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CORRECTION
NCB-974
Distribution of true
January 24, 1945.
reading only by special
arrangement. (SECRET w)
Telegram 102, January 20, noon, from Ankara in
the last line delete "(#)" and insert "Rumania" so
as to read "departure from Runania."
DIVISION OF CENTRAL SERVICES
CAD
Regraded Unclassified
NOT TO BE RE-TRANSMITTED
4
170
COPY NO.
SECRET
OPTEL No. 28
Information received up to 10 a.m., 24th January, 1945,
NAVAL
1.
HOME WATERS. Convoy from North Russia has arrived in U.K.
Reference OPTEL 27, para, 1. Night 22nd/23rd. About 18 E-boats
operated. One, from which prisoners taken, sunk by Tongue Sand
Fort and others damaged by our patrols.
2,
ENEMY ATTACK ON SHIPPING. 22nd/23rd. A 2365 straggler
from eastbound convoy sunk north of Dunkirk, 23rd. A 1599 ton
Norwegian ship sunk north of Angelsy as result of underwater explosion.
MILITARY
3.
WESTERN FRONT. Ardennes Sector: Good progress made against
occasional resistance along whole front from Diekirch to St. Vith,
advance still hampered by snow and minefields. Wiltz and according
to unconfirmed reports, Asselborn, cleared and patrols in St. Vith.
Northern Sector: Troops of 2nd British Army advanced up to two
miles towards Heinsberg on right of present sector of attack. But
on left, nearer the Maas, only slight progress made in difficult
country against stiff resistance and counter attacks.
4.
EASTERN FRONT. Eastern Prussian Sector: Labiau (26 miles
N.E. of Koenigsberg) and Wehlau (23 miles west of Insterburg) cap-
tured. Both towns are strongholds guarding approach to Koenigsburg.
South of Insterburg Darkehmen (19 miles S.E. of Instogh G) and
Benkheim and Treuburg, 12 miles S.W. and 21 miles S.S.E. of Goldap
respectively, captured as well as more than 700 other localities in
Northern Poland. Capture reported of Gratewo, Rajgrod and Jedwabnem
(13 miles S.S.E., 16 miles S.E. and 37 miles south of Lyck) with
over 350 inhabited localities. In Allenstein area more than 600
localities including Saafeld, Mohrung, Willenberg and Ortelsburg (37
miles west, 25 miles N.W., 33 miles S.S.E. and 26 miles S.E. of
Allenstein) have been occupied.
Northern Central Sector: Brodnica and Lipno (37 miles
N.E. and 27 miles S.E. of Torun) and 450 other places have been
taken. Capture of Bydgoszez (Bromberg) also reported.
South Central Sector: In Silesia advance has reached river
Oder-in gree Breslau along stretch of approximately 37 miles;more
than 200 German and 450 Polish inhabited localities captured.
Southern Sector: Russians have lest Szekesfehervar after
heavy claimed. fighting. Destruction of high propertion of enemy tanks
AIR
5.
WESTERN FRONT. Night 22nd/23rd. 1296 tons dropped on
Duisburg Benzol Plant and 431 tons on Gelsenkirchen. At Duisburg
weather clear and bembing concentrated, At Gelsenkirchen bombing
believed good, although through thick cloud. 23rd. Escorted Fort-
resses 181 (5 outstanding) dropped 445 tons on railway centre and a
bridge it Neuss. Some crews bombed visually while others employed
Pathfinder technique. Results fair, SHAEF (Air) bombers 57 (4
missing) attacked communications in Northern and Central Sectors.
1921 fighters (14 missing) operated over battle area; nearly 1400
road and rail vehicles destroyed and 1550 damaged mainly in central
sector. Enemy casualties 27,3,20
-
6.
mediterranean. 22nd. 130 Mitchells, 23 Baltimores and 735
fighter bombers and fighters (8 missing) attacked communications in
N. Italy. Several bridges hit and 625 road and rail vehicles des-
troyed or damaged.
BURMA. 2lst. 82 Liberators dropped 322 tons on northern
vistal areas Ramree Island in support of landing operations. Bombing
1 concentrated. 47 Mitchells bombed bridges in Lower Burma.
SECURITY
7 rocket incidents reported yesterday and last night,
Regraded Unclassified
191
January 25, 1945
9:47 a.m.
HMJr:
Hello.
Operator:
Yes, sir.
HMJr:
Judge Rosenman they said.
Operator:
Right.
White House
Operator:
Hello.
Operator:
Ready with Secretary Morgenthau. Go ahead.
HMJr:
Hello.
Sam
Rosenman:
Hello.
HMJr:
Yes.
R:
Henry.
HMJr:
Good morning.
R:
Good morning, Henry. I talked with Dorothy and
we -- we think that if you will transfer him it
will be fine.
HMJr:
I'll do it at once.
R:
Fine.
HMJr:
Be glad to do it, Sam.
R:
All right, thank you. And I have a call in for
Harry White.
HMJr:
Pardon?
R:
I have a call in now for Harry White. I'm going
to arrange to meet him either today or tomorrow.
HMJr:
Okay.
R:
Have you -- well, he'll know the man you've
selected.
HMJr:
Oh, yes. I talked to him right away about it.
Regraded Unclassified
192
- 2 -
R:
All right.
HMJr:
He knows about it -- Taylor.
R:
Taylor. Okay.
HMJr:
And it's going to be Taylor.
R:
Fine. All righty.
HMJr:
Thank you.
R:
Thank you.
Regraded Unclassified
193
January 25, 1945
9:49 a.m.
HMJr:
Sam Rosenman just called in regard to his
father-in-law.
John
Pehle:
Uh huh.
HMJr:
He'd like to have him transferred over to
Procurement.
P:
Right.
HMJr:
So will you take care of it?
P:
Yes, sir, I will.
HMJr:
I thank you.
Regraded Unclassified
194
January 25, 1944
10:25 a.m.
PRE-PRESS
Present: Mr. White
Mr. D. W. Bell
Mr. O'Connell
Mr. Gaston
Mr. Blough
Mr. Shaeffer
Mrs. Klotz
Miss Chauncey
H.M.JR: Good morning.
MR. GASTON: Good morning.
H.M.JR: Shaeffer, have you got anything?
MR. SHAEFFER: Fredman of the Chicago Journal of
Commerce is going to ask about the possibility of issuing
consols, perpetual bonds without maturity.
(Mrs. Klotz enters the conference.)
MR. BELL: He is worried about this upsurge in the
bond market, and decreasing yields, and he says you can't
put out two and one-half's and two's along the same schedule
you put out before, without having a lot more free-riding,
as the pressure of money is there; and that profit is in
the market, and people will try to get it. He is probably
right, but I think the answer is we have begun to study
the problems that are facing us for the Seventh War Loan,
and we are not in a. position to say anything about interest
rates, what the securities will be that we will put in
the basket, and that will take us sixty days before we
get that decision. But it is in the market and rumors
are all around.
I would prefer to let this market go on just like
it is without any statement from the Government.
Regraded Unclassified
195
- 2 -
H.M.JR: It went off yesterday, didn't it?
MR. BELL: Not too much.
H.M.JR: Did we sell anything?
MR. BELL: I don't know whether they sold anything
yesterday, but they haven't sold any tax-exempts for
several days, and I doubt if they sold any yesterday,
because it went off two or three seconds. But if the
market goes up and it justifies our issuing one and
three-quarter percent bonds on the same basis as two,
we have had nothing to do with it. It has come about
naturally. We haven't issued any statements. We have
sold securities while it has gone up, and I think it
is an excellent position for the Treasury to be in.
H.M.JR: Did you go to the hearings yesterday, Joe?
MR. O'CONNELL: I went down, but couldn't get in.
I didn't get away from here until two-thirty.
H.M.JR: I wish you would look into it. I think
Wallace is taking the position he is still the Head
of RFC.
MR. BELL: You mean Jones.
MR. O'CONNELL: I think he is.
H.M.JR: There was some exchange of conversation
between him and Pepper on that.
MR. O'CONNELL: I will try to get a transcript.
There seems to be a legal theory a little on the academic
side. Under RFC there is no provision for removal of the
Chairman of the Board of Directors. Now, he should serve
as any other Presidential appointee does, at the pleasure
of the President. But back in 1933 or 1934--
(Mr. White enters the conference.)
Regraded Unclassifie
196
- 3 -
MR. 0' CONNELL: ...the President removed a fellow
by the name of William E. Humphrey, who was Federal
Trade Commissioner. He later died, and the Supreme
Court, in a suit brought by his estate said his estate
was entitled to collect compensation even after he was
removed by the President, because the President didn't
remove him for cause. We haven't looked into it, but
it is analogous to this situation in some superficial
ways.
MR. GASTON: There are distinguishable cases. There
is the case of a minor employee of the Post Office
Department in Oregon, and the Supreme Court said he
could remove him any time. Humphrey was the Head of
an independent agency, holding office for a statutory
term, and the Court's decision was he could not be
removed except for cause.
MR. O'CONNELL: All I know about RFC was there is
no affirmative expression of law giving the President
the right to remove him. It may be that he serves at
the pleasure of the Board of Directors, and technically
you would have to remove him by action of the Board,
but I will have that looked into this morning.
H.M.JR: Does anybody have anything else?
MR. BELL: Wallace was coming in this morning. Did
you see him?
H.M.JR: Yes. He has been here and has gone.
MR. BELL: He was coming in to see me this morning
on his way.
H.M.JR: He got in here a little before nine-thirty.
We don't want to have it publicized.
MR. BELL: I guess he was all right. I sent him some
material yesterday afternoon, and he said, "I'll drop by
and talk to you before I go on the Hill."
Regraded Unclassifie
197
- 4 -
H.M.JR: He had some last-minute changes to make
in his statement, and that is what he was working on.
MR. O'CONNELL: I have sent him something early
this morning.
H.M.JR: If you will stay behind, Harry, I want
to talk to you.
Regraded Unclassified
198.
January 25, 1945
11:13 a.m.
HMJr:
Hello.
Operator:
Mr. Yost.
HMJr:
Hello. Mr. Yost.
Charles
Yost:
Yes, sir.
HMJr:
Morgenthau.
Y:
Yes, sir.
HMJr:
There's a little mix-up. I gave you that letter
in regard to French Lend-Lease.
Y:
Yes.
HMJr:
And said if it wasn't wholly satisfactory, I'd
be glad to discuss it with Mr. Stettinius. And
of course, Mr. Stettinius, I take it, has left
by now.
Y:
Yes. Well, now, I -- I thought you wanted me to
give that to Mr. Clayton.
HMJr:
Well, I said -- I said Stettinius, but that's
all right. You gave it to Mr. Clayton.
Y:
I did, and I am very sorry if I misunderstood.
I thought you said Clayton and
HMJr:
No, I said Stettinius. But what happened then?
Y:
I gave it to Clayton and gave him that message.
HMJr:
Yes.
Y:
And he read it over and his reaction seemed to
be favorable but he said he wanted to study it
further and would be in touch with you.
HMJr:
Well, he hasn't been.
Y:
Well, I'll speak to him again.
HMJr:
Now, where the confusion was: in the meantime,
a letter came for me -- to me from the Acting
Secretary of State, Grew
Regraded Unclassified
199
- 2 -
Y:
Yes.
HMJr:
calling for a meeting. And I read that
and I spoke to Mr. Grew yesterday and compli-
mented him on answering me so quickly. I thought
it was in answer to the letter which I gave you
to bring over to the State Department.
Y:
Yes.
HMJr:
And now Mr. White tells me that Mr. Grew's memo-
randum was in answer to a previous one.
Y:
I see.
HMJr:
But on account of all of this -- well, so many
people being interested in this, I would like
to know today whether the letter which you were
kind enough to walk over -- whether -- does the
State Department accept that or don't they?
Y:
Good. I'll either call you back or ask Mr.
Clayton to this morning.
HMJr:
Yes. If you would. I mean, I'd like to know
where we stand because I was under the impression
that this memorandum from Mr. Grew referred to
that, and I gave Mr. Crowley a copy of Mr. Grew's
letter to me
Y:
Yes.
HMJr:
under the impression that that was in answer
to the one you took over, you see?
Y:
I see. Well, I don't know about this other memo-
randum but I took it from Mr. Clayton's reaction
that he was accepting the letter.
HMJr:
Well
....
Y:
But I'll make perfectly sure of that and
....
HMJr:
Will you? And then either he or you call me.
And that letter calls for a formal answer.
Y:
Oh, yes. Yes, indeed.
HMJr:
Which I'd like to get today.
Regraded Unclassified
200
- 3 -
Y:
Good. I'll get in touch with him right away.
HMJr:
I thank you.
Y:
All right.
Regraded Unclassified
2017
January 25, 1945
11:48 a.m.
John
McCloy:
Hello.
HMJr:
Jack, I'm sorry to bother you but I thought you
could listen anyway.
M:
Sure. Go ahead.
HMJr:
General O'Dwyer is here in my office with John
Pehle.
M:
Yes.
HMJr:
And you know we moved Pehle over in Surplus
Property.
M:
Yes.
HMJr:
And there's still a lot of work to be done in
the War Refugee Board.
M:
Yes.
HMJr:
And I would like to strongly recommend to Mr.
Stimson that we put General O'Dwyer into the
War Refugee Board as director.
M:
Oh, I think he'd be very glad to have him.
HMJr:
You think so?
M:
Yes.
HMJr:
And then we also think that he'd be better doing
it in the suit of a civilian.
M:
Yes. Yes.
HMJr:
He could be put on the inactive list.
M:
Yes. I would think that he -- certainly on the
first I think he'd be glad to have him. Whether
we can let him go from the Army, I suppose I've
got to talk to the Judge about that, but I think
it's probably all right.
HMJr:
Do you think you could give me twenty-four hour
service?
Regraded Unclassified
- 2 -
202
M:
Let me -- let me go to work on it. Let me go to
work on it.
HMJr:
You're sympathetic to it?
M:
Yes, I'm sympathetic to this extent: I'm sympathetic
with the idea. I'd like -- because I think he'd be
good in there. I'm sure the Secretary would like
that.
HMJr:
Yeah.
M:
But the -- the question of letting him out of the
Army is another breed of cat. He did a very good
job for us in the Army and
....
HMJr:
Well ....
M:
the idea of letting him go is a little bit
painful.
HMJr:
Well ....
M:
However, it's in a war -- it's in a war job.
HMJr:
It's a war job.
M:
And I might be aole to swing it. Let me just --
let me work on it, will you please?
HMJr:
Yes. Because We are being embarrassed every day
by the fact that we haven't got somebody giving
it full time.
M:
Yes. Yeah. I can understand that.
HMJr:
And I -- you know, I explained, I had to throw
Pehle in the other job and he's been trying to
find somebody and it isn't easy.
M:
Yes.
HMJr:
And now that we know General O'Dwyer is willing
to do it
....
M:
Yes.
HMJr:
and would like to do it....
Regraded Unclassifie
- 3 -
203
M:
Yes.
HMJr:
....
the sooner the better.
M:
Okay. All right.
HMJr:
Thank you very much.
M:
I'll let you know.
HMJr:
Did you get my letter?
M:
Not yet, no.
HMJr:
Oh, didn't ....
M:
No.
HMJr:
About the photographs?
M:
No. No.
HMJr:
You'll get a smile.
M:
Okay.
HMJr:
All right.
M:
Fine.
Regraded Unclassifie
203-A
January 25, 1945
Dear Jack,
Pursuant to our conversation today it
would be very much appreciated if General
william O'Dvyer and Lt. Col. Jerome J.
Ohrbach (#0-908736) could be inactivated
to the War Refugee Board.
As I explained to you, I have found it
necessary to assign John Pehle, who is
Executive Director of the Var Refugee Board,
to the Procurement and Surplus Property job
in the Treasury, and it will further the
cause for which the War Refugee Board vas
set up if O'Dwyer and his assistant, Chrbach,
could be used for this purpose.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Nonorable John J. McOloy,
Assistant Secretary of War,
Pentagem Building,
Washington, D, of
JWPehle:1hh 1-25-45
Regraded Unclassified
204
January 25, 1945
2:38 p.m.
HMJr:
Hello.
Leo
Crowley:
Hello, Henry.
HMJr:
Leo, I'm calling up about that oil well -- oil
refinery equipment
C:
Yeah.
HMJr:
for the Russians.
C:
Yeah.
HMJr:
Anything to report?
C:
No. I had all of our fellows working on this
thing and, as you know, we hit this snag in the
War Production Board that -- we even hit this,
Henry, that they were trying to get us to cancel --
don't tell this to the Russians because 1t will
upset them terribly -- they wanted us to cancel
what we had in the works for them because of the
necessity for them in our war production here.
HMJr:
Yeah.
C:
Now, we have to get hold of Krug. Krug is on
record very definitely that he will not raise
this priority.
HMJr:
Yeah.
C:
And we're trying our hard -- durndest to get him
to cooperate a little bit with us. But we don't
get any help from the War Department. They're
very definitely against it and we haven't had
much help from the War Production Board up to
date, just between ourselves.
HMJr:
Yeah.
C:
But our fellows are working on it, Henry.
HMJr:
Well, you were a little over sanguine, what?
C:
That's right. Well, I didn't know -- they shocked
me when I found out.
Regraded Unclassifie
204-A
- 2 -
HMJr:
Yes.
C:
That not only were we in trouble in trying to
increase this but they were trying to get our
fellows to agree to cancel the priority was
outstanding
....
HMJr:
Yeah.
C:
....
which was a kind of a shock to me. You didn't
know that, did you?
HMJr:
They told me that there was some talk about increas-
ing the production domestically. Yes, I had heard
some talk about it.
C:
Yeah.
HMJr:
But I -- this thing originated with the Russians.
They wrote me a letter about it asking for help.
C:
Well, they -- I think the Russians feel this,
Henry, that we're doing everything we can to help
them, but of course from our view point, all we
can do is certain things, when the final thing is
in the hands of Krug.
HMJr:
Well, I didn't get that impression from the Russians.
I mean, that's why they wrote me, you see, that
they
C:
Well, I'll be very happy to write you 8. note to that
effect.
HMJr:
Well, that doesn't help any.
C:
But we're -- our fellows are doing all they can on
the thing.
HMJr:
Well, is Krug the bottle-neck?
C:
That's right. That's right. And Krug wrote --
Krug -- in the file there, Krug wrote you a letter.
HMJr:
Yeah.
C:
Where he'd turned it down.
HMJr:
Yeah.
Regraded Unclassified
204- B
- 3 -
C:
But that's where it's got -- -- that's where the
bottle-neck is, Henry.
HMJr:
Well, have you any objection if I call Krug?
C:
Not at all in the world.
HMJr:
Okay.
C:
All right, Henry.
Regraded Unclassified
205
January 25, 1945
2:43 p.m.
HMJr:
Hello.
Will
Clayton:
Hello, Mr. Secretary. How are you?
HMJr:
Okay.
C:
Will Clayton.
HMJr:
I know. Will
C:
Yes, sir.
HMJr:
I called up Yost this morning about an
answer to my letter of the 23rd to Stettinius
on the French
C:
Yes.
HMJr:
He said I was apt to hear from you. I wondered
when.
C:
I told him that I would have an answer to send
over to you by hand this afternoon.
HMJr:
Yes.
C:
But I just didn't know whether it was best to
come over and talk with you about it or send
you a letter and I think probably the best
thing to do is to do both. So if you don't
mind, if I could come over
HMJr:
When do you want to come?
C:
Let me see -- oh, my! -- how about -- how about
my coming at -- I could come -- I could come
now or in a few minutes if I could come without
the letter. I'll tell you what the letter is
going to say.
HMJr:
Yes.
C:
It's going to say that we agree with you fully
that the dollar and gold ought to be carefully
examined and that we ought to come to an agree-
ment with the French before we give them anything.
HMJr:
Yeah.
Regraded Unclassified
206
- 2 -
C:
And that we would certainly do that.
HMJr:
Yeah.
C:
But that that might take a little time and
what we would like to do would be to sign the
master agreement with them which doesn't commit
us to anything except what we agree upon.
HMJr:
Yeah.
C:
So that we could get that out of the way.
Monnet 18 very anxious to go home
....
HMJr:
I know.
C:
and then come back. And before we gave
hime anything, why, we'd negotiate these things
with him, in which, of course, you'd take part.
HMJr:
But we differ with you on that.
C:
Is that 80?
HMJr:
Yeah. If you could get over here at three --
do you want to come over at three?
C:
Yes, I can come at three.
HMJr:
I'd like to talk to you about it because on
that procedure, that's -- we're -- we don't
see eye to eye.
C:
Could I come -- could I come right away?
HMJr:
Uh ....
C:
Before three?
HMJr:
Oh, yeah. By the time you get over here, I'll
be ready.
C:
It'll be pretty nearly three, yes. I'll -- I'll
come right away.
HMJr:
Thank you.
C:
Thank you.
Regraded Unclassifie
207
January 25, 1945
MEMORANDUM
RE: Meeting in Secretary Morgenthau's
Office with Assistant Secretary of
State Clayton, January 25, 1945.
(1) Assistant Secretary of State Clayton came to see
Secretary Morgenthau today to talk about the French lend-lease
matter. Also present were White and DuBois.
(2) After referring to the Treasury's letter of January 23,
Clayton read the letter which the State Department proposed to
send to Jean Monnet (copy of which had been forwarded to us
and was referred to in our letter of January 23). Clayton
inquired as to why this letter did not meet the purposes which
we had in mind.
(3) It was explained to Clayton that the proposed letter
0
to Monnet, proposing immediately entering into a master lend-
lease agreement, was not in accordance with our views, for the
following reasons.
It is important that before we enter into a formal
agreement with the French authorities that it be clearly understood
within this Government and between the French and ourselves just
what the agreement contemplates. Unless there is this basic
understanding from the beginning as to what is involved, there
cannot help but be basic misunderstandings after the agreement
is entered into. It is important for example that if the French
are going to be requested to cut down their dollar balances
that they understand this in the beginning. It is important
that they have some idea of the nature and amount of the supplies
that they can expect to receive under the agreement. Furthermore,
from a purely business standpoint, the United States should make
every effort to get what we want from the deal before giving
away most of our chips. It was pointed out that this agreement,
once entered into, would undoubtedly be publicized in France
and understood by the French Parliament and the French people
as a big thing. It is important that when the agreement is
announced that the scope and potentialities of the agreement
be understood.
Regraded Unclassifie
206
- 2 -
Secretary Morgenthau related to Clayton his experience
with the British lend-lease. He pointed out how after the
President directed him to cut down the British dollar balances
the British had been playing one Department of this Government
off against the other. Although this might seem smart, in the
long run interests of Great Britain it is very unwise. Secretary
Morgenthau related his conference in London with Churchill in
which he frankly told Churchill that he knew of the memorandum
which had been prepared by the British Government and given to
the President, attempting to praise certain officials of this
Government with respect to their dealings with the British and
attempting to lay the blame on Secretary Morgenthau for the
difficulties which the British had been having.
Secretary Morgenthau pointed out how the same pattern
followed in the British matter was very apt to also occur in
the French matter unless there was a clear meeting of minds
before entering into any agreement.
(4) Secretary Morgenthau pointed out to Clayton that if
0
it had not been for the support which he had given Crowley at
the Cabinet meeting the President would never have given the
green light on the French lend-lease matter; and that Stettinius
himself had not taken a strong position in the Cabinet meeting.
Clayton said that he had been talking to Crowley and that Crowley
had told him practically the same thing. Secretary Morgenthau
then pointed out that obviously we were in favor of giving
lend-lease to the French but the question was as to the best
method of handling the matter.
(5) After some discussion Clayton finally said that he
could see considerable merit in Secretary Morgenthau's position
and that if Secretary Morgenthau felt strongly about it, he felt
that this position should prevail. Clayton said that he would
discuss the matter further at State.
(6) Secretary Morgenthau then pointed out that he was
perfectly willing to set aside four or five days of his time
to work on the matter and wind it up as quickly as possible.
He suggested that State Department cable to Paris requesting
that Pleven, Minister of Finance of the French Provisional
Regraded Unclassified
209
- 3 -
Government, be sent to Washington to work with Monnet with a
view to winding up the matter; and that he be given plenary
authority by the French to deal with the financial aspects
of the problem. Clayton indicated that State would give
careful consideration to this procedure.
RUSSIA
(7) As he was leaving Clayton stated that he would like
to say a few words with respect to Russia. The Secretary pointed
out that this was not something that could be discussed in a
few minutes and that he would be glad at any time to discuss
the thing in full detail with Clayton. Clayton mentioned that
insofar as the 3 (c) credits to Russia were concerned, the State
Department had decided to make no concessions and that they
were going to stick to their original proposal. Secretary
Morgenthau and White both made it very clear that Treasury
disagreed thoroughly with this procedure and that if State
wanted to take this line they were doing it on their own
responsibility. When questioned as to whether he thought
that an agreement could be reached with Russia on the basis
of State's proposal, Clayton said he felt sure it could.
(8) With respect to the matter of the Russian loan
Clayton said that it had been decided that this should not
be gone into at this time. He said that the thought was that
before entering into such a loan with Russia we should wait
until we could determine what our other Allies will be asking
for so that we can consider the thing as a whole.
(9) Secretary Morgenthau emphatically said that he was
in total disagreement with State on this matter, as well as with
the President. He said that he thought State was making a
great mistake and that State was not dealing with the Russians
in the proper way. Secretary Morgenthau referred to his
experience with the Russians during the last twelve years,
including his relations with the Russians at Bretton Woods.
He stressed the fact that it was important that we make clear
to Russia that we are prepared to help them economically and
Regraded Unclassifie
210
- 4 -
if we could do this at this time, it would go a long way in
helping us get a lot of things in the political field that
we want from Russia. Secretary Morgenthau said he was sure
that eventually we would have to give this sort of aid to Russia
anyway and we should do it at this time when it can do us the
most good. Secretary Morgenthau pointed out that Stettinius
had said that he had presented Secretary Morgenthau's views
to the President.
(10) Clayton said that of course he assumed such a loan
would need Congressional approval. Secretary Morgenthau said
that was part of the Treasury proposal - namely, that the
loan should be carried out by Congressional action. Secretary
Morgenthau then asked Clayton whether or not he had seen the
Treasury proposal. Clayton said he had not seen Treasury's
proposal; that Mr. Stettinius had received it shortly before
he left and that it had not been sent to him (Clayton).
Secretary Morgenthau then said that he would send a copy of
the document which we gave to Stettinius to Clayton. Clayton
said that he would be glad to review the document.
(11) Secretary Morgenthau also pointed out that he had
discussed the Treasury proposal with Mr. Harriman on two
different occasions and that Harriman was very much in favor
of it. Secretary Morgenthau also referred to Harriman's in-
ability to even speak to high Russian officials for a period
of months at a time. Secretary Morgenthau said that he assumed
that if Clayton had a representative of his cotton firm in a
foreign country who reported that he was unable for a long
period to even see any of the important people that he was
supposed to deal with that he assumed Clayton would recall the
man. Clayton said he certainly would.
JE Dusin,J.
J. E. DuBois, Jr.
Regraded Unclassifie
ADDRESS OFFICIAL COMMUNICATIONS TO
THE'SECRETARY OF STATE
WASHINGTON, D. c.
Carbon to Dr. white 1/26/45
211
DEPARTMENT OF STATE
WASHINGTON
January 25, 1945
My dear Mr. Secretary:
Upon receipt of your letter of January 18 addressed
to the Secretary, concerning a lend-lease agreement for
France, I replied on his behalf in a letter, dated Janu-
ary 22, and expressed agreement with your view that lend-
lease for France, both in munitions and in non-munitions,
generally should rest on the same principles as lend-lease
for Great Britain. I also stated that I had asked Mr.
Clayton to discuss with Mr. White and Mr. Oscar Cox a text
of an agreement which could be presented to Mr. Monnet early
this week. It was my understanding that you were in agree-
ment with the Foreign Economic Administration and the De-
partment that a master lend-lease agreement should be signed
with the French, and that, thereafter, representatives of
the three agencies should hold discussions with French repre-
sentatives concerning the nature of the supply program to
be undertaken and the terms upon which supplies would be
furnished.
Apparently, my letter crossed a second letter from you
which was received in the Department on January 23, in
which you suggested that before a lend-lease agreement is
entered into with the Provisional Government of France, a
determination should be made as to the extent to which we
deem it appropriate that the French should use their gold
and dollar exchange resources in meeting their non-munitions
requirements. Since this suggestion is at variance with
what I understood to be the position of the three agencies,
I would like to bring the matter to your attention again.
The Provisional Government of France has now been recog-
nized by this Government, and for the past several months
the French nation has participated with us and our Allies
in the prosecution of the war in Europe. In view of our
political policy with respect to the Provisional Government
of
The Honorable
FORVICTORY
Henry Morgenthau, Jr.,
BUY
UNITED
Secretary of the Treasury.
STATES
NATIROR
BONDS
AND
STAMPS
Regraded Unclassifie
212
-2-
of France, the Department is anxious that our lend-lease
relations be placed on the same general basis as is the case
with respect to Great Britain and Russia, and therefore
it seems desirable to offer a master lend-lease agreement
to the French representatives for signature at this time.
Of course, I am in agreement with you that after such
a document has been signed, it will be necessary for repre-
sentatives of the Treasury Department, the Foreign Economic
Administration and this Department to agree upon the amount
of French dollar and gold assets, including the holdings of
the Bank of France, which we would 8 nsider to be a satis-
factory position for France 80 long as non-munitions are be-
ing furnished under lend-lease, and to determine the extent
to which we deem it appropriate that the French gold and
dollar exchange resources should be used in meeting the non-
munitions requirements. As you know, the provisions of the
master agreement will not prejudice our discussions of these
matters, but will merely provide a general framework for our
lend-lease relations with France.
Since the Department believes that it would be unwise
to delay longer the signing of a master lend-lease agreement
in view of the present political situation, may I ask that
you advise me whether you have any further objection to the
submission of the text of such an agreement to the French
this week?
Sincerely yours,
Acting Secretary
Regraded Unclassified
January 25, 1945 213
3:33 p.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Yes.
Oscar
Cox:
Oscar Cox, Mr. Secretary.
HMJr:
Speaking.
C:
I wonder if some time at your convenience, I
could come over and talk to you a couple of --
about a couple of matters that Leo asked me
to talk to you about.
HMJr:
For instance?
C:
Well, one is the -- the French thing and related
aspects of it on the long term business and, two,
the Russian thing which is connected with that,
and three, some -- whole series of related problems
that etem out of those.
HMJr:
Well, all right. Will Clayton has just left here
now.
C:
Yeah.
HMJr:
I was getting from him first hand -- uh -- eleven
o'clock tomorrow?
C:
That will be fine.
HMJr:
Okay.
C:
Right.
HMJr:
All right.
C:
Thank you, sir.
HMJr:
Bye.
Regraded Unclassifie
House
214
January 25, 1945.
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
I had a half-hour's talk with Vladimir Pravdin
of TASS after we left your office. He said it is the
Russian view that it is quite obvious that we cannot
supply enough Allied representatives to govern the
Germans for any great period of time and therefore
the problem is to pick the right Germans to put into
government posts. So far as the part of Germany in
which they will be dominant is concerned, they will
not put the same old officials back in power but
will choose representatives of the working class who
are likely to prove more reliable. They fear very
much that England and the United States will yield
to the pressure of business groups and let the same
people who have controlled German industry in the
past get control of it again. In Pravdin's opinion
this class of people is the most dangerous class in
Germany and is the class which encouraged and per-
mitted the Nazis to seize and control power. It is
the general Russian view, he told me, that German
heavy industry should be sharply curtailed and he
thinks the idea of physically removing and distribut-
ing to neighboring countries German equipment is a
good one. Their real solution of the problem, however,
is a Socialist solution. They would have large scale
industry operated by the government and would give the
Allies a dominating position in directing the industries
for some years to come.
Among other things he said that the Russians were
very anxious to maintain continuing close and friendly
relations with the United States and in maintaining an
effective and continuing organization of the United
Nations. I don't think this statement was perfunctory;
he seemed to be thoroughly sincere. I would say that in
general Pravdin's concept of the Russian ideas with re-
spect to the treatment of Germany in the economic sphere
checks very closely with yours.
Regraded Unclassifie
Draft I. 215
1-25-45
DRAFT OF A FOUR-MINUTE RADIO SPEECH BY
THE SECRETARY OF THE TREASURY
Organized labor can be justly proud of its war-
time record. It is a record of achievement; a record of
constructive cooperation with management and with govern-
ment. It is a record of work and sacrifice for our common
goal of victory.
As today's discussion of the Bretton Woods proposais
illustrate, organized labor is also deeply conscious of its
responsibility for full and constructive cooperation in the
shaping of America's post-war social, economic and foreign
policies. Labor knows that its stake in the peace is no
less than its stake in this war.
It is too often assumed that international
relations is something with which the man in the street
should not concern himself too deeply--that these are
matters which must be left to the diplomats in the
political field and to the international financiers in the
economic field.
I do not think I need to tell you, however, that
a sound program for international colla boration in the
economic field will directly contribute to attaining our
Regraded Unclassified
216
- 2 -
goal of 60,000,000 jobs here at home. The International
Monetary Fund and International Bank are, in fact, essential
if the President's Economic Bill of Rights is to become a
reality. While our participation in these two international
institutions will by no means insure 60,000,000 jobs, I
think it is safe to say that we cannot attain this necessary
goal without them.
In providing jobs for everyone, we shall not only
have to increase demand for our industrial and agricultural
production here at home; but also abroad. Some parts of
our industrial and agricultural production demand a high
level of foreign trade to be efficient and prosperous.
This is particularly true in our heavy equipment industries
where our war demand will fall sharply but whose output
will be needed by other countries for reconstruction and
development. The foreign demand for such farm commodities
as cotton, tobacco and wheat will also be great if other
countries have the opportunity to buy. We therefore must
take steps, in cooperation with other countries to see
that international trade and investment is resumed promptly
on a sound basis.
Regraded Unclassified
217
- 3 -
The International Monetary Fund, when approved by
Congress, will aid the nations of the world in establishing
sound currencies. It will clear the channels of foreign
trade of discriminatory restrictions and controls so that
there can be a genuine expansion of world trade.
[ith the help of the International Bank, American
capital can play a great constructive role - and a profitable
role - in the development of the economies of other countries.
It will provide us with enormous post-war foreign markets.
For our greatest markets are in prosperous, industrialized
countries.
Nor are the benefits of increased foreign trade and
investment confined to increasing our prosperity. I want to
emphasize that such cooperative measures for expanding
international trade and investment are at the same time the
economic foundation for a lasting peace. A prosperous
world will be a world free of both economic and political
aggression.
Regraded Unclassifie
House 218
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
January 25, 1945
TO THE SECRETARY:
Referring to our conversation of a few days
ago concerning the position of Fiscal Assistant
Secretary, I submit the following:
At the present time the Under Secretary of
the Treasury has jurisdiction over the following
activities of the Treasury Department:
Comptroller of the Currency
Research and Statistics
As Acting Fiscal Assistant Secretary:
The Finances
Bureau of the Public Debt
Treasurer of the United States
Bureau of Accounts
Bureau of Engraving and Printing
Bureau of the Mint
In addition, he performs the duties of Acting
Secretary in the absence of the Secretary, and also
serves as liaison officer with the Federal Reserve
System and the Bureau of the Budget, and substitutes
for the Secretary as a Director on the Federal Farm
Mortgage Corporation and such other specific duties
as the Secretary assigns to him from time to time.
Most of these activities are directly connected
with the war effort. During the last three or four
years they have grown in importance as well as in
volume of business, which has made it necessary
for me to give a great deal more time to the signing
of mail and to holding conferences on operating
policies rather than applying more of my time to
high policy matters. It is difficult to see how
FORVICTORY
these problems can grow any less in the next few
BUY
UNITED
years. As a matter of fact, there is every indica-
STATES
WAR
tion that they will require more attention and as
BONDS
AND
STAMPS
Regraded Unclassified
- 2 -
time goes on it will be more onerous for me to
carry the duties of both offices.
I have come to the conclusion, therefore,
that I should get some assistance in the interest
of my health as well as the problems we face.
Furthermore, each year when we go before the Appro-
priation Committee, inquiry is made as to what you
intend to do about filling the position of Fiscal
Assistant Secretary. Each time the Committee has
been told that you expect to fill it very shortly,
but it has now been vacant for four years. In
this year's hearings there was some indication that
the Committee might take the funds away from us until
you actually fill the position.
As I told you when I accepted the position of
Under Secretary, I had no desire to enter into a
political job and if I took it I wanted the assur-
ance that this position (Assistant to the Secretary,
the creation of the position of Fiscal Assistant
Secretary then being under consideration) would be
available to me when I went out of the Under Secretary's
position. You assured me that it would be available.
All along I have had hopes that you would
appoint an Under Secretary and permit me to take
up the duties of Fiscal Assistant Secretary, but
you recently indicated that you had no intention of
making any change in this connection. Because of
my desire some day again to take up the duties of
Fiscal Assistant Secretary, and because of my interest
in the office in general and the many projects that
I have in line for study, I would still like to keep
more or less general supervision over the matters
coming under the office and I would particularly
like to keep my hands on the finances and the liaison
duties with the Federal Reserve System.
To get me the help that I desire, I would like
to recommend that Mr. E. F. Bartelt be appointed to
Regraded Unclassifie
- 3 -
the position of Fiscal Assistant Secretary with
the understanding that when I am relieved of the
office of Under Secretary I would be appointed to
the Fiscal Assistant Secretary's position and he
would return to his present position of Commissioner
of Accounts; and that any other personnel changes
made along the line because of these two would
likewise revert to their present positions. I am
certain that Mr. Bartelt would fill this office
with distinction and would work very closely with
me as he has over the past twenty-five years. I
believe that so far as he is concerned, the whole
office of Fiscal Assistant Secretary could be placed
under the Under Secretary and be administered more
or less as a bureau. I am sure that would be more
than pleasing to him while he was being made
acquainted with the various administrative problems
and the projects that I have under consideration.
We could also transfer supervision over the Bureau
of Engraving and Printing and the Bureau of the
Mint to the Under Secretary.
Mr. Bartelt was born and raised in Quincy,
Illinois, attending public school and a commercial
business college in that city. After he graduated
from this college he taught the science of account-
ing in that institution for a period of two years.
He was appointed to the Government service in 1917
in the office of the Auditor for the Navy, which
was then under the Treasury Department. In 1918 he
transferred to the Division of Bookkeeping and
Warrants and in 1927 became its Chief. In 1931,
upon my recommendation, he succeeded me as Assistant
Commissioner of Accounts. In 1935 he succeeded me
as Commissioner. He has done quite a bit of outside
accounting work; taught accounting at American
University for two years; and has had charge, as
you know, of the Interdepartmental Committee on
Savings Bonds for the past two years, in which he
has done an outstanding job.
Regraded Unclassified
221
- 4 -
I should like to discuss the matter further
with you at your convenience.
swifree
in
or
white
Regraded Unclassified
222
JAN 25 1945
Dear Mr. Johnson:
This is in reply to your letter of
January 20, 1945. The Treasury Department
is in complete accord with the recently
announced program for restricting group
meetings.
Instructions to Treasury bureaus and
offices require that any applications from
this Department to the War Committee on
Conventions have my express approval prior
to submission. You will note from the
attached circular that we have also directed
that additional measures be taken to dis-
courage the attendance of Treasury personnel
at non-government meetings.
Sincerely,
(Signed) H. Morgenthau, Jr.
Honorable J. M. Johnson
Director, Office of Defense
Transportation and
Chairman, War Committee on
Conventions
Washington, D. C.
JRS:eg
1/23/45
Regraded Unclassified
223
TREASURY DEPARTMENT
Washington 25
Office of the Administrative
January 15, 1945
Assistant to the Secretary
To Heads of Bureaus, Offices and Divisions,
and Chiefs of Divisions, Secretary's Office,
Treasury Department
Subject: Reduction of Travel by Government Personnel
There is attached a copy of a recent letter to the Secretary from
War Mobilization Director James F. Byrnes calling attention to the present
critical need for reducing railway travel.
The Department has repeatedly issued instruction to Treasury
bureaus and offices emphasizing the necessity for increased vigilance
in surveying travel requirements, and considerable reduction has already
been achieved. However, the urgency of the present situation requires
that additional measures be taken to restrict official travel, as well
as participation in group meetings by Government employees. The
substance of the attached letter, along with such additional instructions
as you deem appropriate, should be brought to the attention of all
supervisory personnel who authorize tRavel by employees of your 1
organization. ALL plans for sponsorahip of group meetings involving
the attendance of more than 50 persons shall be submitted to this
office for the approval of the Secretary.
You will note from the fourth paragraph of Director Byrnes's
letter that WO are asked to report, within the next sixty days, on the
percentage reduction that has been effected, To meet this request
I am asking that you :have: prepared a summary report, covering
the period from September 1, 1944 to February 28, 1945, showing as
accurately as possible, by months:
(a) The number of people in travel status;
(b) The cost of rail transportation (exclusive of Pullman charges).
This report should be in my office not later than April 1, 1945. In the
event that it does not reflect a downward trend in travel, I would
appreciate having a brief explanation of the work load or program
requirements which precluded making a reduction.
CHAPLES S. BELL
Administrative Assistant
to the Secretary
Regraded Unclassified
VICTORY
BUY
OFFICE OF DEFENSE TRANSPORTATION
WASHINGTON, D.C.
OFFICE OF DIRECTOR
20 1945
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
Department of the Treasury
Washington, 25, D. C.
Dear Mr. Secretary:
In his letter of January 8, 1945, to the various Government Agencies,
Director of War Mobilization and Reconversion, James F. Byrnes, with the
approval of the President, requested me to head a committee composed of
Under-Secretary of War, Robert P. Patterson; Under-Secretary of the Navy,
Ralph A. Bard; Chairman of the War Production Board, J. A. Krug; and Executive
Services Chief of the War Manpower Commission, Brigadier General William C.
Rose, to receive and pass upon applications for the holding of group meetings
to be attended by more than 50 persons, to determine if the holding of these
meetings is warranted in the war interest. This action is designed to relieve
the present burden upon transportation and hotel facilities and to conserve
scarce materials.
The Committee has been instructed not only to act on requests from the
public but also on requests from the civilian Government Agencies sponsoring
or holding group meetings. Attached are several copies of a special applica-
tion form which has been prepared for this purpose, also a recent press
release on the subject.
I am sure you will agree that Government Agencies must lead the way if
the objectives we are seeking are to be attained. May I, therefore, request
that you scrutinize carefully any plans by members of your agency which would
result in meetings attended by more than 50 persons. It would appear desirable
that no applications reach the War Committee on Conventions without having
previously been reviewed personally by you. Although only meetings with more
than 50 in attendance require a special permit the critical transportation and
hotel situation suggests that all government meetings be held to an absolute
minimum.
May I also point out that the presence of Government personnel at non-
government meetings frequently serves as an excuse for the meeting to be
considered as in the war interest. It would be most beneficial if you will
give careful consideration to the attendance of your personnel at such group
meetings.
Cordially,
J. M. Johnson, Director
Office of Defense Transportation
and
Chairman, War Committee on Conventions
Regraded Unclassified
OFFICE OF VAR MOBILIZATION AND RECONVERSION
Mashington, D. C.
January 8, 1945
Dear Mr. Morgenthau:
Increases in passenger traffic over the past several months have
resulted in an overload of our railway system with a corresponding demand
for additional manpower. A substantial portion of this increase may be
charged to the large number of conventions now being held. These
conventions have also overtaxed our hotel facilities in crowded war
centers.
Therefore, I have issued an appeal for the cancellation of all
group meetings involving the attendance of over 50 persons and trade
shows not essential to the war, and for the elimination of other than
essential travel.
With the approval of the President, I have asked Director J. M.
Johnson of the Office of Defense Transportation to head a committee
to be composed of representatives of the Mar and Navy Departments,
Ear Production Board and the War Manpower Commission to receive and
pass upon apolications for the holding of group meetings to be attended
by more than 50 persons, to determine if the holding of these meetings
is warranted in the war interest. This committee is not only to act
on requests from the public, but also on requests from the civilian
o
government agencies sponsoring or holding group meetings.
In addition to the *easures, I believe that it would be most
helpful if you would establish procedure which would insure that the
personnel under your jurisdiction are pormitted to travel only when
absolutely essential and that all possible measures are taken to
consolidate travel to reduce the number of trips to a minimum. I
would appreciate it very much if you would cooperate with me in this
endeavor and if you would advise me within sixty days of the percentage
reduction which you have been able to effect.
I also believe that the presence of government personnel at group
meetings frequently serves as an excuse for the meeting to be considered
as in the war interest. Therefore, I would like to suggest also that
you give careful consideration to the attendance of the personnel under
your jurisdiction at such group meetings to determine if their presence
is really essential to our war effort.
I know that you will agree with me that a good example set by
government agencies will do much to encourage the general public to
to defer non-essential trips.
Sincerely yours,
James F. Byrnes
Director
Honorable Henry Horgenthau, Jr.
Secretary of the Treasury
ashington, D. C.
Regraded Unclassified
Frins-6334
ODT-761
OFFICE OF DEFENSE TRANSPORTATION
For Immediate Release
Cleared and Issued
Thursday, January 11, 1945
Through Facilities of the
Office of War Information
Organizations planning to hold conventions, conferences, trade shows,
or group meetings after February 1, "will have to show how the war effort would
suffer if the meetings were not held," Col. J. Monroe Johnson, Chairman of the
War Committee on Conventions, announced today.
The Committee of which Under-Secretary of War Robert P. Patterson,
Under-Secretary of the Navy, Ralph A. Bard, Chairman of the War Production Board,
J. A. Krug and Deputy Chairman of the War Manpower Commission, Charles M. Hay,
are members, appointed R. H. Clare, Special Assistant to Colonel Johnson,
Secretary to the Committee.
"The job of the Committee," Colonel Johnson stated, "is to achieve
the objectives set forth by Justice Byrnes-to relieve overburdened transporta-
tion and hotel facilities and conserve desperately needed scarce materials
and manpower. The hundreds of messages already received from organizations
of diverse interests indicate that the Nation is solidly back of our efforts.
The Committee has decided that the yardstick it will use to messure the
essentiality of any meeting is how the winning of the two w:rs we are now fighting
will be impeded if the meeting in question were held to an attendance of 50 or
cancelled outright."
The Committee approved the form of application required of
organizations planning group meetings to be attended by more than 50 persons.
Information required by the Committee includes:
Whether the plenned meeting is a convention, conference, trade show,
or government mesting; the date and Inc tion of the proposed meeting and name
of hotels or other facilities which will be used; attendance planned; previous
frequency of moutings; locition and sttendance of last previous meeting; average
sttendance nt similar moutings before the war and during the war; from what area
those attending are drewn; what steps have already been taken to curtail
attendance; why the objectives of the meeting cennot be attained through "Con-
ventions by Mail"; why 2 group of 50 or less to whom powers are delepated cannot
transact the necessary affairs of the organization and in what way and to what
extent will the war effort suffer if meeting were not held.
Other decisions reached by the Committee include:
(1) Industrial, business, labor, fraternal, professional, religious,
civic, social and governmental organizations are included among those requiring
permits.
(2) The issuance of a special permit to hold meetings of more than
50 does not rantee transportation or hotel facilities or imply priorities
for their use.
(more)
Regraded Unclassified
- 2 -
(3) The general exemption from he need for applying for special
permits for meetings of less than 50 dous not mean that the Committee approves
the holding of such meetings. It was emphasized that meetings of any size
which directly or indirectly constitute a strain on transportation, housing
facilities or other critical situations should be cancelled immediately.
Application forms will be available within the next few days at all
ODT regional and district offices, at mqst hotels, convention bureaus and from
the national ODT office in Washington, D. C.
All applications should be sent directly to Secretary Clare, Room 7321
Interstate Commerce Commission Building, Washington 25, D. C. where they will
be reviewed by the Committee.
Colonel Johnson also announced that the Ienders of the hotel industry
have assured the Conmittee that all of its requests will be scrupulously
honored by hotels throughout the Nation. Coloñel Johnson pointed out that this
means that no additional measures will be necessary at this time to secure
compliance with Justice Byrnes' request.
(Copy. of complete application, which may be reproduced, is attached.)
Budget Bureau NO. 05-R 165
Approval Expires February 28, 1945
WAR COMMITTEE ON CONVENTIONS
J. Monroe Johnson, Chairman
J. A. Krug
Director, Office of Defense Transportation
Chairman, War Production Board
Robert P. Patterson
Charles M. Hay
Under-Secretary of War
Deputy Chairman, War Manpower
Ralph A. Bard
Commission
Under-Secretary of Navy
APPLICATION FORM
Director of Var Mobilization and Reconversion James F. Byrnes, with
approval of the President, has instructed this Committee to effect
a cessation of group meetings such as conventions and trade shows
not necessary in the vor effort. Information requested is to enable
this Committee to review the holding of group meetings which are
to be attended by more than 50 persons to determine if the need for
these meetings is sufficiently in the war interest to warrant the
burden on transportation and services.
1. Name of organization and of President and Secretary together with their
addresses.
2. Nature of organization and character of meeting (convention, conference,
trade show, government meeting or other).
3. Date and location of proposed meeting and name oi notel or hotels or other
facilities which will be used.
4. Attendance planned for above meeting. If a trade show, segregate attendance
into exhibitors and buyers and indicate number of hotel rooms required for
exhibits in addition to those which will be booked for individual use. If
other rooms such as ballrooms, display rooms, etc. are to be used, indicate
number and approximate area of space.
5-2848 bu-wp
Regraded Unclassified
- 2 -
5. Previous frequency of these meetings.
6. Date, location and attendance at last previous meeting.
7. Average attendance at similar meetings before the war
: during war
8. From what area are those attending drawn?
9. What steps have already been taken or are contemplated to curtail attendance?
10. Why cannot the object of this meeting be attained through correspondence
and publication, now frequently termed "Convention by Mail"?
11. Why cannot a group of 50 or less to whom powers are delegated transact
the necessary affairs of your organization?
12. In what way and to what extent will the war effort suffer if this meeting
were not held?
(Signed)
President
Secretary
Date
Mail to: Richard H. Clare, Secretary
War Committee on Conventions
Room 7321 Interstate Commerce Commission Building
Washington 25, D. C.
Whenever possible applications must be filed not less than thirty days prior
to date of meeting but in case more than six months in advance.
This form may be reproduced. where space is insufficient for complete answer to any
question, attachments are permitted.
5-0840 bu-rinal
Regraded Unclassified
227
JAN 25 1945
Dear General Surles:
You will be pleased to learn, I am sure,
that prominent among the factors contributing to
the success of our recent Sixth War Loan campaign
was the wholehearted cooperation and assistance
rendered by your office, particularly by Major
George N. White and his assistant Lieutenant B.
C. Kelly.
Despite the numerous demands and inquiries
which reached them in number sufficient to ex-
haust their patience their response was always
enthusiastic as well as helpful.
It is my purpose in sending this note to you
to express my sincere thanks to you and through
you to the officers mentioned and to express the
hope we may have the privilege of having them work
with us during our coming campaigns.
Sincerely,
(Signed) H. Morgenthau, Jr.
Major General A. D. Surles
Director, Bureau of Public Relations
War Department
Room 2-E-880, The Pentagon
Washington, D. C.
copies to Hamble
Regraded Unclassified
228
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
House
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
January 25, 1945
EUR 740.00119 EW/1-1745
My dear Mr. Secretary:
I refer to your telephone call of January 16
stating that you had just heard that Mr. Churchill
had said something about the so-called Morgenthau
plan and negotiated peace. I immediately telegraphed
the Embassy in order to find out whether the Prime
Minister had made any statements in this connection.
The Embassy has replied that his only words of this
kind were those reported in the Embassy's telegram
no. 576 of January 16, a copy of which is attached.
Sincerely yours,
Acting Secretary: Run
Enclosure:
Telegram no. 576,
from London, dated
January 16, 1945.
se
VV
8
The Honorable
FORVICTORY
BUY
Henry Morgenthau, Jr.,
UNITED
STATES
personse
BONDS
AND
Secretary of the Treasury.
STAMPS
Regraded Unclassified
DEPARTMENT
OF
INCOMING
DIVISION OF
229
STATE
TELEGRAM
CENTRAL SERVICES
TELEGRAPH SECTION
MS-1331
PLAIN
London
Dated January 16, 1945
Rec'd 11:20 p.m.
Secretary of State,
Washington.
576, Sixteenth
The Prime Minister was today asked by a Labor
member in the House of Commons whether the government
had reconsidered its policy of unconditional surrender
and the proposal to transfer from their homes by
force millions of people in central Europe.
Mr. Churchill answered "No, sir" and in reply to
a further question suggesting that these threats against
the Axis powers had a tendency to stiffen the people
of Germany behind their leaders and prolong the war
he added "No, Sir. We don't take that view at all.
I think the House would be overwhelmingly against
our attempting to make peace by negotiation. At
any rate our Allies would be overwhelmingly opposed
to such a course. It is quite impossible to discuss
these things in question time. An opportunity might
occur in debate to discuss them. I am not of the
opinion that the demand for unconditional surrender
is prolonging
Regraded Unclassified
0
230
-2- #576, Sixteenth, from London.
is prolonging the war. In any event the war will be
prolonged until unconditional surrender has been ob-
tained." These remarks were received with checrs.
WINANT
MJF
Regraded Unclassified
231 -
January 25, 1945
my dear Lieut. Putzell:
Thank you for your letter of
January 24 enclosing the report on
the Second Bonomi Cabinet, which I
am glad to have.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Lieut. Edwin J. Putzell, Jr.,
Assistant Executive Officer,
Office of Strategic Services,
Washington, D.C.
Report to Dr white 1/26
Regraded Unclassified
photostet te to 2/15/45. 232 L
MINISTRY OF FINANCE
Chungking, January 25th, 1945.
My dear Mr. Secretary,
I thank you very much for your kind letter
of December 16th, offering me your congratulations
on my assumption of the new office.
I have always appreciated your friendly and
sympathetic attitude towards China as well as your
cooperation hitherto extended to H. E. Dr. H.H. Kung.
The conclusion of the recent financial nego-
tiations is regarded here as yet another indication
of your kind collaboration.
I am confident that my Ministry and your
Department will continue to work in the same happy
spirit characteristic of our past relations.
With the season's greetings,
Yours Oktin very truly,
O. K. Yui
Minister of Finance
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Wahington, D.C., U. S. A.
Regraded Unclassified
TREASURY DEPARTMENT
233
INTER OFFICE COMMUNICATION
DATE
January 25, 1945
TO
Secretary Morgenthau
FROM J. W. Pehle
I haven't heard anything further from FEA
or from WPB on the Russian Refinery matter.
Since FEA is the claimant agency on such
matters, I suggest you might get Crowley to write
a letter to Krug urging a higher priority before
you press Krug further on this matter.
Regraded Unclassified
SECRET
234
war DEPARTMENT
cap hite-
WASHINGTON, D.C.
1/26/45
JAN 25 1945
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
I have received your letter of 8 January 1945, with
inclosures, in which you request me to investigate the present
status of the proposed "take-over" by the War Department of
certain British-owned capital facilities in the United States.
I have noted from the Treasury memorandum that you are not
aware of the War Department's negotiations with the British
for the transfer of the remaining British facilities in this
country to the War Department on a reciprocal aid basis.
In accordance with the instructions dated 18 November
1943 from the Director of War Mobilization, the British
Ministry of Supply Mission, Washington, was requested on
6 December 1943 to consider the War Department's request for
reciprocal aid. On 1 February 1944, Sir Walter Venning re-
plied that the British preferred that "the matter of settle-
ment might be left open for future consideration". This
procedure was approved by the War Department and agreed to
by the Acting Secretary of State on 18 February 1944.
In view of the War Department's negotiations on this
matter, I do not believe it is advisable to make any other
arrangements for cash settlement until the British have
formally refused to provide these facilities to the War De-
partment under reciprocal aid.
Sincerely yours,
RLJPP#
ROBERT P. PATTERSON,
Under Secretary of War.
FORVICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
SECRET
Regraded Unclassified
0
0
235
P
Y
January 25, 1945
Dear Mr. Handler:
I wish to thank you for your letter of
January 20, 1945, concerning the plight of the Jews
in Bulgaria and Rumania.
We, too, have been deeply concerned with
this problem and I assure you that even within its
limited terms of reference the War Refugee Board has
made every effort to have assistance brought to these
people. Until such time as the problem can De handled
on a more permanent basis, the Board has facilitated
in all possible ways the sending of relief into these
areas.
If you should desire to discuss this matter
in more detail, we shall, of course, be glad to arrange
to see you in Washington.
Sincerely yours,
/8/ H. Morgenthau, Jr.
in
Secretary of the Treasury
Mr. Milton Handler,
Columbia University,
New York, N. Y.
Regraded Unclassifie
236
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
AMERICAN EMBASSY, VATICAN CITY
TO:
Secretary of State, Washington
DATED:
January 25, 1945 (Rec'd 8:55 p.m., 26th)
NUMBER: 25
SECRET
Replying to & message from Union of Orthodox Rabbie
New York we advised latter last July that Vatioan after failing
in its attempts to include refuges Rabbinical scholars in
Shanghai in an exchange agreement had approached the Government
of Japan with a view to having them released on a unilateral
basis by the Government of that country. However, the Vatican
stated that up to that time these attempts had been without
results. The matter was again taken up with the Vatican,
on receipt of the message under reference from the Department,
however, to date we learn that still no word has been received
from Japan. It is stated by the Vatican that original exchange
plan failed to materialise as British and American Governments
indicated that it was not possible to include persons in
question in an exchange agreement as their citisenship was neigher
British or American. I an assured by the Vatican that it will
follow closely developments in the matter.
TAYLOR
DC/L:MLO
1-29-45
Regraded Unclassifie
237
LF-173
PLAIN
Lisbon
Dated January 25, 1945
Rec'd 3:43 a.m., 26th
Secretary of State,
Washington.
176, Twenty-fifth
FOR HIAS 425 LAFAYETTE STREET NEW YORK CITY FROM
BERNSTEIN HICEM LISBON WRB 292
Contact relatives favor following our protegees
Bucharest. Request Abreham Feinstein, 6910 Yellowstone
Boulevard, Forest Hills New York nows and advise for
emigration fevor Karl Feinstein, Joseph Rosensweig,
152 Amboy Street, Brooklyn, New York secure USA visas
favor Line Rosensweig and children healthy. Abs Schwarts,
40 Stuyvesant Street, New York news secure USA visa
favor Nathan Hart family healthy. C. Daire Friedman,
651 High Street, Newark, New Jersey secure USA visa favor
Frossa Medelovici healthy alone without news husband.
Eugen Ernest, 205 East or West 94th Street, New York
financial help and secure USA visa favor Gesa and Layos
Jacob alone healthy family deported, Josef Itscovici,
108 Levy Street, New York financial help secure USA visa
favor Hermann Kohn healthy alone without news family.
Inform Sady Schwarts, 7403 18th Avenue, Brooklyn Esterina
Jeni Maria Ghisa Salpeter healthy intending emigration
Palestine Tubi Dori also Bucharest. Cable. Inform
Theodora Bara, Hotel Delmonico New York Florica Sommer
all family healthy Bucharest asks news. Eric Tohauer
1609 North Normandie Hollywood Joseph Schauer healthy
Bucharest 55 Pasteur asks nows.
CROCKER
JMS
0
Regraded Unclassified
238
GABLE TO HEDDLE AND MCOLELLAND, BERN, FROM DEPARTMENT AND WAR REFUGEE BOARD
Information has reached us recently that Sternbuch has developed
a plan for the release of 500,000 Jews from Germany and German-occupied
territory in return for payments totalling $5,000,000. The Jews are to
be released at the rate of 15,000 a month and payments are to be made
at the rate of $250,000 a month. It is further reported that sum of $250,000
remitted from the United States by Vaad Hahatzala is now on deposit in
a Swiss bank in the name of Sternbush and is to be used for payment for the
first shipment of 15,000 Jews expected shortly in Switzerland.
For your information, news reports from Bern similar to the above
reports on the Sternbush plan and as yet unpublished have been presented to
us for confirmation.
Please advise Department and Board of any information you have or can
obtain on the foregoing.
THIS IS WRB BERN CABLE NO. 381.
10:30 a.m.
January 25, 1945.
Miss
FH:hd 1/24/45
Regraded Unclassified
239
GABLE TO HUDDLE, BERN, FOR MCCLELLAND FROM WAR REFUGEE BOARD
Reference your No. 389 of January 19, 1945. The $19,533.60 which
you are now holding for Friedds of Luxembourg can not (repeat not) be
expended in Luxembourg because these funds were appropriated by National
War Fund for relief and rescue in enemy or enemy-occupied territory.
Accordingly, interested groups here hope that you will be able to
arrange with Intercross for relief program suggested in Department's
No. 288 (WEB No. 367) of January 18, 1945.
For your information, Friends of Luxembourg and labor groups
expect to send $12,500 very shortly to labor trustees in Luxembourg
for relief in Luxembourg.
Donors wish to assure you of their complete satisfaction with
your handling of the funds which have been remitted to you for various
relief projects.
THIS IS WRB BERN CABLE NO. 383.
4 p.m.
January 25, 1945.
Miss Chauncey (for the Secty) Ackermann, Aksin, Cohn, Drury, DuBois,
Gaston, Hodel, Marks, McCormack, Pehle, Files.
FH:hd 1/25/45
Regraded Unclassified
240
MS
Distribution of true
reading only by special
January 25, 1945
arrangement. (SECRET w)
2 p.m.
AMLEGATION
BERN
410
The following for Huddle and McClelland from Department
and Mar Refugee Board is WRB 378.
Vaad Hahatmala advised WRB of receipt of a report that
two groups of Hungarian Jews numbering 7,000 and 15,000
respectively await entry into Switserland and that their
resoue depends on assurance of admission into Switzerland,
Please advise Board whether this is correct. If so, it is
assumed, of course, that you will take all appropriate steps
to obtain their admission into Switzerland in accordance
with Department's 240 of January 16.
GREW
(Acting)
(GIN)
WRB:MMV3KG
WE
SE
1/24/45
Regraded Unclassified
241
Distribution of true
January 25, 1945
reading only by special
arrangement. (SECRET W)
Midnight
AMLEGATION
BERN
424
The following for Huddle and McClelland from Department
and War Refugee Board is WRB 381.
Information has reached us recently that Sternbuch has
developed a plan for the release of 300,000 Jews from Germany
and German-cooupded territory in return for payments totalling
$5,000,000. The Jews are to be released at the rate of
15,000 a month and payments are to be made at the rate of
$250,000 a month. It is further reported that sum of
$250,000 remitted from the United States by Vand Hahatuala
is now on deposit in a Swiss bank in the name of Sternbuch
and is to be used for payment for the first shipment of
15,000 Jaws expected shortly in Switzerland.
For your information, news reports from Barn similar
to the above reports on the Starnbuch plan and as yet
unpublished have been presented to us for confirmation.
Please advise Department and Board of any information
you have or can obtain on the foregoing.
GREW
(Acting)
WRB:MMV:10
#
SWP
1/25/45
Regraded Unclassified
242
J106-1894
This telegram must be
Born
paraphrased before being
communicated to anyone
Dated January 25, 1945
other than a Government
Agency. (RESTRICTED)
Rec'd 10:50 a.m.
Secretary of State
Washington
518, January 25, 10 a.m.
FOR WRB FROM MCCLELLAND.
Please deliver the following message from union
05E to Leo Wulmann American OSE:
"He have received your message of January 11. Our
delegate Dr. Rosenbluth is on his may to Lublin and
probably Warsaw. We have given him instructions to re-
establish together with Dr. Herszenhorn the 08E-TOZ
institutions throughout liberated Poland. He has been
informed of your negotiations with Sommers Chein. The
have unofficially notified that the Lublin Government
is ready to receive our sanitary team and we are there-
fore urgently preparing with Joint's substantial help
the personnel medical supplies and equipment.
It would be most advisable for you to contact the
Russians regarding all such possibilities of relief
action in liberated areas under Russian control.
Please keep us posted regarding any represents-
tions you make in this direction".
HUDDLE
was
Regraded Unclassified
243
MH-1904
Bern
Distribution of true
reading only by special
Dated January 25, 1945
arrangement (SECRET W)
Rec'd 10:10 a.m.
Secretary of State,
Washington.
520, January 25, noon.
FOR WRB FROM MCCLELLAND
Substance Department's 368, January 22, was
delivered in an urgent note to Federal Political
Department on January 24.
HUDDLE
RR
Regraded Unclassified
244
EGP-135
PLAIN
Born
Dated January 25, 1945
Rec'd 9:50 p.m.
Secretary of State,
Washington.
523, Twenty-fifth.
FOR WRB FROM MCCIELLAND.
Kindly deliver following message to Jakob Greenberg
1123 Broadway, NYC from Nathan Schwalb, Hechalus, Geneva.
"Educational work among our youth Aliyah groups
here not being satisfactorily handled by local Micrachi.
If possible would accordingly much appreciate receiving
funds to aid Mendel Willner this task otherwise your
splendid efforts behalf these young people will be
largely negated". 1035.
HUDDIE
MRM
cc: Miss Channeey (for the Sec'y) Ackermann, Akain,
Cohn, Drury, DuBois, Caston, Hodel, McCormack,
or O'Dwyer, Files
Regraded Unclassifie
LF-137
Born
Distribution of true
reading only by special
Dated January 25, 1945
arrangement. (SECRET W)
Rec'd 9:45 p.m.
Secretary of State,
Washington.
531, January 25, 3 p.m.
FOR WRB FROM MCCLELLAND
In course of constant contact with various officials
and agencies of Swies Government during past many months
on subject of admission to Switserland of refugees from
Nazi persecution, (Department's 240, January 16, WRB's
364) we have observed no lack of willingness on part of
Swise to grant large numbers of such persons temporary
asylum. On contrary Swies have repeatedly interceded
with Germans as in case of projected evacuation of upwards
of 12,000 Jews from Budapest in effort to expedite and
organize such evacuation.
On occasion of coming of second Bergen-Belsen
convoy of 1300 individuals in early December Federal police
was somewhat disturbed over unannounced arrival of group
of unknown persons of this sise from Germany on under-
standable grounds of military and internal security.
lie have repeatedly conveyed to"Swise our
Government's assurance that any such refugees admitted
to Switserland would be evacuated as promptly as possible.
Although Swies have not as yet chosen to avail them-
selves of our offers of maintenance they took occasion
in course of recent discussions relative to conversion
of dollar equivalent of the 20,000,000 into Swies france
to express informally their distress at United States
unwillingness to allow them import into Switserland even
from Spain some 300,000 tons of food stuffs purchased
for general Swies consumption and warehoused in Spain
for past many months. Our lack of understanding (as
they interpret it) of growing difficulties their food
situation and our simultaneous requests that they admit
large numbers of new refugees contrast rather unfavorably
in their minds. It is worth nothing in this repect that
Switserland has recently received a new contingent of
close to 10,000 French refuges children from the Muhlhouse
region.
HUDDLE
KJF
Regraded Unclassified
247
- 2 -
Thus far in January 628 additional persons
from Rumania (the Stara-Zagora detainees) have passed
through Turkey proceeding to Palestine.
The success of this rescue work, as you
previously have been informed, is attributable to
the breaking of the bottle neck into Turkey as a
result of the efforts of Ambassador Steihardt and
the WRB.
STEINHARDT
EEC
Regraded Unclassified
EIG
LC=162
Ankara
Distribution of true
reading only by special
Dated January 25, 1945
arrangement. (SECRET W)
Rec'd 1:29 a.m., 26th
Secretary of State,
Washington.
130, January 25, 4 p.m.
FROM KATZKI TO PEHLE WAR REFUGEE BOARD.
Ankare's No. 7.
The following statistics, one year after the
creation of the War Refugee Board, relating to rescue
and emigration activities from the Balkans via
Turkey to Palestine for the calendar year 1944, will
be of interest to the board. The total number of
persons who passed in transit through Turkey proceeding
to Palestine excluding 282 people from Holland ex=
changed for German nationals in July is 6527 (repeat
6527). Of this number 1392 came from Bulgaria, 163
from Hungary, 4433 from Rumania and 539 from Greece.
It should be noted, however, that persons included
under Rumania comprise not only Rumanian nationals
but a large proportion of Polish, Slovakian, Ruthenian
and Hungarian refugees who succeeded in escapintato Rumania.
The total of 6527 includes 1737 children and
youths up to the age of 18 years. Approximately
1,000 were orphans repatriated from Transnistria
An additional 327 accompanied their parents and the
balance comprises children emigrating without parents.
All the refugees from Greece escaped by sea.
10 groups arrived by sea from Constanza using vessels
of Bulgarian registry 5 times and Turk vessels 5
times. An 11th group from Constansa was lost with
the sinking of the MEFKURA. Other refugees from Bulgaria
and Rumania arrived by railroad.
co: Miss Chaundey (For the Sec'y.), ackermann, Akain, Cohn,
Drury, PuBois, Gaston, Hodel, Parks., in
Regraded Unclassified
248
NOT TO BE RE-TRANSMITTED
COPY NO.
4
SECRET
OPTEL No. 29
Information received up to 10 a.m., 25th' January, 1945.
NAVAL
1,
HOME WATERS. Night 23rd/24th. Minelaying by enemy air-
craft suspected in Scheldt Approaches and one aircraft destroyed.
Night 24th/25th. E-boats very active between Yarmouth and Thames
Estuary and were engaged by our patrols.
ENEMY ATTACK ON SHIPPING. 23rd. Enemy aircraft bombed
and sank a 5,035 ton U.S. ship during attack on Antwerp dock area.
MILITARY
3.
WESTERN FRONT. Northern Sector: British now holding
Heinsberg and Montfort and have advanced two miles north latter
town. Central Sector $ In Ardennes U.S. forces advanced two to
three miles along whole front against moderate enemy resistance.
Reported Clervaux cleared without opposition.
4.
EASTERN FRONT. East Prussian Sector: Further progress
south and S.W. Insterburg including capture Lyck. North Central
Sector: Chelmza (12 miles north Torun) captured and further
advances north and N.W. of Gniezno. South Central Sector: Kalisz
captured and several places north and N.E. of Breslau including
Rawicz and Trachenberg taken. Oppeln also captured. Southern
Sector: Advance continues some 50 miles N.W. of Miskolc.
5.
BURMA. Arakan Sector: On Ramree Island our troops
reached Minbyin (8 miles south Kyaukyu) without serious opposition.
Central Burma Sector: Tilin captured without opposition. On
Irrawaddy, Myinmu (16 miles west Mandalay) captured after stubborn
fighting.
AIR
6.
WESTERN FRONT. 24th. SHAEF (Air). 1272 aircraft (9
missing) operated all areas bombing midget submarine sheds Rotter-
dam and communications and transport behind battle fronts. 350
M.T. destroyed and enemy air casualties 2, o, 1.
7.
MEDITERRANEAN. 23rd. 621 tactical aircraft attacked
communications North Italy and N.W. Yugoslavia.
HOME SECURITY
8.
ROCKETS. To 7 a.m. 25th. 5 incidents reported.
Regraded Unclassified
249
NOT TO BE RE-TRANSMITTED
COPY NO.
4
SECRET
OPTEL No. 30
Information received up to 10 a.m,, 25th January, 1945.
MILITARY
1.
WESTERN FRONT.
Southern Sector: Germans reported reacting strongly
to pressure Colmar pocket. Further North, enemy have made several
attacks causing slight withdrawals in area Haguenau.
Central Sector; U.S. forces continue to make progress
and line along whole front now almost straightened with St. Vith
occupied.
Northern Sector: British troops advanced one mile
on whole front from north of Geilenkirchen to Linne (5 miles S.W.
Roermond).
2.
EASTERN FRONT.
East Prussian Sector: In the North, Germans admit
penetrations S.E. of Labiau. Russian attacks in direction
Koenigsberg and Elbing met strong resistance, but Germans have
given ground to the south in area Masurian Lakes.
Central Sector: Germans claim holding Russian drives
on Tourun and Posen. Russians report capture Jarocin (S.E. Posen),
Ostrow (s.w. Kalisz), Oels (N.E. Breslau), and Gleiwitz (S.E.
Oppeln). Germans claim Russian attempts to cross River Oder
N.W. and S.E. Breslau wholly and partially repulsed respectively.
Southern Sector: Germans report progress north
Szekesfehervar,
3.
BURMA.
Coastal and Arakan Sectors : Considerable progress
made Ramree Island and our troops now 20 miles south Kyaukpyu on
West Coast. Further North, stubborn resistance encountered north
of Myohaung whilst our troops have reached point 2 miles west of
village,
AIR
4.
WESTERN FRONT.
25th. SHAEF (Air). 830 aircraft (8 missing) opera-
ted mainly central sector dropping 803 tons and destroying 686
(
M.T. and 43 A.F.V. 18 Mosquitoes attacked convoy North Bergen
and left burning one 5,000 ton, one 2,500 ton ship, one tanker
and a coaster. 5 Halifaxes attacked shipping Kristiansand
obtaining direct hits on 4,000 ton ship which left on fire and
sinking.
5.
CHINA ZONE.
19th and 20th. Attacks made on airfields at Swatow
and Shanghai destroying 22 enemy aircraft.
HOME SECURITY
6.
ROCKETS.
7 incidents reported.
Regraded Unclassified
250
January 26, 1945
11:24 a.m.
HMJr:
Hello.
Operator:
Mr. Clayton.
HMJr:
Hello. Will?
Will
Clayton:
Yes, Henry.
HMJr:
You're -- here I've got Oscar Cox and Harry White
in the room with me.
C:
Yes.
HMJr:
Where do we stand vis-a-vis the French now?
C:
Well
HMJr:
On this lend-lease.
C:
Well, I -- I sent you over a letter yesterday
afternoon answering your letter to Ed, and just
stating our position.
HMJr:
Yes.
C:
I think that where we stand is that we probably
had just better notify the French that we are only
prepared to negotiate a master lend-lease agreement
with them when we have come to some agreement with
them regarding their -- their financial position
as regards dollars and gold.
HMJr:
Yeah. But don't you think that State, F.E.A. and
ourselves ought to agree first what we think that
should be?
C:
Well, surely, before we ever -- certainly, Henry,
before We ever sit down to negotiate with them, we
must do that, but they are, I think, expecting some
answer from us now on the simple question whether
we will sign the master agreement now and then
negotiate or whether to negotiate first. I think
that probably we ought to advise them on that point
and then we would get together and agree on what
we ought to do.
HMJr:
Well, now, what is the thing that you've arrived at
as to which comes first?
Regraded Unclassified
251
- 2 -
C:
Oh, well, our position is unchanged. It differs
from yours You think we ought to negotiate the
dollar thing first; and we thought we ought to
sign the master lend-lease agreement like we had
with all the other countries
HMJr:
Yes.
C:
first. But I think that we can't remain in
dead-lock 80 I think the only thing for us to do
is to accept your view of it and -- and then start
negotiating with the French, if they're prepared to
do it and I suppose they are, on that dollar position
and tell them we've got to work that out before we
can sign the master agreement.
HMJr:
Well, if you don't mind my saying, I think that --
as I understand it, you told Pete Collado to get
in touch with Monnet and find out what their finan-
cial position is. Hello?
C:
Yes.
HMJr:
Well, that's always been the Treasury's business.
C:
No, I didn't tell him to find out -- no, no, that's
a mistake. I was talking with Mr. Monnet. He said
he would like to know just what kind of questions
we would ask him and I told him that I would get Pete
Collado to call him up. I was just going into a
staff meeting at the time.
HMJr:
Yeah.
C:
And tell him what sort of questions we would likely
ask of him. Now, I was only speaking for State
Department and not the Treasury.
HMJr:
Well, that -- those financial inquiries in between
the Treasury -- I mean, up to now, we've always
done that, Will. I mean, that's our responsibility.
C:
You mean yours alone?
HMJr:
We've done it alone. Yeah, we'd get the information
for you or for any other branch of the Government.
C:
I see. Well, if that's -- if that's the case, I'm
not informed on that -- if that's the case, we'll
just have to tell Mr. Monnet we have no questions
to ask him.
Regraded Unclassified
- 3 -
252
HMJr:
Well, the thing is we've always done that with
all Treasuries. The record ever since I've been
here is on that front.
C:
Yes.
HMJr:
On my part, I think that -- I think that that's
the way -- I don't think Stettinius would want
to change that.
C:
Yeah. Well, if that's -- if that's the way it
has been done, and that's the way it should be
done, why, certainly, that's all right.
HMJr:
Well, I think
C:
Mr. Monnet merely asked me -- he said, "What
kind of questions are you going into and what
kind of -- what information do you want?" And
I just told him, "Well, I'll have Pete Collado
call you and tell you what kind of questions
we would be asking."
HMJr:
Well, the Treasury
....
C:
He told me that he thought he was going to France
immediately.
HMJr:
Well, may I just say those kind of questions
directed at the French Treasury -- I mean, we --
we've got eleven years experience on that.
C:
Yes.
HMJr:
And we've got a vast amount of information now.
C:
Fine.
HMJr:
And I think we should continue to do that.
C:
All right. Fine.
HMJr:
Now, may I suggest this so that we can get off
to a right start: couldn't you and Harry White and
Oscar Cox get together so that we could present a
united front vis-a-vis the French Government?
C:
Certainly.
HMJr:
And Monnet has asked to see me. He's coming in
this morning. I'm going to listen to him, see?
Regraded Unclassified
- 4 -
253
C:
Yes.
HMJr:
But in view of the turn that things are going to
take, I'd like to tell him that the American
Government will give him an official answer
within twenty-four hours.
C:
On what?
HMJr:
Well, on how we're going to proceed.
C:
You mean as to whether we sign the agreement first
and
HMJr:
Yeah, and what we expect.
C:
Yes.
HMJr:
I mean, tell him -- just tell him the facts of life --
Just what they are.
C:
Well, Henry, I don't think there's any necessity of
our getting together on that if -- if you -- if the
Treasury still maintains their position on it, why,
we just give in. That's all. And tell him now.
HMJr:
Well, what -- what -- what are you going to tell him?
C:
Just tell him that we want to -- we want to discuss
it with him. Or you -- you're the man to do it, why
then, you do.
HMJr:
No, I -- I don't like to be so -- well, in the first
place, I've discussed this thing with Oscar Cox.
Hello?
C:
Yes.
HMJr:
This morning. And Oscar agrees now with the position
we're taking.
C:
I see.
HMJr:
I want to tell you that.
C:
Yes.
HMJr:
Now, I still think that -- so that we'd be sure that
we'd give them the right information -- I think it
would be worth your time if you'd spend fifteen
minutes with White -- with Cox.
Regraded Unclassifie
- 5 -
254
C:
I'm perfectly willing to do it at any time that
we can find a convenient time to get together.
I'm perfectly willing to do it. But I'm just
saying that when we get through, I think we'll
arrive at the decision we arrive at now, which
1s that if you don't change your position, why,
we'll go to your position. That's all.
HMJr:
Well, I -- I am -- overnight nothing has happened
to make me change my position and now that Cox
says that he thinks that my position is correct,
why, I feel fortified.
C:
Yes. Well, then I think -- I mean, I'd be delighted
to get together with Harry and Oscar at any time,
but I think that
HMJr:
Well, I think it should be something on a piece of
paper that -- that State could -- if you don't
mind my saying it -- consult with F.E.A. and Treasury
to make sure that what we tell the French Government
is something that we can see through.
C:
Yes. All right. Fine. Let's see -- this is Friday.
Well, I was trying to get Oscar Cox to ask him to
come and have lunch with me tomorrow. If Harry
wants to come, why, we three will just get together
and talk about it at lunch tomorrow.
HMJr:
Well, Harry is here now in the office and so is
Oscar.
C:
All right.
HMJr:
I'll ask them right now if I may, please.
C:
Yes, fine.
HMJr:
Just a moment. Just a minute. (Talks aside.)
Harry says he has to go back and look at his
calendar.
C:
Well, tell him to let me know.
HMJr:
He'll let you know.
C:
At 12:30 if
HMJr:
Cox says he can make it.
Regraded Unclassified
255
- 6 -
C:
He can
....
HMJr:
Cox says he can make it.
C:
All right. Tell Oscar to meet me at 12:30 at
the Metropolitan Club.
HMJr:
All right.
C:
And then Harry to do the same and we'll sit down
and talk about it then while we eat lunch.
HMJr:
I think if we can move as three partners on this
thing -- I think it -- I think it would be much
more advisable.
C:
Fine. I'll be glad to do it, Henry.
HMJr:
Thank you so much.
C:
Okay. Bye.
is
Regraded Unclassified
256
January 26, 1945
11:59 a.m.
HMJr:
Hello.
Operator:
Mr. Clayton 18 holding a staff meeting in his
office -- his own staff.
HMJr:
Well, let me talk to Mr. Grew.
Operator:
All right.
HMJr:
Hello.
Operator:
Mr. Grew has just started his press conference.
They said they could send a note in to Mr.
Clayton. It will take a couple of minutes to
get him on.
HMJr:
Yes, send a note in to Clayton.
Operator:
Right.
HMJr:
I want to talk to him.
Operator:
All right.
12:02 p.m.
HMJr:
Hello.
Operator:
Mr. Clayton.
HMJr:
Hello. Will.
Will
Clayton:
Yes, sir.
HMJr:
Look, Will, you fellows are getting me all tied
up in knots over here.
C:
What's the matter?
HMJr:
Now, at 11:46 Mr. Grew's letter was delivered to
my office. Hello?
C:
Yes.
HMJr:
And you've undoubtedly seen it.
C:
Yes, I initialed it yesterday. It should have
been over there yesterday afternoon.
Regraded Unclassified
- 2 -
257
HMJr:
Well, of course, it's -- well, you know what's
in it.
C:
Yes.
HMJr:
It's -- it isn't in agreement with what you and
I just agreed to about -- around 11:30.
C:
Well, what I said, Henry, was that our position
is still that we felt that We ought to go ahead
with the master agreement, but that if your
position was to the contrary, that we -- we would
say all right, let's go ahead on your -- we with-
draw -- at any rate, we still remain of that
opinion but we say that we give way to you.
HMJr:
Well, then, let's stop writing letters to each
other, what?
C:
Well, you asked for an answer to your letter.
HMJr:
That's right.
C:
And that was prepared early yesterday morning
and should have been delivered to you yesterday
morning. It just didn't make the round. And the
only reason we wrote you a letter was that you
wrote us one and that we understood you wanted
an answer.
HMJr:
But at 12:05 today you and I are together?
C:
Yes, we
....
HMJr:
You accede to the Treasury position?
C:
We do.
HMJr:
All right. And then the three of you will have
lunch tomorrow and -- and iron it out.
C:
That's fine.
HMJr:
Is that right?
C:
You bet.
HMJr:
I thank you.
C:
All right. Thank you.
Regraded Unclassified
258L
January 26, 1945
MEMORANDUM FOR THE SECRETARY'S FILES
I called the attention of the Secretary to the fact that the
letter the Decretary received from Mr. Grew on January 22, 1945, had
been interpreted by Secretary Morgenthau as being a reply to Secretary
Morgenthau's letter to Mr. Stettinius of January 23 whereas Mr. Grew's
letter had been a reply to Secretary Morgenthau's letter of January 18.
ae had not yet received a reply to the January 23 Treasury letter. The
letter of January 23 had been handed to Mr. Yost with instructions that
he submit it to Mr. Stettinius with the following comment: Secretary
Morgenthau felt that in his letter of January 23 he was backtracking
slightly from his letter of January 18, and if Mr. Stettinius felt
that the latter of January 23 which Secretary Morgenthau signed was
too tough he should send the letter back and the Secretary would be
glad to discuss the matter with him before attempting to send him a
letter formally.
When I called his attention to the fact that Grew's letter was in
answer to Treasury's letter of January 18 the Secretary got in touch
with Yost to ask him about the letter of January 23 to Stettinius that
Yost had walked over. Yost replied over the phone that he thought he
had been asked to give the letter to Mr. Clayton and had done so. The
Secretary said that Yost misunderstood but that in any case he would
like an answer that same day to his letter of January 23.
Later in the day Mr. Clayton came to see the Secretary, and the
meeting is described in a memorandum prepared by Mr. DuBois.
At the end of the conference, Mr. Clayton said that in view of the
Secretary's comments (described in the memorandum) he would like to go
back to the State Department and canvass the State Department's position.
The next morning Mr. Clayton telephoned to say that he had mailed
a reply to the Secretary's letter of January 23, and assumed it had been
received. The Secretary told him he had not yet seen it. Clayton said
that the State Department had not changed its position and was not in
agreement with the view expressed by the Treasury in the letter of
January 23. However, since the Treasury was adamant in its position and
since Mr. Clayton didn't want to hold things up, they were willing to
accept the Treasury's position and go ahead on that basis. The
Secretary repeated the question "Then you are ready to agree with the
Treasury?", and Mr. Clayton repeated that State Department did not
believe that the Treasury's suggestions were the correct ones to adopt
but that they were willing to go along with the Treasury.
About half an hour later Mrs. Klotz brought in the letter from
the State Department to which Clayton had referred. A copy of the
letter is appended. The letter gave the State Department's reason for
not agreeing with the Treasury's position and did not indicate that the
Regraded Unclassified
259
Division of Monetary
Research
- 2 -
State Department was willing to go along and accept the Treasury
point of view. The Secretary, after reading the letter, tried to
get Mr. Clayton. Clayton was out so he got Grew on the phone. He
told Grew that Clayton had stated over the phone that State was.
willing to accept the Treasury position but that the letter which he
had received did not say that. In fact, the letter stated that State
did not agree with the Treasury position. Mr. Grew said that he would
take the matter up with Clayton and get in touch with the Secretary
later in the day. A little later Mr. Clayton called up and explained
that apparently the Secretary had not quite understood his remarks over
the phone. Clayton said that the letter the Secretary received that
morning did not agree with the Treasury position but that Mr. Clayton
had said in view of the fact that the Treasury did not want to recede
from its position, and in view of the necessity to go ahead on the
arrangements, that the State Department was willing to change the de-
cision it had indicated in its reply to Decretary Morgenthau's letter
and was prepared to accept the Treasury position. He explained that
the State Department had come to that decision after the letter had been
sent and that in his telephone coversation with Decretary Morgenthau
earlier that morning he thought he had made that clear. The Secretary
asked: "Then your statement now that you accept the Treasury position
replaces the letter?" "In other words," he continued, "the letter which
I have just received from Mr. Grew in response to Treasury's letter of
January 23 is, in effect, dead?" Clayton said, "That is correct." He
said that State now accepted the Treasury point of view and the letter
which they had just sent in reply to Secretary Morgenthau's letter of
January 23 was superceded by the telephone conversation.
The Secretary also told Mr. Clayton that he had been informed that
Collado was going to have a conference with Mr. Monnet to ascertain
what the financial situation of France was. Mr. Morgenthau said that
it had always been the practice, and he presumed Mr. Stettinius had not
done anything to alter it, for the Treasury to undertake talks with re-
gard to financial matters with the French Treasury. He said that he felt
if there was any financial information to be obtained or any discussion
to be held with the French Treasury that the Treasury should handle it
and not the State Department. Mr. Clayton said he wasn't aware of the
previous practice and he certainly wouldn't wish to alter the practice
if that was what was done. He said that he had asked Collado to talk
to Monnet and to inform him of the kind of information the United States
would want with regard to French financial affairs but that he would
speak to Collado and instruct him to let the Treasury Department handle
it.
H. D. White
New
Regraded Unclassified
C
0
260
P
Y
January 25, 1945
My dear Mr. Secretary:
Upon receipt of your letter of January 18 addressed
to the Secretary, concerning a lend-lease agreement for
France, I replied on his behalf in a letter, dated January
22, and expressed agreement with your view that lend-lease
for France, both in munitions and in non-munitions,
generally should rest on the same principles as lend-lease
for Great Britain. I also stated that I had asked Mr. Clayton
to discuss with Mr. White and Mr. Oscar Cox a text of an
agreement which could be presented to Mr. Monnet early this
week. It was my understanding that you were in agree-
ment with the Foreign Economic Administration and the De-
partment that a master lend-lease agreement should be signed
with the French, and that, thereafter, representatives of
the three agencies should hold discussions with French repre-
sentatives concerning the nature of the supply program to
be undertaken and the terms upon which supplies would be
furnished.
Apparently, my letter crossed a second letter from you
which was received in the Department on January 23, in
which you suggested that before a lend-lease .agreement is
entered into with the Provisional Government of France, a
determination should be made as to the extent to which we
deem it appropriate that the French should use theirgold
and dollar exchange resources in meeting their non-munitions
requirements. Since this suggestion is at variance with
what I understood to be the position of the three agencies,
I would like to bring the matter to your attention again.
The Provisional Government of France has now been recog-
nized by this Government, and for the past several months
the French nation has participated with us and our Allies
in the prosecution of the war in Europe. In view of our
political policy with respect to the Provisional Government
of
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Regraded Unclassified
261
- 2 -
of France, the Department is anxious that our lend-lease
relations be placed on the same general basis as is the case
with respect to Great Britain and Russia, and therefore
it seems desirable to offer a master lend-lease agreement
to the French representatives for signature at this time.
of course, I am in agreement with you that after such
a document has been signed, it will be necessary for repre-
sentatives of the Treasury Department, the Foreign Economic
Administration and this Department to agree upon the amount
of French dollar and gold assets, including the holdings of
the Bank of France, which we would consider to be a satis-
factory position for France so long as non-munitions are be-
ing furnished under lend-lease and to determine the extent
to which we deem it appropriate that the French gold and
dollar exchange resources should be used in meeting the non-
munitions requirements. As you know, the provisions of the
master agreement will not prejudice our discussions of these
matters, but will merely provide a general framework for our
lend-lease relations with France.
o
Since the Department believes that it would be unwise
to delay longer the signing of a master lend-lease agreement
in view of the present political situation, may I ask that
you advise me whether you have any further objection to the
submission of the text of such an agreement to the French
this week?
Sincerely yours,
(signed) Joseph C. Grew
Acting Secretary
Regraded Unclassified
262
January 26, 1945
2:01 p.m.
HMJr:
Hello.
John
McCloy:
Hello.
HMJr:
Yes.
M:
I think we can go ahead with that O'Dwyer business.
HMJr:
Wonderful.
M:
I talked to -- I got the Secretary to agree to it
and then I had Judge Patterson.
HMJr:
Wonderful.
M.
So you can start putting it through. He's got
to apply for inactive service.
HMJr:
I see.
M:
And get out of his uniform.
HMJr:
Uh huh.
M:
And he'd better start that right along and I'll
get that cleared up.
HMJr:
Fine.
M:
So that I'll meet it -- I'll get it -- meet it
coming up -- as it comes up, and 80 I think you
can go right ahead.
HMJr:
Well, I'll just talk to Grew.
M:
Yes.
HMJr:
I haven't talked to him yet.
M:
Yes.
HMJr:
Or Stettinius.
M:
Yes.
HMJr:
But I'll tell him it's all right with Stimson
and me.
Unclassifie
263
- 2 -
M:
Okay.
HMJr:
That's very good service.
M:
All right.
HMJr:
Come on over and play some more with your
camera.
M:
All right, I'll be over and break in in the
midst of an argument again.
HMJr:
All right.
M:
All right. I got your letter.
HMJr:
Okay.
M:
Okay. All right, bye.
Regraded Unclassified
264
January 26, 1945
2:04 p.m.
HMJr:
John.
John
Pehle:
Yes, sir.
HMJr:
General O'Dwyer is cleared by McCloy.
P:
Wonderful.
HMJr:
And now I'm going to try to clear him with
Grew.
P:
Grew, yeah.
HMJr:
Yes. And whoever's brainstorm that was, I think
it was a good one.
P:
Yeah, I think it was Lux's
HMJr:
What?
P:
I thought it was Luxford but I didn't know.
HMJr:
Well
P:
Maybe it was yours.
HMJr:
No.
P:
You have 80 many of them, you don't need credit
for this one. (Laughs) It was a very good
suggestion. If Grew -- if Grew shows some
resistance, I think we ought to go ahead and
put him in as acting and settle it later.
HMJr:
Yes.
P:
How about the White House?
HMJr:
I'm not going to bother them.
P:
You're not going to bother them?
HMJr:
No. I'm not going to bother the White House.
P:
Right. That's wonderful.
HMJr:
Right.
P:
All right, sir.
Regraded Unclassified
265
January 26, 1945
2:27 p.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello. Hello. Hello. Hello.
Joseph
Grew:
Hello.
HMJr:
Morgenthau speaking.
G:
Hello, Mr. Secretary.
HMJr:
How are you?
G:
Fine, thanks.
HMJr:
Two matters: John Pehle has been and still is
the Director of the War Refugee Board. Hello?
G:
Yes.
HMJr:
I've given him other work in the Treasury and I
recommended yesterday to Mr. Stimson, in the place
of Pehle we appoint General O'Dwyer. Hello?
G:
General who?
HMJr:
0' Dwyer.
G:
Dwyer, yes.
HMJr:
No, 0' Dwyer.
G:
Oh, how do you spell it?
HMJr:
O ....
G:
0' Dwyer, yes.
:
HMJr:
0' Dwyer. He's been in Italy.
G:
Yes.
HMJr:
I think he comes from Brooklyn.
G:
Yes.
Regraded Unclassified
266
- 2 -
HMJr:
And I've also asked the Army, in view of the
importance, would they let him return to civil
life and Mr. McCloy has just phoned me and said
that Mr. Stimson likes the idea very much and
they will release him from the Army.
G:
Well, now, what committee is that?
HMJr:
War Refugee Board.
G:
War Refugee Board, yes.
HMJr:
Of which Stettinius is a member with Stimson and
myself.
G:
Yes.
HMJr:
And I recommend it.
G:
As far as I know, it will be all right. Can I
look into it and give you an answer back?
HMJr:
Surely.
G:
You want an answer this afternoon, do you?
HMJr:
If possible.
G:
Yes. I'll get right at it and let you know.
HMJr:
If you could. Now the other thing -- just a
moment -- I got the letter you wrote me on the
French situation around noon today. It only
came over at noon. Previous to that Will Clayton
and I had a conversation and I told Will Clayton
that I felt that we should settle the dollar
balance thing first. See? And he has acceded
to my position. Hello?
G:
Yes. He told me that.
HMJr:
Well, I just wanted to make sure. And I told him
I thought we'd stop corresponding and just take it
for granted that as long as he said that he would
accede to the Treasury's position. Hello?
G:
Yes.
HMJr:
Now, I don't have to write you a formal letter on
that, do I?
Regraded Unclassified
267
- 3 -
G:
I don't believe 80. In other words, you accept
our letter. Is that it?
HMJr:
Well, no. No, you see Clayton now takes the
Treasury's position -- we should settle the
dollar balance thing first.
G:
Yes.
HMJr:
And then go in and ive them a lend-lease agree-
ment.
G:
I see. Well, now
....
HMJr:
It's perfectly clear with Clayton, but that does
not jibe with your letter.
G:
I see. Well, I'll have to look that up and see
if we have to -- if there'll be any modifications.
HMJr:
Well, if you -- yes -- I mean, as the letter stands
now, is not the way Clayton and Oscar Cox and I
propose to carry it out.
G:
All right.
HMJr:
I didn't know
G:
I'll go into that and let you know.
HMJr:
And now -- and I'm seeing you at four, I believe.
G:
Yeah. Now, one question comes up, Mr. Secretary,
as the Secretary of State is chairman of this
legislative committee
HMJr:
Yes.
G:
Wouldn't it be appropriate to have the meeting over
here? I think it would if it's convenient to you.
HMJr:
If you want to stand on protocol, it doesn't make
any difference to me.
G:
I don't give a damn about protocol.
HMJr:
Well
G:
Uh
Regraded Unclassified
268
- 4 -
HMJr:
Then for what other reason?
G:
If it's more convenient to you, this time I'll
come over, but I think that future meetings ought
to be over here probably, because the Secretary of
State is chairman. Will that be agreeable?
HMJr:
Oh, yes. I don't -- I don't -- I don't care where
the meeting is held.
G:
Well, we'll come over to you today anyway.
HMJr:
I'd just as leave lief come over.
G:
No, it's all right with me.
HMJr:
All right.
G:
So we'll come over at four o'clock in your office.
HMJr:
Yeah, but I -- I recognize that the Secretary of
State is chairman. Hello?
G:
Yes.
HMJr:
But I just thought that
G:
Well, I'm not the Secretary, myself. I
....
HMJr:
What's that?
G:
I say, I am not the Secretary, myself, so I'm glad
to come over to your office.
HMJr:
Well, I realize that.
G:
I think our future meetings, perhaps, ought to
come over here.
HMJr:
Uh ....
G:
I'll be there at four o'clock then.
HMJr:
All right.
G:
All right. Thank you. Good bye.
Regraded Unclassified
269
January 26, 1945
3:05 p.m.
NEGOTIATIONS WITH CHINA
Present: Mr. White
Mr. Friedman
Mr. Kung
Mr. Chi
Mrs. Klotz
H.M.JR: I am sorry, Doctor Kung, that I am late.
MR. KUNG: I want to especially thank you for the
trip you made down to see me.
H.M.JR: That was all right.
MR. KUNG: And I am coming here to thank you first
for that.
H.M.JR: Well, I will come to Chungking if you invite
me.
MR. KUNG: I will invite you any time.
H.M.JR: Take it easy; you are supposed to be in the
hospital.
MR. KUNG: I just came out for the first time.
H.M.JR: How did you get along on a vegetable diet?
MR. KUNG: All right.
MR. WHITE: He hasn't tried. (Laughter)
MR. KUNG: I have not reduced any; my weight is just
the same.
Regraded Unclassified
270
- 2 -
H.M.JR: Mrs. Morgenthau said she wanted to send
you up some food, but I said I didn't think we could
compete with Mrs. Soong.
MR. KUNG: I am trying to get my figure back. The
Doctor says I weigh too much.
H.M.JR: You lost ten pounds?
MR. KUNG: I lost half a pound. He wanted me to
lose ten pounds.
H.M.JR: I imagine your family sent you good food.
MR. KUNG: They gave me some chicken soup.
H.M.JR: The war is going much better, isn't it?
MR. KUNG: Yes. Isn't that good?
H.M.JR: Wonderful: What do you make out of the
Russians?
MR. KUNG: The Russians are very clever. They make
progress when they start, and they will go ahead.
H.M.JR: It is amazing what they have done, isn't
it?
Well, we have from the 1st of February to the 1st of
October back of us, haven't we?
MR. KUNG: Yes.
H.M.JR: All we have to worry about is October,
November, and December. Is that right?
MR. KUNG: Yes. I am not worried.
H.M.JR: Have you spent all of that one hundred and
fifty million dollars and four cents?
MR. WHITE: I think they got the four cents.
Regraded Unclassified
271
- 3 -
MR. KUNG: No, we deposited it. When the war is
over, I hope I won't have to worry, myself, but my
Government will.
H.M.JR: They have this road open now.
MR. KUNG: Yes.
H.M.JR: That ought to help, oughtn't it?
MR. KUNG: Yes.
H.M.JR: How many tons can go over that?
MR. KUNG: That depends on how many trucks you put
on. The more trucks they put on--
H.M.JR: Five thousand tons on a month?
MR. KUNG: More than that.
H.M.JR: More than that?
MR. KUNG: Yes.
H.M.JR: Ten thousand?
MR. KUNG: Maybe thirty thousand! You see, the smallest
truck would take two tons. With a big truck you can take
four tons, and then if you have, say, fifteen thousand
cars, they would be able to make two trips during the month.
MR. WHITE: During the best part of the other road,
I think you got thirteen thousand tons a month at its peak.
MR. FRIEDMAN: They do have the advantage now of
having a pipeline being built by the American Army for
its military operations, so they will be able to carry
petroleum in pipes.
MR. KUNG: Originally they had to carry that gasoline
by trucks. Now they have to pipe it.
Regraded Unclassified
272
- 4 -
H.M.JR: That will help.
MR. KUNG: The pipes reach--
H.M.JR: The fact that they know the road is open--
has that had any effect on prices?
MR. KUNG: Yes.
H.M.JR: Stuff will come out of hoarding?
MR. KUNG: Yes, stock will come out of hoarding,
because as soon as you know the goods can be moved in,
then the merchant would know--they think the price would
drop--and they take that and dispose of their goods first.
Then outside goods come in gradually, and you have more
supply. Naturally the price will go down.
H.M.JR: Your friend K. P. Chen was in here for about
five minutes.
MR. KUNG: Was he? He came to see me.
H.M.JR: He was here about five minutes.
MR. KUNG: he is coming back again.
H.M.JR: You know what he always said, he is scared
of being called a politician. He said, "I am a banker.'
He said, "All politicians die young. Remember, I am not
a politician; I am a banker. (Laughter)
MR. KUNG: Bankers live to an old age? Not always.
H.M.JR: He said he was coming back. He looks very
well.
MR. KUNG: Yes, he is only one year younger than
myself. He looks very well.
H.M.JR: Just a couple of young fellows?
MR. KUNG: We are not old yet.
Regraded Unclassified
273
- 5 -
H.M.JR: No. Well, sir?
MR. KUNG: Well, sir.
H.M.JR: What is the business for today?
MR. KUNG: You know what the business is for today.
Or are you just saying that?
H.M.JR: I am not sure that I do. Do you know,
Harry?
MR. WHITE: I thought that Doctor Kung was coming
here to give us some data which would constitute the
basis of consideration of what adjustment would be made
for the last three months of last year.
H.M.JR: Is that it?
MR. KUNG: Yes, that is the question. According to
the agreement that we reached for those three months,
another settlement should be made.
MR. WHITE: Have you got some data on the settlement
as to the expenditures, because we didn't get any?
MR. KUNG: I tell you, the loans to your Army for
October, November, December, and January are for each
month two billion dollars.
MR. WHITE: Two billion dollars each month, or a
total of eight billion dollars.
MR. KUNG: Including January.
MR. WHITE: Including the four months.
MR. KUNG: If they leave January out, they owe six
billion dollars advanced to the U. S. Army, and then there
is another account, the request of the Army advance that
was made to the National Engineering Commission. That is
a commission set up to build or to repair any airfield
or buildings and roads--anything you want. That is, up
to the end of the year, two billion, eight hundred million.
Regraded Unclassified
274
- 6 -
MR. WHITE: For those three months?
MR. KUNG: Yes.
MR. CHI: Your excellency, for January the direct
advance is three billion.
MR. KUNG: For January three billion?
MR. CHI: Yes.
MR. WHITE: Do you have all of that down in a memo?
MR. CHI: No, we didn't write it.
MR. KUNG: I asked for the figure they wanted from
the Minister of Finance from the Central Bank. Most of
the money is, of course, advanced by the Central Bank, and
as to how much is advanced by the Minister of Finance, I
don't think it is very much; I don't have that, but I
wired for it.
MR. WHITE: Wouldn't the next step be to submit 8
memo with the data on it and check it with the Army?
Other than that we can't begin discussion.
MR. KUNG: I think your Army knows that.
MR. FRIEDMAN: The Army actually has not received
yet from Chungking the figures for December. They know
that for October and November the figures more or less
jibe with the ones that Doctor Kung has given for the
months, but they don't have them for the third month,
or last month of the year.
MR. KUNG: For the last three months there has been
each month a request for two billion dollars in Chinese
currency. That is for the Army's use, besides some advance
that was made to the Engineers Commission at the request
of the Army at our request, and for January, as he just
said, it is three billion.
MR. WHITE: How soon did you get an indication that
the Army would be able to supply figures for the third
period?
Regraded Unclassified
275
- 7 -
MR. FRIEDMAN: The Army said that they felt they
ought to give headquarters until the 3lst.
MR. WHITE: Until the 31st of this month?
MR. FRIEDMAN: That would give them a whole month
to get the necessary data to end up the previous month.
MR. WHITE: They are a month behind.
MR. FRIEDMAN: Before they go back and ask General
Wedemeyer and say things are slow, they have agreed to
go back to them at the beginning of next week for the
figures.
MR. WHITE: Isn't the thing to do, Mr. Secretary,
to wait until the Army would supply us with the data?
They can't get the end of December figures until at least
the end of January. We've got the October, November,
figures, and since you want to make an adjustment for
the three months, we can wait another week or two and the
information will be here.
H.M.JR: As I say, I wasn't fully prepared for this
meeting when you suggested that you come down. I looked
forward to seeing you.
MR. KUNG: That is very kind of you.
H.M.JR: But we are shy of which month yet?
MR. WHITE: December.
H.M.JR: December. I see.
MR. WHITE: There is also a month's lag.
H.M.JR: So I just don't know.
MR. KUNG: We can wait until the December figures
come in.
H.M.JR: When will they be in?
Regraded Unclassified
276
- 8 -
MR. WHITE: The Army said they expect them by the
end of the month, but they don't like to go back to
Wedemeyer and needle him until they've given him that
month. Therefore, it may be the end of the month, either
that, or they can supply us--
H.M.JR: All right.
MR. KUNG: That's all right.
MR. WHITE: They can supply us with data on a memo
and you can consider that, and the first two months are
apparently the same, and if the figures are delayed, we
can go on the basis of your data.
H.M.JR: If they are in a hurry, I think it is nicer
to do it on the three-month basis, don't you?
MR. KUNG: Yes, it is all right, but I can tell you
that the third month of December is the same as October
and November, two billion.
H.M.JR: Which General is handling this?
MR. WHITE: I suppose it is General Richards who is
giving us the data, isn't it?
MR. FRIEDMAN: That's right.
MR. WHITE: We are getting it from General Wedemeyer.
MR. CHI: The data for these three months is much
simpler than before.
MR. WHITE: Doctor, either you give us a memo and we
can operate on that basis, and then revise it in the light
of the Army so there won't be any delay, or we can wait
for the Army, but as it is, we have nothing either from
you or from the Army.
MR. KUNG: It is only a few days. I think by the
end of this month the Army ought to be able to give you
figures for December.
Regraded Unclassified
277
- 9 -
MR. WHITE: Couldn't you in the meantime send us
a memorandum with your figures?
MR. KUNG: I will do that.
H.M.JR: I think if we could have a memorandum
from you, it would help.
MR. KUNG: I will do that. How about shipping gold?
H.M.JR: Harry, you are an expert on gold.
MR. WHITE: What was the last shipment that went a
week ago?
MR. FRIEDMAN: I don't know exactly when.
MR. WHITE: Well, as soon as another shipment is
possible we will make it, but the proposal to ship it
through commercial channels is one that we don't think is
a very wise one.
MR. KUNG: We prefer if you can, you can ship it, but
the Army is so much better, but the only thing is that you
say my government hasn't reversed their policy, and it was
reported today that the government now is trying to abolish
some taxes.
MR. WHITE: Abolish taxes.
MR. KUNG: Yes.
H.M.JR: Where is this going to be? In China?
MR. KUNG: In China.
MR. WHITE: They waited until you got out of town.
MR. KUNG: Formerly my policy was to get them as much
as possible from the taxes, see? That was in order to
help the inflation.
H.M.JR: I know a lot of bankers in New York will move
Regraded
Unclassifie
278
- 10 -
to China. (Laughter) That is, if you abolish taxes.
MR. WHITE: I hope they won't be the same bankers that
moved from China.
MR. KUNG: They have abolished some taxes.
MR. WHITE: Are they really going to reduce taxes?
MR. KUNG: Yes.
MR. WHITE: That sounds very strange. I think that
wouldcause more reluctance on sending any gold, because
you are going on a policy of inflation. It is going to
dissipate gold even more.
Are you sure of that, Doctor?
MR. KUNG: Yes.
MR. FRIEDMAN: We had heard they were going to abolish
consumption taxes for one thing.
MR. KUNG: Several taxes have been abolished. Of course,
that means the government will lose more revenue as the
expenditure grows. Therefore, we have to issue more notes,
and in order to try to keep down the inflation, the best
thing is just serve the gold to gather money back from the
market. Otherwise, you have too much surplus of money
and the commodity prices will go up.
MR. WHITE: Well, I think, Dr. Kung, that the question
of continuing to ship gold the way we have, which seems to us
at the moment to be in line with what you want, would be
satisfactory.
Now, raising the question of shipping gold by more
rapid means, we will have to take that up with the Army.
Maybe with the new road that has been opened up they can
send a little more that way, but sending it on commercial
vessels we feel is a most unwise policy.
Regraded Unclassified
279
- 11 -
MR. KUNG: You see, this thing was when Madame
Chiang was here and she spoke to the President about this
two hundred million dollars of gold, and also the President
agreed to it, or almost agreed to ship it, in order to sell
it, take advantage of the high prices of gold, to sell it
on the market and get as much of this currency back in order
to suppress inflation. Well, that has helped some, recently,
because we are short of gold. Therefore, we instructed
them to sell certificates, that is, sell paper, promise to
pay three months afterwards, and the time has arrived.
There was no gold to be delivered, and that created black
markets, so we had to do something recently. You know that
there has been an arrangement to buy some gold from the
British government from India to ship into China, and then
we pay the British.
MR. WHITE: At a very fantastic price.
MR. KUNG: That is worth the price.
MR. WHITE: I mean the extra, the five percent.
MR. KUNG: Well, that is representative.
H.M.JR: How much do you pay?
MR. WHITE: Five percent.
H.M.JR: Interest?
MR. WHITE: It isn't interest. It is supposed to be
various charges.
MR. KUNG: Shipping charges, service charges.
MR. WHITE: But inasmuch as the gold was there already,
the question is whether there should be any charges.
H.M.JR: What is a good price for an ounce of gold
now?
MR. WHITE: In Chungking?
Regraded Unclassified
260
- 12 -
MR. KUNG: In Chungking we sold gold at, I think it
was eighteen thousand five hundred dollars an ounce, but
the shortage that kept up recently caused no gold to be
delivered. Therefore, well, people are speculating.
Those people who had enough gold sell on the market and
try to get more.
H.M.JR: Well, we had a message that the Central
Bank has been selling gold.
MR. KUNG: Yes. We have been selling gold.
H.M.JR: What is the highest price they get now--
how high?
MR. KUNG: Eighteen thousand five hundred. That is
the official price, and that was the price of it at the
time on the theory when there was no gold to be delivered.
Therefore, until recently, a black market appeared, and
when we got gold shipped by you the black market has
dropped, but you don't have gold to meet the demand.
That is so that we can not deliver. I am afraid another
black market will appear.
H.M.JR: Well, we keep watching it all the time.
MR. WHITE: I think we ought to examine what the
possibilities are of the new road opening up. That might
provide additional facilities. That's the bottleneck.
MR. KUNG: You see, we suggest an increase in the
demand both by the Chinese government to prepare and for
the war against the Japanese, and also your army's demand.
Your personnel is increasing in China all the time, and
a year ago you only had ten thousand, but now you have
nearly forty thousand.
MR. WHITE: Troops?
MR. KUNG: Yes--personnel--people connected with the
work, see, of building air fields, and the ground forces,
and so forth; and, of course, now including also the
Regraded Unclassified
281
- 13 -
reason why Mr. Nelson and the WPB--
MR. WHITE: He is spending some money there?
MR. KUNG: I had to advance ten billion dollars to
him.
H.M.JR: Well, you had to advance ten billion to
whom?
MR. KUNG: To the WPB.
H.M.JR: To Nelson?
MR. KUNG: Yes. Well, he said he was going to try to
get all these factories to work. Then you have to give
them money in order to get materials and so on, money to
pay their laborors.
MR. WHITE: Was that a government advance, or did he
get that from private banks?
MR. KUNG: From the Central Bank.
MR. WHITE: couldn't he borrow from private banks?
MR. KUNG: No.
H.M.JR: I understood from Nelson he got the Generalis-
simo to order that the interest rates be reduced.
MR. KUNG: Yes.
MR. WHITE: Were they?
MR. KUNG: Oh, yes.
MR. WHITE: If they don't borrow from them, I thought
that the new program which he initiated was going to be
financed by borrowing from banks.
MR. KUNG: From the Central bank?
Regraded Unclassifie
282
- 14 -
MR. WHITE: From private banks.
MR. KUNG: From the four banks, the four government
banks. Take the Bank of China--they made a loan, but if
they need to, they are allowed to take their paper to
discount with the Central Bank.
MR. WHITE: I see. Well, have the private banks
taken any of the financing?
MR. KUNG: No.
MR. WHITE: No? Well, I thought that Mr. Nelson
thought that he had convinced the banks. It is the govern-
ment that is financing.
H.M.JR: It was the private banks I thought he had
convinced.
MR. WHITE: That is what I thought, because the other
is--
MR. KUNG: They really--the Central Bank is a govern-
ment bank. The other banks are not entirely government
banks. The Bank of China, the Bank of Communications,
Farmers Bank--
MR. WHITE: Are not government banks?
MR. KUNG: The government has shares, but--
MR. WHITE: We have always regarded them as government
banks.
H.M.JR: Well, sir, we shall meet again soon.
MR. KUNG: All right.
H.M.JR: At your pleasure. We will get some kind of
memo from you? Mr. White will call up the Army and tell
them to hurry up with the December figures.
MR. WHITE: And we will also explore the other pos-
sibility.
MR. KUNG: There is another thing, Mr. Secretary,
Regraded Unclassified
283
- 15 -
I would like to request from your good office, and that
is I would like to know, that is, my government would like
to know what is the frozen fund, the Chinese--
MR. WHITE: The total?
MR. KUNG: Yes, and, of course, I know that total,
and put on there frozen, the whole total including the
government fund, bank fund, everything else included, but
now I would like to know how much of that really belongs
to the private Chinese.
MR. WHITE: How much is government and how much--
MR. KUNG: ...is private.
MR. WHITE: Do you know the total? You don't know
the total?
MR. KUNG: I think I knew the total.
MR. WHITE: Just deduct the government, and the rest
is private.
MR. CHI: We knew the total as of June, 1941, but
not since then.
H.M.JR: We will give it to you.
MR. WHITE: You would like the total government and
total private at this time.
MR. KUNG: Yes, at this time.
H.M.JR: That is easy. Anything else?
MR. KUNG: Another thing I would like to speak to
you about is you say when they should have savings cer-
tificates. The purpose of that was to help the Chinese
industries to put their money into this instead of buying
commodities, so as soon as the road opens, the war is over,
Regraded Unclassified
284
- 16 -
they can use that for purchasing machinery, materials,
from this country in order to bring to their industry
and business and the bond--that over short term, and the
buyer could either choose it for one year or two years
or three years. The interest varies, and two years is
a little more than one year, and three years a little
more than two years, and the bond issued by the govern-
ment is a little longer in term.
The money, of course, is already set aside for that,
the demand, but since then we have figured out, as I
think I told you, if we did this in gold as originally
planned and drew them for ten years, the government will
have to pay something, I think, like thirteen million
dollars as interest. I think that China is in a dif-
ficult position, especially after this war, and at Bretton
Woods, now, we wanted some currency, see, so my govern-
ment is thinking of shortening that time.
MR. WHITE: Refinancing.
MR. KUNG: Leave the money here for nothing and then
we have to pay into it all the time. I think if we can--
in view of this road to be opened, the war may be shortened--
we would like to have the people with their money to use
it with the papers and it will help them and also reduce
the government obligation.
MR. WHITE: Well, the idea is to refinance some of
the notes, instead of making them long term, make them
short term, because he says the dollars have to be here
anyhow. They are kept sort of frozen behind them, and
they are paying interest on that. If they can't use the
money, they would rather release those dollars after the
war is over, so they can be spent here and thereby save
the interest.
I think there is much in that. I think you might
want to consider in that program some suggestion that
if the money is going to be released that way, you
might want to consider whether you can get sufficient
assurance as a mechanism that it will be spent for that
Regraded Unclassified
285
- 17 -
purpose and not be spent for investments in American
securities.
MR. KUNG: That money will be. When they want that
they will have to say what they want to buy in this
country, see?
MR. WHITE: I think probably--are you asking the
Secretary's advice on this?
MR. KUNG: Yes.
H.M.JR: I would like to think it over a little.
MR. WHITE: We shall submit the proposal in a memo.
MR. KUNG: Of course, the Chinese government originally--
the government could have made it five years or four years.
I think that was probably overlooking on our part to make
it a long instead of a short term, forgetting we had
interest to pay, because we issued that one hundred mil-
lion. Now that is--
MR. WHITE: That isn't in U.S. dollars, too.
MR. KUNG: That is credit. The capital for the redemption
of that bond is here, but when this goes on our government
will have to pay three million dollars.
MR. WHITE: Haven't you got the right within the bond
to pay them off whenever you want to?
MR. KUNG: Yes.
MR. WHITE: You have that, and you are questioning
whether you should exercise it? The war isn't over yet.
You can always make that decision.
MR. KUNG: Yes.
MR. WHITE: I will submit it.
MR. KUNG: The government has a right to shorten it,
Regraded Unclassified
286
- 18 -
you see. I'm trying to save a little money.
H.M.JR: Good.
MR. KUNG: For the future.
H.M.JR: We all try to do that. We are not very
successful.
MR. KUNG: Well, all right.
H.M.JR: All right, sir, take care of yourself now.
You know what I told you.
MR. KUNG: Thank you.
(Mr. Kung and Mr. Chi leave the conference.)
MR. WHITE: That's going to be tough.
H.M.JR: You can do it very well. I'll throw it to
you the next time. You can say Friedman--
MRS. KLOTZ: His turn will be next.
MR. WHITE: We were very grateful for the most part
that they never raised the question of commercial shipments.
Then somebody tipped them off.
H.M.JR: In this cable I looked at they said they
were selling that for twenty thousand dollars.
MR. WHITE: But they have sold it in the past for
much lower rates than they could have sold it.
MR. FRIEDMAN: They just raised it, the official
price from eighteen thousand, five hundred, to twenty
thousand, but they could get forty thousand at any time.
Regraded Unclassified
287
- 19 -
H.M.JR: He didn't seem to know the price was twenty
thousand.
MR. FRIEDMAN: He seemed to be out of touch with the
latest in the picture.
MR. WHITE: I don't know. I'm surprised he's satis-
fied, unless he is worn out or tired. I am surprised he
is satisfied with the answer we gave him on gold, because
it's no answer at all. Sooner or later he is going to--
H.M.JR: I am surprised he is satisfied with any
answer.
MR. FRIEDMAN: Did you get any sense in the feeling
he was trying to give his friend to O.K.?
MR. WHITE: On taxes it was indicated as soon as
they left, they lowered taxes.
H.M.JR: This one hundred million dollars they want
refunded, isn't that the one all the big boys bought?
MR. WHITE: How much is the total? One Hundred
million?
MR. FRIEDMAN: One hundred million savings was bought
at twenty-one. They sold at sixteen to one to make it
a little more attractive, because it was a ten year bond.
MR. WHITE: And now--well, they are getting a good
interest on it. I think he has got a case there.
H.M.JR: If they don't pay the interest, maybe he
loses the income. Maybe he doesn't have these particular
bonds.
MR. WHITE: If they don't pay the interest, the holders
of the bonds will lose, but they can increase--
H.M.JR: Maybe this isn't a block in bonds that he
has. I thought what he was leading up to was he knows
Regraded Unclassified
288
- 20 -
we are checking on who owned these bonds, and that the
first question was just who has the frozen funds, and the
next will be--
MR. WHITE: The next will be who has them. The first
is he wants the total. As a matter of fact, they have
asked us if we will give them a list of who owns what.
H.M.JR: Personally, I wasn't surprised that he
wasn't up to date, but I was surprised that you fellows
weren't more up to. date on what we owed them. Have you
had any talks with the Army on those three months?
MR. FRIEDMAN: We have had a number of conversations.
H.M.JR: In United States dollars.
MR. WHITE: The Army leaves that wholly up to us.
They only give us the one figure.
H.M.JR: The one figure is meaningless.
MR. WHITE: It is up toyou to convert it into meaning.
H.M.JR: I didn't even get a thank you from Stimson
on the last one. The next time I see McCloy I am going to
tell him. I didn't even get a thank you.
MR. WHITE: All you will get is the expenditures,
and you will have to decide what you are going to pay in
dollars. The Army isn't going to offer any suggestions
now on that. You have taken over the negotiations, and
presumably it will have to be your decision, with or
without their approval, but it will have to be your decision.
Now, that it is really coming to a crux, the next
time we will talk it over, and we will prepare a memo
suggesting what--
H.M.JR: Coming to a crux did you say?
MR. WHITE: Did I use the word crux?
Regraded Unclassified
289
- 21 -
MR. FRIEDMAN: You said it was right--
H.M.JR: Now, wait a minute.
MRS. KLOTZ: He is well trained.
H.M.JR: Did he say it was coming to a crux?
MR. FRIEDMAN I don't remember. (Laughter)
1
Regraded Unclassified
Read by Hab 1/39/95. 230
January 26, 1945
4:25 p.m.
HMJr:
Hello.
John
Pehle:
Yes, sir.
HMJr:
John, Mr. Grew says that the State Department
will go along on General O'Dwyer.
P:
Fine.
HMJr:
So you've got to do two things. You should
resign from the Board and recommend -- you
know, fix something up for the Board to accept
your resignation. See?
P:
Yeah.
HMJr:
And at the same time, fix up a piece of paper
recommending your successor that the Board can
sign.
P:
Yeah.
HMJr:
And see that it's circulated.
P:
All right, I'll take care of the whole thing.
HMJr:
Will you carry the ball?
P:
Yes, sir, I will.
HMJr:
And I needn't worry?
P:
Thank you.
HMJr:
I think that's a happy solution.
P:
Very happy.
HMJr:
And then I don't think that -- I don't -- do
you think that I should give him your office
over here?
P:
I would, if possible, like to hold on to that.
HMJr:
You want to hold on to it?
P:
If I can, yes.
Regraded Unclassified
291
2 I I
HMJr:
Well, that's all right.
P:
But I'll tell you what I'll do, Mr. Secretary --
I'll prepare a proposed memorandum from you to
Mr. Bell indicating what we need, and you can
sign it tomorrow.
HMJr:
I think we could move them off this floor.
P:
Oh, yes, they don't need to be there. I'm the
only one that's up there anyhow.
HMJr:
Well, I didn't know that. I think we could move
them somewhere. But you take care of that.
P:
Right.
HMJr:
Anything else?
P:
That's all.
HMJr:
I thank you.
P:
I thank you.
Regraded Unclassified
Draft II
1-26-4892
The CIO needs no reminder that the welfare of
American labor is tied to the welfare of America as a
whole. It demonstrated its knowledge of this fact last
Fall by taking part actively -- and, I may say, fairly
effectively -- in the political life of the Nation. It
did 80 because it understood, as Sidney Hillman put it,
that "The activity OI such groups in shaping the course
of their government is essential to the functioning of
our democracy."
The discussion of the Bretton Woods proposals which
has taken place on this program indicates that organized
labor understands also that it must play a responsible
part in the shaping of international affairs. It has a vital
stake in the peace no less than in the war.
It is too often assumed that international affairs
are beyond the grasp of the ordinary citizen -- that they
must be left to the diplomats in the political field and
to the bankers in the economic field. If they are left
entirely in such hands, the chances are that they will
be shaped no better than in the past. Your hands must
share in the shaping.
Regraded Unclassified
293
- 2 -
There is nothing remote about the Bretton Woods
proposals. They involve your bread and butter. They
are an essential part of the President's program for the
attainment of 60 million jobs here in the United States.
We cannot reach such a level of employment at home unless
there is a lifting of living standards abroad and 8. revival
of international trade.
The International Monetary Fund is simply a device
to make it possible for workers in all parts of the world
to exchange the goods they produce on a stable basis and
in an orderly way. It would free the flow of commerce
from artificial currency barriers. It would substitute
economic cooperation for economic warfare among the nations
of the earth.
The International Bank, on the other hand, is intended
to give economic help to the prople of war-torn lands. Only
with such help will they be able to buy what we produce. The
only good customers are prosperous customers.
And what is even more important is this: The only kind
of world in which enduring peace can be assuredis a prosperous
world -- a world in which people everywhere have an
opportunity to fulfill the ir reasonable hopes through honest
Regraded Unclassified
294
- 3 -
work and free interchange of the things they grow and
make. The agreement reached by the United Nations at
Bretton Woods is one of the cornerstones of such a world.
It is a charter to free the world from seonomic as well
as political aggression
Regraded Unclassifie
STANDARD FORM NO. 64
Mrs.Klitz295 Mrs.
Office Memorandum
UNITED STATES GOVERNMENT
TO
:
Mrs. Klotz and Mr. Shaeffer
DATE: 1/26/45
FROM : Lt. (j. g.) Levy, USNR
hlth
C 2 0 Broadcast
SUBJECT:
of 1/27/45.
Attached is the "PROCEDURE TO BE FOLLOWED IN THE EVENT OF
BROADCAST BY SECRETARY MORGENTHAU." Items four and five are
actually handled by my phoning the radio station concerned and
having their station manager check with Mr. FitzGerald.
Regraded Unclassified
236
PROCEDURE TO BE FOLLOWED IN THE EVENT OF BROADCAST
BY SECRETARY MORGENTHAU
1. As soon as the time for the broadcast is established,
notify Messrs. Gamble, Coyne, and other persons who may request that
information.
2. Ascertain the point of origin (studio, projection room,
Secretary's office, or remote point.)
3. Notify network of point of origin (so that lines may be
installed.)
4. Arrange with the Telephone Company for approximate time
when lines will be installed.
a. In case of origination in the Secretary's office,
notify Mr. FitsGerald as to the time when lines will
be installed.
b. In case of origination in the projection room
notify Mr. FitzGerald and Mr. Turner as to the time when
the lines will be installed.
5. In the event that the broadcast originates in the Treasury
Building, give Mr. FitzGerald a list of names and the time of arrival
of the announcer, production man, engineer, etc.
6. Order three sets of reference recordings:
a. One for projection room
)
33 1/3
)
revolutions
b. one for Radio Section, War Finance Division)
c. one set of records (78 revolutions) to be sent to Miss
Chauncy as soon as possible.
7. Advise Mr. Masters so that he may send field memoranda or
telegrams over Mr. Coyne's signature to all state administrators and
publicity men notifying them of the time, date and network of the
broadcast, and also send them a publicity release with the request
that it be relayed to all newspapers.
297
-2-
8. Notify all Washington and New York newspapers as well
as news agencies.
9. Notify all radio commentators and news announcers.
10. If broadcast is on Blue Network notify station WKIP in
Poughkeepsie, New York.
11. Notify Mr. Kuhn of OWI overseas Branch as far in ad-
vance as possible. Send him a copy of the speech if available.
Request him to supply us with a report on what use is made for over-
seas broadcasting.
12. Request network to make at least three advance an-
nouncements regarding the speech on the day of the speech.
13. Send a special notice regarding the broadcast to all
Treasury people named on our "special notice list."
14. Make sure that a copy is sent to the Washington outlet
of the network for clearance as far in advance as possible.
Regraded Unclassified
298
House-
January 26, 1945
MEMORANDUM FOR THE SECRETARY
From:
Mr. Blough
Subject: Characteristics of a qualified pension plan
with special reference to R. H. Macy & Co.
(For your information, as previously requested;
no action required)
Pension payments to retired employees are deductible
expenses under the income tax and present no important
tax problem. However, many corporations wish to take
the deduction, not when the pension is paid, but in
advance, at the time money 1s set aside to finance the
pension -- perhaps long before the employee retires.
When the money is put into a trust fund for this purpose
we have a "pension trust. If there were no restrictions
the allowance of the deduction when the funds are set
aside would invite the creation of all sorts of "phony"
plans at the expense of the Government.
Accordingly, restrictions have been imposed,
particularly by the Revenue Act of 1942. To be entitled
to the deduction, and to tax-free accumulation of inter-
est in the trust fund, a pension or annuity plan must
have the following principal characteristics:
1. The plan must be for the exclusive benefit of
employees (or their designated beneficiaries). The
employer must not benefit except indirectly through
increased employee morale, loyalty, ability, and
efficiency.
2. Contributions by the employer to the plan must
be final and not recoverable by the employer.
3. The plan must either: (1) benefit 70 percent
or more of all regular employees (56 percent in case of
plan where the employees make a contribution), or else
(2) satisfy the Commissioner that it does not discrim-
inate in favor of officers, stockholders, supervisory
employees, or highly paid employees.
Regraded Unclassified
299
- 2 -
4. The scale of benefits and the scale of
contributions under the plan must not discriminate
in favor of officers, stockholders, supervisory
employees, or highly paid employees.
5. It will be recalled that the old age retire-
ment provisions of the Social Security Act cover the
first $3,000 of wages. Pension plans are usually
supplementary to social security benefits. The Treasury
regulations require that benefits from a pension plan
on earnings above $3,000 must be proportionately no
greater in value than those provided under the Social
Security Act for employees with earnings under $3,000,
or by both social security and the plan combined.
(The Treasury's interpretation of the law on this
point has resulted in a great deal of criticism by
certain members of the Senate Finance Committee,
notably Senator Taft. There may be more criticism
yet to come.)
Despite the restrictions, the pension trust pro-
visions of the statute undoubtedly are being used by
many corporations largely as a method of reducing
wartime taxes.
Based on newspaper reports, the plan of
R. H. Macy and Company, Inc., involves both (1) a
pension plan and (2) a profit sharing plan. Without
seeing the plan, it is not possible to say exactly
what if any objection the Bureau may have to it in
its present form. With respect to the pension plan,
it would appear that the objections, if any, would
likely be of minor character. The profit sharing plan
presents some problems which have not yet been fully
resolved because of the infrequency of plans of this
type.
If desired, a more careful study of the Macy plan
will be made and a further report prepared for you.
RoyBlough
Regraded Unclassified
House,
300
MEMORANDUM FOR THE SECRETARY.
January 26, 1945.
Mail Report
Reflecting current news stories the Treasury
definitely had a "bad press", so far as the mail went
this past week. It was not quite as heavy in routine
matters as it has been, but contained few words of
praise and many complaints or criticisms.
In both signed and unsigned communications corre-
spondents said in effect that Blaze could go to blazes,
and most of them, as usual, threatened to stop buying
bonds or to sell those already purchased since service
men are so treated. The same action was indicated by
the few writers who referred to the nomination of
Henry A. Wallace to the post of Secretary of Commerce.
All such letters indicated strong disapproval, and most
of them dragged in the bond issue. Another cause of
dissatisfaction was the question of excessive expendi-
tures for advertising. Opposition to this grew stronger
this week, with several writers questioning the sincerity
of the Treasury's stand against inflation. There were
several inquiries as to the unfavorable rate of exchange
allowed American soldiers paid off in the French area.
On the tax front, demands for refunds were perhaps
not quite so many, and there were fewer complaints from
families of service men about delays in receiving bonds,
although this problem is still a pressing one. Questions
and suggestions about new withholding procedures in-
creased in volume as the others decreased.
Only 5 contributions to the war effort were received
this week. The smallest was a $5.00 Money Order from a
resident of Canada, and the largest a $1,000.00 check
transmitted by the Navy Department.
Regraded Unclassified
301
General Comments
Mrs. Florence T. Bateman, Route #4, Walla Walla,
Washington. I am enclosing a copy of a Power of
Attorney signed by my husband shortly before he volun-
tarily enlisted in the Armed Forces. Apparently it
is of no value as far as our Government is concerned,
for when it was attached to a Government check issued
from the Collector of Internal Revenue's Office at
Tacoma, it was returned, stating that it was not ac-
ceptable because it did not explicitly state that
I could endorse checks issued by the Treasurer of the
United States. I certainly cannot understand this.
It is true that there is no mention of the Treasury
Department, but you will notice in the next to the
last paragraph it states - "I also give my said
attorney full power to collect all money due me from
anyone". At the present time my husband is over-
seas, someplace in the Pacific -- God, a few unfortunate
Japs and the U. S. Army alone know where. It has been
hard enough for me to manage everything alone, maintain
our home and keep it in good repair, buy War Bonds
regularly and do every other thing possible so that he
will have something to come back to. It certainly
seems to me that the Government could cooperate a
little bit and not make it any harder for us than it
already is. # # # The enclosed Power of Attorney has
never been questioned before and it was drawn up for
the express purpose of giving me authority to do what
should be done so that while my husband is doing his
job as well as he can, I might look after all his affairs
without any worry on his part. The check was a
refund on our 1942 income tax and was notreceived by
us until after January 7, 1945. I attempted to deposit
this check to the account of Byron E. and Florence T.
Bateman, the same names as appear on the check. The
fact that it was deposited to his account, and by the
way, it is a special account I use for all the money
sent me by my husband, would appear to me to be almost
Regraded
302
- 2 -
a sufficient endorsement. That, however, was not
enough, so we attached one of the original signed
copies of the Power of Attorney and our local bank
sent it in to the Federal Reserve Bank of San Francisco,
California, only to be returned as stated above.
Needless to say, I will attempt to secure another
Power of Attorney, one acceptable to you and which
mentions the Treasury Department explicitly. I have
no idea when it will be forthcoming, or if my husband
will have time or proper authorities at hand to exe-
cute it according to your standards. * # I only
hope and pray you are equally diligent in looking
after the money we are all saving and putting into
War Bonds to see it does not go astray. ***
Leila 0. Stone, Modesto, California. In the current
issue of TIME magazine I read, "Last week the Treasury
Department was glumly trying to-sell 76,712 discarded
caps", etc., etc. I am doing my second season this
year-as a lookout on a station atop a peak of the
Mt. Shasta National Forest, as fire guard for the
U. S. Forest Service. # # # I wore out ski caps and
what-not on my post last year. I looked everywhere
for a suitable cap for this work. The wind blows a
gale much of the time, and we women have to wear
something which keeps our hair "corralled", as well
as something which will shade our eyes from the glare.
I have always looked with envy on nurses, WACs and
others who were privileged to buy and wear those snug-
fitting caps of olive drab. Could not these discarded
caps be taken over by the Forest Service and disposed
of among us women who are doing such jobs? We could
purchase them directly from our Rangers. I would be
very happy to send you, by return mail, the $2.20
cost of one cap, size seven and one-fourth for my own
use, this summer. If the cap were dressed with the
pine tree, insignia of the Forest Service, it would
be considerably enhanced, in the eyes of the hundreds
of women who could certainly make use of them, if the
caps were brought to their attention by the Forest
Service officials for whom they work.
Regraded Unclassified
303
- 3 -
Mrs. Sylvester Davis, R. 6, Box 68-B, Pine Bluff,
Arkansas. Treasury Department, ofice of the
Secretery. please send me special Forms to File
Claim against my husban. Sincely.
J. E. W. Linwell, Linwell & Mathison, Realtors, Grand
Forks, N.D. Lawrence 0. Larson, who lists himself
as a common laborer", is 68 years old and was born
in this County, the son of Norwegian immigrants. He
is a single man and a deaf mute. He had his 1944
Federal Income Tax Return prepared in our office a
few days ago and paid his tax of $172.00 willingly.
In addition, he handed us a $10.00 bill with a
penciled note reading: "I want to make a gift to
my Government to help smash the Axis. I am glad to
do my best for my Government." I thanked him for
this gift and told him that I would send the money in,
with a special letter. The $10.00 bill is enclosed.
***
Alvin Wortham, The Devon, New York City. Your
valuable suggestion to make an agricultural nation
of Germany was thrust aside by the Department of
State as if it had no value or substance whatsoever.
I believe your suggestion will see accomplishment if
the Russian advance continues and the Russians reach
Berlin first. *** The entire ideas of the State
Department on foreign policy are religiously absurd.
The foreign policy is utterly at variance with our
domestic policy as laid down by Abraham Lincoln.
###
Herman W. Johnson, M.D., Houston, Texas. (Telegram)
Would you as fiscal agent of our Government appoint
Wallace as Chairman of the RFC with the billions in-
volved? Does his business experience warrant such
appointment? Further purchase of Government securi-
ties awaits your reply.
Regraded Unclassified
304
- 4 -
The following letter from Mrs. Claudia M. Horn,
Bethesda, Maryland, was forwarded to the Secretary
by Senator Tydings: The current exchange
rate of the French franc is approximately 128 francs
to the dollar; but American soldiers in France are
paid at the rate of 50 francs per dollar. This
means a pay cut of more than 50% The administra-
tion may have good reasons for this unfairness to
overseas troops; but the reasons are not apparent
to the men themselves nor to their relatives and
friends. You would earn the eternal gratitude of
plenty of G.I's. if you could do something to remedy
this situation."
Miss Ann A. Ammerman, Box 56, Kenvil, New Jersey.
We are studying about New Jersey in school. I write
to you to see if you could send me some information
about the music of New Jersey. Last year for
graguation play my sister Jane wrote to you for
some pieces of sheet music so I thought you could
send me so song of New Jersey. I would like it very
much if you would send me so information and music
on New Jersey or music written by and composed by
someone in any part of New Jersey. It would help
me very much in my work at school on the study of
New Jersey.
Regraded Unclassified
305
- 5 -
Favorable Comments on Bonds
William W. Maynor, Slc, USNR, c/o Fleet Post Office,
New York City. I am stationed in French Morocco and
as a citizen of the United States, and having my
country's interest at heart, I wish to convey a
thought to you which I think might prove beneficial
to our great cause. It has come to my attention,
while conversing with people who reside in French
Morocco and also people of a transient status, that
they are particularly interested in converting a
portion of their wealth or monies into some form of
American bonds or securities. # # # My suggestion, be-
cause of the tremendous demand of these peoples to
back our cause and show faith in our Government, is
that these people should be allowed, under some form
of War Bond, to invest their surpluses in our Govern-
ment securities. It might be necessary to in some
manner limit the redemption period, say five years
from date of issue, without interest, or some other
plan along these lines which I know that you will have
cognizance of, and exercise the best of judgment.
I am addressing this letter to you directly instead
of going through the proper Naval channels, because
I believe this to be a matter concerning the individual
citizen more than the sailor, which I am.
Martin Travieso, Chief Justice, Supreme Court of
Puerto Rico, San Juan, P.R. Your very kind letter
of the ninth instant received this morning, has given
me great pleasure and made me feel very proud. You
certainly deserve, Sir, congratulations for the great
successes which are due more than anything else to
your able and splendid leadership. Whatever success
I may have had as Insular Chairman was due to the
cooperation of the fine young man who represents you
in this island -- Mr. Raphael H. O'Malley -- whose
unflagging enthusiasm and loyalty made our success
possible. ***
Regraded Unclassified
306
- 6 -
Unfavorable Comments on Bonds
Mrs. Alexina Pauzi, Holyoke, Massachusetts. I'm the
holder of five War Bonds, which I want to cash in.
Last Wednesday the radio station WSPR of Springfield,
Massachusetts, broadcasted a program which was an
insult to me. My name is Mrs. Pauzi and I'm a widow,
and their program was about the widow Mrs. Pauzi who
wanted to get married. Now the name Pauzi is a rare
name -- there's only two families in Holyoke and three
in Springfield, so I cannot help but think that their
program was meant to reflect on me. Now please send
me the necessary blanks to cash in the following bonds --
$2,100 in all. After the program was over I telephoned
the radio station and told them how crazy and insult-
ing their program was. The girl who answered the phone
very boldly said there was nothing they could do about
it. *** I'm quite sure they said the program was
sponsored by the War Department to promote the sale of
bonds.
Mrs. M. G. Thompson, Beechwood Hill Farm, Castile,
New York. It is shocking and distressing to us who
are continually asked to buy War Bonds to hear of an
Army plane being used to transport a dog, instead of
our soldiers. Certainly, Mr. Elliott Roosevelt's
war effort is no shining example for our men. I have
lost two near relatives in this war, with another who
has been overseas almost three years, but the Roosevelt
dog is given an Army plane from England to California!
My War Bonds are for sale and I hope I'll never hear
the plea to buy more for the War effort!
G. W. Higinbotham, President, State Bank of Victor,
Victor, New York. We are now told by Lowell Thomas,
and other news commentators, that a Roosevelt dog out-
ranks, in cargo space, a soldier with dying relatives.
What a hell of a travesty? Is this what our boys are
dying for? To save the Roosevelt dynasty? Down to
Regraded Unclassified
337
- 7 -
the dogs? Is this what we bankers are selling bonds
for? To save time for a dog at the expense of a
soldier who wants to get home quickly?
The following letter from Douglas Featherstone, Mays &
Featherstone, Law Offices, Greenwood, South Carolina,
was forwarded to the Secretary by Congressman Butler B.
Hare: "In several instances I have encountered a
great deal of unnecessary red tape in transferring
or changing the beneficiary of some of our War Bonds
which have been issued in recent years. It seems to
me that this unnecessary red tape over a period of
years will do an increasing amount of harm by way of
making people dissatisfied with their investments in
these bonds and will prevent them from buying in the
future. * The most unnecessary and flagrant
instance of this red tape is in connection with War
Savings Bonds which are issued in the name of the pur-
chaser and payable on death to some other member of
the purchaser's family. For example, recently a
client of our office asked us to assist her in chang-
ing some Series E War Savings Bonds. # # Mr. Joshua M.
Craig, a son of Mrs. Mollie H. Craig, died on August 12,
1944. Mrs. Craig wished to change these bonds to make
them payable on her death to some of her other children.
I found that it would be necessary for The County Bank
to order some special forms which it would be necessary
for Mrs. Craig to fill out to request this change.
#
Mrs. Craig had paid for these bonds with her own
money and could have cashed the bonds at the Bank with-
out the signature, consent or approval of Mr. Joshua M.
Craig, both before and after his death. # # However,
in order to have a change made so as to show another
beneficiary in the event of death of the purchaser,
it was necessary to fill out a rather technical form
(PD1787) requesting a re-issue of the bonds. It was
also necessary to furnish evidence of the death of
Joshua M. Craig. It was not specified as to what
evidence would be acceptable. Therefore, we sent in
Regraded Unclassified
CTB
- 8 -
with these forms affidavits from the undertaker who
had buried Mr. Joshua M. Craig. All of these papers
with the bonds were sent to the Federal Reserve Bank
of Richmond. Thereupon we were advised by the Federal
Reserve Bank that before proceeding with the re-issue,
it would be necessary for them to receive a certified
copy under seal of the official certificate of death
of Joshua M. Craig from the South Carolina Bureau of
Vital Statistics. We thereupon secured such certi-
ficate from the Bureau of Vital Statistics of the
State of South Carolina and forwarded it to the
Federal Reserve Bank, pointing out that the certifi-
cate set out the name of the deceased's mother, who
is and was the owner of the bonds in question.
On December 29, 1944, we again wrote the Federal
Reserve Bank enclosing affidavit of the Cashier of
The County Bank that Joshua M. Craig and Josh M. Craig
were one and the same person. We have heard nothing
further. # # If Mrs. Mollie H. Craig could have
cashed these bonds on her own signature, it seems
entirely unnecessary to require all of this red tape
to change the name of the secondary beneficiary to
some one else after the death of the original secon-
dary beneficiary. # I have also found that there
seems to be a great deal of unnecessary red tape in
connection with bonds after the death of the purchaser.
# For instance, if John Doe buys a bond and has
it issued to him and has it 'payable on death to
Mrs. John Doe', and then Mrs. John Doe wishes to
either cash these bonds or have them re-issued in her
own name, it requires so much red tape that it really
taxes the capacity of a plain country lawyer or
banker. # Recently, I had a matter where the
secondary beneficiary, who was also the Executor of
the deceased bondholder's estate, was an invalid.
I found that she could not have her signature veri-
fied either before the Clerk of Court, & magistrate
or a Notary Public, but could only have the signature
verified before an authorized bank official. Although
either a magistrate, Clerk of Court and 8. Notary
Public would have been available, the matter had to
be delayed until the good lady could get up and come
to a bank where there was an authorized official to
verify her signature. I know you have your hands full
of other business, but it seems to me that this is a
matter where the elimination of some red tape might
Regraded Unclassified
279
- 9 -
be very helpful in connection with future Bond Drives,
and by way of keeping the purchasers of such bonds
satisfied with their investments.
If
Carol L. Cook, Brooklyn, New York. I have lately
learned that a request was made to you to have the
Treasury's policy allowing wartime advertisements to
flourish at the Government's expense, be halted. The
public is asked not to buy, to save us from inflation.
Also it would save the waste of critically needed paper.
Yet the Treasury permits these colossal profits to make
advertising deductions as an "ordinary cost of doing
business". It is both contradictory and wasteful. It
seems to me the Treasury officials should show a greater
sense of justice and courage to consider the public's
interest, instead of smiling at the advertisers while
accepting War Bond advertising which ineffectively seeks
to offset the damage that has been done by daily extrava-
gance of "buy now" ads. We hope since this is repeatedly
being called to your attention you will take some notice
and act promptly. You wish us to heed your plea to
buy bonds, then reciprocate -- save wasteful spending
on advertising and save the taxpayers' money for some-
thing more essential.
F. D. Patterson, Chief Medical Adviser, The Pennsylvania
Railroad, Philadelphia, Pennsylvania. I am very much
concerned as to whether or not the Government intends
to repudiate the War Bonds, for I have distinct recol-
lections of how much upset my wife was when they can-
celled the Food Stamps, which they said would be good
indefinitely.
Harold W. Ranes, Pastor, The North Baptist Church,
Indianapolis, Indiana. If you have any influence with
the President, that you can honestly use without
jeopardizing your own, in God's name use it. I say
Regraded Unclassified
- 10 -
210
this reverently. How can we buy the Nation's bonds
if Henry A. Wallace is to spend them? If he killed
our pigs, he'll fleece the soil of its natural
resources and our pockets of our financial and economic
reserves. Is our Nation of no consequence to our
National Fathers?
Mary Carroll, Corpus Christi, Texas. I held $3,150
of Home Owners' Loan Corporation Bonds of the issue
due in 1952, held for safekeeping by The State National
Bank, Corpus Christi, Texas. Last week the clerk
sent in for collection the interest coupons due on
the bonds in November, 1944. Yesterday she advised
me that this issue was called on May 1, 1944. She
also advised me that I had not received notice of the
Government's decision to call in the bonds in advance
because the Bank had not been advised of this action,
and hence had not been in a position to advise its
customers. By withdrawing these bonds from circula-
tion in this way, your office has caused me to lose
$47.50. I know that this amount is an infinitesimal
sum to you, but to me, a white-collar worker, a teacher,
now retired, it is a neat sum. I am protesting
to you for the reason that the method employed by the
Government in this call of bonds does not seem to be a
fair and equitable method of doing business with its
customers. I was told by the clerk that the Government
had pursued this same policy in other calls of this
year. #
Mrs. A. H. Bryant, McAllen, Texas. I am writing you
in behalf of two of my sons. One, Sgt. Edward L.
Bryant, 18201146, is in China with the 14th Air Force
and he has not received any pay for more than 9 months,
and I would like to know what the trouble is. Surely
that is not much of a morale-builder where he never
has any money. Then his bonds have stopped coming.
The last one was for August, 1944, and he has been
getting one every month since December, 1942, before
that. He has been overseas since October, 1943. The
other boy's bonds have not all come either, as he did
not get any during 1942 and only one in 1943.
Regraded Unclassified
- 11 -
311
Unfavorable Comments on Taxation
John J. Barry, Bronx, New York. Attached are copies
of letters to the New York Office of the Collector
of Internal Revenue, inquiring about my 1943 income
tax. Not one of them has been acknowledged.
This silence raises the question, what must one do
to get action? It is far from pleasurable for me
to have to write you on this matter, but you seem
to be the court of last resort. Comparisons, they
say, are odious, but your Department sets a deadline
for the payment of our taxes, and the failure to do
so within the time limit, subjects us to penalties.
Perhaps that is why we are the soul of promptness,
and perhaps penalties against departmental personnel
for failure to observe and practice ordinary business
ethics would correct 8. condition for which there does
not
seem
to
be
an
excuse.
*
I have called there
twice and gained nothing but experience. In the
vernacular, I got the "brush off". This time I shall
await with confidence an acknowledgment that will con-
tain a satisfactory explanation, or a promise of
action that will be promptly fulfilled.
Fred Merlin, New York City. I have a claim of an
insignificant sum of $18.44 due me from the tax refund.
For over 7 months I have been trying to get said refund.
I know there must be some sincere and square people in
your Department. In the New York Office they must be
few and far between. I have been given so many run-
arounds and surly brush-offs that it is unbelievable.
I will not trouble you with concrete illustrations --
suffice to say I have been deeply hurt. There is real
need of censuring of the local office. Not because
I am merely a Bowery derelict but there must have been
numerous respectable citizens who were subjected to
the same fate.
Regraded Unclassified
312
THE SECRETARY OF THE TREASURY
WASHINGTON
JAN 26 1945
TREASURY DEPARTMENT ORDER NO. 58
Effective from and after this date the
Division of Monetary Research and Foreign Funds
Control will continue under the supervision of
Mr. Harry D. White, Assistant Secretary of the
Treasury.
Treasury Department Order No. 52, dated
April 15, 1944, is superseded, and Order No. 56,
dated December 1, 1944, is modified by this Order.
Secretary of the Treasury
FOR VICTORY
BUY
UNITED
STATES
WAR
BONDS
AND
STAMPS
Regraded Unclassified
313 -
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan.26,1945
TO
Secretary Morgenthau
FROM
Mr. White
Subject:
Treasury Men Scheduled to Go Abroad.
The following list contains the latest information we have
in respect to probable departures.
Name
Post
Departure Date
Dillon Glendinning
Cairo
January 26
Walter Ostrow
Bern
February 27
William H. Taylor
Special Mission
Probably within
(London, Paris,
a week
Brussels, etc.)
Orvis Schmidt
Bern
Probably within
a week
Henry Tasca
Rome
Mid-February
In addition to the above, Colonel Bernstein will probably re-
quest that Mr. Allan Fisher and Mr. Andrew Kamarck of Monetary
Research and Mr. Hynning of the Legal Division shall be assigned
to him for work on German materials in London. It is anticipated
that these men will be moving sometime within the next month. Mr.
James Saxon is expected to return to Paris as soon as he recovers
from his present illness.
In addition, we have been informed by the British Treasury
Representatives here that Mr. Wade of the British Treasury is going
to Italy in early February to make a study of the financial situa-
tion there. The British have requested that Mr. Harold Glasser
should go to Italy at the same time in order to similarly review
the situation from the American side. No decision has been taken
in respect to this request at the present time.
Regraded Unclassified
314
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Pehle
DATEJan. 26,
1945
TO Secretary Morgenthau (through Mr. Gaston)
FROM J. W. Pehle
Attached is a proposed reply to Reverend Johnston.
As the reply indicates, the previous letter which
Mr. Gaston prepared on the basis of information received
from me was not accurate. I regret that you were placed
in the position of having made an inaccurate statement
to Mr. Hannegan.
Please read JUA
Attachment
January 27, 1945
Dear Mr. Hannegan:
Reference is made to Secretary
Morgenthau's letter to you of January 12,
1945, concerning Dale Johnson, a Procurement
Division employee at St. Louis, concerning
whom Father Johnston of St. Patrick's Church
wrote to you.
There is transmitted herewith for
your information a copy of a. letter dated
January 23, 1945 received from Father Johnston,
together with the reply which I have sent to
him today.
Needless to say I regret that the
previous information furnished to Father
Johnston was inaccurate.
Very truly yours,
(Signed) J.W. Pehle
J. W. Pehle
Assistant to the Secretary
Mr. Robert E. Hannegan
Chairman, Democratic National Committee
Mayflower Hotel
Washington, D. C.
JWP:1hh 1-27-45
Regraded Unclassified
January 27. 1945
My dear Father Johnston:
Your letter of January 23, 1945, addressed to
Secretary Morgenthau, with respect to Mr. Dale Johnson,
an employee of the Procurement Division Office in St.
Louis, Missouri, has been referred to me.
In Secretary Norgenthau's letter to Mr. Hannegan,
it was stated that Mr. Stephens, the Regional Director,
was considering promoting Mr. Johnson and placing him
in charge of the St. Louis District Office.
This statement was made by the Secretary on the
basis of information obtained from me and, I regret to
say, was not accurate. The real situation is as follows.
The promotion for which Mr. Dale Johnson is being con-
sidered is to District Chief of Operations in St. Louis,
with an increase in salary from $3200 to $3800 per year.
Such a promotion would involve B. rather substantial
increase in responsibility for Mr. Johnson but he would,
of course, be under the supervision of our District
Manager in St. Louis.
I might say that I am also advised, I trust accurately,
that Mr. Johnson has indicated that he is more than de-
lighted with his pending promotion and that his relations
with our District Manager, Mr. Swink, are of the best.
Needless to say I as very sorry that the previous
statement furnished you with respect to this matter was
not accurate and I appreciate your calling the matter
to our attention.
Very truly yours,
(Signed) J. Pable
J. W. Pehle
Assistant to the Secretary
The Reverend James P. Johnston
1207 Morth Sixth Street
St. Louis, Missouri
JWP:1hh 1-27-45
Regraded Unclassified
317
January 26, 1945
My dear Father Johnston:
This is in reply to your letter of
January 23, 1945, with respect to Mr. Dale
Johnson, an employee of the Procurement Division
Office in St. Louis, Missouri.
In my previous letter to Mr. Hannegan
I indicated that Mr. Stephens, the Regional
Director, was considering promoting Mr. Johnson
and placing him in charge of the St. Louis
District Office.
As you indicate in your letter, this
statement unfortunately was not accurate. The
real situation is as follows. The promotion
for which Mr. Dale Johnson is being considered
is to District Chief of Operations in St. Louis,
with an increase in salary from $3200 to $3800
per year. Such a promotion would involve a
rather substantial increase in responsibility
for Mr. Johnson but he would, of course, be
under the supervision of our District Manager
in St. Louis.
I might say that I an also advised that
Mr. Johnson has indicated that he is more than
delighted with his pending promotion and that
his relations with our District Manager, Mr.
Swink, are of the best.
Regraded Unclassified
- 2 -
I am sorry that the previous
statement furnished you with respect to this
matter was not accurate and I appreciate your
calling the matter to my attention.
Very truly yours,
The Reverend
Rewx James P. Johnston
1207 North Sixth Street
St. Louis, Missouri
Recorittin Regulature 8am your Pike
wwp JWPeble:1hh 1-26+45
Regraded Unclassified
319
FATHER DEMPSEY'S HOTEL FOR WORKING MEN
SAINT PATRICK'S CHURCH
1481 HOBAN STREET
BIXTH AND BIDDLE STREETS
FATHER DEMPSEY'S HOTEL FOR WORKING WOMEN
REV. JAMES P. JOHNSTON
1417 HOGAN STREET
PASTOR AND SUCCESSOR
ER DEMPSEY'S DAY NURSERY
REV. CHAPLES W. HOFER
REV. THOMAS 6.BUTLER. Asst. PASTOR
TIME HOLY MASS
1308 NORTH BIRTH STREET
FATHER DEMPSEY'S RUMMAGE DEPARTMENT
1207 NORTH SIXTH STREET
SUNDAYS 7.8. 9:30 AND If
⑉ CASH AVENUE
ST. LOUIS, MO.
FATHER DEMPSEY'S CONVALESCENT HOME
January 23 1945
1417 HOGAN STREET
"PERSONAL"
Puble
Jy
Mr.
R Morgenthau
Secretary of the Treasury
Washington - D.C.
Dear Mr. Morgenthau:
Our mutuel friend Bob Hannegan sent me
your nice letter regarding Mr. Dale Johnson, Procurement
Division Employee here. I only wish it were true that Mr.
Stephens did intend promoting him and placing him in charge
of the St. Louis office and that my fears were needless. How-
ever Mr. Stephens has placed a Mr. Schwenk, or some similar
name, and Mr. Johnson finds himself instead of being left in
his original position taking orders from the new appointee
of your Mr. Stephens. I only mention this for your infor-
mation, for I realize a man as busy as you are don't always
get the true picture when you're a long way off from the
scene of action. Certainly, Mr. Morgenthau, its swell of
you to even take an interest in my little request, and I'm
deeply grateful to you if you could leave Dale Johnson in
there to pitch as he understands the game, and the way its
played in Bob Hannegan's home town.
Gratefully again,
0
"HELP FATHER jim CARRY ON FOR FATHER TIM''
Unclassifil
320
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Friday, January 26, 1945.
No. 44-89
Secretary Morgenthau today issued the following statement:
I have studied Mr. Wallace's statement before the
Senate Committee on Commerce.
I believe he has done the country a genuine
service in offering a concrete program for achieving
the President's goal of 60,000,000 jobs after the war.
Without attempting at this time to weigh the merits
of each of his proposals, we can all thank Mr. Wallace
for the courage he has displayed in coming forward
with specific suggestions. Only through a thorough
study and discussion of these proposals and others
that will be stimulated by them will this country be
prepared to meet with intelligence and purpose the
economic problems we shall face after the war.
Intelligent planning for problems we know will arise
after the war spells the difference between an orderly
transition period and a logjam of poorly considered meas-
ures conceived in the throes of emergency and crisis.
I think too that Mr. Wallace is correct in
stating that the real issue involved is not his lack
of experience in the financial field. As Secretary
of the Treasury during most of the period Mr. Wallace
was in charge of the Commodity Credit Corporation,
the Farm Security Administration and the Rural
Electrification Administration, I can say that I
know that Mr. Wallace's record in making loans in
excess of $6,000,000,000 is beyond reproach. He is
in the truest American tradition--a Yankee business
man with the horse sense to recognize that we are
living in a world of change.
I know that Henry Wallace made a genuine con-
tribution to good government and free enterprise as
Secretary of Agriculture. I believe he can make an
even greater contribution as Secretary of Commerce.
-o0o-
Regraded Unclassified
1-25-45321
ADMINISTRATION OF CERTAIN LENDING AGENCIES
OF THE FEDERAL GOVERNMENT
HEARINGS
BEFORE THE
COMMITTEE ON COMMERCE
UNITED STATES SENATE
SEVENTY-NINTH CONGRESS
FIRST SESSION
ON
S. 375
A BILL TO PROVIDE FOR THE EFFECTIVE ADMINIS-
TRATION OF CERTAIN LENDING AGENCIES
OF THE FEDERAL GOVERNMENT
JANUARY 24 AND 25, 1945
Printed for the use of the Committee on Commerce
UNITED STATES
GOVERNMENT PRINTING OFFICE
68424
WASHINGTON : 1945
70
ЯТЛИЛИ
COMMITTEE ON COMMERCE
JOSIAH W. BAILEY, North Carolina, Chairman
JOHN H. OVERTON, Louisiana
HIRAM W. JOHNSON, California
THEODORE
ARTHUR H. VANDENBERG, Michigan
CONTENTS
GEORGE L.
OWEN BREWSTER, Maine
CLAUDE PEPPER, Florida
HAROLD H. BURTON, Ohio
JAMES M. MEAD, New York
ALEXANDER WILEY, Wisconsin
EDWARD V. ROBERTSON, Wyoming
Statement of-
Page
W. LEE O'DANIEL, Texas
PAT McCARRAN, Nevada
GUY CORDON, Oregon
George, Hon. Walter F., United States Senator from the State of
ALBERT B. CHANDLER, Kentucky
C. WAYLAND BROOKS, Illinois
Georgia
2
Jones, Hon. Jesse H., Secretary of Commerce
23.
JOHN L. McCLELLAN, Arkansas
Wallace, Hon. Henry A., former Secretary of Agriculture and former
WARREN G. MAGNUSON, Washington
Vice President of the United States
71
A. HAND JAMES, Clerk
III
II
ADMINISTRATION OF CERTAIN LENDING AGENCIES
OF THE FEDERAL GOVERNMENT
WEDNESDAY, JANUARY 24, 1945
UNITED STATES SENATE,
COMMITTEE ON COMMERCE,
Washington, D. C.
The committee met, pursuant to call, at 2:30 p. m., in room 318,
Senate Office Building, Senator Josiah W. Bailey (chairman) pre-
siding.
Present: Senators Bailey (chairman), Overton, Bilbo, Radcliffe,
Pepper, O'Daniel, Chandler, McClellan, Vandenberg, Brewster, Bur-
ton, Robertson, Wiley, Cordon, and Brooks.
The CHAIRMAN. The committee will come to order.
We have for consideration Senate bill 375, which was introduced
by Senator George.
(S. 375 is as follows:)
[8. 375, 79th Cong., 1st sess.]
A BILL To provide for the effective administration of certain lending agencies of the
Federal Government
Be if enacted by the Senate and House of Representatives of the United
States of America in Congress assembled, That the Federal Loan Agency created
by. Reorganization Plan Numbered I under the Reorganization Act of 1989 is
hereby reestablished as an Independent agency in the executive branch of the
Government, with a Federal Loan Administrator at the head thereof. The
Federal Loan Administrator shall be appointed by the President, by and with
the advice and consent of the Senate, and shall receive a salary at the rate
of $12,000 per annum.
SEC. 2. The Federal Loan Administrator shall appoint an Assistant Federal
Loan Administrator, who shall receive a salary at the rate of $9,000 per annum.
The Assistant Administrator shall net as Administrator during the absence or
disability of the Administrator, or In the event of a vacaney In that office, and
shall perform such other dutles as the Administrator shall direct.
SEC, 3. All functions, powers, and dutles transferred to the Department of
Commerce under Executive Order Numbered 9071, dated February 24, 1942, and
all functions, powers, and dutles of the Department of Commerce or the Secre-
tary of Commerce with respect to all other corporations created or organized
by the Reconstruction Finance Corporation under section 5d of the Recon-
struction Finance Corporation Act, as amended, or any other subsidiaries of
the Reconstruction Finance Corporation, together with the respective personnel,
records, and property (Including office equipment), of the agencies to which
such functions, powers, and duties relate, are hereby transferred to the Federal
Loan Agency.
SEC. 4. The Administrator shall supervise the administration, and shall be
responsible for the coordination of the functions and activities, of the agencies
transferred under the provisions of this Act to the Federal Loan Agency. The
Administrator may appoint such officers and employees and make such expendi-
tures as may be necessary to carry out the provisions of this Act.
SEC. 5. So much of the unexpended balances of the appropriations, alloca-
tions, or other funds available or to be made available for the use of the De-
1
2
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
3
partment of Commerce In the exercise of any function transferred by this Act,
as the Director of the Bureau of the Budget with the approval of the Presi-
the Federal Loan Agency and enthusted to the Administrator of the
dent shall determine, shall be transferred to the Federal Loan Agency for use
Federal Loan Agency for administration.
in connection with the exercise of the functions 80 transferred. In determin-
Under the First War Powers Act of 1941 the President is given
Ing the amount to be transferred the Director of the Bureau of the Budget
may Include an amount to provide for the liquidation of obligations Incurred
the express authority to make such redistribution of functions among
against such appropriations, allocations, or other funds prior to the transfer.
executive agencies as he may deem necessary. I will not read that
SEC. 6. Nothing In this Act shall be construed to transfer any functions from
act, but that is the authority under which the President acted in
the National Housing Agency or from any other agency or establishment other
issuing Executive Order 9070 on February 24, 1942, transferring cer-
than the Department of Commerce.
tain functions from the Federal Loan Administrator to the National
The CHAIRMAN. Senator George, you may proceed with an explana-
Housing Agency, and Executive Order No. 9071 of February 24, 1942
tion of the bill and make such comments as you deem proper.
transferring certain functions of the Federal Loan Agency to the
Department of Commerce.
STATEMENT OF HON. WALTER F. GEORGE, UNITED STATES
Senator PEPPER. Excuse me. Is that April, Senator?
SENATOR FROM THE STATE OF GEORGIA
What is the date, what month?
Senator GEORGE. February 24.
Senator GEORGE. Mr. Chairman and gentlemen of the committee,
The particular part of the Executive order which is here pertinent
I introduced S. 375 in the form in which it appears before the members
is as follows [reading]:
of the committee. Later I may suggest an amendment by way of a
All functions, powers, and duties of the Federal Loan Agency and of the
substitute, which I think accomplishes all the purposes of this bill and
Federal Loan Administrator which relate to the Reconstruction Finance Cor-
makes it somewhat clearer that the purpose of the bill is not to
poration, Electric Home and Farm Authority, RFC Mortgage Company, Federal
create a new agency but is merely to revive an inactive existing agency.
National Mortgage Association, Disaster Loan Corporation, Export and Import
If I may, I will direct the committee's attention to the following,
Bank of Washington, Defense Plants Corporation, Rubber Reserve Company,
Defense Supplies Corporation, and War Insurance Corporation, together with all
which appears as a part of Reorganization Plan No. I, creating the
other functions, powers, and duties not transferred by the Executive order estab
particular office in question here. Section 402 of this Plan No. I,
lishing the National Housing Administration-
which was made effective July 1, 1939, pursuant to the Reorganization
to which reference has already been made-
Act of 1939, approved April 3, 1939, is as follows [reading]
are transferred to the Department of Commerce and shall be administered under
FEDERAL LOAN AGENCY
the direction and supervision of the Secretary of Commerce.
There shall be at the sent of the Government a Federal Loan Agency with a
Now, with reference to the duties and powers to the agencies af-
Federal Loan Administrator at the head thereof. The Federal Loan Administra-
fected-the restoration, rather, of duties and powers to agencies
tor shall be appointed by the President. by and with the advice and consent of
affected the pertinent part of the First War Powers Act provides-
the Senate, and shall receive a salary at the rate of $12,000 per annum,
(b) The Federal Loan Administrator shall appoint an Assistant Federal Loan
All laws or parts of laws conflicting with the provisions of this title are, to
Administrator who shall receive a salary at the rate of $9,000 per annum.
the extent of such conflict, suspended while this title is in force.
The Assistant Administrator shall act as Administrator during the absence
Upon the termination of this title, all executive or administrative agencies,
or disability of the Administrator, or in the event of a vacancy in that office,
governmental corporations, departments, commissions, bureaus, offices, or of-
and shall perform such other dutles as the Administrator shall direct.
ficers shall exercise the same functions, duties, and power as heretofore or as
bereafter by law may be provided, any authorization of the President under
POWERS AND DUTIES OF THE ADMINISTRATOR
this title to the contrary notwithstanding.
The Administrator shall supervise the administration and shall be responsible
The time under which the President could act under the War Powers
for the coordination of the functions and activities of the following agencies:
Act, the First War Powers Act, as we call it, of course is familiar
Reconstruction Finance Corporation, Electric Home and Farm Authority,
to all members of this committee, but for the purpose of the record,
RFC Mortgage Company, Disaster Loan Corporation, Federal National Mortgage
I will simply read the following:
Association, Federal Home Loan Bank Board, Home Owners' Loan Corporation,
Federal Savings and Loan Insurance Corporation, Federal Housing Administra-
Titles I and II of this Act shall remain in force during the continuance of the
tion, and Export and Import Bank of Washington.
present war and for 6 months after the termination of the war, or until such
It is not necessary to read further respecting the powers and duties
earlier time as the Congress, by concurrent resolution, or the President may
designate.
of the Administrator or the functions of this agency, certainly not at
this time.
So, Mr. Chairman, as I stated to the committee yesterday, the pur-
May I say, Mr. Chairman, not only did the Reorganization Act
pose of this bill is merely to revive an existing agency, without adding
under which this Reorganization Plan No. I was issued provide for
powers or changing powers of any of the loaning agencies of the
its legislative approval by the terms of the act but by special resolu-
Federal Government, and that being true, I think, by way of amend-
tion or act of Congress the approvil of this particular order was
ment in the nature of a substitute, the committee may wish to con-
hastened; that is to say, by special legislative act it was approved
sider this, which is in briefer form and in strict compliance with the
earlier than it would have become effective under the Reorganization
law as it exists.
Act itself. So that this particular agency is the direct creature of
Resolved by the Senate and House of Representatives of the United States
the Congress, as well as the various lending agencies covered under
of America in Congress assembled, That the Federal Loan Agency created by
section 402 of the President's Reorganization Plan No. I, under authority of
ADMINISTRATION OF CERTAIN LENDING AGENCIES
5
4
ADMINISTRATION OF CERTAIN LENDING AGENCIES
(b) State Insurance funds established for paying or Insuring payment
the Reorganization Act of 1939 shall continue as an independent establish-
of compensation to injured workmen and those disabled by disease contracted
ment of the Federal Government and shall continue to be administered under
in the course of their employment, or to their dependents.
the direction and supervision of the Federal Loan Administrator in the same
(c) State funds created for Insuring repayment of deposits of public
manner and to the same extent has If Executive Order No. 9071, dated February
moneys of such States or of their political subdivisions.
24, 1942, transferring the functions of the Federal Loan Agency to the Depart-
(d) Rallroads or receivers or trustees thereof to aid in financing, reorgan-
ment of Commerce, had not been Issued.
ization, consolidation, maintenance, or construction, by purchase or guar-
Section 2 merely transfers all of the powers, functions, and so forth,
antee of railroad obligations or by loans (loans and commitments outstand-
as in the original bill which I introduced, and also carries forward
Ing limited to $500,000,000 in addition to loans and commitments made prior
to January 31, 1935, and renewals thereof).
all unexpended balances of funds made available to the Secretary
(e) Partles to marketing agreements entered into by Secretary of Agri-
of Commerce by Public Law 365, Seventy-eighth Congress, for ad-
culture with processors, producers, et al., engaged In handling agricultural
ministrative expenses of supervising the loan agencies, and 80 forth,
commodities or products (sec. 8b, Agricultural Adjustment Act, approved
May 12, 1933, as amended April T, 1934, and August 24, 1935).
to the Federal Loan Agency.
(f) Persons, associations, or corporations for financing the production,
(See appendix for joint resolution in full.)
etc., and orderly marketing of flsh of American flsheries or products thereof
Senator GEORGE. As I say, I submit this suggested amendment be-
(see. 15, net approved June 19, 1934).
cause it is more concise and because it is in strict harmony with the
(g) Processors or distributors for payment of processing taxes (see. 19
(c), Agricultural Adjustment Act, approved May 12, 1944).
legal status of the Federal Loan Agency.
Now, Mr. Chairman, by way of argument in support of this bill,
II. Loans to facilitate the exportation of agricultural or other products and
their sale in foreign markets-
and at the risk of being a bit tedious, I wish to read a statement
which summarizes the powers and authority of the Reconstruction
(a) By acceptance of drafts and bills of exchange (see. 5a, Reconstruction
Finance Corporation Act, approved January 22, 1932).
Finance Corporation relating to loans and investments.
(b) By loans (see. 201 (e), Emergency Rellef and Construction Act of
Before reading, I wish to make this observation, that many of these
1932, approved July 21, 1932).
powers and authorities upon examination will be found to be sub-
III. Subscriptions for or loans upon nonassessable stock and purchase of
ject to little or scant limitation, due to the fact that the R. F. C.
capital notes or debentures of national mortgage associations, mortgage loan
was itself an emergency agency of the Government. Perhaps I am
companies, trust companies, savings and loan associations, and similar financial
the only Member of Congress now in service who was called as a
Institutions whose principal business is lending on mortgages, etc.: to assist in
member of a committee of representative people of the United States,
the reestablishment of a normal mortgage market; limited to $100,000,000 out-
standing (see. Se, Reconstruction Finance Corporation Act, as amended January
some official and many nonofficial, to consider appropriate legislative
31, 1935).
action prior to the creation of the Reconstruction Finance Corpora-
IV. Loans to and purchase of securities and obligations of business enter-
tion. Therefore, I am clearly within the facts when I say that it was
prises direct, or in cooperation with banks and other lending Institutions through
originally conceived or originally advanced as an emergency agency,
agreements to participate or by purchase of participations, or otherwise (see,
5d, Reconstruction Finance Corporation Act, as amended April 13, 1938) loans
at a time when there was, of course, a great economic upheaval in
to and purchase of the obligations of any business enterprise including, when
the country, with the resulting business disruptions, unemployment,
requested by the Federal Loan Administrator, subscription to the capital stock
and so forth. At least all those things were in the offing and very
thereof, for any purpose advantageous to the national defense. The War De-
clearly visible at that moment.
parement and the Navy Department are authorized to participate in or guarantee
any such loans (sec. 5d (2), Reconstruction Finance Corporation Act, as amended
Then, again, many of the broad powers given to the R. F. C. have
June 25, 1940, and June 11, 1942).
been given since we were over the horizon and facing the present
V. Loans upon or purchase of the assets of banks, savings banks, or trust
global war. This, I think, must be taken into consideration in view-
companies closed 1930 to 1933, Inclusive (see. 5e (a), Reconstruction Finance
ing the language, the lack of limitations, the lack of restrictions,
Corporation Act, added by net of June 16, 1934, and amended by act of January
31, 1935).
the lack of definite directives with which Congress safeguarded the
VI. Purchase of debentures or other obligations of the Federal Deposit In-
grant of these vast powers and this vast authority.
surance Corporation: outstanding limited to $250,000,000 (see. 5e (b), Recon-
Now, Mr. Chairman, if I may repeat by way of argument for the
struction Finance Corporation Act, added by net of June 16, 1934).
approval of this measure at this time, I simply recite the powers
VII. Loans and contracts:
and authority of the Reconstruction Finance Corporation with respect
A. Under section 201 (a), Emergency Rellef and Construction Act of
to loans and investments-investments particularly. It is authorized
1932, approved July 21, 1932, as amended, to finance projects self-liquidating
In character, to (power of Reconstruction Finance Corporation to approve
to make [reading]:
applications under such sec. 201 (a) terminated June 26, 1933, pursuant to
I. Loans, under section 5 of the Reconstruction Finance Corporation Act, as
sec. 301, National Industrial Recovery Act, approved June 16, 1933)
amended, to aid in financing agriculture, commerce, and Industry, to-
(a) States, municipalities, and political subdivisions of States: pub-
(a) Financial Institutions: banks; savings banks: trust companies: build-
lle agencies of States, municipalities, and political subdivisions of
ing and loan associations; Insurance companies; mortgage loan companies;
States: public corporations: boards and commissions, and public mu-
credit unions; Federal land banks; Joint-stock land banks: Federal inter-
nicipal instrumentalities of one or more States.
mediate credit banks: agricultural credit corporations (including regional
(b) Corporations formed to provide housing for familles of low
agricultural credit corporations): livestock credit corporations; banks,
income or for reconstruction of slum areas.
savings banks, and building and loan associations closed or In process of
(e) Private corporations to aid in carrying out the construction,
liquidation to aid in their reorganization or liquidation.
replacement, or Improvement of bridges, tunnels, docks, viaducts, water-
works, canals, and markets devoted to public use.
6
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
7
(d) Private limited dividend corporations to aid In financing proj-
(b) The acquisition of structures, building, or property in replacement of
ects for the protection and development of forests and other renewable
property destroyed or rendered unfit for use by catastrophe in the years
natural resources.
1985 and 1936,
(e) Ald In financing the construction of publicly owned bridges to be
used for rallroad, railway, and highway uses.
Limited to $50,000,000. (Act approved April 13, 1034, as amended July 26, 1935,
(f) Nonprofit corporations organized to finance the repuir or re-
and April 17, 1936.)
construction of buildings damaged by earthquake, fire, tornado, or
XIV. Loans and advances to the Secretary of Agriculture to acquire, handle,
cyclone In 1933; limited to an aggregate of $20,000,000-$8,000,000 In
and market cotton owned or held as collateral by other governmental depart-
the case of private property, and $12,000,000 in the case of municipal-
ments and agencies (sec. 5, Agricultural Adjustment Act, approved May 12,
Itles or political subdivisions of States or their public agencies, Includ-
1933, as amended June 19, 1934).
Ing public-school boards and districts.
XV. Loans to or for the benefit of agricultural Improvement districts-drain-
age, levee, Irrigation, etc.-to reduce and refinance outstanding Indebtedness;
B. Under section 301 of the National Industrial Recovery Act, approved
purchase, acquire, construct, complete, repair, extend, improve, or make additions
June 16, 1933, as amended June 19, 1931; further loans and contracts for
to, projects: or purchase or acquire additional drainage, levee, or irrigation
completion or proper functioning of projects or which will increase assur-
works, or property, rights, or appurtenances in connection therewith. Limited to
ance of repayment of Corporation's investments in loans or contracts made
$125,000,000 (sec. 36, Emergency Farm Mortgage Act of 1933, approved May
under section 201 (a) of the Emergency Reilef and Construction Act of
12, 1933, as amended June 22, 1936).
1932, as amended (A (a) above).
XVL Loans to managing agencies of farmers' cooperative mineral-rights pools
C. Under section 5d, Reconstruction Finance Corporation Act, as amended
for defraying the cost of organizing such pools (see. 13, net approved June 19,
April 13, 1938, to aid in financing projects authorized under Federal, State, or
1934).
municipal law-
XVII. Loans to Administrator of the Rural Electrification Administration.
Limited to $50,000,000 for fiscal year 1937 (Rural Electrification Act of 1935,
(a) States, municipalities, and political subdivisions of States.
approved May 20, 1936) : $100,000,000 for fiscal year ending June 30, 1939 (Rural
(b) Public agencies and Instrumentalities of States, municipalities, and
Electrification Act of 1936, approved May 20, 1936, as amended by sec. 401, Rural
political subdivisions of States.
Electrification Act of 1938, approved June 21, 1938; $100,000,000 to the Secretary
(c) Public corporations, boards, and commissions.
of Agriculture for loans in accordance with the Rural Electrification Act of
VIII. Loans to finance the carrying and orderly marketing of agricultural com-
1936, as amended, by Department of Agriculture Appropriation Act, 1941, ap-
modities and livestock produced in the United States (sec. 201 (d), Emergency
proved June 25, 1940; $100,000,000 by Department of Agriculture Appropriation
Relief and Construction Act of 1932, approved July 21, 1932).
Act, 1942, approved July 1, 1941; and $10,000,000 by Department of Agriculture
IX. Subscriptions for preferred stock of National or State banks or trust com-
Appropriation Act, 1943, approved July 22, 1942; and $25,000,000 by Department of
panies, loans secured by such stock as collateral, and purchases of capital notes
Agriculture Appropriation Act, 1945, approved June 28, 1944).
or debentures of State banks or trust companies (see. 304, act approved March
XVIII. Loans to receivers appointed under section 29 of the Federal Farm
9, 1933, as amended March 24, 1933).
Loan Act, as amended, or by a United States district court, to pay taxes on farm
X. Subscriptions for preferred stock and purchases of capital notes, or other
real estate owned or pledged to land banks (sec. 27, Emergency Farm Mortgage
forms of indebtedness, of Insurance companies, and loans secured by such stock
Act of 1933, approved May 12, 1933).
or notes, or other forms of Indebtedness, as collateral; limited to $75,000,000 out-
XIX. Loans to the Corporation of Foreign Security Holders, a corporation
standing (secs. 1 and 2, act approved June 10, 1933, as amended June 19, 1934, and
authorized to be created to protect, conserve, and advance the interests of
January 31, 1985).
holders of foreign securities in default. Limited to $75,000 (sec. 200, Corpora-
XI. Mining loans (sec. 14, act approved June 19, 1934, as amended January 31,
tion of Foreign Bondholders Act, 1933, approved May 27, 1933).
1935, and September 16, 1940) to corporations, individuals, and partnerships
XX. Advances to the reclamation fund, upon request of Secretary of the In-
engaged In-
terior, for the completion of projects under construction or approved and author-
Ized on May 12, 1933. Limited to $5,000,000 (sec. 37, Emergency Farm Mortgage
(a) Mining, milling, or smelting of ores.
Act of 1933, approved May 12, 1933).
(b) Development of ore bodies containing gold, silver, tin, or strategie or
XXI. Purchase of marketable securities from the Federal Emergency Adminis-
critical minerals: limited to $10,000,000, and not over $40,000 to any corpora-
tration of Public Works (now Public Works Administration, Federal Works
tion, individual, or partnership.
Agency). Amount held limited to $400,000,000 (Emergency Appropriation Act,
XII. Loans to or for the benefit of public-school districts or other public-school
fiscal year 1935, approved June 19, 1934; and Publiq Works Administration Exten-
authorities-
sion Act of approved June 29, 1937).
XXII. Purchase from United States Housing Corporation certain mortgages
(a) For payment of teachers' salaries due prior to June 1, 1934: out-
on property in Lincoln Gardens project, New Brunswick, N. J. (act approved June
standing limited to $75,000,000 (sec. 16, net approved June 19, 1984).
25, 1938).
(b) To reduce and reflnance outstanding indebtedness or obligations In-
XXIII. Purchase from Secretary of the Treasury of capital stock of Federal
curred prior to August 24, 1935; and for repairs, extensions, or Improvements
home-loan banks (sec. 2, Reconstruction Finance Corporation Act, as amended
necessary to protect such loans; limited to $10,000,000 (act approved Au-
June 25, 1940, and sec. 304, act approved March 9. 1933, as amended June 25, 1940).
gust 24, 1935).
XXIV. Loans to or subscriptions for preferred stock of Export-Import Bank of
XIII. Loans to corporations, partnerships, Individuals, municipalities, or po-
Washington: Loans or other obligations of bank outstanding at any one time shall
litical subdivisions of States or of their public agencies, including public-school
not exceed $700,000,000. Loans to or subscriptions for preferred stock of Export-
boards and public-school districts, and water, irrigation, sewer, drainage, and
Import Bank to enable bank to make loans to governments, their central banks,
flood-control districts for financing-
or other acceptable banking Institutions, and, when guaranteed by such govern-
ment, a central bank or other acceptable banking institution, to a political sub-
(a) The repair, construction, reconstruction, or rehabilitation-
division, agency, or national of such government, not to exceed $500,000,000, out-
1. Of structures or buildings, including necessary equipment, appli-
standing at any one time (sec. 5d, Reconstruction Finance Corporation Act, as
ances, fixtures, machinery and appurtenances:
amended September 26, 1940, and sec. 9, act approved January 31, 1935, as amended
2. Of water, Irrigation, gas, electric, sewer, drainage, flood control,
September 26, 1940).
communication, or transportation systems, highways and bridges;
XXV. Loans to or purchase of capital stock of any corporation-
damaged or destroyed by catastrophe In the years 1935 or 1936.
(a) For producing, acquiring, and carrying strategic and critical materials,
and
ADMINISTRATION OF CERTAIN LENDING AGENCIES
9
8
ADMINISTRATION OF CERTAIN LENDING AGENCIES
XXXIL To supply funds to War Damage Corporation (created pursuant
(b) For plant construction, expansion, and equipment, and working cap-
to section 5d of the Reconstruction Finance Corporation Act, as amended) only
Ital, to be used by the corporation in the manufacture of equipment and
on the request of the Secretary of Commerce with the approval of the President,
supplies necessary to the national defense.
not exceeding $1,000,000,000 (see. 5g, Reconstruction Finance Corporation Act,
(see. 5, Reconstruction Finance Corporation Act. as amended September 26, 1940).
as amended by sec. 2 of the act approved March 27, 1942).
XXVL Creation or organization, at any time prior to July 1, 1943, of a corpora-
XXXIII. To purchase or make loans upon the security of any article or
tion or corporations with power-
commodity the sale or distribution of which is rationed under authority of the
United States (see. 5h, Reconstruction Finance Corporation Act, as amended by
(a) To produce, acquire, carry, sell, or otherwise deal In strategic or criti-
act approved May 11, 1942).
cal materials;
(b) To purchase and lease land, purchase, lease, build, and expand plants,
Funds of Reconstruction Finance Corporation allocated and made avail-
and purchase and produce equipment, facilities, machinery, materials, and
able to other governmental agencies:
supplies for the manufacture of strategic and critical materials, arms, ammu-
I. (a) To the Secretary of Agriculture for crop loans (see. 2, Recon-
nition, and Implements of war, any other articles, equipment, facilities,
struction Finance Corporation Act: net of February 4, 1933; (b) for the
and supplies necessary to national defense, and such other articles, equip-
capitalization (by Reconstruction Finance Corporation) of the regional
ment, supplies, and materials as may be required in the manufacture or use
agricultural credit corporations (sec. 201 (e). Emergency Relief and
of any of the foregoing or otherwise necessary in connection therewith;
Construction Act of 1932, approved July 21, 1932) : and (e) to the Farm
(e) To lease, sell, or otherwise dispose of such land, plants, facilities, and
Credit Administration for revolving fund for capitalization production
machinery to others to engage in such manufacture:
credit corporations (sec. 5, Farm Credit Act of 1933, approved June 16,
(d) To engage in such manufacture itself, If the President finds It neces-
1933) $200,000,000.
sary:
II. To the Land Bank Commissioner and the Federal Farm Mortgage
(e) To produce, lease, purchase, or otherwise require railroad equipment
Corporation for loans to farmers and capitalization of Federal Farm
(Including rolling stock), and commercial aireraft, and parts, equipment,
Mortgage Corporation ($200,000,000) (section 32, Emergency Farm
facilities, and supplies necessary in connection with such railrond equipment
Mortgage Act of 1933, approved May 12, 1933, as amended: and sec. 3,
and aircraft, and to lease, sell, or otherwise dispose of the same;
Federal Farm Mortgage Corporation Act, approved January 31, 1934).
(f) To purchase, lease, build, expand, or otherwise acquire facilities for
III. To the Land Bank Commissioner for loans to Joint-stock land
the training of aviators and to operate or lease, sell or otherwise dispose of
banks ($100,000,000) (sec. 30 (a), Emergency Farm Mortgage Act of
such facilities to others to engage in such training; and
1933, approved May 12, 1933, as amended June 3, 1935).
(g) To take such other action as the President and the Federal Loan Ad-
IV. To the Federal Housing Administrator:
ministrator may deem necessary to expedite the national defense program.
Aggregate amount of funds of Reconstruction Finance Corporation out-
(a) To carry out provisions of National Housing act (not Ilmited)
standing at any one time to carry out clause (g) shall not exceed $200,000,000.
(sec. 4, National Housing Act, approved June 27, 1934).
(b) For defense housing Insurance fund (not to exceed $10,000,-
(see. 5d. Reconstruction Finance Corporation Act, as amended June 10, 1941.)
000) (sec. 602, National Housing Act, added by act approved March
XXVIL To acquire real estate, or any right or Interest therein, by purchase,
28, 1941).
lease, condemnation, or otherwise determined by the Corporation to be neces-
sary or advantageous to the carrying out of any authority vested in any corpo-
V. To the Secretary of the Treasury for capital of Federal home-
ration created pursuant to section 5d of the Reconstruction Finance Corporation
loan banks subscribed by the United States ($125,000,000) (sec. 2, Recon-
Act, ns amended. (See previous Item.) (See. 5d. Reconstruction Finance Corpo-
struction Finance Corporation Act, as amended by sec. 6 (f), Federal
ration Act, as amended by sec. 1 of net approved March 27, 1942.)
Home Loan Bank Act, approved July 22, 1032).
XXVIII. Loans to foreign governments, to their central banks, or to any person,
VI. To the Secretary of the Treasury for capital of Home Owners'
commission, association, corporation, or bank aeting for or on behalf of such
Loan Corporation subscribed by the United States ($200,000,000) (see
government, for the purpose of achieving the maximum dollar exchange value
4 (b), Home Owners' Loan Act of 1933, approved June 13, 1933).
in the United States for the securities or property of any such government, central
VII. For relief:
bank, person, commission, association, corporation, or bank (see. 5d, Reconstruc-
Emergency Relief and Construction Act of 1932, approved July
tion Finance Corporation Act, as amended June 10, 1941).
21, 1933 ($300,000,000).
XXIX. Loans to the Secretary of Agriculture for farm tenancy loans In
Federal Emergency Relief Act of 1933, approved May 12, 1933
accordance with Bankhead-Jones Farm Tenant Act approved July 22, 1937,
($500,000,000).
$50,000,000 by Department of Agriculture Appropriation Act, 1941, approved
Emergency Appropriation Act. fiscal year 1985, approved June
June 25, 1940; $50,000,000 by Department of Agriculture Appropriation Act,
19, 1934 ($500,000,000).
1942, approved July 1. 1941; $32,500,000 by Department of Agriculture Appro-
Emergency Relief Appropriation Act of 1935, approved April 8,
printion Act. 1943, approved July 22, 1942, and $30,000,000 by Department of
1935 ($500,000,000).
Agriculture Appropriation Act, 1944, approved July 12, 1943, and $15,000.000
by Department of Agriculture Appropriation Act. 1945, approved June 28, 1914.
VIII. For expenses of regional agricultural credit corporations (not
XXX. Loans to the Secretary of Agriculture for rural rehabilitation loans,
limited) (sec. 201 (3), Emergency Rellef and Construction Act of 1932,
$125,000,000 by Emergency Rellef Appropriation Act, fiscal year 1941, approved
approved July 21, 1932, and section 33 (b), Farm Credit Act of 1937,
June 26, 1940; $120,000,000 by Department of Agriculture Appropriation Act,
approved August 19, 1937).
1942, approved July 1, 1941 $97,500,000 by Department of Agriculture Appropria-
IX. To Commodity Credit Corporation for aequisition of Its non-
tion Act. 1943, approved July 22, 1942; $60.000.000 by Department of Agriculture
assessable capital stock. Limited to $97,000,000 (act approved April
Appropriation Act, 1944, approved July 12, 1943. (Increased to $67,500,000 by
10, 1936).
First Supplemental National Appropriation Act, 1944, approved December 23, 1943,
X. To Disaster Loan Corporation for acquisition of Its nonassessable
and $67,500,000 by Department of Agriculture Appropriation Act, 1945, approved
capital stock. Limited to $40,000,000 (act approved February 11, 1937,
June 28. 1944.)
as amended March 4, 1839).
XXXI. Loans or purchase of securities to cooperate with States to finance, or
Nore-The material presented above covers the powers of the Reconstruction
to aid In financing, the acquisition of right-of-way necessary or desirable for
Finance Corporation to June 30, 1944. Since that date additional powers and
road projects eligible for Federal aid under the Federal Highway Act (Federal
Highway Act of 1940, approved September 5, 1940).
Regraded Unclassified
10
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
11
authority have been granted to the Reconstruction Finance Corporation by or
mittee will approve the bill which I have introduced; or, preferably,
pursuant to the following acts of Congress:
A. Title III of the net approved June 22, 1944 (G. I. bill of rights), provides
the amendment by way of a substitute which I am offering for the
for the guarantee of loans to veterans for the purchase or construction of homes,
record today.
farms, and business property and authorizes the Administrator of Veterans'
I believe, Mr. Chairman, that that is all that I have to say.
Affairs to Issue rules and regulations and to designate such agency or agencies
The CHAIRMAN. Do the members of the committee have any ques-
as he finds equipped to determine whether the guaranty of a loan should be
approved. On December 22, 1944, the Administrator issued regulations relating
tions of Senator George?
to the guaranty of loans made for the purchase of business property and sub-
Senator GEORGE. Yesterday some member of the committee did ask
sequently, on January 5, 1945, by letter to the chairman of the board of directors
about an amendment to the bill as drawn, or to the substitute, and I
of the Reconstruction Finance Corporation, designated the Reconstruction Finance
stated that I would be glad to prepare one for the consideration of the
Corporation as an agency with authority to receive and consider veterans' appli-
committee.
cations for loans and to forward to the Veterans Administration written recom-
mendations as to the approval or disapproval of the applications.
(The proposed new section to be added to S. 375 is as follows:)
B. The Contract Settlement Act of 1944, approved July 1, 1944, authorizes
SEC. 7. No functions, powers, or duties shall be transferred from the Federal
certain contracting agencies, including the Reconstruction Finance Corporation
Loan Agency under the provisions of title I of the First War Powers Act, 1941,
and any corporation organized pursuant to the Reconstruction Finance Corpora-
or any other law, unless the Congress shall otherwise by law provide.
tlon Act, as amended, to make available interim financing, through loans and
discounts and commitments and guaranties in connection therewith, in contem-
Senator BREWSTER. Does that have to do with exempting it from
plation of or related to termination of war contracts.
the retransfer powers of the War Powers Act?
C. The Reconstruction Finance Corporation has been designated as the dis-
Senator GEORGE. Exactly.
posal agency for capital and producer's goods under regulations issued by the
Surplus War Property Administrator pursuant to Executive Order No. 9425,
Senator BREWSTER. And that amendment would be acceptable, so
dated February 19, 1944, and has continued to net as such disposal agency
far as you are concerned?
pursuant to section 35 of the Surplus Property Act of 1944, approved October 3,
Senator GEORGE. So far as I am concerned.
1914. As of December 31, 1944, property having an acquisition cost of $1,044,-
Senator BREWSTER. Have you considered the question of whether
316,000 had been declared to the Reconstruction Finance Corporation as surplus.
Included in this amount is Reconstruction Finance Corporation owned property
other loan agencies might be transferred by this same action to the
having an acquisition cost of $181,421,000. Also as of December 31, 1944, sales
Federal Loan Agency?
were made of property having ao acquisition cost of $127,724,000, the sales price
Senator GEORGE. I have, Mr. Chairman and Senator Brewster, but
of which totaled $91,268,000. leaving a balance of such surplus property to be sold
I had not thought that this committee would have jurisdiction with
having an acquisition cost of $916,592,000.
D. The Reconstruction Finance Corporation and corporations organized pur-
respect to the transfer of other agencies that were in other executive
suant to the Reconstruction Finance Corporation Act, as amended, are named
branches of the Government, of which this committee itself has no
as contracting agencies by the War Mobilization and Reconversion Act of 1944,
jurisdiction.
approved October 3, 1944, and as such are governed by the demobilization and
Senator PEPPER. I would like to ask a question, Mr. Chairman.
reconversion policies prescribed In the net and as may be prescribed by the
Director of War Mobilization and Reconversion.
The CHAIRMAN. Go ahead, Senator Pepper.
Senator PEPPER. Senator George, I have before me your bill, S. 375,
Now, Mr. Chairman, as I said before reading this summarized
which you presented to the committee on yesterday. I do not have a
statement of the powers and authority given to the R. F. C. and its
copy of the amendment to which you referred, and from which you
various subsidiaries, organized under the R. F. C. Act or otherwise,
read, nor of the amendment to which, evidently, the Senator from
1 think the vast powers and vast authority given is the strongest pos-
Maine referred in his question to you.
sible argument that anyone can make for the return, or for the hasten-
Would you be good enough to point out the difference between your
ing of the return, of these powers to an independent agency of the
resolution, if I understand it correctly, which is the proposed sub-
Government created by the Congress and responsible to the Congress.
More and more, the responsibility of Congress for the creation of
stitute for your S. 375, and S. 375?
Senator GEORGE. Practically the only difference, Senator Pepper,
these vast powers and for the grant of these vast authorities is placed
is that as S. 375 was drawn, and is now printed, the language reestab-
upon the Senate of the United States as a member of the legislative
lishes the Federal Loan Agency, as created by Reorganization Plan
branch of this Government.
No. 1. The substitute accomplishes the same result, but it more accu-
I am firmly of the opinion, myself, that as we follow through the
mobilization period to the end of the war, whenever it may come,
rately reflects, I believe-and I think in that I am correct-that the
Federal Loan Agency is an existing agency now. Indeed, under the
and as we also enter into and follow through the reconversion period,
War Powers Act, under which the Executive order was issued making
that this direct responsibility ought to be recognized by the Congress
transfers from the Federal Loan Agency to certain departments of
and ought not to be placed, or continued, in an officer in the executive
Government, provision is made for the return of these agencies to the
branch of the Government who is a part of the official family, so to
speak, of the Chief Executive of the Nation.
agency from which transferred, on the termination of the war or 6
months thereafter, or sooner, if the Congress by concurrent resolution
These powers are too vast and are too sweeping; the economic con-
should declare the war ended.
trol over this country, and the political controls, if I may be bold
Senator PEPPER. Is that in the form of a bill or in the form of a
enough to say so, simply cannot be estimated. And for both reasons,
and all reasons, and under all the circumstances, I hope that the com-
joint resolution or in the form of a concurrent resolution?
Regraded Unclassified
12
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
13
Senator GEORGE, It is in the form of a concurrent resolution; it has
Mr. Jones, who has formerly occupied the office of Secretary of Com-
the effect of a bill.
merce, and then the head of the Federal Loan Agency. Does the
Senator PEPPER. But in the form of a concurrent resolution, you say?
Senator happen to know whether he has occupied both of those offices
Senator GEORGE. Yes,
at the same time, or has, in the Senator's theory, the Federal Loan
Senator PEPPER. Well, do you mean by that that it would become
Agency head been submerged into the office of Secretary of Commerce!
effective, have the force of law or the full legal force intended for it,
Senator GEORGE. All I know on that point is that the Congress it-
when it was passed by both Houses of Congress, by a majority of both,
self, by a joint resolution, authorized Jesse H. Jones, Federal Loan
without requiring the signature of the President, or without being
Administrator, to be appointed to and perform the duties of the office
allowed to become law without the President's signature?
of Secretary of Commerce, and that that joint resolution was ap-
Senator GEORGE. I think a concurrent resolution is approved by the
proved September 13, 1944. Whether Mr. Jones-
President just as an act of Congress is.
Senator BURTON. Wasn't that 1940, Senator?
Senator PEPPER. Maybe I err. I had the impression that a joint
Senator GEORGE. I should have said 1940-September 13, 1940.
resolution required the signature of the President to become effective
Whether Mr. Jones has resigned from the Federal Loan Agency as
and had the character of a bill and was in all respects like a bill; but
Federal Loan Administrator, I don't know. If so, there would be a
that a concurrent resolution required only a majority vote of the two
vacancy, and under the President's order that vacancy would be filled
Houses and did not require the signature of the President to become
by appointment of the President by and with the advice of the Senate.
effective.
Senator PEPPER. But if the Senator's bill were enacted and became
Senator GEORGE. Very well, whatever the legal effect, that is what
law, and Mr. Jones has not resigned from his office of Federal Loan
is intended.
Administrator, then he would still-remain the Federal Loan Admin-
Senator PEPPER. So this is a concurrent resolution instead of a bill?
istrator?
Senator GEORGE. It is an amendment to this bill by way of substitute.
Senator GEORGE. I think he would be at this time, if he has not re-
Senator PEPPER. But the amendment, if effectuated, will make it a
signed or retired from that office.
concurrent resolution?
Senator PEPPER. Now, Senator, recalling the clear tracing of the
Senator GEORGE. No, sir; I find it is a joint resolution. So you are
history of the present situation, if I recall correctly the present War
talking to no purpose.
Powers Act allowed the President, as you say, to distribute executive
Senator PEPPER. Well, at least I have elicited a clear statement from
functions among the executive agencies according to his judgment?
the able Senator 80 that we know the character of this bill.
Senator GEORGE. Yes; that is correct. There is no question about
Senator GEORGE. I read it into the record, and it is in form a joint
that.
resolution. I believe I inadvertently stated & moment ago that a
Senator PEPPER. If this bill were to be enacted, it would have the
concurrent resolution is approved by the President. As the Senator
effect of denying the Executive the power to assign to the executive
from Florida has indicated, concurrent resolutions do not go to the
branches of the Government the functions of the Federal Loan Agency,
President, but joint resolutions do. In any event, I presume that the
either now or in the future, by the amendment to which the Senator
substitute which I have offered, if approved by the committee, would
from Maine referred?
be made an amendment in the nature of a substitute to S. 375, so that
Senator GEORGE. Yes; it would be a congressional expression that
we need not be disturbed about the particular form in which it stands
this vast power and authority ought to be placed in an agency directly
now, except that I should emphasize that, of course, it is designed
accountable to and created by the Congress itself, and not hidden away
as a legislative enactment.
in an executive office where it virtually is immune from any reason-
Senator PEPPER. The legal effect of the joint resolution, if enacted,
able examination, even by Congress itself.
would be simply to divide, or to sever, upon the Senator's theory that
Senator PEPPER. Well, does the Senator happen to know the legis-
the Federal Loan Agency is an existing agency, that agency from the
lative history or the congressional past of whether or not the present
Secretaryship of Commerce!
encumbent of the Federal Loan Agency has submitted or has agreed
Senator GEORGE. Simply to return those loan agencies vested in the
to or made possible the auditing of his agency by the auditing agency
Department of Commerce to the Federal Loan Agency, which I con-
of the Government which is responsible to Congress, for example, the
ceive to be still an existing agency.
Comptroller General's office?
Senator PEPPER. I was just trying to clarify the legal significance of
Senator GEORGE. I do not recall.
the Senator's bill.
Senator PEIPER. I had gained the impression, from the Senator's
Senator GEORGE. That is the full significance of it, I may say. to the
able presentation yesterday to the committee, that it was his opinion
Senator, with the exception of those technical provisions which simply
that this bill should be enacted because these vast powers, which
carry functions. back unexpended balances appropriated to administer those
the Senator has pointed out very vividly, are too much for one man
to possess, especially to hold at the same time the duties of Secretary
Senator PEPPER. I was wondering what, in the Senator's theory-
of Commerce. Now it had seemed to me that probably it was a case
and there are no abler lawyers around here than the able Senator from
of the tail wagging the dog, and that the experience of the past had
Georgia-upon his theory what, for example, would be the status of
not, perhaps, indicated that one man was incapable of performing
68424-45-2
Regraded Unclassified
14
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
15
the duties of both positions-of the Federal Loan Administrator's
tary of Commerce, and due to the obvious desire on the part of some,
office and the office of the Secretary of Commerce. In other words,
although the desire may not be shared by the Senator from Georgia,
if you turn it around and ask the question whether an able man who
that the nomination not be considered until this particular piece of
is qualified to be Federal Loan Administrator could also perform
legislation can be disposed of by the Congress, isn't the impression
the duties of Secretary of Commerce, would the Senator think that a
justified that the introduction of this bill is directly related to the
qualified man would find that impossible?
nomination of Henry A. Wallace, by the President, to be Secretary of
Senator GEORGE. I think it would be very difficult to find any man,
Commerce, and it wouldn't have been introduced the day it was intro-
regardless of his great ability and wide experience, who did not come
duced, or wouldn't be pressed as it is now being pressed, in time, had
up with this vast grant of authority under the R. F. C., who could
not a new nomination for the office of Secretary of Commerce come
satisfactorily administer both offices.
down to the Senate from the President!
Now, I am not critical of the past Administrator, Mr. Jones, because
Senator GEORGE. The appointment of Mr. Wallace may have been
he came into R. F. C. before this administration came into office.
an aggravating circumstance. [Laughter.] But I still believe that
He has lived through it; he has seen it put together; he has been
the bill is meritorious, and I don't think my motive or my purpose
largely instrumental in putting every piece of timber, so to speak,
has very much to do with the merits or demerits of the bill. It is either
into the building, and his capacity and his ability and his experience
a good bill or a bad bill, and I think it is definitely a good bill.
need not be compared with other able and experienced men in the
Senator PEPPER. Well, I was just wondering whether or not it might
country. But he certainly is one of the few who have had the
be accurate to say, instead of the nomination of Mr. Wallace being an
opportunity of coming up with this vast organization, having the
aggravating circumstance, it was the impelling circumstance for the
familiarity that he has, necessarily, with it, who could step into
introduction of this legislation?
the Department of Commerce and carry on this vast operation to the
Senator GEORGE. No: I wouldn't go so far, because I am very little
reasonable satisfaction, as I think, of the people.
concerned about Mr. Wallace, if appointed, being able to fill the
Senator PEPPER. Well, Senator, the peculiarity-
routine duties of the Secretary of Commerce, or Secretary of Labor,
Senator GEORGE. And, therefore, I think that there should be a
or Secretary of Agriculture, where he once served. I have no fight
separation of these functions.
on Mr. Wallace. But I would not vote for any man, I think, unless
Senator PEPPER. The peculiarity of the present situation is that
he was a man of demonstrated experience and business capacity, when
this joint resolution is proposed, of course, as legislation by the able
I look at the vast powers given to the Administrator of the Federal
Senator from Georgia.
Loan Agency, and also the not insignificant or inconsequential powers
Senator GEORGE. I beg your pardon?
of the Secretary of Commerce. I am not here appearing on the nom-
Senator PEPPER. This joint resolution is proposed by the Senator
ination of Mr. Wallace, because this committee will, of course, finally
as legislation.
report either favorably or unfavorably upon that nomination, and I
Senator GEORGE. Yes.
will have to consider it as any other Member of the Senate. But
Senator PEPPER. The impression is difficult to escape that what pre-
I think that the suggested legislation here is necessary legislation,
cipitated the introduction of this proposed legislation by the Senator
and I think that that is particularly true as we travel a bit further
from Georgia was the nomination of Mr. Henry A. Wallace by the
toward the end of this war and finally out of it, and through the re-
President to be Secretary of Commerce, and if that inference were
conversion period, with all of the commitments which this Nation
well founded, that would indicate that the Senate was holding in sus-
will be asked to make.
pense the exercise of its constitutional power and duty to advise and
I don't care to expand upon that statement, because I think all of
consent, or not, to the nomination of the Secretary of Commercé
us must know that those commitments are going to be vast, and it
in substance, the office for which the nomination was made had been
seems to me that we ought to have an agency that will function in large
limited in authority and jurisdiction.
In other words, would not the Senator admit that it would be diffi-
part to carry out any commitments that we may make, that will have
a direct responsibility to the Congress and that can be rigidly scru-
cult to escape the impression that the Senate was holding up the nomi-
tinized and examined by the Congress.
nation of the nominee, Mr. Wallace, until legislation could be enacted
Now, I should not like to discuss the confirmation, or whatever the
to change the character of the duties of the Secretary of Commerce!
Senate may finally determine to do with Mr. Wallace's nomination as
Senator GEORGE. Well, I do not know how difficult it is to escape any
Secretary of Commerce.
particular impression or any particular conclusion. In all events and
Senator PEPPER. Does the Senator from Georgia intend to press
under all circumstances, it is my belief that this bill ought to be passed,
for the enactment of this bill, or the final disposition of this bill,
and that these vast powers ought to be again segregated into an inde-
prior to the final consideration of the nomination of Mr. Wallace?
pendent agency over which the Congress itself may have very much
Senator GEORGE. Prior to and subsequent, if he is finally confirmed,
closer control and very much closer scrutiny.
and regardless of who is nominated. I want to make it clear. I am
Senator PEPPER. But, Senator, due to the fact that the legislation
not making any fight on Mr. Wallace. I certainly regard him as a
was offered in the Senate the same day, the same afternoon, that the
gentleman of integrity and character, and I am not making any fight
nomination of Mr. Henry A. Wallace came to the Senate to be Secre-
on Mr. Wallace. And regardless of who is nominated, I think I will
Regraded Unclassified
16
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
17
continue to press for consideration in the Senate, and also in the
Senator BURTON. Therefore, Mr. Chairman, I would like the privi-
House so for as a Senator is permitted to confer with Members of the
lege of reading very briefly for the record two paragraphs containing
House on legislative matters.
the sense of the discussion of that resolution which took place on the
Senator PEPPER. Thank you, Senator.
floor of the House and the Senate, thereby indicating the basis upon
Senator BURTON. Mr. Chairman.
which the House and Senate took that action.
The CHAIRMAN. All right, Senator Burton.
First I refer to the discussion, which was very brief, which took
Senator BURTON. I have one or two questions I would like to ask.
place on the floor of the House on September 9, 1940, when this resolu-
In order to make absolutely clear in our record the legislative his-
tion was unanimously passed, and I quote the following from the
tory that relates to this step, the Senator referred to the fact that
remarks of Congressman Steagall, chairman of the Committee on
Congress had taken action joining in the approval of the creation of
Banking and Currency which approved the resolution, and who was
a Federal Loan Agency; is that correct?
supporting it before the House. He said this, referring to Mr. Jones
Senator GEORGE. Yes; I did, and I said that the effective date of
[reading]:
the Federal Loan Agency had been expedited by direct congressional
action, also. That statement is not literally true. Mr. Boots of the
He has an experience of nearly 10 years In connection with the lending agencies
of the Government. I do not think It is unfair to say that, in the light of his
Legislative Counsel's office called my attention to the fact that that
experience, his judgment cannot be duplicated by any other public official. We
wasn't actually a true description. A resolution was passed fixing
do not want to lose the benefit of his services in connection with these ageneles,
the effective date of plan No. 1, creating the Federal Loan Agency,
by having him surrender these duties in order to accept the appointment to the
thus approving the plan, although the time had not then expired for
office of Secretary of Commerce.
the consideration of the plan by Congress. The effect was to expedite
The House thereupon unanimously passed the resolution.
the approval date of the plan although actually the effective date was
On September 10 it came before the Senate. There was only one
postponed a few days. My point is that there was specific congres-
Senator who made a statement as to it, and that is my colleague,
sional action on this plan No. 1 which created the Federal Loan
Senator Taft, who was serving as a member of the Committee on Bank-
Agency.
ing and Currency of the Senate, which had recently acted favorably
Senator BURTON. But in contrast to that there has been no action of
upon a similar resolution introduced in the Senate, and, if I may, I will
Congress approving the placing of the Federal Loan Agency under
read Senator Taft's remarks which, Mr. Chairman, are the only
the jurisdiction of the Secretary of Commerce. I understand that that
remarks on this matter as it came before the Senate on September 10,
was done solely by Executive order, is that not correct?
1940. He said [reading]:
Senator GEORGE. That was done solely by Executive order. On the
Mr. President, I do not wish to object to the Joint resolution, since I have
contrary the Congress had, by an unusual resolution, authorized Mr.
the highest respect for Mr. Jones and think be is one of the ablest men in the
Jones, who was the Administrator of the Federal Loan Agency, to
public service. I merely wish to call attention to the fact that Mr. Jones already
hold both the office of Administrator of the Federal Loan Agency, and
probably has more power than any other man in the Government, with the single
exception of the President. He has unlimited power to lend money to anyone,
Secretary of the Department of Commerce.
to any industry In the United States, or refuse to lend. We gave him unlimited
Senator BURTON. That is precisely the action of Congress that I
power to Invest Government money In any Government plant which manufac-
wish to emphasize.
tures any form of supplies or any other kind of material which has the remotest
Senator GEORGE. That is correct.
relation to war. I do not think. with the exception noted, any man In the
United States ever has enjoyed so much power. I have no great objection to giv-
Senator BURTON. The only action that the Congress has taken relat-
Ing Mr. Jones the additional power to net also as Secretary of Commerce, but I
ing to the placing of the Federal Loan Agency under the jurisdiction
think It is an extraordinary precedent, which is Justified only by the character
of the same man who was Secretary of Commerce, is included in the
of the man, and which I hope may not be repeated.
resolution to which the Senator referred, as having been approved on
Thereupon the Senate unanimously passed the joint resolution.
September 13, 1940?
The CHAIRMAN. Senator Radeliffe?
Senator GEORGE. That is correct.
Senator RADCLIFFE. Senator George, your statement illustrated the
Senator BURTON. And I will read it as I have it here and see if it is
wide extent of the powers of the head of the R. F. C. and also the vast
the one that the Senator has in mind. [Reading:]
authority which he exercised. Is it your opinion that either the extent
Resolved by the Senate and the House of Representatives of the United States
or the importance of those responsibilities likely to be lessened ma-
assembled, That notwithstanding any provision of law to the contrary, Jesse
terially within the near future?
H. Jones, Federal Loan Administrator, may continue in such office and be
Senator GEORGE. I do not see how that can be possible. I think they
appointed to, In the manner now provided by law, and may exercise the duties
of, the office of Secretary of Commerce, provided that the total compensation to
will continue, at least for an unforeseeable time. There may be some
be paid him as Secretary of Commerce and as Federal Loan Administrator, shall
time in the remote future when some of them will go out, but those
be that provided by law for the Secretary of Commerce.
powers are likely to be more and more exercised as we pass out of the
Is that the resolution to which you had reference!
war, through demobilization and into a definite reconversion period
Senator GEORGE. That is the resolution, which was duly passed by
at home and abroad.
both the House and the Senate, and approved by the President under
Senator RADCLIFFE. That was certainly my impression, but I wanted
date of September 13, 1940.
to know your opinion on the subject.
The CHAIRMAN. Are there further questions?
18
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
19
Senator OVERTON. Mr. Chairman.
Senator OVERTON. Was that officers or offices?
The CHAIRMAN. Senator Overton.
Senator GEORGE. Both. It seems to me that that is the intent of it.
Senator OVERTON. Senator George, in your opinion, does the office
of Federal Loan Administrator still exist, as a matter of law?
Senator OVERTON. Just one other question-
Senator GEORGE. I think it does, Senator. After appearing before
Senator GEORGE (interposing). I said that I did not know whether
Mr. Jones was still in office as Administrator of the Federal Loan
the committee yesterday I made a reexamination and I do think so,
Agency, because he may have resigned, 80 far as I know.
definitely.
Senator OVERTON. You have made the statement that the author-
Senator OVERTON. Now, then, the Congress of the United States
deemed it necessary, in order for Mr. Jones to qualify as Secretary
ity vested in the Federal Loan Administrator is a very vast authority,
not only from an economic standpoint but even from a political stand-
of Commerce, that he should be authorized to hold both offices, that is,
point, and that that authority is SO vast that you do not think it
the office of Federal Loan Administrator and the office of Secretary
wise to continue the offices of Federal Loan Administrator and Sec-
of Commerce.
retary of Commerce in one and the same individual, regardless of who
Senator GEORGE. It authorized him to hold the office of Secretary
he may be.
of Commerce notwithstanding the fact that he was the Administrator
Senator GEORGE. I think so.
of the Federal Loan Agency.
Senator OVERTON. That is correct?
Senator OVERTON. Well, that is equivalent to the same thing.
Senator GEORGE. Yes.
Senator GEORGE. Yes.
Senator OVERTON. Would you go a step further, and do you think
Senator OVERTON. Now, then, that resolution applied personally to
Mr. Jones?
that the powers vested in the office of the Federal Loan Administra-
tor are so vast that they ought not be lodged in one man, but that
Senator GEORGE. Entirely; yes, sir.
Senator OVERTON. Now, then, we have another nomination, that is,
they ought to be subdivided into several agencies and have several
men exercise those functions, rather than give this vast authority to
the nomination of someone else, and that is Mr. Wallace. In your
one individual, regardless of whom he may be?
opinion, would it be necessary for a similar resolution to be passed
Senator GEORGE. I haven't considered that, I might say, Senator
in order that Mr. Wallace might discharge the functions of both the
Federal Loan Administrator and the Secretary of Commerce?
Overton, in connection with this particular bill, because here I thought
Senator GEROGE. No; I think not, because there have been trans-
the only jurisdiction of the committee-or that it might be held to be
ferred to the Department of Commerce, and to the Secretary of Com-
the only jurisdiction of the committee-was to determine whether or
merce, now, certain powers, and I think anyone who becomes Secre-
not you would let something come into Commerce, or let something go
out of Commerce.
tary of Commerce would have the right to exercise those powers with-
Senator OVERTON. I think that is correct, but I would just like to
out more. He would not be colliding with the general principle, Fed-
eral principle, which we have enacted, that one can't hold two offices
have your views in that regard?
at the same time.
Senator GEORGE. I think his powers are very vast and I am satis-
Senator OVERTON. I think I go along with you in that conclusion,
fied that Congress failed to limit or restrict them in certain instances
but I am constrained to differ with you in another conclusion, and
at least, maybe as they should have been limited or restricted, because
that is that if this bill should be passed, and the duties of the former
of the personal confidence in Mr. Jones who had been connected
office of Federal Loan Administrator should be segregated, and that
with the R. F. C., and under whose guidance it had developed from
office revived, Mr. Jones would not continue as Federal Loan Adminis-
year to year. I do not say that that was a very sound basis for legis-
trator. He has discharged the duties of the Federal Loan Adminis-
lation, even in the first instance, but I think that is a fact, and I am
trator simply because he is the Secretary of Commerce, but the revival
simply stating it as a fact.
of the office wouldn't revive the appointment.
Sentor PEPPER. Mr. Chairman, may I ask another question
Senator GEORGE. I think it would, because the act itself provides
The CHAIRMAN. Yes, Senator Pepper.
for it.
Senator PEPPER. Senator, I recall that the duties of the Department
Senator OVERTON. Well, I would like that information so as to get
of Commerce, I believe, if I have the correct language of the statute,
this clear.
among other things are as follows:
Senator GEORGE, I think you will find that it does. If I am not
It shall be the province and duty of said Department-
mistaken, I think this is the provision which, in my judgment, makes
referring to the Department of Commerce-
clear that the enactment of S. 375 would immediately revivify, so to
to foster, promote, and develop the foreign and domestic commerce, the mining,
speak, or revive, the Agency, which already exists ready to function,
manufacturing. shipping, and fishery industries, and the transportation facilities
I suppose, when it has any functions to perform.
of the United States.
The bill I have introduced gives it those functions.
Now, looking at that as one of the principal positions in our Govern-
[Reading:]
ment, would the Senator not agree that these vast powers which are
Upon termination of this title, all executive or administrative agencies, gov-
vested in the Federal Loan Administrator are very directly related to
ernmental corporations, departments, commissions, bureaus, offices, or officers,
those objectives which are set out there for a member of the President's
shall exercise the same functions, duties, and powers as heretofore or here-
after by law may be provided, any authorization of the President under this
Cabinet?
title to the contrary notwithstanding.
Regraded Unclassified
20
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
21
Senator GEORGE. Certainly, because the vast powers vested in the
such vast possible political control or power should be placed in one
Administrator of the Federal Loan Agency are all-embracing; they
man's hands in the executive branch of the Government, or perhaps
cover everything, and they therefore must cover the direct responsi-
in any branch of the Government, because I think we must know,
bilities of the Department of Commerce.
as practical men, that if one were disposed to, if he wished to be a
Senator PEPPER. Would the Senator recognize that as some argu-
politician in this office, there is absolutely no way of measuring the
ment for the fact that the two offices are so intimately related-as no
consequences of his administration of it.
doubt the President thought when he made the Executive order-
Senator PEPPER. Just one other question. I am not sure from the
that it was more appropriate that they should be held by the same
language of the Senator's bill that he throws any great safeguards
man than that they should be held by two men?
around the exercise of this power by whoever it might be.
Senator GEORGE. No. I don't know what was in the President's
Senator GEORGE. No, Senator, I did not, and I didn't attempt to do
mind, of course, but I apprehend that he felt that Mr. Jones' long
that because I think that the Committee on Banking and Currency
experience, and his entire familiarity with the Loan Agency, would
would have jurisdiction of that kind of a bill. I do not mean to say
enable him to discharge the functions of both offices, and I imagine
that this is the last bill that I may offer on this matter if this bill goes
that the Presdent must have felt that way about it. But I do not
through, but I didn't think that the Commerce Committee would want
think that now and for the future these vast powers ought to be
to conflict with the Banking and Currency Committee in considering
vested in an executive department secretary.
limitations on the power, or exercise of power, under any one of the
Senator PEPPER. Well, the Senator will agree that of the two offices
loan agencies set up by the Congress, because that isn't within the
the Federal Loan Administrator's office has far greater power to
jurisdiction, I didn't think, of this committee.
foster, promote, and develop the foreign and domestic commerce, the
Senator PEPPER. That, if I may say 80 to the able Senator, is what
mining, manufacturing, shipping, and fishery industries, and the
leaves an aspect of peculiarity to this particular legislation at this
transportation facilities of the United States, than the office of Secre-
particular time. It has all the aspects of a piece of legislation which
tary of Commerce!
admittedly is not complete in character and which evidently was de-
Senator GEORGE. I think so, because the Secretary of Commerce
signed in haste, and was related to the encumbency of the office of
could only do those things with such funds or tools as Congress might
Secretary of Commerce by the former Vice President of the United
provide him, and the Administrator of the Federal Loan Agency
States. So that it is difficult for the citizen who reads about these
has, I undertake to say, the vastest power lodged in any single official
matters in the paper, and hears the reports about it, not to infer that
of this Government unless it be the President-and of course they are
as soon as the immediate past Vice President of the United States, who
not comparable powers.
had previously been a cabinet officer, was proposed to occupy this
Senator PEPPER. And yet, as the Senator from Louisiana has pointed
office, that immediately an attempt was made to shear him of the
out, the Senator's bill does not propose to distribute those powers
greater part of the powers which had pertained to that office, by the
among several men, or create a board, or anything like that, but it
Congress; as distinguished from the appearance of such legislation
still allows those powers to continue to be vested in one man, as vast
to the citizen if the Senate had rejected or confirmed the nominee,
as those powers are.
according to its judgment in the exercise of its constitutional power,
Senator GEORGE. Yes. You can't unscramble it all at once, and I
and then that the Senate had proceeded to the consideration of any
don't think this committee has jurisdiction over-
legislation that might affect the jurisdiction of that office in the ordi-
Senator BREWSTER (interposing). Wouldn't the suggestion of the
nary legislative course.
Senator from Florida argue, also, that the Federal Loan Admin-
Senator GEORGE. Well, I don't think that I care to argue the point
istrator might with equal propriety be the Secretary of the Treasury
at all. I merely call the Senator's attention to the fact that under the
and the Secretary of Agriculture, since there are vast powers relating
very order which consolidated or brought into the Department of
to those Departments also?
Commerce these extraordinary powers, express provision is made for
Senator GEORGE. Yes, indeed, because as I say, the powers here
their return, so that if the war ended today they would be returned
granted to the Administrator of the Federal Loan Agency cover prac-
within 6 months anyway, and might be returned much earlier if a
tically the whole of our business, financial, and economic life, and it
concurrent resolution of the two Houses declared declared the war
is remarkable, I think, that any one man, though he grew up with this
to be at an end.
Agency, acquiring one by one at different times these vast powers,
Senator O'DANIEL. Mr. Chairman, may I ask a question?
could really handle them all in the capable way that he has,
The CHAIRMAN. Go right ahead. We want to get through with
I question whether it would not be very difficult to find any man,
Senator George, though, so that we may proceed with Mr. Jones.
regardless of his general business ability or capacity or experience,
Senator O'DANIEL Senator George, if and when the Congress should
who could step into the shoes of Mr. Jones and do both of these jobs,
adopt your joint resolution, restoring the powers to the Federal Loan
learn. which he has done because of his peculiar opportunity to know and
Agency, would it be your opinion that the President or Chief Execu-
tive would then later have the authority to retransfer those powers
All of that is wholly aside from another question which, in my
back from the Federal Loan Agency to the Secretary of Commerce,
opinion, is very important. I don't think that in a republic like this,
as he did before!
22
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
23
Senator GEORGE. Not if the amendment which I handed to the re-
STATEMENT OF HON. JESSE H. JONES, SECRETARY OF
porter here was incorporated in the bill, because that expressly freezes
COMMERCE AND FEDERAL LOAN ADMINISTRATOR
it and makes that impossible. I do not think he would anyway, 1
don't think the President would. I don't believe that the President
Secretary JONES. Mr. Chairman, I hardly know where to start or
can be unmindful of a solemn act of the Congress, if it should take
how you would like to have me start.
such action and should say that these lending agencies or loan agencies
The CHAIRMAN. You can start by making a statement, if you prefer,
should go back into an independent agency, an over-all, supervising
or if you wish to proceed by way of questions I am sure there are Sen-
agency. I do not think that the President then would undertake to
ators here who will desire to ask some of you. That is up to you.
transfer them back to Commerce.
Do you have a prepared statement?
Senator O'DANIEL. But you do believe that he would have the au-
Secretary JONES. Well, I have a good deal of material from which
thority?
I can testify. I do have a very short prepared statement that I might
Senator GEORGE Not after the approval of the bill; I wouldn't think
make if the committee is interested in hearing it.
so.
The CHAIRMAN. We are interested, and you may proceed.
Senator O'DANIEL. With the added amendment that you suggest!
Secretary JONES. Mr. Chairman and members of the committee, as
Senator GEORGE. Well, without that amendment I wouldn't think
I see it, the paramount issue before this committee, in considering
that if this bill passes and is approved by the President, that there-
the resolution offered by Senator George, is not the location of the
after he would have that authority. But he might have the naked
powers which the Congress has from time to time delegated to the
power to make the transfer before he approved the bill, or he might
R. F. C. but the proper character of their administration.
veto the bill. I have just never assumed that the President will follow
It is fully within the province, and certainly the responsibility, of
that course when he knows the will of Congress, if there is a founda-
Congress, to determine whether the R. F. C. and its many agencies
tion for what Congress is doing.
and functions, are to be separated from the Department of Commerce.
Senator O'DANIEL. I agree with you that I doubt if he would follow
It has been stated here by Senator George and others that Con-
that course. I was trying to ascertain your opinion as to whether he
gress, by a joint resolution, authorized me personally to hold both
would have the authority to follow that course.
offices, but I want to say that they were careful to provide that I could
Senator GEORGE. Not if this bill passes and is approved. If he
approves it, thereafter he couldn't make this transfer because here is
only draw one salary.
The R. F. C. and its subsidiaries, conduct probably the most gigantio
a law standing, directly to the contrary.
business enterprise, or series of business enterprises, that the world
Senator O'DANIEL. You mean as you originally introduced it or as
has ever known, under one roof-
you propose to amend it?
The CHAIRMAN (interposing). Can you give us some figures on
Senator GEORGE. With the proposed amendment,
that?
Senator BILBO. Mr. Chairman?
Secretary JONES. I' will in just a minute if I may, Senator.
The CHAIRMAN. Senator Bilbo.
The CHAIRMAN. All right.
Senator BILBO. Senator George, I assure you that this is a friendly
Secretary JONES. We have engaged in literally hundreds of separate
question. Some question hasbeen raised about the proximity of the
businesses. Individually and collectively they affect the entire econ-
time of the submission of Mr. Wallace's name and your bill, In order
omy of this Nation. The way in which they are administered from
that no one may question your motive in presenting this legislation,
now on is even more important, if that is possible, than their admin-
if on tomorrow the President should withdraw the name of Wallace
istration in the past, since the post-war adjustments will need to be
and submit the name of Jones, would yourbe that you
most carefully handled in order not to destroy-and I should like to
would pursue the same zeal in the enactment of this legislation?
caphasize that-our entire business and financial structure.
Senator GEORGE, I don't know that any member of any committee
The man who is given the vast responsibilities contained in the
has a right to question my motive, either here or elsewhere, but I do
R. F. C. Act should be one of proven and sound business experience.
not mind you questioning my motive if you want to do it. I have
He should be a man who will attract to him, men of sound judgment,
answered explicitly that I would pursue it as I am now pursuing it,
with business knowledge gained from experience in business. The
regardless of who was appointed or when he was appointed.
country has a right to expect a man in this important place whose
Senator BILBO. That is the point I want to make,
philosophy is in line with the principles which made our country
The CHAIRMAN. If there are no more questions, Senator George,
I will express the thanks of the committee to you for coming and so
great. It is my firm conviction that the Government's investment in plants
thoroughly discussing this matter.
and facilities, and in raw materials, represented by billions of dollars
Senator GEORGE. And I wish to thank the committee for its atten-
of the taxpayers' money, should not be made the subject of careless
tion.
The CHAIRMAN. We will now proceed to hear, pursuant to the in-
experimentation. It is equally important to stop and think how the lending power
vitation of this committee, the Honorable Jesse H. Jones.
of the R. F. C. will be administered in the future. For the past 13
24
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
25
years the resources of the R. F. C. have been used to supplement pri-
Now you asked for figures. I sent each Member of Congress a few
vate credit, so that funds might be available when private resources
days ago a report of what the R. F. C. had done in the war emergency,
were not adequate.
and I would like to make another reference, which is not in my notes.
The R. F. C. Act specifies, and always has specified, that loans should
In May 1940 Mr. Harry Hopkins told me that the President would
only be made either with full and adequate security, or latterly, when
like for me to buy some tin and some rubber, and that is all that was
they were so secured as reasonably to assure their repayment. The
said.
discretion which the latter leaves with the directors of the R. F. C.
When I saw the President at the next Cabinet meeting, I mentioned
could easily be abused either by inexperienced, visionary planning, or
it and he said, "Yes, I think you had better," and th it was all that was
a disregard of the taxpayers' money.
said. I said, "All right, but I will need legislation." He said, "Go
Certainly the R. F. C. should not be placed under the supervision
get it."
of a man willing to jeopardize the country's future with untried ideas
We had drafted a simple bill to buy critical materials and so forth,
and idealistic schemes.
and it was presented to the committees on Banking and Currency of
The lending agencies of the Government can be administered, as
both Houses, and when the members of those committees got through
they have been, on a purely nonpartisan basis for the benefit of all of
rewriting and redrafting and amending and expanding that bill, it
the people, or they can be used to destroy what we have built up in this
was all over the lot. It had everything in it from manufacturing shoe
Nation in our 170 years of indepedence. That, to my mind, is the
strings to as far as you would want to go. It was too much authority,
issue which this committee and the Congress must decide. It must de-
it frightened me, and I said to that committee, to the members of the
cide all of this without any regard whatever to any individual, in-
Senate Banking and Curency Committee-and, I think repeated it
cluding myself.
in the House-"If you are going to give all of that authority to the
I have been honored by the Congress a great deal, and by the Presi-
Reconstruction Finance Corporation I would like to place some safe-
dent. You have passed laws that gave authority for my administra-
guards, Give authority to do these things only when requested to do
tion, enough to make me lay awake nights and worry, and as a result
so by the Federal Loan Administrator with the approval of the Presi-
I have found it necessary to work about 12 hours a day, 7 days a week,
dent of the United States."
for 13 years, or certainly 12, since I have been head of the R. F. C.
And that is in the law, and it is in there at my request because of the
It is an honor, of course, to be in the President's Cabinet. I as-
tremendous amount of authority which I did not want the directors
sume most anyone would like to be in his Cabinet if there was a place
of the R. F. C. to have the responsibility of exercising without super-
he could properly fill.
vision. So that everything that has been done in the war effort had
The President first mentioned to me, as early as 1936, that he
had the written approval of the President of the United States and
would like me in his Cabinet. Well, I didn't encourage it; I didn't
has been done at my request, first as Federal Loan Administrator, and
discourage it. I was asked by him if I would be interested in an ap-
then as Secretary of Commerce.
pointment as Secretary of the Navy, prior to Mr. Edison's appoint-
Now that is the way I feel about this authority. I think it is too
ment to that post as successor to our lamented friend, Secretary Swan-
much authority. I thought so at the time I was asked to become
son. I thanked him and told him that I thought I was not suited
Secretary of Commerce. I didn't want to leave what I was doing
for that, and that I thought I could do better work where I was.
because I thought I was needed there. I still think that somebody
Later, in 1939, he created the Federal Loan Agency and made me
with a proven business experience of an extended nature is needed
the Administrator in charge of the various lending agencies, which
in charge of the R. F. C. and its multiple organizations.
were, from time to time, taken away by Executive order, but leaving
It is bigger than General Motors and General Electric and Mont-
the principal one, the R. F. C., and its subsidiaries.
gomery Ward, and everything else put together and you don't
In 1940 the President stated to me that he would like to appoint me
hear much about it because it is being run by businessmen, by men
Secretary of Commerce. I said, "Mr. President, I appreciate that
experienced in business, by men who haven't any ideas about remaking
but will I take with me my responsibilities as Federal Loan Admin-
the world. [Laughter and applause.] Plodders-not smart, just
istrator?" He said, "No, you will have to give that up." I said,
plodders, trying to do a job honestly and constructively, and they have
"Thank you, Mr. President, but I would rather stay where I am, I am
done it. It is not to my credit that we have done a big job or a good
needed there. Someone else can do the other job." Then he said 8.
job. It is to the credit of the men who have done the job. have
few days later, "If Congress is willing for you to hold two statutory
never failed to give them credit for all the successes, and I hope
jobs, which you can't do simultaneously except by permission of
always to take the blame for all the mistakes.
Congress, I am willing."
The CHAIRMAN. Well, is it your view that the powers of the Loan
And Congress very graciously paid me the compliment of passing
Administrator and the R. F. C. chairmanship, and all this lending
the joint resolution that has been referred to here this afternoon, It is
that has been authorized, are so great that they might be used by one in
an honor to be in this Cabinet, but it is a greater honor to serve where
your place to determine the economic direction of the country and
you can be the most useful, and that is the only place that I want to
affect its whole social and political structure?
serve my Government, where I can be useful and the most useful.
Secretary JONES. You think they should be separated-is that it?
need one.
I am not looking for a job and have never looked for a job-I don't
The CHAIRMAN. No. I say, Is it your view that the powers of the
Loan Administrator and the Reconstruction Finance Corporation
26
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
27
are so great that the man who has charge of them could so administer
payment on plants, and various collections. We have been gradually
those powers as to determine the economic direction of the country,
collecting also from previous peacetime loans and investments. So
and with that, its social and political character?
that we are as well off now, or a little better off, than we were when
Secretary JONES. I think they could affect it very seriously. If
we went to Congress 2 years ago for more money.
it is up to the Loan Administrator or the Secretary of Commerce
I don't think we need any more money; I think we have enough
or the Directors of the R. F. C. to do a thing for which we have full
borrowing authority to go right on through the war because of the fact
authority-
that we are selling all these materials.
The CHAIRMAN (interposing). Have you ever used your powers as
We buy and sell every gallon of 100-octane gasoline that is used in
Loan Administrator and R. F. C. Chairman for the purpose of deter-
the war, and we do many things, too numerous to mention now, which
mining the economic character or the social character of this country
I could mention if I had the time, I condensed that when I sent each
Sectretary JONES. I certainly have not, except to the extent of being
of you a copy, as much as I could, so that you could read it. It is the
helpful. Naturally, in periods of depression we have tried to make
only time I have had an opportunity to report to Congress as to what
all the loans and investments we could justify to maintain and increase
we have done with all of this extraordinary authority, and I was glad
employment.
to be able to do it and to show you exactly what we had done-and it
The CHAIRMAN. But you have undertaken to preserve the American
is all there.
economy?
We have authorized some 32 or 33 billion dollars in war work; it
Secretary JONES. Yes. We have never used anything like all of the
hasn't all been used. We have not held anybody up 1 minute on any
borrowing authority that we had or the power that we had or the money
decision. We have built plants for the War Department that they
that we had available. We have been conscious every minute of every
should have built maybe, but they didn't because of the lack of author-
hour, and every hour of every day, of responsibility that We have,
ity or money or for other reasons. Back in 1940 we started building
and if we were praying men we would pray to God to give us the
plants, and we would do it on the telephone. Knudsen would call up,
courage to do what we thought was right.
Can you do this; can you do that-$100,000,000 here, $200,000,000
The CHAIRMAN. What is the extent of your power to borrow and
there "Yes." That is the way we have run the business.
to lend money
Fiscally, our business is as well handled as the biggest private cor-
Secretary JONES. We have at this time borrowing authority for gen-
poration in the United States. We have as efficient men, as capable
eral purposes something over $14,000,000,000. We have borrowed of
people, as anyone; we have our running audits; they are auditing all
that amount, and used, about $8,000,000,000. We have available now
the time to see where we make any mistakes, where we get out of
about $6,000,000,000.
bounds, or where we are being imposed upon.
The CHAIRMAN. That is in your capacity as Chairman of the
The CHAIRMAN. What are the limits? What are your financial
R. F. C.I
limits or your resources for borrowing money as Loan Adminis-
Secretary JONES. I was referring to the borrowing authority of the
trator?
R. F. C.
Secretary JONES. What are the limits?
The CHAIRMAN. All right.
The CHAIRMAN. Yes. Is there a limit? How far can you go?
Secretary JONES. Now, of that $6,000,000,000 we are committed for
Secretary JONES. We can lend anything that we think we should.
expenditures of 81/2 billion dollars. In other words, we are 21/2 billion
[Laughter.]
dollars overcommitted.
The CHAIRMAN. That means the sky, does it not!
We came to Congress 2 years ago and asked for an increase in
Secretary JONES. Any amount, any length of time, any rate of in-
our borrowing authority of $5,000,000,000. That got tangled up at
terest.
the end of the session and didn't carry. At that time we were getting
The CHAIRMAN. And to anybody?
requests from the War Department and Navy Department and Mari-
Secretary JONES. And to anybody that we feel is entitled to the
time and the War Production Board and every other agency for 50
loan.
million, 100 million, 700 million, 600 million, and it looked as if we
The CHAIRMAN. You have to come to Congress for your money, do
would soon be out of funds. That is the reason we asked for the
increase.
you not?
Secretary JONES. Yes; but you have given us a lot of money.
The committees both reported favorably, and it would have passed
The CHAIRMAN. How much altogether?
except that Congress was about to go home for Christmas, and it
Secretary JONES. Well, as I explained a while ago, we have 6 billion
was the end of a Congress, too. We have spent in the war effort
unexpended, but we have committed 81/2 billion against that.
something over $18,000,000,000.
The CHAIRMAN. How much have you got loaned out?
The CHAIRMAN. You are referring now to the R. F. C.I
Secretary JONES. At this time not a great deal. I think you would
Secretary JONES. Yes; and the other agencies. The R. F. C., De-
be interested to know that the billion and a quarter that we put in as
fense Plant, Metals Reserve, Rubber Reserve, Defense Supplies, Rub-
capital in banks, back in 1933, 1934, and 1935, has all come back except
ber Development.
less than 300 million.
While we have spent the 18 billion, we have received back more
The CHAIRMAN. That goes into the revolving fund?
than $9,000,000,000 for the sale of materials, rent on plants, part
Secretary JONES. Yes.
28
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
29
The CHAIRMAN. And you lend it out again?
Of that, it is all back except about one and three-quarters billion.
Secretary JONES. It is there to lend out or do whatever you want to
That will all come back with a substantial profit.
do with it.
As I said a minute ago, the billion and a quarter we put in banks
The CHAIRMAN. What I am trying to get at is some conception of
is all back except less than $300,000,000. And the money we put in
the total fund in your hands as R. F. C. head, and as the Loan Ad-
6,102 banks, as capital, it is all back except from 2,100 of those banks;
ministrator-what is the total?
and there are only about 51 banks, of all of them, that are delinquent
Secretary JONES. As I explained a while ago, Senator, $14,000,000,-
in their payments.
000 is the total that can go. Of that, 8 billion has been spent. We still
Senator RADCLIFFE. How much have you loaned for all purposes
have 6 billion, and that is committed. But it comes back.
since you have been head of the R. F. C., or Federal Loan Admin-
Senator BURTON. The Senator was asking what other authority, be-
istrator, and how much have you collected back?
sides that under the R. F. C., you had to loan. Your 14 billion was
Secretary JONES. We have authorized loans and investments ag-
R. F. C., was it not? The chairman was asking what additional au-
gregating about $45,000,000,000.
thority you had to loan besides under the R. F. C. through your posi-
Senator RADCLIFFE. How much have you collected, and what is the
tion as Federal Loan Administrator?
value of your present holdings?
Secretary JONES. Nothing.
Secretary JONES. We have paid out about $28,000,000,000 of that,
Senator BURTON. So $14,000,000,000 is the total?
and we have collected about 19 or 20 billions.
Secretary JONES. Yes.
I will have to check myself, but those are about the right figures.
Senator BREWSTER. Mr. Chairman.
If I may go back to the period before the war, where the R. F. C,
The CHAIRMAN. Senator Brewster.
was set up-and the R. F. C. was not set up for the war, but for other
Senator BREWSTER. You said that you had spent 18 billion on Gov-
purposes-it did its job.
ernment plants, That must have been outside the 14 billion.
Of our bank capital all is back except less than $300,000,000.
Secretary JONES. Government work.
Of the billion that went to railroads, all is back except less than
Senator BREWSTER. Government work?
$300,000,000.
Secretary JONES. About 9 billion of it was Government plants, and
Most of our loans to industry of close to a billion have been paid.
the balance was buying materials.
So that we are gradually winding up our collections on everything
Senator BREWSTER. Do you now own those plants under the Defense
loaned prior to the war. In the war work, of course, we have all these
Plant Corporation!
plants, and raw materials. In addition, we have authorized nearly
Secretary JONES. Yes; we own plants now to the cost of about $7,-
$2,000,000,000 of loans for war work.
000,000,000, a little more.
Senator RADCLIFFE. I have always been under the impression, Mr.
Senator BREWSTER. And that is in addition to the 14 billion
Jones, that your loans have turned out very successfully. That is the
Secretary JONES. No.
reason I asked you for some specific statement as to the figures.
Senator BREWSTER. That is included?
Secretary JONES. I would be very glad, if I may-I am testifying
Secretary JONES. That is included.
here from memory-but I would like to put into the record of this
Senator BREWSTER. So you have that as assets against-
hearing the figures that I have here for you, so that anybody who is
Secretary JONES. We have these plants. The only money, Senator,
interested in reading them will get the details.
that we will lose is in the war work. On everything that the R. F. C.
The CHAIRMAN. You may hand those to the reporter.
did before the war, including the bad days back in the panie days, the
(The figures submitted by Secretary Jones are as follows:)
R. F. C. has a definite profit, over all operating expenses and interest
that we paid to borrow the money that we loaned and invested; we will
RECONSTRUCTION FINANCE CORPORATION-SUMMARY OF ACTIVITIES Nor DIRECTLY
have a profit of about $500,000,000. So that the R. F. C. has not cost
RELATED TO THE WAR
the taxpayer a dime except in war work.
Senator RADCLIFFE. Mr. Chairman.
In Its activities not directly related to the war, Reconstruction Finance Cor-
poration has authorized loans and Investments totaling $13,160,000,000, of which
The CHAIRMAN. Senator Radcliffe.
$3,208,000,000 was canceled and $9,656,000,000 disbursed. Repayments and other
Senator RADCLIFFE, Mr. Jones, how much have you loaned out in
credits total $7,978,000,000. In addition, Reconstruction Finance Corporation
the aggregate, how much have you collected back, and about what is
has made allocations to other governmental agencies and for relief by direction
the value of your present holdings?
of Congress totaling $2,900,000,000.
The authorizations include-
Secretary JONES. We have loaned out and invested in bank stocks
Loans to 5,825 going banks, 2,780 closed banks, 1,183 building and loan asso-
and a few securities, a total of about $10,000,000,000-that is not count-
ciations, 7 credit unions, 133 Insurance companies, and 233 mortgage loan com-
ing war work.
panies, aggregating $3,395,400,000.
Investment of capital in 6,882 banks and 10 fire and casualty insurance com-
Senator RADCLIFFE I had reference to all the loans which you have
panies aggregating $1,393,100,000.
made since you have been occupying the position.
Loans to 98 railroads and railroad receivers and trustees aggregating
Secretary JONES. I am trying to analyze them.
$1,503,700,000.
68424-45-3
30
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
31
Loans on 404 self-liquidating projects and projects authorized under Federal,
RAILROADS
State, or municipal law, including public-school districts, aggregating
$831,700,000.
The Corporation has made railroad commitments aggregating $1,503,736,300
Loans to 668 drainage, levee, and irrigation districts Involving disbursements
of which $573,906,171 was not used because with a Reconstruction Finance Cor-
of $100,780,000.
poration commitment the roads were able to get the money in the usual channels
Purchase of 3,319 Issues of securities from other governmental agencies having
or because their plans were not carried out. A total of $851,090,175 was disbursed
par value of $694,745,000 (including $201,000,000 rultroad securities).
and of this $538,828,470 has been repaid. These amounts do not include $200,-
12,102 loans to business and Industry. (This is in addition to 11,216 business
890,500 of railroad securities taken over from the Public Works Administration,
loans for defense and war.). The 22,311 business loans aggregate $2,888,400,000.
of which $101,422,009 has been sold or retired.
Loans for benefit of agriculture totaling $2,485,000,000.
Loans totaling $1,011,500,000 to other governmental agencies for rural elec-
SELF-LIQUIDATING PROJECTS
trification, farm tenancy, and rural rebabilitation.
21,842 loans aggregating $47,385,000 directly or through Disaster Loan Corpo-
The Corporation has authorized loans on 176 self-Hquidating projects; that is,
ration to sufferers from floods and other catastrophes.
projects which pay for themselves principally from the revenues derived from
119,657 loans aggregating $566,500,000 through the RFC Mortgage Company
operation of the project, aggregatinfi $398,873,884. Of this amount, $339,531,641
and Federal National Mortgage Association to reestablish a normal market
was disbursed and of the amount disbursed, $324,633,284 has been repaid through
for mortgages on Income-producing urban property and to provide a market for
retirement or sale of the securities evidencing the loans. A premium of $16,947,121
Federal Housing Administration Insured mortgages.
was realized in the sale or retirement of these securities.
A more detailed statement is attached.
PUBLIC AGENCIES-STATES, MUNICIPALITIES, ETC.
BANKS-10ANS
The Corporation has authorized loans to or contracts with States, municipali-
Loans have been authorized to 5,825 going banks, principally In 1932 and 1933,
tles, and political subdivisions of States to aid In financing 190 projects authorized
In the amount of $1,334,880,161 to enable the banks to meet the demands of their
under Federal, State, or municipal law aggregating $407,395,216. Of this amount
depositors that grew out of fears for the safety of their money during the depres-
$281,052,226 was disbursed and $255,751,406 has been repaid through retirement
or sale of the securities evidencing these loans. A premium of $8,011,131 was
sion. Of this $1,138,251,619 was disbursed, and 08,9 percent of the amount dis-
bursed has been repaid.
realized in the sale or retirement of these securities.
Loans aggregating $1,419,531,473 have been authorized for distribution to de-
PURCHASE OF PUB: IC WORKS ADMINISTRATION SECURITIES
positors in 2,780 closed banks or banks in process of liquidation. or this amount,
$1,056,883,720 has been disbursed, and 99.5 percent of that has been repaid,
The Corporation has purchased from the Federal Emergency Administration
In addition to the bank loans, the Corporation disbursed $13,061,631 to the
of Public Works 3,319 Issues of marketable securities baying par value of $694.-
board of deposits of the State of Wisconsin to make funds available to several
744,788 of which $003,512,388 have been retired or sold nt a net premium over
hundred local governments whose money was tied up in closed or restricted
par of $14,579,369.
banks. This has all been repaid.
BUSINESS AND INDUSTRY
BANKS-CAPITAL
The Corporation has authorized 12,102 loans or participations aggregating
To strengthen the capital structure of the banks of the country, the Corpora-
$738,108,610 not directly related to the war. Banks participated in 8,624 of
tion has authorized the Investment In capital of 6,882 national and State banks
these loans to the extent of $80,950,816, making a total of $819,059,426. In addi-
In the amount of $1,345,946,069. Of this $1.170,206,182 was disbursed to 6,160
tion, for purposes of national defense and war programs, the Corporation has
banks and over 74 percent has been retired. The Corporation still has $304,608,600
authorized 10,239 loans or participations, aggregating $2,019,342,537. including
Invested In the capital of 2,261 national and State banks. In addition, the Cor-
the banks' share of $106,082,049 In 2,760 loans. This makes a total of 22,341
poration holds $174,000,000 preferred stock of the Export-Import Bank.
loans authorized to business aggregating $2,838,401,063, including 1.220 in the
amount of $39,350,975 for mining and mining development.
BUILDING-AND-LOAN ASSOCIATIONS
AGRICULTURE
Loans aggregating $170,980,560 were authorized to 1,183 building-and-loan
associations and receivers of building-and-loan associations to make funds avail-
To facilitate the exportation of surpluses of agricultural products and their
able to shareholders and depositors and to enable receivers to make distributions
sale in the markets of foreign countries In which such sales could not be financed
to depositors and other crysitors of the associations without causing extensive
in the normal course of commerce, the Corporation authorized loans aggregating
foreclosures of or this, $140,156,008 was disbursed and 99.6 percent has
$98,445,246 and disbursed $47,300,826. or this $13,537,388 was taken over by the
been repaid.
Export-Import Bank and all the remainder has been repaid.
CREDIT UNIONS
The Corporation authorized loans aggregating $1,754,712,665 to Commodity
Credit Corporation for loans on cotton, corn, turpentine, tobacco, and several
Loans aggregating $642,968 were made to seven credit unions, all of which have
other commodities, of which $767,716,962 was disbursed. Commodity Credit Cor-
been repaid.
poration has retired Its Indebtedness to the Reconstruction Finance Corporation
INSURANCE COMPANIES-CAPITAL
In full. The Corporation also authorized $86,061,513 of loans to other borrowers
to finance the carrying and orderly marketing of agricultural products, of which
The Corporation authorized $47,150,000 and disbursed $47,100,000 to 10 fire
$19,644,492 was disbursed and 99.7 percent of that has been repaid.
and casualty insurance companies, of which $15,565,560 has been repaid.
The Corporation has made several other elasses of loans for the benefit, directly
or indirectly, of agriculture. These include $387,236,000 disbursed to Federal
INSURANCE COMPANTES-IOANS
land banks, all of which has been repaid $9,250,000 disbursed to Federal Inter-
mediate credit banks and all repaid: $26,194,970 disbursed to Joint stock land
The Corporation, principally In 1932 and 1933, authorized loans totaling $104.-
banks and 98.8 percent repaid: $12,649,956 disbursed to livestock credit corpora-
439,750 to 133 companies to enable them to meet the demands of policyholders.
tions and all repaid: $173,243,641 disbursed to the regional agricultural credit
Of this $90,695,210 was disbursed and 99.7 percent of the amount disbursed has
corporations and all repaid: and $5,643,618 disbursed to other agricultural credit
been repaid.
corporations and all repaid.
Regraded Unclassified
32
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
33
The Corporation authorized loans aggregating $23,500,000 to the Secretary of
Agriculture to enable him to acquire cotton, of which $3,300,000 was used. This
ELECTRIC HOME AND FARM AUTHORITY
has been repaid.
By Executive Order 9256, dated October 13, 1942, the President ordered the
PUBLIC SCHOOL AUTHORITIES
cessation of the activities of the Electric Home and Farm Authority, as of
The Corporation disbursed a loan of $22,300,000 to pay salaries of 15,000 Chicago
October 31, 1942, and transferred to the Reconstruction Finance Corporation
school teachers. The loan was evidenced by bonds secured by real estate owned
for purposes of liquidation and payment of Its liabilities, all of its assets, funds,
by the Chicago Board of Education, all of which were subsequently sold at a
records, contracts, and property. Liquidation is practically complete.
premium.
The Corporation authorized 37 loans aggregating $3,189,050 to tax-supported
ALLOCATIONS TO OTHER GOVERNMENTAL AGENCIES AND FOR RELIEF
public school districts or other similar public school authorities; $957,175 has
In addition to its lending and Investment functions, the Corporation was re-
been disbursed, of which $633,400 has been repaid.
quired by various acts of Congress to allocate funds to other governmental
agencies and for relief of distress.
NATIONAL MORTGAGE ASSOCIATIONS
This Includes allocations by Congress to the Secretary of the Treasury of
To assist In the reestablishment of a normal mortgage market and to aid in
$125,000,000 to capitalize the home loan banks and $200,000,000 to capitalize
carrying out the purpose of the National Housing Act, the Corporation acquired
the Home Owners' Loan Corporation: $200,000,000 to the Land Bank Commis-
and holds all the outstanding capital of the RFC Mortgage Company in the
sioner-later part of the Farm Credit Administration-for loans to farmers
amount of $25,000.000 and the $11,000,000 capital and paid-in surplus of the
and for capital of the Federal Farm Mortgage Corporation and an additional
Federal National Mortgage Association. The Corporation also has outstanding
$100,000,000 to the Land Bank Commissioner for loans to joint stock land banks
loans to these two companies totaling $125,453,307.
$115,000,000 to the Secretary of Agriculture for crop loans; $44,500,000 for the
capitalization of the regional agricultural credit corporations: $40,500,000 to the
OTHER MORTGAGE LOAN COMPANIES
Farm Credit Administration for capitalization of production credit corporations;
$1,800,000,000 for rellef $97,000,000 for the capital of Commodity Credit Cor-
In addition to the loans It has made to the RFC Mortgage Company, the
poration $40,000,000 for the capital of the Disaster Loan Corporation: $97,861,381
Federal National Mortgage Association and mortgage loan companies organized
advances to the Federal Housing Administrator of amounts necessary to earry out
to aid in the reorganization or liquidation of banks, the Corporation has author-
provisions of the National Housing Act and advances for expenses of the regional
Ized loans to privately owned mortgage loan companies to prevent them from
agricultural credit corporation.
falling, most of this In the first 2 or 3 years of the Corporation's existence, The
Pursuant to act of Congress, $2,784,867,007 of the Corporation's notes held
amount of these loans authorized to 233 borrowers was $355,915,432. of which
by the Secretary of the Treasury have been canceled on account of disbursements
$245,130,980 was disbursed. Over 95.5 percent of the amount disbursed has been
made for such allocations and relief advances.
repaid.
DRAINAGE, LEVEE, AND IRRIGATION DISTRICTS
THE RFC MORTGAGE COMPANY
The Corporation has disbursed $100,778,038 in loans to or for the benefit of
The RFC Mortgage Company was created In 1935 to assist In the reestablishment
drainage, levee, irrigation, and similar districts for improvement purposes or
of a normal market on urban income-producing property.
for refinancing outstanding Indebtedness. Repayments total $62,134,200. By
From Its organization In 1935 the Company has disbursed approximately $335,-
these loans the bonded indebtedness of several hundred districts was reduced
400,000 for 63,300 mortgages and loans; has sold or collected 42,700 totaling
55 percent and the water charges and bond-service assessments by two-thirds.
$233,200,000 and now has outstanding 20,600 totaling $102,200,000. Over $100,-
000,000 of the amount disbursed may be described as relating to war housing.
BURAL ELECTRIFICATION ADMINISTRATION
FEDERAL NATIONAL MORTGAGE ASSOCIATION
The Corporation has authorized loans aggregating $356,500,000 to the Admin-
Istrator of the Rural Electrification Administration, of which $281,000,000 was
This Associntion was created In February 1938 to esteablish a market for
disbursed. These loans are collateraled, with a 15-percent margin, by the loans
Federal Housing Administration Insured long-term amortized mortgages and
made by the Administrator secured by mortgage on the projects financed which
make available the full benefits of the National Housing Act to all who wanted
bring electricity and electrical facilities to rural districts.
to build new homes.
The Association has disbursed $271,500,000 for 66,900 mortgages, has sold or
FARM TENANCY
collected 51,900 totaling $219,000,000, and has outstanding 15,000 totaling $52,-
500,000.
In order to enable the Secretary of Agriculture to carry out the provisions
DISASTER LOAN CORPORATION
of title I of the Bankhend-Jones Farm Tenant Act the Corporation has been
authorized and directed to loan to the Secretary of Agriculture $177,500,000, of
This Corporation was organized in February 1937. Its function is to provide
which $141,909,000 has been disbursed.
loans made necessary by floods or other catastrophes that occur between January
1, 1936, and January 22, 1947.
RURAL REHABILITATION
The Corporation has disbursed 21,000 loans totaling $31,200,000. Of these
14,500, totaling $27,300,000, have been repaid and 3,000 active loans, totaling
In order to furnish the Secretary of Agriculture with additional funds for
$3,300,000. remain outstanding.
the purpose of making rural rehabilitation loans to needy farmers, the Cor-
poration has authorized advances to the Secretary of Agriculture In the amount
Secretary JONES. Our operations, our regular operations, include
of $477,500,000, of which $456,549,000 has been advanced.
the RFC Mortgage Company, the Federal National Mortgage As-
sociation, the Disaster Loan Corporation, and the War Damage Cor-
CATASTROPHES
poration.
The Corporation has authorized 718 loans, totaling $16,184,521, to finance
We are operating more than 125 plants that are manufacturing this,
the repair, construction, or reconstruction or rehabilitation and for the acqui-
sition of property In replacement of property damaged or destroyed by floods
that, and the other for war work. We are operating five pipe lines, in-
or other entastrophes occurring in 1935 or 1936. Of this, $12,003,055 was dis-
cluding the Big Inch and the Little Big Inch. We buy every drop of
bursed. $508,634 is still due from the borrowers.
oil that goes into those pipe lines at the oil field, and we sell it again
when it gets up into this country.
Regraded Unclassified
34
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
35
The plants that we are operating now, through industry, acting as
in it; it is the backbone of this country. It has a pretty hard time
our agents, cost about a billion and a half dollars, and they include
to survive against mass production and mass distribution, against the
steel, magnesium, aluminum, chemical, metal-fabricating plants, float-
chain stores and large production. But in our war work we have
ing power plant for the Mississippi-Florida area, gas storage-now
authorized more than 11,000 loans to the little fellow. Three thousand
that is a nice one, I think you would be interested to know that we
of them have been for $5,000 or less; 1,700 of them have been for less
buy gas and pump it back into the ground in California, to keep it
than $10,000; 2,400 of them have been for less than $25,000; 1,500 of
from going to waste, and then we draw it out again and sell it. That
them have been for less than $50,000; and 1,250 for less than $100,000.
sounds a good deal like lending money on a school of codfish, but we
Now, we have made those loans to the little contractor, to the little
really get it back.
plant-the fellow who is making a gadget or who has a subcontract.
Senator BREWSTER. Mr. Chairman.
Those loans for war work total $1,990,000,000. Before the war we
The CHAIRMAN. Senator Brewster.
made over 12,000 loans and 4,500 were $5,000 or less each.
Senator BREWSTER. Have you, Mr. Jones, formulated a plan for the
We have made 2,884 loans under the provisions of the Murray-Pat-
liquidation of the assets, with the object of preserving our traditional
man Act, aggregating $64,000,000. And under the same authority we
economy?
purchased 35,000 items that were covered by that legislation, at a cost
Secretary JONES. It can't be done, because the Congress has passed
of about $8,000,000. They include automobiles and trucks and oil
a law about the disposition of the plants.
burners and typewriters, and various and sundry things that were
Now I am very strongly of the opinion that we ought to keep in
covered in that bill. We have met the requirements, wherever they
stock pile the metals and minerals that we have accumulated for stock
showed up-electric ranges and sundry things.
piles, that do not decay, because we have drawn very heavily on our
In addition to loans to the small fellow, the Defense Plant Corpora-
own minerals in this country. We have subsidized about 3,400 mines
tion has furnished Government-owned machine tools to more than
that produce copper and lead and zine and other things, in order to
3,200 small manufacturers on a lease basis. We lease a man a tool or
get the production that we need for the war. Whatever we have of
two tools, and he pays rent for them; 1,667 of these were in amounts
those metals that do not deteriorate, we should, in my opinion, keep,
of less than $10,000, and only 153 of the 3,200 were for as much as
and use them when we have to have them.
$100,000. So that the little businessman, the little manufacturer, has
As for the plants, they cannot be sold in a hurry. We have some
had almost whatever he asked for in connection with the war.
20 plants that cost an average of one hundred million. We have a few
Now, right after the outbreak of war we authorized our agencies
that cost two hundred million. Well, there are not many people that
all over the country to make loans on the spot without referring them
are interested in buying a plant that cost one hundred million. There
to Washington, up to $100,000 without bank participation and up to
are not many people interested in buying a plant that cost $5,000,000.
$250,000 with bank participation. If it was more than that, they
But they should be operated privately to supply employment, prob-
were instructed to send in a telegram with a recommendation for
ably under lease.
Now we own-we built and own outright-completely integrated
approval. Senator BREWSTER. Mr. Jones, may I ask a question?
plants in the number of about 950, and they cost $6,000,000,000. We
Senator JONES. Yes.
also own about 125 parts of plants, where we have added an addition
Senator BREWSTER. You have had this unique experience now in
to another plant. In those cases we either own the land or have a
handling both of these jobs. Do you care to express an opinion, either
long-term lease. We can lock them up and keep them, or we can sell
out of that experience as to whether or not you would again think it
or lease them.
was wise to undertake both, or whether or not you think a divorce
In selling or leasing our plants, the big plants could be subdivided.
would be well warranted?
The CHAIRMAN. Could you continue to operate them?
Secretary JONES. Well, that depends-I think I must first say
Secretary JONES. You could continue to operate them if you wanted
"Yes," I think they should be divorced, and I didn't want to leave
to. Congress can do it; yes.
the Federal Loan Agency to get in the Cabinet. I didn't care any-
The CHAIRMAN. I mean under the existing law.
thing about that. I thought I was where I could do the best work.
Secretary JONES. I hadn't thought much about that. A great many
But since the President was good enough to appoint me to the Cabinet
of our plants are leased to industry, most of them in fact, and those
and Congress was willing for me to hold the two jobs, there we are.
leases expire maybe 6 months after hostilities cease, or for other
I would like to say this, though. During the war the Department
reasons. It would be very easy for the Government, if they wanted
of Commerce has had very little to do except as a service agency for
to do it, to continue to operate these plants or to have them operated
the other departments. As you know, the Department of Commerce in-
for the account of the Government. We have now 125 important
cludes these various technical bureaus, like the Bureau of Standards
plants that are being operated now for our account, as I said-some
and the Weather Bureau and the Coast and Geodetic Survey and the
of them on a fee basis and some are operated without a fee, as a
Patent Office, and two or three others, including Civil Aeronautics.
patriotic duty, by the operator.
That required some time, not a great deal because there we have a fine
If I may, a good deal has been said about little business, and I
Administrator and a fine organization. There is not much that I
would like to talk a little about that, because we are all interested
can do, or that any other Secretary of Commerce can do, for the
36
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
37
Weather Bureau or for the Patent Office or these other agencies that
Senator BREWSTER. As we approach the end of the war those re-
are purely technical. They are run by technical men.
sponsibilities will offer great opportunities!
We can help them, we can advise with them, and do when they want
Secretary JONES. They will.
advice. We kind of keep track of how they are getting along. We
Senator BREWSTER. And it would be will to have a division of
help them with their budgets and their legislation, but that is about
responsibilities, as this act provides!
all there is to it.
Secretary JONES. It will.
Now, so far as promoting business, commerce, during the war, it
Senator BURTON. Mr. Jones, did you say that you had the post-war
just hasn't been in the cards, because everything has been war.
plan with you, or will you file it with the committee?
Now, we have-and I am going to leave for the record here-a very
Secretary JONES. I don't know whether I have it with me.
broad program for the Department of Commerce, post-war. I say
Senator BURTON. I think it would be well, Mr. Chairman, to have
"broad," intending it to take care of foreign and domestic commerce,
that as a part of the record.
and the many things it can do and information it can give to business
The CHAIRMAN. You may file that with the stenographer.
and industry. We have talked about it between ourselves, and dis-
Secretary JONES. Well, I would like to put it in. I would like also
cussed it, and we have got a nice program. It has been available for
to put in as part of the record this other material that I talked about,
a month, and we discussed it; it looks like the proper time to discuss it.
about the war work, and also about our R. F. C. In other words, if we
But the operations of the Reconstruction Finance Corporation, and
are coming to a parting of the ways, I want to make a report to the
all of these various corporations, they are just as much business as
General Electric and they ought to be run by businessmen-and I am
Congress. The CHAIRMAN. You put in anything in connection with your re-
not looking for the job. I have held the job; I have done it for 13
marks that you think you should put in. Hand it to the stenographer
years; I have been in the trenches for 13 years.
and it will be put in the record as part of your remarks.
The CHAIRMAN, Have you resigned, Mr. Secretary!
(The post-war plan referred to is contained in the following letter:)
Secretary JONES. I don't know whether I have resigned or not. If
DECEMBER 15, 1944.
you read the newspapers you know about as much as I do about it.
The PRESIDENT,
I am still working; I will say that.
The White House.
The CHAIRMAN. You are still working?
DEAR MR. PRESIDENT: You have, in recent public utterances, set as goals for
Secretary JONES. I am still working.
the post-war period full employment and Increased production, so that we may
find work in this country for 60,000,000 persons and maintain a national income
The CHAIRMAN. You are carrying on all the work of the Depart-
approximating $140,000,000,000.
ment of Commerce as Secretary, are you?
These stated objectives, In which the Department of Commerce must play a
Secretary JONES. Well, we have got an Under Secretary and Assist-
prominent part, prompt me to submit, for your consideration, what we In the
Department believe to be essential 80 that we may carry out your objectives
ant Secretary, and another Assistant Secretary, but I am still Sec-
fully and ably. To do so, we must have your full cooperation and that of the
retary, I suppose, officially, until someone else is confirmed.
Bureau of the Budget.
The CHAIRMAN. Then you are carrying on the Loan Adminis-
In the field of foreign trade, the Department of Commerce needs considerable
tration?
strengthening. It should be authorized to detail men of proven business experi-
ence to all of the principal embassies and legations to serve as economic repre-
Secretary JONES. That part of it, I can work for the Reconstruction
sentatives under the direction, of course, of the ambassadors or ministers.
Finance Corporation as a hired hand and I can take whatever salary
We have, for some time, proposed an enlargement of the Field Service of
they are willing to give me. My big responsibility to the country and
the Department of Commerce, in order to provide management advice and counsel
to the Congress is to be helpful to the Reconstruction Finance
to business-particularly small business. Our ideas were embodied In S. 356,
Corporation.
introduced at the last session by Senator Mead.
It is our conviction that, when the returning veterans and those who have been
Now, I do not run that organization at all. It has five directors,
engaged in war work begin to set up their own business establishments, Govern-
and they are all good men. I will say this, that of all the corporations
ment must make available the knowledge and experience It has gained, in order
that we have, the directors of the R. F. C. are the directors of each
to minimize the mortality rate of such ventures.
The Department of Commerce, in cooperation with the War Department,
corporation, and they meet every day, six times a week. When they
already has prepared a series of booklets outlining the best practices for the
are in session, then every corporation is in session, and I do not attend
operation of many types of small business establishments.
the meetings. If they want my advice or my suggestions, they come
This program should be implemented by the addition of experienced men to
and ask for it-I am available-and that is the way it is run. They
our field offices to provide additional guidance for those who seek to perpetuate
are good men.
private enterprise and individual initiative.
In order that the Commerce Department may be additionally useful in earrying
Senator BREWSTER. It is your point, then, that the Secretary of
out Its statutory functions, there should also be an enlargement In the number
Commerce has not had greatly increased responsibilities incident to
of Its Assistant Secretaries.
the war; that many of the activities have been rather inactive on ac-
At the present time, we have an Under Secretary and one Assistant Secretary.
The existing Assistant Secretary is, in effect, an Assistant Secretary for
count of the fact that business and commerce has not required a great
Aviation, although not 80 designated. It would promote efficiency and improve
deal of cultivation and stimulation incident to that office?
administration if he were to be specifically designated as Assistant Secretary for
Secretary JONES. No. The purpose was to promote commerce, and
there has not been much opportunity to promote commerce all during
Aviation. As you know, the Department's functions Include supervision of the Bureau of
the war.
Standards, the Patent Office, and the President's Patent Planning Commission.
These activities are largely in the field of science.
38
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
39
It would be helpful for the Department to have a new Assistant Secretary
finders, gun sights, airplane cameras, and field binoculars has been kept abreast
with scientific background to supervise these activities. He would be particu-
of the demand. Equally Important have been the precise scientific tests which
larly effective in promoting greater public use of the excellent facilities of the
the Bureau of Standards conducts in the field of ordnance development, leading
National Bureau of Standards, especially in the post-war period.
in many Instances to major improvements in the offensive weapons of the
The Bureau of Foreign and Domestic Commerce and the Census Bureau are
United States.
the two bureaus of the Department of Commerce which can be of the greatest
The Civil Aeronauties Administration's direct contribution to the prosecution
direct service to business.
of the war consists of the maintenance and operation of the 35,000 miles of
During the past 4 years much has been done to establish integration and CO-
Federal alrways In the United States and the operation of numerous com-
operation between these two bureaus.
munication and flight-control facilities outside the United States, including
An Assistant Secretary in charge of Business Service could be very effective
Alaska, the Aleutians, the South Pacific, and points in South America, Africa,
In directing the activities of these two bureaus, especially in the field of better
and India. The Civil Aeronautics Administration, in addition, has taken over
service to small business, war workers, and veterans.
traffie control and certain important airports for the Army and Navy and la
The man occupying this position would, in effect, be the Assistant Secretary for
operating oceanie aircraft control for Pacific air traffle, which Is made up
Small business suggested at the last session of Congress in S. 833.
entirely of military aircraft operations.
There is need, in addition, for an Assistant Secretary in Charge of Administra-
The Airways Engineering Division of the Civil Aeronautics Administration
tion.
furnishes and constructs communication facilities for the Army and Navy at
The Department of Commerce has about 30,000 employees and the Reconstrue-
many locations outside of the United States, and has accomplished the airport
tion Finance Corporation about 9,000, stationed in all parts of the United States
construction program Involving airports designated by the military services.
and In many parts of the world.
The Civilian Pilot Training Program, inaugurated by the Civil Aeronautics
Supervision of this great force entails a tremendous amount of detail work.
Administration before the war, provided the armed services with 100,000 aviation
A considerable part of it now occupies the time of the Under Secretary.
candidates during the early war days when avlators were In such great demand
The appointment of an Assistant Secretary for Administration would leave the
by the military.
Under Secretary free for special assignments and for operating relations with
The facilities of the Weather Bureau have been adjusted and expanded
other departments and agencies-phases of the Department's work that can-
to meet a great variety of wartime needs. Special forecasting services have
not be emphasized too strongly.
been instituted to facilitate artillery and aircraft tests and to serve Army posts,
I would appreciate the opportunity of discussing this program with you
construction projects, munitions plants, and the Air Transport Command. Mil-
further, with a view of obtaining your approval for the enlargement of the
Itary aviation communication networks have been extended to service Army
Department's field offices and the creation of the three additional Assistant
establishments wherever necessary. The Alaskan and Carlbbean weather serv-
Secretaries.
Ices have been reorganized and Improved to meet special military needs. Skilled
Sincerely yours,
personnel have been assigned to full-time service details with the armed forces.
JESSE H. JONES,
The Weather Bureau has, through the Joint Meteorological Committee, coordi-
Secretary of Commerce.
nated the activities of civilian and military requirements.
The Const and Geodetie Survey has placed its products and services entirely
Number of employees
at the disposal of the armed services. The production of nantical charts for
use by the Navy and merchant marine has been greatly expanded. The output
Reconstruction Finance Corporation:
of aeronautical charts for air navigation and pilot training has been tremendously
Total employees
9, 419
increased, and many special nautical and aeronautical charts have been added.
Washington pay roll
509
Geodetic control surveys have been expanded and enlarged. many of them being
Loan agencies
3,820 3,
made in regions classed ns "combat areas." Certain vessels of the Const and
Department of Commerce:
Geodetie Survey have been transferred to the Navy Department, and certain
Total employees
32,339
personnel to the War and Navy Departments, to constitute a part of the active
Washington pay roll
10, 102
military or naval forces of the United States. The Philippine charts were pro-
Field
22,237 22,
duced by this Bureau.
The National Inventors Council was established to ald the defense and war
effort. It has served as the screening point for thousands of suggestions sub-
JANUARY 19, 1945.
mitted by American inventors as of possible use in the war effort. Every Idea
The PRESIDENT,
believed to be of even the slightest merit has been considered by some of the
The White House.
outstanding seientists of the country, and a number of devices extremely useful
MR. PRESIDENT: The Department of Commerce has participated in direct
in the war effort have been developed.
national defense and war activities to a major extent. Some of its bureaus, such
The Bureau of Foreign and Domestic Commerce has served not only the mill-
as the National Bureau of Standards, Civil Aeronauties Administration, Weather
tary establishments through providing economie information, but has been a
Bureau, Coast and Geodetic Survey, and the National Inventors Council, have
storehouse of facts on which the war agencies have drawn continuously. The
become virtual adjunets of the military establishments; and the remaining
factual material on which the War Production Board, the Combined Resources
bureatts-Bureau of Foreign and Domestic Commerce, Bureau of the Census,
and Alloentions Board, the Foreign Economic Administration, the Office of
Patent Office, and Inland Waterways-have subordinated their normal functions
Price Administration, and many others have based most of their major decisions,
to such an extent that war work has become their dominant concern. The war
has been provided by the Bureau of Foreign and Domestic Commerce.
work of the bureaus of the Department of Commerce has consisted both of activ-
The Bereau of Foreign and Domestic Commerce is the coissuer of the Pro-
Itles Independent in character and those carried on in cooperation with direct
elnimed List of Certain Blocked Nationals. Members of the staff serve on
war agencies. This has been so to a very great extent, probably more than
dozens of Interdepartmental committees directly concerned with the war effort.
is realized.
The Bureau of the Census provided much of the basic factual data needed
The Bureau of Standards, for Instance, has subordinated all of its peacetime
for nearly every phase of planning for total war. It has been drawn upon for
functions to tasks concerned with the production and improvement of military
such statistical material by nearly every other agency of the Government:
matériel. The Bureau grounds have been declared a prohibited zone by the
and the factual material which It was able to supply time and time again
War Department. It flies the Army-Navy E pennant with two stars. It is,
disclosed the location of facilities and manpower which would be employed for
today, one of the largest producers of optical glass, and, through the manufacture
war production. Procurement agencies, through the assistance of the Bureau
of lenses and prisms, provided the armed services with their requirements
of the Census, have been able to obtain both speedy and accurate economic
following the outbreak of the war. Due to this production, the supply of range
information needed for hundreds of major decisions. From its population
40
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
41
records, the Bureau of the Census was able to establish the citizenship of
hundreds of thousands of workers who needed this proof In order to be em-
REPAYMENTS
ployed in our plants: and, immediately after Pearl Harbor, was in a position
War
$9,100,000,000
to give the military services the name and residence of all Japanese nationals
Non-war
7,978,000,000
residing In prescribed west const areas.
The Patent Office, through the War Division, Initiates searches for applica-
Total
17,078,000,000
tions on inventions deemed important by Government war agencies; It deter-
mines cases In which secrecy orders shall be issued to protect the Interests of
Senator PEPPER. Mr. Jones, following up the inquiries I made of
the United States under inventions, and determines the withholding of licenses
Senator George as to what would be the legal significance of his bill
required to file patent applications abroad, to prevent our inventions from
if enacted, did I understand you to say that you have or have not
reaching unauthorized persons. It has cooperated with the Foreign Economie
Administration and the Allen Property Custodian In matters involving enemy-
submitted your resignation as the Federal Loan Administrator!
owned patents.
Secretary JONES. Suppose you read my letter to the President?
The resources of the Inland Waterways Corporation have been utilized to a
Senator PEPPER. I read the one purporting to be your letter in the
great extent for the transportation of critical and strategie matériel needed In
paper here.
the war effort. It has moved without aceident, from the Great Lakes to New
Orleans, a number of combat vessels which could not go down the rivers under
Secretary JONES. That is all I can tell you.
their own power.
Senator PEPPER. Well, you are present here and you know more
I should Hke to commend the heads of the various bureaus In the Department
about it than anybody, and of course we are not as well informed
and their respective organizations. They have all been prompted by a fine
on it as you are. Did you intend to resign as Federal Loan Admin-
sense of patriotism and have done their Jobs well.
istrator by that letter?
Sincerely yours,
JESSE H. JONES,
Secretary JONES. I had supposed that my term of office would expire
Secretary of Commerce,
when my successor was confirmed. That is what I had been advised.
The CHAIRMAN. Have you finished your statement?
It makes little difference to me. I do not expect to remain as Secre-
Secretary JONES. I do not think of anything else. I may later.
tary of Commerce, if that is what you have in mind.
The CHAIRMAN. Are there any questions?
Senator PETTER. I was wondering whether, if this bill were enacted,
Senator McClellan. Mr. Chairman, I would like to ask a ques-
you would expect to remain as Federal Loan Administrator.
tion.
Secretary JONES. That would be up to the President of the United
The CHAIRMAN. Yes.
States. I am not seeking a job, Senator.
Senator McCLELLAN. Mr. Secretary, probably you have covered this,
Senator PEPTER, I was trying to get the technical situation clear,
but if so, I did not understand it, and I would like for the record
Mr. Secretary. Is there a term of years in the office of Federal Loan
to show the total amount of loans that have been made by the R. F. C.
Administrator? In other words, were you appointed for a term of
and its subsidiaries since you came into this picture. As I under-
years as Federal Loan Administrator, or at the will of the President,
stand, you loan money and it is repaid and goes into a revolving
or at the will of Congress, or what was your term as Federal Loan
fund and you loan it again. I would like to know the volume of
Administrator?
business that has been handled in the 13 years that you have been
Secretary JONES. I do not know, but I doubt if there was a term.
there.
I don't know. Is there anybody here that knows? [Laughter.] I
Secretary JONES. May I put it in the record and get that accu-
don't know, Senator. My impression is that there was no term.
rately?
Senator PEPPER. It is your impression that there was not a term?
Senator McCLELLAN. I would like for the record to show it.
Secretary JONES. That is my impression, but I might be wrong
Secretary JONES. I will be glad to,
about that. It was not for so many years; I know that.
Senator McClellan. Thank you.
Senator PEPPER. According to your own opinion, your opinion is
(The information referred to is as follows:)
that with respect to the office of Secretary of Commerce you submitted
your resignation. Do you regard your resignation as terminating
Over-all authorizations, disbursements, and repayments of the Reconstruction
your tenure of that office, by your letter? Did you regard that as the
Finance Corporation and its subsidiaries
termination of our office as Secretary of Commerce?
Secretary JONES. I regarded that as terminating whenever my suc-
AUTHORIZATIONS
War
cessor was appointed and confirmed.
Non-war
$32,300,000,000
Senator PEPPER. And you have the same view as Federal Loan Ad-
13,160,000,000
ministrator: that is, if another Federal Loan Administrator were ap-
Total
45,460,000,000
pointed by the President and confirmed by the Senate, then that would
terminate your office as Federal Loan Administrator?
DISBURSEMENTS
War
Secretary JONES. Certainly.
Non-war
$18,000,000,000
Senator PEPPER. And you are continuing to function as Federal
9,656,000,000
Loan Administrator, in that office, and doing business as usual as
Total
Federal Loan Administrator?
27,656,000,000
Regraded Unclassified
42
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
43
Secretary JONES. I would think so, and yet there is not much "fune-
Senator PEPPER. He was what?
tion" about it. I am an adviser; I am not a dictator. [Applause.]
Secretary JONES. He WHS with the old War Finance Corporation.
I don't tell these men what to do.
Senator PEPPER. Yes.
Senator PEPPER. Perhaps you underestimate, through your modesty,
Secretary JONES. After the last war. He was brought into this
your importance.
Corporation as assistant treasurer and then promoted to treasurer,
Secretary JONES. I do not. May I say this-that the power of the
and finally to a director of the Corporation, and he is the ablest man,
Federal Loan Administrator is to supervise and coordinate. You can
in my opinion, in Washington.
read into that what you want to read into it.
Senator PEPPER. He worked himself up. Except for being con-
Senator PEPPER. Mr. Secretary, you spoke about the R. F. C. That
nected with the War Finance Corporation-in the last war, you mean!
is the parent company, as it were, is it not? It is the holding com-
Secretary JONES. What?
pany or the parent company for all these subsidiary corporations!
Senator PEPPER. You said he was connected with the War Finance
Secretary JONES. That is correct.
Corporation. Did you mean in the last war?
Senator PEPPER. And that has a board of directors?
Secretary JONES. Yes, sir.
Secretary JONES. Yes; five,
Senator PEPPER. Then he came into this organization and appar-
Senator PEPPER. Would you give us the names of those gentlemen!
ently worked his way up in the organization.
Secretary JONES. Yes, sir; I will be glad to. Charles B. Hender-
Secretary JONES. Yes, sir. They all did. Mr. Klossner, Mr. Hus-
son, a Democrat from California-or Nevada, I believe. Sam H.
bands, Mr. Mulligan, Mr. Fisher-they were all workingmen, they
Husbands, from South Carolina. He is a director. Husbands is
were in the organization, and they are all working directors, they
president of the Defense Plant Corporation. Henderson is president
are all promoted for merit, not political appointments at all.
of Metals Reserve Company, as well as a director. Henry Mulligan-
Senator PEPPER. What was Mr. Fisher's background?
H. A. Mulligan-sitting over here-this red-faced Irishman-he is a
Secretary JONES. Who?
director, and he is president of the Defense Supplies Corporation.
Senator PEPPER. Mr. Fisher.
Charles T. Fisher, Jr., a Republican, he is president of the RFC
Secretary JONES. He was of the Fisher crowd in Detroit. Former
Mortgage Company, and generally handling R. F. C. loans.
Senator Blaine was R Republican member of the Board from that
Senator PEPPER. Handling R. F. C. loans generally?
Federal Reserve district, and we cannot have more than one director
Secretary JONES. That is most of his work, as the work is divided up.
from any one district, and when Senator Blaine died there was a
Senator PEPPER. Yes.
Republican vacancy. Chick Fisher, then a very young man, was
Secretary JONES. Howard Klossner, a Republican from Minnesota.
manager for the R. F. C. in Detroit, one of our biggest offices, and we
He is president of the Rubber Reserve Company.
asked the President to appoint him a member of the R. F. C. board
Senator PEPIER. I believe that makes the five.
and bring him to Washington, upon the theory that we would like to
Secretary JONES. I think maybe he is also president of the War
have his field experience sitting around the board in Washington, and
Damage Corporation.
he is a very excellent director.
Senator PEPPER. I see. Now, who is chairman of the R. F. C.
Senator PEPPER. What is Mr. Klossner's background?
board of directors?
Secretary JONES. I would like to say just a little more.
Secretary JONES. Charles B. Henderson.
Senator PEPPER. Proceed.
Senator PEPPER. What were Mr. Henderson's duties and what was
Secretary JONES. He is president now of the National Bank of
his general background before he came to be a director of the R. F. C.!
Detroit, a bank of about a billion and a half deposits, the biggest bank
Secretary JONES. He was a businessman in Nevada, a banker, in-
in the midwestern area outside of Chicago.
terested in mining, et cetra.
Senator PEPPER. Did he become president of that bank since he has
Senator PEPPER. What was Mr. Husband's background?
been connected with the R. F. C.f
Secretary JONES. Sam Husbands came from South Carolina. He
Secretary JONES. He was not with us when he became president of
was a small-town banker and a very able young man, one of the best
the bank.
in the world.
Senator PEPPER. But he has retained his presidency of a bank while
Senator PEPPER. When you say "a small-town banker," what size
he was a director of the R. F. C.I
bank do you mean?
Secretary JONES. He is a nonworking president of the bank now.
Secretary JONES. Well, I don't know what size, but it was a small
Senator PEPPER. A nonworking president?
town in South Carolina, and your judgment would be as good as
Secretary JONES. He is not working at that job. He is here in
mine if you want to guess.
Washington, with his family, working for the R. F. C., with a leave
Senator PEPPER. What was Mr. Mulligan's background before he
of absence, like a lot of other good people in war work.
came to be a director?
Senator PEPPER. What was Mr. Klossner's background?
Secretary JONES. Mr. Mulligan was brought into the Corporation
Secretary JONES. Mr. Klossner had been a bank examiner, I think-
by Eugene Meyer, as Chairman, when it was first set up. He was with
worked in banks-and I don't know what else, but he was also an
the old War Finance Corporation.
examiner in the R. F. C. in 1932, selected by Mr. Eugene Meyer, and
Unclassified
44
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
45
he also grew up and graduated into being a director. He is a working
Senator PEPPER. Whether it made money after it was transferred to
director, and that is the only kind we have; we have no politicians.
the Department of Agriculture and had lost money prior to that.
[Laughter.]
Secretary JONES. The Commodity Credit Corporation makes loans
Senator PEPPER. You mean on the board of directors of the R. F. C.1
on commodities at a percentage of their parity price fixed by an act
Secretary JONES. Yes, sir; that is right. I hope I can qualify on
of Congress.
that.
Senator PEPPER. Yes.
Senator PEPPER. I take it, it is the general opinion that you have
Secretary JONES. Thus if it makes money it is not due to the man-
done your work well. Now, Mr. Jones, those five men whom you
agement at all.
emphasized were able to run the R. F. C. practically without your
Senator PEPPER. I am afraid I missed the point in the testimony
help-did those men have any background or any legislative positions
here today. I thought the success of the R. F. C. indicated a reflection
that you would describe as more important than the job of being
on your good management.
Secretary of Agriculture?
Secretary JONES. If Congress tells you to lend a dollar a bushel on
Secretary JONES. Just exactly what is your purpose there, Senator
wheat and then you make money, that is not because of the manage-
[Laughter.]
ment of the man who made the loan, it is because Congress told him
Senator PEPPER. Maybe I should ask you what the purpose of your
to lend the dollar a bushel on wheat. That applies to cotton, it applies
original testimony was and your comment upon the kind of persons
to corn, and other things.
who would qualify for this position. The point I attempted to
Senator PEPPER. You do not think, then, that the question of man-
imply-and maybe I can clarify it by stating it-was that I regard
agement enters into the making of loans under the Department of
Mr. Henry Wallace, having been for several years Secretary of Agri-
Agriculture, but you do think that management did enter into the
culture and having loaned under that agency, while he occupied that
making of loans when it was under the R. F. C.I.
position, several billion dollars, and having thousands of employees
Secretary JONES. The question of management has nothing to do
under his jurisdiction, as having a background which, according to
with that type of operation, except as to their routine and other ad-
the importance and responsibility of this position, compares favorably
ministration. I guess there are a good many loans, all kinds of loans,
with any of the directors of the R. F. C., which is the parent company
made by the Commodity Credit. I think it does a lot of things now, a
of that great unit. [Applause.]
lot of subsidizing, which we did not do when they were with us. But
The CHAIRMAN. I hope the public will not indulge in any demon-
I have no desire, Senator, and I am not trying to compare the directors
stration. Let us have quiet.
of the R. F. C., as men, with Secretary Wallace or Mr. Wallace.
Secretary JONES. I might say, to begin with, Senator, that the Com-
The CHAIRMAN. Well, Mr. Jones, the difference is that in this mat-
modity Credit Corporation, which loaned most of that money, was
ter of agricultural commodities Congress sets a certain percent of
created by the R. F. C., and we ran it for 5 or 6 or 7 years. It is a
parity, and if there is a loss or if there is a gain it is probably due to
business organization, created by us, and it was run as a business or-
some policy of Congress.
ganization. I think it is still being run pretty well.
Secretary JONES. Yes.
Corporation? Senator PEPPER. You are referring to the Commodity Credit
The CHAIRMAN. In the R. F. C., you are the judge.
Secretary JONES. We have the discretion there; I mean the R. F. C.
Secretary JONES. What?
has the discretion as to whom to make a loan and whether to make
Corporation? Senator PEPPER. Are you referring to the Commodity Credit
a loan or not, and in agriculture Congress has the responsibility.
Senator PEPPER. Of course, it is a question of fact as to whether that
Secretary JONES. That is what I was talking about; yes,
is true in every case or not.
Senator PEPPER. Am I correct in my memory that at one time that
Secretary JONES. Well, it is a fact.
Corporation was under the R. F. C. and was later transferred to the
Senator PEPPER. You did not mean to imply in every case where
Department of Agriculture, while Mr. Henry Wallace was Secretary
loans are made under the Department of Agriculture, that discretion
of Agriculture?
was not properly and favorably used by Mr. Henry Wallace when he
Secretary JONES. That is just what I stated-that we created it our-
was Secretary
successful business,
selves and ran it and made a business out of it-a going business, and
Secretary JONES. I do not know enough about the Department of
Agriculture. It is a pretty big organization. I do not know all the
Senator PEPPER. Is it a fact, as I have heard it said, that the Com-
things they did, I was just speaking of the Commodity Credit.
modity Credit Corporation lost money either in 1 year or 2 years pre-
Senator PEPPER. Mr. Jones, I understood you to say or to make
to the Department of Agriculture?
ceding the transfer and made money the year following its transfer
some reference to the fact that there had been a running audit-that
Secretary JONES. If so, it was not due to management.
you did keep a running audit of these vast expenditures.
Senator PEPPER. I am asking, of course, about the fact.
Secretary JONES. Yes, sir,
Senator PEPPER. Was that audit made by the R. F. C. or under the
Secretary JONES. What was that?
Federal Loan Administrator, or the same kind of audit that applies
Regraded Unclassified
46
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
47
to other Federal agencies, the audit that the Comptroller General
Analysis of audit control of Government corporations as of June 30, 1944-Con.
makes, who is the agent of Congress, when he audits the Government
accounts?
Audited
by Gen-
Secretary JONES. They are made by the R. F. C.; that is, they are
Name of corporation
eral Ao-
count-
made by the certified public accountants.
Ing Office
Senator PEPPER. Engaged by whom?
Secretary JONES. Engaged by the R. F. C.
Federal Savings and Loan Insurance Corporation
Yes.
Senator PEPPER. So you hire the accountants who audit the affairs
Federal Subsistence Homesteads Corporation
Federal Surplus Commodities Corporation
Yes.¹
of the R. F. C.!
Yes.
Home Owners' Loan Corporation
No.
Secretary JONES, That is correct.
Inland Waterways Corporation
Institute of Inter-American Affairs
Yes.
Senator PEPPER. Is that true of other governmental agencies?
Institute of Inter-American Transportation
Yes!
Inter-American Educational Foundation, Inc.'
Yes."
Secretary JONES. Of what?
Inter-American Navigation Corporation
Yes!
No.
Senator PEPPER. Is that true of other governmental agencies?
Metals Reserve Company
No.
Panama Rafiread Company
No.
Secretary JONES, I don't know. I think there are some that do the
Petroleum Reserves Corporation
Yes.
Prencinradle, Inc.¹
No.
same.
Production credit corporations (12)
No."
Senator PEPPER. Do you know what agencies!
Puerto Rico Cement Corporation
No.
Reconstruction Finance Corporation
No.
Secretary JONES. I do not know.
RFC Mortgage Company
Regional agricultural credit corporations (2), Washington and Minneapolis
No.
Senator PEPPER. The general practice-I will ask you, from your
No.
Rubber Development Corporation
No.
vast knowledge of the operation of the Government-the general
Rubber Reserve Company
Yes."
Smaller War Plants Corporation
Yes.
practice is, is it not, that the office of the Comptroller General, answer-
Smithsonian Institution
No.
Steel Recovery Corporation
able to Congress, audits the accounts of other Federal agencies except-
Tennessee Valley Associated Cooperatives, Ine
No.
Yes.
ing the agencies that generally have been concentrated under your
Tennessee Valley Authority
No.
Textile Foundation, Inc
authority?
United States Commercial Company
No.
United States Housing Corporation 11
Yes.
Secretary JONES, I think there are some others.
United States Spruce Production Corporation 14
No.
Virgin Islands Company
=
Yes.
Senator PEPPER. You do not recall the names of them, though
No.
War Damage Corporation
No.
Secretary JONES, I can get them for you, though.
War Emergency Pine Lines,
No.
War Hemp Industries, Inc.
No.
Senator PEPPER. Will you be good enough to get them?
War Materials, Inc.³
Warrior River Terminal Company
No.
Secretary JONES, I will be glad to.
Welfare and Recreational Association of Public Buildings and Grounds, Inc
Yes.
(The matter referred to is as follows:)
- No accounts submitted to General Accounting Office, but books and records examined in connection
The following appears as appendix B of the Annual Report of the Comptroller
with Maritime Commission audit.
General of the United States for the fiscal year ended June 30, 1944 (pp. 87-88) :
If By agreement, the General Accounting Office has performed a field audit of the Corporation through
Dec. 31. 1943. Accounts for transactions after that date are to be submitted in the regular manner, but none
had been received by June 30, 1944.
Analysis of audit control of Government corporutions as of June 30, 1944
I Agent of the Metals Reserve Company (Copper Recovery Corporation, Steel Recovery Corporation,
and War Materials, Inc., are no longer in active operation).
4 Terminated by Executive order, effective Oct. 31, 1942. and asseta transferred to Reconstruction Finance
Audited
Corporation for liquidation. Transactions subsequent to that date are not audited by the General Account-
by Gen-
ing Office.
Name of corporation
eral Ao-
Never In operation.
F, Operated with funds provided by other Government agencies (Inter-American Navigation Corporation
. Not now in operation.
count-
Ing Office
is now in liquidation).
. Transactions in which the Corporation is Involved are audited by the General Accounting Office to the
American President Lines, Ltd
same extent as transactions of the agencies providing funds to the Corporation.
No.¹
Banks for Cooperatives
, In the fiscal year 1944, submission began of accounts covering transactions of the corporations under the
No.
Central Bank for Cooperatives
jurisdiction of the Coordinator of Inter-American Affairs. from the date of their crestion.
District Bank for Cooperatives (12)
18 In connection with the mudit of the Puerto Rico Reconstruction Administration, an sudit of the books
Cargoes, Ine
and records of the Corporation was made in January 1943.
No.¹
Colonial Mies
= Administrative expenses only.
No.
Commodity Credit Corporation
it The Federal funds are audited by the General Accounting Office but not the private funds.
Yes.
Copper Recovery Corporation
13 In liquidation.
No.
Defense Homes Corporation
is In liquidation since June 28, 1922.
No.
Delense Plant Corporation
is direct appropriations have ever been made to this company, since it finances its operations from allo-
No.
Defense Supplies Corporation
cations made from relief appropriations.
Diaster Loan Corporation
No.
is Agent of the Defense Supplies Corporation.
Electric Home and Farm Authority
No.
if Agent of the Commodity Credit Corporation.
Export-Import Bank of Washington
No.
Farmers' Home Corporation
Yes.
Senator PEPPER. As a matter of fact, has not there been consider-
Federal Crop Insurance Corporation,
Federal Deposit Insurance Corporation
Yes,
able question, and in fact hasn't it been recommended by the Byrd
Federal Farm Mortgage Corporation
No.
Committee on Curtailment of Federal Expenditures, that the ac-
Federal home-loan banks (12)
Yes,
Federal intermediate-credit banks (12)
No.
counts under the Federal Loan Administrator, and under the
Federal land banks (12)
No.
Federal National Mortgage Association
No.
R. F. C.; that is, that the R. F. C. itself be subjected to the audit of
Federal Prison Industries, Ine
No.
Federal Public Housing Authority
Yes,
the Comptroller General like all other Federal agencies?
Yes,
Secretary JONES. That is right.
See footnotes at end of table.
Regraded Unclassified
48
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
49
Senator PEPPER. Now, Mr. Jones
transactions, Involving authorizations In excess of $30,000,000,000. The Recon-
Secretary JONES. Just a minute, please. At the time of those
struction Finance Corporation pays its own expenses, including interest on the
hearings, when that was brought out, your Comptroller General and
money It uses, and has operated at a net profit of more than $300,000,000, after
I worked out an agreement where he was either to do the auditing or
providing a reserve sufficient to cover all losses except those Incident to its war
activities.
he was to employ the auditors. He hasn't the manpower to do the
I know of no better auditing procedure than that employed by the Recon-
auditing at this time. He says that.
struction Finance Corporation. The chief auditor is a certified public accountant,
Senator PEPPER. You say you worked out an agreement. Was not
and has a competent staff of 740 auditors, of whom 110 are certified public
there something about some legislation which was being prepared and
accountants.
Notwithstanding that the directors of the Corporation and I are responsible
was to go to the Congress, which would make it a matter of duty and
to the Congress for the proper administration of the Corporation's affairs and
not an agreement on your part?
are satisfied that the accouns and affairs of the Corporation are well and com-
Secretary JONES. Yes; but only because the Comptroller General
petently audited, if you think it destrable, we would have no objection to the
felt that even with our consent he had no authority to audit R. F. C.
General Accounting Office making an annual postaudit and reporting the same
to Congress, provided such audit does not affect the authority or responsibility
without additional legislation. He prepared the necessary legisla-
of the Board of Directors of the Corporation under existing law.
tion, we approved it and made it available to the Byrd committee. It
The procedure proposed is as follows:
is available all the time.
On or after January 1 of each year, beginning January 1, 1944, a postaudit
Senator PEPPER. By your consent?
of the financial transactions of the Corporation for the preceding calendar year
may be made by the Comptroller General of the United States, or, at the
Secretary JONES. To other agencies, so delegated by statute, but let
election of the Comptroller General, by a firm of certified public accountants
me add, you may make this a matter of statute as to R. F. C. if you
selected by the Corporation with the approval of the Comptroller General.
want to. I did not write the provisions of the original R. F. C. Act
In either case, the scope and extent of any such audit and the manner in
which exempted it from the General Accounting Office. I did not
which It is conducted will be governed by generally accepted practices and
procedures applied by the public accounting profession In audits of commercial,
write the law. It is my impression, however, that those provisions,
industrial, and banking Institutions. The Corporation shall continue to have sule
like many others in the R. F.C. Act were taken from the War Finance
and final authority to determine the type of books and records which It shall
Corporation Act.
keep and the procedure which it shall follow in the transaction of its corporate
Senator PEPPER. The question is whether or not you resisted the
business. The board of directors of the Corporation shall be immediately notl-
fled in writing of any recommendation developed during the course of any
law, Mr. Secretary.
examination. For the purpose of the audit herein provided for, the representa-
Secretary JONES. I do not think I resisted the law at all. How
tives of the Comptroller General or of the public accounting firm conducting
could I resist the law?
such audit shall have access, during the Corporation's usual business hours, to all
Senator PEPPER. That is a matter that you would know better than
books, records, documents, and papers pertinent to such audit, but the Corporation
we, considering all your vast contacts.
shall retain the custody of all Its books, records, documents, and papers. The
Comptroller General or the public accounting firm conducting such audit may
Secretary JONES. I do not make the laws, I did not create the laws,
accept financial reports and other data furnished by fiscal agents or the chief
I do not resist them, I do my best to administer the laws that come
auditor of the Corporation as final verification of all or any part of the Corpo-
under my administration. In order that there may be no misunder-
ration's activities without further audit verification, and may limit the audit to
standing about the manner in which R. F. C. is audited and the
any extent deemed advisable in view of the internal auditing and accounting
controls maintained by the Corporation.
position of the Comptroller General about it, I will submit for the
The expenses for each such audit, when conducted by the Comptroller General,
record the exchange of correspondence with the Comptroller General
shall be paid by the Corporation upon receipt of billings approved by the Director
as follows:
of the Bureau of the Budget, and, when conducted by A public accounting firm,
MAY 12, 1943.
shall be paid by the Corporation pursuant to a contract entered into by it with
Hon. LANDSAY C. WARREN,
such firm. The expenses for any audit provided for berein shall be considered
Comptroller General of the United States,
nonadministrative expenses of the Corporation.
Washington, D. C.
The Comptroller General may make reports to the Congress of any such audit
DEAR LINDSAY: The Directors of the Reconstruction Finance Corporation have
provided for herein together with such comments as he may deem advisable.
been meticulous about Its fiscal policies, including Its records, accounting system,
Copies of any such audit as may be made by a public accounting firm shall be fur-
and auditing since its organization in February 1932.
nished to the Comptroller General for this purpose. Ench such report shall
In addition to an effective system of Internal accounting control In the Corpo-
cover the regular business year of the Corporation. No such report shall be made
ration's Washington office, its loan ageneles, and the Federal Reserve banks which
to the Congress until the Corporation and the Secretary of Commerce shall have
act as its fiscal agents and custodians, the Corporation maintains a competent
been furnished with copies thereof and shall have had 90 days thereafter, or
Audit Division, Independent of its financial and accounting operation. The Audit
such part thereof as they may require, to examine such report, to point out
Division is responsible directly to the Board of Directors. and carries on a current
errors therein. explain or answer the same, and to file a statement which shall
Internal audit of the Corporation's accounts and records, makes periodic audits
be submitted by the Comptroller General with his report.
of its loan agencies and custodians, and, In addition, makes a comprehensive bal-
As used herein the term "Corporation" shall mean each of the following Corpo-
ance sheet audit at the close of each year,
rations: Reconstruction Finance Corporation, the RFC Mortgage Company, Fed-
Further, the Directors of the Corporation, pursuant to Its bylaws, obtain
eral National Mortgage Association. Rubber Development Corporation. Defense
annually an Independent audit by firms of certified public accountants of national
Plant Corporation, Defense Supplies Corporation, Metals Reserve Company,
reputation, chosen after competitive bidding and deemed qualified to make an
Rubber Reserve Company, U. S. Commercial Company, War Damage Corporation,
audit of a financial Institution of the size and character of the Reconstruction
and Disaster Loan Corporation. together with any other corporation hereafter
Finance Corporation. Audits in previous years have been made by Haskins &
created or organized by Reconstruction Finance Corporation pursuant to section
Sells, Arthur Andersen & Co., B. C. Rankin & Co., and Patterson, Teele & Dennis.
5d of the Reconstruction Finance Corporation Act. as amended.
The Corporation and Its subsidiaries have handled hundreds of thousands of
Nothing herein shall be construed to limit the authority of the board of
directors of the Corporation to determine and prescribe the manner in which its
Regraded Unclassified
50
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
51
obligations are incurred and its expenses allowed and paid, or to exercise ex-
important change has been made, however, the enclosed draft of the proposed
clusive control over Its funds, including, without limitation, their receipt, de-
leigislation provides for the audit of the accounts of the Reconstruction Finance
posit, and disbursement, and the Corporation shall continue to have exclusive
Corporation elther by the General Accounting Office or by a firm of certified pub-
authority to make settlement and adjustment for all claims and demands what-
He accountants selected by the Comptroller General. In view of the heavy addi-
ever by the Corporation or against It and all accounts whatever in which the
tional burden which would be imposed upon this office by the proposed legisla-
Corporation is concerned, either as debtor or creditor.
tion, It may be advisable to have such authority at least until qualified personnel
If. in your opinion, the added protection afforded by such audits made by you
can be obtained by this office.
or under your direction is desirable and the foregoing procedure is acceptable,
Under section 4 of the Reconstruction Finance Corporation Act. the Directors
please so Indicate.
of the Corporation have the full responsibility and final authority for determin-
Very truly yours,
ing the type of books and records which the Corporation shall keep and the
JESSE H. JONES, Secretary of Commerce.
accounting methods and procedures It shall follow in the transaction of its
corporate business. The amendment we propose would in no wise limit the
present authority of the Directors of the Corporation In these regards.
Please permit me to express to you my sincere appreciation for the fine
COMPTROLLER GENERAL OF THE UNITED STATES,
spirit of cooperation which you have shown in this matter. In an undertaking
Washington, May 31, 1943.
of the magnitude Involved In the audit by this office of the accounts of the
The Honorable the SECRETARY OF COMMERCE.
Reconstruction Finance Corporation and its subsidiary corporations, there are a
My DEAR MR. JONES: In your letter to me of May 12, you explained rather fully
number of situations which must be worked out and mutually agreed to in order
the careful manner in which the Directors of the Reconstruction Finance Corpo-
to secure the results desired. This, 1 am sure, we can do without impeding the
ration have controlled its fiscal policies, including its records, accounting system.
operations of the corporations or infringing upon the responsibilities of their
and auditing, since its organization in February 1932. I note that, in additon to an
officers and directors.
effective system of Internal accounting control in its Washington office, its loan
I was chairman of the House Committee on Accounts when the bill creating
agencies, and the Federal Reserve banks which net as its fiscal agents and eus-
the Reconstruction Finance Corporation was considered and passed, and I pre-
todians, the Corporation has maintained an Audit Division responsible directly
sided over Its consideration in the House. I have since watched Its course with
to the Board of Directors, which makes current Internal audits and comprehen-
the greatest possible Interest, and take pleasure in commending you and your
sive annual audits; and, further, that the directors have obtained annually an
associates in the Reconstruction Finance Corporation for the enviable record
independent audit by firms of certified public accountants of national reputation.
it has made,
You ask if. in my opinion, the added protection afforded by such audit made by
Sincerely yours,
the General Accounting Office, or under its direction, is desirable and If the
LINDSAY C. WARREN,
procedure outlined in your letter would be acceptable.
Comptroller General of the United States.
I am in agreement generally with the view that the type of audit you suggest
would be preferable to the normal Government audit for financial transactions of
A BILL To provide for an annual audit of the financial transactions of Reconstruction
Finance Corporation and certain subskliaries and affiliated corporations, and for other
corporations: also, that it would be desirable to have such an audit of the Recon-
purposes
struction Finance Corporation and its subsidiary corporations made by, or under
the general supervision of, the General Accounting Office.
Be " enacted by the Senate and House of Representatives of the United States
Briefly, the audit which this office is required to make is based upon the sub-
of America in Congress assembled, That the Reconstruction Finance Corporation
mission by accountable officers of their accounts supported by original documents,
Act, 47 Stat. 5. as amended, is hereby amended by Inserting an "(a)" before
which are audited, adjusted, and settled by the General Accounting Office, and the
the first sentence of section 4 thereof and by adding at the end of such sub-
personal liability of said accountable officers to the United States determined by
section (n) of such section 4 the following new subsections:
applying the legislative restrictions relating to public funds generally. In the few
"(b) Commencing with the period beginning January 1, 1914, an annual post
Instances where this office has deviated from this regular procedure, such devia-
audit of the financial transactions of the Corporation for the preceding calendar
tion has been provided by statutes. See in this connection section 9 of the net
year shall be made by the General Accounting Office or, at the election of the
of May 18, 1933 (48 Stat. 63), as amended, for the audit of the accounts of the
Comptroller General, by a firm of certified public accountants. In either case,
Tennessee Valley Authority: the act of February 16, 1938 (52 Stat. 76). as
the scope and extent of any such andit and the manner in which it shall be
amended, for the Crop Loan Insurance Corporation, and section 207 of the Mer-
conducted shall be governed by generally accepted practices and procedures
ehant Marine Act of June 29, 1936, as amended.
applied by the public accounting profession In audits of commercial, Industrial
As you know. I have recently had for consideration a request, similar to yours,
and banking Institutions. For the purpose of the audit herein provided for, the
from the Secretary of Agriculture, for the andit of the transactions of the Com-
representatives of the General Accounting Office or of the public accounting firm
modity Credit Corporation. Representatives of this office, in eooperation with
conducting such audit shall have access, during the Corporation's usual busi-
representatives of the Department of Agriculture, worked out a plan, whereby
ness hours, to all books, records, documents and papers pertinent to such audit,
the operating accounts of the Commodity Credit Corporation are to be audited
but the Corporation shall retain the custody of all its books, records, documents
"in accordance with the principles applicable to commercial corporate transac-
and papers, The General Accounting Office or the public accounting firm con-
tions." The authority for, and the general scope of, the audit for Commodity
ducting such audit may accept financial reports and other data furnished by
Credit Corporation, are set forth in 110s, which was Introduced in the Senate
fiscal agents or the Chief Auditor of the Corporation as final verification of all
by Senator Wagner May 14. 1943, and in H. R. 2725, introduced in the House by
or any part of the Corporation's activities without further audit verification,
Congressman Steagall, May 17. 1943.
and may limit the audit to any extent deemed advisable In view of the Internal
The general audit plan as set forth in said bills provides a basie pattern for
auditing and accounting controls maintained by the Corporation.
the audit along commercial lines of the financial transactions of all corporations
"The expenses for each such audit may be paid by the Corporation upon receipt
which operate as agencies of the United States, Since the receipt of your
of billings certified by the Comptroller General and shall be considered non-
suggestion the type of legislation to provide the authority of the General Ac-
administrative expenses of the Corporation.
counting Office to make an audit of the accounts of the Reconstruction Finance
"(e) The Comptroller General shall make a report to the Congress of each
Corporation and its subsidiaries has been agreed upon between our respective
such audit but no such report shall be made until the Corporation and the
staffs. A draft of the proposed legislation is enclosed, Basically, the suggested
Secretary of Commerce shall have been furnished with copies thereof and shall
legislation retains the fundamental features in the bills relating to the Com-
have had ninety days thereafter, or such part thereof as they may require, to
modify Credit Corporation now pending in Congress with such changes as are
examine such report, to point out errors therein, explain or answer the same, and
appropriate for the operations of the Reconstruction Finance Corporation. One
to file a statement which shall be submitted by the Comptroller General with
his report.
52
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
53
"(d) Nothing contained In subsections (b) and (e) hereof shall be construed
to limit the authority of the board of directors of the Corporation to determine
Senator PEPPER. You mean it relates to all the corporations that
and prescribe the manner in which Its obligations are incurred and Its expenses
are subsidiaries of R. F. C.?
allowed and paid, or to exercise exclusive control over Its funds, including,
without limitation, their receipt, deposit and disbursement, and the Corporation
Secretary JONES. That means all of the organizations that were
shall continue to have exclusive authority to make settlement and adjustment
created by the R. F. C. under the authority given in the act signed by
for all claims and demands whatever by the Corporation or against it and
the President on June 25, 1940. That law gave the R. F. C. the au-
all accounts whatever In which the Corporation is concerned, elther as debtor
thority to create corporations, to do these things that we are author-
or creditor.
ized to do in the act.
"(e) As used in subsections (b), (e) and (d) of this section, the term 'Cor-
poration' shall mean each of the following corporations: Reconstruction Finance
Senator PEPPER. Those are wartime corporations?
Corporation, The RFC Mortgage Company, Federal National Mortgage Associa-
Secretary JONES. Yes; and those corporations could not be created
tion. Disaster Loan Corporation, Defense Plant Corporation, Defense Supplies
except with the approval of the President, and they were all created
Corporation, Metals Reserve Company. Rubber Reserve Company, Rubber De-
with his approval.
velopment Corporation, War Damage Corporation and U. S. Commercial Com-
pany. together with any other corporation hereafter created or organized by
Senator PEPPER. Mr. Secretary-Mr. Jones-
Reconstruction Finance Corporation pursuant to section 5d of the Reconstrue-
Secretary JONES. Why don't you leave it like you said it?
tion Finance Corporation Act, as amended."
Senator PEPPER. Beg pardon?
Senator PEPPER. I understood you to imply, or to state, I mean, that
Secretary JONES. Why did you correct yourself?
what you had done had been subject to the approval of the President.
Senator PEPPER. I did in view of the qualification which you im-
Secretary JONES. In war work?
posed; I thought it was proper to be Secretary; you have to have what
Senator PEPPER. In war work.
I call squatter's sovereignty that you now enjoy.
Secretary JONES. Yes.
What I wanted to ask was: As a matter of fact, you are not only
Senator PEPPER. Did you mean each individual loan made had to
strong and able, but a candid man. As a matter of fact, with your
have the President's approval?
knowledge of the duties of the Department of Commerce and the inti-
Secretary JONES. No. No.
mate relationship between the performance of those duties and the
Senator PEPPER. In what respect did you mean to connect the Presi-
performance of the duties of Federal Loan Administrator, the real
dent's prior approval with your action?
fight, the issue that is really presented here-
Secretary JONES. Well, we could not buy critical materials without
Secretary JONES. The what?
his designating the material and approving the purchase, that is, the
Senator PEPPER. I say the issue which is really presented here-and
purchase of, we will say, lead, or any other critical material. There
you met it candidly in your original statement, as you meet most
are probably 150 of them that he has approved.
everything-the issue here is the question of whether you or Henry
Senator PEPPER. Does that apply to action taken by the R. F. C.,
Wallace will be Secretary of Commerce and exercise the present duties,
or is that just action taken by the Defense Plant Corporation, or one
powers and prerogatives of that office. One man, whoever he is, if he
particular corporation?
is competent, can perform the duties of both offices; isn't that right,
Secretary JONES. That is in the law that gave the R. F. C. the right
Mr. Jones!
to do these things.
Secretary JONES. What do you expect me to say to that?
Senator PEPPER. The right to do what things?
Senator PEPPER. I expect you to give your opinion.
Secretary JONES. To buy these materials.
The CHAIRMAN. I suggest you do not give any opinion. That is not
Senator PEPPER. Only the critical materials?
pertinent, and I do not think it is fair to Mr. Jones.
Senator JONES. Building plants as well.
Senator PEPPER. That is the whole burden of the testimony that has
Senator PEPPER. Now, the corporation that builds plants and per-
been given here by Senator George and Mr. Jones. The whole purpose
haps aids in war work, that is called the Defense Plant Corporation?
of the bill divides the function of the two on the theory that one man
Secretary JONES. Yes.
cannot perform both of them, and I am asking a man who has
materials? Senator PEPPER. Is there another corporation that buys critical
performing both of them, cannot one man do the job of both.
The CHAIRMAN. You are going beyond that. That is certainly not
Secretary JONES. Yes,
in contemplation here.
Senator PEPPER. Did the laws creating both of those corporations, if
Senator PEPPER. I will reframe the question. Perhaps I can makê
they are created by law independently, did they both provide that
it more clear, so I shall not deceive the able chairman in the purport
you cannot exercise the power provided therein without prior approval
of it.
of the President?
The CHAIRMAN. You are not deceiving me, I will tell you that now.
Secretary JONES. Yes; except at the request of the Federal Loan
Senator PEPPER. I hoped I would not. What I meant to ask was:
Administrator and the approval of the President.
Out of your experience, Mr. Jones, is it not your opinion that these
Senator PEPPER. Is that in both laws?
two offices can be administered by one man, assuming the competence
Secretary JONES. Yes; the war subsidiaries were all created under
of that man, and is it not logical that they should, as closely related
the same law.
as they are, be at least for the time being, operated by one man?
54
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
55
Secretary JONES. If you are trying to ask me if Henry Wallace is
qualified for both jobs, I will say "No."
inability to do it. You have met the issue in a candid way, and that
[Applause.]
is what I want to ask you to do in answering my questions.
Secretary JONES. May I ask to have that repeated? This amplifier
Senator PEPPER. I knew you would say that.
here kind of rumbles, it magnifies and rumbles around, and I cannot
The CHAIRMAN. Please don't make any demonstration for either
side. I assume we are going to adjourn now. I do not want to say
understand you too well.
(The record was read by the reporter.)
anything to be disagreeable, but in order to have order, if there is any
Senator PEPPER. Well, you may divide the question into two parts.
further demonstration I will submit the matter to the committee as
The question I asked was whether it was your opinion that a man,
to what steps to take. Proceed, Mr. Jones.
assuming his competence, that one man can, in these times, administer
Secretary JONES. I would like to add: I am not here to testify
the duties of the office of Federal Loan Administrator and the office
against Mr. Wallace; I am here to give my opinion and my experience
of Secretary of Commerce!
with this organization, with this enormous work. I do not think that
Secretary JONES. I think that is possible, if you will work long
the Senator-I think he would make a fine Secretary of Commerce,
enough, hard enough, and enough hours. I do not believe there is
divorced from the business, but it does not occur to me, Senator, that
another fellow in the world that will do it except me.
you would be qualified, from experience, to run all these vast busi-
Senntor PEPPER. Very well. Now, getting back to the other ques-
nesses,
tion, which you touched upon in your answer, do you feel that you
I happened to have been-and I am not talking about myself be-
have instances and details, or facts at your disposal, which you can
cause I am out-I happened to have been in business all of my life,
disclose to the committee, showing that Mr. Wallace is not, as you
little business too. I have never been in a big corporation. I have
said he was not, qualified to perform the duties of that office?
had a lumber yard and various and sundry other things. and still
The CHAIRMAN. Mr. Jones, you will not be required to answer that
have most of them. I am a little businessman, a typical businessman;
I know the problems of the little businessman, and I also know the
question. That is wholly in your discretion. You were centainly
not invited here to come down and express personal opinions about
big fellows, and I know how smart they are, and I know the people
Mr. Wallace.
who come to the R. F. C. to get money are not all entitled to it, and
Senator PEPPER. That is the first thing the witness did when he
yet they are awfully smart. Men come to us drawing $100,000 a year
started his testimony this afternoon, and that is a matter to which
salary, maybe, and they talk to our boys who are getting $6,000 or
the witness returned when I asked him the previous question.
$7,000 or $8,000, and they do not run away with anything. You know,
The CHAIRMAN. I submit it to Mr. Jones. If you wish to appeal
we are the sugar and there is where the flies are. Where the money
from it, you can have an appeal. I am telling you I do not want to
is, that is where the moochers are, and the moochers have not all
go into the subject of personal comparisons between Mr. Jones and
been in W. P. A.: they are in business. Men come to us for money
Mr. Wallace. We have not sent for Mr. Jones for that purpose.
who are not entitled to it. and yet they put up a plausible tale, and
Senator PEPPER. He has made the statement repeatedly throughout
unless a man is experienced in business he is liable to make a lot of
the hearing that he did not regard Mr. Wallace as qualified, and we
mistakes. I do not mean by that that we have been rigid in our credit.
are entitled to know the basis upon which Mr. Jones makes that state-
We have not been. We have made 10 times more loans than the
ment. If he has got any facts to base his opinion on, or possibly a
Smaller War Plants Corporation. We are making them every day.
and have been making them every day, so you cannot accuse us. you
prejudice, we ought to know it.
Secretary JONES. A lack of experience, and there is no prejudice.
cannot accuse the R. F. C., of being rigid in its credit. We have offices
Senator PEPPER. That is what we are entitled to know.
all over the country: we have borrowed help. We have a small or-
Secretary JONES. Well, I have said that.
ganization, but where we have an agency we have an advisory com-
Senator PETTER. Well, now, what are the experiences that show his
mittee of local businessmen to help pass on the loans, We get that
inability to administer the duties of this office, in your opinion?
for nothing. The men are good enough. and have been for 13 years,
Secretary JONES. I said the lack of experience.
to sit in with the boys and help the boys and give them their advice,
Senator PEPPER. Very well. Will you tell us what the experiences
and that is the reason we have been able to operate cheaply.
are, so we can let him have a chance to answer?
Senator PEPPER. Mr. Secretary, I want you to observe, and the
Secretary JONES. I do not care to get into an argument with you
chairman also, that I reframed my question. and I am asking you
about it I am not going to do it. it is not necessary.
whether, out of your experience, one man could properly hold the
Senator PEPPER. Mr. Jones, the easiest thing in the world, to my
office of Federal Loan Administrator and Secretary of Commerce,
mind, is to provoke an argument. It is the principle of American
and it was you who diverted from the question in your response.
Secretary JONES. What?
jurisprudence when a man is attacked he has an opportunity to answer
the attack. You have come here this afternoon and the whole purport
Senator PEPPER. It was you who diverted in your answer from
of your testimony has been to attack Mr. Wallace as unqualified by lack
the question. You made a statement as to your opinion about Mr.
of experience, as being incompetent, and then being a sort of a dreamer
Wallace, and a comparison between your ability as a businessman
who, to use your language, wants to remake the world. If you think
to administer the duties of those offices, and at least by innuendo, his
he has got any ideas of dangerous experimentation, as you implied,
ADMINISTRATION OF CERTAIN LENDING AGENCIES
57
56
ADMINISTRATION OF CERTAIN LENDING AGENCIES
COMMERCE DEPARTMENT,
I think you used that word, that might endanger the economy of the
Washington, January 25, 1945.
country, we would profit very much if you would give us the experi-
Hon. JOSIAH W. BAILEY,
mentation to which you refer and let the committee have the factual
Chairman, Commerce Committee,
data which you desire to disclose to us.
Senate Office Building, Washington, D. C.
Secretary JONES. Senator, if you don't say so much I can probably
DEAR SENATOR: I am attaching a break-down of our Industrial loans and a copy
of an article on the aid Reconstruction Finance Corporation has given to small
understand you. I cannot understand what you are talking about.
business, which apepared in the Sunday Star.
I am willing to answer your questions.
It would be appreciated if both of these could be made a part of the record.
Senator PEPPER. You said he was incompetent.
Sincerely,
Secretary JONES. I did not say he was incompetent. You are put-
JESSE H. JONES.
ting words in my mouth here. Stick to the text.
Size of all logns and commitments authorized to business enterprises by the
Senator PEPPER. You referred, in your original statement, to the
Reconstruction Finance Corporation through Dec. 31, 1944
danger to the country of turning over this agency to someone who
[Excludes loans and commitments to subsidiaries of Reconstruction Finance Corporation, defense homes
would conduct dangerous experimentations in that office, or to some-
and Great Britain)
one who might want to remake the world, from which statement you
drew a response from the audience. Now, I will confine it to those
Number
Percent
two things. Have you any quotations, have you any official acts on the
$5,000 and under
6,952
31.6
part of Mr. Wallace, which you disclose to the committee, as a basis
$5,001 to $10,000
3,414
15.5
for those opinions?
$10,001 to $25,000
4,552
20.7
$25,001 to $50,000
2,761
12.5
The CHAIRMAN. Mr. Jones, just a minute. The confirmation of
$50,001 to $100,000
2,121
9.6
$100,001 to $200,000
1,034
4.7
Mr. Wallace is not before the committee at the present time, and if
$200,001 to $500,000
697
3.2
218
1.0
we wish to hear from you on his qualifications or he wishes to defend,
$500,001 to $1,000,000
Over $1,000,000
259
1.2
according to the rules of American jurisprudence, he will come here
Total
22,008
100.0
and defend in the presence of a lawyer of his own selection, so you
do not have to answer the question.
Secretary JONES. I did not know the purpose of the question, Sen-
Size of loans and commitments authorized to business enterprises for defense
ator.
by the Reconstruction Finance Corporation through Dec. 31, 1944
The CHAIRMAN, The witness does not need to answer the question.
Number
Percent
Senator PEPPER. I think it is pertinent to the inquiry.
The CHAIRMAN. No; it is not even pertinent to the inquiry.
A. ON RATIONED COMMODITIES (INCLUDING PURCHASES)
Senator PEPPER, Upon that statement by the chairman and the
$5,000 and under
1,411
38.5
witness, there is nothing to do except desist.
622
17.0
$5,001 to $10,000
Secretary JONES. I will try to answer your questions.
796
21.7
$10,001 to $25,000
449
12.2
Senator BREWSTER. Mr. Jones-Mr. Secretary, the Senator from
$25,001 to $50,000
271
7.4
$50,001 to $100,000
8
27
Florida inquired about the record of all these other men, but for the
$100,001 to $200,000
16
.4
$200,001 to $500,000
3
.1
purpose of the historical record. and we want to be familiar with all
$500,001 to $1,000,000
Over $1,000,000
of this, I would like to ask that you put in the record, for future ref-
Total
3,667
100.0
erence, your own record of business experience prior to your taking
over those responsibilities. I think that should be in the record.
n. ALL OTHER-FOR DEFENSE
1,594
21.1
$5,000 and under
Secretary JONES. I will be glad to do that. The trouble is it goes
$5,001 to $10,000
1,077
14.3
$10,001 to $25,000
1,655
221
too far back, Senator.
$25,001 to $50,000
1,009
14.2
974
129
The CHAIRMAN, Now, if there is nothing more, it is time to adjourn.
$50,001 to $100,000
472
6.2
$100,001 to $200,000
We will adjourn until tomorrow morning at 10:30, and I will state
358
4.7
$200,001 to $500,000
144
1.9
that Mr. Wallace need not come down here to testify to his qualifica-
$500,001 to $1,000,000
195
2.6
Over $1,000,000
tions. I am sure he is going to come down here to testify about this
7,549
100.0
Total
legislation. I have not heard from him, but I expect he will be here,
c. GRAND TOTAL-DEFENSE
and We will go to work, if he comes down, at 10:30 in the morning.
$5,000 and under
3,005
25.8
1,699
15.2
(The following was submitted for the record:)
$5,001 to $10,000
2,461
21.9
$10,001 to $25,000
1,518
13.5
$25,001 to $50,000
1,245
11.1
$50,001 to $100,000
571
5.1
$100,001 to $200,000
374
3.3
$200,001 to $500,000
147
1.3
$500,001 to $1,000,000
196
1.8
Over $1,000,000
Total
11,216
100.0
Regraded Unclassified
58
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
59
Bize of loans and commitments authorized to business enterprises except for
July 15, 1943, this Corporation was by Executive Order No. 9361, transferred to
defense by the Reconstruction Finance Corporation through Dec. 31, 1944
the Office of Economic Warfare, now the Foreign Economic Administration, and
now handles all natural-rubber procurement in foreign countries.
Number
Percent
From time to time, by Executive order, the President has placed the responsi-
bility for determining the production or procurement necessary for war purposes
$5,000 and under
3,047
in agencies other than the Reconstruction Finance Corporation. Consequently,
36.6
$5,001 to $10,000
1,715
15.9
the construction of the Reconstruction Finance Corporation war plants and
$10,001 to $25,000
2,091
19.4
projects and the production and procurement of materials have been at the request
$25,001 to $50,000
1,243
11.5
876
of other departments charged with the procurement and production of war
$50,001 to $100,000
8.1
$100,001 to $200,000
463
4.3
matériel.
$200,001 to $500,000
323
3.0
Authorizations by these subsidiary corporations, together with the Reconstrue-
$500,001 to $1,000,000
71
.6
tion Finance Corporation direct commitments for war purposes of approximately
Over $1,000,000
63
.6
$2,600,000,000, have amounted in round numbers to $32,300,000,000. Disburse-
Total
10.792
100.0
ments have been in excess of $18,000,000,000. Repayments of loans and advances,
collections of rentals and part payments on plants and equipment, and proceeds
of sales of materials, etc., have been approximately $9,100,000,000. The disburse-
[Released for morning papers for Thursday, January 18, 1945]
ment figure includés $1,400,000,000 for direct subsidy payments, under section
COMMERCE DEPARTMENT,
2 (e) of the Emergency Price Control Act of 1942, as amended, to increase or
Washington, January 15, 1945.
maintain production of materials defined by the President to be strategic or criti-
cal, but this latter figure does not Include losses arising from the purchase and
To the President and the Congress, reporting on the war activities of the Recon-
sale of such materials.
struction Finance Corporation and its subsidiaries:
We have built plants, shipyards, plpe lines, etc., bought and sold equipment and
June 25, 1940, the President signed Public Law 664, Seventy-sixth Congress,
materials, paid subsidies, etc., at the request of the War, Navy, and State Depart-
which, among other things, authorized the Reconstruction Finance Corporation,
ments, the Maritime Commission, War Production Board, and Its predecessors,
acting through certain subsidiary cohporations to be created by it, for purpose
Supply Priorities and Allocations Board and Office of Production Management,
of national defense, to build and operate plants and facilities for the manufacture
the Office of the Rubber Director, the Petroleum Administration for War. Solld
of matériel, and to procure supplies, equipment, etc., and to buy materials
Fuels Administration for War, the Office of Defense Transportation, Office of
declared by the President to be strategie and critical. The act provided that
Price Administration, War Food Administration. Board of Economic Warfare,
activities of the Reconstruction Finance Corporation under this authority should
Foreign Economic Administration, Office of Economic Stabilization, Office of War
be undertaken at the request of the Federal Loan Administrator and with the
Mobilization, and the Office of War Mobilization and Reconversion.
approval of the President.
All these vast operations, which have been vital to our national defense and
February 24. 1942. by Executive Order No. 9071. the functions, powers, and
the prosecution of the war, could only have been accomplished by the prompt
duties of the Federal Loan Agency and of the Federal Loan Administrator were
and unfalling cooperation which the Reconstruction Finance Corporation and its
transferred to the Department of Commerce to be administered under the diree-
subsidiaries have given other Government agencies responsible for war produe-
tion and supervision of the Secretary of Commerce.
tion and procurement.
June 25, 1940, 3 days after the act was signed, Rubber Reserve Company and
A summary of these operations is attached.
Metals Reserve Company were created by the Reconstruction Finance Corpora-
JESSE H. JONES, Secretary of Commerce.
tion primarily for the purpose of buying a stock pile of rubber, tin, and other
materials Later, Rubber Reserve Company established and is operating the
RUBBER RESERVE COMPANY
synthetic rubber program.
August 22, 1940, Defense Plant Corporation was created by the Reconstruction
Rubber Reserve Company's production of synthetic rubber has been approxi-
Finance Corporaton primarily to build and operate plants and facilities for the
mately 1,000,000 long tons, 737,000 tons of which were manufactured in 1944.
production of war matériel, and to do other things, for our national defense.
In addition to Government plants, private Industry produced 26.000 long tons
August 20, 19-0, Defense Supplies Corporation was created by the Reconstrue-
in 1944. Our synthetic rubber plants are capable of producing at least 1,000,000
tion Finance Corporation to purchase and stock pile strategie and critical mate-
long tons of synthetic rubber a year, if necessary. Forty-seven chemical, petro-
rials other than rubber. minerals, and metals, and to do other things necessary
leum, rubber, and industrial companies are operating the plants for account of
to the production and procurement of essential materials.
Rubber Reserve Company.
December 13, 1941, 6 days after Pearl Harbor, the Reconstruction Finance
Some small plants for the production of synthetic rubber were first authorized
Corporation, at my request and with the approval of the President, created War
early In 1941. Immediately after Penrl Harbor the program was increased to-
Damage Corporation to provide reasonable protection against loss of or damage
an annual eapacity in excess of 400.000 tons, and after the fall of Singapore, was
to property resulting from enemy attack, including action taken by the military.
further increased to its present capacity. The Rubber Director made relatively
naval, or air forces of the United States in resisting enemy attack.
few changes in the program which had been developed and authorized by Rubber
March 26, 1942, United States Commercial Company was created by the Recon-
Reserve Company prior to the appointment of the Rubber Survey Committee in
struction Finance Corporation primarily to buy in the foreign markets strategic
August 1942.
and critical materials that we needed in the war effort, as well as to prevent the
The development of this vital new industry in the emergency is a credit to the
Axis Powers from obtaining them. July 15, 1943, the operations of this Company
Ingenuity and enterprise of American business.
were, by Executive Order No. 1061, transferred to the Office of Economic Warfare,
In addition to the production of synthetic rubber, the plants have produced
now the Foreign Economic Administration
more than 25,000.000 gallons of ethylbenzene and approximately 4,000,000 gallons
June 31. 1943, Petrolegm Reserves Corporation was created by the Reconstrue-
of cumene used In the manufacture of aviation gasoline.
tion Finance Corporation for the purpose of acquiring reserves of crude petroleum
Including the rubber trade, rubber Importations since early 1940 to the present
from sources outside the United States, July 15, 1943, the operations of this
time have been more than 2,280,000 long tons. Rubber Reserve Company's Im-
Corporation were, by Executive Order No. 9361, transferred to the Office of
portations of natural rubber, Including 83,000 tons bought from Commodity
Economic Warfare. now the Foreign Economic Administration.
Credit Corporation, have been 930,000 long tons, 116,000 tons of which were
February 1943, at the request of the Rubber Director, we separated the
received in 1944.
development and procurement of natural rubber In this hemisphere from Rubber
From June 1942 to January 1, 1944, Rubber Reserve Company was the sole
buyer and seller of scrap rubber. In that period It purchased a little more than
Reserve Company and carried on that operation through Rubber Development
Corporation, another subsidiary of the Reconstruction Finance Corporation.
1,100,000 short tons, 920,000 tons of which have been sold.
Regraded Unclassified
60
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
61
We have Invested something over $700,000,000 In plants and faellities for the
Ninety-seven for aluminum facilities In the amount of $812,000.000.
manufacture of synthetic rubber.
Ninety-two for ordnance facilities in the amount of $356,000,000.
Prior to the war, natural rubber was costing from 18 to 20 cents a pound.
Fifty-seven for synthetle-rubber manufacturing facilities in the amount
Synthetic rubber is being produced In some of our plants at less than these
of $715,000,000.
figures, and some In the Industry feel that synthetic can be produced in competi-
tion with natural rubber. Our cost for 1944. exclusive of plant amortization,
Fifty for other rubber-manufacturing faellities necessary in the war effort
in the amount of $115 000,000.
was approximately 38 cents a pound, due to the fact that more than 60 percent
Fifty-two for magnesium facilities in the amount of $453,000,000.
of the rubber was made from high-priced alcohol Instead of petroleum.
Thirty-eight for aviation gasoline facilities In the amount of $245,000,000.
Six for pipe lines in the amount of $189,000.000.
METALS RESERVE COMPANY
Two hundred and forty-seven plants aggregating $3,100,000,000 are leased to
The Reconstruction Finance Corporation, through Metals Reserve Company
operators at an annual rental of $1 a year. In these plants no charge Is made
has made total commitments for the purchase of strategic and critical minerals
to the Government procurement agency for plants or plant facilities in the supply
and metals aggregating $5,174,000,000. Of this amount $2,150,000,000 has been
contracts. In the remaining 1,858 projects, in the amount of $4,900,000,000,
disbursed, and $2,149,000,000 canceled or assigned to industry or the Foreign
rentals have been collected aggregating $422,000,000.
Economic Administration.
The plants and projects are located In 46 States, and ench was undertaken
Sales of these materials have been principally to industries engaged in war
at the request of the War or Navy Department, Maritime Commission, War
production, and have amounted to $1,313,000,000.
Production Board, or other agency having responsibility for the procurement
Stock piles on hand cost $538,600,000, and, in addition, the Company has assets
of war matériel.
largely in the nature of advances to contractors, other receivables, and mining
Recently a number of facilities that had finished their war work were trans-
equipment and supplies in the amount of $67,800,000.
ferred to new operators for other emergency war production.
Losses through sale of materials within Office of Price Administration celling
The distribution of plants and projects by States follows:
prices have been $26,500,000. A great many of the materials have been bought
at more than celling prices.
Plants and
Plants and
Losses through subsidizing domestic production of copper, lead, and zine from
State
Commitment
State
Commitment
projects
projects
marginal mines have aggregated $162,800,000. Premium payments under this
subsidy have been made In connection with the production of 3,493 separate mines,
Purchases have covered 50 different critical materials, and have come from 51
Alabama
16
$73,733,000
Nevada
5
$150,259.000
2,121,000
Arizona
16
98,402,000
New Hampshire
3
foreign countries, 38 States in the United States, Alaska, and the Philippines.
Arkanss*
12
88,853,000
New Jersey
132
258,337,000
Purchases were begun in 1940, well before Pearl Harbor, and have continued
California
120
323,206,000
New Meríco
4
5,208,000
throughout the war.
Colorado
5
6,535,000
New York
106
577,542,000
Connectient
=
152,850,000
North Carolina
9
13.420,000
The objectives of Metals Reserve Company have been the purchase and produc-
778,515,000
Delaware
7
3,383,000
Ohio
232
District of Columbia
3
4,850,000
Oklahoma
20
46.985,000
tion of metals and minerals for use in our national defense, and in prosecution
of the war.
Florida
14
16,008.000
Oregon
K
13,019,010
Georgia
=
4,279.000
Pennsylvania
172
581,663,000
Figures in the foregoing summary are substantially as of December 31, 1944.
Idabo
1
225,000
Rhode Island
13
6,937.000
Illinois
132
695,679,000
South Carolina
11
8,050,000
DEFENSE PLANT CORPORATION
Indiana
St
507,485,000
Tennessee
23
47.545,000
Towa
20
14.999,000
Texas
92
647,080,000
Kansas
10
44,544.000
Utah
18
248,601.000
The Reconstruction Finance Corporation, through Defense Plant Corporation,
Kentucky
56
161,432,000
Vermont
6
4,126,000
16.553,000
has made commitments for war plants, facilities, and machine tools aggregating
Louisiana
27
232.810,000
Virginia
10
Maine
2
352,000
Washington
30
149,058,000
disbursed. $10.704,935,000. Of this total $757,656,000 has been canceled and $7,177,700,000
Maryland
42
72.508,000
West Virginia
12
93,093,000
Massachusetts
71
94,901,000
Wisconsin
56
171,463,000
The total figure includes pool order commitments for machine tools aggre-
Michigan
209
809,000,000
Wyoming
4
12,809,000
Minnesota
27
29,376,000
Facilities
in
more
gating $1,985,000,000. These orders are issued to insure the machine-tool mano-
Mississippi.
5
1,620,000
than I State: Pipo
facturer a market for his product and, as the tools are sold by the manufacturer,
Missouri
32
161,808,000
lines. etc.
60
398,208,000
our obligation ceases.
Montana
3
12,478,000
Nebraska
6
28,125,000
Total
2,098
7,939,465,000
We have only been required to buy tools under these orders aggregating
$4,912,000, and our outstanding commitments at this time are only $33,271,000.
However, we have an informal request now from War Production Board to issue
Commitments for facilities to produce critical and strategic materials in
new pool orders in a substantial amount, to be handled In the same manner.
foreign countries have aggregated $42,714,850. They "Includa the production
In addition to the pool orders, machine tools have been supplied to 1,007 con-
of copper in Chile, nickel in Cuba, vanadium concentrates in Peru, peat in
tractors in the amount of $1,087,000,000, the contractors paying a fixed rental.
Canada, fluorspar in Newfoundland, and balsa wood In Ecuador.
Total commitments include 920 complete, integrated plants wholly owned by
The figures throughout are substantially as of December 31. 1944.
Defense Plant Corporation, In the amount of $6.055.000,000; and the expansion
of 122 existing privately owned plants in the amount of $740,000,000. These
DEFENSE SUPPLIES CORPORATION
-
expansions are wholly owned by Defense Plant Corporation and are located on
land owned by it or held under long-term lease.
The Reconstruction Finance Corporation, through Defense Supplies Corpora-
The over-all commitments include-
tion, had authorized total expenditures In the war effort aggregating $10,350,-
000 000, of which $800,000,000 has been canceled or assumed by private Industry.
$3,100,000,000. Five hundred and seventy-four for aircraft facilities in the amount of
The Corporation's operations include the purchase of strategic and critical
materials, the payment of extraordinary transportation costs on oil, coal, and
One hundred and eighty-three for steel and pig-iron facilities in the amount
of $1,023,000,000.
sugar, loans and advances to contractors in connection with the purchase of
materials, the payment of subsidies and other activities made necessary by
$119,000,000. One hundred and sixty-one for chemical facilities in the amount of
the war. Disbursements for such purposes have been $5,200,000,000. Receipts
from the sale of materials, repayments of loans and advances, et cetera, have
$80,000,000. One hundred and fifty-six for machine-toot facilities in the amount of
totaled $3,600,000,000.
1
62
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
63
The operation includes, but is not limited to, commitments for the following
War Damage Corporation has utilized in Its operations the facilities of 546
purchases:
fire-Insurance companies and 88 casualty-insurance companies, their branch offices,
Aviation gasoline
$2,976,000,000 $2,
and their agency forces.
Alcohol
802,400,000
The Corporation's maximum Insurance liability has been $140,000,000,000, In-
Sugar and molasses
355,200,000
cluding $3,500,000,000 on money and securities. It has collected $223,987,000 net
Burlap
206,500,000
Fibers
20,000.000
premiums. The Corporation has paid $323,800 for losses resulting from cnemy action
Wool
120,700,000
occurring prior to July 1, 1912. No premiums were charged prior to July 1, 1942.
Tires and tubes
83,€00,000
March 31, 1944, War Damage Corporation announced that all war-damage
Nitrate of soda
40,300,000
Insurance policies in force on that date would be automatically extended for an
Benzol
31,200,000
additional term of 12 months beginning with the respective dates of expiration,
Silk
27,700,000
without the payment of any additional premiums.
Calcium carbide
28,200,000
The facilities of the Corporation continue to be available for Issuance of new
Cotton fabries
24,300,000
policies. Reserves on hand from the collection of premiums should be sufficient
Shellne
23,000,000
to cover all damages except those in the Philippines.
and a great many other items.
UNITED STATES COMMERCIAL COMPANY
Avintion gasoline is resold to the War and Navy Departments. The aleohol
is used principally for the manufacture of synthetle rubber, and the molasses is
The Executive order which transferred United States Commercial Company to
converted Into alcohol for this use, Substantially all purchases are resold for
the Foreign Economic Administration provided that Reconstruction Finance
use in the manufacture of war material.
Corporation should furnish the funds necessary In Its operations.
The principal subsidies are on ment, butter, flour, erude oil from stripper
The Reconstruction Finance Corporation has authorized loans to United
wells, aluminum rod and bar, wood pulp, and extraordinary transportation costs.
States Commercial aggregating $1,000,000,000 of which $835,000,000 has been
Subsidy payments through December 31, 1944, on meat were approximately
disbursed. Repayments total $323,700,000.
$053,000.000: on butter $117,000,000; and on flour $88,100 000. Subsidy pay-
ments on the production of crude oll from stripper wells only began August 1,
PETROLEUM RESERVES CORPORATION
1941, and total payments through December 31, 1944, are approximately
$11,300,00. However, all claims have not been paid.
The Executive order which transferred Petroleum Reserves Corporation to
Payment of extraordinary transportation costs includes the movement of
the Foreign Economic Administration provided that Reconstruction Finance
petroleum and petroleum products from the midwestern and the southwestern
Corporation should furnish the funds necessary in Its operations.
sections of the United States to the eastern seaboard at a net cost of $297,400,000;
The Reconstruction Finance Corporation bas authorized loans to Petroleum
the movement af erude oil from Texas and Louisiana to midwestern refineries at
Reserves Corporation in the amount of $1,000,000, and made a further condi-
a net cost of $4,000,000; the transportation of coal by rail to the New York and
tional commitment of $30,000,000.
New England area at an approximate cost of $39,400,000; and the transporta-
Of the loans authorized, $100.000 has been disbursed, and the balance of all
tion of sugar from the western section of the United States to the eastern sea-
loan authorizations and commitments to Petroleum Reserves Corporation have
board at an approximate cost of $25,000,000.
been canceled or deferred.
Loans and advances have been made principally in connection with the con-
struction of facilities for the production of 100-octane aviation gasoline. The
RUBBER DEVELOPMENT CORPORATION
Corporation has disbursed on loans and advances for this purpose $190,400,000.
Repayments have aggregated $84,400,000.
The Executive order which transferred Rubber Development Corporation to
In addition, the Corporation in September 1941 agreed to purchase materials
the Foreign Economic Administration provided that Reconstruction Finance
from the Soviet Union aggregating $100,000,000, and advanced $49,700,000 against
Corporation should furnish the funds necessary In its operations.
The Reconstruction Finance Corporation has authorized loans to Rubber
the future delivery of such materials, To date the Soviet Union has delivered
materials on this contract to the value of $25,200,000 as payment on the advances.
Development Corporation aggregating $150,000,000 of which $130,400,000 has
been disbursed. Repayments from the sule of rubber to Rubber Reserve Company
To enable the Army Exchange Service to establish post exchanges speedily in
all locations where troops were sent, the Corporation authorized loans aggre-
have been $76,800,000.
gating $91,000,000 against which disbursements were made in the total amount
of $71,153,000. All of these advances have been repaid from operations of the
[From the Sunday Star, January 7, 1945]
post exchanges.
Other activities of the Corporation Include the elimination of Axis control of
THE RECONSTRUCTION FINANCE CORPORATION GIVES AID TO LITTLE BUSINESS
Latin-American airlines and bringing citizens of other American republics to the
SEEKS TO REVERSE MORTALITY TREND RESULTING FROM WAR
United States for training as aviation pilots and technicians,
An important activity Is the operation of the various Government-owned plpe
(By Jesse H. Jones)
lines for the transportation of petroleum and petroleum products. The Cor-
poration has expended $438,200,000 for the purchase of petroleum and petroleum
Little business operates on the commercial frontier of the United States.
ations of the lines have totaled $505,700.000
products and in operating the lines. Receipts from the sale of the olls and oper-
In that field lle the risks and adventure, but also the hopes and profits of Indi-
vidual initiative.
The pipe lines are being operated for account of Defense Supplies Corpora-
The forces arrayed against little business are not those the early settlers faced
tion, and at very substantial profits.
as they moved West, but they are no less real. Competition, depressions, and
The figures In the foregoing are substantially as of December 31, 1944.
wars create many hurdles for little business, frequently too many for the man
or woman imbued with the Inudnble desire to be his or her own boss.
WAR DAMAGE CORPORATION
Because the impact of war Imposes the most severe strain little business has
had to face, its problems and how little business can best be encouraged and
The War Damage Corporation has issued over 6,500,000 Insurance policies
protected In our day of mass production and distribution are of great concern.
and 2,200,000 renewals against loss resulting from enemy attack or action of
American forces in resisting enemy attack.
64
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
065
EARLY WAR MORTALITY man
bank. After all, money lending is much like Insurance. Rates can be adjusted to
fit the approximate risk.
When the United States first entered World War II, and for many months
Few, If any, private Institutions, which skim the cream off the loan field, have a
thereafter, the mortality rate among little businesses was high. There are many
better record and few have worked as hard as the Reconstruction Finance Corpo-
failures in this category during more normal years, but, over a long period of
ration to make such loans. This is demonstrated by the fact that In hundreds of
time, new ventures have exceeded those which have found the going too rough.
cases, after Reconstruction Finance Corporation examiners and officials have
After we became involved in the war, this trend was reversed. The establish-
reset the financial structure of some small business, local bankers have decided
ment of new businesses failed to equal those which closed their doors, and be-
that the loan which they had turned down, because of the risk, was really a loan
tween 1939 through 1943 the net decline in the number of business establish-
that the bank should make.
ments-large and small-totaled 536,400, an average of more than 1,100 in each
BOOM FOR SMALL PLANT
of the 48 States.
At the present time, the decline appears to have been checked and the num-
There has always been romance in American business, and there has been
ber of little businesses in operation is remaining faily constant. The year 1944
plenty of It In the record of Reconstruction Finance Corporation loans to business.
may even show a slight Increase. We are at the point from which we must go
Consider the small machine shop in Miami with n book value of $32,280, which,
forward if small business enterprises are to survive.
before the war, made fishing tackle. Its biggest year, 1940, resulted in sales
We in the Department of Commerce and the Reconstruction Finance Corpo-
of $40,000.
ration have not only had actual private experience in little business, but a great
With the outbreak of the war, the proprietors conceived the Idea of using their
deal of experience in the relationship between Government and little business.
equipment for the manufacture of aircraft parts.
The personnel of the Reconstruction Inance Corporation, including Its directors
On August 8, 1941, the Reconstruction Finance Corporation made a loan of
and other executives, have spent their entire lives in business-small business.
$20,000 to provide working capital for the first contract. An addditional $25,000
Executives and experts in the Department of Commerce are also experienced in
was authorized in November of that year and. by April of 1942, contracts which
small business.
the company had obtained justified a loan of $600,000.
NO EXACT FORMULA
To date, the loans which have been authorized to this little company aggregate
$8,463,000 and only $568.000 is outstanding as unpaid.
We know little business, Its problems and its difficulties. There is no exact
Or consider, If you will, the $7,500 loan made In 1938 to a man and his wife
formula for defining little business.
who were in the grocery business In Washington. At the time the money was
The man who operates a shoeshine stand. an independent drug store or corner
advanced, their profits were not sufficient to meet the payments on their store
grocery is certainly a little businessman, but there are little businessmen in the
steel Industry, In the field of antomobile manufacturing, In the production of
fixtures. Today. they owe the Reconstruction Finance Corporation only a few dollars.
tobacco products, the operation of hotels, restaurants, radio stations, and many
Their life savings have been protected and they, themselves, with several helpers,
other lines.
have been kept at work.
Suppose we say that any business which needs financing up to $100,000 is
Out in Spokane, Wash., a loan, amounting to only $2,800, assisted H. woman
regarded a small business and for the purpose of this discussion, that figure is
In establishing a small drug store In 1939. She has been kept in business and
probably as accurate a measure as we can arrive at.
her loan has been substantially repaid.
The Reconstruction Finance Corporation has made more than 19,500 individual
loans in this category, but if $100,000 strikes you as being a lot of money. the
AID FOR TELEPHONE COMPANY
Reconstruction Finance Corporation has made approximately 7,000 loans under
$5,000, 3,400 loans between $5,000 and $10,000, and 4,700 loans between $10,000 and
The residents of Whiteville, N. C., are dependent upon a small Independent
$25,000.
telephone company for service. The financial pleture of this company in June,
It bas actually disbursed $1.008.675,948 to business institutions in the 10 years
1938, was discouraging. The Reconstruction Finance Corporation authorized a
In which it has possessed the authority to make business loans. It has made
loan of $12,500, which made possible expansion of service. The company has
more than 22,000 such loans-some in every State of the Union. The fact that we
shown a very much improved earnings record and the loan has been almost
have made and offered to make business loans, both directly and in cooperation
entirely repaid.
with banks, has made credit available to thousands of independent businesses on
A woman In Demopolis, Aln., needed assistance in 1939 for the Installation of
terms that they could hope to meet-and usually do meet-loans on terms that
cold storage locker plant. The Reconstruction Finance Corporation advanced
banks have heretofore, for one reason or another, been reluctant to make. This
a her $7,000. The plant has been successfully operated and the proprietor has
reluctance was due in some cases to banking laws or customs against long-time
had no d'fficulty in meeting her payments.
loans and many times because the loan did not appear to be a risk that the bank
Out In Helena, Mont., a small oil and gas company needed funds to save Its
could take.
business. The Reconstruction Finance Corporation made $25,000 available to
MANY SAVED FROM FAILURE
It in 1943 and Its business was saved.
At Newborn, Ga., a man was making wooden slat blinds In 1938 when he was
These figures and facts demonstrate that the Reconstruction Finance Corpora-
faced with disaster for Inck of working capital. The Reconstruction Finance
tion has appreciated the importance of little business to our economy and has
Corporation made a $1,600 loan, which had not been entirely repaid when the
been active in making credit available for it. Our experience in making these
war forced a discontinuance of the business.
loans has demonstrated that with proper attention, encouragement, and advice
The borrower did not give up. He is making his repayments from wages as
many small businesses that otherwise would have failed have survived.
a machinist in a war plunt and expects to reopen his shade business after the war.
The Reconstruction Finance Corporation has not competed with private lending
Fittstown, Okla., is supplied with electric power by a small local company.
institutions, but has cooperated with them. It has made many loans that the
banks did not feel Justified In making and has taken participations in 5,000 loans
FISH COMPANY SAVED
made by banks, the Reconstruction Finance Corporation's participation running
as high as 90 percent of the loan, the bank making and servicing the loan. The
In December 1941 the Reconstruction Finance Corporation made a loan of
Reconstruction Finance Corporation's experience in making industrial loans has
$15,000 to it to pay a mortgage. install new facllities, and provide working capital.
clearly shown that, had the banks been energetie enough and taken the tronble
The loan put the company in good shape and enabled it to provide additional
to make the loans and nurse some of them, they could all have been made. This
badly needed facilities. The company is succeeding.
is proven by the fact that the Reconstruction Finance Corporation's losses on
In Nanticoke, Md., there is a small fishing company that has been in business
such loans have averaged less than 1 percent. This percentage of loss can be
since 1917.
taken from a reasonable rate of Interest and still leave a proper profit for the
66
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
67
It found the going rough in 1942 and obtained a $1,900 loan from the Recon-
Much emphasts In post-war discussions has been placed on our increased
struction Finance Corporation.
productive power and it is certainly the keystone of future prosperity, but If
It needed $275 more in May 1943, which It got.
The company has been able to stay in business, thereby providing employment
the products of our mills and factories lack free and full outlets to the consumer,
we will have created a dangerous bottleneck. Little business will have to sup-
and badly needed food products.
We are inclined to think of shipbuilding In terms of such companies as those
ply the channels through which goods and services move.
operated by Henry Kaiser, Todd Shipbuilding Co., Newport News Ship, Bethle-
What can Government do, in addition to seeing that credit is available to
little business to aid In this situation?
hem, Cramps, and New York Shipbuilding-all of which are tremendous
It can and should provide operating and management counsel and advice.
operations.
The high mortality rate in the field of little business over the years proves
But we in the Reconstruction Finance Corporation have knowledge of others.
that this is true. Too many men and women attempt to set themselves up in
Take, as an example, the small shipbuilding and repair yard in Seattle, which
business with no experience and scant knowledge.
needed to install additional facilities to participate in the war effort.
Too many people, unfortunately, have believed that possession of a little
The Reconstruction Finance Corporation, in August 1941, took a 70 percent
capital, some energy, and a great deal of ambition provided sufficient equip-
participation In a loan of $150,000 made by a local bank, the bank taking the
ment for entry into the small-business field.
other 30 percent and servicing the loan.
GREATER AID IS URGED
TERMS TO BANDOLEERS
They have found to their sorrow that there is more to commerce and trade,
This was only the beginning. Since that time, the Reconstruction Finance
whether It be big or small, than these attributes.
Corporation has cooperated with a local bank in loans aggregating $23,584,000,
Many have succeeded with no better Initial equipment but they have learned
and the company has assisted materially in the construction program of the Navy
as they went along. There will, of course, always be failures.
Department.
Certainly, It is the responsibility of Government to make available funda-
The present outstanding balance is only $775,000.
mental information which can be used by anyone who wishes to set himself up
A small fern-packing firm in Florida inced difficulties, because it could no
in business and thereby give him as good a chance ns it is possible to do.
longer obtain boxes to ship its products.
The Department of Commerce has, for some time, asked Congress to take
It decided it could make bandoleers if it could obtain the necessary financing.
a step in this direction through the expansion of Its field offices-already in
The R construction Finance Corporation provided it, and a small plant em-
existence-so that there may be provided for business a service similar to that
ploying 40 to 50 persons was kept in operation.
which Government has for years placed at the disposal of agriculture through
These few typical loans are only examples of thousands of others like them,
county agents.
which the Reconstruction Finance Corporation has made,
This does not mean that we think there should be a representative of the De-
The record of the past is, however, mainly useful as a signpost for the future-
partment of Commerce In every county In the United States, but even a limited
a future which for the present can be devoted only to an all-out war effort, but
number of men-able to give sound advice and pass along to the newcomer in
which on a day we cannot now foretell will bring peace to the world and provide
business the experience of thousands of others-would be of great value and
opportunities for thousands of little businesses,
avoid many needless failures.
With the coming of peace, there will be many opportunities in the field of small
business and many men and women anxious to challenge the opportunity. A
MUCH ADVICE AVAILABLE
great many men now in the service will want to go back to their former jobs or
businesses, but many will want to try their own wings. They have bren risking
As an illustration of what can be done, I cite the program which is already
their lives to preserve freedom and our way of life and may want a business of
under way through cooperation between the War Department and the Department
their own, however small. They must have that chance, and it will be small
of Commerce.
business. Estimates made by experts in the Department of Commerce indicate
Specialists in the Department of Commerce have prepared or are preparing 17
that the war has created a deficiency of 270,000 small businesses in the field of
textbooks dealing with the establishment and operation of the most populous
retail distribution alone.
small business lines. They have been written in complete cooperation with
STORES SUFFERED MOST
industry. so that they contain not only the advice and counsel of Government
experts, but the practical suggestions of men who have already established them-
The net change in the number of firms in retailing is particularly important
selves firmly In business.
prises. since the number of businesses In retailing account for nearly half of all enter-
These books deal with the establishment and operation of automobile repair
shops, retail bakeries, electric appliance and radio shops, grocery stores, metal
War-time casualties, particularly including grocery stores, eating and drinking
working shops, painting and decorating businesses, real estate and insurance
places, and filling stations, but many small manufacturers were put out of busi-
brokerage businesses, small sawmills, shoe repair shops, apparel stores, beauty
DESS in the early years of the war. Some of these were later given orders which
shops, building contracting, hardware stores, service stations, general merchan-
erabled them to start up again. Relative to the total number of various types of
dise stores, dry cleaning establishments, laundries, and restaurants.
retail stotes in existence at the end of 1941, household appliance and radio stores,
The War Department will only distribute these textbooks among soldiers whose
ment and seafood markets, automobile dealers, filling stations, and shoe stores
desire It will be to go Into business for themselves upon demobilization.
suffered most severely. In each of these lines, there was a net decline during
They spell out the financial and physical needs in each class of business and
1942-43 of a fourth or more of the number of stores operating at the end of 1941.
try to show the things that will be helpful and how to avoid the things that
In retailing as in all other Industry groups, roughly nine-tenth= of all business
will spoil the chances of success.
discontinuances occur among firms employing fewer than 4 workers. This pro-
portion has remained relatively constant throughout the 4-year period. 1940-13.
EXPERTS ARE NEEDED
About nine-teuths of all new enterprises also hire less than 4 workers, but the
proportion has tended to decline during the war years. The net decline in the
They should be generally avallable and there should be on hand experts who
could discuss with men and women the situations which the books set forth.
number of basinesses has iberefore. been rreater among small (I. e., those with
less than 4 employees than among large firms.
Moreover, the time will come, after n small business has been established, when
There will be plenty of released veterans and discharged war workers to fill
the operators will need help and guidance which Government should be in a
this can and more. We must, in fact, if we are to achieve the President's goal
position to provide, and there will always be new developments which It is the
Government's duty to pass along to Its citizens.
merchants. of jobs, find a place in our economy for 750,000 to 1,000,000 new small
We will need the aid of every eitizen to keep our economy functioning in peace
just as we have needed the cooperation of everyone for war production.
68
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
69
Banks should occupy the lending role in this field. It Le their responsibility
This proposal, which we will be glad to consider In any part of the country-
to meet the credit needs of the country, and if it takes n little extra trouble to
if the banks want Reconstruction Finance Corporation's cooperation-will not
look after a small businessman, the banker should welcome the opportunity.
only provide a greater amount of available credit but will be, in effect, a partici-
He should know that if he does not meet it, the Government will, and his natural
pation by the Reconstruction Finance Corporation in any loans which are made.
field will get narrower and narrower.
The banks of the country ought to go to work post-war Just as everyone else to
The future of small business does not, however, lie entirely in the hands of
assure a high level of production and employment. Too-stringent policies in the
those who may enter it after the war.
operation of the credit pools will make them ineffective. Liberal policies may
There are, at the present time, 2,500,000 establishments which may be classed
mean some losses, but there again, there will be profit enough in the interest rate
as small business, They, for the most part, have weathered the stresses and
to cover them.
strains of operation in wartime and their problems are concerned not so much
Our experience has convinced us that an organization operated along con-
with the present, which, because of consumer demand, is relatively bright-but
structive business lines-us the Reconstruction Finance Corporation has been-
with what will happen after the war.
can provide sound and helpful assistance to all business with no'let loss. And
Representatives of the Department of Commerce, in the past 6 months, have
no loan is too small or too large to be given serious and prompt consideration.
met with many groups-geographieally well distributed-in order to find out
I repeat, and wish to emphasize, that there is profit enough from reasonable
what was worrying these businessmen.
Interest rates to cover any net loss on small business loans.
The distributors, mostly retailers, were primarily concerned with the sale of
surpluses to speculators rather than through regular channels, with upgrading
Estimated number of all operating business firms (small and large) in 1939 and
of merchandise by manufacturers, making it Impossible to maintain low- and
1943
medium-priced goods In stock: and with post-war competition from large manu-
facturers with their own outlets and chain stores, which could buy up new
Net change, 1941-0'
merchandise as fast as it came on the market.
Some retailers were disturbed by growing competition from consumer coopera-
tives, manpower shortages, job freezing, and inequitable freight rates.
1939
1943
Percent de-
crease or
Number
The manufacturers, almost all of whom employed 100 or less people at the time,
increase
since 1941
were almost uniformly concerned over the distribution of surplus goods; their
Inability under present tax laws to build up a cash reserve essential for quick
reconversion to elvilian production: need for equitable freight rates,
3,316,700
2.861,600
-535,400
-15.8
All industries
Mining and quarrying
21.400
26,200
43,800
+16.2
TAX CHANGES VITAL
202,100
158,100
-85,700
-35.2
Contract construction
214,200
228,600
+2.800
+1.2
In both categories, credit needs were most frequently advanced under the
Transportation, Manufacturing communication, and public utilitées
207,700
188,000
-21,200
-10.1
discussion of taxation. The solution to the problem of post-war risk capital
286,400
261,200
-23,800
-8.4
Finance, insurance, real estate
144,800
114,800
-31,400
-21.5
was uniformly taken up as a tax question, not in terms of borrowing more funds,
Wholesale trade
I do not take this cross section of small business opinion to mean that there
Retail trade
1,601,400
1,330,400
-290,400
-17.9
will be need only for tax relief in the reconversion period, but Income tax rates,
-6.8
regulations and schedules will need to be revised If the smaller units in busi-
General merchandise
36,800
34,500
-2,500
37,700
29,700
-6,100
-17.0
nesses of all kinds ean pay their debts from earnings over a reasonable time, and
General stores with food
Grocery, with, without meats
341,500
284,300
-62,500
-18.0
39.90P
28,500
-10,200
-25.4
there is no other way for them to pay their debts other than from earnings.
Mest and sen food
120.000
93,500
-20,100
-17.7
We cannot expect business, little or big, to put risk or venture capital to work
Other food stores
15,300
13,800
-1,600
-10.4
under a tax system which does not enable the investor of the money to get either
Liquos stores
38,400
30,900
-10,100
-24.6
Auto dealers (new, used)
15,100
13,700
-3,000
-18.0
a profit on his capital or the opportunity of amortizing his obligations In an
Other automotive
73,000
66,700
-6,200
-8.5
orderly way.
Apparel and accessories
13,100
10,400
-2,800
-21.2
We cannot abridge the right of honest and ambitious men to enter the business
Shoes
29,500
28,100
-4,500
-13.8
Home furntshings and equipment
13.000
10,300
-1,500
-30.4
field because our financial institutions are unwilling to take a chance on the
Appliances and radio
52,200
47,200
-4,400
-8.5
future of the United States.
Drugs
37,100
34,800
-3,900
-10.1
Hardware and farm implements
As a matter of fact, there is little or no risk involved for the banker. The
Lumber, building materials
31,300
27,200
-4,800
-15.0
Esting and drinking places
295,400
250,800
-57,000
-18.5
Reconstruction Finance Corporation has for a good many years and is still
226,700
170,900
-56,700
-2L9
willing to participate with banks In making industrial loans In any degree up to
Filling stations
182.700
155,100
-29,500
-16.0
Other retail
90 percent. No system of guaranteed loans could reasonably go any further
638,700
554.300
-80,500
-13.9
than this and certainly any banker should be willing to take at least a 10 percent
Service Industries
share with his Government In the advancement of his own community.
27,500
24,400
-1,700
-16.2
Hotels, boarding houses, etc
86,700
92,000
-3,100
-15
Laundries, dry cleaning. etc.
203,400
183,400
-30,100
-11.1
SMALL LOANS NOT HURTFUL
Barber and beauty shops
93,000
73.100
-8,600
-10,5
Other personal services
77,500
59,100 SA,
-18,500
-23.8
-8,5
To put it another way, a loan application made by a fellow citizen In which a
Automobille repair
44,200
38,000
-6,000
Amusements
106,400
83,400 83,
-17,600
-17.4
local bank is not willing to take some of the risk is either a very poor loan, or a
Business services
great reflection upon the fitness for his job of the banker who turns It down.
I do not believe, however, that the bankers of the United States are going to
1941 was the peak year for the total number of operating businesses.
make the mistake of denying credit to reputable men and women of character
In amounts appropriate to the circumstances. And as for little business and
AMENDMENT TO S. 375
small little loans, loans, I would remind the banker that no bank ever got seriously hurt from
JOINT RESOLUTION To provide for the continuance of the Federal Loan Agency as an
Independent establishment of the Federal Government
finance small business or are In the net of doing 80, Some of these pools will
In many communities banks have either already established credit pools to
Resolved by the Senate and House of Representatives of the United States of
hasis. The Reconstruction Finance Corporation stands ready to participate with
contain as much as $100,000,000. They should be operated on a constructive
America in Congress assembled, That the Federal Loan Agency, created by sec- of
tion 402 of the President's Reorganization Plan Numbered I under authority
these pools so that there may be no lack of credit for legitimate enterprise,
the Reorganization Act of 1939, shall continue as an Independent establishment di-
regardless of size, that will provide employment and opportunity.
of the Federal Government and shall continue to be administered under the
Regraded Unclassified
70
ADMINISTRATION OF CERTAIN LENDING AGENCIES
FROM:
MR. 0°CONNELL
rection and supervision of the Federal Loan Administrator in the same manner
and to the same extent as if Executive Order 9071, dated February 21, 1942,
transferring the functions of the Federal Loan Agency to the Department of
Commerce, had not been Issued.
SEC. 2. All powers, functions, and dutles of the Department of Commerce and
TO: Testimony of mr. Wallaces
of the Secretary of Commerce which relate to the Federal Loan Agency are
hereby transferred to the Federal Loan Agency to be administered under the
direction and supervision of the Federal Loan Administrator.
SEC. 3. The unexpended balance of the funds made available to the Secretary
of Commerce by Public Law 365, Seventy-eighth Congress, approved June 28,
1944, for administrative expenses of supervising loan agencies, shall be trans-
ferred to the Federal Loan Agency to be used for the administrative expenses
of that Agency.
SEC. 4. No functions, powers, or duties shall be transferred from the Federal
Loan Agency under the provisions of title I of the First War Powers Act, 1941,
or any other law unless the Congress shall otherwise by law provide.
(Whereupon, at 5:30 p. m., the committee recessed to 10:30 a. m.
of the following day, Thursday, January 25, 1945.)
CONNELL
of Wallaces
ADMINISTRATION OF CERTAIN LENDING AGENCIES
OF THE FEDERAL GOVERNMENT
THURSDAY, JANUARY 25, 1945
UNITED STATES SENATE,
COMMITTEE ON COMMERCE,
Washington, D.C.
The committee met, pursuant to adjournment, at 10:30 a. m., in
room 318, Senate Office Building, Senator Josiah W. Bailey (chair-
man) presiding.
Present: Senators Bailey (chairman), Overton, Bilbo, Radcliffe,
Pepper, O'Daniel, McCarran, Chandler, McClellan, Johnson (of
California), Vandenberg, Brewster, Burton, Wiley, Robertson, and
Cordon.
The CHAIRMAN (after the arrival of Mr. Wallace). There will be
no further demonstration. The demonstration you gave is entirely
satisfactory; there is no complaint, but the committee is now in session.
It is very important that we should proceed in the most orderly way
possible.
We are welcoming our former Secretary of Agriculture and former
Vice President, and we are all glad to have him here. I think the
photographers will take a few pictures, and after that Mr. Wallace
will be at liberty to proceed.
STATEMENT OF HENRY A. WALLACE, FORMER SECRETARY OF
AGRICULTURE AND FORMER VICE PRESIDENT OF THE UNITED
STATES
The CHAIRMAN. Mr. Wallace, we have before the committee Senate
bill 375, known as the George bill, and the substitute which he pro-
posed on yesterday. You may proceed.
Mr. WALLACE. Mr. Chairman and members of the committee, I
wish to assure you that I appreciate the opportunity which you have
extended to me to appear before this committee for the purpose of
discussing Senate bill 375, the so-called George bill. Obviously I
am deeply concerned with any proposal that has for its purpose the
stripping of the Department of Commerce of its present lending
functions. I would be less than frank if I were to give you the
impression that my concern springs solely from the fact that im-
portant functions are being carved out from under the jurisdiction
of the Department of Commerce. You know, and I know, that of even
greater significance is the fact that my nomination as Secretary of
Commerce was the occasion for this particular proposal.
71
72
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
73
There are some who have suggested-perhaps in an effort to save
the whole world-and ourselves-with our daring conception of what
my feelings or face-that this separation of the lending functions
America could do when forced to war. We have astonished a grate-
from the Commerce Department is desirable because of my alleged
ful world by the stupendous number of planes, tanks, and guns rolling
"lack of experience" in such field. Let me say that this talk does
off our assembly lines; with the bridge of ships we have erected neross
not fool either me or the American public. You know and I know
the oceans; by the overwhelming force with which America has turned
that it is not a question of my "lack of experience." Rather, it is a
the scales of bottle.
case of not liking the experience I have.
Thus has America met the challenge of war-with boldness, courage,
Let me be specific: For 8 years I was Secretary of Agriculture.
and determination. Thus has America become the symbol-the world
During that period the Commodity Credit Corporation, the Farm
over-for the dynamic force of a free people fighting for a free world.
Security Administration, the Farm Credit Administration, and the
But what of the peacetime problems here at home which will follow
Rural Electrification Administration were under my supervision.
the successful conclusion of this war?
During that period these agencies loaned over $6,000,000,000. We
Is America prepared to meet the challenge of these peacetime prob-
made 11,500,000 separate commodity-credit loans and 1,208,000 rural-
lems as it has twice met the challenge of war?
rehabilitation loans. We arranged the financing to permit 20,184
Will we approach the problems of peace with the same boldness of
tenant farmers to buy their own farms.
conception, the same courage and determination, as we have
Collateral for these loans included farm real estate, agricultural
approached the problems of war?
producing, processing, and marketing facilities and a wide range of
In the answer to these questions lies the future of America. To any-
farm commodities, These loans were not only made on a sound busi-
one who has faith in America the answer is clear. The American
ness basis but they were also in the public interest. Farmers bene-
people are prepared to meet the problems of peace in the same inspir-
fited, consumers benefited, and the interests of the Nation itself were
ing way that they have met the problems of war. The American
advanced as a result of these loans. I am proud of our financial
people are resolved that we shall insure that the youth of this Nation
record on this difficult financing. If there are any present who are
will never again be called upon to fight in another war. And the
interested in the details respecting this record, I will be glad to answer
American people are equally resolved that when our boys return home
their questions at the end of my prepared statement. But since I do
from this war, they shall come back to the brightest possible, the
not believe that the real issue relates to my alleged lack of financial
freest possible, the finest possible, place on the face of this earth; to a
experience I would like to proceed to what I conceive to be the real
place where all persons, regardless of race, color, creed, or place of
issue.
birth, shall live in peace, honor, and dignity, free from want and free
The real motive underlying these suggestions for stripping the
from fear. To do otherwise would betray the faith of every soldier,
Department of Commerce of its vast financial powers has, of course,
every worker, every businessman, every farmer in this country who is
nothing to do with my competence to administer these powers. The
giving his best for America.
real issue is whether or not the powers of the Reconstruction Finance
In determining the course of action we should pursue after the war,
Corporation and its giant subsidiaries are to be used only to help big
it is well for America to pause and take stock of her capacities. For
business or whether these powers are also to be used to help little
America's capacities should be the measure of America's future.
business and to help carry out the President's commitment of 60,000,-
America's known capacities are not difficult to calculate. We are
000 jobs. In other words the question is really one of whether this
now producing goods and services to the gigantie total of $200,000.-
committee, the Congress, and the American public want these enor-
000,000 a year with 52,000,000 workers and 12,000,000 soldiers. In
mous financial powers utilized and invested in a free America-in a
simple language, that means that today America is producing nearly
prosperous America.
twice as much as she had ever produced before the war. But an enor-
This is not any petty question of personalities. This is a question
mous part of the goods and services we are producing today does not
of fundamental policy. It is the question of the path which America
find its way into the American home. No: it represents the ships,
will follow in the future. So that there can be no doubt in anyone's
the guns, the planes, and tanks we are using to fight this war.
mind where I stand on these fundamental issues, I would like to take
But I know, and you know, that, if we can produce a huge flow of
this opportunity to discuss with you the future which I feel is in store
ships and guns and planes and tanks, we can also produce an abund-
for America.
ance of houses and cars and clothing and provide education and
In discussing with you the path which I feel the American people
recreation and the other good things of life for all Americans.
should pursue in the years immediately following this war, I am under
And we all know that when our boys return home from the war
no illusions that as Secretary of Commerce I will be able to carry out
and are again able to put their power into the stream of peacetime pro-
all of the measures which I will discuss, However, I do want to make
duction, America's capacity to produce will be even greater than it is
it clear now that, to the extent that powers are vested in me by Con-
today. Yes, much greater than today, even when we remember that
gress, I will use those powers to the fullest possible extent to further
some of our returning soldiers will prefer to resume their education;
the objectives which I will outline to you.
that some older people will begin a retirement delayed to participate
For the second time in 25 years America has proved her capacity to
in war work; and that many women will give up their jobs in favor
meet the challenge of total war. Twice in 25 years we have amazed
of homemaking. Making full allowance for these groups, the fact re-
74
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
75
mains that America will have the capacity after the war for produc-
ing houses, cars, clothing, education, recreation, and all of the other
The right of every businessman, large and small, to trade in an
atmosphere of freedom from unfair competition and domination by
good things of life on a scale that staggers the imagination. That is
what America can and will do if we have the courage and vision to
monopolies at home or abroad.
give her the chance.
The right of every family to a decent home.
The right to adequate medical care and the opportunity to achieve
But to accomplish this task of utilizing our full productive capacity
and enjoy good health.
year after year, it is childish to think that this can be accomplished by
The right to adequate protection from the economic fears of old age,
a small segment of business and finance even though that small seg-
sickness, accident, and unemployment.
ment consists of the giants of industry and the tycoons of American
finance.
The right to a good education.
But the achievement of this American economic bill of rights will
Nor can this be accomplished by throwing crumbs to a reported
not come of itself. These rights will not come to those who merely
20,000 business enterprises out of a total of over 3,000,000 struggling
sit and wait. Nor will they come through merely pious repetition.
small businesses in the United States. Why, an America geared to
Our forefathers had to struggle for our political Bill of Rights; we
that limited conception of our capacity will find itself faced with
will have to struggle for our economic bill of rights. If we are going
millions of unemployed. The same people who set their sights too
to make those rights a living reality we must map out a vigorous and
low for war are now asking the American people to set their sights too
concerted course. We must set as our goal the implementation and
America. low for prosperity. They do not grasp the strength and the spirit of
fulfillment of the eight self-evident truths which together constitute
our economic bill of rights.
Now, do any of us think for a minute that there is any quack
The key to making this economic bill of rights a part of the Amer-
remedy or cure-all that can be automatically applied. The sober
ican way of life is as self-evident as are the rights themselves. The
facts are that genuine progress will be achieved only through con-
crete plans and a real effort.
key is the wholehearted recognition by all our people of the simple
fact that in America the future of the American worker lies in the
In the President's message to Congress last year and this year he set
well-being of American private enterprise; and the future of American
forth eight self-evident economic truths as representing a second Bill
private enterprise lies in the well-being of the American worker. The
of Rights under which a new basis of security and properity can
be established for all-regardless of station, race, or creed.
greatest single thing that this war has demonstrated on the home front
is that when the American worker and the American businessman and
America led the world in establishing political democracy. It
the American farmer work together as one team, there are no limits
must lead the world once more in strengthening and extending po-
on what America can accomplish.
litical democracy by firmly establishing economic democracy. Let us
But to work together as a team, however, there must be a common
not forget the painful lessons of the rise of fascism. Let us re-
goal. In this war that goal has been the defeat of our enemies in the
member that political democracy is at best insecure and unstable with-
shortest possible period of time. In the peace to come the goal must
out economic democracy. Fascism thrives on domestic economic in-
be the well-being of America.
recurity, as well as on lack of or divided resistance to external aggres.
I am now going to outline to you the type of program which I think
sion. Fascism is not only an enemy from without, it is also potentially
would make each of these economic rights a part of our way of life.
an enemy from within.
We now must establish an economic bill of rights not only out of
In your consideration of this program you will note this striking fact,
namely, that to the extent that private enterprise grows in strength
common decency, but also to insure the preservation of our political
the economic bill of rights grows in reality, and to the extent that the
freedoms. We must accord to this economic bill of rights the same
economic bill of rights grows in reality American private enterprise
dignity-the same stature-in our American tradition as that we have
accorded to the original Bill of Rights.
grows in strength.
Thus, all the measures which are suggested in this program for the
Let us therefore affirm this economic bill of rights-and keep affirm-
implementation of the economic bill of rights are at the same time
ing Rights. it-until it is as familiar and real to us as our political Bill of
designed to make American capitalism and private enterprise work in
The economic bill of rights as embodied in the President's message to
the same great manner in peace as it has worked in war.
Congress last January is-
And I also want to emphasize what the implementation of these
The right to a useful and remunerative job in the industries, or shops
America the opportunity to work out its destiny as a free Nation in a
rights will mean to our service men and women. They have given
or farms or mines of the Nation. I might say that this was reiterated
again in the last message to Congress.
free world. The America to which they return must be a land of eco-
recreation. The right to earn enough to provide adequate food and clothing and
nomic opportunity in which they will find not only jobs but a chance
for economic advancement and independent enterprise in industry,
The right of every farmer to raise and sell his products at a return
commerce, agriculture, and the professions. A grateful Nation can do
which will give him and his family a decent living.
no less for her returning service men and women. The G. I. bill of
rights, which became law in June of last year, following a series of
76
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
77
recommendations which the President made to the Congress, is only
financed but the Government will share with the private investor the
designed to fulfill the special needs of our men and women in the serv-
unusual and abnormal financial risks which may be involved in getting
ice. The economic bill of rights is designed to fulfill the needs which
started.
they value most-yes; the needs which they value more than life
But, in providing jobs for everyone, we shall not only have to in-
itself-the needs of America.
crease demand for our industrial and agricultural production here at
I
home; but also abroad. Some parts of our industrial and agricul-
The first economic right is "the right to a useful and remunerative
tural production demand a high level of foreign trade to be efficient
job in the industries or shops or farms or mines of the Nation."
and prosperous. This is particularly true in our heavy equipment
To assure the full realization of this right to a useful and remunera-
industries where our war demand will full sharply but whose output
will be needed by other countries for reconstruction and development.
tive job, an adequate program must provide America with 60,000,000
The foreign demand for such farm commodities as cotton, tobacco,
productive jobs. We must have more jobs than workers; not more
and wheat will also be great if other countries have the opportunity
workers than jobs. Only with more jobs than workers can every man
be guaranteed a job with good wages and decent working conditions.
to buy. We therefore must take steps, in cooperation with other coun-
tries to see that international trade and investment is resumed
This requires private enterprise working at expanded capacity.
This necessary expansion of our peacetime productive capacity will
promptly on a sound basis.
This administration has pioneered in the direction of international
require new facilities, new plants, and new equipment.
economic collaboration with its reciprocal trade agreement program-
It will require large outlays of money which should be raised
on behalf of which I have appeared before committees of Congress at
through normal investment channels. But while private capital should
least a half dozen different times-and the establishment of the Ex-
finance this expansion program, the Government should recognize its
responsibility for sharing part of any special or abnormal risk of loss
port-Import Bank. It has again taken the lead in suggesting inter-
national monetary stabilization and sound international investment
attached to such financing.
measures-measures that are a fundamental prerequisite to healthy
Therefore I propose that the Government guarantee the lender
against the special and abnormal risks which may be involved in
foreign trade and commerce. It was for the purpose of working out
concrete measures of this character that the President convened the
achieving our objective. This will provide new and expanding indus-
United Nations Monetary and Financial Conference at Bretton Woods
try with plenty of private credit at reasonable interest rates. Through
last summer. At the Bretton Woods Conference, 44 countries agreed
this program we will merely be extending to the financing of old and
new business the principles which have proved so successful in our
upon plans for an international monetary fund and an international
bank for reconstruction and development.
experience with the V-loans, T-loans, and Federal Housing Adminis-
tration loans.
The international monetary fund, when approved by Congress, will
aid the nations of the world in establishing sound currencies. It will
A comprehensive investment program dedicated to expanding the
clear the channels of foreign trade of discriminatory restrictions and
peacetime productive capacity of America is the very essence of the
controls so that there can be a genuine expansion of world trade.
American way of raising our standard of living. We build the plants
for greater production so that all of us may share in their greater
With the help of the International Bank, American capital can play
output. But greater output is not our only benefit from this plant
a great constructive role-and a profitable role-in the development
of the economies of other countries. It will provide us with enormous
expansion. In fact, our benefits also include the wages paid to the
labor employed in building these plants, in constructing the ma-
post-war foreign markets for OH" greatest markets are in prosperous
chinery to be used in the plants and in operating the plants after they
industrialized countries.
But America will not be merely a seller of goods abroad. A truly
are erected. These payments as wages all contribute to the Nation's
buying power so that as a nation we will have more money with which
mendous buyer of raw materials and products from abroad. It will
prosperous America-an America with jobs for all-will be a tre-
to buy the goods produced by these expanded plants.
As a matter of fact a comprehensive investment program of this
be an America constantly enlarging the scope of our reciprocal trade
character could make possible $20,000,000,000 of new private invest-
agreements. It will be an America with the time and money to spend
ment each year. Why, just the job of building these plants and the
on tourist travel abroad as well as at home. It will be an America
machinery for them would give America 5,000,000 more jobs a year than
from which other countries can afford to buy more because they are
we had in this work before the war. And this does not include the
selling more.
built. workers who would be needed to operate these plants after they are
With congressional approval of this program and with our program
of jobs for all in this country-the foreign trade of the United States trade
In a nutshell, then, if we are going to have remunerative jobs for
can be trebled after the war. This increase in our foreign
millions more men. I propose that the Government do its part in
all, we must have an expanded private industry capable of hiring
should mean 3,000,000 more jobs in this field after the war than we
had before the war.
helping private enterprise finance this expansion of our industrial
Nor the benefits of increased foreign trade and investment con-
plant. It will be privately owned, privately operated, and privately
fined to are increasing our prosperity. I want to emphasize that such
cooperative measures for expanding international trade and invest-
68424-45-6
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79
ment are at the same time the economic foundation for a lasting peace.
America must remain preeminently the land of high wages and
A prosperous world will be a world free of both economic and political
efficient production. Every job in America must provide enough for
aggression.
a decent living.
There is one further phase of this program of providing jobs for
During the war we have been compelled to hold down wage increases
all which must be made an integral part of any long-range program.
that might have provoked runaway inflation. With all the arms and
That is the task of seeing to it that there are not just jobs for all next
war materials we were producing, there was only a limited amount of
year-or for the year after that. No; we are talking about jobs for
consumption goods available. Increasing wages without increasing
all as a permanent part of our American way of life.
the amount of goods available to the consumer would have been an
It is inevitable, however, that an economy of frée enterprise like
open invitation to inflation,
ours will have some fluctuation in the number of jobs it can provide.
However, the end of the war, even the end of the war in Europe, will
Adjustments in employment are an essential part of an expanding
change this picture. Then there will be more goods available for
free economy. And for these minor fluctuations, we provide unem-
America to buy and it is only good common sense to see that the
ployment insurance. But we must not allow such fluctuations ever
workingman is paid enough to buy these goods.
to deteriorate into panie or depression. We cannot again be caught
The gains made by labor during the war must be retained in full.
in that vicious downward spiral of unemployment, wage cuts, and
After the last war, as part of the process of returning to "normaley."
stagnated business,
the slogan "labor must be deflated" was adopted. This must not hap-
Whenever the number of gainfully employed in this country falls
pen again. This time we must make sure that wage rates are not re-
below 57,000,000, our Government should take prompt steps to see
duced when the wartime demand for labor is diverted into peace-
that new jobs are made available to keep the total from falling sig-
time channels. We must make sure that the labor market is not
nificantly below that figure. This is the floor below which We must
broken by unemployment and wage slashes.
not allow employment to fall.
American labor should be assured that there are not going to be
The basic function of your Government in taking care of any such
any wage cuts after this war. What is even more important-when
slack in jobs is to see to it that private enterprise is assisted until it
the worker's hours are cut back to peacetime levels a real attempt
can absorb this slack. This is entirely possible. During the war
must be made to adjust wage rates upward.
the Federal, State, and local governments have found it necessary
And wage rates should be constantly increased RS the productivity
to put aside the construction of roads, buildings, and public facilities
of industry is increased. An expanding American economy can con-
to the value of many billions of dollars. We have a need, too, for
tinue to expand only if the increased productivity is divided equitably
vast programs of the type exemplified by T.V.A.
between business and the worker. In fact we all know that unless
Some of this construction will have to be undertaken immediately
the worker does get his share of America's increased production in
after the war. A good deal of it, however, can be postponed so that
the form of increased wages and unless business get its share in the
its construction could be timed with periods when the volume of em-
form of increased profits neither will prosper and all-businessman,
ployment that industry, commerce, and agriculture can offer begins
to fall. We must have a reservoir of planned and approved Federal,
wage earner, and farmer-will lose.
But an increase in wages is not the only benefit the American worker
State, and local projects ready to be tapped. And when employment
should secure from increased productivity. He should also benefit
falls below this floor of 57,000,000 jobs, this reservoir of planned and
in the form of shorter hours of work, in the form of increased leisure
approved public works should be opened up to provide more jobs and
take up the slack.
and opportunities for healthful recreation. Thus increased wages
Such useful and essential public works should not produce Gov-
and shorter hours go hand in hand in solving the problem of pros-
ernment relief jobs, however. No; they should produce private
perity the American way.
There is one further aspect of the wage-earner's problem that I
jobs. This is possible if we insist that this construction be done by
would like to comment on. That is his aspiration for an annual wage
private firms under contract with the Government; private firms em-
conditions. ploying labor at the prevailing rate of wages and under standard labor
or guaranteed annual income from his job. It is a terribly important
part of any real attempt to implement America's economic bill of
This assurance of a reserve of private jobs, through constructive
rights. The size of the wage earner's pay envelope is important-
public works when needed to take up the slack, will have a profound
vitally important to American prosperity. But we all know that it is
effect on the whole direction of our economy. In fact, the knowledge
equally important to know how many pay envelopes he gets during
that Government accepts this responsibility of maintaining a floor
a year. I would like to see him get a guaranteed minimum annual
under jobs will act as an immense stabilizing force on the whole econ-
wage and I think the time has come for America to begin tackling
omy, not only of this country, but of the whole world.
this most difficult problem.
Now this goal cannot be attained overnight. It cannot be achieved
II
in a manner to harm business. Nor can it be achieved with the same
speed in every business.
food and clothing and recreation."
The second economic right is "the right to earn enough to provide
But we can start on the job of giving labor an annual wage. We
can do a lot if we all will only agree that it is a problem business and
labor must solve and if we all approach the problem with a genuine
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81
desire to succeed. The Government must do its part also. It must
tradition can flourish only by doing a large volume of business at a
aid business in stabilizing its labor needs so that the burden of an
small profit per unit.
annual wage will be solved in a sound manner. This in my opinion
We must protect free enterprise against monopolies and cartels
is the American way to bring about the annual wage and I have con-
through continued vigorous enforcement of the antitrust laws. Pri-
fidence in the American way of doing things.
vate enterprise yields its full advantage to the consuming public and
to other business only when it is genuinely free and competitive. He
III
is a sinister enemy of free enterprise who pays lip service to competi-
tion but also labels every antitrust prosecution a "persecution."
The third economic right is "the right of every farmer to raise and
Our economy has important new expanding sectors in air transport,
sell his products at a rate which will give him and his family a decent
frequency modulation, television, and fibers, plastics, and many other
living."
fields. These new expanding business areas in particular must be kept
American farmers now have by far the largest farm income in his-
free of the constricting hand of monopoly, and also, and in particular
tory. This is their due reward for the greatest agricultural produc-
those industries which will be based on inventions made in connection
tion in history. We must assure the farmers that there will always
with the war effort, of which there are many in the War and Navy
be a market for all their output at good prices. Concretely we should
Departments.
maintain an adequate floor on farm prices and thereby assure the
There must be a place in these new business areas-as everywhere
farmer against the dangers of falling prices for his products. Our
in our economy-for enterprising small firms. It is from these new
farm program must be one of expansion rather than curtailment.
and small firms that the great industries of the future will grow. We
With jobs for all at good wages and with foreign markets greatly
need new industries and new firms to have industrial progress. We
expanded, the farmer will be able to sell at good prices all that he can
must not permit them to be stifled by monopoly.
raise.
But this is not all. The farmer's income must have stability. To
V
that end, there should be established a comprehensive Federal crop-
insurance program which will secure the farmer against the hazards
The fifth economic right is "the right of every family to a decent
of crop failure. To this must be added concrete steps to raise the
home." Concretely, we should adopt a housing program looking
standard of living on the farm and in the rural areas. We need a
toward the construction through private enterprise of 2,000,000 hous-
complete program of new and modernized homes and farm buildings.
ing units a year and ridding this country of its urban and rural slums.
We must press forward with rural electrification and improvement.
We need to build at least 15,000,000 new housing units if we are to
Only in this way can we bring to the rural communities modern facili-
eliminate all our slums and substandard dwellings. The right to &
ties for decent and healthful living.
home is meaningless when that home is a hovel. We cannot afford
IV
slums. A well-housed America must have modern homes-homes with all
the latest electrical and mechanical equipment which will eliminate the
The fourth economic right is "the right of every businessman, large
drudgery of household work. To the fullest extent possible we must
and small, to trade in an atmosphere of freedom from unfair competi-
be a land of home owners, and to that end we must assure every
tion and domination by monopolies at home and abroad."
family an opportunity for home ownership by making certain that
Our economic bill of rights, like our political Bill of Rights, is based
there is available private credit on terms which will reduce the down
on freedom of enterprise-freedom of enterprise not merely and ex-
clusively for the few but broadly and inclusively for the many. The
payment and cut by one-third the monthly cost of buying homes.
New residential construction and the modernization of America's
political Bill of Rights insured the destruction of special prerogatives
homes alone can provide jobs for 4,000,000 people a year. This is
and privileges. The economic bill of rights will insure the destruc-
tion of special economic prerogatives and privileges.
2,000,000 more than the maximum amount engaged in such work prior
No special class of business deserved to be the spoiled darling of
to the war.
VI
Government. The American people have no interest in preserving
the vested interests and monopolistic privileges of greedy big business.
The sixth economic right is "the right to adequate medical care
The interest of the American people lies in using the resources of the
and the opportunity to achieve and enjoy good health."
country to achieve a prosperous America, prosperous for all business,
As Selective Service has revealed. too large a proportion of our
large and small, and for all the people.
younger men now fall below reasonable health standards. This is all a
We must break through the barriers of monopoly and international
cartels that stand in the way of a healthy expansion of free enterprise.
segments of our population. This condition calls for immediate
warning signal to America with respect to the state of health of and
We must overcome the monopolistic frame of mind which thinks of
business in terms of restricted output at high prices per unit. We
drastic action.
We cannot permit the health of our people to be impaired by
must pass on to workers and consumers the benefits of technological
poverty or lack of medical and hospital facilities. I say to you that
progress and large-scale production. Free enterprise in the American
your Federal and State Governments have just as much responsibility
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83
for the health of their people as they have for providing them with
munities for the development of locally controlled educational pro-
education and police and fire protection. Health and adequate medi-
grams, we should equalize and extend educational opportunities
cal and hospital care are not luxuries. They are basic necessities to
throughout the land. We should provide facilities for technical
which all are entitled.
and higher education for all qualified young men and women without
We must see that medical attention is available to all the people.
regard to their financial means, In this America, the pioneer of
But this health program must be achieved in the American way.
free education, the right to technical and higher education should
Every person should have the right to go to the doctor and hospital of
be as universal as the right to a secondary school education.
their own choosing. The Federal and State governments should work
This is the kind of program that can provide jobs, economic
hand in hand in making health insurance an integral part of our
security, and rising standards of living for all Americans-regard-
social-security program just as old-age and unemployment benefits
less of race, color, or creed. Our democracy can be a living force
are today.
only if it means the good life for all the people.
We need more hospitals and doctors. We should make sure that
The millions of more productive jobs that this program will bring
such facilities are available and that we build hospitals in every
are jobs in private enterprise. They are jobs based on the expanded
community, rural and urban, that does not now have such facilities
demand for the output of our economy for consumption and invest-
for all of its people.
ment. And this program need place no real burden on the Federal
Never again can we afford the waste of poor health in America
Budget, notwithstanding the reduction in taxes which must come
because of poverty or inadequate facilities. And I say to you now
after the war. On the contrary, a program of this character can pro-
that this program will prove in the long run to be a saving to America.
vide America with a national income of such size that it will be
We must not be content to provide medical attention for people
possible to reduce the tax rates still further on personal incomes,
after they become sick. We must implement and extend our knowl-
on business profits, and on consumption, and still collect enough tax
edge of maximum health as well as prevention of sickness. The Gov-
revenue to meet the needs of the Government, including orderly re-
ernment should appropriate needed funds to finance a greatly
tirement of the national debt.
expanded program of medical research in private and public
These should be our immediate goals, once final victory over our
institutions.
enemies has been achieved. Now there are those who say that these
VII
goals are the dream of a "man willing to jeopardize the country's
future with untried ideas and idealistic schemes."
The seventh economic right is "the right to adequate protection
Senator BREWSTER. Is that a quotation?
from the economic fears of old age, sickness, accident, and unem-
Mr. WALLACE. It appears as a quotation in the written text.
ployment."
These people think they are the realists. Actually, they are the
We must assure people who are disabled and temporarily unem-
persons of limited vision and stunted imagination. These people are
ployed that they will be taken care of adequately. We must assure
of the same breed as those "sound businessmen" who haggled over
them that they will not be in want because of loss of income during
pennies in the purchase of strategic stockpiles before the war, only
this period of compulsory unemployment. We cannot neglect these
to leave the materials for the Japs to use against us. These are peo-
groups without incurring serious dangers to the stability of our whole
ple who will fight against enemies waging total war by pinching pen-
economy.
nies. These people think the same as those who said the President
A broader social-security program will be needed after the war.
Old-age insurance should be adequate to provide all of our older
was dreaming when he declared in 1940 that the American people
would produce 50,000 planes in 1 year. Do these Monday morning
men and women with the means for decent living. Our present
old-age benefits are definitely inadequate. A decent, self-respecting
quarterbacks have the great faith in the American people, and in their
old-age, social-security program deemed to be a right, not a charity,
way of life, which is required in order to understand the meaning of
a right springing from the years of service each person delivers to
America? I am confident, however, that the great majority of the American
the sum total of a better America.
An adequate social-security program will, of itself, by adding to
people share the same great faith in America and in the American
the spendable purchasing power available to the people and by plac-
way of doing things which I have expressed here. We know our way,
ing a floor on consumption, add more than 2,000,000 jobs a year.
and the road ahead is straight and broad, although there are many
hills which we must climb. The program which I have set. forth is
VHII
only the first milestone, for the capacity of the American way of life
in the years to come is beyond the vision of man. The American
The eighth economic right is, "the right to a good education."
system of free enterprise is the best the world has ever known, and
We must have an educated and informed America. Even now
through it we can obtain, God willing, the best that this world has to
most of our rural areas and some of our urban areas are poorly
provided with schools. Our teachers are underpaid. Our schools
offer. It is in this perspective that I appeal to you to consider S. 375-
are badly understaffed. We need more schools and at least one-
the so-called George bill. I suggest that the Congress appoint a
half million more teachers, Through Federal aid to poorer com-
committee to investigate the past activities of the Reconstruction
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85
Finance Corporation in order to determine whether or not the Con-
very shortly, as we are in session today. It is now a quarter to 12. I
gress feels that the powers of the R. F. C. have been administered in
would like very much to finish this hearing today, and if you will just
such a way as to do the most good for the American people. If the
desist from demonstration you will expedite the hearing. At any
Congress does not feel that the powers of the R. F. C. should be ex-
rate, I am glad that you gave expression to your feelings. I hope you
ercised in such a way as to further the objectives which I have set
won't repeat it. Let us have quiet for the remainder of the time.
forth here, then I respectfully urge the Congress to take the R. F. C.
Are there any questions from the members of the committee?
out from under the control of the Commerce Department. For I can
Senator VANDENBURG. Mr. Chairman, I would like to ask the Secre-
tell you here and now that if the R. F. C. is left in the Commerce De-
tary this one question, with special reference to S. 375:
partment, I will use its powers in the interests of all the American
If the functions of the R. F. C., specifically the Federal loan ad-
people,
ministration, are separated from the Department of Commerce, the
The greater part of my presentation has had to do with the problem
choice of a loan administrator will still rest with the President of the
of applying the eight principles of the economic bill of rights when
United States, and, therefore, I assume that the separation would not
peace comes and we are struggling with the inevitable readjustments
threaten your bill of rights or your objectives, or the President's; is
that follow a war of this tremendous magnitude. Great as that prob-
that correct?
lem is, and important as it is to plan for it, we must all recognize
Mr. WALLACE. I would say that the testimony as given here yes-
that at the moment when our boys are relentlessly destroying the Jap-
terday afternoon might have a bearing on that point.
anese and German might overseas we have a sacred obligation to do
Senator VANDENBERG. Well, the fact is that the President would still
the most effective job possible on the home front. It is my hope that
have the selection, would he not, of the Loan Administrator, and,
we all cooperate to the utmost in doing that job, while at the same
therefore, any objective to which the President subscribes, and your
time we press ahead with the utmost vigor to prepare for that first
own very able presentation of your program, would still be in good
and most important plank in the economic bill of rights-full em-
hands?
ployment.
Mr. WALLACE. I am not certain about that-I am not certain about
We must now devote all our efforts-and when I say "all," I mean
the legal status, in view of what was reported to me with respect to
all-our efforts to winning of the war. I propose to leave no stone un-
the testimony as given yesterday afternoon.
turned, if confirmed as Secretary of Commerce, to see that every
The CHAIRMAN, Are there further questions?
branch, every activity of the Department of Commerce and of the
Senator PEPPER. I would like to ask just one or two questions, if I
agencies under its control, is directed toward the sole purpose of help-
may, Mr. Chairman.
ing to bring the war to a successful and speedy close and of return-
The CHAIRMAN. Let me make this remark first: There are other
ing our boys back home as soon as possible.
Senators here, not members of the committee. I think the committee
If the R. F. C. and its subsidiaries will remain with the Department
would be glad to permit them to ask any questions,
of Commerce, I pledge myself to utilize all its powers and resources
Now, go ahead, Senator.
directly toward speeding up the war effort. But there is one thing
Senator PEPPER. Mr. Wallace, there are two or three things on which
that I would like to sny in closing: If we are to win this war speedily,
I would like to give you an opportunity to comment if you wish.
we on the home front must all coordinate our efforts to that goal. We
It has been bandied about the country for a good many months, as
must all stick together, and work together. as the boys are doing over
part of the fantasy which you have pursued, that you made a speech
there. We must bury whatever personal differences stand in the way
one time in which you said, according to the report, that you favored
of attaining that No. 1 goal before use. This is no time for personal
taking the money from the American taxpayer to buy milk-it was
and petty controversy.
either a pint or quart; I don't know what the exact quantity was-to
Whether the R. F. and its subsidiaries are included in the Depart-
be given to the Hottentots, and that you proposed to take the money
ment of Commerce or not, I will concentrate all of my efforts and the
of the American taxpayers to build a dam, a T. V. A. for somebody
efforts of the Department under me to the winning of the war. I want
on the Danube.
to make it clear that if it is decided that the R. F. C. should not remain
I would like for you to state whether you ever made such a state-
of Commerce until the war ends.
with the Commerce Department, I will carry on the job of Secretary
ment or not and to make any comment you want to make on the
No soldier on the battlefield can do less than carry out his assign-
report. Mr. WALLACE. The fantasy to which you refer was spoken not by
ment. Certainly we on the home front cannot hesitate to do anything
me but by the President of the National Association of Manufacturers,
less, Both must give their all to the common cause.
The CHAIRMAN. Have you finished?
Senator. What I precisely said can be found in this book, but I will not take din-
Mr. WALLACE. Yes, sir. [Applause.]
the time to look it up now. It was to this general effect-that at half
The CHAIRMAN. Now, friends, let us have quiet. The committee
in ner half seriously, I said what this war was all about was whether milk
the other night I was sitting beside Madam Litvinov and,
wants to resume the hearing. All of you have cooperated wonderfully,
and we thank you. I think your applause was forgivable, it was all
fun, not could have the privilege of having a quart of the a
right, but just do not do it any more, We have to go over to the Senate
or day. That everyone was what I actually said. But as a result of a speech by
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ADMINISTRATION OF CERTAIN LENDING AGENCIES
87
president of the National Association of Manufacturers everybody
try, the present chemical industry; and if we want in 1970 to have the
believed that I said that the purpose of the war was to see that every
Henry Fords and Edisons of 1945 to 1950 coming into flower, it will be
Hottentot had a quart of milk. Even the President of the United
necessary to make possible a type of financing for small business which
States believed that I said that.
does not exist today.
That shows how effective propaganda is, Of course, anyone who
As I said, my ideas on this are quite comprehensive, and I do not
read the speech knows that what I meant was that the causes of the
believe it would be fair to the committee at this time to go into my
war were economic, that people were desirous of getting enough to live
ideas in detail, so I will not elaborate further, because I think many
decently, and that the way to prevent war was to make sure that the
people may want to ask questions.
people did get enough to live decently. Anyone with any imagination
The CHAIRMAN. If you wish to prepare a written statement and sub-
whatever could read the purpose of my semifacetions remark on that
mit it to us in time we will put it in the record.
occasion. But you can't tell what propagandists, who have a definite
Mr. WALLACE. I would like to get a good night's sleep first.
purpose in mind, will do. I have observed this around Washington,
The CHAIRMAN. Very well.
I may say-that so-called New Dealers will again and again be deceived
Senator BREWSTER. That is rather a severe indictment of 12 years
by the propaganda of the enemy just because of what they read or
of this administration, isn't it, wouldn't you say?
what they hear through the press. It is amazing. Even the elect can
Mr. WALLACE. I feel it is a severe indictment of the past 30 years.
be deceived.
Senator BREWSTER. We will take it all in.
Senator PEPPER. I have only one other question, Mr. Wallace.
Mr. WALLACE. I think the tendency began when the Federal Re-
I understand that there was a report made to the Temporary Na-
serve System took over in 1913 and bank examiners became very
tional Economics Committee which was prepared by a representative
meticulous. The result was to eliminate character banking-increas-
of the Department of Commerce, to wit, Mr. William B. Saunders,
ingly to eliminate character banking-which earlier had served both
economic analyst of the Department of Commerce, assisted by Mr.
the farmer and the small businessman.
H. H. Wein, which appears on page 312 of the report of the Temporary
Senator PEPPER. One further question, with your indulgence, Mr.
National Economics Committee of 1941, headed "The Concentration
Chairman.
ing]: of Economic Power," wherein this short paragraph appears [read-
Along the line of the statement that I referred to a moment ago,
which I think you clarified by your comment, a great many people in
No Information has been published by the R. F. C. as to the size of borrowing
the country have not had an opportunity to know you personally as
firms, but the size of the loans authorized Indicates that small business has re-
the people here in Washington and those who are presently associ-
celved little aid. Of $450,000,000 in loans authorized by R. F. C. between 1932
and 1939, less than 4 percent were for loans under $10,000 and only about 30
ated with you do know you, and I think since you have been candid
percent were for loans under $100,000. At the other extreme, loans for a million
enough this morning to make a statement of your philosophy and your
dollars or more represented almost 30 percent of the total amount authorized.
views about the Government and the public interest, and to allay some
Actual disbursements in the 7-year period totaled only $180,000,000. If the dis-
misapprehensions, you have the opportunity now, if you care to avail
tribution of disbursements Is assumed to be identical with the authorization, the
period. total credit extended In loans of $100,000 or less Was about $55,000,000 during the
yourself of it, to state as to whether or not you have been able to
manage your own private affairs in a frugal way, so that you have
Then I skip about five lines, where he distinguishes between author-
been able to stay off of the W. P. A., or to live other than upon the
izations and loans, and this sentence concludes the quotation:
public salary which you have received.
Do you care to make any comment? I would like to extend to
Suffice It is to point out that In actual fact the volume of loans made to small
business by the R. F. C. has been small.
you the opportunity.
Mr. WALLACE. I am not one really to talk about private affairs.
If I understand you, in your statement of policy, you believe that
What have they been saying about me?
small business should receive larger consideration from the R. F. C.
Senator PEPPER. I suspect that a lot of people would be surprised,
and the agencies under its jurisdiction?
if they believed some of the circulated reports about you, to find that
Mr. WALLACE I would hesitate to take up the time of the committee
you were able to make any money privately or to have any private
sufficiently to answer that question, because it is a matter to which
interests. If you do or have been able to do so I think it would help
I have given a great deal of thought and consideration.
the American people in getting a true picture of the man you are.
I might say briefly, though. that the small businessman increasingly
Mr. WALLACE. You think the feeling of the American public is
since 1913 has found it difficult to get equity financing. There is
that only a millionaire should be Secretary of Commerce! Is that
what might be called an "institutional gap," which is recognized by
the idea? [Applause.]
investment bankers. The cost of equity financing has been almost
If it is any reassurance to the committee, the only institution with
prohibitively high.
which I have had any business responsibility is a seed corn company.
first 10 years of this century the present type of financing and the
Let me put it this way, to sum it up in a nutshell-that if during the
I never owned a share of stock in any publishing business at any time.
I had a possible, eventual one-twelfth interest but I never owned any
present taxation had been in effect, it would have been impossible to
stock in any publishing company at any time, was never responsible time.
have anything like the present automobile, the present electrical indus-
for the business conduct of any publishing company at any
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89
When the publishing company, to which I assuine the public has
The CHAIRMAN. Founded on the equity after the obligations of the
been referring, consolidated with another company it was done, the
bonds and the obligations of the preferred stock-
decision was made while I was in Europe attending an international
Mr. WALLACE. That is the customary interpretation. It involves a
economic conference and studying certain scientific matters in the
risk.
Balkan States and I did not know about it until after it was done,
Senator VANDENBERG. A risk; yes,
It was in 1929 and we all know what happened to the farm folks
The CHAIRMAN. I have just been told to talk into this microphone.
between 1929 and 1932. So it was no surprise. It would be no sur-
Can you hear me?
prise to anyone as to what might have happened out there.
Mr. WALLACE. I hear you fine.
But, as I said, I had no business responsibility with that concern,
The CHAIRMAN. Would you have the Government, by way of aiding
I was editor of the paper. And I do not reflect in any way on the
business, big and little, go into the policy of equity financing?
business management. My uncle was responsible for the business
Mr. WALLACE. I prefer to answer that by the expression of an ex-
management. I don't reflect on his capacity as a businessman for a
pert in the business, Mr. Eberstadt. This is an address which he gave
moment because he is a good businessman.
on December 12, 1944, before the National Association of Securities
I just want to point out that the propaganda that is put out is with-
Commissioners. Mr. Eberstadt has been gravely concerned with the
out foundation. I have never undertaken to say anything against it
problems which I have described and suggests a very interesting
because it is my observation that when you pay attention to propa-
approach. I may not have the precise point, but if you will bear with
ganda, why, you confirm the folks in the first idea.
me I will read some of it.
But with regard to the only concern with which I have had busi-
May I say very definitely that I do not think the solution lies in Wall Street
ness responsibility, this corn company, the thing was my idea, it was
or even In the efforts of Wall Street. From a social point of view, this would
based on my own corn breeding work. I had started experiments in
be undestrable; from a political point of view, suspect and from a fuancial
1906, experiments in in-breeding in 1913, had greatly expanded them
point of vlew, I think Impossible. Local people do not know the personalities
in 1919, incorporated the business in 1926. I had very little money
or ramifi cations of Wall Street-
myself at that time due to the farm depression. I raised the money
He is talking about equity financing for little business-
myself. In cooperation with a lawyer I wrote out the articles of in-
Nor can Wall Street people have that intimate acqualntance with local condi-
corporation myself. I selected all the key people in the company
tlons, individuals, and businesses which is necessary to furnishing of Investment
myself. The farm manager, all the folks that are key people in the
capital on a sound basis, Thus disappointment or worse on both sides would
company today are people that I picked at that time. I determined
probably follow nn effort by Wall Street to solve this problem.
every step of the organization of the concern as it went on. It was
I may say parenthetically that those small businesses who have
genuinely a small business in its initiative.
gone to Wall Street in an effort to get capital and have succeeded
I know the problems of the small businessman because I have lived
in getting it because of Wall Street's lack of acquaintance with local
with them. My name has been on the note at the bank for more
conditions, have had to pay such a high rate, and have had to give
money than I could possibly pay unless the seedcorn were sold. I
domination of their business oftentimes, that the experience has been
know what that experience is. I have been up against that more than
rather undesirable.
many men who claim that they are hard-headed realistic businessmen
Could 1 continue this quotation?
and I am not. I know what that is because I have been up against it.
The CHAIRMAN. Yes.
Last year this company sold more than $1,000,000 worth of seed
Mr. WALLACE (reading)
corn. I resigned as president of the concern when I came to Wash-
ington, and shortly thereafter I got my brother into the business.
Nor do I think It can be solved from Washington or even at all by Government
alone. If, for example, the Government sets up a large pool of money, It is
Last night he called me up to wish me luck at the hearing this morn-
probable that not being familiar with the local conditions and individuals, the
ing and I asked just out of curiosity how much money the concern
funds will either be handled too conservatively and thus not made adequately
owed the banks at the present time and was told it was $800,000. Of
available, or too recklessly and thus lost.
course, if the sales of corn go well between now and next May all of
Indications of a possible solution may be obtained from consideration of
certain characteristics of the problem. In the first place, though It has very
that money will be paid off. Last year, I believe, they borrowed some-
important national, social, political, and economie repercussions, It is primarily and
thing like $1,000,000. They have always paid off the money they
and essentially local. It is the home folks who have the most Immediate
borrowed at the banks.
perceptible gain to look for by solving It in the form of additional employment, they are
I won't go into any more details on that, If any of you have any
larger rolls, more production, and more business. Furthermore, financial and
questions about any aspects of my business, either in private life or
character risks involved. They can best appraise the potentialities the capa- local
the only pay people who know intimately the several businesses, the and
in Government, I will be pleased to answer them. I have always felt
bilities of the management. And so any plan looking to the revival the outset of aspects
ganda too much.
this kind of talk more or less was beside the point and dignified propa-
capital and credit markets must, It seems to me, recognize at and
of and seek Its solution through local Initiative, responsibility. involved, but
control. there Is also In the way Important stimulation of the watchful eye of
the problems this not only are community pride and benefits one's neighbors
you understand that to bel
The CHAIRMAN. You spoke just now of equity financing. What do
constantly alert with approval or disapproval.
It means that long-time capital is, in effect, a share in the business.
Mr. WALLACE. Common stocks are equity financing, for example.
I said in my prepared statement that is, take care of the unusual
Some place in here he indicates that the Government can do what risks
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involved and, in effect, handle the problem some way like the F. H. A.
stock piles and as a consequence we let the material go to Fascist
has handled it, 80 that you have a government serving as a pool agent,
nations. That was the implication of your statement.
so that the occasional losses are balanced out against the majority
Mr. WALLACE. Yes, sir.
gains.
The CHAIRMAN. It happens that I have a good deal of correspond-
The CHAIRMAN. I don't think that reaches the question. My ques-
ence on that subject which I will be glad to show you. I filed with
tion was whether you would advocate the financing of small business
the Secretary of State in the year 1938 and again in the year 1939
on the equity basis. That, of course, is by way of taking stock.
complaints from good people in this country who were in great
Mr. WALLACE. I would hope that it would be possible to get it done
sympathy with China. Most of them had lived over there as mis-
by the Government, in effect, furnishing insurance to the local folks.
sionaries and they said that we were sending oil and scrap iron to
That is, I think you can get the most employment by having it done
Japan while the Japanese were fighting China. Mr. Hull wrote me
that way.
two letters and in each instance said we would have to do that, that
The CHAIRMAN. You have the idea of the Government guaranteeing
we were under a treaty, an economic treaty, and if we undertook to
dividends on the stock and repayment as part of the investment?
withhold oil and scrap iron from Japan at that time we would make
Mr. WALLACE. Senator, I would like to present full details to the
bad matters worse; we would induce Japan to move, as she has since
committee later. I might say that while I might make suggestions
moved, to the oil countries with a view of taking over a lot of
along that line, because I have been concerned with the problem, I
territory.
would like any presentation that I might present to the committee
So, wasn't that the Government policy of which you are com-
to be looked on quite tentatively and probably subject to continuous
later modifications.
plaining? Mr. WALLACE. No; I wasn't referring to that at all. I was re-
The CHAIRMAN. That will be satisfactory. However, it is extremely
ferring to the failure to buy certain strategic materials.
important.
The CHAIRMAN. We failed to buy aluminum, and other nations got
Mr. WALLACE. I think it is one of the most important points if we
it. I have a statement that aluminum could be had in 1939, $00,000,000
are going to get full employment in this country, and especially in
pounds, but there was no market here, and under the treaty and with
the Middle West, the South, and the far West.
the encouragement of the State Department it was sold where there
The CHAIRMAN, You will bear in mind in preparing that that the
was a market for it. I think that was characteristic of this country.
common stock, as a rule is the exclusive voting stock and if the Gov-
We sold our scrap iron, as you know. I will add another thing about
ernment takes over the common stock or any great portion of it, it is
that. Mr. Hull stated to me in his letter that the serap iron that was
taking over the control, I will leave it right there for you to answer.
going to Japan was near the coast and too far from the steel plants,
Senator PEPPER. Mr. Wallace
and, therefore, everything we sold we were just saving. That was a
The CHAIRMAN (interposing). I want to finish my examination.
mistake of Government policy, was it not?
Senator PEPPER. There is one point on that subject that I would
Mr. WALLACE. I think it was a mistake, very definitely.
like to bring out before the hearing is terminated. I apologize if you
The CHAIRMAN. You wouldn't blame it on Mr. Jones especially, or
haven't finished.
the R. F. C.?
The CHAIRMAN. I haven't finished by a long shot.
Mr. WALLACE. Well, as a matter of fact, in July 1943 I did.
Senator PEPPER. I am sorry.
Senator BREWSTER. The sale of scrap iron?
The CHAIRMAN. You spoke of small business getting money from
Mr. WALLACE. Not the scrap. The Senator was using his scrap
Wall Street. Small business gets its money from the local banks.
illustration to indicate the whole unawareness of the public. The
Mr. WALLACE I was quoting Mr. Eberstadt.
Senator can repeat what he said.
The CHAIRMAN. Mr. Eberstadt makes the picture there of small
The CHAIRMAN. My inquiry related to the scrap.
businesses all over this country going up to Wall Street and being
The CHAIRMAN. I know you didn't. 1. am talking about the general
Mr. WALLACE. I said nothing about scrap myself.
turned down. Now, the small business goes to its local bank and the
local bank is in position to understand the nature of the business and
policy. You will agree with me that the general policy in 1938 and
the prospects. Is the complaint against the small bank?
1939 was to go on selling to the people in Japan, or to the Kingdom of
Mr. WALLACE. No; it would not be against the local bank except
Japan, anything that they would buy over here?
on this basis, that increasingly since 1913, and especially since the
Mr. WALLACE. Unfortunately it was. I don't quite get the point you
depression of 1930, the small banks have been operating under bank
are making relative to my statement.
examining rules which make it impossible for that small bank to
The CHAIRMAN. Your suggestion was that we had let other nations
engage in this field.
The CHAIRMAN. They were Federal rules.
have these goods.
there failure to buy in the Dutch East Indies adequate quantities that
Mr. WALLACE. I didn't mean to refer to that. Let's say specifically
Mr. WALLACE. That is correct. Well, there were State bank ex-
examiners, aminers, but at the present time they are nearly all Federal bank
of the was materials available in the Dutch East Indies, materials
were very vital to our economy in case we got into war.
The CHAIRMAN. That brings me to another matter. You refer to
Mr. WALLACE. Yes, sir; rubber, tin, and quinine.
Senator BREWSTER. Rubber?
the fact that there was a period in which we were not building up our
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93
The CHAIRMAN. There was no suggestion that we buy in the Dutch
So, I think the policy at that time was one of accommodation and
East Indies until we had gotten into the war period.
perhaps-to use a bad word-one of appeasement. I don't think it
Mr. WALLACE. Frankly, I think it indicates a lack of foresight and
is a bad word, although it did get a black eye at Munich.
vision that we didn't do it.
Mr. WALLACE. Frankly, I think it would have been good policy
The CHAIRMAN. That was not the fault of the R. F. C. especially.
during that period when we knew what Japan, Mussolini, and Hitler
That was the fault of the administration, as conducted by the President
were up to, to have more than the usual quantities on hand. We had
and Secretary of State.
stockpiles in agriculture. In the case of corn we had about 5 times
Mr. WALLACE. Frankly, I say it was the fault of certain advisers
the normal carry-over in the fall of 1940 than we normally had. We
who should have informed the President. I say very specifically it
had 100,000,000 extra bushels of wheat. That kind of thing came
was the fault of certain advisers who should have advised the Presi-
in mighty handy.
dent more adequately on what the world picture was, really was.
The CHAIRMAN. That is all right. I was bringing out the point of
I will say, for my own part, as long as you are pressing this in
the national policy. I don't think the United States accumulated a
this way, that I felt there was a very great danger. Let me give you
surplus of corn with a view of war. We have had frequently a sur-
a specific illustration, Senator. On April 13, 1939, I believe, I came
plus of agricultural commodities. Our biggest complaint in the past
up to the Capitol and sought out Senator Byrnes. There was a par-
has been that we have had too much surplus.
ticular hearing on. This whole thing is in the Congressional Record,
Mr. WALLACE. Nevertheless, Senator, it was a good thing to have
if you care to verify it. At that time I felt there was a great danger
had a stock pile on hand. I will say to the Senator that it definitely
of war with Japan. At that time I told Senator Byrnes that I thought
was not out of my mind.
it would be a mighty smart thing if we took cotton which we had
The CHAIRMAN. We had a great surplus of cotton, and it was a great
stored up and traded it to England for rubber. The Senator agreed
burden, but we didn't accumulate it with the expectation of war.
with me. I went down immediately to the State Department. I
Mr. WALLACE. I never used it as an argument on the Hill because
knew in the State Department there were folks who had been tre-
Iknew it would be an unfortunate argument to use.
mendously concerned all the time about this danger of war with Japan,
The CHAIRMAN. I will move to another subject. You made an
and I am sure Secretary Hull was tremendously concerned.
analogy between our present condition of prosperity, based alto-
I went to see Herbert Feis, because I knew Herbert Feis had always
gether on the war spending and the war borrowing, and the post-war
been interested in rubber, as I had been. Herbert Feis was con-
prosperity. It wouldn't be prosperous if it were based on taxation.
vinced of the trouble that was ahead and was convinced that trouble
We spent on war last year $90,000,000,000 and expect to spend this
would reach us via rubber. I backed rubber when I was Secretary
of Agriculture. I backed rubber when Congress tried to take the
year about seventy-five or eighty billion. Now, that makes a certain
sort of prosperity. That is prosperity based on borrowing, just like
appropriations away entirely. If the Congress will go over its record
if I borrow a million dollars a year and present a certain kind of
it will see that it is not absolutely perfect, I must say.
Mr. Byrnes agreed and Herbert Feis agreed. Herbert Feis made
prosperity. You say we can produce the same conditions in the post-war world.
it possible for me to get clearance. The State Department did not
like the idea of commodity interchanges, felt that it was not quite
How much do you contemplate we borrow or how much would you
the best way of doing business, but the State Department agreed.
raise by taxation to do that?
Joe Kennedy cooperated beautifully.
Mr. WALLACE. Well, Senator, I think you have to realize a very
We made the exchange of 600,000 bales of cotton. The cotton was
large part of this very large governmental expenditure has gone into
on the basis of the price in the first 6 months of 1939 at New Orleans,
the hands of the consuming public in the form of savings.
and the rubber in the same period. We got 90,500 long tons of rubber
Senator BAILEY. Always does.
out of it, enough, as I remember it, to make 20,000,000 tires.
Mr. WALLACE. Well, in this case the excess savings are rather ex-
I think that is the kind of imagination that really was required to
traordinary. As I remember it, the estimate was that they would
meet the stock-piling situation.
amount to $100,000,000,000 at the end of 1944. That was an estimate
The CHAIRMAN. Maybe so; but let me call your attention to a vital
made in 1943. I haven't seen a current estimate, but $100,000,000,000
fact. This country passed a Neutrality Act in 1939 in the month
is more than 10 times what we have had of that type of savings.
of October. Being chairman of this committee, it was my duty to
look after the shipping aspects of that act, and the shipping aspects
restrictions. So, I feel that you can't draw any conclusions from the
Now, that money hasn't gone into expenditure because of war-time
were big aspects. You will remember that we created zones, that is,
war situation that are altogether applicable to peace.
places where ships could not go. They were called combat zones.
I to the Senator, with regard to debts of all kinds, both
We didn't create those zones around Japan. The act didn't con-
private may and say public, there is a very interesting table in the July 1944
template that, nor did the President, nor his office. That was the
issue of the Current Business, a Department of Commerce publica-
That came directly from the head of the administration.
order in which we might ship to Japan. That was the national policy.
tion, and in that the Senator will find, with regard to all You debts, will
both public and private, a most interesting phenomenon. kinds of
find that from 1921 to 1929 there was an increase in all
68424-45-7
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debts of $50,000,000,000, $5,000,000,000 a year. From 1929 to 1939
there was a decline in total debt, just before the war came on, of
$9,000,000,000, or an average decline during the period of about a
was worth more in purchasing power than it is today.
These are pounds, and, of course, in that day a pound of sterling
billion dollars a year. I know it is customarily thought that in the
our case was desperate.
Pamphleteers, historians, and orators pronounced that now, at all events,
decade of the twenties we were exceedingly frugal in paying off debts
Soon war again broke forth; and under the
and that in the decade of the thirties we were riotously going into
swelled to a hundred and forty millions;
energetic and prodigal administration of the first William Pitt, the debt rapidly
men of theory and men of
debt, but on the total debt account, public and private, the contrary
business rived. almost unanimously pronounced that the fatal day had now really ar-
is exactly true, In one case we went into debt to the extent of 50,-
Not less gloomy was the view which George Grenville, a minister
000,000,000, in the twenties, and in the thirties we reduced the total
eminently diligent and practical, took of our financial situation. The nation
must, be conceived, sink under a debt of a hundred and forty millions, unless a
debt by about 9,000,000,000.
portion of the load were borne by the American Colonies, The attempt to lay
So, I think it is important to probe very deeply into this debt
a portion of the load on the American colonies produced another war. That
question, and I am sure it would tire everyone here completely out
war left us with an additional hundred millions of debt, and without the Colonies
whose help had been represented as Indispensable,
if we went into the full aspects of it now.
Soon, however,
the wars which sprang from the French Revolution
The CHAIRMAN. I don't intend to. The difference there lies in the
tasked the powers
of public credit to the ntmost. When the world was again at rest the funded
simple fact that the Government began to borrow and created a
debt of England amounted to eight hundred millions,
It was in truth
certain amount of prosperity on the borrowing and that enabled
a gigantie, a fabulous, debt; and we can hardly wonder that the cry of despair
should have been louder than ever. But again that cry was found to have been
the people to get along, accelerated the number of transactions in
as unreasonable as ever. After a few years of exhaustion, England recovered
business.
herself. Yet like Addison's valedutinarian, who continued to whimper that
Mr. WALLACE. If I may interpolate, in the decade of the twenties
he was dying of consumption fill he became so fat that he was shamed Into
when we were going into debt we had full employment. I think
silence, she went on complaining that she was sunk in poverty till her wealth
we must give the administration of that day credit.
showed Itself by tokens which made her complaints ridiculous. The beggard, the
bankrupt society not only proved able to meet all its obligations, but while meet-
The CHAIRMAN. Would you give the administration credit or would
ing those obligations, grew richer and richer so fast that the growth could almost
you give the people credit?
be discerned by the eye.
Mr. WALLACE. You have asked a question that would take quite a
The prophets of evil were under a double delusion. They erroneously imagined
long time to answer. Your questions, Senator, always have the deep-
that there was an exact analogy between the ease of an Individual who is In
debt to another individual and the case of a society which is in debt to a part of
est philosophical implications.
Itself.
They made no allowance for the effect produced by the Incessant
The CHAIRMAN. When the elder Pitt was leading England as Prime
progress of every experimental science, and by the Incessant efforts of every man
Minister-and this was during the time of a war also-the merchants
to get on In life. They saw that the debt grew; and they forgot that other
passed a resolution praising him by way of saying that even in war-
things grew as well as the debt.
time he had made England prosperous. That was because it was
Senator Danaher, of Connecticut, had a very interesting view on
the first time that the Government had borrowed heavily to carry
this particular question. He said:
on war. Up to that time the Government taxed. They soon learned
If you are satisfied that you get your money's worth, the Federal Budget can
better when it came time to pay their debt. You are proposing a
be sald to be balanced.
theory here that we should provide prosperity in post-war by greater
Sometimes the boys would like to scare us about the debt. They
extensions of the borrowing power of this Government, and in view
used to have pictures of little babies without any clothes on them say-
of the fact that when the war is over in all probability the national
debt will be around $300,000,000,000, and perhaps more.
ing: "Poor fellow, he owes $1,500 the day he is born." Of course, you
Mr. WALLACE, Senator, in that connection I think it perhaps de-
could just as well put another picture over here and say, "Lucky little
sirable to have a little historic perspective.
fellow, isn't it grand he has got $1,500 coming to him the very day he
The CHAIRMAN. I just gave you a little about Mr. Pitt.
is born?"
And one would be as true and one would be just as false as the
Mr. WALLACE. That is what gave me the idea. If I might quote
from Lord Macaulay on this subject [reading]:
other. When you think the thing through the fundamental point is
At every stage in the growth of that debt the nation has set up the same cry
whether or not the payments of interest on the debt have altered
of anguish and despair. At every stage in the growth of that debt It has been
the distribution in income as between the different segments of the
seriously asserted by wise men that bankruptcy and ruin were at hand. Yet
still the debt went on growing: and still bankruptcy and rulo were as remote
population. That is the fundamental point, if you are trying to look
as ever. When the great contest with Louis XIV was finally terminated by the
at the problem from the standpoint of the economy as a whole.
sidered peace of Utrecht the nation owed about fifty millions; and that debt was con-
Senator O'MAHONEY. You were good enough to say that Senators
by acute and profound thinkers as an Incumbrance which
would permanently cripple the body politic. Nevertheless trade flourished
that were not members would be permitted questions. My presence
wealth Increased; the nation became richer and richer. Then came the War
on the floor is required and I would like to ask one or two questions.
of the Austrian Succession; and the debt rose to eighty millions,
The CHAIRMAN. All right.
Senator O'MAHONEY. The issue, as presented to this committee from and
the Senate arises. as you have said in your opening statement,
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97
the fact that you have been nominated as Secretary of Commerce
Senator O'MAHONEY. You have spoken about enterprise being free
and from the fact that a bill has been introduced to divest the Sec-
from monopolies and from private control. Do you also consider that
retary of Commerce of the supervision he now exercises over the
private enterprise should be free from Government regimentation?
Federal loaning agencies.
Mr. WALLACE. Senator, as much as private enterprise can be free
The question, therefore, in my mind, and the only question that
from Government regimentation and yet have the maximum welfare
I think is really involved here is the extent to which the powers of
served, I am strong for it; as a matter of fact, somewhat less than the
the Federal loaning agencies should be used by the Secretary of Com-
maximum welfare served. At times I have been almost as much
merce to effectuate any particular program, social and economic. In
annoyed by Government bureaucrats as any infuriated businessman.
laying down your program for economic democracy in the post-war
Sometimes I have been wrong in my feeling and other times I feel that
world, upon several occasions in your opening statement you said,
I may have been right.
as I recall it, "With the approval of Congress."
I agree that as society gets more complex there can be many differ-
Are we to understand from that statement of yours that it would
ences of opinion as to just where the green and red lights ought to be.
not be your purpose if these lending powers were not divorced from
There do have to be an increasing number of traffic signals as the
the Department of Commerce not to try to effectuate those policies
civilization progresses, and the Government does have to place those
without the approval of Congress!
traffic signals.
Mr. WALLACE. Obviously, Senator, it would be absolutely essential
Senator O'MAHONEY. There can be no doubt but that public regula-
and vital for Congress to set up the program. I always proceeded that
tion is of great importance. Are we to infer from your statement that
way as Secretary of Agriculture. How can anyone proceed in any
it is your belief that the powers of the executive agency should not be
other way?
used to change policy without the prior approval of Congress!
I am aware of the fact that under the R. F. C. as now set up it is
Mr. WALLACE. Certainly; it is obvious.
not bound-I mean it hasn't had to observe some of the requirements
Senator O'MAHONEY. Thank you very much. I am very grateful
which Congress has seen fit to exact of other agencies. If the Con-
to the chairman.
gress sees fit. to wish me to administer these agencies, I should think
Mr. WALLACE. I would appreciate it, if I may say, Senator, if I
that it would want to protect me and itself and the President by
should be given by the Congress this broad supervisory power, if any
have to observe.
seeing that these safeguards are set up which all other departments
question like that comes up, or if any Senator thought this policy was
not being observed, that he would let me know.
Senator O'MAHONEY. I am aware of the fact that as Secretary of
The CHAIRMAN. I take it, Mr. Wallace, your answer to my question
Agriculture that was your policy. But there is possibility of con-
was in the affirmative.
fusion in the public mind owing to the fact that you have come here
this morning with a broad program for stimulating employment, and
The CHAIRMAN. I asked you if you were of the opinion that in the
Mr. WALLACE. I have forgotten what your question was.
enterprise. therefore stimulating business. You have talked of promoting free
post-war which have outlined here by continuing to borrow money on from top
period we should undertake to accomplish these objectives
Now, the question naturally would occur whether or not it was your
purpose to use these tremendously broad and unlimited powers which
Macauley by way of showing that the English people were weeping at
of the prospective you national debt of $300,000,000,000. You quoted
have gathered under the Federal loan agencies to carry out this pro-
gram you have envisaged and laid before this committee without
all to be compared to $300,000,000,000. You answered in the
and wailing at $50,000,000 and finally at $800,000,000, which is affirma- not
previous authorization from the Congress. Now, before you answer,
tive.
may I say again that the powers, which were granted to the first place
That didn't trouble me at all. I thought about Mr. H. K. Carroll the
The CHAIRMAN. I read that statement from Macaulay vears ago.
Mr. WALLACE. Not necessarily.
From that emergency we moved into the emergency of preparation
to the R. F. C., were granted in a period of grave economic emergency.
for the war and of the war, and during all this period new broad
powers were granted, with great discretion to the loàn agencies.
American economy had finished and need not go any further. it. I
(Superintendent of the Census of 1890) who said in 1890 that would
Now, do you believe that those undefined and unlimited powers of
like to get your answer as definitely as you feel you can make
these ends?
such great magnitude should be used by Executive action to achieve
increasing the debt, and that is by getting the maximum of equity
Mr. WALLACE. There is one way of getting full employment without
Mr. WALLACE, I would think, Senator, that it would be highly de-
finance; that is, common stock investment.
sirable for Congress, as it has done repeatedly in the past, to amend
The CHAIRMAN. You are not ready to say the Government should
the R. F. C. Act to define very clearly just what the Congress desires
with regard to carrying out any or all of the program which I have
buy Mr. the WALLACE common stock? No. You can get full employment by increasing modi-
set forth this morning.
private equity financing by a combination-well, under some
being- Senator O'MAHONET. You have spoken about free enterprise
fication of the F. H. A. plan.
The CHAIRMAN. F. H. A. is not equity financing.
Mr. WALLACE. I know, for my own part, I would feel it a very great
Mr. WALLACE. You don't think so, Senator! It is not in industry,
safeguard in administration if Congress would take that action.
J will grant.
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99
The CHAIRMAN. It is not equity financing. It is a lending agency.
Mr. WALLACE. It is a long-time loan and it is a debt.
The CHAIRMAN. You would invoke the full welfare- and commerce-
The CHAIRMAN, A loan is never equity financing, because a. loan
clause powers?
is against the whole property.
Mr. WALLACE. You are talking about the writing of legislation?
The CHAIRMAN. I am talking about the source of the power to do
Mr. WALLACE. I was thinking about the method whereby the Gov-
ernment participated when I made the statement,
what you have in mind.
The CHAIRMAN. Now, I have another question for you.
Senator WILEY. Mr. Chairman, we can't hear you.
The CHAIRMAN. You wouldn't go beyond the Constitution, but as I
Mr. WALLACE. Under the Constitution, yes,
Mr. WALLACE. I want to make this one point further, Senator. We
understand now the Constitution is so interpreted the Congress can
can carry the interest on the $250,000,000,000 or $300,000,000,000 at
appropriate any amount of money for any purpose it finds to be in
low interest rates. We can carry the total interest burden of the
the general welfare. It has been extended now to the small merchant,
country, both public and private, provided we do have people fully
because his activity, as interpreted now, affects the general commerce
employed and do have full production. One of the very strong argu-
of the country. Now, you go a step further and regulate the opera-
ments for doing this is that it is the only way we can carry our tremen-
tion of a farm in Ohio or North Carolina. Do you intend to employ
dous debt load easily.
those full powers to bring about this situation that you speak limited of
but the moment the American public begins to sell the bonds you are
vided the people continue to absorb and hold the bonds at the moment,
The CHAIRMAN, You have got a further proviso, and that is pro-
They would be in substitution, of course, for the present
powers. Mr. WALLACE. I don't think we did quite the thing to the farmer
going to have very great difficulty carrying your debt.
that indicated.
Mr. WALLACE. That is why, it seems to me, the Treasury, in
The you CHAIRMAN. What I had in mind is very simple. We tell the
ticular, has a tremendous stake in seeing that we don't start on par-
tailspin of unemployment. It has a tremendous stake in reassuring any
in cotton and if he produces more, he cannot sell without a heavy
farmer he can cultivate so many acres in wheat and so many acres
businessmen that that is not coming to pass. The stake is so
that the Government is well warranted in working out some device great
penalty. WALLACE. I remember how eager the Senator was to time have the re-
that will give necessary assurance to people who want to engage in
strictions Mr. on the potato crop some years ago. At that when the
equity financing.
Senator may of Israel came to Samuel and said they were tired will judges do
put remember that I referred to the Bible story, of
The CHAIRMAN. The difference is that we are now buying bonds
a matter of duty, but once We get prosperity, We will buy investments as
children wanted king, and Samuel said, "it is up to you-a king and have
the time of peace for the sake of the Government; they carry them for
as a matter of self-interest. People don't carry Government bonds in
and bad things a to you but if you want a king Senator. go ahead
many one." think that is exactly what I said to the
sake of themselves; but right now they are carried for the sake of
CHAIRMAN. I We are getting off a little ways from and the we track, had
the Government.
but I the regulation of everything else, and I did that the potato you
The will meet that. The blood had already been spilt think if
or something of that sort,
businessmen have invested on the basis of local patriotism in a hotel
Mr. WALLACE. I have known in our home locality where the local
gone into to regulate cotton, tobacco, wheat, and corn were driven out
were going be protected against those people who and
The CHAIRMAN. And always lost?
of farmer cotton might and corn and were anticipating going into potatoes
welfare they are not immune to investing from the standpoint of the general
Mr. WALLACE. That has been my experience, sir. But it shows that
breaking the now potato that farmers' I didn't market. think that was good legislation. the
of the community.
I will say BREWSTER. I think the potato legislation is that most is un- the
your analogy. It was under the national defense powers, which with
The CHAIRMAN. I will not argue that. I want to get further
fortunate instance I know in your record, or in that of any an act of Con-
Senator precedent which you could bring up here, since Cabinet officer,
mendous practically unlimited in my view, that we proceeded with this are
only has publicly announced that he would defy deal of concern.
defense was necessary, to fight the war. But when the war is
ever expenditure of borrowing and lending money, doing what- tre-
gress, Mr. WALLACE. you If you will look into the full record, you
when he and will remember that caused a good will find that
powers will be out. Now, do you intend to invoke over the
I did
of Congress, other with a view for this program you have outlined, the from the
The and was brought to me. But we had a little about controversy that, as
not CHAIRMAN. do that. I think the bill was prepared in the Department of
powers, welfare powers, or commerce-clause exercise
present for a long interpreted, time to come? and as I think they are likely to be powers, interpreted as at
Agriculture about the enforcement, but I have never complained
you know.
Mr. WALLACE. Do I intend to
The have CHAIRMAN. You will have to find the power
Mr. Let's get a little further on. I think you offend gave us
WALLACE. Yes, sir.
ment. will to have power equal with the defense powers somewhere; of the you
The CHAIRMAN. that was very desirable and-I hope I the don't concrete part you
Mr. WALLACE. Now, I was asking you where you would look for those Govern- powers.
a statement say-idealistic. I am trying to get down to economic bill of
The Congress is the only institution.
when of it. I You speak of the implementation of the
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101
rights. What action do you contemplate from Congress in the form
of statutes to implement this bill of rights!
a Brettonwoods step and agreed on a plan. What the details I cer-
forward had been made when these 44 nations had of the met plan at
Mr. WALLACE. Obviously, there would be required bills under every
will be when finally worked out, I cannot tell the Senator.
one of these eight points. I think there has been introduced in
Congress a bill covering the full employment matter. I think Sen-
tainly would not attempt to speak for the 44 nations.
The CHAIRMAN. You said you had a plan.
Thomas ator Murray, Senator O'Mahoney, Senator Wagner, and Senator
Mr. WALLACE. CHAIRMAN. No: Now, I didn't you say said that. the foreign trade would of provide course,
The CHAIRMAN (interposing). That was a bill mainly to create a
committee to prepare plans. There was very little affirmative action,
additional workers. Foreign trade will be based also for
The employment over here, our shipments abroad, either on our
certainly no concrete action, proposed in that bill.
for 3,000,000 exporting to us. So, that will provide selling to us,
Mr. WALLACE, Yes, there was some very substantial concrete action
in the bill. As the President pointed out in his message to Con-
lending three to money five million or more men abroad engaged in
gress this year, he looked on that first plank in the economic bill of
wouldn't
Mr. WALLACE. it? Well, it will depend on how efficient they are. If
it rights as the most important one, and the action taken under this bill,
seems to me, would result in bringing forward other proposals that
they are very inefficient, Then, it might you contemplate take 10,000,000. increasing our by employ- five to
bill of rights,
would carry out, at least, some of the other planks in the economic
ment The by CHAIRMAN. 3,000,000 on foreign-trade account and the foreign
The CHAIRMAN. Later on in your statement you spoke about sta-
ten million?
bilizing the economies, and particularly the currencies in other coun-
Mr. WALLACE. It I depends will put on how in your efficient qualifications, they are. "depending would on
tries, You think we can do that over here?
Mr. WALLACE. I think you should have someone from the State De-
how The efficient CHAIRMAN. they are." They wouldn't be on equal wages,
partment and Treasury to discuss the Bretton Woods proposals.
they? Mr. WALLACE. No country has such a high standard of wages as
been no stabilization of currency in France since the First World War,
The CHAIRMAN. Let me put a concrete question to you. There has
we
The have. CHAIRMAN. Have you got a definite plan about these 8,000,000
United States stabilize the currency of France?
The frane has gone down from 25 cents to 1 or 2. How would the
additional
men? Senator, what we import from abroad what doesn't we nec- are
Mr. WALLACE. At the present time it is obviously impossible.
essarily Mr. WALLACE. mean less employment here. It depends on
within the past 25 years?
The CHAIRMAN. Do you think we could have done it at any time
important
The CHAIRMAN. from abroad. It means you have got to buy it abroad to get it
and hoped of for. If you have reasonable assurance of permanent as can
be there is assurance of permanent peace, or as much assurance
Mr. WALLACE, I think you can get stability of currency only when
over here.
Mr. WALLACE. CHAIRMAN. That What is right. do the people service abroad have to sell us?
two countries are the balance wheel for the whole world for all
permanent employment in this country and England-and peace these
The Mr. WALLACE. They (interposing). have tourist What would justify 3,000,000 the employ- more
ment world that will make it possible for them to have full
keystone the to creating that degree of market for the other countries the of
raw material producing countries of the world-then you will have the
ment The of CHAIRMAN 3,000,000 more people, or the equivalent of
men,
Mr. here? WALLACE They have tourist service, Senator, which they are
determined. it is in the world trade where the currency relationships trade, are
because and fair prices for the products which enter into world employ-
very
The eager CHAIRMAN to sell us (interposing). But we had those before and we are
The CHAIRMAN. What is the concrete proposition to stabilize the
not
likely to have Yes; more. I think we are, Senator. With tourists the traveling airplane
the currency in any foreign country, or in several, assuming that we had
in Mr. the picture, WALLACE. I think definitely we will have more
prospect of permanent peace?
Mr. WALLACE. I think you would have to get someone from the
abroad. The CHAIRMAN. We may have some more. I am talking about the
Treasury to discuss that point.
said your paper.
The in CHAIRMA. But you have that in mind. That is what you
objectives Mr. WALLACE. now. Would the Senator like me to submit some other
Mr. WALLACE. No. The point I made in the paper that
additional information?
there this matter of getting full employment it is highly desirable was in
The WALLACE. CHAIRMAN. I don't What? care to bore the Senator. me.
I
am
trying
to
find
far of world trade the restrictions to world trade should max-
imum should be the maximum of world trade and in getting the that
Mr. The CHAIRMAN. You are not going to bore
trade as is possible, removed, and that one of the restrictions be, as
out what you have got on
Mr. WALLACE. The Senator foot. is putting foot. it quite wrong. At the pres-
the uncertainty with regard to currency, and that on I world felt
ent time it is not what I have got on
Regraded Unclassified
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103
The CHAIRMAN. Well, what have you in your mind
the other representatives there. I know that they felt that as a result
Mr. WALLACE. As a matter of fact, this is just a little intellectual
they would be pushed into taking countervailing measures, which later
exercise, as far as I am concerned.
on they did. That is when the world tailspin really began with a
The CHAIRMAN. I hope you are enjoying it very much.
Mr. WALLACE. I am, very much. [Laughter.]
vengeance. Now, here we come after this war. Again, we are again a creditor
The CHAIRMAN. I am trying to get at the ways and means
nation. I want to say that I have considerable sympathy with Herbert
Mr. WALLACE. This whole question of balance of payments is one
Hoover's problem as Secretary of Commerce right now, because I can
which has been of most vital interest to me ever since 1919 and I have
I am going to go all-out to get the maximum of use out of what-
gone into the various ramifications in very great detail. I may say
say ever powers may reside in the Bureau of Foreign and Domestic Com-
to the Republican Senators that it is on the basis of that that I left
merce to foster and develop trade here and abroad. 1 am going to
the Republican Party; that is, the Republican Party was not willing
use those powers to the maximum to get an increase in foreign trade
to see this Nation adopt a policy in conformity with our credit or
there will be a great excess of exports over imports. As Secretary of
and, undoubtedly, for a period of 5 or possibly 10 years after the war
position. I must say that the problem was not quite as simple as I
thought it was when I left the Republican Party. [Laughter.]
Commerce I would be contributing perhaps as much as any single
This doesn't have much to do with my being Secretary of Com-
individual to producing a situation like that for which I criticized
merce, but if you would like to have my full opinion, I would be most
happy to give it to you.
the Republican Party back in the decade of the twenties.
I from the standpoint of the United States and the whole
The CHAIRMAN, I am not going to object. I asked the question
and you have the right to answer it.
world, say, that there should for a time be an excess of exports over imports the
but we should embark on this policy with our eyes open, with Those
Mr. WALLACE After World War I when we emerged as a creditor
idea that eventually we will receive more goods than we export.
nation, and a very great foreign trade drive was put on through the
who are in Congress who are going to be here for a period of
Department of Commerce, I felt very critical because simultaneously
with that very powerful foreign trade-and I think it was very skil-
years; men and that means, of course, the southern Senators should keep
fully done-we raised our tariff, and I used to go around the country
this in mind.
The CHAIRMAN. Not all of them. They change.
saying to the farm falks, "There is going to be a great deal of trouble
Mr. WALLACE. The two imports this country, during the past. and 10
coming to the farmer, because here is the United States, a creditor
has been willing to receive most willingly have been gold countries
nation, saying to the outside world with regard to the debt the out-
years, silver. These gold and silver imports have enabled foreign na-
side world owes to the United States, 'Come here and pay up' and
to tions have a benefitted greatly as a result of our purchase of gold have
finance large volume of purchases from us. Certain foreign and
saying it in a very mean and very dirty tone of voice through all the
newspapers, and congressional speeches."
Then we put a pitchfork against the bellies of these foreign nations,
silver. much of it, but at the same time, if we are interested in the such
I wouldn't go anything to minimize gold, because maximum we
saying, "No you don't, you so-and-so, stay away from here, we won't
so welfare in the long run, eventually we must build up to accept pros-
let you pay up." I said that kind of thing was found to produce
human in the United States that we will be willing and happy done for a
foreign nations.
irritation, bound to create the most serious kind of trouble in those
perity more goods than we export. I don't think that can be
I really think it was the fundamental cause of the rise of Hitler, the
period CHAIRMAN. of a good many You years. could do that by lending money to the for foreign their
fundamental cause for a great deal of disturbances we have had all
nations, The or we could do it by opening our doors further
over the world. I have felt. that most deeply.
Now, it was most important to our full employment in the decade
trade
Mr. be loaned, and we hope on private account, and I we am hope sure it
here. WALLACE. I suspect, Senator, that a great deal of money will also
to the farmer that those loans also serve to create a market abroad for
of the twenties that we finance exports abroad. It was important
have to the complete knowledge of the Government, as volume of
farm products. Simultaneously we strongly expanded our drive
will with be. A great deal of money will be loaned if a large
for exports under Secretary of Commerce Hoover, As a result of loans
the prices were higher than they would have otherwise been on the
export is to it be is financed. very important for us to furnish machinery industrialized. and
wheat and corn products, and tobacco and cotton. The fact that we
were exporting industrial products abroad helped the manufacturers
machine will enable them to industrialize themselves as fast as possible.
I think tools to these foreign nations that are not
people in New England, Ohio, Michigan, and many other States, But
This Then will enlarge their purchases from us of other which things.
when we exported so much more than we imported, and refused to
they have reached a stage somewhat analogous to that England decisive
the accept goods, a day of reckoning was inevitable. When we raised
tariff a second time that day of reckoning came.
reached, and say, assume our responsibility we will again I. create
We 70 years ago. If we don't step forward in some a situation
England in 1929 at the time that bill had been introduced in the
I was attending an international economic conference in southern
similar way that which existed after World War
The number of gainfully employed people, on wages Government as as
CHAIRMAN. to Now, one more question. You stated that good when-
House, the but it had not reached the Senate, I know the effect it had
on economists on the Continent; the effect it had on the British and
ever those our existing now, should full below 57,000,000, the
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105
should take steps. But you didn't say what steps. I would like to
The CHAIRMAN. But we get our present income
know what steps.
Mr. WALLACE (interposing). May I also state this, Senator, that
Mr. WALLACE Governmental building and construction, roads, air-
with that kind of income the burden of interest on all debt, public and
ports, and so forth-should be blue-printed so they could serve as a
prompt basis for construction activity when needed.
private, will not be substantially more on a percentage basis than it
was during the decade of the twenties.
works? The CHAIRMAN. You contemplate a very vast system of public
The CHAIRMAN. But we get our present income of $150,000,000,000
Mr. WALLACE. I think we ought to have a very large volume of
to $160,000,000,000, national income.
Mr. WALLACE. A total product in excess of $200,000,000,000, Senator.
public works blueprinted in case the need should arise, I would hope
The CHAIRMAN. The total product, yes. You were talking about
it would be possible so to stimulate private activity that we wouldn't
have to construct the less desirable type of public works.
the income and that would be $200,000,000,000 on the total product.
The CHAIRMAN. How would that be provided for?
We get that very largely on production of munitions and borrowed
Mr. WALLACE. That would depend upon what the state of finances
would be at the time,
money. Mr. WALLACE. That is right.
The CHAIRMAN, In the present state or any time in the near future.
The CHAIRMAN. Do you contemplate that we can get anything like
You say in your statement that you propose a reduction of taxation,
the national income of $150,000,000,000 or the total products of $200,-
Mr. WALLACE. I think you can get more taxes from what I pro-
000,000,000 without really exhausting the credit of this country!
posed in this testimony than under any other approach because, after
Mr. WALLACE. Senator, when the munitions production is finished it
all, in the final analysis an unbalanced budget is men out of work,
will be necessary to find other places for the activity of our men, mate-
and if you have a large quantity of men out of work and allow the
rials, and technologies, and that is why I put forward this program
national income to be cut in half, as happened between 1929 and
here today. It is only by having a very far-visioned program,
1932-n reduction from 83 billion down to 40 billion-the effect is so
great that there is a net loss to the Treasury by penny pinching. I
Senator- The CHAIRMAN. A very far vision?
mean economy at that time may prove to be a loss,
a total Mr. output of goods and services. Our people have never
WALLACE. A very far-visioned program, that you can have consumed such
"PENNY-WISE-POUND FOOLISH"
the amount necessary in time of peace.
tinually increasing the national debt instead of reducing the con- na-
The CHAIRMAN, Then I gather that your plans contemplate
submitted the by Senator will find listed the consumption by 1940. people You
In Senator Chavez, on markets after the war. the
1943 the Senate printed a document, Senate Document In No. that 40,
tional debt?
document United States of the various goods and services in 1946 to
Mr. WALLACE. Senator, I think that would require a very careful
of the find also the consumption that would be needed in of Com- pre-
presentation that cannot be made in full at this time.
will unemployment. Mr. Livingston, of the Department the Senator
said. The CHAIRMAN, I am making my own deduction from what you
merce, interested along this line, I would have brought the publication it is
vent is the author of that publication. If I had known
Mr. WALLACE. I am glad the Senator is making his own deduc-
was because it is a fascinating publication, not because the people very
tion, but I would not want the Senator to draw wrong deductions. I
with me, but because it is very stimulating. It indicates that would have
hope you will not draw wrong deductions.
precise United States, in order to prevent unemployment, than they
tion of the debt.
The CHAIRMAN. You submitted no provision looking to any redue-
to consumed consume in 1940. People in our station of life might
of the of most consumer goods about 50 percent more not want to
Mr. WALLACE, Yes; I said I thought it was possible to
consider consuming 50 percent more of certain things.
to The reducing the debt. That is what I said in my prepared get statement. around
We pay the interest, by issuing a lot of stock to finance it.
way in different States. When I directed the Farm Security window program open-
But of bathtubs, you in the way of housing-1 have been observing
when go over the whole population and see the need in hous- the
could CHAIRMAN, As I got it, when you get around to it, you expect
my mouth.
Mr. WALLACE Senator, to some extent you are putting words in
I visited doors in the door frames, where there were 7 or with hous-
ing homes where there were no windows in the 8 children
The CHAIRMAN, I would not do that.
and ings, only no one bed. There are myriads of things connected 1940.
Mr. but WALLACE, Some of the words came out of my mouth
ing of which we could consume twice as much as in
edly, cate if I might summarize it for myself, I would like also undoubt-
The CHAIRMAN. T have finished my questions.
product to the Senator that if we can have full employment and to indi-
Does any other Senator have any questions!
result in will fare better than it will under any plan which the na-
tional debt of goods and services in excess of $170,000,000,000, a total
Senator BURTON. I have one question.
of much reduced employment. or a total product of goods and services will
The Senator CHAIRMAN. BURTON. Go There ahead, is just Senator. one question that I wish to get clearly
less than $170,000,000,000.
stated in the record.
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107
We have been discussing this issue today on the broad plane of
Agriculture were helpful in administering the various farm credit
major national policies, not on personalities, nor on the question of
short-term policies. It was brought out yesterday in Senator George's
agencies. Senator BURTON. There you did not have a relation to agriculture,
testimony that, of course, this bill is not a bill to abolish the Federal
but here you say the Department of Commerce relates to everything
Loan Agency. The Federal Loan Agency will continue, and if the
in the world. We have greater difficulty in saying loaning agencies of
bill is not passed, 6 months after the war it would be separated from
of all kinds should be really brought within the Department
the Department of Commerce.
Mr. WALLACE. That is true, sir.
Commerce. Mr. WALLACE. If you will read section 5 (d)-I wonder if I have
Senator BURTON. Your program, as you outlined it this morning,
dealt with a much longer view than that. You were contemplating, I
a copy Senator of it- BURTON. Of the Reconstruction Finance Act?
think, that even though it was separated from the Department of
Senator Mr. BURTON. That was read to us yesterday in full, and it
WALLACE. Of the Reconstruction Finance Act.
Commerce your program could go along just the same.
cific policies. I want to indicate that if it were under my supervision
Mr. WALLACE. Senator, subject to the approval of Congress of spe-
covers the world.
Mr. of maintaining and promoting the economy and find, if
WALLACE. You will find that credit is given to the R. F. stability C. for
I would be coming to the Congress and asking for approval, if it were
in my bailiwick. If it were health, it might be in Tom Parran's
the purpose or encouraging employment. You will that you its
bailiwick; but if it were in my sphere of competence I would be coming
of the the country, statutory functions of the Department of Commerce foster manu-
to the Congress and asking for certain types of legislation looking in
read cover very much the same field, to promote and and so on.
this direction, because I do believe that in the post-war period the
functions shipping, commerce, foreign and domestic, trade, of govern-
problems will be so great that inevitably the Congress will renew
facturing, I have observed—I have sat in on a number about the
the charter of R. F. C. when that charter expires in 1947. But in
doing it will no doubt modify the legislation to take care of the prob- so
mental involved in managing such far-flung machinery The as President we
Insofar reorganizations, as and I have been greatly concerned have
lems that would seem to be emerging at that time.
now; I have against a tremendous problem, with about has been,
problem talked with the reorganization experts. 47 different
of Commerce I would, subject to the Congress, try to administer it,
I want the Congress to know how if it were put in the Department
had been reporting up to him directly. The recent tendency these separate
thing that counts now, but after the war period is over I think it is
after the war period is over. I made it clear that the war is the only
in agencies order to get efficient organization, to get as many of
only fair that you know the direction in which I would be exerting
agencies as possible into One a point Cabinet in department. my mind was this: understood In your con- it,
myself with the Congress.
cluding statement of vision ahead extended so that
Senator BURTON. this morning, you did recognize, far as and I that the value
passed and within 6 months after the war the Federal Loan
Senator BURTON. It would be clear that if the George bill were not
that the scope be contributed your by the loan agency was so the great George you bill
would be continued, but continued apart from the Department Agency of
which might satisfied to go ahead either with or without of Commerce:
defeat of the Therefore, George bill, your does program it? does not turn on the passage or
it Commerce, to be. that your program would still be what you contemplate
separating would be the loan Oh, agency I am just from like the everybody Department else, 1 am just we can a soldier. make
Mr. The WALLACE. CHAIRMAN. I think we have reached a place where
Both rather the extensive experience with credit agencies and farm
Mr. WALLACE. Senator, in the Department of Agriculture I had
a decision.
the The Commodity Credit Corporation, which is the depart- of
ment. farm programs and credit agencies were in the same programs.
Are there any I further suppose questions? we can recess until a later hour questions, in the then day,
If we there can are, get our lunch. If there are no further
of Farm Credit Administration was put into the Department
ture. was transferred, The I might say, in 1939, to the Department of Agricul- It
ever-normal-granary program, for a time was in the R. agency F. C.
so we will have VANDENBERG. completed the Mr. hearing. Chairman, Senator Brewster intellectual left. I
understood Senator he wished an opportunity to indulge in this
tration Agriculture. It had been outside. The Farm Security Adminis-
in was set up outside the Department of Agriculture and it was
exercise with the Vice He President. said he had some questions, but I from thought asking he
put the Department of Agriculture.
had The finished. CHAIRMAN. I do not want to exclude any Senators
statement made many individual loans. I can give you quite an have
All of these agencies have loaned vast sums of money, and
questions. Senator O'DANIEL. Mr. Chairman, I have some questions that I
the banking. it Credit also, if it is to be good credit, to serve the merely
on that, if you wish, but it is late. Credit is not extended
would
like CHAIRMAN. to ask. If you have some questions, o'clock. and I presume other
the local way should, has to be extended on the basis of country
situation. All the scientific bureaus of the Department knowledge of of
Senators The (Whereupon, have, we at will 1:35 take p. a m. recess a recess until 3 was taken until 3 p. m. of
the same day.)
108
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
109
AFTERNOON SESSION
I have had satisfaction in my Government service because I have had the
The CHAIRMAN. The committee will come to order.
confidence of the Congress, as well as you own. I have had that confidence
I have been faithful to the responsibilities that have been Intrusted
because For you to turn over all these assets and responsibilities to a man and
STATEMENT OF HENRY A. WALLACE-Resumed
inexperienced to me. in business and finance will, I believe, be hard for the business
financial world to understand.
The CHAIRMAN. Senator Robertson.
I appreciate the opportunity you have given me to serve my country through
Senator ROBERTSON. Mr. Chairman, I do not feel the record would
the evidence of my desire to be of any assistance to the Government. I seek
depression and in time of war. My 13 years of Government service I can are
be complete without the text of the President's letter to Mr. Jones
ample best be helpful in the line of my life's work-business and finance-but
and Mr. Jones' reply. With your permission I will read them into
no job.
the record. The transcript that I have is taken from the Times-Herald
With best wishes, faithfully yours,
JESSE H. JONES.
of January 22, [Reading:]
The WHITE HOUSE
WASHINGTON, January 20, 1945.
The CHAIRMAN. Mr. Wallace, the letters were read while you were
on the stand, and you may feel at liberty to make any comment you
friendship and splendid relations during all these years, and also because of
DEAR JESSE: This la a very difficult letter to write-first, because of our long
choose or to make none if you choose.
have your splendid services to the Government, and the excellent way In which you
Mr. WALLACE. I have no comment to make, sir.
carried out the many difficult tasks during these years,
The CHAIRMAN. Very well.
working displayed for the utmost devotion to our cause, traveling almost incessantly and he
factority perform. I told him this at the end of the campaign, In can which satis-
Henry Wallace deserves almost any service which he believes he
Senator Robertson, have you any questions?
Though the success of the tleket in a great many parts of the
Senator The CHAIRMAN. Senator Brewster, we recognize you. We under-
ROBERTSON. No, sir.
which ensued. not on the ticket himself, he gave of his utmost toward the country. victory
stood you did BREWSTER. have some I very questions. much appreciate the courtesy when of I was my
that the Department the Vice of Commerce, for which be Is fully suited, and I feel, therefore, good In
He has told me that he thought he could do the greatest amount of
colleagues; called away, because I didn't want to attach any undue
Senator it was a little more than I asked or expected importance
It is President should have this post in the administration,
all for that and I want to tell you that It is In now way a lock of present post
Henry, for this reason only that I am asking you to relinquish this
to my questions, but I spoke am glad this of morning the opportunity. about the lack of danger whether in
Government. you have done, and I hope you will continue to be appreciation a part of the for
During the next few days I hope you will think about a new
the public familiar with it, written by one who has Admin-
Mr. Wallace, debt. you There has been written a book, I will been ask under your
suggestion several ambassadorships which are vacant-or about to be vacated. post-there I are
you are the Chief Economist of the Foreign Economic thousand billion
think well of among It, to many speak other to Ed posts, Stettinius. and I hope you will have a chance, make If this you
administration, indicating that a national debt of four familiar with that
always proud sincerely, you have done during these past years. With my warm regards, very
Finally, of all let me tell you that you have my full confidence and that I'm
istration, would be nothing to be alarmed about. Are you
book? WALLACE. No; I am not familiar with the book, sir.
FRANKLIN D. ROOSEVELT.
Senator Mr. BREWSTER. Would that disturb you!
Now, the text of Mr. Jones' letter [reading]:
Mr. WALLACE. BREWSTER. Four Yes. thousand That billion? is what he said. And he has been
DEAR post MR, as PRESIDENT: I have your letter of today, asking that I 1945,
JANUARY 20,
the Senator Chief Economist of the Foreign Economic remember Administration.
war my production Secretary of Commerce, which carries with It the vast relinquish
subsidiaries 80 agencies within the Reconstruction Finance Corporation financial and
Mr. Senator WALLACE. BREWSTER. What I is can't his name, give do it to you you. I know that was the
support of you in that the campaign. you can give It to Henry Wallace as a reward for and his its
Deparment You state of that Henry thinks he could do the greatest amount
post he held. I am not familiar with the book.
With all due Commerce, and that you consider him fully sulted of good in the
Mr. WALLACE. BREWSTER. I would like your notion about so much the idea.
agree with either respect, of you. Mr. President, while I must accede to your decision, for the I cannot post.
Senator Well, the value of money varies it seems that to it me is
during You all refer the very kindly to our long friendship and our
impossible-it Mr. WALLACE is just fantastic to comment upon it,
Government and years, the and state that you appreciate my splendid splendid relations
during these years. excellent way I have carried out the services to the
totally Senator unrealistic BREWSTER. and To irrelevant. envision in anything like our present econ-
years, and that you are very proud of all I have done I have your full
confidence, and that You are also good enough to say that many difficult tasks
omy would disturb you!
Mr. WALLACE. Of course. Absolutely. I mean the interest on
In a diplomatic you post. hope It I will continue to be a part of the Government during these past
avowed purpose to replace is difficult to reconelle these encomiums probably
that would be quite staggering.
I can, I I would not want a diplomatic me, While assignment. I want to be of any further service with your that
Mr. BREWSTER. I It mean, staggered it would me when seem I to read me it. that that members would of tend the
been for the feel passed proper and in have administration the felt a great of sense the of laws responsibility with respect to to the the Congress R. F. and to you
Mr. WALLACE. to put into the hands of unproductive income.
one experienced In business expectation and that finance. they would be administered by C. me that or some- have
to community, redistribute, an unduly large share of the national
Senator BREWSTER. Yes.
Mr. WALLACE. And that would be unfortunate.
68424-45-8
110
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
111
Senator BREWSTER. That would violate your principles?
Mr. WALLACE. I indicated to Mr. Burton my experience in the De-
Mr. WALLACE. My fear of Federal debt comes when the interest
partment of Agriculture with a number of loan agencies that were
on the Federal debt is so large that it radically shifts the proportion
related to agriculture and indicated the service which Agriculture
of the income to different segments of the community.
could furnish to these loan agencies.
Senator BREWSTER. It is just as bad to have that as it is to have
Senator BREWSTER. Now, this other question is of a more personal
capitalists in Wall Street.
character but I think it is really essential for the record.
Mr. WALLACE. It is what you might call the weight of the "mort-
I think you would agree that in the letter which Senator Robertson
main" or "dead hand" upon the living.
Senator BREWSTER. Yes.
ing you with this job for your political activities; is that correct?
has put in the record the primary and the chief emphasis is on reward-
Mr. WALLACE. Frankly, maybe it is because I still feel pretty young,
Mr. WALLACE. The letter speaks for itself, Senator.
I like, insofar as there is favoritism, to favor
Senator BREWSTER. Why I feel that is of importance
Senator BREWSTER. The enterprise?
Mr. WALLACE. Let me say, I have never felt I was primarily a po-
Mr. WALLACE. Productive enterprise.
litical figure, but I am glad to be recognized as having some competence hitherto.
Senator BREWSTER. Now, in the picture which you presented of the
in the political field, which hasn't always been recognized
order? hensive picture of how you felt the world could be rebuilt in a better
post-war world, I think you would agree that it was a very compre-
[Applause.] Senator BREWSTER. I think you will agree that the President is a
Mr. WALLACE. I think the eight points in the President's-in the
pretty good judge of politics and politicians.
American economic bill of rights are very comprehensive.
Mr. Senator BREWSTER. Why I asked that is because I think we must remain have
WALLACE. It looks like I have passed the first grade.
Senator BREWSTER. Yes. You would agree that while the Sec-
reaction on this question: Assuming these loan powers talk about
retary of Commerce has perhaps in the peacetime economy the pri-
your there were five or ten or fifteen or twenty billion, some world in
the what you pictured to us would take in the functions of of
that mary responsibility for promoting commerce and business enterprise,
and billion of loan powers here, to promote this sort of would a like to
which whether you you would consider that the political morality loans to
forty believe and which you believe is feasible, I indicated
other Cabinet positions, in that in the foreign trade into many which
we entered we would be concerned with the State Department, in the
know letter were going to govern your functions in making of Maine.
products into we would encroach on agriculture, in giving 60,000,000 jobs
cartels we would be concerned with Justice, in the production of farm
Democrats, in that or other people, or where we get off in the State
we get labor-we would even get into Mr. Ickes' Department of
in Maryland, election I can't help hoping that maybe the national Democrats vote in
Mr. and then at Fairfax County across the river will
WALLACE. Senator, as I look at the vote in Montgomery in Virginia County,
Departments. suggested, we might even have to think about the War and the Navy you
Interior, and if you got into breaking up international cartels, as
get the election, namely, 53.6 percent. If 53.6 percent have the right
in the last same percentage of the jobs as they got of the of the people
possibility if of your administering the whole job which you picture, the
have the primary responsibility here, you wouldn't at all envision would
So you would agree, would you not, that while Commerce
the of the last United States are Democrats, it seems to me they
to 53.6 of jobs.
except you should succeed to another job?
Mr. WALLACE. Certainly not. Of course, every department
that in the in sympathy with the policy of the administration, definitely and
Of course, policy positions that there be men administering otherwise
percent I also feel, Senator, that it is only good administration policy
department. Federal Government at one point or another touches on every in other the
who are have good administration. I feel that that the
how can from we the standpoint of appointments. I would hope would
inally should administered in an independent department responsibility as
Senator be BREWSTER. Yes. So if the Federal loan
clearly, National Committee, under its present management, used to show.
show Democratic same high sense of morality as Jim Farley if
single contemplated, and, so far as the Congress is was orig-
the forced a man on me at any time. Jim thought should be given there
sarily a exception, it has continued the policy, that concerned, wouldn't neces- with
Senator WALLACE. Methods can always be worked out, Senator.
Mr. indicate any disruption of the administrative mechanism?
a "break." for the last 4 years. I don't know just what policy were fol-
were a I haven't been in the strictly executive branch has been
Jim never Democrat with equally high qualifications, he of the Gov-
of the BREWSTER. The loan powers are really no more
ernment in recent years. But if the same high standards the Depart-
to part which Commerce Department than many of the other an activities essential
followed were followed by Jim Farley in his relation to would be well
reference has been made.
lowed ment of as Agriculture, I am sure that the Government
in Mr. some WALLACE. detail, I think, After with you left Senator this morning, Burton. Senator, I went into that
served. BREWSTER. Well, I think the record was not in the direction former
Senator BREWSTER. I do not desire to have you repeat.
of Senator thinking primarily in terms of political rewards in your
112
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
113
service as Secretary of Agriculture, I was interested in your "potato
osnaburg hars Instead of burlap. I personally worked out the trade-mark of the
phase" as you pointed out, but I didn't know whether you had been
company. The company grew rapidly and has continually built more plants,
corrupted by the experience of recent years in associating with the
until at the present time there are Pioneer plants In Iowa, Illinois, Indiana, and
Senators or not. [Laughter.]
Ohio. The company has always had to borrow money In the fall. It has always
I would like to have a reaffirmation, at any rate, of your conviction
paid the money back in the spring. It has always taken the greater part of Its
profits, after taxes, to build new plants, or modernize the old ones. Last year
that whatever responsibility came to you to administer, if any, in an
the sales were over $4,000,000.
executive way, you would not use your responsibility primarily or
I was a director, for some years, of the Polk County Building & Loan Associa-
chiefly for political rewards, which is certainly the very embarrassing
tion, of Des Moines, Iowa.
I was assistant editor of Wallaces' Farmer until my father went to Wash-
implication of the President's letter in appointing you.
Ington in 1921, and from that date until 1933 I was editor. The Wallace Pub-
Mr. WALLACE. I can give you that affirmation, Senator.
lishing Co. (which published Wallaces' Farmer) WILS owned and managed by my
Senator BREWSTER. I thought so.
father and uncle. After my father went to Washington, I became editor. My
Mr. WALLACE. I can assure you that I will perform as Secretary of
uncle became president and as such In charge of the business management. It
Commerce as I performed as Secretary of Agriculture in that respect.
is n. common arrangement in periodicals to have the editorial department and the
business management separated. As editor, and to make my editorial policies
Senator BREWSTER. I shan't even ask you whether you welcome get-
sound, 1 constantly studied farm conditions, farm statistics, business conditions
ting the job on this basis or not. I shall form my own opinion about
as they affected farming, and that means all business conditions.
that.
I was early familiar with the damage the European corn borer was doing in
Mr. WALLACE. I think the Senator knows me.
Europe. I antleipated that it would probably sprend to this country and real-
ized how It would cause great damage here.' In 1929 I visited the Balkan States
The CHAIRMAN. Any further questions!
to get advance Information on the corn borer and how to fight It. I also was
Senator BREWSTER. No, sir.
delegate to an International economic conference in England.
The CHAIRMAN. Senator O'Daniel.
While I was on this trip the Wallace Publishing Co. decided to buy the Iowa
Homestend, a competitive State farm paper. Like all too many of the expan-
Senator O'DANIEL. Mr. Wallace, in a previous session there was
sions of that era, this purchase wrecked the purchaser. Anyone who is familiar
something said about business inexperience and your lack of experi-
with the course of corn prices from 1920 to 1932 knows what would happen to a
ence in business and finance prior to your Government experience.
Corn Belt farm paper merger involving heavy 1929 fluancing.
That was touched on this morning slightly by you in your explana-
The net result was that the Iowa Homestead acquired the Wallace Publishing
Co., and Dante Pierce, the publisher of the Iowa Homestead, came in charge
tion of some business transactions you had had. But a former witness
of the business. I continued to be editor and in charge of editorial policies until
was invited, I might say, by a member of this committee, to insert into
I left Des Moines to become Secretary of Agriculture In 1933. In fact, I believe
the record a complete record of his experience in business and finance
Dante Pierce still considers me editor-on leave of absence. I have no better
prior to the Government experience. I want to extend that invitation
friend than Dante Pierce.
I have also been connected with and A stockholder of the Capital City Printing
to you. If you care to accept it, you may insert in the record your
Plate Co., located In Des Moines, Iowa. Prior to coming to Washington I was
business and financial experience.
vice president and on the board If directors. This company started small and
(The matter referred to is as follows:)
is today one of the leading companies in Its field. It has been active In developing
improved electrotpying processes, efficient In serving Its customers. It has an up-
ADDITIONAL STATEMENT OF MR. WALLACE
to-date modern plant and a growing business. Robert R. Myers, the manager, has
been the ringleader of the Industry in stimulating iron plating, thereby reducing
experience. Senntor O'Daniel, of Texas, had asked that I submit for the record, my business
the quantity of copper required. Mr. Myers has also ploneered the use of plastle in
making electrotype molds. This research is revolutionizing the electroplating
PRIVATE BUSINESS EXPERIENCE
business. I do not claim credit for this success. I give all credit to the efficient, loyal
In private life, my chief business experience was In the formation of the
management Bob Myers has given the business. I only claim my connection
Ploneer Hi-Bred Corn Co. After many years of corn breeding experimentation,
with It rather obviously failed to poison It.
I decided to form a corporation to produce and market the seed. I personally
I have operated various farms owned by Mrs. Wallace and these farms served
worked with Mr. Fred W. Lehmann, Jr., an attorney, and the present president
as the physical basis on which the Ploneer Hi-Bred Corn Co. was started.
of the company, in drawing up the articles of incorporation in 1926, I myself
was the president and general manager of the company until I came to Washing-
PUBLIC EXPERIENCE
ton in 1933. I personally raised all the money to start the company. I person-
ally chose the key personnel which is still functioning. I personally, with Simon
Financial.-In my prepared statement I summarized very briefly the magni-
Casady, Jr., designed the first modern seed corn drying and processing plant in
tude of the financial operations which were under my direction as Secretary of
the world. I personally went to a heating company In Des Moines and got their
Agriculture. That condensed summary gave little indication of the complexity
engineers started on the problems of producing suitable heaters and blowers for
or magnitude of these activities or of the enormous benefit they have been
drying seed corn. As a result of my visit this company was stimulated to pro-
to farmers and businessmen In all parts of the country. Accordingly, I nm
duce a type of equipment which is now used very extensively by the seed
submitting here some of the more significant details. The facts of these agri-
the present sales manager of the company, a method of marketing through thou-
companies of the United States. I personally worked out with Nelson Urban, corn
cultural loan operations have been regularly reported to the public in official docu-
ments. These figures are taken from the yearbooks of Agricultural statistics for
sands of local farmers, which has proved very successful, I personally got In
1940 and 1941, covering my last year as Secretary of Agriculture.
touch with a certain bag company and arranged to market our product In cotton
The total amount of agricultural credit outstanding under Department of
Agriculture programs on January 1, 1941, Just after I left office, was over
114
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
115
$4,000,000,000, as shown In table 1. About two and one-half billions of this
TABLE 2.-Loans made and repayments received during calendar year 1940
represented mortgage credit; over one hundred millions loans to farmers co-
operative marketing associations: six hundred billion Commodity Credit Cor-
poration commodity operations. There was half a billion in production credit
Loans made
Repayments
received on
loans to farmers, 170,000,000 through production credit associates, and 312,000,000
Kind and program
current and
through Farm Security Administration rural rehabilitation loans. Rural Electri-
Number
Amount
past loans
fleation Administration, with loans to 755 separate community projects, repre-
sented a quarter of a billion. The number of Individual loans is not shown
Mortgage credit:
for all these operations; the numbers that were shown totaled 1,769,618 of
Federal land-bank loans.
17,027
$64,275,307
$117,712,000
individual loans outstanding at that time. (In comparison, Mr. Jones listed
Land-bank-commissioner loans
21,692
36,391,000
79,068,000
Farm Security Administration tenant-purchase loans
6,396
38,522,134
only 17,084 small-business loans in his testimony, in addition to the loans made
Intermediate credit:
to the handful of big corporations and banks with which Reconstruction Finance
Production credit associations
384,017,000
$60,775,000
31,061,000
33,067,000
Corporation has done the bulk of Its business.)
Banks for cooperatives
4,593,000
4,938,000
Intermediate credit cooperative loans
Other intermediate credit
87,314,000
86,514,000
TABLE 1.-Amounts and number of loans outstanding in major agricultural credit
Other:
programs, Jan. 1, 1941
Farm Security Administration rural-rehabilitation loans
82,255
94,580,000
57,923,000
Emergency crop and feed loans
158,036
18,960,000
18,892,000-
Commodity Credit Corporation commodity operations
600,445,000
380,281,000
Agricultural Marketing Act cooperative loans
3,094,000
7,180,000
Number of
Farm Security Administration cooperative loans
3,540,000
149,000
loans (where
Total amount
Commodity Credit Corporation cooperative loans
14,600,000
13,490,000
Rural electrification loans
101
60,237,000
available)
100,455,000
101,893,000
Banks for cooperatives
Mortgage credit:
Subtotal (where number of loans is available)
285,507
321,965,441
273,595,000
Federal land-bank loans.
Total
285,507
1,551,093,441
1,261,882,000
Land-bank commission loans
613,098
$1,851,218,349
Farm Security Administration tenant-purchase loans
432,567
646,660,000
Intermediate credit:
12,994
75,354,518
I Includes loans, commitments, and commodity purchases.
Federal intermediate credit banks:
Production Credit Association
Source: Agricultural Statistics, 1941, pp. 500-632; 1940, pp. 603-641.
Banks for cooperatives
109,565,000
Direct loans to ocoperatives
15,554,000
(Table 3 is available If desired.)
Others
1,490,000
33,116
Comparative size of the administrative job in Agriculture and Reconstruction
Farm Security Administration rural rehabilitation loans
Emergency crop and seed loans
737,204
312,786,000
Finance Corporation.In judging administrative capacity, it may be of interest
Commodity credit:
167,853,080
to compare the size of the Reconstruction Finance Corporation and agricultural
Commodity Credit Corporation:
Loans held by Commodity Credit Corporation
financial operations at the time I left the Department in 1940. Table 4, based
Held by banks and lending agencies,
280.218,000
on official publications, makes this comparison:
Other loans:
376,850,000
In 1940 the Reconstruction Finance Corporation authorized a total of 1,303
To cooperatives, from Agricultural Marketing Act revolving fund
Farm Security to cooperative associations
16,461,000
loans, less than one-half of 1 percent of the number of loans Agriculture made
Rural Electrification Administration loans
14,941,000
the same year.
Banks for cooperatives
755
253,336,000
The Reconstruction Finance Corporation loaned out 453 millions; Agriculture,
74,405,000
Total Subtotal (where number of losns is available)
1½ billions. The Reconstruction Finance Corporation received back 345 millions;
1,796,618
3,139,354,867
Agriculture, 1.2 billions. On both Items the Reconstruction Finance Corporation
4,289,817,867
operations were less than one-third of Agriculture's.
Source: Agricultural Statistics, 1941, pp. 506-632.
In 1940 the Reconstruction Finance Corporation collected 76 percent as much
as It loaned out that year; Agriculture, 81 percent. Again the agricultural
the business done during a single year. Table 2 shows the agricultural loan
The magnitude of these agricultural loan operations is shown even better by
record is as good as Reconstruction Finance Corporation's.
At the end of the year the Reconstruction Finance Corporation had 1.7 billions
advances and receipts for my last year as Secretary of Agriculture. Advances
of loans outstanding. Agriculture, 4.3 billions. Reconstruction Finance Corpo-
that year totaled 1½ billions; receipts, almost 1% billions. Excluding the
ration's outstanding total was only 39 percent of Agriculture's.
additional Credit 220 millions advanced to farmers on commodities under Commodity
By every measure, the administrative task of operating the agricultural pro- the
amount for the year. Individual loans made that year, as reported, totaled
Corporation operations, advances and repayments were almost equal In
gram was vastly greater than the Reconstruction Finance Corporation's: yet
eurrent collection record was equally good.
285,507, or more than 15 times as many as all the small business loan trans-
Since the war began defense and war financing has greatly increased the work
Corporation. actions reported by Mr. Jones for the entire history of Reconstruction Finance
both of the Reconstruction Finance Corporation and the Department of Agri-
culture. The Reconstruction Finance Corporation has become a central financing
operations which I supervised for the United States as a whole. The extent credit of
These data of actual operations give some Idea of the extent of the
promises of war agencies to absorb the losses, If any, from their appropriations last
agent for many of the war agencies, advancing funds for war construction against
these loans is shown further by the numbers and values outstanding in
for war. Even with this vast increase In Its refinancing operations the
representative In States when I left office, ranging from 31,000 loans for $18,000,000 some
published report of the Reconstruction Finance Corporation (for the first quarter of
loans Florida up to 210,000 loans for $231,000,000 In Texas. These thousands
of 1944) shows a grand total of only 33,361 borrowers since the organization
every State of the Union, and for over one-quarter of the farmers, without In a
Involving hundreds of millions of dollars were placed and collected of
prises, Including both peace and defense purposes. It would appear from these
the corporation in 1932. Of these loans, only 12,113 were made to business enter-
single charge of graft or personal privilege, 80 far as I am aware,
figures (1) that the burden of administering these business loans would advanced not
involve Insuperable problems; and (2) that not much aid can have been
116
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
117
by the Reconstruction Finance Corporation, in war or peace, to the hundreds of
thousands of small business concerns throughout the country.
Act, providing a cooperative farmer-Government planning of basic agricultural
The extent to which the Reconstruction Finance Corporation may have helped
commodities. There were many prophets of doom then who said the adminis-
small business is also Indicated by the average size of loans. Excluding the
trative job could not be done, that 6,000,000 American farmers could never work
$7,000,000 advanced to defense plant and other subsidiary corporations In 1940
together with Government. Representatives of great food-processing Industries
(no details of the number of loans or other activities of these subsidiaries have
testified that the plans were administratively unworkable, that the bill would
ever been published so far as I ean determfine), the remaining 446 millions of
never do what It aimed at doing, that the markets for farm products would dis-
dollars lent by the Reconstruction Finance Corporation In 1940 went to 1,308
appear. Acting on the direction of Congress, and under my supervision, the
borrowers, or $342,470 per borrower. In comparison, table 2 shows agricultural
Department of Agriculture did what these gentlemen said was impossible to do.
loans of 332 millions made in 285,507 separate loans in 1940 (Including only
With the help of the administrators I selected and supervised-George Peck,
those programs for which the number of loans is shown), an average of $1,128
Chester Davis, M. L. Wilson, A. G. Black, Howard Tolley, Cully Cobb, R. M.
per loan. It is clear from the number of loans and the average size of loans that
Evans, and many others, and of the existing staffs of the Department of Agri-
the Reconstruction Finance Corporation was of very little aid to small business-
culture, the Extension Service, and the State colleges of agriculture-milliona
men in 1940, Through the whole period from 1932 to the end of 1944 It has
of contracts were signed with farmers, millions of checks for benefit payments
loaned to only about 12,000 Individual business enterprises or about one-half of
were issued, and order was brought Into the agricultural pleture. This opera-
1 percent of all business enterprises In the United States (excluding farming).
tion Involved a grent expansion In the staff of the Department of Agriculture
This may be compared with financial aid given to about a third of all farms by
both in Washington and in the fleld. This staff was built up swiftly and of-
the agricultural lending agencies.
fectively; Its decentralized field operations were closely directed by locally ap-
pointed or elected committees of farmers without graft or private favoritism and
TABLE 4.-Comparative size of financial operations of Reconstruction Finance
with an operating efficiency that continued the high standards characteristle
Corporation and Agriculture Department, calendar year of 1940
of the Department.
Without going into the other myriad administrative problems of agriculture
developments which Congress authorized during the 8 years I was Secretary of
Reconstrue-
Agriculture, I will merely mention that those included the creation or develop-
Reconstrue-
tion PI-
ment of such landmarks in the Nation's agricultural programs as the present
tion Fin-
name Corpo-
Agriculture
Farm Credit Administration: the Farm Security Administration, with Its tenant-
name Corpo-
ration as
ration 1
percentage
purchase and rural rehabilitation programs; the soll conservation program: the
of Agricul-
rural electrification program; the ever-normal granary program, with its oper-
ture
ating arm, the Commodity Credit Corporation: crop Insurance and regional re-
Amounts advanced
search luboratories; and a great expansion In Forest Service activities. These
Repayments received
1,551,060,000
$453,239,000
29.2
new and expanding activities were built up by administrators I selected and led-
Repayments as percentage of advances
1,261,882,000
345,087,000
27.3
Number of loans made
81.4
men with imagination, leadership, and the Initiative to make use of the wide
76.1
Amount outstanding at end of year
1285,507
1.303
0,5
authority I delegated to them while keeping control of basic policy. By 1940,
4,344,015,000
1,712,639,000
39.4
when I left it, the Department of Agriculture was carrying on, in the service
of farmers and of the general public, a variety of activities far greater than that
I From tables 2 and 3.
I
of most American corporations, with an efficiency and n competence of staff
I Partial total.
From quarterly reports of Reconstruction Finance Corporation for 1940, tables a and 6.
that compares well with that of any other American institution of similar size
and responsibility, public or private.
In this connection It might be noted that prior to the war the maximum dis-
During this period I WILS responsible for a wide variety of activities that
bursements by the Reconstruction Finance Corporation In any year were 1,828
Involved direct contacts and arrangements with many phases of American
millions. That peak disbursement at the height of the effort to check the de-
business, such food-processing industries as the millers, packers, and dairy In-
cultural loans, as shown In table 2. After 1934 the Reconstruction Finance
pression In 1934 was not much more than the usual volume of business In agri-
dustry, all the textile and clothing Industries, tobacco processors, importers and
exporters in many different lines, lumber industry, canning Industry, warehous-
Corporation advances never reached $1,000,000,000 in any year until after the
ing, and many others. Operating programs such as marketing agreements, tax
war began, and in many years were less than one-half billion. This Indicates
Impositions and refunds, Imports and exports quotas and subsidies, regulation of
the relatively small place that the Reconstruction Finance Corporation was
packers and stockyards, control of future markets, aid in negotiation of trade
taking In the financial peacetime activities of the country. During the war,
agreements, and many others, gave a wide and Intimate contact with and
loans under defense financing of the Reconstruction Finance Corporation (backed
knowledge of many phases of American business and Its operating and financial
problems, and helped me to appreciate the problems that businessmen as well as
bursements under all other Reconstruction Finance Corporation activities totaled
by public appropriations for war) totaled 13 billions to March 15, 1944; dis-
farmers must grapple with.
volume of business is not much larger than that In the Department of Agriculture
12 billions more for the 12 years of the Corporation's life. This average annual
In my Inst report as Secretary of Agriculture, in 1940, I stated:
*The Congress and the President were never able to agree on a comprehensive
before the war, while the number of loan commitments to be examined or serv-
attack on the farm problem until the depression of the early 1930's produced such
Iced In the Reconstruction Finance Corporation Is far smaller.
an Impossible situation on the farms that something had to be done. It was my
been a great factor in enabling the war agencies to anticipate congressional
During the war, the Reconstruction Finance Corporation has undoubtedly
opportunity to be Secretary of Agriculture at this time of great stress. For the
first time the Department was given the responsibility of administering Nution-
propriations funds and in enabling war contractors to secure plant, equipment, and ap-
wide action programs. The rapid results that were obtained are In my opinion
for this at Federal expense and risk to carry out their war contracts. Except
a great tribute to the morale and personnel that had been built up In the Depart-
ration has emergency wartime service, however, the Reconstruction Finance Corpo-
ment over a long period of years.
date, in Agriculture bas been In the agricultural. Its administrative task
ment of been much less important In the business sphere than the Depart-
"Farm Income was increased. Farm foreclosures were reduced. Acrenges
were adjusted to the fact of greatly reduced European demand. Domestic de-
was In Agriculture. peacetime operations, has never been anything like 80 great as the task to
mand was increased. Farm security was brought to hundreds of thousands of
poverty-stricken farmers by means of supervised loans. The number of farms
served by electricity was more than doubled. The problem of soil conservation
Experience as an administrator of public funds and organizations,
was given comprehensive attention for the first time.
Administrative.-In and the 1933 President Roosevelt asked me to develop a farm
gram, farm leaders and I jointly proposed the Agricultural Adjustment pro-
scientific work of the Department to decline in importance.
"As I look back over the past 8 years 1 am proud that I have not allowed Using the
the Bankhead-Jones research funds we have set up regional laboratories to
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ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
119
start work on special problems such as poultry disease, truck crops for the South,
grass breeding for the Northeast, sheep breeding in the West, soybean research
There are tremendous new frontiers that await American enterprise. They
in the Corn Belt, etc. Four great regional laboratories were opened at New Or-
provide unparalleled opportunity for the millions of the young men and women
leans, Philadelphia, Pa.; Peoria, III.; and Albany, Callf., this fall. These, fully
in the armed forces who will return home and the millions of men and women
staffed with chemists and other scientists, can In case of need be of great use in
now engaged in war work who will have to turn to peacetime pursuits. Many of
national defense.
them have acquired specialized knowledge and talent as a result of their war-
"Looking toward the future I am happy that agriculture is in such splendid
time experience. America will greatly profit by providing them with an oppor-
shape to serve the general welfare. We have large supplies In the ever-normal
tunity to use their new knowledge-to use It In the American way. Unless new
granary, while at the same time we have protected the farm Income with com-
industrial fields are opened up and old fields are kept open to ambitious and
modity loans. We have Increased soll fertility. If national defense requires it,
competent young men and women who show reasonable promise for business
we are In position to expand agricultural production without plowing up the
success, American industry will stagnate. That can mean only unemployment
hillsides or the Great Plains. If foreign markets are still further reduced after
and low wages.
the war we are in position to make the necessary adjustments by suitable acre-
I do not believe the monopolistic businesses of today have any God-given right
age control and by the stimulation of domestic consumption.
to keep for themselves the business of this country. Big business must earn the
"The personnel of the Department has Increased from 27,350 In 1932 to 79,035
right to remain big by producing at lower cost or by giving the consumer better
in 1940. This number Includes 2,917 Farm Credit employees. When we take
goods at the same cost while maintaining and Improving working equditions for
Into account the far-flung action programs this Increase in personnel Is not at
their employees In harmony with the American standard of life.
all disproportionate.
The cancer of free enterprise is monopoly. Free enterprise thrives on new
"Those who urge that the Department is too big and that some of Its functions
businesses and the expansion of the smaller ones that have proved successful.
should be transferred to other Departments so as to relieve the overburdened
America has stood for unlimited opportunity for the man of energy, Imagination,
Secretary of Agriculture simply do not understand the problem. As long as
and resourcefulness to rise to Industrial leadership: and we must Insure the
problems relate to farmers and the land which they operate, the Job belongs to
continuance of this tradition. The worker must have an opportunity to move
Agriculture. When problems of this sort are put in another Department, the
from his bench to a small business of his own and through energy and vision
Job of being Secretary of Agriculture is made more complicated and difficult.
build his business into a great enterprise. It was that opportunity which made
Mere size does not make administration difficult, so long as there la proper
possible the economic progress of the United States, and It is only by safeguarding
staff organization and sufficient harmony of function to tie everything together
this same opportunity that It will be possible for the United States to fulfill Its
In a sense of purposeful service."
destiny.
There was a time-and not so long ago-when an ambitious young man could
FINANCING FOR SMALL BUSINESS
start a business of his own with a few thousand dollars. Because of the increased
mechanization of Industry and the modernization of marketing techniques even a
In my testimony before your committee on January 25, 1945, I promised an
small-size business, If It Is to operate efficiently. needs far more capital. But
financing. expanded statement of my views on helping small businessmen to obtain needed
facilities for assuring opportunities to raise such capital by small business have
not expanded with the growing need. While It is easy enough for a large cor-
Now I want to make It perfectly clear to begin with that assistance to the
poration to flont new equity securities of $10,000,000 or more at a cost of 5 per-
small businessman is a prerequisite to healthy free enterprise. I belleve that
cent of the Issue and to sell these securities on a 5 or 6 percent yield basis, it is
free enterprise means more than the right of established business organizations
practically impossible for a small business to secure $25,000 or $50,000 for equity
to produce and sell goods under competitive conditions. I believe that free
capital, except at a cost of 20 to 25 percent of the Issue and the securities must
enterprise must also mean the opportunity to move up the economie scale from
then be sold at a yield of 10 or 12 percent, or even more.
worker to owner. It must mean the opportunity for the efficient and successful
Some small business enterprises do manage to raise capital under these
small businessman to expand in proportion to his ability. We must make sure
onerous terms. Many more prospective enterprises die stillborn because they
become a bar to healthy economic advancement.
that lack of adequate capital to finance new and expanding business does not
cannot even begin to pay such high charges. These figures make It clear that
even where a man is fortunate enough to be able to secure financing, he does
Private enterprise in the United States can survive only If It expands and
so at a cost which handicaps him in his efforts to compete with the larger
grows, and It can expand and grow only if new enterprises are born and
concern that has ready access to capital. No one cognizant of the facts can
mitted to develop. The lifeblood of private enterprise In America is the new per-
doubt that Inadequate arrangements for financing are important deterrents to
business and the small business, Without more and prosperous small businesses
the development of new business and the expansion of small business in the
ment. It will be impossible to maintain a healthy economy and high level of employ-
United States.
Ninety-six percent of the business enterprises in this country have less
This is not a question of idealism. It is a stubborn fact that small business
business firms In the country are employed in enterprises with less than 20
than 20 workers, More than one-third of the workers in manufacturing and
In this country does not have an opportunity to secure the capital It needs for Its
development and growth. In my testimony on January 25 I called attention
workers. We must not forget that these small businesses are the foundation on
to the fact that some investment bankers fully recognize the grent need for
which the large businesses of the future will be built,
new lending devices to assure adequate financing for small business. One of
small. I want more business and more business enterprises for this country, large and
Contrary to what you may have seen in the press, I am not against big business.
these, Mr. Ferdinand Eberstadt, an Investment banker with whom I served on
the War Production Board, has developed a proposal for forming local invest-
sure that the seeds for large-scale enterprises are sown far In advance.
We can have efficient progressive business In the future only If We make
ment companies or pools of capital to be obtained from local businesses, banks,
and public-spirited citizens and, where necessary, additional funds could be
It Is only when large businesses are constantly exposed to the keen
secured from governments. Now I call your attention to the fact that Senator
The of newly formed and expanding businesses that our economy can remain competition
Taft has Introduced a bill designed to aid In the financing of small bupiness
business day we make it difficult to establish new business and for efficient healthy.
enterprise by providing governmental Insurance of long-term loans made by
sound the to grow and expand In competition with large business, that small
banks and Insurance companies and of stock when held in the portfolio of
The death knell of private enterprise and give a vested Interest to day we
Investment companies.
ourselves, great danger that lles before us, the threat against which we must monopoly.
The Reconstruction Finance Corporation during the past decade could have
to la the growing tendency to make it impossible for small businessmen protect
been the agency which would have filled this great need. It could have used
get enough capital to start and to expand.
some of Its tremendous resources to help secure financing for small business.
It could have struck a tremendous blow for new enterprise and the growth of
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ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
121
small enterprise. But It la clear that It has not made use of that opportunity
to any significant extent. According to a recent report issued by the Recon-
The CHAIRMAN. Is that all?
struction Finance Corporation covering Its operations for the period from the
Senator O'DANIEL That is all.
organization of the Corporation on February 2, 1932, to September 30, 1944,
The CHAIRMAN. Senator McClellan.
except for lonns for national defense, the Reconstruction Finance Corporation
Senator McClellan. Mr. Wallace, for the record and for my own
has made less than 9,000 loans to business enterprises over the last 12 years.
This is a small number in a country where we have over 3,000,000 small businesses.
information I would like to have you state just what changes in the
I think It is not of overwhelming Importance which of several methods we
use to help provide financing for small business. It la important only that the
cies you have in mind to make, if any, if the George bill is not enacted
policies of administration of the R. F. C. and the other loaning agen-
Government assist small business In securing from private Investors some of Its
and this responsibility rests upon you as Secretary of Commerce.
risk capital. It is Important to do so without fostering ill-conceived, Ill-advised,
and highly speculative ventures and without putting the Government in business.
Mr. WALLACE. Well, I think that is what the President might call
The essence of free enterprise is to give well-conceived new business a chance to
a very "iffy" question.
prove Its worth. The capital needed by free enterprise must come from private
Senator McClellan. No. If you have any changes in mind.
investors. The role of the Government must be limited to that of an Insuror
Mr. WALLACE. I have indicated a general policy that might be fol-
of the extraordinary risks that private Investors cannot assume in full. We
must make sure that financing such enterprises is possible If we are to have free
lowed subject to the will of Congress and the President in the post-
enterprise providing productive employment to American labor and good markets
war period.
for American agriculture.
Senator McClellan. Yes.
The program which I suggested was that the Government should play Its part
Mr. WALLACE. In the immediate war period-well, I would say the
in helping stimulate the growth and expansion of business enterprises in this
country in a manner comparable to the way In which this Government stimulated
first things that I would want would be to have some competent agency
small home building and home modernization under the Federal Housing Ad-
discover exactly what is the status, the financial status of R. F. C.
ministration program. Just as under the Federal Housing Admin ration
Frankly I wouldn't want to take it over unil there had been a pretty
program private homes were built and modernized by private contractors, and
careful examination and I wouldn't care to express much further
financed by private institutions, 80 under the program I have suggested the
business enterprises would be privately owned, privately operated, and privately
opinion until that examination had been made. That is, I wouldn't
financed. Just as under the Federal Housing Administration program the Gov-
want to become responsible for it until that examination had been
ernment shared with private lenders certain risks involved in financing the
made. I would want some cut-off date definitely established. As you
building and modernizing of small homes, so under the program I have suggested
the Government would be sharing with the private Investors certain risks involved
are well aware, the agency has never been subjected to the ordinary
in financing the growth of new business and the expansion of existing business.
Budget Bureau or General Accounting Office procedure.
The Government would merely facilitate financing, without in any way acquiring
ownership or assuming responsibility for management.
consists of before you can state what should be done. I have tried to
Frankly, I think you have to know just exactly what the R. F. C.
The real enemies of the American way of doing things are those who
constructive measures to Insure the development and growth of private business oppose
get certain figures with respect to the R.F.C. I find them quite diffi-
In this country. If we make the American system of free enterprise work in
cult to get.
time of peace with the same outstanding success that it has achieved In time of
Senator McCarllan. It was your statement this morning that
war, we need have DO reason to fear the spread of any "Ism" in this country.
If we do not make an American system of free enterprise work, then there is
prompted me to ask question and it also prompts me in asking this
to any threat of the spread of "Isms" In this country is production to capacity
real danger that our American way of life will be threatened. The total answer
question- Mr. WALLAGE. There is one particular matter which I think be-
in peace as we have produced to capacity in war, thus providing full employment
comes very important in the post-war period and that is the whole
and a better life for all.
matter of small-business loans.
Senator O'DANIEL... And another question which I would like to
Senator McCLELLAN. Well, do you have in mind that the R. F. C.
authored by you entitled "Whose Constitution."
into, I would like to call your attention to a book supposed to go be
should supersede the Smaller War Plants Corporation which has been
Do you recognize or admit the authorship of that book?
set Mr. up WALLACE. for that purpose! No. If the Senator is particularly interested in that
Mr. WALLACE. I do, sir.
field he no doubt knows that the R. F. C. h&s engaged in some small
Senator O'DANIEL. You have not changed your mind as to the ideas
business loans. I think the volume is somewhat larger than was sug-
expressed in that book?
gested this morning, from what I can discover.
my mind on certain matters in the course of the years like all-
Mr. WALLACE, Probably not, Senator. I have of course changed
The CHAIRMAN. It was testified yesterday that the volume was
Senator VANDENBERG. Authors!
$1,900,000,000. Mr. WALLACE. Of small business loans?
Mr. WALLACE. Like all others.
The CHAIRMAN. Yes. That includes the war period. He gave it
Senator O'DANIEL That being the case, I would like to have in-
in a break-down. Not a great deal prior to the war but since the war
have no objection to that?
serted in the record the concluding six paragraphs of that book. You
started. Mr. WALLACE. I think it is somewhat larger than was suggested
Mr. WALLACE. No. It is your privilege, Senator.
this morning.
Senator O'DANIEL Thank you.
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ADMINISTRATION OF CERTAIN LENDING AGENCIES
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123
The R. F. C. is engaged in small business loans. The Federal Re-
Senator McCleilan. I don't think all of them have,
serve banks are operating in the small business field. There are also
Now, may I ask you another question? In this war program and
the loans by the Smaller War Plants organization. There is also a
the necessities of war there must be spending, of course. The national
certain volume of small business loans through the Army and Navy.
debt has been discussed in connection with this program that you
And there are also small business loans coming up around the corner
have outlined this morning, and you discussed also briefly, I believe,
under the G. I. bill or rights. There are several pieces of legislation
how this program might be carried out, and to what extent it may
pending, like the Wagner-Spence bill, and the Voorhis bill.
be necessary for the Government to finance it.
So it seems to me that at the present time the power is quite con-
Do you have in mind now to what extent it would be necessary to
siderably diffused and deserving definitely of a study by Congress to
enable the small businessman to be served in a more clear-cut fashion.
expand the functions of these lending agencies in order to carry loan out
Senator McClellan. Is it your idea that small business loans should
the program that you have outlined? I mean, with respect much to it
be made by the R. F. C. or some other organization?
authority and the spending authority. In other words, how to
will take from the Federal Government in outlay of money
Mr. WALLACE. I think the Congress should look with some care into
the way in which there might be coordination between these various
finance it.
Mr. WALLACE. I would think, Senator, that that might well be the
agencies that do serve the small businessman.
Senator McClellan. Yes,
subject of hearings that would take this committee and the Appro- could
Mr. WALLACE. Insofar as local finance agencies can take care of the
priations Committee several weeks to go into and I certainly
small businessman, the more they can take care of them the better it
not be expected to give an offhand opinion on that.
is, because the local financial man must be familiar with the kind
conclusion about it yourself; you can give us no idea or opinion
Senator MCCLELLAN. In other words, you have not come to any of
more understanding of the character of the man who is borrowing the
of risk involved, he is more sympathetic to what the community needs,
the amount that would be involved?
money. But, unfortunately, as I pointed out this morning, the char-
Mr. WALLACE. Certainly not, Senator.
I this, Senator, that judging from past statistical records, of
out of the picture. The examinations by the bank examiners
acter banking that we used to have prior to 1913 has largely. passed
$170,000,000,000 you a year, it will require about-something formation to do
if can wish say to get a total output of goods and services in excess between
businessman in the field of long-time loans to the extent that the
so strict that the local banker has not been able to service the small are
35 and 40 billion dollars of what is known as capital
served in the first decade of this century.
small businessman needs to be served or to the extent that he used to be
the job.
Senator McClellan. How much?
ing. I would conceive it definitely to be the function of gap the Depart-
I think there is a definite need to fill that institutional in financ-
Senator WALLACE. Billion, yes. Between 35 and 40 billion does dollars not mean of
BREWSTER. You mean billion?
worked to determine what kind of effective cooperation might study be
in ment order of Commerce to give that whole question the most careful
capital That itself would require extensive hearings would go
Mr. formation. That is a very technical phrase and to into
man. out between the various agencies financing the small business-
investment. and explain and I don't have the figures with me and it convey
a false impression if the break-down is not before you.
administration change in policy, if any, you had in mind with to
prompted what me to ask the first question that I did with reference
Senator MOCLELLAN. It was your remark this morning that
Senator the authorization of expenditures for the R. that authority
McClellan. As I understand at present the F. loaning C. is $14,- au-
thority 000,000,000. or Do you mean by what you have said that
to you or suggested that the Congress create a committee morning
recommended of these agencies, and as I understood respect this to the
would have to be extended?
Mr. WALLACE, I didn't mean that at all, Senator.
investigate the R. F. C. and these agencies.
Senator answer my other question quite completely with respect
McCLELLAN. I wanted to get that clear.
to there they have been mismanaged in the past and your purpose
Now, imply I that would like to ask you in that connection was it
to whether imply, and I don't think you did, that there for construe-
You didn't by request for this committee for an investigation had been mis- you
investigation was need for investigation, or did you have in mind therefore the
Mr. WALLACE. was to determine with respect to changes in that
meant to in the R. F. C., but rather you wanted that might
me if Well, I would feel it would be a very definite policy
tive management to purposes to enable you to determine where improvement
to to see Congress would take a very careful look at the whole service
be
made. WALLACE. I think, Senator, that it would be only fair write to who-
I don't exactly know what might be there. I don't know what picture
Senator whether anyone in Congress knows exactly is there and
keep McCLELLAN. Or in any of the other agencies; what it is is difficult there.
ever that he knows exactly where he is. Any county auditor, re-
Mr. administers the R. F. C. that he have a clean page to when upon,
to up with all of them.
cently elected, McCLELLAN. takes that I just precaution. wanted to clarify that for the record, made to if
governmental Mr. WALLACE procedures. The other agencies have been subjected to regular
that Senator was what you had in mind by the recommendation you
the committee this morning.
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ADMINISTRATION OF CERTAIN LENDING AGENCIES
125
Mr. WALLACE, I do not express any opinion one way or the other.
Mr. WALLACE. I would feel it were a very great safeguard, Senator.
Senator McClellan. Thank you, Mr. Chairman.
I may say in this connection that a very comprehensive program and
The CHAIRMAN. Mr. Wallace, what you have in mind is that when
list of recommendations was made to the President of the Senate on
you took over you would want an audit in order to have a base behind
February 10 of 1940 by the Secretary of the Treasury in response to
you to do your work in the future?
a Senate resolution with regard to governmental corporations. There
Mr. WALLACE, That is right.
was a proposal that a uniform policy be adopted by the Congress with
The CHAIRMAN. The other matter you spoke of, the annual forma-
respect to the relations of corporate agencies to the Federal Treas-
tion of capital of $35,000,000,000 a year-
ury. the Bureau of the Budget, the General Accounting Office, and
Mr. WALLACE. I may say that the comparable figure in the pre
the United States Civil Service. That is the first item. I will not
war period was about $20,000,000,000 of capital formation.
go ahead unless there is some special interest. But there is a total
$5,000,000,000. The CHAIRMAN. I was going to ask if the normal was not about
of eight different points made by the Secretary of the Treasury
with respect to procedure that he felt was advisable relative to Gov-
mation. Mr. WALLACE, The normal is about $20,000,000,000 of capital for-
ernment corporations.
Senator PEPPER. So as related to the Federal lending agency and
The CHAIRMAN. New capital investment?
the subsidiary agencies thereunder it is your feeling that they should
Mr. WALLACE. No; not new capital investment. What is known as
capital formation.
be subject to the regular processes of the auditing of the Comptroller
General and the regular supervision of the Bureau of the Budget!
between 4 and 5 billion dollars.
The CHAIRMAN. The new capital investment each year normally is
Mr. WALLACE. Without being too doctrinnaire, that is the way it
Mr. WALLACE. That is capital investment; yes.
seems to me from outside, Senator. That is why I suggested a con-
The CHAIRMAN. That is according to the Federal Reserve report.
gressional investigation committee this morning. It is conceivable
Mr. WALLACE. That is right.
that the kind of work done by the R. F. C. is such that it would be
The CHAIRMAN. That kept the country on a pretty even keel.
greatly handicapped if it had to go through the regular governmental
Mr. WALLACE, Incidentally, that was almost exactly the same as
sional committee, if one is appointed, could look into that to determine
procedure. I personally do not think so, but nevertheless the congres-
the increase in the total debt during the decade of the 20's.
financing? The CHAIRMAN, Your idea is to supplement that by Government
the point.
Senator PEPPER. And would you think it proper to include in the
Mr. WALLACE. No; I didn't say that, Senator. It might be neces-
jurisdiction of that committee the determination of whether or sub- not
sary.
the lending agencies under the Federal Loan Agency might be
The CHAIRMAN, You would be for it if it were necessary.
jected to the Classification Act?
Mr. WALLACE. I hold to this view, that there is, in the final analysis
Mr. WALLACE. Yes; I think that would be well worth looking
unbalanced budget, and that is labor not at work.
from an over-all national point of view, there is only one type of an
into. Senator PEPPER. Now, Mr. Wallace, in your administration of the
The CHAIRMAN. Are there further questions?
man. Senator PEPPER. I have one or two questions, if I may, Mr. Chair-
Farm Credit Administration, which included the Production be-
office of Secretary of Ágriculture you dealt with loans under Credit the
Association and the regional agricultural credit corporations, I
The CHAIRMAN, Senator Pepper.
lieve, corporation and T-loans, Agricultural Marketing Act revolving Rural
Senator PEPPER, Mr. Wallace, in further response to the question
Electrification Administration, and Federal land banks.
funds, bank cooperatives, Farm Security Administration,
be done to indicate any change of administration or policy in the
which was asked, whether you had in mind anything else that might
That is the list I have. Do you recall whether that is substan-
office of the Federal Loan Administrator, did I understand to
tially an accurate list of the lending agencies that were under you
reply, in response to some question, or in your original statement, you that
as Secretary of Agriculture?
you thought the Federal Loan Administrator's office, and all the lend-
Mr. WALLACE, Yes; all those were there. Did you include Rural
answers to the Congress
procedures of the Government through the Comptroller General, who
ing agencies under that office, should be subject to the regular auditing
Electrification? Senator PEPPER. Yes; I have. Now, I believe you mentioned this
morning that there were several billions of dollars loaned by those
Mr. WALLACE, Yes; and also, Senator, to the Bureau of the Budget.
several agencies while you were Secretary of Agriculture in your
Senator PEPPER. And if you were Secretary of Commerce and had
8-year tenure?
supervising powers over the Federal lending agencies, as an incident
Mr. WALLACE. Yes; that is true. The outstanding loans in the
done! thereto would it be your purpose to take steps to see that that were
fall of 1940 when I ceased being Secretary of Agriculture were about
$4,000,000,000. Senator PEPPER. About $4,000,000,000
68424-45-9
126
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
127
Mr. WALLACE. Yes,
Senator PEPPER. Mr. Wallace, would you express an opinion as to
(The tables referred to are as follows:)
whether there are many men in the country who have had a larger
TABLE L-Reconstruction Finance Corporation: Amount of business loans author-
experience than your experience in the conduct of the Department of
(sed and disbursed, cumulative da of Feb. 29, 1940, and Mar. 31, 1944. by size
Agriculture and in the supervision of those several lending agencies
of loan
over a period of 8 years?
[Percentages and millions of dollars)
Mr. WALLACE. There are several men in Government who have had
Percentage
experience with lending very large sums of money, but I don't think
As of Feb. 29, 1940
As of Mar. 31, 1944 ²
changes over
there are many who have had greater experience than this.
1940
Senator PEPPER, Now, some question was asked about the functions
of the Department of Commerce, and I believe you stated that you
Disbursed
Disbursed
Size of loan
Authorized
Authorised
(actual)
(estimated)
Authori-
Die
burse-
thought the general statutory provisions for the functions of the De-
rations
ments
(per-
partment of Commerce were somewhat analogous in substance to the
Per-
Per-
Per-
Value
Value
Value
Value
Per-
cent)
(per-
cent)
functions of the lending agency. Did you have in mind the language
cent
cent
cent
cent
of the statute setting up the Department of Commerce, which reads,
$7.5
1.6
$4.9
1.7
$17.2
0.7
$6.9
0,7
129.3
40.8
among other things, as follows:
Under $5,000
2.b
7.0
2.4
25.7
1.0
10.3
1.0
123.5
47.1
$5,000 to $10,000
11.5
32.1
6.9
19.9
6.8
75.6
1.0
30.5
3.0
135.5
53.3
It shall be the province and duty of sald Department to foster, promote, and
$10,001 to $25,000
41.1
8.8
23.8
8.1
98.4
3.9
39,6
3.9
139.4
00.4
$25,001 to $50,000
develop the foreign and domestic commerce, the mining. manufacturing, ship-
$10,001 to $100,000
61.7
13,2
38.3
13.0
149,8
5.9
00.3
5.9
142.8
57.4
118.5
33.4
64.4
13,8
42.5
14.5
140.7
5.5
56.7
5.5
States. ping, and fishery industries, and the transportation facilities of the United
$ 00,001 to $200,000
(21
21.1
202.3
7,9
81.4
7.9
123.0
31.1
$200,001 to $500,000
90.7
19.5
47,3
10,1
31.9
10.8
139,6
5.5
56.2
5.5
195.1
76.2
$500,001 to $1,000,000
21.6
1,691.0
66,6
680.9
66.6
1,438.7
974.0
Mr. WALLACE. You are quoting it accurately, Senator. I was only
Over $1,000,000
109.9
23.6
63.4
406.2
100.0
293.8
100.0
2,540.3
100.0
1,022.8
100.0
444.9
248.1
quoting it this morning from memory, sir.
Total
Senator PEPPER. Well, now, some inquiry was made about small
business loans. I have before me what purports to be a report of all
1. Temporary Finance Corporation Summary of Authorizations. Finance Corpora- on
National Economic Committee Monograph No. 17, Problems Disbursements of Small Business, are entimated p. 300.
I Reconstruction disbursement figure of $1,022,800,000 furnished by the Reconstruction disbursement figure of
loans and commitments authorized to business enterprises by the
$1,022,800,000 tion, by assuming disagrees a slightly with the disbursement of $1,008,000,000 used by Mr. Jomes
the basis of total distribution parallel to that of authorizations. Note that total la Washington
R. F. C. through August 31, 1944, published by the R. F. C. September
14, 1944, wherein it appears that 6,871 loans under $5,000 were made,
Star.
totaling about 171/2 million dollars, but constituting only about seven-
TABLE II.-Reconstruction Finance Corporation: Number of business loans au- by
tenths of 1 percent of the total number of loans made by the R. F. C.,
thorized and disbursed, cumulative as of Feb. 29, 1940, and Mar. 31, 1944,
and showing that there were loans of less than $10,000 to small busi-
size of loan
ness in the amount of 1.7 percent of the total amount of the loans, and
Feb. 29. 1940
Mar. 31, 1944'
less than $100,000, the total percentage, would be about 12 or 13 per-
cent of the total amount of money loaned; 66.2 percent of all the money
Authorized
Disbursed
Authorized
Percent
loaned was loaned in units of over $1,000,000.
Bise of loan
increase,
1940 to
Without, of course, having known of the individual applications
Per-
Per-
Per-
Number
Number
Number
1944
cent
cent
cent
believe as a matter of policy that it would be in the public interest for
from small applicants and large applicants, would you say that you
3,332
36.6
2,402
60.5
6,738
32.3
102.2
greater consideration be given to small business and that that would
Under $5,000
1,412
15.5
874
14.4
3,202
15.6
131.0
20.7
149.1
$5,001 to $10,000
1,729
19.1
1,095
18.0
4,331
be worth looking into?
$10,001 to $25,000
11.4
605
9.9
2,309
12.5
151.8
1,032
$25,001 to $50,000
786
8.6
502
8.3
1,964
9.4
149.9
Mr. WALLACE. Yes; based on the record as you have read it, It is
$50,001 to $100,000
421
4.6
282
4.6
946
4.5
124.7
$100,001 to $200,000
193
3.2
627
3.0
125.5
difficult now to say just what the full facts may be. I do think the
278
3.1
$200,001 to $500,000
63
.7
44
,7
187
9
195.8
situation ought to be looked into.
$500,001 to $1,000,000
40
.4
26
.4
228
1.1
470.0
Senator PEPPER. Mr. Chairman, if I may, I would like to submit
Over $1,000,000
9,103
100.0
6,083
100.0
20,882
100.0
129.4
for the record the three statements which I have in my hand, showing
Total
the reports of the R. F. C. up to 1940 and then up to 1944, respecting
loans to small business.
Il Temporary Reconstruction Finance Corporation-Number and distribution of 1944,
National Economic Committee Monograph No. 17, Problems disbursements of Email Business, to Mar. p. 31, 300.
The CHAIRMAN. They are official, are they?
not available.
Senator PEPPER. Yes, They were taken from official reports.
ADMINISTRATION OF CERTAIN LENDING AGENCIES
129
128
ADMINISTRATION OF CERTAIN LENDING AGENCIES
diene plant, Standard continued this work at its own expense. Therefore, when
TABLE III.-Size of all loans and commitments authorized to business enterprises
Pearl Harbor changed the whole Government attitude toward synthetic rubber
by Reconstruction Finance Corporation, through Aug. 31, 1944
and Reconstruction Finance Corporation telegraphed Standard to go ahead, the
engineering work had advanced 3 months. Practically no time had been lost as
[Excludes loans and commitments to subsidiaries of Reconstruction Finance Corporation, Defense Homes,
a result of the Government cancelation of the project in September.
and Great Britain)
[Published by Reconstruction Finance Corporation Sept. 14, 1914]
Then, further, there was this testimony by Mr. Howard, Mr. Frank
A. Howard, vice president, Standard Oil Co. of New Jersey, and he is
Number
Percent
Amount
Percent
addressing Mr. Fulton, chief counsel of the committee:
There is a great deal of correspondence, I am sure, that you have, Mr. Fulton,
$5,000 and under
6,871
3.8
$17,588,440.29
$5,001 to $10,000
0.7
that shows that we didn't believe the reduction of the 40,000-ton program to a
3,367
15.6
26,472,512.04
1.0
47.4
$10,001 to $75,000
1.7
program of four shadow plants, each with a capacity for only 2,500 tons, was a
4,462
20.7
$25,001 to $50,000
77.882,835.77
2.9
wise decision.
2,701
12.5
$70,001 to $100,000
102,329,096.02
3.8
2,063
9.6
$100,001 to $200,000
156,921,782.56
5.9
And, further, his testimony continues:
1,002
4,6
$200,001 to $500,000
149,182,989.43
5.6
673
3.1
$500,001 to $1,000,000
217,540,560.12
8.2
From that conclusion of ours, we succeeded In getting-or at least we or others
205
1.0
Over $1,000,000
151,765,616.47
5.7
245
-1.1
1.702.797,504.22
-06.2
succeeded in getting-the Reconstruction Finance Corporation to reverse itself
Total
21,589
100.0
very soon.
Average of all loans and commitments
2.062.481,300.92
100.0
Mr. FULTON. On that I noted that in September, some 5 months Inter, the Rubber
123,325.00
Reserve Instructed you to suspend all work on your butadiene project, which you,
of course, did not do, but did they reverse their position on this 2,500-ton matter
Senator PEPPER. Now, Mr. Wallace, this morning I believe you were
before Pearl Harbor?
Mr. HOWARD. Oh, yes, sir. They had reversed that position sometime quite
questioned, after you had made some comment in your original state-
early In 1941, I am sure before the middle of the year they had reestablised their
ment about some laxness on the part of the R. F. C. or the lending
minimum program at 40,000 tons.
agencies in the acquisition of critical material or in the expenditure of
Mr. FULTON. And It destroyed the shadow program of four 2,500-ton plants?
money for purposes of strategic or critical material.
Mr. HOWARD. They enlarged it back up to the place where It had started.
I would like to read to you just two or three things and ask if that
Was that the sort of thing you had in mind?
is the kind of thing you had in mind or if it is not the kind of thing you
Mr. WALLACE. That is the sort of thing I had in mind.
had in mind. I read a copy of a letter from Mr. E. R. Stettinius, Jr.,
dated November 25, 1940, to the Honorable Jesse Jones, Federal Loan
he had his office over in the Federal Reserve Building, was on the sub-
I may say, Senator, that the first visit I paid to Mr. Stettinius, when
Administrator, Washington, D. C., as follows:
ject of synthetic rubber, because of the fact that we had in the Depart-
ments for the production of synthetic rubber are progressing. This is only to
There has been some question raised as to the speed with which the arrange-
ment of Agriculture a chemist who had been with the Standard of
New Jersey, had been working on butyl rubber; and while we were not
be expected, because It may be a matter of vital Importance In the defense effort.
in the war yet, I felt that Mr. Stettinius should be getting into the
Division's responsibility In the program.
I want to take this opportunity therefore to make a matter of record this
You will recall the unsatisfactory situation which resulted in conversation
that other gentlemen in positions of authority to help did not share felt. the
rubber picture with the utmost vigor. Mr. Stettinius agreed. I know
Finance Corporation and the Industrial Materials Division of the Defense Com-
carried on between representatives of the Industry and both the Reconstruction
That does not in any way impugn their patriotism or their standard
alarm which I felt about it and which I think Mr. Stettinius
turned the whole matter over to you for final determination. With my letter to
mission. At your request, therefore, and with the approval of the Congress, I
you of October 23 was enclosed a copy of my report to the Defense Commission
of Senator high business PEPPER. conduct. Now, Mr. Wallace, I think it is only fair to you, if
situntion. The same material was sent to the President on that date, together
and the report of this Division's chemical group outlining the synthetic-rubber
memory is not clear on the exact words in the last six paragraphs
your which the able Senator from Texas asked if you still subscribed to,
situation had been turned over to you.
with the covering memorandum, making It clear that the whole synthetic rubber
that I might read these paragraphs so that you have them before you
It perfectly clear that the Industrial Materials Division of the Defense
You be are thoroughly familiar with these facts. I have felt It desirable that
to make any comments on them that you care to make [reading]
for solution of our present problems lies In the Constitution itself, to deal in
matter. mission is not now considering Itself responsible for the developments In Com- this
its the eternal problems of justice, liberty, and the general welfare. meet them.
The declaration cue of the united purpose of the people, through government, These
Sincerely yours,
with take new forms: previous mechanisms may not suffice to would be con-
E. R. STETTINIUS, Jr.
problems concepts of how to approach them arise In a new age. It from the
Now, just a couple of excerpts from the testimony given to the Tru-
New to the very spirit in which the men of 1787 acted to shrink con-
man committee on April 2, 1942, by Mr. W. S. Farish, president, Stand-
general that instruments of government are devised by men for furthering a
trary welfare today. The Constitution Itself was the product of a deep the
ard Oil Co. of New Jersey. [Reading:]
viction for being. Not to use the Constitution In that spirit, but to set It up as the
On January 15, 1941, Standard submitted to the Reconstruction Finance
reason sacred and changeless authority on changing material conditions, is to deny
poration a complete plan under which It offered to construct a plant Cor-
kernel and worship the husk.
production Corporation of butadiene, to be financed 75 percent by the Reconstruction Finance for the
In and 25 percent by Standard. Nothing came of this
vated by motivated by the Idea of a democratic political society. for the
Today we the Idea of cooperative economle society as the young men The one IS
need a great many more persons who will become as deeply of 1776 moti- and
pend work on the Government Baton Ronge butadiene project for to sus-
September all 1941 the Rubber Reserve Company Instructed Standard proposal.
1787 the living were stream of thought for the twentleth century as the other was
Notwithstanding the cance'ation of the engineering work on the 15.000-ton 1 buta- year.
130
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
131
eighteenth. I believe the majority of American people are already receptive to
contribution to the productivity and ordered welfare of the peoples of the world
the general purposes and possibilities of a cooperative commonwealth. They
and perhaps an even greater contribution to the consuming power and happiness
want more security In sickness, in old age, In unemployment; they want a wider
distribution of the good things of life: and they have become disillusioned of
of all the nations.
the system, In its present self-contradicting form, of free competition and devil
Senator BREWSTER. I want to ask one question. It seemed to me
take the hindmost as a method for reaching those ends. The movements or
the record had been blurred a little from the beginning, from your
achieving such ends Is indicative of the feeling of many people. The need is for
a body of people In accord on general alms, as Idealistic and as realistic as were
categorical statement as I understood at the conclusion of your state-
the young Federalist of 1787, to channelize thought and Initiate and consider
ment this morning, that if the loan agencies were given to you as
proposals which may lend to a cooperative society, The means for conveying Ideas
Secretary of Commerce you propose to use all the power they contain
are certainly more extensive than they were in the 1780's, even though there
are 30 times as many people to reach, Perhaps the very multiplicity of means
to carry out these objectives which you have outlined to us.
makes for confusion. But we may well profit by the example of the young men
Mr. WALLACE. Subject, of course, to the President and Congress.
of 1787 who used the Federalist with such effect, In utilizing similar national
Senator BREWSTER. You mean if Congress should make a change,
forums for analyzing and propagating new proposals. By such means, by the
you would recognize that change? In connection with that, I invite
give-and-take of discussion, by the determined effort of persons themselves con-
vinced and thus able to convince others, new concepts will eventually take form
your attention to your potato cuts.
in social mechanisms.
Mr. WALLACE. Senator, I wanted the Senators and Congressmen
It seems to me that thoughtful people today, In relation to prospective action,
to think it over again and again before they insisted we go ahead with
stand somewhat In the position of thoughtful men in the early 1780's. At that
the compulsion of the potato cuts.
time they were Increasingly aware that the set-up under the Articles of Con-
Senator BREWSTER. You did make the statement you would use all
federation was not working out to meet national problems in an adequate way.
They were thinking, suggesting, comparing Ideas and plans, wondering what
the powers of the office to advance what you believed was the goal.
action was necessary, wondering what form It should take, whether the ar-
Mr. WALLACE. Subject, of course, to-
actually fermulating a definite plan.
ticles needed amendment, revision, or what. They had not got to the point of
Senator BREWSTER (interposing). To future action?
Mr. WALLACE. No; subject, of course, to the regular Governmental
Similarly, thoughtful people today are wondering what action will be needed.
They know that solution of our present problems will eventually require a new
checks, by which I refer not merely to Congress and the President but.
kind of statecraft as effective In the economic field as was the statecraft of
quite possibly also the Budget Office and Accounting Office.
Madison, Hamilton, and the others in the more purely political field. The pre-
Senator BREWSTER. As you know, in this case the loan agency is
Thoughtful people today believe that the Constitution provides ample scope for
eise form of statecraft which will be required, however, does not yet appear.
not subject to either the Budget or the General Accounting Office, so
evolution toward the Dew form of statecraft. Much depends, however, on the
are taking the powers, the same powers possessed by Mr. Jones,
Much depends on whether the plain intent of the Constitution to enable Govern-
way old or new legislation under the Constitution Is used by pressure groups.
you which, as you know, are very unlimited. He pointed out to us yes-
terday he made loans of many billions; we did not get clear how many
ment to promote the general welfare can really be effectuated under modern
economic ,conditions. If this book has shown anything, It has shown that
billions were involved, but it certainly was in character with this
the present relationships of economic groups and the present scope of Individual
revolving fund that he could loan that amount at any time to any
and governmental action do not work out sufficiently toward the general wel-
for any purpose. I think that was his plain statement. So
fare. If it raises any question of Immedinte concern to all of us, It is: Who
person there would be very great powers possessed here, and if then they were
owns the Constitution, If not the people as a whole?
If our more privileged and powerful people under the present rules of the
to be used for the purposes you outlined it would certainly go outside
game-financiers, corporation lawyers, and directors-resolutely fall to un-
the purpose which I think the Congress had in view when they enacted
order they are alive to the necessity for making certain fundamental changes In
If derstand the signs of the times, one type of statecraft may need to be evolved.
the law.
Mr. WALLACE. I think the Congress ought to step in and review the'
be in order, to preserve One situation the general might welfare quite a different form of statecraft may
whole situation, as I suggested this morning, but I also suggested
In varlous countries of the world In the past, privileged classes have often acted
tution. In Another might require nothing in the require way amendments of constitutional to the changes, Consti-
what could be done.
Senator BREWSTER. Could be done?
action, such n way as to make gradual change impossible and have precipitated violent
Mr. WALLACE. What could be done.
organization and Intelligent social action.
gradual change, and have made steady progress in the direction of cooperative
Some countries, as for example Sweden, have shown a capacity for
Senator BREWSTER. You are not modifying that statement in any
We in In the United States should eventually be prepared If necessary to work
way? Mr. WALLACE. No; I am not modifying that statement in any way;
out as the spirit of Madison a mechanism which would embody the spirit of the
neither am I suggesting any arbitrary use of power.
eighteenth age successfully as the Constitution of 1787 mirrored the philosophy of the
Senator BREWSTER. This is not arbitrary at all. I mean if you use
as the Constitution century. We may hope that such action can be taken as bloodlessly
This will was enacted and that the handiwork will be as
the powers Mr. Jones has to accomplish your different concepts of
we use undoubtedly be possible If a spirit of common sense prevails; enduring. and If
the public welfare.
may not be necessary at all.¹
our Constitution as Hamilton anticipated It should be used, such action
Mr. WALLACE. Frankly, I think undoubtedly the Congress would
ly United States It is my belief that in the spirit, If not in the form of enormous- 1787, the
America's significant. contribution in 1787 to world governmental practice was
have to pass on those items, there is no question about that.
Senator BREWSTER. They would not under the present law.
can, In the not too distant future, make again fully as great a
Mr. WALLACE. I think they would.
Senator BREWSTER. Why do you say that?
'See art. 34 of the Federalist, as quoted on p. 205 of this book.
Mr. WALLACE. I am sure Congress would have to pass on that.
132
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
133
Senator BREWSTER. You mean to say you would not exercise the
Mr. WALLACE. Yes.
powers which you possessed?
Senator TOBEY. I would like to present to your mind an article which
Mr. WALLACE You see, I started out with unemployment.
you wrote, which appeared in the New York Times Sunday maga-
Senator BREWSTER. Yes.
zine issue about a year or a year and a half ago, the substance of
Mr. WALLACE. Obviously, under the R. F. C. as it now exists, under
which is that with the aftermath of the war you would diseard a large
section 5 (d) of the R. F. C. Act, there is a provision there for loan-
part of the productivity set-up in the synthetic-rubber industry in this
ing money to prevent unemployment.
country and go back and purchase from the old order. Is that correct
Senator BREWSTER. Yes, yes, and for manufacture, there is a pro-
Mr. WALLACE. That, Senator, is not quite fully stated.
vision in that for manufactures which was not subject to the Presi-
Senator TOBEY. How would you phrase the article?
dent, I think, but they could aid manufactures.
Mr. WALLACE. There did seem to be some misunderstanding there.
Mr. WALLACE. Insofar as I have already been granted power by
I think it is clear in the article, and if it is not clear it was made clear
Congress, I have served notice on Congress that I would do my best
later on, that I think it is regrettable to put a tariff on rubber merely
in the loaning, to carry out what is set forth in section 5 (d).
in order to keep these synthetic plants going. I feel that a tariff would
Senator BREWSTER. I just wanted to be sure that the questions which
put a burden on every automobile user. I feel the synthetic-rubber
Senator O'Daniel and Senator McClellan asked did not mean you
plants should be kept going, but not in an extensive way, if it requires
modified in any way your determination to use the power given you
a tariff to keep them going.
set forth.
to do everything humanly possible in the direction the powers were
Senator TOBEY. But over against that, if you returned to the old
order and brought out rubber from the original supply, which was
Mr. WALLACE. Insofar ns the powers have been specifically set
controlled by the largest cartel in the world, perhaps, the British and
forth by Congress, I would carry them out for the objectives which
Dutch cartel, we would have a repetition of the very thing that you and
I set forth this morning.
The CHAIRMAN. Are there any further questions?
I abhore, would we not?
Mr. WALLACE. I have been very strong, over a period of many years,
I think Senator Tobey desires to ask a question.
for the development of rubber production in Latin America. I share
Senator TOBEY. Mr. Wallace, last October, in reading the Wash-
ington Post, the issue I think of the 16th of October, there came to
with you ycur feelings in regard to the cartels of the Far East, whether
they have had to do with rubber or with quinine.
my eye an article telling about a statement made in Muncie, Ind., in
Senator TOBEY. Of course, under that cartel you and I know that
the course of political debate. There you made this statement, and I
sometimes the price went from 2 cents to $2, depending on the whims
would like to read it to you:
of the cartel.
Mr. Wallace sald, "After the war we can buy twice as many automobiles
Mr. WALLACE. I think the highest price was reached in November
things possible we need only the money."
we did in the past. We can buy twice as many refrigerators. To make these as
1925, when it was $1.30 a pound.
Senator TOBEY. It is amazing when you contrast it to the low
As to where the money will come from, you answered:
price that it sometimes has come down to. It is a rigged market, When
From R man who will do more than give the green light to Wall Street,
rigged production, and I do not want to see that returned.
Did you refer to the President?
we pay $20,000,000 to build a synthetic-rubber industry I say we
Whom did you refer tol
should keep that on the job in case we have another war.
I made the statement,
Mr. WALLACE. I was referring to Franklin Delano Roosevelt when
Mr. WALLACE. I agree, Senator. Rubber, I might say, has been
a our being "caught with our pants down" with respect to rubber as any-
hobby of mine for some time. I probably worked as hard to avoid
Senator TOBEY. Where is the money coming from to buy twice as
past? many refrigerators and twice as many automobiles as we had in the
body in this country. I think the record will prove that, Senator.
But neither do I think this situation should be used to enrich any-
wages. Mr. WALLACE. The money is coming from men fully at work, at full
thing in the nature of a domestic cartel. And remember this: It of is
old, old democratic saying that the "tariff is the mother the
Senator TOBEY, The statement is: "twice as many
belief?
in the past." That means after the war. Is that your as
tariff at the expense of the American automobile user, merely to
monopoly," an and you should be a little careful before you use
build up a domestic synthetic-rubber cartel.
Mr. WALLACE. I am sure it can be done, Senator. As a matter of
I do think we want to utilize everything we have found here in the
fact, if we are to have full employment we shall have to consume
course of the war.
nearly Senator twice as many automobiles and twice as many refrigerators.
Furthermore, if we found, as the result of our war experience,
pressed hostile what has been in my heart for many years, that is that you ex-
TOREY. One other question. I think this morning
that we can make rubber cheaper than it can be produced in the
natural way, rubber of a superior quality, I am all for it, but if it
on are that? to cartels. I believe you have expressed yourself before you
is more expensive, why, I think it would be a serious mistake to soak de-
the American consumer, unless there is a campaign of national
fense involved, and in that case I would suggest we consider our
134
ADMINISTRATION OF CERTAIN LENDING AGENCIES
135
ADMINISTRATION OF CERTAIN LENDING AGENCIES
Latin-American neighbors, we should survey the situation to see to
capital, and agriculture really understand each other and start pulling together
what extent we can produce rubber close to our shores, if natural
to turn out more goods in such a balanced way that there will be no serious
rubber can be produced cheaper than synthetic rubber.
set-backs. As we consider the absolutely vital functions of capital we should all rement-
Senator BREWSTER. You realize, don't you, that the price of rubber
higher than the problem of profit to the general welfare considerations Involved
ber that there are a number of capitalists who are capable of lifting their eyes
in the Dutch East Indies is dependent on the standard of living
of the men producing it You would not advise having competition
should not be blamed for the abuses practiced by the others. Of course there
In getting new Industries started in a sensible way. Capitalists with vision
on that basis, would you?
certain abuses which are Inherent in any system of maturing capitalism
Mr. WALLACE. Their wages were deplorably low, Senator. As a
are with which we must wrestle courageously in order to keep capitalism from de-
matter of fact, that is one of the great difficulties in building up
of good feeling will characterize all our efforts and that the flow of private
stroying itself. Insofar as we have set our hand to that task, I hope the utmost
the Latin-American rubber industry. But I may say this also, that
science works in the biological world just as much as in the world of
capital Into productive Investment will be encouraged. The time is now and rapidly
approaching when the general public will demand that labor, capital, and more agri-
inorganie matter. Science has done some very remarkable things
culture spend less of their energy in a struggle for relative advantage national
in the way of rubber breeding, and I am beginning to think it is
possible to produce rubber at 6 to 8 cents a pound in Latin America,
of energy We have the inventive ability. the factories, the workers, the and
their In devising constructive cooperative ways to Increase the farmers,
because of the high productivity of some of these rubber clones
to output. take care of all of our people in marvelous fashion. Capital, labor,
that have recently been discovered.
agriculture cooperating can do the job.
Senator BREWSTER. What kind of wage would you pay the workers?
STATEMENT BEFORE THE INTERSTATE COMMERCE COMMISSION JANUARY 18, 1938, ON
Mr. WALLACE. The workers could be paid a much higher wage than
THE DEPENDENCE OF THE RAILBOADS ON INCREASED INDUSTRIAL PRODUCTION
the workers in the Far East.
Senator TOBEY. Mr. Wallace, I would like to say for the record in
reference to your work in the Board of Economic Warfare and your
one which and all other industries that supply the railroads with of business
The only means real health for the construction, manufacturing. volume. mining, I be-
short-time policy which can mean real health for the railronds agri- is
appearance before the Banking and Currency Committee of the
cultural, can be taken to bring about a rapid restoration restoration
Senate in which you gave an account of the new development, I think
activity and production. 1 believe the railroads might to devise ways
lieve that and steps production through our productive system and a effectively rapid cooper-
it is a very constructive piece of work. The Nation and the world
of employment the industrialists and other groups that are now trying Such means
are benefited by that work of the Board of Economic Warfare very
ate with for getting construction and industrial activity revived. to all other
materially, and that is also true with reference to quinine.
and can means bring profits to the railroads at the same time It brings profits
The CHAIRMAN. Are there any further questions? If not, we
Industries.
thank you, Mr. Wallace. You have very thoroughly discussed the
matter before us and given us your views. We will excuse you as
LETTER TO SENATOR BYRNES, CHIEF OF SENATE COMMITTEE 1938 TO INVESTIGATE
a witness and we will go into executive session.
UNEMPLOYMENT AND RELIEF, JANUARY 12,
(Following is additional testimony submitted by Mr. Wallace for
the record:)
From speech January and 3, businessmen 1938: all suffer when investment varles fluetuate widely
"Farmers, workers, time, and when steel and other durable-goods Industries and almost com-
ADDRESS BEFORE THE COMMUNITY FORUM, PITTSBURGH, PA., JANUARY 3, 1938, ON
erratically between at others. When new Investment, or even the business uncer-
from time to frantle attempts to fill orders at one time expenditure of
THE COMMUNITY OF INTEREST BETWEEN LABOR, CAPITAL, AND AGRICULTURE
plete stagnation reserves for repairs and replacements, is checked Industrial by pay rolls,
depreciation or fright, or by Investors' fears. business activity, do either Inhor
But businessmen In general are not seeking predatory proflis.
tain'y for farm products collapse together. It doesn't all find ways to
values. This It can hope to get In the long run only through balanced abundance.
Business does want a chance to earn an honest return on true Investment
and the demand good to scare eapital: Instead, they must depreciation can
or agriculture any Means must be worked out so that repairs and Instead of
Business at 25 cannot hope for long to cover the overhead costs of Its plant if It
work together. and new plants created. more eventy year after farmers year, and workers
less. Initiative and leadership and that ancient plants eventually become value-
of or to percent of capacity. It must recognize that profits are the operates reward
be made good, when times seem good. Cooperation between businessmen
to maintain Any attempt over long periods of time to operate at limited capacity and
is needed for is needed to create a steady flow in the creation of the business
all in a lump expanding production, and cooperation of both with of durable goods.
culture enpital, seeking opportunity for profitable investment, like the Interests of agri-
new investors, new capital, and new business leadership. The true Interests of
the values of obsolete equipment will renet against the Interest of
If and this investors prob'em can be solved, much of the extreme ups and downs
cycle may be smoothed out."
and labor, lie In balanced abundance.
It gain is my bellef that business management and Investors both have
ADDRESS AT JACKSON DAY DINNER MINNEAPOLIS. MINN., JANUARY 7. 1939, ON THE
business to from a sound working relationship between agriculture and everything labor.
CHALLENGE TO THE WEST
vestors will return a reasonable yield on the capital invested, and If full In-
production management is willing to produce and sell at prices which with If
In he previous to 1980, but we all hope the day will soon come Both when the art and
future there will probably always be greater Federal expenditures private than
will find are wide willing to put their funds Into use at moderate Interest rates, they
was the case will Increase and Government financing will decrease. in considerable
will be effectively the farmers and labor cooperate to expand production, the The
more markets for their products and effective use for their funds.
financing of government in the years Immediately abead will center rapidly as
work for all opportunities for industry as a whole, Yes: there will be wider
science measure around the problem of bringing about this transition as
capital which la willing to accept a fair return as soon plenty as labor, of
possible but without shock.
136
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
137
Rooseveltian democracy has learned and la learning more completely than any
party has ever done, the need for agriculture, labor, and capital to pull con-
ADDRESS AT ANNUAL JEFFERSON DINNER SPONSORED BY NATIONAL DEMOCRATIC
tinuously together in a balanced way for the service and welfare of all the people.
CLUB AT COMMODORE HOTEL NEW YORK, APRIL 22, 1939, ON PROGRESSIVE DE-
We are determined to serve the farmers, the workers, the small businessmen and
MOCRACY AND THIS CHANGING WORLD
the underprivileged. We know that If this is done In terms of Increased balanced
abundance the larger businessmen will take care of themselves and will prosper
Jefferson tried to get an amendment to the Constitution to prevent corpora-
along with the rest. We want to cooperate with capital to keep it continuously
tions from being formed. I am sure If he could see the way In which corpora-
productive. Our program is one of unity in the service of the general welfare.
tions and labor unions are serving the people in the cities today, be would be
eager to have agriculture served by compensating devices and organizations,
democratically administered. The businessmen of the wholesale and retail
grocery trade have unanimonsly Indorsed this (food stamp) plan and are tak-
REMARKS AT FIRST OF A WEEKLY SERIES OF BROADCASTS ON DEMOCRABY IN ACTION,
ing the lead to make It work to the greatest advantage of all. Through this
DESCRIBING FEDERAL PARTICIPATION IN THE WORLD'S FAIR, PRESENTED Over
plan we hope to help farmers dispose of more of their surpluses, give low-
NATIONAL BROADCASTING Co., FEBRUARY 5, 1939
Income groups in the cities better nourishment and better health, and bring
to business more volume. If successful and If applied on a wider scale, this
I do not mean that the Government produces and distributes the food, but I
plan will be a three-way contribution to the general welfare.
do mean that It must see to it that the conditions are such that producion and
In this job of rebuilding, an essential role must full to businessmen. This
distribution and consumption can continue In behalf of the general welfare.
twentleth century la a machine age, and n machine age Is nn age of business.
The farmer's job Is of course only one complicated step in the total process of
American life as we know It centers largely around business, and without the
feeding those 2,000,000 residents of Manhattan Island. The processor, the
constructive leadership of businessmen, cooperating with the constructive lend-
distributor, and the retailer usually have functions to perform before the con-
ership of agriculture, the constructive lendership of labor, and the constructive
sumer can eat.
lendership of government, the general welfare cannot be adequately served.
Modern distribution has done two great things. It has banished distance, and
It would be a splendid thing If businessmen themselves would take the initin-
has Just about bunished season. The entire country's food resources are available
tive In setting up machinery that would help guide business toward increased
now at the consumer's door, no matter where or how large the city.
production, employment, and distribution. Insofar as businessmen succeed In
this effort, farmers and workers will share in the Increased prosperity of a
balanced, continuing abundance.
ADDRESS AT THIRD ANNUAL NATIONAL FARM INSTITUTE, DES MOINES, Towa, FEB-
RUARY 18, 1939, ON How AGRICULTURE, INDUSTRY, LABOR, AND GOVERNMENT CAN
WORK TOGETHER FOR A $100,000,000 INCOME
ADDRESS AT BANQUET FOR EIGHTY-SEVENTH ANNUAL CONVENTION OF DISTRICT
GRAND LODGE 1 OF B'NAI B'arru AT HOTEL ASTOR, NEW York (BROADCAST BY BLUE
I believe It is just as Important for government to follow stable and well-
NETWORK, NATIONAL BROADCASTING COMPANY), MAY 21, 1939, ON AMERICA THE
considered spending and Investment policies for productive and social purposes as
LAND OF OPPORTUNITY
for private business to do so, That means, first, Government activities ought
not to be suddenly curtailed without regard to the effect on the course of busi-
The existing physical needs make America a land of opportunity right now
ness. But since budget considerations make It Impossible for government to
for men with training and experience in the Investment field. The wise In-
match in full the outlays that private business normally makes, It means, second,
vestor does not wait for a high tide of business before he poes ahead, for he
the sensible thing would be to encourage private capital and get it to flowing
knows that by that time the best opportunities are gone. The wise investor
as It ought to flow. Can agriculture, industry, labor, and government agree on
puts his enpital to work when business is just starting on Its upward curve.
these two principles? If they can, then why not declare a truce and call off the
By his boldness, he helps make jobs for Idle men, and he helps create business
argument and concentrate on doing the Job that needs to be done? We must
for all. At the present time the greatest opportunities are open to those who
carry out both principles. We must maintain government activity as long as
can make the right combination of labor, capital, management, and the demo-
necessary. And we must encourage private capital to go back to work. That
eratie powers lent by Government.
Is the sound way, and the only sound way, to get the Increase in business activity
There Is always room for a difference of opinion on details, but It seems
and national Income which will increase Government revenues, decrease Govern-
to me the national recovery program sponsored by President Roosevelt deserves
ment expenditures, and achieve the balanced Budget which all of us so earnestly
all the cooperation that the whole country can give. We can never get full
desire. The Nation needs more business, and that should be our first goal.
recovery unless everyone-Including the leaders of Industry, the leaders of
labor, the leaders of agriculture, and the leaders of government-are willing
jut their shoulders to the wheel.
REMARKS BEFORE MEETING OF THE FOOD AND GROCERY CONFERENCE COMMITTEE,
WASHINGTON, D. C., MARCH 13, 1939
ADDRESS AT LUNCHEON OF RETAILERS' NATIONAL FORUM AT MAYFLOWER HOTEL,
All of 08 In Government appreciate the way In which the members of the
WASHINGTON, D. C., MAY 23, 1939, ON THE AGRICULTURAL SURPLUSES
trade groups have worked with us on this Important problem (food stamp plan).
We rely upon your cooperation, including increasingly effective methods of mer-
The question is, Can the distribution system be Improved? Yes: I think It can.
chandising, to make this plan successful. In turn you can rely upon the neces-
I think It is being improved. I think the Federal Government and the various
sary cooperation of Government agencies, It is only through united effort that
State governments are helping distributors to improve their methods-but to be
we can find the way to plenty.
fair, we must recognize that, after all, the men In the distribution business are
I have been continually delighted with the reports of the mutually fine attitude
in the best position to do the improving, and that valuable Improvements have
displayed by the representatives of the different groups. Having confidence
been made and are being made within the distribution system Itself.
In each other, they have got down to work on the mechanical details In a very
Execution of this plan is largely in the hands of retailers themselves. Its
effective way. The food trades, I am confident, are going to do their very best
success or failure largely depends on their diligence. If the plan succeeds, It
to do a real job of moving the surplus In the selected cities in such a manner
will be because you and your associates make It succeed. I feel sure that all
as to demonstrate real efficiency to the public.
of you here who have anything to do with the plan will see to It that It has a fair
test, that you will give it your loyal cooperation and your determined support.
I feel sure that you will do your very best to make the stamp plan work.
138
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
139
When capital is flowing and employment is increasing, purchasing power will
It is time now to settle down calmly for the long-time pull. Certain read-
be more widely spread. When these things come to pass, then the retailers will
justments are necessary, of course, but there is no reason why we cannot make
truly be able to serve the masses of the American people. When mass distribu-
them in a common-sense way without getting alarmed. There is no basis what-
tion is accomplished, mass production can be unleashed and the American people
ever for alarm as far as food is concerned. I am convinced that farmers, proc-
can enjoy to the full the abundance which Nature's generosity and man's In-
essors, wholesalers, grocerymen, and labor are going to do the patriotie thing.
genuity have combined to bring about.
They are going to stand for abundance and a fair relationship between prices
I know the retailers of America are enger to see business, labor, agriculture,
and services of different sorts, All of them will be against unjustified price
and government cooperate together to do a larger volume of business, 1 believe
advances. None of us wants again to Invite frenzied expansion and tragle
that, International affairs permitting, we are going to do more business.
collapse. By counseling together we can avoid such a disaster.
ADDRESS AT DINNER OF THE DEMOCRATIC PARTY IN MILWAUKEE, W18., JUNE 17, 1939,
ADDRESS AT ANNUAL JACKSON DAY DINNER AT DES MOINES, Iowa, JANUARY 8, 1940,
ON PROGRESSIVE FOUNDATIONS THAT CAN ENDURE
ON THE FIGHT FOR DEMOCRACY IN 1940
The job of stimulating private Investment, so that the building of factories
The vast majority of businessmen are honest. Government should, so far as
and production of articles to be sold to consumers can be kept In balance with
possible, encourage them In their legitimate endenvors. They are the men
each other and with the needs of the American people, is perhaps the principal
who pay a large part of the Federal income taxes and who pride themselves on
task which now confronts us.
furnishing jobs for laboring men and markets for farm products.
This Job cannot be done-or at least is not being done-by business operating
by Itself. Neither can It be done by government operating by Itself, unless we are
willing to go to a system of state capitalism. Under our American system this
is a job which must be undertaken by business, with whatever government aid is
ADDRESS, SEPTEMBER 19, 1940, ON THE PRICE OF FREEDOM
needed to assure success. Doing this job will give us the kind of foundation we
need If our progressivism is going to endure.
Practical businessmen and engineers are beginning to think through the Joint
obligation of government and business toward maintaining full employment and
economic stability, and the powers that might be placed at the disposal of govern-
ment and business to mitigate the fluctuations of the business cycle. New op-
ADDRESS AT STATE UNIVERSITY OF Iowa, IOWA CITY, IOWA, JUNE 23, 1039, ON
portunities for thought and action are available In the new frontiers of social-
PILLARS OF FUTURE DEMOCRACY
economic engineering to businessmen, engineers, educators, and young people
Capitalism is based on the Iden of putting money to work at a profit. A healthy
seeking ways to serve the Nation.
capitalism requires an expanding frontier of some kind. This frontler doesn't
have to be land, but It may be some new method of production. Vital capitalism,
therefore, must have in It the Idea of progress. It must either be in position to
ADDRESS IN CADLE TABERNACLE, INDIANAPOLIS, IND., SEPTEMBER 23, 1940, ON
exploit a new physical frontier, or it must give the utmost attention to new
DEMOCRACY AND CAPITALISM
scientifle discoveries or inventions which promise to minister to the human desires
of the future.
The substance of democracy that I want to see handed down to my children la
The capital for loan was held more or less Informally by thousands of Indi-
a democracy that meets the Ideals and protects the interests of the vast majority
viduals. The corporate capitalism of the twentieth century is undoubtedly more
of Americans-of farmers, of workers, of small businessmen, and of those big
efficient In producing steel than the Individual capitalism of the early nineteenth
businessmen whose great power is matched by good judgment, fairness, and
century. Corporate capitalism has made It possible for millions of people to
responsibility to the general welfare.
pool their resources, to produce products which would be difficult or Impossible
During all this long struggle, we Americans have been trying to protect cap-
for any one Individual, no matter how wealthy, to produce at " reasonable cost,
Italist business, which includes agriculture, against the growing powers of high
A certain amount of corporate capitalism is undoubtedly in the line of progress.
finance. There is a difference between business and finance, which some people
Without it, we could not have built our railroads and factoriés so fast, As long
sometimes try to make you forget. Capitalist enterprise is a familiar process of
as the corporations were borrowing money from the public and spending- It to
producing and selling food, clothes, automobiles, and other useful goods and
build railroads, public utilities, or factories under the guidance of the early
captains of Industry, it seemed that democracy was probably being helped rather
services. There are plenty of legitimate businessmen in the utility business. They are
than harmed by corporate capitalism,
to be found In most of the operating companies, doing the actual work of man-
aging the generation and distribution of electricity. The engineering achieve-
ments of the industry are a testimony to the fact that in the works there are
RADIO ADDRESS OVER COLUMBIA BROADCASTING SYSTEM, SEPTEMBER 8, 1939, ON
real producers who know and care about production. They are not the ones who
WAR FARMERS, CONSUMERS, AND MIDDLEMAN AND THEIR FOOD SUPPLIES IN TIME OF
lack knowledge or business judgment, If only they were free to exercise their
talents.
I am confident that the men who are responsible for the operations of the
ADDRESS AT DETROIT, MICH., OCTOBER 24, 1940, ON LABOR AND Joss
sugar mills as well as our domestic growers of sugar beets and sugarcane know
from sad experience that It doesn't do anyone in the sugar business any good to
You all know what a real or working businessman is. He runs a store or a
have wide fluctuations In sugar prices based on nothing more than hoarding
factory. He buys materials, hires workers, sells goods. He may be a success
and speculative activity. These men who have cooperated earnestly with the
or a failure, but nt least be knows what It means to struggle with the real
Department during the past few years in endeavoring to stabilize returns for
everyday problems of producing and selling. The New Deal has no quarrel with
producers and processors would undoubtedly Join In advocating that kind of
stability In sugar prices which will best Insure Justice to the farmers and justice
real businessmen.
to the consumers.
140
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
141
RADIO ADDRESS ON EIGHTY-SIXTH ANNIVIRSARY OF BIRTHDAY OF WOODROW WILSON,
(From Saturday Evening Post, October 23, 1943]
UNDER SPONSORSHIP OF WOODROW WILSON FOUNDATION, AMERICAN POLITICAL
SCIENCE ASSOCIATION, AND AMERICAN HISTORICAL ASSOCIATION, DECEMBER 28,
WE MUST SAVE FREE ENTERPRISE
1942, ON AMERICA'S PART IN WORLD RECONSTRUCTION
Capitalism throughout the world, and even in our own country, has often been
When the war is over, the more quickly private enterprise gets back Into
the object of derision Not its inherent faults but Its misuse has been the under-
peacetime production and sells its goods to peacetime markets here and abroad,
lying reason for this attitude. Considered in Its essentials, however, capitalism
the more quickly will the level of Government wartime expenditures be reduced.
ean be the most efficient system of organizing production and distribution on
No country needs deficit spending when private enterprise, either through Its
principles of freedom and equal opportunity yet devised by man. It should not,
own efforts or In cooperation with government, Is able to maintain full employ-
as many radical reformers have suggested, be uprooted. It should be modernized
ment. Let us hope that the best thought of both business and government can
and made to work. Indeed, It must be made to work If we are to maintain the
be focused on this problem which lles at the heart of our American democracy
foundations of those things which we believe to be the essentials of American
and our American way of life.
society. The chief trouble with capitalism has been the perversion of its Instru-
The war has brought forth a new type of Industrialist who gives much promise
ments and their misdirection by small, powerful, privileged groups for purposes
they were never Intended to achieve.
for the future. The type of business leader I have in mind has caught a new
vision of opportunities In national and International projects. He is willing
The system of free enterprise is based upon the willingness of the business-
to cooperate with the people's government In carrying out socially desirable pro-
man to accept risk. As technology grew, as our economy expanded. and as
grams. He conducts these programs on the basis of private enterprise and for
large-scale production came to dominate the economic process, the Individual
private profit, while putting Into effect the people's standards as to wages and
found it Impossible to undertake such huge ventures alone. To nu this need,
working conditions. We shall need the best efforts of such men as we tackle
the corporation had the soundest reasons for coming into being, Every new cor-
the economic problem of the peace,
poration enabled numbers of men to pool their resources and to, carry out a
Maintenance of full employment and the highest possible level of national In-
venture beyond the means of any one of them. Economic teamplay-yet fully
come should be the joint responsibility of private business and of government.
within the framework of competition-was the genesis of the modern corporation.
It Is reassuring to know that business groups in contact with government agen-
To the corporate form of organization must go much of the credit for the speed
cles already are assembling facts, Ideas, and plans that will speed up the shift
with which new Industries were founded, railroads were built and a continent
from a government-flnanced war program to a privately financed program of
opened up to the American people.
Risk taking was an essential of the free economy. Because a corporation
peacetime activity.
limited the liability of the individual and spread the possible losses, It was
destined to become the principle means of attracting venture capital. It en-
[From American Magazine, March 1943]
couraged the businessman and the Investor to assume the risk of developing new
industries. As an elastic, flexible association of risk takers, the corporation
WHAT Wg WILL GET Our OF THE WAR
was Ideally fitted to bring forth new goods and services and to create going con-
cerns, Without the use of the corporate form, the emergence of the railroad,
The American businessman will rise to the challenge of the air age, to the
the telegraph and telephone, the automobile and the radio, the large-scale dis-
challenge of the new frontier, to the infinite possibilities for development not
tribution of electric power, to say the least, would have been delayed. Viewed
only In our own country, but In the tropies and in Asia. Just ns he has co-
from this persepetive, the developments of the nineteenth and twentieth cen-
operated with Government in time of war to build planes for the saving of
turies have proved the social and economic importance of the corporation.
civilization, 80 likewise will he cooperate with Government to make air power
It is clear that the corporation and the patent system were major factors
the preserver of elvilization.
contributing to the growth of modern "America. The patent system gave to the
More and more, everyone will recognize that business, labor, agrienlture, and
little man with the big Idea an unparalleled opportunity to utilize his creative
Government have just one Job in their four-way partnership: To lead the common
Imagination and to risk his limited resources In a game where the rewards of
man to full employment. a higher standard of living, and a peace which will be
success were great and where his own gain served the general welfare:
permented by the exciting spirit of new frontiers, The creative businessman of
It is a hopeful sign when Erie Johnston, the president of the United States
the future will recognize that, while Government will play a large part in opening
Chamber of Commerce, can say in the September Reader's Digest:
up these new frontiers, the Government activity will be such as not to reduce
Then there is a people's capitalism. I come from It. I want to see It survive
but to Increase the field for private Initiative. Better Government organization
for every poor boy and girl in America after me. And not only survive but
and more individual drive will go hand in hand.
triumph. Only America, I think, can light the world toward an ultimate
In serving the common man, the business leader will have opportunities for
capitalism of everybody.
Initiative such as he never dreamed of before.
What happens when the little man with the big iden is able to fight the forces
of special privilege and power which attempt to strangle him is shown clearly
In the development of the attomobile Industry. The sage of the American
automobile Industry is one of the proudest chapters in the history of free
ADDRESS BEFORE MEETING OF DETROIT LABOR AND CIVIC ORGANIZATIONS AT THE
private enterprise. The importance of this Industry to our well-being is readily
STATE FAIRGROUNDS, DETROIT, MICH., JULY 25, 1943, ON "AMERICA TOMORROW"
If Industrial management can bring the same wisdom in producing for peace
apparent. The rebuibling of a war-torn world, the development of new trade routes
that It has shown on many production fronts In the supply program for war,
and new markets, and the endless stream of discoveries which flow from our
the horizons we face are bright. We have witnessed many evidences of Industrial
laboratories will be new frontiers. To the hardy. to the venturesome-In
statesmanship. of cooperation with labor to Increase production and cut costs.
short, to the American businessman with the pioneering spirit-the chance for
In hundreds of Industries the war has demonstrated that management and labor
reward and the promise of useful and fruitful action for the release of those
can be friends In the service of the Nation.
energies which have characterized him are an open road. There will be the
greatest need for cooperation between business, labor, agriculture and Govern-
ment. There will be obstancles. There will be discord and disappointments.
68424-45-10
142
ADMINISTRATION OF CERTAIN LENDING AGENCIES
ADMINISTRATION OF CERTAIN LENDING AGENCIES
143
But none of these hurdles is 80 great that it cannot be surmounted if American
ADDRESS GIVEN IN Los ANGELES, FEBRUARY 4, 1944, ON WHAT AMERICA WANTS
business lives up to Its responsibilities.
Primarily, the task of reemployment is the responsibility of Insignessmen. It
Some of the businessmen who most want to serve the world in the post-war
is a responsibility which they can meet only If enterprise is free to develop and
period are probably those who have rather recently graduated from the ranks of
extend the new lines of industry as well as the presently existing enormous
the small businessmen into handling large affairs in the war effort. Because
plant espacity.
of his unusual capacity, this kind of man has made large sums of money during
To aid business in carrying out this responsibility, the existing plants con-
the war but has paid nearly all of his profits to the Government. He will come
structed by the Government for the war effort should not fall into disuse.
out of the war with large plant facilities. He wants to know how to reconvert
Neither should they become part of the philosophy of planned seareity which is
as fast as possible. His success has often depended largely upon his fine rela-
implicit in monopoly control. So far as practical, they should be turned over
tionship with labor. Appreciating the loyalty of labor, he wants to give his
to private business and become part of our free private-enterprise system.
workers jobs in the post-war period, not so much from the standpoint of making
Why not, for Instance, lend-lease these plants to those American businessmen
money as from the standpoint of doing things both for his workers and for his
who are free of monopoly association and willing to engage in full production?
country. Such men are In some ways the hope of America and the world.
Such men are entitled to encouragement and should be given every incentive
to produce.
SPEECH GIVEN AT PLANKINTON HALL, Civic AUDITORIUM, MILWAUKER Wts,
STATEMENT BEFORE ANNUAL CONVENTION OF NATIONAL CONGRESS OF INDUSTRIAL
FEBRUARY 11, 1944
ORGANIZATIONS, AT HOTEL, PHILADELPHIA, PA., NOVEMBER
3, 1943
Full employment involves governmental cooperation. whether It be In war or
peace. When I speak of governmental cooperation producing additional Jobs, I
The fourth duty of the farmer and worker is to see that capital is fairly
am referring to the free enterprise job opportunities which flow from the creation
treated, that the man who risks his name and credit may get his risk capital
of such national assets as airfields, housing projects, schools, hospitals, T. V. A.'s,
returned when he has served well in creating new jobs and needed products.
good roads, and other public works. No single Arm. no local government, no
Oterwise stagnation and joblessness will Increase: otherwise there can be no
single group, can provide activities of this sort In suffletent colume to save us
growth of new enterprise or free enterprise. Free enterprise must not be made
from joblessness. Only by democratic, cooperative pinnning between govern-
a mockery by big enterprise. In the baekwash of war the small businessmian
ment and the various groups and regions can there be provided sufficient activity
must not be washed out.
to ereate for private business the additional jobs which are needed to save our
free-enterprise system. Free enterprise and joblessness cannot long exist side
by side in the same nation.
STATEMENT BEFORE SUBCOMMITTEE ON WAR MOBILIZATION OF THE SENATE MILITARY
AFFAIRS COMMITTEE, OCTOBER 14, 1943
SPEECH AT MEETINO SPONSORED BY DEMOCRATIC, Crvic, AND LABOR GROUPS OF
I welcome this opportunity to support your Interest in one of the most urgent
MINNEAPOLIS AT MINNEAPOLIS, FEBRUARY 14. 1944
problems before the American people today-the full use of our technological
resources to win a decisive victory and to build an enduring peace. In our
The development of regional capital markets is a task for local business and
struggle to translate the total capabilities of this Nation into an effective
financial Interests. Here is an opportunity for small Investment banking
striking force, we have every reason to be proud of the splendid achievements
houses and security dealers to expand their services in behalf of local Industry.
of science, both in industry and In Government. We must realize, however,
Here is an opportunity to reduce the cost of financing so ns to encourage the
that in reality we have only begun to marshal the inventive skills and energy
growth of regional enterprises which will ultimately develop into more financing.
of the American people on the scale required for the tasks which lie ahead.
Investment In the development of regional economies will require venture
The application of modern science should not be the exclusive domain of
capital rather than the timid capital which seeks snfety In the bonds of estab-
great corporations and cartels who can, if they desire, restrict and suppress
lished enterprises. Federal legislation has done much to relieve those who
new Inventions and sclentnfle information to sult their own interests instead
would Invest venture capital of the unnecessary risks that attach to fraudulent
of the public interest. Unless the little man has access to the bounties of
financing. A revision of our tax laws can provide further Incentives to Invest
technology, free enterprise will suffer, to the detriment of full employment of
in the common stocks of new enterprises,
labor and our resources.
The development of regional economies within a full-production national
economy will open a new era in American history. New opportunities for em-
ployment, for capital Investment. for enterprise, will be the first effects. The
ADDRESS BEFORE LUNCHEON MEETING OF COMMITTEE FOR POLITICAL ACTION OF THE
use of new natural resources, plus the fuller employment of labor and capital,
CONGRESS OF INDUSTRIAL ORGANIZATIONS, AT PARK CENTRAL HOTEL, NEW YORK,
will mean enlarged production, both regionally and nationally. A balanced
JANUARY 15, 1944, ON FULL EMPLOYMENT
regional development will provide increased stability for business and the founda-
tion for a new post-war American standard of living.
But, fortunately. there are many big businessmen who believe wholeheartedly
In allied unity in Just the same way as the President. They believe in unity
both for the war and for the pence. They want to see an enduring peace based
on a higher standard of living and a growing volume of world trade and there-
ADDRESS BEFORE THE AMERICAN BUSINESS CONGRESS AT Waldorf-Astoria Horm,
fore believe In the good-neighbor polley, not only between the United States and
NEW YORK (BROADCAST Over LOCAL STATIONS). MARCH 17, 1944
Latin America but also between the United States and the other United Nations
In the post-war period. These businessmen do not finance anti-Semitie move-
Free enterprise means that each and every Industry Is open to new capital and
ments or American Fasclats. They believe In clean, aggressive competition
new firms, that all business has free access to raw materials, to labor, to tech-
in foreign markets. They may fight Roosevelt on his domestic policies, but
nologies: that producers have free access to the markets in which they buy
in the main they do It fairly. If the common man has to choose between these
and sell: that all individuals, in accordance with their varying abilities and
two big business groups, there is no question as to where his interest lles,
irrespective of color, race, and creed, have equal opportunity to work at their
chosen jobs,
144
ADMINISTRATION OF CERTAIN LENDING AGENCIES
In the tasks assigned to them during the war small businessmen have done a
magnificent job. It will be even more important that small business continues
to function when reconversion begins-that adequate resources are then avail-
able to permit them to participate in this great task. Small businessmen have
always been the foundation of our American economic system-it is vitally
important that they continue as producers and distributors in our American
system.
ADDRESS UNDER THE AUSPICES OF THE INDEPENDENT CITIZENS COMMITTEE,
PITTSBURGH, PA., SEPTEMBER 30, 1944
Tonight I want to talk about your community here in Greater Pittsburgh,
because this area is a symbol of so much of America's industrial greatness_
her power in coal, iron and steel, oil, railroads, glass, aluminum, and electrical
equipment. Pittsburgh has been the beating heart of America's vast develop-
ment since 1860. Pittsburgh boomed during the Civil War and the railroad
expansion which followed that war. She boomed again during World War No. 1
and enjoyed the tremendous stimulus which came to heavy industry as a result
of the rapid growth of automobile construction during the twenties. Today we
stand on the threshold of another post-war era following upon a time when
Pittsburgh has made a greater contribution many times over to the American
war effort than ever before in American history. Tomorrow, as in the past,
Pittsburgh will be the barometer of the Nation's success in building prosperity
for all Americans in the post-war period.
We are not going to have a planned economy in the United States, but we
must plan for our economy in peace just B8 we did in war. We are not going
to have a planned economy, because that means that everything is done from
one central spot by one group of people. But we do need specific plans In every
city, in every industry, in every State, and coordination of these plans on a
national basis. When I visited with the mayors, the chambers of commerce, and
the members of the Committee for Economic Development in many eastern
cities, I found them doing excellent work. But nearly everywhere I found them
thinking just a little too much in terms of an outmoded normaley and not enough
in terms of the truly great abundance which we must have if we are to have
full employment. An abundance program for our economy should be based on
the needs of the average American family.
(Whereupon, at 4:12 p. m., the committee retired into executive
session.)
X
322
January 26, 1945
Dear Will:
I am enclosing herewith a very confidential
memorandum which I gave to the President. I also
gave a copy of it to the Secretary of State.
I would be glad to discuss this proposal
with you at any time.
Sincerely yours,
(Signed) Henry
The Honorable William L. Clayton,
Assistant Secretary of State,
State Department,
Washington, D.C.
Regraded Unclassified
X- Hold Indefinitaly
323
Jan 10, 1945
MEMORANDUM FOR THE PRESIDENT
A $10 Billion Reconstruction Credit for the U.S.S.R.
I suggest consideration be given to a financial arrangement
with the U.S.S.R. to provide her with $10 billion credits for
the purchase of reconstruction goods in the U.S., with provision
for repayment to us chiefly in strategic raw materials in short
supply in the U.S.
1. The interest rate could be 2%, amortized over a period
of 35 years. A schedule of repayments is attached.
2. The Russians have more than adequate means to assure
full repayment. There are three principal sources from which
she can obtain the necessary amount of dollars.
(a) Selling to us strategic raw materials which are in
short supply in the U.S. becuase of our depleted
natural resources. (See attached memorandum)
(b) Russia will be able to develop substantial dollar
assets from tourist trade, exports of non-strategic
items to the U.S., and from a favorable balance of
trade with the rest of the world.
(c) Russia has a stock of gold estimated at $2 billion
now and is reported to be able to produce from $150
to $250 million per year. These gold resources can
be used to pay her obligations to the United States
to the extent that her other dollar sources are not
adequate.
3. An important feature of this proposal is that we will
be conserving our depleted natural resources by drawing on
Russia's huge reserves for current needs of industrial raw
materials in short supply here. We would be able to obtain a
provision in the financial agreement whereby we could call upon
Russia for whatever raw materials we need without giving a
commitment on our part to buy.
4. This credit to Russia would be a major step in your
program to provide 60 million jobs in the post-war period.
hdw;hg;afl;jed;sg;rl 1/10/45
Regraded Unclassified
324
Conservation of U.S. Natural Resources and Imports from the U.S.S.R.
The U.S. has had to draw heavily on domestic raw material
reserves during the war to meet peak production requirements.
The following table prepared from some recent confidential re-
ports for the Under Secretary of Interior discloses the depleted
natural resources of the United States, and emphasizes the need
for conservation measures.
Reserve Domestic Supplies
On Basis of our
On Basis of our
1939 Domestic
Current Consumption
Consumption
1943
Petroleum
16 years supply "
13 years supply
Manganese
9
If
3
II
fi
Tungsten
23
IT
If
3
u
=
Zinc
17
II
II
8
=
=
=
Lead
7
=
11
6
11
Chrome
No record
Less than 1 year's
supply
Mercury
3 years supply
We could safeguard and conserve our strategic material re-
serves in post-war years which are now at minimum levels, by
importing from abroad to meet ordinary annual production require-
ments. The U.S.S.R. has tremendous reserves of many materials
which the U.S. will urgently require after the war. A reconstruc-
tion loan to the U.S.S.R. will give us the means whereby we can
conserve our own natural resources for the next two generations,
by utilizing Russian reserves. The U.S.S.R. could provide sub-
stantial quantities of strategic raw materials for an annual basis
within five years after the close of the war as indicated in the
following table.
Metals and metallic ores
$80,000,000
(Manganese, Tungsten, graphite,
mica, chrome, mercury, iron ore,
platinum, copper)
Timber and wood products
45,000,000
Petroleum
50,000,000
Oils and oilcake
10,000,000
Other industrial raw materials
15,000,000
Total
$200,000,000
Regraded Unclassified
325
Repayment Schedule for Advance of $10 Billion
Credit for 35 Years at 2 Percent 1/
(Millions of Dollars)
Scheduled
Annual
Annual Scheduled
Unpaid Balance
Year
Expenditure
Interest
Repayment
At End of Year
1
1,000
20
0
1,020
2
2,500
70
0
3,590
3
3,000
132
0
6,722
4
2,500
184
100
9,307
5
1,000
206
150
10,513
6
210
200
10,523
7
210
250
10,484
8
210
300
10,393
9
208
350
10,251
10
205
400
10,056
11
201
400
9,857
12
197
400
9,655
13
193
400
9,448
14
189
400
9,237
15
185
500
8,922
16
178
500
8,601
17
172
500
8,273
18
165
500
7,938
19
159
500
7,597
20
152
500
7,249
21
145
500
6,894
22
138
500
6,532
23
131
500
6,162
24
123
500
5,785
25
116
600
5,301
26
106
600
4,807
27
96
600
4,303
28
86
600
3,789
29
76
600
3,265
30
65
600
2,730
31
55
600
2,185
32
44
600
1,629
33
33
600
1,061
34
21
600
483
35
10
492
4,691
14,842
1/
This schedule is a basis for negotiation.
Regraded Unclassified
January 26, 1945
My dear Lieutenant Putzell:
I have received your letter of January 23rd,
enclosing copy of a letter from General Spaatz
to General Donovan, and also your letter of
January 24th, enclosing a radio-telephone
message from your representative in Bern.
I appreciate your forwarding this information
to me.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Lieutenant (j.g.) Edwin J. Putzell, Jr.,
Assistant Executive Officer,
Office of Strategic Services,
Washington, D.C.
Regraded Unclassified
SECRET
acb,
OFFICE OF STRATEGIC SERVICES
WASHINGTON, D.C.
23 January 1945
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Treasury Department
Washington, D. C.
My dear Mr. Secretary:
Upon returning to my office from your very
enjoyable luncheon, I find a letter from General Spaatz
to General Donovan, dated 16 January 1945, a copy of
which is enclosed. It may be of interest to you.
As the letter indicates, personnel of our
organization has, for an extended period, been working
with the Strategic Air Forces in the systematic selec-
tion of bombing targets in Germany and in analysis of
damage done.
On behalf of Dr. Langer and all of his
associates, permit me to express our appreciation for
the instructive and enjoyable meeting we had with you
and your men today.
Respectfully yours,
Edi Edwin J. Putzell PubellJ Jr.
Lt., (j.8.), USNR
Assistant Executive Officer
Enclosure
SECRET
Regraded Unclassified
SECRET
16 January 1945
Major General William J. Donovan
Office of Strategic Services
Washington, D. C.
All
Dear General Donovan:
I would like to express to you my appreciation of the
material aid which the Office of Strategic Services and its
sub-section have rendered to the United States Strategic Air
Forces while operating in this theater of war. This appreci-
ation 1s enhanced by numerous reports made to me by my Staff
Officers, who have profited continually by their valuable con-
tacts with your service organization.
It would seem unfair to single out any particular
aid which the Office of Strategic Services has extended to the
United States Strategic Air Forces. However, I would like to
stress that the wealth of timely assistance given to us by
your sections dealing with the periodic condition of the
various German industrial complexes has been of tremendous
value. We have made use of intelligence given to us by men
of your organization time and time again in our target work,
and it 1s sincerely hoped that the type of services which are
presently being rendered by your sections dealing with these
matters will not end with this War, but will continue to develop
throughout the future of our country.
Your generosity in allowing the United States Strate-
gic Air Forces to utilize experienced analysts has made for a
well rounded program and has enabled our Intelligence and
Operational Directorates to feel a certain confidence in their
decisions which might have been lacking without this assistance.
Sincerely yours,
CARL SPAATZ,
Lieutenant General, U.S.A.,
Commanding.
COPY
SECRET Unclassified
RESTRICTED
OFFICE OF STRATEGIC SERVICES
WASHINGTON, D.C.
24 January 1945
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Treasury Department
Washington, D. C.
My dear Mr. Secretary:
I thought that the attached radio-
telephone message from our representative in
Bern might be of some interest to you.
Respectfully yours,
Join Edwin J. Putzell, Pubelly Jr.
Lt., (j.g.), USNR
Assistant Executive Officer
Attachment
RESTRICTED
Regraded Unclassified
8-43 22996
088
Form 69 (Revised)
330
OFFICE OF STRATEGIC SERVICES
OFFICIAL DISPATCH
DATE Jonuary 1945
#470
FROM
Berne
HBG
PRIORITY
ROUTINE
TO
DEFERRED
DIRECTOR, OFFICE OF STRATEGIC SERVICES
DISTRIBUTION
(FOR ACTION)
(FOR INFORMATION)
RECEIVED IN PLAIN TEXT
RESTRICTED
GERM NY
The unstion is generally being asked here whether the Russian
offensive 1.111 bring about the collapce of organized German resist nee,
or whether Germany vill be able to organize for another stand. The loss
of Silesio would certainly be a serious blow, but it is extremely diffi-
t to understand Germon vilitary dispositions except on the theory that
the Germans still have confidence in their ability to halt the Russians
well short of Berlin. Otherwise, Thy did the Germans keep troops fighting
in North Itsly, in the Balkons, in Norway, in Denasrk? And thy do they
still engage in offensive action in strategically secondary, even if nol-
itically important, cress, such 03 Aluace: The fury of the Russian offen-
sivemay well have surprised the Germans, but not the foot that e grost
offensive was in preseration.
The vigorous defensive : ad offensive tacties in the est might.
of course, be explained as being & decision on the part of the Nazi londer-
ship to holá at all costs in the est, even et the risk of : breakdown
in the East. This 1a probably an over-simolifieation of the situation.
Holever, 83 proviously indicated, 1 Cuil inclined to feel that veny or the
high Nazia, despite their fear end Intred of Russia, would prefer to see
the Rugalans first in Borlin rather than the nglo-Sexous. I believe this
viow is also sharei by many in the Gerunn Army. Russian holicy towards
Germany Las been noro subtle and osychologically nore effective than our
own. Tho uno vblicb the Ruosians have made of their captured Gorman generals
has had SOME effect. They have not talked very moh about what they plan
to do 11th Certany except insofer us the unishment of cridinals is con-
cerned, ..Dd it 1s a natural tendency of 611 human buings, shared by sody
high as officials, to believe what, in one may or smother, they 111
avoid inclusion on the list of criminals.
It 13 most unlikely that the Germins no. nourish ony illunion
that they oan make a sepurate doal titl Russia prior to German additory
lagse. On the other Lend, many Nazio believe that there are similerities
RESTR
FED
Regraded Unclassified
ols Form 69a
PAGE 2
OFFICE OF STRATEGIC SERVICES
331
OFFICIAL DISPATCH
REF. No. 270
FROM Berne
TO DIRECTOR, OFFICE OF STRATEGIC SERVICES
10-09201-1 GPO
RECEIVED
RESTRICTED
between the National Socialist and the Communist movements; that the
National Socialist movement can be shifted to the Left and communized;
and that, efter the collapse, they, the 88 in particular, will find it
easier individually to work out their future with the Russians than
with the Anglo-Saxons.
little
The fact that relatively bombing damage has been done by Russia
and particularly that Silesia has not been destroyed has considerable
effect in turning many Germans towards Russia rather than towards the
West. Also, Russia has never been identified with the Anglo-Saxon slogan
of unconditional surrender, and this has undoubtedly had some influence
on the German people.
The Nazi leaders may also calculate that if they cannot hold both
the eastern and western fronts, their bargoining position may be better
if they succeed in holding one front than if both fronts collapse. They
possibly hope that Russia would be grateful to them if they succeed in
doing this and thereby cause Russian rather than Anglo-Saxon influence
to predominate in the first phase of the occupation of Germany. Hence,
they may hope to gain some good will from Russia if they keep the American
a British forces out of the country until the last possible moment.
By this I donnot mean that the Germans would deliberately allow the
Russians to come in, but merely that, when faced with the fateful choice,
they would choose the Russian invader to the American and British.
In view of the discipline of the German Army and the fect that
the German generals have rarely, if ever, done any political thinking,
the choice, if it is ever consciously made, will be made by Hitler and
Himmler and Goebbels and Bormann, and the Army will probably obey.
I do not mean to imply and I do not believe that Hitler would be
likely to surrender himself to the Russians under any circumstances.
The informationwe get here locally seems to tend more and more to the
theory of a final Nozi withdravel into the Austrian end Bavarian Alps,
with the idea of making a last stand there. This seems more likely than
a dremotic attempt on the part of Hitler and the present Nazi leaders
to escape by submarine or other modes of flight. Such flight might be
attempted by the weaker characters of the Goering class. Hitler will
probably seek a Magnerian end, and Himmler et al. will presumsbly be
with him. The smaller fry among the SS will probably be divided into two
groups -- those who might prefer to take a chance with the Russians,
end the fenatical ones who will follow Hitler into a mountain retreat.
This is all speculation and guesses made here are probably no better,
possibly not as good 88 those made from the perspective of Washington,
end the end may not come for some months yet.
RESTRICTED
Regraded Unclassified
332
TOs Mr. Collade
JAN 26 1945
FROM: Mr. Classer
will you please send the following cable to the American
Rubeasy, Chungking, Chinas
FOR ADLER FROM THE SECRETARY OF THE TREASURY
The fellowing press release was issued on January 22, 1945 with
approval of State and Mar Departments:
"The U. s. Treasury Department has just completed transfer to
the Republic of China d $220,000,000 in settlement for advances of
local currency and for supplies, services and military construction
furnished the U. S. Foress in China.
"This excludes certain aid furnished to the United States w
the Chinese Government in the form of reciprosal aid.
"A partien of the settlement - from U. s, funds already
in China, a partien from funds previously placed to China's credit
in the United States and the reatinder in the form of a check for
appreximately $150,000,000 which Secretary Morgestion gave to
& i i Inc. i
ISF/efe 1/25/45
Regraded Unclassified
333
EXECUTIVE OFFICE OF THE PRESIDENT
WAR REFUGEE BOARD
INTER-OFFICE COMMUNICATION
DATE January 26, 1945
TO
Mrs. Klotz
FROM Miss Hodel
In connection with your recent request for a copy of
the reports issued by the British army concerning the German
prison camp at Breedonck, Belgium, you will be interested in the
attached excerpt from a letter we received from our representa-
tive in London, together with the clippings he forwarded from
the leading newspaper articles appearing in the British press.
As soon as the report is received from Mr. Mann we
shall send it to you.
JH.
Regraded Unclassified
334
Excerpt from a letter dated January 16, 1945, from
James H. Mann, War Refugee Board Representative
in London
"The London newspapers of January 4 carried detailed accounts
concerning the British army report of Nazi atrocities in Belgium.
I clipped the leading newspaper articles on that date and immedi-
ately tried to find the basic reports in question. Thus far I
have been unable to get either the report or the photographs. I
am informed that such are not available. However, the British
Foreign Office has very kindly consented to attempt to obtain these
for me. You may be assured that as soon as such reports are re-
ceived they will be forwarded to you by airmail. In the meanwhile,
I am enclosing some of the more important newspaper clippings."
Regraded Unclassifie
335
Enclosure No.
4
PAPER.
HEWS CHRONICLE
NUMBER:
CITY:
LONDON
DATE.
JAN - 4 1945
First official British Army
report on Nazi atrocities
From S. L. SOLON, News Chronicle War Correspondent
TWENTY-FIRST ARMY GROUP H.Q., Wednesday.
THE British Twenty-first Army Group has issued its first official report
German atrocities. I believe it is the first report issued by any of
the British armed forces.
It is a solemn and important document, which deserves the careful attention of
every Allied reader, although it is stated that this report cannot be regarded as
exhaustive."
As the report states, the first thing that strikes one
when mentioning German atrocities is the scepticism of the
British troops and the British civilians.
The Idea of torture and mutilation is so abhorrent to
the British mind that It is not easy to believe that practices
which are associated, say, with the Spanish Inquisition
could be carried out in the twentieth century by Europeans.
"This paper produces evidence of German atrocities.
Whilst it is not easy to find people who bear signs of
mutilation, 1b must be remembered that the worst mutilated
people were killed, or died, or were taken off to Germany."
The guilty men
Five German and quisling
organisations are held chiefly re-
sponsible for the atrocities. They
are:
1. The German Security Police-
the Sicherbeitspolizet "-of
which the Gestapo is 8 part;
2. The German Army Secret
Field Police-the e Gebelme
Feldpolizei
3. The German Army Guards:
4. The Flemish and Walloon S.S.
in Belgium:
5. The Dutch S.S. in Holland.
Civilian prisoners were besten,
starved, burnt with cigar ends, tor-
tured with epecial electric Instru-
ments, including a bot plate with
needle projections, humiliated and
degraded in unmentionable ways
Torture deaths
The part of the report Issued to-
day deals primarily with the activi-
ties of the Germans at Breendonck.
Executions at Breendonck by
shooting and hanging, apart from
the incidental killings by torture,
maltreatment and starvation, run
into hundreds. A former employee
of the camp told British interro-
galora that the number executed
was at least 350.
Another employee states that to
his knowledge more than 500 men
died during his stay at Breen-
donek from March 3, 1941. to March
31, 1944,
About 200 of this number died of
maltreatment at the camp. Many
more were transported from the
camp while they were sick and
dying. They are not included in
the figure of 500.
I have seen this amazing fortified
prison camp from which escape
seems impossible.
Some prisoners state that e
room known as the gas chamber
was used as a moritary and some-
times contained up to 20 bodies.
Naked woman beaten
One former prisoner told how
German guards would order stck
men to Tash each other Into to-
sensibility for their amusement,
Ones, when Flamish 5.8, Guards
rounded up a wumber of Jews for
shipment to Breendonck, donens of
their were pressed into a train
truck which was left for M back
Regraded Unclassified
PAPER:
DAILY EXPRESS
NUMBER:
CITY:
LONDON
DATE:
JAN - 4 1945
OUR MEN LEARN ABOUT THE MEN THEY ARE FIGHTING
MONTGOMERY ORDERED
TORTURE INQUIRY
Gassed
Prisoners state that men and
women were gassed by the coke
acove in this room. Others think
that it was used as a mortuary
and say that up to 20 bodies were
These are the horrors
put in there.
The torture chamber is cir-
cular, without windows
A
shallow gutter cuta the stone
floor in two and perves as & drain
he wants you to know
In one wall there is an electric
point, to which was connected a
five-pronged toasting fork," used
to bum the flests of the prisoners
under interrogation.
From PAUL HOLT: Western Front, Wednesday
& pulley on the celling was used
to hotst by the hands or by the
Shen hen he 1 was Field-Marshal Montgomery
feet some stubborn people who
would not give the right answers
first found that the enèmy treated
To vary the treatment two
civilian prisoners of war with medieval cruelty,
sharp wooden triangular blocks,
by the gutters, were waiting for
that he gave an order for a full investigation of
the bare feet of the prisoners
who, thrashed In mid-air. did not
atrocities throughout the area of his command.
answer and bad to be dropped
sharply to the ground.
Senior officers at his
The German secret police
headquarters were removed
guards were also pleased to dis-
cover that a clamp for pinning
from their duties to con-
the tail of an aircraft on the
duct it. Their report is
ground made & most excellent
apparatus for crushing the fin-
released today.
gera of a questione.
It is a message from Monty
That method they favoured
and his Army to all at home,
with women, who were fre-
saying This is the man you
quently interrogated naked.
are fighting. Get to know him
Apart from this modern Inno-
as we know him."
vation the report makes it clear
The atrocities revealed by this
that the Germans were strictly
medieval In their methods.
cold count of sadism were com-
mitted, in main, by the German
secret field police against Belgian
Cigar butts
civilians in the resistance move-
They used & ext-o'-nine-talls
ment and against women who
helped British and American air-
made of cord with aplin buckshos
attached. They burned their vic-
then to escape.
tims' flesh with cigar butta.
The discoveries Monty's officers
made so sickened them that they
They had an fron hook they
fought, they told me, all through
heated in stoves, small enough
the investigation, to check, weed
to drive straight into the flesh
out, discount or disprove all
when while hot. there to be
twisted and withdrawn at
evidence brought to them.
lelaure.
After they had finished, here
is a short summary of what they
At another camp the Germans
had & small cell with a wooden
have admitted as evidence,
bunk and two holes in the wall.
The report starts with this
One let in scalding steam, the
presemble:-
other jets of Ice water.
"The first thing that strikes
For "extra dangerous"
one when mentioning German
prisoners at this camp there
atrocities is the acepticiam of
were the dark cells with ankle
British troops and civilians, The
shackles cemented to the wall
idea of torture and mutilation LS
furthest from the door.
80 abborrent.
The point of this inconvent-
ence was that the cell door had
Torture chamber
n. little trap-door through which
food was pushed. But is had to
This paper produces evidence
of German atrocities. Many of
rest on the ledge of the trap-
these stories would not have been
door, which mide the prisoner
eat extended on all fours,
obtained If two train loads of
prisoners, on the way to Germany
The story to not new. What M
from Belgium at the beginning of
new and notable is that, for the
September. owing to sabotage to
first time since this war started,
the engines and dimage to the
n is not the Foreign Office, not
track, had not been left behind
the Ministry of Inforpution, who
by the Germans."
issue these further evidences of
German bestiality,
The report continues to give the
It is the Commander-in-Chlet
first full story of the Gestap
torture chamber at Breendone
of the British Liberation Army.
He wants you to know.
AS this fort the Germans built
32 brick cells, 6tt. Bins, by 4ft.
Sins.
The bed. & wooden board. was
lowered at black-out by an tron
lever operated from outside, and
raised against the wall at 6 a.m.
every day.
AL this same fort there are six
dark cells where no daylight
could penetrate, The walls are
whitewashed. If a prisoner
leaned against one the white-
wash showed on his clothes and
he was thrashed next day by a
Nam army guard.
The prisoners were taken out of
the cell for five minutes each day.
Before they reached daylight they
had a black hood thrown over
their heads and were led to
latrines.
One room is known as the "gas
chamber." IL has no window,
Regraded Unclassified
DaILY TELEVING
JAN 1940
- I wind - that of Mone
NAZIS' TORTURE CAMP
Ber tem cantos - EYES AS she
has Printing is hands,
Mms - le - route was M
IN BELGIUM
Brank and war . of IM
Beigin die
a the ridem of a Belgun officer with
EM service of bening
Brish and French atters - of
the
-
HORRORS OF BREENDONCK
Below - - Mine
P. taxt been N/A standing MP
right in a dutined el from NIE in
PRISON : BRITISH REPORT
the tieming in run a the emins
All the had to sing signat
milima, blankets or CORPUTION at any
FROM OUR SPECIAL CORRESPONDENT
And the vary der and
sure the - entr allowed in RP:
Sist ARMY GROUP H.Q., Wednesday.
REPVE Use during de 14
when sibe mustint ber tin
The British military authorities here issued
today bowl,
to-day a closely-doctimented report on the horrors
Lite others issurerented in LIVA
nov. the was only - to nal just
of the Gestapo prison camp at Breendonck during
box be lapping IL is with ner
mouth like - animal
the German occupation of Belgium.
This " ter account al her treat
Breendonek is a name at the mention of which
in the sinture chamber
- interragated sis If -
Beigian civilians still shudder. Even now I have
time ID the 8.8. room The was
heard them utter It with lowered voices.
- round changer windress
with . nabor and . bench an which
Originally designed as a concentration camp for
eg the sua as IDENTATIONS
Jews, the prison's scope was extended to political
On the jeft, as the ent. VM .
mother attached to the reline from
prisemers and, finally, members of the Belgian Resistance
I E I I È il
and
underground
move-
reaning knot. This with
lost - mun as three, jour
De of the tertare than
ments were incarrerated
or the along in weight
they sum IN elber prisoners)
there.
Pvot. Paid Liny the wrd-kren
DAILY BEATINGS
Breendenrk 14 a gloomy and
Belgian broadmater and professor et
the Institut des Haurs Rindre. who
Crippled by Rifle Blow
forbidding looking building
NONT and and surrounded by a
NOT our of the priment - stand
Entirely maked I NM uned above
that - of the of chis
the and and bealm with a name
wide
most
consinent - the
tranchens covered with Inwther,
The most. which is sparted by
growth if cood máve
wirlded by . - Restations and
a causeway, the unless approach.
When a parel of food arrived the
land
ILA
a surrounded by a barbid-wire
requires through sierving se each
AS con of chere intermigations
trace acrea fact high
would be unable to bring havelf
had may nails erushed in is and at
Formerly other of the outer torta
to ml If Mr. world hourd = and
une the machine,
of the ASSWITS defences. Breen-
BRAP M it until de contents tecame
Aller the Gret. the
dunic had beinn shandoned by
miles and mustr
medical orderds - - an injection
The a how the car's labour a
the Belginn milliary authorities
= the Through a em ib
described by Dr. Prant Pidm. a
because of as unhealthiness
needed tall Mixpetx - 1 LOOK adven-
number of de Briden
tage all a maintention to put
Water genetrated regularly thin
and inter if the any
- Engres down or throw. the
the lower enviros
All priviors Bad le
making moved NORREL
B was partged by the Gestago
the and diffinit upa without
bried Die orderly to the
to in . suitable place for their
importe for are and and
major, D/a no grod. The injections
whief concentration camp =
without itung deir brade.
makes Der
Belatum.
They had to and banks was
be Addition I, - will as all my
showle push tracks letro with
company, mindled alamodi, every
GERMAN SADISM
each they had to DATE large floors
day pursibes and truncheon
Record of Terror
extracted trum the NOT AND trail
which, among offer things, broken my
The words
- bricks take mill uses
torth
have passed tato our changes of
All the vas by
During ner single ourse to
(hought so completaly that Usere is &
bestines with which and acida
many BUY received -
fisher or developitati a Earte habit
meted at by the supermam and
Invoice wound in the AUTOR: from -
of what goes - in - places
acidiers when the work vas not
Another LIMIT tur survice -
we
for
granged.
programse quickly mough
WEB the Block of his riBe in the back
W- and to our minds with
For hours - FOR une could
of the remailing in survature
entr being lbs tentil yells that were
of
De famil, - card to recall - our-
the apine.
DAIV more than CRET
supposent to elimule this forced
EVIL THINGS
inform the evu thones, Une obscenti-
One could her also the
dell that of the and the
German Bestialities
in the Institutions display of middlem
their for Bour tools prince data
painted mossings at the virtima
1 DATE ann and the
whind Check remove and
This visa the ordicary days
instrument which - used to crush
water
routine, but frequently collective
the Engers and et
Time which I have to
- impoird. Time
under
meet - net burd DO hearner, or
involved the continualion of labour
last soon photographs at the wounds
gifting or examined taken, 11 is
or sothe sure longer al Use and of
in Main. - and other
De result of virta of camfail study
the day or the dental of all food to
prisonal
mede the conditions at Breen-
the primonare threachout - whole
Description of the institutions
dant* by Brittin observets appointed
EAT.
but is . Usa
for
It a the purpose. of interviews with
CAPTIVES FLOGGED
WT should know - - en in this
the
thing space which - are
ans of c-priments who
Telephone-Booth Cells
to is important, - shand anow
# witnessed the informies
that - TRUDE Are viluse taxe had
The more dangerous priscripts
which - nurred out there
Devil informa out and -
NAME lorget in dark cetta. Maty of
What entie bare . only a Eraction
bireding treety had tital visits
timese cella were larger than
at the available material and them is
wasted
with
a telephone booth The
much that a 100 observety fout der
Ii LA important that - should
- their WITH and anking know the eximi is which the OFT-
will
shackled. were expected to mard
man printh pará monght every
CHARGES UNKNOWN
in theme cella
The lower part of the walls tras
proce at diministing the emar -
Prisoners' Ordeals
whilevashed. If a prisoner leaned
tramen Centry of the
Primium arre breatht to the fort.
that lir United own Unit
against the wall the cane
would inmed their DE
en . specific charge. some-
off on le Inter total er
For
um with 115 knowledge of what -
loves W lear part in . nate, essidos
case offetime - a Doegmi,
advanced aguinst them
is was not and thes bed bern in
simse the ground en their
The my Brat orderá after esterial
while the marits thrm en
Use - - month or more that
the prace TM to state striesty to
with exi-calis and na
primoners were subjecting MP Itterns-
with Vetr INTER against
The probation period em
is 34 important Uhat et anould
mill The more inquest than nos designed M & means of breaking
know that . primoter were nace
for - hours. during
down their powers of resistance.
- the result of bring brain und
which une se novement of any sort
Interrogations which the Gratage
Use thing tato a
sas
The permitted - known - et the
presented - important look place in
which TO pushed into the demp
the sortune chalmber.
waire
if
Or
mail
kind occurred was a batch of
or the many sulhentle deserio-
The officer for shich use ess
prischers who were to -
Liona of this room and of the be-
TM that - had box
Junr 22. IHI (the day of Hair
bastour of the Chestado durine INVOICE
Round miller group a . prans of
alima on Huma and word -
tiling the sur firth food
pilind » stand to allention for 45
ralim.
1
FIENDISH CRUELTY
One alier spother UMP collagant
(1) the ground from failures.
National Character
I'hem on they ware mind -
Bow an - is explain - Date
blows and no
and dendult musty negt in time
The provivers day marked M us
of a street of in the
in the morning 11 was a our of
mailonal character which has term
maxim work. interrupted Mill by
encouraged and by the
be midda) titral This equilated al
muleta
of
Dermany?
towl of value Ma For break-
Dr. Fusher, when 1 have =
- there - too - of
and , THE of mail cettes.
TROUND - 15 tring hour a
is - months parmets -
of Brendenck chartiable
slowed 10 be - to de prossors.
- R the régime."
trul - Institution on
Mart a widespread mim of de-
the ground libel the BYTO made the
Sterate ersetty conta & large -
FEDER of in submitters
Net of The Orrgian
Literature No winder that - if the
your has privided the
Doners
IL bes. NA 17 know, provide mam
of Der sictime es well, but fill no
internated the working of the men
Wital has occurred a
MM occurred in the
campa inside and outside the Brich
a have brant is AUS that there LT
- who reture to believe storms
at Ovilage trutality WYI) they
probable 400 those win would not
believe through - FORM from the
desd.
have . suid that in with
of M to preach to
- corrected. Used -
accepte Germant andien as - abjes-
live Twen, Check regatition as only be
I da not Now more than
- - this with waster of the was
when the - none - near -
temporarily be have monded, - need
to remind - mu is this
permer - - seme
As E write Chese au mind
trwevie back more than Die years
to . 2004. Annual das in 1839 when
así in a DATE dualy mom a Krain
and listened to the depossible of
the Cash recagnes who NETS dellar
searming the Polus transfer
to
receipt
Nbr
I did not understand the Desb
languager, the speciadie 10 mm
in mortal neur » non that MAIN
WILD - se this day. And there was
- word which Rept in
Che et each refeger. a was
Declares. To-Bar. a =
M
Brendmek
Per 11 years Burope like been we
under this liertor GREE - are in
danger of INRIDE 5 - as the
natural debet of things This THE
" have the change la make 40 end
of = for over.
Regraded Unclassified
328
PAPER:
DAILY TELEGRAPH
NUMBER:
CITY:
LONDON
JAN - 4 1945
DATE:
NAZI BESTIALITY
Bo carefully documented a
report as the 6,000-word account
from Shaef of German bestiall-
ties in Belgium, notably at the
Breendonek camp. will confirm
beyond a suspleton of doubt pre-
vious evidence that the mentality
of those who claim to rule Ger-
many belongs to the Dark Ages.
To make their victims talk, the
guolers at Breendonek subjected
them to the most terrible
medireval tortures, dragging
them to be interrogated after one
month of mental cruelty so that
their resistance might make
them more amenable to speech.
If they refused, as so many us-
known and unrecorded patriots
did, then the carefully planned
horrors were unloosed upon
them.
To the tortures of the Middle
Ages were added the more
modern, essentially Germanic re-
finéments of thrashings while
the victim hung in the air, or
burning the body with-cigar ends.
Women were not excluded from
these tortures. The value of
this truly awful document lies in
the fact that It is the first official
report of German horrors issued
by the British Army. The minds
of those who read It will reel
before its revelations. Let us hope
that It will also strengthen our
resolution to punish those who
devised the cruelties as well as
their underlings who carried
them out.
Regraded Unclassified
DEPARTMENT
OUTGOING
DIVISION OF 339
OF
COMMUNICATIONS
STATE
TELEGRAMy 8, 1945
AND RECORDS
Distribution of true DEPARTMENT OF STATE
reading only by special
Midnight
arrangement. (SECRET-W)
1945 JAN 10 AM IO 30
COMMUNICATIONS
AND RECORDS
AMEMBASSY
(LIAISON)
LONDON
177
The following for Mann is WRB 36.
Newspaper PM of January 4 under heading of Reuter
article dated January 4, Headquarters Plot British Army
Group, summarizes 12 page report issued by British army
authorities describing the German prison camp at Breedonek
Libreendonek during the occupation of Belgium. According
I
to the newspaper article the report is accompanied with a 11
volume of photographs.
Please forward a copy of this report by air mail,
together with photographs if possible.
CONFIDENTIALONS
the
STETTINIUS
(GHW)
message must
STETTINIUS
be of
URB:MMV:KG
BC
WE
1/8/45
Regraded Unclassified
340
CABLE TO AMBASSADOR, PARISM FRANCE, AND HOFFMAN, TREASURY REPRESENTATIVE.
Embassy is authorized accept War Refugee Board cables submitted
by Hoffman on reimbursable basis, Authority retroactive September 1,
1944.
3:00 p.m.
January 26, 1945
Miss Chauncey (for the Sec'y) Ackermann, Akzin, Cohn, Drury, DuBois,
Gaston, Hodel, Marks, McCormack, Pehle, Files.
DWhite:hmd
1/26/45
Regraded Unclassified
IF
Distribution of true
January 26, 1945
reading only by special
arrangement. (SECRET w)
2 p.m.
AMEMBASSY
ROME
148
The cable below for Kirk is from
War
here
Refugee Board.
The following item appeared in the Jewish Telegraphic
Agency Bulletin, December 18, 1944:
QUOTE 1,000 YUG0SLAV JEWS RETURNED HOME FROM CAMPS IN
ITALY AT TITO'S REQUEST -- ROME, Dec. 17 (JTA)--Approximately
1,000 Jews are among 5,000 to 6,000 Yugoslavs who have
recently been returned from relief camps in Italy to their
homeland at the request of Marshal Tito. Stateless persons
and refugees from Germany, Poland, Czechoslovakia and northern
Italy will be placed in the camps vacated by the Yugoslave.
Maximum use will probably be made of the camps only after the
liberation of northern Italy. At present, only a few state-
less persons are being moved there from camps in central
Italy UNQUOTE
will you kindly investigate and advise the Board of the
correctness of this item and furnish us with any other relevant
information pertaining thereto.
GREW
(Acting)
(GLN)
WRB:MMV:KG
18
1/25/45
CC:
Regraded Unclassifie
342
CABLE TO AMERICAN LEGATION, LISBON, FROM WAR REFUGEE BOARD.
Please deliver following message to Robert Pilpel from M. A.
Leavitt of American Jewish Joint Distribution Committee, New York:
QUOTE PLEASE INSTRUCT LAURA MARGOLIS ARRANGE PAYMENT
$10,000 FOR MEDICINES PURCHASED SWEDEN FOR SHIPMENT EMIL
SOMMERSTEIN LUBLIN ACCORDANCE AMENDED LICENSE. TRANSMITTED
SECOND $500,000 SALY MAYER JANUARY, UNQUOTE
THIS IS WRB LISBON CABLE NO. 132.
gan. 26,1945
Regraded Unclassified
MFD-845
PLAIN
Lisbon
Dated January 26, 1945
Rec'd 7:40 a.m., 28th
Secretary of State,
Washington.
195, Twentysixth.
WRB 293 FOR HIAS 425 LAFAYETTE STREET, NEW YORK
FROM JAMES BERNSTEIN HICEM.
Request Max Simon, 392 Miller Avenue, Brooklyn
secure United States of America visas favor Sigmend
Rosie Segal and Sara Golda Simionowits, also financial
help for mother, all healthy, Bucharest. Oscar Albeit,
601 West 151 Street, New York secure United States of
America fevor Samuel Ruff family healthy, Bucharest.
Samy Schery, 115 Evergreen Avenue, Hartford, Connecticut
secure United States of America visa favor Samuel Ruff
family healthy, Bucharest. Sammy Schery, 115 Evergreen
Avenue, Hartford, Connecticut secure United States of
America visa favor Moritz Eserik Toees, Healthy, Bucharest.
Olga senreiber, 55 Brockdale Drive, Crestwood Tuckahoe
New York News and secure writed States of America visa
favor Leopold and Rachelle Nadler, Healthy, Bucharest.
Egon Neustadt, 133 East 58 Street, New York secure United
States of America visa favor Oscar Fritsi, healthy,
Bucharest. Inform Goldie Itsovici, care of Davidovits,
322 East 8th. Street, New York, Israel Itcovici alone,
healthy Bucharest, without news, family intends emigrate
Palestine, brother Itsic Russia. Sigmund Steiner,
905 Avenue, St. John, New York, Emerich Steiner, healthy,
Bucharest intending emigration Palestine, family remained
Germany. Ours December 27 Calra Goldstein, Sami
Goldstein, also healthy, Bucharest Haryy Palestine
Clara Engelber children healthy.
Inform Minna Dunkin 608 West 184th. Street, New
York, Daphne Zaisev, healthy, Bucharest asking news.
Elese Gold, 2075 Grandeoncours, Bronx Schein all family
Regraded Unclassified
-2-#195, Twentymixth, from Lisbon
and Hilda Fischer, healthy, Rumania asking news.
Hirschmann, 9012 178 Street, Jamaica, New York, sixter
Rosa Hirschmann healthy Palais New York Frederic Passy
Nice asks financial help. Lina Golodets, 120 Wall
Street, Non York, Marguerite Fildermann, healthy,
Bucharest, 31 Marie Rosetti, parents address Hotel Bugey
Bellay Ain France asks news.
CROCKER
BB
Regraded Unclassified
SH
Distribution of true
January 26, 1945
reading only by special
arrangement. (SECRET W)
2 p.m.
AMLEGATION
BERN
436
The following for McClelland is WRB 383.
Reference your No. 389 of January 19, 1945. The $19,533.60
which you are now holding for Friends of Luxembourg can not
(repeat not) be expended in Luxembourg because these funds were
appropriated by National War Fund for relief and rescue in enemy
or enery-occupied territory. Accordingly, interested groups here
hope that you will be able to arrange with Interorose for relief
program suggested in Department's No. 288 (WRB No. 367) of
January 18, 1945.
For your information, Friends of Luxembourg and labor groups
expect to send $12,500 very shortly to labor trastees in Luxembourg
for relief in Luxembourg.
Donors wish to assure you of their complete satisfaction with
your handling of the funds which have been remitted to you for
various relief projects.
GREW
(Acting)
(GIN)
WRB:104V:10
WE
SWD
1/26/45
Regraded Unclassified
346
CABLE TO MR. HUDDLE AND MCCLELLAND, AMLEGATION, BERNE, SWITZERLAND,
FROM WAR REFUGEE BOARD
Reference your 459 of January 22. Action taken by Legation is
fully approved.
THIS IS WRB BERN CABLE NO. 384.
9:30 a,m,
January 26, 1945
Regraded Unclassified
CABLE TO AMERICAN LEGATION, BERN, FOR MC CLELLAND, FROM WAR REFUGEE
BOARD.
Please deliver following message to Adolf Freudenberg,
41 Avenue de Champel, Geneva, from Dr. Leland Rex Robinson,
American Christian Committee for Refugees:
QUOTE ANSWERING YOUR CABLE RECEIVED TODAY $5,000
REMITTED YOUR REGULAR SWITZERLAND BUDGET AISO SUCH
CONTINGENCIES AS WORK HUNGARY RUMANIA. PLEASE CABLE
YOUR AVERAGE ANTICIPATED MONTHLY NEEDS FOR PURCHASING
IN SWITZERLAND FOR REFUGEE WORK CIMADE AND FRENCH
CHAPLAINCY SERVICE. REMITTANCE FUNDS TO FRANCE VIA
SWITZERLAND PROHIBITED UNDER EXISTING U.S. REGULATIONS
BUT APPLYING PERMISSION USE DOLLARS FOR PURCHASES FOOD
MEDICINE CLOTHING IN SWITZERLAND FOR SHIPMENT FRANCE. PROVIDED
LATTER PERMISSION OBTAINED ACCR HOPES REGULARLY SUPPLY ADDITIONAL
NEED FUNDS FOR LATTER PURPOSES BEYOND YOUR BASIC OPERATING
REQUIREMENTS. WILL INFORM YOU RESULTS OUR APPLICATION.
NECESSITY ACCR DIRECTLY DEALING CIMADE OTHER FRENCH REFUGEE
AGENCIES THROUGH ANTICIPATED REPRESENTATION FRANCE BECAUSE
SUPPORT OF SUCH WORK PARTLY FROM NONCHURCH FUNDS BUT WOULD
ASSURE CONSTANT COORDINATION WITH ECUMENICAL REFUGEE COMMISSION
WHICH MIGHT ACT DIRECTLY AS ACCR'S SWISS AGENT IN PURCHASES
FOR FRANCE FINANCED FROM SECULAR SOURCES. YOU ARE AUTHORIZED
COMMUNICATE BOEGNER AND BAROT REQUESTING USE 200,000 FRENCH
FRANCS FROM OUR $10,000 REMITTANCE FOR WORK PASTOR TOUREILLE.
WE ARE so CABLING MLIE. BARCT. UNQUOTE
THIS IS WRB BERN CABLE NO. 385.
1:00 p.m.
January 26, 1945
Regraded Unclassified
348
CABLE TO AMLEGATION, BERN, FOR MCCLELLAND FROM PEHLE, WAR REFUGEE BOARD
Reference your No. 483 of January 23. We, of course, have no
objection to your taking a well-earned vacation between either of the
dates mentioned by you. I assume that you have made arrangements for
the handling of War Refugee Board work during your absence.
THIS IS WRB BERN CABLE NO. 386.
1:00 p.m.
January 26, 1945
Regraded Unclassifie
349
BG
Distribution of thue
January 26, 1945
reading only by special
arrangement. (SECRET W)
10 p.m.
AMLEGATION
BERN
442
The following for McClelland from Pehle is WRB 386.
Reference your No. 483 of January 23. We, of
dourse, have no objection to your taking a well-carned
vacation between either of the dates mentioned by you.
I assume that you have made arrangements for the hand-
ling of War Refugee Board work during your absence.
brew
(Acting)
(GLN)
WRB:MAV:KO
NE
1/26/45
Regraded Unclassified
350
CABLE TO AMERICAN LEGATION, BERN, FOR MC CLELLAND, FROM WAR REFUGEE BOARD.
Please deliver following message to Adolf Freudenberg, 41 Avenue de
Champel, Geneva, firom Dr. Leland Rex Robinson, American Christian Committee
for Refugees, Inc.:
QUOTE SENDING $5,000 REGULAR $3,000 BUDGET $2,000 CONTINGENCIES
INCLUDING HUNGARIAN CHURCH COMMITTEE SENDING SAME AMOUNT FEBRUARY.
RECEIVED DOCUMENTS WARNSHUIS BROUGHT LATE DECEMBER. GIVING
CONSIDERATION BEST WAYS DIRECTLY SUPPORTING CIMADE'S REFUGEE WORK
BEGINNING MARCH PROBABLY THROUGH PROPOSED DIRECT REPRESENTATION
FRANCE. FOLLOWING ADVICE WARNSHIS LAST REMITTANCE MADE BOEGNER.
APPRECIATE RECIPROCATE NEW YEARS MESSAGE. FUNDS USED SHANGHAI 1944
VIA AMERICAN JEWISH JOINT DISTRIBUTION COMMITTEE. WILL CHECK WITH
YOU BE FORE SENDING FURTHER FUNDS THERE. UNQUOTE
THIS IS WRB BERN CABLE NO. 387.
3:00 p.m.
January 26, 1945
Regraded Unclassifie
351
CORRECTION
MF
Distribution of true
January 26, 1945
reading only by special
arrangement. (SECRET W)
Cable from Bern numbered 531, dated January 25,
3 p.m. reading "FOR WRB FROM MCCLELLAND" serial number
should be "530" instead of "531".
DIVISION OF CENTRAL SERVICES
JMB
Nots: Correction from Regation at Bern.
Regraded Unclassifie
352
№1-275
Distribution of true
Bern
reading only by special
arrangement. (SECRET W)
Dated January 26, 1945
Rec'd 1 p.m.
Secretary of State,
Washington.
547, January 26, 2 p.m.
As authorised in your 317 (January 19 WRB's
370), I paid Dutch Minister at Bern, Mr. Bosch de
Rosenthal, sum of 704,009.45 Swiss france, equiva-
lent of $165,000 minus customary one-half percent
Swiss National Bank Commission, on January 26.
I asked Mr. de Rosenthal to kindly confirm
receipt immediately to Netherlands Government in
London.
This therefore exhausts all Queen Wilhelmina
funds I have been holding.
HUDDLE
BB
Regraded Unclassified
EAS-227
Distribution of true
Bern
reading only by special
arrangement. (SECRET W)
Dated January 26, 1945
Rec'd 10:31 a.m.
Secretary of State,
Washington.
548, January 26, 3 p.m.
FOR W.R.B FROM MCCLELLAND
Department's 387, January 23, WRB'S 376 refer my
8265 December 22.
Do you?
HUDDLE
RB
Regraded Unclassified
JEC-412
Bern
Distribution of true
reading only by special
Dated January 26, 1945
arrangement. (SECRET W)
Rec'd 7:53 p.m.
Secretary of State,
Washington.
570, January 26, 7 p.m.
FOR WRB FROM (#) IND.
I immediately contacted Dr. Riegner World
Jewish Congress representative in Switzerland in an
attempt check on these reports. (Department's 400,
January 24 WRB'D 379) Riegner stated that he had
received no (repeat no) information to effect that
Germans were transforming the Resienstadt into an
extermination camp. His information was princi-
pally to effect that since about last October Masis
had transferred great many people from the Resion-
stadt into Germany proper ostensibly as labor.
Number is unknown as is fate of anny olderly people
unsuited for work who must have been left behind.
Customery post cards dated end November, however,
reached Geneva 2 days ago from the Resienstadt which
contain no indication that situation as far as
treatment is concerned has changed in the Resien-
stadt.
Reports contained your wire were nevertheless
used as basis urgent appeal to ICRC to do all its
power investigate and secure permission visit the
Resienstadt once more as soon as possible.
HUDDLE
(#) correction to follow
MJF
Regraded Inclassifie
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Hossow
TO:
Secretary of State, Washington
DATED:
January 26, 1945
NUMBER:
238
CONFIDENTIAL
I have reminded the Foreign Office, in conformity with the
desires express in message of January 22 from the Department,
No. 134, that these concentration camps exist and that it is
possible that they may contain victins of Nasi persecution still.
The interest of the War Refugee Boardrin the welfare of these
people and in such measures as can be taken for their protection
has been expressed by ne. No information with regard to the
civilian populations of the areas covered by the recent advances of
the Soviets has as yet been released by the Soviet Government
and the fact that this question is looked upon as a military
secret for the time being is obvious. Furthermore, the Soviet
Foreign Office has not been willing in any wase to divulge
information of this kind to my knowledge. It is doubtful whether
the Soviet military authorities discriminate at all between Jewe
and other people in such records as they may make of the civilians
which their advance has liberated. In addition, when we inquired
last September about the Jews in Lods, the Foreign Office made
reply that it was not able to furnish us any information on that
matter and referred us to the Polish National Committee of
Liberation; a similar attitude will be taken in the present
instance, I have no doubt.
The Embassy has made every effort to secure information on
the fate of the Jews in Russian controlled territories, as the
Department will notice from the message dated December 9 from the
Embassy, No. 4730 and the one dated December 30, No. 5059. We
will not fail, as soon as the Polish authorities have had an
opportunity to establish their administration in the territories
recently liberated and to find out what has transpired there,
to exploit every possibility for securing information with regard
to those territories which is similar to that secured from Russian
controlled territories.
DC/L:LCW:AN
KENNAN
1-29-45
Regraded Unclassified
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"ocrText": "189\nCORRECTION\nNCB-974\nDistribution of true\nJanuary 24, 1945.\nreading only by special\narrangement. (SECRET w)\nTelegram 102, January 20, noon, from Ankara in\nthe last line delete \"(#)\" and insert \"Rumania\" so\nas to read \"departure from Runania.\"\nDIVISION OF CENTRAL SERVICES\nCAD\nRegraded Unclassified\nNOT TO BE RE-TRANSMITTED\n4\n170\nCOPY NO.\nSECRET\nOPTEL No. 28\nInformation received up to 10 a.m., 24th January, 1945,\nNAVAL\n1.\nHOME WATERS. Convoy from North Russia has arrived in U.K.\nReference OPTEL 27, para, 1. Night 22nd/23rd. About 18 E-boats\noperated. One, from which prisoners taken, sunk by Tongue Sand\nFort and others damaged by our patrols.\n2,\nENEMY ATTACK ON SHIPPING. 22nd/23rd. A 2365 straggler\nfrom eastbound convoy sunk north of Dunkirk, 23rd. A 1599 ton\nNorwegian ship sunk north of Angelsy as result of underwater explosion.\nMILITARY\n3.\nWESTERN FRONT. Ardennes Sector: Good progress made against\noccasional resistance along whole front from Diekirch to St. Vith,\nadvance still hampered by snow and minefields. Wiltz and according\nto unconfirmed reports, Asselborn, cleared and patrols in St. Vith.\nNorthern Sector: Troops of 2nd British Army advanced up to two\nmiles towards Heinsberg on right of present sector of attack. But\non left, nearer the Maas, only slight progress made in difficult\ncountry against stiff resistance and counter attacks.\n4.\nEASTERN FRONT. Eastern Prussian Sector: Labiau (26 miles\nN.E. of Koenigsberg) and Wehlau (23 miles west of Insterburg) cap-\ntured. Both towns are strongholds guarding approach to Koenigsburg.\nSouth of Insterburg Darkehmen (19 miles S.E. of Instogh G) and\nBenkheim and Treuburg, 12 miles S.W. and 21 miles S.S.E. of Goldap\nrespectively, captured as well as more than 700 other localities in\nNorthern Poland. Capture reported of Gratewo, Rajgrod and Jedwabnem\n(13 miles S.S.E., 16 miles S.E. and 37 miles south of Lyck) with\nover 350 inhabited localities. In Allenstein area more than 600\nlocalities including Saafeld, Mohrung, Willenberg and Ortelsburg (37\nmiles west, 25 miles N.W., 33 miles S.S.E. and 26 miles S.E. of\nAllenstein) have been occupied.\nNorthern Central Sector: Brodnica and Lipno (37 miles\nN.E. and 27 miles S.E. of Torun) and 450 other places have been\ntaken. Capture of Bydgoszez (Bromberg) also reported.\nSouth Central Sector: In Silesia advance has reached river\nOder-in gree Breslau along stretch of approximately 37 miles;more\nthan 200 German and 450 Polish inhabited localities captured.\nSouthern Sector: Russians have lest Szekesfehervar after\nheavy claimed. fighting. Destruction of high propertion of enemy tanks\nAIR\n5.\nWESTERN FRONT. Night 22nd/23rd. 1296 tons dropped on\nDuisburg Benzol Plant and 431 tons on Gelsenkirchen. At Duisburg\nweather clear and bembing concentrated, At Gelsenkirchen bombing\nbelieved good, although through thick cloud. 23rd. Escorted Fort-\nresses 181 (5 outstanding) dropped 445 tons on railway centre and a\nbridge it Neuss. Some crews bombed visually while others employed\nPathfinder technique. Results fair, SHAEF (Air) bombers 57 (4\nmissing) attacked communications in Northern and Central Sectors.\n1921 fighters (14 missing) operated over battle area; nearly 1400\nroad and rail vehicles destroyed and 1550 damaged mainly in central\nsector. Enemy casualties 27,3,20\n-\n6.\nmediterranean. 22nd. 130 Mitchells, 23 Baltimores and 735\nfighter bombers and fighters (8 missing) attacked communications in\nN. Italy. Several bridges hit and 625 road and rail vehicles des-\ntroyed or damaged.\nBURMA. 2lst. 82 Liberators dropped 322 tons on northern\nvistal areas Ramree Island in support of landing operations. Bombing\n1 concentrated. 47 Mitchells bombed bridges in Lower Burma.\nSECURITY\n7 rocket incidents reported yesterday and last night,\nRegraded Unclassified\n191\nJanuary 25, 1945\n9:47 a.m.\nHMJr:\nHello.\nOperator:\nYes, sir.\nHMJr:\nJudge Rosenman they said.\nOperator:\nRight.\nWhite House\nOperator:\nHello.\nOperator:\nReady with Secretary Morgenthau. Go ahead.\nHMJr:\nHello.\nSam\nRosenman:\nHello.\nHMJr:\nYes.\nR:\nHenry.\nHMJr:\nGood morning.\nR:\nGood morning, Henry. I talked with Dorothy and\nwe -- we think that if you will transfer him it\nwill be fine.\nHMJr:\nI'll do it at once.\nR:\nFine.\nHMJr:\nBe glad to do it, Sam.\nR:\nAll right, thank you. And I have a call in for\nHarry White.\nHMJr:\nPardon?\nR:\nI have a call in now for Harry White. I'm going\nto arrange to meet him either today or tomorrow.\nHMJr:\nOkay.\nR:\nHave you -- well, he'll know the man you've\nselected.\nHMJr:\nOh, yes. I talked to him right away about it.\nRegraded Unclassified\n192\n- 2 -\nR:\nAll right.\nHMJr:\nHe knows about it -- Taylor.\nR:\nTaylor. Okay.\nHMJr:\nAnd it's going to be Taylor.\nR:\nFine. All righty.\nHMJr:\nThank you.\nR:\nThank you.\nRegraded Unclassified\n193\nJanuary 25, 1945\n9:49 a.m.\nHMJr:\nSam Rosenman just called in regard to his\nfather-in-law.\nJohn\nPehle:\nUh huh.\nHMJr:\nHe'd like to have him transferred over to\nProcurement.\nP:\nRight.\nHMJr:\nSo will you take care of it?\nP:\nYes, sir, I will.\nHMJr:\nI thank you.\nRegraded Unclassified\n194\nJanuary 25, 1944\n10:25 a.m.\nPRE-PRESS\nPresent: Mr. White\nMr. D. W. Bell\nMr. O'Connell\nMr. Gaston\nMr. Blough\nMr. Shaeffer\nMrs. Klotz\nMiss Chauncey\nH.M.JR: Good morning.\nMR. GASTON: Good morning.\nH.M.JR: Shaeffer, have you got anything?\nMR. SHAEFFER: Fredman of the Chicago Journal of\nCommerce is going to ask about the possibility of issuing\nconsols, perpetual bonds without maturity.\n(Mrs. Klotz enters the conference.)\nMR. BELL: He is worried about this upsurge in the\nbond market, and decreasing yields, and he says you can't\nput out two and one-half's and two's along the same schedule\nyou put out before, without having a lot more free-riding,\nas the pressure of money is there; and that profit is in\nthe market, and people will try to get it. He is probably\nright, but I think the answer is we have begun to study\nthe problems that are facing us for the Seventh War Loan,\nand we are not in a. position to say anything about interest\nrates, what the securities will be that we will put in\nthe basket, and that will take us sixty days before we\nget that decision. But it is in the market and rumors\nare all around.\nI would prefer to let this market go on just like\nit is without any statement from the Government.\nRegraded Unclassified\n195\n- 2 -\nH.M.JR: It went off yesterday, didn't it?\nMR. BELL: Not too much.\nH.M.JR: Did we sell anything?\nMR. BELL: I don't know whether they sold anything\nyesterday, but they haven't sold any tax-exempts for\nseveral days, and I doubt if they sold any yesterday,\nbecause it went off two or three seconds. But if the\nmarket goes up and it justifies our issuing one and\nthree-quarter percent bonds on the same basis as two,\nwe have had nothing to do with it. It has come about\nnaturally. We haven't issued any statements. We have\nsold securities while it has gone up, and I think it\nis an excellent position for the Treasury to be in.\nH.M.JR: Did you go to the hearings yesterday, Joe?\nMR. O'CONNELL: I went down, but couldn't get in.\nI didn't get away from here until two-thirty.\nH.M.JR: I wish you would look into it. I think\nWallace is taking the position he is still the Head\nof RFC.\nMR. BELL: You mean Jones.\nMR. O'CONNELL: I think he is.\nH.M.JR: There was some exchange of conversation\nbetween him and Pepper on that.\nMR. O'CONNELL: I will try to get a transcript.\nThere seems to be a legal theory a little on the academic\nside. Under RFC there is no provision for removal of the\nChairman of the Board of Directors. Now, he should serve\nas any other Presidential appointee does, at the pleasure\nof the President. But back in 1933 or 1934--\n(Mr. White enters the conference.)\nRegraded Unclassifie\n196\n- 3 -\nMR. 0' CONNELL: ...the President removed a fellow\nby the name of William E. Humphrey, who was Federal\nTrade Commissioner. He later died, and the Supreme\nCourt, in a suit brought by his estate said his estate\nwas entitled to collect compensation even after he was\nremoved by the President, because the President didn't\nremove him for cause. We haven't looked into it, but\nit is analogous to this situation in some superficial\nways.\nMR. GASTON: There are distinguishable cases. There\nis the case of a minor employee of the Post Office\nDepartment in Oregon, and the Supreme Court said he\ncould remove him any time. Humphrey was the Head of\nan independent agency, holding office for a statutory\nterm, and the Court's decision was he could not be\nremoved except for cause.\nMR. O'CONNELL: All I know about RFC was there is\nno affirmative expression of law giving the President\nthe right to remove him. It may be that he serves at\nthe pleasure of the Board of Directors, and technically\nyou would have to remove him by action of the Board,\nbut I will have that looked into this morning.\nH.M.JR: Does anybody have anything else?\nMR. BELL: Wallace was coming in this morning. Did\nyou see him?\nH.M.JR: Yes. He has been here and has gone.\nMR. BELL: He was coming in to see me this morning\non his way.\nH.M.JR: He got in here a little before nine-thirty.\nWe don't want to have it publicized.\nMR. BELL: I guess he was all right. I sent him some\nmaterial yesterday afternoon, and he said, \"I'll drop by\nand talk to you before I go on the Hill.\"\nRegraded Unclassifie\n197\n- 4 -\nH.M.JR: He had some last-minute changes to make\nin his statement, and that is what he was working on.\nMR. O'CONNELL: I have sent him something early\nthis morning.\nH.M.JR: If you will stay behind, Harry, I want\nto talk to you.\nRegraded Unclassified\n198.\nJanuary 25, 1945\n11:13 a.m.\nHMJr:\nHello.\nOperator:\nMr. Yost.\nHMJr:\nHello. Mr. Yost.\nCharles\nYost:\nYes, sir.\nHMJr:\nMorgenthau.\nY:\nYes, sir.\nHMJr:\nThere's a little mix-up. I gave you that letter\nin regard to French Lend-Lease.\nY:\nYes.\nHMJr:\nAnd said if it wasn't wholly satisfactory, I'd\nbe glad to discuss it with Mr. Stettinius. And\nof course, Mr. Stettinius, I take it, has left\nby now.\nY:\nYes. Well, now, I -- I thought you wanted me to\ngive that to Mr. Clayton.\nHMJr:\nWell, I said -- I said Stettinius, but that's\nall right. You gave it to Mr. Clayton.\nY:\nI did, and I am very sorry if I misunderstood.\nI thought you said Clayton and\nHMJr:\nNo, I said Stettinius. But what happened then?\nY:\nI gave it to Clayton and gave him that message.\nHMJr:\nYes.\nY:\nAnd he read it over and his reaction seemed to\nbe favorable but he said he wanted to study it\nfurther and would be in touch with you.\nHMJr:\nWell, he hasn't been.\nY:\nWell, I'll speak to him again.\nHMJr:\nNow, where the confusion was: in the meantime,\na letter came for me -- to me from the Acting\nSecretary of State, Grew\nRegraded Unclassified\n199\n- 2 -\nY:\nYes.\nHMJr:\ncalling for a meeting. And I read that\nand I spoke to Mr. Grew yesterday and compli-\nmented him on answering me so quickly. I thought\nit was in answer to the letter which I gave you\nto bring over to the State Department.\nY:\nYes.\nHMJr:\nAnd now Mr. White tells me that Mr. Grew's memo-\nrandum was in answer to a previous one.\nY:\nI see.\nHMJr:\nBut on account of all of this -- well, so many\npeople being interested in this, I would like\nto know today whether the letter which you were\nkind enough to walk over -- whether -- does the\nState Department accept that or don't they?\nY:\nGood. I'll either call you back or ask Mr.\nClayton to this morning.\nHMJr:\nYes. If you would. I mean, I'd like to know\nwhere we stand because I was under the impression\nthat this memorandum from Mr. Grew referred to\nthat, and I gave Mr. Crowley a copy of Mr. Grew's\nletter to me\nY:\nYes.\nHMJr:\nunder the impression that that was in answer\nto the one you took over, you see?\nY:\nI see. Well, I don't know about this other memo-\nrandum but I took it from Mr. Clayton's reaction\nthat he was accepting the letter.\nHMJr:\nWell\n....\nY:\nBut I'll make perfectly sure of that and\n....\nHMJr:\nWill you? And then either he or you call me.\nAnd that letter calls for a formal answer.\nY:\nOh, yes. Yes, indeed.\nHMJr:\nWhich I'd like to get today.\nRegraded Unclassified\n200\n- 3 -\nY:\nGood. I'll get in touch with him right away.\nHMJr:\nI thank you.\nY:\nAll right.\nRegraded Unclassified\n2017\nJanuary 25, 1945\n11:48 a.m.\nJohn\nMcCloy:\nHello.\nHMJr:\nJack, I'm sorry to bother you but I thought you\ncould listen anyway.\nM:\nSure. Go ahead.\nHMJr:\nGeneral O'Dwyer is here in my office with John\nPehle.\nM:\nYes.\nHMJr:\nAnd you know we moved Pehle over in Surplus\nProperty.\nM:\nYes.\nHMJr:\nAnd there's still a lot of work to be done in\nthe War Refugee Board.\nM:\nYes.\nHMJr:\nAnd I would like to strongly recommend to Mr.\nStimson that we put General O'Dwyer into the\nWar Refugee Board as director.\nM:\nOh, I think he'd be very glad to have him.\nHMJr:\nYou think so?\nM:\nYes.\nHMJr:\nAnd then we also think that he'd be better doing\nit in the suit of a civilian.\nM:\nYes. Yes.\nHMJr:\nHe could be put on the inactive list.\nM:\nYes. I would think that he -- certainly on the\nfirst I think he'd be glad to have him. Whether\nwe can let him go from the Army, I suppose I've\ngot to talk to the Judge about that, but I think\nit's probably all right.\nHMJr:\nDo you think you could give me twenty-four hour\nservice?\nRegraded Unclassified\n- 2 -\n202\nM:\nLet me -- let me go to work on it. Let me go to\nwork on it.\nHMJr:\nYou're sympathetic to it?\nM:\nYes, I'm sympathetic to this extent: I'm sympathetic\nwith the idea. I'd like -- because I think he'd be\ngood in there. I'm sure the Secretary would like\nthat.\nHMJr:\nYeah.\nM:\nBut the -- the question of letting him out of the\nArmy is another breed of cat. He did a very good\njob for us in the Army and\n....\nHMJr:\nWell ....\nM:\nthe idea of letting him go is a little bit\npainful.\nHMJr:\nWell ....\nM:\nHowever, it's in a war -- it's in a war job.\nHMJr:\nIt's a war job.\nM:\nAnd I might be aole to swing it. Let me just --\nlet me work on it, will you please?\nHMJr:\nYes. Because We are being embarrassed every day\nby the fact that we haven't got somebody giving\nit full time.\nM:\nYes. Yeah. I can understand that.\nHMJr:\nAnd I -- you know, I explained, I had to throw\nPehle in the other job and he's been trying to\nfind somebody and it isn't easy.\nM:\nYes.\nHMJr:\nAnd now that we know General O'Dwyer is willing\nto do it\n....\nM:\nYes.\nHMJr:\nand would like to do it....\nRegraded Unclassifie\n- 3 -\n203\nM:\nYes.\nHMJr:\n....\nthe sooner the better.\nM:\nOkay. All right.\nHMJr:\nThank you very much.\nM:\nI'll let you know.\nHMJr:\nDid you get my letter?\nM:\nNot yet, no.\nHMJr:\nOh, didn't ....\nM:\nNo.\nHMJr:\nAbout the photographs?\nM:\nNo. No.\nHMJr:\nYou'll get a smile.\nM:\nOkay.\nHMJr:\nAll right.\nM:\nFine.\nRegraded Unclassifie\n203-A\nJanuary 25, 1945\nDear Jack,\nPursuant to our conversation today it\nwould be very much appreciated if General\nwilliam O'Dvyer and Lt. Col. Jerome J.\nOhrbach (#0-908736) could be inactivated\nto the War Refugee Board.\nAs I explained to you, I have found it\nnecessary to assign John Pehle, who is\nExecutive Director of the Var Refugee Board,\nto the Procurement and Surplus Property job\nin the Treasury, and it will further the\ncause for which the War Refugee Board vas\nset up if O'Dwyer and his assistant, Chrbach,\ncould be used for this purpose.\nVery truly yours,\n(Signed) H. Morgenthau, Jr.\nNonorable John J. McOloy,\nAssistant Secretary of War,\nPentagem Building,\nWashington, D, of\nJWPehle:1hh 1-25-45\nRegraded Unclassified\n204\nJanuary 25, 1945\n2:38 p.m.\nHMJr:\nHello.\nLeo\nCrowley:\nHello, Henry.\nHMJr:\nLeo, I'm calling up about that oil well -- oil\nrefinery equipment\nC:\nYeah.\nHMJr:\nfor the Russians.\nC:\nYeah.\nHMJr:\nAnything to report?\nC:\nNo. I had all of our fellows working on this\nthing and, as you know, we hit this snag in the\nWar Production Board that -- we even hit this,\nHenry, that they were trying to get us to cancel --\ndon't tell this to the Russians because 1t will\nupset them terribly -- they wanted us to cancel\nwhat we had in the works for them because of the\nnecessity for them in our war production here.\nHMJr:\nYeah.\nC:\nNow, we have to get hold of Krug. Krug is on\nrecord very definitely that he will not raise\nthis priority.\nHMJr:\nYeah.\nC:\nAnd we're trying our hard -- durndest to get him\nto cooperate a little bit with us. But we don't\nget any help from the War Department. They're\nvery definitely against it and we haven't had\nmuch help from the War Production Board up to\ndate, just between ourselves.\nHMJr:\nYeah.\nC:\nBut our fellows are working on it, Henry.\nHMJr:\nWell, you were a little over sanguine, what?\nC:\nThat's right. Well, I didn't know -- they shocked\nme when I found out.\nRegraded Unclassifie\n204-A\n- 2 -\nHMJr:\nYes.\nC:\nThat not only were we in trouble in trying to\nincrease this but they were trying to get our\nfellows to agree to cancel the priority was\noutstanding\n....\nHMJr:\nYeah.\nC:\n....\nwhich was a kind of a shock to me. You didn't\nknow that, did you?\nHMJr:\nThey told me that there was some talk about increas-\ning the production domestically. Yes, I had heard\nsome talk about it.\nC:\nYeah.\nHMJr:\nBut I -- this thing originated with the Russians.\nThey wrote me a letter about it asking for help.\nC:\nWell, they -- I think the Russians feel this,\nHenry, that we're doing everything we can to help\nthem, but of course from our view point, all we\ncan do is certain things, when the final thing is\nin the hands of Krug.\nHMJr:\nWell, I didn't get that impression from the Russians.\nI mean, that's why they wrote me, you see, that\nthey\nC:\nWell, I'll be very happy to write you 8. note to that\neffect.\nHMJr:\nWell, that doesn't help any.\nC:\nBut we're -- our fellows are doing all they can on\nthe thing.\nHMJr:\nWell, is Krug the bottle-neck?\nC:\nThat's right. That's right. And Krug wrote --\nKrug -- in the file there, Krug wrote you a letter.\nHMJr:\nYeah.\nC:\nWhere he'd turned it down.\nHMJr:\nYeah.\nRegraded Unclassified\n204- B\n- 3 -\nC:\nBut that's where it's got -- -- that's where the\nbottle-neck is, Henry.\nHMJr:\nWell, have you any objection if I call Krug?\nC:\nNot at all in the world.\nHMJr:\nOkay.\nC:\nAll right, Henry.\nRegraded Unclassified\n205\nJanuary 25, 1945\n2:43 p.m.\nHMJr:\nHello.\nWill\nClayton:\nHello, Mr. Secretary. How are you?\nHMJr:\nOkay.\nC:\nWill Clayton.\nHMJr:\nI know. Will\nC:\nYes, sir.\nHMJr:\nI called up Yost this morning about an\nanswer to my letter of the 23rd to Stettinius\non the French\nC:\nYes.\nHMJr:\nHe said I was apt to hear from you. I wondered\nwhen.\nC:\nI told him that I would have an answer to send\nover to you by hand this afternoon.\nHMJr:\nYes.\nC:\nBut I just didn't know whether it was best to\ncome over and talk with you about it or send\nyou a letter and I think probably the best\nthing to do is to do both. So if you don't\nmind, if I could come over\nHMJr:\nWhen do you want to come?\nC:\nLet me see -- oh, my! -- how about -- how about\nmy coming at -- I could come -- I could come\nnow or in a few minutes if I could come without\nthe letter. I'll tell you what the letter is\ngoing to say.\nHMJr:\nYes.\nC:\nIt's going to say that we agree with you fully\nthat the dollar and gold ought to be carefully\nexamined and that we ought to come to an agree-\nment with the French before we give them anything.\nHMJr:\nYeah.\nRegraded Unclassified\n206\n- 2 -\nC:\nAnd that we would certainly do that.\nHMJr:\nYeah.\nC:\nBut that that might take a little time and\nwhat we would like to do would be to sign the\nmaster agreement with them which doesn't commit\nus to anything except what we agree upon.\nHMJr:\nYeah.\nC:\nSo that we could get that out of the way.\nMonnet 18 very anxious to go home\n....\nHMJr:\nI know.\nC:\nand then come back. And before we gave\nhime anything, why, we'd negotiate these things\nwith him, in which, of course, you'd take part.\nHMJr:\nBut we differ with you on that.\nC:\nIs that 80?\nHMJr:\nYeah. If you could get over here at three --\ndo you want to come over at three?\nC:\nYes, I can come at three.\nHMJr:\nI'd like to talk to you about it because on\nthat procedure, that's -- we're -- we don't\nsee eye to eye.\nC:\nCould I come -- could I come right away?\nHMJr:\nUh ....\nC:\nBefore three?\nHMJr:\nOh, yeah. By the time you get over here, I'll\nbe ready.\nC:\nIt'll be pretty nearly three, yes. I'll -- I'll\ncome right away.\nHMJr:\nThank you.\nC:\nThank you.\nRegraded Unclassifie\n207\nJanuary 25, 1945\nMEMORANDUM\nRE: Meeting in Secretary Morgenthau's\nOffice with Assistant Secretary of\nState Clayton, January 25, 1945.\n(1) Assistant Secretary of State Clayton came to see\nSecretary Morgenthau today to talk about the French lend-lease\nmatter. Also present were White and DuBois.\n(2) After referring to the Treasury's letter of January 23,\nClayton read the letter which the State Department proposed to\nsend to Jean Monnet (copy of which had been forwarded to us\nand was referred to in our letter of January 23). Clayton\ninquired as to why this letter did not meet the purposes which\nwe had in mind.\n(3) It was explained to Clayton that the proposed letter\n0\nto Monnet, proposing immediately entering into a master lend-\nlease agreement, was not in accordance with our views, for the\nfollowing reasons.\nIt is important that before we enter into a formal\nagreement with the French authorities that it be clearly understood\nwithin this Government and between the French and ourselves just\nwhat the agreement contemplates. Unless there is this basic\nunderstanding from the beginning as to what is involved, there\ncannot help but be basic misunderstandings after the agreement\nis entered into. It is important for example that if the French\nare going to be requested to cut down their dollar balances\nthat they understand this in the beginning. It is important\nthat they have some idea of the nature and amount of the supplies\nthat they can expect to receive under the agreement. Furthermore,\nfrom a purely business standpoint, the United States should make\nevery effort to get what we want from the deal before giving\naway most of our chips. It was pointed out that this agreement,\nonce entered into, would undoubtedly be publicized in France\nand understood by the French Parliament and the French people\nas a big thing. It is important that when the agreement is\nannounced that the scope and potentialities of the agreement\nbe understood.\nRegraded Unclassifie\n206\n- 2 -\nSecretary Morgenthau related to Clayton his experience\nwith the British lend-lease. He pointed out how after the\nPresident directed him to cut down the British dollar balances\nthe British had been playing one Department of this Government\noff against the other. Although this might seem smart, in the\nlong run interests of Great Britain it is very unwise. Secretary\nMorgenthau related his conference in London with Churchill in\nwhich he frankly told Churchill that he knew of the memorandum\nwhich had been prepared by the British Government and given to\nthe President, attempting to praise certain officials of this\nGovernment with respect to their dealings with the British and\nattempting to lay the blame on Secretary Morgenthau for the\ndifficulties which the British had been having.\nSecretary Morgenthau pointed out how the same pattern\nfollowed in the British matter was very apt to also occur in\nthe French matter unless there was a clear meeting of minds\nbefore entering into any agreement.\n(4) Secretary Morgenthau pointed out to Clayton that if\n0\nit had not been for the support which he had given Crowley at\nthe Cabinet meeting the President would never have given the\ngreen light on the French lend-lease matter; and that Stettinius\nhimself had not taken a strong position in the Cabinet meeting.\nClayton said that he had been talking to Crowley and that Crowley\nhad told him practically the same thing. Secretary Morgenthau\nthen pointed out that obviously we were in favor of giving\nlend-lease to the French but the question was as to the best\nmethod of handling the matter.\n(5) After some discussion Clayton finally said that he\ncould see considerable merit in Secretary Morgenthau's position\nand that if Secretary Morgenthau felt strongly about it, he felt\nthat this position should prevail. Clayton said that he would\ndiscuss the matter further at State.\n(6) Secretary Morgenthau then pointed out that he was\nperfectly willing to set aside four or five days of his time\nto work on the matter and wind it up as quickly as possible.\nHe suggested that State Department cable to Paris requesting\nthat Pleven, Minister of Finance of the French Provisional\nRegraded Unclassified\n209\n- 3 -\nGovernment, be sent to Washington to work with Monnet with a\nview to winding up the matter; and that he be given plenary\nauthority by the French to deal with the financial aspects\nof the problem. Clayton indicated that State would give\ncareful consideration to this procedure.\nRUSSIA\n(7) As he was leaving Clayton stated that he would like\nto say a few words with respect to Russia. The Secretary pointed\nout that this was not something that could be discussed in a\nfew minutes and that he would be glad at any time to discuss\nthe thing in full detail with Clayton. Clayton mentioned that\ninsofar as the 3 (c) credits to Russia were concerned, the State\nDepartment had decided to make no concessions and that they\nwere going to stick to their original proposal. Secretary\nMorgenthau and White both made it very clear that Treasury\ndisagreed thoroughly with this procedure and that if State\nwanted to take this line they were doing it on their own\nresponsibility. When questioned as to whether he thought\nthat an agreement could be reached with Russia on the basis\nof State's proposal, Clayton said he felt sure it could.\n(8) With respect to the matter of the Russian loan\nClayton said that it had been decided that this should not\nbe gone into at this time. He said that the thought was that\nbefore entering into such a loan with Russia we should wait\nuntil we could determine what our other Allies will be asking\nfor so that we can consider the thing as a whole.\n(9) Secretary Morgenthau emphatically said that he was\nin total disagreement with State on this matter, as well as with\nthe President. He said that he thought State was making a\ngreat mistake and that State was not dealing with the Russians\nin the proper way. Secretary Morgenthau referred to his\nexperience with the Russians during the last twelve years,\nincluding his relations with the Russians at Bretton Woods.\nHe stressed the fact that it was important that we make clear\nto Russia that we are prepared to help them economically and\nRegraded Unclassifie\n210\n- 4 -\nif we could do this at this time, it would go a long way in\nhelping us get a lot of things in the political field that\nwe want from Russia. Secretary Morgenthau said he was sure\nthat eventually we would have to give this sort of aid to Russia\nanyway and we should do it at this time when it can do us the\nmost good. Secretary Morgenthau pointed out that Stettinius\nhad said that he had presented Secretary Morgenthau's views\nto the President.\n(10) Clayton said that of course he assumed such a loan\nwould need Congressional approval. Secretary Morgenthau said\nthat was part of the Treasury proposal - namely, that the\nloan should be carried out by Congressional action. Secretary\nMorgenthau then asked Clayton whether or not he had seen the\nTreasury proposal. Clayton said he had not seen Treasury's\nproposal; that Mr. Stettinius had received it shortly before\nhe left and that it had not been sent to him (Clayton).\nSecretary Morgenthau then said that he would send a copy of\nthe document which we gave to Stettinius to Clayton. Clayton\nsaid that he would be glad to review the document.\n(11) Secretary Morgenthau also pointed out that he had\ndiscussed the Treasury proposal with Mr. Harriman on two\ndifferent occasions and that Harriman was very much in favor\nof it. Secretary Morgenthau also referred to Harriman's in-\nability to even speak to high Russian officials for a period\nof months at a time. Secretary Morgenthau said that he assumed\nthat if Clayton had a representative of his cotton firm in a\nforeign country who reported that he was unable for a long\nperiod to even see any of the important people that he was\nsupposed to deal with that he assumed Clayton would recall the\nman. Clayton said he certainly would.\nJE Dusin,J.\nJ. E. DuBois, Jr.\nRegraded Unclassifie\nADDRESS OFFICIAL COMMUNICATIONS TO\nTHE'SECRETARY OF STATE\nWASHINGTON, D. c.\nCarbon to Dr. white 1/26/45\n211\nDEPARTMENT OF STATE\nWASHINGTON\nJanuary 25, 1945\nMy dear Mr. Secretary:\nUpon receipt of your letter of January 18 addressed\nto the Secretary, concerning a lend-lease agreement for\nFrance, I replied on his behalf in a letter, dated Janu-\nary 22, and expressed agreement with your view that lend-\nlease for France, both in munitions and in non-munitions,\ngenerally should rest on the same principles as lend-lease\nfor Great Britain. I also stated that I had asked Mr.\nClayton to discuss with Mr. White and Mr. Oscar Cox a text\nof an agreement which could be presented to Mr. Monnet early\nthis week. It was my understanding that you were in agree-\nment with the Foreign Economic Administration and the De-\npartment that a master lend-lease agreement should be signed\nwith the French, and that, thereafter, representatives of\nthe three agencies should hold discussions with French repre-\nsentatives concerning the nature of the supply program to\nbe undertaken and the terms upon which supplies would be\nfurnished.\nApparently, my letter crossed a second letter from you\nwhich was received in the Department on January 23, in\nwhich you suggested that before a lend-lease agreement is\nentered into with the Provisional Government of France, a\ndetermination should be made as to the extent to which we\ndeem it appropriate that the French should use their gold\nand dollar exchange resources in meeting their non-munitions\nrequirements. Since this suggestion is at variance with\nwhat I understood to be the position of the three agencies,\nI would like to bring the matter to your attention again.\nThe Provisional Government of France has now been recog-\nnized by this Government, and for the past several months\nthe French nation has participated with us and our Allies\nin the prosecution of the war in Europe. In view of our\npolitical policy with respect to the Provisional Government\nof\nThe Honorable\nFORVICTORY\nHenry Morgenthau, Jr.,\nBUY\nUNITED\nSecretary of the Treasury.\nSTATES\nNATIROR\nBONDS\nAND\nSTAMPS\nRegraded Unclassifie\n212\n-2-\nof France, the Department is anxious that our lend-lease\nrelations be placed on the same general basis as is the case\nwith respect to Great Britain and Russia, and therefore\nit seems desirable to offer a master lend-lease agreement\nto the French representatives for signature at this time.\nOf course, I am in agreement with you that after such\na document has been signed, it will be necessary for repre-\nsentatives of the Treasury Department, the Foreign Economic\nAdministration and this Department to agree upon the amount\nof French dollar and gold assets, including the holdings of\nthe Bank of France, which we would 8 nsider to be a satis-\nfactory position for France 80 long as non-munitions are be-\ning furnished under lend-lease, and to determine the extent\nto which we deem it appropriate that the French gold and\ndollar exchange resources should be used in meeting the non-\nmunitions requirements. As you know, the provisions of the\nmaster agreement will not prejudice our discussions of these\nmatters, but will merely provide a general framework for our\nlend-lease relations with France.\nSince the Department believes that it would be unwise\nto delay longer the signing of a master lend-lease agreement\nin view of the present political situation, may I ask that\nyou advise me whether you have any further objection to the\nsubmission of the text of such an agreement to the French\nthis week?\nSincerely yours,\nActing Secretary\nRegraded Unclassified\nJanuary 25, 1945 213\n3:33 p.m.\nHMJr:\nHello.\nOperator:\nGo ahead.\nHMJr:\nYes.\nOscar\nCox:\nOscar Cox, Mr. Secretary.\nHMJr:\nSpeaking.\nC:\nI wonder if some time at your convenience, I\ncould come over and talk to you a couple of --\nabout a couple of matters that Leo asked me\nto talk to you about.\nHMJr:\nFor instance?\nC:\nWell, one is the -- the French thing and related\naspects of it on the long term business and, two,\nthe Russian thing which is connected with that,\nand three, some -- whole series of related problems\nthat etem out of those.\nHMJr:\nWell, all right. Will Clayton has just left here\nnow.\nC:\nYeah.\nHMJr:\nI was getting from him first hand -- uh -- eleven\no'clock tomorrow?\nC:\nThat will be fine.\nHMJr:\nOkay.\nC:\nRight.\nHMJr:\nAll right.\nC:\nThank you, sir.\nHMJr:\nBye.\nRegraded Unclassifie\nHouse\n214\nJanuary 25, 1945.\nMEMORANDUM\nTO: Secretary Morgenthau\nFROM: Mr. Gaston\nI had a half-hour's talk with Vladimir Pravdin\nof TASS after we left your office. He said it is the\nRussian view that it is quite obvious that we cannot\nsupply enough Allied representatives to govern the\nGermans for any great period of time and therefore\nthe problem is to pick the right Germans to put into\ngovernment posts. So far as the part of Germany in\nwhich they will be dominant is concerned, they will\nnot put the same old officials back in power but\nwill choose representatives of the working class who\nare likely to prove more reliable. They fear very\nmuch that England and the United States will yield\nto the pressure of business groups and let the same\npeople who have controlled German industry in the\npast get control of it again. In Pravdin's opinion\nthis class of people is the most dangerous class in\nGermany and is the class which encouraged and per-\nmitted the Nazis to seize and control power. It is\nthe general Russian view, he told me, that German\nheavy industry should be sharply curtailed and he\nthinks the idea of physically removing and distribut-\ning to neighboring countries German equipment is a\ngood one. Their real solution of the problem, however,\nis a Socialist solution. They would have large scale\nindustry operated by the government and would give the\nAllies a dominating position in directing the industries\nfor some years to come.\nAmong other things he said that the Russians were\nvery anxious to maintain continuing close and friendly\nrelations with the United States and in maintaining an\neffective and continuing organization of the United\nNations. I don't think this statement was perfunctory;\nhe seemed to be thoroughly sincere. I would say that in\ngeneral Pravdin's concept of the Russian ideas with re-\nspect to the treatment of Germany in the economic sphere\nchecks very closely with yours.\nRegraded Unclassifie\nDraft I. 215\n1-25-45\nDRAFT OF A FOUR-MINUTE RADIO SPEECH BY\nTHE SECRETARY OF THE TREASURY\nOrganized labor can be justly proud of its war-\ntime record. It is a record of achievement; a record of\nconstructive cooperation with management and with govern-\nment. It is a record of work and sacrifice for our common\ngoal of victory.\nAs today's discussion of the Bretton Woods proposais\nillustrate, organized labor is also deeply conscious of its\nresponsibility for full and constructive cooperation in the\nshaping of America's post-war social, economic and foreign\npolicies. Labor knows that its stake in the peace is no\nless than its stake in this war.\nIt is too often assumed that international\nrelations is something with which the man in the street\nshould not concern himself too deeply--that these are\nmatters which must be left to the diplomats in the\npolitical field and to the international financiers in the\neconomic field.\nI do not think I need to tell you, however, that\na sound program for international colla boration in the\neconomic field will directly contribute to attaining our\nRegraded Unclassified\n216\n- 2 -\ngoal of 60,000,000 jobs here at home. The International\nMonetary Fund and International Bank are, in fact, essential\nif the President's Economic Bill of Rights is to become a\nreality. While our participation in these two international\ninstitutions will by no means insure 60,000,000 jobs, I\nthink it is safe to say that we cannot attain this necessary\ngoal without them.\nIn providing jobs for everyone, we shall not only\nhave to increase demand for our industrial and agricultural\nproduction here at home; but also abroad. Some parts of\nour industrial and agricultural production demand a high\nlevel of foreign trade to be efficient and prosperous.\nThis is particularly true in our heavy equipment industries\nwhere our war demand will fall sharply but whose output\nwill be needed by other countries for reconstruction and\ndevelopment. The foreign demand for such farm commodities\nas cotton, tobacco and wheat will also be great if other\ncountries have the opportunity to buy. We therefore must\ntake steps, in cooperation with other countries to see\nthat international trade and investment is resumed promptly\non a sound basis.\nRegraded Unclassified\n217\n- 3 -\nThe International Monetary Fund, when approved by\nCongress, will aid the nations of the world in establishing\nsound currencies. It will clear the channels of foreign\ntrade of discriminatory restrictions and controls so that\nthere can be a genuine expansion of world trade.\n[ith the help of the International Bank, American\ncapital can play a great constructive role - and a profitable\nrole - in the development of the economies of other countries.\nIt will provide us with enormous post-war foreign markets.\nFor our greatest markets are in prosperous, industrialized\ncountries.\nNor are the benefits of increased foreign trade and\ninvestment confined to increasing our prosperity. I want to\nemphasize that such cooperative measures for expanding\ninternational trade and investment are at the same time the\neconomic foundation for a lasting peace. A prosperous\nworld will be a world free of both economic and political\naggression.\nRegraded Unclassifie\nHouse 218\nTHE UNDER SECRETARY OF THE TREASURY\nWASHINGTON\nJanuary 25, 1945\nTO THE SECRETARY:\nReferring to our conversation of a few days\nago concerning the position of Fiscal Assistant\nSecretary, I submit the following:\nAt the present time the Under Secretary of\nthe Treasury has jurisdiction over the following\nactivities of the Treasury Department:\nComptroller of the Currency\nResearch and Statistics\nAs Acting Fiscal Assistant Secretary:\nThe Finances\nBureau of the Public Debt\nTreasurer of the United States\nBureau of Accounts\nBureau of Engraving and Printing\nBureau of the Mint\nIn addition, he performs the duties of Acting\nSecretary in the absence of the Secretary, and also\nserves as liaison officer with the Federal Reserve\nSystem and the Bureau of the Budget, and substitutes\nfor the Secretary as a Director on the Federal Farm\nMortgage Corporation and such other specific duties\nas the Secretary assigns to him from time to time.\nMost of these activities are directly connected\nwith the war effort. During the last three or four\nyears they have grown in importance as well as in\nvolume of business, which has made it necessary\nfor me to give a great deal more time to the signing\nof mail and to holding conferences on operating\npolicies rather than applying more of my time to\nhigh policy matters. It is difficult to see how\nFORVICTORY\nthese problems can grow any less in the next few\nBUY\nUNITED\nyears. As a matter of fact, there is every indica-\nSTATES\nWAR\ntion that they will require more attention and as\nBONDS\nAND\nSTAMPS\nRegraded Unclassified\n- 2 -\ntime goes on it will be more onerous for me to\ncarry the duties of both offices.\nI have come to the conclusion, therefore,\nthat I should get some assistance in the interest\nof my health as well as the problems we face.\nFurthermore, each year when we go before the Appro-\npriation Committee, inquiry is made as to what you\nintend to do about filling the position of Fiscal\nAssistant Secretary. Each time the Committee has\nbeen told that you expect to fill it very shortly,\nbut it has now been vacant for four years. In\nthis year's hearings there was some indication that\nthe Committee might take the funds away from us until\nyou actually fill the position.\nAs I told you when I accepted the position of\nUnder Secretary, I had no desire to enter into a\npolitical job and if I took it I wanted the assur-\nance that this position (Assistant to the Secretary,\nthe creation of the position of Fiscal Assistant\nSecretary then being under consideration) would be\navailable to me when I went out of the Under Secretary's\nposition. You assured me that it would be available.\nAll along I have had hopes that you would\nappoint an Under Secretary and permit me to take\nup the duties of Fiscal Assistant Secretary, but\nyou recently indicated that you had no intention of\nmaking any change in this connection. Because of\nmy desire some day again to take up the duties of\nFiscal Assistant Secretary, and because of my interest\nin the office in general and the many projects that\nI have in line for study, I would still like to keep\nmore or less general supervision over the matters\ncoming under the office and I would particularly\nlike to keep my hands on the finances and the liaison\nduties with the Federal Reserve System.\nTo get me the help that I desire, I would like\nto recommend that Mr. E. F. Bartelt be appointed to\nRegraded Unclassifie\n- 3 -\nthe position of Fiscal Assistant Secretary with\nthe understanding that when I am relieved of the\noffice of Under Secretary I would be appointed to\nthe Fiscal Assistant Secretary's position and he\nwould return to his present position of Commissioner\nof Accounts; and that any other personnel changes\nmade along the line because of these two would\nlikewise revert to their present positions. I am\ncertain that Mr. Bartelt would fill this office\nwith distinction and would work very closely with\nme as he has over the past twenty-five years. I\nbelieve that so far as he is concerned, the whole\noffice of Fiscal Assistant Secretary could be placed\nunder the Under Secretary and be administered more\nor less as a bureau. I am sure that would be more\nthan pleasing to him while he was being made\nacquainted with the various administrative problems\nand the projects that I have under consideration.\nWe could also transfer supervision over the Bureau\nof Engraving and Printing and the Bureau of the\nMint to the Under Secretary.\nMr. Bartelt was born and raised in Quincy,\nIllinois, attending public school and a commercial\nbusiness college in that city. After he graduated\nfrom this college he taught the science of account-\ning in that institution for a period of two years.\nHe was appointed to the Government service in 1917\nin the office of the Auditor for the Navy, which\nwas then under the Treasury Department. In 1918 he\ntransferred to the Division of Bookkeeping and\nWarrants and in 1927 became its Chief. In 1931,\nupon my recommendation, he succeeded me as Assistant\nCommissioner of Accounts. In 1935 he succeeded me\nas Commissioner. He has done quite a bit of outside\naccounting work; taught accounting at American\nUniversity for two years; and has had charge, as\nyou know, of the Interdepartmental Committee on\nSavings Bonds for the past two years, in which he\nhas done an outstanding job.\nRegraded Unclassified\n221\n- 4 -\nI should like to discuss the matter further\nwith you at your convenience.\nswifree\nin\nor\nwhite\nRegraded Unclassified\n222\nJAN 25 1945\nDear Mr. Johnson:\nThis is in reply to your letter of\nJanuary 20, 1945. The Treasury Department\nis in complete accord with the recently\nannounced program for restricting group\nmeetings.\nInstructions to Treasury bureaus and\noffices require that any applications from\nthis Department to the War Committee on\nConventions have my express approval prior\nto submission. You will note from the\nattached circular that we have also directed\nthat additional measures be taken to dis-\ncourage the attendance of Treasury personnel\nat non-government meetings.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nHonorable J. M. Johnson\nDirector, Office of Defense\nTransportation and\nChairman, War Committee on\nConventions\nWashington, D. C.\nJRS:eg\n1/23/45\nRegraded Unclassified\n223\nTREASURY DEPARTMENT\nWashington 25\nOffice of the Administrative\nJanuary 15, 1945\nAssistant to the Secretary\nTo Heads of Bureaus, Offices and Divisions,\nand Chiefs of Divisions, Secretary's Office,\nTreasury Department\nSubject: Reduction of Travel by Government Personnel\nThere is attached a copy of a recent letter to the Secretary from\nWar Mobilization Director James F. Byrnes calling attention to the present\ncritical need for reducing railway travel.\nThe Department has repeatedly issued instruction to Treasury\nbureaus and offices emphasizing the necessity for increased vigilance\nin surveying travel requirements, and considerable reduction has already\nbeen achieved. However, the urgency of the present situation requires\nthat additional measures be taken to restrict official travel, as well\nas participation in group meetings by Government employees. The\nsubstance of the attached letter, along with such additional instructions\nas you deem appropriate, should be brought to the attention of all\nsupervisory personnel who authorize tRavel by employees of your 1\norganization. ALL plans for sponsorahip of group meetings involving\nthe attendance of more than 50 persons shall be submitted to this\noffice for the approval of the Secretary.\nYou will note from the fourth paragraph of Director Byrnes's\nletter that WO are asked to report, within the next sixty days, on the\npercentage reduction that has been effected, To meet this request\nI am asking that you :have: prepared a summary report, covering\nthe period from September 1, 1944 to February 28, 1945, showing as\naccurately as possible, by months:\n(a) The number of people in travel status;\n(b) The cost of rail transportation (exclusive of Pullman charges).\nThis report should be in my office not later than April 1, 1945. In the\nevent that it does not reflect a downward trend in travel, I would\nappreciate having a brief explanation of the work load or program\nrequirements which precluded making a reduction.\nCHAPLES S. BELL\nAdministrative Assistant\nto the Secretary\nRegraded Unclassified\nVICTORY\nBUY\nOFFICE OF DEFENSE TRANSPORTATION\nWASHINGTON, D.C.\nOFFICE OF DIRECTOR\n20 1945\nThe Honorable\nHenry Morgenthau, Jr.\nSecretary of the Treasury\nDepartment of the Treasury\nWashington, 25, D. C.\nDear Mr. Secretary:\nIn his letter of January 8, 1945, to the various Government Agencies,\nDirector of War Mobilization and Reconversion, James F. Byrnes, with the\napproval of the President, requested me to head a committee composed of\nUnder-Secretary of War, Robert P. Patterson; Under-Secretary of the Navy,\nRalph A. Bard; Chairman of the War Production Board, J. A. Krug; and Executive\nServices Chief of the War Manpower Commission, Brigadier General William C.\nRose, to receive and pass upon applications for the holding of group meetings\nto be attended by more than 50 persons, to determine if the holding of these\nmeetings is warranted in the war interest. This action is designed to relieve\nthe present burden upon transportation and hotel facilities and to conserve\nscarce materials.\nThe Committee has been instructed not only to act on requests from the\npublic but also on requests from the civilian Government Agencies sponsoring\nor holding group meetings. Attached are several copies of a special applica-\ntion form which has been prepared for this purpose, also a recent press\nrelease on the subject.\nI am sure you will agree that Government Agencies must lead the way if\nthe objectives we are seeking are to be attained. May I, therefore, request\nthat you scrutinize carefully any plans by members of your agency which would\nresult in meetings attended by more than 50 persons. It would appear desirable\nthat no applications reach the War Committee on Conventions without having\npreviously been reviewed personally by you. Although only meetings with more\nthan 50 in attendance require a special permit the critical transportation and\nhotel situation suggests that all government meetings be held to an absolute\nminimum.\nMay I also point out that the presence of Government personnel at non-\ngovernment meetings frequently serves as an excuse for the meeting to be\nconsidered as in the war interest. It would be most beneficial if you will\ngive careful consideration to the attendance of your personnel at such group\nmeetings.\nCordially,\nJ. M. Johnson, Director\nOffice of Defense Transportation\nand\nChairman, War Committee on Conventions\nRegraded Unclassified\nOFFICE OF VAR MOBILIZATION AND RECONVERSION\nMashington, D. C.\nJanuary 8, 1945\nDear Mr. Morgenthau:\nIncreases in passenger traffic over the past several months have\nresulted in an overload of our railway system with a corresponding demand\nfor additional manpower. A substantial portion of this increase may be\ncharged to the large number of conventions now being held. These\nconventions have also overtaxed our hotel facilities in crowded war\ncenters.\nTherefore, I have issued an appeal for the cancellation of all\ngroup meetings involving the attendance of over 50 persons and trade\nshows not essential to the war, and for the elimination of other than\nessential travel.\nWith the approval of the President, I have asked Director J. M.\nJohnson of the Office of Defense Transportation to head a committee\nto be composed of representatives of the Mar and Navy Departments,\nEar Production Board and the War Manpower Commission to receive and\npass upon apolications for the holding of group meetings to be attended\nby more than 50 persons, to determine if the holding of these meetings\nis warranted in the war interest. This committee is not only to act\non requests from the public, but also on requests from the civilian\no\ngovernment agencies sponsoring or holding group meetings.\nIn addition to the *easures, I believe that it would be most\nhelpful if you would establish procedure which would insure that the\npersonnel under your jurisdiction are pormitted to travel only when\nabsolutely essential and that all possible measures are taken to\nconsolidate travel to reduce the number of trips to a minimum. I\nwould appreciate it very much if you would cooperate with me in this\nendeavor and if you would advise me within sixty days of the percentage\nreduction which you have been able to effect.\nI also believe that the presence of government personnel at group\nmeetings frequently serves as an excuse for the meeting to be considered\nas in the war interest. Therefore, I would like to suggest also that\nyou give careful consideration to the attendance of the personnel under\nyour jurisdiction at such group meetings to determine if their presence\nis really essential to our war effort.\nI know that you will agree with me that a good example set by\ngovernment agencies will do much to encourage the general public to\nto defer non-essential trips.\nSincerely yours,\nJames F. Byrnes\nDirector\nHonorable Henry Horgenthau, Jr.\nSecretary of the Treasury\nashington, D. C.\nRegraded Unclassified\nFrins-6334\nODT-761\nOFFICE OF DEFENSE TRANSPORTATION\nFor Immediate Release\nCleared and Issued\nThursday, January 11, 1945\nThrough Facilities of the\nOffice of War Information\nOrganizations planning to hold conventions, conferences, trade shows,\nor group meetings after February 1, \"will have to show how the war effort would\nsuffer if the meetings were not held,\" Col. J. Monroe Johnson, Chairman of the\nWar Committee on Conventions, announced today.\nThe Committee of which Under-Secretary of War Robert P. Patterson,\nUnder-Secretary of the Navy, Ralph A. Bard, Chairman of the War Production Board,\nJ. A. Krug and Deputy Chairman of the War Manpower Commission, Charles M. Hay,\nare members, appointed R. H. Clare, Special Assistant to Colonel Johnson,\nSecretary to the Committee.\n\"The job of the Committee,\" Colonel Johnson stated, \"is to achieve\nthe objectives set forth by Justice Byrnes-to relieve overburdened transporta-\ntion and hotel facilities and conserve desperately needed scarce materials\nand manpower. The hundreds of messages already received from organizations\nof diverse interests indicate that the Nation is solidly back of our efforts.\nThe Committee has decided that the yardstick it will use to messure the\nessentiality of any meeting is how the winning of the two w:rs we are now fighting\nwill be impeded if the meeting in question were held to an attendance of 50 or\ncancelled outright.\"\nThe Committee approved the form of application required of\norganizations planning group meetings to be attended by more than 50 persons.\nInformation required by the Committee includes:\nWhether the plenned meeting is a convention, conference, trade show,\nor government mesting; the date and Inc tion of the proposed meeting and name\nof hotels or other facilities which will be used; attendance planned; previous\nfrequency of moutings; locition and sttendance of last previous meeting; average\nsttendance nt similar moutings before the war and during the war; from what area\nthose attending are drewn; what steps have already been taken to curtail\nattendance; why the objectives of the meeting cennot be attained through \"Con-\nventions by Mail\"; why 2 group of 50 or less to whom powers are delepated cannot\ntransact the necessary affairs of the organization and in what way and to what\nextent will the war effort suffer if meeting were not held.\nOther decisions reached by the Committee include:\n(1) Industrial, business, labor, fraternal, professional, religious,\ncivic, social and governmental organizations are included among those requiring\npermits.\n(2) The issuance of a special permit to hold meetings of more than\n50 does not rantee transportation or hotel facilities or imply priorities\nfor their use.\n(more)\nRegraded Unclassified\n- 2 -\n(3) The general exemption from he need for applying for special\npermits for meetings of less than 50 dous not mean that the Committee approves\nthe holding of such meetings. It was emphasized that meetings of any size\nwhich directly or indirectly constitute a strain on transportation, housing\nfacilities or other critical situations should be cancelled immediately.\nApplication forms will be available within the next few days at all\nODT regional and district offices, at mqst hotels, convention bureaus and from\nthe national ODT office in Washington, D. C.\nAll applications should be sent directly to Secretary Clare, Room 7321\nInterstate Commerce Commission Building, Washington 25, D. C. where they will\nbe reviewed by the Committee.\nColonel Johnson also announced that the Ienders of the hotel industry\nhave assured the Conmittee that all of its requests will be scrupulously\nhonored by hotels throughout the Nation. Coloñel Johnson pointed out that this\nmeans that no additional measures will be necessary at this time to secure\ncompliance with Justice Byrnes' request.\n(Copy. of complete application, which may be reproduced, is attached.)\nBudget Bureau NO. 05-R 165\nApproval Expires February 28, 1945\nWAR COMMITTEE ON CONVENTIONS\nJ. Monroe Johnson, Chairman\nJ. A. Krug\nDirector, Office of Defense Transportation\nChairman, War Production Board\nRobert P. Patterson\nCharles M. Hay\nUnder-Secretary of War\nDeputy Chairman, War Manpower\nRalph A. Bard\nCommission\nUnder-Secretary of Navy\nAPPLICATION FORM\nDirector of Var Mobilization and Reconversion James F. Byrnes, with\napproval of the President, has instructed this Committee to effect\na cessation of group meetings such as conventions and trade shows\nnot necessary in the vor effort. Information requested is to enable\nthis Committee to review the holding of group meetings which are\nto be attended by more than 50 persons to determine if the need for\nthese meetings is sufficiently in the war interest to warrant the\nburden on transportation and services.\n1. Name of organization and of President and Secretary together with their\naddresses.\n2. Nature of organization and character of meeting (convention, conference,\ntrade show, government meeting or other).\n3. Date and location of proposed meeting and name oi notel or hotels or other\nfacilities which will be used.\n4. Attendance planned for above meeting. If a trade show, segregate attendance\ninto exhibitors and buyers and indicate number of hotel rooms required for\nexhibits in addition to those which will be booked for individual use. If\nother rooms such as ballrooms, display rooms, etc. are to be used, indicate\nnumber and approximate area of space.\n5-2848 bu-wp\nRegraded Unclassified\n- 2 -\n5. Previous frequency of these meetings.\n6. Date, location and attendance at last previous meeting.\n7. Average attendance at similar meetings before the war\n: during war\n8. From what area are those attending drawn?\n9. What steps have already been taken or are contemplated to curtail attendance?\n10. Why cannot the object of this meeting be attained through correspondence\nand publication, now frequently termed \"Convention by Mail\"?\n11. Why cannot a group of 50 or less to whom powers are delegated transact\nthe necessary affairs of your organization?\n12. In what way and to what extent will the war effort suffer if this meeting\nwere not held?\n(Signed)\nPresident\nSecretary\nDate\nMail to: Richard H. Clare, Secretary\nWar Committee on Conventions\nRoom 7321 Interstate Commerce Commission Building\nWashington 25, D. C.\nWhenever possible applications must be filed not less than thirty days prior\nto date of meeting but in case more than six months in advance.\nThis form may be reproduced. where space is insufficient for complete answer to any\nquestion, attachments are permitted.\n5-0840 bu-rinal\nRegraded Unclassified\n227\nJAN 25 1945\nDear General Surles:\nYou will be pleased to learn, I am sure,\nthat prominent among the factors contributing to\nthe success of our recent Sixth War Loan campaign\nwas the wholehearted cooperation and assistance\nrendered by your office, particularly by Major\nGeorge N. White and his assistant Lieutenant B.\nC. Kelly.\nDespite the numerous demands and inquiries\nwhich reached them in number sufficient to ex-\nhaust their patience their response was always\nenthusiastic as well as helpful.\nIt is my purpose in sending this note to you\nto express my sincere thanks to you and through\nyou to the officers mentioned and to express the\nhope we may have the privilege of having them work\nwith us during our coming campaigns.\nSincerely,\n(Signed) H. Morgenthau, Jr.\nMajor General A. D. Surles\nDirector, Bureau of Public Relations\nWar Department\nRoom 2-E-880, The Pentagon\nWashington, D. C.\ncopies to Hamble\nRegraded Unclassified\n228\nADDRESS OFFICIAL COMMUNICATIONS TO\nTHE SECRETARY OF STATE\nHouse\nWASHINGTON, D.C.\nDEPARTMENT OF STATE\nWASHINGTON\nIn reply refer to\nJanuary 25, 1945\nEUR 740.00119 EW/1-1745\nMy dear Mr. Secretary:\nI refer to your telephone call of January 16\nstating that you had just heard that Mr. Churchill\nhad said something about the so-called Morgenthau\nplan and negotiated peace. I immediately telegraphed\nthe Embassy in order to find out whether the Prime\nMinister had made any statements in this connection.\nThe Embassy has replied that his only words of this\nkind were those reported in the Embassy's telegram\nno. 576 of January 16, a copy of which is attached.\nSincerely yours,\nActing Secretary: Run\nEnclosure:\nTelegram no. 576,\nfrom London, dated\nJanuary 16, 1945.\nse\nVV\n8\nThe Honorable\nFORVICTORY\nBUY\nHenry Morgenthau, Jr.,\nUNITED\nSTATES\npersonse\nBONDS\nAND\nSecretary of the Treasury.\nSTAMPS\nRegraded Unclassified\nDEPARTMENT\nOF\nINCOMING\nDIVISION OF\n229\nSTATE\nTELEGRAM\nCENTRAL SERVICES\nTELEGRAPH SECTION\nMS-1331\nPLAIN\nLondon\nDated January 16, 1945\nRec'd 11:20 p.m.\nSecretary of State,\nWashington.\n576, Sixteenth\nThe Prime Minister was today asked by a Labor\nmember in the House of Commons whether the government\nhad reconsidered its policy of unconditional surrender\nand the proposal to transfer from their homes by\nforce millions of people in central Europe.\nMr. Churchill answered \"No, sir\" and in reply to\na further question suggesting that these threats against\nthe Axis powers had a tendency to stiffen the people\nof Germany behind their leaders and prolong the war\nhe added \"No, Sir. We don't take that view at all.\nI think the House would be overwhelmingly against\nour attempting to make peace by negotiation. At\nany rate our Allies would be overwhelmingly opposed\nto such a course. It is quite impossible to discuss\nthese things in question time. An opportunity might\noccur in debate to discuss them. I am not of the\nopinion that the demand for unconditional surrender\nis prolonging\nRegraded Unclassified\n0\n230\n-2- #576, Sixteenth, from London.\nis prolonging the war. In any event the war will be\nprolonged until unconditional surrender has been ob-\ntained.\" These remarks were received with checrs.\nWINANT\nMJF\nRegraded Unclassified\n231 -\nJanuary 25, 1945\nmy dear Lieut. Putzell:\nThank you for your letter of\nJanuary 24 enclosing the report on\nthe Second Bonomi Cabinet, which I\nam glad to have.\nYours sincerely,\n(Signed) H. Morgenthau, Jr.\nLieut. Edwin J. Putzell, Jr.,\nAssistant Executive Officer,\nOffice of Strategic Services,\nWashington, D.C.\nReport to Dr white 1/26\nRegraded Unclassified\nphotostet te to 2/15/45. 232 L\nMINISTRY OF FINANCE\nChungking, January 25th, 1945.\nMy dear Mr. Secretary,\nI thank you very much for your kind letter\nof December 16th, offering me your congratulations\non my assumption of the new office.\nI have always appreciated your friendly and\nsympathetic attitude towards China as well as your\ncooperation hitherto extended to H. E. Dr. H.H. Kung.\nThe conclusion of the recent financial nego-\ntiations is regarded here as yet another indication\nof your kind collaboration.\nI am confident that my Ministry and your\nDepartment will continue to work in the same happy\nspirit characteristic of our past relations.\nWith the season's greetings,\nYours Oktin very truly,\nO. K. Yui\nMinister of Finance\nHonorable Henry Morgenthau, Jr.,\nSecretary of the Treasury,\nWahington, D.C., U. S. A.\nRegraded Unclassified\nTREASURY DEPARTMENT\n233\nINTER OFFICE COMMUNICATION\nDATE\nJanuary 25, 1945\nTO\nSecretary Morgenthau\nFROM J. W. Pehle\nI haven't heard anything further from FEA\nor from WPB on the Russian Refinery matter.\nSince FEA is the claimant agency on such\nmatters, I suggest you might get Crowley to write\na letter to Krug urging a higher priority before\nyou press Krug further on this matter.\nRegraded Unclassified\nSECRET\n234\nwar DEPARTMENT\ncap hite-\nWASHINGTON, D.C.\n1/26/45\nJAN 25 1945\nHonorable Henry Morgenthau, Jr.,\nSecretary of the Treasury,\nWashington, D. C.\nMy dear Mr. Secretary:\nI have received your letter of 8 January 1945, with\ninclosures, in which you request me to investigate the present\nstatus of the proposed \"take-over\" by the War Department of\ncertain British-owned capital facilities in the United States.\nI have noted from the Treasury memorandum that you are not\naware of the War Department's negotiations with the British\nfor the transfer of the remaining British facilities in this\ncountry to the War Department on a reciprocal aid basis.\nIn accordance with the instructions dated 18 November\n1943 from the Director of War Mobilization, the British\nMinistry of Supply Mission, Washington, was requested on\n6 December 1943 to consider the War Department's request for\nreciprocal aid. On 1 February 1944, Sir Walter Venning re-\nplied that the British preferred that \"the matter of settle-\nment might be left open for future consideration\". This\nprocedure was approved by the War Department and agreed to\nby the Acting Secretary of State on 18 February 1944.\nIn view of the War Department's negotiations on this\nmatter, I do not believe it is advisable to make any other\narrangements for cash settlement until the British have\nformally refused to provide these facilities to the War De-\npartment under reciprocal aid.\nSincerely yours,\nRLJPP#\nROBERT P. PATTERSON,\nUnder Secretary of War.\nFORVICTORY\nBUY\nUNITED\nSTATES\nWAR\nBONDS\nAND\nSTAMPS\nSECRET\nRegraded Unclassified\n0\n0\n235\nP\nY\nJanuary 25, 1945\nDear Mr. Handler:\nI wish to thank you for your letter of\nJanuary 20, 1945, concerning the plight of the Jews\nin Bulgaria and Rumania.\nWe, too, have been deeply concerned with\nthis problem and I assure you that even within its\nlimited terms of reference the War Refugee Board has\nmade every effort to have assistance brought to these\npeople. Until such time as the problem can De handled\non a more permanent basis, the Board has facilitated\nin all possible ways the sending of relief into these\nareas.\nIf you should desire to discuss this matter\nin more detail, we shall, of course, be glad to arrange\nto see you in Washington.\nSincerely yours,\n/8/ H. Morgenthau, Jr.\nin\nSecretary of the Treasury\nMr. Milton Handler,\nColumbia University,\nNew York, N. Y.\nRegraded Unclassifie\n236\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM:\nAMERICAN EMBASSY, VATICAN CITY\nTO:\nSecretary of State, Washington\nDATED:\nJanuary 25, 1945 (Rec'd 8:55 p.m., 26th)\nNUMBER: 25\nSECRET\nReplying to & message from Union of Orthodox Rabbie\nNew York we advised latter last July that Vatioan after failing\nin its attempts to include refuges Rabbinical scholars in\nShanghai in an exchange agreement had approached the Government\nof Japan with a view to having them released on a unilateral\nbasis by the Government of that country. However, the Vatican\nstated that up to that time these attempts had been without\nresults. The matter was again taken up with the Vatican,\non receipt of the message under reference from the Department,\nhowever, to date we learn that still no word has been received\nfrom Japan. It is stated by the Vatican that original exchange\nplan failed to materialise as British and American Governments\nindicated that it was not possible to include persons in\nquestion in an exchange agreement as their citisenship was neigher\nBritish or American. I an assured by the Vatican that it will\nfollow closely developments in the matter.\nTAYLOR\nDC/L:MLO\n1-29-45\nRegraded Unclassifie\n237\nLF-173\nPLAIN\nLisbon\nDated January 25, 1945\nRec'd 3:43 a.m., 26th\nSecretary of State,\nWashington.\n176, Twenty-fifth\nFOR HIAS 425 LAFAYETTE STREET NEW YORK CITY FROM\nBERNSTEIN HICEM LISBON WRB 292\nContact relatives favor following our protegees\nBucharest. Request Abreham Feinstein, 6910 Yellowstone\nBoulevard, Forest Hills New York nows and advise for\nemigration fevor Karl Feinstein, Joseph Rosensweig,\n152 Amboy Street, Brooklyn, New York secure USA visas\nfavor Line Rosensweig and children healthy. Abs Schwarts,\n40 Stuyvesant Street, New York news secure USA visa\nfavor Nathan Hart family healthy. C. Daire Friedman,\n651 High Street, Newark, New Jersey secure USA visa favor\nFrossa Medelovici healthy alone without news husband.\nEugen Ernest, 205 East or West 94th Street, New York\nfinancial help and secure USA visa favor Gesa and Layos\nJacob alone healthy family deported, Josef Itscovici,\n108 Levy Street, New York financial help secure USA visa\nfavor Hermann Kohn healthy alone without news family.\nInform Sady Schwarts, 7403 18th Avenue, Brooklyn Esterina\nJeni Maria Ghisa Salpeter healthy intending emigration\nPalestine Tubi Dori also Bucharest. Cable. Inform\nTheodora Bara, Hotel Delmonico New York Florica Sommer\nall family healthy Bucharest asks news. Eric Tohauer\n1609 North Normandie Hollywood Joseph Schauer healthy\nBucharest 55 Pasteur asks nows.\nCROCKER\nJMS\n0\nRegraded Unclassified\n238\nGABLE TO HEDDLE AND MCOLELLAND, BERN, FROM DEPARTMENT AND WAR REFUGEE BOARD\nInformation has reached us recently that Sternbuch has developed\na plan for the release of 500,000 Jews from Germany and German-occupied\nterritory in return for payments totalling $5,000,000. The Jews are to\nbe released at the rate of 15,000 a month and payments are to be made\nat the rate of $250,000 a month. It is further reported that sum of $250,000\nremitted from the United States by Vaad Hahatzala is now on deposit in\na Swiss bank in the name of Sternbush and is to be used for payment for the\nfirst shipment of 15,000 Jews expected shortly in Switzerland.\nFor your information, news reports from Bern similar to the above\nreports on the Sternbush plan and as yet unpublished have been presented to\nus for confirmation.\nPlease advise Department and Board of any information you have or can\nobtain on the foregoing.\nTHIS IS WRB BERN CABLE NO. 381.\n10:30 a.m.\nJanuary 25, 1945.\nMiss\nFH:hd 1/24/45\nRegraded Unclassified\n239\nGABLE TO HUDDLE, BERN, FOR MCCLELLAND FROM WAR REFUGEE BOARD\nReference your No. 389 of January 19, 1945. The $19,533.60 which\nyou are now holding for Friedds of Luxembourg can not (repeat not) be\nexpended in Luxembourg because these funds were appropriated by National\nWar Fund for relief and rescue in enemy or enemy-occupied territory.\nAccordingly, interested groups here hope that you will be able to\narrange with Intercross for relief program suggested in Department's\nNo. 288 (WEB No. 367) of January 18, 1945.\nFor your information, Friends of Luxembourg and labor groups\nexpect to send $12,500 very shortly to labor trustees in Luxembourg\nfor relief in Luxembourg.\nDonors wish to assure you of their complete satisfaction with\nyour handling of the funds which have been remitted to you for various\nrelief projects.\nTHIS IS WRB BERN CABLE NO. 383.\n4 p.m.\nJanuary 25, 1945.\nMiss Chauncey (for the Secty) Ackermann, Aksin, Cohn, Drury, DuBois,\nGaston, Hodel, Marks, McCormack, Pehle, Files.\nFH:hd 1/25/45\nRegraded Unclassified\n240\nMS\nDistribution of true\nreading only by special\nJanuary 25, 1945\narrangement. (SECRET w)\n2 p.m.\nAMLEGATION\nBERN\n410\nThe following for Huddle and McClelland from Department\nand Mar Refugee Board is WRB 378.\nVaad Hahatmala advised WRB of receipt of a report that\ntwo groups of Hungarian Jews numbering 7,000 and 15,000\nrespectively await entry into Switserland and that their\nresoue depends on assurance of admission into Switzerland,\nPlease advise Board whether this is correct. If so, it is\nassumed, of course, that you will take all appropriate steps\nto obtain their admission into Switzerland in accordance\nwith Department's 240 of January 16.\nGREW\n(Acting)\n(GIN)\nWRB:MMV3KG\nWE\nSE\n1/24/45\nRegraded Unclassified\n241\nDistribution of true\nJanuary 25, 1945\nreading only by special\narrangement. (SECRET W)\nMidnight\nAMLEGATION\nBERN\n424\nThe following for Huddle and McClelland from Department\nand War Refugee Board is WRB 381.\nInformation has reached us recently that Sternbuch has\ndeveloped a plan for the release of 300,000 Jews from Germany\nand German-cooupded territory in return for payments totalling\n$5,000,000. The Jews are to be released at the rate of\n15,000 a month and payments are to be made at the rate of\n$250,000 a month. It is further reported that sum of\n$250,000 remitted from the United States by Vand Hahatuala\nis now on deposit in a Swiss bank in the name of Sternbuch\nand is to be used for payment for the first shipment of\n15,000 Jaws expected shortly in Switzerland.\nFor your information, news reports from Barn similar\nto the above reports on the Starnbuch plan and as yet\nunpublished have been presented to us for confirmation.\nPlease advise Department and Board of any information\nyou have or can obtain on the foregoing.\nGREW\n(Acting)\nWRB:MMV:10\n#\nSWP\n1/25/45\nRegraded Unclassified\n242\nJ106-1894\nThis telegram must be\nBorn\nparaphrased before being\ncommunicated to anyone\nDated January 25, 1945\nother than a Government\nAgency. (RESTRICTED)\nRec'd 10:50 a.m.\nSecretary of State\nWashington\n518, January 25, 10 a.m.\nFOR WRB FROM MCCLELLAND.\nPlease deliver the following message from union\n05E to Leo Wulmann American OSE:\n\"He have received your message of January 11. Our\ndelegate Dr. Rosenbluth is on his may to Lublin and\nprobably Warsaw. We have given him instructions to re-\nestablish together with Dr. Herszenhorn the 08E-TOZ\ninstitutions throughout liberated Poland. He has been\ninformed of your negotiations with Sommers Chein. The\nhave unofficially notified that the Lublin Government\nis ready to receive our sanitary team and we are there-\nfore urgently preparing with Joint's substantial help\nthe personnel medical supplies and equipment.\nIt would be most advisable for you to contact the\nRussians regarding all such possibilities of relief\naction in liberated areas under Russian control.\nPlease keep us posted regarding any represents-\ntions you make in this direction\".\nHUDDLE\nwas\nRegraded Unclassified\n243\nMH-1904\nBern\nDistribution of true\nreading only by special\nDated January 25, 1945\narrangement (SECRET W)\nRec'd 10:10 a.m.\nSecretary of State,\nWashington.\n520, January 25, noon.\nFOR WRB FROM MCCLELLAND\nSubstance Department's 368, January 22, was\ndelivered in an urgent note to Federal Political\nDepartment on January 24.\nHUDDLE\nRR\nRegraded Unclassified\n244\nEGP-135\nPLAIN\nBorn\nDated January 25, 1945\nRec'd 9:50 p.m.\nSecretary of State,\nWashington.\n523, Twenty-fifth.\nFOR WRB FROM MCCIELLAND.\nKindly deliver following message to Jakob Greenberg\n1123 Broadway, NYC from Nathan Schwalb, Hechalus, Geneva.\n\"Educational work among our youth Aliyah groups\nhere not being satisfactorily handled by local Micrachi.\nIf possible would accordingly much appreciate receiving\nfunds to aid Mendel Willner this task otherwise your\nsplendid efforts behalf these young people will be\nlargely negated\". 1035.\nHUDDIE\nMRM\ncc: Miss Channeey (for the Sec'y) Ackermann, Akain,\nCohn, Drury, DuBois, Caston, Hodel, McCormack,\nor O'Dwyer, Files\nRegraded Unclassifie\nLF-137\nBorn\nDistribution of true\nreading only by special\nDated January 25, 1945\narrangement. (SECRET W)\nRec'd 9:45 p.m.\nSecretary of State,\nWashington.\n531, January 25, 3 p.m.\nFOR WRB FROM MCCLELLAND\nIn course of constant contact with various officials\nand agencies of Swies Government during past many months\non subject of admission to Switserland of refugees from\nNazi persecution, (Department's 240, January 16, WRB's\n364) we have observed no lack of willingness on part of\nSwise to grant large numbers of such persons temporary\nasylum. On contrary Swies have repeatedly interceded\nwith Germans as in case of projected evacuation of upwards\nof 12,000 Jews from Budapest in effort to expedite and\norganize such evacuation.\nOn occasion of coming of second Bergen-Belsen\nconvoy of 1300 individuals in early December Federal police\nwas somewhat disturbed over unannounced arrival of group\nof unknown persons of this sise from Germany on under-\nstandable grounds of military and internal security.\nlie have repeatedly conveyed to\"Swise our\nGovernment's assurance that any such refugees admitted\nto Switserland would be evacuated as promptly as possible.\nAlthough Swies have not as yet chosen to avail them-\nselves of our offers of maintenance they took occasion\nin course of recent discussions relative to conversion\nof dollar equivalent of the 20,000,000 into Swies france\nto express informally their distress at United States\nunwillingness to allow them import into Switserland even\nfrom Spain some 300,000 tons of food stuffs purchased\nfor general Swies consumption and warehoused in Spain\nfor past many months. Our lack of understanding (as\nthey interpret it) of growing difficulties their food\nsituation and our simultaneous requests that they admit\nlarge numbers of new refugees contrast rather unfavorably\nin their minds. It is worth nothing in this repect that\nSwitserland has recently received a new contingent of\nclose to 10,000 French refuges children from the Muhlhouse\nregion.\nHUDDLE\nKJF\nRegraded Unclassified\n247\n- 2 -\nThus far in January 628 additional persons\nfrom Rumania (the Stara-Zagora detainees) have passed\nthrough Turkey proceeding to Palestine.\nThe success of this rescue work, as you\npreviously have been informed, is attributable to\nthe breaking of the bottle neck into Turkey as a\nresult of the efforts of Ambassador Steihardt and\nthe WRB.\nSTEINHARDT\nEEC\nRegraded Unclassified\nEIG\nLC=162\nAnkara\nDistribution of true\nreading only by special\nDated January 25, 1945\narrangement. (SECRET W)\nRec'd 1:29 a.m., 26th\nSecretary of State,\nWashington.\n130, January 25, 4 p.m.\nFROM KATZKI TO PEHLE WAR REFUGEE BOARD.\nAnkare's No. 7.\nThe following statistics, one year after the\ncreation of the War Refugee Board, relating to rescue\nand emigration activities from the Balkans via\nTurkey to Palestine for the calendar year 1944, will\nbe of interest to the board. The total number of\npersons who passed in transit through Turkey proceeding\nto Palestine excluding 282 people from Holland ex=\nchanged for German nationals in July is 6527 (repeat\n6527). Of this number 1392 came from Bulgaria, 163\nfrom Hungary, 4433 from Rumania and 539 from Greece.\nIt should be noted, however, that persons included\nunder Rumania comprise not only Rumanian nationals\nbut a large proportion of Polish, Slovakian, Ruthenian\nand Hungarian refugees who succeeded in escapintato Rumania.\nThe total of 6527 includes 1737 children and\nyouths up to the age of 18 years. Approximately\n1,000 were orphans repatriated from Transnistria\nAn additional 327 accompanied their parents and the\nbalance comprises children emigrating without parents.\nAll the refugees from Greece escaped by sea.\n10 groups arrived by sea from Constanza using vessels\nof Bulgarian registry 5 times and Turk vessels 5\ntimes. An 11th group from Constansa was lost with\nthe sinking of the MEFKURA. Other refugees from Bulgaria\nand Rumania arrived by railroad.\nco: Miss Chaundey (For the Sec'y.), ackermann, Akain, Cohn,\nDrury, PuBois, Gaston, Hodel, Parks., in\nRegraded Unclassified\n248\nNOT TO BE RE-TRANSMITTED\nCOPY NO.\n4\nSECRET\nOPTEL No. 29\nInformation received up to 10 a.m., 25th' January, 1945.\nNAVAL\n1,\nHOME WATERS. Night 23rd/24th. Minelaying by enemy air-\ncraft suspected in Scheldt Approaches and one aircraft destroyed.\nNight 24th/25th. E-boats very active between Yarmouth and Thames\nEstuary and were engaged by our patrols.\nENEMY ATTACK ON SHIPPING. 23rd. Enemy aircraft bombed\nand sank a 5,035 ton U.S. ship during attack on Antwerp dock area.\nMILITARY\n3.\nWESTERN FRONT. Northern Sector: British now holding\nHeinsberg and Montfort and have advanced two miles north latter\ntown. Central Sector $ In Ardennes U.S. forces advanced two to\nthree miles along whole front against moderate enemy resistance.\nReported Clervaux cleared without opposition.\n4.\nEASTERN FRONT. East Prussian Sector: Further progress\nsouth and S.W. Insterburg including capture Lyck. North Central\nSector: Chelmza (12 miles north Torun) captured and further\nadvances north and N.W. of Gniezno. South Central Sector: Kalisz\ncaptured and several places north and N.E. of Breslau including\nRawicz and Trachenberg taken. Oppeln also captured. Southern\nSector: Advance continues some 50 miles N.W. of Miskolc.\n5.\nBURMA. Arakan Sector: On Ramree Island our troops\nreached Minbyin (8 miles south Kyaukyu) without serious opposition.\nCentral Burma Sector: Tilin captured without opposition. On\nIrrawaddy, Myinmu (16 miles west Mandalay) captured after stubborn\nfighting.\nAIR\n6.\nWESTERN FRONT. 24th. SHAEF (Air). 1272 aircraft (9\nmissing) operated all areas bombing midget submarine sheds Rotter-\ndam and communications and transport behind battle fronts. 350\nM.T. destroyed and enemy air casualties 2, o, 1.\n7.\nMEDITERRANEAN. 23rd. 621 tactical aircraft attacked\ncommunications North Italy and N.W. Yugoslavia.\nHOME SECURITY\n8.\nROCKETS. To 7 a.m. 25th. 5 incidents reported.\nRegraded Unclassified\n249\nNOT TO BE RE-TRANSMITTED\nCOPY NO.\n4\nSECRET\nOPTEL No. 30\nInformation received up to 10 a.m,, 25th January, 1945.\nMILITARY\n1.\nWESTERN FRONT.\nSouthern Sector: Germans reported reacting strongly\nto pressure Colmar pocket. Further North, enemy have made several\nattacks causing slight withdrawals in area Haguenau.\nCentral Sector; U.S. forces continue to make progress\nand line along whole front now almost straightened with St. Vith\noccupied.\nNorthern Sector: British troops advanced one mile\non whole front from north of Geilenkirchen to Linne (5 miles S.W.\nRoermond).\n2.\nEASTERN FRONT.\nEast Prussian Sector: In the North, Germans admit\npenetrations S.E. of Labiau. Russian attacks in direction\nKoenigsberg and Elbing met strong resistance, but Germans have\ngiven ground to the south in area Masurian Lakes.\nCentral Sector: Germans claim holding Russian drives\non Tourun and Posen. Russians report capture Jarocin (S.E. Posen),\nOstrow (s.w. Kalisz), Oels (N.E. Breslau), and Gleiwitz (S.E.\nOppeln). Germans claim Russian attempts to cross River Oder\nN.W. and S.E. Breslau wholly and partially repulsed respectively.\nSouthern Sector: Germans report progress north\nSzekesfehervar,\n3.\nBURMA.\nCoastal and Arakan Sectors : Considerable progress\nmade Ramree Island and our troops now 20 miles south Kyaukpyu on\nWest Coast. Further North, stubborn resistance encountered north\nof Myohaung whilst our troops have reached point 2 miles west of\nvillage,\nAIR\n4.\nWESTERN FRONT.\n25th. SHAEF (Air). 830 aircraft (8 missing) opera-\nted mainly central sector dropping 803 tons and destroying 686\n(\nM.T. and 43 A.F.V. 18 Mosquitoes attacked convoy North Bergen\nand left burning one 5,000 ton, one 2,500 ton ship, one tanker\nand a coaster. 5 Halifaxes attacked shipping Kristiansand\nobtaining direct hits on 4,000 ton ship which left on fire and\nsinking.\n5.\nCHINA ZONE.\n19th and 20th. Attacks made on airfields at Swatow\nand Shanghai destroying 22 enemy aircraft.\nHOME SECURITY\n6.\nROCKETS.\n7 incidents reported.\nRegraded Unclassified\n250\nJanuary 26, 1945\n11:24 a.m.\nHMJr:\nHello.\nOperator:\nMr. Clayton.\nHMJr:\nHello. Will?\nWill\nClayton:\nYes, Henry.\nHMJr:\nYou're -- here I've got Oscar Cox and Harry White\nin the room with me.\nC:\nYes.\nHMJr:\nWhere do we stand vis-a-vis the French now?\nC:\nWell\nHMJr:\nOn this lend-lease.\nC:\nWell, I -- I sent you over a letter yesterday\nafternoon answering your letter to Ed, and just\nstating our position.\nHMJr:\nYes.\nC:\nI think that where we stand is that we probably\nhad just better notify the French that we are only\nprepared to negotiate a master lend-lease agreement\nwith them when we have come to some agreement with\nthem regarding their -- their financial position\nas regards dollars and gold.\nHMJr:\nYeah. But don't you think that State, F.E.A. and\nourselves ought to agree first what we think that\nshould be?\nC:\nWell, surely, before we ever -- certainly, Henry,\nbefore We ever sit down to negotiate with them, we\nmust do that, but they are, I think, expecting some\nanswer from us now on the simple question whether\nwe will sign the master agreement now and then\nnegotiate or whether to negotiate first. I think\nthat probably we ought to advise them on that point\nand then we would get together and agree on what\nwe ought to do.\nHMJr:\nWell, now, what is the thing that you've arrived at\nas to which comes first?\nRegraded Unclassified\n251\n- 2 -\nC:\nOh, well, our position is unchanged. It differs\nfrom yours You think we ought to negotiate the\ndollar thing first; and we thought we ought to\nsign the master lend-lease agreement like we had\nwith all the other countries\nHMJr:\nYes.\nC:\nfirst. But I think that we can't remain in\ndead-lock 80 I think the only thing for us to do\nis to accept your view of it and -- and then start\nnegotiating with the French, if they're prepared to\ndo it and I suppose they are, on that dollar position\nand tell them we've got to work that out before we\ncan sign the master agreement.\nHMJr:\nWell, if you don't mind my saying, I think that --\nas I understand it, you told Pete Collado to get\nin touch with Monnet and find out what their finan-\ncial position is. Hello?\nC:\nYes.\nHMJr:\nWell, that's always been the Treasury's business.\nC:\nNo, I didn't tell him to find out -- no, no, that's\na mistake. I was talking with Mr. Monnet. He said\nhe would like to know just what kind of questions\nwe would ask him and I told him that I would get Pete\nCollado to call him up. I was just going into a\nstaff meeting at the time.\nHMJr:\nYeah.\nC:\nAnd tell him what sort of questions we would likely\nask of him. Now, I was only speaking for State\nDepartment and not the Treasury.\nHMJr:\nWell, that -- those financial inquiries in between\nthe Treasury -- I mean, up to now, we've always\ndone that, Will. I mean, that's our responsibility.\nC:\nYou mean yours alone?\nHMJr:\nWe've done it alone. Yeah, we'd get the information\nfor you or for any other branch of the Government.\nC:\nI see. Well, if that's -- if that's the case, I'm\nnot informed on that -- if that's the case, we'll\njust have to tell Mr. Monnet we have no questions\nto ask him.\nRegraded Unclassified\n- 3 -\n252\nHMJr:\nWell, the thing is we've always done that with\nall Treasuries. The record ever since I've been\nhere is on that front.\nC:\nYes.\nHMJr:\nOn my part, I think that -- I think that that's\nthe way -- I don't think Stettinius would want\nto change that.\nC:\nYeah. Well, if that's -- if that's the way it\nhas been done, and that's the way it should be\ndone, why, certainly, that's all right.\nHMJr:\nWell, I think\nC:\nMr. Monnet merely asked me -- he said, \"What\nkind of questions are you going into and what\nkind of -- what information do you want?\" And\nI just told him, \"Well, I'll have Pete Collado\ncall you and tell you what kind of questions\nwe would be asking.\"\nHMJr:\nWell, the Treasury\n....\nC:\nHe told me that he thought he was going to France\nimmediately.\nHMJr:\nWell, may I just say those kind of questions\ndirected at the French Treasury -- I mean, we --\nwe've got eleven years experience on that.\nC:\nYes.\nHMJr:\nAnd we've got a vast amount of information now.\nC:\nFine.\nHMJr:\nAnd I think we should continue to do that.\nC:\nAll right. Fine.\nHMJr:\nNow, may I suggest this so that we can get off\nto a right start: couldn't you and Harry White and\nOscar Cox get together so that we could present a\nunited front vis-a-vis the French Government?\nC:\nCertainly.\nHMJr:\nAnd Monnet has asked to see me. He's coming in\nthis morning. I'm going to listen to him, see?\nRegraded Unclassified\n- 4 -\n253\nC:\nYes.\nHMJr:\nBut in view of the turn that things are going to\ntake, I'd like to tell him that the American\nGovernment will give him an official answer\nwithin twenty-four hours.\nC:\nOn what?\nHMJr:\nWell, on how we're going to proceed.\nC:\nYou mean as to whether we sign the agreement first\nand\nHMJr:\nYeah, and what we expect.\nC:\nYes.\nHMJr:\nI mean, tell him -- just tell him the facts of life --\nJust what they are.\nC:\nWell, Henry, I don't think there's any necessity of\nour getting together on that if -- if you -- if the\nTreasury still maintains their position on it, why,\nwe just give in. That's all. And tell him now.\nHMJr:\nWell, what -- what -- what are you going to tell him?\nC:\nJust tell him that we want to -- we want to discuss\nit with him. Or you -- you're the man to do it, why\nthen, you do.\nHMJr:\nNo, I -- I don't like to be so -- well, in the first\nplace, I've discussed this thing with Oscar Cox.\nHello?\nC:\nYes.\nHMJr:\nThis morning. And Oscar agrees now with the position\nwe're taking.\nC:\nI see.\nHMJr:\nI want to tell you that.\nC:\nYes.\nHMJr:\nNow, I still think that -- so that we'd be sure that\nwe'd give them the right information -- I think it\nwould be worth your time if you'd spend fifteen\nminutes with White -- with Cox.\nRegraded Unclassifie\n- 5 -\n254\nC:\nI'm perfectly willing to do it at any time that\nwe can find a convenient time to get together.\nI'm perfectly willing to do it. But I'm just\nsaying that when we get through, I think we'll\narrive at the decision we arrive at now, which\n1s that if you don't change your position, why,\nwe'll go to your position. That's all.\nHMJr:\nWell, I -- I am -- overnight nothing has happened\nto make me change my position and now that Cox\nsays that he thinks that my position is correct,\nwhy, I feel fortified.\nC:\nYes. Well, then I think -- I mean, I'd be delighted\nto get together with Harry and Oscar at any time,\nbut I think that\nHMJr:\nWell, I think it should be something on a piece of\npaper that -- that State could -- if you don't\nmind my saying it -- consult with F.E.A. and Treasury\nto make sure that what we tell the French Government\nis something that we can see through.\nC:\nYes. All right. Fine. Let's see -- this is Friday.\nWell, I was trying to get Oscar Cox to ask him to\ncome and have lunch with me tomorrow. If Harry\nwants to come, why, we three will just get together\nand talk about it at lunch tomorrow.\nHMJr:\nWell, Harry is here now in the office and so is\nOscar.\nC:\nAll right.\nHMJr:\nI'll ask them right now if I may, please.\nC:\nYes, fine.\nHMJr:\nJust a moment. Just a minute. (Talks aside.)\nHarry says he has to go back and look at his\ncalendar.\nC:\nWell, tell him to let me know.\nHMJr:\nHe'll let you know.\nC:\nAt 12:30 if\nHMJr:\nCox says he can make it.\nRegraded Unclassified\n255\n- 6 -\nC:\nHe can\n....\nHMJr:\nCox says he can make it.\nC:\nAll right. Tell Oscar to meet me at 12:30 at\nthe Metropolitan Club.\nHMJr:\nAll right.\nC:\nAnd then Harry to do the same and we'll sit down\nand talk about it then while we eat lunch.\nHMJr:\nI think if we can move as three partners on this\nthing -- I think it -- I think it would be much\nmore advisable.\nC:\nFine. I'll be glad to do it, Henry.\nHMJr:\nThank you so much.\nC:\nOkay. Bye.\nis\nRegraded Unclassified\n256\nJanuary 26, 1945\n11:59 a.m.\nHMJr:\nHello.\nOperator:\nMr. Clayton 18 holding a staff meeting in his\noffice -- his own staff.\nHMJr:\nWell, let me talk to Mr. Grew.\nOperator:\nAll right.\nHMJr:\nHello.\nOperator:\nMr. Grew has just started his press conference.\nThey said they could send a note in to Mr.\nClayton. It will take a couple of minutes to\nget him on.\nHMJr:\nYes, send a note in to Clayton.\nOperator:\nRight.\nHMJr:\nI want to talk to him.\nOperator:\nAll right.\n12:02 p.m.\nHMJr:\nHello.\nOperator:\nMr. Clayton.\nHMJr:\nHello. Will.\nWill\nClayton:\nYes, sir.\nHMJr:\nLook, Will, you fellows are getting me all tied\nup in knots over here.\nC:\nWhat's the matter?\nHMJr:\nNow, at 11:46 Mr. Grew's letter was delivered to\nmy office. Hello?\nC:\nYes.\nHMJr:\nAnd you've undoubtedly seen it.\nC:\nYes, I initialed it yesterday. It should have\nbeen over there yesterday afternoon.\nRegraded Unclassified\n- 2 -\n257\nHMJr:\nWell, of course, it's -- well, you know what's\nin it.\nC:\nYes.\nHMJr:\nIt's -- it isn't in agreement with what you and\nI just agreed to about -- around 11:30.\nC:\nWell, what I said, Henry, was that our position\nis still that we felt that We ought to go ahead\nwith the master agreement, but that if your\nposition was to the contrary, that we -- we would\nsay all right, let's go ahead on your -- we with-\ndraw -- at any rate, we still remain of that\nopinion but we say that we give way to you.\nHMJr:\nWell, then, let's stop writing letters to each\nother, what?\nC:\nWell, you asked for an answer to your letter.\nHMJr:\nThat's right.\nC:\nAnd that was prepared early yesterday morning\nand should have been delivered to you yesterday\nmorning. It just didn't make the round. And the\nonly reason we wrote you a letter was that you\nwrote us one and that we understood you wanted\nan answer.\nHMJr:\nBut at 12:05 today you and I are together?\nC:\nYes, we\n....\nHMJr:\nYou accede to the Treasury position?\nC:\nWe do.\nHMJr:\nAll right. And then the three of you will have\nlunch tomorrow and -- and iron it out.\nC:\nThat's fine.\nHMJr:\nIs that right?\nC:\nYou bet.\nHMJr:\nI thank you.\nC:\nAll right. Thank you.\nRegraded Unclassified\n258L\nJanuary 26, 1945\nMEMORANDUM FOR THE SECRETARY'S FILES\nI called the attention of the Secretary to the fact that the\nletter the Decretary received from Mr. Grew on January 22, 1945, had\nbeen interpreted by Secretary Morgenthau as being a reply to Secretary\nMorgenthau's letter to Mr. Stettinius of January 23 whereas Mr. Grew's\nletter had been a reply to Secretary Morgenthau's letter of January 18.\nae had not yet received a reply to the January 23 Treasury letter. The\nletter of January 23 had been handed to Mr. Yost with instructions that\nhe submit it to Mr. Stettinius with the following comment: Secretary\nMorgenthau felt that in his letter of January 23 he was backtracking\nslightly from his letter of January 18, and if Mr. Stettinius felt\nthat the latter of January 23 which Secretary Morgenthau signed was\ntoo tough he should send the letter back and the Secretary would be\nglad to discuss the matter with him before attempting to send him a\nletter formally.\nWhen I called his attention to the fact that Grew's letter was in\nanswer to Treasury's letter of January 18 the Secretary got in touch\nwith Yost to ask him about the letter of January 23 to Stettinius that\nYost had walked over. Yost replied over the phone that he thought he\nhad been asked to give the letter to Mr. Clayton and had done so. The\nSecretary said that Yost misunderstood but that in any case he would\nlike an answer that same day to his letter of January 23.\nLater in the day Mr. Clayton came to see the Secretary, and the\nmeeting is described in a memorandum prepared by Mr. DuBois.\nAt the end of the conference, Mr. Clayton said that in view of the\nSecretary's comments (described in the memorandum) he would like to go\nback to the State Department and canvass the State Department's position.\nThe next morning Mr. Clayton telephoned to say that he had mailed\na reply to the Secretary's letter of January 23, and assumed it had been\nreceived. The Secretary told him he had not yet seen it. Clayton said\nthat the State Department had not changed its position and was not in\nagreement with the view expressed by the Treasury in the letter of\nJanuary 23. However, since the Treasury was adamant in its position and\nsince Mr. Clayton didn't want to hold things up, they were willing to\naccept the Treasury's position and go ahead on that basis. The\nSecretary repeated the question \"Then you are ready to agree with the\nTreasury?\", and Mr. Clayton repeated that State Department did not\nbelieve that the Treasury's suggestions were the correct ones to adopt\nbut that they were willing to go along with the Treasury.\nAbout half an hour later Mrs. Klotz brought in the letter from\nthe State Department to which Clayton had referred. A copy of the\nletter is appended. The letter gave the State Department's reason for\nnot agreeing with the Treasury's position and did not indicate that the\nRegraded Unclassified\n259\nDivision of Monetary\nResearch\n- 2 -\nState Department was willing to go along and accept the Treasury\npoint of view. The Secretary, after reading the letter, tried to\nget Mr. Clayton. Clayton was out so he got Grew on the phone. He\ntold Grew that Clayton had stated over the phone that State was.\nwilling to accept the Treasury position but that the letter which he\nhad received did not say that. In fact, the letter stated that State\ndid not agree with the Treasury position. Mr. Grew said that he would\ntake the matter up with Clayton and get in touch with the Secretary\nlater in the day. A little later Mr. Clayton called up and explained\nthat apparently the Secretary had not quite understood his remarks over\nthe phone. Clayton said that the letter the Secretary received that\nmorning did not agree with the Treasury position but that Mr. Clayton\nhad said in view of the fact that the Treasury did not want to recede\nfrom its position, and in view of the necessity to go ahead on the\narrangements, that the State Department was willing to change the de-\ncision it had indicated in its reply to Decretary Morgenthau's letter\nand was prepared to accept the Treasury position. He explained that\nthe State Department had come to that decision after the letter had been\nsent and that in his telephone coversation with Decretary Morgenthau\nearlier that morning he thought he had made that clear. The Secretary\nasked: \"Then your statement now that you accept the Treasury position\nreplaces the letter?\" \"In other words,\" he continued, \"the letter which\nI have just received from Mr. Grew in response to Treasury's letter of\nJanuary 23 is, in effect, dead?\" Clayton said, \"That is correct.\" He\nsaid that State now accepted the Treasury point of view and the letter\nwhich they had just sent in reply to Secretary Morgenthau's letter of\nJanuary 23 was superceded by the telephone conversation.\nThe Secretary also told Mr. Clayton that he had been informed that\nCollado was going to have a conference with Mr. Monnet to ascertain\nwhat the financial situation of France was. Mr. Morgenthau said that\nit had always been the practice, and he presumed Mr. Stettinius had not\ndone anything to alter it, for the Treasury to undertake talks with re-\ngard to financial matters with the French Treasury. He said that he felt\nif there was any financial information to be obtained or any discussion\nto be held with the French Treasury that the Treasury should handle it\nand not the State Department. Mr. Clayton said he wasn't aware of the\nprevious practice and he certainly wouldn't wish to alter the practice\nif that was what was done. He said that he had asked Collado to talk\nto Monnet and to inform him of the kind of information the United States\nwould want with regard to French financial affairs but that he would\nspeak to Collado and instruct him to let the Treasury Department handle\nit.\nH. D. White\nNew\nRegraded Unclassified\nC\n0\n260\nP\nY\nJanuary 25, 1945\nMy dear Mr. Secretary:\nUpon receipt of your letter of January 18 addressed\nto the Secretary, concerning a lend-lease agreement for\nFrance, I replied on his behalf in a letter, dated January\n22, and expressed agreement with your view that lend-lease\nfor France, both in munitions and in non-munitions,\ngenerally should rest on the same principles as lend-lease\nfor Great Britain. I also stated that I had asked Mr. Clayton\nto discuss with Mr. White and Mr. Oscar Cox a text of an\nagreement which could be presented to Mr. Monnet early this\nweek. It was my understanding that you were in agree-\nment with the Foreign Economic Administration and the De-\npartment that a master lend-lease agreement should be signed\nwith the French, and that, thereafter, representatives of\nthe three agencies should hold discussions with French repre-\nsentatives concerning the nature of the supply program to\nbe undertaken and the terms upon which supplies would be\nfurnished.\nApparently, my letter crossed a second letter from you\nwhich was received in the Department on January 23, in\nwhich you suggested that before a lend-lease .agreement is\nentered into with the Provisional Government of France, a\ndetermination should be made as to the extent to which we\ndeem it appropriate that the French should use theirgold\nand dollar exchange resources in meeting their non-munitions\nrequirements. Since this suggestion is at variance with\nwhat I understood to be the position of the three agencies,\nI would like to bring the matter to your attention again.\nThe Provisional Government of France has now been recog-\nnized by this Government, and for the past several months\nthe French nation has participated with us and our Allies\nin the prosecution of the war in Europe. In view of our\npolitical policy with respect to the Provisional Government\nof\nThe Honorable\nHenry Morgenthau, Jr.,\nSecretary of the Treasury.\nRegraded Unclassified\n261\n- 2 -\nof France, the Department is anxious that our lend-lease\nrelations be placed on the same general basis as is the case\nwith respect to Great Britain and Russia, and therefore\nit seems desirable to offer a master lend-lease agreement\nto the French representatives for signature at this time.\nof course, I am in agreement with you that after such\na document has been signed, it will be necessary for repre-\nsentatives of the Treasury Department, the Foreign Economic\nAdministration and this Department to agree upon the amount\nof French dollar and gold assets, including the holdings of\nthe Bank of France, which we would consider to be a satis-\nfactory position for France so long as non-munitions are be-\ning furnished under lend-lease and to determine the extent\nto which we deem it appropriate that the French gold and\ndollar exchange resources should be used in meeting the non-\nmunitions requirements. As you know, the provisions of the\nmaster agreement will not prejudice our discussions of these\nmatters, but will merely provide a general framework for our\nlend-lease relations with France.\no\nSince the Department believes that it would be unwise\nto delay longer the signing of a master lend-lease agreement\nin view of the present political situation, may I ask that\nyou advise me whether you have any further objection to the\nsubmission of the text of such an agreement to the French\nthis week?\nSincerely yours,\n(signed) Joseph C. Grew\nActing Secretary\nRegraded Unclassified\n262\nJanuary 26, 1945\n2:01 p.m.\nHMJr:\nHello.\nJohn\nMcCloy:\nHello.\nHMJr:\nYes.\nM:\nI think we can go ahead with that O'Dwyer business.\nHMJr:\nWonderful.\nM:\nI talked to -- I got the Secretary to agree to it\nand then I had Judge Patterson.\nHMJr:\nWonderful.\nM.\nSo you can start putting it through. He's got\nto apply for inactive service.\nHMJr:\nI see.\nM:\nAnd get out of his uniform.\nHMJr:\nUh huh.\nM:\nAnd he'd better start that right along and I'll\nget that cleared up.\nHMJr:\nFine.\nM:\nSo that I'll meet it -- I'll get it -- meet it\ncoming up -- as it comes up, and 80 I think you\ncan go right ahead.\nHMJr:\nWell, I'll just talk to Grew.\nM:\nYes.\nHMJr:\nI haven't talked to him yet.\nM:\nYes.\nHMJr:\nOr Stettinius.\nM:\nYes.\nHMJr:\nBut I'll tell him it's all right with Stimson\nand me.\nUnclassifie\n263\n- 2 -\nM:\nOkay.\nHMJr:\nThat's very good service.\nM:\nAll right.\nHMJr:\nCome on over and play some more with your\ncamera.\nM:\nAll right, I'll be over and break in in the\nmidst of an argument again.\nHMJr:\nAll right.\nM:\nAll right. I got your letter.\nHMJr:\nOkay.\nM:\nOkay. All right, bye.\nRegraded Unclassified\n264\nJanuary 26, 1945\n2:04 p.m.\nHMJr:\nJohn.\nJohn\nPehle:\nYes, sir.\nHMJr:\nGeneral O'Dwyer is cleared by McCloy.\nP:\nWonderful.\nHMJr:\nAnd now I'm going to try to clear him with\nGrew.\nP:\nGrew, yeah.\nHMJr:\nYes. And whoever's brainstorm that was, I think\nit was a good one.\nP:\nYeah, I think it was Lux's\nHMJr:\nWhat?\nP:\nI thought it was Luxford but I didn't know.\nHMJr:\nWell\nP:\nMaybe it was yours.\nHMJr:\nNo.\nP:\nYou have 80 many of them, you don't need credit\nfor this one. (Laughs) It was a very good\nsuggestion. If Grew -- if Grew shows some\nresistance, I think we ought to go ahead and\nput him in as acting and settle it later.\nHMJr:\nYes.\nP:\nHow about the White House?\nHMJr:\nI'm not going to bother them.\nP:\nYou're not going to bother them?\nHMJr:\nNo. I'm not going to bother the White House.\nP:\nRight. That's wonderful.\nHMJr:\nRight.\nP:\nAll right, sir.\nRegraded Unclassified\n265\nJanuary 26, 1945\n2:27 p.m.\nHMJr:\nHello.\nOperator:\nGo ahead.\nHMJr:\nHello. Hello. Hello. Hello.\nJoseph\nGrew:\nHello.\nHMJr:\nMorgenthau speaking.\nG:\nHello, Mr. Secretary.\nHMJr:\nHow are you?\nG:\nFine, thanks.\nHMJr:\nTwo matters: John Pehle has been and still is\nthe Director of the War Refugee Board. Hello?\nG:\nYes.\nHMJr:\nI've given him other work in the Treasury and I\nrecommended yesterday to Mr. Stimson, in the place\nof Pehle we appoint General O'Dwyer. Hello?\nG:\nGeneral who?\nHMJr:\n0' Dwyer.\nG:\nDwyer, yes.\nHMJr:\nNo, 0' Dwyer.\nG:\nOh, how do you spell it?\nHMJr:\nO ....\nG:\n0' Dwyer, yes.\n:\nHMJr:\n0' Dwyer. He's been in Italy.\nG:\nYes.\nHMJr:\nI think he comes from Brooklyn.\nG:\nYes.\nRegraded Unclassified\n266\n- 2 -\nHMJr:\nAnd I've also asked the Army, in view of the\nimportance, would they let him return to civil\nlife and Mr. McCloy has just phoned me and said\nthat Mr. Stimson likes the idea very much and\nthey will release him from the Army.\nG:\nWell, now, what committee is that?\nHMJr:\nWar Refugee Board.\nG:\nWar Refugee Board, yes.\nHMJr:\nOf which Stettinius is a member with Stimson and\nmyself.\nG:\nYes.\nHMJr:\nAnd I recommend it.\nG:\nAs far as I know, it will be all right. Can I\nlook into it and give you an answer back?\nHMJr:\nSurely.\nG:\nYou want an answer this afternoon, do you?\nHMJr:\nIf possible.\nG:\nYes. I'll get right at it and let you know.\nHMJr:\nIf you could. Now the other thing -- just a\nmoment -- I got the letter you wrote me on the\nFrench situation around noon today. It only\ncame over at noon. Previous to that Will Clayton\nand I had a conversation and I told Will Clayton\nthat I felt that we should settle the dollar\nbalance thing first. See? And he has acceded\nto my position. Hello?\nG:\nYes. He told me that.\nHMJr:\nWell, I just wanted to make sure. And I told him\nI thought we'd stop corresponding and just take it\nfor granted that as long as he said that he would\naccede to the Treasury's position. Hello?\nG:\nYes.\nHMJr:\nNow, I don't have to write you a formal letter on\nthat, do I?\nRegraded Unclassified\n267\n- 3 -\nG:\nI don't believe 80. In other words, you accept\nour letter. Is that it?\nHMJr:\nWell, no. No, you see Clayton now takes the\nTreasury's position -- we should settle the\ndollar balance thing first.\nG:\nYes.\nHMJr:\nAnd then go in and ive them a lend-lease agree-\nment.\nG:\nI see. Well, now\n....\nHMJr:\nIt's perfectly clear with Clayton, but that does\nnot jibe with your letter.\nG:\nI see. Well, I'll have to look that up and see\nif we have to -- if there'll be any modifications.\nHMJr:\nWell, if you -- yes -- I mean, as the letter stands\nnow, is not the way Clayton and Oscar Cox and I\npropose to carry it out.\nG:\nAll right.\nHMJr:\nI didn't know\nG:\nI'll go into that and let you know.\nHMJr:\nAnd now -- and I'm seeing you at four, I believe.\nG:\nYeah. Now, one question comes up, Mr. Secretary,\nas the Secretary of State is chairman of this\nlegislative committee\nHMJr:\nYes.\nG:\nWouldn't it be appropriate to have the meeting over\nhere? I think it would if it's convenient to you.\nHMJr:\nIf you want to stand on protocol, it doesn't make\nany difference to me.\nG:\nI don't give a damn about protocol.\nHMJr:\nWell\nG:\nUh\nRegraded Unclassified\n268\n- 4 -\nHMJr:\nThen for what other reason?\nG:\nIf it's more convenient to you, this time I'll\ncome over, but I think that future meetings ought\nto be over here probably, because the Secretary of\nState is chairman. Will that be agreeable?\nHMJr:\nOh, yes. I don't -- I don't -- I don't care where\nthe meeting is held.\nG:\nWell, we'll come over to you today anyway.\nHMJr:\nI'd just as leave lief come over.\nG:\nNo, it's all right with me.\nHMJr:\nAll right.\nG:\nSo we'll come over at four o'clock in your office.\nHMJr:\nYeah, but I -- I recognize that the Secretary of\nState is chairman. Hello?\nG:\nYes.\nHMJr:\nBut I just thought that\nG:\nWell, I'm not the Secretary, myself. I\n....\nHMJr:\nWhat's that?\nG:\nI say, I am not the Secretary, myself, so I'm glad\nto come over to your office.\nHMJr:\nWell, I realize that.\nG:\nI think our future meetings, perhaps, ought to\ncome over here.\nHMJr:\nUh ....\nG:\nI'll be there at four o'clock then.\nHMJr:\nAll right.\nG:\nAll right. Thank you. Good bye.\nRegraded Unclassified\n269\nJanuary 26, 1945\n3:05 p.m.\nNEGOTIATIONS WITH CHINA\nPresent: Mr. White\nMr. Friedman\nMr. Kung\nMr. Chi\nMrs. Klotz\nH.M.JR: I am sorry, Doctor Kung, that I am late.\nMR. KUNG: I want to especially thank you for the\ntrip you made down to see me.\nH.M.JR: That was all right.\nMR. KUNG: And I am coming here to thank you first\nfor that.\nH.M.JR: Well, I will come to Chungking if you invite\nme.\nMR. KUNG: I will invite you any time.\nH.M.JR: Take it easy; you are supposed to be in the\nhospital.\nMR. KUNG: I just came out for the first time.\nH.M.JR: How did you get along on a vegetable diet?\nMR. KUNG: All right.\nMR. WHITE: He hasn't tried. (Laughter)\nMR. KUNG: I have not reduced any; my weight is just\nthe same.\nRegraded Unclassified\n270\n- 2 -\nH.M.JR: Mrs. Morgenthau said she wanted to send\nyou up some food, but I said I didn't think we could\ncompete with Mrs. Soong.\nMR. KUNG: I am trying to get my figure back. The\nDoctor says I weigh too much.\nH.M.JR: You lost ten pounds?\nMR. KUNG: I lost half a pound. He wanted me to\nlose ten pounds.\nH.M.JR: I imagine your family sent you good food.\nMR. KUNG: They gave me some chicken soup.\nH.M.JR: The war is going much better, isn't it?\nMR. KUNG: Yes. Isn't that good?\nH.M.JR: Wonderful: What do you make out of the\nRussians?\nMR. KUNG: The Russians are very clever. They make\nprogress when they start, and they will go ahead.\nH.M.JR: It is amazing what they have done, isn't\nit?\nWell, we have from the 1st of February to the 1st of\nOctober back of us, haven't we?\nMR. KUNG: Yes.\nH.M.JR: All we have to worry about is October,\nNovember, and December. Is that right?\nMR. KUNG: Yes. I am not worried.\nH.M.JR: Have you spent all of that one hundred and\nfifty million dollars and four cents?\nMR. WHITE: I think they got the four cents.\nRegraded Unclassified\n271\n- 3 -\nMR. KUNG: No, we deposited it. When the war is\nover, I hope I won't have to worry, myself, but my\nGovernment will.\nH.M.JR: They have this road open now.\nMR. KUNG: Yes.\nH.M.JR: That ought to help, oughtn't it?\nMR. KUNG: Yes.\nH.M.JR: How many tons can go over that?\nMR. KUNG: That depends on how many trucks you put\non. The more trucks they put on--\nH.M.JR: Five thousand tons on a month?\nMR. KUNG: More than that.\nH.M.JR: More than that?\nMR. KUNG: Yes.\nH.M.JR: Ten thousand?\nMR. KUNG: Maybe thirty thousand! You see, the smallest\ntruck would take two tons. With a big truck you can take\nfour tons, and then if you have, say, fifteen thousand\ncars, they would be able to make two trips during the month.\nMR. WHITE: During the best part of the other road,\nI think you got thirteen thousand tons a month at its peak.\nMR. FRIEDMAN: They do have the advantage now of\nhaving a pipeline being built by the American Army for\nits military operations, so they will be able to carry\npetroleum in pipes.\nMR. KUNG: Originally they had to carry that gasoline\nby trucks. Now they have to pipe it.\nRegraded Unclassified\n272\n- 4 -\nH.M.JR: That will help.\nMR. KUNG: The pipes reach--\nH.M.JR: The fact that they know the road is open--\nhas that had any effect on prices?\nMR. KUNG: Yes.\nH.M.JR: Stuff will come out of hoarding?\nMR. KUNG: Yes, stock will come out of hoarding,\nbecause as soon as you know the goods can be moved in,\nthen the merchant would know--they think the price would\ndrop--and they take that and dispose of their goods first.\nThen outside goods come in gradually, and you have more\nsupply. Naturally the price will go down.\nH.M.JR: Your friend K. P. Chen was in here for about\nfive minutes.\nMR. KUNG: Was he? He came to see me.\nH.M.JR: He was here about five minutes.\nMR. KUNG: he is coming back again.\nH.M.JR: You know what he always said, he is scared\nof being called a politician. He said, \"I am a banker.'\nHe said, \"All politicians die young. Remember, I am not\na politician; I am a banker. (Laughter)\nMR. KUNG: Bankers live to an old age? Not always.\nH.M.JR: He said he was coming back. He looks very\nwell.\nMR. KUNG: Yes, he is only one year younger than\nmyself. He looks very well.\nH.M.JR: Just a couple of young fellows?\nMR. KUNG: We are not old yet.\nRegraded Unclassified\n273\n- 5 -\nH.M.JR: No. Well, sir?\nMR. KUNG: Well, sir.\nH.M.JR: What is the business for today?\nMR. KUNG: You know what the business is for today.\nOr are you just saying that?\nH.M.JR: I am not sure that I do. Do you know,\nHarry?\nMR. WHITE: I thought that Doctor Kung was coming\nhere to give us some data which would constitute the\nbasis of consideration of what adjustment would be made\nfor the last three months of last year.\nH.M.JR: Is that it?\nMR. KUNG: Yes, that is the question. According to\nthe agreement that we reached for those three months,\nanother settlement should be made.\nMR. WHITE: Have you got some data on the settlement\nas to the expenditures, because we didn't get any?\nMR. KUNG: I tell you, the loans to your Army for\nOctober, November, December, and January are for each\nmonth two billion dollars.\nMR. WHITE: Two billion dollars each month, or a\ntotal of eight billion dollars.\nMR. KUNG: Including January.\nMR. WHITE: Including the four months.\nMR. KUNG: If they leave January out, they owe six\nbillion dollars advanced to the U. S. Army, and then there\nis another account, the request of the Army advance that\nwas made to the National Engineering Commission. That is\na commission set up to build or to repair any airfield\nor buildings and roads--anything you want. That is, up\nto the end of the year, two billion, eight hundred million.\nRegraded Unclassified\n274\n- 6 -\nMR. WHITE: For those three months?\nMR. KUNG: Yes.\nMR. CHI: Your excellency, for January the direct\nadvance is three billion.\nMR. KUNG: For January three billion?\nMR. CHI: Yes.\nMR. WHITE: Do you have all of that down in a memo?\nMR. CHI: No, we didn't write it.\nMR. KUNG: I asked for the figure they wanted from\nthe Minister of Finance from the Central Bank. Most of\nthe money is, of course, advanced by the Central Bank, and\nas to how much is advanced by the Minister of Finance, I\ndon't think it is very much; I don't have that, but I\nwired for it.\nMR. WHITE: Wouldn't the next step be to submit 8\nmemo with the data on it and check it with the Army?\nOther than that we can't begin discussion.\nMR. KUNG: I think your Army knows that.\nMR. FRIEDMAN: The Army actually has not received\nyet from Chungking the figures for December. They know\nthat for October and November the figures more or less\njibe with the ones that Doctor Kung has given for the\nmonths, but they don't have them for the third month,\nor last month of the year.\nMR. KUNG: For the last three months there has been\neach month a request for two billion dollars in Chinese\ncurrency. That is for the Army's use, besides some advance\nthat was made to the Engineers Commission at the request\nof the Army at our request, and for January, as he just\nsaid, it is three billion.\nMR. WHITE: How soon did you get an indication that\nthe Army would be able to supply figures for the third\nperiod?\nRegraded Unclassified\n275\n- 7 -\nMR. FRIEDMAN: The Army said that they felt they\nought to give headquarters until the 3lst.\nMR. WHITE: Until the 31st of this month?\nMR. FRIEDMAN: That would give them a whole month\nto get the necessary data to end up the previous month.\nMR. WHITE: They are a month behind.\nMR. FRIEDMAN: Before they go back and ask General\nWedemeyer and say things are slow, they have agreed to\ngo back to them at the beginning of next week for the\nfigures.\nMR. WHITE: Isn't the thing to do, Mr. Secretary,\nto wait until the Army would supply us with the data?\nThey can't get the end of December figures until at least\nthe end of January. We've got the October, November,\nfigures, and since you want to make an adjustment for\nthe three months, we can wait another week or two and the\ninformation will be here.\nH.M.JR: As I say, I wasn't fully prepared for this\nmeeting when you suggested that you come down. I looked\nforward to seeing you.\nMR. KUNG: That is very kind of you.\nH.M.JR: But we are shy of which month yet?\nMR. WHITE: December.\nH.M.JR: December. I see.\nMR. WHITE: There is also a month's lag.\nH.M.JR: So I just don't know.\nMR. KUNG: We can wait until the December figures\ncome in.\nH.M.JR: When will they be in?\nRegraded Unclassified\n276\n- 8 -\nMR. WHITE: The Army said they expect them by the\nend of the month, but they don't like to go back to\nWedemeyer and needle him until they've given him that\nmonth. Therefore, it may be the end of the month, either\nthat, or they can supply us--\nH.M.JR: All right.\nMR. KUNG: That's all right.\nMR. WHITE: They can supply us with data on a memo\nand you can consider that, and the first two months are\napparently the same, and if the figures are delayed, we\ncan go on the basis of your data.\nH.M.JR: If they are in a hurry, I think it is nicer\nto do it on the three-month basis, don't you?\nMR. KUNG: Yes, it is all right, but I can tell you\nthat the third month of December is the same as October\nand November, two billion.\nH.M.JR: Which General is handling this?\nMR. WHITE: I suppose it is General Richards who is\ngiving us the data, isn't it?\nMR. FRIEDMAN: That's right.\nMR. WHITE: We are getting it from General Wedemeyer.\nMR. CHI: The data for these three months is much\nsimpler than before.\nMR. WHITE: Doctor, either you give us a memo and we\ncan operate on that basis, and then revise it in the light\nof the Army so there won't be any delay, or we can wait\nfor the Army, but as it is, we have nothing either from\nyou or from the Army.\nMR. KUNG: It is only a few days. I think by the\nend of this month the Army ought to be able to give you\nfigures for December.\nRegraded Unclassified\n277\n- 9 -\nMR. WHITE: Couldn't you in the meantime send us\na memorandum with your figures?\nMR. KUNG: I will do that.\nH.M.JR: I think if we could have a memorandum\nfrom you, it would help.\nMR. KUNG: I will do that. How about shipping gold?\nH.M.JR: Harry, you are an expert on gold.\nMR. WHITE: What was the last shipment that went a\nweek ago?\nMR. FRIEDMAN: I don't know exactly when.\nMR. WHITE: Well, as soon as another shipment is\npossible we will make it, but the proposal to ship it\nthrough commercial channels is one that we don't think is\na very wise one.\nMR. KUNG: We prefer if you can, you can ship it, but\nthe Army is so much better, but the only thing is that you\nsay my government hasn't reversed their policy, and it was\nreported today that the government now is trying to abolish\nsome taxes.\nMR. WHITE: Abolish taxes.\nMR. KUNG: Yes.\nH.M.JR: Where is this going to be? In China?\nMR. KUNG: In China.\nMR. WHITE: They waited until you got out of town.\nMR. KUNG: Formerly my policy was to get them as much\nas possible from the taxes, see? That was in order to\nhelp the inflation.\nH.M.JR: I know a lot of bankers in New York will move\nRegraded\nUnclassifie\n278\n- 10 -\nto China. (Laughter) That is, if you abolish taxes.\nMR. WHITE: I hope they won't be the same bankers that\nmoved from China.\nMR. KUNG: They have abolished some taxes.\nMR. WHITE: Are they really going to reduce taxes?\nMR. KUNG: Yes.\nMR. WHITE: That sounds very strange. I think that\nwouldcause more reluctance on sending any gold, because\nyou are going on a policy of inflation. It is going to\ndissipate gold even more.\nAre you sure of that, Doctor?\nMR. KUNG: Yes.\nMR. FRIEDMAN: We had heard they were going to abolish\nconsumption taxes for one thing.\nMR. KUNG: Several taxes have been abolished. Of course,\nthat means the government will lose more revenue as the\nexpenditure grows. Therefore, we have to issue more notes,\nand in order to try to keep down the inflation, the best\nthing is just serve the gold to gather money back from the\nmarket. Otherwise, you have too much surplus of money\nand the commodity prices will go up.\nMR. WHITE: Well, I think, Dr. Kung, that the question\nof continuing to ship gold the way we have, which seems to us\nat the moment to be in line with what you want, would be\nsatisfactory.\nNow, raising the question of shipping gold by more\nrapid means, we will have to take that up with the Army.\nMaybe with the new road that has been opened up they can\nsend a little more that way, but sending it on commercial\nvessels we feel is a most unwise policy.\nRegraded Unclassified\n279\n- 11 -\nMR. KUNG: You see, this thing was when Madame\nChiang was here and she spoke to the President about this\ntwo hundred million dollars of gold, and also the President\nagreed to it, or almost agreed to ship it, in order to sell\nit, take advantage of the high prices of gold, to sell it\non the market and get as much of this currency back in order\nto suppress inflation. Well, that has helped some, recently,\nbecause we are short of gold. Therefore, we instructed\nthem to sell certificates, that is, sell paper, promise to\npay three months afterwards, and the time has arrived.\nThere was no gold to be delivered, and that created black\nmarkets, so we had to do something recently. You know that\nthere has been an arrangement to buy some gold from the\nBritish government from India to ship into China, and then\nwe pay the British.\nMR. WHITE: At a very fantastic price.\nMR. KUNG: That is worth the price.\nMR. WHITE: I mean the extra, the five percent.\nMR. KUNG: Well, that is representative.\nH.M.JR: How much do you pay?\nMR. WHITE: Five percent.\nH.M.JR: Interest?\nMR. WHITE: It isn't interest. It is supposed to be\nvarious charges.\nMR. KUNG: Shipping charges, service charges.\nMR. WHITE: But inasmuch as the gold was there already,\nthe question is whether there should be any charges.\nH.M.JR: What is a good price for an ounce of gold\nnow?\nMR. WHITE: In Chungking?\nRegraded Unclassified\n260\n- 12 -\nMR. KUNG: In Chungking we sold gold at, I think it\nwas eighteen thousand five hundred dollars an ounce, but\nthe shortage that kept up recently caused no gold to be\ndelivered. Therefore, well, people are speculating.\nThose people who had enough gold sell on the market and\ntry to get more.\nH.M.JR: Well, we had a message that the Central\nBank has been selling gold.\nMR. KUNG: Yes. We have been selling gold.\nH.M.JR: What is the highest price they get now--\nhow high?\nMR. KUNG: Eighteen thousand five hundred. That is\nthe official price, and that was the price of it at the\ntime on the theory when there was no gold to be delivered.\nTherefore, until recently, a black market appeared, and\nwhen we got gold shipped by you the black market has\ndropped, but you don't have gold to meet the demand.\nThat is so that we can not deliver. I am afraid another\nblack market will appear.\nH.M.JR: Well, we keep watching it all the time.\nMR. WHITE: I think we ought to examine what the\npossibilities are of the new road opening up. That might\nprovide additional facilities. That's the bottleneck.\nMR. KUNG: You see, we suggest an increase in the\ndemand both by the Chinese government to prepare and for\nthe war against the Japanese, and also your army's demand.\nYour personnel is increasing in China all the time, and\na year ago you only had ten thousand, but now you have\nnearly forty thousand.\nMR. WHITE: Troops?\nMR. KUNG: Yes--personnel--people connected with the\nwork, see, of building air fields, and the ground forces,\nand so forth; and, of course, now including also the\nRegraded Unclassified\n281\n- 13 -\nreason why Mr. Nelson and the WPB--\nMR. WHITE: He is spending some money there?\nMR. KUNG: I had to advance ten billion dollars to\nhim.\nH.M.JR: Well, you had to advance ten billion to\nwhom?\nMR. KUNG: To the WPB.\nH.M.JR: To Nelson?\nMR. KUNG: Yes. Well, he said he was going to try to\nget all these factories to work. Then you have to give\nthem money in order to get materials and so on, money to\npay their laborors.\nMR. WHITE: Was that a government advance, or did he\nget that from private banks?\nMR. KUNG: From the Central Bank.\nMR. WHITE: couldn't he borrow from private banks?\nMR. KUNG: No.\nH.M.JR: I understood from Nelson he got the Generalis-\nsimo to order that the interest rates be reduced.\nMR. KUNG: Yes.\nMR. WHITE: Were they?\nMR. KUNG: Oh, yes.\nMR. WHITE: If they don't borrow from them, I thought\nthat the new program which he initiated was going to be\nfinanced by borrowing from banks.\nMR. KUNG: From the Central bank?\nRegraded Unclassifie\n282\n- 14 -\nMR. WHITE: From private banks.\nMR. KUNG: From the four banks, the four government\nbanks. Take the Bank of China--they made a loan, but if\nthey need to, they are allowed to take their paper to\ndiscount with the Central Bank.\nMR. WHITE: I see. Well, have the private banks\ntaken any of the financing?\nMR. KUNG: No.\nMR. WHITE: No? Well, I thought that Mr. Nelson\nthought that he had convinced the banks. It is the govern-\nment that is financing.\nH.M.JR: It was the private banks I thought he had\nconvinced.\nMR. WHITE: That is what I thought, because the other\nis--\nMR. KUNG: They really--the Central Bank is a govern-\nment bank. The other banks are not entirely government\nbanks. The Bank of China, the Bank of Communications,\nFarmers Bank--\nMR. WHITE: Are not government banks?\nMR. KUNG: The government has shares, but--\nMR. WHITE: We have always regarded them as government\nbanks.\nH.M.JR: Well, sir, we shall meet again soon.\nMR. KUNG: All right.\nH.M.JR: At your pleasure. We will get some kind of\nmemo from you? Mr. White will call up the Army and tell\nthem to hurry up with the December figures.\nMR. WHITE: And we will also explore the other pos-\nsibility.\nMR. KUNG: There is another thing, Mr. Secretary,\nRegraded Unclassified\n283\n- 15 -\nI would like to request from your good office, and that\nis I would like to know, that is, my government would like\nto know what is the frozen fund, the Chinese--\nMR. WHITE: The total?\nMR. KUNG: Yes, and, of course, I know that total,\nand put on there frozen, the whole total including the\ngovernment fund, bank fund, everything else included, but\nnow I would like to know how much of that really belongs\nto the private Chinese.\nMR. WHITE: How much is government and how much--\nMR. KUNG: ...is private.\nMR. WHITE: Do you know the total? You don't know\nthe total?\nMR. KUNG: I think I knew the total.\nMR. WHITE: Just deduct the government, and the rest\nis private.\nMR. CHI: We knew the total as of June, 1941, but\nnot since then.\nH.M.JR: We will give it to you.\nMR. WHITE: You would like the total government and\ntotal private at this time.\nMR. KUNG: Yes, at this time.\nH.M.JR: That is easy. Anything else?\nMR. KUNG: Another thing I would like to speak to\nyou about is you say when they should have savings cer-\ntificates. The purpose of that was to help the Chinese\nindustries to put their money into this instead of buying\ncommodities, so as soon as the road opens, the war is over,\nRegraded Unclassified\n284\n- 16 -\nthey can use that for purchasing machinery, materials,\nfrom this country in order to bring to their industry\nand business and the bond--that over short term, and the\nbuyer could either choose it for one year or two years\nor three years. The interest varies, and two years is\na little more than one year, and three years a little\nmore than two years, and the bond issued by the govern-\nment is a little longer in term.\nThe money, of course, is already set aside for that,\nthe demand, but since then we have figured out, as I\nthink I told you, if we did this in gold as originally\nplanned and drew them for ten years, the government will\nhave to pay something, I think, like thirteen million\ndollars as interest. I think that China is in a dif-\nficult position, especially after this war, and at Bretton\nWoods, now, we wanted some currency, see, so my govern-\nment is thinking of shortening that time.\nMR. WHITE: Refinancing.\nMR. KUNG: Leave the money here for nothing and then\nwe have to pay into it all the time. I think if we can--\nin view of this road to be opened, the war may be shortened--\nwe would like to have the people with their money to use\nit with the papers and it will help them and also reduce\nthe government obligation.\nMR. WHITE: Well, the idea is to refinance some of\nthe notes, instead of making them long term, make them\nshort term, because he says the dollars have to be here\nanyhow. They are kept sort of frozen behind them, and\nthey are paying interest on that. If they can't use the\nmoney, they would rather release those dollars after the\nwar is over, so they can be spent here and thereby save\nthe interest.\nI think there is much in that. I think you might\nwant to consider in that program some suggestion that\nif the money is going to be released that way, you\nmight want to consider whether you can get sufficient\nassurance as a mechanism that it will be spent for that\nRegraded Unclassified\n285\n- 17 -\npurpose and not be spent for investments in American\nsecurities.\nMR. KUNG: That money will be. When they want that\nthey will have to say what they want to buy in this\ncountry, see?\nMR. WHITE: I think probably--are you asking the\nSecretary's advice on this?\nMR. KUNG: Yes.\nH.M.JR: I would like to think it over a little.\nMR. WHITE: We shall submit the proposal in a memo.\nMR. KUNG: Of course, the Chinese government originally--\nthe government could have made it five years or four years.\nI think that was probably overlooking on our part to make\nit a long instead of a short term, forgetting we had\ninterest to pay, because we issued that one hundred mil-\nlion. Now that is--\nMR. WHITE: That isn't in U.S. dollars, too.\nMR. KUNG: That is credit. The capital for the redemption\nof that bond is here, but when this goes on our government\nwill have to pay three million dollars.\nMR. WHITE: Haven't you got the right within the bond\nto pay them off whenever you want to?\nMR. KUNG: Yes.\nMR. WHITE: You have that, and you are questioning\nwhether you should exercise it? The war isn't over yet.\nYou can always make that decision.\nMR. KUNG: Yes.\nMR. WHITE: I will submit it.\nMR. KUNG: The government has a right to shorten it,\nRegraded Unclassified\n286\n- 18 -\nyou see. I'm trying to save a little money.\nH.M.JR: Good.\nMR. KUNG: For the future.\nH.M.JR: We all try to do that. We are not very\nsuccessful.\nMR. KUNG: Well, all right.\nH.M.JR: All right, sir, take care of yourself now.\nYou know what I told you.\nMR. KUNG: Thank you.\n(Mr. Kung and Mr. Chi leave the conference.)\nMR. WHITE: That's going to be tough.\nH.M.JR: You can do it very well. I'll throw it to\nyou the next time. You can say Friedman--\nMRS. KLOTZ: His turn will be next.\nMR. WHITE: We were very grateful for the most part\nthat they never raised the question of commercial shipments.\nThen somebody tipped them off.\nH.M.JR: In this cable I looked at they said they\nwere selling that for twenty thousand dollars.\nMR. WHITE: But they have sold it in the past for\nmuch lower rates than they could have sold it.\nMR. FRIEDMAN: They just raised it, the official\nprice from eighteen thousand, five hundred, to twenty\nthousand, but they could get forty thousand at any time.\nRegraded Unclassified\n287\n- 19 -\nH.M.JR: He didn't seem to know the price was twenty\nthousand.\nMR. FRIEDMAN: He seemed to be out of touch with the\nlatest in the picture.\nMR. WHITE: I don't know. I'm surprised he's satis-\nfied, unless he is worn out or tired. I am surprised he\nis satisfied with the answer we gave him on gold, because\nit's no answer at all. Sooner or later he is going to--\nH.M.JR: I am surprised he is satisfied with any\nanswer.\nMR. FRIEDMAN: Did you get any sense in the feeling\nhe was trying to give his friend to O.K.?\nMR. WHITE: On taxes it was indicated as soon as\nthey left, they lowered taxes.\nH.M.JR: This one hundred million dollars they want\nrefunded, isn't that the one all the big boys bought?\nMR. WHITE: How much is the total? One Hundred\nmillion?\nMR. FRIEDMAN: One hundred million savings was bought\nat twenty-one. They sold at sixteen to one to make it\na little more attractive, because it was a ten year bond.\nMR. WHITE: And now--well, they are getting a good\ninterest on it. I think he has got a case there.\nH.M.JR: If they don't pay the interest, maybe he\nloses the income. Maybe he doesn't have these particular\nbonds.\nMR. WHITE: If they don't pay the interest, the holders\nof the bonds will lose, but they can increase--\nH.M.JR: Maybe this isn't a block in bonds that he\nhas. I thought what he was leading up to was he knows\nRegraded Unclassified\n288\n- 20 -\nwe are checking on who owned these bonds, and that the\nfirst question was just who has the frozen funds, and the\nnext will be--\nMR. WHITE: The next will be who has them. The first\nis he wants the total. As a matter of fact, they have\nasked us if we will give them a list of who owns what.\nH.M.JR: Personally, I wasn't surprised that he\nwasn't up to date, but I was surprised that you fellows\nweren't more up to. date on what we owed them. Have you\nhad any talks with the Army on those three months?\nMR. FRIEDMAN: We have had a number of conversations.\nH.M.JR: In United States dollars.\nMR. WHITE: The Army leaves that wholly up to us.\nThey only give us the one figure.\nH.M.JR: The one figure is meaningless.\nMR. WHITE: It is up toyou to convert it into meaning.\nH.M.JR: I didn't even get a thank you from Stimson\non the last one. The next time I see McCloy I am going to\ntell him. I didn't even get a thank you.\nMR. WHITE: All you will get is the expenditures,\nand you will have to decide what you are going to pay in\ndollars. The Army isn't going to offer any suggestions\nnow on that. You have taken over the negotiations, and\npresumably it will have to be your decision, with or\nwithout their approval, but it will have to be your decision.\nNow, that it is really coming to a crux, the next\ntime we will talk it over, and we will prepare a memo\nsuggesting what--\nH.M.JR: Coming to a crux did you say?\nMR. WHITE: Did I use the word crux?\nRegraded Unclassified\n289\n- 21 -\nMR. FRIEDMAN: You said it was right--\nH.M.JR: Now, wait a minute.\nMRS. KLOTZ: He is well trained.\nH.M.JR: Did he say it was coming to a crux?\nMR. FRIEDMAN I don't remember. (Laughter)\n1\nRegraded Unclassified\nRead by Hab 1/39/95. 230\nJanuary 26, 1945\n4:25 p.m.\nHMJr:\nHello.\nJohn\nPehle:\nYes, sir.\nHMJr:\nJohn, Mr. Grew says that the State Department\nwill go along on General O'Dwyer.\nP:\nFine.\nHMJr:\nSo you've got to do two things. You should\nresign from the Board and recommend -- you\nknow, fix something up for the Board to accept\nyour resignation. See?\nP:\nYeah.\nHMJr:\nAnd at the same time, fix up a piece of paper\nrecommending your successor that the Board can\nsign.\nP:\nYeah.\nHMJr:\nAnd see that it's circulated.\nP:\nAll right, I'll take care of the whole thing.\nHMJr:\nWill you carry the ball?\nP:\nYes, sir, I will.\nHMJr:\nAnd I needn't worry?\nP:\nThank you.\nHMJr:\nI think that's a happy solution.\nP:\nVery happy.\nHMJr:\nAnd then I don't think that -- I don't -- do\nyou think that I should give him your office\nover here?\nP:\nI would, if possible, like to hold on to that.\nHMJr:\nYou want to hold on to it?\nP:\nIf I can, yes.\nRegraded Unclassified\n291\n2 I I\nHMJr:\nWell, that's all right.\nP:\nBut I'll tell you what I'll do, Mr. Secretary --\nI'll prepare a proposed memorandum from you to\nMr. Bell indicating what we need, and you can\nsign it tomorrow.\nHMJr:\nI think we could move them off this floor.\nP:\nOh, yes, they don't need to be there. I'm the\nonly one that's up there anyhow.\nHMJr:\nWell, I didn't know that. I think we could move\nthem somewhere. But you take care of that.\nP:\nRight.\nHMJr:\nAnything else?\nP:\nThat's all.\nHMJr:\nI thank you.\nP:\nI thank you.\nRegraded Unclassified\nDraft II\n1-26-4892\nThe CIO needs no reminder that the welfare of\nAmerican labor is tied to the welfare of America as a\nwhole. It demonstrated its knowledge of this fact last\nFall by taking part actively -- and, I may say, fairly\neffectively -- in the political life of the Nation. It\ndid 80 because it understood, as Sidney Hillman put it,\nthat \"The activity OI such groups in shaping the course\nof their government is essential to the functioning of\nour democracy.\"\nThe discussion of the Bretton Woods proposals which\nhas taken place on this program indicates that organized\nlabor understands also that it must play a responsible\npart in the shaping of international affairs. It has a vital\nstake in the peace no less than in the war.\nIt is too often assumed that international affairs\nare beyond the grasp of the ordinary citizen -- that they\nmust be left to the diplomats in the political field and\nto the bankers in the economic field. If they are left\nentirely in such hands, the chances are that they will\nbe shaped no better than in the past. Your hands must\nshare in the shaping.\nRegraded Unclassified\n293\n- 2 -\nThere is nothing remote about the Bretton Woods\nproposals. They involve your bread and butter. They\nare an essential part of the President's program for the\nattainment of 60 million jobs here in the United States.\nWe cannot reach such a level of employment at home unless\nthere is a lifting of living standards abroad and 8. revival\nof international trade.\nThe International Monetary Fund is simply a device\nto make it possible for workers in all parts of the world\nto exchange the goods they produce on a stable basis and\nin an orderly way. It would free the flow of commerce\nfrom artificial currency barriers. It would substitute\neconomic cooperation for economic warfare among the nations\nof the earth.\nThe International Bank, on the other hand, is intended\nto give economic help to the prople of war-torn lands. Only\nwith such help will they be able to buy what we produce. The\nonly good customers are prosperous customers.\nAnd what is even more important is this: The only kind\nof world in which enduring peace can be assuredis a prosperous\nworld -- a world in which people everywhere have an\nopportunity to fulfill the ir reasonable hopes through honest\nRegraded Unclassified\n294\n- 3 -\nwork and free interchange of the things they grow and\nmake. The agreement reached by the United Nations at\nBretton Woods is one of the cornerstones of such a world.\nIt is a charter to free the world from seonomic as well\nas political aggression\nRegraded Unclassifie\nSTANDARD FORM NO. 64\nMrs.Klitz295 Mrs.\nOffice Memorandum\nUNITED STATES GOVERNMENT\nTO\n:\nMrs. Klotz and Mr. Shaeffer\nDATE: 1/26/45\nFROM : Lt. (j. g.) Levy, USNR\nhlth\nC 2 0 Broadcast\nSUBJECT:\nof 1/27/45.\nAttached is the \"PROCEDURE TO BE FOLLOWED IN THE EVENT OF\nBROADCAST BY SECRETARY MORGENTHAU.\" Items four and five are\nactually handled by my phoning the radio station concerned and\nhaving their station manager check with Mr. FitzGerald.\nRegraded Unclassified\n236\nPROCEDURE TO BE FOLLOWED IN THE EVENT OF BROADCAST\nBY SECRETARY MORGENTHAU\n1. As soon as the time for the broadcast is established,\nnotify Messrs. Gamble, Coyne, and other persons who may request that\ninformation.\n2. Ascertain the point of origin (studio, projection room,\nSecretary's office, or remote point.)\n3. Notify network of point of origin (so that lines may be\ninstalled.)\n4. Arrange with the Telephone Company for approximate time\nwhen lines will be installed.\na. In case of origination in the Secretary's office,\nnotify Mr. FitsGerald as to the time when lines will\nbe installed.\nb. In case of origination in the projection room\nnotify Mr. FitzGerald and Mr. Turner as to the time when\nthe lines will be installed.\n5. In the event that the broadcast originates in the Treasury\nBuilding, give Mr. FitzGerald a list of names and the time of arrival\nof the announcer, production man, engineer, etc.\n6. Order three sets of reference recordings:\na. One for projection room\n)\n33 1/3\n)\nrevolutions\nb. one for Radio Section, War Finance Division)\nc. one set of records (78 revolutions) to be sent to Miss\nChauncy as soon as possible.\n7. Advise Mr. Masters so that he may send field memoranda or\ntelegrams over Mr. Coyne's signature to all state administrators and\npublicity men notifying them of the time, date and network of the\nbroadcast, and also send them a publicity release with the request\nthat it be relayed to all newspapers.\n297\n-2-\n8. Notify all Washington and New York newspapers as well\nas news agencies.\n9. Notify all radio commentators and news announcers.\n10. If broadcast is on Blue Network notify station WKIP in\nPoughkeepsie, New York.\n11. Notify Mr. Kuhn of OWI overseas Branch as far in ad-\nvance as possible. Send him a copy of the speech if available.\nRequest him to supply us with a report on what use is made for over-\nseas broadcasting.\n12. Request network to make at least three advance an-\nnouncements regarding the speech on the day of the speech.\n13. Send a special notice regarding the broadcast to all\nTreasury people named on our \"special notice list.\"\n14. Make sure that a copy is sent to the Washington outlet\nof the network for clearance as far in advance as possible.\nRegraded Unclassified\n298\nHouse-\nJanuary 26, 1945\nMEMORANDUM FOR THE SECRETARY\nFrom:\nMr. Blough\nSubject: Characteristics of a qualified pension plan\nwith special reference to R. H. Macy & Co.\n(For your information, as previously requested;\nno action required)\nPension payments to retired employees are deductible\nexpenses under the income tax and present no important\ntax problem. However, many corporations wish to take\nthe deduction, not when the pension is paid, but in\nadvance, at the time money 1s set aside to finance the\npension -- perhaps long before the employee retires.\nWhen the money is put into a trust fund for this purpose\nwe have a \"pension trust. If there were no restrictions\nthe allowance of the deduction when the funds are set\naside would invite the creation of all sorts of \"phony\"\nplans at the expense of the Government.\nAccordingly, restrictions have been imposed,\nparticularly by the Revenue Act of 1942. To be entitled\nto the deduction, and to tax-free accumulation of inter-\nest in the trust fund, a pension or annuity plan must\nhave the following principal characteristics:\n1. The plan must be for the exclusive benefit of\nemployees (or their designated beneficiaries). The\nemployer must not benefit except indirectly through\nincreased employee morale, loyalty, ability, and\nefficiency.\n2. Contributions by the employer to the plan must\nbe final and not recoverable by the employer.\n3. The plan must either: (1) benefit 70 percent\nor more of all regular employees (56 percent in case of\nplan where the employees make a contribution), or else\n(2) satisfy the Commissioner that it does not discrim-\ninate in favor of officers, stockholders, supervisory\nemployees, or highly paid employees.\nRegraded Unclassified\n299\n- 2 -\n4. The scale of benefits and the scale of\ncontributions under the plan must not discriminate\nin favor of officers, stockholders, supervisory\nemployees, or highly paid employees.\n5. It will be recalled that the old age retire-\nment provisions of the Social Security Act cover the\nfirst $3,000 of wages. Pension plans are usually\nsupplementary to social security benefits. The Treasury\nregulations require that benefits from a pension plan\non earnings above $3,000 must be proportionately no\ngreater in value than those provided under the Social\nSecurity Act for employees with earnings under $3,000,\nor by both social security and the plan combined.\n(The Treasury's interpretation of the law on this\npoint has resulted in a great deal of criticism by\ncertain members of the Senate Finance Committee,\nnotably Senator Taft. There may be more criticism\nyet to come.)\nDespite the restrictions, the pension trust pro-\nvisions of the statute undoubtedly are being used by\nmany corporations largely as a method of reducing\nwartime taxes.\nBased on newspaper reports, the plan of\nR. H. Macy and Company, Inc., involves both (1) a\npension plan and (2) a profit sharing plan. Without\nseeing the plan, it is not possible to say exactly\nwhat if any objection the Bureau may have to it in\nits present form. With respect to the pension plan,\nit would appear that the objections, if any, would\nlikely be of minor character. The profit sharing plan\npresents some problems which have not yet been fully\nresolved because of the infrequency of plans of this\ntype.\nIf desired, a more careful study of the Macy plan\nwill be made and a further report prepared for you.\nRoyBlough\nRegraded Unclassified\nHouse,\n300\nMEMORANDUM FOR THE SECRETARY.\nJanuary 26, 1945.\nMail Report\nReflecting current news stories the Treasury\ndefinitely had a \"bad press\", so far as the mail went\nthis past week. It was not quite as heavy in routine\nmatters as it has been, but contained few words of\npraise and many complaints or criticisms.\nIn both signed and unsigned communications corre-\nspondents said in effect that Blaze could go to blazes,\nand most of them, as usual, threatened to stop buying\nbonds or to sell those already purchased since service\nmen are so treated. The same action was indicated by\nthe few writers who referred to the nomination of\nHenry A. Wallace to the post of Secretary of Commerce.\nAll such letters indicated strong disapproval, and most\nof them dragged in the bond issue. Another cause of\ndissatisfaction was the question of excessive expendi-\ntures for advertising. Opposition to this grew stronger\nthis week, with several writers questioning the sincerity\nof the Treasury's stand against inflation. There were\nseveral inquiries as to the unfavorable rate of exchange\nallowed American soldiers paid off in the French area.\nOn the tax front, demands for refunds were perhaps\nnot quite so many, and there were fewer complaints from\nfamilies of service men about delays in receiving bonds,\nalthough this problem is still a pressing one. Questions\nand suggestions about new withholding procedures in-\ncreased in volume as the others decreased.\nOnly 5 contributions to the war effort were received\nthis week. The smallest was a $5.00 Money Order from a\nresident of Canada, and the largest a $1,000.00 check\ntransmitted by the Navy Department.\nRegraded Unclassified\n301\nGeneral Comments\nMrs. Florence T. Bateman, Route #4, Walla Walla,\nWashington. I am enclosing a copy of a Power of\nAttorney signed by my husband shortly before he volun-\ntarily enlisted in the Armed Forces. Apparently it\nis of no value as far as our Government is concerned,\nfor when it was attached to a Government check issued\nfrom the Collector of Internal Revenue's Office at\nTacoma, it was returned, stating that it was not ac-\nceptable because it did not explicitly state that\nI could endorse checks issued by the Treasurer of the\nUnited States. I certainly cannot understand this.\nIt is true that there is no mention of the Treasury\nDepartment, but you will notice in the next to the\nlast paragraph it states - \"I also give my said\nattorney full power to collect all money due me from\nanyone\". At the present time my husband is over-\nseas, someplace in the Pacific -- God, a few unfortunate\nJaps and the U. S. Army alone know where. It has been\nhard enough for me to manage everything alone, maintain\nour home and keep it in good repair, buy War Bonds\nregularly and do every other thing possible so that he\nwill have something to come back to. It certainly\nseems to me that the Government could cooperate a\nlittle bit and not make it any harder for us than it\nalready is. # # # The enclosed Power of Attorney has\nnever been questioned before and it was drawn up for\nthe express purpose of giving me authority to do what\nshould be done so that while my husband is doing his\njob as well as he can, I might look after all his affairs\nwithout any worry on his part. The check was a\nrefund on our 1942 income tax and was notreceived by\nus until after January 7, 1945. I attempted to deposit\nthis check to the account of Byron E. and Florence T.\nBateman, the same names as appear on the check. The\nfact that it was deposited to his account, and by the\nway, it is a special account I use for all the money\nsent me by my husband, would appear to me to be almost\nRegraded\n302\n- 2 -\na sufficient endorsement. That, however, was not\nenough, so we attached one of the original signed\ncopies of the Power of Attorney and our local bank\nsent it in to the Federal Reserve Bank of San Francisco,\nCalifornia, only to be returned as stated above.\nNeedless to say, I will attempt to secure another\nPower of Attorney, one acceptable to you and which\nmentions the Treasury Department explicitly. I have\nno idea when it will be forthcoming, or if my husband\nwill have time or proper authorities at hand to exe-\ncute it according to your standards. * # I only\nhope and pray you are equally diligent in looking\nafter the money we are all saving and putting into\nWar Bonds to see it does not go astray. ***\nLeila 0. Stone, Modesto, California. In the current\nissue of TIME magazine I read, \"Last week the Treasury\nDepartment was glumly trying to-sell 76,712 discarded\ncaps\", etc., etc. I am doing my second season this\nyear-as a lookout on a station atop a peak of the\nMt. Shasta National Forest, as fire guard for the\nU. S. Forest Service. # # # I wore out ski caps and\nwhat-not on my post last year. I looked everywhere\nfor a suitable cap for this work. The wind blows a\ngale much of the time, and we women have to wear\nsomething which keeps our hair \"corralled\", as well\nas something which will shade our eyes from the glare.\nI have always looked with envy on nurses, WACs and\nothers who were privileged to buy and wear those snug-\nfitting caps of olive drab. Could not these discarded\ncaps be taken over by the Forest Service and disposed\nof among us women who are doing such jobs? We could\npurchase them directly from our Rangers. I would be\nvery happy to send you, by return mail, the $2.20\ncost of one cap, size seven and one-fourth for my own\nuse, this summer. If the cap were dressed with the\npine tree, insignia of the Forest Service, it would\nbe considerably enhanced, in the eyes of the hundreds\nof women who could certainly make use of them, if the\ncaps were brought to their attention by the Forest\nService officials for whom they work.\nRegraded Unclassified\n303\n- 3 -\nMrs. Sylvester Davis, R. 6, Box 68-B, Pine Bluff,\nArkansas. Treasury Department, ofice of the\nSecretery. please send me special Forms to File\nClaim against my husban. Sincely.\nJ. E. W. Linwell, Linwell & Mathison, Realtors, Grand\nForks, N.D. Lawrence 0. Larson, who lists himself\nas a common laborer\", is 68 years old and was born\nin this County, the son of Norwegian immigrants. He\nis a single man and a deaf mute. He had his 1944\nFederal Income Tax Return prepared in our office a\nfew days ago and paid his tax of $172.00 willingly.\nIn addition, he handed us a $10.00 bill with a\npenciled note reading: \"I want to make a gift to\nmy Government to help smash the Axis. I am glad to\ndo my best for my Government.\" I thanked him for\nthis gift and told him that I would send the money in,\nwith a special letter. The $10.00 bill is enclosed.\n***\nAlvin Wortham, The Devon, New York City. Your\nvaluable suggestion to make an agricultural nation\nof Germany was thrust aside by the Department of\nState as if it had no value or substance whatsoever.\nI believe your suggestion will see accomplishment if\nthe Russian advance continues and the Russians reach\nBerlin first. *** The entire ideas of the State\nDepartment on foreign policy are religiously absurd.\nThe foreign policy is utterly at variance with our\ndomestic policy as laid down by Abraham Lincoln.\n###\nHerman W. Johnson, M.D., Houston, Texas. (Telegram)\nWould you as fiscal agent of our Government appoint\nWallace as Chairman of the RFC with the billions in-\nvolved? Does his business experience warrant such\nappointment? Further purchase of Government securi-\nties awaits your reply.\nRegraded Unclassified\n304\n- 4 -\nThe following letter from Mrs. Claudia M. Horn,\nBethesda, Maryland, was forwarded to the Secretary\nby Senator Tydings: The current exchange\nrate of the French franc is approximately 128 francs\nto the dollar; but American soldiers in France are\npaid at the rate of 50 francs per dollar. This\nmeans a pay cut of more than 50% The administra-\ntion may have good reasons for this unfairness to\noverseas troops; but the reasons are not apparent\nto the men themselves nor to their relatives and\nfriends. You would earn the eternal gratitude of\nplenty of G.I's. if you could do something to remedy\nthis situation.\"\nMiss Ann A. Ammerman, Box 56, Kenvil, New Jersey.\nWe are studying about New Jersey in school. I write\nto you to see if you could send me some information\nabout the music of New Jersey. Last year for\ngraguation play my sister Jane wrote to you for\nsome pieces of sheet music so I thought you could\nsend me so song of New Jersey. I would like it very\nmuch if you would send me so information and music\non New Jersey or music written by and composed by\nsomeone in any part of New Jersey. It would help\nme very much in my work at school on the study of\nNew Jersey.\nRegraded Unclassified\n305\n- 5 -\nFavorable Comments on Bonds\nWilliam W. Maynor, Slc, USNR, c/o Fleet Post Office,\nNew York City. I am stationed in French Morocco and\nas a citizen of the United States, and having my\ncountry's interest at heart, I wish to convey a\nthought to you which I think might prove beneficial\nto our great cause. It has come to my attention,\nwhile conversing with people who reside in French\nMorocco and also people of a transient status, that\nthey are particularly interested in converting a\nportion of their wealth or monies into some form of\nAmerican bonds or securities. # # # My suggestion, be-\ncause of the tremendous demand of these peoples to\nback our cause and show faith in our Government, is\nthat these people should be allowed, under some form\nof War Bond, to invest their surpluses in our Govern-\nment securities. It might be necessary to in some\nmanner limit the redemption period, say five years\nfrom date of issue, without interest, or some other\nplan along these lines which I know that you will have\ncognizance of, and exercise the best of judgment.\nI am addressing this letter to you directly instead\nof going through the proper Naval channels, because\nI believe this to be a matter concerning the individual\ncitizen more than the sailor, which I am.\nMartin Travieso, Chief Justice, Supreme Court of\nPuerto Rico, San Juan, P.R. Your very kind letter\nof the ninth instant received this morning, has given\nme great pleasure and made me feel very proud. You\ncertainly deserve, Sir, congratulations for the great\nsuccesses which are due more than anything else to\nyour able and splendid leadership. Whatever success\nI may have had as Insular Chairman was due to the\ncooperation of the fine young man who represents you\nin this island -- Mr. Raphael H. O'Malley -- whose\nunflagging enthusiasm and loyalty made our success\npossible. ***\nRegraded Unclassified\n306\n- 6 -\nUnfavorable Comments on Bonds\nMrs. Alexina Pauzi, Holyoke, Massachusetts. I'm the\nholder of five War Bonds, which I want to cash in.\nLast Wednesday the radio station WSPR of Springfield,\nMassachusetts, broadcasted a program which was an\ninsult to me. My name is Mrs. Pauzi and I'm a widow,\nand their program was about the widow Mrs. Pauzi who\nwanted to get married. Now the name Pauzi is a rare\nname -- there's only two families in Holyoke and three\nin Springfield, so I cannot help but think that their\nprogram was meant to reflect on me. Now please send\nme the necessary blanks to cash in the following bonds --\n$2,100 in all. After the program was over I telephoned\nthe radio station and told them how crazy and insult-\ning their program was. The girl who answered the phone\nvery boldly said there was nothing they could do about\nit. *** I'm quite sure they said the program was\nsponsored by the War Department to promote the sale of\nbonds.\nMrs. M. G. Thompson, Beechwood Hill Farm, Castile,\nNew York. It is shocking and distressing to us who\nare continually asked to buy War Bonds to hear of an\nArmy plane being used to transport a dog, instead of\nour soldiers. Certainly, Mr. Elliott Roosevelt's\nwar effort is no shining example for our men. I have\nlost two near relatives in this war, with another who\nhas been overseas almost three years, but the Roosevelt\ndog is given an Army plane from England to California!\nMy War Bonds are for sale and I hope I'll never hear\nthe plea to buy more for the War effort!\nG. W. Higinbotham, President, State Bank of Victor,\nVictor, New York. We are now told by Lowell Thomas,\nand other news commentators, that a Roosevelt dog out-\nranks, in cargo space, a soldier with dying relatives.\nWhat a hell of a travesty? Is this what our boys are\ndying for? To save the Roosevelt dynasty? Down to\nRegraded Unclassified\n337\n- 7 -\nthe dogs? Is this what we bankers are selling bonds\nfor? To save time for a dog at the expense of a\nsoldier who wants to get home quickly?\nThe following letter from Douglas Featherstone, Mays &\nFeatherstone, Law Offices, Greenwood, South Carolina,\nwas forwarded to the Secretary by Congressman Butler B.\nHare: \"In several instances I have encountered a\ngreat deal of unnecessary red tape in transferring\nor changing the beneficiary of some of our War Bonds\nwhich have been issued in recent years. It seems to\nme that this unnecessary red tape over a period of\nyears will do an increasing amount of harm by way of\nmaking people dissatisfied with their investments in\nthese bonds and will prevent them from buying in the\nfuture. * The most unnecessary and flagrant\ninstance of this red tape is in connection with War\nSavings Bonds which are issued in the name of the pur-\nchaser and payable on death to some other member of\nthe purchaser's family. For example, recently a\nclient of our office asked us to assist her in chang-\ning some Series E War Savings Bonds. # # Mr. Joshua M.\nCraig, a son of Mrs. Mollie H. Craig, died on August 12,\n1944. Mrs. Craig wished to change these bonds to make\nthem payable on her death to some of her other children.\nI found that it would be necessary for The County Bank\nto order some special forms which it would be necessary\nfor Mrs. Craig to fill out to request this change.\n#\nMrs. Craig had paid for these bonds with her own\nmoney and could have cashed the bonds at the Bank with-\nout the signature, consent or approval of Mr. Joshua M.\nCraig, both before and after his death. # # However,\nin order to have a change made so as to show another\nbeneficiary in the event of death of the purchaser,\nit was necessary to fill out a rather technical form\n(PD1787) requesting a re-issue of the bonds. It was\nalso necessary to furnish evidence of the death of\nJoshua M. Craig. It was not specified as to what\nevidence would be acceptable. Therefore, we sent in\nRegraded Unclassified\nCTB\n- 8 -\nwith these forms affidavits from the undertaker who\nhad buried Mr. Joshua M. Craig. All of these papers\nwith the bonds were sent to the Federal Reserve Bank\nof Richmond. Thereupon we were advised by the Federal\nReserve Bank that before proceeding with the re-issue,\nit would be necessary for them to receive a certified\ncopy under seal of the official certificate of death\nof Joshua M. Craig from the South Carolina Bureau of\nVital Statistics. We thereupon secured such certi-\nficate from the Bureau of Vital Statistics of the\nState of South Carolina and forwarded it to the\nFederal Reserve Bank, pointing out that the certifi-\ncate set out the name of the deceased's mother, who\nis and was the owner of the bonds in question.\nOn December 29, 1944, we again wrote the Federal\nReserve Bank enclosing affidavit of the Cashier of\nThe County Bank that Joshua M. Craig and Josh M. Craig\nwere one and the same person. We have heard nothing\nfurther. # # If Mrs. Mollie H. Craig could have\ncashed these bonds on her own signature, it seems\nentirely unnecessary to require all of this red tape\nto change the name of the secondary beneficiary to\nsome one else after the death of the original secon-\ndary beneficiary. # I have also found that there\nseems to be a great deal of unnecessary red tape in\nconnection with bonds after the death of the purchaser.\n# For instance, if John Doe buys a bond and has\nit issued to him and has it 'payable on death to\nMrs. John Doe', and then Mrs. John Doe wishes to\neither cash these bonds or have them re-issued in her\nown name, it requires so much red tape that it really\ntaxes the capacity of a plain country lawyer or\nbanker. # Recently, I had a matter where the\nsecondary beneficiary, who was also the Executor of\nthe deceased bondholder's estate, was an invalid.\nI found that she could not have her signature veri-\nfied either before the Clerk of Court, & magistrate\nor a Notary Public, but could only have the signature\nverified before an authorized bank official. Although\neither a magistrate, Clerk of Court and 8. Notary\nPublic would have been available, the matter had to\nbe delayed until the good lady could get up and come\nto a bank where there was an authorized official to\nverify her signature. I know you have your hands full\nof other business, but it seems to me that this is a\nmatter where the elimination of some red tape might\nRegraded Unclassified\n279\n- 9 -\nbe very helpful in connection with future Bond Drives,\nand by way of keeping the purchasers of such bonds\nsatisfied with their investments.\nIf\nCarol L. Cook, Brooklyn, New York. I have lately\nlearned that a request was made to you to have the\nTreasury's policy allowing wartime advertisements to\nflourish at the Government's expense, be halted. The\npublic is asked not to buy, to save us from inflation.\nAlso it would save the waste of critically needed paper.\nYet the Treasury permits these colossal profits to make\nadvertising deductions as an \"ordinary cost of doing\nbusiness\". It is both contradictory and wasteful. It\nseems to me the Treasury officials should show a greater\nsense of justice and courage to consider the public's\ninterest, instead of smiling at the advertisers while\naccepting War Bond advertising which ineffectively seeks\nto offset the damage that has been done by daily extrava-\ngance of \"buy now\" ads. We hope since this is repeatedly\nbeing called to your attention you will take some notice\nand act promptly. You wish us to heed your plea to\nbuy bonds, then reciprocate -- save wasteful spending\non advertising and save the taxpayers' money for some-\nthing more essential.\nF. D. Patterson, Chief Medical Adviser, The Pennsylvania\nRailroad, Philadelphia, Pennsylvania. I am very much\nconcerned as to whether or not the Government intends\nto repudiate the War Bonds, for I have distinct recol-\nlections of how much upset my wife was when they can-\ncelled the Food Stamps, which they said would be good\nindefinitely.\nHarold W. Ranes, Pastor, The North Baptist Church,\nIndianapolis, Indiana. If you have any influence with\nthe President, that you can honestly use without\njeopardizing your own, in God's name use it. I say\nRegraded Unclassified\n- 10 -\n210\nthis reverently. How can we buy the Nation's bonds\nif Henry A. Wallace is to spend them? If he killed\nour pigs, he'll fleece the soil of its natural\nresources and our pockets of our financial and economic\nreserves. Is our Nation of no consequence to our\nNational Fathers?\nMary Carroll, Corpus Christi, Texas. I held $3,150\nof Home Owners' Loan Corporation Bonds of the issue\ndue in 1952, held for safekeeping by The State National\nBank, Corpus Christi, Texas. Last week the clerk\nsent in for collection the interest coupons due on\nthe bonds in November, 1944. Yesterday she advised\nme that this issue was called on May 1, 1944. She\nalso advised me that I had not received notice of the\nGovernment's decision to call in the bonds in advance\nbecause the Bank had not been advised of this action,\nand hence had not been in a position to advise its\ncustomers. By withdrawing these bonds from circula-\ntion in this way, your office has caused me to lose\n$47.50. I know that this amount is an infinitesimal\nsum to you, but to me, a white-collar worker, a teacher,\nnow retired, it is a neat sum. I am protesting\nto you for the reason that the method employed by the\nGovernment in this call of bonds does not seem to be a\nfair and equitable method of doing business with its\ncustomers. I was told by the clerk that the Government\nhad pursued this same policy in other calls of this\nyear. #\nMrs. A. H. Bryant, McAllen, Texas. I am writing you\nin behalf of two of my sons. One, Sgt. Edward L.\nBryant, 18201146, is in China with the 14th Air Force\nand he has not received any pay for more than 9 months,\nand I would like to know what the trouble is. Surely\nthat is not much of a morale-builder where he never\nhas any money. Then his bonds have stopped coming.\nThe last one was for August, 1944, and he has been\ngetting one every month since December, 1942, before\nthat. He has been overseas since October, 1943. The\nother boy's bonds have not all come either, as he did\nnot get any during 1942 and only one in 1943.\nRegraded Unclassified\n- 11 -\n311\nUnfavorable Comments on Taxation\nJohn J. Barry, Bronx, New York. Attached are copies\nof letters to the New York Office of the Collector\nof Internal Revenue, inquiring about my 1943 income\ntax. Not one of them has been acknowledged.\nThis silence raises the question, what must one do\nto get action? It is far from pleasurable for me\nto have to write you on this matter, but you seem\nto be the court of last resort. Comparisons, they\nsay, are odious, but your Department sets a deadline\nfor the payment of our taxes, and the failure to do\nso within the time limit, subjects us to penalties.\nPerhaps that is why we are the soul of promptness,\nand perhaps penalties against departmental personnel\nfor failure to observe and practice ordinary business\nethics would correct 8. condition for which there does\nnot\nseem\nto\nbe\nan\nexcuse.\n*\nI have called there\ntwice and gained nothing but experience. In the\nvernacular, I got the \"brush off\". This time I shall\nawait with confidence an acknowledgment that will con-\ntain a satisfactory explanation, or a promise of\naction that will be promptly fulfilled.\nFred Merlin, New York City. I have a claim of an\ninsignificant sum of $18.44 due me from the tax refund.\nFor over 7 months I have been trying to get said refund.\nI know there must be some sincere and square people in\nyour Department. In the New York Office they must be\nfew and far between. I have been given so many run-\narounds and surly brush-offs that it is unbelievable.\nI will not trouble you with concrete illustrations --\nsuffice to say I have been deeply hurt. There is real\nneed of censuring of the local office. Not because\nI am merely a Bowery derelict but there must have been\nnumerous respectable citizens who were subjected to\nthe same fate.\nRegraded Unclassified\n312\nTHE SECRETARY OF THE TREASURY\nWASHINGTON\nJAN 26 1945\nTREASURY DEPARTMENT ORDER NO. 58\nEffective from and after this date the\nDivision of Monetary Research and Foreign Funds\nControl will continue under the supervision of\nMr. Harry D. White, Assistant Secretary of the\nTreasury.\nTreasury Department Order No. 52, dated\nApril 15, 1944, is superseded, and Order No. 56,\ndated December 1, 1944, is modified by this Order.\nSecretary of the Treasury\nFOR VICTORY\nBUY\nUNITED\nSTATES\nWAR\nBONDS\nAND\nSTAMPS\nRegraded Unclassified\n313 -\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nDATE Jan.26,1945\nTO\nSecretary Morgenthau\nFROM\nMr. White\nSubject:\nTreasury Men Scheduled to Go Abroad.\nThe following list contains the latest information we have\nin respect to probable departures.\nName\nPost\nDeparture Date\nDillon Glendinning\nCairo\nJanuary 26\nWalter Ostrow\nBern\nFebruary 27\nWilliam H. Taylor\nSpecial Mission\nProbably within\n(London, Paris,\na week\nBrussels, etc.)\nOrvis Schmidt\nBern\nProbably within\na week\nHenry Tasca\nRome\nMid-February\nIn addition to the above, Colonel Bernstein will probably re-\nquest that Mr. Allan Fisher and Mr. Andrew Kamarck of Monetary\nResearch and Mr. Hynning of the Legal Division shall be assigned\nto him for work on German materials in London. It is anticipated\nthat these men will be moving sometime within the next month. Mr.\nJames Saxon is expected to return to Paris as soon as he recovers\nfrom his present illness.\nIn addition, we have been informed by the British Treasury\nRepresentatives here that Mr. Wade of the British Treasury is going\nto Italy in early February to make a study of the financial situa-\ntion there. The British have requested that Mr. Harold Glasser\nshould go to Italy at the same time in order to similarly review\nthe situation from the American side. No decision has been taken\nin respect to this request at the present time.\nRegraded Unclassified\n314\nTREASURY DEPARTMENT\nINTER OFFICE COMMUNICATION\nPehle\nDATEJan. 26,\n1945\nTO Secretary Morgenthau (through Mr. Gaston)\nFROM J. W. Pehle\nAttached is a proposed reply to Reverend Johnston.\nAs the reply indicates, the previous letter which\nMr. Gaston prepared on the basis of information received\nfrom me was not accurate. I regret that you were placed\nin the position of having made an inaccurate statement\nto Mr. Hannegan.\nPlease read JUA\nAttachment\nJanuary 27, 1945\nDear Mr. Hannegan:\nReference is made to Secretary\nMorgenthau's letter to you of January 12,\n1945, concerning Dale Johnson, a Procurement\nDivision employee at St. Louis, concerning\nwhom Father Johnston of St. Patrick's Church\nwrote to you.\nThere is transmitted herewith for\nyour information a copy of a. letter dated\nJanuary 23, 1945 received from Father Johnston,\ntogether with the reply which I have sent to\nhim today.\nNeedless to say I regret that the\nprevious information furnished to Father\nJohnston was inaccurate.\nVery truly yours,\n(Signed) J.W. Pehle\nJ. W. Pehle\nAssistant to the Secretary\nMr. Robert E. Hannegan\nChairman, Democratic National Committee\nMayflower Hotel\nWashington, D. C.\nJWP:1hh 1-27-45\nRegraded Unclassified\nJanuary 27. 1945\nMy dear Father Johnston:\nYour letter of January 23, 1945, addressed to\nSecretary Morgenthau, with respect to Mr. Dale Johnson,\nan employee of the Procurement Division Office in St.\nLouis, Missouri, has been referred to me.\nIn Secretary Norgenthau's letter to Mr. Hannegan,\nit was stated that Mr. Stephens, the Regional Director,\nwas considering promoting Mr. Johnson and placing him\nin charge of the St. Louis District Office.\nThis statement was made by the Secretary on the\nbasis of information obtained from me and, I regret to\nsay, was not accurate. The real situation is as follows.\nThe promotion for which Mr. Dale Johnson is being con-\nsidered is to District Chief of Operations in St. Louis,\nwith an increase in salary from $3200 to $3800 per year.\nSuch a promotion would involve B. rather substantial\nincrease in responsibility for Mr. Johnson but he would,\nof course, be under the supervision of our District\nManager in St. Louis.\nI might say that I am also advised, I trust accurately,\nthat Mr. Johnson has indicated that he is more than de-\nlighted with his pending promotion and that his relations\nwith our District Manager, Mr. Swink, are of the best.\nNeedless to say I as very sorry that the previous\nstatement furnished you with respect to this matter was\nnot accurate and I appreciate your calling the matter\nto our attention.\nVery truly yours,\n(Signed) J. Pable\nJ. W. Pehle\nAssistant to the Secretary\nThe Reverend James P. Johnston\n1207 Morth Sixth Street\nSt. Louis, Missouri\nJWP:1hh 1-27-45\nRegraded Unclassified\n317\nJanuary 26, 1945\nMy dear Father Johnston:\nThis is in reply to your letter of\nJanuary 23, 1945, with respect to Mr. Dale\nJohnson, an employee of the Procurement Division\nOffice in St. Louis, Missouri.\nIn my previous letter to Mr. Hannegan\nI indicated that Mr. Stephens, the Regional\nDirector, was considering promoting Mr. Johnson\nand placing him in charge of the St. Louis\nDistrict Office.\nAs you indicate in your letter, this\nstatement unfortunately was not accurate. The\nreal situation is as follows. The promotion\nfor which Mr. Dale Johnson is being considered\nis to District Chief of Operations in St. Louis,\nwith an increase in salary from $3200 to $3800\nper year. Such a promotion would involve a\nrather substantial increase in responsibility\nfor Mr. Johnson but he would, of course, be\nunder the supervision of our District Manager\nin St. Louis.\nI might say that I an also advised that\nMr. Johnson has indicated that he is more than\ndelighted with his pending promotion and that\nhis relations with our District Manager, Mr.\nSwink, are of the best.\nRegraded Unclassified\n- 2 -\nI am sorry that the previous\nstatement furnished you with respect to this\nmatter was not accurate and I appreciate your\ncalling the matter to my attention.\nVery truly yours,\nThe Reverend\nRewx James P. Johnston\n1207 North Sixth Street\nSt. Louis, Missouri\nRecorittin Regulature 8am your Pike\nwwp JWPeble:1hh 1-26+45\nRegraded Unclassified\n319\nFATHER DEMPSEY'S HOTEL FOR WORKING MEN\nSAINT PATRICK'S CHURCH\n1481 HOBAN STREET\nBIXTH AND BIDDLE STREETS\nFATHER DEMPSEY'S HOTEL FOR WORKING WOMEN\nREV. JAMES P. JOHNSTON\n1417 HOGAN STREET\nPASTOR AND SUCCESSOR\nER DEMPSEY'S DAY NURSERY\nREV. CHAPLES W. HOFER\nREV. THOMAS 6.BUTLER. Asst. PASTOR\nTIME HOLY MASS\n1308 NORTH BIRTH STREET\nFATHER DEMPSEY'S RUMMAGE DEPARTMENT\n1207 NORTH SIXTH STREET\nSUNDAYS 7.8. 9:30 AND If\n⑉ CASH AVENUE\nST. LOUIS, MO.\nFATHER DEMPSEY'S CONVALESCENT HOME\nJanuary 23 1945\n1417 HOGAN STREET\n\"PERSONAL\"\nPuble\nJy\nMr.\nR Morgenthau\nSecretary of the Treasury\nWashington - D.C.\nDear Mr. Morgenthau:\nOur mutuel friend Bob Hannegan sent me\nyour nice letter regarding Mr. Dale Johnson, Procurement\nDivision Employee here. I only wish it were true that Mr.\nStephens did intend promoting him and placing him in charge\nof the St. Louis office and that my fears were needless. How-\never Mr. Stephens has placed a Mr. Schwenk, or some similar\nname, and Mr. Johnson finds himself instead of being left in\nhis original position taking orders from the new appointee\nof your Mr. Stephens. I only mention this for your infor-\nmation, for I realize a man as busy as you are don't always\nget the true picture when you're a long way off from the\nscene of action. Certainly, Mr. Morgenthau, its swell of\nyou to even take an interest in my little request, and I'm\ndeeply grateful to you if you could leave Dale Johnson in\nthere to pitch as he understands the game, and the way its\nplayed in Bob Hannegan's home town.\nGratefully again,\n0\n\"HELP FATHER jim CARRY ON FOR FATHER TIM''\nUnclassifil\n320\nTREASURY DEPARTMENT\nWashington\nFOR IMMEDIATE RELEASE,\nPress Service\nFriday, January 26, 1945.\nNo. 44-89\nSecretary Morgenthau today issued the following statement:\nI have studied Mr. Wallace's statement before the\nSenate Committee on Commerce.\nI believe he has done the country a genuine\nservice in offering a concrete program for achieving\nthe President's goal of 60,000,000 jobs after the war.\nWithout attempting at this time to weigh the merits\nof each of his proposals, we can all thank Mr. Wallace\nfor the courage he has displayed in coming forward\nwith specific suggestions. Only through a thorough\nstudy and discussion of these proposals and others\nthat will be stimulated by them will this country be\nprepared to meet with intelligence and purpose the\neconomic problems we shall face after the war.\nIntelligent planning for problems we know will arise\nafter the war spells the difference between an orderly\ntransition period and a logjam of poorly considered meas-\nures conceived in the throes of emergency and crisis.\nI think too that Mr. Wallace is correct in\nstating that the real issue involved is not his lack\nof experience in the financial field. As Secretary\nof the Treasury during most of the period Mr. Wallace\nwas in charge of the Commodity Credit Corporation,\nthe Farm Security Administration and the Rural\nElectrification Administration, I can say that I\nknow that Mr. Wallace's record in making loans in\nexcess of $6,000,000,000 is beyond reproach. He is\nin the truest American tradition--a Yankee business\nman with the horse sense to recognize that we are\nliving in a world of change.\nI know that Henry Wallace made a genuine con-\ntribution to good government and free enterprise as\nSecretary of Agriculture. I believe he can make an\neven greater contribution as Secretary of Commerce.\n-o0o-\nRegraded Unclassified\n1-25-45321\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nOF THE FEDERAL GOVERNMENT\nHEARINGS\nBEFORE THE\nCOMMITTEE ON COMMERCE\nUNITED STATES SENATE\nSEVENTY-NINTH CONGRESS\nFIRST SESSION\nON\nS. 375\nA BILL TO PROVIDE FOR THE EFFECTIVE ADMINIS-\nTRATION OF CERTAIN LENDING AGENCIES\nOF THE FEDERAL GOVERNMENT\nJANUARY 24 AND 25, 1945\nPrinted for the use of the Committee on Commerce\nUNITED STATES\nGOVERNMENT PRINTING OFFICE\n68424\nWASHINGTON : 1945\n70\nЯТЛИЛИ\nCOMMITTEE ON COMMERCE\nJOSIAH W. BAILEY, North Carolina, Chairman\nJOHN H. OVERTON, Louisiana\nHIRAM W. JOHNSON, California\nTHEODORE\nARTHUR H. VANDENBERG, Michigan\nCONTENTS\nGEORGE L.\nOWEN BREWSTER, Maine\nCLAUDE PEPPER, Florida\nHAROLD H. BURTON, Ohio\nJAMES M. MEAD, New York\nALEXANDER WILEY, Wisconsin\nEDWARD V. ROBERTSON, Wyoming\nStatement of-\nPage\nW. LEE O'DANIEL, Texas\nPAT McCARRAN, Nevada\nGUY CORDON, Oregon\nGeorge, Hon. Walter F., United States Senator from the State of\nALBERT B. CHANDLER, Kentucky\nC. WAYLAND BROOKS, Illinois\nGeorgia\n2\nJones, Hon. Jesse H., Secretary of Commerce\n23.\nJOHN L. McCLELLAN, Arkansas\nWallace, Hon. Henry A., former Secretary of Agriculture and former\nWARREN G. MAGNUSON, Washington\nVice President of the United States\n71\nA. HAND JAMES, Clerk\nIII\nII\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nOF THE FEDERAL GOVERNMENT\nWEDNESDAY, JANUARY 24, 1945\nUNITED STATES SENATE,\nCOMMITTEE ON COMMERCE,\nWashington, D. C.\nThe committee met, pursuant to call, at 2:30 p. m., in room 318,\nSenate Office Building, Senator Josiah W. Bailey (chairman) pre-\nsiding.\nPresent: Senators Bailey (chairman), Overton, Bilbo, Radcliffe,\nPepper, O'Daniel, Chandler, McClellan, Vandenberg, Brewster, Bur-\nton, Robertson, Wiley, Cordon, and Brooks.\nThe CHAIRMAN. The committee will come to order.\nWe have for consideration Senate bill 375, which was introduced\nby Senator George.\n(S. 375 is as follows:)\n[8. 375, 79th Cong., 1st sess.]\nA BILL To provide for the effective administration of certain lending agencies of the\nFederal Government\nBe if enacted by the Senate and House of Representatives of the United\nStates of America in Congress assembled, That the Federal Loan Agency created\nby. Reorganization Plan Numbered I under the Reorganization Act of 1989 is\nhereby reestablished as an Independent agency in the executive branch of the\nGovernment, with a Federal Loan Administrator at the head thereof. The\nFederal Loan Administrator shall be appointed by the President, by and with\nthe advice and consent of the Senate, and shall receive a salary at the rate\nof $12,000 per annum.\nSEC. 2. The Federal Loan Administrator shall appoint an Assistant Federal\nLoan Administrator, who shall receive a salary at the rate of $9,000 per annum.\nThe Assistant Administrator shall net as Administrator during the absence or\ndisability of the Administrator, or In the event of a vacaney In that office, and\nshall perform such other dutles as the Administrator shall direct.\nSEC, 3. All functions, powers, and dutles transferred to the Department of\nCommerce under Executive Order Numbered 9071, dated February 24, 1942, and\nall functions, powers, and dutles of the Department of Commerce or the Secre-\ntary of Commerce with respect to all other corporations created or organized\nby the Reconstruction Finance Corporation under section 5d of the Recon-\nstruction Finance Corporation Act, as amended, or any other subsidiaries of\nthe Reconstruction Finance Corporation, together with the respective personnel,\nrecords, and property (Including office equipment), of the agencies to which\nsuch functions, powers, and duties relate, are hereby transferred to the Federal\nLoan Agency.\nSEC. 4. The Administrator shall supervise the administration, and shall be\nresponsible for the coordination of the functions and activities, of the agencies\ntransferred under the provisions of this Act to the Federal Loan Agency. The\nAdministrator may appoint such officers and employees and make such expendi-\ntures as may be necessary to carry out the provisions of this Act.\nSEC. 5. So much of the unexpended balances of the appropriations, alloca-\ntions, or other funds available or to be made available for the use of the De-\n1\n2\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n3\npartment of Commerce In the exercise of any function transferred by this Act,\nas the Director of the Bureau of the Budget with the approval of the Presi-\nthe Federal Loan Agency and enthusted to the Administrator of the\ndent shall determine, shall be transferred to the Federal Loan Agency for use\nFederal Loan Agency for administration.\nin connection with the exercise of the functions 80 transferred. In determin-\nUnder the First War Powers Act of 1941 the President is given\nIng the amount to be transferred the Director of the Bureau of the Budget\nmay Include an amount to provide for the liquidation of obligations Incurred\nthe express authority to make such redistribution of functions among\nagainst such appropriations, allocations, or other funds prior to the transfer.\nexecutive agencies as he may deem necessary. I will not read that\nSEC. 6. Nothing In this Act shall be construed to transfer any functions from\nact, but that is the authority under which the President acted in\nthe National Housing Agency or from any other agency or establishment other\nissuing Executive Order 9070 on February 24, 1942, transferring cer-\nthan the Department of Commerce.\ntain functions from the Federal Loan Administrator to the National\nThe CHAIRMAN. Senator George, you may proceed with an explana-\nHousing Agency, and Executive Order No. 9071 of February 24, 1942\ntion of the bill and make such comments as you deem proper.\ntransferring certain functions of the Federal Loan Agency to the\nDepartment of Commerce.\nSTATEMENT OF HON. WALTER F. GEORGE, UNITED STATES\nSenator PEPPER. Excuse me. Is that April, Senator?\nSENATOR FROM THE STATE OF GEORGIA\nWhat is the date, what month?\nSenator GEORGE. February 24.\nSenator GEORGE. Mr. Chairman and gentlemen of the committee,\nThe particular part of the Executive order which is here pertinent\nI introduced S. 375 in the form in which it appears before the members\nis as follows [reading]:\nof the committee. Later I may suggest an amendment by way of a\nAll functions, powers, and duties of the Federal Loan Agency and of the\nsubstitute, which I think accomplishes all the purposes of this bill and\nFederal Loan Administrator which relate to the Reconstruction Finance Cor-\nmakes it somewhat clearer that the purpose of the bill is not to\nporation, Electric Home and Farm Authority, RFC Mortgage Company, Federal\ncreate a new agency but is merely to revive an inactive existing agency.\nNational Mortgage Association, Disaster Loan Corporation, Export and Import\nIf I may, I will direct the committee's attention to the following,\nBank of Washington, Defense Plants Corporation, Rubber Reserve Company,\nDefense Supplies Corporation, and War Insurance Corporation, together with all\nwhich appears as a part of Reorganization Plan No. I, creating the\nother functions, powers, and duties not transferred by the Executive order estab\nparticular office in question here. Section 402 of this Plan No. I,\nlishing the National Housing Administration-\nwhich was made effective July 1, 1939, pursuant to the Reorganization\nto which reference has already been made-\nAct of 1939, approved April 3, 1939, is as follows [reading]\nare transferred to the Department of Commerce and shall be administered under\nFEDERAL LOAN AGENCY\nthe direction and supervision of the Secretary of Commerce.\nThere shall be at the sent of the Government a Federal Loan Agency with a\nNow, with reference to the duties and powers to the agencies af-\nFederal Loan Administrator at the head thereof. The Federal Loan Administra-\nfected-the restoration, rather, of duties and powers to agencies\ntor shall be appointed by the President. by and with the advice and consent of\naffected the pertinent part of the First War Powers Act provides-\nthe Senate, and shall receive a salary at the rate of $12,000 per annum,\n(b) The Federal Loan Administrator shall appoint an Assistant Federal Loan\nAll laws or parts of laws conflicting with the provisions of this title are, to\nAdministrator who shall receive a salary at the rate of $9,000 per annum.\nthe extent of such conflict, suspended while this title is in force.\nThe Assistant Administrator shall act as Administrator during the absence\nUpon the termination of this title, all executive or administrative agencies,\nor disability of the Administrator, or in the event of a vacancy in that office,\ngovernmental corporations, departments, commissions, bureaus, offices, or of-\nand shall perform such other dutles as the Administrator shall direct.\nficers shall exercise the same functions, duties, and power as heretofore or as\nbereafter by law may be provided, any authorization of the President under\nPOWERS AND DUTIES OF THE ADMINISTRATOR\nthis title to the contrary notwithstanding.\nThe Administrator shall supervise the administration and shall be responsible\nThe time under which the President could act under the War Powers\nfor the coordination of the functions and activities of the following agencies:\nAct, the First War Powers Act, as we call it, of course is familiar\nReconstruction Finance Corporation, Electric Home and Farm Authority,\nto all members of this committee, but for the purpose of the record,\nRFC Mortgage Company, Disaster Loan Corporation, Federal National Mortgage\nI will simply read the following:\nAssociation, Federal Home Loan Bank Board, Home Owners' Loan Corporation,\nFederal Savings and Loan Insurance Corporation, Federal Housing Administra-\nTitles I and II of this Act shall remain in force during the continuance of the\ntion, and Export and Import Bank of Washington.\npresent war and for 6 months after the termination of the war, or until such\nIt is not necessary to read further respecting the powers and duties\nearlier time as the Congress, by concurrent resolution, or the President may\ndesignate.\nof the Administrator or the functions of this agency, certainly not at\nthis time.\nSo, Mr. Chairman, as I stated to the committee yesterday, the pur-\nMay I say, Mr. Chairman, not only did the Reorganization Act\npose of this bill is merely to revive an existing agency, without adding\nunder which this Reorganization Plan No. I was issued provide for\npowers or changing powers of any of the loaning agencies of the\nits legislative approval by the terms of the act but by special resolu-\nFederal Government, and that being true, I think, by way of amend-\ntion or act of Congress the approvil of this particular order was\nment in the nature of a substitute, the committee may wish to con-\nhastened; that is to say, by special legislative act it was approved\nsider this, which is in briefer form and in strict compliance with the\nearlier than it would have become effective under the Reorganization\nlaw as it exists.\nAct itself. So that this particular agency is the direct creature of\nResolved by the Senate and House of Representatives of the United States\nthe Congress, as well as the various lending agencies covered under\nof America in Congress assembled, That the Federal Loan Agency created by\nsection 402 of the President's Reorganization Plan No. I, under authority of\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n5\n4\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n(b) State Insurance funds established for paying or Insuring payment\nthe Reorganization Act of 1939 shall continue as an independent establish-\nof compensation to injured workmen and those disabled by disease contracted\nment of the Federal Government and shall continue to be administered under\nin the course of their employment, or to their dependents.\nthe direction and supervision of the Federal Loan Administrator in the same\n(c) State funds created for Insuring repayment of deposits of public\nmanner and to the same extent has If Executive Order No. 9071, dated February\nmoneys of such States or of their political subdivisions.\n24, 1942, transferring the functions of the Federal Loan Agency to the Depart-\n(d) Rallroads or receivers or trustees thereof to aid in financing, reorgan-\nment of Commerce, had not been Issued.\nization, consolidation, maintenance, or construction, by purchase or guar-\nSection 2 merely transfers all of the powers, functions, and so forth,\nantee of railroad obligations or by loans (loans and commitments outstand-\nas in the original bill which I introduced, and also carries forward\nIng limited to $500,000,000 in addition to loans and commitments made prior\nto January 31, 1935, and renewals thereof).\nall unexpended balances of funds made available to the Secretary\n(e) Partles to marketing agreements entered into by Secretary of Agri-\nof Commerce by Public Law 365, Seventy-eighth Congress, for ad-\nculture with processors, producers, et al., engaged In handling agricultural\nministrative expenses of supervising the loan agencies, and 80 forth,\ncommodities or products (sec. 8b, Agricultural Adjustment Act, approved\nMay 12, 1933, as amended April T, 1934, and August 24, 1935).\nto the Federal Loan Agency.\n(f) Persons, associations, or corporations for financing the production,\n(See appendix for joint resolution in full.)\netc., and orderly marketing of flsh of American flsheries or products thereof\nSenator GEORGE. As I say, I submit this suggested amendment be-\n(see. 15, net approved June 19, 1934).\ncause it is more concise and because it is in strict harmony with the\n(g) Processors or distributors for payment of processing taxes (see. 19\n(c), Agricultural Adjustment Act, approved May 12, 1944).\nlegal status of the Federal Loan Agency.\nNow, Mr. Chairman, by way of argument in support of this bill,\nII. Loans to facilitate the exportation of agricultural or other products and\ntheir sale in foreign markets-\nand at the risk of being a bit tedious, I wish to read a statement\nwhich summarizes the powers and authority of the Reconstruction\n(a) By acceptance of drafts and bills of exchange (see. 5a, Reconstruction\nFinance Corporation Act, approved January 22, 1932).\nFinance Corporation relating to loans and investments.\n(b) By loans (see. 201 (e), Emergency Rellef and Construction Act of\nBefore reading, I wish to make this observation, that many of these\n1932, approved July 21, 1932).\npowers and authorities upon examination will be found to be sub-\nIII. Subscriptions for or loans upon nonassessable stock and purchase of\nject to little or scant limitation, due to the fact that the R. F. C.\ncapital notes or debentures of national mortgage associations, mortgage loan\nwas itself an emergency agency of the Government. Perhaps I am\ncompanies, trust companies, savings and loan associations, and similar financial\nthe only Member of Congress now in service who was called as a\nInstitutions whose principal business is lending on mortgages, etc.: to assist in\nmember of a committee of representative people of the United States,\nthe reestablishment of a normal mortgage market; limited to $100,000,000 out-\nstanding (see. Se, Reconstruction Finance Corporation Act, as amended January\nsome official and many nonofficial, to consider appropriate legislative\n31, 1935).\naction prior to the creation of the Reconstruction Finance Corpora-\nIV. Loans to and purchase of securities and obligations of business enter-\ntion. Therefore, I am clearly within the facts when I say that it was\nprises direct, or in cooperation with banks and other lending Institutions through\noriginally conceived or originally advanced as an emergency agency,\nagreements to participate or by purchase of participations, or otherwise (see,\n5d, Reconstruction Finance Corporation Act, as amended April 13, 1938) loans\nat a time when there was, of course, a great economic upheaval in\nto and purchase of the obligations of any business enterprise including, when\nthe country, with the resulting business disruptions, unemployment,\nrequested by the Federal Loan Administrator, subscription to the capital stock\nand so forth. At least all those things were in the offing and very\nthereof, for any purpose advantageous to the national defense. The War De-\nclearly visible at that moment.\nparement and the Navy Department are authorized to participate in or guarantee\nany such loans (sec. 5d (2), Reconstruction Finance Corporation Act, as amended\nThen, again, many of the broad powers given to the R. F. C. have\nJune 25, 1940, and June 11, 1942).\nbeen given since we were over the horizon and facing the present\nV. Loans upon or purchase of the assets of banks, savings banks, or trust\nglobal war. This, I think, must be taken into consideration in view-\ncompanies closed 1930 to 1933, Inclusive (see. 5e (a), Reconstruction Finance\ning the language, the lack of limitations, the lack of restrictions,\nCorporation Act, added by net of June 16, 1934, and amended by act of January\n31, 1935).\nthe lack of definite directives with which Congress safeguarded the\nVI. Purchase of debentures or other obligations of the Federal Deposit In-\ngrant of these vast powers and this vast authority.\nsurance Corporation: outstanding limited to $250,000,000 (see. 5e (b), Recon-\nNow, Mr. Chairman, if I may repeat by way of argument for the\nstruction Finance Corporation Act, added by net of June 16, 1934).\napproval of this measure at this time, I simply recite the powers\nVII. Loans and contracts:\nand authority of the Reconstruction Finance Corporation with respect\nA. Under section 201 (a), Emergency Rellef and Construction Act of\nto loans and investments-investments particularly. It is authorized\n1932, approved July 21, 1932, as amended, to finance projects self-liquidating\nIn character, to (power of Reconstruction Finance Corporation to approve\nto make [reading]:\napplications under such sec. 201 (a) terminated June 26, 1933, pursuant to\nI. Loans, under section 5 of the Reconstruction Finance Corporation Act, as\nsec. 301, National Industrial Recovery Act, approved June 16, 1933)\namended, to aid in financing agriculture, commerce, and Industry, to-\n(a) States, municipalities, and political subdivisions of States: pub-\n(a) Financial Institutions: banks; savings banks: trust companies: build-\nlle agencies of States, municipalities, and political subdivisions of\ning and loan associations; Insurance companies; mortgage loan companies;\nStates: public corporations: boards and commissions, and public mu-\ncredit unions; Federal land banks; Joint-stock land banks: Federal inter-\nnicipal instrumentalities of one or more States.\nmediate credit banks: agricultural credit corporations (including regional\n(b) Corporations formed to provide housing for familles of low\nagricultural credit corporations): livestock credit corporations; banks,\nincome or for reconstruction of slum areas.\nsavings banks, and building and loan associations closed or In process of\n(e) Private corporations to aid in carrying out the construction,\nliquidation to aid in their reorganization or liquidation.\nreplacement, or Improvement of bridges, tunnels, docks, viaducts, water-\nworks, canals, and markets devoted to public use.\n6\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n7\n(d) Private limited dividend corporations to aid In financing proj-\n(b) The acquisition of structures, building, or property in replacement of\nects for the protection and development of forests and other renewable\nproperty destroyed or rendered unfit for use by catastrophe in the years\nnatural resources.\n1985 and 1936,\n(e) Ald In financing the construction of publicly owned bridges to be\nused for rallroad, railway, and highway uses.\nLimited to $50,000,000. (Act approved April 13, 1034, as amended July 26, 1935,\n(f) Nonprofit corporations organized to finance the repuir or re-\nand April 17, 1936.)\nconstruction of buildings damaged by earthquake, fire, tornado, or\nXIV. Loans and advances to the Secretary of Agriculture to acquire, handle,\ncyclone In 1933; limited to an aggregate of $20,000,000-$8,000,000 In\nand market cotton owned or held as collateral by other governmental depart-\nthe case of private property, and $12,000,000 in the case of municipal-\nments and agencies (sec. 5, Agricultural Adjustment Act, approved May 12,\nItles or political subdivisions of States or their public agencies, Includ-\n1933, as amended June 19, 1934).\nIng public-school boards and districts.\nXV. Loans to or for the benefit of agricultural Improvement districts-drain-\nage, levee, Irrigation, etc.-to reduce and refinance outstanding Indebtedness;\nB. Under section 301 of the National Industrial Recovery Act, approved\npurchase, acquire, construct, complete, repair, extend, improve, or make additions\nJune 16, 1933, as amended June 19, 1931; further loans and contracts for\nto, projects: or purchase or acquire additional drainage, levee, or irrigation\ncompletion or proper functioning of projects or which will increase assur-\nworks, or property, rights, or appurtenances in connection therewith. Limited to\nance of repayment of Corporation's investments in loans or contracts made\n$125,000,000 (sec. 36, Emergency Farm Mortgage Act of 1933, approved May\nunder section 201 (a) of the Emergency Reilef and Construction Act of\n12, 1933, as amended June 22, 1936).\n1932, as amended (A (a) above).\nXVL Loans to managing agencies of farmers' cooperative mineral-rights pools\nC. Under section 5d, Reconstruction Finance Corporation Act, as amended\nfor defraying the cost of organizing such pools (see. 13, net approved June 19,\nApril 13, 1938, to aid in financing projects authorized under Federal, State, or\n1934).\nmunicipal law-\nXVII. Loans to Administrator of the Rural Electrification Administration.\nLimited to $50,000,000 for fiscal year 1937 (Rural Electrification Act of 1935,\n(a) States, municipalities, and political subdivisions of States.\napproved May 20, 1936) : $100,000,000 for fiscal year ending June 30, 1939 (Rural\n(b) Public agencies and Instrumentalities of States, municipalities, and\nElectrification Act of 1936, approved May 20, 1936, as amended by sec. 401, Rural\npolitical subdivisions of States.\nElectrification Act of 1938, approved June 21, 1938; $100,000,000 to the Secretary\n(c) Public corporations, boards, and commissions.\nof Agriculture for loans in accordance with the Rural Electrification Act of\nVIII. Loans to finance the carrying and orderly marketing of agricultural com-\n1936, as amended, by Department of Agriculture Appropriation Act, 1941, ap-\nmodities and livestock produced in the United States (sec. 201 (d), Emergency\nproved June 25, 1940; $100,000,000 by Department of Agriculture Appropriation\nRelief and Construction Act of 1932, approved July 21, 1932).\nAct, 1942, approved July 1, 1941; and $10,000,000 by Department of Agriculture\nIX. Subscriptions for preferred stock of National or State banks or trust com-\nAppropriation Act, 1943, approved July 22, 1942; and $25,000,000 by Department of\npanies, loans secured by such stock as collateral, and purchases of capital notes\nAgriculture Appropriation Act, 1945, approved June 28, 1944).\nor debentures of State banks or trust companies (see. 304, act approved March\nXVIII. Loans to receivers appointed under section 29 of the Federal Farm\n9, 1933, as amended March 24, 1933).\nLoan Act, as amended, or by a United States district court, to pay taxes on farm\nX. Subscriptions for preferred stock and purchases of capital notes, or other\nreal estate owned or pledged to land banks (sec. 27, Emergency Farm Mortgage\nforms of indebtedness, of Insurance companies, and loans secured by such stock\nAct of 1933, approved May 12, 1933).\nor notes, or other forms of Indebtedness, as collateral; limited to $75,000,000 out-\nXIX. Loans to the Corporation of Foreign Security Holders, a corporation\nstanding (secs. 1 and 2, act approved June 10, 1933, as amended June 19, 1934, and\nauthorized to be created to protect, conserve, and advance the interests of\nJanuary 31, 1985).\nholders of foreign securities in default. Limited to $75,000 (sec. 200, Corpora-\nXI. Mining loans (sec. 14, act approved June 19, 1934, as amended January 31,\ntion of Foreign Bondholders Act, 1933, approved May 27, 1933).\n1935, and September 16, 1940) to corporations, individuals, and partnerships\nXX. Advances to the reclamation fund, upon request of Secretary of the In-\nengaged In-\nterior, for the completion of projects under construction or approved and author-\nIzed on May 12, 1933. Limited to $5,000,000 (sec. 37, Emergency Farm Mortgage\n(a) Mining, milling, or smelting of ores.\nAct of 1933, approved May 12, 1933).\n(b) Development of ore bodies containing gold, silver, tin, or strategie or\nXXI. Purchase of marketable securities from the Federal Emergency Adminis-\ncritical minerals: limited to $10,000,000, and not over $40,000 to any corpora-\ntration of Public Works (now Public Works Administration, Federal Works\ntion, individual, or partnership.\nAgency). Amount held limited to $400,000,000 (Emergency Appropriation Act,\nXII. Loans to or for the benefit of public-school districts or other public-school\nfiscal year 1935, approved June 19, 1934; and Publiq Works Administration Exten-\nauthorities-\nsion Act of approved June 29, 1937).\nXXII. Purchase from United States Housing Corporation certain mortgages\n(a) For payment of teachers' salaries due prior to June 1, 1934: out-\non property in Lincoln Gardens project, New Brunswick, N. J. (act approved June\nstanding limited to $75,000,000 (sec. 16, net approved June 19, 1984).\n25, 1938).\n(b) To reduce and reflnance outstanding indebtedness or obligations In-\nXXIII. Purchase from Secretary of the Treasury of capital stock of Federal\ncurred prior to August 24, 1935; and for repairs, extensions, or Improvements\nhome-loan banks (sec. 2, Reconstruction Finance Corporation Act, as amended\nnecessary to protect such loans; limited to $10,000,000 (act approved Au-\nJune 25, 1940, and sec. 304, act approved March 9. 1933, as amended June 25, 1940).\ngust 24, 1935).\nXXIV. Loans to or subscriptions for preferred stock of Export-Import Bank of\nXIII. Loans to corporations, partnerships, Individuals, municipalities, or po-\nWashington: Loans or other obligations of bank outstanding at any one time shall\nlitical subdivisions of States or of their public agencies, including public-school\nnot exceed $700,000,000. Loans to or subscriptions for preferred stock of Export-\nboards and public-school districts, and water, irrigation, sewer, drainage, and\nImport Bank to enable bank to make loans to governments, their central banks,\nflood-control districts for financing-\nor other acceptable banking Institutions, and, when guaranteed by such govern-\nment, a central bank or other acceptable banking institution, to a political sub-\n(a) The repair, construction, reconstruction, or rehabilitation-\ndivision, agency, or national of such government, not to exceed $500,000,000, out-\n1. Of structures or buildings, including necessary equipment, appli-\nstanding at any one time (sec. 5d, Reconstruction Finance Corporation Act, as\nances, fixtures, machinery and appurtenances:\namended September 26, 1940, and sec. 9, act approved January 31, 1935, as amended\n2. Of water, Irrigation, gas, electric, sewer, drainage, flood control,\nSeptember 26, 1940).\ncommunication, or transportation systems, highways and bridges;\nXXV. Loans to or purchase of capital stock of any corporation-\ndamaged or destroyed by catastrophe In the years 1935 or 1936.\n(a) For producing, acquiring, and carrying strategic and critical materials,\nand\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n9\n8\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nXXXIL To supply funds to War Damage Corporation (created pursuant\n(b) For plant construction, expansion, and equipment, and working cap-\nto section 5d of the Reconstruction Finance Corporation Act, as amended) only\nItal, to be used by the corporation in the manufacture of equipment and\non the request of the Secretary of Commerce with the approval of the President,\nsupplies necessary to the national defense.\nnot exceeding $1,000,000,000 (see. 5g, Reconstruction Finance Corporation Act,\n(see. 5, Reconstruction Finance Corporation Act. as amended September 26, 1940).\nas amended by sec. 2 of the act approved March 27, 1942).\nXXVL Creation or organization, at any time prior to July 1, 1943, of a corpora-\nXXXIII. To purchase or make loans upon the security of any article or\ntion or corporations with power-\ncommodity the sale or distribution of which is rationed under authority of the\nUnited States (see. 5h, Reconstruction Finance Corporation Act, as amended by\n(a) To produce, acquire, carry, sell, or otherwise deal In strategic or criti-\nact approved May 11, 1942).\ncal materials;\n(b) To purchase and lease land, purchase, lease, build, and expand plants,\nFunds of Reconstruction Finance Corporation allocated and made avail-\nand purchase and produce equipment, facilities, machinery, materials, and\nable to other governmental agencies:\nsupplies for the manufacture of strategic and critical materials, arms, ammu-\nI. (a) To the Secretary of Agriculture for crop loans (see. 2, Recon-\nnition, and Implements of war, any other articles, equipment, facilities,\nstruction Finance Corporation Act: net of February 4, 1933; (b) for the\nand supplies necessary to national defense, and such other articles, equip-\ncapitalization (by Reconstruction Finance Corporation) of the regional\nment, supplies, and materials as may be required in the manufacture or use\nagricultural credit corporations (sec. 201 (e). Emergency Relief and\nof any of the foregoing or otherwise necessary in connection therewith;\nConstruction Act of 1932, approved July 21, 1932) : and (e) to the Farm\n(e) To lease, sell, or otherwise dispose of such land, plants, facilities, and\nCredit Administration for revolving fund for capitalization production\nmachinery to others to engage in such manufacture:\ncredit corporations (sec. 5, Farm Credit Act of 1933, approved June 16,\n(d) To engage in such manufacture itself, If the President finds It neces-\n1933) $200,000,000.\nsary:\nII. To the Land Bank Commissioner and the Federal Farm Mortgage\n(e) To produce, lease, purchase, or otherwise require railroad equipment\nCorporation for loans to farmers and capitalization of Federal Farm\n(Including rolling stock), and commercial aireraft, and parts, equipment,\nMortgage Corporation ($200,000,000) (section 32, Emergency Farm\nfacilities, and supplies necessary in connection with such railrond equipment\nMortgage Act of 1933, approved May 12, 1933, as amended: and sec. 3,\nand aircraft, and to lease, sell, or otherwise dispose of the same;\nFederal Farm Mortgage Corporation Act, approved January 31, 1934).\n(f) To purchase, lease, build, expand, or otherwise acquire facilities for\nIII. To the Land Bank Commissioner for loans to Joint-stock land\nthe training of aviators and to operate or lease, sell or otherwise dispose of\nbanks ($100,000,000) (sec. 30 (a), Emergency Farm Mortgage Act of\nsuch facilities to others to engage in such training; and\n1933, approved May 12, 1933, as amended June 3, 1935).\n(g) To take such other action as the President and the Federal Loan Ad-\nIV. To the Federal Housing Administrator:\nministrator may deem necessary to expedite the national defense program.\nAggregate amount of funds of Reconstruction Finance Corporation out-\n(a) To carry out provisions of National Housing act (not Ilmited)\nstanding at any one time to carry out clause (g) shall not exceed $200,000,000.\n(sec. 4, National Housing Act, approved June 27, 1934).\n(b) For defense housing Insurance fund (not to exceed $10,000,-\n(see. 5d. Reconstruction Finance Corporation Act, as amended June 10, 1941.)\n000) (sec. 602, National Housing Act, added by act approved March\nXXVIL To acquire real estate, or any right or Interest therein, by purchase,\n28, 1941).\nlease, condemnation, or otherwise determined by the Corporation to be neces-\nsary or advantageous to the carrying out of any authority vested in any corpo-\nV. To the Secretary of the Treasury for capital of Federal home-\nration created pursuant to section 5d of the Reconstruction Finance Corporation\nloan banks subscribed by the United States ($125,000,000) (sec. 2, Recon-\nAct, ns amended. (See previous Item.) (See. 5d. Reconstruction Finance Corpo-\nstruction Finance Corporation Act, as amended by sec. 6 (f), Federal\nration Act, as amended by sec. 1 of net approved March 27, 1942.)\nHome Loan Bank Act, approved July 22, 1032).\nXXVIII. Loans to foreign governments, to their central banks, or to any person,\nVI. To the Secretary of the Treasury for capital of Home Owners'\ncommission, association, corporation, or bank aeting for or on behalf of such\nLoan Corporation subscribed by the United States ($200,000,000) (see\ngovernment, for the purpose of achieving the maximum dollar exchange value\n4 (b), Home Owners' Loan Act of 1933, approved June 13, 1933).\nin the United States for the securities or property of any such government, central\nVII. For relief:\nbank, person, commission, association, corporation, or bank (see. 5d, Reconstruc-\nEmergency Relief and Construction Act of 1932, approved July\ntion Finance Corporation Act, as amended June 10, 1941).\n21, 1933 ($300,000,000).\nXXIX. Loans to the Secretary of Agriculture for farm tenancy loans In\nFederal Emergency Relief Act of 1933, approved May 12, 1933\naccordance with Bankhead-Jones Farm Tenant Act approved July 22, 1937,\n($500,000,000).\n$50,000,000 by Department of Agriculture Appropriation Act, 1941, approved\nEmergency Appropriation Act. fiscal year 1985, approved June\nJune 25, 1940; $50,000,000 by Department of Agriculture Appropriation Act,\n19, 1934 ($500,000,000).\n1942, approved July 1. 1941; $32,500,000 by Department of Agriculture Appro-\nEmergency Relief Appropriation Act of 1935, approved April 8,\nprintion Act. 1943, approved July 22, 1942, and $30,000,000 by Department of\n1935 ($500,000,000).\nAgriculture Appropriation Act, 1944, approved July 12, 1943, and $15,000.000\nby Department of Agriculture Appropriation Act. 1945, approved June 28, 1914.\nVIII. For expenses of regional agricultural credit corporations (not\nXXX. Loans to the Secretary of Agriculture for rural rehabilitation loans,\nlimited) (sec. 201 (3), Emergency Rellef and Construction Act of 1932,\n$125,000,000 by Emergency Rellef Appropriation Act, fiscal year 1941, approved\napproved July 21, 1932, and section 33 (b), Farm Credit Act of 1937,\nJune 26, 1940; $120,000,000 by Department of Agriculture Appropriation Act,\napproved August 19, 1937).\n1942, approved July 1, 1941 $97,500,000 by Department of Agriculture Appropria-\nIX. To Commodity Credit Corporation for aequisition of Its non-\ntion Act. 1943, approved July 22, 1942; $60.000.000 by Department of Agriculture\nassessable capital stock. Limited to $97,000,000 (act approved April\nAppropriation Act, 1944, approved July 12, 1943. (Increased to $67,500,000 by\n10, 1936).\nFirst Supplemental National Appropriation Act, 1944, approved December 23, 1943,\nX. To Disaster Loan Corporation for acquisition of Its nonassessable\nand $67,500,000 by Department of Agriculture Appropriation Act, 1945, approved\ncapital stock. Limited to $40,000,000 (act approved February 11, 1937,\nJune 28. 1944.)\nas amended March 4, 1839).\nXXXI. Loans or purchase of securities to cooperate with States to finance, or\nNore-The material presented above covers the powers of the Reconstruction\nto aid In financing, the acquisition of right-of-way necessary or desirable for\nFinance Corporation to June 30, 1944. Since that date additional powers and\nroad projects eligible for Federal aid under the Federal Highway Act (Federal\nHighway Act of 1940, approved September 5, 1940).\nRegraded Unclassified\n10\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n11\nauthority have been granted to the Reconstruction Finance Corporation by or\nmittee will approve the bill which I have introduced; or, preferably,\npursuant to the following acts of Congress:\nA. Title III of the net approved June 22, 1944 (G. I. bill of rights), provides\nthe amendment by way of a substitute which I am offering for the\nfor the guarantee of loans to veterans for the purchase or construction of homes,\nrecord today.\nfarms, and business property and authorizes the Administrator of Veterans'\nI believe, Mr. Chairman, that that is all that I have to say.\nAffairs to Issue rules and regulations and to designate such agency or agencies\nThe CHAIRMAN. Do the members of the committee have any ques-\nas he finds equipped to determine whether the guaranty of a loan should be\napproved. On December 22, 1944, the Administrator issued regulations relating\ntions of Senator George?\nto the guaranty of loans made for the purchase of business property and sub-\nSenator GEORGE. Yesterday some member of the committee did ask\nsequently, on January 5, 1945, by letter to the chairman of the board of directors\nabout an amendment to the bill as drawn, or to the substitute, and I\nof the Reconstruction Finance Corporation, designated the Reconstruction Finance\nstated that I would be glad to prepare one for the consideration of the\nCorporation as an agency with authority to receive and consider veterans' appli-\ncommittee.\ncations for loans and to forward to the Veterans Administration written recom-\nmendations as to the approval or disapproval of the applications.\n(The proposed new section to be added to S. 375 is as follows:)\nB. The Contract Settlement Act of 1944, approved July 1, 1944, authorizes\nSEC. 7. No functions, powers, or duties shall be transferred from the Federal\ncertain contracting agencies, including the Reconstruction Finance Corporation\nLoan Agency under the provisions of title I of the First War Powers Act, 1941,\nand any corporation organized pursuant to the Reconstruction Finance Corpora-\nor any other law, unless the Congress shall otherwise by law provide.\ntlon Act, as amended, to make available interim financing, through loans and\ndiscounts and commitments and guaranties in connection therewith, in contem-\nSenator BREWSTER. Does that have to do with exempting it from\nplation of or related to termination of war contracts.\nthe retransfer powers of the War Powers Act?\nC. The Reconstruction Finance Corporation has been designated as the dis-\nSenator GEORGE. Exactly.\nposal agency for capital and producer's goods under regulations issued by the\nSurplus War Property Administrator pursuant to Executive Order No. 9425,\nSenator BREWSTER. And that amendment would be acceptable, so\ndated February 19, 1944, and has continued to net as such disposal agency\nfar as you are concerned?\npursuant to section 35 of the Surplus Property Act of 1944, approved October 3,\nSenator GEORGE. So far as I am concerned.\n1914. As of December 31, 1944, property having an acquisition cost of $1,044,-\nSenator BREWSTER. Have you considered the question of whether\n316,000 had been declared to the Reconstruction Finance Corporation as surplus.\nIncluded in this amount is Reconstruction Finance Corporation owned property\nother loan agencies might be transferred by this same action to the\nhaving an acquisition cost of $181,421,000. Also as of December 31, 1944, sales\nFederal Loan Agency?\nwere made of property having ao acquisition cost of $127,724,000, the sales price\nSenator GEORGE. I have, Mr. Chairman and Senator Brewster, but\nof which totaled $91,268,000. leaving a balance of such surplus property to be sold\nI had not thought that this committee would have jurisdiction with\nhaving an acquisition cost of $916,592,000.\nD. The Reconstruction Finance Corporation and corporations organized pur-\nrespect to the transfer of other agencies that were in other executive\nsuant to the Reconstruction Finance Corporation Act, as amended, are named\nbranches of the Government, of which this committee itself has no\nas contracting agencies by the War Mobilization and Reconversion Act of 1944,\njurisdiction.\napproved October 3, 1944, and as such are governed by the demobilization and\nSenator PEPPER. I would like to ask a question, Mr. Chairman.\nreconversion policies prescribed In the net and as may be prescribed by the\nDirector of War Mobilization and Reconversion.\nThe CHAIRMAN. Go ahead, Senator Pepper.\nSenator PEPPER. Senator George, I have before me your bill, S. 375,\nNow, Mr. Chairman, as I said before reading this summarized\nwhich you presented to the committee on yesterday. I do not have a\nstatement of the powers and authority given to the R. F. C. and its\ncopy of the amendment to which you referred, and from which you\nvarious subsidiaries, organized under the R. F. C. Act or otherwise,\nread, nor of the amendment to which, evidently, the Senator from\n1 think the vast powers and vast authority given is the strongest pos-\nMaine referred in his question to you.\nsible argument that anyone can make for the return, or for the hasten-\nWould you be good enough to point out the difference between your\ning of the return, of these powers to an independent agency of the\nresolution, if I understand it correctly, which is the proposed sub-\nGovernment created by the Congress and responsible to the Congress.\nMore and more, the responsibility of Congress for the creation of\nstitute for your S. 375, and S. 375?\nSenator GEORGE. Practically the only difference, Senator Pepper,\nthese vast powers and for the grant of these vast authorities is placed\nis that as S. 375 was drawn, and is now printed, the language reestab-\nupon the Senate of the United States as a member of the legislative\nlishes the Federal Loan Agency, as created by Reorganization Plan\nbranch of this Government.\nNo. 1. The substitute accomplishes the same result, but it more accu-\nI am firmly of the opinion, myself, that as we follow through the\nmobilization period to the end of the war, whenever it may come,\nrately reflects, I believe-and I think in that I am correct-that the\nFederal Loan Agency is an existing agency now. Indeed, under the\nand as we also enter into and follow through the reconversion period,\nWar Powers Act, under which the Executive order was issued making\nthat this direct responsibility ought to be recognized by the Congress\ntransfers from the Federal Loan Agency to certain departments of\nand ought not to be placed, or continued, in an officer in the executive\nGovernment, provision is made for the return of these agencies to the\nbranch of the Government who is a part of the official family, so to\nspeak, of the Chief Executive of the Nation.\nagency from which transferred, on the termination of the war or 6\nmonths thereafter, or sooner, if the Congress by concurrent resolution\nThese powers are too vast and are too sweeping; the economic con-\nshould declare the war ended.\ntrol over this country, and the political controls, if I may be bold\nSenator PEPPER. Is that in the form of a bill or in the form of a\nenough to say so, simply cannot be estimated. And for both reasons,\nand all reasons, and under all the circumstances, I hope that the com-\njoint resolution or in the form of a concurrent resolution?\nRegraded Unclassified\n12\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n13\nSenator GEORGE, It is in the form of a concurrent resolution; it has\nMr. Jones, who has formerly occupied the office of Secretary of Com-\nthe effect of a bill.\nmerce, and then the head of the Federal Loan Agency. Does the\nSenator PEPPER. But in the form of a concurrent resolution, you say?\nSenator happen to know whether he has occupied both of those offices\nSenator GEORGE. Yes,\nat the same time, or has, in the Senator's theory, the Federal Loan\nSenator PEPPER. Well, do you mean by that that it would become\nAgency head been submerged into the office of Secretary of Commerce!\neffective, have the force of law or the full legal force intended for it,\nSenator GEORGE. All I know on that point is that the Congress it-\nwhen it was passed by both Houses of Congress, by a majority of both,\nself, by a joint resolution, authorized Jesse H. Jones, Federal Loan\nwithout requiring the signature of the President, or without being\nAdministrator, to be appointed to and perform the duties of the office\nallowed to become law without the President's signature?\nof Secretary of Commerce, and that that joint resolution was ap-\nSenator GEORGE. I think a concurrent resolution is approved by the\nproved September 13, 1944. Whether Mr. Jones-\nPresident just as an act of Congress is.\nSenator BURTON. Wasn't that 1940, Senator?\nSenator PEPPER. Maybe I err. I had the impression that a joint\nSenator GEORGE. I should have said 1940-September 13, 1940.\nresolution required the signature of the President to become effective\nWhether Mr. Jones has resigned from the Federal Loan Agency as\nand had the character of a bill and was in all respects like a bill; but\nFederal Loan Administrator, I don't know. If so, there would be a\nthat a concurrent resolution required only a majority vote of the two\nvacancy, and under the President's order that vacancy would be filled\nHouses and did not require the signature of the President to become\nby appointment of the President by and with the advice of the Senate.\neffective.\nSenator PEPPER. But if the Senator's bill were enacted and became\nSenator GEORGE. Very well, whatever the legal effect, that is what\nlaw, and Mr. Jones has not resigned from his office of Federal Loan\nis intended.\nAdministrator, then he would still-remain the Federal Loan Admin-\nSenator PEPPER. So this is a concurrent resolution instead of a bill?\nistrator?\nSenator GEORGE. It is an amendment to this bill by way of substitute.\nSenator GEORGE. I think he would be at this time, if he has not re-\nSenator PEPPER. But the amendment, if effectuated, will make it a\nsigned or retired from that office.\nconcurrent resolution?\nSenator PEPPER. Now, Senator, recalling the clear tracing of the\nSenator GEORGE. No, sir; I find it is a joint resolution. So you are\nhistory of the present situation, if I recall correctly the present War\ntalking to no purpose.\nPowers Act allowed the President, as you say, to distribute executive\nSenator PEPPER. Well, at least I have elicited a clear statement from\nfunctions among the executive agencies according to his judgment?\nthe able Senator 80 that we know the character of this bill.\nSenator GEORGE. Yes; that is correct. There is no question about\nSenator GEORGE. I read it into the record, and it is in form a joint\nthat.\nresolution. I believe I inadvertently stated & moment ago that a\nSenator PEPPER. If this bill were to be enacted, it would have the\nconcurrent resolution is approved by the President. As the Senator\neffect of denying the Executive the power to assign to the executive\nfrom Florida has indicated, concurrent resolutions do not go to the\nbranches of the Government the functions of the Federal Loan Agency,\nPresident, but joint resolutions do. In any event, I presume that the\neither now or in the future, by the amendment to which the Senator\nsubstitute which I have offered, if approved by the committee, would\nfrom Maine referred?\nbe made an amendment in the nature of a substitute to S. 375, so that\nSenator GEORGE. Yes; it would be a congressional expression that\nwe need not be disturbed about the particular form in which it stands\nthis vast power and authority ought to be placed in an agency directly\nnow, except that I should emphasize that, of course, it is designed\naccountable to and created by the Congress itself, and not hidden away\nas a legislative enactment.\nin an executive office where it virtually is immune from any reason-\nSenator PEPPER. The legal effect of the joint resolution, if enacted,\nable examination, even by Congress itself.\nwould be simply to divide, or to sever, upon the Senator's theory that\nSenator PEPPER. Well, does the Senator happen to know the legis-\nthe Federal Loan Agency is an existing agency, that agency from the\nlative history or the congressional past of whether or not the present\nSecretaryship of Commerce!\nencumbent of the Federal Loan Agency has submitted or has agreed\nSenator GEORGE. Simply to return those loan agencies vested in the\nto or made possible the auditing of his agency by the auditing agency\nDepartment of Commerce to the Federal Loan Agency, which I con-\nof the Government which is responsible to Congress, for example, the\nceive to be still an existing agency.\nComptroller General's office?\nSenator PEPPER. I was just trying to clarify the legal significance of\nSenator GEORGE. I do not recall.\nthe Senator's bill.\nSenator PEIPER. I had gained the impression, from the Senator's\nSenator GEORGE. That is the full significance of it, I may say. to the\nable presentation yesterday to the committee, that it was his opinion\nSenator, with the exception of those technical provisions which simply\nthat this bill should be enacted because these vast powers, which\ncarry functions. back unexpended balances appropriated to administer those\nthe Senator has pointed out very vividly, are too much for one man\nto possess, especially to hold at the same time the duties of Secretary\nSenator PEPPER. I was wondering what, in the Senator's theory-\nof Commerce. Now it had seemed to me that probably it was a case\nand there are no abler lawyers around here than the able Senator from\nof the tail wagging the dog, and that the experience of the past had\nGeorgia-upon his theory what, for example, would be the status of\nnot, perhaps, indicated that one man was incapable of performing\n68424-45-2\nRegraded Unclassified\n14\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n15\nthe duties of both positions-of the Federal Loan Administrator's\ntary of Commerce, and due to the obvious desire on the part of some,\noffice and the office of the Secretary of Commerce. In other words,\nalthough the desire may not be shared by the Senator from Georgia,\nif you turn it around and ask the question whether an able man who\nthat the nomination not be considered until this particular piece of\nis qualified to be Federal Loan Administrator could also perform\nlegislation can be disposed of by the Congress, isn't the impression\nthe duties of Secretary of Commerce, would the Senator think that a\njustified that the introduction of this bill is directly related to the\nqualified man would find that impossible?\nnomination of Henry A. Wallace, by the President, to be Secretary of\nSenator GEORGE. I think it would be very difficult to find any man,\nCommerce, and it wouldn't have been introduced the day it was intro-\nregardless of his great ability and wide experience, who did not come\nduced, or wouldn't be pressed as it is now being pressed, in time, had\nup with this vast grant of authority under the R. F. C., who could\nnot a new nomination for the office of Secretary of Commerce come\nsatisfactorily administer both offices.\ndown to the Senate from the President!\nNow, I am not critical of the past Administrator, Mr. Jones, because\nSenator GEORGE. The appointment of Mr. Wallace may have been\nhe came into R. F. C. before this administration came into office.\nan aggravating circumstance. [Laughter.] But I still believe that\nHe has lived through it; he has seen it put together; he has been\nthe bill is meritorious, and I don't think my motive or my purpose\nlargely instrumental in putting every piece of timber, so to speak,\nhas very much to do with the merits or demerits of the bill. It is either\ninto the building, and his capacity and his ability and his experience\na good bill or a bad bill, and I think it is definitely a good bill.\nneed not be compared with other able and experienced men in the\nSenator PEPPER. Well, I was just wondering whether or not it might\ncountry. But he certainly is one of the few who have had the\nbe accurate to say, instead of the nomination of Mr. Wallace being an\nopportunity of coming up with this vast organization, having the\naggravating circumstance, it was the impelling circumstance for the\nfamiliarity that he has, necessarily, with it, who could step into\nintroduction of this legislation?\nthe Department of Commerce and carry on this vast operation to the\nSenator GEORGE. No: I wouldn't go so far, because I am very little\nreasonable satisfaction, as I think, of the people.\nconcerned about Mr. Wallace, if appointed, being able to fill the\nSenator PEPPER. Well, Senator, the peculiarity-\nroutine duties of the Secretary of Commerce, or Secretary of Labor,\nSenator GEORGE. And, therefore, I think that there should be a\nor Secretary of Agriculture, where he once served. I have no fight\nseparation of these functions.\non Mr. Wallace. But I would not vote for any man, I think, unless\nSenator PEPPER. The peculiarity of the present situation is that\nhe was a man of demonstrated experience and business capacity, when\nthis joint resolution is proposed, of course, as legislation by the able\nI look at the vast powers given to the Administrator of the Federal\nSenator from Georgia.\nLoan Agency, and also the not insignificant or inconsequential powers\nSenator GEORGE. I beg your pardon?\nof the Secretary of Commerce. I am not here appearing on the nom-\nSenator PEPPER. This joint resolution is proposed by the Senator\nination of Mr. Wallace, because this committee will, of course, finally\nas legislation.\nreport either favorably or unfavorably upon that nomination, and I\nSenator GEORGE. Yes.\nwill have to consider it as any other Member of the Senate. But\nSenator PEPPER. The impression is difficult to escape that what pre-\nI think that the suggested legislation here is necessary legislation,\ncipitated the introduction of this proposed legislation by the Senator\nand I think that that is particularly true as we travel a bit further\nfrom Georgia was the nomination of Mr. Henry A. Wallace by the\ntoward the end of this war and finally out of it, and through the re-\nPresident to be Secretary of Commerce, and if that inference were\nconversion period, with all of the commitments which this Nation\nwell founded, that would indicate that the Senate was holding in sus-\nwill be asked to make.\npense the exercise of its constitutional power and duty to advise and\nI don't care to expand upon that statement, because I think all of\nconsent, or not, to the nomination of the Secretary of Commercé\nus must know that those commitments are going to be vast, and it\nin substance, the office for which the nomination was made had been\nseems to me that we ought to have an agency that will function in large\nlimited in authority and jurisdiction.\nIn other words, would not the Senator admit that it would be diffi-\npart to carry out any commitments that we may make, that will have\na direct responsibility to the Congress and that can be rigidly scru-\ncult to escape the impression that the Senate was holding up the nomi-\ntinized and examined by the Congress.\nnation of the nominee, Mr. Wallace, until legislation could be enacted\nNow, I should not like to discuss the confirmation, or whatever the\nto change the character of the duties of the Secretary of Commerce!\nSenate may finally determine to do with Mr. Wallace's nomination as\nSenator GEORGE. Well, I do not know how difficult it is to escape any\nSecretary of Commerce.\nparticular impression or any particular conclusion. In all events and\nSenator PEPPER. Does the Senator from Georgia intend to press\nunder all circumstances, it is my belief that this bill ought to be passed,\nfor the enactment of this bill, or the final disposition of this bill,\nand that these vast powers ought to be again segregated into an inde-\nprior to the final consideration of the nomination of Mr. Wallace?\npendent agency over which the Congress itself may have very much\nSenator GEORGE. Prior to and subsequent, if he is finally confirmed,\ncloser control and very much closer scrutiny.\nand regardless of who is nominated. I want to make it clear. I am\nSenator PEPPER. But, Senator, due to the fact that the legislation\nnot making any fight on Mr. Wallace. I certainly regard him as a\nwas offered in the Senate the same day, the same afternoon, that the\ngentleman of integrity and character, and I am not making any fight\nnomination of Mr. Henry A. Wallace came to the Senate to be Secre-\non Mr. Wallace. And regardless of who is nominated, I think I will\nRegraded Unclassified\n16\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n17\ncontinue to press for consideration in the Senate, and also in the\nSenator BURTON. Therefore, Mr. Chairman, I would like the privi-\nHouse so for as a Senator is permitted to confer with Members of the\nlege of reading very briefly for the record two paragraphs containing\nHouse on legislative matters.\nthe sense of the discussion of that resolution which took place on the\nSenator PEPPER. Thank you, Senator.\nfloor of the House and the Senate, thereby indicating the basis upon\nSenator BURTON. Mr. Chairman.\nwhich the House and Senate took that action.\nThe CHAIRMAN. All right, Senator Burton.\nFirst I refer to the discussion, which was very brief, which took\nSenator BURTON. I have one or two questions I would like to ask.\nplace on the floor of the House on September 9, 1940, when this resolu-\nIn order to make absolutely clear in our record the legislative his-\ntion was unanimously passed, and I quote the following from the\ntory that relates to this step, the Senator referred to the fact that\nremarks of Congressman Steagall, chairman of the Committee on\nCongress had taken action joining in the approval of the creation of\nBanking and Currency which approved the resolution, and who was\na Federal Loan Agency; is that correct?\nsupporting it before the House. He said this, referring to Mr. Jones\nSenator GEORGE. Yes; I did, and I said that the effective date of\n[reading]:\nthe Federal Loan Agency had been expedited by direct congressional\naction, also. That statement is not literally true. Mr. Boots of the\nHe has an experience of nearly 10 years In connection with the lending agencies\nof the Government. I do not think It is unfair to say that, in the light of his\nLegislative Counsel's office called my attention to the fact that that\nexperience, his judgment cannot be duplicated by any other public official. We\nwasn't actually a true description. A resolution was passed fixing\ndo not want to lose the benefit of his services in connection with these ageneles,\nthe effective date of plan No. 1, creating the Federal Loan Agency,\nby having him surrender these duties in order to accept the appointment to the\nthus approving the plan, although the time had not then expired for\noffice of Secretary of Commerce.\nthe consideration of the plan by Congress. The effect was to expedite\nThe House thereupon unanimously passed the resolution.\nthe approval date of the plan although actually the effective date was\nOn September 10 it came before the Senate. There was only one\npostponed a few days. My point is that there was specific congres-\nSenator who made a statement as to it, and that is my colleague,\nsional action on this plan No. 1 which created the Federal Loan\nSenator Taft, who was serving as a member of the Committee on Bank-\nAgency.\ning and Currency of the Senate, which had recently acted favorably\nSenator BURTON. But in contrast to that there has been no action of\nupon a similar resolution introduced in the Senate, and, if I may, I will\nCongress approving the placing of the Federal Loan Agency under\nread Senator Taft's remarks which, Mr. Chairman, are the only\nthe jurisdiction of the Secretary of Commerce. I understand that that\nremarks on this matter as it came before the Senate on September 10,\nwas done solely by Executive order, is that not correct?\n1940. He said [reading]:\nSenator GEORGE. That was done solely by Executive order. On the\nMr. President, I do not wish to object to the Joint resolution, since I have\ncontrary the Congress had, by an unusual resolution, authorized Mr.\nthe highest respect for Mr. Jones and think be is one of the ablest men in the\nJones, who was the Administrator of the Federal Loan Agency, to\npublic service. I merely wish to call attention to the fact that Mr. Jones already\nhold both the office of Administrator of the Federal Loan Agency, and\nprobably has more power than any other man in the Government, with the single\nexception of the President. He has unlimited power to lend money to anyone,\nSecretary of the Department of Commerce.\nto any industry In the United States, or refuse to lend. We gave him unlimited\nSenator BURTON. That is precisely the action of Congress that I\npower to Invest Government money In any Government plant which manufac-\nwish to emphasize.\ntures any form of supplies or any other kind of material which has the remotest\nSenator GEORGE. That is correct.\nrelation to war. I do not think. with the exception noted, any man In the\nUnited States ever has enjoyed so much power. I have no great objection to giv-\nSenator BURTON. The only action that the Congress has taken relat-\nIng Mr. Jones the additional power to net also as Secretary of Commerce, but I\ning to the placing of the Federal Loan Agency under the jurisdiction\nthink It is an extraordinary precedent, which is Justified only by the character\nof the same man who was Secretary of Commerce, is included in the\nof the man, and which I hope may not be repeated.\nresolution to which the Senator referred, as having been approved on\nThereupon the Senate unanimously passed the joint resolution.\nSeptember 13, 1940?\nThe CHAIRMAN. Senator Radeliffe?\nSenator GEORGE. That is correct.\nSenator RADCLIFFE. Senator George, your statement illustrated the\nSenator BURTON. And I will read it as I have it here and see if it is\nwide extent of the powers of the head of the R. F. C. and also the vast\nthe one that the Senator has in mind. [Reading:]\nauthority which he exercised. Is it your opinion that either the extent\nResolved by the Senate and the House of Representatives of the United States\nor the importance of those responsibilities likely to be lessened ma-\nassembled, That notwithstanding any provision of law to the contrary, Jesse\nterially within the near future?\nH. Jones, Federal Loan Administrator, may continue in such office and be\nSenator GEORGE. I do not see how that can be possible. I think they\nappointed to, In the manner now provided by law, and may exercise the duties\nof, the office of Secretary of Commerce, provided that the total compensation to\nwill continue, at least for an unforeseeable time. There may be some\nbe paid him as Secretary of Commerce and as Federal Loan Administrator, shall\ntime in the remote future when some of them will go out, but those\nbe that provided by law for the Secretary of Commerce.\npowers are likely to be more and more exercised as we pass out of the\nIs that the resolution to which you had reference!\nwar, through demobilization and into a definite reconversion period\nSenator GEORGE. That is the resolution, which was duly passed by\nat home and abroad.\nboth the House and the Senate, and approved by the President under\nSenator RADCLIFFE. That was certainly my impression, but I wanted\ndate of September 13, 1940.\nto know your opinion on the subject.\nThe CHAIRMAN. Are there further questions?\n18\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n19\nSenator OVERTON. Mr. Chairman.\nSenator OVERTON. Was that officers or offices?\nThe CHAIRMAN. Senator Overton.\nSenator GEORGE. Both. It seems to me that that is the intent of it.\nSenator OVERTON. Senator George, in your opinion, does the office\nof Federal Loan Administrator still exist, as a matter of law?\nSenator OVERTON. Just one other question-\nSenator GEORGE. I think it does, Senator. After appearing before\nSenator GEORGE (interposing). I said that I did not know whether\nMr. Jones was still in office as Administrator of the Federal Loan\nthe committee yesterday I made a reexamination and I do think so,\nAgency, because he may have resigned, 80 far as I know.\ndefinitely.\nSenator OVERTON. You have made the statement that the author-\nSenator OVERTON. Now, then, the Congress of the United States\ndeemed it necessary, in order for Mr. Jones to qualify as Secretary\nity vested in the Federal Loan Administrator is a very vast authority,\nnot only from an economic standpoint but even from a political stand-\nof Commerce, that he should be authorized to hold both offices, that is,\npoint, and that that authority is SO vast that you do not think it\nthe office of Federal Loan Administrator and the office of Secretary\nwise to continue the offices of Federal Loan Administrator and Sec-\nof Commerce.\nretary of Commerce in one and the same individual, regardless of who\nSenator GEORGE. It authorized him to hold the office of Secretary\nhe may be.\nof Commerce notwithstanding the fact that he was the Administrator\nSenator GEORGE. I think so.\nof the Federal Loan Agency.\nSenator OVERTON. That is correct?\nSenator OVERTON. Well, that is equivalent to the same thing.\nSenator GEORGE. Yes.\nSenator GEORGE. Yes.\nSenator OVERTON. Would you go a step further, and do you think\nSenator OVERTON. Now, then, that resolution applied personally to\nMr. Jones?\nthat the powers vested in the office of the Federal Loan Administra-\ntor are so vast that they ought not be lodged in one man, but that\nSenator GEORGE. Entirely; yes, sir.\nSenator OVERTON. Now, then, we have another nomination, that is,\nthey ought to be subdivided into several agencies and have several\nmen exercise those functions, rather than give this vast authority to\nthe nomination of someone else, and that is Mr. Wallace. In your\none individual, regardless of whom he may be?\nopinion, would it be necessary for a similar resolution to be passed\nSenator GEORGE. I haven't considered that, I might say, Senator\nin order that Mr. Wallace might discharge the functions of both the\nFederal Loan Administrator and the Secretary of Commerce?\nOverton, in connection with this particular bill, because here I thought\nSenator GEROGE. No; I think not, because there have been trans-\nthe only jurisdiction of the committee-or that it might be held to be\nferred to the Department of Commerce, and to the Secretary of Com-\nthe only jurisdiction of the committee-was to determine whether or\nmerce, now, certain powers, and I think anyone who becomes Secre-\nnot you would let something come into Commerce, or let something go\nout of Commerce.\ntary of Commerce would have the right to exercise those powers with-\nSenator OVERTON. I think that is correct, but I would just like to\nout more. He would not be colliding with the general principle, Fed-\neral principle, which we have enacted, that one can't hold two offices\nhave your views in that regard?\nat the same time.\nSenator GEORGE. I think his powers are very vast and I am satis-\nSenator OVERTON. I think I go along with you in that conclusion,\nfied that Congress failed to limit or restrict them in certain instances\nbut I am constrained to differ with you in another conclusion, and\nat least, maybe as they should have been limited or restricted, because\nthat is that if this bill should be passed, and the duties of the former\nof the personal confidence in Mr. Jones who had been connected\noffice of Federal Loan Administrator should be segregated, and that\nwith the R. F. C., and under whose guidance it had developed from\noffice revived, Mr. Jones would not continue as Federal Loan Adminis-\nyear to year. I do not say that that was a very sound basis for legis-\ntrator. He has discharged the duties of the Federal Loan Adminis-\nlation, even in the first instance, but I think that is a fact, and I am\ntrator simply because he is the Secretary of Commerce, but the revival\nsimply stating it as a fact.\nof the office wouldn't revive the appointment.\nSentor PEPPER. Mr. Chairman, may I ask another question\nSenator GEORGE. I think it would, because the act itself provides\nThe CHAIRMAN. Yes, Senator Pepper.\nfor it.\nSenator PEPPER. Senator, I recall that the duties of the Department\nSenator OVERTON. Well, I would like that information so as to get\nof Commerce, I believe, if I have the correct language of the statute,\nthis clear.\namong other things are as follows:\nSenator GEORGE, I think you will find that it does. If I am not\nIt shall be the province and duty of said Department-\nmistaken, I think this is the provision which, in my judgment, makes\nreferring to the Department of Commerce-\nclear that the enactment of S. 375 would immediately revivify, so to\nto foster, promote, and develop the foreign and domestic commerce, the mining,\nspeak, or revive, the Agency, which already exists ready to function,\nmanufacturing. shipping, and fishery industries, and the transportation facilities\nI suppose, when it has any functions to perform.\nof the United States.\nThe bill I have introduced gives it those functions.\nNow, looking at that as one of the principal positions in our Govern-\n[Reading:]\nment, would the Senator not agree that these vast powers which are\nUpon termination of this title, all executive or administrative agencies, gov-\nvested in the Federal Loan Administrator are very directly related to\nernmental corporations, departments, commissions, bureaus, offices, or officers,\nthose objectives which are set out there for a member of the President's\nshall exercise the same functions, duties, and powers as heretofore or here-\nafter by law may be provided, any authorization of the President under this\nCabinet?\ntitle to the contrary notwithstanding.\nRegraded Unclassified\n20\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n21\nSenator GEORGE. Certainly, because the vast powers vested in the\nsuch vast possible political control or power should be placed in one\nAdministrator of the Federal Loan Agency are all-embracing; they\nman's hands in the executive branch of the Government, or perhaps\ncover everything, and they therefore must cover the direct responsi-\nin any branch of the Government, because I think we must know,\nbilities of the Department of Commerce.\nas practical men, that if one were disposed to, if he wished to be a\nSenator PEPPER. Would the Senator recognize that as some argu-\npolitician in this office, there is absolutely no way of measuring the\nment for the fact that the two offices are so intimately related-as no\nconsequences of his administration of it.\ndoubt the President thought when he made the Executive order-\nSenator PEPPER. Just one other question. I am not sure from the\nthat it was more appropriate that they should be held by the same\nlanguage of the Senator's bill that he throws any great safeguards\nman than that they should be held by two men?\naround the exercise of this power by whoever it might be.\nSenator GEORGE. No. I don't know what was in the President's\nSenator GEORGE. No, Senator, I did not, and I didn't attempt to do\nmind, of course, but I apprehend that he felt that Mr. Jones' long\nthat because I think that the Committee on Banking and Currency\nexperience, and his entire familiarity with the Loan Agency, would\nwould have jurisdiction of that kind of a bill. I do not mean to say\nenable him to discharge the functions of both offices, and I imagine\nthat this is the last bill that I may offer on this matter if this bill goes\nthat the Presdent must have felt that way about it. But I do not\nthrough, but I didn't think that the Commerce Committee would want\nthink that now and for the future these vast powers ought to be\nto conflict with the Banking and Currency Committee in considering\nvested in an executive department secretary.\nlimitations on the power, or exercise of power, under any one of the\nSenator PEPPER. Well, the Senator will agree that of the two offices\nloan agencies set up by the Congress, because that isn't within the\nthe Federal Loan Administrator's office has far greater power to\njurisdiction, I didn't think, of this committee.\nfoster, promote, and develop the foreign and domestic commerce, the\nSenator PEPPER. That, if I may say 80 to the able Senator, is what\nmining, manufacturing, shipping, and fishery industries, and the\nleaves an aspect of peculiarity to this particular legislation at this\ntransportation facilities of the United States, than the office of Secre-\nparticular time. It has all the aspects of a piece of legislation which\ntary of Commerce!\nadmittedly is not complete in character and which evidently was de-\nSenator GEORGE. I think so, because the Secretary of Commerce\nsigned in haste, and was related to the encumbency of the office of\ncould only do those things with such funds or tools as Congress might\nSecretary of Commerce by the former Vice President of the United\nprovide him, and the Administrator of the Federal Loan Agency\nStates. So that it is difficult for the citizen who reads about these\nhas, I undertake to say, the vastest power lodged in any single official\nmatters in the paper, and hears the reports about it, not to infer that\nof this Government unless it be the President-and of course they are\nas soon as the immediate past Vice President of the United States, who\nnot comparable powers.\nhad previously been a cabinet officer, was proposed to occupy this\nSenator PEPPER. And yet, as the Senator from Louisiana has pointed\noffice, that immediately an attempt was made to shear him of the\nout, the Senator's bill does not propose to distribute those powers\ngreater part of the powers which had pertained to that office, by the\namong several men, or create a board, or anything like that, but it\nCongress; as distinguished from the appearance of such legislation\nstill allows those powers to continue to be vested in one man, as vast\nto the citizen if the Senate had rejected or confirmed the nominee,\nas those powers are.\naccording to its judgment in the exercise of its constitutional power,\nSenator GEORGE. Yes. You can't unscramble it all at once, and I\nand then that the Senate had proceeded to the consideration of any\ndon't think this committee has jurisdiction over-\nlegislation that might affect the jurisdiction of that office in the ordi-\nSenator BREWSTER (interposing). Wouldn't the suggestion of the\nnary legislative course.\nSenator from Florida argue, also, that the Federal Loan Admin-\nSenator GEORGE. Well, I don't think that I care to argue the point\nistrator might with equal propriety be the Secretary of the Treasury\nat all. I merely call the Senator's attention to the fact that under the\nand the Secretary of Agriculture, since there are vast powers relating\nvery order which consolidated or brought into the Department of\nto those Departments also?\nCommerce these extraordinary powers, express provision is made for\nSenator GEORGE. Yes, indeed, because as I say, the powers here\ntheir return, so that if the war ended today they would be returned\ngranted to the Administrator of the Federal Loan Agency cover prac-\nwithin 6 months anyway, and might be returned much earlier if a\ntically the whole of our business, financial, and economic life, and it\nconcurrent resolution of the two Houses declared declared the war\nis remarkable, I think, that any one man, though he grew up with this\nto be at an end.\nAgency, acquiring one by one at different times these vast powers,\nSenator O'DANIEL. Mr. Chairman, may I ask a question?\ncould really handle them all in the capable way that he has,\nThe CHAIRMAN. Go right ahead. We want to get through with\nI question whether it would not be very difficult to find any man,\nSenator George, though, so that we may proceed with Mr. Jones.\nregardless of his general business ability or capacity or experience,\nSenator O'DANIEL Senator George, if and when the Congress should\nwho could step into the shoes of Mr. Jones and do both of these jobs,\nadopt your joint resolution, restoring the powers to the Federal Loan\nlearn. which he has done because of his peculiar opportunity to know and\nAgency, would it be your opinion that the President or Chief Execu-\ntive would then later have the authority to retransfer those powers\nAll of that is wholly aside from another question which, in my\nback from the Federal Loan Agency to the Secretary of Commerce,\nopinion, is very important. I don't think that in a republic like this,\nas he did before!\n22\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n23\nSenator GEORGE. Not if the amendment which I handed to the re-\nSTATEMENT OF HON. JESSE H. JONES, SECRETARY OF\nporter here was incorporated in the bill, because that expressly freezes\nCOMMERCE AND FEDERAL LOAN ADMINISTRATOR\nit and makes that impossible. I do not think he would anyway, 1\ndon't think the President would. I don't believe that the President\nSecretary JONES. Mr. Chairman, I hardly know where to start or\ncan be unmindful of a solemn act of the Congress, if it should take\nhow you would like to have me start.\nsuch action and should say that these lending agencies or loan agencies\nThe CHAIRMAN. You can start by making a statement, if you prefer,\nshould go back into an independent agency, an over-all, supervising\nor if you wish to proceed by way of questions I am sure there are Sen-\nagency. I do not think that the President then would undertake to\nators here who will desire to ask some of you. That is up to you.\ntransfer them back to Commerce.\nDo you have a prepared statement?\nSenator O'DANIEL. But you do believe that he would have the au-\nSecretary JONES. Well, I have a good deal of material from which\nthority?\nI can testify. I do have a very short prepared statement that I might\nSenator GEORGE Not after the approval of the bill; I wouldn't think\nmake if the committee is interested in hearing it.\nso.\nThe CHAIRMAN. We are interested, and you may proceed.\nSenator O'DANIEL. With the added amendment that you suggest!\nSecretary JONES. Mr. Chairman and members of the committee, as\nSenator GEORGE. Well, without that amendment I wouldn't think\nI see it, the paramount issue before this committee, in considering\nthat if this bill passes and is approved by the President, that there-\nthe resolution offered by Senator George, is not the location of the\nafter he would have that authority. But he might have the naked\npowers which the Congress has from time to time delegated to the\npower to make the transfer before he approved the bill, or he might\nR. F. C. but the proper character of their administration.\nveto the bill. I have just never assumed that the President will follow\nIt is fully within the province, and certainly the responsibility, of\nthat course when he knows the will of Congress, if there is a founda-\nCongress, to determine whether the R. F. C. and its many agencies\ntion for what Congress is doing.\nand functions, are to be separated from the Department of Commerce.\nSenator O'DANIEL. I agree with you that I doubt if he would follow\nIt has been stated here by Senator George and others that Con-\nthat course. I was trying to ascertain your opinion as to whether he\ngress, by a joint resolution, authorized me personally to hold both\nwould have the authority to follow that course.\noffices, but I want to say that they were careful to provide that I could\nSenator GEORGE. Not if this bill passes and is approved. If he\napproves it, thereafter he couldn't make this transfer because here is\nonly draw one salary.\nThe R. F. C. and its subsidiaries, conduct probably the most gigantio\na law standing, directly to the contrary.\nbusiness enterprise, or series of business enterprises, that the world\nSenator O'DANIEL. You mean as you originally introduced it or as\nhas ever known, under one roof-\nyou propose to amend it?\nThe CHAIRMAN (interposing). Can you give us some figures on\nSenator GEORGE. With the proposed amendment,\nthat?\nSenator BILBO. Mr. Chairman?\nSecretary JONES. I' will in just a minute if I may, Senator.\nThe CHAIRMAN. Senator Bilbo.\nThe CHAIRMAN. All right.\nSenator BILBO. Senator George, I assure you that this is a friendly\nSecretary JONES. We have engaged in literally hundreds of separate\nquestion. Some question hasbeen raised about the proximity of the\nbusinesses. Individually and collectively they affect the entire econ-\ntime of the submission of Mr. Wallace's name and your bill, In order\nomy of this Nation. The way in which they are administered from\nthat no one may question your motive in presenting this legislation,\nnow on is even more important, if that is possible, than their admin-\nif on tomorrow the President should withdraw the name of Wallace\nistration in the past, since the post-war adjustments will need to be\nand submit the name of Jones, would yourbe that you\nmost carefully handled in order not to destroy-and I should like to\nwould pursue the same zeal in the enactment of this legislation?\ncaphasize that-our entire business and financial structure.\nSenator GEORGE, I don't know that any member of any committee\nThe man who is given the vast responsibilities contained in the\nhas a right to question my motive, either here or elsewhere, but I do\nR. F. C. Act should be one of proven and sound business experience.\nnot mind you questioning my motive if you want to do it. I have\nHe should be a man who will attract to him, men of sound judgment,\nanswered explicitly that I would pursue it as I am now pursuing it,\nwith business knowledge gained from experience in business. The\nregardless of who was appointed or when he was appointed.\ncountry has a right to expect a man in this important place whose\nSenator BILBO. That is the point I want to make,\nphilosophy is in line with the principles which made our country\nThe CHAIRMAN. If there are no more questions, Senator George,\nI will express the thanks of the committee to you for coming and so\ngreat. It is my firm conviction that the Government's investment in plants\nthoroughly discussing this matter.\nand facilities, and in raw materials, represented by billions of dollars\nSenator GEORGE. And I wish to thank the committee for its atten-\nof the taxpayers' money, should not be made the subject of careless\ntion.\nThe CHAIRMAN. We will now proceed to hear, pursuant to the in-\nexperimentation. It is equally important to stop and think how the lending power\nvitation of this committee, the Honorable Jesse H. Jones.\nof the R. F. C. will be administered in the future. For the past 13\n24\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n25\nyears the resources of the R. F. C. have been used to supplement pri-\nNow you asked for figures. I sent each Member of Congress a few\nvate credit, so that funds might be available when private resources\ndays ago a report of what the R. F. C. had done in the war emergency,\nwere not adequate.\nand I would like to make another reference, which is not in my notes.\nThe R. F. C. Act specifies, and always has specified, that loans should\nIn May 1940 Mr. Harry Hopkins told me that the President would\nonly be made either with full and adequate security, or latterly, when\nlike for me to buy some tin and some rubber, and that is all that was\nthey were so secured as reasonably to assure their repayment. The\nsaid.\ndiscretion which the latter leaves with the directors of the R. F. C.\nWhen I saw the President at the next Cabinet meeting, I mentioned\ncould easily be abused either by inexperienced, visionary planning, or\nit and he said, \"Yes, I think you had better,\" and th it was all that was\na disregard of the taxpayers' money.\nsaid. I said, \"All right, but I will need legislation.\" He said, \"Go\nCertainly the R. F. C. should not be placed under the supervision\nget it.\"\nof a man willing to jeopardize the country's future with untried ideas\nWe had drafted a simple bill to buy critical materials and so forth,\nand idealistic schemes.\nand it was presented to the committees on Banking and Currency of\nThe lending agencies of the Government can be administered, as\nboth Houses, and when the members of those committees got through\nthey have been, on a purely nonpartisan basis for the benefit of all of\nrewriting and redrafting and amending and expanding that bill, it\nthe people, or they can be used to destroy what we have built up in this\nwas all over the lot. It had everything in it from manufacturing shoe\nNation in our 170 years of indepedence. That, to my mind, is the\nstrings to as far as you would want to go. It was too much authority,\nissue which this committee and the Congress must decide. It must de-\nit frightened me, and I said to that committee, to the members of the\ncide all of this without any regard whatever to any individual, in-\nSenate Banking and Curency Committee-and, I think repeated it\ncluding myself.\nin the House-\"If you are going to give all of that authority to the\nI have been honored by the Congress a great deal, and by the Presi-\nReconstruction Finance Corporation I would like to place some safe-\ndent. You have passed laws that gave authority for my administra-\nguards, Give authority to do these things only when requested to do\ntion, enough to make me lay awake nights and worry, and as a result\nso by the Federal Loan Administrator with the approval of the Presi-\nI have found it necessary to work about 12 hours a day, 7 days a week,\ndent of the United States.\"\nfor 13 years, or certainly 12, since I have been head of the R. F. C.\nAnd that is in the law, and it is in there at my request because of the\nIt is an honor, of course, to be in the President's Cabinet. I as-\ntremendous amount of authority which I did not want the directors\nsume most anyone would like to be in his Cabinet if there was a place\nof the R. F. C. to have the responsibility of exercising without super-\nhe could properly fill.\nvision. So that everything that has been done in the war effort had\nThe President first mentioned to me, as early as 1936, that he\nhad the written approval of the President of the United States and\nwould like me in his Cabinet. Well, I didn't encourage it; I didn't\nhas been done at my request, first as Federal Loan Administrator, and\ndiscourage it. I was asked by him if I would be interested in an ap-\nthen as Secretary of Commerce.\npointment as Secretary of the Navy, prior to Mr. Edison's appoint-\nNow that is the way I feel about this authority. I think it is too\nment to that post as successor to our lamented friend, Secretary Swan-\nmuch authority. I thought so at the time I was asked to become\nson. I thanked him and told him that I thought I was not suited\nSecretary of Commerce. I didn't want to leave what I was doing\nfor that, and that I thought I could do better work where I was.\nbecause I thought I was needed there. I still think that somebody\nLater, in 1939, he created the Federal Loan Agency and made me\nwith a proven business experience of an extended nature is needed\nthe Administrator in charge of the various lending agencies, which\nin charge of the R. F. C. and its multiple organizations.\nwere, from time to time, taken away by Executive order, but leaving\nIt is bigger than General Motors and General Electric and Mont-\nthe principal one, the R. F. C., and its subsidiaries.\ngomery Ward, and everything else put together and you don't\nIn 1940 the President stated to me that he would like to appoint me\nhear much about it because it is being run by businessmen, by men\nSecretary of Commerce. I said, \"Mr. President, I appreciate that\nexperienced in business, by men who haven't any ideas about remaking\nbut will I take with me my responsibilities as Federal Loan Admin-\nthe world. [Laughter and applause.] Plodders-not smart, just\nistrator?\" He said, \"No, you will have to give that up.\" I said,\nplodders, trying to do a job honestly and constructively, and they have\n\"Thank you, Mr. President, but I would rather stay where I am, I am\ndone it. It is not to my credit that we have done a big job or a good\nneeded there. Someone else can do the other job.\" Then he said 8.\njob. It is to the credit of the men who have done the job. have\nfew days later, \"If Congress is willing for you to hold two statutory\nnever failed to give them credit for all the successes, and I hope\njobs, which you can't do simultaneously except by permission of\nalways to take the blame for all the mistakes.\nCongress, I am willing.\"\nThe CHAIRMAN. Well, is it your view that the powers of the Loan\nAnd Congress very graciously paid me the compliment of passing\nAdministrator and the R. F. C. chairmanship, and all this lending\nthe joint resolution that has been referred to here this afternoon, It is\nthat has been authorized, are so great that they might be used by one in\nan honor to be in this Cabinet, but it is a greater honor to serve where\nyour place to determine the economic direction of the country and\nyou can be the most useful, and that is the only place that I want to\naffect its whole social and political structure?\nserve my Government, where I can be useful and the most useful.\nSecretary JONES. You think they should be separated-is that it?\nneed one.\nI am not looking for a job and have never looked for a job-I don't\nThe CHAIRMAN. No. I say, Is it your view that the powers of the\nLoan Administrator and the Reconstruction Finance Corporation\n26\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n27\nare so great that the man who has charge of them could so administer\npayment on plants, and various collections. We have been gradually\nthose powers as to determine the economic direction of the country,\ncollecting also from previous peacetime loans and investments. So\nand with that, its social and political character?\nthat we are as well off now, or a little better off, than we were when\nSecretary JONES. I think they could affect it very seriously. If\nwe went to Congress 2 years ago for more money.\nit is up to the Loan Administrator or the Secretary of Commerce\nI don't think we need any more money; I think we have enough\nor the Directors of the R. F. C. to do a thing for which we have full\nborrowing authority to go right on through the war because of the fact\nauthority-\nthat we are selling all these materials.\nThe CHAIRMAN (interposing). Have you ever used your powers as\nWe buy and sell every gallon of 100-octane gasoline that is used in\nLoan Administrator and R. F. C. Chairman for the purpose of deter-\nthe war, and we do many things, too numerous to mention now, which\nmining the economic character or the social character of this country\nI could mention if I had the time, I condensed that when I sent each\nSectretary JONES. I certainly have not, except to the extent of being\nof you a copy, as much as I could, so that you could read it. It is the\nhelpful. Naturally, in periods of depression we have tried to make\nonly time I have had an opportunity to report to Congress as to what\nall the loans and investments we could justify to maintain and increase\nwe have done with all of this extraordinary authority, and I was glad\nemployment.\nto be able to do it and to show you exactly what we had done-and it\nThe CHAIRMAN. But you have undertaken to preserve the American\nis all there.\neconomy?\nWe have authorized some 32 or 33 billion dollars in war work; it\nSecretary JONES. Yes. We have never used anything like all of the\nhasn't all been used. We have not held anybody up 1 minute on any\nborrowing authority that we had or the power that we had or the money\ndecision. We have built plants for the War Department that they\nthat we had available. We have been conscious every minute of every\nshould have built maybe, but they didn't because of the lack of author-\nhour, and every hour of every day, of responsibility that We have,\nity or money or for other reasons. Back in 1940 we started building\nand if we were praying men we would pray to God to give us the\nplants, and we would do it on the telephone. Knudsen would call up,\ncourage to do what we thought was right.\nCan you do this; can you do that-$100,000,000 here, $200,000,000\nThe CHAIRMAN. What is the extent of your power to borrow and\nthere \"Yes.\" That is the way we have run the business.\nto lend money\nFiscally, our business is as well handled as the biggest private cor-\nSecretary JONES. We have at this time borrowing authority for gen-\nporation in the United States. We have as efficient men, as capable\neral purposes something over $14,000,000,000. We have borrowed of\npeople, as anyone; we have our running audits; they are auditing all\nthat amount, and used, about $8,000,000,000. We have available now\nthe time to see where we make any mistakes, where we get out of\nabout $6,000,000,000.\nbounds, or where we are being imposed upon.\nThe CHAIRMAN. That is in your capacity as Chairman of the\nThe CHAIRMAN. What are the limits? What are your financial\nR. F. C.I\nlimits or your resources for borrowing money as Loan Adminis-\nSecretary JONES. I was referring to the borrowing authority of the\ntrator?\nR. F. C.\nSecretary JONES. What are the limits?\nThe CHAIRMAN. All right.\nThe CHAIRMAN. Yes. Is there a limit? How far can you go?\nSecretary JONES. Now, of that $6,000,000,000 we are committed for\nSecretary JONES. We can lend anything that we think we should.\nexpenditures of 81/2 billion dollars. In other words, we are 21/2 billion\n[Laughter.]\ndollars overcommitted.\nThe CHAIRMAN. That means the sky, does it not!\nWe came to Congress 2 years ago and asked for an increase in\nSecretary JONES. Any amount, any length of time, any rate of in-\nour borrowing authority of $5,000,000,000. That got tangled up at\nterest.\nthe end of the session and didn't carry. At that time we were getting\nThe CHAIRMAN. And to anybody?\nrequests from the War Department and Navy Department and Mari-\nSecretary JONES. And to anybody that we feel is entitled to the\ntime and the War Production Board and every other agency for 50\nloan.\nmillion, 100 million, 700 million, 600 million, and it looked as if we\nThe CHAIRMAN. You have to come to Congress for your money, do\nwould soon be out of funds. That is the reason we asked for the\nincrease.\nyou not?\nSecretary JONES. Yes; but you have given us a lot of money.\nThe committees both reported favorably, and it would have passed\nThe CHAIRMAN. How much altogether?\nexcept that Congress was about to go home for Christmas, and it\nSecretary JONES. Well, as I explained a while ago, we have 6 billion\nwas the end of a Congress, too. We have spent in the war effort\nunexpended, but we have committed 81/2 billion against that.\nsomething over $18,000,000,000.\nThe CHAIRMAN. How much have you got loaned out?\nThe CHAIRMAN. You are referring now to the R. F. C.I\nSecretary JONES. At this time not a great deal. I think you would\nSecretary JONES. Yes; and the other agencies. The R. F. C., De-\nbe interested to know that the billion and a quarter that we put in as\nfense Plant, Metals Reserve, Rubber Reserve, Defense Supplies, Rub-\ncapital in banks, back in 1933, 1934, and 1935, has all come back except\nber Development.\nless than 300 million.\nWhile we have spent the 18 billion, we have received back more\nThe CHAIRMAN. That goes into the revolving fund?\nthan $9,000,000,000 for the sale of materials, rent on plants, part\nSecretary JONES. Yes.\n28\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n29\nThe CHAIRMAN. And you lend it out again?\nOf that, it is all back except about one and three-quarters billion.\nSecretary JONES. It is there to lend out or do whatever you want to\nThat will all come back with a substantial profit.\ndo with it.\nAs I said a minute ago, the billion and a quarter we put in banks\nThe CHAIRMAN. What I am trying to get at is some conception of\nis all back except less than $300,000,000. And the money we put in\nthe total fund in your hands as R. F. C. head, and as the Loan Ad-\n6,102 banks, as capital, it is all back except from 2,100 of those banks;\nministrator-what is the total?\nand there are only about 51 banks, of all of them, that are delinquent\nSecretary JONES. As I explained a while ago, Senator, $14,000,000,-\nin their payments.\n000 is the total that can go. Of that, 8 billion has been spent. We still\nSenator RADCLIFFE. How much have you loaned for all purposes\nhave 6 billion, and that is committed. But it comes back.\nsince you have been head of the R. F. C., or Federal Loan Admin-\nSenator BURTON. The Senator was asking what other authority, be-\nistrator, and how much have you collected back?\nsides that under the R. F. C., you had to loan. Your 14 billion was\nSecretary JONES. We have authorized loans and investments ag-\nR. F. C., was it not? The chairman was asking what additional au-\ngregating about $45,000,000,000.\nthority you had to loan besides under the R. F. C. through your posi-\nSenator RADCLIFFE. How much have you collected, and what is the\ntion as Federal Loan Administrator?\nvalue of your present holdings?\nSecretary JONES. Nothing.\nSecretary JONES. We have paid out about $28,000,000,000 of that,\nSenator BURTON. So $14,000,000,000 is the total?\nand we have collected about 19 or 20 billions.\nSecretary JONES. Yes.\nI will have to check myself, but those are about the right figures.\nSenator BREWSTER. Mr. Chairman.\nIf I may go back to the period before the war, where the R. F. C,\nThe CHAIRMAN. Senator Brewster.\nwas set up-and the R. F. C. was not set up for the war, but for other\nSenator BREWSTER. You said that you had spent 18 billion on Gov-\npurposes-it did its job.\nernment plants, That must have been outside the 14 billion.\nOf our bank capital all is back except less than $300,000,000.\nSecretary JONES. Government work.\nOf the billion that went to railroads, all is back except less than\nSenator BREWSTER. Government work?\n$300,000,000.\nSecretary JONES. About 9 billion of it was Government plants, and\nMost of our loans to industry of close to a billion have been paid.\nthe balance was buying materials.\nSo that we are gradually winding up our collections on everything\nSenator BREWSTER. Do you now own those plants under the Defense\nloaned prior to the war. In the war work, of course, we have all these\nPlant Corporation!\nplants, and raw materials. In addition, we have authorized nearly\nSecretary JONES. Yes; we own plants now to the cost of about $7,-\n$2,000,000,000 of loans for war work.\n000,000,000, a little more.\nSenator RADCLIFFE. I have always been under the impression, Mr.\nSenator BREWSTER. And that is in addition to the 14 billion\nJones, that your loans have turned out very successfully. That is the\nSecretary JONES. No.\nreason I asked you for some specific statement as to the figures.\nSenator BREWSTER. That is included?\nSecretary JONES. I would be very glad, if I may-I am testifying\nSecretary JONES. That is included.\nhere from memory-but I would like to put into the record of this\nSenator BREWSTER. So you have that as assets against-\nhearing the figures that I have here for you, so that anybody who is\nSecretary JONES. We have these plants. The only money, Senator,\ninterested in reading them will get the details.\nthat we will lose is in the war work. On everything that the R. F. C.\nThe CHAIRMAN. You may hand those to the reporter.\ndid before the war, including the bad days back in the panie days, the\n(The figures submitted by Secretary Jones are as follows:)\nR. F. C. has a definite profit, over all operating expenses and interest\nthat we paid to borrow the money that we loaned and invested; we will\nRECONSTRUCTION FINANCE CORPORATION-SUMMARY OF ACTIVITIES Nor DIRECTLY\nhave a profit of about $500,000,000. So that the R. F. C. has not cost\nRELATED TO THE WAR\nthe taxpayer a dime except in war work.\nSenator RADCLIFFE. Mr. Chairman.\nIn Its activities not directly related to the war, Reconstruction Finance Cor-\nporation has authorized loans and Investments totaling $13,160,000,000, of which\nThe CHAIRMAN. Senator Radcliffe.\n$3,208,000,000 was canceled and $9,656,000,000 disbursed. Repayments and other\nSenator RADCLIFFE, Mr. Jones, how much have you loaned out in\ncredits total $7,978,000,000. In addition, Reconstruction Finance Corporation\nthe aggregate, how much have you collected back, and about what is\nhas made allocations to other governmental agencies and for relief by direction\nthe value of your present holdings?\nof Congress totaling $2,900,000,000.\nThe authorizations include-\nSecretary JONES. We have loaned out and invested in bank stocks\nLoans to 5,825 going banks, 2,780 closed banks, 1,183 building and loan asso-\nand a few securities, a total of about $10,000,000,000-that is not count-\nciations, 7 credit unions, 133 Insurance companies, and 233 mortgage loan com-\ning war work.\npanies, aggregating $3,395,400,000.\nInvestment of capital in 6,882 banks and 10 fire and casualty insurance com-\nSenator RADCLIFFE I had reference to all the loans which you have\npanies aggregating $1,393,100,000.\nmade since you have been occupying the position.\nLoans to 98 railroads and railroad receivers and trustees aggregating\nSecretary JONES. I am trying to analyze them.\n$1,503,700,000.\n68424-45-3\n30\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n31\nLoans on 404 self-liquidating projects and projects authorized under Federal,\nRAILROADS\nState, or municipal law, including public-school districts, aggregating\n$831,700,000.\nThe Corporation has made railroad commitments aggregating $1,503,736,300\nLoans to 668 drainage, levee, and irrigation districts Involving disbursements\nof which $573,906,171 was not used because with a Reconstruction Finance Cor-\nof $100,780,000.\nporation commitment the roads were able to get the money in the usual channels\nPurchase of 3,319 Issues of securities from other governmental agencies having\nor because their plans were not carried out. A total of $851,090,175 was disbursed\npar value of $694,745,000 (including $201,000,000 rultroad securities).\nand of this $538,828,470 has been repaid. These amounts do not include $200,-\n12,102 loans to business and Industry. (This is in addition to 11,216 business\n890,500 of railroad securities taken over from the Public Works Administration,\nloans for defense and war.). The 22,311 business loans aggregate $2,888,400,000.\nof which $101,422,009 has been sold or retired.\nLoans for benefit of agriculture totaling $2,485,000,000.\nLoans totaling $1,011,500,000 to other governmental agencies for rural elec-\nSELF-LIQUIDATING PROJECTS\ntrification, farm tenancy, and rural rebabilitation.\n21,842 loans aggregating $47,385,000 directly or through Disaster Loan Corpo-\nThe Corporation has authorized loans on 176 self-Hquidating projects; that is,\nration to sufferers from floods and other catastrophes.\nprojects which pay for themselves principally from the revenues derived from\n119,657 loans aggregating $566,500,000 through the RFC Mortgage Company\noperation of the project, aggregatinfi $398,873,884. Of this amount, $339,531,641\nand Federal National Mortgage Association to reestablish a normal market\nwas disbursed and of the amount disbursed, $324,633,284 has been repaid through\nfor mortgages on Income-producing urban property and to provide a market for\nretirement or sale of the securities evidencing the loans. A premium of $16,947,121\nFederal Housing Administration Insured mortgages.\nwas realized in the sale or retirement of these securities.\nA more detailed statement is attached.\nPUBLIC AGENCIES-STATES, MUNICIPALITIES, ETC.\nBANKS-10ANS\nThe Corporation has authorized loans to or contracts with States, municipali-\nLoans have been authorized to 5,825 going banks, principally In 1932 and 1933,\ntles, and political subdivisions of States to aid In financing 190 projects authorized\nIn the amount of $1,334,880,161 to enable the banks to meet the demands of their\nunder Federal, State, or municipal law aggregating $407,395,216. Of this amount\ndepositors that grew out of fears for the safety of their money during the depres-\n$281,052,226 was disbursed and $255,751,406 has been repaid through retirement\nor sale of the securities evidencing these loans. A premium of $8,011,131 was\nsion. Of this $1,138,251,619 was disbursed, and 08,9 percent of the amount dis-\nbursed has been repaid.\nrealized in the sale or retirement of these securities.\nLoans aggregating $1,419,531,473 have been authorized for distribution to de-\nPURCHASE OF PUB: IC WORKS ADMINISTRATION SECURITIES\npositors in 2,780 closed banks or banks in process of liquidation. or this amount,\n$1,056,883,720 has been disbursed, and 99.5 percent of that has been repaid,\nThe Corporation has purchased from the Federal Emergency Administration\nIn addition to the bank loans, the Corporation disbursed $13,061,631 to the\nof Public Works 3,319 Issues of marketable securities baying par value of $694.-\nboard of deposits of the State of Wisconsin to make funds available to several\n744,788 of which $003,512,388 have been retired or sold nt a net premium over\nhundred local governments whose money was tied up in closed or restricted\npar of $14,579,369.\nbanks. This has all been repaid.\nBUSINESS AND INDUSTRY\nBANKS-CAPITAL\nThe Corporation has authorized 12,102 loans or participations aggregating\nTo strengthen the capital structure of the banks of the country, the Corpora-\n$738,108,610 not directly related to the war. Banks participated in 8,624 of\ntion has authorized the Investment In capital of 6,882 national and State banks\nthese loans to the extent of $80,950,816, making a total of $819,059,426. In addi-\nIn the amount of $1,345,946,069. Of this $1.170,206,182 was disbursed to 6,160\ntion, for purposes of national defense and war programs, the Corporation has\nbanks and over 74 percent has been retired. The Corporation still has $304,608,600\nauthorized 10,239 loans or participations, aggregating $2,019,342,537. including\nInvested In the capital of 2,261 national and State banks. In addition, the Cor-\nthe banks' share of $106,082,049 In 2,760 loans. This makes a total of 22,341\nporation holds $174,000,000 preferred stock of the Export-Import Bank.\nloans authorized to business aggregating $2,838,401,063, including 1.220 in the\namount of $39,350,975 for mining and mining development.\nBUILDING-AND-LOAN ASSOCIATIONS\nAGRICULTURE\nLoans aggregating $170,980,560 were authorized to 1,183 building-and-loan\nassociations and receivers of building-and-loan associations to make funds avail-\nTo facilitate the exportation of surpluses of agricultural products and their\nable to shareholders and depositors and to enable receivers to make distributions\nsale in the markets of foreign countries In which such sales could not be financed\nto depositors and other crysitors of the associations without causing extensive\nin the normal course of commerce, the Corporation authorized loans aggregating\nforeclosures of or this, $140,156,008 was disbursed and 99.6 percent has\n$98,445,246 and disbursed $47,300,826. or this $13,537,388 was taken over by the\nbeen repaid.\nExport-Import Bank and all the remainder has been repaid.\nCREDIT UNIONS\nThe Corporation authorized loans aggregating $1,754,712,665 to Commodity\nCredit Corporation for loans on cotton, corn, turpentine, tobacco, and several\nLoans aggregating $642,968 were made to seven credit unions, all of which have\nother commodities, of which $767,716,962 was disbursed. Commodity Credit Cor-\nbeen repaid.\nporation has retired Its Indebtedness to the Reconstruction Finance Corporation\nINSURANCE COMPANIES-CAPITAL\nIn full. The Corporation also authorized $86,061,513 of loans to other borrowers\nto finance the carrying and orderly marketing of agricultural products, of which\nThe Corporation authorized $47,150,000 and disbursed $47,100,000 to 10 fire\n$19,644,492 was disbursed and 99.7 percent of that has been repaid.\nand casualty insurance companies, of which $15,565,560 has been repaid.\nThe Corporation has made several other elasses of loans for the benefit, directly\nor indirectly, of agriculture. These include $387,236,000 disbursed to Federal\nINSURANCE COMPANTES-IOANS\nland banks, all of which has been repaid $9,250,000 disbursed to Federal Inter-\nmediate credit banks and all repaid: $26,194,970 disbursed to Joint stock land\nThe Corporation, principally In 1932 and 1933, authorized loans totaling $104.-\nbanks and 98.8 percent repaid: $12,649,956 disbursed to livestock credit corpora-\n439,750 to 133 companies to enable them to meet the demands of policyholders.\ntions and all repaid: $173,243,641 disbursed to the regional agricultural credit\nOf this $90,695,210 was disbursed and 99.7 percent of the amount disbursed has\ncorporations and all repaid: and $5,643,618 disbursed to other agricultural credit\nbeen repaid.\ncorporations and all repaid.\nRegraded Unclassified\n32\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n33\nThe Corporation authorized loans aggregating $23,500,000 to the Secretary of\nAgriculture to enable him to acquire cotton, of which $3,300,000 was used. This\nELECTRIC HOME AND FARM AUTHORITY\nhas been repaid.\nBy Executive Order 9256, dated October 13, 1942, the President ordered the\nPUBLIC SCHOOL AUTHORITIES\ncessation of the activities of the Electric Home and Farm Authority, as of\nThe Corporation disbursed a loan of $22,300,000 to pay salaries of 15,000 Chicago\nOctober 31, 1942, and transferred to the Reconstruction Finance Corporation\nschool teachers. The loan was evidenced by bonds secured by real estate owned\nfor purposes of liquidation and payment of Its liabilities, all of its assets, funds,\nby the Chicago Board of Education, all of which were subsequently sold at a\nrecords, contracts, and property. Liquidation is practically complete.\npremium.\nThe Corporation authorized 37 loans aggregating $3,189,050 to tax-supported\nALLOCATIONS TO OTHER GOVERNMENTAL AGENCIES AND FOR RELIEF\npublic school districts or other similar public school authorities; $957,175 has\nIn addition to its lending and Investment functions, the Corporation was re-\nbeen disbursed, of which $633,400 has been repaid.\nquired by various acts of Congress to allocate funds to other governmental\nagencies and for relief of distress.\nNATIONAL MORTGAGE ASSOCIATIONS\nThis Includes allocations by Congress to the Secretary of the Treasury of\nTo assist In the reestablishment of a normal mortgage market and to aid in\n$125,000,000 to capitalize the home loan banks and $200,000,000 to capitalize\ncarrying out the purpose of the National Housing Act, the Corporation acquired\nthe Home Owners' Loan Corporation: $200,000,000 to the Land Bank Commis-\nand holds all the outstanding capital of the RFC Mortgage Company in the\nsioner-later part of the Farm Credit Administration-for loans to farmers\namount of $25,000.000 and the $11,000,000 capital and paid-in surplus of the\nand for capital of the Federal Farm Mortgage Corporation and an additional\nFederal National Mortgage Association. The Corporation also has outstanding\n$100,000,000 to the Land Bank Commissioner for loans to joint stock land banks\nloans to these two companies totaling $125,453,307.\n$115,000,000 to the Secretary of Agriculture for crop loans; $44,500,000 for the\ncapitalization of the regional agricultural credit corporations: $40,500,000 to the\nOTHER MORTGAGE LOAN COMPANIES\nFarm Credit Administration for capitalization of production credit corporations;\n$1,800,000,000 for rellef $97,000,000 for the capital of Commodity Credit Cor-\nIn addition to the loans It has made to the RFC Mortgage Company, the\nporation $40,000,000 for the capital of the Disaster Loan Corporation: $97,861,381\nFederal National Mortgage Association and mortgage loan companies organized\nadvances to the Federal Housing Administrator of amounts necessary to earry out\nto aid in the reorganization or liquidation of banks, the Corporation has author-\nprovisions of the National Housing Act and advances for expenses of the regional\nIzed loans to privately owned mortgage loan companies to prevent them from\nagricultural credit corporation.\nfalling, most of this In the first 2 or 3 years of the Corporation's existence, The\nPursuant to act of Congress, $2,784,867,007 of the Corporation's notes held\namount of these loans authorized to 233 borrowers was $355,915,432. of which\nby the Secretary of the Treasury have been canceled on account of disbursements\n$245,130,980 was disbursed. Over 95.5 percent of the amount disbursed has been\nmade for such allocations and relief advances.\nrepaid.\nDRAINAGE, LEVEE, AND IRRIGATION DISTRICTS\nTHE RFC MORTGAGE COMPANY\nThe Corporation has disbursed $100,778,038 in loans to or for the benefit of\nThe RFC Mortgage Company was created In 1935 to assist In the reestablishment\ndrainage, levee, irrigation, and similar districts for improvement purposes or\nof a normal market on urban income-producing property.\nfor refinancing outstanding Indebtedness. Repayments total $62,134,200. By\nFrom Its organization In 1935 the Company has disbursed approximately $335,-\nthese loans the bonded indebtedness of several hundred districts was reduced\n400,000 for 63,300 mortgages and loans; has sold or collected 42,700 totaling\n55 percent and the water charges and bond-service assessments by two-thirds.\n$233,200,000 and now has outstanding 20,600 totaling $102,200,000. Over $100,-\n000,000 of the amount disbursed may be described as relating to war housing.\nBURAL ELECTRIFICATION ADMINISTRATION\nFEDERAL NATIONAL MORTGAGE ASSOCIATION\nThe Corporation has authorized loans aggregating $356,500,000 to the Admin-\nIstrator of the Rural Electrification Administration, of which $281,000,000 was\nThis Associntion was created In February 1938 to esteablish a market for\ndisbursed. These loans are collateraled, with a 15-percent margin, by the loans\nFederal Housing Administration Insured long-term amortized mortgages and\nmade by the Administrator secured by mortgage on the projects financed which\nmake available the full benefits of the National Housing Act to all who wanted\nbring electricity and electrical facilities to rural districts.\nto build new homes.\nThe Association has disbursed $271,500,000 for 66,900 mortgages, has sold or\nFARM TENANCY\ncollected 51,900 totaling $219,000,000, and has outstanding 15,000 totaling $52,-\n500,000.\nIn order to enable the Secretary of Agriculture to carry out the provisions\nDISASTER LOAN CORPORATION\nof title I of the Bankhend-Jones Farm Tenant Act the Corporation has been\nauthorized and directed to loan to the Secretary of Agriculture $177,500,000, of\nThis Corporation was organized in February 1937. Its function is to provide\nwhich $141,909,000 has been disbursed.\nloans made necessary by floods or other catastrophes that occur between January\n1, 1936, and January 22, 1947.\nRURAL REHABILITATION\nThe Corporation has disbursed 21,000 loans totaling $31,200,000. Of these\n14,500, totaling $27,300,000, have been repaid and 3,000 active loans, totaling\nIn order to furnish the Secretary of Agriculture with additional funds for\n$3,300,000. remain outstanding.\nthe purpose of making rural rehabilitation loans to needy farmers, the Cor-\nporation has authorized advances to the Secretary of Agriculture In the amount\nSecretary JONES. Our operations, our regular operations, include\nof $477,500,000, of which $456,549,000 has been advanced.\nthe RFC Mortgage Company, the Federal National Mortgage As-\nsociation, the Disaster Loan Corporation, and the War Damage Cor-\nCATASTROPHES\nporation.\nThe Corporation has authorized 718 loans, totaling $16,184,521, to finance\nWe are operating more than 125 plants that are manufacturing this,\nthe repair, construction, or reconstruction or rehabilitation and for the acqui-\nsition of property In replacement of property damaged or destroyed by floods\nthat, and the other for war work. We are operating five pipe lines, in-\nor other entastrophes occurring in 1935 or 1936. Of this, $12,003,055 was dis-\ncluding the Big Inch and the Little Big Inch. We buy every drop of\nbursed. $508,634 is still due from the borrowers.\noil that goes into those pipe lines at the oil field, and we sell it again\nwhen it gets up into this country.\nRegraded Unclassified\n34\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n35\nThe plants that we are operating now, through industry, acting as\nin it; it is the backbone of this country. It has a pretty hard time\nour agents, cost about a billion and a half dollars, and they include\nto survive against mass production and mass distribution, against the\nsteel, magnesium, aluminum, chemical, metal-fabricating plants, float-\nchain stores and large production. But in our war work we have\ning power plant for the Mississippi-Florida area, gas storage-now\nauthorized more than 11,000 loans to the little fellow. Three thousand\nthat is a nice one, I think you would be interested to know that we\nof them have been for $5,000 or less; 1,700 of them have been for less\nbuy gas and pump it back into the ground in California, to keep it\nthan $10,000; 2,400 of them have been for less than $25,000; 1,500 of\nfrom going to waste, and then we draw it out again and sell it. That\nthem have been for less than $50,000; and 1,250 for less than $100,000.\nsounds a good deal like lending money on a school of codfish, but we\nNow, we have made those loans to the little contractor, to the little\nreally get it back.\nplant-the fellow who is making a gadget or who has a subcontract.\nSenator BREWSTER. Mr. Chairman.\nThose loans for war work total $1,990,000,000. Before the war we\nThe CHAIRMAN. Senator Brewster.\nmade over 12,000 loans and 4,500 were $5,000 or less each.\nSenator BREWSTER. Have you, Mr. Jones, formulated a plan for the\nWe have made 2,884 loans under the provisions of the Murray-Pat-\nliquidation of the assets, with the object of preserving our traditional\nman Act, aggregating $64,000,000. And under the same authority we\neconomy?\npurchased 35,000 items that were covered by that legislation, at a cost\nSecretary JONES. It can't be done, because the Congress has passed\nof about $8,000,000. They include automobiles and trucks and oil\na law about the disposition of the plants.\nburners and typewriters, and various and sundry things that were\nNow I am very strongly of the opinion that we ought to keep in\ncovered in that bill. We have met the requirements, wherever they\nstock pile the metals and minerals that we have accumulated for stock\nshowed up-electric ranges and sundry things.\npiles, that do not decay, because we have drawn very heavily on our\nIn addition to loans to the small fellow, the Defense Plant Corpora-\nown minerals in this country. We have subsidized about 3,400 mines\ntion has furnished Government-owned machine tools to more than\nthat produce copper and lead and zine and other things, in order to\n3,200 small manufacturers on a lease basis. We lease a man a tool or\nget the production that we need for the war. Whatever we have of\ntwo tools, and he pays rent for them; 1,667 of these were in amounts\nthose metals that do not deteriorate, we should, in my opinion, keep,\nof less than $10,000, and only 153 of the 3,200 were for as much as\nand use them when we have to have them.\n$100,000. So that the little businessman, the little manufacturer, has\nAs for the plants, they cannot be sold in a hurry. We have some\nhad almost whatever he asked for in connection with the war.\n20 plants that cost an average of one hundred million. We have a few\nNow, right after the outbreak of war we authorized our agencies\nthat cost two hundred million. Well, there are not many people that\nall over the country to make loans on the spot without referring them\nare interested in buying a plant that cost one hundred million. There\nto Washington, up to $100,000 without bank participation and up to\nare not many people interested in buying a plant that cost $5,000,000.\n$250,000 with bank participation. If it was more than that, they\nBut they should be operated privately to supply employment, prob-\nwere instructed to send in a telegram with a recommendation for\nably under lease.\nNow we own-we built and own outright-completely integrated\napproval. Senator BREWSTER. Mr. Jones, may I ask a question?\nplants in the number of about 950, and they cost $6,000,000,000. We\nSenator JONES. Yes.\nalso own about 125 parts of plants, where we have added an addition\nSenator BREWSTER. You have had this unique experience now in\nto another plant. In those cases we either own the land or have a\nhandling both of these jobs. Do you care to express an opinion, either\nlong-term lease. We can lock them up and keep them, or we can sell\nout of that experience as to whether or not you would again think it\nor lease them.\nwas wise to undertake both, or whether or not you think a divorce\nIn selling or leasing our plants, the big plants could be subdivided.\nwould be well warranted?\nThe CHAIRMAN. Could you continue to operate them?\nSecretary JONES. Well, that depends-I think I must first say\nSecretary JONES. You could continue to operate them if you wanted\n\"Yes,\" I think they should be divorced, and I didn't want to leave\nto. Congress can do it; yes.\nthe Federal Loan Agency to get in the Cabinet. I didn't care any-\nThe CHAIRMAN. I mean under the existing law.\nthing about that. I thought I was where I could do the best work.\nSecretary JONES. I hadn't thought much about that. A great many\nBut since the President was good enough to appoint me to the Cabinet\nof our plants are leased to industry, most of them in fact, and those\nand Congress was willing for me to hold the two jobs, there we are.\nleases expire maybe 6 months after hostilities cease, or for other\nI would like to say this, though. During the war the Department\nreasons. It would be very easy for the Government, if they wanted\nof Commerce has had very little to do except as a service agency for\nto do it, to continue to operate these plants or to have them operated\nthe other departments. As you know, the Department of Commerce in-\nfor the account of the Government. We have now 125 important\ncludes these various technical bureaus, like the Bureau of Standards\nplants that are being operated now for our account, as I said-some\nand the Weather Bureau and the Coast and Geodetic Survey and the\nof them on a fee basis and some are operated without a fee, as a\nPatent Office, and two or three others, including Civil Aeronautics.\npatriotic duty, by the operator.\nThat required some time, not a great deal because there we have a fine\nIf I may, a good deal has been said about little business, and I\nAdministrator and a fine organization. There is not much that I\nwould like to talk a little about that, because we are all interested\ncan do, or that any other Secretary of Commerce can do, for the\n36\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n37\nWeather Bureau or for the Patent Office or these other agencies that\nSenator BREWSTER. As we approach the end of the war those re-\nare purely technical. They are run by technical men.\nsponsibilities will offer great opportunities!\nWe can help them, we can advise with them, and do when they want\nSecretary JONES. They will.\nadvice. We kind of keep track of how they are getting along. We\nSenator BREWSTER. And it would be will to have a division of\nhelp them with their budgets and their legislation, but that is about\nresponsibilities, as this act provides!\nall there is to it.\nSecretary JONES. It will.\nNow, so far as promoting business, commerce, during the war, it\nSenator BURTON. Mr. Jones, did you say that you had the post-war\njust hasn't been in the cards, because everything has been war.\nplan with you, or will you file it with the committee?\nNow, we have-and I am going to leave for the record here-a very\nSecretary JONES. I don't know whether I have it with me.\nbroad program for the Department of Commerce, post-war. I say\nSenator BURTON. I think it would be well, Mr. Chairman, to have\n\"broad,\" intending it to take care of foreign and domestic commerce,\nthat as a part of the record.\nand the many things it can do and information it can give to business\nThe CHAIRMAN. You may file that with the stenographer.\nand industry. We have talked about it between ourselves, and dis-\nSecretary JONES. Well, I would like to put it in. I would like also\ncussed it, and we have got a nice program. It has been available for\nto put in as part of the record this other material that I talked about,\na month, and we discussed it; it looks like the proper time to discuss it.\nabout the war work, and also about our R. F. C. In other words, if we\nBut the operations of the Reconstruction Finance Corporation, and\nare coming to a parting of the ways, I want to make a report to the\nall of these various corporations, they are just as much business as\nGeneral Electric and they ought to be run by businessmen-and I am\nCongress. The CHAIRMAN. You put in anything in connection with your re-\nnot looking for the job. I have held the job; I have done it for 13\nmarks that you think you should put in. Hand it to the stenographer\nyears; I have been in the trenches for 13 years.\nand it will be put in the record as part of your remarks.\nThe CHAIRMAN, Have you resigned, Mr. Secretary!\n(The post-war plan referred to is contained in the following letter:)\nSecretary JONES. I don't know whether I have resigned or not. If\nDECEMBER 15, 1944.\nyou read the newspapers you know about as much as I do about it.\nThe PRESIDENT,\nI am still working; I will say that.\nThe White House.\nThe CHAIRMAN. You are still working?\nDEAR MR. PRESIDENT: You have, in recent public utterances, set as goals for\nSecretary JONES. I am still working.\nthe post-war period full employment and Increased production, so that we may\nfind work in this country for 60,000,000 persons and maintain a national income\nThe CHAIRMAN. You are carrying on all the work of the Depart-\napproximating $140,000,000,000.\nment of Commerce as Secretary, are you?\nThese stated objectives, In which the Department of Commerce must play a\nSecretary JONES. Well, we have got an Under Secretary and Assist-\nprominent part, prompt me to submit, for your consideration, what we In the\nDepartment believe to be essential 80 that we may carry out your objectives\nant Secretary, and another Assistant Secretary, but I am still Sec-\nfully and ably. To do so, we must have your full cooperation and that of the\nretary, I suppose, officially, until someone else is confirmed.\nBureau of the Budget.\nThe CHAIRMAN. Then you are carrying on the Loan Adminis-\nIn the field of foreign trade, the Department of Commerce needs considerable\ntration?\nstrengthening. It should be authorized to detail men of proven business experi-\nence to all of the principal embassies and legations to serve as economic repre-\nSecretary JONES. That part of it, I can work for the Reconstruction\nsentatives under the direction, of course, of the ambassadors or ministers.\nFinance Corporation as a hired hand and I can take whatever salary\nWe have, for some time, proposed an enlargement of the Field Service of\nthey are willing to give me. My big responsibility to the country and\nthe Department of Commerce, in order to provide management advice and counsel\nto the Congress is to be helpful to the Reconstruction Finance\nto business-particularly small business. Our ideas were embodied In S. 356,\nCorporation.\nintroduced at the last session by Senator Mead.\nIt is our conviction that, when the returning veterans and those who have been\nNow, I do not run that organization at all. It has five directors,\nengaged in war work begin to set up their own business establishments, Govern-\nand they are all good men. I will say this, that of all the corporations\nment must make available the knowledge and experience It has gained, in order\nthat we have, the directors of the R. F. C. are the directors of each\nto minimize the mortality rate of such ventures.\nThe Department of Commerce, in cooperation with the War Department,\ncorporation, and they meet every day, six times a week. When they\nalready has prepared a series of booklets outlining the best practices for the\nare in session, then every corporation is in session, and I do not attend\noperation of many types of small business establishments.\nthe meetings. If they want my advice or my suggestions, they come\nThis program should be implemented by the addition of experienced men to\nand ask for it-I am available-and that is the way it is run. They\nour field offices to provide additional guidance for those who seek to perpetuate\nare good men.\nprivate enterprise and individual initiative.\nIn order that the Commerce Department may be additionally useful in earrying\nSenator BREWSTER. It is your point, then, that the Secretary of\nout Its statutory functions, there should also be an enlargement In the number\nCommerce has not had greatly increased responsibilities incident to\nof Its Assistant Secretaries.\nthe war; that many of the activities have been rather inactive on ac-\nAt the present time, we have an Under Secretary and one Assistant Secretary.\nThe existing Assistant Secretary is, in effect, an Assistant Secretary for\ncount of the fact that business and commerce has not required a great\nAviation, although not 80 designated. It would promote efficiency and improve\ndeal of cultivation and stimulation incident to that office?\nadministration if he were to be specifically designated as Assistant Secretary for\nSecretary JONES. No. The purpose was to promote commerce, and\nthere has not been much opportunity to promote commerce all during\nAviation. As you know, the Department's functions Include supervision of the Bureau of\nthe war.\nStandards, the Patent Office, and the President's Patent Planning Commission.\nThese activities are largely in the field of science.\n38\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n39\nIt would be helpful for the Department to have a new Assistant Secretary\nfinders, gun sights, airplane cameras, and field binoculars has been kept abreast\nwith scientific background to supervise these activities. He would be particu-\nof the demand. Equally Important have been the precise scientific tests which\nlarly effective in promoting greater public use of the excellent facilities of the\nthe Bureau of Standards conducts in the field of ordnance development, leading\nNational Bureau of Standards, especially in the post-war period.\nin many Instances to major improvements in the offensive weapons of the\nThe Bureau of Foreign and Domestic Commerce and the Census Bureau are\nUnited States.\nthe two bureaus of the Department of Commerce which can be of the greatest\nThe Civil Aeronauties Administration's direct contribution to the prosecution\ndirect service to business.\nof the war consists of the maintenance and operation of the 35,000 miles of\nDuring the past 4 years much has been done to establish integration and CO-\nFederal alrways In the United States and the operation of numerous com-\noperation between these two bureaus.\nmunication and flight-control facilities outside the United States, including\nAn Assistant Secretary in charge of Business Service could be very effective\nAlaska, the Aleutians, the South Pacific, and points in South America, Africa,\nIn directing the activities of these two bureaus, especially in the field of better\nand India. The Civil Aeronautics Administration, in addition, has taken over\nservice to small business, war workers, and veterans.\ntraffie control and certain important airports for the Army and Navy and la\nThe man occupying this position would, in effect, be the Assistant Secretary for\noperating oceanie aircraft control for Pacific air traffle, which Is made up\nSmall business suggested at the last session of Congress in S. 833.\nentirely of military aircraft operations.\nThere is need, in addition, for an Assistant Secretary in Charge of Administra-\nThe Airways Engineering Division of the Civil Aeronautics Administration\ntion.\nfurnishes and constructs communication facilities for the Army and Navy at\nThe Department of Commerce has about 30,000 employees and the Reconstrue-\nmany locations outside of the United States, and has accomplished the airport\ntion Finance Corporation about 9,000, stationed in all parts of the United States\nconstruction program Involving airports designated by the military services.\nand In many parts of the world.\nThe Civilian Pilot Training Program, inaugurated by the Civil Aeronautics\nSupervision of this great force entails a tremendous amount of detail work.\nAdministration before the war, provided the armed services with 100,000 aviation\nA considerable part of it now occupies the time of the Under Secretary.\ncandidates during the early war days when avlators were In such great demand\nThe appointment of an Assistant Secretary for Administration would leave the\nby the military.\nUnder Secretary free for special assignments and for operating relations with\nThe facilities of the Weather Bureau have been adjusted and expanded\nother departments and agencies-phases of the Department's work that can-\nto meet a great variety of wartime needs. Special forecasting services have\nnot be emphasized too strongly.\nbeen instituted to facilitate artillery and aircraft tests and to serve Army posts,\nI would appreciate the opportunity of discussing this program with you\nconstruction projects, munitions plants, and the Air Transport Command. Mil-\nfurther, with a view of obtaining your approval for the enlargement of the\nItary aviation communication networks have been extended to service Army\nDepartment's field offices and the creation of the three additional Assistant\nestablishments wherever necessary. The Alaskan and Carlbbean weather serv-\nSecretaries.\nIces have been reorganized and Improved to meet special military needs. Skilled\nSincerely yours,\npersonnel have been assigned to full-time service details with the armed forces.\nJESSE H. JONES,\nThe Weather Bureau has, through the Joint Meteorological Committee, coordi-\nSecretary of Commerce.\nnated the activities of civilian and military requirements.\nThe Const and Geodetie Survey has placed its products and services entirely\nNumber of employees\nat the disposal of the armed services. The production of nantical charts for\nuse by the Navy and merchant marine has been greatly expanded. The output\nReconstruction Finance Corporation:\nof aeronautical charts for air navigation and pilot training has been tremendously\nTotal employees\n9, 419\nincreased, and many special nautical and aeronautical charts have been added.\nWashington pay roll\n509\nGeodetic control surveys have been expanded and enlarged. many of them being\nLoan agencies\n3,820 3,\nmade in regions classed ns \"combat areas.\" Certain vessels of the Const and\nDepartment of Commerce:\nGeodetie Survey have been transferred to the Navy Department, and certain\nTotal employees\n32,339\npersonnel to the War and Navy Departments, to constitute a part of the active\nWashington pay roll\n10, 102\nmilitary or naval forces of the United States. The Philippine charts were pro-\nField\n22,237 22,\nduced by this Bureau.\nThe National Inventors Council was established to ald the defense and war\neffort. It has served as the screening point for thousands of suggestions sub-\nJANUARY 19, 1945.\nmitted by American inventors as of possible use in the war effort. Every Idea\nThe PRESIDENT,\nbelieved to be of even the slightest merit has been considered by some of the\nThe White House.\noutstanding seientists of the country, and a number of devices extremely useful\nMR. PRESIDENT: The Department of Commerce has participated in direct\nin the war effort have been developed.\nnational defense and war activities to a major extent. Some of its bureaus, such\nThe Bureau of Foreign and Domestic Commerce has served not only the mill-\nas the National Bureau of Standards, Civil Aeronauties Administration, Weather\ntary establishments through providing economie information, but has been a\nBureau, Coast and Geodetic Survey, and the National Inventors Council, have\nstorehouse of facts on which the war agencies have drawn continuously. The\nbecome virtual adjunets of the military establishments; and the remaining\nfactual material on which the War Production Board, the Combined Resources\nbureatts-Bureau of Foreign and Domestic Commerce, Bureau of the Census,\nand Alloentions Board, the Foreign Economic Administration, the Office of\nPatent Office, and Inland Waterways-have subordinated their normal functions\nPrice Administration, and many others have based most of their major decisions,\nto such an extent that war work has become their dominant concern. The war\nhas been provided by the Bureau of Foreign and Domestic Commerce.\nwork of the bureaus of the Department of Commerce has consisted both of activ-\nThe Bereau of Foreign and Domestic Commerce is the coissuer of the Pro-\nItles Independent in character and those carried on in cooperation with direct\nelnimed List of Certain Blocked Nationals. Members of the staff serve on\nwar agencies. This has been so to a very great extent, probably more than\ndozens of Interdepartmental committees directly concerned with the war effort.\nis realized.\nThe Bureau of the Census provided much of the basic factual data needed\nThe Bureau of Standards, for Instance, has subordinated all of its peacetime\nfor nearly every phase of planning for total war. It has been drawn upon for\nfunctions to tasks concerned with the production and improvement of military\nsuch statistical material by nearly every other agency of the Government:\nmatériel. The Bureau grounds have been declared a prohibited zone by the\nand the factual material which It was able to supply time and time again\nWar Department. It flies the Army-Navy E pennant with two stars. It is,\ndisclosed the location of facilities and manpower which would be employed for\ntoday, one of the largest producers of optical glass, and, through the manufacture\nwar production. Procurement agencies, through the assistance of the Bureau\nof lenses and prisms, provided the armed services with their requirements\nof the Census, have been able to obtain both speedy and accurate economic\nfollowing the outbreak of the war. Due to this production, the supply of range\ninformation needed for hundreds of major decisions. From its population\n40\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n41\nrecords, the Bureau of the Census was able to establish the citizenship of\nhundreds of thousands of workers who needed this proof In order to be em-\nREPAYMENTS\nployed in our plants: and, immediately after Pearl Harbor, was in a position\nWar\n$9,100,000,000\nto give the military services the name and residence of all Japanese nationals\nNon-war\n7,978,000,000\nresiding In prescribed west const areas.\nThe Patent Office, through the War Division, Initiates searches for applica-\nTotal\n17,078,000,000\ntions on inventions deemed important by Government war agencies; It deter-\nmines cases In which secrecy orders shall be issued to protect the Interests of\nSenator PEPPER. Mr. Jones, following up the inquiries I made of\nthe United States under inventions, and determines the withholding of licenses\nSenator George as to what would be the legal significance of his bill\nrequired to file patent applications abroad, to prevent our inventions from\nif enacted, did I understand you to say that you have or have not\nreaching unauthorized persons. It has cooperated with the Foreign Economie\nAdministration and the Allen Property Custodian In matters involving enemy-\nsubmitted your resignation as the Federal Loan Administrator!\nowned patents.\nSecretary JONES. Suppose you read my letter to the President?\nThe resources of the Inland Waterways Corporation have been utilized to a\nSenator PEPPER. I read the one purporting to be your letter in the\ngreat extent for the transportation of critical and strategie matériel needed In\npaper here.\nthe war effort. It has moved without aceident, from the Great Lakes to New\nOrleans, a number of combat vessels which could not go down the rivers under\nSecretary JONES. That is all I can tell you.\ntheir own power.\nSenator PEPPER. Well, you are present here and you know more\nI should Hke to commend the heads of the various bureaus In the Department\nabout it than anybody, and of course we are not as well informed\nand their respective organizations. They have all been prompted by a fine\non it as you are. Did you intend to resign as Federal Loan Admin-\nsense of patriotism and have done their Jobs well.\nistrator by that letter?\nSincerely yours,\nJESSE H. JONES,\nSecretary JONES. I had supposed that my term of office would expire\nSecretary of Commerce,\nwhen my successor was confirmed. That is what I had been advised.\nThe CHAIRMAN. Have you finished your statement?\nIt makes little difference to me. I do not expect to remain as Secre-\nSecretary JONES. I do not think of anything else. I may later.\ntary of Commerce, if that is what you have in mind.\nThe CHAIRMAN. Are there any questions?\nSenator PETTER. I was wondering whether, if this bill were enacted,\nSenator McClellan. Mr. Chairman, I would like to ask a ques-\nyou would expect to remain as Federal Loan Administrator.\ntion.\nSecretary JONES. That would be up to the President of the United\nThe CHAIRMAN. Yes.\nStates. I am not seeking a job, Senator.\nSenator McCLELLAN. Mr. Secretary, probably you have covered this,\nSenator PEPTER, I was trying to get the technical situation clear,\nbut if so, I did not understand it, and I would like for the record\nMr. Secretary. Is there a term of years in the office of Federal Loan\nto show the total amount of loans that have been made by the R. F. C.\nAdministrator? In other words, were you appointed for a term of\nand its subsidiaries since you came into this picture. As I under-\nyears as Federal Loan Administrator, or at the will of the President,\nstand, you loan money and it is repaid and goes into a revolving\nor at the will of Congress, or what was your term as Federal Loan\nfund and you loan it again. I would like to know the volume of\nAdministrator?\nbusiness that has been handled in the 13 years that you have been\nSecretary JONES. I do not know, but I doubt if there was a term.\nthere.\nI don't know. Is there anybody here that knows? [Laughter.] I\nSecretary JONES. May I put it in the record and get that accu-\ndon't know, Senator. My impression is that there was no term.\nrately?\nSenator PEPPER. It is your impression that there was not a term?\nSenator McCLELLAN. I would like for the record to show it.\nSecretary JONES. That is my impression, but I might be wrong\nSecretary JONES. I will be glad to,\nabout that. It was not for so many years; I know that.\nSenator McClellan. Thank you.\nSenator PEPPER. According to your own opinion, your opinion is\n(The information referred to is as follows:)\nthat with respect to the office of Secretary of Commerce you submitted\nyour resignation. Do you regard your resignation as terminating\nOver-all authorizations, disbursements, and repayments of the Reconstruction\nyour tenure of that office, by your letter? Did you regard that as the\nFinance Corporation and its subsidiaries\ntermination of our office as Secretary of Commerce?\nSecretary JONES. I regarded that as terminating whenever my suc-\nAUTHORIZATIONS\nWar\ncessor was appointed and confirmed.\nNon-war\n$32,300,000,000\nSenator PEPPER. And you have the same view as Federal Loan Ad-\n13,160,000,000\nministrator: that is, if another Federal Loan Administrator were ap-\nTotal\n45,460,000,000\npointed by the President and confirmed by the Senate, then that would\nterminate your office as Federal Loan Administrator?\nDISBURSEMENTS\nWar\nSecretary JONES. Certainly.\nNon-war\n$18,000,000,000\nSenator PEPPER. And you are continuing to function as Federal\n9,656,000,000\nLoan Administrator, in that office, and doing business as usual as\nTotal\nFederal Loan Administrator?\n27,656,000,000\nRegraded Unclassified\n42\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n43\nSecretary JONES. I would think so, and yet there is not much \"fune-\nSenator PEPPER. He was what?\ntion\" about it. I am an adviser; I am not a dictator. [Applause.]\nSecretary JONES. He WHS with the old War Finance Corporation.\nI don't tell these men what to do.\nSenator PEPPER. Yes.\nSenator PEPPER. Perhaps you underestimate, through your modesty,\nSecretary JONES. After the last war. He was brought into this\nyour importance.\nCorporation as assistant treasurer and then promoted to treasurer,\nSecretary JONES. I do not. May I say this-that the power of the\nand finally to a director of the Corporation, and he is the ablest man,\nFederal Loan Administrator is to supervise and coordinate. You can\nin my opinion, in Washington.\nread into that what you want to read into it.\nSenator PEPPER. He worked himself up. Except for being con-\nSenator PEPPER. Mr. Secretary, you spoke about the R. F. C. That\nnected with the War Finance Corporation-in the last war, you mean!\nis the parent company, as it were, is it not? It is the holding com-\nSecretary JONES. What?\npany or the parent company for all these subsidiary corporations!\nSenator PEPPER. You said he was connected with the War Finance\nSecretary JONES. That is correct.\nCorporation. Did you mean in the last war?\nSenator PEPPER. And that has a board of directors?\nSecretary JONES. Yes, sir.\nSecretary JONES. Yes; five,\nSenator PEPPER. Then he came into this organization and appar-\nSenator PEPPER. Would you give us the names of those gentlemen!\nently worked his way up in the organization.\nSecretary JONES. Yes, sir; I will be glad to. Charles B. Hender-\nSecretary JONES. Yes, sir. They all did. Mr. Klossner, Mr. Hus-\nson, a Democrat from California-or Nevada, I believe. Sam H.\nbands, Mr. Mulligan, Mr. Fisher-they were all workingmen, they\nHusbands, from South Carolina. He is a director. Husbands is\nwere in the organization, and they are all working directors, they\npresident of the Defense Plant Corporation. Henderson is president\nare all promoted for merit, not political appointments at all.\nof Metals Reserve Company, as well as a director. Henry Mulligan-\nSenator PEPPER. What was Mr. Fisher's background?\nH. A. Mulligan-sitting over here-this red-faced Irishman-he is a\nSecretary JONES. Who?\ndirector, and he is president of the Defense Supplies Corporation.\nSenator PEPPER. Mr. Fisher.\nCharles T. Fisher, Jr., a Republican, he is president of the RFC\nSecretary JONES. He was of the Fisher crowd in Detroit. Former\nMortgage Company, and generally handling R. F. C. loans.\nSenator Blaine was R Republican member of the Board from that\nSenator PEPPER. Handling R. F. C. loans generally?\nFederal Reserve district, and we cannot have more than one director\nSecretary JONES. That is most of his work, as the work is divided up.\nfrom any one district, and when Senator Blaine died there was a\nSenator PEPPER. Yes.\nRepublican vacancy. Chick Fisher, then a very young man, was\nSecretary JONES. Howard Klossner, a Republican from Minnesota.\nmanager for the R. F. C. in Detroit, one of our biggest offices, and we\nHe is president of the Rubber Reserve Company.\nasked the President to appoint him a member of the R. F. C. board\nSenator PEPIER. I believe that makes the five.\nand bring him to Washington, upon the theory that we would like to\nSecretary JONES. I think maybe he is also president of the War\nhave his field experience sitting around the board in Washington, and\nDamage Corporation.\nhe is a very excellent director.\nSenator PEPPER. I see. Now, who is chairman of the R. F. C.\nSenator PEPPER. What is Mr. Klossner's background?\nboard of directors?\nSecretary JONES. I would like to say just a little more.\nSecretary JONES. Charles B. Henderson.\nSenator PEPPER. Proceed.\nSenator PEPPER. What were Mr. Henderson's duties and what was\nSecretary JONES. He is president now of the National Bank of\nhis general background before he came to be a director of the R. F. C.!\nDetroit, a bank of about a billion and a half deposits, the biggest bank\nSecretary JONES. He was a businessman in Nevada, a banker, in-\nin the midwestern area outside of Chicago.\nterested in mining, et cetra.\nSenator PEPPER. Did he become president of that bank since he has\nSenator PEPPER. What was Mr. Husband's background?\nbeen connected with the R. F. C.f\nSecretary JONES. Sam Husbands came from South Carolina. He\nSecretary JONES. He was not with us when he became president of\nwas a small-town banker and a very able young man, one of the best\nthe bank.\nin the world.\nSenator PEPPER. But he has retained his presidency of a bank while\nSenator PEPPER. When you say \"a small-town banker,\" what size\nhe was a director of the R. F. C.I\nbank do you mean?\nSecretary JONES. He is a nonworking president of the bank now.\nSecretary JONES. Well, I don't know what size, but it was a small\nSenator PEPPER. A nonworking president?\ntown in South Carolina, and your judgment would be as good as\nSecretary JONES. He is not working at that job. He is here in\nmine if you want to guess.\nWashington, with his family, working for the R. F. C., with a leave\nSenator PEPPER. What was Mr. Mulligan's background before he\nof absence, like a lot of other good people in war work.\ncame to be a director?\nSenator PEPPER. What was Mr. Klossner's background?\nSecretary JONES. Mr. Mulligan was brought into the Corporation\nSecretary JONES. Mr. Klossner had been a bank examiner, I think-\nby Eugene Meyer, as Chairman, when it was first set up. He was with\nworked in banks-and I don't know what else, but he was also an\nthe old War Finance Corporation.\nexaminer in the R. F. C. in 1932, selected by Mr. Eugene Meyer, and\nUnclassified\n44\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n45\nhe also grew up and graduated into being a director. He is a working\nSenator PEPPER. Whether it made money after it was transferred to\ndirector, and that is the only kind we have; we have no politicians.\nthe Department of Agriculture and had lost money prior to that.\n[Laughter.]\nSecretary JONES. The Commodity Credit Corporation makes loans\nSenator PEPPER. You mean on the board of directors of the R. F. C.1\non commodities at a percentage of their parity price fixed by an act\nSecretary JONES. Yes, sir; that is right. I hope I can qualify on\nof Congress.\nthat.\nSenator PEPPER. Yes.\nSenator PEPPER. I take it, it is the general opinion that you have\nSecretary JONES. Thus if it makes money it is not due to the man-\ndone your work well. Now, Mr. Jones, those five men whom you\nagement at all.\nemphasized were able to run the R. F. C. practically without your\nSenator PEPPER. I am afraid I missed the point in the testimony\nhelp-did those men have any background or any legislative positions\nhere today. I thought the success of the R. F. C. indicated a reflection\nthat you would describe as more important than the job of being\non your good management.\nSecretary of Agriculture?\nSecretary JONES. If Congress tells you to lend a dollar a bushel on\nSecretary JONES. Just exactly what is your purpose there, Senator\nwheat and then you make money, that is not because of the manage-\n[Laughter.]\nment of the man who made the loan, it is because Congress told him\nSenator PEPPER. Maybe I should ask you what the purpose of your\nto lend the dollar a bushel on wheat. That applies to cotton, it applies\noriginal testimony was and your comment upon the kind of persons\nto corn, and other things.\nwho would qualify for this position. The point I attempted to\nSenator PEPPER. You do not think, then, that the question of man-\nimply-and maybe I can clarify it by stating it-was that I regard\nagement enters into the making of loans under the Department of\nMr. Henry Wallace, having been for several years Secretary of Agri-\nAgriculture, but you do think that management did enter into the\nculture and having loaned under that agency, while he occupied that\nmaking of loans when it was under the R. F. C.I.\nposition, several billion dollars, and having thousands of employees\nSecretary JONES. The question of management has nothing to do\nunder his jurisdiction, as having a background which, according to\nwith that type of operation, except as to their routine and other ad-\nthe importance and responsibility of this position, compares favorably\nministration. I guess there are a good many loans, all kinds of loans,\nwith any of the directors of the R. F. C., which is the parent company\nmade by the Commodity Credit. I think it does a lot of things now, a\nof that great unit. [Applause.]\nlot of subsidizing, which we did not do when they were with us. But\nThe CHAIRMAN. I hope the public will not indulge in any demon-\nI have no desire, Senator, and I am not trying to compare the directors\nstration. Let us have quiet.\nof the R. F. C., as men, with Secretary Wallace or Mr. Wallace.\nSecretary JONES. I might say, to begin with, Senator, that the Com-\nThe CHAIRMAN. Well, Mr. Jones, the difference is that in this mat-\nmodity Credit Corporation, which loaned most of that money, was\nter of agricultural commodities Congress sets a certain percent of\ncreated by the R. F. C., and we ran it for 5 or 6 or 7 years. It is a\nparity, and if there is a loss or if there is a gain it is probably due to\nbusiness organization, created by us, and it was run as a business or-\nsome policy of Congress.\nganization. I think it is still being run pretty well.\nSecretary JONES. Yes.\nCorporation? Senator PEPPER. You are referring to the Commodity Credit\nThe CHAIRMAN. In the R. F. C., you are the judge.\nSecretary JONES. We have the discretion there; I mean the R. F. C.\nSecretary JONES. What?\nhas the discretion as to whom to make a loan and whether to make\nCorporation? Senator PEPPER. Are you referring to the Commodity Credit\na loan or not, and in agriculture Congress has the responsibility.\nSenator PEPPER. Of course, it is a question of fact as to whether that\nSecretary JONES. That is what I was talking about; yes,\nis true in every case or not.\nSenator PEPPER. Am I correct in my memory that at one time that\nSecretary JONES. Well, it is a fact.\nCorporation was under the R. F. C. and was later transferred to the\nSenator PEPPER. You did not mean to imply in every case where\nDepartment of Agriculture, while Mr. Henry Wallace was Secretary\nloans are made under the Department of Agriculture, that discretion\nof Agriculture?\nwas not properly and favorably used by Mr. Henry Wallace when he\nSecretary JONES. That is just what I stated-that we created it our-\nwas Secretary\nsuccessful business,\nselves and ran it and made a business out of it-a going business, and\nSecretary JONES. I do not know enough about the Department of\nAgriculture. It is a pretty big organization. I do not know all the\nSenator PEPPER. Is it a fact, as I have heard it said, that the Com-\nthings they did, I was just speaking of the Commodity Credit.\nmodity Credit Corporation lost money either in 1 year or 2 years pre-\nSenator PEPPER. Mr. Jones, I understood you to say or to make\nto the Department of Agriculture?\nceding the transfer and made money the year following its transfer\nsome reference to the fact that there had been a running audit-that\nSecretary JONES. If so, it was not due to management.\nyou did keep a running audit of these vast expenditures.\nSenator PEPPER. I am asking, of course, about the fact.\nSecretary JONES. Yes, sir,\nSenator PEPPER. Was that audit made by the R. F. C. or under the\nSecretary JONES. What was that?\nFederal Loan Administrator, or the same kind of audit that applies\nRegraded Unclassified\n46\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n47\nto other Federal agencies, the audit that the Comptroller General\nAnalysis of audit control of Government corporations as of June 30, 1944-Con.\nmakes, who is the agent of Congress, when he audits the Government\naccounts?\nAudited\nby Gen-\nSecretary JONES. They are made by the R. F. C.; that is, they are\nName of corporation\neral Ao-\ncount-\nmade by the certified public accountants.\nIng Office\nSenator PEPPER. Engaged by whom?\nSecretary JONES. Engaged by the R. F. C.\nFederal Savings and Loan Insurance Corporation\nYes.\nSenator PEPPER. So you hire the accountants who audit the affairs\nFederal Subsistence Homesteads Corporation\nFederal Surplus Commodities Corporation\nYes.¹\nof the R. F. C.!\nYes.\nHome Owners' Loan Corporation\nNo.\nSecretary JONES, That is correct.\nInland Waterways Corporation\nInstitute of Inter-American Affairs\nYes.\nSenator PEPPER. Is that true of other governmental agencies?\nInstitute of Inter-American Transportation\nYes!\nInter-American Educational Foundation, Inc.'\nYes.\"\nSecretary JONES. Of what?\nInter-American Navigation Corporation\nYes!\nNo.\nSenator PEPPER. Is that true of other governmental agencies?\nMetals Reserve Company\nNo.\nPanama Rafiread Company\nNo.\nSecretary JONES, I don't know. I think there are some that do the\nPetroleum Reserves Corporation\nYes.\nPrencinradle, Inc.¹\nNo.\nsame.\nProduction credit corporations (12)\nNo.\"\nSenator PEPPER. Do you know what agencies!\nPuerto Rico Cement Corporation\nNo.\nReconstruction Finance Corporation\nNo.\nSecretary JONES. I do not know.\nRFC Mortgage Company\nRegional agricultural credit corporations (2), Washington and Minneapolis\nNo.\nSenator PEPPER. The general practice-I will ask you, from your\nNo.\nRubber Development Corporation\nNo.\nvast knowledge of the operation of the Government-the general\nRubber Reserve Company\nYes.\"\nSmaller War Plants Corporation\nYes.\npractice is, is it not, that the office of the Comptroller General, answer-\nSmithsonian Institution\nNo.\nSteel Recovery Corporation\nable to Congress, audits the accounts of other Federal agencies except-\nTennessee Valley Associated Cooperatives, Ine\nNo.\nYes.\ning the agencies that generally have been concentrated under your\nTennessee Valley Authority\nNo.\nTextile Foundation, Inc\nauthority?\nUnited States Commercial Company\nNo.\nUnited States Housing Corporation 11\nYes.\nSecretary JONES, I think there are some others.\nUnited States Spruce Production Corporation 14\nNo.\nVirgin Islands Company\n=\nYes.\nSenator PEPPER. You do not recall the names of them, though\nNo.\nWar Damage Corporation\nNo.\nSecretary JONES, I can get them for you, though.\nWar Emergency Pine Lines,\nNo.\nWar Hemp Industries, Inc.\nNo.\nSenator PEPPER. Will you be good enough to get them?\nWar Materials, Inc.³\nWarrior River Terminal Company\nNo.\nSecretary JONES, I will be glad to.\nWelfare and Recreational Association of Public Buildings and Grounds, Inc\nYes.\n(The matter referred to is as follows:)\n- No accounts submitted to General Accounting Office, but books and records examined in connection\nThe following appears as appendix B of the Annual Report of the Comptroller\nwith Maritime Commission audit.\nGeneral of the United States for the fiscal year ended June 30, 1944 (pp. 87-88) :\nIf By agreement, the General Accounting Office has performed a field audit of the Corporation through\nDec. 31. 1943. Accounts for transactions after that date are to be submitted in the regular manner, but none\nhad been received by June 30, 1944.\nAnalysis of audit control of Government corporutions as of June 30, 1944\nI Agent of the Metals Reserve Company (Copper Recovery Corporation, Steel Recovery Corporation,\nand War Materials, Inc., are no longer in active operation).\n4 Terminated by Executive order, effective Oct. 31, 1942. and asseta transferred to Reconstruction Finance\nAudited\nCorporation for liquidation. Transactions subsequent to that date are not audited by the General Account-\nby Gen-\ning Office.\nName of corporation\neral Ao-\nNever In operation.\nF, Operated with funds provided by other Government agencies (Inter-American Navigation Corporation\n. Not now in operation.\ncount-\nIng Office\nis now in liquidation).\n. Transactions in which the Corporation is Involved are audited by the General Accounting Office to the\nAmerican President Lines, Ltd\nsame extent as transactions of the agencies providing funds to the Corporation.\nNo.¹\nBanks for Cooperatives\n, In the fiscal year 1944, submission began of accounts covering transactions of the corporations under the\nNo.\nCentral Bank for Cooperatives\njurisdiction of the Coordinator of Inter-American Affairs. from the date of their crestion.\nDistrict Bank for Cooperatives (12)\n18 In connection with the mudit of the Puerto Rico Reconstruction Administration, an sudit of the books\nCargoes, Ine\nand records of the Corporation was made in January 1943.\nNo.¹\nColonial Mies\n= Administrative expenses only.\nNo.\nCommodity Credit Corporation\nit The Federal funds are audited by the General Accounting Office but not the private funds.\nYes.\nCopper Recovery Corporation\n13 In liquidation.\nNo.\nDefense Homes Corporation\nis In liquidation since June 28, 1922.\nNo.\nDelense Plant Corporation\nis direct appropriations have ever been made to this company, since it finances its operations from allo-\nNo.\nDefense Supplies Corporation\ncations made from relief appropriations.\nDiaster Loan Corporation\nNo.\nis Agent of the Defense Supplies Corporation.\nElectric Home and Farm Authority\nNo.\nif Agent of the Commodity Credit Corporation.\nExport-Import Bank of Washington\nNo.\nFarmers' Home Corporation\nYes.\nSenator PEPPER. As a matter of fact, has not there been consider-\nFederal Crop Insurance Corporation,\nFederal Deposit Insurance Corporation\nYes,\nable question, and in fact hasn't it been recommended by the Byrd\nFederal Farm Mortgage Corporation\nNo.\nCommittee on Curtailment of Federal Expenditures, that the ac-\nFederal home-loan banks (12)\nYes,\nFederal intermediate-credit banks (12)\nNo.\ncounts under the Federal Loan Administrator, and under the\nFederal land banks (12)\nNo.\nFederal National Mortgage Association\nNo.\nR. F. C.; that is, that the R. F. C. itself be subjected to the audit of\nFederal Prison Industries, Ine\nNo.\nFederal Public Housing Authority\nYes,\nthe Comptroller General like all other Federal agencies?\nYes,\nSecretary JONES. That is right.\nSee footnotes at end of table.\nRegraded Unclassified\n48\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n49\nSenator PEPPER. Now, Mr. Jones\ntransactions, Involving authorizations In excess of $30,000,000,000. The Recon-\nSecretary JONES. Just a minute, please. At the time of those\nstruction Finance Corporation pays its own expenses, including interest on the\nhearings, when that was brought out, your Comptroller General and\nmoney It uses, and has operated at a net profit of more than $300,000,000, after\nI worked out an agreement where he was either to do the auditing or\nproviding a reserve sufficient to cover all losses except those Incident to its war\nactivities.\nhe was to employ the auditors. He hasn't the manpower to do the\nI know of no better auditing procedure than that employed by the Recon-\nauditing at this time. He says that.\nstruction Finance Corporation. The chief auditor is a certified public accountant,\nSenator PEPPER. You say you worked out an agreement. Was not\nand has a competent staff of 740 auditors, of whom 110 are certified public\nthere something about some legislation which was being prepared and\naccountants.\nNotwithstanding that the directors of the Corporation and I are responsible\nwas to go to the Congress, which would make it a matter of duty and\nto the Congress for the proper administration of the Corporation's affairs and\nnot an agreement on your part?\nare satisfied that the accouns and affairs of the Corporation are well and com-\nSecretary JONES. Yes; but only because the Comptroller General\npetently audited, if you think it destrable, we would have no objection to the\nfelt that even with our consent he had no authority to audit R. F. C.\nGeneral Accounting Office making an annual postaudit and reporting the same\nto Congress, provided such audit does not affect the authority or responsibility\nwithout additional legislation. He prepared the necessary legisla-\nof the Board of Directors of the Corporation under existing law.\ntion, we approved it and made it available to the Byrd committee. It\nThe procedure proposed is as follows:\nis available all the time.\nOn or after January 1 of each year, beginning January 1, 1944, a postaudit\nSenator PEPPER. By your consent?\nof the financial transactions of the Corporation for the preceding calendar year\nmay be made by the Comptroller General of the United States, or, at the\nSecretary JONES. To other agencies, so delegated by statute, but let\nelection of the Comptroller General, by a firm of certified public accountants\nme add, you may make this a matter of statute as to R. F. C. if you\nselected by the Corporation with the approval of the Comptroller General.\nwant to. I did not write the provisions of the original R. F. C. Act\nIn either case, the scope and extent of any such audit and the manner in\nwhich exempted it from the General Accounting Office. I did not\nwhich It is conducted will be governed by generally accepted practices and\nprocedures applied by the public accounting profession In audits of commercial,\nwrite the law. It is my impression, however, that those provisions,\nindustrial, and banking Institutions. The Corporation shall continue to have sule\nlike many others in the R. F.C. Act were taken from the War Finance\nand final authority to determine the type of books and records which It shall\nCorporation Act.\nkeep and the procedure which it shall follow in the transaction of its corporate\nSenator PEPPER. The question is whether or not you resisted the\nbusiness. The board of directors of the Corporation shall be immediately notl-\nfled in writing of any recommendation developed during the course of any\nlaw, Mr. Secretary.\nexamination. For the purpose of the audit herein provided for, the representa-\nSecretary JONES. I do not think I resisted the law at all. How\ntives of the Comptroller General or of the public accounting firm conducting\ncould I resist the law?\nsuch audit shall have access, during the Corporation's usual business hours, to all\nSenator PEPPER. That is a matter that you would know better than\nbooks, records, documents, and papers pertinent to such audit, but the Corporation\nwe, considering all your vast contacts.\nshall retain the custody of all Its books, records, documents, and papers. The\nComptroller General or the public accounting firm conducting such audit may\nSecretary JONES. I do not make the laws, I did not create the laws,\naccept financial reports and other data furnished by fiscal agents or the chief\nI do not resist them, I do my best to administer the laws that come\nauditor of the Corporation as final verification of all or any part of the Corpo-\nunder my administration. In order that there may be no misunder-\nration's activities without further audit verification, and may limit the audit to\nstanding about the manner in which R. F. C. is audited and the\nany extent deemed advisable in view of the internal auditing and accounting\ncontrols maintained by the Corporation.\nposition of the Comptroller General about it, I will submit for the\nThe expenses for each such audit, when conducted by the Comptroller General,\nrecord the exchange of correspondence with the Comptroller General\nshall be paid by the Corporation upon receipt of billings approved by the Director\nas follows:\nof the Bureau of the Budget, and, when conducted by A public accounting firm,\nMAY 12, 1943.\nshall be paid by the Corporation pursuant to a contract entered into by it with\nHon. LANDSAY C. WARREN,\nsuch firm. The expenses for any audit provided for berein shall be considered\nComptroller General of the United States,\nnonadministrative expenses of the Corporation.\nWashington, D. C.\nThe Comptroller General may make reports to the Congress of any such audit\nDEAR LINDSAY: The Directors of the Reconstruction Finance Corporation have\nprovided for herein together with such comments as he may deem advisable.\nbeen meticulous about Its fiscal policies, including Its records, accounting system,\nCopies of any such audit as may be made by a public accounting firm shall be fur-\nand auditing since its organization in February 1932.\nnished to the Comptroller General for this purpose. Ench such report shall\nIn addition to an effective system of Internal accounting control In the Corpo-\ncover the regular business year of the Corporation. No such report shall be made\nration's Washington office, its loan ageneles, and the Federal Reserve banks which\nto the Congress until the Corporation and the Secretary of Commerce shall have\nact as its fiscal agents and custodians, the Corporation maintains a competent\nbeen furnished with copies thereof and shall have had 90 days thereafter, or\nAudit Division, Independent of its financial and accounting operation. The Audit\nsuch part thereof as they may require, to examine such report, to point out\nDivision is responsible directly to the Board of Directors. and carries on a current\nerrors therein. explain or answer the same, and to file a statement which shall\nInternal audit of the Corporation's accounts and records, makes periodic audits\nbe submitted by the Comptroller General with his report.\nof its loan agencies and custodians, and, In addition, makes a comprehensive bal-\nAs used herein the term \"Corporation\" shall mean each of the following Corpo-\nance sheet audit at the close of each year,\nrations: Reconstruction Finance Corporation, the RFC Mortgage Company, Fed-\nFurther, the Directors of the Corporation, pursuant to Its bylaws, obtain\neral National Mortgage Association. Rubber Development Corporation. Defense\nannually an Independent audit by firms of certified public accountants of national\nPlant Corporation, Defense Supplies Corporation, Metals Reserve Company,\nreputation, chosen after competitive bidding and deemed qualified to make an\nRubber Reserve Company, U. S. Commercial Company, War Damage Corporation,\naudit of a financial Institution of the size and character of the Reconstruction\nand Disaster Loan Corporation. together with any other corporation hereafter\nFinance Corporation. Audits in previous years have been made by Haskins &\ncreated or organized by Reconstruction Finance Corporation pursuant to section\nSells, Arthur Andersen & Co., B. C. Rankin & Co., and Patterson, Teele & Dennis.\n5d of the Reconstruction Finance Corporation Act. as amended.\nThe Corporation and Its subsidiaries have handled hundreds of thousands of\nNothing herein shall be construed to limit the authority of the board of\ndirectors of the Corporation to determine and prescribe the manner in which its\nRegraded Unclassified\n50\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n51\nobligations are incurred and its expenses allowed and paid, or to exercise ex-\nimportant change has been made, however, the enclosed draft of the proposed\nclusive control over Its funds, including, without limitation, their receipt, de-\nleigislation provides for the audit of the accounts of the Reconstruction Finance\nposit, and disbursement, and the Corporation shall continue to have exclusive\nCorporation elther by the General Accounting Office or by a firm of certified pub-\nauthority to make settlement and adjustment for all claims and demands what-\nHe accountants selected by the Comptroller General. In view of the heavy addi-\never by the Corporation or against It and all accounts whatever in which the\ntional burden which would be imposed upon this office by the proposed legisla-\nCorporation is concerned, either as debtor or creditor.\ntion, It may be advisable to have such authority at least until qualified personnel\nIf. in your opinion, the added protection afforded by such audits made by you\ncan be obtained by this office.\nor under your direction is desirable and the foregoing procedure is acceptable,\nUnder section 4 of the Reconstruction Finance Corporation Act. the Directors\nplease so Indicate.\nof the Corporation have the full responsibility and final authority for determin-\nVery truly yours,\ning the type of books and records which the Corporation shall keep and the\nJESSE H. JONES, Secretary of Commerce.\naccounting methods and procedures It shall follow in the transaction of its\ncorporate business. The amendment we propose would in no wise limit the\npresent authority of the Directors of the Corporation In these regards.\nPlease permit me to express to you my sincere appreciation for the fine\nCOMPTROLLER GENERAL OF THE UNITED STATES,\nspirit of cooperation which you have shown in this matter. In an undertaking\nWashington, May 31, 1943.\nof the magnitude Involved In the audit by this office of the accounts of the\nThe Honorable the SECRETARY OF COMMERCE.\nReconstruction Finance Corporation and its subsidiary corporations, there are a\nMy DEAR MR. JONES: In your letter to me of May 12, you explained rather fully\nnumber of situations which must be worked out and mutually agreed to in order\nthe careful manner in which the Directors of the Reconstruction Finance Corpo-\nto secure the results desired. This, 1 am sure, we can do without impeding the\nration have controlled its fiscal policies, including its records, accounting system.\noperations of the corporations or infringing upon the responsibilities of their\nand auditing, since its organization in February 1932. I note that, in additon to an\nofficers and directors.\neffective system of Internal accounting control in its Washington office, its loan\nI was chairman of the House Committee on Accounts when the bill creating\nagencies, and the Federal Reserve banks which net as its fiscal agents and eus-\nthe Reconstruction Finance Corporation was considered and passed, and I pre-\ntodians, the Corporation has maintained an Audit Division responsible directly\nsided over Its consideration in the House. I have since watched Its course with\nto the Board of Directors, which makes current Internal audits and comprehen-\nthe greatest possible Interest, and take pleasure in commending you and your\nsive annual audits; and, further, that the directors have obtained annually an\nassociates in the Reconstruction Finance Corporation for the enviable record\nindependent audit by firms of certified public accountants of national reputation.\nit has made,\nYou ask if. in my opinion, the added protection afforded by such audit made by\nSincerely yours,\nthe General Accounting Office, or under its direction, is desirable and If the\nLINDSAY C. WARREN,\nprocedure outlined in your letter would be acceptable.\nComptroller General of the United States.\nI am in agreement generally with the view that the type of audit you suggest\nwould be preferable to the normal Government audit for financial transactions of\nA BILL To provide for an annual audit of the financial transactions of Reconstruction\nFinance Corporation and certain subskliaries and affiliated corporations, and for other\ncorporations: also, that it would be desirable to have such an audit of the Recon-\npurposes\nstruction Finance Corporation and its subsidiary corporations made by, or under\nthe general supervision of, the General Accounting Office.\nBe \" enacted by the Senate and House of Representatives of the United States\nBriefly, the audit which this office is required to make is based upon the sub-\nof America in Congress assembled, That the Reconstruction Finance Corporation\nmission by accountable officers of their accounts supported by original documents,\nAct, 47 Stat. 5. as amended, is hereby amended by Inserting an \"(a)\" before\nwhich are audited, adjusted, and settled by the General Accounting Office, and the\nthe first sentence of section 4 thereof and by adding at the end of such sub-\npersonal liability of said accountable officers to the United States determined by\nsection (n) of such section 4 the following new subsections:\napplying the legislative restrictions relating to public funds generally. In the few\n\"(b) Commencing with the period beginning January 1, 1914, an annual post\nInstances where this office has deviated from this regular procedure, such devia-\naudit of the financial transactions of the Corporation for the preceding calendar\ntion has been provided by statutes. See in this connection section 9 of the net\nyear shall be made by the General Accounting Office or, at the election of the\nof May 18, 1933 (48 Stat. 63), as amended, for the audit of the accounts of the\nComptroller General, by a firm of certified public accountants. In either case,\nTennessee Valley Authority: the act of February 16, 1938 (52 Stat. 76). as\nthe scope and extent of any such andit and the manner in which it shall be\namended, for the Crop Loan Insurance Corporation, and section 207 of the Mer-\nconducted shall be governed by generally accepted practices and procedures\nehant Marine Act of June 29, 1936, as amended.\napplied by the public accounting profession In audits of commercial, Industrial\nAs you know. I have recently had for consideration a request, similar to yours,\nand banking Institutions. For the purpose of the audit herein provided for, the\nfrom the Secretary of Agriculture, for the andit of the transactions of the Com-\nrepresentatives of the General Accounting Office or of the public accounting firm\nmodity Credit Corporation. Representatives of this office, in eooperation with\nconducting such audit shall have access, during the Corporation's usual busi-\nrepresentatives of the Department of Agriculture, worked out a plan, whereby\nness hours, to all books, records, documents and papers pertinent to such audit,\nthe operating accounts of the Commodity Credit Corporation are to be audited\nbut the Corporation shall retain the custody of all its books, records, documents\n\"in accordance with the principles applicable to commercial corporate transac-\nand papers, The General Accounting Office or the public accounting firm con-\ntions.\" The authority for, and the general scope of, the audit for Commodity\nducting such audit may accept financial reports and other data furnished by\nCredit Corporation, are set forth in 110s, which was Introduced in the Senate\nfiscal agents or the Chief Auditor of the Corporation as final verification of all\nby Senator Wagner May 14. 1943, and in H. R. 2725, introduced in the House by\nor any part of the Corporation's activities without further audit verification,\nCongressman Steagall, May 17. 1943.\nand may limit the audit to any extent deemed advisable In view of the Internal\nThe general audit plan as set forth in said bills provides a basie pattern for\nauditing and accounting controls maintained by the Corporation.\nthe audit along commercial lines of the financial transactions of all corporations\n\"The expenses for each such audit may be paid by the Corporation upon receipt\nwhich operate as agencies of the United States, Since the receipt of your\nof billings certified by the Comptroller General and shall be considered non-\nsuggestion the type of legislation to provide the authority of the General Ac-\nadministrative expenses of the Corporation.\ncounting Office to make an audit of the accounts of the Reconstruction Finance\n\"(e) The Comptroller General shall make a report to the Congress of each\nCorporation and its subsidiaries has been agreed upon between our respective\nsuch audit but no such report shall be made until the Corporation and the\nstaffs. A draft of the proposed legislation is enclosed, Basically, the suggested\nSecretary of Commerce shall have been furnished with copies thereof and shall\nlegislation retains the fundamental features in the bills relating to the Com-\nhave had ninety days thereafter, or such part thereof as they may require, to\nmodify Credit Corporation now pending in Congress with such changes as are\nexamine such report, to point out errors therein, explain or answer the same, and\nappropriate for the operations of the Reconstruction Finance Corporation. One\nto file a statement which shall be submitted by the Comptroller General with\nhis report.\n52\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n53\n\"(d) Nothing contained In subsections (b) and (e) hereof shall be construed\nto limit the authority of the board of directors of the Corporation to determine\nSenator PEPPER. You mean it relates to all the corporations that\nand prescribe the manner in which Its obligations are incurred and Its expenses\nare subsidiaries of R. F. C.?\nallowed and paid, or to exercise exclusive control over Its funds, including,\nwithout limitation, their receipt, deposit and disbursement, and the Corporation\nSecretary JONES. That means all of the organizations that were\nshall continue to have exclusive authority to make settlement and adjustment\ncreated by the R. F. C. under the authority given in the act signed by\nfor all claims and demands whatever by the Corporation or against it and\nthe President on June 25, 1940. That law gave the R. F. C. the au-\nall accounts whatever In which the Corporation is concerned, elther as debtor\nthority to create corporations, to do these things that we are author-\nor creditor.\nized to do in the act.\n\"(e) As used in subsections (b), (e) and (d) of this section, the term 'Cor-\nporation' shall mean each of the following corporations: Reconstruction Finance\nSenator PEPPER. Those are wartime corporations?\nCorporation, The RFC Mortgage Company, Federal National Mortgage Associa-\nSecretary JONES. Yes; and those corporations could not be created\ntion. Disaster Loan Corporation, Defense Plant Corporation, Defense Supplies\nexcept with the approval of the President, and they were all created\nCorporation, Metals Reserve Company. Rubber Reserve Company, Rubber De-\nwith his approval.\nvelopment Corporation, War Damage Corporation and U. S. Commercial Com-\npany. together with any other corporation hereafter created or organized by\nSenator PEPPER. Mr. Secretary-Mr. Jones-\nReconstruction Finance Corporation pursuant to section 5d of the Reconstrue-\nSecretary JONES. Why don't you leave it like you said it?\ntion Finance Corporation Act, as amended.\"\nSenator PEPPER. Beg pardon?\nSenator PEPPER. I understood you to imply, or to state, I mean, that\nSecretary JONES. Why did you correct yourself?\nwhat you had done had been subject to the approval of the President.\nSenator PEPPER. I did in view of the qualification which you im-\nSecretary JONES. In war work?\nposed; I thought it was proper to be Secretary; you have to have what\nSenator PEPPER. In war work.\nI call squatter's sovereignty that you now enjoy.\nSecretary JONES. Yes.\nWhat I wanted to ask was: As a matter of fact, you are not only\nSenator PEPPER. Did you mean each individual loan made had to\nstrong and able, but a candid man. As a matter of fact, with your\nhave the President's approval?\nknowledge of the duties of the Department of Commerce and the inti-\nSecretary JONES. No. No.\nmate relationship between the performance of those duties and the\nSenator PEPPER. In what respect did you mean to connect the Presi-\nperformance of the duties of Federal Loan Administrator, the real\ndent's prior approval with your action?\nfight, the issue that is really presented here-\nSecretary JONES. Well, we could not buy critical materials without\nSecretary JONES. The what?\nhis designating the material and approving the purchase, that is, the\nSenator PEPPER. I say the issue which is really presented here-and\npurchase of, we will say, lead, or any other critical material. There\nyou met it candidly in your original statement, as you meet most\nare probably 150 of them that he has approved.\neverything-the issue here is the question of whether you or Henry\nSenator PEPPER. Does that apply to action taken by the R. F. C.,\nWallace will be Secretary of Commerce and exercise the present duties,\nor is that just action taken by the Defense Plant Corporation, or one\npowers and prerogatives of that office. One man, whoever he is, if he\nparticular corporation?\nis competent, can perform the duties of both offices; isn't that right,\nSecretary JONES. That is in the law that gave the R. F. C. the right\nMr. Jones!\nto do these things.\nSecretary JONES. What do you expect me to say to that?\nSenator PEPPER. The right to do what things?\nSenator PEPPER. I expect you to give your opinion.\nSecretary JONES. To buy these materials.\nThe CHAIRMAN. I suggest you do not give any opinion. That is not\nSenator PEPPER. Only the critical materials?\npertinent, and I do not think it is fair to Mr. Jones.\nSenator JONES. Building plants as well.\nSenator PEPPER. That is the whole burden of the testimony that has\nSenator PEPPER. Now, the corporation that builds plants and per-\nbeen given here by Senator George and Mr. Jones. The whole purpose\nhaps aids in war work, that is called the Defense Plant Corporation?\nof the bill divides the function of the two on the theory that one man\nSecretary JONES. Yes.\ncannot perform both of them, and I am asking a man who has\nmaterials? Senator PEPPER. Is there another corporation that buys critical\nperforming both of them, cannot one man do the job of both.\nThe CHAIRMAN. You are going beyond that. That is certainly not\nSecretary JONES. Yes,\nin contemplation here.\nSenator PEPPER. Did the laws creating both of those corporations, if\nSenator PEPPER. I will reframe the question. Perhaps I can makê\nthey are created by law independently, did they both provide that\nit more clear, so I shall not deceive the able chairman in the purport\nyou cannot exercise the power provided therein without prior approval\nof it.\nof the President?\nThe CHAIRMAN. You are not deceiving me, I will tell you that now.\nSecretary JONES. Yes; except at the request of the Federal Loan\nSenator PEPPER. I hoped I would not. What I meant to ask was:\nAdministrator and the approval of the President.\nOut of your experience, Mr. Jones, is it not your opinion that these\nSenator PEPPER. Is that in both laws?\ntwo offices can be administered by one man, assuming the competence\nSecretary JONES. Yes; the war subsidiaries were all created under\nof that man, and is it not logical that they should, as closely related\nthe same law.\nas they are, be at least for the time being, operated by one man?\n54\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n55\nSecretary JONES. If you are trying to ask me if Henry Wallace is\nqualified for both jobs, I will say \"No.\"\ninability to do it. You have met the issue in a candid way, and that\n[Applause.]\nis what I want to ask you to do in answering my questions.\nSecretary JONES. May I ask to have that repeated? This amplifier\nSenator PEPPER. I knew you would say that.\nhere kind of rumbles, it magnifies and rumbles around, and I cannot\nThe CHAIRMAN. Please don't make any demonstration for either\nside. I assume we are going to adjourn now. I do not want to say\nunderstand you too well.\n(The record was read by the reporter.)\nanything to be disagreeable, but in order to have order, if there is any\nSenator PEPPER. Well, you may divide the question into two parts.\nfurther demonstration I will submit the matter to the committee as\nThe question I asked was whether it was your opinion that a man,\nto what steps to take. Proceed, Mr. Jones.\nassuming his competence, that one man can, in these times, administer\nSecretary JONES. I would like to add: I am not here to testify\nthe duties of the office of Federal Loan Administrator and the office\nagainst Mr. Wallace; I am here to give my opinion and my experience\nof Secretary of Commerce!\nwith this organization, with this enormous work. I do not think that\nSecretary JONES. I think that is possible, if you will work long\nthe Senator-I think he would make a fine Secretary of Commerce,\nenough, hard enough, and enough hours. I do not believe there is\ndivorced from the business, but it does not occur to me, Senator, that\nanother fellow in the world that will do it except me.\nyou would be qualified, from experience, to run all these vast busi-\nSenntor PEPPER. Very well. Now, getting back to the other ques-\nnesses,\ntion, which you touched upon in your answer, do you feel that you\nI happened to have been-and I am not talking about myself be-\nhave instances and details, or facts at your disposal, which you can\ncause I am out-I happened to have been in business all of my life,\ndisclose to the committee, showing that Mr. Wallace is not, as you\nlittle business too. I have never been in a big corporation. I have\nsaid he was not, qualified to perform the duties of that office?\nhad a lumber yard and various and sundry other things. and still\nThe CHAIRMAN. Mr. Jones, you will not be required to answer that\nhave most of them. I am a little businessman, a typical businessman;\nI know the problems of the little businessman, and I also know the\nquestion. That is wholly in your discretion. You were centainly\nnot invited here to come down and express personal opinions about\nbig fellows, and I know how smart they are, and I know the people\nMr. Wallace.\nwho come to the R. F. C. to get money are not all entitled to it, and\nSenator PEPPER. That is the first thing the witness did when he\nyet they are awfully smart. Men come to us drawing $100,000 a year\nstarted his testimony this afternoon, and that is a matter to which\nsalary, maybe, and they talk to our boys who are getting $6,000 or\nthe witness returned when I asked him the previous question.\n$7,000 or $8,000, and they do not run away with anything. You know,\nThe CHAIRMAN. I submit it to Mr. Jones. If you wish to appeal\nwe are the sugar and there is where the flies are. Where the money\nfrom it, you can have an appeal. I am telling you I do not want to\nis, that is where the moochers are, and the moochers have not all\ngo into the subject of personal comparisons between Mr. Jones and\nbeen in W. P. A.: they are in business. Men come to us for money\nMr. Wallace. We have not sent for Mr. Jones for that purpose.\nwho are not entitled to it. and yet they put up a plausible tale, and\nSenator PEPPER. He has made the statement repeatedly throughout\nunless a man is experienced in business he is liable to make a lot of\nthe hearing that he did not regard Mr. Wallace as qualified, and we\nmistakes. I do not mean by that that we have been rigid in our credit.\nare entitled to know the basis upon which Mr. Jones makes that state-\nWe have not been. We have made 10 times more loans than the\nment. If he has got any facts to base his opinion on, or possibly a\nSmaller War Plants Corporation. We are making them every day.\nand have been making them every day, so you cannot accuse us. you\nprejudice, we ought to know it.\nSecretary JONES. A lack of experience, and there is no prejudice.\ncannot accuse the R. F. C., of being rigid in its credit. We have offices\nSenator PEPPER. That is what we are entitled to know.\nall over the country: we have borrowed help. We have a small or-\nSecretary JONES. Well, I have said that.\nganization, but where we have an agency we have an advisory com-\nSenator PETTER. Well, now, what are the experiences that show his\nmittee of local businessmen to help pass on the loans, We get that\ninability to administer the duties of this office, in your opinion?\nfor nothing. The men are good enough. and have been for 13 years,\nSecretary JONES. I said the lack of experience.\nto sit in with the boys and help the boys and give them their advice,\nSenator PEPPER. Very well. Will you tell us what the experiences\nand that is the reason we have been able to operate cheaply.\nare, so we can let him have a chance to answer?\nSenator PEPPER. Mr. Secretary, I want you to observe, and the\nSecretary JONES. I do not care to get into an argument with you\nchairman also, that I reframed my question. and I am asking you\nabout it I am not going to do it. it is not necessary.\nwhether, out of your experience, one man could properly hold the\nSenator PEPPER. Mr. Jones, the easiest thing in the world, to my\noffice of Federal Loan Administrator and Secretary of Commerce,\nmind, is to provoke an argument. It is the principle of American\nand it was you who diverted from the question in your response.\nSecretary JONES. What?\njurisprudence when a man is attacked he has an opportunity to answer\nthe attack. You have come here this afternoon and the whole purport\nSenator PEPPER. It was you who diverted in your answer from\nof your testimony has been to attack Mr. Wallace as unqualified by lack\nthe question. You made a statement as to your opinion about Mr.\nof experience, as being incompetent, and then being a sort of a dreamer\nWallace, and a comparison between your ability as a businessman\nwho, to use your language, wants to remake the world. If you think\nto administer the duties of those offices, and at least by innuendo, his\nhe has got any ideas of dangerous experimentation, as you implied,\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n57\n56\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nCOMMERCE DEPARTMENT,\nI think you used that word, that might endanger the economy of the\nWashington, January 25, 1945.\ncountry, we would profit very much if you would give us the experi-\nHon. JOSIAH W. BAILEY,\nmentation to which you refer and let the committee have the factual\nChairman, Commerce Committee,\ndata which you desire to disclose to us.\nSenate Office Building, Washington, D. C.\nSecretary JONES. Senator, if you don't say so much I can probably\nDEAR SENATOR: I am attaching a break-down of our Industrial loans and a copy\nof an article on the aid Reconstruction Finance Corporation has given to small\nunderstand you. I cannot understand what you are talking about.\nbusiness, which apepared in the Sunday Star.\nI am willing to answer your questions.\nIt would be appreciated if both of these could be made a part of the record.\nSenator PEPPER. You said he was incompetent.\nSincerely,\nSecretary JONES. I did not say he was incompetent. You are put-\nJESSE H. JONES.\nting words in my mouth here. Stick to the text.\nSize of all logns and commitments authorized to business enterprises by the\nSenator PEPPER. You referred, in your original statement, to the\nReconstruction Finance Corporation through Dec. 31, 1944\ndanger to the country of turning over this agency to someone who\n[Excludes loans and commitments to subsidiaries of Reconstruction Finance Corporation, defense homes\nwould conduct dangerous experimentations in that office, or to some-\nand Great Britain)\none who might want to remake the world, from which statement you\ndrew a response from the audience. Now, I will confine it to those\nNumber\nPercent\ntwo things. Have you any quotations, have you any official acts on the\n$5,000 and under\n6,952\n31.6\npart of Mr. Wallace, which you disclose to the committee, as a basis\n$5,001 to $10,000\n3,414\n15.5\nfor those opinions?\n$10,001 to $25,000\n4,552\n20.7\n$25,001 to $50,000\n2,761\n12.5\nThe CHAIRMAN. Mr. Jones, just a minute. The confirmation of\n$50,001 to $100,000\n2,121\n9.6\n$100,001 to $200,000\n1,034\n4.7\nMr. Wallace is not before the committee at the present time, and if\n$200,001 to $500,000\n697\n3.2\n218\n1.0\nwe wish to hear from you on his qualifications or he wishes to defend,\n$500,001 to $1,000,000\nOver $1,000,000\n259\n1.2\naccording to the rules of American jurisprudence, he will come here\nTotal\n22,008\n100.0\nand defend in the presence of a lawyer of his own selection, so you\ndo not have to answer the question.\nSecretary JONES. I did not know the purpose of the question, Sen-\nSize of loans and commitments authorized to business enterprises for defense\nator.\nby the Reconstruction Finance Corporation through Dec. 31, 1944\nThe CHAIRMAN, The witness does not need to answer the question.\nNumber\nPercent\nSenator PEPPER. I think it is pertinent to the inquiry.\nThe CHAIRMAN. No; it is not even pertinent to the inquiry.\nA. ON RATIONED COMMODITIES (INCLUDING PURCHASES)\nSenator PEPPER, Upon that statement by the chairman and the\n$5,000 and under\n1,411\n38.5\nwitness, there is nothing to do except desist.\n622\n17.0\n$5,001 to $10,000\nSecretary JONES. I will try to answer your questions.\n796\n21.7\n$10,001 to $25,000\n449\n12.2\nSenator BREWSTER. Mr. Jones-Mr. Secretary, the Senator from\n$25,001 to $50,000\n271\n7.4\n$50,001 to $100,000\n8\n27\nFlorida inquired about the record of all these other men, but for the\n$100,001 to $200,000\n16\n.4\n$200,001 to $500,000\n3\n.1\npurpose of the historical record. and we want to be familiar with all\n$500,001 to $1,000,000\nOver $1,000,000\nof this, I would like to ask that you put in the record, for future ref-\nTotal\n3,667\n100.0\nerence, your own record of business experience prior to your taking\nover those responsibilities. I think that should be in the record.\nn. ALL OTHER-FOR DEFENSE\n1,594\n21.1\n$5,000 and under\nSecretary JONES. I will be glad to do that. The trouble is it goes\n$5,001 to $10,000\n1,077\n14.3\n$10,001 to $25,000\n1,655\n221\ntoo far back, Senator.\n$25,001 to $50,000\n1,009\n14.2\n974\n129\nThe CHAIRMAN, Now, if there is nothing more, it is time to adjourn.\n$50,001 to $100,000\n472\n6.2\n$100,001 to $200,000\nWe will adjourn until tomorrow morning at 10:30, and I will state\n358\n4.7\n$200,001 to $500,000\n144\n1.9\nthat Mr. Wallace need not come down here to testify to his qualifica-\n$500,001 to $1,000,000\n195\n2.6\nOver $1,000,000\ntions. I am sure he is going to come down here to testify about this\n7,549\n100.0\nTotal\nlegislation. I have not heard from him, but I expect he will be here,\nc. GRAND TOTAL-DEFENSE\nand We will go to work, if he comes down, at 10:30 in the morning.\n$5,000 and under\n3,005\n25.8\n1,699\n15.2\n(The following was submitted for the record:)\n$5,001 to $10,000\n2,461\n21.9\n$10,001 to $25,000\n1,518\n13.5\n$25,001 to $50,000\n1,245\n11.1\n$50,001 to $100,000\n571\n5.1\n$100,001 to $200,000\n374\n3.3\n$200,001 to $500,000\n147\n1.3\n$500,001 to $1,000,000\n196\n1.8\nOver $1,000,000\nTotal\n11,216\n100.0\nRegraded Unclassified\n58\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n59\nBize of loans and commitments authorized to business enterprises except for\nJuly 15, 1943, this Corporation was by Executive Order No. 9361, transferred to\ndefense by the Reconstruction Finance Corporation through Dec. 31, 1944\nthe Office of Economic Warfare, now the Foreign Economic Administration, and\nnow handles all natural-rubber procurement in foreign countries.\nNumber\nPercent\nFrom time to time, by Executive order, the President has placed the responsi-\nbility for determining the production or procurement necessary for war purposes\n$5,000 and under\n3,047\nin agencies other than the Reconstruction Finance Corporation. Consequently,\n36.6\n$5,001 to $10,000\n1,715\n15.9\nthe construction of the Reconstruction Finance Corporation war plants and\n$10,001 to $25,000\n2,091\n19.4\nprojects and the production and procurement of materials have been at the request\n$25,001 to $50,000\n1,243\n11.5\n876\nof other departments charged with the procurement and production of war\n$50,001 to $100,000\n8.1\n$100,001 to $200,000\n463\n4.3\nmatériel.\n$200,001 to $500,000\n323\n3.0\nAuthorizations by these subsidiary corporations, together with the Reconstrue-\n$500,001 to $1,000,000\n71\n.6\ntion Finance Corporation direct commitments for war purposes of approximately\nOver $1,000,000\n63\n.6\n$2,600,000,000, have amounted in round numbers to $32,300,000,000. Disburse-\nTotal\n10.792\n100.0\nments have been in excess of $18,000,000,000. Repayments of loans and advances,\ncollections of rentals and part payments on plants and equipment, and proceeds\nof sales of materials, etc., have been approximately $9,100,000,000. The disburse-\n[Released for morning papers for Thursday, January 18, 1945]\nment figure includés $1,400,000,000 for direct subsidy payments, under section\nCOMMERCE DEPARTMENT,\n2 (e) of the Emergency Price Control Act of 1942, as amended, to increase or\nWashington, January 15, 1945.\nmaintain production of materials defined by the President to be strategic or criti-\ncal, but this latter figure does not Include losses arising from the purchase and\nTo the President and the Congress, reporting on the war activities of the Recon-\nsale of such materials.\nstruction Finance Corporation and its subsidiaries:\nWe have built plants, shipyards, plpe lines, etc., bought and sold equipment and\nJune 25, 1940, the President signed Public Law 664, Seventy-sixth Congress,\nmaterials, paid subsidies, etc., at the request of the War, Navy, and State Depart-\nwhich, among other things, authorized the Reconstruction Finance Corporation,\nments, the Maritime Commission, War Production Board, and Its predecessors,\nacting through certain subsidiary cohporations to be created by it, for purpose\nSupply Priorities and Allocations Board and Office of Production Management,\nof national defense, to build and operate plants and facilities for the manufacture\nthe Office of the Rubber Director, the Petroleum Administration for War. Solld\nof matériel, and to procure supplies, equipment, etc., and to buy materials\nFuels Administration for War, the Office of Defense Transportation, Office of\ndeclared by the President to be strategie and critical. The act provided that\nPrice Administration, War Food Administration. Board of Economic Warfare,\nactivities of the Reconstruction Finance Corporation under this authority should\nForeign Economic Administration, Office of Economic Stabilization, Office of War\nbe undertaken at the request of the Federal Loan Administrator and with the\nMobilization, and the Office of War Mobilization and Reconversion.\napproval of the President.\nAll these vast operations, which have been vital to our national defense and\nFebruary 24. 1942. by Executive Order No. 9071. the functions, powers, and\nthe prosecution of the war, could only have been accomplished by the prompt\nduties of the Federal Loan Agency and of the Federal Loan Administrator were\nand unfalling cooperation which the Reconstruction Finance Corporation and its\ntransferred to the Department of Commerce to be administered under the diree-\nsubsidiaries have given other Government agencies responsible for war produe-\ntion and supervision of the Secretary of Commerce.\ntion and procurement.\nJune 25, 1940, 3 days after the act was signed, Rubber Reserve Company and\nA summary of these operations is attached.\nMetals Reserve Company were created by the Reconstruction Finance Corpora-\nJESSE H. JONES, Secretary of Commerce.\ntion primarily for the purpose of buying a stock pile of rubber, tin, and other\nmaterials Later, Rubber Reserve Company established and is operating the\nRUBBER RESERVE COMPANY\nsynthetic rubber program.\nAugust 22, 1940, Defense Plant Corporation was created by the Reconstruction\nRubber Reserve Company's production of synthetic rubber has been approxi-\nFinance Corporaton primarily to build and operate plants and facilities for the\nmately 1,000,000 long tons, 737,000 tons of which were manufactured in 1944.\nproduction of war matériel, and to do other things, for our national defense.\nIn addition to Government plants, private Industry produced 26.000 long tons\nAugust 20, 19-0, Defense Supplies Corporation was created by the Reconstrue-\nin 1944. Our synthetic rubber plants are capable of producing at least 1,000,000\ntion Finance Corporation to purchase and stock pile strategie and critical mate-\nlong tons of synthetic rubber a year, if necessary. Forty-seven chemical, petro-\nrials other than rubber. minerals, and metals, and to do other things necessary\nleum, rubber, and industrial companies are operating the plants for account of\nto the production and procurement of essential materials.\nRubber Reserve Company.\nDecember 13, 1941, 6 days after Pearl Harbor, the Reconstruction Finance\nSome small plants for the production of synthetic rubber were first authorized\nCorporation, at my request and with the approval of the President, created War\nearly In 1941. Immediately after Penrl Harbor the program was increased to-\nDamage Corporation to provide reasonable protection against loss of or damage\nan annual eapacity in excess of 400.000 tons, and after the fall of Singapore, was\nto property resulting from enemy attack, including action taken by the military.\nfurther increased to its present capacity. The Rubber Director made relatively\nnaval, or air forces of the United States in resisting enemy attack.\nfew changes in the program which had been developed and authorized by Rubber\nMarch 26, 1942, United States Commercial Company was created by the Recon-\nReserve Company prior to the appointment of the Rubber Survey Committee in\nstruction Finance Corporation primarily to buy in the foreign markets strategic\nAugust 1942.\nand critical materials that we needed in the war effort, as well as to prevent the\nThe development of this vital new industry in the emergency is a credit to the\nAxis Powers from obtaining them. July 15, 1943, the operations of this Company\nIngenuity and enterprise of American business.\nwere, by Executive Order No. 1061, transferred to the Office of Economic Warfare,\nIn addition to the production of synthetic rubber, the plants have produced\nnow the Foreign Economic Administration\nmore than 25,000.000 gallons of ethylbenzene and approximately 4,000,000 gallons\nJune 31. 1943, Petrolegm Reserves Corporation was created by the Reconstrue-\nof cumene used In the manufacture of aviation gasoline.\ntion Finance Corporation for the purpose of acquiring reserves of crude petroleum\nIncluding the rubber trade, rubber Importations since early 1940 to the present\nfrom sources outside the United States, July 15, 1943, the operations of this\ntime have been more than 2,280,000 long tons. Rubber Reserve Company's Im-\nCorporation were, by Executive Order No. 9361, transferred to the Office of\nportations of natural rubber, Including 83,000 tons bought from Commodity\nEconomic Warfare. now the Foreign Economic Administration.\nCredit Corporation, have been 930,000 long tons, 116,000 tons of which were\nFebruary 1943, at the request of the Rubber Director, we separated the\nreceived in 1944.\ndevelopment and procurement of natural rubber In this hemisphere from Rubber\nFrom June 1942 to January 1, 1944, Rubber Reserve Company was the sole\nbuyer and seller of scrap rubber. In that period It purchased a little more than\nReserve Company and carried on that operation through Rubber Development\nCorporation, another subsidiary of the Reconstruction Finance Corporation.\n1,100,000 short tons, 920,000 tons of which have been sold.\nRegraded Unclassified\n60\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n61\nWe have Invested something over $700,000,000 In plants and faellities for the\nNinety-seven for aluminum facilities In the amount of $812,000.000.\nmanufacture of synthetic rubber.\nNinety-two for ordnance facilities in the amount of $356,000,000.\nPrior to the war, natural rubber was costing from 18 to 20 cents a pound.\nFifty-seven for synthetle-rubber manufacturing facilities in the amount\nSynthetic rubber is being produced In some of our plants at less than these\nof $715,000,000.\nfigures, and some In the Industry feel that synthetic can be produced in competi-\ntion with natural rubber. Our cost for 1944. exclusive of plant amortization,\nFifty for other rubber-manufacturing faellities necessary in the war effort\nin the amount of $115 000,000.\nwas approximately 38 cents a pound, due to the fact that more than 60 percent\nFifty-two for magnesium facilities in the amount of $453,000,000.\nof the rubber was made from high-priced alcohol Instead of petroleum.\nThirty-eight for aviation gasoline facilities In the amount of $245,000,000.\nSix for pipe lines in the amount of $189,000.000.\nMETALS RESERVE COMPANY\nTwo hundred and forty-seven plants aggregating $3,100,000,000 are leased to\nThe Reconstruction Finance Corporation, through Metals Reserve Company\noperators at an annual rental of $1 a year. In these plants no charge Is made\nhas made total commitments for the purchase of strategic and critical minerals\nto the Government procurement agency for plants or plant facilities in the supply\nand metals aggregating $5,174,000,000. Of this amount $2,150,000,000 has been\ncontracts. In the remaining 1,858 projects, in the amount of $4,900,000,000,\ndisbursed, and $2,149,000,000 canceled or assigned to industry or the Foreign\nrentals have been collected aggregating $422,000,000.\nEconomic Administration.\nThe plants and projects are located In 46 States, and ench was undertaken\nSales of these materials have been principally to industries engaged in war\nat the request of the War or Navy Department, Maritime Commission, War\nproduction, and have amounted to $1,313,000,000.\nProduction Board, or other agency having responsibility for the procurement\nStock piles on hand cost $538,600,000, and, in addition, the Company has assets\nof war matériel.\nlargely in the nature of advances to contractors, other receivables, and mining\nRecently a number of facilities that had finished their war work were trans-\nequipment and supplies in the amount of $67,800,000.\nferred to new operators for other emergency war production.\nLosses through sale of materials within Office of Price Administration celling\nThe distribution of plants and projects by States follows:\nprices have been $26,500,000. A great many of the materials have been bought\nat more than celling prices.\nPlants and\nPlants and\nLosses through subsidizing domestic production of copper, lead, and zine from\nState\nCommitment\nState\nCommitment\nprojects\nprojects\nmarginal mines have aggregated $162,800,000. Premium payments under this\nsubsidy have been made In connection with the production of 3,493 separate mines,\nPurchases have covered 50 different critical materials, and have come from 51\nAlabama\n16\n$73,733,000\nNevada\n5\n$150,259.000\n2,121,000\nArizona\n16\n98,402,000\nNew Hampshire\n3\nforeign countries, 38 States in the United States, Alaska, and the Philippines.\nArkanss*\n12\n88,853,000\nNew Jersey\n132\n258,337,000\nPurchases were begun in 1940, well before Pearl Harbor, and have continued\nCalifornia\n120\n323,206,000\nNew Meríco\n4\n5,208,000\nthroughout the war.\nColorado\n5\n6,535,000\nNew York\n106\n577,542,000\nConnectient\n=\n152,850,000\nNorth Carolina\n9\n13.420,000\nThe objectives of Metals Reserve Company have been the purchase and produc-\n778,515,000\nDelaware\n7\n3,383,000\nOhio\n232\nDistrict of Columbia\n3\n4,850,000\nOklahoma\n20\n46.985,000\ntion of metals and minerals for use in our national defense, and in prosecution\nof the war.\nFlorida\n14\n16,008.000\nOregon\nK\n13,019,010\nGeorgia\n=\n4,279.000\nPennsylvania\n172\n581,663,000\nFigures in the foregoing summary are substantially as of December 31, 1944.\nIdabo\n1\n225,000\nRhode Island\n13\n6,937.000\nIllinois\n132\n695,679,000\nSouth Carolina\n11\n8,050,000\nDEFENSE PLANT CORPORATION\nIndiana\nSt\n507,485,000\nTennessee\n23\n47.545,000\nTowa\n20\n14.999,000\nTexas\n92\n647,080,000\nKansas\n10\n44,544.000\nUtah\n18\n248,601.000\nThe Reconstruction Finance Corporation, through Defense Plant Corporation,\nKentucky\n56\n161,432,000\nVermont\n6\n4,126,000\n16.553,000\nhas made commitments for war plants, facilities, and machine tools aggregating\nLouisiana\n27\n232.810,000\nVirginia\n10\nMaine\n2\n352,000\nWashington\n30\n149,058,000\ndisbursed. $10.704,935,000. Of this total $757,656,000 has been canceled and $7,177,700,000\nMaryland\n42\n72.508,000\nWest Virginia\n12\n93,093,000\nMassachusetts\n71\n94,901,000\nWisconsin\n56\n171,463,000\nThe total figure includes pool order commitments for machine tools aggre-\nMichigan\n209\n809,000,000\nWyoming\n4\n12,809,000\nMinnesota\n27\n29,376,000\nFacilities\nin\nmore\ngating $1,985,000,000. These orders are issued to insure the machine-tool mano-\nMississippi.\n5\n1,620,000\nthan I State: Pipo\nfacturer a market for his product and, as the tools are sold by the manufacturer,\nMissouri\n32\n161,808,000\nlines. etc.\n60\n398,208,000\nour obligation ceases.\nMontana\n3\n12,478,000\nNebraska\n6\n28,125,000\nTotal\n2,098\n7,939,465,000\nWe have only been required to buy tools under these orders aggregating\n$4,912,000, and our outstanding commitments at this time are only $33,271,000.\nHowever, we have an informal request now from War Production Board to issue\nCommitments for facilities to produce critical and strategic materials in\nnew pool orders in a substantial amount, to be handled In the same manner.\nforeign countries have aggregated $42,714,850. They \"Includa the production\nIn addition to the pool orders, machine tools have been supplied to 1,007 con-\nof copper in Chile, nickel in Cuba, vanadium concentrates in Peru, peat in\ntractors in the amount of $1,087,000,000, the contractors paying a fixed rental.\nCanada, fluorspar in Newfoundland, and balsa wood In Ecuador.\nTotal commitments include 920 complete, integrated plants wholly owned by\nThe figures throughout are substantially as of December 31. 1944.\nDefense Plant Corporation, In the amount of $6.055.000,000; and the expansion\nof 122 existing privately owned plants in the amount of $740,000,000. These\nDEFENSE SUPPLIES CORPORATION\n-\nexpansions are wholly owned by Defense Plant Corporation and are located on\nland owned by it or held under long-term lease.\nThe Reconstruction Finance Corporation, through Defense Supplies Corpora-\nThe over-all commitments include-\ntion, had authorized total expenditures In the war effort aggregating $10,350,-\n000 000, of which $800,000,000 has been canceled or assumed by private Industry.\n$3,100,000,000. Five hundred and seventy-four for aircraft facilities in the amount of\nThe Corporation's operations include the purchase of strategic and critical\nmaterials, the payment of extraordinary transportation costs on oil, coal, and\nOne hundred and eighty-three for steel and pig-iron facilities in the amount\nof $1,023,000,000.\nsugar, loans and advances to contractors in connection with the purchase of\nmaterials, the payment of subsidies and other activities made necessary by\n$119,000,000. One hundred and sixty-one for chemical facilities in the amount of\nthe war. Disbursements for such purposes have been $5,200,000,000. Receipts\nfrom the sale of materials, repayments of loans and advances, et cetera, have\n$80,000,000. One hundred and fifty-six for machine-toot facilities in the amount of\ntotaled $3,600,000,000.\n1\n62\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n63\nThe operation includes, but is not limited to, commitments for the following\nWar Damage Corporation has utilized in Its operations the facilities of 546\npurchases:\nfire-Insurance companies and 88 casualty-insurance companies, their branch offices,\nAviation gasoline\n$2,976,000,000 $2,\nand their agency forces.\nAlcohol\n802,400,000\nThe Corporation's maximum Insurance liability has been $140,000,000,000, In-\nSugar and molasses\n355,200,000\ncluding $3,500,000,000 on money and securities. It has collected $223,987,000 net\nBurlap\n206,500,000\nFibers\n20,000.000\npremiums. The Corporation has paid $323,800 for losses resulting from cnemy action\nWool\n120,700,000\noccurring prior to July 1, 1912. No premiums were charged prior to July 1, 1942.\nTires and tubes\n83,€00,000\nMarch 31, 1944, War Damage Corporation announced that all war-damage\nNitrate of soda\n40,300,000\nInsurance policies in force on that date would be automatically extended for an\nBenzol\n31,200,000\nadditional term of 12 months beginning with the respective dates of expiration,\nSilk\n27,700,000\nwithout the payment of any additional premiums.\nCalcium carbide\n28,200,000\nThe facilities of the Corporation continue to be available for Issuance of new\nCotton fabries\n24,300,000\npolicies. Reserves on hand from the collection of premiums should be sufficient\nShellne\n23,000,000\nto cover all damages except those in the Philippines.\nand a great many other items.\nUNITED STATES COMMERCIAL COMPANY\nAvintion gasoline is resold to the War and Navy Departments. The aleohol\nis used principally for the manufacture of synthetle rubber, and the molasses is\nThe Executive order which transferred United States Commercial Company to\nconverted Into alcohol for this use, Substantially all purchases are resold for\nthe Foreign Economic Administration provided that Reconstruction Finance\nuse in the manufacture of war material.\nCorporation should furnish the funds necessary In Its operations.\nThe principal subsidies are on ment, butter, flour, erude oil from stripper\nThe Reconstruction Finance Corporation has authorized loans to United\nwells, aluminum rod and bar, wood pulp, and extraordinary transportation costs.\nStates Commercial aggregating $1,000,000,000 of which $835,000,000 has been\nSubsidy payments through December 31, 1944, on meat were approximately\ndisbursed. Repayments total $323,700,000.\n$053,000.000: on butter $117,000,000; and on flour $88,100 000. Subsidy pay-\nments on the production of crude oll from stripper wells only began August 1,\nPETROLEUM RESERVES CORPORATION\n1941, and total payments through December 31, 1944, are approximately\n$11,300,00. However, all claims have not been paid.\nThe Executive order which transferred Petroleum Reserves Corporation to\nPayment of extraordinary transportation costs includes the movement of\nthe Foreign Economic Administration provided that Reconstruction Finance\npetroleum and petroleum products from the midwestern and the southwestern\nCorporation should furnish the funds necessary in Its operations.\nsections of the United States to the eastern seaboard at a net cost of $297,400,000;\nThe Reconstruction Finance Corporation bas authorized loans to Petroleum\nthe movement af erude oil from Texas and Louisiana to midwestern refineries at\nReserves Corporation in the amount of $1,000,000, and made a further condi-\na net cost of $4,000,000; the transportation of coal by rail to the New York and\ntional commitment of $30,000,000.\nNew England area at an approximate cost of $39,400,000; and the transporta-\nOf the loans authorized, $100.000 has been disbursed, and the balance of all\ntion of sugar from the western section of the United States to the eastern sea-\nloan authorizations and commitments to Petroleum Reserves Corporation have\nboard at an approximate cost of $25,000,000.\nbeen canceled or deferred.\nLoans and advances have been made principally in connection with the con-\nstruction of facilities for the production of 100-octane aviation gasoline. The\nRUBBER DEVELOPMENT CORPORATION\nCorporation has disbursed on loans and advances for this purpose $190,400,000.\nRepayments have aggregated $84,400,000.\nThe Executive order which transferred Rubber Development Corporation to\nIn addition, the Corporation in September 1941 agreed to purchase materials\nthe Foreign Economic Administration provided that Reconstruction Finance\nfrom the Soviet Union aggregating $100,000,000, and advanced $49,700,000 against\nCorporation should furnish the funds necessary In its operations.\nThe Reconstruction Finance Corporation has authorized loans to Rubber\nthe future delivery of such materials, To date the Soviet Union has delivered\nmaterials on this contract to the value of $25,200,000 as payment on the advances.\nDevelopment Corporation aggregating $150,000,000 of which $130,400,000 has\nbeen disbursed. Repayments from the sule of rubber to Rubber Reserve Company\nTo enable the Army Exchange Service to establish post exchanges speedily in\nall locations where troops were sent, the Corporation authorized loans aggre-\nhave been $76,800,000.\ngating $91,000,000 against which disbursements were made in the total amount\nof $71,153,000. All of these advances have been repaid from operations of the\n[From the Sunday Star, January 7, 1945]\npost exchanges.\nOther activities of the Corporation Include the elimination of Axis control of\nTHE RECONSTRUCTION FINANCE CORPORATION GIVES AID TO LITTLE BUSINESS\nLatin-American airlines and bringing citizens of other American republics to the\nSEEKS TO REVERSE MORTALITY TREND RESULTING FROM WAR\nUnited States for training as aviation pilots and technicians,\nAn important activity Is the operation of the various Government-owned plpe\n(By Jesse H. Jones)\nlines for the transportation of petroleum and petroleum products. The Cor-\nporation has expended $438,200,000 for the purchase of petroleum and petroleum\nLittle business operates on the commercial frontier of the United States.\nations of the lines have totaled $505,700.000\nproducts and in operating the lines. Receipts from the sale of the olls and oper-\nIn that field lle the risks and adventure, but also the hopes and profits of Indi-\nvidual initiative.\nThe pipe lines are being operated for account of Defense Supplies Corpora-\nThe forces arrayed against little business are not those the early settlers faced\ntion, and at very substantial profits.\nas they moved West, but they are no less real. Competition, depressions, and\nThe figures In the foregoing are substantially as of December 31, 1944.\nwars create many hurdles for little business, frequently too many for the man\nor woman imbued with the Inudnble desire to be his or her own boss.\nWAR DAMAGE CORPORATION\nBecause the impact of war Imposes the most severe strain little business has\nhad to face, its problems and how little business can best be encouraged and\nThe War Damage Corporation has issued over 6,500,000 Insurance policies\nprotected In our day of mass production and distribution are of great concern.\nand 2,200,000 renewals against loss resulting from enemy attack or action of\nAmerican forces in resisting enemy attack.\n64\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n065\nEARLY WAR MORTALITY man\nbank. After all, money lending is much like Insurance. Rates can be adjusted to\nfit the approximate risk.\nWhen the United States first entered World War II, and for many months\nFew, If any, private Institutions, which skim the cream off the loan field, have a\nthereafter, the mortality rate among little businesses was high. There are many\nbetter record and few have worked as hard as the Reconstruction Finance Corpo-\nfailures in this category during more normal years, but, over a long period of\nration to make such loans. This is demonstrated by the fact that In hundreds of\ntime, new ventures have exceeded those which have found the going too rough.\ncases, after Reconstruction Finance Corporation examiners and officials have\nAfter we became involved in the war, this trend was reversed. The establish-\nreset the financial structure of some small business, local bankers have decided\nment of new businesses failed to equal those which closed their doors, and be-\nthat the loan which they had turned down, because of the risk, was really a loan\ntween 1939 through 1943 the net decline in the number of business establish-\nthat the bank should make.\nments-large and small-totaled 536,400, an average of more than 1,100 in each\nBOOM FOR SMALL PLANT\nof the 48 States.\nAt the present time, the decline appears to have been checked and the num-\nThere has always been romance in American business, and there has been\nber of little businesses in operation is remaining faily constant. The year 1944\nplenty of It In the record of Reconstruction Finance Corporation loans to business.\nmay even show a slight Increase. We are at the point from which we must go\nConsider the small machine shop in Miami with n book value of $32,280, which,\nforward if small business enterprises are to survive.\nbefore the war, made fishing tackle. Its biggest year, 1940, resulted in sales\nWe in the Department of Commerce and the Reconstruction Finance Corpo-\nof $40,000.\nration have not only had actual private experience in little business, but a great\nWith the outbreak of the war, the proprietors conceived the Idea of using their\ndeal of experience in the relationship between Government and little business.\nequipment for the manufacture of aircraft parts.\nThe personnel of the Reconstruction Inance Corporation, including Its directors\nOn August 8, 1941, the Reconstruction Finance Corporation made a loan of\nand other executives, have spent their entire lives in business-small business.\n$20,000 to provide working capital for the first contract. An addditional $25,000\nExecutives and experts in the Department of Commerce are also experienced in\nwas authorized in November of that year and. by April of 1942, contracts which\nsmall business.\nthe company had obtained justified a loan of $600,000.\nNO EXACT FORMULA\nTo date, the loans which have been authorized to this little company aggregate\n$8,463,000 and only $568.000 is outstanding as unpaid.\nWe know little business, Its problems and its difficulties. There is no exact\nOr consider, If you will, the $7,500 loan made In 1938 to a man and his wife\nformula for defining little business.\nwho were in the grocery business In Washington. At the time the money was\nThe man who operates a shoeshine stand. an independent drug store or corner\nadvanced, their profits were not sufficient to meet the payments on their store\ngrocery is certainly a little businessman, but there are little businessmen in the\nsteel Industry, In the field of antomobile manufacturing, In the production of\nfixtures. Today. they owe the Reconstruction Finance Corporation only a few dollars.\ntobacco products, the operation of hotels, restaurants, radio stations, and many\nTheir life savings have been protected and they, themselves, with several helpers,\nother lines.\nhave been kept at work.\nSuppose we say that any business which needs financing up to $100,000 is\nOut in Spokane, Wash., a loan, amounting to only $2,800, assisted H. woman\nregarded a small business and for the purpose of this discussion, that figure is\nIn establishing a small drug store In 1939. She has been kept in business and\nprobably as accurate a measure as we can arrive at.\nher loan has been substantially repaid.\nThe Reconstruction Finance Corporation has made more than 19,500 individual\nloans in this category, but if $100,000 strikes you as being a lot of money. the\nAID FOR TELEPHONE COMPANY\nReconstruction Finance Corporation has made approximately 7,000 loans under\n$5,000, 3,400 loans between $5,000 and $10,000, and 4,700 loans between $10,000 and\nThe residents of Whiteville, N. C., are dependent upon a small Independent\n$25,000.\ntelephone company for service. The financial pleture of this company in June,\nIt bas actually disbursed $1.008.675,948 to business institutions in the 10 years\n1938, was discouraging. The Reconstruction Finance Corporation authorized a\nIn which it has possessed the authority to make business loans. It has made\nloan of $12,500, which made possible expansion of service. The company has\nmore than 22,000 such loans-some in every State of the Union. The fact that we\nshown a very much improved earnings record and the loan has been almost\nhave made and offered to make business loans, both directly and in cooperation\nentirely repaid.\nwith banks, has made credit available to thousands of independent businesses on\nA woman In Demopolis, Aln., needed assistance in 1939 for the Installation of\nterms that they could hope to meet-and usually do meet-loans on terms that\ncold storage locker plant. The Reconstruction Finance Corporation advanced\nbanks have heretofore, for one reason or another, been reluctant to make. This\na her $7,000. The plant has been successfully operated and the proprietor has\nreluctance was due in some cases to banking laws or customs against long-time\nhad no d'fficulty in meeting her payments.\nloans and many times because the loan did not appear to be a risk that the bank\nOut In Helena, Mont., a small oil and gas company needed funds to save Its\ncould take.\nbusiness. The Reconstruction Finance Corporation made $25,000 available to\nMANY SAVED FROM FAILURE\nIt in 1943 and Its business was saved.\nAt Newborn, Ga., a man was making wooden slat blinds In 1938 when he was\nThese figures and facts demonstrate that the Reconstruction Finance Corpora-\nfaced with disaster for Inck of working capital. The Reconstruction Finance\ntion has appreciated the importance of little business to our economy and has\nCorporation made a $1,600 loan, which had not been entirely repaid when the\nbeen active in making credit available for it. Our experience in making these\nwar forced a discontinuance of the business.\nloans has demonstrated that with proper attention, encouragement, and advice\nThe borrower did not give up. He is making his repayments from wages as\nmany small businesses that otherwise would have failed have survived.\na machinist in a war plunt and expects to reopen his shade business after the war.\nThe Reconstruction Finance Corporation has not competed with private lending\nFittstown, Okla., is supplied with electric power by a small local company.\ninstitutions, but has cooperated with them. It has made many loans that the\nbanks did not feel Justified In making and has taken participations in 5,000 loans\nFISH COMPANY SAVED\nmade by banks, the Reconstruction Finance Corporation's participation running\nas high as 90 percent of the loan, the bank making and servicing the loan. The\nIn December 1941 the Reconstruction Finance Corporation made a loan of\nReconstruction Finance Corporation's experience in making industrial loans has\n$15,000 to it to pay a mortgage. install new facllities, and provide working capital.\nclearly shown that, had the banks been energetie enough and taken the tronble\nThe loan put the company in good shape and enabled it to provide additional\nto make the loans and nurse some of them, they could all have been made. This\nbadly needed facilities. The company is succeeding.\nis proven by the fact that the Reconstruction Finance Corporation's losses on\nIn Nanticoke, Md., there is a small fishing company that has been in business\nsuch loans have averaged less than 1 percent. This percentage of loss can be\nsince 1917.\ntaken from a reasonable rate of Interest and still leave a proper profit for the\n66\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n67\nIt found the going rough in 1942 and obtained a $1,900 loan from the Recon-\nMuch emphasts In post-war discussions has been placed on our increased\nstruction Finance Corporation.\nproductive power and it is certainly the keystone of future prosperity, but If\nIt needed $275 more in May 1943, which It got.\nThe company has been able to stay in business, thereby providing employment\nthe products of our mills and factories lack free and full outlets to the consumer,\nwe will have created a dangerous bottleneck. Little business will have to sup-\nand badly needed food products.\nWe are inclined to think of shipbuilding In terms of such companies as those\nply the channels through which goods and services move.\noperated by Henry Kaiser, Todd Shipbuilding Co., Newport News Ship, Bethle-\nWhat can Government do, in addition to seeing that credit is available to\nlittle business to aid In this situation?\nhem, Cramps, and New York Shipbuilding-all of which are tremendous\nIt can and should provide operating and management counsel and advice.\noperations.\nThe high mortality rate in the field of little business over the years proves\nBut we in the Reconstruction Finance Corporation have knowledge of others.\nthat this is true. Too many men and women attempt to set themselves up in\nTake, as an example, the small shipbuilding and repair yard in Seattle, which\nbusiness with no experience and scant knowledge.\nneeded to install additional facilities to participate in the war effort.\nToo many people, unfortunately, have believed that possession of a little\nThe Reconstruction Finance Corporation, in August 1941, took a 70 percent\ncapital, some energy, and a great deal of ambition provided sufficient equip-\nparticipation In a loan of $150,000 made by a local bank, the bank taking the\nment for entry into the small-business field.\nother 30 percent and servicing the loan.\nGREATER AID IS URGED\nTERMS TO BANDOLEERS\nThey have found to their sorrow that there is more to commerce and trade,\nThis was only the beginning. Since that time, the Reconstruction Finance\nwhether It be big or small, than these attributes.\nCorporation has cooperated with a local bank in loans aggregating $23,584,000,\nMany have succeeded with no better Initial equipment but they have learned\nand the company has assisted materially in the construction program of the Navy\nas they went along. There will, of course, always be failures.\nDepartment.\nCertainly, It is the responsibility of Government to make available funda-\nThe present outstanding balance is only $775,000.\nmental information which can be used by anyone who wishes to set himself up\nA small fern-packing firm in Florida inced difficulties, because it could no\nin business and thereby give him as good a chance ns it is possible to do.\nlonger obtain boxes to ship its products.\nThe Department of Commerce has, for some time, asked Congress to take\nIt decided it could make bandoleers if it could obtain the necessary financing.\na step in this direction through the expansion of Its field offices-already in\nThe R construction Finance Corporation provided it, and a small plant em-\nexistence-so that there may be provided for business a service similar to that\nploying 40 to 50 persons was kept in operation.\nwhich Government has for years placed at the disposal of agriculture through\nThese few typical loans are only examples of thousands of others like them,\ncounty agents.\nwhich the Reconstruction Finance Corporation has made,\nThis does not mean that we think there should be a representative of the De-\nThe record of the past is, however, mainly useful as a signpost for the future-\npartment of Commerce In every county In the United States, but even a limited\na future which for the present can be devoted only to an all-out war effort, but\nnumber of men-able to give sound advice and pass along to the newcomer in\nwhich on a day we cannot now foretell will bring peace to the world and provide\nbusiness the experience of thousands of others-would be of great value and\nopportunities for thousands of little businesses,\navoid many needless failures.\nWith the coming of peace, there will be many opportunities in the field of small\nbusiness and many men and women anxious to challenge the opportunity. A\nMUCH ADVICE AVAILABLE\ngreat many men now in the service will want to go back to their former jobs or\nbusinesses, but many will want to try their own wings. They have bren risking\nAs an illustration of what can be done, I cite the program which is already\ntheir lives to preserve freedom and our way of life and may want a business of\nunder way through cooperation between the War Department and the Department\ntheir own, however small. They must have that chance, and it will be small\nof Commerce.\nbusiness. Estimates made by experts in the Department of Commerce indicate\nSpecialists in the Department of Commerce have prepared or are preparing 17\nthat the war has created a deficiency of 270,000 small businesses in the field of\ntextbooks dealing with the establishment and operation of the most populous\nretail distribution alone.\nsmall business lines. They have been written in complete cooperation with\nSTORES SUFFERED MOST\nindustry. so that they contain not only the advice and counsel of Government\nexperts, but the practical suggestions of men who have already established them-\nThe net change in the number of firms in retailing is particularly important\nselves firmly In business.\nprises. since the number of businesses In retailing account for nearly half of all enter-\nThese books deal with the establishment and operation of automobile repair\nshops, retail bakeries, electric appliance and radio shops, grocery stores, metal\nWar-time casualties, particularly including grocery stores, eating and drinking\nworking shops, painting and decorating businesses, real estate and insurance\nplaces, and filling stations, but many small manufacturers were put out of busi-\nbrokerage businesses, small sawmills, shoe repair shops, apparel stores, beauty\nDESS in the early years of the war. Some of these were later given orders which\nshops, building contracting, hardware stores, service stations, general merchan-\nerabled them to start up again. Relative to the total number of various types of\ndise stores, dry cleaning establishments, laundries, and restaurants.\nretail stotes in existence at the end of 1941, household appliance and radio stores,\nThe War Department will only distribute these textbooks among soldiers whose\nment and seafood markets, automobile dealers, filling stations, and shoe stores\ndesire It will be to go Into business for themselves upon demobilization.\nsuffered most severely. In each of these lines, there was a net decline during\nThey spell out the financial and physical needs in each class of business and\n1942-43 of a fourth or more of the number of stores operating at the end of 1941.\ntry to show the things that will be helpful and how to avoid the things that\nIn retailing as in all other Industry groups, roughly nine-tenth= of all business\nwill spoil the chances of success.\ndiscontinuances occur among firms employing fewer than 4 workers. This pro-\nportion has remained relatively constant throughout the 4-year period. 1940-13.\nEXPERTS ARE NEEDED\nAbout nine-teuths of all new enterprises also hire less than 4 workers, but the\nproportion has tended to decline during the war years. The net decline in the\nThey should be generally avallable and there should be on hand experts who\ncould discuss with men and women the situations which the books set forth.\nnumber of basinesses has iberefore. been rreater among small (I. e., those with\nless than 4 employees than among large firms.\nMoreover, the time will come, after n small business has been established, when\nThere will be plenty of released veterans and discharged war workers to fill\nthe operators will need help and guidance which Government should be in a\nthis can and more. We must, in fact, if we are to achieve the President's goal\nposition to provide, and there will always be new developments which It is the\nGovernment's duty to pass along to Its citizens.\nmerchants. of jobs, find a place in our economy for 750,000 to 1,000,000 new small\nWe will need the aid of every eitizen to keep our economy functioning in peace\njust as we have needed the cooperation of everyone for war production.\n68\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n69\nBanks should occupy the lending role in this field. It Le their responsibility\nThis proposal, which we will be glad to consider In any part of the country-\nto meet the credit needs of the country, and if it takes n little extra trouble to\nif the banks want Reconstruction Finance Corporation's cooperation-will not\nlook after a small businessman, the banker should welcome the opportunity.\nonly provide a greater amount of available credit but will be, in effect, a partici-\nHe should know that if he does not meet it, the Government will, and his natural\npation by the Reconstruction Finance Corporation in any loans which are made.\nfield will get narrower and narrower.\nThe banks of the country ought to go to work post-war Just as everyone else to\nThe future of small business does not, however, lie entirely in the hands of\nassure a high level of production and employment. Too-stringent policies in the\nthose who may enter it after the war.\noperation of the credit pools will make them ineffective. Liberal policies may\nThere are, at the present time, 2,500,000 establishments which may be classed\nmean some losses, but there again, there will be profit enough in the interest rate\nas small business, They, for the most part, have weathered the stresses and\nto cover them.\nstrains of operation in wartime and their problems are concerned not so much\nOur experience has convinced us that an organization operated along con-\nwith the present, which, because of consumer demand, is relatively bright-but\nstructive business lines-us the Reconstruction Finance Corporation has been-\nwith what will happen after the war.\ncan provide sound and helpful assistance to all business with no'let loss. And\nRepresentatives of the Department of Commerce, in the past 6 months, have\nno loan is too small or too large to be given serious and prompt consideration.\nmet with many groups-geographieally well distributed-in order to find out\nI repeat, and wish to emphasize, that there is profit enough from reasonable\nwhat was worrying these businessmen.\nInterest rates to cover any net loss on small business loans.\nThe distributors, mostly retailers, were primarily concerned with the sale of\nsurpluses to speculators rather than through regular channels, with upgrading\nEstimated number of all operating business firms (small and large) in 1939 and\nof merchandise by manufacturers, making it Impossible to maintain low- and\n1943\nmedium-priced goods In stock: and with post-war competition from large manu-\nfacturers with their own outlets and chain stores, which could buy up new\nNet change, 1941-0'\nmerchandise as fast as it came on the market.\nSome retailers were disturbed by growing competition from consumer coopera-\ntives, manpower shortages, job freezing, and inequitable freight rates.\n1939\n1943\nPercent de-\ncrease or\nNumber\nThe manufacturers, almost all of whom employed 100 or less people at the time,\nincrease\nsince 1941\nwere almost uniformly concerned over the distribution of surplus goods; their\nInability under present tax laws to build up a cash reserve essential for quick\nreconversion to elvilian production: need for equitable freight rates,\n3,316,700\n2.861,600\n-535,400\n-15.8\nAll industries\nMining and quarrying\n21.400\n26,200\n43,800\n+16.2\nTAX CHANGES VITAL\n202,100\n158,100\n-85,700\n-35.2\nContract construction\n214,200\n228,600\n+2.800\n+1.2\nIn both categories, credit needs were most frequently advanced under the\nTransportation, Manufacturing communication, and public utilitées\n207,700\n188,000\n-21,200\n-10.1\ndiscussion of taxation. The solution to the problem of post-war risk capital\n286,400\n261,200\n-23,800\n-8.4\nFinance, insurance, real estate\n144,800\n114,800\n-31,400\n-21.5\nwas uniformly taken up as a tax question, not in terms of borrowing more funds,\nWholesale trade\nI do not take this cross section of small business opinion to mean that there\nRetail trade\n1,601,400\n1,330,400\n-290,400\n-17.9\nwill be need only for tax relief in the reconversion period, but Income tax rates,\n-6.8\nregulations and schedules will need to be revised If the smaller units in busi-\nGeneral merchandise\n36,800\n34,500\n-2,500\n37,700\n29,700\n-6,100\n-17.0\nnesses of all kinds ean pay their debts from earnings over a reasonable time, and\nGeneral stores with food\nGrocery, with, without meats\n341,500\n284,300\n-62,500\n-18.0\n39.90P\n28,500\n-10,200\n-25.4\nthere is no other way for them to pay their debts other than from earnings.\nMest and sen food\n120.000\n93,500\n-20,100\n-17.7\nWe cannot expect business, little or big, to put risk or venture capital to work\nOther food stores\n15,300\n13,800\n-1,600\n-10.4\nunder a tax system which does not enable the investor of the money to get either\nLiquos stores\n38,400\n30,900\n-10,100\n-24.6\nAuto dealers (new, used)\n15,100\n13,700\n-3,000\n-18.0\na profit on his capital or the opportunity of amortizing his obligations In an\nOther automotive\n73,000\n66,700\n-6,200\n-8.5\norderly way.\nApparel and accessories\n13,100\n10,400\n-2,800\n-21.2\nWe cannot abridge the right of honest and ambitious men to enter the business\nShoes\n29,500\n28,100\n-4,500\n-13.8\nHome furntshings and equipment\n13.000\n10,300\n-1,500\n-30.4\nfield because our financial institutions are unwilling to take a chance on the\nAppliances and radio\n52,200\n47,200\n-4,400\n-8.5\nfuture of the United States.\nDrugs\n37,100\n34,800\n-3,900\n-10.1\nHardware and farm implements\nAs a matter of fact, there is little or no risk involved for the banker. The\nLumber, building materials\n31,300\n27,200\n-4,800\n-15.0\nEsting and drinking places\n295,400\n250,800\n-57,000\n-18.5\nReconstruction Finance Corporation has for a good many years and is still\n226,700\n170,900\n-56,700\n-2L9\nwilling to participate with banks In making industrial loans In any degree up to\nFilling stations\n182.700\n155,100\n-29,500\n-16.0\nOther retail\n90 percent. No system of guaranteed loans could reasonably go any further\n638,700\n554.300\n-80,500\n-13.9\nthan this and certainly any banker should be willing to take at least a 10 percent\nService Industries\nshare with his Government In the advancement of his own community.\n27,500\n24,400\n-1,700\n-16.2\nHotels, boarding houses, etc\n86,700\n92,000\n-3,100\n-15\nLaundries, dry cleaning. etc.\n203,400\n183,400\n-30,100\n-11.1\nSMALL LOANS NOT HURTFUL\nBarber and beauty shops\n93,000\n73.100\n-8,600\n-10,5\nOther personal services\n77,500\n59,100 SA,\n-18,500\n-23.8\n-8,5\nTo put it another way, a loan application made by a fellow citizen In which a\nAutomobille repair\n44,200\n38,000\n-6,000\nAmusements\n106,400\n83,400 83,\n-17,600\n-17.4\nlocal bank is not willing to take some of the risk is either a very poor loan, or a\nBusiness services\ngreat reflection upon the fitness for his job of the banker who turns It down.\nI do not believe, however, that the bankers of the United States are going to\n1941 was the peak year for the total number of operating businesses.\nmake the mistake of denying credit to reputable men and women of character\nIn amounts appropriate to the circumstances. And as for little business and\nAMENDMENT TO S. 375\nsmall little loans, loans, I would remind the banker that no bank ever got seriously hurt from\nJOINT RESOLUTION To provide for the continuance of the Federal Loan Agency as an\nIndependent establishment of the Federal Government\nfinance small business or are In the net of doing 80, Some of these pools will\nIn many communities banks have either already established credit pools to\nResolved by the Senate and House of Representatives of the United States of\nhasis. The Reconstruction Finance Corporation stands ready to participate with\ncontain as much as $100,000,000. They should be operated on a constructive\nAmerica in Congress assembled, That the Federal Loan Agency, created by sec- of\ntion 402 of the President's Reorganization Plan Numbered I under authority\nthese pools so that there may be no lack of credit for legitimate enterprise,\nthe Reorganization Act of 1939, shall continue as an Independent establishment di-\nregardless of size, that will provide employment and opportunity.\nof the Federal Government and shall continue to be administered under the\nRegraded Unclassified\n70\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nFROM:\nMR. 0°CONNELL\nrection and supervision of the Federal Loan Administrator in the same manner\nand to the same extent as if Executive Order 9071, dated February 21, 1942,\ntransferring the functions of the Federal Loan Agency to the Department of\nCommerce, had not been Issued.\nSEC. 2. All powers, functions, and dutles of the Department of Commerce and\nTO: Testimony of mr. Wallaces\nof the Secretary of Commerce which relate to the Federal Loan Agency are\nhereby transferred to the Federal Loan Agency to be administered under the\ndirection and supervision of the Federal Loan Administrator.\nSEC. 3. The unexpended balance of the funds made available to the Secretary\nof Commerce by Public Law 365, Seventy-eighth Congress, approved June 28,\n1944, for administrative expenses of supervising loan agencies, shall be trans-\nferred to the Federal Loan Agency to be used for the administrative expenses\nof that Agency.\nSEC. 4. No functions, powers, or duties shall be transferred from the Federal\nLoan Agency under the provisions of title I of the First War Powers Act, 1941,\nor any other law unless the Congress shall otherwise by law provide.\n(Whereupon, at 5:30 p. m., the committee recessed to 10:30 a. m.\nof the following day, Thursday, January 25, 1945.)\nCONNELL\nof Wallaces\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nOF THE FEDERAL GOVERNMENT\nTHURSDAY, JANUARY 25, 1945\nUNITED STATES SENATE,\nCOMMITTEE ON COMMERCE,\nWashington, D.C.\nThe committee met, pursuant to adjournment, at 10:30 a. m., in\nroom 318, Senate Office Building, Senator Josiah W. Bailey (chair-\nman) presiding.\nPresent: Senators Bailey (chairman), Overton, Bilbo, Radcliffe,\nPepper, O'Daniel, McCarran, Chandler, McClellan, Johnson (of\nCalifornia), Vandenberg, Brewster, Burton, Wiley, Robertson, and\nCordon.\nThe CHAIRMAN (after the arrival of Mr. Wallace). There will be\nno further demonstration. The demonstration you gave is entirely\nsatisfactory; there is no complaint, but the committee is now in session.\nIt is very important that we should proceed in the most orderly way\npossible.\nWe are welcoming our former Secretary of Agriculture and former\nVice President, and we are all glad to have him here. I think the\nphotographers will take a few pictures, and after that Mr. Wallace\nwill be at liberty to proceed.\nSTATEMENT OF HENRY A. WALLACE, FORMER SECRETARY OF\nAGRICULTURE AND FORMER VICE PRESIDENT OF THE UNITED\nSTATES\nThe CHAIRMAN. Mr. Wallace, we have before the committee Senate\nbill 375, known as the George bill, and the substitute which he pro-\nposed on yesterday. You may proceed.\nMr. WALLACE. Mr. Chairman and members of the committee, I\nwish to assure you that I appreciate the opportunity which you have\nextended to me to appear before this committee for the purpose of\ndiscussing Senate bill 375, the so-called George bill. Obviously I\nam deeply concerned with any proposal that has for its purpose the\nstripping of the Department of Commerce of its present lending\nfunctions. I would be less than frank if I were to give you the\nimpression that my concern springs solely from the fact that im-\nportant functions are being carved out from under the jurisdiction\nof the Department of Commerce. You know, and I know, that of even\ngreater significance is the fact that my nomination as Secretary of\nCommerce was the occasion for this particular proposal.\n71\n72\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n73\nThere are some who have suggested-perhaps in an effort to save\nthe whole world-and ourselves-with our daring conception of what\nmy feelings or face-that this separation of the lending functions\nAmerica could do when forced to war. We have astonished a grate-\nfrom the Commerce Department is desirable because of my alleged\nful world by the stupendous number of planes, tanks, and guns rolling\n\"lack of experience\" in such field. Let me say that this talk does\noff our assembly lines; with the bridge of ships we have erected neross\nnot fool either me or the American public. You know and I know\nthe oceans; by the overwhelming force with which America has turned\nthat it is not a question of my \"lack of experience.\" Rather, it is a\nthe scales of bottle.\ncase of not liking the experience I have.\nThus has America met the challenge of war-with boldness, courage,\nLet me be specific: For 8 years I was Secretary of Agriculture.\nand determination. Thus has America become the symbol-the world\nDuring that period the Commodity Credit Corporation, the Farm\nover-for the dynamic force of a free people fighting for a free world.\nSecurity Administration, the Farm Credit Administration, and the\nBut what of the peacetime problems here at home which will follow\nRural Electrification Administration were under my supervision.\nthe successful conclusion of this war?\nDuring that period these agencies loaned over $6,000,000,000. We\nIs America prepared to meet the challenge of these peacetime prob-\nmade 11,500,000 separate commodity-credit loans and 1,208,000 rural-\nlems as it has twice met the challenge of war?\nrehabilitation loans. We arranged the financing to permit 20,184\nWill we approach the problems of peace with the same boldness of\ntenant farmers to buy their own farms.\nconception, the same courage and determination, as we have\nCollateral for these loans included farm real estate, agricultural\napproached the problems of war?\nproducing, processing, and marketing facilities and a wide range of\nIn the answer to these questions lies the future of America. To any-\nfarm commodities, These loans were not only made on a sound busi-\none who has faith in America the answer is clear. The American\nness basis but they were also in the public interest. Farmers bene-\npeople are prepared to meet the problems of peace in the same inspir-\nfited, consumers benefited, and the interests of the Nation itself were\ning way that they have met the problems of war. The American\nadvanced as a result of these loans. I am proud of our financial\npeople are resolved that we shall insure that the youth of this Nation\nrecord on this difficult financing. If there are any present who are\nwill never again be called upon to fight in another war. And the\ninterested in the details respecting this record, I will be glad to answer\nAmerican people are equally resolved that when our boys return home\ntheir questions at the end of my prepared statement. But since I do\nfrom this war, they shall come back to the brightest possible, the\nnot believe that the real issue relates to my alleged lack of financial\nfreest possible, the finest possible, place on the face of this earth; to a\nexperience I would like to proceed to what I conceive to be the real\nplace where all persons, regardless of race, color, creed, or place of\nissue.\nbirth, shall live in peace, honor, and dignity, free from want and free\nThe real motive underlying these suggestions for stripping the\nfrom fear. To do otherwise would betray the faith of every soldier,\nDepartment of Commerce of its vast financial powers has, of course,\nevery worker, every businessman, every farmer in this country who is\nnothing to do with my competence to administer these powers. The\ngiving his best for America.\nreal issue is whether or not the powers of the Reconstruction Finance\nIn determining the course of action we should pursue after the war,\nCorporation and its giant subsidiaries are to be used only to help big\nit is well for America to pause and take stock of her capacities. For\nbusiness or whether these powers are also to be used to help little\nAmerica's capacities should be the measure of America's future.\nbusiness and to help carry out the President's commitment of 60,000,-\nAmerica's known capacities are not difficult to calculate. We are\n000 jobs. In other words the question is really one of whether this\nnow producing goods and services to the gigantie total of $200,000.-\ncommittee, the Congress, and the American public want these enor-\n000,000 a year with 52,000,000 workers and 12,000,000 soldiers. In\nmous financial powers utilized and invested in a free America-in a\nsimple language, that means that today America is producing nearly\nprosperous America.\ntwice as much as she had ever produced before the war. But an enor-\nThis is not any petty question of personalities. This is a question\nmous part of the goods and services we are producing today does not\nof fundamental policy. It is the question of the path which America\nfind its way into the American home. No: it represents the ships,\nwill follow in the future. So that there can be no doubt in anyone's\nthe guns, the planes, and tanks we are using to fight this war.\nmind where I stand on these fundamental issues, I would like to take\nBut I know, and you know, that, if we can produce a huge flow of\nthis opportunity to discuss with you the future which I feel is in store\nships and guns and planes and tanks, we can also produce an abund-\nfor America.\nance of houses and cars and clothing and provide education and\nIn discussing with you the path which I feel the American people\nrecreation and the other good things of life for all Americans.\nshould pursue in the years immediately following this war, I am under\nAnd we all know that when our boys return home from the war\nno illusions that as Secretary of Commerce I will be able to carry out\nand are again able to put their power into the stream of peacetime pro-\nall of the measures which I will discuss, However, I do want to make\nduction, America's capacity to produce will be even greater than it is\nit clear now that, to the extent that powers are vested in me by Con-\ntoday. Yes, much greater than today, even when we remember that\ngress, I will use those powers to the fullest possible extent to further\nsome of our returning soldiers will prefer to resume their education;\nthe objectives which I will outline to you.\nthat some older people will begin a retirement delayed to participate\nFor the second time in 25 years America has proved her capacity to\nin war work; and that many women will give up their jobs in favor\nmeet the challenge of total war. Twice in 25 years we have amazed\nof homemaking. Making full allowance for these groups, the fact re-\n74\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n75\nmains that America will have the capacity after the war for produc-\ning houses, cars, clothing, education, recreation, and all of the other\nThe right of every businessman, large and small, to trade in an\natmosphere of freedom from unfair competition and domination by\ngood things of life on a scale that staggers the imagination. That is\nwhat America can and will do if we have the courage and vision to\nmonopolies at home or abroad.\ngive her the chance.\nThe right of every family to a decent home.\nThe right to adequate medical care and the opportunity to achieve\nBut to accomplish this task of utilizing our full productive capacity\nand enjoy good health.\nyear after year, it is childish to think that this can be accomplished by\nThe right to adequate protection from the economic fears of old age,\na small segment of business and finance even though that small seg-\nsickness, accident, and unemployment.\nment consists of the giants of industry and the tycoons of American\nfinance.\nThe right to a good education.\nBut the achievement of this American economic bill of rights will\nNor can this be accomplished by throwing crumbs to a reported\nnot come of itself. These rights will not come to those who merely\n20,000 business enterprises out of a total of over 3,000,000 struggling\nsit and wait. Nor will they come through merely pious repetition.\nsmall businesses in the United States. Why, an America geared to\nOur forefathers had to struggle for our political Bill of Rights; we\nthat limited conception of our capacity will find itself faced with\nwill have to struggle for our economic bill of rights. If we are going\nmillions of unemployed. The same people who set their sights too\nto make those rights a living reality we must map out a vigorous and\nlow for war are now asking the American people to set their sights too\nconcerted course. We must set as our goal the implementation and\nAmerica. low for prosperity. They do not grasp the strength and the spirit of\nfulfillment of the eight self-evident truths which together constitute\nour economic bill of rights.\nNow, do any of us think for a minute that there is any quack\nThe key to making this economic bill of rights a part of the Amer-\nremedy or cure-all that can be automatically applied. The sober\nican way of life is as self-evident as are the rights themselves. The\nfacts are that genuine progress will be achieved only through con-\ncrete plans and a real effort.\nkey is the wholehearted recognition by all our people of the simple\nfact that in America the future of the American worker lies in the\nIn the President's message to Congress last year and this year he set\nwell-being of American private enterprise; and the future of American\nforth eight self-evident economic truths as representing a second Bill\nprivate enterprise lies in the well-being of the American worker. The\nof Rights under which a new basis of security and properity can\nbe established for all-regardless of station, race, or creed.\ngreatest single thing that this war has demonstrated on the home front\nis that when the American worker and the American businessman and\nAmerica led the world in establishing political democracy. It\nthe American farmer work together as one team, there are no limits\nmust lead the world once more in strengthening and extending po-\non what America can accomplish.\nlitical democracy by firmly establishing economic democracy. Let us\nBut to work together as a team, however, there must be a common\nnot forget the painful lessons of the rise of fascism. Let us re-\ngoal. In this war that goal has been the defeat of our enemies in the\nmember that political democracy is at best insecure and unstable with-\nshortest possible period of time. In the peace to come the goal must\nout economic democracy. Fascism thrives on domestic economic in-\nbe the well-being of America.\nrecurity, as well as on lack of or divided resistance to external aggres.\nI am now going to outline to you the type of program which I think\nsion. Fascism is not only an enemy from without, it is also potentially\nwould make each of these economic rights a part of our way of life.\nan enemy from within.\nWe now must establish an economic bill of rights not only out of\nIn your consideration of this program you will note this striking fact,\nnamely, that to the extent that private enterprise grows in strength\ncommon decency, but also to insure the preservation of our political\nthe economic bill of rights grows in reality, and to the extent that the\nfreedoms. We must accord to this economic bill of rights the same\neconomic bill of rights grows in reality American private enterprise\ndignity-the same stature-in our American tradition as that we have\naccorded to the original Bill of Rights.\ngrows in strength.\nThus, all the measures which are suggested in this program for the\nLet us therefore affirm this economic bill of rights-and keep affirm-\nimplementation of the economic bill of rights are at the same time\ning Rights. it-until it is as familiar and real to us as our political Bill of\ndesigned to make American capitalism and private enterprise work in\nThe economic bill of rights as embodied in the President's message to\nthe same great manner in peace as it has worked in war.\nCongress last January is-\nAnd I also want to emphasize what the implementation of these\nThe right to a useful and remunerative job in the industries, or shops\nAmerica the opportunity to work out its destiny as a free Nation in a\nrights will mean to our service men and women. They have given\nor farms or mines of the Nation. I might say that this was reiterated\nagain in the last message to Congress.\nfree world. The America to which they return must be a land of eco-\nrecreation. The right to earn enough to provide adequate food and clothing and\nnomic opportunity in which they will find not only jobs but a chance\nfor economic advancement and independent enterprise in industry,\nThe right of every farmer to raise and sell his products at a return\ncommerce, agriculture, and the professions. A grateful Nation can do\nwhich will give him and his family a decent living.\nno less for her returning service men and women. The G. I. bill of\nrights, which became law in June of last year, following a series of\n76\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n77\nrecommendations which the President made to the Congress, is only\nfinanced but the Government will share with the private investor the\ndesigned to fulfill the special needs of our men and women in the serv-\nunusual and abnormal financial risks which may be involved in getting\nice. The economic bill of rights is designed to fulfill the needs which\nstarted.\nthey value most-yes; the needs which they value more than life\nBut, in providing jobs for everyone, we shall not only have to in-\nitself-the needs of America.\ncrease demand for our industrial and agricultural production here at\nI\nhome; but also abroad. Some parts of our industrial and agricul-\nThe first economic right is \"the right to a useful and remunerative\ntural production demand a high level of foreign trade to be efficient\njob in the industries or shops or farms or mines of the Nation.\"\nand prosperous. This is particularly true in our heavy equipment\nTo assure the full realization of this right to a useful and remunera-\nindustries where our war demand will full sharply but whose output\nwill be needed by other countries for reconstruction and development.\ntive job, an adequate program must provide America with 60,000,000\nThe foreign demand for such farm commodities as cotton, tobacco,\nproductive jobs. We must have more jobs than workers; not more\nand wheat will also be great if other countries have the opportunity\nworkers than jobs. Only with more jobs than workers can every man\nbe guaranteed a job with good wages and decent working conditions.\nto buy. We therefore must take steps, in cooperation with other coun-\ntries to see that international trade and investment is resumed\nThis requires private enterprise working at expanded capacity.\nThis necessary expansion of our peacetime productive capacity will\npromptly on a sound basis.\nThis administration has pioneered in the direction of international\nrequire new facilities, new plants, and new equipment.\neconomic collaboration with its reciprocal trade agreement program-\nIt will require large outlays of money which should be raised\non behalf of which I have appeared before committees of Congress at\nthrough normal investment channels. But while private capital should\nleast a half dozen different times-and the establishment of the Ex-\nfinance this expansion program, the Government should recognize its\nresponsibility for sharing part of any special or abnormal risk of loss\nport-Import Bank. It has again taken the lead in suggesting inter-\nnational monetary stabilization and sound international investment\nattached to such financing.\nmeasures-measures that are a fundamental prerequisite to healthy\nTherefore I propose that the Government guarantee the lender\nagainst the special and abnormal risks which may be involved in\nforeign trade and commerce. It was for the purpose of working out\nconcrete measures of this character that the President convened the\nachieving our objective. This will provide new and expanding indus-\nUnited Nations Monetary and Financial Conference at Bretton Woods\ntry with plenty of private credit at reasonable interest rates. Through\nlast summer. At the Bretton Woods Conference, 44 countries agreed\nthis program we will merely be extending to the financing of old and\nnew business the principles which have proved so successful in our\nupon plans for an international monetary fund and an international\nbank for reconstruction and development.\nexperience with the V-loans, T-loans, and Federal Housing Adminis-\ntration loans.\nThe international monetary fund, when approved by Congress, will\naid the nations of the world in establishing sound currencies. It will\nA comprehensive investment program dedicated to expanding the\nclear the channels of foreign trade of discriminatory restrictions and\npeacetime productive capacity of America is the very essence of the\ncontrols so that there can be a genuine expansion of world trade.\nAmerican way of raising our standard of living. We build the plants\nfor greater production so that all of us may share in their greater\nWith the help of the International Bank, American capital can play\noutput. But greater output is not our only benefit from this plant\na great constructive role-and a profitable role-in the development\nof the economies of other countries. It will provide us with enormous\nexpansion. In fact, our benefits also include the wages paid to the\nlabor employed in building these plants, in constructing the ma-\npost-war foreign markets for OH\" greatest markets are in prosperous\nchinery to be used in the plants and in operating the plants after they\nindustrialized countries.\nBut America will not be merely a seller of goods abroad. A truly\nare erected. These payments as wages all contribute to the Nation's\nbuying power so that as a nation we will have more money with which\nmendous buyer of raw materials and products from abroad. It will\nprosperous America-an America with jobs for all-will be a tre-\nto buy the goods produced by these expanded plants.\nAs a matter of fact a comprehensive investment program of this\nbe an America constantly enlarging the scope of our reciprocal trade\ncharacter could make possible $20,000,000,000 of new private invest-\nagreements. It will be an America with the time and money to spend\nment each year. Why, just the job of building these plants and the\non tourist travel abroad as well as at home. It will be an America\nmachinery for them would give America 5,000,000 more jobs a year than\nfrom which other countries can afford to buy more because they are\nwe had in this work before the war. And this does not include the\nselling more.\nbuilt. workers who would be needed to operate these plants after they are\nWith congressional approval of this program and with our program\nof jobs for all in this country-the foreign trade of the United States trade\nIn a nutshell, then, if we are going to have remunerative jobs for\ncan be trebled after the war. This increase in our foreign\nmillions more men. I propose that the Government do its part in\nall, we must have an expanded private industry capable of hiring\nshould mean 3,000,000 more jobs in this field after the war than we\nhad before the war.\nhelping private enterprise finance this expansion of our industrial\nNor the benefits of increased foreign trade and investment con-\nplant. It will be privately owned, privately operated, and privately\nfined to are increasing our prosperity. I want to emphasize that such\ncooperative measures for expanding international trade and invest-\n68424-45-6\n78\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n79\nment are at the same time the economic foundation for a lasting peace.\nAmerica must remain preeminently the land of high wages and\nA prosperous world will be a world free of both economic and political\nefficient production. Every job in America must provide enough for\naggression.\na decent living.\nThere is one further phase of this program of providing jobs for\nDuring the war we have been compelled to hold down wage increases\nall which must be made an integral part of any long-range program.\nthat might have provoked runaway inflation. With all the arms and\nThat is the task of seeing to it that there are not just jobs for all next\nwar materials we were producing, there was only a limited amount of\nyear-or for the year after that. No; we are talking about jobs for\nconsumption goods available. Increasing wages without increasing\nall as a permanent part of our American way of life.\nthe amount of goods available to the consumer would have been an\nIt is inevitable, however, that an economy of frée enterprise like\nopen invitation to inflation,\nours will have some fluctuation in the number of jobs it can provide.\nHowever, the end of the war, even the end of the war in Europe, will\nAdjustments in employment are an essential part of an expanding\nchange this picture. Then there will be more goods available for\nfree economy. And for these minor fluctuations, we provide unem-\nAmerica to buy and it is only good common sense to see that the\nployment insurance. But we must not allow such fluctuations ever\nworkingman is paid enough to buy these goods.\nto deteriorate into panie or depression. We cannot again be caught\nThe gains made by labor during the war must be retained in full.\nin that vicious downward spiral of unemployment, wage cuts, and\nAfter the last war, as part of the process of returning to \"normaley.\"\nstagnated business,\nthe slogan \"labor must be deflated\" was adopted. This must not hap-\nWhenever the number of gainfully employed in this country falls\npen again. This time we must make sure that wage rates are not re-\nbelow 57,000,000, our Government should take prompt steps to see\nduced when the wartime demand for labor is diverted into peace-\nthat new jobs are made available to keep the total from falling sig-\ntime channels. We must make sure that the labor market is not\nnificantly below that figure. This is the floor below which We must\nbroken by unemployment and wage slashes.\nnot allow employment to fall.\nAmerican labor should be assured that there are not going to be\nThe basic function of your Government in taking care of any such\nany wage cuts after this war. What is even more important-when\nslack in jobs is to see to it that private enterprise is assisted until it\nthe worker's hours are cut back to peacetime levels a real attempt\ncan absorb this slack. This is entirely possible. During the war\nmust be made to adjust wage rates upward.\nthe Federal, State, and local governments have found it necessary\nAnd wage rates should be constantly increased RS the productivity\nto put aside the construction of roads, buildings, and public facilities\nof industry is increased. An expanding American economy can con-\nto the value of many billions of dollars. We have a need, too, for\ntinue to expand only if the increased productivity is divided equitably\nvast programs of the type exemplified by T.V.A.\nbetween business and the worker. In fact we all know that unless\nSome of this construction will have to be undertaken immediately\nthe worker does get his share of America's increased production in\nafter the war. A good deal of it, however, can be postponed so that\nthe form of increased wages and unless business get its share in the\nits construction could be timed with periods when the volume of em-\nform of increased profits neither will prosper and all-businessman,\nployment that industry, commerce, and agriculture can offer begins\nto fall. We must have a reservoir of planned and approved Federal,\nwage earner, and farmer-will lose.\nBut an increase in wages is not the only benefit the American worker\nState, and local projects ready to be tapped. And when employment\nshould secure from increased productivity. He should also benefit\nfalls below this floor of 57,000,000 jobs, this reservoir of planned and\nin the form of shorter hours of work, in the form of increased leisure\napproved public works should be opened up to provide more jobs and\ntake up the slack.\nand opportunities for healthful recreation. Thus increased wages\nSuch useful and essential public works should not produce Gov-\nand shorter hours go hand in hand in solving the problem of pros-\nernment relief jobs, however. No; they should produce private\nperity the American way.\nThere is one further aspect of the wage-earner's problem that I\njobs. This is possible if we insist that this construction be done by\nwould like to comment on. That is his aspiration for an annual wage\nprivate firms under contract with the Government; private firms em-\nconditions. ploying labor at the prevailing rate of wages and under standard labor\nor guaranteed annual income from his job. It is a terribly important\npart of any real attempt to implement America's economic bill of\nThis assurance of a reserve of private jobs, through constructive\nrights. The size of the wage earner's pay envelope is important-\npublic works when needed to take up the slack, will have a profound\nvitally important to American prosperity. But we all know that it is\neffect on the whole direction of our economy. In fact, the knowledge\nequally important to know how many pay envelopes he gets during\nthat Government accepts this responsibility of maintaining a floor\na year. I would like to see him get a guaranteed minimum annual\nunder jobs will act as an immense stabilizing force on the whole econ-\nwage and I think the time has come for America to begin tackling\nomy, not only of this country, but of the whole world.\nthis most difficult problem.\nNow this goal cannot be attained overnight. It cannot be achieved\nII\nin a manner to harm business. Nor can it be achieved with the same\nspeed in every business.\nfood and clothing and recreation.\"\nThe second economic right is \"the right to earn enough to provide\nBut we can start on the job of giving labor an annual wage. We\ncan do a lot if we all will only agree that it is a problem business and\nlabor must solve and if we all approach the problem with a genuine\n80\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n81\ndesire to succeed. The Government must do its part also. It must\ntradition can flourish only by doing a large volume of business at a\naid business in stabilizing its labor needs so that the burden of an\nsmall profit per unit.\nannual wage will be solved in a sound manner. This in my opinion\nWe must protect free enterprise against monopolies and cartels\nis the American way to bring about the annual wage and I have con-\nthrough continued vigorous enforcement of the antitrust laws. Pri-\nfidence in the American way of doing things.\nvate enterprise yields its full advantage to the consuming public and\nto other business only when it is genuinely free and competitive. He\nIII\nis a sinister enemy of free enterprise who pays lip service to competi-\ntion but also labels every antitrust prosecution a \"persecution.\"\nThe third economic right is \"the right of every farmer to raise and\nOur economy has important new expanding sectors in air transport,\nsell his products at a rate which will give him and his family a decent\nfrequency modulation, television, and fibers, plastics, and many other\nliving.\"\nfields. These new expanding business areas in particular must be kept\nAmerican farmers now have by far the largest farm income in his-\nfree of the constricting hand of monopoly, and also, and in particular\ntory. This is their due reward for the greatest agricultural produc-\nthose industries which will be based on inventions made in connection\ntion in history. We must assure the farmers that there will always\nwith the war effort, of which there are many in the War and Navy\nbe a market for all their output at good prices. Concretely we should\nDepartments.\nmaintain an adequate floor on farm prices and thereby assure the\nThere must be a place in these new business areas-as everywhere\nfarmer against the dangers of falling prices for his products. Our\nin our economy-for enterprising small firms. It is from these new\nfarm program must be one of expansion rather than curtailment.\nand small firms that the great industries of the future will grow. We\nWith jobs for all at good wages and with foreign markets greatly\nneed new industries and new firms to have industrial progress. We\nexpanded, the farmer will be able to sell at good prices all that he can\nmust not permit them to be stifled by monopoly.\nraise.\nBut this is not all. The farmer's income must have stability. To\nV\nthat end, there should be established a comprehensive Federal crop-\ninsurance program which will secure the farmer against the hazards\nThe fifth economic right is \"the right of every family to a decent\nof crop failure. To this must be added concrete steps to raise the\nhome.\" Concretely, we should adopt a housing program looking\nstandard of living on the farm and in the rural areas. We need a\ntoward the construction through private enterprise of 2,000,000 hous-\ncomplete program of new and modernized homes and farm buildings.\ning units a year and ridding this country of its urban and rural slums.\nWe must press forward with rural electrification and improvement.\nWe need to build at least 15,000,000 new housing units if we are to\nOnly in this way can we bring to the rural communities modern facili-\neliminate all our slums and substandard dwellings. The right to &\nties for decent and healthful living.\nhome is meaningless when that home is a hovel. We cannot afford\nIV\nslums. A well-housed America must have modern homes-homes with all\nthe latest electrical and mechanical equipment which will eliminate the\nThe fourth economic right is \"the right of every businessman, large\ndrudgery of household work. To the fullest extent possible we must\nand small, to trade in an atmosphere of freedom from unfair competi-\nbe a land of home owners, and to that end we must assure every\ntion and domination by monopolies at home and abroad.\"\nfamily an opportunity for home ownership by making certain that\nOur economic bill of rights, like our political Bill of Rights, is based\nthere is available private credit on terms which will reduce the down\non freedom of enterprise-freedom of enterprise not merely and ex-\nclusively for the few but broadly and inclusively for the many. The\npayment and cut by one-third the monthly cost of buying homes.\nNew residential construction and the modernization of America's\npolitical Bill of Rights insured the destruction of special prerogatives\nhomes alone can provide jobs for 4,000,000 people a year. This is\nand privileges. The economic bill of rights will insure the destruc-\ntion of special economic prerogatives and privileges.\n2,000,000 more than the maximum amount engaged in such work prior\nNo special class of business deserved to be the spoiled darling of\nto the war.\nVI\nGovernment. The American people have no interest in preserving\nthe vested interests and monopolistic privileges of greedy big business.\nThe sixth economic right is \"the right to adequate medical care\nThe interest of the American people lies in using the resources of the\nand the opportunity to achieve and enjoy good health.\"\ncountry to achieve a prosperous America, prosperous for all business,\nAs Selective Service has revealed. too large a proportion of our\nlarge and small, and for all the people.\nyounger men now fall below reasonable health standards. This is all a\nWe must break through the barriers of monopoly and international\ncartels that stand in the way of a healthy expansion of free enterprise.\nsegments of our population. This condition calls for immediate\nwarning signal to America with respect to the state of health of and\nWe must overcome the monopolistic frame of mind which thinks of\nbusiness in terms of restricted output at high prices per unit. We\ndrastic action.\nWe cannot permit the health of our people to be impaired by\nmust pass on to workers and consumers the benefits of technological\npoverty or lack of medical and hospital facilities. I say to you that\nprogress and large-scale production. Free enterprise in the American\nyour Federal and State Governments have just as much responsibility\n82\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n83\nfor the health of their people as they have for providing them with\nmunities for the development of locally controlled educational pro-\neducation and police and fire protection. Health and adequate medi-\ngrams, we should equalize and extend educational opportunities\ncal and hospital care are not luxuries. They are basic necessities to\nthroughout the land. We should provide facilities for technical\nwhich all are entitled.\nand higher education for all qualified young men and women without\nWe must see that medical attention is available to all the people.\nregard to their financial means, In this America, the pioneer of\nBut this health program must be achieved in the American way.\nfree education, the right to technical and higher education should\nEvery person should have the right to go to the doctor and hospital of\nbe as universal as the right to a secondary school education.\ntheir own choosing. The Federal and State governments should work\nThis is the kind of program that can provide jobs, economic\nhand in hand in making health insurance an integral part of our\nsecurity, and rising standards of living for all Americans-regard-\nsocial-security program just as old-age and unemployment benefits\nless of race, color, or creed. Our democracy can be a living force\nare today.\nonly if it means the good life for all the people.\nWe need more hospitals and doctors. We should make sure that\nThe millions of more productive jobs that this program will bring\nsuch facilities are available and that we build hospitals in every\nare jobs in private enterprise. They are jobs based on the expanded\ncommunity, rural and urban, that does not now have such facilities\ndemand for the output of our economy for consumption and invest-\nfor all of its people.\nment. And this program need place no real burden on the Federal\nNever again can we afford the waste of poor health in America\nBudget, notwithstanding the reduction in taxes which must come\nbecause of poverty or inadequate facilities. And I say to you now\nafter the war. On the contrary, a program of this character can pro-\nthat this program will prove in the long run to be a saving to America.\nvide America with a national income of such size that it will be\nWe must not be content to provide medical attention for people\npossible to reduce the tax rates still further on personal incomes,\nafter they become sick. We must implement and extend our knowl-\non business profits, and on consumption, and still collect enough tax\nedge of maximum health as well as prevention of sickness. The Gov-\nrevenue to meet the needs of the Government, including orderly re-\nernment should appropriate needed funds to finance a greatly\ntirement of the national debt.\nexpanded program of medical research in private and public\nThese should be our immediate goals, once final victory over our\ninstitutions.\nenemies has been achieved. Now there are those who say that these\nVII\ngoals are the dream of a \"man willing to jeopardize the country's\nfuture with untried ideas and idealistic schemes.\"\nThe seventh economic right is \"the right to adequate protection\nSenator BREWSTER. Is that a quotation?\nfrom the economic fears of old age, sickness, accident, and unem-\nMr. WALLACE. It appears as a quotation in the written text.\nployment.\"\nThese people think they are the realists. Actually, they are the\nWe must assure people who are disabled and temporarily unem-\npersons of limited vision and stunted imagination. These people are\nployed that they will be taken care of adequately. We must assure\nof the same breed as those \"sound businessmen\" who haggled over\nthem that they will not be in want because of loss of income during\npennies in the purchase of strategic stockpiles before the war, only\nthis period of compulsory unemployment. We cannot neglect these\nto leave the materials for the Japs to use against us. These are peo-\ngroups without incurring serious dangers to the stability of our whole\nple who will fight against enemies waging total war by pinching pen-\neconomy.\nnies. These people think the same as those who said the President\nA broader social-security program will be needed after the war.\nOld-age insurance should be adequate to provide all of our older\nwas dreaming when he declared in 1940 that the American people\nwould produce 50,000 planes in 1 year. Do these Monday morning\nmen and women with the means for decent living. Our present\nold-age benefits are definitely inadequate. A decent, self-respecting\nquarterbacks have the great faith in the American people, and in their\nold-age, social-security program deemed to be a right, not a charity,\nway of life, which is required in order to understand the meaning of\na right springing from the years of service each person delivers to\nAmerica? I am confident, however, that the great majority of the American\nthe sum total of a better America.\nAn adequate social-security program will, of itself, by adding to\npeople share the same great faith in America and in the American\nthe spendable purchasing power available to the people and by plac-\nway of doing things which I have expressed here. We know our way,\ning a floor on consumption, add more than 2,000,000 jobs a year.\nand the road ahead is straight and broad, although there are many\nhills which we must climb. The program which I have set. forth is\nVHII\nonly the first milestone, for the capacity of the American way of life\nin the years to come is beyond the vision of man. The American\nThe eighth economic right is, \"the right to a good education.\"\nsystem of free enterprise is the best the world has ever known, and\nWe must have an educated and informed America. Even now\nthrough it we can obtain, God willing, the best that this world has to\nmost of our rural areas and some of our urban areas are poorly\nprovided with schools. Our teachers are underpaid. Our schools\noffer. It is in this perspective that I appeal to you to consider S. 375-\nare badly understaffed. We need more schools and at least one-\nthe so-called George bill. I suggest that the Congress appoint a\nhalf million more teachers, Through Federal aid to poorer com-\ncommittee to investigate the past activities of the Reconstruction\n84\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n85\nFinance Corporation in order to determine whether or not the Con-\nvery shortly, as we are in session today. It is now a quarter to 12. I\ngress feels that the powers of the R. F. C. have been administered in\nwould like very much to finish this hearing today, and if you will just\nsuch a way as to do the most good for the American people. If the\ndesist from demonstration you will expedite the hearing. At any\nCongress does not feel that the powers of the R. F. C. should be ex-\nrate, I am glad that you gave expression to your feelings. I hope you\nercised in such a way as to further the objectives which I have set\nwon't repeat it. Let us have quiet for the remainder of the time.\nforth here, then I respectfully urge the Congress to take the R. F. C.\nAre there any questions from the members of the committee?\nout from under the control of the Commerce Department. For I can\nSenator VANDENBURG. Mr. Chairman, I would like to ask the Secre-\ntell you here and now that if the R. F. C. is left in the Commerce De-\ntary this one question, with special reference to S. 375:\npartment, I will use its powers in the interests of all the American\nIf the functions of the R. F. C., specifically the Federal loan ad-\npeople,\nministration, are separated from the Department of Commerce, the\nThe greater part of my presentation has had to do with the problem\nchoice of a loan administrator will still rest with the President of the\nof applying the eight principles of the economic bill of rights when\nUnited States, and, therefore, I assume that the separation would not\npeace comes and we are struggling with the inevitable readjustments\nthreaten your bill of rights or your objectives, or the President's; is\nthat follow a war of this tremendous magnitude. Great as that prob-\nthat correct?\nlem is, and important as it is to plan for it, we must all recognize\nMr. WALLACE. I would say that the testimony as given here yes-\nthat at the moment when our boys are relentlessly destroying the Jap-\nterday afternoon might have a bearing on that point.\nanese and German might overseas we have a sacred obligation to do\nSenator VANDENBERG. Well, the fact is that the President would still\nthe most effective job possible on the home front. It is my hope that\nhave the selection, would he not, of the Loan Administrator, and,\nwe all cooperate to the utmost in doing that job, while at the same\ntherefore, any objective to which the President subscribes, and your\ntime we press ahead with the utmost vigor to prepare for that first\nown very able presentation of your program, would still be in good\nand most important plank in the economic bill of rights-full em-\nhands?\nployment.\nMr. WALLACE. I am not certain about that-I am not certain about\nWe must now devote all our efforts-and when I say \"all,\" I mean\nthe legal status, in view of what was reported to me with respect to\nall-our efforts to winning of the war. I propose to leave no stone un-\nthe testimony as given yesterday afternoon.\nturned, if confirmed as Secretary of Commerce, to see that every\nThe CHAIRMAN, Are there further questions?\nbranch, every activity of the Department of Commerce and of the\nSenator PEPPER. I would like to ask just one or two questions, if I\nagencies under its control, is directed toward the sole purpose of help-\nmay, Mr. Chairman.\ning to bring the war to a successful and speedy close and of return-\nThe CHAIRMAN. Let me make this remark first: There are other\ning our boys back home as soon as possible.\nSenators here, not members of the committee. I think the committee\nIf the R. F. C. and its subsidiaries will remain with the Department\nwould be glad to permit them to ask any questions,\nof Commerce, I pledge myself to utilize all its powers and resources\nNow, go ahead, Senator.\ndirectly toward speeding up the war effort. But there is one thing\nSenator PEPPER. Mr. Wallace, there are two or three things on which\nthat I would like to sny in closing: If we are to win this war speedily,\nI would like to give you an opportunity to comment if you wish.\nwe on the home front must all coordinate our efforts to that goal. We\nIt has been bandied about the country for a good many months, as\nmust all stick together, and work together. as the boys are doing over\npart of the fantasy which you have pursued, that you made a speech\nthere. We must bury whatever personal differences stand in the way\none time in which you said, according to the report, that you favored\nof attaining that No. 1 goal before use. This is no time for personal\ntaking the money from the American taxpayer to buy milk-it was\nand petty controversy.\neither a pint or quart; I don't know what the exact quantity was-to\nWhether the R. F. and its subsidiaries are included in the Depart-\nbe given to the Hottentots, and that you proposed to take the money\nment of Commerce or not, I will concentrate all of my efforts and the\nof the American taxpayers to build a dam, a T. V. A. for somebody\nefforts of the Department under me to the winning of the war. I want\non the Danube.\nto make it clear that if it is decided that the R. F. C. should not remain\nI would like for you to state whether you ever made such a state-\nof Commerce until the war ends.\nwith the Commerce Department, I will carry on the job of Secretary\nment or not and to make any comment you want to make on the\nNo soldier on the battlefield can do less than carry out his assign-\nreport. Mr. WALLACE. The fantasy to which you refer was spoken not by\nment. Certainly we on the home front cannot hesitate to do anything\nme but by the President of the National Association of Manufacturers,\nless, Both must give their all to the common cause.\nThe CHAIRMAN. Have you finished?\nSenator. What I precisely said can be found in this book, but I will not take din-\nMr. WALLACE. Yes, sir. [Applause.]\nthe time to look it up now. It was to this general effect-that at half\nThe CHAIRMAN. Now, friends, let us have quiet. The committee\nin ner half seriously, I said what this war was all about was whether milk\nthe other night I was sitting beside Madam Litvinov and,\nwants to resume the hearing. All of you have cooperated wonderfully,\nand we thank you. I think your applause was forgivable, it was all\nfun, not could have the privilege of having a quart of the a\nright, but just do not do it any more, We have to go over to the Senate\nor day. That everyone was what I actually said. But as a result of a speech by\n86\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n87\npresident of the National Association of Manufacturers everybody\ntry, the present chemical industry; and if we want in 1970 to have the\nbelieved that I said that the purpose of the war was to see that every\nHenry Fords and Edisons of 1945 to 1950 coming into flower, it will be\nHottentot had a quart of milk. Even the President of the United\nnecessary to make possible a type of financing for small business which\nStates believed that I said that.\ndoes not exist today.\nThat shows how effective propaganda is, Of course, anyone who\nAs I said, my ideas on this are quite comprehensive, and I do not\nread the speech knows that what I meant was that the causes of the\nbelieve it would be fair to the committee at this time to go into my\nwar were economic, that people were desirous of getting enough to live\nideas in detail, so I will not elaborate further, because I think many\ndecently, and that the way to prevent war was to make sure that the\npeople may want to ask questions.\npeople did get enough to live decently. Anyone with any imagination\nThe CHAIRMAN. If you wish to prepare a written statement and sub-\nwhatever could read the purpose of my semifacetions remark on that\nmit it to us in time we will put it in the record.\noccasion. But you can't tell what propagandists, who have a definite\nMr. WALLACE. I would like to get a good night's sleep first.\npurpose in mind, will do. I have observed this around Washington,\nThe CHAIRMAN. Very well.\nI may say-that so-called New Dealers will again and again be deceived\nSenator BREWSTER. That is rather a severe indictment of 12 years\nby the propaganda of the enemy just because of what they read or\nof this administration, isn't it, wouldn't you say?\nwhat they hear through the press. It is amazing. Even the elect can\nMr. WALLACE. I feel it is a severe indictment of the past 30 years.\nbe deceived.\nSenator BREWSTER. We will take it all in.\nSenator PEPPER. I have only one other question, Mr. Wallace.\nMr. WALLACE. I think the tendency began when the Federal Re-\nI understand that there was a report made to the Temporary Na-\nserve System took over in 1913 and bank examiners became very\ntional Economics Committee which was prepared by a representative\nmeticulous. The result was to eliminate character banking-increas-\nof the Department of Commerce, to wit, Mr. William B. Saunders,\ningly to eliminate character banking-which earlier had served both\neconomic analyst of the Department of Commerce, assisted by Mr.\nthe farmer and the small businessman.\nH. H. Wein, which appears on page 312 of the report of the Temporary\nSenator PEPPER. One further question, with your indulgence, Mr.\nNational Economics Committee of 1941, headed \"The Concentration\nChairman.\ning]: of Economic Power,\" wherein this short paragraph appears [read-\nAlong the line of the statement that I referred to a moment ago,\nwhich I think you clarified by your comment, a great many people in\nNo Information has been published by the R. F. C. as to the size of borrowing\nthe country have not had an opportunity to know you personally as\nfirms, but the size of the loans authorized Indicates that small business has re-\nthe people here in Washington and those who are presently associ-\ncelved little aid. Of $450,000,000 in loans authorized by R. F. C. between 1932\nand 1939, less than 4 percent were for loans under $10,000 and only about 30\nated with you do know you, and I think since you have been candid\npercent were for loans under $100,000. At the other extreme, loans for a million\nenough this morning to make a statement of your philosophy and your\ndollars or more represented almost 30 percent of the total amount authorized.\nviews about the Government and the public interest, and to allay some\nActual disbursements in the 7-year period totaled only $180,000,000. If the dis-\nmisapprehensions, you have the opportunity now, if you care to avail\ntribution of disbursements Is assumed to be identical with the authorization, the\nperiod. total credit extended In loans of $100,000 or less Was about $55,000,000 during the\nyourself of it, to state as to whether or not you have been able to\nmanage your own private affairs in a frugal way, so that you have\nThen I skip about five lines, where he distinguishes between author-\nbeen able to stay off of the W. P. A., or to live other than upon the\nizations and loans, and this sentence concludes the quotation:\npublic salary which you have received.\nDo you care to make any comment? I would like to extend to\nSuffice It is to point out that In actual fact the volume of loans made to small\nbusiness by the R. F. C. has been small.\nyou the opportunity.\nMr. WALLACE. I am not one really to talk about private affairs.\nIf I understand you, in your statement of policy, you believe that\nWhat have they been saying about me?\nsmall business should receive larger consideration from the R. F. C.\nSenator PEPPER. I suspect that a lot of people would be surprised,\nand the agencies under its jurisdiction?\nif they believed some of the circulated reports about you, to find that\nMr. WALLACE I would hesitate to take up the time of the committee\nyou were able to make any money privately or to have any private\nsufficiently to answer that question, because it is a matter to which\ninterests. If you do or have been able to do so I think it would help\nI have given a great deal of thought and consideration.\nthe American people in getting a true picture of the man you are.\nI might say briefly, though. that the small businessman increasingly\nMr. WALLACE. You think the feeling of the American public is\nsince 1913 has found it difficult to get equity financing. There is\nthat only a millionaire should be Secretary of Commerce! Is that\nwhat might be called an \"institutional gap,\" which is recognized by\nthe idea? [Applause.]\ninvestment bankers. The cost of equity financing has been almost\nIf it is any reassurance to the committee, the only institution with\nprohibitively high.\nwhich I have had any business responsibility is a seed corn company.\nfirst 10 years of this century the present type of financing and the\nLet me put it this way, to sum it up in a nutshell-that if during the\nI never owned a share of stock in any publishing business at any time.\nI had a possible, eventual one-twelfth interest but I never owned any\npresent taxation had been in effect, it would have been impossible to\nstock in any publishing company at any time, was never responsible time.\nhave anything like the present automobile, the present electrical indus-\nfor the business conduct of any publishing company at any\n88\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n89\nWhen the publishing company, to which I assuine the public has\nThe CHAIRMAN. Founded on the equity after the obligations of the\nbeen referring, consolidated with another company it was done, the\nbonds and the obligations of the preferred stock-\ndecision was made while I was in Europe attending an international\nMr. WALLACE. That is the customary interpretation. It involves a\neconomic conference and studying certain scientific matters in the\nrisk.\nBalkan States and I did not know about it until after it was done,\nSenator VANDENBERG. A risk; yes,\nIt was in 1929 and we all know what happened to the farm folks\nThe CHAIRMAN. I have just been told to talk into this microphone.\nbetween 1929 and 1932. So it was no surprise. It would be no sur-\nCan you hear me?\nprise to anyone as to what might have happened out there.\nMr. WALLACE. I hear you fine.\nBut, as I said, I had no business responsibility with that concern,\nThe CHAIRMAN. Would you have the Government, by way of aiding\nI was editor of the paper. And I do not reflect in any way on the\nbusiness, big and little, go into the policy of equity financing?\nbusiness management. My uncle was responsible for the business\nMr. WALLACE. I prefer to answer that by the expression of an ex-\nmanagement. I don't reflect on his capacity as a businessman for a\npert in the business, Mr. Eberstadt. This is an address which he gave\nmoment because he is a good businessman.\non December 12, 1944, before the National Association of Securities\nI just want to point out that the propaganda that is put out is with-\nCommissioners. Mr. Eberstadt has been gravely concerned with the\nout foundation. I have never undertaken to say anything against it\nproblems which I have described and suggests a very interesting\nbecause it is my observation that when you pay attention to propa-\napproach. I may not have the precise point, but if you will bear with\nganda, why, you confirm the folks in the first idea.\nme I will read some of it.\nBut with regard to the only concern with which I have had busi-\nMay I say very definitely that I do not think the solution lies in Wall Street\nness responsibility, this corn company, the thing was my idea, it was\nor even In the efforts of Wall Street. From a social point of view, this would\nbased on my own corn breeding work. I had started experiments in\nbe undestrable; from a political point of view, suspect and from a fuancial\n1906, experiments in in-breeding in 1913, had greatly expanded them\npoint of vlew, I think Impossible. Local people do not know the personalities\nin 1919, incorporated the business in 1926. I had very little money\nor ramifi cations of Wall Street-\nmyself at that time due to the farm depression. I raised the money\nHe is talking about equity financing for little business-\nmyself. In cooperation with a lawyer I wrote out the articles of in-\nNor can Wall Street people have that intimate acqualntance with local condi-\ncorporation myself. I selected all the key people in the company\ntlons, individuals, and businesses which is necessary to furnishing of Investment\nmyself. The farm manager, all the folks that are key people in the\ncapital on a sound basis, Thus disappointment or worse on both sides would\ncompany today are people that I picked at that time. I determined\nprobably follow nn effort by Wall Street to solve this problem.\nevery step of the organization of the concern as it went on. It was\nI may say parenthetically that those small businesses who have\ngenuinely a small business in its initiative.\ngone to Wall Street in an effort to get capital and have succeeded\nI know the problems of the small businessman because I have lived\nin getting it because of Wall Street's lack of acquaintance with local\nwith them. My name has been on the note at the bank for more\nconditions, have had to pay such a high rate, and have had to give\nmoney than I could possibly pay unless the seedcorn were sold. I\ndomination of their business oftentimes, that the experience has been\nknow what that experience is. I have been up against that more than\nrather undesirable.\nmany men who claim that they are hard-headed realistic businessmen\nCould 1 continue this quotation?\nand I am not. I know what that is because I have been up against it.\nThe CHAIRMAN. Yes.\nLast year this company sold more than $1,000,000 worth of seed\nMr. WALLACE (reading)\ncorn. I resigned as president of the concern when I came to Wash-\nington, and shortly thereafter I got my brother into the business.\nNor do I think It can be solved from Washington or even at all by Government\nalone. If, for example, the Government sets up a large pool of money, It is\nLast night he called me up to wish me luck at the hearing this morn-\nprobable that not being familiar with the local conditions and individuals, the\ning and I asked just out of curiosity how much money the concern\nfunds will either be handled too conservatively and thus not made adequately\nowed the banks at the present time and was told it was $800,000. Of\navailable, or too recklessly and thus lost.\ncourse, if the sales of corn go well between now and next May all of\nIndications of a possible solution may be obtained from consideration of\ncertain characteristics of the problem. In the first place, though It has very\nthat money will be paid off. Last year, I believe, they borrowed some-\nimportant national, social, political, and economie repercussions, It is primarily and\nthing like $1,000,000. They have always paid off the money they\nand essentially local. It is the home folks who have the most Immediate\nborrowed at the banks.\nperceptible gain to look for by solving It in the form of additional employment, they are\nI won't go into any more details on that, If any of you have any\nlarger rolls, more production, and more business. Furthermore, financial and\nquestions about any aspects of my business, either in private life or\ncharacter risks involved. They can best appraise the potentialities the capa- local\nthe only pay people who know intimately the several businesses, the and\nin Government, I will be pleased to answer them. I have always felt\nbilities of the management. And so any plan looking to the revival the outset of aspects\nganda too much.\nthis kind of talk more or less was beside the point and dignified propa-\ncapital and credit markets must, It seems to me, recognize at and\nof and seek Its solution through local Initiative, responsibility. involved, but\ncontrol. there Is also In the way Important stimulation of the watchful eye of\nthe problems this not only are community pride and benefits one's neighbors\nyou understand that to bel\nThe CHAIRMAN. You spoke just now of equity financing. What do\nconstantly alert with approval or disapproval.\nIt means that long-time capital is, in effect, a share in the business.\nMr. WALLACE. Common stocks are equity financing, for example.\nI said in my prepared statement that is, take care of the unusual\nSome place in here he indicates that the Government can do what risks\n90\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n91\ninvolved and, in effect, handle the problem some way like the F. H. A.\nstock piles and as a consequence we let the material go to Fascist\nhas handled it, 80 that you have a government serving as a pool agent,\nnations. That was the implication of your statement.\nso that the occasional losses are balanced out against the majority\nMr. WALLACE. Yes, sir.\ngains.\nThe CHAIRMAN. It happens that I have a good deal of correspond-\nThe CHAIRMAN. I don't think that reaches the question. My ques-\nence on that subject which I will be glad to show you. I filed with\ntion was whether you would advocate the financing of small business\nthe Secretary of State in the year 1938 and again in the year 1939\non the equity basis. That, of course, is by way of taking stock.\ncomplaints from good people in this country who were in great\nMr. WALLACE. I would hope that it would be possible to get it done\nsympathy with China. Most of them had lived over there as mis-\nby the Government, in effect, furnishing insurance to the local folks.\nsionaries and they said that we were sending oil and scrap iron to\nThat is, I think you can get the most employment by having it done\nJapan while the Japanese were fighting China. Mr. Hull wrote me\nthat way.\ntwo letters and in each instance said we would have to do that, that\nThe CHAIRMAN. You have the idea of the Government guaranteeing\nwe were under a treaty, an economic treaty, and if we undertook to\ndividends on the stock and repayment as part of the investment?\nwithhold oil and scrap iron from Japan at that time we would make\nMr. WALLACE. Senator, I would like to present full details to the\nbad matters worse; we would induce Japan to move, as she has since\ncommittee later. I might say that while I might make suggestions\nmoved, to the oil countries with a view of taking over a lot of\nalong that line, because I have been concerned with the problem, I\nterritory.\nwould like any presentation that I might present to the committee\nSo, wasn't that the Government policy of which you are com-\nto be looked on quite tentatively and probably subject to continuous\nlater modifications.\nplaining? Mr. WALLACE. No; I wasn't referring to that at all. I was re-\nThe CHAIRMAN. That will be satisfactory. However, it is extremely\nferring to the failure to buy certain strategic materials.\nimportant.\nThe CHAIRMAN. We failed to buy aluminum, and other nations got\nMr. WALLACE. I think it is one of the most important points if we\nit. I have a statement that aluminum could be had in 1939, $00,000,000\nare going to get full employment in this country, and especially in\npounds, but there was no market here, and under the treaty and with\nthe Middle West, the South, and the far West.\nthe encouragement of the State Department it was sold where there\nThe CHAIRMAN, You will bear in mind in preparing that that the\nwas a market for it. I think that was characteristic of this country.\ncommon stock, as a rule is the exclusive voting stock and if the Gov-\nWe sold our scrap iron, as you know. I will add another thing about\nernment takes over the common stock or any great portion of it, it is\nthat. Mr. Hull stated to me in his letter that the serap iron that was\ntaking over the control, I will leave it right there for you to answer.\ngoing to Japan was near the coast and too far from the steel plants,\nSenator PEPPER. Mr. Wallace\nand, therefore, everything we sold we were just saving. That was a\nThe CHAIRMAN (interposing). I want to finish my examination.\nmistake of Government policy, was it not?\nSenator PEPPER. There is one point on that subject that I would\nMr. WALLACE. I think it was a mistake, very definitely.\nlike to bring out before the hearing is terminated. I apologize if you\nThe CHAIRMAN. You wouldn't blame it on Mr. Jones especially, or\nhaven't finished.\nthe R. F. C.?\nThe CHAIRMAN. I haven't finished by a long shot.\nMr. WALLACE. Well, as a matter of fact, in July 1943 I did.\nSenator PEPPER. I am sorry.\nSenator BREWSTER. The sale of scrap iron?\nThe CHAIRMAN. You spoke of small business getting money from\nMr. WALLACE. Not the scrap. The Senator was using his scrap\nWall Street. Small business gets its money from the local banks.\nillustration to indicate the whole unawareness of the public. The\nMr. WALLACE I was quoting Mr. Eberstadt.\nSenator can repeat what he said.\nThe CHAIRMAN. Mr. Eberstadt makes the picture there of small\nThe CHAIRMAN. My inquiry related to the scrap.\nbusinesses all over this country going up to Wall Street and being\nThe CHAIRMAN. I know you didn't. 1. am talking about the general\nMr. WALLACE. I said nothing about scrap myself.\nturned down. Now, the small business goes to its local bank and the\nlocal bank is in position to understand the nature of the business and\npolicy. You will agree with me that the general policy in 1938 and\nthe prospects. Is the complaint against the small bank?\n1939 was to go on selling to the people in Japan, or to the Kingdom of\nMr. WALLACE. No; it would not be against the local bank except\nJapan, anything that they would buy over here?\non this basis, that increasingly since 1913, and especially since the\nMr. WALLACE. Unfortunately it was. I don't quite get the point you\ndepression of 1930, the small banks have been operating under bank\nare making relative to my statement.\nexamining rules which make it impossible for that small bank to\nThe CHAIRMAN. Your suggestion was that we had let other nations\nengage in this field.\nThe CHAIRMAN. They were Federal rules.\nhave these goods.\nthere failure to buy in the Dutch East Indies adequate quantities that\nMr. WALLACE. I didn't mean to refer to that. Let's say specifically\nMr. WALLACE. That is correct. Well, there were State bank ex-\nexaminers, aminers, but at the present time they are nearly all Federal bank\nof the was materials available in the Dutch East Indies, materials\nwere very vital to our economy in case we got into war.\nThe CHAIRMAN. That brings me to another matter. You refer to\nMr. WALLACE. Yes, sir; rubber, tin, and quinine.\nSenator BREWSTER. Rubber?\nthe fact that there was a period in which we were not building up our\n92\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n93\nThe CHAIRMAN. There was no suggestion that we buy in the Dutch\nSo, I think the policy at that time was one of accommodation and\nEast Indies until we had gotten into the war period.\nperhaps-to use a bad word-one of appeasement. I don't think it\nMr. WALLACE. Frankly, I think it indicates a lack of foresight and\nis a bad word, although it did get a black eye at Munich.\nvision that we didn't do it.\nMr. WALLACE. Frankly, I think it would have been good policy\nThe CHAIRMAN. That was not the fault of the R. F. C. especially.\nduring that period when we knew what Japan, Mussolini, and Hitler\nThat was the fault of the administration, as conducted by the President\nwere up to, to have more than the usual quantities on hand. We had\nand Secretary of State.\nstockpiles in agriculture. In the case of corn we had about 5 times\nMr. WALLACE. Frankly, I say it was the fault of certain advisers\nthe normal carry-over in the fall of 1940 than we normally had. We\nwho should have informed the President. I say very specifically it\nhad 100,000,000 extra bushels of wheat. That kind of thing came\nwas the fault of certain advisers who should have advised the Presi-\nin mighty handy.\ndent more adequately on what the world picture was, really was.\nThe CHAIRMAN. That is all right. I was bringing out the point of\nI will say, for my own part, as long as you are pressing this in\nthe national policy. I don't think the United States accumulated a\nthis way, that I felt there was a very great danger. Let me give you\nsurplus of corn with a view of war. We have had frequently a sur-\na specific illustration, Senator. On April 13, 1939, I believe, I came\nplus of agricultural commodities. Our biggest complaint in the past\nup to the Capitol and sought out Senator Byrnes. There was a par-\nhas been that we have had too much surplus.\nticular hearing on. This whole thing is in the Congressional Record,\nMr. WALLACE. Nevertheless, Senator, it was a good thing to have\nif you care to verify it. At that time I felt there was a great danger\nhad a stock pile on hand. I will say to the Senator that it definitely\nof war with Japan. At that time I told Senator Byrnes that I thought\nwas not out of my mind.\nit would be a mighty smart thing if we took cotton which we had\nThe CHAIRMAN. We had a great surplus of cotton, and it was a great\nstored up and traded it to England for rubber. The Senator agreed\nburden, but we didn't accumulate it with the expectation of war.\nwith me. I went down immediately to the State Department. I\nMr. WALLACE. I never used it as an argument on the Hill because\nknew in the State Department there were folks who had been tre-\nIknew it would be an unfortunate argument to use.\nmendously concerned all the time about this danger of war with Japan,\nThe CHAIRMAN. I will move to another subject. You made an\nand I am sure Secretary Hull was tremendously concerned.\nanalogy between our present condition of prosperity, based alto-\nI went to see Herbert Feis, because I knew Herbert Feis had always\ngether on the war spending and the war borrowing, and the post-war\nbeen interested in rubber, as I had been. Herbert Feis was con-\nprosperity. It wouldn't be prosperous if it were based on taxation.\nvinced of the trouble that was ahead and was convinced that trouble\nWe spent on war last year $90,000,000,000 and expect to spend this\nwould reach us via rubber. I backed rubber when I was Secretary\nof Agriculture. I backed rubber when Congress tried to take the\nyear about seventy-five or eighty billion. Now, that makes a certain\nsort of prosperity. That is prosperity based on borrowing, just like\nappropriations away entirely. If the Congress will go over its record\nif I borrow a million dollars a year and present a certain kind of\nit will see that it is not absolutely perfect, I must say.\nMr. Byrnes agreed and Herbert Feis agreed. Herbert Feis made\nprosperity. You say we can produce the same conditions in the post-war world.\nit possible for me to get clearance. The State Department did not\nlike the idea of commodity interchanges, felt that it was not quite\nHow much do you contemplate we borrow or how much would you\nthe best way of doing business, but the State Department agreed.\nraise by taxation to do that?\nJoe Kennedy cooperated beautifully.\nMr. WALLACE. Well, Senator, I think you have to realize a very\nWe made the exchange of 600,000 bales of cotton. The cotton was\nlarge part of this very large governmental expenditure has gone into\non the basis of the price in the first 6 months of 1939 at New Orleans,\nthe hands of the consuming public in the form of savings.\nand the rubber in the same period. We got 90,500 long tons of rubber\nSenator BAILEY. Always does.\nout of it, enough, as I remember it, to make 20,000,000 tires.\nMr. WALLACE. Well, in this case the excess savings are rather ex-\nI think that is the kind of imagination that really was required to\ntraordinary. As I remember it, the estimate was that they would\nmeet the stock-piling situation.\namount to $100,000,000,000 at the end of 1944. That was an estimate\nThe CHAIRMAN. Maybe so; but let me call your attention to a vital\nmade in 1943. I haven't seen a current estimate, but $100,000,000,000\nfact. This country passed a Neutrality Act in 1939 in the month\nis more than 10 times what we have had of that type of savings.\nof October. Being chairman of this committee, it was my duty to\nlook after the shipping aspects of that act, and the shipping aspects\nrestrictions. So, I feel that you can't draw any conclusions from the\nNow, that money hasn't gone into expenditure because of war-time\nwere big aspects. You will remember that we created zones, that is,\nwar situation that are altogether applicable to peace.\nplaces where ships could not go. They were called combat zones.\nI to the Senator, with regard to debts of all kinds, both\nWe didn't create those zones around Japan. The act didn't con-\nprivate may and say public, there is a very interesting table in the July 1944\ntemplate that, nor did the President, nor his office. That was the\nissue of the Current Business, a Department of Commerce publica-\nThat came directly from the head of the administration.\norder in which we might ship to Japan. That was the national policy.\ntion, and in that the Senator will find, with regard to all You debts, will\nboth public and private, a most interesting phenomenon. kinds of\nfind that from 1921 to 1929 there was an increase in all\n68424-45-7\n94\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n95\ndebts of $50,000,000,000, $5,000,000,000 a year. From 1929 to 1939\nthere was a decline in total debt, just before the war came on, of\n$9,000,000,000, or an average decline during the period of about a\nwas worth more in purchasing power than it is today.\nThese are pounds, and, of course, in that day a pound of sterling\nbillion dollars a year. I know it is customarily thought that in the\nour case was desperate.\nPamphleteers, historians, and orators pronounced that now, at all events,\ndecade of the twenties we were exceedingly frugal in paying off debts\nSoon war again broke forth; and under the\nand that in the decade of the thirties we were riotously going into\nswelled to a hundred and forty millions;\nenergetic and prodigal administration of the first William Pitt, the debt rapidly\nmen of theory and men of\ndebt, but on the total debt account, public and private, the contrary\nbusiness rived. almost unanimously pronounced that the fatal day had now really ar-\nis exactly true, In one case we went into debt to the extent of 50,-\nNot less gloomy was the view which George Grenville, a minister\n000,000,000, in the twenties, and in the thirties we reduced the total\neminently diligent and practical, took of our financial situation. The nation\nmust, be conceived, sink under a debt of a hundred and forty millions, unless a\ndebt by about 9,000,000,000.\nportion of the load were borne by the American Colonies, The attempt to lay\nSo, I think it is important to probe very deeply into this debt\na portion of the load on the American colonies produced another war. That\nquestion, and I am sure it would tire everyone here completely out\nwar left us with an additional hundred millions of debt, and without the Colonies\nwhose help had been represented as Indispensable,\nif we went into the full aspects of it now.\nSoon, however,\nthe wars which sprang from the French Revolution\nThe CHAIRMAN. I don't intend to. The difference there lies in the\ntasked the powers\nof public credit to the ntmost. When the world was again at rest the funded\nsimple fact that the Government began to borrow and created a\ndebt of England amounted to eight hundred millions,\nIt was in truth\ncertain amount of prosperity on the borrowing and that enabled\na gigantie, a fabulous, debt; and we can hardly wonder that the cry of despair\nshould have been louder than ever. But again that cry was found to have been\nthe people to get along, accelerated the number of transactions in\nas unreasonable as ever. After a few years of exhaustion, England recovered\nbusiness.\nherself. Yet like Addison's valedutinarian, who continued to whimper that\nMr. WALLACE. If I may interpolate, in the decade of the twenties\nhe was dying of consumption fill he became so fat that he was shamed Into\nwhen we were going into debt we had full employment. I think\nsilence, she went on complaining that she was sunk in poverty till her wealth\nwe must give the administration of that day credit.\nshowed Itself by tokens which made her complaints ridiculous. The beggard, the\nbankrupt society not only proved able to meet all its obligations, but while meet-\nThe CHAIRMAN. Would you give the administration credit or would\ning those obligations, grew richer and richer so fast that the growth could almost\nyou give the people credit?\nbe discerned by the eye.\nMr. WALLACE. You have asked a question that would take quite a\nThe prophets of evil were under a double delusion. They erroneously imagined\nlong time to answer. Your questions, Senator, always have the deep-\nthat there was an exact analogy between the ease of an Individual who is In\ndebt to another individual and the case of a society which is in debt to a part of\nest philosophical implications.\nItself.\nThey made no allowance for the effect produced by the Incessant\nThe CHAIRMAN. When the elder Pitt was leading England as Prime\nprogress of every experimental science, and by the Incessant efforts of every man\nMinister-and this was during the time of a war also-the merchants\nto get on In life. They saw that the debt grew; and they forgot that other\npassed a resolution praising him by way of saying that even in war-\nthings grew as well as the debt.\ntime he had made England prosperous. That was because it was\nSenator Danaher, of Connecticut, had a very interesting view on\nthe first time that the Government had borrowed heavily to carry\nthis particular question. He said:\non war. Up to that time the Government taxed. They soon learned\nIf you are satisfied that you get your money's worth, the Federal Budget can\nbetter when it came time to pay their debt. You are proposing a\nbe sald to be balanced.\ntheory here that we should provide prosperity in post-war by greater\nSometimes the boys would like to scare us about the debt. They\nextensions of the borrowing power of this Government, and in view\nused to have pictures of little babies without any clothes on them say-\nof the fact that when the war is over in all probability the national\ndebt will be around $300,000,000,000, and perhaps more.\ning: \"Poor fellow, he owes $1,500 the day he is born.\" Of course, you\nMr. WALLACE, Senator, in that connection I think it perhaps de-\ncould just as well put another picture over here and say, \"Lucky little\nsirable to have a little historic perspective.\nfellow, isn't it grand he has got $1,500 coming to him the very day he\nThe CHAIRMAN. I just gave you a little about Mr. Pitt.\nis born?\"\nAnd one would be as true and one would be just as false as the\nMr. WALLACE. That is what gave me the idea. If I might quote\nfrom Lord Macaulay on this subject [reading]:\nother. When you think the thing through the fundamental point is\nAt every stage in the growth of that debt the nation has set up the same cry\nwhether or not the payments of interest on the debt have altered\nof anguish and despair. At every stage in the growth of that debt It has been\nthe distribution in income as between the different segments of the\nseriously asserted by wise men that bankruptcy and ruin were at hand. Yet\nstill the debt went on growing: and still bankruptcy and rulo were as remote\npopulation. That is the fundamental point, if you are trying to look\nas ever. When the great contest with Louis XIV was finally terminated by the\nat the problem from the standpoint of the economy as a whole.\nsidered peace of Utrecht the nation owed about fifty millions; and that debt was con-\nSenator O'MAHONEY. You were good enough to say that Senators\nby acute and profound thinkers as an Incumbrance which\nwould permanently cripple the body politic. Nevertheless trade flourished\nthat were not members would be permitted questions. My presence\nwealth Increased; the nation became richer and richer. Then came the War\non the floor is required and I would like to ask one or two questions.\nof the Austrian Succession; and the debt rose to eighty millions,\nThe CHAIRMAN. All right.\nSenator O'MAHONEY. The issue, as presented to this committee from and\nthe Senate arises. as you have said in your opening statement,\n96\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n97\nthe fact that you have been nominated as Secretary of Commerce\nSenator O'MAHONEY. You have spoken about enterprise being free\nand from the fact that a bill has been introduced to divest the Sec-\nfrom monopolies and from private control. Do you also consider that\nretary of Commerce of the supervision he now exercises over the\nprivate enterprise should be free from Government regimentation?\nFederal loaning agencies.\nMr. WALLACE. Senator, as much as private enterprise can be free\nThe question, therefore, in my mind, and the only question that\nfrom Government regimentation and yet have the maximum welfare\nI think is really involved here is the extent to which the powers of\nserved, I am strong for it; as a matter of fact, somewhat less than the\nthe Federal loaning agencies should be used by the Secretary of Com-\nmaximum welfare served. At times I have been almost as much\nmerce to effectuate any particular program, social and economic. In\nannoyed by Government bureaucrats as any infuriated businessman.\nlaying down your program for economic democracy in the post-war\nSometimes I have been wrong in my feeling and other times I feel that\nworld, upon several occasions in your opening statement you said,\nI may have been right.\nas I recall it, \"With the approval of Congress.\"\nI agree that as society gets more complex there can be many differ-\nAre we to understand from that statement of yours that it would\nences of opinion as to just where the green and red lights ought to be.\nnot be your purpose if these lending powers were not divorced from\nThere do have to be an increasing number of traffic signals as the\nthe Department of Commerce not to try to effectuate those policies\ncivilization progresses, and the Government does have to place those\nwithout the approval of Congress!\ntraffic signals.\nMr. WALLACE. Obviously, Senator, it would be absolutely essential\nSenator O'MAHONEY. There can be no doubt but that public regula-\nand vital for Congress to set up the program. I always proceeded that\ntion is of great importance. Are we to infer from your statement that\nway as Secretary of Agriculture. How can anyone proceed in any\nit is your belief that the powers of the executive agency should not be\nother way?\nused to change policy without the prior approval of Congress!\nI am aware of the fact that under the R. F. C. as now set up it is\nMr. WALLACE. Certainly; it is obvious.\nnot bound-I mean it hasn't had to observe some of the requirements\nSenator O'MAHONEY. Thank you very much. I am very grateful\nwhich Congress has seen fit to exact of other agencies. If the Con-\nto the chairman.\ngress sees fit. to wish me to administer these agencies, I should think\nMr. WALLACE. I would appreciate it, if I may say, Senator, if I\nthat it would want to protect me and itself and the President by\nshould be given by the Congress this broad supervisory power, if any\nhave to observe.\nseeing that these safeguards are set up which all other departments\nquestion like that comes up, or if any Senator thought this policy was\nnot being observed, that he would let me know.\nSenator O'MAHONEY. I am aware of the fact that as Secretary of\nThe CHAIRMAN. I take it, Mr. Wallace, your answer to my question\nAgriculture that was your policy. But there is possibility of con-\nwas in the affirmative.\nfusion in the public mind owing to the fact that you have come here\nthis morning with a broad program for stimulating employment, and\nThe CHAIRMAN. I asked you if you were of the opinion that in the\nMr. WALLACE. I have forgotten what your question was.\nenterprise. therefore stimulating business. You have talked of promoting free\npost-war which have outlined here by continuing to borrow money on from top\nperiod we should undertake to accomplish these objectives\nNow, the question naturally would occur whether or not it was your\npurpose to use these tremendously broad and unlimited powers which\nMacauley by way of showing that the English people were weeping at\nof the prospective you national debt of $300,000,000,000. You quoted\nhave gathered under the Federal loan agencies to carry out this pro-\ngram you have envisaged and laid before this committee without\nall to be compared to $300,000,000,000. You answered in the\nand wailing at $50,000,000 and finally at $800,000,000, which is affirma- not\nprevious authorization from the Congress. Now, before you answer,\ntive.\nmay I say again that the powers, which were granted to the first place\nThat didn't trouble me at all. I thought about Mr. H. K. Carroll the\nThe CHAIRMAN. I read that statement from Macaulay vears ago.\nMr. WALLACE. Not necessarily.\nFrom that emergency we moved into the emergency of preparation\nto the R. F. C., were granted in a period of grave economic emergency.\nfor the war and of the war, and during all this period new broad\npowers were granted, with great discretion to the loàn agencies.\nAmerican economy had finished and need not go any further. it. I\n(Superintendent of the Census of 1890) who said in 1890 that would\nNow, do you believe that those undefined and unlimited powers of\nlike to get your answer as definitely as you feel you can make\nthese ends?\nsuch great magnitude should be used by Executive action to achieve\nincreasing the debt, and that is by getting the maximum of equity\nMr. WALLACE. There is one way of getting full employment without\nMr. WALLACE, I would think, Senator, that it would be highly de-\nfinance; that is, common stock investment.\nsirable for Congress, as it has done repeatedly in the past, to amend\nThe CHAIRMAN. You are not ready to say the Government should\nthe R. F. C. Act to define very clearly just what the Congress desires\nwith regard to carrying out any or all of the program which I have\nbuy Mr. the WALLACE common stock? No. You can get full employment by increasing modi-\nset forth this morning.\nprivate equity financing by a combination-well, under some\nbeing- Senator O'MAHONET. You have spoken about free enterprise\nfication of the F. H. A. plan.\nThe CHAIRMAN. F. H. A. is not equity financing.\nMr. WALLACE. I know, for my own part, I would feel it a very great\nMr. WALLACE. You don't think so, Senator! It is not in industry,\nsafeguard in administration if Congress would take that action.\nJ will grant.\n98\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n99\nThe CHAIRMAN. It is not equity financing. It is a lending agency.\nMr. WALLACE. It is a long-time loan and it is a debt.\nThe CHAIRMAN. You would invoke the full welfare- and commerce-\nThe CHAIRMAN, A loan is never equity financing, because a. loan\nclause powers?\nis against the whole property.\nMr. WALLACE. You are talking about the writing of legislation?\nThe CHAIRMAN. I am talking about the source of the power to do\nMr. WALLACE. I was thinking about the method whereby the Gov-\nernment participated when I made the statement,\nwhat you have in mind.\nThe CHAIRMAN. Now, I have another question for you.\nSenator WILEY. Mr. Chairman, we can't hear you.\nThe CHAIRMAN. You wouldn't go beyond the Constitution, but as I\nMr. WALLACE. Under the Constitution, yes,\nMr. WALLACE. I want to make this one point further, Senator. We\nunderstand now the Constitution is so interpreted the Congress can\ncan carry the interest on the $250,000,000,000 or $300,000,000,000 at\nappropriate any amount of money for any purpose it finds to be in\nlow interest rates. We can carry the total interest burden of the\nthe general welfare. It has been extended now to the small merchant,\ncountry, both public and private, provided we do have people fully\nbecause his activity, as interpreted now, affects the general commerce\nemployed and do have full production. One of the very strong argu-\nof the country. Now, you go a step further and regulate the opera-\nments for doing this is that it is the only way we can carry our tremen-\ntion of a farm in Ohio or North Carolina. Do you intend to employ\ndous debt load easily.\nthose full powers to bring about this situation that you speak limited of\nbut the moment the American public begins to sell the bonds you are\nvided the people continue to absorb and hold the bonds at the moment,\nThe CHAIRMAN, You have got a further proviso, and that is pro-\nThey would be in substitution, of course, for the present\npowers. Mr. WALLACE. I don't think we did quite the thing to the farmer\ngoing to have very great difficulty carrying your debt.\nthat indicated.\nMr. WALLACE. That is why, it seems to me, the Treasury, in\nThe you CHAIRMAN. What I had in mind is very simple. We tell the\nticular, has a tremendous stake in seeing that we don't start on par-\ntailspin of unemployment. It has a tremendous stake in reassuring any\nin cotton and if he produces more, he cannot sell without a heavy\nfarmer he can cultivate so many acres in wheat and so many acres\nbusinessmen that that is not coming to pass. The stake is so\nthat the Government is well warranted in working out some device great\npenalty. WALLACE. I remember how eager the Senator was to time have the re-\nthat will give necessary assurance to people who want to engage in\nstrictions Mr. on the potato crop some years ago. At that when the\nequity financing.\nSenator may of Israel came to Samuel and said they were tired will judges do\nput remember that I referred to the Bible story, of\nThe CHAIRMAN. The difference is that we are now buying bonds\na matter of duty, but once We get prosperity, We will buy investments as\nchildren wanted king, and Samuel said, \"it is up to you-a king and have\nthe time of peace for the sake of the Government; they carry them for\nas a matter of self-interest. People don't carry Government bonds in\nand bad things a to you but if you want a king Senator. go ahead\nmany one.\" think that is exactly what I said to the\nsake of themselves; but right now they are carried for the sake of\nCHAIRMAN. I We are getting off a little ways from and the we track, had\nthe Government.\nbut I the regulation of everything else, and I did that the potato you\nThe will meet that. The blood had already been spilt think if\nor something of that sort,\nbusinessmen have invested on the basis of local patriotism in a hotel\nMr. WALLACE. I have known in our home locality where the local\ngone into to regulate cotton, tobacco, wheat, and corn were driven out\nwere going be protected against those people who and\nThe CHAIRMAN. And always lost?\nof farmer cotton might and corn and were anticipating going into potatoes\nwelfare they are not immune to investing from the standpoint of the general\nMr. WALLACE. That has been my experience, sir. But it shows that\nbreaking the now potato that farmers' I didn't market. think that was good legislation. the\nof the community.\nI will say BREWSTER. I think the potato legislation is that most is un- the\nyour analogy. It was under the national defense powers, which with\nThe CHAIRMAN. I will not argue that. I want to get further\nfortunate instance I know in your record, or in that of any an act of Con-\nSenator precedent which you could bring up here, since Cabinet officer,\nmendous practically unlimited in my view, that we proceeded with this are\nonly has publicly announced that he would defy deal of concern.\ndefense was necessary, to fight the war. But when the war is\never expenditure of borrowing and lending money, doing what- tre-\ngress, Mr. WALLACE. you If you will look into the full record, you\nwhen he and will remember that caused a good will find that\npowers will be out. Now, do you intend to invoke over the\nI did\nof Congress, other with a view for this program you have outlined, the from the\nThe and was brought to me. But we had a little about controversy that, as\nnot CHAIRMAN. do that. I think the bill was prepared in the Department of\npowers, welfare powers, or commerce-clause exercise\npresent for a long interpreted, time to come? and as I think they are likely to be powers, interpreted as at\nAgriculture about the enforcement, but I have never complained\nyou know.\nMr. WALLACE. Do I intend to\nThe have CHAIRMAN. You will have to find the power\nMr. Let's get a little further on. I think you offend gave us\nWALLACE. Yes, sir.\nment. will to have power equal with the defense powers somewhere; of the you\nThe CHAIRMAN. that was very desirable and-I hope I the don't concrete part you\nMr. WALLACE. Now, I was asking you where you would look for those Govern- powers.\na statement say-idealistic. I am trying to get down to economic bill of\nThe Congress is the only institution.\nwhen of it. I You speak of the implementation of the\n100\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n101\nrights. What action do you contemplate from Congress in the form\nof statutes to implement this bill of rights!\na Brettonwoods step and agreed on a plan. What the details I cer-\nforward had been made when these 44 nations had of the met plan at\nMr. WALLACE. Obviously, there would be required bills under every\nwill be when finally worked out, I cannot tell the Senator.\none of these eight points. I think there has been introduced in\nCongress a bill covering the full employment matter. I think Sen-\ntainly would not attempt to speak for the 44 nations.\nThe CHAIRMAN. You said you had a plan.\nThomas ator Murray, Senator O'Mahoney, Senator Wagner, and Senator\nMr. WALLACE. CHAIRMAN. No: Now, I didn't you say said that. the foreign trade would of provide course,\nThe CHAIRMAN (interposing). That was a bill mainly to create a\ncommittee to prepare plans. There was very little affirmative action,\nadditional workers. Foreign trade will be based also for\nThe employment over here, our shipments abroad, either on our\ncertainly no concrete action, proposed in that bill.\nfor 3,000,000 exporting to us. So, that will provide selling to us,\nMr. WALLACE, Yes, there was some very substantial concrete action\nin the bill. As the President pointed out in his message to Con-\nlending three to money five million or more men abroad engaged in\ngress this year, he looked on that first plank in the economic bill of\nwouldn't\nMr. WALLACE. it? Well, it will depend on how efficient they are. If\nit rights as the most important one, and the action taken under this bill,\nseems to me, would result in bringing forward other proposals that\nthey are very inefficient, Then, it might you contemplate take 10,000,000. increasing our by employ- five to\nbill of rights,\nwould carry out, at least, some of the other planks in the economic\nment The by CHAIRMAN. 3,000,000 on foreign-trade account and the foreign\nThe CHAIRMAN. Later on in your statement you spoke about sta-\nten million?\nbilizing the economies, and particularly the currencies in other coun-\nMr. WALLACE. It I depends will put on how in your efficient qualifications, they are. \"depending would on\ntries, You think we can do that over here?\nMr. WALLACE. I think you should have someone from the State De-\nhow The efficient CHAIRMAN. they are.\" They wouldn't be on equal wages,\npartment and Treasury to discuss the Bretton Woods proposals.\nthey? Mr. WALLACE. No country has such a high standard of wages as\nbeen no stabilization of currency in France since the First World War,\nThe CHAIRMAN. Let me put a concrete question to you. There has\nwe\nThe have. CHAIRMAN. Have you got a definite plan about these 8,000,000\nUnited States stabilize the currency of France?\nThe frane has gone down from 25 cents to 1 or 2. How would the\nadditional\nmen? Senator, what we import from abroad what doesn't we nec- are\nMr. WALLACE. At the present time it is obviously impossible.\nessarily Mr. WALLACE. mean less employment here. It depends on\nwithin the past 25 years?\nThe CHAIRMAN. Do you think we could have done it at any time\nimportant\nThe CHAIRMAN. from abroad. It means you have got to buy it abroad to get it\nand hoped of for. If you have reasonable assurance of permanent as can\nbe there is assurance of permanent peace, or as much assurance\nMr. WALLACE, I think you can get stability of currency only when\nover here.\nMr. WALLACE. CHAIRMAN. That What is right. do the people service abroad have to sell us?\ntwo countries are the balance wheel for the whole world for all\npermanent employment in this country and England-and peace these\nThe Mr. WALLACE. They (interposing). have tourist What would justify 3,000,000 the employ- more\nment world that will make it possible for them to have full\nkeystone the to creating that degree of market for the other countries the of\nraw material producing countries of the world-then you will have the\nment The of CHAIRMAN 3,000,000 more people, or the equivalent of\nmen,\nMr. here? WALLACE They have tourist service, Senator, which they are\ndetermined. it is in the world trade where the currency relationships trade, are\nbecause and fair prices for the products which enter into world employ-\nvery\nThe eager CHAIRMAN to sell us (interposing). But we had those before and we are\nThe CHAIRMAN. What is the concrete proposition to stabilize the\nnot\nlikely to have Yes; more. I think we are, Senator. With tourists the traveling airplane\nthe currency in any foreign country, or in several, assuming that we had\nin Mr. the picture, WALLACE. I think definitely we will have more\nprospect of permanent peace?\nMr. WALLACE. I think you would have to get someone from the\nabroad. The CHAIRMAN. We may have some more. I am talking about the\nTreasury to discuss that point.\nsaid your paper.\nThe in CHAIRMA. But you have that in mind. That is what you\nobjectives Mr. WALLACE. now. Would the Senator like me to submit some other\nMr. WALLACE. No. The point I made in the paper that\nadditional information?\nthere this matter of getting full employment it is highly desirable was in\nThe WALLACE. CHAIRMAN. I don't What? care to bore the Senator. me.\nI\nam\ntrying\nto\nfind\nfar of world trade the restrictions to world trade should max-\nimum should be the maximum of world trade and in getting the that\nMr. The CHAIRMAN. You are not going to bore\ntrade as is possible, removed, and that one of the restrictions be, as\nout what you have got on\nMr. WALLACE. The Senator foot. is putting foot. it quite wrong. At the pres-\nthe uncertainty with regard to currency, and that on I world felt\nent time it is not what I have got on\nRegraded Unclassified\n102\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n103\nThe CHAIRMAN. Well, what have you in your mind\nthe other representatives there. I know that they felt that as a result\nMr. WALLACE. As a matter of fact, this is just a little intellectual\nthey would be pushed into taking countervailing measures, which later\nexercise, as far as I am concerned.\non they did. That is when the world tailspin really began with a\nThe CHAIRMAN. I hope you are enjoying it very much.\nMr. WALLACE. I am, very much. [Laughter.]\nvengeance. Now, here we come after this war. Again, we are again a creditor\nThe CHAIRMAN. I am trying to get at the ways and means\nnation. I want to say that I have considerable sympathy with Herbert\nMr. WALLACE. This whole question of balance of payments is one\nHoover's problem as Secretary of Commerce right now, because I can\nwhich has been of most vital interest to me ever since 1919 and I have\nI am going to go all-out to get the maximum of use out of what-\ngone into the various ramifications in very great detail. I may say\nsay ever powers may reside in the Bureau of Foreign and Domestic Com-\nto the Republican Senators that it is on the basis of that that I left\nmerce to foster and develop trade here and abroad. 1 am going to\nthe Republican Party; that is, the Republican Party was not willing\nuse those powers to the maximum to get an increase in foreign trade\nto see this Nation adopt a policy in conformity with our credit or\nthere will be a great excess of exports over imports. As Secretary of\nand, undoubtedly, for a period of 5 or possibly 10 years after the war\nposition. I must say that the problem was not quite as simple as I\nthought it was when I left the Republican Party. [Laughter.]\nCommerce I would be contributing perhaps as much as any single\nThis doesn't have much to do with my being Secretary of Com-\nindividual to producing a situation like that for which I criticized\nmerce, but if you would like to have my full opinion, I would be most\nhappy to give it to you.\nthe Republican Party back in the decade of the twenties.\nI from the standpoint of the United States and the whole\nThe CHAIRMAN, I am not going to object. I asked the question\nand you have the right to answer it.\nworld, say, that there should for a time be an excess of exports over imports the\nbut we should embark on this policy with our eyes open, with Those\nMr. WALLACE After World War I when we emerged as a creditor\nidea that eventually we will receive more goods than we export.\nnation, and a very great foreign trade drive was put on through the\nwho are in Congress who are going to be here for a period of\nDepartment of Commerce, I felt very critical because simultaneously\nwith that very powerful foreign trade-and I think it was very skil-\nyears; men and that means, of course, the southern Senators should keep\nfully done-we raised our tariff, and I used to go around the country\nthis in mind.\nThe CHAIRMAN. Not all of them. They change.\nsaying to the farm falks, \"There is going to be a great deal of trouble\nMr. WALLACE. The two imports this country, during the past. and 10\ncoming to the farmer, because here is the United States, a creditor\nhas been willing to receive most willingly have been gold countries\nnation, saying to the outside world with regard to the debt the out-\nyears, silver. These gold and silver imports have enabled foreign na-\nside world owes to the United States, 'Come here and pay up' and\nto tions have a benefitted greatly as a result of our purchase of gold have\nfinance large volume of purchases from us. Certain foreign and\nsaying it in a very mean and very dirty tone of voice through all the\nnewspapers, and congressional speeches.\"\nThen we put a pitchfork against the bellies of these foreign nations,\nsilver. much of it, but at the same time, if we are interested in the such\nI wouldn't go anything to minimize gold, because maximum we\nsaying, \"No you don't, you so-and-so, stay away from here, we won't\nso welfare in the long run, eventually we must build up to accept pros-\nlet you pay up.\" I said that kind of thing was found to produce\nhuman in the United States that we will be willing and happy done for a\nforeign nations.\nirritation, bound to create the most serious kind of trouble in those\nperity more goods than we export. I don't think that can be\nI really think it was the fundamental cause of the rise of Hitler, the\nperiod CHAIRMAN. of a good many You years. could do that by lending money to the for foreign their\nfundamental cause for a great deal of disturbances we have had all\nnations, The or we could do it by opening our doors further\nover the world. I have felt. that most deeply.\nNow, it was most important to our full employment in the decade\ntrade\nMr. be loaned, and we hope on private account, and I we am hope sure it\nhere. WALLACE. I suspect, Senator, that a great deal of money will also\nto the farmer that those loans also serve to create a market abroad for\nof the twenties that we finance exports abroad. It was important\nhave to the complete knowledge of the Government, as volume of\nfarm products. Simultaneously we strongly expanded our drive\nwill with be. A great deal of money will be loaned if a large\nfor exports under Secretary of Commerce Hoover, As a result of loans\nthe prices were higher than they would have otherwise been on the\nexport is to it be is financed. very important for us to furnish machinery industrialized. and\nwheat and corn products, and tobacco and cotton. The fact that we\nwere exporting industrial products abroad helped the manufacturers\nmachine will enable them to industrialize themselves as fast as possible.\nI think tools to these foreign nations that are not\npeople in New England, Ohio, Michigan, and many other States, But\nThis Then will enlarge their purchases from us of other which things.\nwhen we exported so much more than we imported, and refused to\nthey have reached a stage somewhat analogous to that England decisive\nthe accept goods, a day of reckoning was inevitable. When we raised\ntariff a second time that day of reckoning came.\nreached, and say, assume our responsibility we will again I. create\nWe 70 years ago. If we don't step forward in some a situation\nEngland in 1929 at the time that bill had been introduced in the\nI was attending an international economic conference in southern\nsimilar way that which existed after World War\nThe number of gainfully employed people, on wages Government as as\nCHAIRMAN. to Now, one more question. You stated that good when-\nHouse, the but it had not reached the Senate, I know the effect it had\non economists on the Continent; the effect it had on the British and\never those our existing now, should full below 57,000,000, the\n104\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n105\nshould take steps. But you didn't say what steps. I would like to\nThe CHAIRMAN. But we get our present income\nknow what steps.\nMr. WALLACE (interposing). May I also state this, Senator, that\nMr. WALLACE Governmental building and construction, roads, air-\nwith that kind of income the burden of interest on all debt, public and\nports, and so forth-should be blue-printed so they could serve as a\nprompt basis for construction activity when needed.\nprivate, will not be substantially more on a percentage basis than it\nwas during the decade of the twenties.\nworks? The CHAIRMAN. You contemplate a very vast system of public\nThe CHAIRMAN. But we get our present income of $150,000,000,000\nMr. WALLACE. I think we ought to have a very large volume of\nto $160,000,000,000, national income.\nMr. WALLACE. A total product in excess of $200,000,000,000, Senator.\npublic works blueprinted in case the need should arise, I would hope\nThe CHAIRMAN. The total product, yes. You were talking about\nit would be possible so to stimulate private activity that we wouldn't\nhave to construct the less desirable type of public works.\nthe income and that would be $200,000,000,000 on the total product.\nThe CHAIRMAN. How would that be provided for?\nWe get that very largely on production of munitions and borrowed\nMr. WALLACE. That would depend upon what the state of finances\nwould be at the time,\nmoney. Mr. WALLACE. That is right.\nThe CHAIRMAN, In the present state or any time in the near future.\nThe CHAIRMAN. Do you contemplate that we can get anything like\nYou say in your statement that you propose a reduction of taxation,\nthe national income of $150,000,000,000 or the total products of $200,-\nMr. WALLACE. I think you can get more taxes from what I pro-\n000,000,000 without really exhausting the credit of this country!\nposed in this testimony than under any other approach because, after\nMr. WALLACE. Senator, when the munitions production is finished it\nall, in the final analysis an unbalanced budget is men out of work,\nwill be necessary to find other places for the activity of our men, mate-\nand if you have a large quantity of men out of work and allow the\nrials, and technologies, and that is why I put forward this program\nnational income to be cut in half, as happened between 1929 and\nhere today. It is only by having a very far-visioned program,\n1932-n reduction from 83 billion down to 40 billion-the effect is so\ngreat that there is a net loss to the Treasury by penny pinching. I\nSenator- The CHAIRMAN. A very far vision?\nmean economy at that time may prove to be a loss,\na total Mr. output of goods and services. Our people have never\nWALLACE. A very far-visioned program, that you can have consumed such\n\"PENNY-WISE-POUND FOOLISH\"\nthe amount necessary in time of peace.\ntinually increasing the national debt instead of reducing the con- na-\nThe CHAIRMAN, Then I gather that your plans contemplate\nsubmitted the by Senator will find listed the consumption by 1940. people You\nIn Senator Chavez, on markets after the war. the\n1943 the Senate printed a document, Senate Document In No. that 40,\ntional debt?\ndocument United States of the various goods and services in 1946 to\nMr. WALLACE. Senator, I think that would require a very careful\nof the find also the consumption that would be needed in of Com- pre-\npresentation that cannot be made in full at this time.\nwill unemployment. Mr. Livingston, of the Department the Senator\nsaid. The CHAIRMAN, I am making my own deduction from what you\nmerce, interested along this line, I would have brought the publication it is\nvent is the author of that publication. If I had known\nMr. WALLACE. I am glad the Senator is making his own deduc-\nwas because it is a fascinating publication, not because the people very\ntion, but I would not want the Senator to draw wrong deductions. I\nwith me, but because it is very stimulating. It indicates that would have\nhope you will not draw wrong deductions.\nprecise United States, in order to prevent unemployment, than they\ntion of the debt.\nThe CHAIRMAN. You submitted no provision looking to any redue-\nto consumed consume in 1940. People in our station of life might\nof the of most consumer goods about 50 percent more not want to\nMr. WALLACE, Yes; I said I thought it was possible to\nconsider consuming 50 percent more of certain things.\nto The reducing the debt. That is what I said in my prepared get statement. around\nWe pay the interest, by issuing a lot of stock to finance it.\nway in different States. When I directed the Farm Security window program open-\nBut of bathtubs, you in the way of housing-1 have been observing\nwhen go over the whole population and see the need in hous- the\ncould CHAIRMAN, As I got it, when you get around to it, you expect\nmy mouth.\nMr. WALLACE Senator, to some extent you are putting words in\nI visited doors in the door frames, where there were 7 or with hous-\ning homes where there were no windows in the 8 children\nThe CHAIRMAN, I would not do that.\nand ings, only no one bed. There are myriads of things connected 1940.\nMr. but WALLACE, Some of the words came out of my mouth\ning of which we could consume twice as much as in\nedly, cate if I might summarize it for myself, I would like also undoubt-\nThe CHAIRMAN. T have finished my questions.\nproduct to the Senator that if we can have full employment and to indi-\nDoes any other Senator have any questions!\nresult in will fare better than it will under any plan which the na-\ntional debt of goods and services in excess of $170,000,000,000, a total\nSenator BURTON. I have one question.\nof much reduced employment. or a total product of goods and services will\nThe Senator CHAIRMAN. BURTON. Go There ahead, is just Senator. one question that I wish to get clearly\nless than $170,000,000,000.\nstated in the record.\n106\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n107\nWe have been discussing this issue today on the broad plane of\nAgriculture were helpful in administering the various farm credit\nmajor national policies, not on personalities, nor on the question of\nshort-term policies. It was brought out yesterday in Senator George's\nagencies. Senator BURTON. There you did not have a relation to agriculture,\ntestimony that, of course, this bill is not a bill to abolish the Federal\nbut here you say the Department of Commerce relates to everything\nLoan Agency. The Federal Loan Agency will continue, and if the\nin the world. We have greater difficulty in saying loaning agencies of\nbill is not passed, 6 months after the war it would be separated from\nof all kinds should be really brought within the Department\nthe Department of Commerce.\nMr. WALLACE. That is true, sir.\nCommerce. Mr. WALLACE. If you will read section 5 (d)-I wonder if I have\nSenator BURTON. Your program, as you outlined it this morning,\ndealt with a much longer view than that. You were contemplating, I\na copy Senator of it- BURTON. Of the Reconstruction Finance Act?\nthink, that even though it was separated from the Department of\nSenator Mr. BURTON. That was read to us yesterday in full, and it\nWALLACE. Of the Reconstruction Finance Act.\nCommerce your program could go along just the same.\ncific policies. I want to indicate that if it were under my supervision\nMr. WALLACE. Senator, subject to the approval of Congress of spe-\ncovers the world.\nMr. of maintaining and promoting the economy and find, if\nWALLACE. You will find that credit is given to the R. F. stability C. for\nI would be coming to the Congress and asking for approval, if it were\nin my bailiwick. If it were health, it might be in Tom Parran's\nthe purpose or encouraging employment. You will that you its\nbailiwick; but if it were in my sphere of competence I would be coming\nof the the country, statutory functions of the Department of Commerce foster manu-\nto the Congress and asking for certain types of legislation looking in\nread cover very much the same field, to promote and and so on.\nthis direction, because I do believe that in the post-war period the\nfunctions shipping, commerce, foreign and domestic, trade, of govern-\nproblems will be so great that inevitably the Congress will renew\nfacturing, I have observed—I have sat in on a number about the\nthe charter of R. F. C. when that charter expires in 1947. But in\ndoing it will no doubt modify the legislation to take care of the prob- so\nmental involved in managing such far-flung machinery The as President we\nInsofar reorganizations, as and I have been greatly concerned have\nlems that would seem to be emerging at that time.\nnow; I have against a tremendous problem, with about has been,\nproblem talked with the reorganization experts. 47 different\nof Commerce I would, subject to the Congress, try to administer it,\nI want the Congress to know how if it were put in the Department\nhad been reporting up to him directly. The recent tendency these separate\nthing that counts now, but after the war period is over I think it is\nafter the war period is over. I made it clear that the war is the only\nin agencies order to get efficient organization, to get as many of\nonly fair that you know the direction in which I would be exerting\nagencies as possible into One a point Cabinet in department. my mind was this: understood In your con- it,\nmyself with the Congress.\ncluding statement of vision ahead extended so that\nSenator BURTON. this morning, you did recognize, far as and I that the value\npassed and within 6 months after the war the Federal Loan\nSenator BURTON. It would be clear that if the George bill were not\nthat the scope be contributed your by the loan agency was so the great George you bill\nwould be continued, but continued apart from the Department Agency of\nwhich might satisfied to go ahead either with or without of Commerce:\ndefeat of the Therefore, George bill, your does program it? does not turn on the passage or\nit Commerce, to be. that your program would still be what you contemplate\nseparating would be the loan Oh, agency I am just from like the everybody Department else, 1 am just we can a soldier. make\nMr. The WALLACE. CHAIRMAN. I think we have reached a place where\nBoth rather the extensive experience with credit agencies and farm\nMr. WALLACE. Senator, in the Department of Agriculture I had\na decision.\nthe The Commodity Credit Corporation, which is the depart- of\nment. farm programs and credit agencies were in the same programs.\nAre there any I further suppose questions? we can recess until a later hour questions, in the then day,\nIf we there can are, get our lunch. If there are no further\nof Farm Credit Administration was put into the Department\nture. was transferred, The I might say, in 1939, to the Department of Agricul- It\never-normal-granary program, for a time was in the R. agency F. C.\nso we will have VANDENBERG. completed the Mr. hearing. Chairman, Senator Brewster intellectual left. I\nunderstood Senator he wished an opportunity to indulge in this\ntration Agriculture. It had been outside. The Farm Security Adminis-\nin was set up outside the Department of Agriculture and it was\nexercise with the Vice He President. said he had some questions, but I from thought asking he\nput the Department of Agriculture.\nhad The finished. CHAIRMAN. I do not want to exclude any Senators\nstatement made many individual loans. I can give you quite an have\nAll of these agencies have loaned vast sums of money, and\nquestions. Senator O'DANIEL. Mr. Chairman, I have some questions that I\nthe banking. it Credit also, if it is to be good credit, to serve the merely\non that, if you wish, but it is late. Credit is not extended\nwould\nlike CHAIRMAN. to ask. If you have some questions, o'clock. and I presume other\nthe local way should, has to be extended on the basis of country\nsituation. All the scientific bureaus of the Department knowledge of of\nSenators The (Whereupon, have, we at will 1:35 take p. a m. recess a recess until 3 was taken until 3 p. m. of\nthe same day.)\n108\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n109\nAFTERNOON SESSION\nI have had satisfaction in my Government service because I have had the\nThe CHAIRMAN. The committee will come to order.\nconfidence of the Congress, as well as you own. I have had that confidence\nI have been faithful to the responsibilities that have been Intrusted\nbecause For you to turn over all these assets and responsibilities to a man and\nSTATEMENT OF HENRY A. WALLACE-Resumed\ninexperienced to me. in business and finance will, I believe, be hard for the business\nfinancial world to understand.\nThe CHAIRMAN. Senator Robertson.\nI appreciate the opportunity you have given me to serve my country through\nSenator ROBERTSON. Mr. Chairman, I do not feel the record would\nthe evidence of my desire to be of any assistance to the Government. I seek\ndepression and in time of war. My 13 years of Government service I can are\nbe complete without the text of the President's letter to Mr. Jones\nample best be helpful in the line of my life's work-business and finance-but\nand Mr. Jones' reply. With your permission I will read them into\nno job.\nthe record. The transcript that I have is taken from the Times-Herald\nWith best wishes, faithfully yours,\nJESSE H. JONES.\nof January 22, [Reading:]\nThe WHITE HOUSE\nWASHINGTON, January 20, 1945.\nThe CHAIRMAN. Mr. Wallace, the letters were read while you were\non the stand, and you may feel at liberty to make any comment you\nfriendship and splendid relations during all these years, and also because of\nDEAR JESSE: This la a very difficult letter to write-first, because of our long\nchoose or to make none if you choose.\nhave your splendid services to the Government, and the excellent way In which you\nMr. WALLACE. I have no comment to make, sir.\ncarried out the many difficult tasks during these years,\nThe CHAIRMAN. Very well.\nworking displayed for the utmost devotion to our cause, traveling almost incessantly and he\nfactority perform. I told him this at the end of the campaign, In can which satis-\nHenry Wallace deserves almost any service which he believes he\nSenator Robertson, have you any questions?\nThough the success of the tleket in a great many parts of the\nSenator The CHAIRMAN. Senator Brewster, we recognize you. We under-\nROBERTSON. No, sir.\nwhich ensued. not on the ticket himself, he gave of his utmost toward the country. victory\nstood you did BREWSTER. have some I very questions. much appreciate the courtesy when of I was my\nthat the Department the Vice of Commerce, for which be Is fully suited, and I feel, therefore, good In\nHe has told me that he thought he could do the greatest amount of\ncolleagues; called away, because I didn't want to attach any undue\nSenator it was a little more than I asked or expected importance\nIt is President should have this post in the administration,\nall for that and I want to tell you that It is In now way a lock of present post\nHenry, for this reason only that I am asking you to relinquish this\nto my questions, but I spoke am glad this of morning the opportunity. about the lack of danger whether in\nGovernment. you have done, and I hope you will continue to be appreciation a part of the for\nDuring the next few days I hope you will think about a new\nthe public familiar with it, written by one who has Admin-\nMr. Wallace, debt. you There has been written a book, I will been ask under your\nsuggestion several ambassadorships which are vacant-or about to be vacated. post-there I are\nyou are the Chief Economist of the Foreign Economic thousand billion\nthink well of among It, to many speak other to Ed posts, Stettinius. and I hope you will have a chance, make If this you\nadministration, indicating that a national debt of four familiar with that\nalways proud sincerely, you have done during these past years. With my warm regards, very\nFinally, of all let me tell you that you have my full confidence and that I'm\nistration, would be nothing to be alarmed about. Are you\nbook? WALLACE. No; I am not familiar with the book, sir.\nFRANKLIN D. ROOSEVELT.\nSenator Mr. BREWSTER. Would that disturb you!\nNow, the text of Mr. Jones' letter [reading]:\nMr. WALLACE. BREWSTER. Four Yes. thousand That billion? is what he said. And he has been\nDEAR post MR, as PRESIDENT: I have your letter of today, asking that I 1945,\nJANUARY 20,\nthe Senator Chief Economist of the Foreign Economic remember Administration.\nwar my production Secretary of Commerce, which carries with It the vast relinquish\nsubsidiaries 80 agencies within the Reconstruction Finance Corporation financial and\nMr. Senator WALLACE. BREWSTER. What I is can't his name, give do it to you you. I know that was the\nsupport of you in that the campaign. you can give It to Henry Wallace as a reward for and his its\nDeparment You state of that Henry thinks he could do the greatest amount\npost he held. I am not familiar with the book.\nWith all due Commerce, and that you consider him fully sulted of good in the\nMr. WALLACE. BREWSTER. I would like your notion about so much the idea.\nagree with either respect, of you. Mr. President, while I must accede to your decision, for the I cannot post.\nSenator Well, the value of money varies it seems that to it me is\nduring You all refer the very kindly to our long friendship and our\nimpossible-it Mr. WALLACE is just fantastic to comment upon it,\nGovernment and years, the and state that you appreciate my splendid splendid relations\nduring these years. excellent way I have carried out the services to the\ntotally Senator unrealistic BREWSTER. and To irrelevant. envision in anything like our present econ-\nyears, and that you are very proud of all I have done I have your full\nconfidence, and that You are also good enough to say that many difficult tasks\nomy would disturb you!\nMr. WALLACE. Of course. Absolutely. I mean the interest on\nIn a diplomatic you post. hope It I will continue to be a part of the Government during these past\navowed purpose to replace is difficult to reconelle these encomiums probably\nthat would be quite staggering.\nI can, I I would not want a diplomatic me, While assignment. I want to be of any further service with your that\nMr. BREWSTER. I It mean, staggered it would me when seem I to read me it. that that members would of tend the\nbeen for the feel passed proper and in have administration the felt a great of sense the of laws responsibility with respect to to the the Congress R. F. and to you\nMr. WALLACE. to put into the hands of unproductive income.\none experienced In business expectation and that finance. they would be administered by C. me that or some- have\nto community, redistribute, an unduly large share of the national\nSenator BREWSTER. Yes.\nMr. WALLACE. And that would be unfortunate.\n68424-45-8\n110\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n111\nSenator BREWSTER. That would violate your principles?\nMr. WALLACE. I indicated to Mr. Burton my experience in the De-\nMr. WALLACE. My fear of Federal debt comes when the interest\npartment of Agriculture with a number of loan agencies that were\non the Federal debt is so large that it radically shifts the proportion\nrelated to agriculture and indicated the service which Agriculture\nof the income to different segments of the community.\ncould furnish to these loan agencies.\nSenator BREWSTER. It is just as bad to have that as it is to have\nSenator BREWSTER. Now, this other question is of a more personal\ncapitalists in Wall Street.\ncharacter but I think it is really essential for the record.\nMr. WALLACE. It is what you might call the weight of the \"mort-\nI think you would agree that in the letter which Senator Robertson\nmain\" or \"dead hand\" upon the living.\nSenator BREWSTER. Yes.\ning you with this job for your political activities; is that correct?\nhas put in the record the primary and the chief emphasis is on reward-\nMr. WALLACE. Frankly, maybe it is because I still feel pretty young,\nMr. WALLACE. The letter speaks for itself, Senator.\nI like, insofar as there is favoritism, to favor\nSenator BREWSTER. Why I feel that is of importance\nSenator BREWSTER. The enterprise?\nMr. WALLACE. Let me say, I have never felt I was primarily a po-\nMr. WALLACE. Productive enterprise.\nlitical figure, but I am glad to be recognized as having some competence hitherto.\nSenator BREWSTER. Now, in the picture which you presented of the\nin the political field, which hasn't always been recognized\norder? hensive picture of how you felt the world could be rebuilt in a better\npost-war world, I think you would agree that it was a very compre-\n[Applause.] Senator BREWSTER. I think you will agree that the President is a\nMr. WALLACE. I think the eight points in the President's-in the\npretty good judge of politics and politicians.\nAmerican economic bill of rights are very comprehensive.\nMr. Senator BREWSTER. Why I asked that is because I think we must remain have\nWALLACE. It looks like I have passed the first grade.\nSenator BREWSTER. Yes. You would agree that while the Sec-\nreaction on this question: Assuming these loan powers talk about\nretary of Commerce has perhaps in the peacetime economy the pri-\nyour there were five or ten or fifteen or twenty billion, some world in\nthe what you pictured to us would take in the functions of of\nthat mary responsibility for promoting commerce and business enterprise,\nand billion of loan powers here, to promote this sort of would a like to\nwhich whether you you would consider that the political morality loans to\nforty believe and which you believe is feasible, I indicated\nother Cabinet positions, in that in the foreign trade into many which\nwe entered we would be concerned with the State Department, in the\nknow letter were going to govern your functions in making of Maine.\nproducts into we would encroach on agriculture, in giving 60,000,000 jobs\ncartels we would be concerned with Justice, in the production of farm\nDemocrats, in that or other people, or where we get off in the State\nwe get labor-we would even get into Mr. Ickes' Department of\nin Maryland, election I can't help hoping that maybe the national Democrats vote in\nMr. and then at Fairfax County across the river will\nWALLACE. Senator, as I look at the vote in Montgomery in Virginia County,\nDepartments. suggested, we might even have to think about the War and the Navy you\nInterior, and if you got into breaking up international cartels, as\nget the election, namely, 53.6 percent. If 53.6 percent have the right\nin the last same percentage of the jobs as they got of the of the people\npossibility if of your administering the whole job which you picture, the\nhave the primary responsibility here, you wouldn't at all envision would\nSo you would agree, would you not, that while Commerce\nthe of the last United States are Democrats, it seems to me they\nto 53.6 of jobs.\nexcept you should succeed to another job?\nMr. WALLACE. Certainly not. Of course, every department\nthat in the in sympathy with the policy of the administration, definitely and\nOf course, policy positions that there be men administering otherwise\npercent I also feel, Senator, that it is only good administration policy\ndepartment. Federal Government at one point or another touches on every in other the\nwho are have good administration. I feel that that the\nhow can from we the standpoint of appointments. I would hope would\ninally should administered in an independent department responsibility as\nSenator be BREWSTER. Yes. So if the Federal loan\nclearly, National Committee, under its present management, used to show.\nshow Democratic same high sense of morality as Jim Farley if\nsingle contemplated, and, so far as the Congress is was orig-\nthe forced a man on me at any time. Jim thought should be given there\nsarily a exception, it has continued the policy, that concerned, wouldn't neces- with\nSenator WALLACE. Methods can always be worked out, Senator.\nMr. indicate any disruption of the administrative mechanism?\na \"break.\" for the last 4 years. I don't know just what policy were fol-\nwere a I haven't been in the strictly executive branch has been\nJim never Democrat with equally high qualifications, he of the Gov-\nof the BREWSTER. The loan powers are really no more\nernment in recent years. But if the same high standards the Depart-\nto part which Commerce Department than many of the other an activities essential\nfollowed were followed by Jim Farley in his relation to would be well\nreference has been made.\nlowed ment of as Agriculture, I am sure that the Government\nin Mr. some WALLACE. detail, I think, After with you left Senator this morning, Burton. Senator, I went into that\nserved. BREWSTER. Well, I think the record was not in the direction former\nSenator BREWSTER. I do not desire to have you repeat.\nof Senator thinking primarily in terms of political rewards in your\n112\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n113\nservice as Secretary of Agriculture, I was interested in your \"potato\nosnaburg hars Instead of burlap. I personally worked out the trade-mark of the\nphase\" as you pointed out, but I didn't know whether you had been\ncompany. The company grew rapidly and has continually built more plants,\ncorrupted by the experience of recent years in associating with the\nuntil at the present time there are Pioneer plants In Iowa, Illinois, Indiana, and\nSenators or not. [Laughter.]\nOhio. The company has always had to borrow money In the fall. It has always\nI would like to have a reaffirmation, at any rate, of your conviction\npaid the money back in the spring. It has always taken the greater part of Its\nprofits, after taxes, to build new plants, or modernize the old ones. Last year\nthat whatever responsibility came to you to administer, if any, in an\nthe sales were over $4,000,000.\nexecutive way, you would not use your responsibility primarily or\nI was a director, for some years, of the Polk County Building & Loan Associa-\nchiefly for political rewards, which is certainly the very embarrassing\ntion, of Des Moines, Iowa.\nI was assistant editor of Wallaces' Farmer until my father went to Wash-\nimplication of the President's letter in appointing you.\nIngton in 1921, and from that date until 1933 I was editor. The Wallace Pub-\nMr. WALLACE. I can give you that affirmation, Senator.\nlishing Co. (which published Wallaces' Farmer) WILS owned and managed by my\nSenator BREWSTER. I thought so.\nfather and uncle. After my father went to Washington, I became editor. My\nMr. WALLACE. I can assure you that I will perform as Secretary of\nuncle became president and as such In charge of the business management. It\nCommerce as I performed as Secretary of Agriculture in that respect.\nis n. common arrangement in periodicals to have the editorial department and the\nbusiness management separated. As editor, and to make my editorial policies\nSenator BREWSTER. I shan't even ask you whether you welcome get-\nsound, 1 constantly studied farm conditions, farm statistics, business conditions\nting the job on this basis or not. I shall form my own opinion about\nas they affected farming, and that means all business conditions.\nthat.\nI was early familiar with the damage the European corn borer was doing in\nMr. WALLACE. I think the Senator knows me.\nEurope. I antleipated that it would probably sprend to this country and real-\nized how It would cause great damage here.' In 1929 I visited the Balkan States\nThe CHAIRMAN. Any further questions!\nto get advance Information on the corn borer and how to fight It. I also was\nSenator BREWSTER. No, sir.\ndelegate to an International economic conference in England.\nThe CHAIRMAN. Senator O'Daniel.\nWhile I was on this trip the Wallace Publishing Co. decided to buy the Iowa\nHomestend, a competitive State farm paper. Like all too many of the expan-\nSenator O'DANIEL. Mr. Wallace, in a previous session there was\nsions of that era, this purchase wrecked the purchaser. Anyone who is familiar\nsomething said about business inexperience and your lack of experi-\nwith the course of corn prices from 1920 to 1932 knows what would happen to a\nence in business and finance prior to your Government experience.\nCorn Belt farm paper merger involving heavy 1929 fluancing.\nThat was touched on this morning slightly by you in your explana-\nThe net result was that the Iowa Homestead acquired the Wallace Publishing\nCo., and Dante Pierce, the publisher of the Iowa Homestead, came in charge\ntion of some business transactions you had had. But a former witness\nof the business. I continued to be editor and in charge of editorial policies until\nwas invited, I might say, by a member of this committee, to insert into\nI left Des Moines to become Secretary of Agriculture In 1933. In fact, I believe\nthe record a complete record of his experience in business and finance\nDante Pierce still considers me editor-on leave of absence. I have no better\nprior to the Government experience. I want to extend that invitation\nfriend than Dante Pierce.\nI have also been connected with and A stockholder of the Capital City Printing\nto you. If you care to accept it, you may insert in the record your\nPlate Co., located In Des Moines, Iowa. Prior to coming to Washington I was\nbusiness and financial experience.\nvice president and on the board If directors. This company started small and\n(The matter referred to is as follows:)\nis today one of the leading companies in Its field. It has been active In developing\nimproved electrotpying processes, efficient In serving Its customers. It has an up-\nADDITIONAL STATEMENT OF MR. WALLACE\nto-date modern plant and a growing business. Robert R. Myers, the manager, has\nbeen the ringleader of the Industry in stimulating iron plating, thereby reducing\nexperience. Senntor O'Daniel, of Texas, had asked that I submit for the record, my business\nthe quantity of copper required. Mr. Myers has also ploneered the use of plastle in\nmaking electrotype molds. This research is revolutionizing the electroplating\nPRIVATE BUSINESS EXPERIENCE\nbusiness. I do not claim credit for this success. I give all credit to the efficient, loyal\nIn private life, my chief business experience was In the formation of the\nmanagement Bob Myers has given the business. I only claim my connection\nPloneer Hi-Bred Corn Co. After many years of corn breeding experimentation,\nwith It rather obviously failed to poison It.\nI decided to form a corporation to produce and market the seed. I personally\nI have operated various farms owned by Mrs. Wallace and these farms served\nworked with Mr. Fred W. Lehmann, Jr., an attorney, and the present president\nas the physical basis on which the Ploneer Hi-Bred Corn Co. was started.\nof the company, in drawing up the articles of incorporation in 1926, I myself\nwas the president and general manager of the company until I came to Washing-\nPUBLIC EXPERIENCE\nton in 1933. I personally raised all the money to start the company. I person-\nally chose the key personnel which is still functioning. I personally, with Simon\nFinancial.-In my prepared statement I summarized very briefly the magni-\nCasady, Jr., designed the first modern seed corn drying and processing plant in\ntude of the financial operations which were under my direction as Secretary of\nthe world. I personally went to a heating company In Des Moines and got their\nAgriculture. That condensed summary gave little indication of the complexity\nengineers started on the problems of producing suitable heaters and blowers for\nor magnitude of these activities or of the enormous benefit they have been\ndrying seed corn. As a result of my visit this company was stimulated to pro-\nto farmers and businessmen In all parts of the country. Accordingly, I nm\nduce a type of equipment which is now used very extensively by the seed\nsubmitting here some of the more significant details. The facts of these agri-\nthe present sales manager of the company, a method of marketing through thou-\ncompanies of the United States. I personally worked out with Nelson Urban, corn\ncultural loan operations have been regularly reported to the public in official docu-\nments. These figures are taken from the yearbooks of Agricultural statistics for\nsands of local farmers, which has proved very successful, I personally got In\n1940 and 1941, covering my last year as Secretary of Agriculture.\ntouch with a certain bag company and arranged to market our product In cotton\nThe total amount of agricultural credit outstanding under Department of\nAgriculture programs on January 1, 1941, Just after I left office, was over\n114\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n115\n$4,000,000,000, as shown In table 1. About two and one-half billions of this\nTABLE 2.-Loans made and repayments received during calendar year 1940\nrepresented mortgage credit; over one hundred millions loans to farmers co-\noperative marketing associations: six hundred billion Commodity Credit Cor-\nporation commodity operations. There was half a billion in production credit\nLoans made\nRepayments\nreceived on\nloans to farmers, 170,000,000 through production credit associates, and 312,000,000\nKind and program\ncurrent and\nthrough Farm Security Administration rural rehabilitation loans. Rural Electri-\nNumber\nAmount\npast loans\nfleation Administration, with loans to 755 separate community projects, repre-\nsented a quarter of a billion. The number of Individual loans is not shown\nMortgage credit:\nfor all these operations; the numbers that were shown totaled 1,769,618 of\nFederal land-bank loans.\n17,027\n$64,275,307\n$117,712,000\nindividual loans outstanding at that time. (In comparison, Mr. Jones listed\nLand-bank-commissioner loans\n21,692\n36,391,000\n79,068,000\nFarm Security Administration tenant-purchase loans\n6,396\n38,522,134\nonly 17,084 small-business loans in his testimony, in addition to the loans made\nIntermediate credit:\nto the handful of big corporations and banks with which Reconstruction Finance\nProduction credit associations\n384,017,000\n$60,775,000\n31,061,000\n33,067,000\nCorporation has done the bulk of Its business.)\nBanks for cooperatives\n4,593,000\n4,938,000\nIntermediate credit cooperative loans\nOther intermediate credit\n87,314,000\n86,514,000\nTABLE 1.-Amounts and number of loans outstanding in major agricultural credit\nOther:\nprograms, Jan. 1, 1941\nFarm Security Administration rural-rehabilitation loans\n82,255\n94,580,000\n57,923,000\nEmergency crop and feed loans\n158,036\n18,960,000\n18,892,000-\nCommodity Credit Corporation commodity operations\n600,445,000\n380,281,000\nAgricultural Marketing Act cooperative loans\n3,094,000\n7,180,000\nNumber of\nFarm Security Administration cooperative loans\n3,540,000\n149,000\nloans (where\nTotal amount\nCommodity Credit Corporation cooperative loans\n14,600,000\n13,490,000\nRural electrification loans\n101\n60,237,000\navailable)\n100,455,000\n101,893,000\nBanks for cooperatives\nMortgage credit:\nSubtotal (where number of loans is available)\n285,507\n321,965,441\n273,595,000\nFederal land-bank loans.\nTotal\n285,507\n1,551,093,441\n1,261,882,000\nLand-bank commission loans\n613,098\n$1,851,218,349\nFarm Security Administration tenant-purchase loans\n432,567\n646,660,000\nIntermediate credit:\n12,994\n75,354,518\nI Includes loans, commitments, and commodity purchases.\nFederal intermediate credit banks:\nProduction Credit Association\nSource: Agricultural Statistics, 1941, pp. 500-632; 1940, pp. 603-641.\nBanks for cooperatives\n109,565,000\nDirect loans to ocoperatives\n15,554,000\n(Table 3 is available If desired.)\nOthers\n1,490,000\n33,116\nComparative size of the administrative job in Agriculture and Reconstruction\nFarm Security Administration rural rehabilitation loans\nEmergency crop and seed loans\n737,204\n312,786,000\nFinance Corporation.In judging administrative capacity, it may be of interest\nCommodity credit:\n167,853,080\nto compare the size of the Reconstruction Finance Corporation and agricultural\nCommodity Credit Corporation:\nLoans held by Commodity Credit Corporation\nfinancial operations at the time I left the Department in 1940. Table 4, based\nHeld by banks and lending agencies,\n280.218,000\non official publications, makes this comparison:\nOther loans:\n376,850,000\nIn 1940 the Reconstruction Finance Corporation authorized a total of 1,303\nTo cooperatives, from Agricultural Marketing Act revolving fund\nFarm Security to cooperative associations\n16,461,000\nloans, less than one-half of 1 percent of the number of loans Agriculture made\nRural Electrification Administration loans\n14,941,000\nthe same year.\nBanks for cooperatives\n755\n253,336,000\nThe Reconstruction Finance Corporation loaned out 453 millions; Agriculture,\n74,405,000\nTotal Subtotal (where number of losns is available)\n1½ billions. The Reconstruction Finance Corporation received back 345 millions;\n1,796,618\n3,139,354,867\nAgriculture, 1.2 billions. On both Items the Reconstruction Finance Corporation\n4,289,817,867\noperations were less than one-third of Agriculture's.\nSource: Agricultural Statistics, 1941, pp. 506-632.\nIn 1940 the Reconstruction Finance Corporation collected 76 percent as much\nas It loaned out that year; Agriculture, 81 percent. Again the agricultural\nthe business done during a single year. Table 2 shows the agricultural loan\nThe magnitude of these agricultural loan operations is shown even better by\nrecord is as good as Reconstruction Finance Corporation's.\nAt the end of the year the Reconstruction Finance Corporation had 1.7 billions\nadvances and receipts for my last year as Secretary of Agriculture. Advances\nof loans outstanding. Agriculture, 4.3 billions. Reconstruction Finance Corpo-\nthat year totaled 1½ billions; receipts, almost 1% billions. Excluding the\nration's outstanding total was only 39 percent of Agriculture's.\nadditional Credit 220 millions advanced to farmers on commodities under Commodity\nBy every measure, the administrative task of operating the agricultural pro- the\namount for the year. Individual loans made that year, as reported, totaled\nCorporation operations, advances and repayments were almost equal In\ngram was vastly greater than the Reconstruction Finance Corporation's: yet\neurrent collection record was equally good.\n285,507, or more than 15 times as many as all the small business loan trans-\nSince the war began defense and war financing has greatly increased the work\nCorporation. actions reported by Mr. Jones for the entire history of Reconstruction Finance\nboth of the Reconstruction Finance Corporation and the Department of Agri-\nculture. The Reconstruction Finance Corporation has become a central financing\noperations which I supervised for the United States as a whole. The extent credit of\nThese data of actual operations give some Idea of the extent of the\npromises of war agencies to absorb the losses, If any, from their appropriations last\nagent for many of the war agencies, advancing funds for war construction against\nthese loans is shown further by the numbers and values outstanding in\nfor war. Even with this vast increase In Its refinancing operations the\nrepresentative In States when I left office, ranging from 31,000 loans for $18,000,000 some\npublished report of the Reconstruction Finance Corporation (for the first quarter of\nloans Florida up to 210,000 loans for $231,000,000 In Texas. These thousands\nof 1944) shows a grand total of only 33,361 borrowers since the organization\nevery State of the Union, and for over one-quarter of the farmers, without In a\nInvolving hundreds of millions of dollars were placed and collected of\nprises, Including both peace and defense purposes. It would appear from these\nthe corporation in 1932. Of these loans, only 12,113 were made to business enter-\nsingle charge of graft or personal privilege, 80 far as I am aware,\nfigures (1) that the burden of administering these business loans would advanced not\ninvolve Insuperable problems; and (2) that not much aid can have been\n116\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n117\nby the Reconstruction Finance Corporation, in war or peace, to the hundreds of\nthousands of small business concerns throughout the country.\nAct, providing a cooperative farmer-Government planning of basic agricultural\nThe extent to which the Reconstruction Finance Corporation may have helped\ncommodities. There were many prophets of doom then who said the adminis-\nsmall business is also Indicated by the average size of loans. Excluding the\ntrative job could not be done, that 6,000,000 American farmers could never work\n$7,000,000 advanced to defense plant and other subsidiary corporations In 1940\ntogether with Government. Representatives of great food-processing Industries\n(no details of the number of loans or other activities of these subsidiaries have\ntestified that the plans were administratively unworkable, that the bill would\never been published so far as I ean determfine), the remaining 446 millions of\nnever do what It aimed at doing, that the markets for farm products would dis-\ndollars lent by the Reconstruction Finance Corporation In 1940 went to 1,308\nappear. Acting on the direction of Congress, and under my supervision, the\nborrowers, or $342,470 per borrower. In comparison, table 2 shows agricultural\nDepartment of Agriculture did what these gentlemen said was impossible to do.\nloans of 332 millions made in 285,507 separate loans in 1940 (Including only\nWith the help of the administrators I selected and supervised-George Peck,\nthose programs for which the number of loans is shown), an average of $1,128\nChester Davis, M. L. Wilson, A. G. Black, Howard Tolley, Cully Cobb, R. M.\nper loan. It is clear from the number of loans and the average size of loans that\nEvans, and many others, and of the existing staffs of the Department of Agri-\nthe Reconstruction Finance Corporation was of very little aid to small business-\nculture, the Extension Service, and the State colleges of agriculture-milliona\nmen in 1940, Through the whole period from 1932 to the end of 1944 It has\nof contracts were signed with farmers, millions of checks for benefit payments\nloaned to only about 12,000 Individual business enterprises or about one-half of\nwere issued, and order was brought Into the agricultural pleture. This opera-\n1 percent of all business enterprises In the United States (excluding farming).\ntion Involved a grent expansion In the staff of the Department of Agriculture\nThis may be compared with financial aid given to about a third of all farms by\nboth in Washington and in the fleld. This staff was built up swiftly and of-\nthe agricultural lending agencies.\nfectively; Its decentralized field operations were closely directed by locally ap-\npointed or elected committees of farmers without graft or private favoritism and\nTABLE 4.-Comparative size of financial operations of Reconstruction Finance\nwith an operating efficiency that continued the high standards characteristle\nCorporation and Agriculture Department, calendar year of 1940\nof the Department.\nWithout going into the other myriad administrative problems of agriculture\ndevelopments which Congress authorized during the 8 years I was Secretary of\nReconstrue-\nAgriculture, I will merely mention that those included the creation or develop-\nReconstrue-\ntion PI-\nment of such landmarks in the Nation's agricultural programs as the present\ntion Fin-\nname Corpo-\nAgriculture\nFarm Credit Administration: the Farm Security Administration, with Its tenant-\nname Corpo-\nration as\nration 1\npercentage\npurchase and rural rehabilitation programs; the soll conservation program: the\nof Agricul-\nrural electrification program; the ever-normal granary program, with its oper-\nture\nating arm, the Commodity Credit Corporation: crop Insurance and regional re-\nAmounts advanced\nsearch luboratories; and a great expansion In Forest Service activities. These\nRepayments received\n1,551,060,000\n$453,239,000\n29.2\nnew and expanding activities were built up by administrators I selected and led-\nRepayments as percentage of advances\n1,261,882,000\n345,087,000\n27.3\nNumber of loans made\n81.4\nmen with imagination, leadership, and the Initiative to make use of the wide\n76.1\nAmount outstanding at end of year\n1285,507\n1.303\n0,5\nauthority I delegated to them while keeping control of basic policy. By 1940,\n4,344,015,000\n1,712,639,000\n39.4\nwhen I left it, the Department of Agriculture was carrying on, in the service\nof farmers and of the general public, a variety of activities far greater than that\nI From tables 2 and 3.\nI\nof most American corporations, with an efficiency and n competence of staff\nI Partial total.\nFrom quarterly reports of Reconstruction Finance Corporation for 1940, tables a and 6.\nthat compares well with that of any other American institution of similar size\nand responsibility, public or private.\nIn this connection It might be noted that prior to the war the maximum dis-\nDuring this period I WILS responsible for a wide variety of activities that\nbursements by the Reconstruction Finance Corporation In any year were 1,828\nInvolved direct contacts and arrangements with many phases of American\nmillions. That peak disbursement at the height of the effort to check the de-\nbusiness, such food-processing industries as the millers, packers, and dairy In-\ncultural loans, as shown In table 2. After 1934 the Reconstruction Finance\npression In 1934 was not much more than the usual volume of business In agri-\ndustry, all the textile and clothing Industries, tobacco processors, importers and\nexporters in many different lines, lumber industry, canning Industry, warehous-\nCorporation advances never reached $1,000,000,000 in any year until after the\ning, and many others. Operating programs such as marketing agreements, tax\nwar began, and in many years were less than one-half billion. This Indicates\nImpositions and refunds, Imports and exports quotas and subsidies, regulation of\nthe relatively small place that the Reconstruction Finance Corporation was\npackers and stockyards, control of future markets, aid in negotiation of trade\ntaking In the financial peacetime activities of the country. During the war,\nagreements, and many others, gave a wide and Intimate contact with and\nloans under defense financing of the Reconstruction Finance Corporation (backed\nknowledge of many phases of American business and Its operating and financial\nproblems, and helped me to appreciate the problems that businessmen as well as\nbursements under all other Reconstruction Finance Corporation activities totaled\nby public appropriations for war) totaled 13 billions to March 15, 1944; dis-\nfarmers must grapple with.\nvolume of business is not much larger than that In the Department of Agriculture\n12 billions more for the 12 years of the Corporation's life. This average annual\nIn my Inst report as Secretary of Agriculture, in 1940, I stated:\n*The Congress and the President were never able to agree on a comprehensive\nbefore the war, while the number of loan commitments to be examined or serv-\nattack on the farm problem until the depression of the early 1930's produced such\nIced In the Reconstruction Finance Corporation Is far smaller.\nan Impossible situation on the farms that something had to be done. It was my\nbeen a great factor in enabling the war agencies to anticipate congressional\nDuring the war, the Reconstruction Finance Corporation has undoubtedly\nopportunity to be Secretary of Agriculture at this time of great stress. For the\nfirst time the Department was given the responsibility of administering Nution-\npropriations funds and in enabling war contractors to secure plant, equipment, and ap-\nwide action programs. The rapid results that were obtained are In my opinion\nfor this at Federal expense and risk to carry out their war contracts. Except\na great tribute to the morale and personnel that had been built up In the Depart-\nration has emergency wartime service, however, the Reconstruction Finance Corpo-\nment over a long period of years.\ndate, in Agriculture bas been In the agricultural. Its administrative task\nment of been much less important In the business sphere than the Depart-\n\"Farm Income was increased. Farm foreclosures were reduced. Acrenges\nwere adjusted to the fact of greatly reduced European demand. Domestic de-\nwas In Agriculture. peacetime operations, has never been anything like 80 great as the task to\nmand was increased. Farm security was brought to hundreds of thousands of\npoverty-stricken farmers by means of supervised loans. The number of farms\nserved by electricity was more than doubled. The problem of soil conservation\nExperience as an administrator of public funds and organizations,\nwas given comprehensive attention for the first time.\nAdministrative.-In and the 1933 President Roosevelt asked me to develop a farm\ngram, farm leaders and I jointly proposed the Agricultural Adjustment pro-\nscientific work of the Department to decline in importance.\n\"As I look back over the past 8 years 1 am proud that I have not allowed Using the\nthe Bankhead-Jones research funds we have set up regional laboratories to\n118\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n119\nstart work on special problems such as poultry disease, truck crops for the South,\ngrass breeding for the Northeast, sheep breeding in the West, soybean research\nThere are tremendous new frontiers that await American enterprise. They\nin the Corn Belt, etc. Four great regional laboratories were opened at New Or-\nprovide unparalleled opportunity for the millions of the young men and women\nleans, Philadelphia, Pa.; Peoria, III.; and Albany, Callf., this fall. These, fully\nin the armed forces who will return home and the millions of men and women\nstaffed with chemists and other scientists, can In case of need be of great use in\nnow engaged in war work who will have to turn to peacetime pursuits. Many of\nnational defense.\nthem have acquired specialized knowledge and talent as a result of their war-\n\"Looking toward the future I am happy that agriculture is in such splendid\ntime experience. America will greatly profit by providing them with an oppor-\nshape to serve the general welfare. We have large supplies In the ever-normal\ntunity to use their new knowledge-to use It In the American way. Unless new\ngranary, while at the same time we have protected the farm Income with com-\nindustrial fields are opened up and old fields are kept open to ambitious and\nmodity loans. We have Increased soll fertility. If national defense requires it,\ncompetent young men and women who show reasonable promise for business\nwe are In position to expand agricultural production without plowing up the\nsuccess, American industry will stagnate. That can mean only unemployment\nhillsides or the Great Plains. If foreign markets are still further reduced after\nand low wages.\nthe war we are in position to make the necessary adjustments by suitable acre-\nI do not believe the monopolistic businesses of today have any God-given right\nage control and by the stimulation of domestic consumption.\nto keep for themselves the business of this country. Big business must earn the\n\"The personnel of the Department has Increased from 27,350 In 1932 to 79,035\nright to remain big by producing at lower cost or by giving the consumer better\nin 1940. This number Includes 2,917 Farm Credit employees. When we take\ngoods at the same cost while maintaining and Improving working equditions for\nInto account the far-flung action programs this Increase in personnel Is not at\ntheir employees In harmony with the American standard of life.\nall disproportionate.\nThe cancer of free enterprise is monopoly. Free enterprise thrives on new\n\"Those who urge that the Department is too big and that some of Its functions\nbusinesses and the expansion of the smaller ones that have proved successful.\nshould be transferred to other Departments so as to relieve the overburdened\nAmerica has stood for unlimited opportunity for the man of energy, Imagination,\nSecretary of Agriculture simply do not understand the problem. As long as\nand resourcefulness to rise to Industrial leadership: and we must Insure the\nproblems relate to farmers and the land which they operate, the Job belongs to\ncontinuance of this tradition. The worker must have an opportunity to move\nAgriculture. When problems of this sort are put in another Department, the\nfrom his bench to a small business of his own and through energy and vision\nJob of being Secretary of Agriculture is made more complicated and difficult.\nbuild his business into a great enterprise. It was that opportunity which made\nMere size does not make administration difficult, so long as there la proper\npossible the economic progress of the United States, and It is only by safeguarding\nstaff organization and sufficient harmony of function to tie everything together\nthis same opportunity that It will be possible for the United States to fulfill Its\nIn a sense of purposeful service.\"\ndestiny.\nThere was a time-and not so long ago-when an ambitious young man could\nFINANCING FOR SMALL BUSINESS\nstart a business of his own with a few thousand dollars. Because of the increased\nmechanization of Industry and the modernization of marketing techniques even a\nIn my testimony before your committee on January 25, 1945, I promised an\nsmall-size business, If It Is to operate efficiently. needs far more capital. But\nfinancing. expanded statement of my views on helping small businessmen to obtain needed\nfacilities for assuring opportunities to raise such capital by small business have\nnot expanded with the growing need. While It is easy enough for a large cor-\nNow I want to make It perfectly clear to begin with that assistance to the\nporation to flont new equity securities of $10,000,000 or more at a cost of 5 per-\nsmall businessman is a prerequisite to healthy free enterprise. I belleve that\ncent of the Issue and to sell these securities on a 5 or 6 percent yield basis, it is\nfree enterprise means more than the right of established business organizations\npractically impossible for a small business to secure $25,000 or $50,000 for equity\nto produce and sell goods under competitive conditions. I believe that free\ncapital, except at a cost of 20 to 25 percent of the Issue and the securities must\nenterprise must also mean the opportunity to move up the economie scale from\nthen be sold at a yield of 10 or 12 percent, or even more.\nworker to owner. It must mean the opportunity for the efficient and successful\nSome small business enterprises do manage to raise capital under these\nsmall businessman to expand in proportion to his ability. We must make sure\nonerous terms. Many more prospective enterprises die stillborn because they\nbecome a bar to healthy economic advancement.\nthat lack of adequate capital to finance new and expanding business does not\ncannot even begin to pay such high charges. These figures make It clear that\neven where a man is fortunate enough to be able to secure financing, he does\nPrivate enterprise in the United States can survive only If It expands and\nso at a cost which handicaps him in his efforts to compete with the larger\ngrows, and It can expand and grow only if new enterprises are born and\nconcern that has ready access to capital. No one cognizant of the facts can\nmitted to develop. The lifeblood of private enterprise In America is the new per-\ndoubt that Inadequate arrangements for financing are important deterrents to\nbusiness and the small business, Without more and prosperous small businesses\nthe development of new business and the expansion of small business in the\nment. It will be impossible to maintain a healthy economy and high level of employ-\nUnited States.\nNinety-six percent of the business enterprises in this country have less\nThis is not a question of idealism. It is a stubborn fact that small business\nbusiness firms In the country are employed in enterprises with less than 20\nthan 20 workers, More than one-third of the workers in manufacturing and\nIn this country does not have an opportunity to secure the capital It needs for Its\ndevelopment and growth. In my testimony on January 25 I called attention\nworkers. We must not forget that these small businesses are the foundation on\nto the fact that some investment bankers fully recognize the grent need for\nwhich the large businesses of the future will be built,\nnew lending devices to assure adequate financing for small business. One of\nsmall. I want more business and more business enterprises for this country, large and\nContrary to what you may have seen in the press, I am not against big business.\nthese, Mr. Ferdinand Eberstadt, an Investment banker with whom I served on\nthe War Production Board, has developed a proposal for forming local invest-\nsure that the seeds for large-scale enterprises are sown far In advance.\nWe can have efficient progressive business In the future only If We make\nment companies or pools of capital to be obtained from local businesses, banks,\nand public-spirited citizens and, where necessary, additional funds could be\nIt Is only when large businesses are constantly exposed to the keen\nsecured from governments. Now I call your attention to the fact that Senator\nThe of newly formed and expanding businesses that our economy can remain competition\nTaft has Introduced a bill designed to aid In the financing of small bupiness\nbusiness day we make it difficult to establish new business and for efficient healthy.\nenterprise by providing governmental Insurance of long-term loans made by\nsound the to grow and expand In competition with large business, that small\nbanks and Insurance companies and of stock when held in the portfolio of\nThe death knell of private enterprise and give a vested Interest to day we\nInvestment companies.\nourselves, great danger that lles before us, the threat against which we must monopoly.\nThe Reconstruction Finance Corporation during the past decade could have\nto la the growing tendency to make it impossible for small businessmen protect\nbeen the agency which would have filled this great need. It could have used\nget enough capital to start and to expand.\nsome of Its tremendous resources to help secure financing for small business.\nIt could have struck a tremendous blow for new enterprise and the growth of\n120\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n121\nsmall enterprise. But It la clear that It has not made use of that opportunity\nto any significant extent. According to a recent report issued by the Recon-\nThe CHAIRMAN. Is that all?\nstruction Finance Corporation covering Its operations for the period from the\nSenator O'DANIEL That is all.\norganization of the Corporation on February 2, 1932, to September 30, 1944,\nThe CHAIRMAN. Senator McClellan.\nexcept for lonns for national defense, the Reconstruction Finance Corporation\nSenator McClellan. Mr. Wallace, for the record and for my own\nhas made less than 9,000 loans to business enterprises over the last 12 years.\nThis is a small number in a country where we have over 3,000,000 small businesses.\ninformation I would like to have you state just what changes in the\nI think It is not of overwhelming Importance which of several methods we\nuse to help provide financing for small business. It la important only that the\ncies you have in mind to make, if any, if the George bill is not enacted\npolicies of administration of the R. F. C. and the other loaning agen-\nGovernment assist small business In securing from private Investors some of Its\nand this responsibility rests upon you as Secretary of Commerce.\nrisk capital. It is Important to do so without fostering ill-conceived, Ill-advised,\nand highly speculative ventures and without putting the Government in business.\nMr. WALLACE. Well, I think that is what the President might call\nThe essence of free enterprise is to give well-conceived new business a chance to\na very \"iffy\" question.\nprove Its worth. The capital needed by free enterprise must come from private\nSenator McClellan. No. If you have any changes in mind.\ninvestors. The role of the Government must be limited to that of an Insuror\nMr. WALLACE. I have indicated a general policy that might be fol-\nof the extraordinary risks that private Investors cannot assume in full. We\nmust make sure that financing such enterprises is possible If we are to have free\nlowed subject to the will of Congress and the President in the post-\nenterprise providing productive employment to American labor and good markets\nwar period.\nfor American agriculture.\nSenator McClellan. Yes.\nThe program which I suggested was that the Government should play Its part\nMr. WALLACE. In the immediate war period-well, I would say the\nin helping stimulate the growth and expansion of business enterprises in this\ncountry in a manner comparable to the way In which this Government stimulated\nfirst things that I would want would be to have some competent agency\nsmall home building and home modernization under the Federal Housing Ad-\ndiscover exactly what is the status, the financial status of R. F. C.\nministration program. Just as under the Federal Housing Admin ration\nFrankly I wouldn't want to take it over unil there had been a pretty\nprogram private homes were built and modernized by private contractors, and\ncareful examination and I wouldn't care to express much further\nfinanced by private institutions, 80 under the program I have suggested the\nbusiness enterprises would be privately owned, privately operated, and privately\nopinion until that examination had been made. That is, I wouldn't\nfinanced. Just as under the Federal Housing Administration program the Gov-\nwant to become responsible for it until that examination had been\nernment shared with private lenders certain risks involved in financing the\nmade. I would want some cut-off date definitely established. As you\nbuilding and modernizing of small homes, so under the program I have suggested\nthe Government would be sharing with the private Investors certain risks involved\nare well aware, the agency has never been subjected to the ordinary\nin financing the growth of new business and the expansion of existing business.\nBudget Bureau or General Accounting Office procedure.\nThe Government would merely facilitate financing, without in any way acquiring\nownership or assuming responsibility for management.\nconsists of before you can state what should be done. I have tried to\nFrankly, I think you have to know just exactly what the R. F. C.\nThe real enemies of the American way of doing things are those who\nconstructive measures to Insure the development and growth of private business oppose\nget certain figures with respect to the R.F.C. I find them quite diffi-\nIn this country. If we make the American system of free enterprise work in\ncult to get.\ntime of peace with the same outstanding success that it has achieved In time of\nSenator McCarllan. It was your statement this morning that\nwar, we need have DO reason to fear the spread of any \"Ism\" in this country.\nIf we do not make an American system of free enterprise work, then there is\nprompted me to ask question and it also prompts me in asking this\nto any threat of the spread of \"Isms\" In this country is production to capacity\nreal danger that our American way of life will be threatened. The total answer\nquestion- Mr. WALLAGE. There is one particular matter which I think be-\nin peace as we have produced to capacity in war, thus providing full employment\ncomes very important in the post-war period and that is the whole\nand a better life for all.\nmatter of small-business loans.\nSenator O'DANIEL... And another question which I would like to\nSenator McCLELLAN. Well, do you have in mind that the R. F. C.\nauthored by you entitled \"Whose Constitution.\"\ninto, I would like to call your attention to a book supposed to go be\nshould supersede the Smaller War Plants Corporation which has been\nDo you recognize or admit the authorship of that book?\nset Mr. up WALLACE. for that purpose! No. If the Senator is particularly interested in that\nMr. WALLACE. I do, sir.\nfield he no doubt knows that the R. F. C. h&s engaged in some small\nSenator O'DANIEL. You have not changed your mind as to the ideas\nbusiness loans. I think the volume is somewhat larger than was sug-\nexpressed in that book?\ngested this morning, from what I can discover.\nmy mind on certain matters in the course of the years like all-\nMr. WALLACE, Probably not, Senator. I have of course changed\nThe CHAIRMAN. It was testified yesterday that the volume was\nSenator VANDENBERG. Authors!\n$1,900,000,000. Mr. WALLACE. Of small business loans?\nMr. WALLACE. Like all others.\nThe CHAIRMAN. Yes. That includes the war period. He gave it\nSenator O'DANIEL That being the case, I would like to have in-\nin a break-down. Not a great deal prior to the war but since the war\nhave no objection to that?\nserted in the record the concluding six paragraphs of that book. You\nstarted. Mr. WALLACE. I think it is somewhat larger than was suggested\nMr. WALLACE. No. It is your privilege, Senator.\nthis morning.\nSenator O'DANIEL Thank you.\n122\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n123\nThe R. F. C. is engaged in small business loans. The Federal Re-\nSenator McCleilan. I don't think all of them have,\nserve banks are operating in the small business field. There are also\nNow, may I ask you another question? In this war program and\nthe loans by the Smaller War Plants organization. There is also a\nthe necessities of war there must be spending, of course. The national\ncertain volume of small business loans through the Army and Navy.\ndebt has been discussed in connection with this program that you\nAnd there are also small business loans coming up around the corner\nhave outlined this morning, and you discussed also briefly, I believe,\nunder the G. I. bill or rights. There are several pieces of legislation\nhow this program might be carried out, and to what extent it may\npending, like the Wagner-Spence bill, and the Voorhis bill.\nbe necessary for the Government to finance it.\nSo it seems to me that at the present time the power is quite con-\nDo you have in mind now to what extent it would be necessary to\nsiderably diffused and deserving definitely of a study by Congress to\nenable the small businessman to be served in a more clear-cut fashion.\nexpand the functions of these lending agencies in order to carry loan out\nSenator McClellan. Is it your idea that small business loans should\nthe program that you have outlined? I mean, with respect much to it\nbe made by the R. F. C. or some other organization?\nauthority and the spending authority. In other words, how to\nwill take from the Federal Government in outlay of money\nMr. WALLACE. I think the Congress should look with some care into\nthe way in which there might be coordination between these various\nfinance it.\nMr. WALLACE. I would think, Senator, that that might well be the\nagencies that do serve the small businessman.\nSenator McClellan. Yes,\nsubject of hearings that would take this committee and the Appro- could\nMr. WALLACE. Insofar as local finance agencies can take care of the\npriations Committee several weeks to go into and I certainly\nsmall businessman, the more they can take care of them the better it\nnot be expected to give an offhand opinion on that.\nis, because the local financial man must be familiar with the kind\nconclusion about it yourself; you can give us no idea or opinion\nSenator MCCLELLAN. In other words, you have not come to any of\nmore understanding of the character of the man who is borrowing the\nof risk involved, he is more sympathetic to what the community needs,\nthe amount that would be involved?\nmoney. But, unfortunately, as I pointed out this morning, the char-\nMr. WALLACE. Certainly not, Senator.\nI this, Senator, that judging from past statistical records, of\nout of the picture. The examinations by the bank examiners\nacter banking that we used to have prior to 1913 has largely. passed\n$170,000,000,000 you a year, it will require about-something formation to do\nif can wish say to get a total output of goods and services in excess between\nbusinessman in the field of long-time loans to the extent that the\nso strict that the local banker has not been able to service the small are\n35 and 40 billion dollars of what is known as capital\nserved in the first decade of this century.\nsmall businessman needs to be served or to the extent that he used to be\nthe job.\nSenator McClellan. How much?\ning. I would conceive it definitely to be the function of gap the Depart-\nI think there is a definite need to fill that institutional in financ-\nSenator WALLACE. Billion, yes. Between 35 and 40 billion does dollars not mean of\nBREWSTER. You mean billion?\nworked to determine what kind of effective cooperation might study be\nin ment order of Commerce to give that whole question the most careful\ncapital That itself would require extensive hearings would go\nMr. formation. That is a very technical phrase and to into\nman. out between the various agencies financing the small business-\ninvestment. and explain and I don't have the figures with me and it convey\na false impression if the break-down is not before you.\nadministration change in policy, if any, you had in mind with to\nprompted what me to ask the first question that I did with reference\nSenator MOCLELLAN. It was your remark this morning that\nSenator the authorization of expenditures for the R. that authority\nMcClellan. As I understand at present the F. loaning C. is $14,- au-\nthority 000,000,000. or Do you mean by what you have said that\nto you or suggested that the Congress create a committee morning\nrecommended of these agencies, and as I understood respect this to the\nwould have to be extended?\nMr. WALLACE, I didn't mean that at all, Senator.\ninvestigate the R. F. C. and these agencies.\nSenator answer my other question quite completely with respect\nMcCLELLAN. I wanted to get that clear.\nto there they have been mismanaged in the past and your purpose\nNow, imply I that would like to ask you in that connection was it\nto whether imply, and I don't think you did, that there for construe-\nYou didn't by request for this committee for an investigation had been mis- you\ninvestigation was need for investigation, or did you have in mind therefore the\nMr. WALLACE. was to determine with respect to changes in that\nmeant to in the R. F. C., but rather you wanted that might\nme if Well, I would feel it would be a very definite policy\ntive management to purposes to enable you to determine where improvement\nto to see Congress would take a very careful look at the whole service\nbe\nmade. WALLACE. I think, Senator, that it would be only fair write to who-\nI don't exactly know what might be there. I don't know what picture\nSenator whether anyone in Congress knows exactly is there and\nkeep McCLELLAN. Or in any of the other agencies; what it is is difficult there.\never that he knows exactly where he is. Any county auditor, re-\nMr. administers the R. F. C. that he have a clean page to when upon,\nto up with all of them.\ncently elected, McCLELLAN. takes that I just precaution. wanted to clarify that for the record, made to if\ngovernmental Mr. WALLACE procedures. The other agencies have been subjected to regular\nthat Senator was what you had in mind by the recommendation you\nthe committee this morning.\n124\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n125\nMr. WALLACE, I do not express any opinion one way or the other.\nMr. WALLACE. I would feel it were a very great safeguard, Senator.\nSenator McClellan. Thank you, Mr. Chairman.\nI may say in this connection that a very comprehensive program and\nThe CHAIRMAN. Mr. Wallace, what you have in mind is that when\nlist of recommendations was made to the President of the Senate on\nyou took over you would want an audit in order to have a base behind\nFebruary 10 of 1940 by the Secretary of the Treasury in response to\nyou to do your work in the future?\na Senate resolution with regard to governmental corporations. There\nMr. WALLACE, That is right.\nwas a proposal that a uniform policy be adopted by the Congress with\nThe CHAIRMAN. The other matter you spoke of, the annual forma-\nrespect to the relations of corporate agencies to the Federal Treas-\ntion of capital of $35,000,000,000 a year-\nury. the Bureau of the Budget, the General Accounting Office, and\nMr. WALLACE. I may say that the comparable figure in the pre\nthe United States Civil Service. That is the first item. I will not\nwar period was about $20,000,000,000 of capital formation.\ngo ahead unless there is some special interest. But there is a total\n$5,000,000,000. The CHAIRMAN. I was going to ask if the normal was not about\nof eight different points made by the Secretary of the Treasury\nwith respect to procedure that he felt was advisable relative to Gov-\nmation. Mr. WALLACE, The normal is about $20,000,000,000 of capital for-\nernment corporations.\nSenator PEPPER. So as related to the Federal lending agency and\nThe CHAIRMAN. New capital investment?\nthe subsidiary agencies thereunder it is your feeling that they should\nMr. WALLACE. No; not new capital investment. What is known as\ncapital formation.\nbe subject to the regular processes of the auditing of the Comptroller\nGeneral and the regular supervision of the Bureau of the Budget!\nbetween 4 and 5 billion dollars.\nThe CHAIRMAN. The new capital investment each year normally is\nMr. WALLACE. Without being too doctrinnaire, that is the way it\nMr. WALLACE. That is capital investment; yes.\nseems to me from outside, Senator. That is why I suggested a con-\nThe CHAIRMAN. That is according to the Federal Reserve report.\ngressional investigation committee this morning. It is conceivable\nMr. WALLACE. That is right.\nthat the kind of work done by the R. F. C. is such that it would be\nThe CHAIRMAN. That kept the country on a pretty even keel.\ngreatly handicapped if it had to go through the regular governmental\nMr. WALLACE, Incidentally, that was almost exactly the same as\nsional committee, if one is appointed, could look into that to determine\nprocedure. I personally do not think so, but nevertheless the congres-\nthe increase in the total debt during the decade of the 20's.\nfinancing? The CHAIRMAN, Your idea is to supplement that by Government\nthe point.\nSenator PEPPER. And would you think it proper to include in the\nMr. WALLACE. No; I didn't say that, Senator. It might be neces-\njurisdiction of that committee the determination of whether or sub- not\nsary.\nthe lending agencies under the Federal Loan Agency might be\nThe CHAIRMAN, You would be for it if it were necessary.\njected to the Classification Act?\nMr. WALLACE. I hold to this view, that there is, in the final analysis\nMr. WALLACE. Yes; I think that would be well worth looking\nunbalanced budget, and that is labor not at work.\nfrom an over-all national point of view, there is only one type of an\ninto. Senator PEPPER. Now, Mr. Wallace, in your administration of the\nThe CHAIRMAN. Are there further questions?\nman. Senator PEPPER. I have one or two questions, if I may, Mr. Chair-\nFarm Credit Administration, which included the Production be-\noffice of Secretary of Ágriculture you dealt with loans under Credit the\nAssociation and the regional agricultural credit corporations, I\nThe CHAIRMAN, Senator Pepper.\nlieve, corporation and T-loans, Agricultural Marketing Act revolving Rural\nSenator PEPPER, Mr. Wallace, in further response to the question\nElectrification Administration, and Federal land banks.\nfunds, bank cooperatives, Farm Security Administration,\nbe done to indicate any change of administration or policy in the\nwhich was asked, whether you had in mind anything else that might\nThat is the list I have. Do you recall whether that is substan-\noffice of the Federal Loan Administrator, did I understand to\ntially an accurate list of the lending agencies that were under you\nreply, in response to some question, or in your original statement, you that\nas Secretary of Agriculture?\nyou thought the Federal Loan Administrator's office, and all the lend-\nMr. WALLACE, Yes; all those were there. Did you include Rural\nanswers to the Congress\nprocedures of the Government through the Comptroller General, who\ning agencies under that office, should be subject to the regular auditing\nElectrification? Senator PEPPER. Yes; I have. Now, I believe you mentioned this\nmorning that there were several billions of dollars loaned by those\nMr. WALLACE, Yes; and also, Senator, to the Bureau of the Budget.\nseveral agencies while you were Secretary of Agriculture in your\nSenator PEPPER. And if you were Secretary of Commerce and had\n8-year tenure?\nsupervising powers over the Federal lending agencies, as an incident\nMr. WALLACE. Yes; that is true. The outstanding loans in the\ndone! thereto would it be your purpose to take steps to see that that were\nfall of 1940 when I ceased being Secretary of Agriculture were about\n$4,000,000,000. Senator PEPPER. About $4,000,000,000\n68424-45-9\n126\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n127\nMr. WALLACE. Yes,\nSenator PEPPER. Mr. Wallace, would you express an opinion as to\n(The tables referred to are as follows:)\nwhether there are many men in the country who have had a larger\nTABLE L-Reconstruction Finance Corporation: Amount of business loans author-\nexperience than your experience in the conduct of the Department of\n(sed and disbursed, cumulative da of Feb. 29, 1940, and Mar. 31, 1944. by size\nAgriculture and in the supervision of those several lending agencies\nof loan\nover a period of 8 years?\n[Percentages and millions of dollars)\nMr. WALLACE. There are several men in Government who have had\nPercentage\nexperience with lending very large sums of money, but I don't think\nAs of Feb. 29, 1940\nAs of Mar. 31, 1944 ²\nchanges over\nthere are many who have had greater experience than this.\n1940\nSenator PEPPER, Now, some question was asked about the functions\nof the Department of Commerce, and I believe you stated that you\nDisbursed\nDisbursed\nSize of loan\nAuthorized\nAuthorised\n(actual)\n(estimated)\nAuthori-\nDie\nburse-\nthought the general statutory provisions for the functions of the De-\nrations\nments\n(per-\npartment of Commerce were somewhat analogous in substance to the\nPer-\nPer-\nPer-\nValue\nValue\nValue\nValue\nPer-\ncent)\n(per-\ncent)\nfunctions of the lending agency. Did you have in mind the language\ncent\ncent\ncent\ncent\nof the statute setting up the Department of Commerce, which reads,\n$7.5\n1.6\n$4.9\n1.7\n$17.2\n0.7\n$6.9\n0,7\n129.3\n40.8\namong other things, as follows:\nUnder $5,000\n2.b\n7.0\n2.4\n25.7\n1.0\n10.3\n1.0\n123.5\n47.1\n$5,000 to $10,000\n11.5\n32.1\n6.9\n19.9\n6.8\n75.6\n1.0\n30.5\n3.0\n135.5\n53.3\nIt shall be the province and duty of sald Department to foster, promote, and\n$10,001 to $25,000\n41.1\n8.8\n23.8\n8.1\n98.4\n3.9\n39,6\n3.9\n139.4\n00.4\n$25,001 to $50,000\ndevelop the foreign and domestic commerce, the mining. manufacturing, ship-\n$10,001 to $100,000\n61.7\n13,2\n38.3\n13.0\n149,8\n5.9\n00.3\n5.9\n142.8\n57.4\n118.5\n33.4\n64.4\n13,8\n42.5\n14.5\n140.7\n5.5\n56.7\n5.5\nStates. ping, and fishery industries, and the transportation facilities of the United\n$ 00,001 to $200,000\n(21\n21.1\n202.3\n7,9\n81.4\n7.9\n123.0\n31.1\n$200,001 to $500,000\n90.7\n19.5\n47,3\n10,1\n31.9\n10.8\n139,6\n5.5\n56.2\n5.5\n195.1\n76.2\n$500,001 to $1,000,000\n21.6\n1,691.0\n66,6\n680.9\n66.6\n1,438.7\n974.0\nMr. WALLACE. You are quoting it accurately, Senator. I was only\nOver $1,000,000\n109.9\n23.6\n63.4\n406.2\n100.0\n293.8\n100.0\n2,540.3\n100.0\n1,022.8\n100.0\n444.9\n248.1\nquoting it this morning from memory, sir.\nTotal\nSenator PEPPER. Well, now, some inquiry was made about small\nbusiness loans. I have before me what purports to be a report of all\n1. Temporary Finance Corporation Summary of Authorizations. Finance Corpora- on\nNational Economic Committee Monograph No. 17, Problems Disbursements of Small Business, are entimated p. 300.\nI Reconstruction disbursement figure of $1,022,800,000 furnished by the Reconstruction disbursement figure of\nloans and commitments authorized to business enterprises by the\n$1,022,800,000 tion, by assuming disagrees a slightly with the disbursement of $1,008,000,000 used by Mr. Jomes\nthe basis of total distribution parallel to that of authorizations. Note that total la Washington\nR. F. C. through August 31, 1944, published by the R. F. C. September\n14, 1944, wherein it appears that 6,871 loans under $5,000 were made,\nStar.\ntotaling about 171/2 million dollars, but constituting only about seven-\nTABLE II.-Reconstruction Finance Corporation: Number of business loans au- by\ntenths of 1 percent of the total number of loans made by the R. F. C.,\nthorized and disbursed, cumulative as of Feb. 29, 1940, and Mar. 31, 1944,\nand showing that there were loans of less than $10,000 to small busi-\nsize of loan\nness in the amount of 1.7 percent of the total amount of the loans, and\nFeb. 29. 1940\nMar. 31, 1944'\nless than $100,000, the total percentage, would be about 12 or 13 per-\ncent of the total amount of money loaned; 66.2 percent of all the money\nAuthorized\nDisbursed\nAuthorized\nPercent\nloaned was loaned in units of over $1,000,000.\nBise of loan\nincrease,\n1940 to\nWithout, of course, having known of the individual applications\nPer-\nPer-\nPer-\nNumber\nNumber\nNumber\n1944\ncent\ncent\ncent\nbelieve as a matter of policy that it would be in the public interest for\nfrom small applicants and large applicants, would you say that you\n3,332\n36.6\n2,402\n60.5\n6,738\n32.3\n102.2\ngreater consideration be given to small business and that that would\nUnder $5,000\n1,412\n15.5\n874\n14.4\n3,202\n15.6\n131.0\n20.7\n149.1\n$5,001 to $10,000\n1,729\n19.1\n1,095\n18.0\n4,331\nbe worth looking into?\n$10,001 to $25,000\n11.4\n605\n9.9\n2,309\n12.5\n151.8\n1,032\n$25,001 to $50,000\n786\n8.6\n502\n8.3\n1,964\n9.4\n149.9\nMr. WALLACE. Yes; based on the record as you have read it, It is\n$50,001 to $100,000\n421\n4.6\n282\n4.6\n946\n4.5\n124.7\n$100,001 to $200,000\n193\n3.2\n627\n3.0\n125.5\ndifficult now to say just what the full facts may be. I do think the\n278\n3.1\n$200,001 to $500,000\n63\n.7\n44\n,7\n187\n9\n195.8\nsituation ought to be looked into.\n$500,001 to $1,000,000\n40\n.4\n26\n.4\n228\n1.1\n470.0\nSenator PEPPER. Mr. Chairman, if I may, I would like to submit\nOver $1,000,000\n9,103\n100.0\n6,083\n100.0\n20,882\n100.0\n129.4\nfor the record the three statements which I have in my hand, showing\nTotal\nthe reports of the R. F. C. up to 1940 and then up to 1944, respecting\nloans to small business.\nIl Temporary Reconstruction Finance Corporation-Number and distribution of 1944,\nNational Economic Committee Monograph No. 17, Problems disbursements of Email Business, to Mar. p. 31, 300.\nThe CHAIRMAN. They are official, are they?\nnot available.\nSenator PEPPER. Yes, They were taken from official reports.\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n129\n128\nADMINISTRATION OF CERTAIN LENDING AGENCIES\ndiene plant, Standard continued this work at its own expense. Therefore, when\nTABLE III.-Size of all loans and commitments authorized to business enterprises\nPearl Harbor changed the whole Government attitude toward synthetic rubber\nby Reconstruction Finance Corporation, through Aug. 31, 1944\nand Reconstruction Finance Corporation telegraphed Standard to go ahead, the\nengineering work had advanced 3 months. Practically no time had been lost as\n[Excludes loans and commitments to subsidiaries of Reconstruction Finance Corporation, Defense Homes,\na result of the Government cancelation of the project in September.\nand Great Britain)\n[Published by Reconstruction Finance Corporation Sept. 14, 1914]\nThen, further, there was this testimony by Mr. Howard, Mr. Frank\nA. Howard, vice president, Standard Oil Co. of New Jersey, and he is\nNumber\nPercent\nAmount\nPercent\naddressing Mr. Fulton, chief counsel of the committee:\nThere is a great deal of correspondence, I am sure, that you have, Mr. Fulton,\n$5,000 and under\n6,871\n3.8\n$17,588,440.29\n$5,001 to $10,000\n0.7\nthat shows that we didn't believe the reduction of the 40,000-ton program to a\n3,367\n15.6\n26,472,512.04\n1.0\n47.4\n$10,001 to $75,000\n1.7\nprogram of four shadow plants, each with a capacity for only 2,500 tons, was a\n4,462\n20.7\n$25,001 to $50,000\n77.882,835.77\n2.9\nwise decision.\n2,701\n12.5\n$70,001 to $100,000\n102,329,096.02\n3.8\n2,063\n9.6\n$100,001 to $200,000\n156,921,782.56\n5.9\nAnd, further, his testimony continues:\n1,002\n4,6\n$200,001 to $500,000\n149,182,989.43\n5.6\n673\n3.1\n$500,001 to $1,000,000\n217,540,560.12\n8.2\nFrom that conclusion of ours, we succeeded In getting-or at least we or others\n205\n1.0\nOver $1,000,000\n151,765,616.47\n5.7\n245\n-1.1\n1.702.797,504.22\n-06.2\nsucceeded in getting-the Reconstruction Finance Corporation to reverse itself\nTotal\n21,589\n100.0\nvery soon.\nAverage of all loans and commitments\n2.062.481,300.92\n100.0\nMr. FULTON. On that I noted that in September, some 5 months Inter, the Rubber\n123,325.00\nReserve Instructed you to suspend all work on your butadiene project, which you,\nof course, did not do, but did they reverse their position on this 2,500-ton matter\nSenator PEPPER. Now, Mr. Wallace, this morning I believe you were\nbefore Pearl Harbor?\nMr. HOWARD. Oh, yes, sir. They had reversed that position sometime quite\nquestioned, after you had made some comment in your original state-\nearly In 1941, I am sure before the middle of the year they had reestablised their\nment about some laxness on the part of the R. F. C. or the lending\nminimum program at 40,000 tons.\nagencies in the acquisition of critical material or in the expenditure of\nMr. FULTON. And It destroyed the shadow program of four 2,500-ton plants?\nmoney for purposes of strategic or critical material.\nMr. HOWARD. They enlarged it back up to the place where It had started.\nI would like to read to you just two or three things and ask if that\nWas that the sort of thing you had in mind?\nis the kind of thing you had in mind or if it is not the kind of thing you\nMr. WALLACE. That is the sort of thing I had in mind.\nhad in mind. I read a copy of a letter from Mr. E. R. Stettinius, Jr.,\ndated November 25, 1940, to the Honorable Jesse Jones, Federal Loan\nhe had his office over in the Federal Reserve Building, was on the sub-\nI may say, Senator, that the first visit I paid to Mr. Stettinius, when\nAdministrator, Washington, D. C., as follows:\nject of synthetic rubber, because of the fact that we had in the Depart-\nments for the production of synthetic rubber are progressing. This is only to\nThere has been some question raised as to the speed with which the arrange-\nment of Agriculture a chemist who had been with the Standard of\nNew Jersey, had been working on butyl rubber; and while we were not\nbe expected, because It may be a matter of vital Importance In the defense effort.\nin the war yet, I felt that Mr. Stettinius should be getting into the\nDivision's responsibility In the program.\nI want to take this opportunity therefore to make a matter of record this\nYou will recall the unsatisfactory situation which resulted in conversation\nthat other gentlemen in positions of authority to help did not share felt. the\nrubber picture with the utmost vigor. Mr. Stettinius agreed. I know\nFinance Corporation and the Industrial Materials Division of the Defense Com-\ncarried on between representatives of the Industry and both the Reconstruction\nThat does not in any way impugn their patriotism or their standard\nalarm which I felt about it and which I think Mr. Stettinius\nturned the whole matter over to you for final determination. With my letter to\nmission. At your request, therefore, and with the approval of the Congress, I\nyou of October 23 was enclosed a copy of my report to the Defense Commission\nof Senator high business PEPPER. conduct. Now, Mr. Wallace, I think it is only fair to you, if\nsituntion. The same material was sent to the President on that date, together\nand the report of this Division's chemical group outlining the synthetic-rubber\nmemory is not clear on the exact words in the last six paragraphs\nyour which the able Senator from Texas asked if you still subscribed to,\nsituation had been turned over to you.\nwith the covering memorandum, making It clear that the whole synthetic rubber\nthat I might read these paragraphs so that you have them before you\nIt perfectly clear that the Industrial Materials Division of the Defense\nYou be are thoroughly familiar with these facts. I have felt It desirable that\nto make any comments on them that you care to make [reading]\nfor solution of our present problems lies In the Constitution itself, to deal in\nmatter. mission is not now considering Itself responsible for the developments In Com- this\nits the eternal problems of justice, liberty, and the general welfare. meet them.\nThe declaration cue of the united purpose of the people, through government, These\nSincerely yours,\nwith take new forms: previous mechanisms may not suffice to would be con-\nE. R. STETTINIUS, Jr.\nproblems concepts of how to approach them arise In a new age. It from the\nNow, just a couple of excerpts from the testimony given to the Tru-\nNew to the very spirit in which the men of 1787 acted to shrink con-\nman committee on April 2, 1942, by Mr. W. S. Farish, president, Stand-\ngeneral that instruments of government are devised by men for furthering a\ntrary welfare today. The Constitution Itself was the product of a deep the\nard Oil Co. of New Jersey. [Reading:]\nviction for being. Not to use the Constitution In that spirit, but to set It up as the\nOn January 15, 1941, Standard submitted to the Reconstruction Finance\nreason sacred and changeless authority on changing material conditions, is to deny\nporation a complete plan under which It offered to construct a plant Cor-\nkernel and worship the husk.\nproduction Corporation of butadiene, to be financed 75 percent by the Reconstruction Finance for the\nIn and 25 percent by Standard. Nothing came of this\nvated by motivated by the Idea of a democratic political society. for the\nToday we the Idea of cooperative economle society as the young men The one IS\nneed a great many more persons who will become as deeply of 1776 moti- and\npend work on the Government Baton Ronge butadiene project for to sus-\nSeptember all 1941 the Rubber Reserve Company Instructed Standard proposal.\n1787 the living were stream of thought for the twentleth century as the other was\nNotwithstanding the cance'ation of the engineering work on the 15.000-ton 1 buta- year.\n130\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n131\neighteenth. I believe the majority of American people are already receptive to\ncontribution to the productivity and ordered welfare of the peoples of the world\nthe general purposes and possibilities of a cooperative commonwealth. They\nand perhaps an even greater contribution to the consuming power and happiness\nwant more security In sickness, in old age, In unemployment; they want a wider\ndistribution of the good things of life: and they have become disillusioned of\nof all the nations.\nthe system, In its present self-contradicting form, of free competition and devil\nSenator BREWSTER. I want to ask one question. It seemed to me\ntake the hindmost as a method for reaching those ends. The movements or\nthe record had been blurred a little from the beginning, from your\nachieving such ends Is indicative of the feeling of many people. The need is for\na body of people In accord on general alms, as Idealistic and as realistic as were\ncategorical statement as I understood at the conclusion of your state-\nthe young Federalist of 1787, to channelize thought and Initiate and consider\nment this morning, that if the loan agencies were given to you as\nproposals which may lend to a cooperative society, The means for conveying Ideas\nSecretary of Commerce you propose to use all the power they contain\nare certainly more extensive than they were in the 1780's, even though there\nare 30 times as many people to reach, Perhaps the very multiplicity of means\nto carry out these objectives which you have outlined to us.\nmakes for confusion. But we may well profit by the example of the young men\nMr. WALLACE. Subject, of course, to the President and Congress.\nof 1787 who used the Federalist with such effect, In utilizing similar national\nSenator BREWSTER. You mean if Congress should make a change,\nforums for analyzing and propagating new proposals. By such means, by the\nyou would recognize that change? In connection with that, I invite\ngive-and-take of discussion, by the determined effort of persons themselves con-\nvinced and thus able to convince others, new concepts will eventually take form\nyour attention to your potato cuts.\nin social mechanisms.\nMr. WALLACE. Senator, I wanted the Senators and Congressmen\nIt seems to me that thoughtful people today, In relation to prospective action,\nto think it over again and again before they insisted we go ahead with\nstand somewhat In the position of thoughtful men in the early 1780's. At that\nthe compulsion of the potato cuts.\ntime they were Increasingly aware that the set-up under the Articles of Con-\nSenator BREWSTER. You did make the statement you would use all\nfederation was not working out to meet national problems in an adequate way.\nThey were thinking, suggesting, comparing Ideas and plans, wondering what\nthe powers of the office to advance what you believed was the goal.\naction was necessary, wondering what form It should take, whether the ar-\nMr. WALLACE. Subject, of course, to-\nactually fermulating a definite plan.\nticles needed amendment, revision, or what. They had not got to the point of\nSenator BREWSTER (interposing). To future action?\nMr. WALLACE. No; subject, of course, to the regular Governmental\nSimilarly, thoughtful people today are wondering what action will be needed.\nThey know that solution of our present problems will eventually require a new\nchecks, by which I refer not merely to Congress and the President but.\nkind of statecraft as effective In the economic field as was the statecraft of\nquite possibly also the Budget Office and Accounting Office.\nMadison, Hamilton, and the others in the more purely political field. The pre-\nSenator BREWSTER. As you know, in this case the loan agency is\nThoughtful people today believe that the Constitution provides ample scope for\neise form of statecraft which will be required, however, does not yet appear.\nnot subject to either the Budget or the General Accounting Office, so\nevolution toward the Dew form of statecraft. Much depends, however, on the\nare taking the powers, the same powers possessed by Mr. Jones,\nMuch depends on whether the plain intent of the Constitution to enable Govern-\nway old or new legislation under the Constitution Is used by pressure groups.\nyou which, as you know, are very unlimited. He pointed out to us yes-\nterday he made loans of many billions; we did not get clear how many\nment to promote the general welfare can really be effectuated under modern\neconomic ,conditions. If this book has shown anything, It has shown that\nbillions were involved, but it certainly was in character with this\nthe present relationships of economic groups and the present scope of Individual\nrevolving fund that he could loan that amount at any time to any\nand governmental action do not work out sufficiently toward the general wel-\nfor any purpose. I think that was his plain statement. So\nfare. If it raises any question of Immedinte concern to all of us, It is: Who\nperson there would be very great powers possessed here, and if then they were\nowns the Constitution, If not the people as a whole?\nIf our more privileged and powerful people under the present rules of the\nto be used for the purposes you outlined it would certainly go outside\ngame-financiers, corporation lawyers, and directors-resolutely fall to un-\nthe purpose which I think the Congress had in view when they enacted\norder they are alive to the necessity for making certain fundamental changes In\nIf derstand the signs of the times, one type of statecraft may need to be evolved.\nthe law.\nMr. WALLACE. I think the Congress ought to step in and review the'\nbe in order, to preserve One situation the general might welfare quite a different form of statecraft may\nwhole situation, as I suggested this morning, but I also suggested\nIn varlous countries of the world In the past, privileged classes have often acted\ntution. In Another might require nothing in the require way amendments of constitutional to the changes, Consti-\nwhat could be done.\nSenator BREWSTER. Could be done?\naction, such n way as to make gradual change impossible and have precipitated violent\nMr. WALLACE. What could be done.\norganization and Intelligent social action.\ngradual change, and have made steady progress in the direction of cooperative\nSome countries, as for example Sweden, have shown a capacity for\nSenator BREWSTER. You are not modifying that statement in any\nWe in In the United States should eventually be prepared If necessary to work\nway? Mr. WALLACE. No; I am not modifying that statement in any way;\nout as the spirit of Madison a mechanism which would embody the spirit of the\nneither am I suggesting any arbitrary use of power.\neighteenth age successfully as the Constitution of 1787 mirrored the philosophy of the\nSenator BREWSTER. This is not arbitrary at all. I mean if you use\nas the Constitution century. We may hope that such action can be taken as bloodlessly\nThis will was enacted and that the handiwork will be as\nthe powers Mr. Jones has to accomplish your different concepts of\nwe use undoubtedly be possible If a spirit of common sense prevails; enduring. and If\nthe public welfare.\nmay not be necessary at all.¹\nour Constitution as Hamilton anticipated It should be used, such action\nMr. WALLACE. Frankly, I think undoubtedly the Congress would\nly United States It is my belief that in the spirit, If not in the form of enormous- 1787, the\nAmerica's significant. contribution in 1787 to world governmental practice was\nhave to pass on those items, there is no question about that.\nSenator BREWSTER. They would not under the present law.\ncan, In the not too distant future, make again fully as great a\nMr. WALLACE. I think they would.\nSenator BREWSTER. Why do you say that?\n'See art. 34 of the Federalist, as quoted on p. 205 of this book.\nMr. WALLACE. I am sure Congress would have to pass on that.\n132\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n133\nSenator BREWSTER. You mean to say you would not exercise the\nMr. WALLACE. Yes.\npowers which you possessed?\nSenator TOBEY. I would like to present to your mind an article which\nMr. WALLACE You see, I started out with unemployment.\nyou wrote, which appeared in the New York Times Sunday maga-\nSenator BREWSTER. Yes.\nzine issue about a year or a year and a half ago, the substance of\nMr. WALLACE. Obviously, under the R. F. C. as it now exists, under\nwhich is that with the aftermath of the war you would diseard a large\nsection 5 (d) of the R. F. C. Act, there is a provision there for loan-\npart of the productivity set-up in the synthetic-rubber industry in this\ning money to prevent unemployment.\ncountry and go back and purchase from the old order. Is that correct\nSenator BREWSTER. Yes, yes, and for manufacture, there is a pro-\nMr. WALLACE. That, Senator, is not quite fully stated.\nvision in that for manufactures which was not subject to the Presi-\nSenator TOBEY. How would you phrase the article?\ndent, I think, but they could aid manufactures.\nMr. WALLACE. There did seem to be some misunderstanding there.\nMr. WALLACE. Insofar as I have already been granted power by\nI think it is clear in the article, and if it is not clear it was made clear\nCongress, I have served notice on Congress that I would do my best\nlater on, that I think it is regrettable to put a tariff on rubber merely\nin the loaning, to carry out what is set forth in section 5 (d).\nin order to keep these synthetic plants going. I feel that a tariff would\nSenator BREWSTER. I just wanted to be sure that the questions which\nput a burden on every automobile user. I feel the synthetic-rubber\nSenator O'Daniel and Senator McClellan asked did not mean you\nplants should be kept going, but not in an extensive way, if it requires\nmodified in any way your determination to use the power given you\na tariff to keep them going.\nset forth.\nto do everything humanly possible in the direction the powers were\nSenator TOBEY. But over against that, if you returned to the old\norder and brought out rubber from the original supply, which was\nMr. WALLACE. Insofar ns the powers have been specifically set\ncontrolled by the largest cartel in the world, perhaps, the British and\nforth by Congress, I would carry them out for the objectives which\nDutch cartel, we would have a repetition of the very thing that you and\nI set forth this morning.\nThe CHAIRMAN. Are there any further questions?\nI abhore, would we not?\nMr. WALLACE. I have been very strong, over a period of many years,\nI think Senator Tobey desires to ask a question.\nfor the development of rubber production in Latin America. I share\nSenator TOBEY. Mr. Wallace, last October, in reading the Wash-\nington Post, the issue I think of the 16th of October, there came to\nwith you ycur feelings in regard to the cartels of the Far East, whether\nthey have had to do with rubber or with quinine.\nmy eye an article telling about a statement made in Muncie, Ind., in\nSenator TOBEY. Of course, under that cartel you and I know that\nthe course of political debate. There you made this statement, and I\nsometimes the price went from 2 cents to $2, depending on the whims\nwould like to read it to you:\nof the cartel.\nMr. Wallace sald, \"After the war we can buy twice as many automobiles\nMr. WALLACE. I think the highest price was reached in November\nthings possible we need only the money.\"\nwe did in the past. We can buy twice as many refrigerators. To make these as\n1925, when it was $1.30 a pound.\nSenator TOBEY. It is amazing when you contrast it to the low\nAs to where the money will come from, you answered:\nprice that it sometimes has come down to. It is a rigged market, When\nFrom R man who will do more than give the green light to Wall Street,\nrigged production, and I do not want to see that returned.\nDid you refer to the President?\nwe pay $20,000,000 to build a synthetic-rubber industry I say we\nWhom did you refer tol\nshould keep that on the job in case we have another war.\nI made the statement,\nMr. WALLACE. I was referring to Franklin Delano Roosevelt when\nMr. WALLACE. I agree, Senator. Rubber, I might say, has been\na our being \"caught with our pants down\" with respect to rubber as any-\nhobby of mine for some time. I probably worked as hard to avoid\nSenator TOBEY. Where is the money coming from to buy twice as\npast? many refrigerators and twice as many automobiles as we had in the\nbody in this country. I think the record will prove that, Senator.\nBut neither do I think this situation should be used to enrich any-\nwages. Mr. WALLACE. The money is coming from men fully at work, at full\nthing in the nature of a domestic cartel. And remember this: It of is\nold, old democratic saying that the \"tariff is the mother the\nSenator TOBEY, The statement is: \"twice as many\nbelief?\nin the past.\" That means after the war. Is that your as\ntariff at the expense of the American automobile user, merely to\nmonopoly,\" an and you should be a little careful before you use\nbuild up a domestic synthetic-rubber cartel.\nMr. WALLACE. I am sure it can be done, Senator. As a matter of\nI do think we want to utilize everything we have found here in the\nfact, if we are to have full employment we shall have to consume\ncourse of the war.\nnearly Senator twice as many automobiles and twice as many refrigerators.\nFurthermore, if we found, as the result of our war experience,\npressed hostile what has been in my heart for many years, that is that you ex-\nTOREY. One other question. I think this morning\nthat we can make rubber cheaper than it can be produced in the\nnatural way, rubber of a superior quality, I am all for it, but if it\non are that? to cartels. I believe you have expressed yourself before you\nis more expensive, why, I think it would be a serious mistake to soak de-\nthe American consumer, unless there is a campaign of national\nfense involved, and in that case I would suggest we consider our\n134\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n135\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nLatin-American neighbors, we should survey the situation to see to\ncapital, and agriculture really understand each other and start pulling together\nwhat extent we can produce rubber close to our shores, if natural\nto turn out more goods in such a balanced way that there will be no serious\nrubber can be produced cheaper than synthetic rubber.\nset-backs. As we consider the absolutely vital functions of capital we should all rement-\nSenator BREWSTER. You realize, don't you, that the price of rubber\nhigher than the problem of profit to the general welfare considerations Involved\nber that there are a number of capitalists who are capable of lifting their eyes\nin the Dutch East Indies is dependent on the standard of living\nof the men producing it You would not advise having competition\nshould not be blamed for the abuses practiced by the others. Of course there\nIn getting new Industries started in a sensible way. Capitalists with vision\non that basis, would you?\ncertain abuses which are Inherent in any system of maturing capitalism\nMr. WALLACE. Their wages were deplorably low, Senator. As a\nare with which we must wrestle courageously in order to keep capitalism from de-\nmatter of fact, that is one of the great difficulties in building up\nof good feeling will characterize all our efforts and that the flow of private\nstroying itself. Insofar as we have set our hand to that task, I hope the utmost\nthe Latin-American rubber industry. But I may say this also, that\nscience works in the biological world just as much as in the world of\ncapital Into productive Investment will be encouraged. The time is now and rapidly\napproaching when the general public will demand that labor, capital, and more agri-\ninorganie matter. Science has done some very remarkable things\nculture spend less of their energy in a struggle for relative advantage national\nin the way of rubber breeding, and I am beginning to think it is\npossible to produce rubber at 6 to 8 cents a pound in Latin America,\nof energy We have the inventive ability. the factories, the workers, the and\ntheir In devising constructive cooperative ways to Increase the farmers,\nbecause of the high productivity of some of these rubber clones\nto output. take care of all of our people in marvelous fashion. Capital, labor,\nthat have recently been discovered.\nagriculture cooperating can do the job.\nSenator BREWSTER. What kind of wage would you pay the workers?\nSTATEMENT BEFORE THE INTERSTATE COMMERCE COMMISSION JANUARY 18, 1938, ON\nMr. WALLACE. The workers could be paid a much higher wage than\nTHE DEPENDENCE OF THE RAILBOADS ON INCREASED INDUSTRIAL PRODUCTION\nthe workers in the Far East.\nSenator TOBEY. Mr. Wallace, I would like to say for the record in\nreference to your work in the Board of Economic Warfare and your\none which and all other industries that supply the railroads with of business\nThe only means real health for the construction, manufacturing. volume. mining, I be-\nshort-time policy which can mean real health for the railronds agri- is\nappearance before the Banking and Currency Committee of the\ncultural, can be taken to bring about a rapid restoration restoration\nSenate in which you gave an account of the new development, I think\nactivity and production. 1 believe the railroads might to devise ways\nlieve that and steps production through our productive system and a effectively rapid cooper-\nit is a very constructive piece of work. The Nation and the world\nof employment the industrialists and other groups that are now trying Such means\nare benefited by that work of the Board of Economic Warfare very\nate with for getting construction and industrial activity revived. to all other\nmaterially, and that is also true with reference to quinine.\nand can means bring profits to the railroads at the same time It brings profits\nThe CHAIRMAN. Are there any further questions? If not, we\nIndustries.\nthank you, Mr. Wallace. You have very thoroughly discussed the\nmatter before us and given us your views. We will excuse you as\nLETTER TO SENATOR BYRNES, CHIEF OF SENATE COMMITTEE 1938 TO INVESTIGATE\na witness and we will go into executive session.\nUNEMPLOYMENT AND RELIEF, JANUARY 12,\n(Following is additional testimony submitted by Mr. Wallace for\nthe record:)\nFrom speech January and 3, businessmen 1938: all suffer when investment varles fluetuate widely\n\"Farmers, workers, time, and when steel and other durable-goods Industries and almost com-\nADDRESS BEFORE THE COMMUNITY FORUM, PITTSBURGH, PA., JANUARY 3, 1938, ON\nerratically between at others. When new Investment, or even the business uncer-\nfrom time to frantle attempts to fill orders at one time expenditure of\nTHE COMMUNITY OF INTEREST BETWEEN LABOR, CAPITAL, AND AGRICULTURE\nplete stagnation reserves for repairs and replacements, is checked Industrial by pay rolls,\ndepreciation or fright, or by Investors' fears. business activity, do either Inhor\nBut businessmen In general are not seeking predatory proflis.\ntain'y for farm products collapse together. It doesn't all find ways to\nvalues. This It can hope to get In the long run only through balanced abundance.\nBusiness does want a chance to earn an honest return on true Investment\nand the demand good to scare eapital: Instead, they must depreciation can\nor agriculture any Means must be worked out so that repairs and Instead of\nBusiness at 25 cannot hope for long to cover the overhead costs of Its plant if It\nwork together. and new plants created. more eventy year after farmers year, and workers\nless. Initiative and leadership and that ancient plants eventually become value-\nof or to percent of capacity. It must recognize that profits are the operates reward\nbe made good, when times seem good. Cooperation between businessmen\nto maintain Any attempt over long periods of time to operate at limited capacity and\nis needed for is needed to create a steady flow in the creation of the business\nall in a lump expanding production, and cooperation of both with of durable goods.\nculture enpital, seeking opportunity for profitable investment, like the Interests of agri-\nnew investors, new capital, and new business leadership. The true Interests of\nthe values of obsolete equipment will renet against the Interest of\nIf and this investors prob'em can be solved, much of the extreme ups and downs\ncycle may be smoothed out.\"\nand labor, lie In balanced abundance.\nIt gain is my bellef that business management and Investors both have\nADDRESS AT JACKSON DAY DINNER MINNEAPOLIS. MINN., JANUARY 7. 1939, ON THE\nbusiness to from a sound working relationship between agriculture and everything labor.\nCHALLENGE TO THE WEST\nvestors will return a reasonable yield on the capital invested, and If full In-\nproduction management is willing to produce and sell at prices which with If\nIn he previous to 1980, but we all hope the day will soon come Both when the art and\nfuture there will probably always be greater Federal expenditures private than\nwill find are wide willing to put their funds Into use at moderate Interest rates, they\nwas the case will Increase and Government financing will decrease. in considerable\nwill be effectively the farmers and labor cooperate to expand production, the The\nmore markets for their products and effective use for their funds.\nfinancing of government in the years Immediately abead will center rapidly as\nwork for all opportunities for industry as a whole, Yes: there will be wider\nscience measure around the problem of bringing about this transition as\ncapital which la willing to accept a fair return as soon plenty as labor, of\npossible but without shock.\n136\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n137\nRooseveltian democracy has learned and la learning more completely than any\nparty has ever done, the need for agriculture, labor, and capital to pull con-\nADDRESS AT ANNUAL JEFFERSON DINNER SPONSORED BY NATIONAL DEMOCRATIC\ntinuously together in a balanced way for the service and welfare of all the people.\nCLUB AT COMMODORE HOTEL NEW YORK, APRIL 22, 1939, ON PROGRESSIVE DE-\nWe are determined to serve the farmers, the workers, the small businessmen and\nMOCRACY AND THIS CHANGING WORLD\nthe underprivileged. We know that If this is done In terms of Increased balanced\nabundance the larger businessmen will take care of themselves and will prosper\nJefferson tried to get an amendment to the Constitution to prevent corpora-\nalong with the rest. We want to cooperate with capital to keep it continuously\ntions from being formed. I am sure If he could see the way In which corpora-\nproductive. Our program is one of unity in the service of the general welfare.\ntions and labor unions are serving the people in the cities today, be would be\neager to have agriculture served by compensating devices and organizations,\ndemocratically administered. The businessmen of the wholesale and retail\ngrocery trade have unanimonsly Indorsed this (food stamp) plan and are tak-\nREMARKS AT FIRST OF A WEEKLY SERIES OF BROADCASTS ON DEMOCRABY IN ACTION,\ning the lead to make It work to the greatest advantage of all. Through this\nDESCRIBING FEDERAL PARTICIPATION IN THE WORLD'S FAIR, PRESENTED Over\nplan we hope to help farmers dispose of more of their surpluses, give low-\nNATIONAL BROADCASTING Co., FEBRUARY 5, 1939\nIncome groups in the cities better nourishment and better health, and bring\nto business more volume. If successful and If applied on a wider scale, this\nI do not mean that the Government produces and distributes the food, but I\nplan will be a three-way contribution to the general welfare.\ndo mean that It must see to it that the conditions are such that producion and\nIn this job of rebuilding, an essential role must full to businessmen. This\ndistribution and consumption can continue In behalf of the general welfare.\ntwentleth century la a machine age, and n machine age Is nn age of business.\nThe farmer's job Is of course only one complicated step in the total process of\nAmerican life as we know It centers largely around business, and without the\nfeeding those 2,000,000 residents of Manhattan Island. The processor, the\nconstructive leadership of businessmen, cooperating with the constructive lend-\ndistributor, and the retailer usually have functions to perform before the con-\nership of agriculture, the constructive lendership of labor, and the constructive\nsumer can eat.\nlendership of government, the general welfare cannot be adequately served.\nModern distribution has done two great things. It has banished distance, and\nIt would be a splendid thing If businessmen themselves would take the initin-\nhas Just about bunished season. The entire country's food resources are available\ntive In setting up machinery that would help guide business toward increased\nnow at the consumer's door, no matter where or how large the city.\nproduction, employment, and distribution. Insofar as businessmen succeed In\nthis effort, farmers and workers will share in the Increased prosperity of a\nbalanced, continuing abundance.\nADDRESS AT THIRD ANNUAL NATIONAL FARM INSTITUTE, DES MOINES, Towa, FEB-\nRUARY 18, 1939, ON How AGRICULTURE, INDUSTRY, LABOR, AND GOVERNMENT CAN\nWORK TOGETHER FOR A $100,000,000 INCOME\nADDRESS AT BANQUET FOR EIGHTY-SEVENTH ANNUAL CONVENTION OF DISTRICT\nGRAND LODGE 1 OF B'NAI B'arru AT HOTEL ASTOR, NEW York (BROADCAST BY BLUE\nI believe It is just as Important for government to follow stable and well-\nNETWORK, NATIONAL BROADCASTING COMPANY), MAY 21, 1939, ON AMERICA THE\nconsidered spending and Investment policies for productive and social purposes as\nLAND OF OPPORTUNITY\nfor private business to do so, That means, first, Government activities ought\nnot to be suddenly curtailed without regard to the effect on the course of busi-\nThe existing physical needs make America a land of opportunity right now\nness. But since budget considerations make It Impossible for government to\nfor men with training and experience in the Investment field. The wise In-\nmatch in full the outlays that private business normally makes, It means, second,\nvestor does not wait for a high tide of business before he poes ahead, for he\nthe sensible thing would be to encourage private capital and get it to flowing\nknows that by that time the best opportunities are gone. The wise investor\nas It ought to flow. Can agriculture, industry, labor, and government agree on\nputs his enpital to work when business is just starting on Its upward curve.\nthese two principles? If they can, then why not declare a truce and call off the\nBy his boldness, he helps make jobs for Idle men, and he helps create business\nargument and concentrate on doing the Job that needs to be done? We must\nfor all. At the present time the greatest opportunities are open to those who\ncarry out both principles. We must maintain government activity as long as\ncan make the right combination of labor, capital, management, and the demo-\nnecessary. And we must encourage private capital to go back to work. That\neratie powers lent by Government.\nIs the sound way, and the only sound way, to get the Increase in business activity\nThere Is always room for a difference of opinion on details, but It seems\nand national Income which will increase Government revenues, decrease Govern-\nto me the national recovery program sponsored by President Roosevelt deserves\nment expenditures, and achieve the balanced Budget which all of us so earnestly\nall the cooperation that the whole country can give. We can never get full\ndesire. The Nation needs more business, and that should be our first goal.\nrecovery unless everyone-Including the leaders of Industry, the leaders of\nlabor, the leaders of agriculture, and the leaders of government-are willing\njut their shoulders to the wheel.\nREMARKS BEFORE MEETING OF THE FOOD AND GROCERY CONFERENCE COMMITTEE,\nWASHINGTON, D. C., MARCH 13, 1939\nADDRESS AT LUNCHEON OF RETAILERS' NATIONAL FORUM AT MAYFLOWER HOTEL,\nAll of 08 In Government appreciate the way In which the members of the\nWASHINGTON, D. C., MAY 23, 1939, ON THE AGRICULTURAL SURPLUSES\ntrade groups have worked with us on this Important problem (food stamp plan).\nWe rely upon your cooperation, including increasingly effective methods of mer-\nThe question is, Can the distribution system be Improved? Yes: I think It can.\nchandising, to make this plan successful. In turn you can rely upon the neces-\nI think It is being improved. I think the Federal Government and the various\nsary cooperation of Government agencies, It is only through united effort that\nState governments are helping distributors to improve their methods-but to be\nwe can find the way to plenty.\nfair, we must recognize that, after all, the men In the distribution business are\nI have been continually delighted with the reports of the mutually fine attitude\nin the best position to do the improving, and that valuable Improvements have\ndisplayed by the representatives of the different groups. Having confidence\nbeen made and are being made within the distribution system Itself.\nIn each other, they have got down to work on the mechanical details In a very\nExecution of this plan is largely in the hands of retailers themselves. Its\neffective way. The food trades, I am confident, are going to do their very best\nsuccess or failure largely depends on their diligence. If the plan succeeds, It\nto do a real job of moving the surplus In the selected cities in such a manner\nwill be because you and your associates make It succeed. I feel sure that all\nas to demonstrate real efficiency to the public.\nof you here who have anything to do with the plan will see to It that It has a fair\ntest, that you will give it your loyal cooperation and your determined support.\nI feel sure that you will do your very best to make the stamp plan work.\n138\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n139\nWhen capital is flowing and employment is increasing, purchasing power will\nIt is time now to settle down calmly for the long-time pull. Certain read-\nbe more widely spread. When these things come to pass, then the retailers will\njustments are necessary, of course, but there is no reason why we cannot make\ntruly be able to serve the masses of the American people. When mass distribu-\nthem in a common-sense way without getting alarmed. There is no basis what-\ntion is accomplished, mass production can be unleashed and the American people\never for alarm as far as food is concerned. I am convinced that farmers, proc-\ncan enjoy to the full the abundance which Nature's generosity and man's In-\nessors, wholesalers, grocerymen, and labor are going to do the patriotie thing.\ngenuity have combined to bring about.\nThey are going to stand for abundance and a fair relationship between prices\nI know the retailers of America are enger to see business, labor, agriculture,\nand services of different sorts, All of them will be against unjustified price\nand government cooperate together to do a larger volume of business, 1 believe\nadvances. None of us wants again to Invite frenzied expansion and tragle\nthat, International affairs permitting, we are going to do more business.\ncollapse. By counseling together we can avoid such a disaster.\nADDRESS AT DINNER OF THE DEMOCRATIC PARTY IN MILWAUKEE, W18., JUNE 17, 1939,\nADDRESS AT ANNUAL JACKSON DAY DINNER AT DES MOINES, Iowa, JANUARY 8, 1940,\nON PROGRESSIVE FOUNDATIONS THAT CAN ENDURE\nON THE FIGHT FOR DEMOCRACY IN 1940\nThe job of stimulating private Investment, so that the building of factories\nThe vast majority of businessmen are honest. Government should, so far as\nand production of articles to be sold to consumers can be kept In balance with\npossible, encourage them In their legitimate endenvors. They are the men\neach other and with the needs of the American people, is perhaps the principal\nwho pay a large part of the Federal income taxes and who pride themselves on\ntask which now confronts us.\nfurnishing jobs for laboring men and markets for farm products.\nThis Job cannot be done-or at least is not being done-by business operating\nby Itself. Neither can It be done by government operating by Itself, unless we are\nwilling to go to a system of state capitalism. Under our American system this\nis a job which must be undertaken by business, with whatever government aid is\nADDRESS, SEPTEMBER 19, 1940, ON THE PRICE OF FREEDOM\nneeded to assure success. Doing this job will give us the kind of foundation we\nneed If our progressivism is going to endure.\nPractical businessmen and engineers are beginning to think through the Joint\nobligation of government and business toward maintaining full employment and\neconomic stability, and the powers that might be placed at the disposal of govern-\nment and business to mitigate the fluctuations of the business cycle. New op-\nADDRESS AT STATE UNIVERSITY OF Iowa, IOWA CITY, IOWA, JUNE 23, 1039, ON\nportunities for thought and action are available In the new frontiers of social-\nPILLARS OF FUTURE DEMOCRACY\neconomic engineering to businessmen, engineers, educators, and young people\nCapitalism is based on the Iden of putting money to work at a profit. A healthy\nseeking ways to serve the Nation.\ncapitalism requires an expanding frontier of some kind. This frontler doesn't\nhave to be land, but It may be some new method of production. Vital capitalism,\ntherefore, must have in It the Idea of progress. It must either be in position to\nADDRESS IN CADLE TABERNACLE, INDIANAPOLIS, IND., SEPTEMBER 23, 1940, ON\nexploit a new physical frontier, or it must give the utmost attention to new\nDEMOCRACY AND CAPITALISM\nscientifle discoveries or inventions which promise to minister to the human desires\nof the future.\nThe substance of democracy that I want to see handed down to my children la\nThe capital for loan was held more or less Informally by thousands of Indi-\na democracy that meets the Ideals and protects the interests of the vast majority\nviduals. The corporate capitalism of the twentieth century is undoubtedly more\nof Americans-of farmers, of workers, of small businessmen, and of those big\nefficient In producing steel than the Individual capitalism of the early nineteenth\nbusinessmen whose great power is matched by good judgment, fairness, and\ncentury. Corporate capitalism has made It possible for millions of people to\nresponsibility to the general welfare.\npool their resources, to produce products which would be difficult or Impossible\nDuring all this long struggle, we Americans have been trying to protect cap-\nfor any one Individual, no matter how wealthy, to produce at \" reasonable cost,\nItalist business, which includes agriculture, against the growing powers of high\nA certain amount of corporate capitalism is undoubtedly in the line of progress.\nfinance. There is a difference between business and finance, which some people\nWithout it, we could not have built our railroads and factoriés so fast, As long\nsometimes try to make you forget. Capitalist enterprise is a familiar process of\nas the corporations were borrowing money from the public and spending- It to\nproducing and selling food, clothes, automobiles, and other useful goods and\nbuild railroads, public utilities, or factories under the guidance of the early\ncaptains of Industry, it seemed that democracy was probably being helped rather\nservices. There are plenty of legitimate businessmen in the utility business. They are\nthan harmed by corporate capitalism,\nto be found In most of the operating companies, doing the actual work of man-\naging the generation and distribution of electricity. The engineering achieve-\nments of the industry are a testimony to the fact that in the works there are\nRADIO ADDRESS OVER COLUMBIA BROADCASTING SYSTEM, SEPTEMBER 8, 1939, ON\nreal producers who know and care about production. They are not the ones who\nWAR FARMERS, CONSUMERS, AND MIDDLEMAN AND THEIR FOOD SUPPLIES IN TIME OF\nlack knowledge or business judgment, If only they were free to exercise their\ntalents.\nI am confident that the men who are responsible for the operations of the\nADDRESS AT DETROIT, MICH., OCTOBER 24, 1940, ON LABOR AND Joss\nsugar mills as well as our domestic growers of sugar beets and sugarcane know\nfrom sad experience that It doesn't do anyone in the sugar business any good to\nYou all know what a real or working businessman is. He runs a store or a\nhave wide fluctuations In sugar prices based on nothing more than hoarding\nfactory. He buys materials, hires workers, sells goods. He may be a success\nand speculative activity. These men who have cooperated earnestly with the\nor a failure, but nt least be knows what It means to struggle with the real\nDepartment during the past few years in endeavoring to stabilize returns for\neveryday problems of producing and selling. The New Deal has no quarrel with\nproducers and processors would undoubtedly Join In advocating that kind of\nstability In sugar prices which will best Insure Justice to the farmers and justice\nreal businessmen.\nto the consumers.\n140\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n141\nRADIO ADDRESS ON EIGHTY-SIXTH ANNIVIRSARY OF BIRTHDAY OF WOODROW WILSON,\n(From Saturday Evening Post, October 23, 1943]\nUNDER SPONSORSHIP OF WOODROW WILSON FOUNDATION, AMERICAN POLITICAL\nSCIENCE ASSOCIATION, AND AMERICAN HISTORICAL ASSOCIATION, DECEMBER 28,\nWE MUST SAVE FREE ENTERPRISE\n1942, ON AMERICA'S PART IN WORLD RECONSTRUCTION\nCapitalism throughout the world, and even in our own country, has often been\nWhen the war is over, the more quickly private enterprise gets back Into\nthe object of derision Not its inherent faults but Its misuse has been the under-\npeacetime production and sells its goods to peacetime markets here and abroad,\nlying reason for this attitude. Considered in Its essentials, however, capitalism\nthe more quickly will the level of Government wartime expenditures be reduced.\nean be the most efficient system of organizing production and distribution on\nNo country needs deficit spending when private enterprise, either through Its\nprinciples of freedom and equal opportunity yet devised by man. It should not,\nown efforts or In cooperation with government, Is able to maintain full employ-\nas many radical reformers have suggested, be uprooted. It should be modernized\nment. Let us hope that the best thought of both business and government can\nand made to work. Indeed, It must be made to work If we are to maintain the\nbe focused on this problem which lles at the heart of our American democracy\nfoundations of those things which we believe to be the essentials of American\nand our American way of life.\nsociety. The chief trouble with capitalism has been the perversion of its Instru-\nThe war has brought forth a new type of Industrialist who gives much promise\nments and their misdirection by small, powerful, privileged groups for purposes\nthey were never Intended to achieve.\nfor the future. The type of business leader I have in mind has caught a new\nvision of opportunities In national and International projects. He is willing\nThe system of free enterprise is based upon the willingness of the business-\nto cooperate with the people's government In carrying out socially desirable pro-\nman to accept risk. As technology grew, as our economy expanded. and as\ngrams. He conducts these programs on the basis of private enterprise and for\nlarge-scale production came to dominate the economic process, the Individual\nprivate profit, while putting Into effect the people's standards as to wages and\nfound it Impossible to undertake such huge ventures alone. To nu this need,\nworking conditions. We shall need the best efforts of such men as we tackle\nthe corporation had the soundest reasons for coming into being, Every new cor-\nthe economic problem of the peace,\nporation enabled numbers of men to pool their resources and to, carry out a\nMaintenance of full employment and the highest possible level of national In-\nventure beyond the means of any one of them. Economic teamplay-yet fully\ncome should be the joint responsibility of private business and of government.\nwithin the framework of competition-was the genesis of the modern corporation.\nIt Is reassuring to know that business groups in contact with government agen-\nTo the corporate form of organization must go much of the credit for the speed\ncles already are assembling facts, Ideas, and plans that will speed up the shift\nwith which new Industries were founded, railroads were built and a continent\nfrom a government-flnanced war program to a privately financed program of\nopened up to the American people.\nRisk taking was an essential of the free economy. Because a corporation\npeacetime activity.\nlimited the liability of the individual and spread the possible losses, It was\ndestined to become the principle means of attracting venture capital. It en-\n[From American Magazine, March 1943]\ncouraged the businessman and the Investor to assume the risk of developing new\nindustries. As an elastic, flexible association of risk takers, the corporation\nWHAT Wg WILL GET Our OF THE WAR\nwas Ideally fitted to bring forth new goods and services and to create going con-\ncerns, Without the use of the corporate form, the emergence of the railroad,\nThe American businessman will rise to the challenge of the air age, to the\nthe telegraph and telephone, the automobile and the radio, the large-scale dis-\nchallenge of the new frontier, to the infinite possibilities for development not\ntribution of electric power, to say the least, would have been delayed. Viewed\nonly In our own country, but In the tropies and in Asia. Just ns he has co-\nfrom this persepetive, the developments of the nineteenth and twentieth cen-\noperated with Government in time of war to build planes for the saving of\nturies have proved the social and economic importance of the corporation.\ncivilization, 80 likewise will he cooperate with Government to make air power\nIt is clear that the corporation and the patent system were major factors\nthe preserver of elvilization.\ncontributing to the growth of modern \"America. The patent system gave to the\nMore and more, everyone will recognize that business, labor, agrienlture, and\nlittle man with the big Idea an unparalleled opportunity to utilize his creative\nGovernment have just one Job in their four-way partnership: To lead the common\nImagination and to risk his limited resources In a game where the rewards of\nman to full employment. a higher standard of living, and a peace which will be\nsuccess were great and where his own gain served the general welfare:\npermented by the exciting spirit of new frontiers, The creative businessman of\nIt is a hopeful sign when Erie Johnston, the president of the United States\nthe future will recognize that, while Government will play a large part in opening\nChamber of Commerce, can say in the September Reader's Digest:\nup these new frontiers, the Government activity will be such as not to reduce\nThen there is a people's capitalism. I come from It. I want to see It survive\nbut to Increase the field for private Initiative. Better Government organization\nfor every poor boy and girl in America after me. And not only survive but\nand more individual drive will go hand in hand.\ntriumph. Only America, I think, can light the world toward an ultimate\nIn serving the common man, the business leader will have opportunities for\ncapitalism of everybody.\nInitiative such as he never dreamed of before.\nWhat happens when the little man with the big iden is able to fight the forces\nof special privilege and power which attempt to strangle him is shown clearly\nIn the development of the attomobile Industry. The sage of the American\nautomobile Industry is one of the proudest chapters in the history of free\nADDRESS BEFORE MEETING OF DETROIT LABOR AND CIVIC ORGANIZATIONS AT THE\nprivate enterprise. The importance of this Industry to our well-being is readily\nSTATE FAIRGROUNDS, DETROIT, MICH., JULY 25, 1943, ON \"AMERICA TOMORROW\"\nIf Industrial management can bring the same wisdom in producing for peace\napparent. The rebuibling of a war-torn world, the development of new trade routes\nthat It has shown on many production fronts In the supply program for war,\nand new markets, and the endless stream of discoveries which flow from our\nthe horizons we face are bright. We have witnessed many evidences of Industrial\nlaboratories will be new frontiers. To the hardy. to the venturesome-In\nstatesmanship. of cooperation with labor to Increase production and cut costs.\nshort, to the American businessman with the pioneering spirit-the chance for\nIn hundreds of Industries the war has demonstrated that management and labor\nreward and the promise of useful and fruitful action for the release of those\ncan be friends In the service of the Nation.\nenergies which have characterized him are an open road. There will be the\ngreatest need for cooperation between business, labor, agriculture and Govern-\nment. There will be obstancles. There will be discord and disappointments.\n68424-45-10\n142\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nADMINISTRATION OF CERTAIN LENDING AGENCIES\n143\nBut none of these hurdles is 80 great that it cannot be surmounted if American\nADDRESS GIVEN IN Los ANGELES, FEBRUARY 4, 1944, ON WHAT AMERICA WANTS\nbusiness lives up to Its responsibilities.\nPrimarily, the task of reemployment is the responsibility of Insignessmen. It\nSome of the businessmen who most want to serve the world in the post-war\nis a responsibility which they can meet only If enterprise is free to develop and\nperiod are probably those who have rather recently graduated from the ranks of\nextend the new lines of industry as well as the presently existing enormous\nthe small businessmen into handling large affairs in the war effort. Because\nplant espacity.\nof his unusual capacity, this kind of man has made large sums of money during\nTo aid business in carrying out this responsibility, the existing plants con-\nthe war but has paid nearly all of his profits to the Government. He will come\nstructed by the Government for the war effort should not fall into disuse.\nout of the war with large plant facilities. He wants to know how to reconvert\nNeither should they become part of the philosophy of planned seareity which is\nas fast as possible. His success has often depended largely upon his fine rela-\nimplicit in monopoly control. So far as practical, they should be turned over\ntionship with labor. Appreciating the loyalty of labor, he wants to give his\nto private business and become part of our free private-enterprise system.\nworkers jobs in the post-war period, not so much from the standpoint of making\nWhy not, for Instance, lend-lease these plants to those American businessmen\nmoney as from the standpoint of doing things both for his workers and for his\nwho are free of monopoly association and willing to engage in full production?\ncountry. Such men are In some ways the hope of America and the world.\nSuch men are entitled to encouragement and should be given every incentive\nto produce.\nSPEECH GIVEN AT PLANKINTON HALL, Civic AUDITORIUM, MILWAUKER Wts,\nSTATEMENT BEFORE ANNUAL CONVENTION OF NATIONAL CONGRESS OF INDUSTRIAL\nFEBRUARY 11, 1944\nORGANIZATIONS, AT HOTEL, PHILADELPHIA, PA., NOVEMBER\n3, 1943\nFull employment involves governmental cooperation. whether It be In war or\npeace. When I speak of governmental cooperation producing additional Jobs, I\nThe fourth duty of the farmer and worker is to see that capital is fairly\nam referring to the free enterprise job opportunities which flow from the creation\ntreated, that the man who risks his name and credit may get his risk capital\nof such national assets as airfields, housing projects, schools, hospitals, T. V. A.'s,\nreturned when he has served well in creating new jobs and needed products.\ngood roads, and other public works. No single Arm. no local government, no\nOterwise stagnation and joblessness will Increase: otherwise there can be no\nsingle group, can provide activities of this sort In suffletent colume to save us\ngrowth of new enterprise or free enterprise. Free enterprise must not be made\nfrom joblessness. Only by democratic, cooperative pinnning between govern-\na mockery by big enterprise. In the baekwash of war the small businessmian\nment and the various groups and regions can there be provided sufficient activity\nmust not be washed out.\nto ereate for private business the additional jobs which are needed to save our\nfree-enterprise system. Free enterprise and joblessness cannot long exist side\nby side in the same nation.\nSTATEMENT BEFORE SUBCOMMITTEE ON WAR MOBILIZATION OF THE SENATE MILITARY\nAFFAIRS COMMITTEE, OCTOBER 14, 1943\nSPEECH AT MEETINO SPONSORED BY DEMOCRATIC, Crvic, AND LABOR GROUPS OF\nI welcome this opportunity to support your Interest in one of the most urgent\nMINNEAPOLIS AT MINNEAPOLIS, FEBRUARY 14. 1944\nproblems before the American people today-the full use of our technological\nresources to win a decisive victory and to build an enduring peace. In our\nThe development of regional capital markets is a task for local business and\nstruggle to translate the total capabilities of this Nation into an effective\nfinancial Interests. Here is an opportunity for small Investment banking\nstriking force, we have every reason to be proud of the splendid achievements\nhouses and security dealers to expand their services in behalf of local Industry.\nof science, both in industry and In Government. We must realize, however,\nHere is an opportunity to reduce the cost of financing so ns to encourage the\nthat in reality we have only begun to marshal the inventive skills and energy\ngrowth of regional enterprises which will ultimately develop into more financing.\nof the American people on the scale required for the tasks which lie ahead.\nInvestment In the development of regional economies will require venture\nThe application of modern science should not be the exclusive domain of\ncapital rather than the timid capital which seeks snfety In the bonds of estab-\ngreat corporations and cartels who can, if they desire, restrict and suppress\nlished enterprises. Federal legislation has done much to relieve those who\nnew Inventions and sclentnfle information to sult their own interests instead\nwould Invest venture capital of the unnecessary risks that attach to fraudulent\nof the public interest. Unless the little man has access to the bounties of\nfinancing. A revision of our tax laws can provide further Incentives to Invest\ntechnology, free enterprise will suffer, to the detriment of full employment of\nin the common stocks of new enterprises,\nlabor and our resources.\nThe development of regional economies within a full-production national\neconomy will open a new era in American history. New opportunities for em-\nployment, for capital Investment. for enterprise, will be the first effects. The\nADDRESS BEFORE LUNCHEON MEETING OF COMMITTEE FOR POLITICAL ACTION OF THE\nuse of new natural resources, plus the fuller employment of labor and capital,\nCONGRESS OF INDUSTRIAL ORGANIZATIONS, AT PARK CENTRAL HOTEL, NEW YORK,\nwill mean enlarged production, both regionally and nationally. A balanced\nJANUARY 15, 1944, ON FULL EMPLOYMENT\nregional development will provide increased stability for business and the founda-\ntion for a new post-war American standard of living.\nBut, fortunately. there are many big businessmen who believe wholeheartedly\nIn allied unity in Just the same way as the President. They believe in unity\nboth for the war and for the pence. They want to see an enduring peace based\non a higher standard of living and a growing volume of world trade and there-\nADDRESS BEFORE THE AMERICAN BUSINESS CONGRESS AT Waldorf-Astoria Horm,\nfore believe In the good-neighbor polley, not only between the United States and\nNEW YORK (BROADCAST Over LOCAL STATIONS). MARCH 17, 1944\nLatin America but also between the United States and the other United Nations\nIn the post-war period. These businessmen do not finance anti-Semitie move-\nFree enterprise means that each and every Industry Is open to new capital and\nments or American Fasclats. They believe In clean, aggressive competition\nnew firms, that all business has free access to raw materials, to labor, to tech-\nin foreign markets. They may fight Roosevelt on his domestic policies, but\nnologies: that producers have free access to the markets in which they buy\nin the main they do It fairly. If the common man has to choose between these\nand sell: that all individuals, in accordance with their varying abilities and\ntwo big business groups, there is no question as to where his interest lles,\nirrespective of color, race, and creed, have equal opportunity to work at their\nchosen jobs,\n144\nADMINISTRATION OF CERTAIN LENDING AGENCIES\nIn the tasks assigned to them during the war small businessmen have done a\nmagnificent job. It will be even more important that small business continues\nto function when reconversion begins-that adequate resources are then avail-\nable to permit them to participate in this great task. Small businessmen have\nalways been the foundation of our American economic system-it is vitally\nimportant that they continue as producers and distributors in our American\nsystem.\nADDRESS UNDER THE AUSPICES OF THE INDEPENDENT CITIZENS COMMITTEE,\nPITTSBURGH, PA., SEPTEMBER 30, 1944\nTonight I want to talk about your community here in Greater Pittsburgh,\nbecause this area is a symbol of so much of America's industrial greatness_\nher power in coal, iron and steel, oil, railroads, glass, aluminum, and electrical\nequipment. Pittsburgh has been the beating heart of America's vast develop-\nment since 1860. Pittsburgh boomed during the Civil War and the railroad\nexpansion which followed that war. She boomed again during World War No. 1\nand enjoyed the tremendous stimulus which came to heavy industry as a result\nof the rapid growth of automobile construction during the twenties. Today we\nstand on the threshold of another post-war era following upon a time when\nPittsburgh has made a greater contribution many times over to the American\nwar effort than ever before in American history. Tomorrow, as in the past,\nPittsburgh will be the barometer of the Nation's success in building prosperity\nfor all Americans in the post-war period.\nWe are not going to have a planned economy in the United States, but we\nmust plan for our economy in peace just B8 we did in war. We are not going\nto have a planned economy, because that means that everything is done from\none central spot by one group of people. But we do need specific plans In every\ncity, in every industry, in every State, and coordination of these plans on a\nnational basis. When I visited with the mayors, the chambers of commerce, and\nthe members of the Committee for Economic Development in many eastern\ncities, I found them doing excellent work. But nearly everywhere I found them\nthinking just a little too much in terms of an outmoded normaley and not enough\nin terms of the truly great abundance which we must have if we are to have\nfull employment. An abundance program for our economy should be based on\nthe needs of the average American family.\n(Whereupon, at 4:12 p. m., the committee retired into executive\nsession.)\nX\n322\nJanuary 26, 1945\nDear Will:\nI am enclosing herewith a very confidential\nmemorandum which I gave to the President. I also\ngave a copy of it to the Secretary of State.\nI would be glad to discuss this proposal\nwith you at any time.\nSincerely yours,\n(Signed) Henry\nThe Honorable William L. Clayton,\nAssistant Secretary of State,\nState Department,\nWashington, D.C.\nRegraded Unclassified\nX- Hold Indefinitaly\n323\nJan 10, 1945\nMEMORANDUM FOR THE PRESIDENT\nA $10 Billion Reconstruction Credit for the U.S.S.R.\nI suggest consideration be given to a financial arrangement\nwith the U.S.S.R. to provide her with $10 billion credits for\nthe purchase of reconstruction goods in the U.S., with provision\nfor repayment to us chiefly in strategic raw materials in short\nsupply in the U.S.\n1. The interest rate could be 2%, amortized over a period\nof 35 years. A schedule of repayments is attached.\n2. The Russians have more than adequate means to assure\nfull repayment. There are three principal sources from which\nshe can obtain the necessary amount of dollars.\n(a) Selling to us strategic raw materials which are in\nshort supply in the U.S. becuase of our depleted\nnatural resources. (See attached memorandum)\n(b) Russia will be able to develop substantial dollar\nassets from tourist trade, exports of non-strategic\nitems to the U.S., and from a favorable balance of\ntrade with the rest of the world.\n(c) Russia has a stock of gold estimated at $2 billion\nnow and is reported to be able to produce from $150\nto $250 million per year. These gold resources can\nbe used to pay her obligations to the United States\nto the extent that her other dollar sources are not\nadequate.\n3. An important feature of this proposal is that we will\nbe conserving our depleted natural resources by drawing on\nRussia's huge reserves for current needs of industrial raw\nmaterials in short supply here. We would be able to obtain a\nprovision in the financial agreement whereby we could call upon\nRussia for whatever raw materials we need without giving a\ncommitment on our part to buy.\n4. This credit to Russia would be a major step in your\nprogram to provide 60 million jobs in the post-war period.\nhdw;hg;afl;jed;sg;rl 1/10/45\nRegraded Unclassified\n324\nConservation of U.S. Natural Resources and Imports from the U.S.S.R.\nThe U.S. has had to draw heavily on domestic raw material\nreserves during the war to meet peak production requirements.\nThe following table prepared from some recent confidential re-\nports for the Under Secretary of Interior discloses the depleted\nnatural resources of the United States, and emphasizes the need\nfor conservation measures.\nReserve Domestic Supplies\nOn Basis of our\nOn Basis of our\n1939 Domestic\nCurrent Consumption\nConsumption\n1943\nPetroleum\n16 years supply \"\n13 years supply\nManganese\n9\nIf\n3\nII\nfi\nTungsten\n23\nIT\nIf\n3\nu\n=\nZinc\n17\nII\nII\n8\n=\n=\n=\nLead\n7\n=\n11\n6\n11\nChrome\nNo record\nLess than 1 year's\nsupply\nMercury\n3 years supply\nWe could safeguard and conserve our strategic material re-\nserves in post-war years which are now at minimum levels, by\nimporting from abroad to meet ordinary annual production require-\nments. The U.S.S.R. has tremendous reserves of many materials\nwhich the U.S. will urgently require after the war. A reconstruc-\ntion loan to the U.S.S.R. will give us the means whereby we can\nconserve our own natural resources for the next two generations,\nby utilizing Russian reserves. The U.S.S.R. could provide sub-\nstantial quantities of strategic raw materials for an annual basis\nwithin five years after the close of the war as indicated in the\nfollowing table.\nMetals and metallic ores\n$80,000,000\n(Manganese, Tungsten, graphite,\nmica, chrome, mercury, iron ore,\nplatinum, copper)\nTimber and wood products\n45,000,000\nPetroleum\n50,000,000\nOils and oilcake\n10,000,000\nOther industrial raw materials\n15,000,000\nTotal\n$200,000,000\nRegraded Unclassified\n325\nRepayment Schedule for Advance of $10 Billion\nCredit for 35 Years at 2 Percent 1/\n(Millions of Dollars)\nScheduled\nAnnual\nAnnual Scheduled\nUnpaid Balance\nYear\nExpenditure\nInterest\nRepayment\nAt End of Year\n1\n1,000\n20\n0\n1,020\n2\n2,500\n70\n0\n3,590\n3\n3,000\n132\n0\n6,722\n4\n2,500\n184\n100\n9,307\n5\n1,000\n206\n150\n10,513\n6\n210\n200\n10,523\n7\n210\n250\n10,484\n8\n210\n300\n10,393\n9\n208\n350\n10,251\n10\n205\n400\n10,056\n11\n201\n400\n9,857\n12\n197\n400\n9,655\n13\n193\n400\n9,448\n14\n189\n400\n9,237\n15\n185\n500\n8,922\n16\n178\n500\n8,601\n17\n172\n500\n8,273\n18\n165\n500\n7,938\n19\n159\n500\n7,597\n20\n152\n500\n7,249\n21\n145\n500\n6,894\n22\n138\n500\n6,532\n23\n131\n500\n6,162\n24\n123\n500\n5,785\n25\n116\n600\n5,301\n26\n106\n600\n4,807\n27\n96\n600\n4,303\n28\n86\n600\n3,789\n29\n76\n600\n3,265\n30\n65\n600\n2,730\n31\n55\n600\n2,185\n32\n44\n600\n1,629\n33\n33\n600\n1,061\n34\n21\n600\n483\n35\n10\n492\n4,691\n14,842\n1/\nThis schedule is a basis for negotiation.\nRegraded Unclassified\nJanuary 26, 1945\nMy dear Lieutenant Putzell:\nI have received your letter of January 23rd,\nenclosing copy of a letter from General Spaatz\nto General Donovan, and also your letter of\nJanuary 24th, enclosing a radio-telephone\nmessage from your representative in Bern.\nI appreciate your forwarding this information\nto me.\nSincerely yours,\n(Signed) H. Morgenthau, Jr.\nLieutenant (j.g.) Edwin J. Putzell, Jr.,\nAssistant Executive Officer,\nOffice of Strategic Services,\nWashington, D.C.\nRegraded Unclassified\nSECRET\nacb,\nOFFICE OF STRATEGIC SERVICES\nWASHINGTON, D.C.\n23 January 1945\nHonorable Henry Morgenthau, Jr.\nSecretary of the Treasury\nTreasury Department\nWashington, D. C.\nMy dear Mr. Secretary:\nUpon returning to my office from your very\nenjoyable luncheon, I find a letter from General Spaatz\nto General Donovan, dated 16 January 1945, a copy of\nwhich is enclosed. It may be of interest to you.\nAs the letter indicates, personnel of our\norganization has, for an extended period, been working\nwith the Strategic Air Forces in the systematic selec-\ntion of bombing targets in Germany and in analysis of\ndamage done.\nOn behalf of Dr. Langer and all of his\nassociates, permit me to express our appreciation for\nthe instructive and enjoyable meeting we had with you\nand your men today.\nRespectfully yours,\nEdi Edwin J. Putzell PubellJ Jr.\nLt., (j.8.), USNR\nAssistant Executive Officer\nEnclosure\nSECRET\nRegraded Unclassified\nSECRET\n16 January 1945\nMajor General William J. Donovan\nOffice of Strategic Services\nWashington, D. C.\nAll\nDear General Donovan:\nI would like to express to you my appreciation of the\nmaterial aid which the Office of Strategic Services and its\nsub-section have rendered to the United States Strategic Air\nForces while operating in this theater of war. This appreci-\nation 1s enhanced by numerous reports made to me by my Staff\nOfficers, who have profited continually by their valuable con-\ntacts with your service organization.\nIt would seem unfair to single out any particular\naid which the Office of Strategic Services has extended to the\nUnited States Strategic Air Forces. However, I would like to\nstress that the wealth of timely assistance given to us by\nyour sections dealing with the periodic condition of the\nvarious German industrial complexes has been of tremendous\nvalue. We have made use of intelligence given to us by men\nof your organization time and time again in our target work,\nand it 1s sincerely hoped that the type of services which are\npresently being rendered by your sections dealing with these\nmatters will not end with this War, but will continue to develop\nthroughout the future of our country.\nYour generosity in allowing the United States Strate-\ngic Air Forces to utilize experienced analysts has made for a\nwell rounded program and has enabled our Intelligence and\nOperational Directorates to feel a certain confidence in their\ndecisions which might have been lacking without this assistance.\nSincerely yours,\nCARL SPAATZ,\nLieutenant General, U.S.A.,\nCommanding.\nCOPY\nSECRET Unclassified\nRESTRICTED\nOFFICE OF STRATEGIC SERVICES\nWASHINGTON, D.C.\n24 January 1945\nHonorable Henry Morgenthau, Jr.\nThe Secretary of the Treasury\nTreasury Department\nWashington, D. C.\nMy dear Mr. Secretary:\nI thought that the attached radio-\ntelephone message from our representative in\nBern might be of some interest to you.\nRespectfully yours,\nJoin Edwin J. Putzell, Pubelly Jr.\nLt., (j.g.), USNR\nAssistant Executive Officer\nAttachment\nRESTRICTED\nRegraded Unclassified\n8-43 22996\n088\nForm 69 (Revised)\n330\nOFFICE OF STRATEGIC SERVICES\nOFFICIAL DISPATCH\nDATE Jonuary 1945\n#470\nFROM\nBerne\nHBG\nPRIORITY\nROUTINE\nTO\nDEFERRED\nDIRECTOR, OFFICE OF STRATEGIC SERVICES\nDISTRIBUTION\n(FOR ACTION)\n(FOR INFORMATION)\nRECEIVED IN PLAIN TEXT\nRESTRICTED\nGERM NY\nThe unstion is generally being asked here whether the Russian\noffensive 1.111 bring about the collapce of organized German resist nee,\nor whether Germany vill be able to organize for another stand. The loss\nof Silesio would certainly be a serious blow, but it is extremely diffi-\nt to understand Germon vilitary dispositions except on the theory that\nthe Germans still have confidence in their ability to halt the Russians\nwell short of Berlin. Otherwise, Thy did the Germans keep troops fighting\nin North Itsly, in the Balkons, in Norway, in Denasrk? And thy do they\nstill engage in offensive action in strategically secondary, even if nol-\nitically important, cress, such 03 Aluace: The fury of the Russian offen-\nsivemay well have surprised the Germans, but not the foot that e grost\noffensive was in preseration.\nThe vigorous defensive : ad offensive tacties in the est might.\nof course, be explained as being & decision on the part of the Nazi londer-\nship to holá at all costs in the est, even et the risk of : breakdown\nin the East. This 1a probably an over-simolifieation of the situation.\nHolever, 83 proviously indicated, 1 Cuil inclined to feel that veny or the\nhigh Nazia, despite their fear end Intred of Russia, would prefer to see\nthe Rugalans first in Borlin rather than the nglo-Sexous. I believe this\nviow is also sharei by many in the Gerunn Army. Russian holicy towards\nGermany Las been noro subtle and osychologically nore effective than our\nown. Tho uno vblicb the Ruosians have made of their captured Gorman generals\nhas had SOME effect. They have not talked very moh about what they plan\nto do 11th Certany except insofer us the unishment of cridinals is con-\ncerned, ..Dd it 1s a natural tendency of 611 human buings, shared by sody\nhigh as officials, to believe what, in one may or smother, they 111\navoid inclusion on the list of criminals.\nIt 13 most unlikely that the Germins no. nourish ony illunion\nthat they oan make a sepurate doal titl Russia prior to German additory\nlagse. On the other Lend, many Nazio believe that there are similerities\nRESTR\nFED\nRegraded Unclassified\nols Form 69a\nPAGE 2\nOFFICE OF STRATEGIC SERVICES\n331\nOFFICIAL DISPATCH\nREF. No. 270\nFROM Berne\nTO DIRECTOR, OFFICE OF STRATEGIC SERVICES\n10-09201-1 GPO\nRECEIVED\nRESTRICTED\nbetween the National Socialist and the Communist movements; that the\nNational Socialist movement can be shifted to the Left and communized;\nand that, efter the collapse, they, the 88 in particular, will find it\neasier individually to work out their future with the Russians than\nwith the Anglo-Saxons.\nlittle\nThe fact that relatively bombing damage has been done by Russia\nand particularly that Silesia has not been destroyed has considerable\neffect in turning many Germans towards Russia rather than towards the\nWest. Also, Russia has never been identified with the Anglo-Saxon slogan\nof unconditional surrender, and this has undoubtedly had some influence\non the German people.\nThe Nazi leaders may also calculate that if they cannot hold both\nthe eastern and western fronts, their bargoining position may be better\nif they succeed in holding one front than if both fronts collapse. They\npossibly hope that Russia would be grateful to them if they succeed in\ndoing this and thereby cause Russian rather than Anglo-Saxon influence\nto predominate in the first phase of the occupation of Germany. Hence,\nthey may hope to gain some good will from Russia if they keep the American\na British forces out of the country until the last possible moment.\nBy this I donnot mean that the Germans would deliberately allow the\nRussians to come in, but merely that, when faced with the fateful choice,\nthey would choose the Russian invader to the American and British.\nIn view of the discipline of the German Army and the fect that\nthe German generals have rarely, if ever, done any political thinking,\nthe choice, if it is ever consciously made, will be made by Hitler and\nHimmler and Goebbels and Bormann, and the Army will probably obey.\nI do not mean to imply and I do not believe that Hitler would be\nlikely to surrender himself to the Russians under any circumstances.\nThe informationwe get here locally seems to tend more and more to the\ntheory of a final Nozi withdravel into the Austrian end Bavarian Alps,\nwith the idea of making a last stand there. This seems more likely than\na dremotic attempt on the part of Hitler and the present Nazi leaders\nto escape by submarine or other modes of flight. Such flight might be\nattempted by the weaker characters of the Goering class. Hitler will\nprobably seek a Magnerian end, and Himmler et al. will presumsbly be\nwith him. The smaller fry among the SS will probably be divided into two\ngroups -- those who might prefer to take a chance with the Russians,\nend the fenatical ones who will follow Hitler into a mountain retreat.\nThis is all speculation and guesses made here are probably no better,\npossibly not as good 88 those made from the perspective of Washington,\nend the end may not come for some months yet.\nRESTRICTED\nRegraded Unclassified\n332\nTOs Mr. Collade\nJAN 26 1945\nFROM: Mr. Classer\nwill you please send the following cable to the American\nRubeasy, Chungking, Chinas\nFOR ADLER FROM THE SECRETARY OF THE TREASURY\nThe fellowing press release was issued on January 22, 1945 with\napproval of State and Mar Departments:\n\"The U. s. Treasury Department has just completed transfer to\nthe Republic of China d $220,000,000 in settlement for advances of\nlocal currency and for supplies, services and military construction\nfurnished the U. S. Foress in China.\n\"This excludes certain aid furnished to the United States w\nthe Chinese Government in the form of reciprosal aid.\n\"A partien of the settlement - from U. s, funds already\nin China, a partien from funds previously placed to China's credit\nin the United States and the reatinder in the form of a check for\nappreximately $150,000,000 which Secretary Morgestion gave to\n& i i Inc. i\nISF/efe 1/25/45\nRegraded Unclassified\n333\nEXECUTIVE OFFICE OF THE PRESIDENT\nWAR REFUGEE BOARD\nINTER-OFFICE COMMUNICATION\nDATE January 26, 1945\nTO\nMrs. Klotz\nFROM Miss Hodel\nIn connection with your recent request for a copy of\nthe reports issued by the British army concerning the German\nprison camp at Breedonck, Belgium, you will be interested in the\nattached excerpt from a letter we received from our representa-\ntive in London, together with the clippings he forwarded from\nthe leading newspaper articles appearing in the British press.\nAs soon as the report is received from Mr. Mann we\nshall send it to you.\nJH.\nRegraded Unclassified\n334\nExcerpt from a letter dated January 16, 1945, from\nJames H. Mann, War Refugee Board Representative\nin London\n\"The London newspapers of January 4 carried detailed accounts\nconcerning the British army report of Nazi atrocities in Belgium.\nI clipped the leading newspaper articles on that date and immedi-\nately tried to find the basic reports in question. Thus far I\nhave been unable to get either the report or the photographs. I\nam informed that such are not available. However, the British\nForeign Office has very kindly consented to attempt to obtain these\nfor me. You may be assured that as soon as such reports are re-\nceived they will be forwarded to you by airmail. In the meanwhile,\nI am enclosing some of the more important newspaper clippings.\"\nRegraded Unclassifie\n335\nEnclosure No.\n4\nPAPER.\nHEWS CHRONICLE\nNUMBER:\nCITY:\nLONDON\nDATE.\nJAN - 4 1945\nFirst official British Army\nreport on Nazi atrocities\nFrom S. L. SOLON, News Chronicle War Correspondent\nTWENTY-FIRST ARMY GROUP H.Q., Wednesday.\nTHE British Twenty-first Army Group has issued its first official report\nGerman atrocities. I believe it is the first report issued by any of\nthe British armed forces.\nIt is a solemn and important document, which deserves the careful attention of\nevery Allied reader, although it is stated that this report cannot be regarded as\nexhaustive.\"\nAs the report states, the first thing that strikes one\nwhen mentioning German atrocities is the scepticism of the\nBritish troops and the British civilians.\nThe Idea of torture and mutilation is so abhorrent to\nthe British mind that It is not easy to believe that practices\nwhich are associated, say, with the Spanish Inquisition\ncould be carried out in the twentieth century by Europeans.\n\"This paper produces evidence of German atrocities.\nWhilst it is not easy to find people who bear signs of\nmutilation, 1b must be remembered that the worst mutilated\npeople were killed, or died, or were taken off to Germany.\"\nThe guilty men\nFive German and quisling\norganisations are held chiefly re-\nsponsible for the atrocities. They\nare:\n1. The German Security Police-\nthe Sicherbeitspolizet \"-of\nwhich the Gestapo is 8 part;\n2. The German Army Secret\nField Police-the e Gebelme\nFeldpolizei\n3. The German Army Guards:\n4. The Flemish and Walloon S.S.\nin Belgium:\n5. The Dutch S.S. in Holland.\nCivilian prisoners were besten,\nstarved, burnt with cigar ends, tor-\ntured with epecial electric Instru-\nments, including a bot plate with\nneedle projections, humiliated and\ndegraded in unmentionable ways\nTorture deaths\nThe part of the report Issued to-\nday deals primarily with the activi-\nties of the Germans at Breendonck.\nExecutions at Breendonck by\nshooting and hanging, apart from\nthe incidental killings by torture,\nmaltreatment and starvation, run\ninto hundreds. A former employee\nof the camp told British interro-\ngalora that the number executed\nwas at least 350.\nAnother employee states that to\nhis knowledge more than 500 men\ndied during his stay at Breen-\ndonek from March 3, 1941. to March\n31, 1944,\nAbout 200 of this number died of\nmaltreatment at the camp. Many\nmore were transported from the\ncamp while they were sick and\ndying. They are not included in\nthe figure of 500.\nI have seen this amazing fortified\nprison camp from which escape\nseems impossible.\nSome prisoners state that e\nroom known as the gas chamber\nwas used as a moritary and some-\ntimes contained up to 20 bodies.\nNaked woman beaten\nOne former prisoner told how\nGerman guards would order stck\nmen to Tash each other Into to-\nsensibility for their amusement,\nOnes, when Flamish 5.8, Guards\nrounded up a wumber of Jews for\nshipment to Breendonck, donens of\ntheir were pressed into a train\ntruck which was left for M back\nRegraded Unclassified\nPAPER:\nDAILY EXPRESS\nNUMBER:\nCITY:\nLONDON\nDATE:\nJAN - 4 1945\nOUR MEN LEARN ABOUT THE MEN THEY ARE FIGHTING\nMONTGOMERY ORDERED\nTORTURE INQUIRY\nGassed\nPrisoners state that men and\nwomen were gassed by the coke\nacove in this room. Others think\nthat it was used as a mortuary\nand say that up to 20 bodies were\nThese are the horrors\nput in there.\nThe torture chamber is cir-\ncular, without windows\nA\nshallow gutter cuta the stone\nfloor in two and perves as & drain\nhe wants you to know\nIn one wall there is an electric\npoint, to which was connected a\nfive-pronged toasting fork,\" used\nto bum the flests of the prisoners\nunder interrogation.\nFrom PAUL HOLT: Western Front, Wednesday\n& pulley on the celling was used\nto hotst by the hands or by the\nShen hen he 1 was Field-Marshal Montgomery\nfeet some stubborn people who\nwould not give the right answers\nfirst found that the enèmy treated\nTo vary the treatment two\ncivilian prisoners of war with medieval cruelty,\nsharp wooden triangular blocks,\nby the gutters, were waiting for\nthat he gave an order for a full investigation of\nthe bare feet of the prisoners\nwho, thrashed In mid-air. did not\natrocities throughout the area of his command.\nanswer and bad to be dropped\nsharply to the ground.\nSenior officers at his\nThe German secret police\nheadquarters were removed\nguards were also pleased to dis-\ncover that a clamp for pinning\nfrom their duties to con-\nthe tail of an aircraft on the\nduct it. Their report is\nground made & most excellent\napparatus for crushing the fin-\nreleased today.\ngera of a questione.\nIt is a message from Monty\nThat method they favoured\nand his Army to all at home,\nwith women, who were fre-\nsaying This is the man you\nquently interrogated naked.\nare fighting. Get to know him\nApart from this modern Inno-\nas we know him.\"\nvation the report makes it clear\nThe atrocities revealed by this\nthat the Germans were strictly\nmedieval In their methods.\ncold count of sadism were com-\nmitted, in main, by the German\nsecret field police against Belgian\nCigar butts\ncivilians in the resistance move-\nThey used & ext-o'-nine-talls\nment and against women who\nhelped British and American air-\nmade of cord with aplin buckshos\nattached. They burned their vic-\nthen to escape.\ntims' flesh with cigar butta.\nThe discoveries Monty's officers\nmade so sickened them that they\nThey had an fron hook they\nfought, they told me, all through\nheated in stoves, small enough\nthe investigation, to check, weed\nto drive straight into the flesh\nout, discount or disprove all\nwhen while hot. there to be\ntwisted and withdrawn at\nevidence brought to them.\nlelaure.\nAfter they had finished, here\nis a short summary of what they\nAt another camp the Germans\nhad & small cell with a wooden\nhave admitted as evidence,\nbunk and two holes in the wall.\nThe report starts with this\nOne let in scalding steam, the\npresemble:-\nother jets of Ice water.\n\"The first thing that strikes\nFor \"extra dangerous\"\none when mentioning German\nprisoners at this camp there\natrocities is the acepticiam of\nwere the dark cells with ankle\nBritish troops and civilians, The\nshackles cemented to the wall\nidea of torture and mutilation LS\nfurthest from the door.\n80 abborrent.\nThe point of this inconvent-\nence was that the cell door had\nTorture chamber\nn. little trap-door through which\nfood was pushed. But is had to\nThis paper produces evidence\nof German atrocities. Many of\nrest on the ledge of the trap-\nthese stories would not have been\ndoor, which mide the prisoner\neat extended on all fours,\nobtained If two train loads of\nprisoners, on the way to Germany\nThe story to not new. What M\nfrom Belgium at the beginning of\nnew and notable is that, for the\nSeptember. owing to sabotage to\nfirst time since this war started,\nthe engines and dimage to the\nn is not the Foreign Office, not\ntrack, had not been left behind\nthe Ministry of Inforpution, who\nby the Germans.\"\nissue these further evidences of\nGerman bestiality,\nThe report continues to give the\nIt is the Commander-in-Chlet\nfirst full story of the Gestap\ntorture chamber at Breendone\nof the British Liberation Army.\nHe wants you to know.\nAS this fort the Germans built\n32 brick cells, 6tt. Bins, by 4ft.\nSins.\nThe bed. & wooden board. was\nlowered at black-out by an tron\nlever operated from outside, and\nraised against the wall at 6 a.m.\nevery day.\nAL this same fort there are six\ndark cells where no daylight\ncould penetrate, The walls are\nwhitewashed. If a prisoner\nleaned against one the white-\nwash showed on his clothes and\nhe was thrashed next day by a\nNam army guard.\nThe prisoners were taken out of\nthe cell for five minutes each day.\nBefore they reached daylight they\nhad a black hood thrown over\ntheir heads and were led to\nlatrines.\nOne room is known as the \"gas\nchamber.\" IL has no window,\nRegraded Unclassified\nDaILY TELEVING\nJAN 1940\n- I wind - that of Mone\nNAZIS' TORTURE CAMP\nBer tem cantos - EYES AS she\nhas Printing is hands,\nMms - le - route was M\nIN BELGIUM\nBrank and war . of IM\nBeigin die\na the ridem of a Belgun officer with\nEM service of bening\nBrish and French atters - of\nthe\n-\nHORRORS OF BREENDONCK\nBelow - - Mine\nP. taxt been N/A standing MP\nright in a dutined el from NIE in\nPRISON : BRITISH REPORT\nthe tieming in run a the emins\nAll the had to sing signat\nmilima, blankets or CORPUTION at any\nFROM OUR SPECIAL CORRESPONDENT\nAnd the vary der and\nsure the - entr allowed in RP:\nSist ARMY GROUP H.Q., Wednesday.\nREPVE Use during de 14\nwhen sibe mustint ber tin\nThe British military authorities here issued\ntoday bowl,\nto-day a closely-doctimented report on the horrors\nLite others issurerented in LIVA\nnov. the was only - to nal just\nof the Gestapo prison camp at Breendonck during\nbox be lapping IL is with ner\nmouth like - animal\nthe German occupation of Belgium.\nThis \" ter account al her treat\nBreendonek is a name at the mention of which\nin the sinture chamber\n- interragated sis If -\nBeigian civilians still shudder. Even now I have\ntime ID the 8.8. room The was\nheard them utter It with lowered voices.\n- round changer windress\nwith . nabor and . bench an which\nOriginally designed as a concentration camp for\neg the sua as IDENTATIONS\nJews, the prison's scope was extended to political\nOn the jeft, as the ent. VM .\nmother attached to the reline from\nprisemers and, finally, members of the Belgian Resistance\nI E I I È il\nand\nunderground\nmove-\nreaning knot. This with\nlost - mun as three, jour\nDe of the tertare than\nments were incarrerated\nor the along in weight\nthey sum IN elber prisoners)\nthere.\nPvot. Paid Liny the wrd-kren\nDAILY BEATINGS\nBreendenrk 14 a gloomy and\nBelgian broadmater and professor et\nthe Institut des Haurs Rindre. who\nCrippled by Rifle Blow\nforbidding looking building\nNONT and and surrounded by a\nNOT our of the priment - stand\nEntirely maked I NM uned above\nthat - of the of chis\nthe and and bealm with a name\nwide\nmost\nconsinent - the\ntranchens covered with Inwther,\nThe most. which is sparted by\ngrowth if cood máve\nwirlded by . - Restations and\na causeway, the unless approach.\nWhen a parel of food arrived the\nland\nILA\na surrounded by a barbid-wire\nrequires through sierving se each\nAS con of chere intermigations\ntrace acrea fact high\nwould be unable to bring havelf\nhad may nails erushed in is and at\nFormerly other of the outer torta\nto ml If Mr. world hourd = and\nune the machine,\nof the ASSWITS defences. Breen-\nBRAP M it until de contents tecame\nAller the Gret. the\ndunic had beinn shandoned by\nmiles and mustr\nmedical orderds - - an injection\nThe a how the car's labour a\nthe Belginn milliary authorities\n= the Through a em ib\ndescribed by Dr. Prant Pidm. a\nbecause of as unhealthiness\nneeded tall Mixpetx - 1 LOOK adven-\nnumber of de Briden\ntage all a maintention to put\nWater genetrated regularly thin\nand inter if the any\n- Engres down or throw. the\nthe lower enviros\nAll priviors Bad le\nmaking moved NORREL\nB was partged by the Gestago\nthe and diffinit upa without\nbried Die orderly to the\nto in . suitable place for their\nimporte for are and and\nmajor, D/a no grod. The injections\nwhief concentration camp =\nwithout itung deir brade.\nmakes Der\nBelatum.\nThey had to and banks was\nbe Addition I, - will as all my\nshowle push tracks letro with\ncompany, mindled alamodi, every\nGERMAN SADISM\neach they had to DATE large floors\nday pursibes and truncheon\nRecord of Terror\nextracted trum the NOT AND trail\nwhich, among offer things, broken my\nThe words\n- bricks take mill uses\ntorth\nhave passed tato our changes of\nAll the vas by\nDuring ner single ourse to\n(hought so completaly that Usere is &\nbestines with which and acida\nmany BUY received -\nfisher or developitati a Earte habit\nmeted at by the supermam and\nInvoice wound in the AUTOR: from -\nof what goes - in - places\nacidiers when the work vas not\nAnother LIMIT tur survice -\nwe\nfor\ngranged.\nprogramse quickly mough\nWEB the Block of his riBe in the back\nW- and to our minds with\nFor hours - FOR une could\nof the remailing in survature\nentr being lbs tentil yells that were\nof\nDe famil, - card to recall - our-\nthe apine.\nDAIV more than CRET\nsupposent to elimule this forced\nEVIL THINGS\ninform the evu thones, Une obscenti-\nOne could her also the\ndell that of the and the\nGerman Bestialities\nin the Institutions display of middlem\ntheir for Bour tools prince data\npainted mossings at the virtima\n1 DATE ann and the\nwhind Check remove and\nThis visa the ordicary days\ninstrument which - used to crush\nwater\nroutine, but frequently collective\nthe Engers and et\nTime which I have to\n- impoird. Time\nunder\nmeet - net burd DO hearner, or\ninvolved the continualion of labour\nlast soon photographs at the wounds\ngifting or examined taken, 11 is\nor sothe sure longer al Use and of\nin Main. - and other\nDe result of virta of camfail study\nthe day or the dental of all food to\nprisonal\nmede the conditions at Breen-\nthe primonare threachout - whole\nDescription of the institutions\ndant* by Brittin observets appointed\nEAT.\nbut is . Usa\nfor\nIt a the purpose. of interviews with\nCAPTIVES FLOGGED\nWT should know - - en in this\nthe\nthing space which - are\nans of c-priments who\nTelephone-Booth Cells\nto is important, - shand anow\n# witnessed the informies\nthat - TRUDE Are viluse taxe had\nThe more dangerous priscripts\nwhich - nurred out there\nDevil informa out and -\nNAME lorget in dark cetta. Maty of\nWhat entie bare . only a Eraction\nbireding treety had tital visits\ntimese cella were larger than\nat the available material and them is\nwasted\nwith\na telephone booth The\nmuch that a 100 observety fout der\nIi LA important that - should\n- their WITH and anking know the eximi is which the OFT-\nwill\nshackled. were expected to mard\nman printh pará monght every\nCHARGES UNKNOWN\nin theme cella\nThe lower part of the walls tras\nproce at diministing the emar -\nPrisoners' Ordeals\nwhilevashed. If a prisoner leaned\ntramen Centry of the\nPrimium arre breatht to the fort.\nthat lir United own Unit\nagainst the wall the cane\nwould inmed their DE\nen . specific charge. some-\noff on le Inter total er\nFor\num with 115 knowledge of what -\nloves W lear part in . nate, essidos\ncase offetime - a Doegmi,\nadvanced aguinst them\nis was not and thes bed bern in\nsimse the ground en their\nThe my Brat orderá after esterial\nwhile the marits thrm en\nUse - - month or more that\nthe prace TM to state striesty to\nwith exi-calis and na\nprimoners were subjecting MP Itterns-\nwith Vetr INTER against\nThe probation period em\nis 34 important Uhat et anould\nmill The more inquest than nos designed M & means of breaking\nknow that . primoter were nace\nfor - hours. during\ndown their powers of resistance.\n- the result of bring brain und\nwhich une se novement of any sort\nInterrogations which the Gratage\nUse thing tato a\nsas\nThe permitted - known - et the\npresented - important look place in\nwhich TO pushed into the demp\nthe sortune chalmber.\nwaire\nif\nOr\nmail\nkind occurred was a batch of\nor the many sulhentle deserio-\nThe officer for shich use ess\nprischers who were to -\nLiona of this room and of the be-\nTM that - had box\nJunr 22. IHI (the day of Hair\nbastour of the Chestado durine INVOICE\nRound miller group a . prans of\nalima on Huma and word -\ntiling the sur firth food\npilind » stand to allention for 45\nralim.\n1\nFIENDISH CRUELTY\nOne alier spother UMP collagant\n(1) the ground from failures.\nNational Character\nI'hem on they ware mind -\nBow an - is explain - Date\nblows and no\nand dendult musty negt in time\nThe provivers day marked M us\nof a street of in the\nin the morning 11 was a our of\nmailonal character which has term\nmaxim work. interrupted Mill by\nencouraged and by the\nbe midda) titral This equilated al\nmuleta\nof\nDermany?\ntowl of value Ma For break-\nDr. Fusher, when 1 have =\n- there - too - of\nand , THE of mail cettes.\nTROUND - 15 tring hour a\nis - months parmets -\nof Brendenck chartiable\nslowed 10 be - to de prossors.\n- R the régime.\"\ntrul - Institution on\nMart a widespread mim of de-\nthe ground libel the BYTO made the\nSterate ersetty conta & large -\nFEDER of in submitters\nNet of The Orrgian\nLiterature No winder that - if the\nyour has privided the\nDoners\nIL bes. NA 17 know, provide mam\nof Der sictime es well, but fill no\ninternated the working of the men\nWital has occurred a\nMM occurred in the\ncampa inside and outside the Brich\na have brant is AUS that there LT\n- who reture to believe storms\nat Ovilage trutality WYI) they\nprobable 400 those win would not\nbelieve through - FORM from the\ndesd.\nhave . suid that in with\nof M to preach to\n- corrected. Used -\naccepte Germant andien as - abjes-\nlive Twen, Check regatition as only be\nI da not Now more than\n- - this with waster of the was\nwhen the - none - near -\ntemporarily be have monded, - need\nto remind - mu is this\npermer - - seme\nAs E write Chese au mind\ntrwevie back more than Die years\nto . 2004. Annual das in 1839 when\nasí in a DATE dualy mom a Krain\nand listened to the depossible of\nthe Cash recagnes who NETS dellar\nsearming the Polus transfer\nto\nreceipt\nNbr\nI did not understand the Desb\nlanguager, the speciadie 10 mm\nin mortal neur » non that MAIN\nWILD - se this day. And there was\n- word which Rept in\nChe et each refeger. a was\nDeclares. To-Bar. a =\nM\nBrendmek\nPer 11 years Burope like been we\nunder this liertor GREE - are in\ndanger of INRIDE 5 - as the\nnatural debet of things This THE\n\" have the change la make 40 end\nof = for over.\nRegraded Unclassified\n328\nPAPER:\nDAILY TELEGRAPH\nNUMBER:\nCITY:\nLONDON\nJAN - 4 1945\nDATE:\nNAZI BESTIALITY\nBo carefully documented a\nreport as the 6,000-word account\nfrom Shaef of German bestiall-\nties in Belgium, notably at the\nBreendonek camp. will confirm\nbeyond a suspleton of doubt pre-\nvious evidence that the mentality\nof those who claim to rule Ger-\nmany belongs to the Dark Ages.\nTo make their victims talk, the\nguolers at Breendonek subjected\nthem to the most terrible\nmedireval tortures, dragging\nthem to be interrogated after one\nmonth of mental cruelty so that\ntheir resistance might make\nthem more amenable to speech.\nIf they refused, as so many us-\nknown and unrecorded patriots\ndid, then the carefully planned\nhorrors were unloosed upon\nthem.\nTo the tortures of the Middle\nAges were added the more\nmodern, essentially Germanic re-\nfinéments of thrashings while\nthe victim hung in the air, or\nburning the body with-cigar ends.\nWomen were not excluded from\nthese tortures. The value of\nthis truly awful document lies in\nthe fact that It is the first official\nreport of German horrors issued\nby the British Army. The minds\nof those who read It will reel\nbefore its revelations. Let us hope\nthat It will also strengthen our\nresolution to punish those who\ndevised the cruelties as well as\ntheir underlings who carried\nthem out.\nRegraded Unclassified\nDEPARTMENT\nOUTGOING\nDIVISION OF 339\nOF\nCOMMUNICATIONS\nSTATE\nTELEGRAMy 8, 1945\nAND RECORDS\nDistribution of true DEPARTMENT OF STATE\nreading only by special\nMidnight\narrangement. (SECRET-W)\n1945 JAN 10 AM IO 30\nCOMMUNICATIONS\nAND RECORDS\nAMEMBASSY\n(LIAISON)\nLONDON\n177\nThe following for Mann is WRB 36.\nNewspaper PM of January 4 under heading of Reuter\narticle dated January 4, Headquarters Plot British Army\nGroup, summarizes 12 page report issued by British army\nauthorities describing the German prison camp at Breedonek\nLibreendonek during the occupation of Belgium. According\nI\nto the newspaper article the report is accompanied with a 11\nvolume of photographs.\nPlease forward a copy of this report by air mail,\ntogether with photographs if possible.\nCONFIDENTIALONS\nthe\nSTETTINIUS\n(GHW)\nmessage must\nSTETTINIUS\nbe of\nURB:MMV:KG\nBC\nWE\n1/8/45\nRegraded Unclassified\n340\nCABLE TO AMBASSADOR, PARISM FRANCE, AND HOFFMAN, TREASURY REPRESENTATIVE.\nEmbassy is authorized accept War Refugee Board cables submitted\nby Hoffman on reimbursable basis, Authority retroactive September 1,\n1944.\n3:00 p.m.\nJanuary 26, 1945\nMiss Chauncey (for the Sec'y) Ackermann, Akzin, Cohn, Drury, DuBois,\nGaston, Hodel, Marks, McCormack, Pehle, Files.\nDWhite:hmd\n1/26/45\nRegraded Unclassified\nIF\nDistribution of true\nJanuary 26, 1945\nreading only by special\narrangement. (SECRET w)\n2 p.m.\nAMEMBASSY\nROME\n148\nThe cable below for Kirk is from\nWar\nhere\nRefugee Board.\nThe following item appeared in the Jewish Telegraphic\nAgency Bulletin, December 18, 1944:\nQUOTE 1,000 YUG0SLAV JEWS RETURNED HOME FROM CAMPS IN\nITALY AT TITO'S REQUEST -- ROME, Dec. 17 (JTA)--Approximately\n1,000 Jews are among 5,000 to 6,000 Yugoslavs who have\nrecently been returned from relief camps in Italy to their\nhomeland at the request of Marshal Tito. Stateless persons\nand refugees from Germany, Poland, Czechoslovakia and northern\nItaly will be placed in the camps vacated by the Yugoslave.\nMaximum use will probably be made of the camps only after the\nliberation of northern Italy. At present, only a few state-\nless persons are being moved there from camps in central\nItaly UNQUOTE\nwill you kindly investigate and advise the Board of the\ncorrectness of this item and furnish us with any other relevant\ninformation pertaining thereto.\nGREW\n(Acting)\n(GLN)\nWRB:MMV:KG\n18\n1/25/45\nCC:\nRegraded Unclassifie\n342\nCABLE TO AMERICAN LEGATION, LISBON, FROM WAR REFUGEE BOARD.\nPlease deliver following message to Robert Pilpel from M. A.\nLeavitt of American Jewish Joint Distribution Committee, New York:\nQUOTE PLEASE INSTRUCT LAURA MARGOLIS ARRANGE PAYMENT\n$10,000 FOR MEDICINES PURCHASED SWEDEN FOR SHIPMENT EMIL\nSOMMERSTEIN LUBLIN ACCORDANCE AMENDED LICENSE. TRANSMITTED\nSECOND $500,000 SALY MAYER JANUARY, UNQUOTE\nTHIS IS WRB LISBON CABLE NO. 132.\ngan. 26,1945\nRegraded Unclassified\nMFD-845\nPLAIN\nLisbon\nDated January 26, 1945\nRec'd 7:40 a.m., 28th\nSecretary of State,\nWashington.\n195, Twentysixth.\nWRB 293 FOR HIAS 425 LAFAYETTE STREET, NEW YORK\nFROM JAMES BERNSTEIN HICEM.\nRequest Max Simon, 392 Miller Avenue, Brooklyn\nsecure United States of America visas favor Sigmend\nRosie Segal and Sara Golda Simionowits, also financial\nhelp for mother, all healthy, Bucharest. Oscar Albeit,\n601 West 151 Street, New York secure United States of\nAmerica fevor Samuel Ruff family healthy, Bucharest.\nSamy Schery, 115 Evergreen Avenue, Hartford, Connecticut\nsecure United States of America visa favor Samuel Ruff\nfamily healthy, Bucharest. Sammy Schery, 115 Evergreen\nAvenue, Hartford, Connecticut secure United States of\nAmerica visa favor Moritz Eserik Toees, Healthy, Bucharest.\nOlga senreiber, 55 Brockdale Drive, Crestwood Tuckahoe\nNew York News and secure writed States of America visa\nfavor Leopold and Rachelle Nadler, Healthy, Bucharest.\nEgon Neustadt, 133 East 58 Street, New York secure United\nStates of America visa favor Oscar Fritsi, healthy,\nBucharest. Inform Goldie Itsovici, care of Davidovits,\n322 East 8th. Street, New York, Israel Itcovici alone,\nhealthy Bucharest, without news, family intends emigrate\nPalestine, brother Itsic Russia. Sigmund Steiner,\n905 Avenue, St. John, New York, Emerich Steiner, healthy,\nBucharest intending emigration Palestine, family remained\nGermany. Ours December 27 Calra Goldstein, Sami\nGoldstein, also healthy, Bucharest Haryy Palestine\nClara Engelber children healthy.\nInform Minna Dunkin 608 West 184th. Street, New\nYork, Daphne Zaisev, healthy, Bucharest asking news.\nElese Gold, 2075 Grandeoncours, Bronx Schein all family\nRegraded Unclassified\n-2-#195, Twentymixth, from Lisbon\nand Hilda Fischer, healthy, Rumania asking news.\nHirschmann, 9012 178 Street, Jamaica, New York, sixter\nRosa Hirschmann healthy Palais New York Frederic Passy\nNice asks financial help. Lina Golodets, 120 Wall\nStreet, Non York, Marguerite Fildermann, healthy,\nBucharest, 31 Marie Rosetti, parents address Hotel Bugey\nBellay Ain France asks news.\nCROCKER\nBB\nRegraded Unclassified\nSH\nDistribution of true\nJanuary 26, 1945\nreading only by special\narrangement. (SECRET W)\n2 p.m.\nAMLEGATION\nBERN\n436\nThe following for McClelland is WRB 383.\nReference your No. 389 of January 19, 1945. The $19,533.60\nwhich you are now holding for Friends of Luxembourg can not\n(repeat not) be expended in Luxembourg because these funds were\nappropriated by National War Fund for relief and rescue in enemy\nor enery-occupied territory. Accordingly, interested groups here\nhope that you will be able to arrange with Interorose for relief\nprogram suggested in Department's No. 288 (WRB No. 367) of\nJanuary 18, 1945.\nFor your information, Friends of Luxembourg and labor groups\nexpect to send $12,500 very shortly to labor trastees in Luxembourg\nfor relief in Luxembourg.\nDonors wish to assure you of their complete satisfaction with\nyour handling of the funds which have been remitted to you for\nvarious relief projects.\nGREW\n(Acting)\n(GIN)\nWRB:104V:10\nWE\nSWD\n1/26/45\nRegraded Unclassified\n346\nCABLE TO MR. HUDDLE AND MCCLELLAND, AMLEGATION, BERNE, SWITZERLAND,\nFROM WAR REFUGEE BOARD\nReference your 459 of January 22. Action taken by Legation is\nfully approved.\nTHIS IS WRB BERN CABLE NO. 384.\n9:30 a,m,\nJanuary 26, 1945\nRegraded Unclassified\nCABLE TO AMERICAN LEGATION, BERN, FOR MC CLELLAND, FROM WAR REFUGEE\nBOARD.\nPlease deliver following message to Adolf Freudenberg,\n41 Avenue de Champel, Geneva, from Dr. Leland Rex Robinson,\nAmerican Christian Committee for Refugees:\nQUOTE ANSWERING YOUR CABLE RECEIVED TODAY $5,000\nREMITTED YOUR REGULAR SWITZERLAND BUDGET AISO SUCH\nCONTINGENCIES AS WORK HUNGARY RUMANIA. PLEASE CABLE\nYOUR AVERAGE ANTICIPATED MONTHLY NEEDS FOR PURCHASING\nIN SWITZERLAND FOR REFUGEE WORK CIMADE AND FRENCH\nCHAPLAINCY SERVICE. REMITTANCE FUNDS TO FRANCE VIA\nSWITZERLAND PROHIBITED UNDER EXISTING U.S. REGULATIONS\nBUT APPLYING PERMISSION USE DOLLARS FOR PURCHASES FOOD\nMEDICINE CLOTHING IN SWITZERLAND FOR SHIPMENT FRANCE. PROVIDED\nLATTER PERMISSION OBTAINED ACCR HOPES REGULARLY SUPPLY ADDITIONAL\nNEED FUNDS FOR LATTER PURPOSES BEYOND YOUR BASIC OPERATING\nREQUIREMENTS. WILL INFORM YOU RESULTS OUR APPLICATION.\nNECESSITY ACCR DIRECTLY DEALING CIMADE OTHER FRENCH REFUGEE\nAGENCIES THROUGH ANTICIPATED REPRESENTATION FRANCE BECAUSE\nSUPPORT OF SUCH WORK PARTLY FROM NONCHURCH FUNDS BUT WOULD\nASSURE CONSTANT COORDINATION WITH ECUMENICAL REFUGEE COMMISSION\nWHICH MIGHT ACT DIRECTLY AS ACCR'S SWISS AGENT IN PURCHASES\nFOR FRANCE FINANCED FROM SECULAR SOURCES. YOU ARE AUTHORIZED\nCOMMUNICATE BOEGNER AND BAROT REQUESTING USE 200,000 FRENCH\nFRANCS FROM OUR $10,000 REMITTANCE FOR WORK PASTOR TOUREILLE.\nWE ARE so CABLING MLIE. BARCT. UNQUOTE\nTHIS IS WRB BERN CABLE NO. 385.\n1:00 p.m.\nJanuary 26, 1945\nRegraded Unclassified\n348\nCABLE TO AMLEGATION, BERN, FOR MCCLELLAND FROM PEHLE, WAR REFUGEE BOARD\nReference your No. 483 of January 23. We, of course, have no\nobjection to your taking a well-earned vacation between either of the\ndates mentioned by you. I assume that you have made arrangements for\nthe handling of War Refugee Board work during your absence.\nTHIS IS WRB BERN CABLE NO. 386.\n1:00 p.m.\nJanuary 26, 1945\nRegraded Unclassifie\n349\nBG\nDistribution of thue\nJanuary 26, 1945\nreading only by special\narrangement. (SECRET W)\n10 p.m.\nAMLEGATION\nBERN\n442\nThe following for McClelland from Pehle is WRB 386.\nReference your No. 483 of January 23. We, of\ndourse, have no objection to your taking a well-carned\nvacation between either of the dates mentioned by you.\nI assume that you have made arrangements for the hand-\nling of War Refugee Board work during your absence.\nbrew\n(Acting)\n(GLN)\nWRB:MAV:KO\nNE\n1/26/45\nRegraded Unclassified\n350\nCABLE TO AMERICAN LEGATION, BERN, FOR MC CLELLAND, FROM WAR REFUGEE BOARD.\nPlease deliver following message to Adolf Freudenberg, 41 Avenue de\nChampel, Geneva, firom Dr. Leland Rex Robinson, American Christian Committee\nfor Refugees, Inc.:\nQUOTE SENDING $5,000 REGULAR $3,000 BUDGET $2,000 CONTINGENCIES\nINCLUDING HUNGARIAN CHURCH COMMITTEE SENDING SAME AMOUNT FEBRUARY.\nRECEIVED DOCUMENTS WARNSHUIS BROUGHT LATE DECEMBER. GIVING\nCONSIDERATION BEST WAYS DIRECTLY SUPPORTING CIMADE'S REFUGEE WORK\nBEGINNING MARCH PROBABLY THROUGH PROPOSED DIRECT REPRESENTATION\nFRANCE. FOLLOWING ADVICE WARNSHIS LAST REMITTANCE MADE BOEGNER.\nAPPRECIATE RECIPROCATE NEW YEARS MESSAGE. FUNDS USED SHANGHAI 1944\nVIA AMERICAN JEWISH JOINT DISTRIBUTION COMMITTEE. WILL CHECK WITH\nYOU BE FORE SENDING FURTHER FUNDS THERE. UNQUOTE\nTHIS IS WRB BERN CABLE NO. 387.\n3:00 p.m.\nJanuary 26, 1945\nRegraded Unclassifie\n351\nCORRECTION\nMF\nDistribution of true\nJanuary 26, 1945\nreading only by special\narrangement. (SECRET W)\nCable from Bern numbered 531, dated January 25,\n3 p.m. reading \"FOR WRB FROM MCCLELLAND\" serial number\nshould be \"530\" instead of \"531\".\nDIVISION OF CENTRAL SERVICES\nJMB\nNots: Correction from Regation at Bern.\nRegraded Unclassifie\n352\n№1-275\nDistribution of true\nBern\nreading only by special\narrangement. (SECRET W)\nDated January 26, 1945\nRec'd 1 p.m.\nSecretary of State,\nWashington.\n547, January 26, 2 p.m.\nAs authorised in your 317 (January 19 WRB's\n370), I paid Dutch Minister at Bern, Mr. Bosch de\nRosenthal, sum of 704,009.45 Swiss france, equiva-\nlent of $165,000 minus customary one-half percent\nSwiss National Bank Commission, on January 26.\nI asked Mr. de Rosenthal to kindly confirm\nreceipt immediately to Netherlands Government in\nLondon.\nThis therefore exhausts all Queen Wilhelmina\nfunds I have been holding.\nHUDDLE\nBB\nRegraded Unclassified\nEAS-227\nDistribution of true\nBern\nreading only by special\narrangement. (SECRET W)\nDated January 26, 1945\nRec'd 10:31 a.m.\nSecretary of State,\nWashington.\n548, January 26, 3 p.m.\nFOR W.R.B FROM MCCLELLAND\nDepartment's 387, January 23, WRB'S 376 refer my\n8265 December 22.\nDo you?\nHUDDLE\nRB\nRegraded Unclassified\nJEC-412\nBern\nDistribution of true\nreading only by special\nDated January 26, 1945\narrangement. (SECRET W)\nRec'd 7:53 p.m.\nSecretary of State,\nWashington.\n570, January 26, 7 p.m.\nFOR WRB FROM (#) IND.\nI immediately contacted Dr. Riegner World\nJewish Congress representative in Switzerland in an\nattempt check on these reports. (Department's 400,\nJanuary 24 WRB'D 379) Riegner stated that he had\nreceived no (repeat no) information to effect that\nGermans were transforming the Resienstadt into an\nextermination camp. His information was princi-\npally to effect that since about last October Masis\nhad transferred great many people from the Resion-\nstadt into Germany proper ostensibly as labor.\nNumber is unknown as is fate of anny olderly people\nunsuited for work who must have been left behind.\nCustomery post cards dated end November, however,\nreached Geneva 2 days ago from the Resienstadt which\ncontain no indication that situation as far as\ntreatment is concerned has changed in the Resien-\nstadt.\nReports contained your wire were nevertheless\nused as basis urgent appeal to ICRC to do all its\npower investigate and secure permission visit the\nResienstadt once more as soon as possible.\nHUDDLE\n(#) correction to follow\nMJF\nRegraded Inclassifie\nPARAPHRASE OF TELEGRAM RECEIVED\nFROM:\nAmerican Embassy, Hossow\nTO:\nSecretary of State, Washington\nDATED:\nJanuary 26, 1945\nNUMBER:\n238\nCONFIDENTIAL\nI have reminded the Foreign Office, in conformity with the\ndesires express in message of January 22 from the Department,\nNo. 134, that these concentration camps exist and that it is\npossible that they may contain victins of Nasi persecution still.\nThe interest of the War Refugee Boardrin the welfare of these\npeople and in such measures as can be taken for their protection\nhas been expressed by ne. No information with regard to the\ncivilian populations of the areas covered by the recent advances of\nthe Soviets has as yet been released by the Soviet Government\nand the fact that this question is looked upon as a military\nsecret for the time being is obvious. Furthermore, the Soviet\nForeign Office has not been willing in any wase to divulge\ninformation of this kind to my knowledge. It is doubtful whether\nthe Soviet military authorities discriminate at all between Jewe\nand other people in such records as they may make of the civilians\nwhich their advance has liberated. In addition, when we inquired\nlast September about the Jews in Lods, the Foreign Office made\nreply that it was not able to furnish us any information on that\nmatter and referred us to the Polish National Committee of\nLiberation; a similar attitude will be taken in the present\ninstance, I have no doubt.\nThe Embassy has made every effort to secure information on\nthe fate of the Jews in Russian controlled territories, as the\nDepartment will notice from the message dated December 9 from the\nEmbassy, No. 4730 and the one dated December 30, No. 5059. We\nwill not fail, as soon as the Polish authorities have had an\nopportunity to establish their administration in the territories\nrecently liberated and to find out what has transpired there,\nto exploit every possibility for securing information with regard\nto those territories which is similar to that secured from Russian\ncontrolled territories.\nDC/L:LCW:AN\nKENNAN\n1-29-45\nRegraded Unclassified"
}