.,Jr.: Wake stre of the details first before you à anything. I can tell you thrugh that the President will be planned to come, Minister: Is everything resiy? H.M.,Jr.: Jo, to one lows enything about it. In late to ab all the arreagments, Dy. Minister: I understand. 78 January 13, 1941 5:21 p.s. H.M.Jr: Hello. Operator: Leon Benderson: Leon Henderson: Hello, Henry. H.R.Jr: Leca, they asked me about prices of inflation, and I said some very nice things about you which they didn't run, and I'm sending you over a stenographic report of what II said. Hello? ài Teah. H.M.Jr: Where are you, BO that it can get to you? ai I'm over at the S.E.C. H.M.Jr: i'll have it there within fifteen or twenty simites. Will you be there? di Yes, I'll wait for it. H.K.Jr: West? ái I'll wait for it. E.N.Jr: Because I said, I think, some quite complimentary things. ai Well, I can stand those after ----- H.M.Jr: Well, what I said, as best I remember, I said, Mr. Benderson is doing a very excellent job under very difficult circumstances. in Well, that's very good. H.M.Jr: That's EF near as I can resember what I said. # Now, on another matter. Did you motice what they did with Palmer? H.M.Jr: Teah, I see that they put his in charge. 79 - 2 - That thing, and I think friend Mac was responsible for that. We, specifically, in the Commission discussed that, decided we didn't want an Executive Order of that kind, and had a specific understanding with Mac that it would not be done, no proposal of that kind would ever be made to the President without us being advised, and they chased it up to Hyde Park and got it signed. E.M.Jr; Well, the first I knew about it was when I saw it in the paper this morning. in Well, wouldn't you fire a fellow that did that to you? Well, I wouldn't feel kindly to his. in Well, I'm telling you that's your boy Mac - one of the boys that did it. S.M.Jr: Well, he didn't act like that when he worked for me. in I guess maybe we don't treat him right, but you might ask his about it when you get a chance. E.N.Jr: Well, I never see his anymore. I never see him. But I'll send you over the whole thing because quite a lot of it had to do with S.E.C. I'll send over the whole thing, I'd like to have you see what I said about you. in All right, fine, Henry. E.M.Jr: Good-bye. Regraded Unclassified 80 CONFIDENTIAL TO KEEP YOU POSTED January 13, 1941 To: The Secretary From: Mr. Young Re: Savy Planes for the Greeks. I received your message concerning the possible release of thirty Havy Grunmen planes from the "Wasp" to the Greeks. I tried to get in touch with Secretary Knox to find out what the situation vas, but he was unavailable. I contacted Under Secretary Forrestal, but he had no information as to details of the situation. With Mr. Forrestal's permission I called Admiral Towers who advised me that he knew nothing about it but that he was seeing Secretary Xmox and would let me know what the situation vas, Subsequently, on Saturday afternoon Admiral Towers called me back to say that Secretary Knox had promised thirty of the old Grummans off the "Masp", which were currently being re- placed by new ships. Towers went on to say, however, that he thought only about seventeen of those planes were any good and that even those needed a thorough overhauling. Further, Towers had grave doubt as to their usefulness inasmuch as each plane carried only one .50 and one .30 calibre gun. Admiral Tovers advised me that he was making a thorough study of the situation over the week-end. D4. 81 CONFIDENTIAL TO KEEP YOU POSTED January 13, 1941 To: The Secretary From: Mr. Young Re: Purchase of Var Supplies by South America. In line with the President's letter of January 4th to you suggesting the formation of a committee to handle policy matters for South America, I have been attempting to find out just what agencies and groups are interested in this question. In this connection I talked with Mr. McReynolds and advised him that it vas my feeling the Liaison Committee should call together all parties interested in the South American situation in order to find out just what each does. Mr. McReynolds thought this to be a good idea and agreed with me that the formation of any nev committee should be tem- porarily held up pending this survey. I have called a meeting of parties interested in this problem for 3 o'clock today. Is there any objection to forwarding copies of the President's letter to Mr. McReynolds and Colonel Maxwell? go ahead P.G. mr. to Regraded Unclassified 82 CONFIDENTIAL 20 YOU POSTED January 13, 1941 To: The Secretary From: X-. Young Re: Availability of Xary Funds I vas advised this morning by Xr. Vise of Secretary Knox' office that the Savy had 20 noney available for taking III) the bid on merchant ships which vas the subject of lb nenorandum to you of Jamary 10th. However, Mr. Vise stated that the Xavy had a consid- erable amount of money which could be expended for both ordnance items and aircraft. I gather that this amount say total up to 200 million dollars. P.4. Regraded Unclassified 83 Regraded Unclassified COMPLIMENTIAL TO YOU POSTED January 13, 1941 To: The Secretary From: Mr. Young Re: Chinese P-40 Planes. In line with the instructions which you gave me by tele- phone early Saturday norning, I got in touch with Burdette Wright at Buffalo, and Bill Goulding, Vice President of Curtise Wright, in New York. Guy Vaughan could not be reached by tele- phone. I explained to both Wright and Goulding the urgency of the situation and that delivery had to start on the planes immediately regardless of the negotiations between the parties or the paper work involved. Burdette Wright explained that actual physical delivery of the planes could not be made under the Neutrality Act until payment had been secured. However, it vas his opinion that delivery of the planes could not be made anyway for a few days as there had to be certain minor changes. Mr. Goulding also emphasized the difficulties of working out the paper part of the transaction and stated that he did not even know what the price of the engines was going to be or what changes the Chinese wished in the planes. I told Goulding that Universal Trading knew both the price for the engines and that no changes were required in the planes other than the removal of the British insignia. Goulding said that he would check with Universal in You York to get the latest word. In the meantime I had Archie Lochhead call Mr. Ren of Universal, who in turn called Goulding and straightened out the mechanics of the situation. Subsequently, Goulding called me from New York stating that be had talked with Mr. Ren and that it vas all straightened out with respect to the physical delivery. 84 - 2 - Delivery of the planes would start next Wednesday, January 15th, and Curtiss would arrange it 80 that the Chinese would get ten by the end of the week just as if the two per day rate had started on Monday. The Chinese were to take the planes without any change except the removal of the British insignia. Also the Chinese were to buy engines direct from Allison at a price of $19,477.10 each. (This compares with the price of $17,500 each quoted to Universal by Allison on the so-called "rejects"). In the meantime, Universal and Curtiss Wright are to get together either in Washington or New York to work out the details of the transaction. TO4. Regraded Unclassified 85 COMPIDENTIAL TO KEEP YOU POSTED January 13, 1941 To: The Secretary From: Mr. Young Re: British Orders Placed Since December 19th. At your press conference on December 19th, it vis stated that the British were told to go shead with Dego- tiations on all future orders up to the point of signing contracts with the exception of the 87 million dollar contract for the sixty ships. Since that date, and excluding a ship contract, the British have signed other contracts with a value of $10,600,000 which involves an additional amount for capital assistance of $700,000 or a total of $11,300,000. The major part of these additional contracts cover iron and steel orders end the balance is made up principally of machine tool orders. Attached herewith is a list of these contracts, but you will note that the two contracts covering the sixty ships with Todd are included in the totals. Ty. Speak tome 86 Orders Flaced by the British Government Through the British Purchasing Commission after Desember 19, 1940 As Reported up to Desember 28, 1901 : Value or order of Contractor Description Quantity Projuct 1031090 Toyal met ( on ToddeDath anipbuilding COPT., steel-hulled carge steen- douth Portland, MAINA upo, approx. 9,300 tone deadweight 30 8 $4,782,000.00 # 4,094,000.00 $8,836,000,00 (M) muptaild- Steel-Mulled cargo steach THE surp., calland, dellt. ore, spuras. 7,300 tone deadwelight 30 $3,045,000.00 4,105,000.00 47,150,000.00 20 Drap HOLOR do., Four eylinder Dieeel engineer Octually Vish. completely equipped 65 100,753.89 306,953.89 no 20 Kearney . Transer Carp., willing menhines, Wilmoukee, #100, extra equipment and wiring 15 72,625.00 78,625.00 10.20 Pratt & Whitney Dtr. of Two-epinate reading -Remnt-Pon Cord., wechines TO 10,487.00 60,587.00 has York, N. T. TO The Thrispaon Orinder 00 crinding monines 7 70,949.45 70,089.05 Maringfield, Ohio my c. ", Pllan Do., Centtal assistance to Memblyn, N. Y. Remington Arma Co. for production of .50 callber amminition 387,449.90 387,449.90 27 Enwigh Blokford Do., Primacord instantaneous 15 att. Sinabury, Conn. detonating Puees co. 505,000.00 525,000.00 se, 83 Ferracute Machine Do., Capital assistance to Bridgeton, N. J. Western Cartridge Co. 291,000.00 291,000.00 Iron and steel ordered by the British Iron & Steel Groes Corp. tons Pig iron 40,000 1,200,000.00 1,200,000.00 Barep steel A. iron 1,717 14,340.00 39,340.00 Comercial carton steel 79,132 3,956,600.00 1,956,400.00 Alloy and spécial purpose stwel 9,019 1,574,385.00 1,574,325.00 was Cocometive Works,Ton., Drug shovel units. dras- 110m, Ohio. Tion mechanisme, and aragline buckets 10 67,852.43 67,652.43 Chain crowd anovel attach- mente ano classhell grabe a #X-426 Sude engine COB- plate with all ancessories 1 Dio. 21 E. I, duPont de Henours Methyl Methacrylate reein & Co., Arlington, N.J. sheets 3,039 60,575.58 60,575.58 Ded. 20 Pratt & Whitney Div. of J1g borere, including Milne-Sement-Pond Co., additional equipment 10 111,640.30 111,840.30 Want Hartford, Conn. no. 26 Kareath Mfg. 06,, Kernath 225 n.p. "See Detroit, Mich. Wolf" enginee 140 238,000.00 218,000.00 160. 21 Pratt & Whitney Div. of Jig borere, including do,, additional equipment 18 126,020.00 128,686.05 Heat Hartford, Conn. leg. 20 Cincinnati Milling Vah. & Vertical high speed dial Cincinnati Grindero, Inc., type milling cashines Cincinnati, Onio. and aquipment 22 154,771.00 151,371.00 Dec. 27 Production baccine Co., Hand acrow anchines with Greenfield, Mass. electrical and other additional squipment 150 396,325.00 290,325.00 Dec. 20 Automatic Machinery ure. Rydraulio dual milling Corp. Bridgeport, Conn. machines, complete with equipment 25 123,750.00 123,750.00 Dao, 20 Pratt & Waitney D1V. of JLg borers, including Co., equipment 7 118,945.09 118,545.09 West Hartford, Conn. Dec. 26 International Machine Tool Turret lathes and extra Co., Indianapolis, Ind. aquipment 60 299,700.00 299,700.00 23 Porter MaLeod Machine Tool Porter McLand 6° no14 Co., Inc., Hatfield, Maan. metal sewing machines 25 79,552.03 75,552.03 Deo. 23 Simmone Mechine Tool Corp., Micro-speed drive New York, N. Y. lathes 54. 95,470.00 95,430,00 Dec. 21 General Machinery Corp Time sever lathes, Niles Tool Works DIV, rente and squipment 25 140,825.00 440,825.00 Manilton, Ohio. Combined total of orders for Issue than $50,000.00 95 contracts 607,861.73 03,005.50 687,530.23 Orand Total 117 contracts $98,392,534.75 $4,961,118.80 $107,353,653.15 January 10, 1941 Office of the Becretary of the Treasury, Division of Recearch and Statistics. Excludes orders placed during the week Denesber 16 - 21 by the British Iron and Steel Corporation aggregating 250.00. 2 Excludes AR indeterminate number of contracts of the British Iron and Steel Corporation, the dollar values of which have been included Le the above statement. Regraded Unclassified 87 DISFIDERFIAL TO M TOT POSTED Jamury 13, 1941 25 De Secretary the From: Ye. Toms in: Leak-proof Tanks tor the Vitid Boeing 3-17, In necordrace with your instructions, I got in touch with Sob Lovett Saturday d'terass and saced tis about the delay de would be caused in the delivery of the 3-17's to the 2018 the to the fact that Leak-proof tasts could not be procured. Lorett said that be vas talking with kr. Johnson, President of Boeing, and that be will call If back 84 soon as be the the comlete story. Subsequently, Lorett called tack to any that the British Ad niced for a. sube of changes is the 3-17 ni that it vas these changes which vere delaying the islivery rather than the India of leak-proof tanks. 30 vest == to SET that the original lies YES for the British to take the -lass 25 quickly as 708- sible, ni that the first plane ves realy to fly on Saturday, issury 11th. About a vest 40. have the bitte advised Bostag that they rented fourteen changes usis in the planes R$ follows: [1] languilage - Boeing advised the British they could sit to and vork in the Senttle plant. (3) Identification Keridage - Agreet to by Boeing. (3) Special Oxygen - Aged to by Boeing. (4) Change in Flare Installation - Agreed to by Boeing. (5) Filot Earness Installation - Agreed to by Boeing. (6) Tery Pistol Ancharage - Agreet to by 30eing. Regraded Unclassified 88 - 2 Regraded Unclassified (7) Change is Radio Receiver - Agreed to by Boeing. (8) Special Camera Konsting - Agreed to by Bosing. (9) Installation of British Type Bomb Backs British agreed to use the U.S. bomb racks as they were getting some U.S. bombs: Boeing agreed to supply drawings for the alteration of the bomb racks to fit British bombs. (10) Throttle and Kixture Controls - Agreed to by Boeing. (11) Collapsible Boats and Special Places - Agreed to by Boeing. (12) Top and Bottom Identification Lights - Agreed to by Boeing. (13) Special Armor Plate for the Pilot - Agreed to by Boeing. (14) Leak-proof Tenics -- Os this point Boeing advised Lovett that the installation of leak-proof tanks in the British B-17C's could not be made without delaying the B-17's to be delivered to the Army by March. If tank changes were unde, the production line would be slowed = so that the British would not get the B-17's until March 22nd instead of March 1st. In this con- nection Lovett emphasized the desperate need of the Air Corps for these planes and the fact that the War Department was not sympathetic to any delay inasmuch as twenty planes had been given up to the British and as the British has then insisted upon the changes noted above. Lovett vent on to point out that evidently there had been a good deal of changing 02 the part of the British Air Commission, and that there had been some difference of opinion between Fairey and the British technical people as to what should be done. In fact it was not until a weak ago that there had been any agreement on these particular changes and this agreement vas not actually signed until Saturday, Inmary 11th. With respect to the leak-proof tanks, Lovett did not seem to think that it vas worth-while to delay the production of Boeing to make the change, first, because of the desand on the part of the Air Corps for those planes, and, secondly, because the leak- proof tanks are only in the vings and would not cover the reserve tanks. Ph. 89 JT PLAIN LONDON Dated January 13, 1941 Rec'd 5:10 p.m. Secretary of State, Washington. 132, thirternth. FOR TREASURY: (1) Another vesting order covering OVEr 100 American securities is announced today. The list is made up largely of preferred stocks and bonds including about 30 United States Treasury bonds. Payment will be on February 24 and may be made in 21, percent war bonds, S percent savings bonds "baby" defence bonds, or in cash. Full list of issues are being mailed. (2) Today's FINANCIAL TIMES under Washington dateline quotes the Associated Press as stating that "highly-placed federal officials declare that Britain may DE asked to put up $2,000,000,000 of British assets in the United States as collatoral for war materials supplied under the British aid bill" and mentions direct investments in addition to the $600,000.000 of securities noted in the report cited in the Embassy's No. 110 of January 10. JOHNSON 5PL Regraded Unclassified 90 n HAIF Tanking Dated Junuary 13. 1941 Inc't 2:14 M. Secretary of State Washington 15, Jamary 13, 6 M. The local Linese press published 3. report from the "Central Beserve Bank that during its first week of operation it issued notes of cae dollar and upards to the value of five million six hundred thousand dollars and subsidiary notes to the value of almost eight hundred and fourteen thousand dollars. the identical total is significantly given as the backs current cash reserve. Sent to the Department, repeated to Changicing, Peiping and Sunghai, by mil to Thkyo. PAYMEN VSB eh:copy 20 155 LEGINICY X DEI "WE R 50 188 S% new Regraded Unclassified 91 DEPARTMENT OF STATE Washington, D. c. :- reply rde to January 13. 1941 la 151.5151/2660/2669 The Secretary of State presents his comlinmts to the Ennorable the Secretary of the Treasury and encloses two conies of persphrases of each of the following tele- gas, regriting recent action taken by the German authorities to examine safety deposit bezes in compled Prance. 1. Do Ticky, December 23, 1940. 20. 875- 2. Prom Ticty, January 5, 1941, 20. 38. Inclosures: Parantrases of two teleghas, as listed. COFT:lsp Regraded Unclassified 92 PARAPERASE - TELEPAN SENT TO: AMERICAN ENRASSY, VICHY. DATE: December 23. 1940, 2 p.M. NO.: 875 You are requested to inform the Embassy at Paris that we vast it to take all appropriate and feasible steps toward the protection of the American property in the safety deposit baxes in the occupied territory. Request it to make a full report on the matter. You should also repeat these instructions to the consulates in the occupied territory. HILL Ba:LC:RIC EA:MSG the Bill m K HI 15 te COFY:lap Regraded Unclassified 93 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embasay, Viety (Paris). DATE: January 8, 1941. NO.: 38 FROM PARIS. This matter was discussed by one of our staff yesterday with Imbartel (the Director of the Divisenschuts Komando). Kambartel said that the German officials' decision of Dec. 9th, which was communicated to the banks much later, related to safety deposit bases located in the occupied territory and belonging to people who are actually in this country. Under the provisions of the decision, after the 10th of January, 1941, safety deposits will be opened by force if their owners have not presented themselves for the opening. Steps have been taken by American banks here to notify their clients in both the unoccupied and occupied territory of the procedure they should taken in this regard, It was definitely stated by Kambartel that the German officials do not contemplate opening foreibly the safety deposit boxes belonging to neutral persons who are not in France - or even if they are in France, providing force majeure prevents them from presenting themselves before the 10th of January. Assurance was given by Kambartel that the Embassy would be notified if decision is made to open the deposit baxes of neutrals who are absent; he also gave assurance that the Germans would allow the absent neutrals Regraded Unclassified 94 + a "reasonable" amount of time in which to transmit their keys and appoint & deputy. Apparently the position taken by the Serven authorities which I have just outlined has also been communicated by them verbally to American and other banks here, but I think in & less categorical way. I have been informed that the National City Bank has taken the precention of requesting its N. Y. office to suggest to persons in the United States who own safety deposit boxes over here that they authorize the bank's lawyer to represent the here. It appears that similar precautions have been taken by Korgan k Company and the Chase Bank, No stamp steps in this regard have been taken by the Guaranty Trust Company yet, nor has the Company provided this Embassy with a list of Americans owning deposit boxes. This is likewise contrary to the statement mãe in the last paragraph of telegram no. 1144 of Dec. 16, 5 p.s., from Vichy. These safety deposit boxes are being examined by the German authorities for the purpose of withdrawing from them gold (in the form of coins and hars), unset presions stones, foreign banks notes and foreign securities, and placing them in a blocked account in the ovner's - and with the bank of the banx box holders. There - be no withdrawals from such a blocked account unless the German authorities grant authorization, BARNES EA:KSG LEAHY Regraded Unclassified 95 (Ennded by Sir Frederick Phillips to b. Cockran in the Treasury at 12:35 p.m., Jamary 13, 1941.) THE UNIVED DEVICE VITE CANADA Danada helps us as much as she on, by repatriating British-hald obligations and by allowing her sterling balances to rise; the amount of her helm is only limited 4 her ability to raise funds internally. In to date, in this var. she has furnished is with between Can. $350 and $400 millions since the beginning of the var. Denada undertook in the same vay to supply our deficit of Canadian dollars for the first half of the second wer year to the extent of Can. 8150 millions (say U.S. $130 millions). She had already provided this amount early in December, and we bed to start paying her gold again. In view I our critical position, we asked her to give us further help, and the Canadian Government undertock to furnish a further Can. $50 millions. But they could not and to their total help without endanger- ing their own financial structure, and this vas an anticipation of the helr which they would give as during the second half of the second ver year. This amount is now exhausted, and once again ve have asked them for further help, in order to and having to pay them more gold at present. This situation has to aspects of importance:- (2) Ve are straining the Imalian economy by asking them to help us at so rapid a pare. If, for example, we were to net then to see us through till the el of February, it would 2022 that they would have furnished = with a further Can. $75 millions: i.e. Can. $275 willions in all, against their original Regraded Unclassified 96 - 2 - promise of Can. $150 millions. We do not believe that we CA2 ask them for so meh, and though they may be able to give as further help, we must almost certainly pay them some gold in February. (b) is already noted, Canada cannot take nore then a DET- tain total of sterling and securities in exchange for Canadian dollars in the year. The extra help she has given us in December, 1940, and any further immediate help she may give, can therefore only take the form of anticipating the help she might give us in the remainder of the second var year. Thus during the remaining months of that year ve must count on less help, and the drain on our gold and U. S. dollar reserves will be correspondingly increased. British labassy. Kashington 12th January, 1941 COPY:lap Regraded Unclassified X DE COMPANY 97 RICTLY CONFIDENTIAL Deliverties of Airplane Engines Astal : Intimated deliveries : delivaries : - misting orders WAO January May 1 - June 1. June 2 - 29 June 30 - July 27 July 25 - August 31 September 1 - 25 September 29 - October 5 Detober 6 - 12 Detober 13 - 19 October 20 - 26. October 27 - November 20 November 3 - 9 Rovember 10 - 16 November 17 - 23. November 24 - 30 December 1 - 7 a SERR and STATE SSSR RRVER 24 December B - 14. December 15 - 21. December 22 - 28. December 29 - January If de January 5 - 11. 5 January 12 - 31 February March April May. June July August September REF same BEEK Dotober, November. December 10kg Commany February March AS Anril 40 May # June Office of the Secretary of the has Division of Research and Restistins. Juney 13, 1941. Regraded Unclassified 98 STRICTLY CONFIDENTIAL ALLISON SHIPMENTS : los. In.: Dor. :Dec.:Dec.: Dec.: Dec.:Dec.29:Jam.: Total 1-7:8-14:15-21:22-28:Jan. 4:5-11: 4 16 C: 27 82 60 46 5 83 426 I 3 3 1 1 18 6 4 2 41 If 19 is 30 86 78 52 12 85 467 2 H = a a // Item of Besearch and Statistics. January 13, 1941. Regraded Unclassified 99 Jenuary 13, 1941 Ky dear Mr. President: I - sending you herewith a monorer- due from George Hass an the prices of German municipal dollar bonds. There has been no great variation in their prices. Evidently, the newspaper story that you read was not based on very accurate fasts. Yours sincerely, (Signed) I Mesganihan, dr. The President, The White House. Inclesure. By - 245 Regraded Unclassified 100 January 18, 1941 My dear Mr. President: I - sending you herewith a dum from George Heas a the prices of German municipal dollar bonds. There has been no great variation in their prices. Evidently, the newspaper story that you read was net based on very accurate fasts. Yours sincerely, I of 1 $ 4. The President, The White House. Inclesure. w I 101 3 Secretary 4. has majost: Prices ef bernas insicipal Bonds. The attached table IN been prepared is accordance with your request for at analysis of the resent price arreasts of municipal hands. It shows veskly gince the beginning of and daily far the past DE veels, the prises of 6 dellar bonds of berman municipalities listed If the in Lart Stock Exchange. Class bonds 171 the only ones st listed which we exhibited OTEO a misrate degree of activity during the period under ounsideration. The bonds of the different municipalities have shown consistent treat. Their prices are is general about M the name " at the end of October - fear being alightly tigher, and tro slightly lever. Only the Berlin and Trankfort bonds have shows substantial intermodiate flastantions - each of these dealining by about 6 points and thes resevering this loss is the period covered by the table. 1/11/41 Regraded Unclassified 102 1 Tylees of Selected - biller Into Emiel - the See Test Red - 1 I Include 1 I flastag price I 15th 15k1 1990 1948 in. . á 9 In. 16 200. 45 lies. 30 Ins. T Date 14 Des. a Jas. a in. à 2ns. 30 É a 2 , in . dir. 4 in. 7 in. # das. , As. 10 in 11 are & of - 26-1/2 263A 16-L/2 25-1/1 06-1/2 20-3/h 20-1/2 25-1/2 25-2/2 25-1/2 . as - - - 26-1/2 - - I as of 1999 16-1/2 - - ay a 16 - - - 25-1/2 25-1/2 - - - - - - - **1/1/4 - - I & of - to - 164/2 16-1/1 264/1 8-1/2 16-1/1/2018 25-1/2 B-1/1 as 25-1/2 25-1/2 - . - - - #7 56-1/4 - - I the of - á . a - - as - - 25 - 25-1/2 . of . . - . my - - - I 7. of - # 164/1 - If - - - - es a - - - - - - 26-1/2 - - - I 6 9 Y VII 164/2 a-34 26-1/2 - - at - - as - - - as - - - # - - - I I Y 1 1 I 1 - 11, 1941. II 103 January 13, 1941 by dear Mr. President: I an inclosing 1 memorandum from Herbert Gaston, which is self-explana- tory. Where do we go from here? Sincerely yours, (Signed) I Morgenthan, h. The President, The White House. Inclosure. $55 I x Regraded Unclassified 104 Jenuary 18, 1941 My dear Mr. President: I an inclosing & memorandum from Herbert Gaston, which is self-explans- tory. Where do ne go from here? Sincerely yours, (Signed) 1 dr. The President, The White House. Inclesure. Regraded Unclassified 105 Junuary 13, 1941. for Ers. Clots Prent Mr. Gastom the Secretary called no from the form et 10:10 p.m. Saturday, January 11. Be asked if 11 was true that a Coass Geard cutter was transporting sotte occuped French convicts who were being deported to Martinique. I told his yes and is response to his questions said that the natter bad been a reaged as a result of request by the Department of Justice supported by the State Department, and that the cutter UKALGA had picked up - of the am at Mieni and was proceeting to Sex Jum, Poorto Rico, where she would get the others at ⑈ on to Martinique with them. The Secretary said he bed just had a call from Mrs. Receivelt who speke for the President and ested that 50 have the ship returned and net P to Martinique with the priceners until further orders ware received. I told the Secretary that the UNALGA we either seer or at Ban Jun, Puerto Rice, and that - could hold her there. Be saked as to have it dame imediately set alied that 10 - not necessary to call his basic unless I forms 11 was impossible to stop the outter. I imediately called the duty officer at Goast Goard, Livetement Hillington, and gave him the message, suggesting that he shock the form of the massage with Oxytain Chalker and report back to no. A too minutes later be tolephened back the form of the accouge as drafted by Captain Chalkers 90 UMALGA: "Procced to Sun Im ml email further orders before completing veyage to Nartinique Acknowledge" Be explained that the USALGA had crrived at to Jun at 6:50 M. Baturday and that Headquarters bel received a restine - cage requiring reply which w not amt urgent indicating that the enter w an to leave in has imodictely but that the form of the usessage M drafted w Challer would cover the site- etten if the had already left. Willington called ⑉ Subjey morning to siving as that the skipper of the ind receipt of the many, I attached file returned to theston 1/14/41 Regraded Unclassified 106 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 13, 1941 TO Secretary of the Treasury FROM Mr. Foley There was a. 3-1/2 hour meeting et Attorney General Jackson's office attended by the following: Mossrs. Jackson, Arnold, Shee and L.M.C. Smith of Justice, Mr. Berle, Mr. David Ginsberg, Counsel to Leon Henderson and Foley and Berustein for the Treasury. The entire meeting was devoted to discussing the Treasury's proposed Executive Order. Thursen Arnold read e monate which be had written describing the setting up. of three or four comittees to coordinate and pass on the policy questions in the three or four fields relating to economic defense. The subcommittees would take matters at with the Cabinet only when there E&S 8. conflict. Vr. Jackson and Ir. Barle the proceeded to state their objection to the extension of the freesing control, saying RET such HII Order would have tremendously unfevorable reperentations in this country. fr. Jackson felt that the public would not understand the granting of general licenses to areas such as the British Empire, Istin America, Japan and Russia, and would assume that all foreign assets were being controlled, with consequent widespread confusion in this country on the part of those dealing with foreign funds. It. Jackson also felt that se a result thereof people would seek to attack the validity of the Orders and the regulatory system and the informal method employed in carrying out the regulations would result in considerable support being given to the passage of the Logun-Malter Bill, which he fears will come S again this session. Mr. Jackson also felt there were a limited umber of things that the Administration should attempt to do by Executive Order without specific congressional ratification, and he was inclined to feel that even though there was broad enough legal power to obtain complete reporting of all foreign assets, nevertheless - should ask for congressional approval. Mr. Berle, in indicating his views, expressed agreement with Mr. Jackson and also felt that foreign relations wight be seriously impariled. Mr. Berle also claimed that if we extended the Order to Germany, Germany would imediately seize all American owned assets in Germany and perhaps in German occupied countries. We pointed out at length how the artended Order could be administered in such a my as to be completely in accord with the Government's foreign policy, and at the same time providing a very flexible instrument for imposing controls and pressures in directions where to wished to do BO. We discussed at length the method of administering the Order and pointed out that as a result of the issuance of the general licenses, the Order BUS in effect nothing more them a- tending freesing control to continantal Europe, except Russia, and obtaining reports for the whole world. Regraded Unclassified 107 - 2 - Regraded Unclassified Mr. Jackson said that if the Order were simply applied to continental Europe be would have no objection to it. Mr. Jackson wes also willing to have the control applied to those nationals of whatever country that the Secretary found were acting in behalf of 5 country or national thereof specifically covered by the Order. Mr. Berle felt, however, that the Secretary of State would have to decide whether such action would be consistent with our welfere. Mr. Berle suggested as an alternative giving the Secretary of the Treasury authority to bring specific persons or classes of persons under the Order upon determining that such persons were engaging in activities adverse to the national defense. Mr. Foley pointed out the imprecticability of such a proposal from the edministrative point of view, and in addition indicated that it would impose such a responsi- bility upon the Secretary of the Treasury that he would recommend should not be assumed by the Secretary. These difficulties were readily recognized by the others, particularly by the Department of Justice officials. Another alternative suggestion was simply to prevent the withdrawal from the United States of assets belonging to continental Europe. Fie pointed out that so long as the property could be dealt with freely in this country, the property could be readily withdrawn from the country by smuggling or through the diplomatic pouch or used in this country for improper purposes. In connection with the discussion of Title III of the Order, Serle seemed to feel that the provisions relative to the liaison work in connection with foreign buying involved impinging on some of Jesse Jones' activities. Berle indicated that ha had discussed this matter with Jones last night. Mr. Foley pointed/that this provision of the Order serely formalizes the lisison activities which the Treasury at the present time is exercising pursuant to authority from the President, and in no my impinges on Mr. Jones' activities in purchasing in foreign countries. Justice had no objection to the transfer to this Department of Colonel Mexwell's export activities. Kr. Berle did not commit himself explicitly on this point. Itr. Ginsberg stated that Henderson was all in favor of the administrative powers being vested in the Treasury, but felt that Army and Havy ought not be on the Board and Justice ought be on the Board. It was decided at the end of the meeting that the Treasury should draft another Order limited exclusively to reporting of all foreign assets here, end that Berle would take up with the State Department the advisability of axtending the freezing control to continental Europs. At the next meeting to be held on Wednesday these problems would be discussed, as well as further discussion of the problem of coordination. E.N.Th. 108 JAN 13 1941 Dear Per your conveniance I - enclosing - - fidential tables of British foreign exchange assets and requirements which were presented to represents- tives of Departments of War and Havy, Defense Council and State Department in my effice on December 10. Next of the information - supplied to us by the British and Considian Governments and 10, of course, to be treated w confidential material. If there is my other information that you would care to have with reference to British expenditures and reseipts, I shall be hoppy to and you whatever have. Sincerely, (Signed) E. Morganthan, fr. Secretary of the Treasury. The Emerable Cordell Hall, Secretary of State. I Delivered by Merle Cochran Mida 1/3/41 Hew FILE COPY Regraded Unclassified 109 JAN 13 1941 Dear Cordell: For your convenience I - enclosing - - fidential tables of British foreign exchange assets and requirements which ware presented to represents- tives of Departments of Mar and Havy, Defense Council and State Department in my office on December 10. Nest of the information was supplied to w by the British and Canadian Governments and 10, of course, to be treated as confidential naterial. If there 10 my other information that you would eare to have with reference to British expenditures and receipts, I shall be hoppy to send you whatever we have. (Signed) I Merganthau, Jr. Secretary of the Treasury. The Hanorable Cordell Hall, Secretary of State. Inclesures. Delivered by Merle Cochran Mida 1/3/41 Regraded Unclassified 110 - 1 $ 1941 Dear Cordells you your correntance I - enclosing - - fidential tables of British foreign exclange assets parents s I requirement I 1 tives of Departments of Har and Newy, Defense Council and State Department in my office # December 10. Next of the information - supplied w w w the British and Conndian Governments and 10, of course, to be treated - confidential naterial. If there to my other information that you would care to have with reference to British and receipts, I shall be happy w end you vistorer we here. (Signed) I dr. Secretary of the Treasury. the Emerable Cordail Ball, Secretary of State. Inclesures. Delivered by Merle Cochran Mida 1/2/2 Regraded Unclassified copy" 111 U.S. Treasury Department Strictly Confidential Division of Monetary Research December 16, 1940 SUMMARY ESTIMATE OF FOREIGN EXCHANGE ASSETS OF CANADA (Except where otherwise indicated, the figures below were obtained from the Canadian Govern- ment.) (In millions of U.S. dollars) I. Gold and Assets in U.S. 1. Gold, Dec. 9, 1940. $ 137 2. Official dollar balances, Dec. 9, 1940 190 3. Private dollar balances, Sept. 30, 1940 30 This excludes some $140 million of private deposits Canada regards as necessary for the conduct of business. 4. U.S. securities, Dec. 9, 1940 340 Estimated at market value - mostly listed stocks. 7 5. Direct investments in U.S. Nominal value, Dec. 31, 1938 - 3328 million Total (at least) $ 697 II. Long-Term Investments of Canada Outside U.S. The values indicated below should not be totalled because they are not reduced to a comparable basis; some are nominal value, some book value and some market value. 1. Latin America Securities, market value as of Dec. 1, 1940 $ 6 Direct investments, nominal, Dec. 31, 1938 176 Regraded Unclassified 112 - 2 - (In millions of U.S. $) 2. Australasia Government bonds (par value) $ 6 Direct investments (book value) 12 3. Africa Government bonds (par value) 0.5 Direct investments (book value) 5.0 4. British Asia Government bonds (par value) 0.5 Direct investments (book value) 5.0 5. Other Ásia Government bonds (par value) 1.2 Direct investments (book value) 0.4 6. United Kingdom Government bonds (par value) 15 Corporation securities 13 Direct investments 14 7. Europe outside U.K. Government bonds (par value) 5 Stocks (estimated) 4 Direct investments 7 Regraded Unclassified capy" Strictly Confidential U. 8. Treasury Department Division of Monetary Research December 17, 1940 A SUMMARIZED STATEMENT OF THE ESTIMATED 113 TOTAL OF U. E. DOLLAR DEFICITS (The figures below are estimates of the British Government.) This is a preliminary report and will be revised as further information becomes available to us. (In billions) Total (at least) $8.5 of which, Amount due on British Government orders $8.3 Deficit accruing on all other items to Sept. 1, 1941 .2 1. Deficit accruing to Sept. 1, 1941: Amount due on British Government orders $2.5 All other sterling area expenditures requiring dollars 1.3 Total $3.8 Sterling area receipts in dollars to Sept. 1, 1941 1.1 Deficit accruing to Sept. 1, 1941, to be met by sale of assets $2.7 2. Deficit accruing after Sept. 1, 1941: Balance due on Government orders $5.8 Net deficit on all other sterling area dollar expenditures after Sept. 1, 1941 (estimated at $15 million a month on the assumption of continued net payments by the U. K. to Canada of $50 million a month) - Total (at least) $5.8 114 - 2 - (In billions) 3- Therefore U. I. must finance: Deficit accruing by Sept. 1, 1941 $2.7 Due after Sept. 1, 1941 on British Government orders from U. S. placed and proposed 5.8 Deficit after Sept. 1, 1941 on sterling area transactions other than B.P.C. orders from the D. S. ($15 million per sonth) I Total (at least) $8.5 To meet this $8.5 billion deficit (plus the monthly current deficit) the U. I. has assets as shown in the accompanying table. Regraded Unclassified copy" 115 U.S. Treasury Department Strictly Confidential Division of Monetary Research December 10, 1940 SUMMARY ESTIMATES OF FOREIGN EXCHANGE ASSETS THAT CAN 56 MADE AVAILABLE TO U. K. FOR DOLLAR EXPENDITURES (Except where otherwise indicated, the figures be- low were obtained from the British Government.) This is at preliminary report and will be revised as further information becomes available to us. (In millions) 1. Gold held by U.K., Dec. 6, 1940 $ 460 2. U.K. Official Dollar Balances 124 Bank of England balances on Dec. 4 $64 Dollar balances of authorized agents 60 The British feel that a minimum balance of gold and official dollar balances of $600 million 18 desir- able, but in the absence of other cash items these are being drawn down and will be exhausted within 3 months. 3. U.K. Private Dollar Balances, Nov. 27, 1940.. 240 The above item is from U.S. Treasury data. It excludes $60 million held by British authorized agents which amount was included above under official dollar balances. The British will furnish their data on this matter. The British state that these private funds con- sist of (a) funds in transit, and (b) funds of business and financial enterprises held under authority of the British Exchange Control and deemed essential to the conduct of business. Regraded Unclassified 116 a I I (In millions) 4. American securities held by U.K. which are readily marketable, Dec. 6, 1940 $ 660 5. Diverse securities held by U.K. dollar and optional dollar -- Dec. 6, 1940 140 The British state these are not easily market- able. 6. U.K. direct and other investments in the United States --- The United States Department of Commerce estimates these items at over $1 billion at book value. The British estimate of this item which is now being compiled 1s expected by them to be lower. The British are of the opinion that the value of these investments depends especially upon finding willing buyers. They wish to point out further- more that a portion of the value of these invest- ments is due to the relationship of the particular firm to the British parent company. 7. U.K. Investments in Canada Canadian dollar securities. Market value as of Sept. 1940 $427 These are being liquidated at the rate of one- quarter billion a year to help meet U.K.'s adverse balance of payments with Canada. Canadian sterling securities British are awaiting data on this item. Direct investments in Canada 117 in I I (In millions) The British are mking inquiries with respect to these three items. The United States Treasury tentative estimates based on official Canadian studies are in the neigh- borhood of R billion. 8. Gold reserves of the Allies held in United States and British Empire $ 1,088 Holland In the United States 364 In the British Empire 100 Belgium In the United States 168 In the British Expire 348 Crechoslovakia In the United States o In the British Empire. 30 Poland In the United States 2 In the British Empire 2 Normy In the United States 34 In the British Empire st The figures of gold on earnark in the United States are as reported by the Federal Reserve Bank of Bes York. 118 - 4 - (In millions) with respect to the gold holdings of the Allies, the British Government has not yet been able to obtain more then an offer of a temporary loan - three to six months - from some of then, e.g. Beigium. 9- French gold in Canada or the United Kingdom... $ 650 In addition France had $502 million of gold on earmark in the United States on December 4, 1940. $370 million of this $650 million must be dealt with under Canadian policy and law, and the remaining $280 million under United Kingdom policy and law. 10. Dellar Balances of British Allies Official, Dec. 4, 1940. 20 Netherlands 8 Belgium 1 Norway 12 Crechoslovakia - Poland 1 Private, Nov. 27, 1940 350 Netherlands. 161 Belgium. 145 Kormy 38 Crechoslovakie - Poland 2 The above items are from U.S. Treasury data. The Polish private balances are for the New York 119 - 5 - (In millions) Federal Reserve District only and are as of Sept. 25, 1040, the latest date for which infor- setion is available. so statement has been nade by the British Scrernment with respect to the status of these balances. On November 27, French official talances in the United States totalled $347 million, of which $97.5 million are held in the account of the Bank of Canada, and French private dollar balances to $249 million. 11. I.L. investments in Latin America Argentine railways, nominal value -- British estimate $ 1,000 The British are et present in the process of establishing the price which they would no- cept from Argentina for these assets. Other Latin American securities, nominal value, British estimate 1,800 The British estimate the value of the quoted portion {over 90 percent) of these securities at $635 million. These are almost all sterling securities and for most of them, in the opinion of the British, it would be very difficult to find buyers outside the sterling area. Some of them, for example Argentine Public Utilities, say be salable for Regraded 120 - 6 - (In millions) dollars. The British state that they would be glad to sell any of their Latin American investments except some special and minor items, for example the Bank of London and South America. In some cases, a transfer of owner- ship out of present hands may encounter local political opposition. 12. U.K. investments outside the Western Hemisphere The British Government 1s now making a study of these investments. 13. Long-term investments in the United States held by British Allies 1,000 Hollend 767 Belgium 203 Norway 32 These figures are the holdings of the United States securities and direct investments in the United States, as reported to the Treasury on form TFR-100 as of the date of the freezing of their assets. It is not known how large a portion of these investments are accessible to England and the Allied Governments. Long-term investments of France in the United States total 8443 million as of June 17, 1940. Regraded Unclassified 121 Strictly Confidential - 7 - FOREIGN EXCHANGE ASSETS OF OTHER BRITISH EMPIRE COUNTRIES WHICH MAY NOT YET BE AVAILABLE TO THE UNITED KINGDOM FOR DOLLAR EXPENDITURES Whether or not any of the assets listed below would be available to neet United Kingdom requirements depends, according to the British, on the governments of the res- pective dominions and India. The data are from U.S. Government reports unless otherwise indicated. (In Millions) 1. Gold $748 Canada 137 Union of South Africa 314 New Zealand 23 British India 274 These figures are for various dates and except for Canada are the latest published in the Federal Reserve Bulletin. The Canadian holdings are as of December 9, 1940 and were reported to us by the Canadian Government. The gold holdings consist in part of monetary reserves required by the law of the countries. 2. Official Dollar Balances, Dec. 4, 1940 190 Canada 180 This excludes $97 million held by the Bank of Canada for French account. Other 10 A portion of these balances will probably be needed to conduct current business. Regraded Unclassified 122 - 8 - (In Millions) $ 300 3. Private dollar balances Canada, Nov. 27, 1940 170 Hong Long, Nov. 27, 1940 & 37 Other These figures, the latest reported, are for N.Y.F.R. District only and are as of Sept. 25 or Oct. 11. A substantial portion of the above private dollar balances are doubtless needed in the conduct of business. 380 4. American securities 340 Canada This is the Canadian estimate of market value. Department of Commerce estimate ad- justed for net sale is $500 million. Some part of the Canadian holdings of American securi- ties will probably be needed to help Canada neet its own payments to the U.S. of Other This is the Department of Commerce estimate. 5. Direct investments in the United States 465 460 Canada 5 Other These are Department of Commerce estimates of book value. The Canadian estimate of nonimal value of Canadian direct investments in the United States as of December 31, 1938, is $326 million. Regraded Unclassified DOLLAR OPERATES AND RECEIPTS OF CANADA FROM DECEMBER 1, 1940 a SEPTEMBER 1, 1941 (In Millions of D. 8. dollars) llar Expenditures of Canada Dollar Receints of Canada to to be made to t. S. A. Dollar receints by Canada from U. 5. w paid by Canadian Government 1. Canadian exports of merchandise to U. 3. jencies between December 1. (including silver) 1305 E September 1, 1941 for govern- rehaves from the U. 5. $250 2. Receints by Canada from U. 5. on invisi- Mition, Canada is apected to ble items 115 8297 million on government Interest and dividends & to after September 1. 1940.) Tourist travel 5 surchandise imorts from the 3. Canadian nevly-nined gold to be exported law States 350 to U. S. 145 - to be paid December 1, 1940 - Total $565 1, 1941, on interest and account 225 Data is compleed of the following B. U. 8. dollar receipts by Canada from countries If other than U. 5. and U. I. Surest $ 64 tridends 10* 1. Commodity exports 35 gist travel 17 Freight and miscellaneous 2. Invisible items 10 services 37 Total 45 to be paid to retire Canadian Har ohligations naturing before C. Receipts of gold and U. S. dollars by Canada (Mober 1, 1941 45 from U. I. due, according to British figures supplied us, on balance with sterling area 465 Intal payments to be nede by Canada to U. S. ⑈70 Total receints of U. S. dollars .... 1,075 payments, requiring gold or = S. to be nade to areas outside the D. Surclus of U. S. dollars received by Canada 165 adity imports 32 Heible items Total cryments outside the U. S. recuiring dollars 40 DRAND TOTAL GRAND TOTAL Dollar recuirements of Cranda Dollar receipts minus surplus accruing 3910 from December 1, 1940 to Seot. 1, 1941 9910 for all transactions December 17, 1940. irtment, Division of locetary Research. Regraded Unclassified R EXPENDITURES AND RECEIPTS OF STERLING AREA FROM DECEMBER 1, 1940 TO SEPTEMBER 1, 1941 (In Williams of U.S. Dollars) Expenditures of Sterling Area Dollar Receipts of Sterling Area in be made on total purchases from the U.S. d. Dollar receipts by U.K. from U.S. 1. M M between December 1, 1940 and Sept. I, 1. U.K. exports of merchandise to U.S... 3064 already placed $1,035 $123 ! $200 willion 1a expected to fall due 2. Net belance from U.S. to U.K. on after see 1, 1941) invisible items 12 L. - tax to paid to next nine months on additional orders Total $ 136 % tistion. 541 is $864 million la expected to fall due B. Dollar U.S. receipts by sterling area from - Cale progres after Sept. 1, 19411 1. - the to paid by Sept. 1, 1941 on contemplated "T" 1. Comodity exports (2) 050 2. Australian gold exports to U.S. 50 15 alition, $1,100 million will be payable on this per after Sept. 1. 1941) 3. South African exports of gold 360 4. Importe free U.S. not purchased through the British Total 836 handwing Commission. 210 C. Canadian assistance to U.K. 195 Total payments to be made on U.K. purchases Total dollar receipts of U.K. and from U.S. $2,745 sterling area $1,166 Items 2 and 3 above do not include $709 million of capital assistance. Whatever part of this is to Total dollar deficit of sterling area with U.S. be paid before Sept. 1941 must be added to this total. 2,213 1. I.L. purchases from areas outside the U.S. requiring gold Total dollar deficit of sterling area with Canada (in U.S. dollars). 465 or dollars L. Prechases M starling area (sortly U.K.) outside the U.S. Total U.S. and Canadian dollar 1 196 deficit of sterling area Omaila requiring dollars 2,678 GRAND TOTAL 2. house by starling area Imostly U.K.I to Canada and leh 000 Total receipts and deficit on operation from Dec. 1, 1948 to I. payments outside U.S. requiring dollars 846 Sept. 1, 1941 $3,844 wierling area (excluding U.K.) from U.S. Special Note Sept. 1941) al In addition to the deficit expected to 250 accrue before Sept. 1, 1941, there will L bords 3 be payable after Sept. 1. 1941 form orders Indicated to A 1 - 2 - 3 in opposite col- ts to U.S. by sterling area (excluding union) a total of $2,762 sillion. This does 253 not include any deficit accruing from ad- ditional orders expected to be placed by requirements of sterling area for all the British but not yet decided upon. 53,544 Anticipated deficit prior to Sept. 1, 1941 $2,678 Minimum deficit after Sept. 1, 1941 2,762 Division of Monetary Research Minime total deficit $5,440 Regraded Unclassified 125 EXPORTS of HIME, me E ID N - FROM E STATES 20 JAPAN, He, BIX, I at END AS SECTION If 1 - MY the I # 1 all : DAY R " as = BE = 11 " II I - PRODUCTS M al Bas DII (including liest Dil) 465,400 Bis. I an Ms. 110,25 30s. à Leist or Delifornia High Dotane Cruis* $,000 30s. I I I E Other Drude I I I I Busiline 200 - # # 189 301s. levelline Fr 148,177 Ms. I 1 RE 301s. Diner Gasoline I I I 7.25 His. diesting Oil - I atistion Lubricating 011*** - I I 11,55 Ms. 40 Dther Lubricating 011 45,480 his I 1 520 30s. instruction Lead*** - I $ 1 "Instery", such as Iso- Intern, Iso-Hexane, or Im-Pentame I 1 I I DE AND SURAP STEEL lake 2 Heavy Nelting Scrap I - I mo Your 40 Mher Scrap 1 - 1 J sers be of the Secretary of the Treasury, 1 brunt mi lists Tapic $ I the Office of Marchant Ship Central but Any naterial from which by commercial distilla to - in - than 3 percent of aviation antor del, introduction = - President's regulations of big a 190. Infistion Basoline. la ünfined in the President's registies of My á 190. Regraded Unclassified 126 COUNCIL OF NATIONAL DEFENSE OCCORDINATOR OF COMMERCIAL - CIRTIRAL RELATIONS BETWEEN THE MERCH MILIS You will find, herewith, for your confidential information e. capy of our weikly digest of the current activities of the wari- come departments and agencies handling autters on inter-American concern. Attachment 127 CONFIDENTIAL 2560 COUNCIL OF NATIONAL DEFENSE COORDINATOR OF COMMERCIAL AND CULTURAL RELATIONS BETWEEN THE AMERICAN REPUBLICS per guner - - as January 13, 1941 RESSELY PROGRESS REPORT 2 ACTIVITIES IS RELATION TO.THE OTHER AMERICAN REPUBLICS COMMERCIAL United States Pirms with Agents à sufficient sumber of U.S. exporting firms to cause concern from the polat of view of defense, are represented in Central and South America by agents with non-American connections. This was disclosed is a press statement made last Wednesday by the Coordinator concerning the findings of the mission sent by this office, in cooperation with State and inter- ested agencies. The statement emphasized that in many cases these firms rave been of their agents' commections with anti-American acti- vities. The mission WES beaded by Percy L. Douglas, on leave of absence from the Xis Elevator Company, and included John Lockwood of the New York law firs, kilbank, Tweed, and Eope, and George E. Butler of State, as well LE . group of technical assistants. It undertook its study of these practices shortly after the establishment of the Coordinator's office = August, and returned in December, after visits to eighteen of the twenty American Republics. The work of correlating the findings ca 8. hemisphere basis is mearing ampletion. Examination of the country by country reports discloses the following facts: :. That United States business is frequently represented in Central and South America by firms and individuals now known to support objectives contrary to the best interests of the American Republics: 2. That these representatives often use advertising appropriations of United States business firms to force newspapers and in some in- stances radio stations to adopt anti-Anerican editorial policies; 3. That may employees of Inited States companies or their affiliates it Central and South America are known members of local anti-American organizations; 4. That many anti-American firm, which formerly sold only European products, have now succeeded in obtaining agencies for United States business. These new commections are keeping them alive, and enabling then to mintain their trade contacts. In many instances, they openly declare they will return to their former lines at the expirs- tics of the mr; i. That many of these agents who DOW represent United States firms are obtaining through this médium confidential trade information which it made evailable to anti-American powers; Regraded Unclassified 128 Page 2 13, 1941 8. But profits thus derived from representation of United States firms are being used to finance operations of propaganda agencies in (entral and South America; T. That may of the firms representing United States companius also street 5.5 centers for distribution of anti-American literature and 8. propégunés; May of the larger anti-Amorican firms have established their own purchasing egents in the United States and with the goods obtained in this market remain in business; 9. Officers and employees of a number of firms, representing United States businesses, are officials of anti-American powers. Mary Deited States companies have alrendy taken steps to namily the situs- the = cooperating with the Nationals in the countries is which they opinate to appoint agants friendly to inter-Amurican solidarity. It is confidently inticipated that our exporting firms C5 G. whole vill cooperate 1.8 $005 =s they ero apprised of the situation as it relates to their in- tents. Knudsen Sympathetic on Priorities The Coordinator has given e. list of U.S. exports to Latin America in 1938 to Er. Enudsen (Defense Commission), who has indicated that most of these materials can still be furnished to Latin America without difficulty. Thile the are certain notable exceptions such 1.5 aircraft, he had in- fiested that the Priorities Bonrd will give sympathetic consideration to INC difficultios brought to its attention. Although shipmunt of cortain goods, such as maintehance ports for scro- clanes, have been hold up, Worrill C. Noigs (Defense - Director, Acronnuti- ent Section of the Production Division) has helped expedito Any and Savy cirumences of necessary supplies end has appointed en assistent on Latin incrices meterials. Commodity Developments Industrial Siamonds: Loith (Defonse) anticipates action on industrial cismond purchases from Brazil end Vonezuela this week. Zinc: é solution of the labor difficulties at the Rosits smolter in Vexico seams imminent. The opening of the smolter my solve the scute shortige of synthetic zinc. Jungsten and Antimony: Coordinator's office is invostigating the pos- sibility of purchases of tungsten end antimony from Bolivis and ingration. Cotton: Since all agencies ero substantially in agreement that thore should be sn increase of long-staple cotton importations from Peru, 10 sarly agreement is expected. Sugar: The Executive committee of the Export-Import Bank has approved 5. Mecamendation for the financing of an extraordinary Spanish quota of 400,000 long tons of sugar from Cube. Coffee: The President sant the Inter-American Coffee !greement to the Sinate on Thursday. Regraded Unclassified 2560 129 Page 3 Jenuary 13, 1941 Country by Country Studies Four of the agemeies working on the first country by country study, Colombia, bawe indicated that their preliminary reports will be ready in = for days. These studies are designed to give overall conomic pictures of the other American Republics. Index of Prices The Coordinator's office is arranging on index of prices for the princi- pal goods shipped to latin America by this country which will cover the period from 1938 and will be kept a: month by month so that any increase in our prices to Latin incrice will be noticeable. Agriculture Mekes Annual Report The report of Lislie Whecler (Director, Foreign Agricultural Rolations) stresses the edvisability of developing complementary products in Intin Imerica such 13 rubber, sbace, cinchons, numerous agricultural plants yielding tropical vegutable oils, drugs, herbs, perfumes, flevoring ex- tracts, too, tropical fruits, and hardwoods. Although U.S. imports of crude rubber, cinchone, staes, kapok, rotonone-bearing plants, crude and refined camphor, toe, and cocon approximated $235,000,000 in 1939, latin America, which can produce all of them, supplied only $15,000,000 of the total, according to the report. Be points out that E: lerge part of agricultural production comes st pre- sent from three of the twenty other Republics lying sholly or in part in the Temperate Zone since tropical and semi-tropical regions are undeveloped. Of this production which mins up as much as ninety per cent of imports from that region, sbout one-half is supplementary; i.c., composed of pro- ducts also produced in U.S. Concerning the important agricultural commodities now produced within the imericas in quantities far in excess of cristing hemisphere requirements, Theeler suggests two spprosches: 1. "Through an increase in the consumption of such products within the hemisphere, possibly through the insuguration of intensive inter- American relief distribution similar to that which already exists in the U.S. and state of the other Imerican Republics"; 2. "Through international commodity arrangements, the object of which would be to reduce the supply of these products more nearly to the level of existing dumends." Be citos the coffee arrangement as an example. Agricultura also reports that the EAC bas sent 6. representative, Guy Bush, on a two months' trip into Brezil and Argentina (and possibly Chile) to mike = survey of agricultural industries in those countries with special reference to the agricultural situation in corn, cotton, whost, and live- stock. The Department has else selected personnel for the proposed survey party to'make try staties needed in connection with the proposed loan to Cuba for agricultural development. The party will include Dr. Wilson Popenoo of the United Fruit Company, as well as members of the Department. Weekly Progress Report No. 16 Regraded Unclassified 130 TREASURY DEPARTMENT INTER OFFICE COMMENICATION DATE Jesuary 13. 1941. TO Secretary CONFIDENTIAL FROM Mr. Cochran legistered sterling transactions of the reporting banks were as follows: Sold to comercial concerns 245,000 Purchased from comercial i 6,000 Open murket sterling remained at 4.03-3/4. Transactions of the reporting tanks VITY: Sold to comercial concerns i 7,000 Purchased from comercial more 1 4,000 The Cuben peso discount videned further to 8-5/166, as compared with 8-1/16% = Saturday. is for the other currencies, the only appreciable took place in the lanadian dollar and Svice franc rates, which declined slightly. Closing quotations vere: Canadian dollar 14-1/51 discount Swies franc 2520 Swellsh kross 25 Reichanark .4005 Line J515 Argentine peso (free) -2960 Pracilism milreis (free) J5505 Merican peso 20th Chinese you 25-3/8 The Federal leserve Bank of Fev York reported that the Bank of Canada shipped $1,820,000 is gold from Canada to the Federal for account of the Government of Canada, for sale to the Jev York Assay Office. 1 of gold and silver, with 5 combined value of $596,000, was also reported as hering been sent from Para by the Central leserve Bank of Pers for its ONL account. 5 disposition of the Pera- vias shipment, which is consigned to the Federal, to at present unknown. The Bonbay gold price ⑉ uncharged st the equivalent of $33.91. Silver vas 1/16# higher at the equivalent of 44.116 Regraded Unclassified 131 - 2 - st 23-5/16₫ y and 23-1/41 respectively. The dollar equivalents were 42.33# and prices find is Lendon for spot and forward silver were both unchanged, 12.21/- Easty and Earman's settlement price for foreign silver was unchanged at 34-3/44. y Preasury's purchase price for foreign silver was also unchanged at 35#. Ve mis four purchases of silver totaling 450,000 ounces under the Silver Pur- - Let, all of which consisted of mv production from foreign countries, for forward delivery. Juirl CONFIDENTIAL 132 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL DATE Jenuary 13, 1941 TO Secretary Morgenthau FROM Mr. Klaus you reports: January 8. A report on Japanese naval construction says, among other things, that two capital ships of 42,000 tons each, 30 knots, and 10 heavy gun amesent are under construction. Seven million dollars of asbestos 1s. imported annually from Africa, and there is 5 shortage of shoe leather, matches and rubber in Japan. January 8. Walter P, Reuther of the Automobile Workers Union 16 shown to have been definitely a Communist, at least as late as 1937; in 1934 he and 8. brother Victor went to Russia and worked two years in & factory there; FBI has obtained one of several letters written by Reuther from Russia in which the Soviet system is praised and reference is made to carrying on "the fight for Soviet America." Be is also said to have run for the Common Council in Detroit in 1937 on the Communist Party ticket. January 9. Russian balances in the Chase Bank as of December 11, 1940, were £28,087,133. January 10. With reference to the withdrawal by the Swiss of $5,000,000 in currency on December 31 we are told (orally) that this may be for the purpose of satisfying a Swiss legal provision requiring assets to be in cash for certain purposes. January 10. An intercepted letter dated November 25, 1940, from a member of the Vichy Ministry of Foreign Affairs to someone in Bogota, Colombia, states that "the very presence of the Germans" makes Paris "like a smouldering fire," riots having taken place culminating in 8 demonstration on November 11th when machine-gunning killed and wounded several people; in spite of the newspapers and the radio "everyone is more and more convinced that England will be able to stand up against Germany in the sir." January 11. On November 20, 1940, a letter was sent by the president of "Solidaridad Filipina," a Philippine civic association, to Sunder drawing the latter's attention "to the need of the new order of things" in the Philippines and of the desire of the members of "Solidaridad Filipina" and all the youth of the Philippines to 800 a free government established under the protection of "our Mother, the great end immortal Spain." January 11. Between May 17, 1940, and November 22, 1940, the Norwagian Legation withdrew $650,000 in $1,000 bills; this 10 apart from the $105,000 item reported January 9. (This has been reported to Mr. Pable by no.) October 25. Special Agent's report on Russian runde, New York, shows, amoug other items, a payment on October 8 of $1,250 to Mro. Ruther Baker Pratt out of the account of the New York Soviet Consulate General. is nclassified 133 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE January 13, 1941 Secretary Morgenthau TO FROM Mr. Haas MA- The attached tables and chart show an increase of 2,000 persons in Work Pro Jects Administration employment for the week ended January 1, 1941. The number of persons employed during that week was 1,880,000, compared with 1,878,000 during the week ended December 25, 1940. Attachments 134 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Neek ending Number of Workers 1940 (In thousands) May 1 2,059 May 8 2,009 May 15 1,970 May 22 1,945 May 29 1,926 June 5 1,858 June 12 1,785 June 19 1,714 June 26 1,665 July 3 1,608 July 10 1,620 July 17 1,659 July 24 1,690 July 31 1,701 August 7 1,709 August 1- 1,708 August 21 1,698 August 28 1,691 September 4 1,690 September 11 1,687 September 18 1,689 September 25 1,704 October 2 1,747 October 9 1,762 October 16 1,768 October 23 1,776 October 30 1,779 November 6 1,783 November 13 1,785 November 20 1,806 November 27 1,820 December 4 1,832 December 11 1,855 December 18 1,872 December 25 1,878 January 1 1,880 Source: Work Projects Administration 135 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers 1938 (In thousands) July 3,053 August 3,171 September 3,228 October 3,346 November 3,287 December 3,094 1939 January 2,986 February 3,043 March 2,980 April 2,751 May 2,600 June 2,551 July 2,200 August 1,842 September 1,790 October 1,902 November 2,024 December 2,152 1940 January 2,266 February 2,324 March 2,288 April 2,092 May 1,926 June 1,665 July 1,701 August 1,691 September 1,704 October 1,779 November 1,820 December 1,878 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. WORK PROJECTS ADMINISTRATION Number of Workers Employed United States Mmthly W.P.A. Employment 8.7.1. Explayed 1933 1936 1937 1930 1939 1940 41 1939 1949 1941 BLIMI MILLIONS WILLINGS If or or or - WORKERS WORKERS I 3.4 14 33 33 1.2 3.2 3-2 w . 3.1 11 1.8 2.8 3.0 10 2.9 2.9 2.4 2.4 2.8 2.0 2.7 2.7 2.0 2.0 2.6 15 2.5 as 1.4 1.6 2.4 24 2.3 23 2.2 22 1.2 1.2 2.1 2 2.0 28 4 -8 1.9 1.9 1.8 1.8 A - 1.7 1.7 1.6 M 0 - o 1.5 1.5 If 5 . - JAB. 1 - JULY MPT. - 1 as. - i É - ( - 1935 1936 1937 1930 1939 1940 in 1939 1946 1941 SOURCE: PROJECTS ADMINISTRATION - et be Secretary of the Transy - all - - - 201 - Regraded I Inclassified 137 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION Miss Chausey DATE January 13, 1941. 10 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL The Federal Reserve Bank of New York reported the following transaction in the account of the Central Corporation of Banking Companies, Budspest, maintained with the Guaranty Trust Company of New York. Amount Credited Received From Date January 10 $98,700 National City Bank by order of National Bank of Hungary B.M.P. Regraded Unclassified 138 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION CONFIDENTIAL DATE January 13, 1941 TO Secretary Morgenthau FROM Mr. Haas MA Subject: The Business Situation, Week ending January 11, 1941. Summary (1) The commodity markets show clearer evidence that & renewed price rise 18 getting under vay. Prices of basic foodstuffs last week approached the peak of last April, while prices of industrial raw materials reached a new high since January. Greatest advances during the week were in paint materials, fats and oils, and coffee. (2) Speculative interest in commodities appears to be increasing somewhat, motivated in part by the uncertain out- look for speculative profits in the security markets. Inter- est currently 1s centered in the fats and oils, a group con- sidered in some quarters as likely to be relatively free from Government control. The development of widespread speculative buying would increase the difficulties of stabilizing com- modity prices. (3) The steel industry in December fell still further behind in its attempts to keep up with the volume of orders. New orders of the U. S. Steel Corporation in that month con- tinued far above shipments, and unfilled orders have accord- ingly shown a further sharp increase. (4) Our new orders index rose during the New Year's holiday week, despite a reduction in steel orders. The turn of the year has initiated a heavy spring buying movement in cotton goods. Sales of print cloth last week rose to about three times the current weekly production, which is already at a record level. (5) The New York Times index, which has been basically revised, continues to indicate an expansion in industrial activity. In the first week of January, the index rose 1.9 points to a record high of 123.0. Regraded Uncla fied 139 ev I I Benewed rise in commodity prices á further advance in commodity prices last week provides ilearer evidence that 8 renewed price rise is under may, fol- IN E period in which prices levelled out for several rela. (See Chart 1, upper section.) By the end of last week the foodstuffs Index had approached last April's high, while 2 industrial naterials group reached a new high since inst. In the entire group of 28 basic commodities, only 2 Leclines EN reported, while 16 items showed increases. the me: pronounced gains were in fats and oils, coffee, and xist naterials. (Lower section of chart.) Speculative interest in the comodity markets seems to be increasing somewhet, although trading in the futures markets 19 at pet reached the November volume. Some opinion in the truis attributes a part of last week's rise to speculative In- rither than to trade demand. Reduced opportunities : speculative profit in stock trading have caused 8 certain out of speculative interest to shift to commodity markets, to this vier, especially markets such BE lard and notionseed oil, shere there is believed to be relatively less for of Government intervention in the way of price control. i ridestread speculative buying movement, of course, would 10- the difficulties of stabilizing commodity prices. Price increases affect many comodities Factors in the fats and oils market last week included mets that the Finnish Government expects shortly to buy certain quantities of provisions, including 14 million pounds of lard, la expected reduction of 14 per cent in spring hog farrowing remains a bullish influence, particularly for lard prices, and recent reports of heavy Russian and Japanese having of various fats and oils contributes to E. bullish tack- ground for this commodity group. The second group of items showing substantial increases TEDS the telat materials. Shellac prices increased despite recent trade reports that buyers In this country had purchased DE if their 1941 needs in November. The increase in Carseed trices continues to reflect a shortage of shipping the from Argentime, combined with unfavorable crop reports the that country. Judging by the longer list of paint Deterials in the broader HLS index, latest date for which liter the week ended January 4, increases in prices of paint materials have been general. Regraded Unclassified 140 3 Coffee prices rose last week in response to two succes- sive increases by Colombia in minimum export prices, which nskes four increases since November. According to uncon- firmed rumors, Brazil 16 also contemplating the establish- ment of minimo export prices. Consumption of copper and zinc sharply increased A sharp increase in deliveries of copper in December videned the discrepancy between production and offtake of this detal. Deliveries of copper of domestic origin increased in December to a new monthly high of 112,671 tons, representing a gain of 10,185 tons over November. Even with 60 strong an impetus, production of refined copper increased to only 97.035 tons in December from 96,283 in November. According to trade sources, the needs for nearby months, including defense needs, are substantially in excess of amounts available, so that namifacturers my request releases of good-sized tonnages from the 100,000 tons of Latin American copper purchased by the Metal Reserves Company. This copper 1s scheduled to begin arriving in the United States in March and will continue through September at the monthly rate of about 14,300 tons. Shipments of domestic zine increased to 65,385 tons in December, from 62,295 tons in the previous month. While the production of sine has strongly expanded in recent months, it is still substantially below the volume of shipments, and stocks have declined to extremely low levels. Production reached 59,883 toma in December, having made successive gains since August when 51,010 tons were produced. While the cuoted stot price of tine remains unchanged at 7.25 cents a pound, St. Louis, this price is purely nominal and no metal is currently available at that price. January futures for time are now quoted at 8.65 cents, with practically no trading. The American Smelting and Refinining Company is planning to arect B. large electrolytic zino refining plant in Texas. Then completed, probably in early 1942, the plant will add from 24,000 to 30,000 tons to the annual capacity of the United States. In addition to this nez plant, other plans for expension by rehabilitating old retorts are expected to raise total capacity to about 900,000 tons a year. Recent estimates by the zine industry of the amount of sinc required for domestic end forsign purposes in 1941 put the total at stout 330,000 tons, en estimate which ie now considered by Bode In the trade to have been too low. Regraded Unclassified 141 Moderate gains in broader commodity index The SLS all-commodity index, which 1s nov available for the reek ended January 4, shows 82 increase of 4.3 per cent above its 1940 low, as compared with the 3.6 per cent in- crease shown in the week enied December 21. Chart 2 shows those sub-group indexes which have risen further above their respective 1940 lows than the rise in the all-commodity index. The percentage increase from 1940 lows to the week ended January 4 is indicated for each commodity. The two group indexes which had increased most on December 21 -hides and attes, end lumber - declined slightly over the next two veebs. 4 sharp rise occurred in the live- stock price index, and also in the indexes for meets, grains, and oils and fats. Dairy products showed the widest decline, prizarily because of & trop in butter prices, and prices of certain fruits and vegetables were sharply lower. Cut in steel screp price requested In contrast with the rising tendency noted in the prices of numerous other commodities during the past week, a halt occurred in the rise in steel screp prices. This resulted from the issuance of a statement by the Price Stabilization Division of the National Defense Commission on January 7 N- questing 2. reduction in steel scrap prices, with the ultimate objective of bringing the price for No. 1 heavy melting strap at Pittsburgh down to not more than $20 per ton. Prior to the date mentioned, scrap prices had been rising and had reached $23.50 to $24 for the No. 1 heavy melting grade at Pittsburgh. On January 9, dealers in the Sex York district are re- ported to have cut prices $1 a ton; on January 10, it was reported that brokers is the Chicago district vere offering No. 1 beavy melting steel scrap at about $1 under previous levels; and on January 11 brokers in Pittsburgh quoted a N- duction of $1.50 per too. To actual purchases by mills vere reported, hovever, at any of these quotations. New steel production records The tonnage output of steel ingots last week again reached 2 nev high record, with & gain of 1.3 points in the operating rate to 97.2 per. cent of capacity. Although an Regraded Unclassified 142 05 met ups operating rate vas reached in 1929, the tomage reduced us less, because of the sualler capacity of the infustry st that time. Reference to Chart 3 will show that mentionally all districts continue to operate virtually at levels. Steel output in the current veek is sched- nied st 2. still further increase, with the operating rate 2.7 winds higher at 98.5 per cent of capacity. Devertheless, the steel industry continues to fall behind :: Its dirts to handle the incoming volume of orders, judg- int to surrent trade reports and from reported data of the S. 5. Steel Corporation. While shipments of finished steel X the T. 5. Steel Corporation in December rose 8 per cent Dere the previous month, thus attaining the highest December nice it the corporation's history, the corporation's esti- artel metice of unfilled orders showed 8. further substantial | by the end of the month. (See Chart 4.) The con- 1 incoming business fell to a little below capacity dur- 100 - Date week, but in view of the tenor of current trade you, E rebound to around pre-holiday levels is now probably talding place, Defense activity boosts construction bookings of construction steel in the first THE in Junuary slipped off somewhat from the hich levels of - litte part of December, they were no less than 146 per cetts sizure the corresponding week of 1940. Further heavy attage of structural steel will develop as E. result of a. 28% net 1- heavy construction indicated by the engineering swarded in the week ended January 9, as reported by = Shgineering Zevs Record. The total for the week mentioned 158,000,000, the third highest weekly total reported Code the defense progres got under way. Four large avards = Jr the laz Department for plants to be operated by pri- TAIL companies accounted for 46 per cent of the total. These torerei 2 powder and explosives plants amounting to 27,000,000 etch, together with an ammunition loading plant of. = - plant costing $15,000,000 and $11,000,000 requestively. Pather evidence of booming construction activity is dre to the ?. T. Dodge Corporation's figures of contract meis for December, which rose to the highest level since 2018 2931. The monthly total of $456,000,000 WES 10 per cent there the previous 1940 peak reached last August. It was estimated that defense construction awards in December amounted II 115,000,000 02 36 per cent of the total. Regraded Unclassified 143 - 6 - Textile orders sharply increased Our new orders index for the holiday week ended January 2 increased to 162.8, compared with 144.5 in the preceding veeit, largely because of increases in textile orders. (See Chart 5.) New orders for steel were lower, and the total ex- cluding steel and textiles vas practically unchanged. The increase in textile orders apparently marks the be- ginning of the seasonal spring buying movement, in which tex- tiles are usually the leader. Sales of print cloth and related items last week vere estimated at over 60 million yards, three times the current weekly output of mills, although the output in December reached a new record level. New York Times business index revised In addition to the usual annual revision of seasonal factors, the New York Times has recently made other revisions of 2. more fundamental nature in its weekly index of business activity. The revisions have been carried back to the begin- ning of 1938, and the results on a revised basis have been reported currently for the first time during the past veek. The net result of the revision has been to raise the level of the combined index, as will be seen on Chart 6, which shows the iniex on the revised and on the old bases. Vaile the revised index has shown a greater rise since the beginning of 1938, its general pattern is essentially similar to that of the old index. The most important change in the revision has been the inclusion of 8. new component, paperboard production. The ad- dition of this item, with a fairly heavy weight, has necessi- tated revisions in the weights assigned to the other items. The veicht given to electric power production has been cut substantially. In addition, the estimated normal levels for miscellaneous freight car loadings and lumber have been lovered noticeably, with the result that both of these indexes nov stal at higher levels. During the week ended January 4, most of the components of the Times index showed gains, raising the combined index from 121.1 in the previous week to a new high at 123.0. The principal factor vas a sharp rise in the adjusted index of lumber production, although good gains were also shown by the adjusted indexes of electric power, steel ingot, and paperboard production. The adjusted index of miscellaneous freight car Regraded Unclassified 144 - 7 - loadings rose fractionally but the index of "all other" carloadings declined rather sharply, largely as a result of E lag in coal shipments. In addition, the adjusted indexes of cotton mill activity and automobile production showed minor declines. Barron's index of business activity for the week ended January 4 rose at a slower pace than the Times index, advan- cing only fractionally to 125.6 from 125.4 in the previous week. Preliminary data for the week ended January 11 reveal a slightly less than seasonal gain in steel ingot production, and a substantially greater than seasonal rise in automobile production. The week's automobile production of 116,000 units was the highest January weekly output on record. 145 NOVEMENT If BASIC COMMUNITY PRICES - 1940 1541 1 AQ % N 4 - 18 10 I n R$ 1 and in D I I I I il 55 128 5 # 19 to - lesses, be - a less IS a H @ 50 18 15 TM # HE If = Facestures a = - III DI TE . If # 4 WE k - - . 1 1 # . # - n , - . - s 15 23 30 7 34 21 26 4 11 18 25 1 $ 15 If = E 5 1948 1541 - I FORMAT - 1940 1941 of IN 1 X of I I 1 B I 3 a I 2 I I # If D or le is - know 12 * 0 A 5 MI M M M IN WI H = M 15 FT - If $ a - T a a 5 7 Jall Regraded Unclassified SUBGROUPS OF B.L.S. ALL COMMODITY INDEX SHOWING GREATER PRICE INCREASES THAN COMBINED AVERAGE Percentage Increase From 1940 Low To Dec. 21. 1940 and to Jan. 4. 1941 PER CENT 30 Hides, Skine 30.1% 28 26 Lumber 25.7% Catt/e feed 25.7% Livestock 250% Druga,etc. 24.5% 24 22 146 20 18 Graine 17.7% Meats 16.9% 16 Dairy products 14.7% 14 Oils, Fate 13.7% Rubber (crude) 128% 12 Other foods 10.8% Cotton goods 10.5% 10 Chemicals 8.4% Other farm products 78% Leather 7.3% 8 Woolen products 71% Nonfer. metals 68% Anthracite fuel 6.4% Fertilizers 62% 6 Autos, etc. 5.9% Other textile products 5.0% (Tires, tubes 49% Bituminous fuel 49% Gas, fuel 48% 4 Paper, etc. 48% Fruits. Vegetables 4.4% ALL COMMODITIES 43% 2 o 1940 Lew Dec.21,1940 Jan 4,1941 Bouree: Bureau of Labor Statistics Regraded Unclassif P-209-A B STEEL OUTPUT AND RATED CAPACITY Weekly Tennage 1999 1940 1941 M M . TONS FUNN Millione U.S Total Millions Cappcity 11 11 14 14 13 11 Output 18 1.8 - # 1 - * 4 # I - 8 8 M 1984 1441 PRINCIPAL PRODUCING DISTRICTS 1940 1939 1948 TONE TOMO TOME THOUSANDS THOUSANDS Chinago / ⑉ --- ... ... Fitteburgh ... ... ... ... ⑉ ... 140 --- ... 140 --- ... ... ⑉ 100 ($9 - 160 160 ISS 100 I'M 180 " " se " 4d 40 4d 40 e # Veungstewn - e ... ⑉ 160 Philadelphia 100 160 160 188 180 190 188 - se as : 48 40 46 46 # # e - Glevelend Suffale : " -- " 48 : " : # - # . Birminghem " : " -- Wheeling # # # . Dinsinnati 147 40 = 4d : Detreit - # # - A 1939 1940 1941 1939 1940 1941 "Boord at --- Age date Regraded Unclassity ----- Chart 4 148 CONFIDENTIAL REPORTED NEW ORDERS, ВИӀРИВИТО, AND INDICATED UNFILLED ORDERS OF THE U.S. STREL CORPORATION TONS TOIS THOUSANDS THOUSANDS 2400 2400 2000 2000 REPORTED to 1600 1600 1200 1200 500 500 REPORTED SHIPMENTS 400 400 0 0 1938 1939 1940 1941 TOMS TOMS THOUSANDS THOUSANDS 3600 3600 3200 3200 2800 2800 2400 2400 INDICATED UNFILLED Crocks 2000 2000 1600 1600 1200 1200 800 800 400 400 0 0 1938 1939 1940 1941 - - the Services di be Injury I - 133 - of - of Más 149 INDICES of ⑉ ⑉⑉ Cabled - of to Orders and Mistal Deparate 1938 1933 1540 - . POINTS I 210 210 200 200 190 190 160 IND 170 IN 100 TND 150 ISU 140 140 5 130 I I 120 - 110 180 100 - 90 80 Ammuny MM a 70 a 8 Total exising - of - X 50 8 X 20 - Orders MMM 10 Datile tobre . s . - 3 a - 1938 1939 / % / f I . 2 ) 1-8-C 1 - I Chart 6 150 REVISED NEV YORK TIMES INDEX COMPARED WITH OLD INDEX EST RATED KINL . 100 1938 1939 1940 1941 PER PCS SEXT CENT 1,25 125 120 120 115 115 Reviser Issues 110 110 105 105 100 100 55 95 as has so so IN as a BD 75 75 R 70 - F - A - J , A $ . 9 = , F . a . - , A $ - a . J , - A . , , A $ o . a d F a A . J 1938 1939 1940 1941 the of the Securry of The Trampy 1 . J I I C 30 TO: 1/17'41 Mr. Foley 151 Room 268 Mr. White sent the attached letter of January 13th from Warriner Socles to the Secretary in to you for you to read. Me MR. FOLEY 152 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM MSHINSTON in OFFICE DF THE CHARRIAN 0 THE January 15, 1941. Dear Betry: it our conference on December & it was agreed that there should be full cooperation between the Treasury and the Federal Re- serve Board in all matters of antual interest. Since then two metters DATE criset which sharply raise the question of how that cooperation 22 be brought about. The first relates to benking legislation. Certainly it wuld sem that banking legislation sponsored or sup- ported 17 either agency affecting the other would come within the scope of visit I believed to be our understanding. In the Tall Street Journal of January 3 there wes an article, nie E fashington dateline, stating that "the Treasury Department is preparing = 15% bank holding company bill", that "wach of the pre- liminary work or the bank holding company legialation has been done", end that "there taxe been conferences between Secretary Morgentheu and Lenator lass." The article also stated that "Secretary Morgenthau is represented as favoring legislation which would force 1 break-up of eristing bank holding compery systems", and that "yesterday Comptroller of the Currency Preston Delano and Treasury General Commel Rdward Foley discussed the holding company legislation with Senator Glass ..." Assuming that this report is correct, it is the first cardledge that - had that the Treasury was seeking DEV legislation at this time dealing with this subject. is I think you are aware, the Bard is specifically charged under the lew with the various legal re- sponsitilities applying to bank holding companies. le are strised that the initiation of this bill did not come from Senator Glass, but from yourself. Te had recognized the need for a change in eristing legislation and bed prepared legislation to deal with it, ent ted it been thought desirable to have benking legislation et this time, this subject certainly should be included. However, it was - understanding that the Administration desired to avoid piece- zeal legislation and, accordingly, we have not undertaken to push this particular merce, feeling that it was far preferable that the subject be teken = and dealt with as part of the program contemplated by the proposed barings unter the has Resolution. Regraded Unclassified 153 as # I The second instance, which I want to mention to you in all frankness, relates to the special report of the Federal Reserve Sys- tes which was submitted to Congress after you had had an opportunity to consider it for a period of some ten days. Re, of course, did not ask you to assume responsibility either for objecting to or approving of the report. However, had you desired to do so, you could have 8.6- sumed that responsibility end either approved it or made known the ob- jections you had to it. You advised me that you considered the report our responsibility and that you reserved the right later on either to approve or disapprove all or any portion of it. Immediately after our conference in your office on December 30 you stated at your press conference that we had been discussing Federal Reserve matters and that I would have an important statement to make. As 8 result, even before I had had an opportunity to get back to my desk, my office was besieged by newspaper inquiries. I web obliged to tell the press that I had no statement to make that night and did not know whether I would have any statement to make. I was especially embarrassed because I was acting in this matter not only for the Board but for the Federal Advisory Council and the presi- dents of the Reserve Banka. I felt, as did Harry White and Lauchlin Currie, that the President should be advised that 8 statement was to be issued, though I did not want to take his time to discuss the many technical matters involved, unless he wanted no to do 60- It was too late that night, but the next morning I took a copy of the report over to Mr. Early personally, together with a brief explanatory letter for the President. Mr. Early advised me that afternoon that he had taken it to the Presi- dent and that the President had no objection to our releasing the re- port. Mr. Early felt that we should give it out without further delay, inssmuch as your statement that an important "move" was to be made W&B in all of the papers of that morning. Mr. Early advised making the re- port for release in afternoon papers of the following day, that is, Lednesday afternoon. Accordingly, I called a press conference in my office for five o'clock on the evening of December 31, and I was at great pains to avoid either committing the President or yourself to the report or, OD the other hand, to give any indication that there might or might not be opposition to it. As you know, this was a compromise report which prevented the Advisory Council from issuing one that they had previously adopted which was highly critical of Administration policy. Regraded Unclassified 154 - 3 - 'A't "his press conference on the day following publication of the report, Mr. Early did his utmost to correct erroneous impressions given by some of the headlines indicating that there night be an M- ministration fight on the program. He stated that the report bed been issued with the full knowledge of the President, that the President re- garded it 86 "something for Congress to study", and that it was being studied meanwhile at the White Bouse and at the Treasury. Be stated further, "Despite the headlines I don't think you are going to find any fight between the Treasury, the Board and the White House." Mr. Early's statement seemed to no to leave the matter in correct focus, committing neither the White House nor the Treasury to the report, but indicating that it would be fairly considered and discussed before the appropriate committees of Congress. On Thursday, January 9, however, at your press conference you went out of your way, as it seemed to no, to belittle the report and to take pot-shots at me personally. Subsequently the press has uniformly interpreted this to mean that you propose to fight the program, assuming that Congress takes it "seriously". Now, Henry, in all fairness, if this is playing ball, then I just don't understand the rules of the game. All of us have naturally been greatly disturbed by your attitude as it was volunteered at this press conference. Strongly tempted though I was to make public e statement in self-defense, I have refrained from doing so, though I think the position attributed to you at this press conference is highly vulnerable. I am equally convinced that if there are parts of this program to which you have serious objection -- though you did not state ob- jections when you had an opportunity to do so in our discussions - a basis of compromise can be found which will be satisfactory to both of us and will enable us to present a united front instead of the division that is now proclaimed to exist between us. I cernestly wish to get to- gether and I do not want to be forced to debate 8 matter as important as this publicly or through press conferences. Accordingly, I - writing this personally to you in an effort to bring about that cooperation which you have said you desired, but which certainly has not brought satis- factory results in either of these two instances. Marrimer Sincerely Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Fashington, D. C. Regraded Unclassified 155 WAR DEPARTMENT G-2/2267-115 WAR DEPARTMENT GENERAL STAFF MILITARY WILLMENCE DIVISION 6-2 WASHINGTON I.B. 11 January 13, 1941 MEMOPANDUM FOR THE SECRETARY OF THE TREASURY: Subject: British, Allied and Neutral kr Shipping Losses. The following is a tabulation of British, Allied and neutral shipping losses for the weeks ending on the dates indicated: December 29, 1940 January 5, 1941* Gross Gross Number Tone Number Tons British 3 18,208 ? 54,875 Allied 4 19,348 ( ? (41,042 Neutral 0 - ( TOTAL 7 37,556 95,917 + Unofficial tabulation subject to correction. Forruan Smiles SHERMAN MILES, Brigadier General, U. S. Army, Acting Assistant Chief of Staff, G-2. Regraded Unclassified 156 0-2/2267-115 I.B. 11 Jamary 13, 1941 VENCRANDUM PUR THE SECRETARY OF THE TREASURY: Subject: British, Allied and Neutral far Shipping Losses. the following is a tabulation of British, Allied and netral shipping losses for the weeks ending on the dates indicated: December 29, 1940 January 5, 1941° Gross Gross Number Tone Number Tond British 3 18,208 7 54,875 Allied & 19,348 ( ? (41,042 Neutral o - ( TOTAL 7 37,556 95,917 4 Unofficial tabulation subject to correction. SHERMAN MILES, Brigadier Imaral, U. S. Army, Asting Assistant Chief of Staff, 0-2. the an then 7 u you m Regraded Unclassified 157 mash. Post 1/13/41 Capital Parade By Joseph Alsop and Robert Kintner Jockeying For Trade Power OF THE THREE most prese- certain that the mailer will be Ing British needs-for cash, ship- put up to Congree If the lend- ping and planes and other war lesse program goes through with- materials-this country can most out too much opposition. easily meal the need for cash. An American affort of exempte Examinally, the President's lend- warfare is both feasible and un lease plan of aid la Britten IN . gently required. The are dévice to muret this red in A time running short not only of dollar Ited way, by giving American aschange, but also of all sinds products to lie Bruish withous TIP: of cash WIDE insuffl- quiring each payments. clent cash (PRIVAL they nannot A AND in already shoul in back up sheir naval birchards of the Government la meal the Brij- Gerouny with e simultaneous 200° Ten need for each altroad M well nomie blockede. This country has as le Utis mustry, by supplement- the each reserves, siw needs the the the British effrict of economic same new materials that Brilein warlare with an affort of INIP OWN cannot keep out of the hands of And that is why the behind the the AXIR powers, and Las well scenta jocksying für destral of equipped to handle she the land-lease program may prove Bo far. little has Intern done. Even to have great future significance, in South America, where we are To deal first with the current lending buge nime, we have set- Repres of the problem. the price dom salved for annomie contra- for which ibe various agencies and store favorable to curselves and departments are competing is the harmful to the Avia as part pays power in smith what quid pro gau meet for our Inana, the British must affer a for our Z Insand or Insued products, The ALTHOUGH BO practical steps decision as to whet the Brittsh are have been taken much thought in get. and what we are in relain. has given to the subject. 1a naturally in be left in the Presi- chiefly in the same agencies now dent and the chiefs of the Army in for the bergaining and Nevy. But the bargaining power under the lend-lesse pro- power LA anybody's for the taking gram. Al the Commerce Depart- Z ment Undersecretary Wayne THE NATURAL competitors are Chatteld Taylor has evolved A the Commerce Department, the strikingly interesting over-aD Treasury and the office of the Ad- program. including both economic ministrator of Export Control wartare and consurrent prepare- Rather different views are held by Non for postwer reconstruction. each Secretary of Commerce At the Trienury there are thoughts Jesse H Janas, the has trader in of a listem committes, with 140- the Government, regards the level- resentatives of all the interested Issue program se il business proper- Government agenties, and en on- willion plans great emphasis en require chairman. And at the ni- the apportunity (se improve Amen- ten's sermite qualition at Belaims expense Nurh at Teams is the IM: pression of June friends of the Capital where his Influence la M great That the President's plan mas will ne allered to place (D# 200 list Janed hands The Treasure under Henry at, has always Dusught Dear et the breader M. peris of the President's fureign have by Let taken In and has never Defin mill with the BUT bis AIRPORENT emprises 18 en quien all to Brit- 4Th while mm ROCKY importation of Britten mirect Investments in this emintry and invistment That the program bring us adjustique of with visa) DW materiate 64 Public and us, he would NOT follow Jones in mine the War explain to take Illitain's LAST wooden nicket. - JESSE JONES AS FOR THE OFFICE of Ex- part Control 11a administrator "The Best Trader Cnl. Rossell Maswell has proved himself A remarkshly efficient ⑉ Are of Expert Control plans are protive, who would sypnish the already laid Inr practical action If problem with considerations of and when the Line American milliary and navel Is will of causes be very entry sirategy primarily in mind. State in embará nn wastere, Congress, last daty, strengthened Cumering the world copper exp. The governmental authority over giv. too - DE not . cheep important expirits, Cal. Manwell Ibling to do None of the has worked difective under the of annual auting thus far pros President While Junes pared are under the billion mark. has the edge on the MILL Secretary But nature berning in deepty Margenthou and Cel. Maxwell alarmed should additional have equally - changes of 108. these who emaller the prob. While Hirus support - should remember será chings. River they are different expects By 5ta very nature money spent of the semili problem. the agency MI consumie warfare @ NOS . desd whinty has charge of the bargain- has in the last war, Indeed, the the under the program allied name WEAT, in the to who likely in direct the Amen PM, to abroad . profit And if pain offers of cortaxo, if she American milley of aid ser BUT an effres is made to misside Brilam shart of war insure engre Plan for the White House the with thing if and to meso American Ann of perking las provide help in the And Meet- Wastern the mg provide for our max has sing domined The and shipping may be aim. President has dural a livels the sult and luiver, 18 fered And M internation halh simple and demic offective 158 January 13, 1941 8:30 p.m. (st Secretary's Home) = :. Stement Young Cochren Kuha Tell Chite X Foley ... Dox N Pinsent Inc. Morgenthau Dié Phillips have any suggestions 32 how : should testify. 2e is very worried and blue about the whole busi- LESS. Is be really! 7, he the worried about Landon, Landon's state- cent arainst the bill. C: be really blue? 3 just stobd there and seened andully blue, looking out toward the White House, and I tried to soothe him and cheer his up about it. be de is in with 28, he is rather cheerful. Regraded Unclassified 159 - 2 - Irs. Morg: Maybe he thinks that is good. LE.Jr: He is very plesant when he is in there. Purvis said he actually chuckled the other day. (Mr. Young entered the conference) H.N.Jr: Come in, Philip. This is one occasion where you can use your brain tonight. (Laughter) On the discussion with the Greeks, we offered them 30 five year old planes. Philip said he thought that was an insult. I said, "Philip, this is a Cabinet decision, and you are not supposed to think." He said, "If I had only known that before, look at all the time I would have saved, and I said he was boasting. (Laughter) I thought I had the Greek for a minute, but not on your life. What a man! Toung: Why? E.A.Jr: I thought he would be satisfied when he heard he was going to get 30 good planes, but he wanted 60. Young: It didn't take him long to get back to that, did it? The minute he said 30, he said, "Oh, but the State Department promised us 60." Cochran: He raised you 30. Young: Merle probably opened all the windows. Mrs. Morg: Does he know that they are five years old? E.V.Jr: Say, leave that out. Admiral Towers said they were designed seven years ago and not con- structed until five years ago. He said, "Not that I am saying that they are rusty." (Laughter) He says, "They can fly." But I really think it is silly. 160 - 3 - Young: They just go four hundred miles an our slower. H.M.Jr: Yes. Can we start without Professor Foley? Kuhn: Harry White is coming, isn't he? H.M.Jr: Has anybody got & document for me? Kuhn: Lots. Cochran: I didn't give you that Canadian stuff, did I? H.M.Jr: No. Cochran: I will give you that as my contribution. H.M.Jr: Did you get to see Mr. Hull? Cochran: Yes. He had & group in his office, and he had stepped out to & little anti-chamber to talk to Douglas, and then when he got rid of Douglas I went in. H.M.Jr: Lew Douglas? Cochran: Yes. H.M.Jr: And you gave him that? Cochran: Yes. I told him that you had told ne of your conversation with him this morning, and that you wanted to get the data in his hands in re- gard to what the people had, and so on, and so I told him that there was this book plus a letter, and I drew his notice to the fact that you would give him anything he would be interested in. He said, "I an sure this will be enough. The technical end of it, I have to leave to Secretary Morgenthau. I want to do my part on the other." And I said, "The Secretary in turn would be much interested in having anything that you may have received in the past or made while Regraded Unclassified 161 + I I these negotiations were going III that wall be pertinent to the problem, that if - to or to the British." Ind be sii, T mirstand. H.I.Jr: Tell, that me good to get in to see lia. Cochran: If yes. Be MES very nice. le tallted to If in smetine. (In. Puley entered the conference) Lt: Hella, professor. Cochran: Ing were working = 1. statement. They int the im this was cuning dif terms. I ant sure. H.V.Jr: I in't inon. Foley arranged it. list did Jull tall Charley to do? Foley: tali him le wouldn't be rain to III, and re wanted to à it inco de- mm. LA The State Department will be & little in airence, tim. I.I.Jr: Ian, uhr has got smething for nt Perilief Inhn: This is really Oscar's. à reste it. H.I.Jr: Tell, I can't resd it unless 30 initials at. (Laughter) And it out loud. Sell: That is the netter, in't mytory alling to claim it? LA: Smiledy read it. Folay: I think Fardie ought to read it. is and it. Regraded Unclassified 162 - 5 - Bell: Get sume yumg fellow with good eyes. Inim: This is just the bare bones - it is an intro- duction, and then a whole lot of questions which R are trying to get the answers for and then a cancluiing passage again. Shall I read it? LL: If you please. Inia: (See Ittachment 1) I think it may be helpful to the Committee if I repart at the outset, as frankly and fully as I can, what I know of the British position in its relation to the bill now before Congress. is Secretary of the Treasury, I have been in tomeh with this position in two mys. The first is the obvious one, that the Secretary of the Treasury is the chief fiscal officer of the United States Government and is thus directly cencerned with government financing. The second is that ever since the fall of 1938, the Treasury has been the exclusive connecting link between foreign purchasers and the United States Govern- 1 "Drept foreign government wishing to place orders here has had to go through the State Department to the Treasury. The Treasury has then consulted other government departments as to the avail- ability of the goods needed, the prices to be paid, and the priorities as among the purchasers themselves, and between the purchasers and the United States. "This has placed upon me a direct and continu- ing responsibility to American manufacturers." LLr: likj I interrupt you there? My first reaction, it is 1 little bit - well, it gives me a little Regraded Unclassified 163 - 6 - bit too much credit or whatever the word is. I mean, it is a little bit bolder than I am accustomed to being. Kuhn: All I was trying to do was to account for the fact that you were testifying. H.M.Jr: Well, I just wanted to give you my first re- action. Cochran: Leave out that word "exclusive" and going through the State Department. H.M.Jr: No, going through the State Department is all right, if it does, but I just gave you my first blush. (Mr. White entered the conference) H.M.Jr: Hello, Harry. White: Good evening. H.M.Jr: You can come over here and sit next to Professor Foley. Foley: I was late too, Harry. Come on over here. White: Sure. H.M.Jr: I hear you kept the train waiting the other day at Poughkeepsie. White: Well, I had a good reason. H.M.Jr: You made it all right? White: Oh, yes. H.M.Jr: One minute, was it? White: I made it. Regraded Unclassified 164 - 7 - Has White heard this? Yes. You (White) saw that introduction this morning. Did you change it since I saw it? Itkn: Yes. I put your things into it. Then I didn't hear what you have got. (Laughter) I an just coming to that. 1 = surprised Harry didn't say, Then it is inproved." "This has placed upon ne 2 direct and continu- ing responsibility to American manufacturers. It has been my responsibility to see that no orders are sanctioned by the Treasury unless there are ample liquid funds available to meet then. In all the two years of this work of coordinating foreign purchases, I have kept this responsibility in mind in every transaction. "Having been placed in such a direct relation- ship with foreign purchasers, particularly the French and British, I have also had to keep myself informed continually about their posi- tion and their prospects in the ser. The British have made it clear to ne that they are still in danger in spite of the wonders they have performed in their self defense. They expect that within the next three nonths they zay be subjected to the most intense strain of the entire war, perhaps by invasion, perhaps by a ferocious air attack, perhaps by both. They believe that they will come through these three months if we do our very utmost to send them all the material help that we can, They are confident that they will survive and stand to win in the end, if We really make ourselves Regraded Unclassified 165 - 8 - the arsenal of the democracies, as this bill would have us do. "The British say that their imediate needs are merchant ships, long-range bambers, and long- range seaplanes for patrolling the sea routes. Te shall have to scrape our cupboards to cover these three critical months for them. Beyond this three-month period, they tell me that they will need weapons and materials of all descriptions, in quantities beyond all our previous conceptions, if they are to win. "But the British have told ne repeatedly that they have another need fully as urgent, fully as desperate as their need for the weapons of BAP. This is the assurance that they can get the flow of future supplies without which they cannot continue this war. "I can tell you gentlemen, quite deliverately and quite solemnly, that unless the British can have such assurance, they will have to make peace. And if they make peace - a "dictated peace" as they President has called it -- they will lose the war and we shall be faced with dangers we have never yet faced in our history ES E nation. "I have come here today to put this problem before you with Treasury figures which will, I think, help you to see the problem in its true proportions. Up to now, no such accurate figures have been available. I an going to put before you everything which is in our possession so that you can see the situation for yourselves." Now, from that point on He have an outline of all kinds of questions which you my, 07 my not, want to answer. Regraded Unclassified 166 - 9 - H.K.Jr: Just a ninute. Do you want to say anything now? Irs. Morg: No. H.K.Jr: Well, let me say this. I don't know who is the author, so I don't - it is a fresh approach. It is well done, but it isn't me. But I am perfectly willing to have somebody else argue why I should say that. Do you want to say any- thing, Walter? Stewart: Not for the moment, I don't think. I think you are right, that it has to be you. I mean, it has to be your method and your approach and your mood and all the rest of it. E.M.Jr: I mean, it is extremely well written. White: Well, there are some things in there that I don't think you ought to say, but as far as 8. starter is concerned, I suppose you can easily make it your style by just going over it here and there, but I an a little bit troubled by your stepping outside the immediate problem of this is what the British owe, this is what they have, this is what they say they will need. I would leave the rest to the State Department, the Army, and the Navy, it seems to me, and Congress. They will be able to think of all those arguments. E.V.Jr: Well, there are two ways to approach this thing. There is a way to do the written thing. Bell was the only person that heard me in New York on this very subject, and there was another may of doing this thing, the way I did this thing in New York. I can simply say, "Gentlemen, I have come up here to put before you any in- formation that you may want pertaining to the British finances that TTe have in our possession. I have got to impress upon you the importance of the secrecy, because the information which Regraded Unclassified 167 - 10 - : = going to give you in is information which the Pritish people is at have and any leaks st this time aight do Le ! great, great injury, with I en sure you don't mut to be a part of. Day are planning : public hearings. The press will be there. I Leinesiay, 38. Vi LS et Sol sali toiay. it. ve di talk about that it & minute. Just X it 8 siste. to, getine, arting that you want to asic 2, just 2 shead at ass If. Vell, you (Stewart) WETE there at la York, ist the teck. - then 200 in what happened. LIN: think that mile be 1 tiousand times the best R. ......................... Too (Stewart) 38% de Sefore and you (Bell) saw 28 before. part :: zest very well, : thing. will, : = not esidas, int that as certainly as intelligent and certainly 1. for more intelligent recause they were mly financial people. Inc certainly is the my : would approach it. think that is the 12, to to it, and I would leave ill the pleating, all the argument - either in to = question, 12 they ask vist is par opinion, you CED express matever 700 wish to express, but : think that will 2° further tomari giving the the contribution with you can 20, which is to show the state of their finances and 4 they need help, and Regraded Unclassified 168 - 11 - I think there will be plenty of others who will point out the necessity for keeping then fighting, et cetera. LL: What do you think, Dan? Fell: I think that is all right if it is going to be an executive session, but if it is going to be an executive session, then I think you ourst to have that statement. But there is one thing in that statement that I don't know whether you nit to say and that is that you late watched these finances from the beginning and you have always been able to say - I don't how whether these are the words - that they have had the funis with which to pay for the contracts. They haven't got the funds now, have they, with which to pay their commitments? Yes, they have. Bell: Without going into their direct investments? S.S.ir: Oh, no, but I an figuring on those. I figured this thing two ways. What is the figure of the contracts that they have on hand! Is it E bil- lion three? Toung: - billion three - it is about fifty-fifty either my, of billion three paid out and $ billion three due to come. But I mean yet to pay for. Toung: & billion three, both. It is just at half and half non. E.I.Ir: Tell, the figure of & billion three is all right? Toung: Yes. Regraded 169 - 12 - 11 Well, this is to show what I have got in III mind. They have 6 hundred million of securities, 9 hundred thousand direct investments, is 1 billion and & half, and there is a total of cash in all accounts, private and everything of the English, of about 8 humired million, which is not available but is there, à port see, in this country. Fall: That seens high. Ex: What is that? Mr. About 8 hundred million dollars worth of inlars. lite That is the Expire? L. Tes. Thite: British Empire. Include: But that is not immediately available to the LA No, but it is there. They could borrow it if they have to. But they have got a billion and E. half worth of direct investments and secur- ities against a billion three, which I would if is enough to pay out their - that doesn't tain in things like the wool we were talking ebout today, does it, or the tin and rubber, and the various things? White: No, nor the French gold or the Belgiam gold. U.S. There is plenty there. Bell: Well, you can't take in things of that kini. LA 30, but there is plenty there. lite: Can't take them in if you dom't ant to. Regraded Unclassified 170 18 I I Bell: well, I mulh't say it unless you had to. E.V.Jr: Well, there is E billion and & half dollars worth of investments in the United States against E billion three of orders, so I would say they are annly covered. After all, those orders at least for 12 months, don't they? Young: Oh, pas. all indefinite periods, but certainly the majority of them do. E.M.Jr: There are 2 couple of things I want to clear DD: in IV mini that I asked you (White) for, to see theirer you have been able to do your home work, b. White. What was the date - I asked you this in the country - that the English took over the French contracts? White: 14, it THE between June - it WES in June, between June 1 and July 1. Young: It THE time Fourth of July weekend, nen't it? H.I.Jr: What TRESE St? Young: I timult it WES the Fourth of July weekend. E.V.Jr: Well, will somebody make notes of the things that I want to answer tomorrow? I want to know what that date was. And then the thing that I rent to ask is, what did it anount to, how much did the French contracts amount to in dol- lard White: I thünk it was about five hundred million dol- lars. H.V.Jr: The prünt I - making is, you see, when these contracts were let, we were doing business with France and England. Regraded Unclassified 171 - 14 - Bell: That is right. E.M.Jr: And while they have contracts today of a billion three, so many were French and we were counting at that time on the French assets and gold, so there was ample reason to believe that there was plenty of security. White: (See Attachment 2) Five hundred and sixty million dollars of French Government orders. H.M.Jr: On July 4? White: June. The June comitments which were allocated in June included - you see, the comitments at the end of May were 397 million. They jumped to & billion 87. That billion 87 included 560 million of orders assumed from the French Govern- nent. H.N.Jr: Check that as of July third 02 fourth. Young: Yes. H.H.Jr: I want to memorise these things. White: Now, actually they didn't give us records of payments made on that. I nean, they didn't give George's nen - until they stretahed over several months, but they is why they were assumed. Young: They didn't assume all of the French contracts either. White: No, but we allocated to them. H.N.Jr: Purvis would know. Young: They are still working out those figures. Regraded Unclassified 172 - 15 - - Thite: There is still about 20 or 30 million. LLr: Give ne $ figure. Thite: Five immired and sixty million. You can say 600 if you want to round it off. Tell, I would rather be on the short side. 1 half E billion dollars, would that be safe? White: Over half. MA The interesting this is, just to tell you & nimute, I told - I served final notice on October 29 to General Marshall that from that time on the Inglish should only be permitted to buy standard American stuff, which I think is in- portant in view of the By the thing has gone. lhite: October what? Twenty-nine. lhite: Well, on October 29 they had unpaid commitments, including the French we talked about, of 8. bil- lion three. Their assets, of course, were higher than what they are LOW. They had E billion three. U.S. Tell, that was the date I served notice on him- White: Iou served notice on then when they had unpaid comitnents of E. billion three and assets of at least a billion and & half? Well, 20%, let's just talk $ nimute. If this thing is going to be 8. public thing, I don't see how I can testify. White: There may be certain figures that the British Government may want kept confidential. Since Regraded Unclassified 173 - 16 - their own ambassador said they would be running out of funds before June - of course, that is several nonths away - they may not mind your giving nost of the figures, and I certainly think that they will come out one my or another and they will come out in a distorted my, and distorted the wrong my. The only figure that they might mind - that they might be very N- luctant to permit the public learning is the anount of gold and the official dollar balances. The private dollar balances are known anyway. We have published then. The various assets and their investments in the United States and else- where are contained in numerous publications. Hell: It is going to be quite 8. shock, isn't it, larry, to the British public to find out that their gold is exhausted? Mite: I say that one figure they might not want known. It would be 1 shock. Bell: I should think SO. White: There are & lot of people who won't believe it. Etime They are issuing a statement soon on the fact that their gold is being depleted so fast that they are going to have to get to their direct investments. mite: Yes. Oh, they made $ public statement? Sulm: They are going to. L.V.Jr: That their gold has depleted so fast? Luhn: That their gold and American securities have depleted. White: They haven't said anything like that yet. All 174 - 17 - the comments have usually been in the direction that they have still got quite a little gold. But they may object to that figure, and that figure, when you came to that, you might say you can only give that confidentially. H.M.Jr: Well, what I told Phillips today, I said, "Now look, Phillips, just so we understand each other, I am going to do everything I can to protect your interest when I go up and testify," but I said, "When the wolves attack me, I don't know what I an going to do. I will just do the best I can.³ His answer was, "lir. Morgenthau, if you had seen the cable that I have sent to England, they know what you have done and what- ever you do is all right with us," and that was about what he said. White: Well, they are going to press you for information. They will hold you much more than any one else who will come before them, not responsible, exactly, but they will expect to know from you what their financial status is, and I don't see how you can withhold anything from them except at the express request of the British Govern- ment that you give certain figures that are available only to the committee in an executive session or clear the room, as they do many times. E.V.Jr: Well, there is one trouble. I learned my les- son from Senator Cousens. Whenever he said it was executive session, he always left the room. He wouldn't participate in an executive session. You saw, Dan, what happened to me the last time in an executive session before the committee in the House. Within 15 minutes after I left it was on the ticker. So in one my - if I an going to give it, I would rather let the newspaper men get it from me than third hand. White: Wouldn't it help their case if the public knew this? Regraded Unclassified 175 - 18 - That is the purpose of this neeting taright. Lite: - "Ell see where the British public would be disturbed, and I can see where the Sermans muld mine capital of it, but if assistance is going to be given, then this would help. If assistance is not going to be given, it is just too ted. S.L.In Just $ second, Earry, hold your harses 1 zimte. I couldn't tell which my you (Stemart) REN going. Stewart: I vould have thought it us impossible to set to any committee what the facts in the case 178. is are understand the facts, this is the middle til January. At the end of January they have got IND cash at all, and you have got to is sma interin financing by one form = another to carry then on through this period, SD to 22 it is 2. question of degree LS to what you at ni what you don't say. IN: Hell, I never dreamed of saying that to tim. Stemart: 3ut If you don't say that, which I agree [II] can't sej, then you come finally to some sart of statement which carries conviction but does not give detailed figures in which pet assure them that from day to day you late followed the position and you have kept yourself informed, you have talked to then and they wallin't expect you to go into the detailed account d what the position of the British Goverment is. White: But what is the general statement that be would make, them, that they will be in need of funis by the end of January? Stemart: That they are now urgently in need of funis, but he doesn't go into the fact that they are inskrupt. Regraded Unclassified 176 - 19 - Etc That will leter satiafy the committee. st I don't believe you cen get by with that. Wite: I don't see with Dimgress should take the Secretary's word III E matter of that importance unless he can DEJ the British Government has given him these figures in confidence, and if be says that, they are coming here for money, and I don't see in they should keep it confidential. Stemart: I would testify by 18 private transaction, or I would take & me case and have a country not informed as to its country's desperate need and late it show up: in the London newspapers the next day ES to what the position actually ms. Bellt Leeping the public in the dark won't set very well with our Compress. hiley: No, that is tv- Start: They souldn't be in the dark. It is just a question of how much twilight you give then. They are going to be in the dark because you are going to give then some facts anyway. him: Aren't there $ lot of facts that can be told publicly, how much they spent on private plant expansions and 50 forth? Stemart: Yes, that can be tald. lite: But supposing you were on the comittee, Kuhn, and the problem TES that they need cash. Sow wouldn't the very first question which you would ask be, IN min have they got not? You, if the answer to that is, "I can't tell you, but you will have to take my word that they are in urgent need," the friends will be all right, Regraded Unclassified 177 - 20 - but I en thinking of those who are not friendly. Steart: is guess is that only the friends are going to be all right anyway. Tell, now, let's just - I mean, after all, Harry keeps saying they are coming here for cash, which they are not, I don't think he means that. Sel: se zeans it is equivalent to cash. Wis lihat! Bell: Tou mean its equivalent, don't you? They are not coming for cash. After all-- 2ite: Call it by any other me. You either give an accurate balance sheet or you don't, and I don't see how there is any two TATS, you know what I nean. You either say, Well, gentlemen, here is their position, these are their assets as they have snown them to us, and so forth." Of course, as own incli- nation is, I think that if you paint the picture ES bad as it is, nobody is going to believe it. I have dome that on the Hill before. You (Bell) have seen ne do it on the Hill before. I have told then what the deficit was going to be and things like that, and they said, "Oh, Morgen- than, he is so blue. He always says it is much worse. It can't be that bad. You have seen that before. Bell: Ies. And just thinking out loud, if they are going to press ne, I would much rather trot out this December 1 statement which I take it is the latest Regraded Unclassified 178 - 21 - we have, isn't it, Harry? White: Well, we brought it up to January 1. H.M.Jr: Have you got that? White: Yes. The January numbers are in red, if you want it re-done. H.M.Jr: I will just take this statement and say, "Here, gentlemen, here it is." White: Of course that doesn't involve telling them what they have. I.V.Jr: Let ne just look at this (White's statement) a ninute and see whether this is it. U.K. pay- ments made total purchases in the United States, a billion 100 million, sums to be paid in the next nine months, 296. Sums to be paid by September 1, 1941, as contemplated in the "I" program, that wouldn't have to go in at this time. I mean, imports from U.S. not purchased through the British Purchasing Commission, 187, and U.K. purchases from areas outside the U.S. requiring gold. Purchases by the sterling area. Payments by the sterling area to Canada and New- foundland. Do you think that would have to go in? White: No, you can trim very - just two or three items out of that for your purpose. H.M.Jr: I don't see what good it would be. Purchases by sterling area from U.S. 22. Commodity imports. Invisible items. Grand total. And dollar receipts, net balance, dollar receipts sterling area, commodity exports, Australian gold exports, South African, Canadian assistance to U.K. I don't see why we can't leave the Canadian thing out entirely. Don't you think so, Walter? Regraded Unclassified 179 22 - Stewart: I think 50. H.M.Jr: I don't think they would be smart enough to ask for that, do you, Dan? I think you could lift the Canadian thing right out of here. Bell: It will probably cause a lot of questions if it is in there. H.M.Jr: Why? Bell: The committee would ask you why you bring it in and so forth. White: The trouble is if you don't bring it in they have more money and-- H.M.Jr: My suggestion is to leave it out. White: Well, if you leave it out, then their income will be larger than it is there, their net income. You can say they also one sums to Canada without specifying it. H.M.Jr: That is all right. What can you see, Merle, that - in those figures that they could object to? I mean, we are going to take the Canadian figures out and take out that "I" program thing, Harry. White: Oh, I think I wouldn't refer to it that say, but I think you might make your case - I don't know whether you want to indicate-- H.M.Jr: I'll tell you what. One thing the President is very definite on, and I an ready to go along with him on that, he doesn't want to say whether it is one billion or eight billion. White: Well, in that case, I think the only commitments I would leave in were those orders which have already been placed, take the others out entirely. Regraded Unclassified 180 - 23 - LLM That is right. That is what I Ell trying to say. Thite: There are two, the "I" program and the orders under negotiation. I would take then all out, just what is on hand. jochran: I think you could dress this up by sort of smoothing it over and making - give then & bal- ance sheet. I agree with one or two of the nen that it is wrong in an open hearing to give the exact status of their gold and dollar balances. I don't think we ought to do that. Tell, what I an going to ask is that the Canadian thing be taken out. Who works on this for you, Harry? Thite: There are 2 couple of then. If you got to the office at nine tonorrow norn- ing, how long would it take you before you could have a statement for me? Thite: Typed? LLD: No, no, in pencil. Thite: Oh, it wouldn't take long, depending upon what you wat. At the most & half hour. I nean by the time I get back from Full's, it will be 10:15 until I can get settled down. Thite: Te will have it dome any time you want it. If you vant it for Hull, we will get there $ little earlier and do it, that is all. It will be done any time you specify. I don't want it at Bull's. I want it when I come back from Full's. Regraded Unclassified 181 - 24 - Shite: I thought you were going to tell Hull what you were going to do. I thought that was what you said over the phone. Oh, yes, but I an not going to - it is the whole argument - it is over with him, whether I should recomend that they put up collateral. Wite: or course, giving them that, Mr. Secretary - they will be interested in it and it will be helpful for your purpose in order to show what they will have and what they will need, but it doesn't touch on the question which they will follow that with, how much have they got now? ...... nn right, now, let's do one thing at a time. Supposing we do that and we meet again tomorrow. I mean, anybody talk up. Can anybody see why that wouldn't be all right? Dan? Bell: Eas that got the gold and the cash in it? Cochran: Income. hite: It has income. It has the gold they get from Australia. Sell: But it doesn't have their present gold. No. Sell: No, I certainly don't see any objection to it. I El not so sure before it is over with you haven't got to give E complete statement. Toley: I think, Dan, that that is absolutely true, and I don't agree with Walter Stewart. You just aren't going to get this bill through unless you come clean, and you can't do it in executive session, either, because these figures are going to be out and these fellows have got to use this on Regraded Unclassified 182 - 25 - the floor. The only thing that Martin said to Rayburn today was, I will withdraw my opposi- tion to having this thing put into a fight as to committee jurisdiction if you will assure me that there will be full and ample opportun- ities afforded to the minority members of the committee to cross-examine Mr. Morgenthau and Mr. Knoxand Mr. Stimson and Mr. Hull, and if there is that opportunity--" H.M.Jr: In that order? Foley: Well, I don't know about the order. But if there is that opportunity, I am willing to with draw. And Sam gave him that assurance, and that is what happened. Now, the one thing they want to know is, are we being soft-headed about this? are we being played for suckers? and they have got to know what the condition of that treasury is over there before they are going to be will- ing to underwrite what it costs to carry on this war. Now, I don't see why the fact that these figures haven't been made available in England makes any difference. How long has it been necessary to have cash to carry on 8 war? Germany started this war without any cash. Cash isn't necessary. And if they have access to us and if we are willing to give them material aid and if we are willing to back up what the Presi- dent has said, that is all they need. Their morale is all right, and it isn't going to be helpful to the Germans to know that they haven't got any money. They have unlimited access to the resources of the United States, which are prac- tically boundless. I don't see as it is-- Bell: Well, you may have to do that to get the bill through, but it is going to be disheartening to the British public. Foley: But you have thrown it out on the table, and there 183 . 26 - fail. it is and it has got to go through, it can't Cochran: How long do you figure, Ed, it will take to get it through both Houses? Foley: I think they can pass it in the House this week. Cochran: And then an appropriation is to take care of the finances of it. Foley: Altogether I think it will take from a month to six weeks. Cochran: But it will take that long? Foley: Yes, because I think the debate in the Senate is going to be longer. Cochran: This will all reveal that we have to do some- thing in the interim. White: I definitely and categorically disagree that Te don't have to do anything in the interin. Cochran: I mean they have got to liquidate some of these things. White: But we don't have to do it. Foley: I think-- H.M.Jr: Wait a minute, I want to make that plain to Mrs. Morgenthau. The point - there is & differ- ence here. You see, Harry takes the position, and I largely agree with him, let then do their own sweating as to how they are going to raise the money, and I shouldn't worry too much about it, that they can sell some wool here and some tin here and securities there and so forth dur- ing the next six weeks, you see, and that I Regraded Unclassified 184 - 27 - shouldn't let uyself get down the my they keep working on ne all the time, Purvis and the others, as to how they are going to get tomorrow's noney, you see. I went to explain - isn't that what you nean, Earry? (hite: Tes. I think that is their problem. I an posi- tive they have got adequate assets which they can liquidate. They knew what they were getting into $ long time ago. They must be anply pre- pared. If they are really up against lt, they can borrow from their dominions, from Canada, the can dicker with the Belgians and borrow from then, they can do at lot of things to cover the amount which they have, which is really small, and I think, speaking quite frankly, I think it is inercusable of them to put that in your lap, and I think it would be - I don't see on what grounds you should give yourself one monents concern as to how they raise the money that is necessary in the next six or eight weeks. It is the British Empire after all. LLC: On the other hand, Harry, if I hain't done what I did last week we wouldn't have gotten to the point today that for the first time at 2:30 they tell 20 they are ready to sell their direct investments. If I didn't get an investment trust group together here, there wouldn't be anybody to buy it. is I told the President today in no uncertain terms, once I have intro- duced then to the investment group, how they do the business is their business. But it was only today that I understood from Purvis that they - that the message they got last night, the treasury turned then down and they only got & telephone confirmation at 11 this norning. There is great, great pressure, you see, just as I have been explaining over the weekend, to hang on to these things. Regraded Unclassified 185 - 28 - White: Do you think that the Secretary can divulge that information which they have given him with- out the British Government's permission? Foley: No, but he has got to tell the British that he can't go dom there and expect success there unless he is able to make complete disclosure. E.V.Jr: I did this morning. Foley: Se has got to have his hands untied when he goes down. He has got to be able to use it as he sees fit and as the situation develops down there, all or & part of the information they have given to him. H.V.Jr: Ed, I served notice on Sir Frederick Phillips today that I can not go down there unless I an prepared to tell all. I am going to do the best I can. White: You have that permission? H.V.Jr: No, I have done it and he simply said, "Well, you have done so much for us, or words to that effect, "that we have just got to leave it to you." White: I would be inclined to get their express permis- sion to divulge this information because I am a little in disagreement with Ed. I feel that the repercussions of this - the British public is going to - the statement that they are going to be all out of funds, that they practically have no cash now, no gold left - I don't know what the noral effect of that would be. It might be quite dis- piriting with this new group demanding an end to the war on the left and on the right wanting to appease them - it is & certain responsibility that I should think I would be inclined to be & little reluctant to take without their express permission. Regraded Unclassified 186 - 29 - Bell: I think we ought to get up statements to go along with your prepared statement and the British ought to approve them. Foley: I do too. Cochran: Fix up a statement to go with this first balance sheet, have his introduction and this first balance sheet, then have this other statement such as we worked up two or three days ago showing the exact situation at the end of February and get the British approval to submitting that, if neces- sary. E.E.Jr: Tell, Foley is right, I think. There are two ways to do this thing. If the Committee feels they have to draw it out of me inch by inch, that nakes a bad impression, but if I go up there and simply say, "Now, gentlemen, there isn't anything that you can ask me that I am not prepared to tell you - now, I am here, realizing the seriousness of this thing, and am authorized by the British Government to tell you everything -- now, don't hesitate;" but if I say, "Gentlemen, I don't know about that one, and I don't think I can answer this one, and wait a minute, I have got to ask my lawyer about that one -- Danny, what do you think about this one" - they would say, "Good God, what is the matter with Morgenthau." You know, if you fel- lows think before I get through, I am going to have to do it, then I night as well do it and do it-- Foley: Come clean. White: I don't see how a Congressman or 8. Senator is going to let you get away without answering his question as to how much cash they have got. Bell: If you don't do it here, you certainly are going Regraded Unclassified 187 - 30 - to have to do it in the Senate. E.V.Jr: Then you know how the House will feel? Bell: That is right. E.S.Jr: And then when the thing goes back, after they have changed it for concurrence in the House, they will give it to us there. The whole pur- Dose here is to give ne a chance to think, and I think the thing to do is to get up the facts and say, "Gentlemen, this is what I an going to do. I ment you to initial it. Coohran: If you are going to give E. straight statement of what they have, I hope you will stick to what they had in this statement the other day and not go on to what they might get from Canada. They sent & man to Canada and got a very negative reply. This thing of getting gold from India would cause a revolution out there if they tried that and so on. H.M.Jr: I am with you on that. What I did Saturday at the House, when they have the 650 million gold and the Belgian gold and the Datch gold, what they have got outside of that, I don't see any reason why ae have to go into that. If we show their cash position and show that they haven't got cash enough to run out the month without sell- ing these securities, and then , as I say, all the rest of the stuff, I don't see why I have to go in there. White: Isn't there a half-way position? I quite agree with you that if you can indicate that the assets which you regard as available are adequate to cover the commitments which you knew before, from that point on I don't think you are called upon, unless you wish to, to state whether their assets you regard as available. That is & very dif- Regraded Unclassified 188 - 31- ferent thing, however, from stating, either in response to a question or, if you like, in properly prefaced statement, that they may or may not have access to the following assets, or these are the assets of their allies. These are the assets of their dominions. By so doing you don't say they are available, but you give them the facts rather than having some- body else give them to them. Cochran: But you put the burden on other people trying to have them give them. You don't know the British are going to get those assets. But you put the burden on the British of trying to do it and you slow up the whole thing, I 22 afraid. H.M.Jr: I don't follow you Merle. Cochran: If you say, "This is what they have, but still they night approach the dominions for loans, they might get gold that is hoarded in India," I think you give a lead to them there which they would be prone to follow up. H.M.Jr: I don't think that is necessary. I don't think it is necessary to say that they have so much gold in India and so much gold in Africa. What I had thought of saying is this: "To the best of our knowledge the total assets of the United Kingdom, outside of the United States, is in the neighborhood of 10 billion dollars, some of which they can realize on and some of which they can't." White: Well, 10 billion nominal value. The actual value is very uncertain. Some depends upon the out- come of the war, and how long. H.M.Jr: I know, but that is a rough figure. White: I think it would probably be more nearly accurate, Regraded Unclassified 189 - 32 - and certainly wiser, to say that that is the nominal value, not the market value. E.Y.Jr: That is all right. You know what I WSS thinking, in order that they could get this message off to their Government tonight, what would you think of having - telephoning - I know that they have & dinner at the Embassy, but I could get hold of Playfair tonight and then he could give this message so they could get off 8 cable that I want authorization. Playfair is the m. Thite: Specific authorization to tell then whatever they have told you in regard to their assets. Then the responsibility is theirs for the ef- fect of it and not yours. H.V.Jr: If I give it to Playfair, he can give it to Purvis. Cochran: He would get any approval he needed from his superiors here when he sent it off. E.K.Jr: He would give it to Purvis when he was through with the dinner tonight, wouldn't he? Philip, do you mind going to the phone and try- ing to locate Playfair and ask him to come to the house? Toung: Yes. H.M.Jr: If they can't get Playfair, then Pinsent had better drop over. Toung: Right. White: I don't think it is necessary to give them this information, but with your purpose, which you have stated and which I think is the may to approach this problem, they will ask you the questions. How, if they don't ask you about 190 - 33 - the Empire holdings, you don't tell then. If somebody asks you, however, how much gold does India have, I don't see how you can say you don't know. You can say you will give it to them. If they ask you how much gold has France got in England, you will give it to then. You don't say at that point 07 at any point that that is available to them. Bell: But you leave the inference. is feeling is that any question that they ask ne about the British Empire, I should say, "Gentlenen, I will give it to you." Foley: That is right. White: That is the point. E.M.Jr: And I don't believe - if half the story is true about their norale, then the fact that they are busted I don't think is going to make them quit any nore - if those fellows could 50 through Dunkirk and then face the Germans with nothing, the my they did for three to six nonths, I think they can 80 through this thing, only knowing that they are going to get it from here. Foley: That is right, that is right, but the chips are down on that, b. Secretary, and they are sunk anyway, and if you try and you don't get this thing, they are through, but if we get it for then, they can keep on going and therefore it seems to ne that the risk is only one of not getting this, and you can't afford not to be frank and not to be candid, irrespective of the effect it my have. I.L.dr: I told Purvis today in the office - after I said it, I said that was En exaggeration, but I said by the time that Halifax gets here, which they Regraded Unclassified 191 - 34 - SAT is & month or six weeks, the not will be with or lost. Their is true. Cost: I say it is E slight exaggeration, but it will be were or lost by the time he gets here. They Erm"t think he will be here for & month or six weeks DOW. What do you think? Ins. Vorg: Tell, I think it is much more important as to what effect you think this is going to have on Congress then what effect it is going to have ccl England, because, after all, your whole point is to get this thing from Congress, The Inglish can take care of themselves, and they DEL interpret it to suit their own public opin- iom, but for that reason I think you ought to have 11 very strong first statement if not the une that Ferdie Kuhn read, something in your evn language, and then 8. very full statement of facts so that they can't pull out questions visce meal from you, because so often testimony Locks SO bad because they will ask one thing and 702 will have at lot of unfriendly questions - I mean the people who will ask the question are the uniriendly ones who will try to jockey your answers into being unfavorable; and, therefore, I think it is much more important for you to have E very full statement. But you wouldn't give that one? Mrs. Morg: : wouldn't, for instance, give your views on reace or war, I mean, I dom't think that is your business, but I would give a pretty clear state- nent, and I would give & very full statement of all the facts that you want to get over to then before they ask you, because I think when they ask 700, they will ask you in such & my that your answers my look very unfavorable. Regraded Unclassified 192 - 35 - thite: Mrs. Morgenthau, nine times out of ten that, I think, would be the correct approach, but I will tell you why I think this is E. separate case, because I believe that the Secretary should confine himself in his whole testimony to what may go under the name of facts, whereas, ordinarily, he is jockeyed into a position with regard to opinions, in this case he can give them all the facts and no matter what questions they can ask him, if they bear at all on England's position, he has the answer. Either the answer such as they have given to him, and he will clearly distinguish between the information which they have and the information which is available everywhere, but I think that in every case the questions will be of that char- acter except of & different category of ques- tions entirely in which they night ask him, even if he read that or if he didn't, "Do you approve of this bill?" "Do you think that that is all they have?" and things of that character, thich they will ask him anyhow, which the state- ment won't avoid, whereas if he attempts to give then & full statement, he meets with the difficult problem: "What shall he include in the British assets?" "Shall he include their investments elsewhere?" "Shall he include what their allies have?" "Shall he include what the dominions have?" and by his very inclusion or exclusion, he is taking a position which nakes the most for the Congressmen or the Senators to harp away. They will say, "Why didn't you include this and why didn't you include that?" Ers. Morge I wouldn't give any of their assets over here. Let those be given through questions, because they night not ask you. Dex: Don't you think there is a point to what Ers. Morgenthau says, that you get e. connected sicture of the facts if you put them in your own state- Regraded Unclassified 193 - 36 - ment and those facts - I nean the point to the facts is that they are persuasive without being humanitarian. If you leave it to terms of dis- jointed questions, you are going to get one question on facts and the next question on opinion, and you are going to have B. completely mixed up picture where you are going to have to do cuite a construction job to get 8. connected picture. Thite: Supposing he were to say, "I an here to give you any facts that you want, and I have prepared for you a statement of what their outstanding orders are, of what their anticipated expenditures are, and of what their anticipated income is. I also have prepared here another statement of their dollar cash position and their investments in the United States. I have those prepared, and give them. "Now, gentlemen, if there are any other questions relating to the British, finan- cial position, I will be glad to give you the answers if I have them. And I think I would strenously avoid speaking for the importance of it. The facts speak for themselves. Stren- uously avoid taking the position that we have got to help England maintain herself. That is so obvious that other speakers will stress that. I think in that way, any question they ask - if they ask him how about the British investments in Latin America, all right, we have those. The question of their market ability is a very dubi- ous one, but here they are, a nominal value, and he can have something prepared on that. If they ask him about anything else, he can approach it that way, and he is expressing no matter of opinion at all. He is not expressing any judg- ment which makes it vulnerable to pressure. How, they may ask him, "Don't you think that the British ought to first borrow from the dominions rather than us?" Well, he can answer that as he would like, but I an inclined to think that in Regraded Unclassified 194 37 - this particular situation, it is better for kim to have that small amount of material and answer any questions they like, and then be is not in any position of either defending the British Expire or of being either hard-boiled or not. Be is stating the facts as they are. That is the situation. And he is making his plea, and I think that is where we might - he night have 8. prepared statement. Pointing out, when be takes this table, the first statement, ni be distributes it and says, "Gentlemen, I went to call your attention to the fact that the comit- nents on the outstanding orderswere on January 1°- 07 be can refer back to December 1, which I think would be better, "were one billion three. It the point I called attention of the various Cabinet members to the situation because, in y judguent, their liquid assets were not much more than that and it was necessary to - that I- - if first responsibility is the protection of the American nasufacturer and to see that they had sufficient foreign exchange to protect that." I nean 1 prepared statement on that. That is his responsibility. And beyond that - the character of these questions that were laid to the British financial situation I think are very different than the tax program or 1 budget program 07 my of those questions which they Can push him around on. Irt. Morg: You assume that they will only ask him questions that are purely financial? I mean, after all, the reason for putting through & bill and leni- ing mey to & country which is financially at rock bottom - you must justify it by the reason that - in you think it is a good policy to con- time giving to that country. Therefore, I think you should have something of that kind in per introductory statement. White: Tell, they will ask him that. I imgine the Regraded Unclassified 195 - 38 - most effective answer to that can be very simule. "Gentlemen, unless you extend them aid, they can't keep fighting." Ins. large That should go in first, though, I think, as to your reason, because this is going to go all around the country, isn't it? I mean, the Congressmen want support in getting this bill through from their own people at home. If you give them an sufully sort of jumbled thing which they can't piece together, I think it makes it that much harder for them. Cochran: But Mr. Hull was undertaking to make that part of it, Mrs. Morgenthau. lirs. Morg: But they are not just going to leave Henry and not ask him the questions because they are going to try to embarrass him, the opposition. That is what I would think, listening to some of these radio debates between the senators. Cochran: I heard that last night. Inlin: But Mr. Hull won't deal with the financial reasons, and there are also financial aspects to the continuance of the war. That is, the con- tinuance of the war is now dependent on the as- surance. White: In the presence of Secretary Bull and the Secre- tary of lar and the Secretary of Navy, I don't think it is the Secretary's place to take any position as to whether it is necessary or not. Each one has a contribution to make. I think his contribution must be to make clear that this is what they need and this is what they have got, they haven't got enough money, and obviously they will need more money and beyond that I think the function to sell Congress or the cammittee, the other aspects should be left Regraded Unclassified 196 21 - - for the other members. That is their job. It is the Army and Navy's job to show how important it is to keep England fighting for our defense, et cetera, and it is Hull's job to show how important it is for our foreign policy, and the President has already made it clear and Congress will make it clear, and I think that nobody - you see, nobody can share the Secretary's responsibility on this matter, the financial aspect, and if he covers that, I think that is all he should do. Kuhn: But you just said before that somewhere in this statement ought to be the statement that we ought to have this in order to keep then fight- ing. White: Only in response to & question. His personal opinion - if they ask him why they need this money, it is very easy to answer. But why do you think we ought to extend them more aid? Well, the simple answer. It is and different matter when they ask him & question, you see, than when he makes a statement which goes & little bit out of his baliwick. It is not a matter of stabilization, it is not & monetary matter, it is not a fiscal matter, it is not & lending matter, the question as to whether England keeps fighting or not. H.M.Jr: There is one thing I want to introduce at this time, is the thing which - I mean, I my have said it to some of you, but I want to say it to all of you, the argument that Hall uses against my doing this, you see, that you can have it and you can argue about that a bit. He says if I go up and tell the facts the my we are talking about here, he says, "Then you are just proving that everything that Joe Kennedy said was so, that they are through, they are busted, and why throw good noney Regraded Unclassified 197 40 - after bad." I just want to give you his argument. Whitter: It can't be both. Mait at minute, Earry, just give somebody else E chance. Knime: Kennedy said two things. Be said, "They are busted and they are through," and the two are not synonymous. Foley: I agree with that. Salure: They can be busted and win the war, but Kennedy added, "They are through," which you don't agree with one second. Whitter: Well, they both ean't have money and need it. If they need noney from us, it is because they haven't got enough to carry on. Kuhme That is all right, but that doesn't zean they are through. Bell: I think Kuhn has the answer, that they my be busted but they are not through. Of course the my I feel, we come back on it, to get this bill through, and that is this: I think you have got to shock the American people into the fact that England is busted Pinancially, as far as cash goes, and then the Congress has got to decide, do we wit to give them eight, ten, fiftem, or twenty million dollars worth el nerchandise? I mean, give them the shock, not let it leak out, give the E. shock, and then let the Congress decide, in we or don't n. I dm't think there is any other two mys. If they drag it out of n, I think it is bai. I think they ought to get it Regraded Unclassified 198 in the first 10 minutes, and then they have gat the simil, that is the my the President knew, that is what he knows, and that, gentle- nan, is 4 he has taken this extraordinary action to ask for this thing. Foley: Tell, this Dangress is defense minded, and this Congress relises that the defense of Great Britain is vital to our defense, and I believe that if pm show them the necessity for daing shat TE and then to do, they will provide IBEDS to in it, mo matter what the costs. H.V.Jr: I think HI, but I may be crazy. Cochran: How in pm think, Ed? Do you think their entimalism would be chilled if during that period the British would suffer a terrific best- ing or attack from the Germans, after we had made known all this? Foley: Na, I in't think BD, I think that would just rusin it through. Cochran: I lean if the thing may properly take six weeks to gett them and in that six weeks Jun my have a terrific attack. White: Well, I dm/t BEE riy-- Foley: The Germans Imm this, Merle. Cochran: Will, I BI not sure they know just how low they are financially. White: I dom"t think anybody would believe it. Inre- over, I think the have got to distinguish between what they clain end what we know, because this is what they a. It is possible to check 4. It does unusually low. There are several - there is enythere from half & billion to & billion dollars ym just can't account for, but I im't Regraded Unclassified 199 - 42 - think the Germans know that is low either. that I don't see is why that should effect their - unless they feel that the British people would be so shocked by it-- Coolerant If question to Ed was whether it would chill the enthusiasm of Congress to give an all-out assistance. Foley: I don't think so, Merle. You never CEZ tell, but my judgment is that it wouldn't, and I think that if the attack - the all-out attack en Great Britain comes while this measure is 00 consideration, this will do more than anything else to hasten its passage. I think they would sit nights to put it through. Inkn: I would like to ask you sometime, Ir. Secretary, about what figures ought to 80 in this state- ment, not only to satisfy the objectors in Congress, but also to help in putting your case across. This is the thing where I disagree with the President and on the basis of all the truth and nothing but the truth, if they say to me, % Morgenthau, how many orders do they want to place here, what do they anount to?" I = going to tell them. Code Won't you have to add that it is 2 fast changing picture and by the time the legislation gets through, you won't know definitely? Wite: It is a changing picture upward, and the Presi- dent's reluctance to show the nagnitude, $0 if he starts with the picture as he has it, and if you start in by saying it is & fast changing picture, it can only change one my and that is worse. Regraded Unclassified 200 - 43 - Inhn: Isn't it also & selling point with the public to show what the British have put in here in cash, in orders, to expand plants, to give employment and so on and so forth? I think it is E dead turkey. I think it was all TeΓ, good when the airplane industry employed a few thousand people, but I think today the thing has changed so fast - I used that for all it was worth two years ago, but I don't think they are interested today. I mean, they read every day, 80 million dollars for this plant and & hundred million dollars for this. I think it is past that. Inin: You don't think in Hartford, Connecticut, or Soston, or Buffalo that it would have any no- litical effect to know that this or that plant, which employs five thousand people, has been helped by the British? I think what would happen, if Dallas thought they night get a plant and didn't and Fort Worth and Oklahoma got one, but if Dallas and Houston and New Orleans thought they were going to get then out of this, that might interest them, but not what was gone behind. Inhn: It has never been told. Thite: About & half & billion dollars. Toung: That might have some effect on & quantity basis rather than 8. dollar basis in the future, not what has been done. Rite: I don't think this bill can be sold on the basis of the economic aid it is going to do the United States. (Mr. Pinsent entered the conference.) Regraded Unclassified 201 I thought I ctuli tall you this and then you could tell it to then dte they and through convine- ing these other patlen. After talking here with my advisors, 12 feel - whether I like it or I don't libe it - that when I go up on the Hill, I am going to have to give them an accurate picture of what the English financial situation is. They feel - at least they have convinced me, that lacking that, и can't get the bill through, that I myst to do it willingly and not have it iron out of 29, but that is what they expect of 28, ani, as & matter of fact, they only got the bill - the minority leader Martin came to an agreement to have it & in that committee if be is given amle time to Cross- examine. Sow, THE lieve figures which you have given us in confidence. is I say, this is mly my judgment after listening and having thought about this thing for days and nights, that I enght to be prepared to P = and say that I = author- ized by the British Government to sey that these are the figures which they have furnished ne, you see, and that THERE that anything that I have. Now, I as not thinking necessarily, = less I am asked, lim much rold have you in India, how much in Canada, but if I 81 asked those questions, I want to be prepared to answer then. And I will volunteer to show what your cash posi- tion is, and when pm are going to run out of cash and the whole thing because we don't think - I am talking for upself, having given days and nights to this thing - the only may to get this thing through is to curvince these people, just the say I am trying to get Phillips to convince the others, that you herm't got the money, and if we can do that, then it becomes obvious my Mr. Roosevelt tack surh extraordinary steps as he did in recommending this legislation, but I want to be able to in this thing and not have it drag out, not have to run dom and say, "Can I say this, can I as tist," but às it openly as though this ms smeting that I take it per- fectly for granted that the Congress of the Regraded Unclassified 302 6 - Trited States simli hm. N In, 7es, I realized that TE smili to faced with this problem. at it, 100, I aid this taing to III Eir't pt. it quite - vist I sull to the Prederick is fils: : St talling pm tist de H all IN a n u If B at ES. let III questions and JII. ill taxe to trust = in in 21 10 (3) -5. 3 is is I tim tist you here, ni is THE tini and to in If 11 in The III. of E. at our people hare tungit I agit to in it 2018 funally." In se nist JES M. I think R in- E Txt I nught to in it more inally mi * 1 imal ELSTET irm pm sujing that the - PT. = II Debesity that the bitisi is rill- ing that I in this! Inc Inc. : first e late it im Inia. it laste smitize back already printal mt to the tist at wali be quite inevitable. St in as : И. n A 1. :: - all T 5 # under entirely in - imia ni lesse it II your discretion 15 to int Jul till in to in and at you EN 1st dilipi to 1. E I it is left to 22 de tamight's tales, I EI guing to have 1 statement dià Z will in thi to show and mili lite to show = le = start = it early tax uning I EI ping in offer that because, as I &, - - in I El repeating apself, int lacking mulete trai- THESE III 47 part, и in't think in is E chance = (st, this thing tirapi. à the in fixed peti Regraded Unclassified 203 - 45 - LLr: It is Wednesday, isn't it? Foley: That is the last I heard. Weimesday. Pinsent: Well, I think I will get a cable off, Mr. Secre- tary. You feel that you would rather have that agreement rather than do this without it? LLJ: Hell, that is mist the people here thought, that what I said this morning to Sir Frederick msn't sufficiently formal and that I ought to get a formal release, you see, say, Well, whatever we have given you is" - because what the reper- cussions will be on your own people, that you will have to decide. But as somebody said here tmight, my job is to get this bill through, and I SEEL a. thousand percent sure that I cannot get it through or cen't contribute toward getting it through unless I tell what I know about the British government's financial position. Lack- ing that, I don't think there is a chance of getting this bill through. Pinsent: Yes. The session will be closed-- Io. They are going to be open, and they had much better be open because then they will get ry own interpretation from my lips and not get it second hand and distorted, because if I told this in closed session, somebody would leave the rom and it would be on the wires before I got at. Pinsent: Ies, sir, and in garbled form. LLIr: In, they insist on an open session, and I under- stand that Kr. Bull is insisting on being heard in the open and I wouldn't talk these figures unless they are open because then at least the newpaper nen are going to get it from me and Regraded Unclassified 204 - 47 - not get it from an enemy of this bill. Masent: Yes. So this is going to be open and 15 minutes after they start they are going to know what your financial position is, and this is such at major thing that I want your Government to know it. I an convinced that unless I go the whole may and have E free hand, I can't get this bill through. Now, -8 were saying here, if you people can do what you die after Dunkirk, I don't think that whether you do or don't have the cash, it will make any difference, knowing that it is coming from here, the munitions. Pinsent: I feel absolutely, myself, Mr. Secretary, that we are in your hands. It is not for us to say what attitude you have to take. LLC: But you know how I have always garded your secrets. Pinsent: I know that very well, and it is By own feeling that it is for you to judge how far these things have to be treated as secrets or how far they have to be treated as necessary to be used in & situation like this. However, that is a ques- tion we must put to London quickly. I think so, and there ought to be an answer just as soon as possible. Pinsent: Yes. Well, then, if I may, I will take that back to Sir Frederick. You are at dinner there, aren't you? Plasent: Oh, well, we were talking and were fully speaking - it won't take a very long telegram, I don't think. Regraded Unclassified 205 - 48 - Foley: You want specifically two things, don't you Mr. Secretary? You want the clearance of your formal statement by the British and also authority, formal authority, from the British Government, that the information that has been commicated to you in confidence you may use as you see fit before the comittee. H.M.Jr: I didn't think I wanted the clearance of ay statement. Pinsent: I should rather suggest treating that, if you want to consult Sir Frederick, treat that as a matter for local consultation between you and Sir Frederick, I mean-- White: Well, it is the second one. H.M.Jr: I want formal word from the British Government saying, "lr. Morgenthau, the information that we have given you is at your disposal in any way that you think is necessary in order to get this legislation through." NOW, as to what I am preparing to say, why then when we get it in form, I would like you and Sir Frederick to come down and go over it and get your advice in the Treasury, but I don't expect London to pass on it. Pinsent: That would be impossible. H.M.Jr: But you can tell Sir Frederick that you will see By prepared statement before I give it. Pinsent: I almost feel easier for us if we didn't even tell London that because it will make it more difficult for us. H.M.Jr: That is all right. I don't want to put that. All I an asking is for a formal release. Re aded Unclassified 206 - 49 - Pinsent: Yes. I will go back straight and see Sir Frederick, Kr. Secretary. Can we still commi- cate with you for a short time if there should be any question. H.M.Jr: Well, everyone of these men - I an going to give them 20 minutes to drink this drink so they will be out of here at a quarter past 10. I an glad you asked me the question, you see. Fifteen minutes over time, you see. By a quarter past 10 the house will be dark. Pinsent: If there is any question, I will be back before then. H.M.Jr: Then we will give you a drink. Pinsent: Is that the best my, if I came back? H.M.Jr: Yes. And there will be a. drink here for you. Have you a car? Pinsent: Yes, I drove my car. (Mr. Pinsent left the conference.) Foley: There shouldn't be any misunderstanding on a matter like that. H.M.Jr: I told it to hin once. I, personally, don't think it is going to have a bad reaction. Kuhn: Over there? H.M.Jr: Yes. Kuhn: Only in the city, that is all, for a moment. H.M.Jr: And their market isn't open anyway, is it? They had better close it the day I testify. Regraded Unclassified 307 - 50 - Ball: Well, this gives then an opportunity to make & statement before hand. under That is right, I thought of that, too. I dreamt that one, you know. Sell: So did I. I have been asleep too. Cockran: The have got competition here now. sell: All these dreans that go around the Treasury are really something. (Laughter) Did you see the Federal Reserve had another article on this month's bulletin? Lait until you see the personal letter I got from Marriner Eccles tonight, three pages. Cochran: About the bond market? EACH No, he doesn't think I have been cooperating with him. Somebody told him I said a nasty word about him. Poley: His conscience must bother his. And he brings you (Foley) and Lauch in, too. Ee had forgotten all about it was our suggestion. Not you, he went to see the President. Foley: I thought you said Dan Bell WES in. Well, it will take & day to answer that one. He has got & couple of nice points in it, too. Eite: Is that where he brings us in? Dell: That is where he brings in Thite and Currie. - I see by the Wall Street Journal, he says that Regraded Unclassified 208 - 51 - you are thinking of putting in a bank holding bill, not that I know whether it is so, but we have something to do with bank holding legis- lation. Why didn't you consult me? Foley: Carter Glass said he didn't want me to. Kuhn: I hear you made the newspapers happy. E.V.Jr: Somebody planted & story on me about inflation, and I said I would have told you this long ago but Harry White didn't want me to sound off. I got suspicious of who put a job up on me, too. I got that across, and then I said some nice things about Leon Henderson. I an serious, what & wonderful job he had done and under what difficult circumstances, and the UP ticker didn't have it so I called up Leon and sent the press conference to him. He was home at 5:30. Foley: He was home all day. E.N.Jr: I sent it over. But I did say some nice things. I said Mr. Bell has a committee in the Treasury working on this. Bell: That ought to go big too. More committees. Cochran: Couldn't the Secretary address us sometime, Dan? He hasn't honored our committee. Bell: I think he ought to quit. Inflation is already here. Mrs. Morg: Young Henry happened to be making & record. He has the same kind of machine in Cleveland that we have here. He made a record and mailed it to Regraded Unclassified 209 - 52 - is. ..e said he thought that if it worked well, it would save telephone conversations. LOTE writing. D. Finsent returned and held conversation with the Secretary in the library. That is what he said. Re said that Phillips' answer unhesitatingly WES yes, but he wanted ze to realize that if Le didn't get the legis- lation through, once having given the informa- tion to the public, that they were through. They are through anyway. 50 : said, "Well, I personally TES absolutely confident that the legislation would pass and that -ª then he said they were working on & statement for us, which was Purvis' idea to try to show, going back to the beginning of the war, hots they got this may, would that be useful? And = - said, "Tes. 3ut they were perfectly willing to have us use it. Unhesitatingly, They are wiring back home: Tes, tonight. But Le be said il they don't get it through-- They are through anyway, SO don't let that bother you. That is not bothering IIS. Lell, I wouldn't say they are through. Regraded Unclassified 210 - 53 - Thite: I wouldn't say they are through. Bell: They could go over to Canada or Australia and continue this war. Thite: The answer is, they will be through if they don't get it. E.V.Jr: Just as a matter of population, a matter of factories, you can't, on a little bit of an island, manufacture enough munitions to fight the area which is now covered by Germany. White: And certainly the people would not - the forces seeking for peace would unquestionably be able to-- You can't do it. If their factories could be spread out, but concentrate all those factories in a little section with all the convoys having to go through between Belfast and Liverpool and down through that north channel, and these poor devils can't even take Ireland. Even if they had Ireland, it would be better. Mrs. Morg: Don't you think if you gave the statement, even though they give you complete permission, it is much better not to say that you are giving it with their permission? Cox: I should think SO. Cochran: I think so, Irs. Morg: Because that leaves them much freer at home for their own consumption to say what they want. E.V.Jr: I an not sure. Thite: I think you have got to do that for your own protection. There may be commentators in town, otherwise, who might critize you for doing that, Regraded Unclassified 211 - 54 - saying that you are exposing Great Britain to a situation in which the enemy knows what her assets are, so that I think that at sometime later you would be - have to say that you did it with their permission and why not say it to begin with. Cox: You could say it was done with their authority. White: Well, I mean if it is going to come out in any case, why not right at first. Cox: I think the feeling is that after all the Secre- tary is a Government officer testifying in our own national interest and he ought to be able to do what he wants to with or without the authority of the British Government in terms of the really wide-spread aid that is going to be given to them. H.M.Jr: There is this difference. This is their informa- tion I am peddling. Cox: That is right, and given in confidence. White: It is different if you are giving your state- ment of what they have got, but I take it what he is going to give them is what they have sub- mitted to him and it is really of so important strategic nature that I think some where along in that either in response to B. question or some where you have got to indicate-- H.M.Jr: Oh, this is a terrific responsibility. I realize that. I mean, here you are talking about the British Empire, the Rock of Gibralter, and the Bank of England. I had the greatest difficulty in saying it to him in there, that what I am proposing to say is that they are busted. It is just - go back how many years with you (Stewart) sitting over there in the Bank of Regraded Unclassified 213 - 55 - England. This isn't something that I do lightly, but as Mrs. Morgenthau said, "What is our objec- tive?" Our objective is to get this bill through. White: England has parted with between two and 8. half and three billion dollars since the unr has begun in dollar exchange and its equivalent. I don't think they are busted. E.M.Jr: Well, Bill Bullitt always told me that the day that England, as he put it, welshed on their debt to us was the day that they crossed the Rubicon. He always figured from that day on they lost prestige all over the world. Kuhn: There are two points that Professor Stewart raised. I wonder if I could ask him before the party breaks up whether it wouldn't be a good idea to remind the committee of the French hold- ings here which suddenly vanished as far as the British were concerned and caused then to find themselves in their present position, and the second is, don't you want to deal with the direct investments here so as to reaind the committee that these investments which look so large are in reality not all marketable and that it wouldn't be desirable to have them all dumped at once? H.M.Jr: Good point. Kuhn: Now, Oscar has written 8. passage there which you might like to have him read. It is & short one on that very point. H.V.Jr: All right, go ahead, Oscar. Stewart: May I make those points just 8. little differently? What I was saying when you went out WAS this, that I think a committeeman night even feel as the American public does, how can it be that the British Empire has reached the point where it is Regraded Unclassified 213 - 56 - as short of money as to require this bill and my did they get short of money SO such earlier this time than they did last time? I think the 625287 is that you are not telling about the British Empire assets. You are dealing with dollars. Those dollars represent gold, foreign exchange and investments. The other is that the last time you did have an allied cause and you had it until June of last year. You were making orders, as you said, against a total as- set, so if you are going to tell that story of the total, I would put the total assets there and have that just drop out of the picture the middle of last year, so that you are dealing with the thing as an increased burden with & dinin- ished asset compared with the last mr. "In increased burden with & diminished asset." That is 2 good phrase. Cochran: The British put it this RJ: "It should be borne strongly in mind that since the unexpected French collapse six months ago, the burden on the British of financing the not has been doubled and the resources halved. - LLA: I think that all of that, Ferdie, if you could take tomorrow morning, never nind about the bal- ance sheets, and take what you have listed here al sit down over again and deaving it more, not I, but the Treasury, and we and SO forth and & little bit nore impersonal, see. I think if you could take not you have heard here tonight and try it once more in the norning. luin: Sure. I would like to hear this before It- This is Oscar's sun song. Car: The difficulty with it is that it is opinion which is my from the fact. (See Attachment 3) Regraded Unclassified 214 - 57 - "Forced liquidation of all of the holdings of the British nationals in this country at this time would have serious disadvantages to us. Many of the holdings of these British citizens is in companies like Dunhill's and Jaeger's, whose main business is to distribute English goods in this country. They have primarily a going concern value. If they were forced into liqui- dation, their value would be nominal. If all of the other holdings were liquidated immediately, they would disrupt our securities and other markets and would drain the resources of the British so that they could not quickly acquire indispensible resources in other parts of the world, such as South America. "At the same time, such an imediate and forced liquidation of all of the assets of British citizens would tend to weaken their will to resist the aggressors. If the United States required all of their assets now, some of the English whose property WES being so used might feel that they would rather appease the dictators by giving up some rather than all of their property. "Therever it is possible reasonably to do so, Britain is ready and willing to liquidate the holdings of its people in this country. Since last fall it has been liquidating the securities in American companies held by its nationals. A special representative is now on the way over from London to take the necessary steps to liqui- date British direct investments wholly owned by British citizens and doing business in the United States. This liquidation will proceed as expedi- tiously as possible from the standpoint of our national interest. "The lend-lease bill supplies the methods by which most of these disadvantages, of immediately stripping Britain of her overseas investments, can be eliminated. If it is deemed wise and Regraded Unclassified 215 - 58 - practicable for us to take the non-liquid hold- ings of British nationals in this country as collateral, that can be done under the proposed legislation. Under the proposed legislation, the President can also, for example, authorise the Army or Navy to supply airplanes to the British in exchange for rubber, tin, nickel or the various other materials which the British produce, over e. reasonable time. In this my we can get the many things which we seriously need and cannot produce. We can also get then without disrupting our markets or foreing then into appeasement. In this and other similar ways we shall also keep open the channels of international trade so that they may be readily available to us in the post-war period. At the same time our workmen will be trained and en- ployed, and our production capacity will be expanded and ready for our own direct uses at a moment's notice.' H.M.Jr: The first part that you read, up to the time that you got down into - if they forced them that they might want to go into appeasement, just that first part, down to there, I mean that was factual. Cox: That is right. White: Factual, but it wasn't true, part of it ne't. (Laughter) H.M.Jr: I liked it, Oscar. White: When it is corrected, it will be more in accord- ance with the facts. Mrs. Morg: The second part, Henry, was just the thing we had all the argument about over the weekend. H.M.Jr: I say if you take all these good things away from them, they will say, "What the hell, we might as well quit now. Regraded Unclassified 216 - 59 - Irs. Morg: And them these people would mey, 'ire Be going. into this thing for the salte n° the appeasers. I think I ought to been EME] from that. I think there will be plenty È that. is I say, I like that first part, that kind of thing. Inio: It should go in. I think so. Earry will make it fastual. Thite: Tell, more nearly true. I think smething of that kind can go in if it is qualified nifi- ciently. That is purely financial, kind of ary and you know (Laughter) - I think that is all right. then you get into that appeasement stuff, no? Bell: Shouldn't you put in this statement, that the urgency of this bill is that the British can't out any additional orders in until they get it through. Mr: I think that is & groù print. Sell: Ind the second is that they my not use all of their assets in liquidating their present commit- ments, but there will be may things they need which can't be purchased through the "ar and Javy which will not be stendard and therefore they should have some of their assets. White: The trouble with that is, that is committing. If you want to take that policy, that is = good point, but the my the present bill is witten, you can sell them agricultural comodities. MM How, be (Young) comes in today, for instance. There is 2 contract with Studebaker and Buick for two thousand harsepower engines. It is just blocked because - well, under the rule of Regraded Unclassified 217 - 60 - thanb they can't place the order. The Army han't got the orders to place. They need the English orders in order to get the capacity and Baick and Studebaker won't sign and here our own program is blocked up. Thite: Well, that relates to his first important point, that they must be able to place orders, but if you say the second thing, it is committing you to E. policy that I don't know whether you vant to commit yourself to, namely, that they will PAY out of their own assets and current income for all purchases that are not directly armanents. You nay or may not want to do it, but that is a definite statement of policy which I don't think the present bill precludes. The my the bill is written now, it would be pos- sible to sell them food and sell then on credit. LLC: No, but I think that kind of thing ought to 80 into the statement. You can give a few examples and just show how everything is blocked pending this thing and how long it takes these things to get ordered. Euim: To give a specific example, you nean? LLJr: You nean you can always put it in and te can always knock it out Ee can give you anything from 37 millineter guns to & two thousand horsepower engine. le can pull them out of his pocket. He can give you & five-year-old plane. (Laughter) Toung: I didn't have anything to do with those five- year-old planes. Inin: Do you want to leave it to Stinson or somebody to say how the British have given us military secrets and so on in the course of this help that we have given them? How they have given - turrets and so on? Regraded Unclassified 218 - 61 - LLJr: I don't want to get into that. White: One horse, one rabbit. H.M.Jr: The do you think has given up. more? White: Oh, I think the British have given us secrets that are invaluable. (Langhter) H.M.Jr: All right. Te will stop. 1 How you and Cox are going out and make this fatuous. (Laughter)