Volume 4, March 1 – April 22, 1935

WE no contracto 50 Fant Milion 5573 NO How vita 4/24 17 2021 16c Date, We transits % With Glass report adminis rele RM will Service challe of personnel sifectal by yourse team tax / 465 of 1935 The the Web of 1 discuss etio - 126 Geter sevie 10 NW 200 We someed & hard in receive Americation DIARY Dyet Locates - instal 26 Don't on with - invoices HANDY wide propertive for Book 4 in Pints 11 is 3714 making ane and Reserved M by PRIT March 1- April 22, 1935 by 54/7 State Department La disness 4020 divis 7/4/70 TO: we Inverting of Unital States mix Why chap 4/13/19 and 6020 shough Street NO- of 7408 "20 pest N R) appropriation for shall be that 2019 pessonal Pervices 549 by 1/11/35. SAC 360 listed the Tasted statime de UNICAR we 3kg wilver 224,245,750 Name of 360 Publication 156 Ass 50 240 12,13,12 20,28,19, 116,109,209 Lenk log International desalements the Publicipation 22,213 Unclassified - A - Book Page Air Mail Contracts Foreign contracts increase in Post Office appropriation bill discussed by HMJr with McAdoo 4/22/35 IV 253 A Alcohol Tax Unit HMJr transmits to Carter Glass Mellott's report with relation to Civil Service status of personnel affected by proviso found in Emergency Appropriation Act of 1935 3/4/35 29+ List of enforcement officers who qualified under Civil Service 31+ Executive Order consolidating agencies engaged in anforcement 31+ See also Berney, Edward E. Allotment Board See Unemployment Relief 195,205, 207,249,252 American Bankers' Association See Lending Agencies, Interdepartmental Committee of Report of Banking subcommittee on memorandum listing Eccles' nine proposals for changes in Title II of 1935 Banking Act and American Bankers' Association's two proposals 118 Appert, Jean (Financial Attache', French Embassy) Sees Coolidge; HMJr suggests appointment through State Department to discuss gold situation 3/4/35 7 Tells HMJr lowering of United States interest rate "best thing ever happened" 4/18/35 246 Appropriation Acts O'Mahoney (Senator) phones HMJr of provision that "no part of any Appropriation Act shall be used for personal services not specifically authorized by law" 3/11/35. 66 A-C - B - Baby Bonds See United States Savings Bonds Banco de Mexico See Silver 225,245,250 Bank of England See Stabilization 154 Bank of France See Stabilization 11,13,14, 25,28,68, 154,157,158, 166,169,209 Bank for International Settlements See Stabilization 12,111 - B - - (Continued) Book Page Banking Bill Glass advises HMJr "not to defend benking bill too hard" IV 109 Granducci tells HMJr "their financial man heard FDR has not endorsed" bill 110 HMJr tells FDR Glass told him FDR was only interested in a unified bank examination and permanent plan for Federal Deposit Insurance Corporation: FDR "explains" 3/18/35 114 Berney, Edward E. See Investigations, Treasury Personnel Black, Hugo At lunch with FDR and HMJr discussing ship mail contracts 4/15/35 208 Board of Tax Appeals Bulkley (Ohio) asks HMJr to weigh carefully Bulkley's recommendation of Judge Ferneding when FDR fills vacancy 3/6/35 44 A-B Doughton recommends Mills Kitchin (son of Claude Kitchin, former Chairman, Ways and Means Committee) 3/6/35 44 C-E Boler, James P. (Deputy Collector of Internal Revenue, Omaha, Nebraska) See Political Activities of Treasury Employees Bonus Garner tells HMJr no one knows when bonus will be considered 4/9/35 1.69 D-E FDR tells HMJr "question of soldier legislation must be taken out of politics" 115 Wright Patman discusses plan with HMJr 117 Garner asks, "Should part of bonus be paid in form of Baby Bonde? Are they transferable?" HMJr says "No, but a special issue would be salable and transferable" 3/15/35 90 D-E FDR asks HMJr to make statement; does not want Hines to do this; FDR wants to suggest changing $1000 certificate for a Baby Bond 4/18/35 247 FDR, HMJr, Hines, Bell, et cetera, discuss prospects 4/22/35 251 HMJr appears before Congress 2534 Brown, Clyde A. (See also Book II) Disbarment order rescinded at Senator Glass' request 3/23/35 147 Byrd, Harry (Senator, Virginia) States in newspapers he can't get any information on spending of Public Works Administration funds from Treasury, HMJr (with Bell present) tells him Treasury will always consider "anything done in the way of spending money an open book" 3/5/35 13 E-F HMJr phones him Treasury is "turning everything upside down to get the information" 3/7/35 48 J-K - C - Coast Guard See North Island, San Diego, California 171 Regraded Unclassified - C - (Continued) Book Page Cochran, Merle See Stabilisation IV 25 Congress, Statements before, by HMJr HMJr on Treasury and Post Office Appropriation Bill, 1936 3/2/35 5+ HMJr on Anti-Smuggling Act 3/8/35 52 C HMJr on Social Security Act amendment permitting annuitants to receive pension at 65 even though still at work - 4/18/35 248 HMJr on World War Veterans' adjusted service certificate claims 4/22/35 253+ Consolidated Gas Company See New York City Costigan, Edward P. (Senator, Colorado) With LaFollette and Wagner discusses support of FDR with FDR 113 Coughlin, Father Murphy tells HMJr Father Coughlin has confidence in him alone in Washington - 3/5/35 8 Couzens, James (Senator, Michigan) Phones HMJr about (1) publicity feature of income tax returns, (2) Mellon tax case - 3/7/35 48 A-B, 66 D-I See also Federal Housing Administration 209 Crane, J. E. (Deputy Governor - Federal Reserve Bank, New York) Tells HMJr he is resigning 4/22/35 256 E Crowley, Leo J. F. T. O'Connor tells HMJr he has finished investigation; thinks situation is bad - 3/12/35 67 HMJr tells O'Connor by telephone and by letter to confirm or withdraw charges - - 3/22/35 144 Customs, Bureau of HMJr, Oliphant, and Conboy discuss Goldberg smuggling case 4/22/35 256 A-D - D - - de Laboulaye, Andre (French Ambassador) HMJr conveys to him satisfaction over smuggling agreement at St. Pierre 4/9/35 175 HMJr consults with - before departure for France; de Laboulaye asks about working through Bank of France, which is & private bank; promises to see HMJr upon return 4/10/35 182 Disarmament FDR discusses with HMJr on his wedding anniversary 3/18/35 112 Distilled Spirite Institute See Whalen, Grover 247 Doughton, Robert L. (Congressman, North Carolina) See Board of Tax Appeals 3/6/35 44 C-E Regraded Unclassified - D - - (Continued) Book Page Douglas, Lewis W. In speech says "United States spending threatens currency and middle-class destruction" 3/15/35 IV 89 FDR's unpublished statement concerning article 90 - E - Eccles, Marriner Bank stock transferred to Eccles Family Investment Corporation - - Marriner Eccles still owning 9% of this corporation; Glass reported to have enough votes to prevent Eccles' confirmation; both Oliphant and Wyatt (General Counsel of Federal Reserve) advised Eccles on what his holdings could be - 3/20/35 139 HMJr tells FDR above; FDR suggests letter to Senator Fletcher, explaining Eccles Family Investment Corporation and advice of Oliphant and Wyatt; HMJr tells Eccles 3/22/35 143 Bulkley tells HMJr he will talk further to Glass and try to get confirmation without a scrap 4/17/35 234 At Emergency Relief See Unemployment Relief Exchange Stabilization Fund See Stabilization - F - Farley, James See Long, Huey 36 Federal Housing Administration FDR suggests Cousens to succeed Moffett, then make Murphy Michigen Senator - - 4/15/35 209 HMJr suggests to FDR that Winfield Riefler investigate organization, preparatory to successor to Moffett 4/17/35 244 HMJr asks Moffett if this is satisfactory to him; Moffett says "yes" 4/22/35 252,252 A-B Federal Intermediate Credit Banks Consideration of H. R. 6151. authorizing issuance of currency by - 4/17/35 235 Federal Reserve Bank, New York Crane, J. E. - Deputy Governor in charge of Foreign Department - resigns 4/22/35 256 E Financing, Government 3/4/35 - Offering of 20-25-year 2-7/8% Treasury bonds of 1955-60 in exchange for Fourth Liberty Loan 42% bonds of 1933-38 called for redemption 4/15/35 (Third - called Fourth 41's); and 5-year 1-5/8% Treasury notes of Series A, 1940, in exchange for Treasury notes of Series c, 1935, maturing 3/15/35 34 H Regraded - F - (Continued) Book Page Financing, Government (Continued) a) Subscription books will close 3/8/35 IV 52 B b) Subscriptions aggregate 8513 million for 5-year 1-5/8% Treasury notes; approximately $555 million of Fourth Liberty Loan bonds called for redemption on 4/15/35 have been exchanged for Treasury bonds 3/9/35 52 D c) Allotments 3/18/35 115 A d) Subscriptions aggregate $1,332,000,000 for 2-7/8% Treasury bonds 1955-60, offered in exchange for Fourth Liberty Loan bonds; books will close 3/27/35 3/25/35 147 A e) Allotments 4/2/35 156 A See also United States Savings Bonds First Liberties ($1 billion, 900 million) to be called for redemption 6/15/35 (actual call 4/22/35 - Book IV, page 256 I+) 87 Panama Canal Loan Bonds (2%) and Consols of 1930 (2%) to be retired and free gold resulting from reduction in weight of the gold dollar to be used - 3/11/35 92 Last of Liberties will be called on 4/15/35 for redemption on 10/15/35 (HMJr tells Early); $8 billion will have been called in little over year; HMJr wants to make radio talk 4/9/35 - (call, page 209 P-Q; talk, page 209 A-0) 170 Kennedy consulted about private flotations in the offing so HMJr can figure out next refunding - 4/9/35 170 $4 Billion 8 Fund See Unemployment Relief France See Appert, Jean 7,246 See de Laboulaye, Andre 175,282 See Stabilization Fraser, Leon (President - Bank for International Settlements) See Stabilization 12,111 - G - Glass, Carter (Senator, Virginia) See also Berney, Edward E 53,55,58, 59,83,91,109 Advises HMJr "not to defend banking bill too hard" 109 HMJr tells Glass, exclusive of Rogers' expenses, total cost of Stabilization Fund is less than $40,000 109 Tells HMJr he's only Cabinet member trying to do honest job 4/16/35 227 Gold See Stabilization Goldsborough, Senator (Maryland) McNary recommends to HMJr for Federal Deposit Insurence Corporation - 4/22/35 256 G-H Government Financing See Financing, Government - H - Book Page Hansen, Alvin See Stabilization IV 214,227, 244,250 Holland See Stabilization 158,159, 178,187 Home Owners' Loan Corporation HMJr asks Fahey to confer with him immediately on two features of bill: (1) Home Owners' Loan Corporation can accept applications for another 60 days and (2) bill now calls for $2 billion, 500 million; so they can report to White House 3/7/35 48 G-I Amendment sponsored by Blanton and Ramspeck concerning residence of employees in Congressional districts in which office is located discussed by HMJr and Fahey 3/12/35 71 A-C Plan to "open up" for another 60 days discussed by HMJr with Bulkley 4/17/35 234 C+ Howe, Louis See Unemployment Relief 207 - I - Income Tax Returns Publicity clause See also Book III Cousens discusses with HMJr 48 A-B, 66 D-I Doughton told if Senate passes after March 15, it's still effective 3/12/35 71 D-E Harrison told "number of months before statement could be made after law is passed" 71 F-G Investigations, Treasury Personnel Berney, Edward E. Glass tells HMJr Senate Finance Committee unanimously recommends "firing" 3/11/35 53 HMJr tells Glass, unofficially, not a single charge of Berney's political activities can be substantiated 55 HMJr's letter to McKellar 3/12/35 58 McKellar's letter to HMJr, giving testimony before Committee on Post Offices and Post Roads 59 HMJr tells Glass Farm Credit Administration will take Berney if McKellar won't object; Glass thinks it "all nonsense" 83 Glass tells HMJr McKellar has promised not to interfere further - - 3/15/35 91 Glass further assures HMJr McKellar will not interfere with a job elsewhere; HMJr still wants McKellar's written assurance - 3/15/35 109 Letter to Glass for advice after further attack by McKellar on floor of Senate; Glass upset - comes to 886 HMJr 4/16/35 227 - K - Book Page Kitchin, Mills See Board of Tax Appeals 3/6/35 IV 44 C-E - L - - LaFollette, Robert (Senator, Wisconsin) With Wagner and Costigan discusses support of FDR with FDR. 113 LeHand, Marguerite Interrupts FDR and HMJr with motion picture camera - FDR's reaction 207 Lending Agencies, Interdepartmental Committee of Report of Committee 3/7/35 49 a) Consideration of Hopkins amendment to pending Works Relief bill permitting Reconstruction Finance Corporation, Home Owners' Loan Corporation, and Farm Credit Administration to loan to state rehabilitation corporations Report of Banking subcommittee 3/19/35 118 a) Consideration of 8 memorandum from American Bankers' Association listing Eccles' nine proposals for changes in Title II of 1935 Banking Act and their own two proposals b) Discussion of composition of Open Market Committee: HMJr insisting present Board is not fit to be Committee Housing report of Tom K. Smith discussed 4/10/35 184 Leon, Rene HMJr authorizes Crane to "drop the word" Leon has never been asked by Treasury for advice - 4/5/35 158 or Liberty Bonds See Financing, Government Lindbergh Kidnapping Case See New York Daily News 244 Liquor HMJr tells Speaker Byrnes Treasury has prepared series of bills and sent to Doughton 4/11/35 192 Long, Huey Moran (Secret Service) told to drop investigation 3/5/35 9 McKellar (Senator), Chairman of Committee on Post Offices and Post Roads, transmits Long's charges concerning Treasury to HMJr and asks for statement 3/6/35 35 Long's statement concerning New York City Post Office bid, Farley, et cetera, as read into Congressional Record 36+ HMJr tells McKellar he finds no reference to Treasury in Long's charges 3/7/35 45 HMJr's second and fuller letter 3/7/35 46+ Garner, at Cabinet: "Don't give New Orleans $1.00 until they get rid of Huey Long" 3/22/35 143 - M - Book Page Manley, Basil HMJr asks him for copy of report on New York City Federal Power project; FOR has asked HMJr for decision in this pending contract 3/5/35 IV 10 McCarran Amendment FDR discusses with LaFollette, Costigan, and Wagner 114 HNJr tells Robinson he is answering McCarran letter on silver today and will send Robinson a copy 4/11/35 196-201 a) Robinson says he will insert in Record b) Actual letter McConihie, Mr. Conversation with HMJr concerning job in Treasury and 80 lower rent for house 24 McKellar, Kenneth (Senator, Tennessee) See Berney, Edward E 35,45,46,53, 55,58,59 See Long, Huey 83,91, 109,227 Mexican Eagle Oil Company Crane (Federal Reserve) and Cattern (Bank of England) discuss sale of silver 3/6/35 19 Mexico See Silver 225,245,250 Moffett, James A. (Federal Housing Administration) See Federal Housing Administration 244,252 Murphy, Frank FDR suggests to HMJr Cousens to succeed Moffett as head of Federal Housing Administration and Murphy as possible Senator from Michigan - 4/15/35 209 - N - National Grain Yeast Corporation Chronological Diary: March 15, 1935 - October 2, 1935 934 New York City FDR asks HMJr for decision on pending Federal Power project; HMJr asks Basil Manley for report thereon 3/5/35 10 LaGuardia told by HMJr rate offered by Consolidated Gas Company for the Government light and power in New York is to be accepted - 3/14/35 90 A-B LaGuardia suggests to HMJr Federal Government and New York City both sign at same time - 4/9/35 169 A-C 4/15/35 209 G-H New York City Post Office See Long, Huey 36,46 New York Daily News Dewell, introduced by Farley, discusses reopening of Lindbergh case with HMJr from narcotics angle - 4/17/35 244 North Island, San Diego, California HMJr discusses with General MacArthur plans for Coast Guard there - 4/9/35; letters concerning, attached 171 - 0 - Book Page Oliphant, Herman Three drafts of "a further word on money and price" 3/16/35 IV 140+ O'Malley, G. W. (Collector of Internal Revenue - Omaha, Nebraska) See Political Activities of Treasury Employees Open Market Committee Eccles testifies on Hill 5 Governors of Federal Reserve Banks should advise Federal Reserve Board; only a week ago Eccles had agreed with HMJr on 2 Governors and 3 members of Federal Reserve Board, which plan was presented at White House; HMJr upset at "broken faith" in Eccles - 3/5/35 10 Committee report 3/13/35 72 Banking subcommittee discusses make-up of Committee 3/19/35; HMJr insists present Federal Reserve Board is not fit to be Committee 118 HMJr suggests to Burgess that Open Market Committee "lighten its burden of security" and sell in good times; Burgess does not agree that this is good strategy - 4/5/35 158 M-P Glass asks HMJr whether he's satisfied with make-up of Committee; HMJr says "yes" 4/11/35 228 Meets with HMJr; First Liberties discussed 4/17/35 238 - P - Patman, Wright Discusses bonus with HMJr 117 Poland Zoltowski, Financial Counselor, and Gruber, President of Postal Savings Bank of Poland, call on HMJr 4/15/35 202 Political Activities of Treasury Employees Boler, James P. (Deputy Collector of Internal Revenue - Omaha, Nebraska) See O'Malley, G. W. - - Political activities 230 O'Malley, G. W. (Collector of Internal Revenue - - Omaha, Nebraska) Political activities considered by HMJr 4/16/35 2304 Pyke, Bernice (Collector of Customs - Cleveland, Ohio) Politically active in assisting Davey against Harry Hopkins 3/14/35 87 Report on (by Dick Maher, Cleveland Press) 88 HMJr tells Bulkley no action will be taken - 4/22/35 248 C Lewis (Senator, Illinois) discusses investigations in New Jersey and HMJr tells him he has appointed a Committee to go into all this; "practical politicians": Helvering, Gibbons, Ross, Julian, and Jackson - 4/13/35 201 D-F Public Works Administration Jesse Jones discusses with HMJr desire of Publio Works Administration that Reconstruction Finance Corporation buy today securities maturing tomorrow and then sell them tomorrow; Jones doesn't like it - wants at least 30 days leaway - 4/8/35 158 E-T Regraded Unclassified - P - (Continued) Book Page Pyke, Bernice (Collector of Customs - Cleveland, Ohio) See Political Activities of Treasury Employees - R - Reconstruction Finance Corporation See Public Works Administration - 4/8/35 IV 158 R-T Relief Appropriation See Unemployment Relief Riefler, Winfield HMJr suggests to FDR that Winfield Riefler investigate Moffett's organization; FDR agrees; McIntyre annoyed 4/17/35 244 Roosevelt, Franklin Delano HMJr has supper at White House on FDR's wedding anniversary 3/18/35; they discuss general disarmament.. 112 Roosevelt, James See National Grain Yeast Corporation Rosenman, Judge HMJr talks to Higgins about job for Judge Rosenman's sister - 4/18/35 245 E - S - St. Pierre, Island of HMJr expresses gratification concerning - to French Ambassador 4/9/35 175 See also Stabilization FDR shown Crane-Cariguel conversation; laughs at HMJr for thanking French for St. Pierre cooperation and immediately offering them a credit of 85 million 205 Secret Service Improvement of White House protection discussed 3/4/35 35 Silver (arranged chronologically) Oliphant's letter to Senator McCarran concerning continuation of provisions of Sections 6, 7, and 8 of Silver Purchase Act of 1934 - 4/11/35 196 Mexican Ambassador complains of advance in price of silver to HMJr; HMJr resents this, after all the assistance United States has given Mexico - 4/16/35 225 Confidential cable from London heavy purchases of silver by Banco de Mexico: rumored for possible sale to Federal Reserve - 4/17/35 245 HMJr tells FDR he is sending for Mexican Ambassador to arrange for sale to United States of their London silver; tells him also President of Banco de Mexico has been fired - 4/22/35 250 "Silver and India" - article by F. E. Holsinger in New York Times discussed by FDR and HMJr 2/21/35 253 "Silver price and the stabilization of sterling" - memorandum from Starr to Knoke, both of Federal Reserve Bank, New York, about Holsinger article - 4/22/35 254 Regraded Unclassified - S - (Continued) Book Page Social Security Bill Josephine Roche reports amendment to bill permitting people over 65 to continue working, pay no taxes, and collect pensions, would increase cost to Treasury considerably - 4/17/35 IV 237 HMJr, Josephine Roche, et cetera, testify concerning before Ways and Means Committee 4/18/35 248 Speeches, Radio, by HMJr Speech on 3/4/35 as part of Anniversary Day broadcast 34 A-G HMJr assisted by Bell, Upham, and Gaston, Bell's figures incorrect, HMJr has to do speech on redemption of Fourth Liberty Loan Bonds himself, at last minute 208 Actual speech 4/14/35 209 A-F Comments on 209 I-0 LaGuardia congratulates HMJr on reducing interest and the public debt - 4/15/35 209 G-H Speech on the external dollar discussed by HMJr and Chester Crowell 4/16/35 226 A-C Stabilization (arranged chronologically) HMJr tells Warren if business continues downward for another two weeks, he will seriously consider raising price - 3/1/35 1 HMJr tells FDR sterling is down and francs up, $18,000,000 of gold in London; HMJr suggests offering francs in Paris and shipping gold over in payment; FDR agrees 3/4/35 7 Conversations between Crane (Federal Reserve, New York) and Cariguel (Bank of France) - 3/4/35 and 3/5/35 11,13 For first time Cariguel clearly implies devaluation of franc may be necessary to adjust position vis a vis sterling Cariguel also says belga is all right; lira continues to be under pressure Conversation between Crane and Fraser (Bank for International Settlements) 3/4/35 12 HMJr phones FDR of French support of sterling - 3/5/35 10 Crane tells HMJr of conversation with Cariguel - 3/6/35 14 Sterling is very weak, reaction of Scandinavian countries, South Africa, Governor of Bank of France considering offer of credit to British (5 billion francs), Cariguel thinks it should be Franco-American move, Crane assures "sympathetic hearing"; HMJr sees FDR; phones Crane decision is "no real authority for pact but sympathetic support to objective" - which is to be conveyed to French after they make up own mind on the suggested move Harrison tells HMJr of misinterpretation of FDR's remarks "purchasing power of dollar should be lifted further to ease burden of debts" 22,23 Merle Cochran trensmits through Straus Bank of France's proposal concerning deoline of sterling and joint offer of loan to Bank of England 254 Conversations with Harrison concerning 27 A-H - B - (Continued) Book Page Stabilization (Continued) Crane and Cariguel discuss American decision Cariguel expresses disappointment United States and France cannot make joint offer - 3/13/35 IV 28 Copies of cables between Harrison and Bank of France concerning joint offer 684 Panama Canal Loan Bonds (2%) and Consols of 1930 (2%) to be retired and free gold resulting from reduction in weight of the gold dollar will be used - 3/11/35 92 HMJr tells Glass that, exclusive of Rogers' expenses, total expense of Fund is less than $40,000 109 Fraser (Bank for International Settlements) cables Harrison situation in Belgium very serious 111 HMJr telle Oliphant to have all plans ready for embargo 3/19/35 116 Memorandum from John G. Laylin presenting various plans (attached) considered by Treasury and Federal Reserve Banks to lessen shock to United States end world if France and other gold-standard countries have to suspend payments in gold - 3/20/35 124 HMJr's reports, in longhand, to FDR on board "Farragut" March, 1935 149 Cariguel and Crane discuss Belgian situation - 3/28/35 154 Catterns and Crane discuss gradual liquidation of Treasury's sterling balance and Belgian situation 4/4/35 157 Cariguel and Crane discuss pressure on Dutch and Swise currencies 4/5/35 158 Altschul and HMJr discuss Swiss, Dutch, end Belgian situation 4/5/35 158 D-G Crane explaine Swiss and Dutch situation to HMJr 4/9/35 159 HMJr tells Crane (after agreement concerning smuggling at St. Pierre) to tell Bank of France they can use United States account up to $5 million any time exchange goes below gold point, HMJr wants to work in close accord with French and has won over State Department 4/9/35 166 Crane-Cariguel cable conversation 169 HMJr tells Hull of his plan to aid French - 4/9/35 170 Holland wants us to buy gold direct from them at 35 per ounce, FDR says OK for 10 million - 4/10/35 - Cables attached 1784 1874 When asked to act on Allotment Board, HMJr tells FDR he thinks he can best serve by getting American dollar bloc to include North and South America and China - 4/15/35 205 Cariguel (Bank of France) asks Crane, "Do you think exchange stabilization is any nearer?" HMJr tells FDR, who advises reading Ottawa conference report on money and monetary statement by English after London Economic Conference. FDR hopes to get various European countries to agree and then get England to join; HMJr "No stabilization possible until one of important countries is flat on its back" - 4/15/35 209+ Regraded - S - (Continued) Book Page Stabilization (Continued) State Department transmits to Coolidge for review proposed memorandum on exchange stabilization prepared by Alvin Hansen for diplomatic and consular representatives abroad - 4/15/35 IV 214 Wallace tells HMJr Hansen of State Department has consulted Ezekiel on plans for stabilization; wants United States to join France and urge 15% devaluation; HMJr resents this interference - 4/16/35 227 Jones (Marvin) proposes to take $800 million away from Fund and issue currency against it to establish two central banks for farmers, HMJr discusses this with Bulkley 4/17/35 234 C a) After meeting in HMJr's office, calls Jones and tells him Treasury will oppose 236 Hansen memorandum sent to Coolidge discussed by HMJr with Hull; Hull didn't know about it - - will handle - 4/17/35 244 HMJr tells FDR about Hansen memorandum, FDR angry 4/22/35 250 Switzerland See Stabilization 158 - I 1 Third Party Movements FDR discusses with HMJr apropos Tugwell - 3/18/35 113 Tugwell, Rexford Viner's report of activities in Chicago discussed by HMJr with FDR 3/18/35 113 D I I Unemployment Relief $4 Billion 8 Fund Bell should approve spending and not FDR, 80 HMJr thinks asks for appointment for Bell and himself with FDR. 143 Allotment Board - If Ickes is Chairman, Hopkins may quit 4/11/35 195 FDR asks HMJr to be member of Allotment Board. See Stabilisation - 4/15/35 205 HMJr sees FDR about chairmanship - suggests Joe Kennedy FDR suggests Frank Walker, thinks Kennedy is too temperamental; FDR shows HAJr Louis Howe's chart "which doesn't make sense", FDR says he will appoint an Assistant to President in charge of Public Works 4/15/35 207 Program to be announced by FDR in four parts - 4/22/35 249 (1) Frank Welker to accept all applications through National Emergency Council (2) Ickes to head Allotment Board with super committee FDR ex-officio member, HMJr, Ickes, Wallace, Hopkins, Kennedy (HMJr does not think Kennedy will accept) Regraded Unclassified - U - - (Continued) Book Page Unemployment Relief (Continued) Program to be announced by FDR in four parts (Continued) IV 249 (3) Hopkins to head & follow-up committee, which HMJr cannot understand (4) Existing agencies to handle all projects except rural housing and rural electrification Kennedy tells HMJr he will accept only if Ickes is fired and he knows FDR will not do that 252 United States Savings Bonds Go on sale 3/1/35; pictures taken 2 FDR purchase 3+ Order blank (sample) $6 million sold in first 11/2 days - - 3/4/35 34 I - W - Wagner, Robert (Senator, New York) With LaFollette and Costigan discusses support of FDR with FDR 113 Warren, George F. See Stabilization 1 Watson, "Jim" Case discussed by HMJr at lunch with FDR 4/15/35 FDR says file after Finkelstein case 208 Whalen, Grover Phones HMJr about "glass business" and "institutional advertising" 4/11/35 190 A-B Tells HMJr Distilled Spirits Institute wants to do some "positive advertising"; HMJr suggests they explain and popularize regulations - 4/18/35 247 Wheeler, Burton K. (Senator, Montana) Discusses Penwell, Collector of Internal Revenue in Montana and former owner of progressive newspaper with HMJr - 4/5/35 158 A-B Regraded Unclassified 1 March 1st. H.M.Jr. saw Professor Warren to-day and told him that if business statistics continued to go down for another two weeks he would seriously consider raising the price of gold. H. M. Jr. telephoned Mr. Phillips, of the State Department, and told him that he had seen in this morning's New York Tribune a story by Henry F. Grady on Stabilization of World Currency. H. M. Jr. told Mr. Phillips that he feels it would have been courteous to show it to him first. Phillips said he knew nothing about it and that Grady had no right to do it. Regraded Unclassified 2 March 1st Baby Bonds went on sale to-day. H.M.Jr. went to the White House at 10:30 and a movietone was made of the President, James Farley and himself - the President buying six $25.00 Baby Bonds for himself and five grand children. Attached is a copy of the script which was used. In the afternoon Speaker Byrnes, the Vice-President and Mr. Farley came over to Mr. Morgenthau's office and pictures were again taken showing the Speaker and the V.P. buying Baby Bonds. To Rs - % instructed 10 as 80% moo, 3505 is Indian, De with by and THE (12) 425 trall hours a AT main. wills 566 we USA were, respectively, per she two, mich, $000 us 51000 WITH For Max 15 till Rso for 86ml *111 withine at Mr NY QUINK shew val- not X) 150 heard X Inc End 05:00 Department last Antersites 10 all yes Hillers burds 101 of the 16 16% Drif Mr se ow will and 55 in Pm York, tale, and Regraded Unclassified 3 2A TREASURY DEPARTMENT Washington FOR RELEASE, MORNING PAPERS, Press Service Friday, March 1, 1935. No. 4-37 2-28-35. President Roosevelt is scheduled to buy the first of the United States Savings Bonds which were placed on sale today at 14,000 post offices throughout the country. The Chief Executive will buy the bond from Postmaster General Farley today (Friday) after Secretary of the Treasury Morgenthau has told Mr. Roosevelt how this new form of Government security affords individual investors the first opportunity to buy this kind of security since World War days. The purchase at the White House is scheduled for 10:30 A.M. As head of the Post Office Department, which will be the sales agency for the new bonds, Mr. Farley will explain how they will be handled at post offices. He has instructed postmasters and their staffs to give every assistance to people who wish to purchase the bonds. Although it is not known what denomina- tions the President will buy, the first run of all units-$25, $50, $100, $500 and $1000- have been laid aside for a Presidential purchase. The various denominations are designated by prefix letters and numbers. The first $25 bond bears the designation of "QI", while the letters, L,C,D and M are used, respectively, for the $50, $100, $500 and $1000 units. Thus the first bond of the $100 denomination would be "C1". These designations will simplify handling of the bonds at postoffices during their sale and at the Treasury, where a record of each transaction will bo kept. The Post Office Department has supplied socurities to all post offices where the bonds will be on sale. Because of the interest shown in this new form of Government obligation, however, postmasters in many cities asked for an additional supply. The original total sent to New York, Omaha, Washington and -2- 2B other places was doubled upon request of the postmasters in those cities. Although definite allocations of bonds have not been made, as there is no limit on their total sale, the Post Office Department distributed these new savings bonds on the basis of the sale of Treasury war savings certificates. They were also issued in small denominations. Many of the postmasters' requests for an additional supply of the bonds contained orders for the two larger denominations-the $500 and $1000 units. Word that many people had announced their intention of buying the maximum amount allowed to one individual in a single calendar year-$10,000-has been received at the Post Office Department from many sections. At the station in the Treasury Building one would-be buyer insisted on leaving his check for $7,500, which is the cost of ten $1000 bonds at the issue price. Each $1000 bond costs the purchaser $750 when he buys it, and the investment increases by one-third if held the full ten years to maturity. Unclassifie 3 SCRIPT FOR WHITE HOUSE PURCHASE OF UNITED STATES SAVINGS BONDS (Note: I understand that the President does not want anything written for him. I have given him some lines in the script simply to have atmosphere and sequence in its preparation.) THE PRESIDENT: Mr. Secretary, I wish you would tell me about these new United States Savings Bonds I have been reading about. SECRETARY MORGENTHAU: Gladly, Mr. President. These bonds are designed as a convenient and profitable invest- ment for the savings of individual investors. As you know, since the World War the Government has done its financing by large bond issues which have been taken by banks and corporations. Now the Treasury has decided that every citizen should have a chance to buy sound Government securities and become a partner in his Government. They are issued in denominations as low as $25.00. The other units are $50.00, $100.00, $500.00 and $1,000.00. The $25.00 bond will cost you $18.75 to-day. It grows in value every year, and if you hold it for the full 10 years you will increase your investment by one-third. That applies to all other denominations. THE PRESIDENT: But suppose I need the money in a hurry? SECRETARY MORGENTHAU: In case of emergency, the Government will redeem your bond at any time after 60 days from the date of issue. You cannot be deprived of payment through loss, theft or destruction. The Government will always replace them. Your name is written on the face of the bond when you buy it and the United States Treasury will have a record of your ownership. It will even keep a bond for you if you request it. THE PRESIDENT: That sounds attractive to me. I want some. Now, how do I buy them? POSTMASTER GENERAL FARLEY: Mr. President, the United States Post Office Department is the sales agency for these savings bonds. You buy them from me and it is as simple as buying a Money Order. Throughout the Country 4 these bonds are on sale in about 14,000 post offices. I have advised Postmasters and their staffs to give every assistance to people wishing to buy these securities. In many post offices there will be separate windows and special officials to handle the sale and to help people in every way. If there is anybody who does not know how to buy them, all he or she has to do is to ask at the nearest post office about United States Savings Bonds. ORDER BLANK FOR UNITED STATES SAVINGS BONDS Enclosed find check, draft, or money order for- Number Amount $25 United States Savings Bonds at $18.75 $ $50 United States Savings Bonds at $37.50 $100 United States Savings Bonds at $75.00 $500 United States Savings Bonds at $375.00 $1000 United States Savings Bonds at $750.00 Total, $ Name Register in the name of and send to Street address City State Mail this blank with remittance to Savings Bond Section, U.S. Treasury, Washington, D.C. Your personal check will be accepted, subject to collection, or you may send bank draft or money order. Do not send currency by mail. Make checks payable to U.S. Treasury. Cut on this line TABLE OF REDEMPTION VALUES SHOWING HOW UNITED STATES SAVINGS BONDS INCREASE IN VALUE EVERY 6 MONTHS Issue price $18.75 $37.50 $75.00 $375.00 $750.00 Redemption values after the issue date: First year $18.75 $37.50 $75.00 $375.00 $750.00 1 to 1½ years 19.00 38,00 76.00 380.00 760.00 38.50 77.00 385.00 770.00 1½ to 2 years 19.25 2 to 2½ years 19.50 39.00 78.00 390.00 780.00 19.75 39.50 79.00 395.00 790.00 2½ to 3 years 3 to 3½ years 20.00 40.00 80.00 400.00 800.00 20.25 40.50 81.00 405.00 810.00 3½ to 4 years 4 to 4½ years 20.50 41.00 82.00 410.00 820.00 4½ to 5 years 20.75 41.50 63.00 415.00 830.00 5 to 5½ years 21.00 42.00 84.00 420.00 840.00 5½ to 6 years 21.25 42.50 85.00 425.00 850.00 21.50 43.00 86.00 430.00 860.00 6 to 6½ years 6½ to 7 years 21.75 43.50 87.00 435.00 870.00 22.00 44.00 88.00 440.00 B80.00 7 to 7½ years 22.50 45.00 90.00 450.00 900.00 7½ to 8 years 8 to 8½ years 23,00 46.00 92.00 460.00 920.00 8½ to 9 years 23.50 47.00 94.00 470.00 940.00 480.00 960.00 9 to 9½ years 24.00 48.00 96.00 9½ to 10 years 24.50 49.00 98.00 490.00 980.00 Maturity value 25.00 50.00 100.00 500.00 1,000.00 M. 1. GOVERNMENT PRINTING OFFICE c2-16737 UNITED STATES TREASURY PENALTY FOR PRIVATE USE TO AVOID Your Government Offers PAYMENT OF POSTAGE, $300 SAVINGS BOND SECTION UNITED STATES OFFICIAL BUSINESS SAVINGS BONDS For Regular Investment of Savings $18.75 increases in ten years to $25 HOUSEHOLDER, $37.50 increases in ten years to $50 $75.00 increases in ten years to $100 $375.00 increases in ten years to $500 Local $750.00 increases in ten years to $1000 BUY AT POST OFFICES OR ORDER BY MAIL INFORMATION ON UNITED STATES SAVINGS BONDS Form 509 Regraded Unclassified 5x Treasury and Post Office Departments Appropriation Bill, 1936 HEARINGS DEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE SEVENTY-FOURTH CONGRESS FIRST SESSION ON H. R. 4442 A BILL MAKING APPROPRIATIONS FOR THE TREASURY AND POST OFFICE DEPARTMENTS FOR THE FISCAL YEAR ENDING JUNE 30, 1936 AND FOR OTHER PURPOSES Printed for the use of the Committee on Appropriations UNITED STATES GOVERNMENT PRINTING OFFICE 119242 WASHINGTON : 1935 Regraded Unclassified sinomings(I stillo 1209 bas Ager дня TREASURY AND POST OFFICE DEPARTMENTS APPROPRIATIONS BILL, 1936 SATURDAY, MARCH 2, 1935 UNITED STATES SENATE, HATTIMMOO SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, D. C. The subcommittee met, pursuant to call, at 10:30 a. m. in the committee room, Capitol, Hon. Carter Glass presiding. SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS Present: Senators Glass (chairman), McKellar, Hayden, McCar- ran, O'Mahoney, Steiwer, Norbeck, and Dickinson. CARTER GLASS, Virginia, Chairman The subcommittee thereupon proceeded to the consideration of the KENNETH McKELLAR, Tennessee FREDERICK STEIWER, Oregon bill (H. R. 4442) making appropriations for the Treasury and Post MILLARD E. TYDINGS, Maryland PETER NORBECK, Bouth Dakota Office Departments for the fiscal year ending June 30, 1936, and for PATRICK McCARRAN, Nevada L. J. DICKINSON, Iown other purposes. JOSEPH c. O'MAHONEY, Wyoming WILLIAM GIBBS McADOO, California TREASURY DEPARTMENT The CHAIRMAN. Mr. Secretary, we are beginning to consider H. R. 4442, making appropriations for the Treasury and Post Office De- Ex OFFICIO MEMDERS FROM COMMITTEE ON POST OFFICES AND POST ROADS partments. 1 have your letter of February 4, stating what you PARK TRAMMELL, Florida THOMAS D. SCHALL, Minnesota would like to have done, and I though perhaps you might want to CARL HAYDEN, Arizons come before the committee and make any supplementary statement KENNEDY F. RES, Clerk that you may please. n Secretary MORGENTHAU. Senator Glass, I have a very short state- ment that I would be glad to read, but before doing so, I think that Mr. Bell, Commissioner of Accounts, has an item. Possibly you would like to take that up while we are waiting. The CHAIRMAN. Yes, STATEMENT OF D. W. BELL, COMMISSIONER OF ACCOUNTS AND DEPOSITS, CONSOLIDATION OF THREE APPROPRIATIONS Mr. BELL. Last year, Mr. Chairman, in considering the needs of my office, consultation was had between the then Director of the Bureau of the Budget, Mr. Douglas, and the Secretary of the Treasury. It was decided that we needed to substantially increase our force to take care of the large increase in the work. It was esti- mated at that time that we would require about $40,000; but, in view of the fact that we have to get specially qualified people, we decided that we would ask for half of it last year and the other half this year. The CHAIRMAN. What particular provision of the House bill are you discussing now! Mr. BELL. The office of the Commissioner of Accounts and De- posits. Regraded Unclassified 2 THEASURY AND POST OFFICE APPROPRIATION BILL, 1936 TREASURY AND PORT OFFICE APPROPRIATION BILL, 1936 8 The CHAIRMAN. Have you the bill there? Senator MOKELLAR Are you going to put on some more people in Mr. Bria. I have the bill. that? The Chairman. Proceed, Mr. Bell. Mr. BELL. That is merely a transfer of employees, amounting to Mr. BELL. As I say, we asked for half of it last year, and the other about $87,000, which makes a total of about $988,000; and that was half this year The reason we did not ask for all of it last year Was reduced in the Budget to $288,000. That is the amount that the due to the fact that we require in our work specially qualified people, Secretary in now asking for, particularly ones that have had A. number of years' experience in Senator MOKELLAR. You want an additional $25,0001 governmental fiscal and accounting procedure, We did not feel that Mr. BELL. It is not additional. It is additional over the House we could use the full amount the first year as it is difficult to secure allowance, but it is the sube as last year plus the transfer-a little qualified personnel, This year, we asked for about $27,000, and the less, as a matter of fact. House committee reduced it by $16,900, In their report, they said The CHAIRMAN, As you, Senator McKellar, are chiefly interested that they were eliminating the employees on the emergency roll with in this other matter, we will let the Secretary go on with that, annual salaries of this amount. I have since talked to the clerk of unless Mr. Bell wants to call attention to something clae. the House committee, explained it to him, and be lins admitted that Mr. Bru... I think the Secretary might proceed, and after be that was apparently a mistake, that the amount paid from these finishes, you can go on with the others, if you would like to, emergency appropriations amounts to only $7,000. These employees are urgently needed. The work and daties of STATEMENT OF HON. HENRY MORGENTHAU, JR., SECRETARY or the office have greatly increased due to the large increase in the THE TREASURY Government activities. To show the necessity for additional help, four employees of my immediate office, in the last year, worked more (Secretary Morgenthau was accompanied by Messra. Guy T. Hol- than 100 days each overtime. vering, Commissioner of Internal Revenue: Arthur J. Mellott, Dep. The other matter under my office to be discussed is the consolida- uty Commissioner of Internal Revenue, in charge of the Alcohol Tax tion of three appropriation items. The immediate office of the Com- Unit: and D. W. Bell, Commissioner of Accounts and Deposite.) missioner of Accounts and Deposite has an appropriation for salaries; the Division of Bookkeeping and Warrants has an appropriation PAY OF EMPLOYEES OF ALCOHOL TAX UNIT for salaries, and the Division of Disbursements has an appropria- tion for salaries and expenses. They are all under my supervision, Secretary MORGENTHAU. On February 11, 1935, the President sub- and it would be advantageous if we could consolidate them into one mitted to the Senate a request that an additional sum of $1,763,827 appropriation, having only one account on our books. be added to the Treasury estimates for appropriation for next year, Furthermore, I have 40 people in my office. The Division of and that this sum be made immediately available for payment for Bookkeeping and Warrants has about 70. It requires the time of one personal aervices after November 30, 1934, as follows: clerk not more than 2 or 3 hours a week to take care of the time, the Burean of Costoms 43,000 leave, and the pay-roll work. In these two offices, we cannot pos- Internal Revenue 1,739,627 Narcotle Bureau sibly have clerks who get enough experience on such work to become 11,600 Secret Service 10,000 experts in that line. For example there are departmental time and leave, and the pay-roll work. In these two offlces, we cannot pos- The purpose of this request was to enable the Treasury to pay the if we had the consolidation we could have experts handling that class salaries of approximately 1,300 employees of the several bureaus of work, as they would be doing nothing else. specified from December 1, 1934, to June 30, 1935, no funds being now available for this purpose because of the following proviso SECRETARY'S OFFICE which WILS incorporated in the Emergency Appropriation Act of June 19, 1934: There is another small item, Mr. Chairman, for the Secretary's Provided, That after December 1, 1034, no DATE of the appropriation made office proper. It amounts to only $25,000. As I understand it, at herein or heretofore made for the Oscal year 1985 shall be used to pas the the present time, that office is $20,000 overcommitted, and it is abso- milary of any person formerly employed Bir Investigator, special agreet, senter lutely necessary that it have those funds to carry on for next year. warehoustman, deputy probilition administrator. agent, ambitant attorney, Assistant probibition administrator, senior Investigator, deputy production ad- As you know from experience, the Secretary has many functions to storekerper, or gauger, or any other position: in the Probibition perform, and needs many assistants in this emergency, and it is Bureau OF Alenhalle Beverage Unit, Department of Justice, who was separated vitally necessary that he have that additional amount. from the service or such Anreen or Unit between June 10, 1998. and December Senator MCKELLAR. Was this $283,320 the estimate last year? m, MAR, while in any web position to The Treasury Department intend and und when person skall be appointed thereto ne a result of na open competitive Mr. BELL That is the Budget estimate, Senator McKellar. examination to be Lotim/ter held by the Ciril Bervice Commission. Senator McKellar. The Budget estimate? I ATH talking about last year. You have got $150,000, and it states a deficiency of $100,- After obtaining the advice of the Attorney General as to the effect of the proviso in question, and the decision of the Comptroller 000, That is $250,000 last year. General with respect to the availability of Treasury appropriations Mr. BELL. That is right. Regraded Unclassified TREASURY AND POST CORREOR APPROPRIATION BILL, 1936 TREASURY AND POST OFFICE APPROPRIATION BILL, 3080 5 for personal envices, it has been determined that beginning Docem- ber 1, 1934, no salary payments may be paid from existing appropria- operations in every part of the country and would have created a tions to the soveral groups of employees covered by this estimate, condition from which it would have taken many months to recover, However, the Attorney General held in his opinion dated November There is also 8. third reason, which is in my opinion of very great importance, and that is the question of intogrity of the civil- 80, 1934, that- service system us it applies to Federal employees. The group of This proviso (loss not in espress termis direct or require removal Trom the employees affected by this proviso were recruited through regular service of the employees included within 9th scope. Nor does It, to my opthion, do - by Implication. The positions occupted by these employees and Die civil-service channels and bad, with scarcely an exception, acquired sularies apperiating thereto ways crested and established under general civil service status through open opmpetitive examination, plus a statutes therefore enacted by the Congress very searching character investigation made by the Oivil Service The proviso does not purport to abolish these post(lema On the contracy, Commission which resulted in the elimination of n. majority of the Its language clearly todicates that the Cimgram did not intend to sholtsh them. candidates who had successfully passed the written test. This is the It provides only that after December 1, 1004. no part of the approprintion made under the act or theretofore made for the year 1005, shall be used first time since the enactment of the civil-service law more than 00 to Day the salary of any employee falling within the providous unless and years ago that the Congress has undertaken to encroach upon the until such employee shall have been appointed to the position occupied by him jurisdiction of the Civil Service Commission in the administration na a result rit an open competitive examination therefter to be held by the of that law, or to undertake by statutory enactment to destroy Civil Bervice Commission. In view of the and stnce II appears thut the employves involved the civil-service status und right to employment of a group which had been appointed to their positions in the Treasury Department pursuant to had successfully met and complied with the law and the regulations statutory authority at the time of the enactment of the prociso, II Im clear of the Civil Service Commission with respect to eligibility for a that the proviso does not change or affect their status as employees to the particular type of employment. I can think of nothing more Treasury Department, except with respect to the payment of their estaries, Since this be an, it le my opinion that the proviso does not require the likely to denioralize and discourage the rank and file of civil-service Secretary of the Treasury to remove these employees from the service either employees generally than for them to realize that the eligibility for by outright separation (if by a partial dismission) In the form of e forlough. employment of any group of employees may be destroyed by con- For the same reason, and ILW a necessary corollary, It is my further opintos gressional action at any time. that they may be continued in the service In a duty status without pay. Senator NORHECK. Was that legislation on the appropriation bill! There were two outstanding reasons why it seemed to us urgently Senator DICKINSON, Yes. necessary to retain the services of the employees in question: Senator HATDEN, It was a limitation on the appropriation, and 1. There were thousands of cases in the various stages of investiga- came within the Senate rules: but is there anyone here that con tion by these employees, and to dispense with the services of so large answer this question? It is my distinct recollection that at the time n. group would have meant an incalculable loss of revenue as well Senator McKellar offered the amendment, that the Senate was ns the practical abandonment of criminal prosecutions then in pro- advised there were in the Alcohol Tax Unit men who had not passed cess. The advantage of the headway already gained would have been successfully a civil-service examination, but who had been blanketed lost and it would have been necessary to start all over with IL new and in from other appointments not made under the civil service. How relatively untrained force, facing the handicap of uncompleted and many were there of that kind! therefore unsuccessful previous attempts in the difficult task of Secretary MONGENTHAU. Mr. Chairman, Commissioner Helvering cradicating traffic in illicit and non-tax-paid alcoholic beverages. and Mr. Mellott are both here. Mr. Mellott is the head of the of Although, as 1 understand it, the Civil Service Commission an- Alcohol Tax Unit, and I would like him to answer these questions, nounced new examinations for positions in the Alcohol Tax Unit if that is agreeable to you. promptly after the enactment of the Emergency Appropriation Act, Senator HAYDEN. I would be very glad to get the information from it was not until November that the rating of examination papers those who themselves know. WHS completed so that eligibles could be certified to the Department Senator MCKMAAR. Mr. Hayden, before you do that, would you for appointment. In other words, the Department would have had mind my asking the Secretary some questions regarding his state- e period of less than 1 month to make new appointments to replace ment, and then we will go into it with the other gentlemen, if you do the old men and to train the new men in the performance of their not mind. duties. The work of investigators in the Alcohol Tax Unit ja com- Mr. Secretary, you believe in the honest and straight administra- plicated and difficult. It requires months of experience before green tion of the civil-service law, do you not! men can begin to do their work with reasonable effectiveness. To Secretary MORGENTHAO. Yes: I do. have dropped those of the old force who failed to qualify on the Senator McKellar. Do you believe that it is compatible with an new examination would have put us under the necessity of attempt- honest and straight administration of those laws for men in your ing to enforce the Liquor laws with a green and inexperienced force Department to be appointed from out of the public without any and would unquestionably have resulted in a collupse of the enforce- examination and put to work in your Department, and then, by ment effort which the Department was making at a most critical Executive order, blanketed into the service without examination at time. This in turn would have resulted in an increase of illicit all? Do you believe in that? Regraded Unclassified 6 TREASURY AND BOST OFFICE APPROPRIATION BILA, 1688 TREASURY AND POINT OFFICE ATTROPHIATION all 1930 7 Secretary MORNENTHAU. I do not understand that that has been rate. Possibly before you were the Secretary of the Treasury, done, air, Sonator McKersan But did you know that these une you speak President Roosevelt made an order reparating some 1,850, if I TO: of nine-tanthe of them, maybe 99 percent of them, were appointed member correctly, or somewhere th that neighborhood, 15. very large by politicians-and they are all despised politicians, up your way number of prohibition agents, not members of the TAX survice, but you do not like them; but, for instruce, in my State, there are, BE I prohibition agents, separating them from the service; and those meh remember it, 26 of these men who were appointed. J. Will Tayler, had been separated from the service alroady, by the order of Presi- a Republican Congressman from Knoxville, and & very nice gentle- dent Roosevelt, and in that order It was provided that they should nian, appointed every one of them, not from the civil-service rolls, have the right to make application to return, if any were needed, until January 30, 1984, but such men as he wanted to appoint, all of them Republicans; and then, after they were once appointed, Mr. Huover put in a blanker Someone in your office-and I believe it was Mr. MeReynolds-ar- ranged If committee composed of five men, whose names I do not order, blanketing them into the civil service, They had not stood an examination, or a competitive examination. They were asked remember, but Mr. Berney, of your office, was the one in charge of entre questions by the Civil Service Commission after they had gone it. This all carne out in the hearing, under onth. That committee went over them and selected some 750-it is about that-to return, m, but not before. Now, is that the kind of civil service you believe MY I cannot all of whom were Republican prohibition agents. That was as déveloped in the hearing. believe it, Mr. Secretary. Secretary MORGENTHAU. Senator, if I may answer you, this is the Secretary MORGENTHAU, If my memory serves me right, when those men were checked subsequently, and during the hearing which way I ece my job, if I may take a minute or two. Senstor McKman. I shall be happy to have you do so. you conducted, was it not found that their politics, as between Ro- publicans and Democrata, was about 50-501 Secretary MORGENTHAU. The Treasury is charged primarily with two responsibilities, the collection of the revenue and the protection Mr. MELLOTT. There was never any complete check made, Mr. of that revenue, That is our primary work. We have M lot of Secretary, but we know that there were a good many Democrate in the group. other things put on us, but that is our primary work; and in the Senator MOKELLAR. Mr. Secretary, all I can say is that there was collection and the protection of the revenue in connection with alco- no testimony of that sort brought out before the Committee on Civil hol, we inherited 14 years' experience, The question of solling al- Service, and I can further state to you that, of the 26 in Tennessee, cohol during those years came to be such that people laughed at the every single one of them, to my knowledge, was a Republican; and, law. and no one took it very seriously. s whole generation grew by the way, not only were they Republicans, but when they came up, taking it for granted they could break that law and no one would punish them. No honest effort was made, as far as I could to stand this examination, every single, solitary one in Tennessee failed to pass it. tell, during those 14 years, to enforce the prohibition laws, You tell us that you appointed them because of their efficiency I On the 10th of May 1034, I was faced with the situation that. through an Executive order, I was given the entire responsibility Secretary MODGENTHAU, So did 80 percent of all applicants, Senator McKellan. You have got a capable list for the collection of taxes on alcohol and beer, and also the pro- Secretary MORGENTHAD. But 80 percript of them failed, tection of that revenue against fraud; and I wanted to get the best Senator MCKELLAR. That may be so-thet frequently happens. group of men I could to do that, I wanted to get men whose records Secretary MORGENTHAU. I could not pass that examination myself showed they were efficient and that they could do the job. If my Senator McKellar. There were a great many who did pass it. For memory serves me right-and some of my people can check me instance, in my State, you have got right now on that list ample believe there were something like 3,500 men, originally, in the De- men who have stood that examination, You say you could not have partment of Justice doing that work. You may stop me, Mr. Mellott, stood it: There are ample men who stood that examination to per- if I am wrong in any of my figures. form the work which you need to have done in Tennessee. Mind Those men were combed over by civil service and by the Intelli- you, these men not only failed, but they were selected because of gence Unit of the Internal Revenue, to get the men whose records politics and not because of their efficiency, and could not have been, showed they had been the most efficient. Out of the 3,500 mon, we The proof of it is that they took the examination and failed, when, picked the 1,300 men whose records showed they were the best. We if anybody ought to have passed that examination-at loast, if they did not pick those men on a political basis. We picked them on had ever had any experience-they had that right. their record, and these men were kept. Some were taken by Secret Under those circumstances you are asking this committee and Service, some were taken by Narcotics, some were taken by Customs, this Congress to do this-to restore to the civil-mervice rolls men but the bulk of these men, all of whom were field agents, were re- that had fuiled in their examination; and showing that the civil tained by the Alcohol Tax Unit, on their record of efficiency, That service had been badly mishandled no to that date; because, you was the motivating spirit back of my action. remember, now, that your predecessor had secured the blanketing in Senator MOKELLAR Mr. Secretary, I feel quite sure you are ETH- of these men without competitive examinations, and, when this law tirely sincere in making that statement, but you are entirely inaceu- I Regraded Unclassified 8 TREASURY AND POST OFFICE APPROPRIATION BILL, 1956 TREASURY AND PORT OFFICE APPROPRIATION BILL, 1988 9 required them to stand an examination they failed, and they are not the competent men that you think they are. Senator HATMEN. Three-quarters of the 2,189 political appointees Senator HATDRN. That is the point I wanted to bring out defi- failed to pass the civil-service examination, and there would be then nitely, because in my own State there were only four men affected. left, out of the 2,182, my, about 500, who succeeded in obtaining - an happened to belong to my political party. They all insisted regular civil-survice status! they had never received ii. political appointment and bad not been Mr. MELLOTT. I think NO. blanketed into the service, that they bad passed a regular civil-service Senator HAYDEN, And that 500 men who were originally political examination in order to obtain their appointment. appointees made up a part of the 2,039 eligibles! Let me ask Mr. Mellott: Do the records show that a man received Senator MCKELLAR. He did not say that, because that would be a political appointment without having taken a civil-service ex- impossible for him to find out, unless he goes and makes AD exami- amination; then, being in the Department for a time, was given nation; and I would be very glad if he would make an examination permission to take an examination, ne A result of which be was and find out who stood competitive examinations, retained in the service? It could be done that way, or by simply Senator Nouneon, Senator McKellar, the witheme cited his author- ity for making the statement. having A political appointee blanketed in. What are the facts in that regard Senator MCKEILAR. I know, but what does Attorney General Mr. MELLOTT. May I try to answer the question by reading an Commings know about the thing, except what he has been told Ho says that he has been told. excerpt from the opinion of the Attorney General, addressed to the Secretary under date of October 25, 1934: Senator NORBECK. He only answered the question as nearly as be could answer it. The second question raised by your letter to whether the proviso in ques Senator HAYDEN. I am just trying to aed if the inforence I have time includes employees who have already taken and passed a competitive civil-service examinativo. A. brief summary of the bistory of the Bureau of drawn is correct, or if Mr. Mellott has any way of verifying it as Prohibition in necessary to a proper consideration of this question. correct or incorrect. Prior to March 3. 1927, there was in the Bureau of Internal Revenue, e unit Mr. MELLOTT. Of course, there were afterword other civil-servios known as the Prohibition Unit, In which certain field positions were not re- examinations held. In 1928, it is my understanding, there was an- quired to be filled In accordance with the Civil Service Act and rules. The other examination held. net of March 5, 1927. established this unit as a separate burenu in the Treasury Department, known as the Bureau of Prohibition, and directed that the eco- Senator HAYDEN. What was the date of the examination! ployees of the field service of the said Bureau, who had acquired a proper Mr. MELLOTT. This was on March 3, 1927. chril-service should have their employments terminated 6 months Senator HAYDEN. March 3, 1927, is when the first civil-servies from the effective date of the act, which was April 1, 1927. There were 2,182 examination was held? such Celd positions. Competitive examinations were duly held by the Civil Service Commission. There were 15,524 applicants for the first examination, Mr. MELLOTE. Yes, sir; that is when the Prohibition Service WRE of whom 12,486 took the written test. However, only 4,504 of these passed the put under civil service. examination: Character Investigations of these persons further reduced to Senator MCKELLAR, You could easily find out by simply seeing OF 2,639 the toral number of eligibles for the position of agent, Inspector, and getting the names on the present list, that were covered by the Hoover Investigator. I RTD informed that as B result of the examinations beld by the Civil Service order, after they had been appointed. That would be the easiest Commission, pursent to the act of March 3. 1927, TO percent of the employees thing in the world. affected by that became ineligible to hold their positions. The CHAIRMAN. What is the use of putting him to that trouble, Senator HAYDEN. Let me get that clear. There were, prior to BF all of them are Democrats, now. 1927, 2,182 men in the prohibition unit, appointed through political Senator NORRECK. Surely, they are Democrats now. influence and not AB IL result of a civil-service examination. A civil- Senator MOKELLAR. They may be Democrato now, but at the time service examination was ordered, 15,000 applied, 12,000 took the test, of this examination, last year, they could not find a single Demo- 4,500 passed it: and, finally, as A result of character investigations, crat in the lot; and I know of my own personal knowledge that only 2,639 eligibles were obtained. everyone in Tennessee, except two, that have been appointed since-- Mr. MELLOTT. That is right, and under the Attorney General's interpretation, those two were Senator HAYDEN. Of that 2,639 eligibles, how many came from the included, too-failed, the 2 Democrats and the 26 Republicans: and, 2,182 who were political appointees having failed, they ought to go out. Mr. MELLOTT. I do not think there was ever any check made of Senator NORDER. Senator McKellar, when I first came here, in that 1920, it was rumored that the Wilson Democrats had put several Senator HATDEN. I am sure that you read that 75 percent became hundred men into the Alien Bureau to do political work, so the ineligible to hold their positions. Republicans started out to eliminate all those Democrats, and the Mr. MELLOTT. The Attorney General states that be is a informed report they got was, that the morning after the Inndalide election, that ns the result of the examinations held by the Commission, pur- they could only find two Democrate, suant to the act of March 3, 1927, 75 percent of the employees affected Senator MOKELLAR. Without doubt, that is 80. by that net became ineligible to hold their positions BO that would Senator HAYDEN. I interrupted the gentleman. la there some- refer back, I take it. thing else you wanted to read, Mr. Mellott! Regraded Unclassified 50 TAMANURY AND POST OFFICE PPROPREATION Bird., 1938 TREASURY AND PORT OFFICE APPROPHIATION 0112, 1936 11 Sountor Mr. Chairman, let mo nsk a fort Mr. MELLOTE. That is right, Wheredid you become the hend of this Unit? Mr Missort. On May 10, 1934, when it was créated. Senator O'MAHONEY That WHB just a change of Dame, but actually the personnel of the old bureau went over into the new and WERE Senator O'MAHONEY, Have you any records to show how many taken on the rolli Is that right? persons were separated from the service between the 10th of June 1988, and December 31, 1933, hut whose separation WILH not the re- General ruled Mr. Manager, Of course, the Comptroller General and the Attorney milt of the mere transfer of this Unit from the Department of Jus- Senator O'MARONET, Let 115 get the answer to that question. In tice to the Treasury Department! that not right? Mr. MELLOTT. I think we can make the record complete. I am Mr. MELLOTT. I started to say that was our thought in the matter, not quite suro that an answer to your question is the best way. The but the Comptroller General and the Attorney General ruled that unit, under the Executive order of March 10, which because effective that was a separation from the service, which occurred on August 9. May 10, is composed of 639 people, investigators who were trans Senstor O'MARONET. Yes; I understand that, surely. We are forred from the Alcoholic Beverage Unit of the Department of coming to that, but as a practical matter, when the Prohibition Unit Justice. Senator O'MAHONEY. Transferred When? was abolished, and the Alcoholic Beverage Unit of the Department of Justice was created, in the contemplation of the Bureau, or of Mr. MELLOTT. Under the Executive order of May 10, coming into those in charge of this particular work, there was only a transfer of the Treasury Department on May 10, 1934. That WHR 650: 099 had personnel, they were dropped from one roll and immediately put on been appointed in the Industrial Alcohol Bureau and that also be- the other; is not that right? came part of the Alcohol Tax Unit, making It total of 1,837 investi- Mr. MELLOTT. That is correct. They worked all day, August 9, BR gators in the consolidated Alcohol Tax Unit, after fusing together members of the Prohibition Unit of the Department of Justice, and the Alcoholic Beverage Unit of the Department of Justice and the began working on August 10, 1933, the next day, as personnel in and Industrial Alcohol Bureau of the Treasury Department. Of that group, those affected by the amendment in question, there were 1,202 tions part of the Alcoholic Beverage Unit of the Division of Investiga- investigators and 43 storekeeper-gagers, who were subject to the Senator O'MARIONHE. That was my understanding, and because competitive examination prescribed by the amendment in question. of that fact, it seems to me it is important for us to know how many Senator O'MARONET. Mr. Mellott. that does not nnswer my ques- of those who worked all the 9th of August and began working again tion. I observe from reading this proviso that it becamie necessary on the 10th of August were affected by this ruling and prevented under the law for all persons holding any of these designated posi- from obtaining their salaries. tions, who were separated from the service between June 10, 1983, and Mr. MELLOTT. That number would be approximately 639, December 31, 1933, to take a new civil-service examination, whether Senator O'MAHONEY. Those were persons who were on the roll or not they lind previously had one. That is your interpretation of all day the 9th, end on the roll all day the 10th that statute, is it not Mr. MELLOTT. That is right, only on different rolls. Mr. MELLOTT. Yes. Senator O'MAHONET. On the pay roll of the Government Senator O'MAHONET, So that it becomes important to know how Mr. MELLOTT. That is right. many persons were actually separated from the service between those Senator O'MAHONET. Doing the same character of work? two dates. Mr. MELLOTT. On the pay roll and doing the same character of Let me make clear what I have in mind. There were two kinds of work. separation, ILS I understand it. Senator O'MAHONEY. Then how many individuals are affected by Mr. MELLOTT, Right. this order, who were actually separated from the service for several Senator O'MAHONEY. In the first place, those persons who were days or several weeks, between these two dates? dropped from the rolls, under the old Prohibition Unit, after the Mr. MELLOTT. That number I cannot give you exactly, but is would 10th of June, for one reason or other, by the persons then in charge, be somewhere in the neighborhood of 700, were separated from the service: Then, there was another group of Senator O'MAHONEY. Ja it) not your understanding that this reso- persons who were separated from the service technically, when the lution was intended to cover those 7001 unit was transferred from the Department of Justice to the Treasury Mr. MELLOTT. I thought, at the time it was enacted, that that was Department. the evident purpose of it. Mr. MÉLLOTT. Not to the Treasury Department, Senator. It was Senator O'MAHONER. But it was interpreted to cover all of them, when the old Prohibition Unit was abolished, and the Alcoholio because of the technical effect of the words separated from the Beverage Unit of the Department of Justice was created. the effective service when taken into consideration with the fact that the Bureau date being August 10. who abolished and a now burean instituted Senator O'MAHONEL. What year? Mr. MELLOTT. That is right. Mr. MELLORER 1933. Senator Mr. Mellott, is it not easy. enough for the Senator O'MAHONEY. You had oué bureau, which WAR abolished, Department to give us the names of the men who had been reparated and a new bureau set upt. Regraded Unclassified 12 TREASURY AND POST OFFICE APPROPRIATION BILL, 1988 TREASURY AND PURT OFFICE APPROPRIATION BILL, 1980 13 from the service, and who were put back by the Department on the recommendation of the committee headed by Mr. Berney Would Senator MoKman, All right. We are waiting OD thoms gentle- men down there to answer the question I asked about the Executive there be any trouble about your Department furnishing DE that? order, which they now any is repealed. Mr. MELLOTT. No. We would be very glad to furnish it to you, Senator O'MAHONEY Can we not get them, just as they are? The Senator MCKELLAB. Mr. Berney testified that under President you have them here? Roosevelt's order, I think, of June 10, 1983-I will not be positive Mr, MELLOTT. Yes: I have about the dates-the men he put back were the men that had been Senator O'MAHONNY, Read the Executive orders in their order, separated from the Department by that order, and who had left the service, nearly all of them, field men like the ones in Tennessee and General. Mr. MYELOTT. I am quoting from an opinion of the Attorney like the ones in every other State, nearly all field men that had been Senator MCKRIAAR Have you not the order there, itself separated from the service by President Roosevelt's order; in which Mr. MELLOUT. I have section 3 of the order of June 10, 1988, which order of President Roosevelt, by the way, there was en express pro- provides in part us follows: vision that if any of them were returned to the service, or naked to retarn to the service, it should be before January BO, 1934. Why General providons: Each signed. wit the functions of which are transferred to or consolidated with another agreescy. in abollahed All personnel employed to can you not furnish the names of those 700, or thereabouts, that connection with the work of 90 abollahed agency or function disposed of, advanted Mr. Berney testified to, who had been out of the service of the be separated from the service of the United State, except that the head of any Government since the preceding August, and whom you put back successor agency, subject to my approval. may within a period of 4 months into service under this order! Why can you not give us those after transfer or consolidation, resppoint any of such personnel required for status. the work of the successor agency without recommination or loss ne elvil-service names! Mr. MELLOTT. We can furnish the names of any group that you That is the section you refer to, is it not, Senator McKollart may desire, sir. Senator MOKELLAR, Do you understand what I am talking about, Senator MCKEILAR. Yes. I want to ask you this: Were these 750, reported by Mr. Berney, put back into the service within that 4 when I tell you that the men were put back by Mr. Berney, who months, or did you or did you not ignore the order of the President says he examined their files, and that, upon an examination, he put in regard to that! My recollection is that January 30 was the last them back, or recommended that they should go back, and that the day on which anybody could have been restored under that order, and Secretary of the Treasury put them back! Why cannot we have that list of names of those put back by Mr. Berney, or on his recom- these men were not put back until some time in April or May. Is that not true? mendation? Mr. HELVERING. Mr. Chairman, I do not know, but I believe the Mr. MELLOTT. Briefly, the history in connection with the reap- pointment of those folks in this, The Secretary, finding it neces- Senator is confusing two Executive orders. Senator MOKELLAR. No. I remember the other order. The latter eary to appoint investigators in the Bureau of Industrial Alcohol, which he called regulative inspectors" to take care of the enforce- order is the order by which they were put back, and that is the order that Mr. McReynolds testified he wrote and sent up to the President ment work, which was thrust onto him to some extent following repeal, asked the Civil Service Commission for a list of eligibles. by his superior, the Secretary of the Treasury. I am not confusing Senator MCKELLAR. When was that, Mr. Mellott? That WILLE after those two ordera. One was the order of President Roosevelt, sep- January 30, 1934, was it not? arating these men from the service, in 1933, and the second one was Mr. MELLOTT. Somewhere in the first month of the year, I think, his order restoring them, upon the recommendation of the Secretary in January of 1934. of the Treasury. I want to be perfectly practicable, and I do not want the civil Senator McKullar. Do not "think" about it. Will you not get. the record, because the records dispute what you are now saying. service debased in any such way ns this, to have Mr. Hoover, under Those men were recommended to go back after the 30th of January his administration, let politicians in the various States appoint these 1934, and after the time of expiration, by the President's own order men, and then blanket them into the service, and when they come Mr. MELLOTT. I think the Senator is correct. to an examination, a real examination, fail, and still they are sought Senator MCKELLAR. Why, of course! to be kept in their places, although the men who stood the examina- Mr. MELLOTT. That most of the appointments were made after tion are ready to perform their work. January 30. Senator STEIWER. Senator, when you say a real examination?", Senator McKellar They were all made, do you mean an examination in which they are required to name the Mr. MELLOTT. They were made from the only reservoir which the counties of the State of Tennessee! Civil Service Commission furnished the Secretary, from which to Sentitor McKrizan. I do not know what the examination was, make the appointments of investigators, Stuator, but I do know they all passed on examination, and a suffi- Senator Let me nak you, do you pay no attention to ciont one. on Executive order goverting your duty, bened by the President of The CHAIRMAN. Let 128 get the facts, and not go into an argument the United States, and in which he Area the time within which men of the question. can be restored, as January not No; you came along and disregurded Regraded Unclassified и TREASURY AND FORT OFFICE APPROPELATION BILL, 1986 TREASURY AND POST OFFICE APPROPRIATION BILL, 1030 10 that order, and restored them some time in the spring, after the 30th of January. In not that truel Secretary MORGENTHAV. Well, I do not know. Mr. Mailott. The Civil Service Commission furnished the eligi- Senator MCKELLAR. If you will look it up and verify it, and make ble list for appointment, to you. Just have your man attend to that a statement in answer to that question, I will be very much obliged Senator MCKELLAR. Yes; they furnished the men on this list, and those were the very men that the President of the United States had separated from the service and said that they could not go back to for the record. Secretary Morgentieau. I would like to submit such n statement the service after January 30? It is perfectly plain. All you have Senator MOKELLAR. Thank you. to do is look at your order. Mr. Bris. Senator, the order did not deprive the employee of IL Civil Service status. In my opinion the order intended that the that some 700 persons were removed, from time to time, and rein- have been since addressed to him. He stated, as I understood him. answering my question, subutantially unswered the questions which Senator O'MAIRONET. Lat me my that I think Mr, Mellott, in employers dismissed thereunder should have the same status 05 any other employees dismissed as a result of a reduction in force. stated after the month of January 1934. Senstor McKellan. But the order of the President, which it seemo Mr. MELLOTT. That is right. to me all departments ought to obey if they can, was that they could not be restored after January 30, 1934. Senator McKellar is desirons of having information; and, of course, Senator O'MAIRONEY, Those are the persons concerning whom Mr. BELL Not at all. we all are; and all that is necessary, I think, to clear this up is for Senator NORRECK. You are mixed up, Senator. Senator MCKELLAB. No; I am not. I have looked nt it, and you arated from the service only because one unit Was abolished and the order. and then the number of persons in the Bureau who were sep- you to produce the various Executive orders, in their chronological have not. Senator O'MAHONEY. If we can get the dates I think it will be other unit established the next day. It was never the intention, 1 cleared up. Of these 700 whom you mentioned in answer to one of may say, so far as I know, to have this particular provision apply my questions, most of them were restored to the service after the to the persons who were dropped by reasion of the President's order to those persons, but it was distinctly the intention to have it apply date given by Sonator McKellar, in January 1984, is not that a fact? Mr. MELLOTT. That is right. of June 10, and afterward remstated, after the expiration of the Senator MOKELLAR. All of them were 4-month period mentioned by the Preddent in that order. Senator O'MAHONEY. All of them? Senator McKellar. And reinstated by direction or by recom- Senator MOKELLAR. The record 80 ahows. Senator O'MAHONEY. Let us get the witness' answer. selected them. They did not pass the civil service examination at all. mendation of Mr. Berney and the three or foir me: under him They Senator MCKELLAR. I want to get the witness to look at the record They merely took out, from the files, certain men they wanted rein- and testify. Senator O'MAHONEY. Is not that what you said in response to my the Secretary, if he knows; and if he does not, anybody else, stated. I would like to ask this question, and I would like to nak question. Mr. Mellott! in the order that I have referred to, load nothing to do with the col- You talk about the collection of taxes. These men, contemplated Mr. MELLOTT. I think there were some appointments made in January. lection of taxes before you became Secretary of the Treasury. They Secretary MORGENTHAU. I am just as anxious BE Senator McKellar were raiding officers. what were known AR "prohibition officers, to have the chronological order of what was done. and I um as They were field people, out in the field. They had nothing to do positive na anybody can be that we did not go contrary to any been separated from the service. with the protection of taxes, Mr. Secretary, and they hail viready Executive order, in spirit or any other way. I want to give you the exact facts. Secretary MORGENTHAU. Senator, if I can reply, I remember cor- Senator MOKELLAR. You remember, Mr. Secretary, we bad IL rectly what I said. I said our main function Was the collection of hearing, taxes and the protection of the revenue. These men Were trained in Senator MORGENTHAU. I know you did, vestigators, trained in finding illient stills: That had been their Senator MCKELLAR. This was developed, and I know it is true. training, and what we are using them for today is to continue the Of course, you had nothing to do with it, personally. Secretary MORGENTHAU. I take the responsibility. that conice under the protection of the Government's revenues, work of detecting where non-tax-paid alcohol is manufactured; and Senator MCKELLAR I know you do. Those under you make a Senator McKellan I can she how you could put them in on that distinction between removing from n. civil-service status" and basis, but I want to say this to you, MY. Secretary: You believe in separating from the service, and although the President said they the civil service, do you not? do. 1 801 n. very sincere believer could not be restored after January 30, they go to the Civil Service in it, and served on that committee for years, I honor it and rev Commission and get 3L statement that they still have a civil-service speet it, and want to see it faithfully administered. status, and thereupon those under you appointed these men lunving The CHAIRMAN. The Secretary anys be does, too. a civil-service. status, but directly in conflict with the Presidential Senator MCKETLAR. If the Secretary does, why are you willing to order. Those are the facts. put these 119242-35-8 men back on the rolle, or keep them there, with the hope Regraded Unclassified (1) THEASURY AND POST OFFICE APPROPRIATION BUA, 1920 TREASURY AND POST OFFICE APPROPHIATION BILL, 1936 17 Congress will pay them the money for it, when as $ matter of fact civil-service laws have been violated, and whether people have been they have failed to pass every examination that has been held, and put on the roll purely for political reasons you have got ample people who have passed the examinations to fill Senator MORELLAR. Yes. these places? Senator HAYDEN. The other set of facts that Senator O'Mahoney Secretary Morgenthau. The answer to that is, Senator, as I on- is developing is that what Senator McKellar undoubtedly had in derstand it, the majority of them had all previously taken 0.0 EX- mind were some 700 men who were separated from the service, back umination and passed it, and this is the first time, as I understand it, in Angus, and were given until January to be put back. Later, it in the history of civil service, that a man who has passed the civil being determined that although they were separated from the service, service is required to take another examination. they had not lost their civil-service status, when the Department Senstor MCKELLAR. Mr. Secretary, you were just being misled by someone in your own Department about that, for here is what Commission. called for eligibles, this same list was submitted by the Civil Service took place: These men were appointed on political grounds entirely, Senator O'MAHONET. The Executive order of June 10 provided in the Hoover administration, and they were afterward asked some that everybody was separated from the service, but that for a certain questions, and put on the civil-service roll. They were blanketed period, any of these persons could be reinstated without examina- in by Mr. Hoover. I have got the order, and will show it to you. tion. I will be glad to show it to you at any time The CHAIRMAN. But thereafter there must be an examination Senator HAYDEN. That is the point I was trying to develop a while Senator O'MAHONEY. That is the clear implication. ago. Undonbtedly, there were 2,182 political appointees, blanketed The CHAIRMAN. That is the whole question. in. Subsequently, in March 1927, a civil-service examination was examined. Senator McKellar. And thereafter be employed after being hold, which these 2,182 persons had an opportunity to take, and several thousand more did take it. As a result of that civil-service Senator HATDEN. Did the order indicate that it must be by a new examination the Treasury Department did obtain a list of men examination, or that, by reason of their having theretofore passed eligible to engage in this very investigational work, raiding stills, an examination, they were qualified and all that The Civil Service Commission submitted a list of Senator O'MAHONET. It was a clear indication that there should 2,689 eligibles, of whom I understood Mr. Mellott to say only about be a new examination, but it was interpreted otherwise, It was 500 of the original blanketed employees were included, because interpreted to mean that any person who bad a civil-service status, 75 percent of them failed to qualify. A large majority of the polit- and was 80 certified by the Civil Service Commission, could be ical appointees could not pass that civil-service examination. reappointed. That is my understanding of it. Senator Nonseck. But the trouble is, those 500 were Republicans, The CHAIRMAN, If that was the interpretation, what was the need of the Executive order! and they should be climinated. Senator MOKELLAR. They are all Republicans, there is no question Senator O'MAHONEY. Surely. sbout that, There are DO Democrats in that list, or in this list, Senator HAYDEN. That is one group. You have another group, either, because they were appointed purely for political purposes, however, that were never separated from the service, except to be dropped, from one moment to be transferred to the other. at first. Senator HAYDEN. It is very important to get the exact facts. If Senator O'MAHONET, Just technically. Mr. Mellott can check the list of 2,182 political appointees against Senator HAYDEN. And yet they are affected by this order. the list of 2,639 eligibles who were certified, be can tell how many Senator O'MAHONEY. They are affected by this order. original political appointees were able to qualify at the civil-service Senator HAYDEN, How many are there in that group] examination, held for the special purpose of obtaining men qualified Senator O'MAHONEY. Some 600, he testified. to serve in the position of investigator. Mr. MELLOTT. Some 639 investigators. Secretary MORGENTHAU. But, Senator, I think I am correct in say. Senator HAYDEN, I an sure that when the Senate adopted the ing that there is no one on our roll today who has not been qualified McKellar amendment nobody had that group in mind. and certified by the Civil Service Commission. Wo could not have Senator O'MAHONET. Oh, no. anybody else. It may be my fault that I have not pointed it out, Senator MOKELLAR. That was brought about by an Attorney Gen- but the acid test, as far as I am concerned and as far as the country eral. The Attorney General put them in there by his opinion, and is concerned, is, Are we doing this job well, or are we doing it badly his opinion is absolutely incorrect. It was not intended by Con- Are we protecting the revenue? Are we collecting laxes! Are we gress to put them in there, and the words do not put them in there. suppressing the illicit stilla, and are we making headway! That is I do not know why that interpretation was given it, but it WAS the question. Is this group of men efficient? Are they doing their given it. work well? Senator O'MANONEY. It was given it, Senator, because the lan- The CHAIRMAN. Of course, that is the primary question, but an- guage of the resolution says, Who are separated from the service other question is involved, Mr. Secretary, and that is whether the between these dates." Regraded Unclassified 18 TREASURY AND POST OFFICE APPROPRIATION MILL, 3906 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 19 Benater MCKELLAR. Yes some excuse; but it did not mean that, Senator Nommer. Mr. Chairman, I suggest, unless the witness be Senator O'MAHONET. The Comptroller interpreted that to mean permitted to answer the question, that We give it up and listen to this technical separation. Senator McKellur the rest of the day. Benator MORRILLAR Mr. Secretary, I was interested in what you Senator MOKRILLAR. The Senator's statement about that is abou- said about the good of the service. I want to say this about that: lutely without any foundation in fact. 1 sent to Mr. Mellott, and be sent to me is list of the men Senator NOMBER. The record spenks for itself. been blanketed into the service, and whom you still have on your Senator HATDEN. Will the witness please answer! How many rolls, but whom you are not paying; and also those that had passed names were sent over by the Civil Service Commission, from which the examination. It just happens that I know, personally, nearly the Treasury Department could solect six or seven hundred, or what- every man who is on the rolle in my State. One of them is u re- ever number was wanted after January! tired capitalist, down there, whom Bill Taylor put on the rolls. Mr. MELLOTT. They are in the Department, and I am going to He does not do any work, He has never done any work, and he answer the best that I possibly can, according to my understanding. is not doing any work now, Mr. Secretary. Talk about fakers! I The Civil Service Commission, it is my understanding, advised the will give you his name I am not going to put it on the record for Treasury that the former prohibition agents were eligible for appoint- the committee, but I will give you his name. He is not doing any ment in the service, The committee of which the Senator speaks work now. He does not need the place. He is a retired capitalist reviewed the records, or the personnel files, of all of the Bolks who had and yet you are keeping him down there without pay. That does served, and who had civil-service eligibility as prohibition agents. not make much difference because be does not need the pay. He Senator HANDEN. And how many were there? may stay with you all the time. Mr. MELLOTT, I think there were some 2,500. Secretary MOBOENTHAU. I did not know there were any retired Senator HAYDEN. That is, the Civil Service Commission sent over capitalista. Senator MCKELLAR. But I will say to you that Congressman J. 2,500 names of men certified as having previously passed the civil- service examination and therefore eligible for appointment, The Will Taylor-and, incidentally, I will quote him right here BB any- Civil Service Commission sent over the whole list of about 2,500, and ing this because he told me with no secret-stated to me that he Was then 16 committee of the Treasury selected how many from that list atterly astonished that you kept those Republicans politicians in for appointment! down there. He did not say that they were not doing any good, but Mr. MELLOTT. I do not understand that it. was worked exactly that I tell you that they are not doing a bit of good. 1 tell you we are way. I understand that the list was made available in general, in not having efficient service in my State, and I tell you that you have toto: that from that the committee reviewed the personnel files of the got on the waiting lists in the Civil Service Commission, under this various folls who were in that whole group. Inst examination, some of the very best men, whom you could ap- Senator O'MAHONEY. If the list was made available in toto, then point instead of holding these inefficient, incompetent, and politi- all 2,500 names were submitted to the Treasury committee! oally-appointed men in office. Mr. MELLOTT. I do not think they were certified in 5. regular order. Senator HATDEN. Let me ask this: Would it be possible, if some- Senator O'MANOMET. Not certified one were politically núnded and wanted to do it, that, after January, Mr. MELLOTT. That is what I am trying to say. Then, after they when the period of grace had expired during which these men might were picked out, they asked for a certification as to the particular man be restored under the law, and the Civil Service Commission sub- whose file indicated that he was-- mitted lists of eligibles, if there were someone who looked over those Senator HATHEN. How many men did the Treasury committee lists and knew that certain men were his friends, could he select select out of the 2,5001 them and leave others offi How are selections made from the civil- Mr. MELLOTT, I think 698 altogether, service list, if B. large group is needed! The Department wanted Senator HATDEN, If, from the original list of 2,182 political np- how many-six or seven hundred! pointees, there were carried into the civil service, by reason of a sub- Mr. MELLOTT. Yes, sequent examination, 500 men who were able to pass the test, and they Senator HAYDEN. And how many names did the Civil Service were included arong 2,500 eligibles, and if sumebody who was doing Commission send over as eligibles from which the Department could the selecting then and picked out, in the majority of cases, these par- select? ticular 500 political appointees, there would be just cause for com- Senator MCKELLAR They sent the whole list. plaint? Senator HATURN, There were how many names on it? Mr. MELIOTT. We could check the records. Oh, yes. Senator MCKELLAR. The evidence in the Civil Service Committee Senator HATDEN. That is what I want you to do, The only way to hearings shows that they sent over the whole list. do it is to find out the names of the 500 political appointees who did Senntor HAYDEN. How many were on it? That is what I want succeed in passing a civil-service examination, and then ascertain to find out. how many of the 500 appear on the list of 600 that the Department committee selected. Senator MCKELLAR It also shows that Mr. Bornoy went through the list and solected those that he wanted to be reappointed, and The CHAIRMAN. Well, do you not know that they are all Democrate that they were all Republicans. now? What is the use in asking for that Regraded Unclassified 20 TRHASURY AND POST OFFICE APPROPRIATION B/LLA 1026 TREASURY AND POST OFFICE APPROPRIATION ETTA, 1926 21 Senstor McKellan. We are not asking for their politics, now, be them were Republicans, and the Treasury, my good friend Helver- cause we know they are all Democrats. ing, with whom I used to serve in the House, and who I estedin as Senator HATDEN. If the record shows it to be a fact, then clearly highly as I do anybody, had not given me 16. single one, He would thore was voritism exercised within the Department. If the rec- not remove any of them. He would riot remove anybody. He Inft ord should show that only an average number of original political me down there with the Republicans, who light us, They take an appointees were selected; then there could have been DO favoritism. active hand in polities, Do not talk about their not taking an active Senator O'MAHONET. And, if the entire list was mede available to hand in politics. They are the most notive people in my State, for this committee, and then the committee made selections from that their own party. I do not blame them, but they ought not to stay list, not upon the basis of the records of the Civil Service Commis- in there, under the wonderful civil service examination, which they sion, but upon the basis of the personnel files in the unit, then, have never stood. clearly, us Senstor Hayden says, there must have been some selec- Senator HAYDEN. Mr. Chairman, this matter came to my atten- tion, not by the Civil Service Commission but by individuals on the tion just after I met Senator McKellar in Los Angeles, when be was committee. leaving for the Philippine Islands, or I would have taken it up Senator MOKELLAR. All of that is testified to in this hearing. We with him I came back home, and I What contacted by one of the have got the facts about it. agents who had been set aside by the McKellar amendment so that Senator HAYDEN. The absolute proof will be when the list of 500 he could not draw any pay. I found that there were four in the names that were originally political appointees is compared with State. Each one of them insisted that he bad passed a regular civil- the list of those finally selected by the Treasury committee, and if service examination and obtained his rating, and on inquiry as to IL great majority of those on the new list were originally political their polities, they were all four Democrats. appointees, there WAS favoritism. Senator NORRECK. How did you manage it? Senator MOKELLAR. What I want, Mr. Mellott, for this committee Senator HAYDEN. That is the point I (M) trying to make, that, so are the names and addresses of the 698 that were certified by Mr. far as my State WAS concerned, all of them insisted that they had Berney, and afterward appointed by the Department. That is what obtained their appointments in a regular civil-service way. They I want. were all residents of Arizona when they passed the civil-service The CHAIRMAN. There being no question to the witness on the examination, and each one of them was positive in his assertion that stand, the chairman is going to make an observation. I do not care he never had received any kind of I political appointment, that he BA. continental about polities or about patronage. I turn all those never had been blanketed into the service. But the proof of the matters over to other members of the Virginia delegation. Every- pudding is going to be when IL check is made of the list of the six hone body knows that. I do not bother with that. But, in substantiation dred-odd names who were selected by the Treasury committee to see of the suggestion that this was largely a partisan political move- how many of the original 500 political appointees are included. If it ment, I obtained from the Commissioner of Internal Revenue, Mr. is found that a large majority of that old group are in the new Helvering, a list of the field agents in Virginia-rather, Senator group, then somebody with political leanings fixed the list and did Byrd did, and gave me a copy of it-and of the 30 field agents in not select them out of the whole 2,500, solely because of their qualifi- Virginia, headed by one of the most obnoxious persons whose record cations. I ever had brought to my attention, efficient in the discharge of his Senator O'MAHONEY. It is the group of 700, Senutor. duties, and very efficient in the manifestation of his politics; of the Senator MCKELLAR, Six hundred and ninety-eight. 30 field agents in Virginia, 28 of them were carpetbaggers, all the Senator NOHNECK. That would throw a suspicion. It might not way from Maine to some other remote point. There were only 7 be conclusive. If there were 500 experienced men on the list, and Virginians, and of the 30 there were only 3 Democrate. another 1,500 who had not. had experience, it might have resulted, Senator HAYDEN. You do not think that WHE an accident even if they did not know their politics at all, in D. Inrger percent The CHAIRMAN. No; I do not think it was an accident. If it was, being selected, of the experienced men, than of the inexperienced. it was A very bad accident. Senator HAYDEN. If it just happened to be about half and half, I Senator STEIWER. As of what date are you speaking! would not be suspicious. The CHAIRMAN, Not 90 very remotely-since Mr. Helvering has The CHAIRMAN. I think the whole question in volved is not so much been Commissioner of the Internal Revenue. Mr. Helvering knows one of politics, but it is apparent the civil-aervice law and the Presi- it took the very strongest protests of both Senator Byrd and me to dent's order have been evaded by subterfuge. remove the chief of the field agents down there, because he had made Senator HAYDEN. I think you are right, Mr. Chairman, himself 90 obnoxious; and that is the reason, whenever anybody Senator MCKELLAR Emetly right; and, by the way, Mr. Chair- wants to be appointed from Virginia, they tell us that Virginia's man, in this connection I want to ask permission to insert in the quota is overfilled; but it is overfilled with appointees from other record the hearings, which are printed and not very long. I do not States-carpotbaggers. want to have them reprinted, but I want them as a part of this rec- Senator MCKELLAR. Senator, you are lucky. I had 27. I will not ord, 80 we can take it to the Senate. I refer to the hearings in the be positive, it was either 26 or 27 that were in the list, and all of civil-service investigations that were made last year. And for the Regraded Unclassified 22 TREASURY AND POST OFFICE APPROPRIATION BILL, 1930 FREASURY AND POST OFFICE APPROPRIATION DILLA, 1936 23 convenience of the committee I am going to submit a copy of a let- tar that I wrote to the Secretary, to Mr. Berney, who was the man Party were successful, to my Indgment, the Republican money powers over the that made the selections of all these 698, and 1 want that letter, and country would - bendle Children that the New York Exchange would close. I bet I want to call it to the special cttention of the Secretary. Have you one man In the service 10 to 5 that that would happen, and E collected the let. seen that letter yet? I want to call the special attention of the man Senator That of the Democrate was. the sheck exchange would close? who really did the work of selecting these 698 inefficient Republican Mr. BEANET. Yes, sir, employees, how claiming civil-service status, to that letter. Senator MOKELLAR. I thought you and mit Inke any Interest In polities. That (The letter presented for the record by Senator McKellar is in absolutely surprising. follows:) Mr. BERNEY. I didn't any I don't take any Intervst in politice. T and that I was DUE qualified and aur not qualified to vinte ofther way, and Hild pet attempt FERRUARY 20, 1935 to vote olther way." Bon. HENRY MORGENTHAU, Ja. Beuember that be had just restified in words that he fook no Interest to Secretary of the Treasury, Washington, D. C. polities. Dass MR. SECRETARY I whb again to call your attention to the evant of E. R. At the time I was questivaine Mr. Horney concerning his polities I had a paper Herney, now bolding a podition In your alcohol wait. On May 11, 1854, Mr. In my hand that a evatlemas had passed up to no, and I was appearing in look Berney was called Infore the Benate Committee nu Civil Service to featify at the paper before naking Mr. Berney the question, and the following occurred: regarding his selection of the Prohibition or Alcohol Unit for respoinding In Sountor MCKELLAR If a man taken mush inforest to bet on an electing of your Department. I quite from Mr. Berney's testimony. on shown on page any kind, he lass some political views or opinions, If le entirely out of harmony 96 of the record: with your previous testimony that you took no Interest in polities, und that Benator MORELLAR Where are you from? politics DeVer had anything to do WITH any declation you made about personnel or Mr. Beaser. From central Pennsylvenia anything of the Kind. Senetor McKELLAR Are you a Democrat we Republican? Mr. Hearney, I still any that It never affected any official nothm of retur, but Mr. BEASEY. 1 do not know. 1 wtill think 1 have the right to visualize what may take place In different Senator MCKELLAR You de not know? An expert Ib the Burenu of Pro- political campaigns. and I am sufficiently Interested in American citizenship to Withittion and not know whether you are II Democrat or a Repatilican? do 80 (p. 135). Mr. BERNET, If I may place my own lest, ! assume the test of a man's Senator McKeilar Were you.d member of a political club as the political faith in determined by his registration in a primary, I have never Hoover-Cortis Olub registered to vote in a primary In my life. I voted once in my Itle, in the Mr. BERNEY. I would eas I was not. I can give you the story behind that State of Connecticat, at a general eléction. and I have never lined ap with a Senator MCKELLAR I would be glad to have it. political party: en I de not know. Mr. BERNET. Very well, sir. In, I believe, 1924, I was In the Veterans' Senator How did 500 vote then? Bureau, and I was invited by # enbordinate of intere to attend A notification Mr. Beaser. I voted on A. machine. exercise for President Coolidge. I attended them. We got down to the place Senator MOKELLAR I know: but how did you vote? Did you vote for the where they were held. Democratic candidate or fur the Republican condidate? Senator MORILLAR Where was that? Mr. BERNEY, I voted for both. Mr. BERNEY. I believe n. was Constitutionst Hall We got down there and Senator MCKELLAR. You voted for both the Democratic and the Republican were about to take OUP cents, The man 1 was with Who a member of the Bons candidate at the same time? of the American Revolution, and other agencies of that kind in the District. Mr. BERNEY. 1 certainly did." Someone entre to him and wid liken the man in charge of the door will not This man was educated at Yale University, I believe he graduated there, and going to be there, and wanted him to take charge. He asked. What does it had been working for the Government since 1918, when he went Into the Buresa require?' They said, Well, we have a evople of marines to keep things to of War Risk Insurance. Be entered that Bureau by standing a competitive order.' Be mid, 'Mr. Berney la experienced more than I am In each things. examination for elnims examiner and reviewer (p. (M), Be admitted that be Why not ask him to go to the door?' 1 want to the door and organized these was a member of the committee that prepared the list of former employees than men at the Convention Hall, so that we could have order. could he reflored (p. 97), Senator MCKELLAR or course, It Was not the love of politics, but your love Mr. Borney did not know of President Roomevelt's order which limited the and loyalty to law and order that brought you to that Coolidge meeting In 1924. relestatement of these employees to January NO, 1984 (p. 98). He did not of Mr. Brancy. It was my interest In the leader of this Nation at the time. know how many of the R25 employees selected by him and his committee were I have had an Interest In the person, and I will say the personnel, of the White Democrats and how many were Republicans (D. 100). He out that bis method House ever since I have been old enough to read and write of handling the matter Wills as follows: Senstor MOKELLAR But you never had enrogh Interest to to to the muble My passing upon them Was specifically and definitely limited to putling to vote for anybody for that office? records and passing out Information, with certida restrictions" (p. 108), Mr. Resiver, If I could have afforded to 120 back to Pennsylvania T would He claimed that be WILD appointed during the Wilson administration and have. served under the others, bot housted that he had never voted in his life, except Benator MCKELLAR You loste getting $6,000 n. year. Woold not that permit once, and that time for both the Democratic and the Republicau candidate, and you to go to Pennaylvania If FOR wanted to vote? that be had no Interest In polities. I quote from htm: Mr. BERNEY, I have DO residence there' (p. 139). Senstor McKellar. You said that you are not to politics? Romember 1 gill had the little memorandum in my hand. Mr. BERNEY, Yes, air. Sensior McKELLAR. You ean Vule anywhere you please You can vote to Senator MCKELLAR You take no Interest in It? Maryland or Virginia. You can declare your residence there and vote. You Mr. No, air (D. 138). never looked Into that, but while you did not have enough Interest to vote, you Them statements were unqualified, trut he hoón had to udmit that he was had enough interest in polities or to law and order. not in politics-to be mistaken. present at a Coolidge meeting and gel as doorkeeper. Senator MORRELAR Is It not a fact that during the campaign of 1032 you " Mr. BEASET. Senetor, 1 would like to clear your mind on that made Roowevelt! bets NB the Presidential election, and bet that Hoover would defent Senator MCROJAR. Il needa clearing very much, Mr. Beaver. Nothing would please me better than to to able to tell you, Mr. Reserver, That la an auqualified misstatement of fact and falsehood. while I am under outh, that I am a member of one of the two arreet parties. I made no beta to the campaign except one, which was that If the Demorite Nothing would please the better. I wish that I could tell you that. I want to clear up my position as to that situation. 110242-35-4 Regraded Unclassified 24 TREASURY AND POST OFFICE APPROPHIATION DILL', 1936 TREASURY AND POST OFFICE APPROPRIATION BILL, 1926 25 Senator MORELLAR All right Mr. Reiner. Some time Inter 1. Was amazed one day to open e letter in memorandum, he additied that be had taken part in B Coolidge ratification in which I found a check for $5 for my services strued by somebody Who In in 1024, that be contributed to President Coolidge's campuige, that he contributed to Mr. Hoover's compaten In 1928, and that be had contributed to Mr. Honser's Chicago, very likely A member of one of the committees. Senator You usen the Repablicae committee, do you not? campaign in 1982: and while be best around the bush, be substantially admitted that no had bet on Hoover as against Reosevelt tn 1932, Mr. BRENEY. Yes, air, Now, I am not asking that Mr. Berney be removed because of his support or as Benator McKmLAR You did list take that check! R Mr. BERNEY. I took the check and endorsed 11 back to the man who wrote Mr. Hoover in 1028 and 1832 or because be to a Republicien, but T Alb asking for his removal because be did not tell the reach about his polities, but on lhe It, and returned it. contrary trying to pervert the mith and concert the truch as his exidence shows. Senator MCKELLAR You regarded practical politics as NO debased and low Under superate cover, T our sending you u copy of the feethwong The you to that you had to send It back? read it all: Mr. BRENEY, x did not regard It as debased ne low no Inathanme in the least. 1 am informed that norwithstanding my protest to you last year. Mr. Berney I regird it as a very fine proposition. It means as much to me as the eltizen- is still no the Government pay roll. I think be should be renuived therefrum. ship of Rome meant to a Homan, If I am permitted to carry this through, 1 Very stocerely yours, would 10w to tell you the entire story. (Stated) Kersern Senator MORRELAR, Go ahead. I thought you were through. Mr. BRANKY. Not quite. In the next compaign I received a letter, the same The CHAIRMAN. We appear to have said all there is to be said on as I received letters from the American Legion, of which I aux not a member, that point. and other agencies for contributions. I received a letter eaying substantially Secretary MORGENTHAU. Do I understand, sir, that I am to submit that in Washltigton there was but one place established where people could vote, and to keep that place up They were asking for it donation of $5 or $10, a statement, in ehronological order, of what has taken place with as the caso may have been, I don't remember which 1 ment a contribution for regard to these men! that purpose. Senator MCKELLAR. Yes. Senntor MCKELLAR To the Republican organization? The CHAIRMAN. I think so, Mr. Beaser, To il Presidential organization. Secretary MORGENTHAU. I would like to. Senator McKellar It was Republican, was It not? Mr. BERNEY, I don't know. It had been questioned seriously whether Senator McKellar. Especially the Executive orders. Mr. Hoover was a Republican OP not. He didn't know whether he was or not, Secretary MORGENTHAU. Going right back to the beginning, when- Senator MCKELLAR It WILLF la Hoover organization? ever the thing started, Mr. BEANEY. Yes" (p- 140). The CHAIRMAN. I think that would be all right. And again be testified that he had done the same thing the following year (p. 140). Is there anything further, Mr. Secretary! Senator MCKELLAR As I understand it, you were doorkeeper at a Republi- Secretary MOBGENTHAU. Not unless you want to ask as some can meeting in this city In 1924. questions, Mr. HERNET. It was not n. Republican meeting. (The statement referred to is as follows:) Senator MOKELLAR I would suppose that IL was, If It WILLE for Mr. Coollidge, Mr. BEASEY. It was a notification exercise. TREASURY DEPARTMENT, OFFICE or THE SECURTARY, Senstor McKellar Mr. Coolidge was a good Republican, And you say Washington, March 4. 1935. that you contributed to the campaign of Mr. Hoover in 1928, and contributed Hon. CASTER GLASS, agalo to the campaign of Mr. Hoover in 1932. Chairman Committee on Appropriations, Mr. Theorey. But my contribution was for the purpose of establishing these United States Benole, boother for these men and WORMIN to vote. MY DEAR Ma. CHAIRMAN: In accordance with the understanding reached at Senator In other words, you helped Mr. Hoover's cause In 1028, Saturday's hearing I am enclosing, herewith, u report given me by Deputy the first time he ran. when he was elected: and m the Nime way you helped Mr. Commissioner Mellott, of the Alcohol Tax Unit of the Bureau of Internal Rev- Hoover's cause In 1982, when he happened to Del defeated. ende, with relation to the civil-service status of the personnel affected by the Mr. Benney, I have given the facts, and you eun draw your own com- proviso found In the Emergency Appropriation Act of 1985, In the Item Collect- cinstons." Ing the Internal revenue," Now, Mr. Secretary, that Wills the testimony of the maxi you now have in your I think that you will find from this report that there in no foundation In employ under civil service regulations, There In DO possible objection to Mr. fact for the suggestion that these men had been blanketed lato the former Herney's being a Republican, and as I look at It there le BO possible objection Bureau of Prohibition wibout clvil-service examination, They bad all qualified to Mr. Burney's having contributed to the Republican computen from 1024 an, by open competitive examination in complete accord with the civil-service roles. up until 1902 lle had a perfect right to do If, bot The point I make to you to I believe that you will flud also that the appointment or approximately TOO of that I de not believe your Department should keep In the public service n these men in the Bureau of Industrial Alcohol, by rainstatement, was Ukewise who will falsify about the facts connected with lile political activities. Remem- in full compliance with the clvil-service rules. Your attention is especially ber, in the first instance. Mr. Berney testified that he took no Inferest in Invited in this connection to the quoted extruct from the Attorney General's polities, lie had never voted, except unre when be voted both the Democratic and opinion addressed to the President on May 28, 1934, advising him that the the Republican Ucket, the inforence being all through the first testimony that he classified status of employees separated, from the service under the provisions was far removed from any political thought or action. of the Executive order of June 10, 1983, was in no wise affected by such All of the men he selected from Temporatory for respointment on this liet were separation. Republicans, and, sur for oy I know and Be for as I have been able by find mit I will very much appreciate your favorable consideration of the pending the men he selected from the list in other States were Republicans. His argu- estimate for funds from which this personnel may be compensated. Should ments seemed to be that It was a mere entaridence that all of these resppelatees the committee desire further information upon any phase of the matter. I shall were Republicana. All This associates un the committee were Republicans and be only too glad to furnish It. mll those reappointed were Republicans, Very truly yours, And then sorne young man. whom 1 do not know, handed me B memorandum, (Signed) Herry It,, I held II to my hand and examined Mr. Berney about bis political activities. Becretary, With this memorandum In my hand, the witness not knowing what was on the Regraded Unclassified 26 THRASURY AND POST OFFICE APPROPRIATION Bilds, 1936 TREASURY AND PORT OFFICE APPROPRIATION HOLLS 1936 27 Manon = JANIS. service rules, A certain bumber or positions had here Biled by the listefer of above 4,750 employees, were In their positions In Full Record with the civil- By April 30, 1980, the whole furee of the Bureen of Probibition, conduting MEMORANION na THE SECRETARY OF TUG TREASURY of of classified employees from other Government departments or by relustatement In accordance with year Instructions, I submit below B. résumé of the history petitive theme exceptions the entire personsel had qualidad under the upen evu- with classified employees, with the approval or the Chril Service Commission, but of the Alcohol Tax Unit and Its predecessor agencies from the standpoint of the application of the civil-service laws: the examinations conducted by the Civil Service Commitation Les From the adoption of the eighteenth amendment until April 1, 1927. the requirements of the net of March a. 1927. enforcement of the prohibition laws was carried on by the Bureau of Internal Revenue In M. special division known na the Probibition Colt," By the act of 500 Commission for appointments lo the classified civil service. For approximately These examinations were of the type regularly g'ven by the Civil Service March 8, 1927, which became effective April 1, 1927, the Prohibition Unit of the positions above the grade of Investigator, that by administrators, Bureau of Internal Revenue was abollshed, and until July 1, 1950, the duty of applicant of his education. training. and experience. For all other positions chemists, the exciminations were nonnammbled, constating of e showing by ouch administrators, deputy administrators, senior investigators, Attorneys, and probibition enformement was performed by a separato Bureau In the Treasury Department known as the Bureau of Probibition." By the act of May 27, 1980, which became effective July 1, 1980, the Bureau of Prohibition was transferred to the Department of Justice Those of its functions, however, which bad to do calculated to determine the applicant's general intelligence an well as his the examinations were issumbled and constated of e mental the to three sections with the supervision of the production and distribution of aleohol for industrial Bfness for the duties of a prohibition officer. An eundidates in The case special of the and scientific liself were transferred to a new Bureau in the Treasury Department, nonamembled, AS well as the assetubled, comminations were subjected to 6 worch- which was given the name Bureau of Industrial Alcohol" The Bureau of Prohthition in the Department of Justiew was abollshed on ability, and Judgment. The exproinations were In all particulars as exples and cant's personal characteristics and address, quickness of understandleg. adapt- Ing character Investigation and to un oral examination to determine the appil- Angust 0, 1933, pursuant to the providens of the Preaklent's order of June 10, effecting it general reorgantrative of the executive departments. Its functions, comprehensive as any which had been given by the Commission up to that Time however, were enationed without substantial change in a suparate division entled the "Alcoholle Beverage Unit." exidence of the difficulty of the examinations will be found la the fact that the for analogous positions las may bronch of the Government service. Some The Executive order of March 10, 1004, abolished Die Bureau of Industrial Alcohol to the Treasury Department and the Alcoholic Beverage Unit in the this latter number, 1,805 were later declared Ineligible by the Commission es a eligible retings on the mental requirements, and from the further fact that of Brst of the Two testa was taken by 12,480 persons of whom only 4,806 received Department of Justice and transferred their functions, records, and personnel to the Bureau of Internal Revenue. This order bécame effective May 10, 1934, and result of the personality. character, and Allness investigations. to carry out Its provisions a special unit was created in the Bureau of Internal It le to be understood, of course, that virtually all the 2,600 noncivil-service Revenue under the name "Alcohol Tax Unit." With minor exceptions, this nolf, employees in the Bureen of Prohibition at the time competed In these examina- under the direction of the Commissioner of Internal Revenue, is now charged with the enforcement of all Federal liquire tawa. Ing them eligible to hold their positions. or those failing in the first examina- of these old employees survived the Best examination and received ratings mak- Hons. In this connection It be to be noted that only 30 percent, or sbout 800, REQUIREMENTS Boy, however, elmost 500 surversfully completed the second examination. In other words, about half the old personnel of the probildtion service were eith- From the estabilabment of the Prohibition Unit In the Dorean of Internal Imposed by the ace of March 3, 1027. mately able to retain their positions under the civil-service requirements Revenue in 1020, until 1927, the appointments le the Prohibition Service, with the exception of clorical personnel, were, by special provision of law, made without reference in the clvil-service mies. By the not of March 3. 1927. which became effective April 1, 1027, Cougtens provided that all appointments should Department of Justice not July 1. 1950, Its personnel was entirely a elvil-service the Bureau of Probibition was transferred from the Trensury Department to the In view of the foregoing Casta It will be correct to may that at the time be subject to the provisions of the civil-servier laws, and provided further that the term of office of any person In the Prohibition Service who was not ap- pertaining to the Civil Service System. personnel, recruited lu full compliance with all the laws and regulations pointed subject to the civil-service laws should expire October 1, HeT, The number of employees in the Bureau of Prohibition when this law because effec- THE EXECUTIVE ORDER OF JUNE 10, 1935 rive was approximately 4,300 or whom approximately 2,000 were officers, agents, administrators: taspectors, and investigators who and been appothted without Department of Justice, until July 1, 1033, appointments to positions in the From July I, 1030, when the Burewu of Prohibition became a part of the regard to the civil-service Inws.¹ Following the net of March 3. 1027, the Civil Service Commission announced probibition service confinued to be made exelusively from the Itsts of eligibles upen competitive examinations for all positions In the Barean or Prohibition, Instances of transfers or relustatements of persons WITH a classified civil-service established by the Civil Service Commission, with the exception, of course, of excepting clerical positions already held by persons with a cinsified civil-service status, The certification of eligibles from these open competitive comminations status. to Until July 1. 1932, the tendency was to Increase the Burean's personnel was not completed by the Cirll Service Commission untill September 1938, and keep pace with the continued efforts of the Department to give effective in the menntime the Commission found It necessary, pending the establishment law enforcement to the prohibition laws. With the enactment of the first of elegible lists, to authorize BE Indefinite extension of the employment of any individual case upon an adverse finding by the Commission In respect to the June At 30, 1938, this personnel had been reduced by normal separations to 3,100. following which the Bureau's total force stood of a Agure of about 3,300. By some sitght reduction in the force of neld agree was made on July economy 1, 1992. 8009 then In the Bureau without civil-service status, this to be terminated In focumber's character. From the liste of eligibles certified by the Commission that time, partly to meet the reduced appropriations available for the flarst in September 1928, the Department proceeded to make appointments as required year 1934, and partly in anticipation of the repeal of the prohibition amend- by law. replacing those of the existing force who had not qualified in the emm- ment, It was found advisable to make IL dravtic reduction to the number of Ination. and within a few months had exhausted the lists of eligibles in prac- really at Beld districts. In most districts, however. it developed that there 100 were subsequently relatated. Approximately 100 new oppotuments were of business on June 30, 1932. or abortly thereafter, of which number about employees, Almost 1,400 field agents and clerks were furioughed at the close were Insufficient effeibles In fill all postitions and It became Decessary for the Civil Service Commission to announce further examinatives bi meet this de- of alightly Insue than 2,000 employees of all classes. made, and the Burean's personnel to active-daty status on Attgust D conalsted Beloney, from which eligibles were certified nnit appointments made Inte in the year 1929, Order No. 0166, dated June TO, 1953 This Executive order, which became Aa has been wen, the Burrau of Prohibition was abollabed by Executive OF this munber, approximately 406 Were Inspectors assigned in the supervision of offective on August D, 1033, abolished or consolidated a large number or ageo- permittices under the provisions of the National Probitition Act. Regraded Unclassified 98 TREASURY AND PORT OFFICE APPROPRIATION BILL, 1930 TREASURY AND POST OFFICE APPROPRIATION BILL, 1938 29 cheir in may departments of the Government, und with regard to all such abol- labed agencios It comminated the following provision respecting the dispoutition in Duit of the Department of Justice were indosterred to the Barena of in termal Revenue and consultated in the Alcohol Tax Unit. Under ship order be made of the personal: "All perminuel employed to connection with the work of an ubolished agency Die GDN egents who had been appointed by the Commissioner of industrial (FE function dispowed of shall be separated from the service of the United Blates, Alcohol, ILE above indicated, Were nierged with the 639 Investigations transferred except that the boad of and agency. subject to my approval, may, neld Investigative organization. from the Aleoholic Beyerage Unit of the Department of Justice late . stugle within a period of 4 months after transfer or consolidation, reappoint any of such personnel required for the work of the allecessor agreey without reex- The Provisions of the Emergency Ippropriation Act unimation or loss of civil-service status." Purseant to this provision the entire force of the Bureau of Prohibition, cot)- stating of approximately 2,000 employees of all classes in activeduty vtatus and The Emergency Appropriation Act, approved Jone 19, 1884, contatood an approximately 1,260 who bad previously been placed on forlough, were wipa- attended the following provido: appropriation of $10,000,000 for the Bureau of Internal Revenue, to which was rated from the service sil the cloise of bustness on August 9. Aue authorized by the Executive order, 1,191* of this number were resippotated OD August 10, in Provided, That after December 1, 1984, no part. of the appropriation made the Aleoholic Beverage Unit, to which the functions of the Prohibition Service herein or herethfore made for the Theal year 1095 shod be used to pay the were now assigned. Doring the period which Intervened between August 9 salury of any person formerly employed as Investigator, speetal agent. sentive and the transfer of the personnel to the Burese of Internal Revenue 5 counts warehousemen, deputy prohibition administrator, agent, assistant attheney, erable number of those separated from the service on August 9 were relastated assistator probibition administrator, sentor Investigator, deputy production ed- instion, wilbout repind to the civil-wervice rules. In the same perjod upward of and a number of new appointments were made, under special Executive author- ministrator, storekeeper or gauger, or any other position In the Prohibition Bureau BE Alcoholle Beverage Unit. Department of Insties, who was separated 200 additional clerks and Investigators were separated from the service On from the service of such Intreas OF between Jone 10. 1933, and December May 10, 1904. when the personnel was transferred to the Bureau of Internal 81, use, while In any such position in the Treasury Department, unless work Revenue It consisted of 977 persons, explusive of approximiately 70 who were uniti such person shall be appointed thereto as a result of on open, compett- retained to the Department of Justice. or this number 6W were Investigators tive examination to be bereniter beld by the Civil Service Commission." or flotd agents. The remainder were elerical med rechnical employees of various Although the purpose of this legislation to not evident from the terms of the statute, is is to be assemed from contemporary discussions that Its framers classifications. were of the opining, Brat, Cont the employees of the claims enumerated had THE TAX ENIT not secured their positions in the former Bureuu of Prohibition through proper With the repeal of the prohibition supendment to December 1988, IT was deter- civil-service examination and second, that the employees of the classe who were separated from the service under the provisions of the Executive minet by the President, upon the advice of the Attorney General und the Secre- order of June 10, 1033, who had not been respected prior in the expiration tary of the Treasury, that responsibility for the enforcement of Federal laws of the 4-month period defined la that order. had lost their eligibility for relating to the production and distribution of ulcoholle beverages should proporty reinstatement under the civil-service rules and that, therefore, the appointment be transferred from the Department of Justice to the Bureau of Internal Revenue of 605 of auch persons to the Bureuu of Industrial Alcohol, DE above described and this transfer was ultimately consumniated by Executive Order No. was not authorized by IAW. dated March 10, 1934, which became effective on May 10, 1934. Pending this As to the first of these points, II has alroady been observed that the field transfer If was also determined that the Treasury Department, through the agents who were in the service of the Burean of Probibition prior to the Burenu of Industrial Alcohol, should nt once lay plans for the enforcement of abolishment of that Burven by the Executive order of June 10, 1033, had, the Internal-revente laws relating by Intoxlesting bererages and to rentilt per- without exception received their appointments (LP the result of regular upen sontiel which could be used in enforcement work for different parts of the country competitive civil-service examinations or. in rare Inslancer, by transfer from After conference with the Civil Service Commission It Was determined by the positions to the classified ervil service, or by relastatement la accordance with Department that the only available means of recruiting an experienced furce the rules. The claim has been made that the civil-service roomina- would be by making appointments, by reinstatement, from suime the approxi- tions TO which this personnel were subjected anionted to nothing more than tuately 2000 Investigators and agents who had been separated from the Depart- so-called character tests", or, In other words, that they were not required ment of Justice under the provisions of the Executive Order of June 10, 1083, to pass a mental examination but were virtually blanketed Into the service, ICE ubove noted. Accordingly, the records of all such investigators and agents There is no evidence to support this charge. The received shows no instance were carefully examined by the Commissioner of Industrial Alenhol and during of Manketing into the service. The facts with reference to the examinations the period from February I to April 10, 1934, 608 wen were selected for appoint- given have been set forth above, but It will be well to add that of the persons ment to the rolls of the Bureuu of Industrial Alcohot in this way. and their who were employed in the former Burenu of Prohibition prior to the estab- reinstatement was authorized by the Civil Service Commission. In making theme lishment of civil-service requirements only 208 remained DD May 10, 1904, appolatments the sole baids taken was the effelency. character, and disciplinary when the residue of the prohibition organisation WAS consolidated In the records of the over and no consideration was given to any other factor." To Aleohol Tax Unit of the Treasury Department, theme survivors. of course, ald him to passing upon these records the Commissioner of Industrial Aleohol having qualified in the meantime ou open competitivo examination, made use of a committee informally designated by him and consisting of expert- Of this number 172 were relostated In the Bureau of Industrial Alcohol dur- enced officers velocted from the Burrau of Industrial Aleohol, the Intelligence Ing February and March 1984, and 106 were transferred from the Alcoholic Unit of the Bureau of Internal Revenne, and the Alcoholic Bevetage Unit of the Beverage Unit of the Department of Justice. There In attached bereto II Department of Justice. list of such employees. On May 10, 1934, under the provisions of Esecutive Order No. 0630. the As to the second point, that Is, the charge that employees of the classes personnel of the Boreau of Industrial Aleohol and the Alcoholic Beverage enumerated who were separated from the/service by operation or the Exerctive onler of June 10, 1938, unloss reappointed in the Aleuholic Beverage Unit Inctuding approximately 300 clarical employees. Exact recurds of the personal within the 4-wonth period named to that order, were Ineligible to be relustated transactions which necurred In the Department of Justice during The period unisler under the citil-service rules, it must be sald that this is a point which received discussion are not available in the Treasury Department. The relastatement eligibility of classified employers who AZP separated trops the no attention by the Department et the Ume 6V8 of these employees were no metho without fault la determined to Presitive order. Employees eltethie for relo- funtated la the Bureau of Industrial Alebhol, MM above described It will be and relastatement most in and cues be made upon the Judgment and optains of the statement are not listed by the Civil Bervice Commission le the unler of there eligibility remembered Chat the Executive order of June 10 had application to a large appointing officer as to the qualifications of those eligible, subject to the approval of number of agencies in varlous executive departments which were either the Citil Service Commission abollshed or consolidated by IDI prortatons. Thousands of employees In various branches of the Government were affected by the provisions of the order regair- Regraded Unclassified 30 TREASURY AND POST OFFICE APPROPRIATION BULL, 1036 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 31 Ing their separation from the service: and H was E watter of countring knowl- edge at the time that all such employees from whatever agencies separated The CHAIRMAN. Yes, sin. were considered not only by the appointing officers In the executive depart Secretary MORGENTHAU. Dr. Viner was on the stabilization pay roll ments generally, bat by the Civil Service Commission also, BE retaining their while he was in the ser rice. eligibility for reinstatement under the civil-service rúles without any regard to the 4-month limitation found to the Executive order. The appointments The CHAIRMAN, I know, but why should it have been supposed that Were made by the Burrey of Industrial Alcohol in good faith to gerordance Dr. Viner, who, as I am informed-maybe incorrectly-never had any with the common practice which prevailed ut the time It was not unfil weeks banking experience, particularly with the technique of banking, could after the consummation of these appointments that IX came to the notice of the Treasury Department that the eligibility of the persons solected for rein- know more about the banking situation than the two banking and statement in the Bureno of Industrial Alcohol had been beought luto question. currency committees of Congress, both of which bad recently spent 18 The merite of this contention must, or course, depend upon the meaning and months in a complete review of the banking situation all over the Intent of the provision of the Executive order of June 10, which was quoted country. Why Was it supposed that he could, by assembling a staff of on page 5, above. A construction of this provision was requested of the Attor- some 60 persons, I am told, tell us more about it than we already ney General by the President following the raising of the questime during the knew? month of May 1994. In response to the President's request the Attorney Gen- eral, under date of May 20, 1904. rendered an opinion reading, in part, as Secretary MOBOENTHAU. Senator, I do not think that he or I had follows: The language of the paragraph in question la plain and unamblgnous. It any conditions. idea that we could tell you more than you yourself knew of those speaka for itself. Under the provistions of the paragraph the personnel - The CHAIRMAN, Maybe you can, but Dr. Viner could not played in connection with any abolished agency or function disposed of are Secretary MOROENTHAU. I am sure I cannot, either. separated from the service, but the head of any successor agency in authorized to resuppoint within a certain period without reexamination or loss of civil- The CHAIRMAN. In his report be did not discuss a single, solitary service NDATOR, any of such personnel required for the work of the successor problem that had not been discussed over and over again by the Bank- egency. The purpose of this provision, an Its language clearly Indicates, Le ing and Currency Committee. to enable the beed of the successor agency within A limited period to make Secretary MORGENTILAU. If 1 may take a moment to explain, the resppointments from among such personnel without regard to the civil-service not and rules. Not even by the remotest Implication of the language employed work that he did at my direction was a combination relating to the can It be said that it deprives or attempts to deprive those who are not TO- Comptroller's office, Federal Deposit Insurance, the R. F. C, and the appointed within the prescribed period of the civil-service status possessed by Federal Reserve, The idea WILH to go into the field in a Federal them at the time of their sepuration from the service." Reserve district and, by asking a series of questions, try to find out At least from the standpoint of the appointing officers this In believed to dispose of any question which may have been raised with respect to the civil just one thing-whether the borrower was able to get his accommoda- service eligibility of persons separated from classified positions pursuant to the tions from the banks OF whether he was not, and just where the blame provisions of The Executive order of June 10. Such persons must be deemed lay. In many cases letters would come to my desk where a borrower, to have retained their eligibility for relastatement In accordance with the usual particularly the small business man, would want to borrow $25,000 or civil-service rules, Certainly there can be DO greater reason for questioning $50,000, and in many cases the letters would say, We cannot get it." the status of the 698 men who were reinstated in the Boreau of Industrial Alcohol under the efrenmatances surrounding this particular case then to rater We would write to the banker and ask him whether this was a fair n similar question with regard TO former classified employees of any agency letter or whether it Was not a fair letter. In many cases the unswer abollsbed by the Executive order of June 10, who may have received employ- would come back that the bank examiner was so atrict in his bank ment by relastatement, to cirestfied posttions in other branches of the Federal examinations that the banks were afraid to make loans in their service. Respectfully submitted. anxiety to keep liquid. This happened a number of times, and there ABTUUD J. Medors, was enough discussion of them, of what was a slow loun and what Deputy Commissioner of Internal Revenue was not, that I felt that the best answer-and. as far hs I knew, no Senator HATDEN. Is the bill which passed the House antisfactory to such work had been undertaken by Congress-was to get a group of you! men to make a combined investigation for the four agencies, which Secretary MORGENTHAU. With certain exceptions. included the Comptroller, R. F. C., Federal Reserve, and F. D. I, C. Mr. Betr- Two or three items. With their backing and with their cooperation, We wanted to & into the field and ask, BE I remember it, 2,000 borrowers, 2,000 banks, DE. VINER'S REVIEW OF BANKING CONDITIONS IN A PEDERAL RESERVE taking the cases that had come to our attention, whether the small business num was getting his accommodation OF not, DISTRICT As for as I know, that did not duplicate any work that Congress The CHAIRMAN. Mr. Secretary, I would like to ask you one ques- had been doing, and it was an original piece of work. I, ns Secretary tion. I would like to be advised under what authority of law the of the Treasury, in connection with recovery, WAR trying to find out Treasury employed a gentleman from Chicago to assemble what I am just one thing-whether these complaints were justified or not, and told was a rather numerous and costly staff to make a review of bank- that was the purpose of the report. Not only was Dr. Viner inter- ing conditions in one Federal Reserve banking district and to make Institute ested, but we also got the services and the advice of the Brookings recommendations na to certain alterations of the law. Secretary MORGENTHAV. Mr. Chairman, you are referring to Dr. The CHAIRMAN, Mr. Secretary, what did it cost the Government Viner1 Secretary Mobeenthau. About $25,000. Regraded Unclassified 32. THEASURY AND POST OFFICE APPROPRIATION BILL, 1930 TREASURY AND POST OFFICE APPROPRIATION DULL, 1030 33 Senator MCKULLAR. And out of what appropriation who it taken banking conditions was a mistake. The public statement was made The CHAIRMAN, If Mr. Viner had come over to my office, which that Mr. Jones, of the R. F. C,, cooperated in the report on banking would have cost him 20 cents in taxicab hire, I could have given him conditions. Both of them told me, personally and explicitly, they a pile of letters and interrogatories sent out that would have been a had nothing in the world to do with the report on changes in the much more complete answer to his inquiries than his report indicated banking system. that he was able to make himself. Senator MOKELLAR. Mr. Secretary, may I ask one question in that Secretary MORGENTHAU. It was not the effort of one man. It was connection? Tave you the right to appoint such technical advisers the efforts of the four financial agencies of the Government. as you desire, and pay them, and if 50, out of what appropriation? The CHAIRMAN, Moreover, he recommended the abrogation of cer- Secretary MORGENTILAO. I have the right to appoint, under the tain provisions of the Banking Act of 1933 that bad been specially stabilization fund, such people ILE I need to help me in the work. requested to be incorporated by the President, without knowing the The CHAIRMAN. But there is no question of stabilization involved history of it, without knowing why it was put in, or without telling in this Viner inquiry. us why it should be eliminated. Secretary MORGENTRAU. Senator, I got him originally on account Secretary MORGENTHAU. I just do not know to what part you of the fact that I understood he was recognized as 1 of the 8 refer, but that is the whole story. of 4 men who knew more about international currencies than any- Senator MoKellar Out of what appropriation was it paid! body else in the United States, and be was retained for that purpose. Mr. Bull. Dr. Viner's salary was paid out of the stabilization The CHAIBMAN. He certainly does not know more about domestic fund. His force was paid out of the emergency banking appropria- banking and currency than anybody else in the United States. tion. Secretary MORGENTHAU. No; I am talking about international The CHAIRMAN. Just on that point of emergency banking, I notice currencies. in the hearings before the House, last December, speaking of one The CHAIRMAN. He certainly does not know more about banking expenditure in the various departments, of $1,300,000, and the fur- and currency than anybody else in the United States. ther expenditure of some $2,153,000, Mr. McReynolds stated that the Secretary MORGENTHAU. But I am very sorry to hear that Mr. expenditure was specifically authorized by the 1935 Banking Act. Jones did not know about it. I cannot understand that. At that time there could not have been any 44 1935 Banking Act ", The CHAIRMAN. I did not say that Mr. Jones said he did not know and there has not been any " 1935 Banking Act since. about it. It was publicly reported that Mr. Jones and Governor Mr. BELL He meant the Emergency Banking Appropriation Act Black had approved the report on banking conditions, and both of of 1938. I am sure that is what he referred to. It is under the 1933 them denied to me that they had approved it. However, that may Banking Act, but the appropriations made subsequently. be water over the dam but it is good as an illustration. The CHAIRMAN, He said the 1985 Banking Act." Secretary MORGENTHAU. But I am quite sure that Mr. Jones, or his Secretary MORGENTHAU. That is a mistake. office, read the whole report before it was published, and personally Mr. Briz. Yes; that is a mistake. approved it. The CHAIRMAN. I do not know of anything, either, in the 1983 The CHAIRMAN. I dug through every word of it. Banking Act, which I have here before me, that involved the Treas- Secretary MORGENTHAU. You might ask me, some time. ury in any anusual expenditure. The CHAIRMAN. Let me nsk you now: Have you read the 79 pages Secretary MOBGENTHAU. Senator, may I further explain about of a tentative draft of a banking bill that has been sent up to nal Dr. Viner? He was with me about 6 months and returned to the Secretary MORGENTHAU. No, sir. University of Chicago on the 1st of January. He was there as eco- The CHAIRMAN. How! nomic adviser to me, and this question of a survey in the Chicago Secretary MORGENTHAU. No. air. district was something else. The CHAIRMAN. Of course not. The CHAIRMAN. I know, but that was one that vitally affected Senator McKellar. Mr. Secretary, you are an honost man! the banking system of the country. Mr. Viner did not communicate with any members of the Federal Reserve Board or, as far BS I have PAYMENT TO PERSONS WHOSE NOMINATIONS ARE REJECTED BY THE learned, any responsible officials of Federal Reserve banks. He did SENATE not communicate with = single member of either Banking and Cur- rency Committee of Congress. I could have given, without cost, or The CHAIRMAN. Senator Lonergan, is there something you want to course, vastly more information than his report indicated he had say to the committee? obtained by the examination of n. single Federal Reserve banking Senator LONERGAN. Yes, sir. district. Secretary MORGENTHAU. Senator, I am sorry, but I think you have STATEMENT OF SENATOR AUQUSTINE LONERGAN been misinformed. The whole Federal Reserve Board, and the Gov- ernors, were entirely sequinted with this, and cooperated with us. Senator LONERGAN. The appropriation bill for the Departmente of The CHAIRMAN. Governor Black told me explicitly that the pub- State, Justice, and Judiciary, also the Departments of Commerce lie statement made that he cooperated in Dr. Viner's report on the Regraded Unclassified a TREASURY AND POST OFFICE APPROPRIATION BILL, 1930 TREASURY AND PORTY OFFICE APPROPRIATION DILL, 1930 35 and Labor, was passed by the Senate, the other day. Page 100, sec- destroying and tearing down of MD $800,000 building for the erection tion 2. reads: of a $90,000 post office, understanding that an allocation has already That no part of the money appropriated under This set shall be paid to any been made of $121,000 for & post office for Bremerton, after they person for the fulling of any position for which be or she has bown numbated have waited for 40 years to get a post office of their own, living in after the Benete has voted not to approve of the nomination of eald person. rented property, now, that has become inadequate because of its Senator MCRELLAR: Page 66. size, That is the main thing, just because of its size, Its location, Senator LONERGAN. This provision was incorporated in the law and the position of the post office, has never been objectionable to last year, in the Treasury and Post Office Department bills, and in the peopla of Bremerton, where they have to do work, and when this this bill, last year. so, what I would like to have done, is to have this bill was proposed, in order that the money could be used by the un- paragraph incorporated in the Treasury and Post Office Departments' employed, in order to begin work, by immediately making available appropriation bill. the Navy Yard Hotel, it had passed the House, two readings in the Senator McKellar. You mean. for instance, that if a man were Senate, and come up to this committee, before they had proper notice appointed postmaster and were rejected by the Senate, he could not that it probably would be transferred and the work would start: AD be paid if he were kept in office? they asked me if I would run down and bring the protests of the Senator LONERGAN. Yes, sir; that is it. people that had built up the city. Senator McKellar. I think that is manifestly right. When it was laid out by Mr. Bremer and the admiral of the havy The CHAIRMAN. All right, sir, yards, at the time of the founding of Bremerton, it WAS a system Senator LONERGAN. Thank you. of coordination between the havy yard proper, shown by this space The CHAIRMAN. We will take it up at the proper time. here [referring to a map], this being the drydocks in these build- ings, and the commercial business of Bremerton: the commercial business of Bremerton, or Bremerton itself, would exist because of POST OFFICE ATTE, DEEMERTON, WASH. the Davy yard and the employment and the money expended there. The CHAIRMAN. Mr. Walker. the committee understands you want Senator McKellar. Where is the present post office, on the mapl to be heard on something about the post-office building site in your Mr. WALKER. The present post office is right there [indicating], Senator MCKELLAR. Where is the proposed site? city, Mr. WALKER. That [indicating] is the proposed site. Mr. WALKER. Yes, sit. Senator MOKELLAR. Right across the street from it! Senator McKellau. Page 37 of the bill. Senator O'MAHONET. Mr. Walker, let me ask you first to give the Mr. WALKER. That is the proposed site, Senator MCKELLAR. Where is the botel! reporter your name, your residence, and what your position is in the Mr. WALKER. Here is the Navy Yord Hotel. town, if any. Senator NORBECK. How many blocks is it from the present loca- STATEMENT OF JOHN WALKER, ACTING SECRETARY. MER. tion of the post office to the Navy Yard Hotel! CHANTS ASSOCIATION COMMITTEE, BREMERTON, WASH. Mr. WALKER. You see, there is no regularity to the size of the blocks. Senator MCKYLLAR. What is the distance? Mr. WALRED. I am John Walker, Bremerton, neting secretary of Senator O'MAHONEY. What is the distance! the Merchants Association Committee, to protest the location of the post office in the Navy Yard Hotel, for the reason that citizens at Mr. WALKER From the present post office to the other post-office site, I would say approximately 2,000 feet. Bremerton, for a long time, struggled to get the Navy Yard Hotel Senator MCKELLAR. How large is the town? built. I nm here to request you to consider the protests of IL good Mr. WALKER. The fixed population of Breinerton is between 12,000 many of the people of Bremerton against the provision set forth in and 15,000, while the floating population in probably 25,000+be- H. R. 4442, page 37, the first 7 lines, They wish to enter their protest tween 25,000 and 80,000. On this little map or blueprint that I against the transfer of that property for the use of n post office. have here, the green property is the high-rental area, the blue prop- During the time of the war, when there was an emergency, an erty is the secondary, and the white area would be the residence appropriation was made and n. contract was finally let for the sum property, and this [indicating] is the apartment-bouse area. of $800,000. The building was built. It is a beautiful building. As you see, all traffic to Bremerton comes in by water. If you go where it is, well built with concrete and steel, veneered with brick. to Seattle, it is a distance of 15 miles, approximately, by water, but The cross-partitions in the building are all the same way. The you would travel 150 miles by road in order to get there. There floors are made of concrete, and rest upon the cross partitions. It is one way in, and that is by the municipal dock, right here. All is connected by an underground tunned with the navy yard. It the lines comes in here, all passenger traffic and all commerce backs up against the navy yard fence line property. comes over this dock. As you come up Front Street, a distance of Last year, or the year before, out of the Public Works fund, the three or four hundred feet, you enter the havy yard gate, into the road between the navy yard fence and the building was paved. The navy yard. principal objection ILR to the Navy Yard Hotel, therefore, is the Regraded Unclassified 38 TREASURY AND PORT OFFICE APPROPRIATION uns, 1936 TREASURV 30 POST OFFICE APPROPRIATION ATT., 1936 39 Mr. WALKER. Yes: because of the fact that, 40 or 50 years from now, after waiting for 40 or 50 years, the post office would never be would have had about 20,000, and for which they would have had to in the business center. It would not be where the people have con- pay about $20,000 apiece. centrated their effort to beautify it and to make it convenient for the The statement that the old Navy Yard Hotel cost $800,000 T think business traffic of the city, Here is the main way. The main way is A a little exaggerated, but assuming that it did cost that much, it was across a bridge to East Bremerton. The main way out into the built during the war, and it was not built with Government funds. country is here [teferring to map]. If you come here, you go to this The Bremerton Boosters Club and miny officers of the Navy sub- corner, and out this way. This is on a side street. This is blocked scribed to stock, and the United States Housing Corporation built it over here. It is blocked over this way, and it never will be on any- They put up IL steel-und-conerete structure there that is such that it thing but IL back street, backing up against the navy-yard fence, next cannot be lised for anything else. The fact of the matter is that the to the boiler houses, and next to the foundry, next to the smokestacks Navy has sent, I think, two OF three commissions to see if they could do remodeling so it could be used for Navy purposes, and they have of the foundry. The CHAIRMAN. I think we understand it, Mr. Walker, all right. all structure. recommended adversely, because you cannot change it due to its STATEMENT OF HON. MARION A. ZIONCHECK, REPRESENTATIVE, The Navy itself has taken out all the plumbing fixtures and all the FIRST CONGRESSIONAL DISTRICT, STATE OF WASHINGTON, bathtub fixtures and everything that is removable for salvage, They have no intention of using this hotel for any purpose whatsoever. SEATTLE, WASH. In 1923 they leased it to n private concern to operate it as a hotel, Mr. ZIONCHECK. Mr. Chairman, my name is Marion Zioncheck, and but they went bankrupt within 1 year. Since 1924 the only purpose for which this old Navy Yard Hotel has been used bas been the stor- 1 am the Representative of the First Congressional District of the State of Washington, that talnes in the city of Seattle, and Kitsap age of old blueprints, The impression is given that it is being nsed us County in which the city of Bremerton is located. With your per- n. storage house. Just about two rooms are being used for the storage of blueprints, and in the last 2 years, I think, some old clothes for the mission, and with the committee's permission, I would like to present unemployed. a little different view of this whole situation. I have the testimony of Admiral Peoples. He says that the hotel The CHAIRMAN. Yes. is of no value whatsoever. It is an eyesore, Mr. ZIONCHECK. I will make it ne brief ILS possible, if you will let me have that map, Mr. Walker, I want the committee to under- This is an age-old controversy there, of trying to get the post stand that my primary interest is to get a new post office for Bremer- other enst of Pacific Avenue in order to revive property values along Washington Street, which is a comparatively dead street, Anyone ton, because it is sadly needed. It is a live and growing community. They have a large navy yard there. The Post Office Department has coming to Bremerton comes to the dock, comes up here, and comes up Pacific Avenue. had submitted to it this sito and several others in the town, and the Senator Where is the hotel of the town now! postal inspector, after thoroughly going into this site matter about Mr. ZIONCHECK. There is one hotel here [indicating], and there 3 or 8 years ago, recommended two sites. The first choice was upon are several apartment houses right in this district in here [indi- Sixth and Pacific, cating] which have all moved in this westerly direction. It is a Senator NOUBUCK. What committee? Mr. ZIONCHECK. The Post Office Committee, or the inspectors. hotels. small town, 12,000 population. They would not have any large Senator NORBECE. Oh, the inspectors! Senator McCarran. Is there a commercial hotel there that is Mr. ZIONCHICK, Yes, They recommended 15 site here [pointing patronized by the traveling public? to Sixth and Pacific], which would cost $26,000, and it. would require Mr. ZIONCHECK. The only one is over there [indicating]. There the tearing down of a building. Their second choice was a site one- is a peculiar situation in Bremerton, in that the Bremers, for whom half block away from the Navy Yard Hotel site-ine., nt Gourth and the town was named. still own abont half the property. They own Park. It is just 1 block, any that it is out of the way. a bank, they own this [indicating]. and they own that [indicating]. Senator NORRECK. How long a block? They virtually own the town, outside of the havy yard, and their Mr. ZIONCHECK Well, you have it right here [referring to the chief concern is to keep up the rental values of the property east of maple They are the regulation blocks in here. These cross blocks are Pacific Avenue and revive the rental values. shorter, There is the business district, right in here [indicating], Mr. Case was sent there, subsequent to the previous postal inspec- now. tors' survey, to go into the matter, to see whether there was any Senator MCCARRAN When you say here" you refer to blocks 15, collusion OF fraud, because there is an allegation-and I do not think 16. and 177 Mr. Walker will deny it-that a fund of $19,000 WAS collected in Mr. That is right-right in there [indicating]. gas order to locute the post-office site at this place on Washington Street, stations, garages, and businesses of that pature surround the Navy On this proposed site, in fact. one man that I know of, who happensi Hotel site. It is not residential property as such. There are 71,000 to be on official in the Demoeratic Party, had $5,000 to come back square feet of land this particular pint. On these other plots they here and see that it WNS lover", and be returned $4.500 of it, because he only dued 8500 for his traveling expense, and could not Regraded Unclassified 40 TREASURY AND POST OFFICE APPROPRIATION BELO, 1986 TREASURY AND POST OFFICE APPROPRIATION BILL, 1930 41 " connect in the parlance of the street. I cannot see any justifica- of the Procurement Division, testified before the Appropriations tion myself. Committee, or Treasury and Post Office, in the House, that there was Let me go on with Mr. Case. Mr. Case cable to Bremerton and no use for this hotel, that the Navy is willing to turn it over, the held a public meeting. I happened to be in the town that day. I Tresaury Department was willing to accept it. Tentative plans are didn't know the meeting was going to be held. already drawn for this site [indicating], rough plans. They care- Senator O'MAHONET. Who was Mr. Casel not go into the detailed plans until the action of the Senate is taken. Mr. ZIONCHECK. Mr. Case was with the Post Office Department. Senator Bone does not know much about the matter. I called it to That is just within the last year. There were about 300 people at his attention, and it seems reseonable to him. That, you know, is the meeting, Mr. Case asked me to make some comment on it. I his reaction upon it. Senator Schwellenbach, a new Senator from said, have no comment to make. My only concern as a Repre- our State, is more familiar with the particular problem. sentative is to do what the people want done, and get proper postal If there are any questions, I would be glad to answer them. I facilities, which is primarily to deliver mail and get mail out." I am quite familiar with this situation. asked the people at this meeting, in order to get an expression of They can talk about the navy-yard workers going this way. Well, opinion of those 250 or 100 that were there, if they could get the true enough, about a thousand of them live in the city of Seattle: Navy Yard Hotel site and get that building, which is an eyesore, out but if they live in the city of Seattle, they get their mail in the city of the way, how many of them would prefer that na their first choice, of Seattle, they do not go to the post office; and as far as the central and 95 percent of them stood up on a rising vote of the people of business district is concerned, it centers right upon Fourth and the town. Pacific, or probably Third and Pacific, and that is merely one block Then I said, "If you cannot get the Navy Yard Hotel site, how away from the proposed. post-office site, or the present Old Navy many of you would favor the post office being west of Pacific Ave- Yard Hotel site. nuel That is, being west of this particular avenue [indicating]- Senator O'MAHONET. Mr. Chairman, for the benefit of the record, Ninety-five percent of them again wanted it west of Pacific Avenue. 1 want to call attention to the fact. that on pages 635 and 636 of About 90 percent of the population of Bremerton live west of this the hearings of the House committee it appears that Mr. Martin, street, because this is a peninsula. from the Procurement Division, testified that it was the desire of the The town must expand to the west because the water will not per- Treasury Department to procure this site, and Admiral Peoples, in mit them to expand in any other direction. response to a question by Mr. Arnold, who asked him if he had any Under the circumstances, I do not know what else I can any. The proposal of landowners, said: 44 Yes." people want the Navy Yard Hotel site. Outside of n few interests, It reads AB follows: like the Bermers, a man by the name of Mehnor and 3 or 4 OF 5 The Secretary of the Treasury and the Postmaster General, setting under others, everybody that I know of wants it the other way. the provisions of the Emergency Appropriation Act. fiscal 1985, having defer- You have an 80-foot paved street. here [indicating]. You have mined upon the construction of n post-office building nt Bremerton, Wash., and an 80-foot paved street on Burwell. That is on one side of the It having been decided that the most destrable atte for such building is D Navy Yard Hotel site, and an 80-foot paved street here [indicating]- piece of Government-owned property formerly acquired by the Secretary of the Nevy, but not how needed for naval purposes, the Secretary of the Navy If You have paved alleys on both sidos of it. You have ample space hereby authorised to transfer to the Treasury Department the property for parking. You will have ample space for beautification, if you located on the south side of Fourth Street opposite the terminus of Park Ave- want it. Instead of a $90,000 post-office building, a $121,000 post Due in the city of Premerton, Wash.. known as the Navy Yard Hotel site", and the Secretary or the Treasury is authorized to construct thereon and office can be built, post-office building within the flints of cost specified in House Report No There is a contractor in Bremerton who claims be can tear down 1879, Seventy-third Congress, record session. the old hotel for what salvage he can get out of it, such as the win- Mr. ZIONOHECK. Are there any other questions! dows and the different odds and ends, and the pipes that he can take out, but assuming that it costs $5,000, which is the estimate of The CHAIRMAN, Mr. Congressman, we are obliged to you for coming. Commander Warfield, who is in charge of Public Works, to lear Mr. ZIONCHECK. I gave the presentation just as I see it. I am not down this hotel and remove the debris, the debris will again be used concerned with sites particularly. I do think that the people are to BS a breakwater for a park and employment will be created. be served, and their interests and their desires should be considered, By the way, Mr. Walker has n. letter from a commissioner, but it particularly in view of the fact that this was considered a desirable is dated back 2 or 3 years, which says that they want it east of enough site for a hotel, that the foundations were proper for a Pacific Avenue, but every commissioner that I have talked to, every large hotel, that the needs of foundations for the post office will not elected official, and the citizens generally, and the navy-yard em- be as great as the hotel itself. ployees, want it west of Pacific. The Navy Yard Hotel site can be Relative to the argument that this was a swamp property, I reply, used for nothing else. It is an eyesore, and it was not Government true enough. The property was first acquired by the Navy for water funda that were expended, in the first place, for the building of it. purposes, before the city had its water, and since that time they have The people that own stock in it are willing that it be torn down, had no need for it. because it is & reminder to them of money badly spent. I do not know of any legitimate argument against this. Admiral Peoplem, Regraded Unclassified 42 TREASURY AND POST OFFICE APPROPRIATION BITS, 1934 TREASURY AND POST OFFICE APPROPRIATION BILLS 1936 43 It 18 whatever the committee desires, not my desire. I just wanted that the enlisted mini should suffer logo of their reentistment allowance and other undercentry dechieting such AP I have indicated. to make this presentation. The CHAIRMAN. We have both sides of the question now. From the of requare deallog. I hope your bonorable committee with delete the lines referred To on page 21 of the Trensury-Post Office bill Mr. WALKER. Mr. Chairman, if you do not mind, I would like, for Thanking you for your Invoiceble Lum, the record, to any that I wish it understood that the protests I car- Sincerely yours, ried represented the Navy Yard Y. M. C. A., the Lutheran Brother- The chpping referred to is as follows: I. H. Hourse. hood, with their welfare center, the Knights of Columbus, with their welfare work and their welfare center, the banks of the city of Brem- MAYBRICK RIDIOULES REQUEST to ' BAYE ARMY, NAVE From Rep erton, three in number, the Bremerton Merchants' Association, con- sisting of 90 percent of all the merchants within the city limits of PEOPLE ARE UNTTING - NOTHING, RATE TEXAS ISADED Bremerton; that it also represents Father Cameron, of the Catholic (Ity the Associated Pross) Church, who has spent a lifetime there ns the father in the district and has had an interest in building up that community; that it rep- A House military WAS advised restonlay by Army and Navy resenta, besides that, numerous of the local citizens, civie and coni- spokermen by act against no increasing flow of phipagable serking to enlies American soldiers and sullors into ranks of communism. munity organizations that have an interest in the city of Bremerton: At the SADUS time. however, E member of the full Millery Committee, Rep. that it represents the people who pay taxes in that city, three times resentative Maverick (Democrat), Texas, cidiculed suggrations that corrective greater on the proportion of the marked lines than all the rest of legislation was necessary, because, he suld, the American people are getting littery over bothing. the city of Bremerton put together; that not only those people pro- test, but the people that are interested in all of the welfare work that There are only 24,000 communists in the country, Mavorick sold, and they are all crackpots" and a lowy crew." is carried on in connection with the navy yard. War and Navy Department officials unserted there was II real need for The CHAIRMAN. All right, gentlemen. élactment of a bill by Representative McCormack (Democrat), Massachnsetts, Mr. WALKER. If the committee would care to see any of these pho- to stop propaganda seeking to induce persons in the armed forces to break laws or regulations. tographs, I will show you a photograph of the hotel itself In A letter to the full Military Committee, Secretary Branson asserted that (The following letter was submitted by Congressman J. H: communiatie literature In Increasing quantities had been distributed to the Hoeppel, of California, for the information of the committee:) Navy. Existing law was Inadequate $ curb If, he said, Brig. Gen. Harry E. Knight sald that communists are more activé In Army Hom. CARTER GLASS, circles than they were a year ago, Chairman Treasury and Post Office Department Subcommittee, Comdr. Sammel Clements of the Xavy added that some communiste III Committee on Appropriations, United States Senate, Washington, D. d. erature orges comrades" to work themselves john monitions plants in time DMAN SEXATOS Chass: I um very surry that your committee's time to so limited of war to concentrate on subotage. that I could not be granted an opportualty to appear personally; therefore I am The MeCorunck bill Was termed by Beary L. Rosevelt, Asststant Recretary submitting to you briefly the Ideas which I had in mind when I requested of the Navy, Decessary to prevent persistent and continued attempts to Doute the naval forces to illaibey laws and regulations." permission to appear before your committee. WIll you kindly refer to a clipping herewith from Today's paper in reference Maverick then tossed in this remark: to the threat of communism within the runks of the enlisted personnel of the If the colonela and generals had Loct, courage, loyalty. and brains enough, Army and Nayy? After a service of 2 years in the Army, 1 am convinced that they would keep the soldlers from dishoyalty." communism will not thrive In the Army as long as the colleted men are given fair consideration. At present fair and Just consideration in not being estended hi entisted men, AMERICAN FEDERATION OF GOVERNMENT EMPLOYERS, and I do know (lint there la considerable disguisfaction, but not communism. The Treasury-Post Office bill. now before your committee, on page 21, Unes 17 Washington, D: 0,, March 1, 1985. to 21, Includes a provision which will prevent eulisted men from receiving their Hon, CARTER GLABB, reenlistment bondses for another year. In other words, the enlisted men will be United Blates Emale, Washington, D. C. the only individuals who will suffer the provisions of the economy art pp to the My DEAR SENATOR GLASS: In order to expedite the work of the Appropria fiscal year 1997. tions Committes In handling the Treasury-Post Office bill an oral presentation In justice to the enlisted meh, I hope your honorable committee will delete these will not be necessary. Unes in order that the enlisted nen may be accorded fair treatment complated However, It would be extremely approciated if you would consider and with other branches of the milliary and civil service. incorporate in the proceedings of the committee the attached wemorandum The enlisted men who receives $9 per month less then does the boy in the which reflects the point of view of the American Federation of Government C. a C. who works only no hours per week, while the enlisted mes la on duty Employees, with respect to the nonpayment of several hundred present (I) and available every hour, day and night, feels that this is a discrimination, ployees of the Government working In the Aleohol Tas Vult of the Treasury Just a few days ago the Senate passed a bill to provide a 25-cent deduction Department. per month Erim the already low-paid enlisted men, who receives only $21 per Respectfully yours, E. CLAUM BANCOME, President. month. It is 107 observation that these petty discriminations directed as the enlisted met will do more to create communition, If such la really a menace, than will any AMERICAN FEDERATION or GOVERNMENT EMPLOYERS, propaganda from outside sources. Only yesterday, as I understand, your committee approved of 1940, which Washington, D. e neeks to grant quarter and subsistence (pereases to officens. 1 cannot under- Statement of E. Clande Babonek, president American Poleration of Govern stand this, and do not think It is fair that the officers should receive increased ment Employees, before the Senate Appropriations Committee runk and promotion, Increased pay and substatence. and other emoluments, and Mr. Chairman and gentlemen of this committee, we are here to ask. justice for some 1,100 OF more employees of the Alcohol Tax Unit who have been Regraded Unclassified 44 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 45 working without pay alove December 1, 1934, as a result of the wurding of the The employees concerned have been performing faithfully the duties Assigned rider on last year's deBelency bill which withholds mobey from these men. them to empection with the important Work of collecting the revenue for the The Attorney General roled to the case of these employees that they might United States. The employees enceroed are victima of e provise in the lawfully be retained in their positions but that they could not be paid Trons any Emergency Appropriation Act of June 10, 1994, reading BE follows: appropriations already in extatence unless they were newly appointed to each In view of the foregoing facts It will be correct to my that at the time the positions after passing new competitive examinations. The Secretary of the Bureau of Prohibition was transferred from the Treasury Department to the Treasury realized that these men's services were essential to the law-enforce- Department of Justice on July 1, 1080, Its personnel was entirely a civil-service ment work of his agency, and that the Alcohol Tax Unit would be disrupted personnel, recruited In full compliance with all the laws and regulations por- If they were summarily ousled and replaced by toexperienced meu who has taining to the civil-service system." somewhat greater facility In the nae of words. Tt wils generally recognized, 1 This amendment refused payment for services performed to approximately think, that the Civil Service Commission's examination, required by the de- 1,300 employees of the Treasury Department from December 1, 1984, to June 30, ficiency MIII rider, for the most part had no relation whatsoever to the work 1905, because of mistaken impression that these employees had not qualified für on which these mou were engaged, and that success In passing the examing- their positions through civil-service examination. The fact is that all of them tion afforded DO guaranty whatsoever that there would be equal success in employees had duty qualified under civil-service laws and regulations, and the holding down B job In the Alcohol Tur Unit. Specifically no credit was given Attorney General or the United States has held that their present status IN the efficient service on the Job. legal and regular. You are, of course, familiar with the history of the case. Consequently, in the public interest, these men were retained in their posts, The Executive order of June 10, 1933, Which had to do not only with the and have gone HB working efficiently stuce December 1, without one cent of pay. consolldation of the Burean of Prohibition with the Department of Justice, trut Bet since they are not in general high-antaried men, and contrary to the gen- with general reorgantention within the Federal service, provided as follows: eral Impression, did not accomulate wealth as a result of their work. many "All personnel employed in connection with the work of an abolished agency of them are now nearing the end of their resources, and some unfortunately or function disposed of shall be separated from the service of the United States, have been forced to quit the service because they can no longer carry on and except that the bead of any successor agency, subject to my approval, may, support their families without money, morely in the anticipation that some within a period of I months stree the transfer or consolidation, resppoint any time in the foture they may be paid. As the representative of the American of such personnel required for the work of the successor agency without Federation of Government Employees I submit that the United States Gov- reexamination or loss of civil-service status." ernment has no right to subject these men to Intolerable hardships of this The Attorney General In construing the Intuguage of the above-quoted provision sort, or to expect them to work Indednitely without compensation; and the has given the following opinion: public reaction has satisfied our federation that the people of this country "The language of the paragraph in question la plain and unamblguous. It de not want any euch unfair condition to continue. speaks for itself. Under the provisions of the paragraph the personnel employed There 16 DO question In my mind and DO question as to the attitude of my In connection with any abolished agency or function disposed of are separated organization, that these men ought to be restored to a pay status at the from the service, but the head of any successor agency Is authorized to reappolet earliest possible moment. After careful consideration of the situation we within a certain period without reexamination or loss of civil-service status, have come to the conclusion that the quickest and least embarrassing way of any of such personnel required for the work of the successor agency. The pur- bandling It to to include in this appropriation measure nu amount sufficient pose of this provision, as Its language clearly indicates, In to enable the heed of to pay them. This amount, we have been informed by Treasury officials, would the successor agency within a limited period to make resppointments from be about $1,700,000. If this appropriation is Jueluded In the bill, with a proviso among such personnel without regard to the Civil Service Act and rules, Not that It be made available immediately, this distressing situation, a situation even by the remotest implication of the language employed can LE be entil that which the Government of the United States onght in all consélence to correct, It deprives or attempts to deprive these who are not reuppointed within the would be promptly remedied. prescribed period of the civil-service status possibled by them at the time of their separation from the service." UNIFORMA FOR QUARDS When the Bureau of Prohibition was placed within the competitive classified service on April 1, 1927, the employees then serving In the Bureau of Prohibt. I should like also to remark that the guards at the Bureau of Engraving tion were not blanketed Into the service but were required to quality in open and Printing, unlike guards In other governmental agencies, are required to competitive examination. Their competitive classified status was carried over boy their own uniforms, and that this discrimination does not seem justidable. with them In the reorganization of August 1932. We ask that you insert a provision that uniforms for these guards may be These employees have been earrying on the difficult and dangerous task or purchased from the funds available for the Burenu-a procedure necessary protecting the Government's Interest In The alcobul-tax collection and protection because the language of the appropriation measure earrying funds for that work. The employees have now been without salary for more than a months Bureau does not now make them available for such A purpose. No additional and their situation has become desperate, We bespeak early and favorable appropriation is needed, and a group of very low-paid employees would be action by the committee, no that these employees, who have demonstrated their afforded Justice and a substantial Improvement to their status. loyalty to the Federal Government. may receive the compensation they have earned during this period of time NATIONAL FEDERATION OF FEDERAL EMPLOYERS, Sincerely. Washington, D. C., March 6, 1935, LUTHER C. STEWARD, Président. Hon CARTER GLASS, Chairman Senate Appropriations Committee, United States Capitol, Washington, D. C. DEAR SEVATUR GLASS: The National Federation of Federal Employees earnestly urges favorable action by the Senate subcommittee on the Treasury- Post Office Departments' appropriation hill of the Item of $1,763,827 requested by the President to be made immediately available for personal services for certain employees of the Treasury Department. Regraded Unclassified 46 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 THEASURY AND POST OFFICE APPROPRIATION BILL, 1936 Premint enforcement offects of the Alpohed Tax 1/mit ICÃO occupied escapted positions in the Prohibition Unit Trrasury Départment. prior to Apr. 1, 1927, Present enforcement officers of the Meshal Tue Unit who persipled and who have acquired status as result of competitive 1 politions in the Prohibition Unit. Treasury Department, prior to Apr. I, 45, Nons held since that date and use have required efeit-service status OF result of computitive tions held since that defe-Continued Date of pro pointment Date of per Present postison betings) apr Name from cneo patitive Name Preside positivo pointment from ma- pelitive mamination Investigation too charge Get. 16, 1929 Coyte, Robert W Investigation Jan. 31,1020 Saumaki, Harry Henneberry, Barold L Investigator Apr. 1,500 Rest, Josish Investigation to charge Feb 16,1929 TRIMY, Michael de Mar. 11,1950 filses, Frank I Investigator Oct. K.1928 Tatro, Joseph A do Ant. 25,122M Investigator to change Feb 7,1929 Fant. Robert D Wasver, Henry P. Investigator In charge Feb. 14,1929 Investignent Apr. 1,1980 Oregory A Bird. Edward BJ Investigator Sept. 1924 do Nov. 18,1950 L. Dene Bewditch, Edward A/ Benise Investigator May 1,192) do Feb. Shirley, Laidlurt 0 De Annelow, Thomas Investigator In charge Mar. 8,1920 do Jan. 28,1928 Childester, Thurman L Exent. Haruld W Investigator Oct. LICE do Feb. 28,1000 Corporan, Dan H. do Graves, Buy B. Mar. 19,1030 do Mar. 1,19% Chodfrey. Reland A de Hall, John 7an. 16,1829 do June 22,1991 Herr. Cynia A Hitcheock, William do Mar. 24,1991 Kelley, Edward F do Jan: 1939 Hill, Hurr de Fab. 20,1900 do Mar: Johnson, Julins N do Kent. James MI Jan. 21,192) de Jan. 31,190 Janes, Orville Londan, Dennis T do Feb 14,192% Mar. L 1920 Montgomery Julin G de Lydie. George B.: de Apr. 1,1929 do May 4,1829 Paris. Edgar DJ do MacBraym, Wintred o Isn IL 21,1929 da Fab. 28,1920 Rapey, Hurry W An Murphy, Themas F Mar 1,1929 Norton, John E de Feb. 27,1099 Lessard do Feb. 13, 1020 Benter Investigator Oct. 27,192N Dunican, William E Palias, Fellx o Assistant supervisor Apr. 10,1929 Investigator June 1029 Barnhart, Charles 21 Bullivan, Walter # Investigator Oit. 16,1025 Investigator to charge Jan. 14,1020 Beauter, Arthur D. do Hanson. Martin o. Inn 6,1930 Armitam. Vietor L Benior Investigator Feb. 1929 Cambalists, Michael P. do Jan. 0,1930 da May 1,1920 Gould, George , do Bernsteln, Carlos M Get, 23,199 Investigator Feb L 19,9 Hubert, Frank E.º do Brinckerbuff, Cuttlord Det. 1,1939 din Feb. 8,1020 Inlar, Samual OF de Inn 1991 Wroderick, James 7.1. Brown. Joseph IL do Sept. 18,1999 Kramer, George C. do Feb. Carrico, Andrew, Jr. de Jan T.1927 Langford, Harold A do Jan 21, 1030 Cussck. Warren E. do Feb. 4,1929 McCandless, Park H. do Get. 16 1929 de May 1,1200 Malloy, Edward o do Daty. William E.1 Sept. 1930 do Oct. 1,1307 Shane, Harry C do Apt. 24, 1028 Davis, Richard l'Ancelica. de Mar. =1, 21,1000 Uptegraff, Frank B. do Oct. 10, 1928 Deardoff, Edward EX do Dec. 1,1925 Uptegraff, Thomas A. do Do. Feb. 26,1980 Weible, Charles EL! Delone. J. Clark 1. de do Jan. 9, 1900 Dirouse, Jomph M.I. Feb. 4,1930 Wills, Prancis V do de Aug. 14, 1928 Dec. 21, 1029 Yours, Robert EL do do Jun. A, 1990 Duen, William E. Jr dia Feb. 4,1920 Haddens, Warren A Asststant supervisor July 1905 Fellx, Prederick Forbes, Charles M de Jsb. 7,1000 Wiekham, John H Investigator in charge Dec 1,1925 Bensor Investigator Feb. 1,1020 Alexander, Nathaniel C.1 Investigator Feb 10, 100% Frayne, Jomph A Investigator Feb. 4,1009 Arnold, Alessander M du Jan 16, 1929 Gallsaber. John P.I. Clienter, illiam H.¹ do Mar. 16, Banks, John B.) do Dec. 10. 1029 Gunnison, Laurence W do May 8,1929 Barton, John M de Jan. 20, 1900 do Apr. 5,1029 Hishop. Louis I.I do Die 1924 Hall. Charles L. de Msr 19, 1959 Burgess, Batural C. do Do. Hanlon, Arthur May 16, 1000 Calley, Myron M do Apr Hartwall, Perley B. de Mar. 21,1930 Clash, John TO do do Die. 16, 1020 Henry, Lawrenes T Hildrath, James W. Mar. 2,1930 Cooper Tabe P. in do Oct. 14, right Journesy Henry Y do Sept. 8,1928 a Crush, William B do Nev. 6, 1025 de Mar. 7,1999 Dirsing, John L' do Dec. 1,1928 Kenting. Elten T Feb. 4,1929 Gotar, Lelloy L do do Jan. 10,1900 Kelly, Francis Kendail, Harry W de June 21,190 Gridio, Cyrll T. do Dec 1925 Lennon, Julio P. Apr. 2,1000 Harman, George 0 do de Feb. 18, 1932 Mar. 1981 Harvey, William R Tarpton. Charles W3 de do July 1,1931 MeCann, William 7 Mar. A,1680 Hood. Chasser A.F. do do Dec. 1, 1928 Hunt, James W Do Molntyre, Ambrose AS de Fab. 4,192 do Menty, Joseph J., Jr. do Feb. 11,1920 King. Marion A. R do Dec. 16. 1929 Feb. 1939 London, John 2.1 do do Dec. 1. 1928 Morriney, James BA Mullaner, Charles A Jan. 25,1920 Lampkin, Frank DA do do Do de Mar. 19, 1930 Mitchell, Lawrence G.1 de July 1,1901 Murphy, Edward 2 Newman. Harry do Feb. 1930 Moore, Tames L. de Jan. 2,1930 Newton, Revenued M do May 1929 Mulhall, William B du Mar. 15,1929 O'Brien. William June MA 1931 Owans, John R du Feb. 0,1932 do Jan. 1930 Pan), David B Olson. Herbert Wire technician. do Dec. 1,1928 Investigator May 1% 1929 Relledge I. y.) do July 1931 Patton. Harnid TI Nov. 18. 193 Beharts, Waiter H Wire technician Dec 1928 Isine K de Jan 7a. 100% White, Samuel o Respir, Petre de Investigator Do de May 1981 Wilkins, Thomas C.I. do Do. Rine, Juhn DA Dept. 1929 Wood, William E. do July IT, 1929 Riam. Terry 5 do Begior investigator Jan 16,1929 Pasmilation, John D District supervisor Peb, a 1929 Smith. Lawell R Spate, o Inveligator June 10. 1930 Loshier, Ratle K Investigitor la charge. Jan. 16,129 Scevenim, Herman W. de. Petr 24,1990 Compingham, Wm. F de Apr. 12, 1925 do Pain Tunkay, Wm. MeK do Feb. 19. 1929 John P.O. 1 Relectated as regulative Inspectors, Bureau of Industrial Alcohol, Pebruary-April 1924. L Relastated as regulative inspectors, Bureau of Industrial Aleohol February-Aprll 1924. Regraded Unclassified 48 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 TREASURY AND POST OFFICE APPROPRIATION BILL, 1936 49 Present extorcement officers of the Alcohot Tar Unit scho occupied excepted Present ex/orcement officers of the Alcohol Tue Unit who occupied coropted positions in the Prohibition Datt, Treasury Department, prior to Apr. 1, 1937, positions in the Prohibition Unit, Treasury Department, prior to Apr. 1. 1927, and icho have acquired status of result of competitive caumina- and soño have acquired civil-servies status (M result of competitive cromina- None held alnoir that date-Continued tions held since that date-Continued Date of pro- Date of pro- bational ap- fational up- pointment Name Name Present podtled from com- Present position pointment ham ocm- petitive petitive examination examination Investigsion Feb. 4,1000 Boully, Arthor Q.I. Investigator Aiglim, Frank E Oct. 19. 1938 Von Hatzhelder, Linns de May 1929 Back, Kenneth 0 e Cowan, L. Morell Mar. 30, 1991 Nov. 1,1028 de Claffey. Jeseph II do do Get. 1,1998 Murrill, John W Sept. 1929 White James L Assistant supervisor. Evans, Geo. R Flaberty, Hugh E do Feb. 11, 1939 Half, William L. Investigator in charge Mar. 4,1930 Apr. IA 199 Investigator Jan. 25, 1929 Hommes, Inc. F de Mischell, John J Wire technician Jan. 0,1980 Kentatter, Maredith BA do Jun. 16, 16,1900 do Mar. 14, 1932 Taylor, Froderie M. Investigator Dec. 1,1028 Ward, Edw. M Ray, W. L Amistant supervisor (Ref.) Feb. 15, 1939 Dunean, Harvey L Herrlek, Ralph E Investigator In charge Jan. 23,1929 Investigator is darge Nov. 7,188 de Mar. 30,1925 30, Loss Bearell, Barrise) D do Feb. 2,19m Wire technician July 1,1927 Blenona, Gustave J. Brown, Date P.I. Investigator Jan. 7,1029 Investigator Dec. 1,108 Cola, Louis F Feb. L1929 Destribe, Howard e Nov. 72,1998 22, do Mar. 10,1020 Bennett will M.A. Wire tretruidan DeArmond, Norval W Investigator Nov. 1,19% do RIIL, William F.1 Fab. 1,1920 Browning, Incrian as Date 1,1228 de Campbell, Frands J do Bricills, Jacob E do July 1,1999 Cumerly, Bay , do Do. GIII, Paral K. Jan. 7,1930 Feb. 11, HERE de Dowd, Victor , da Harris, Thomas L. Fah. L1929 do Feb. 1,102 de Knspp, Other D. Jan. 24,1000 Ford. Hobert W de Kombon, William IL da Dae. 1,1028 Pullan, Ulous Feb. 1,1999 May 6,1931 do Kominakis, James do Rowden, Thad W.I Feb. 1,1930 do Jan. 1,1980 John , da Small, George P. May 5,1928 do de July 14,1981 Larsen. Arthor R. Butterfield, Arthur Jan. 25,1630 do do Dec 1,1928 McCode, lohn Whitensek, Lester o Feb. 1,1930 de Do. do Wright, Wellington Jan. 13,1930 McCellum, John, It Jan. 11,1930 do Miller, Walter T do Campbell, Charles RJ Mar. 20,1980 do Mills, Benj. F de Dec. 1,1228. Depew, Charles E.º Mar. 1930 do Nabalsick, Albert PA dn Ave. 2,1998 Eastland, Howard W Jan. 7,1029 do Shallerup, Harry W de Die. 18, 1228. Hermann, Nicholas N.I. Itims 28,1930 do de Feb. 14. Suma. Glenn WD Hoselton, Reginald J1 Jan. 7,1929 do de Oct. 4,1928 Knotson, Martin A June 17,1930 Frank L. White do Investigator in charge Mar. Lippold, Burton V I, Dec. 1,1228 Chaptian, Ells 8. do Auderman, Emile Investigator Jan. 9,1950 May, Gos Jan. LIVE do Bryant, George F.I. do Nov. 16,1928 Nelson, Nethan H. June 25,1900 do do July 1,1909 Corper, Clari B Peterson, Edward L1 Nov. 26,1935 do Guinn, Walter o da Del 18,1028 Bhowdes, Robert L'. Feb. 16,1981 do Holland, Lake do Jan. 7,1900 Bensun, Charles R.A. Jan. 7,1939 de Fab. 16,1000 Hudsreth, Gie Schroeder, Herman W.I Feb. 17,1981 do do de Oct. 10, Silverman, Matrice May Landry, Edw. o do Newman, Wis. a da Jan. 31,1081 Splawn, Newton Nov. 1,1225 do do Nov. 24, 1938 Viltala, Matt May 14,1929 Schreeder, Bidney de de Mar 15,1900 Weld, Kenneth LA Mar. 16,1980 Smith, Edwin y de Jan. 14, Williams, Clarence W.4 Feb LIMI Wright, Willy H do do Tuttle, Robert E Distries supervier Mar. 7,1939 Wood, Humar F. Jan. 4,32 do Hearington, William D Investister is charge Feb. 10,1990 Baker, Lemuel L' Oct. 14,128 do Andrews, Jumes E Investigator Jan. 6,1930 Coheen, Burton W., It June 1,1901 da Austin, E N Dec 1,1038 Drew, Harry 2 Feb. 1929 do do Barrenbrugge, James D de Feb. 1,1900 Lawrence, David B Dec. 1,1028 do Clark, Frank DA Del. 10,1998 Reeves, Clarence E. Mar. 1,7000 de do Day, Williams TV Mar 2,1938 Seaver, George H. July 1,1980 de do Grubbs, Walter c. do Peb. Sweet, George H Jan. 13,2029 do Jan. 20,1981 Tingle, Benjamin B. Jan. 18,1929 Kimsey, Jompt: EL do do MePherson, Samuel 0,1 do July 1,1229 Urs. John E. Aug. 2,1938 do Merrick, Romatine Q.º der Feb. DL Mar. 18,1930 Myrick, Kivir W. de ARE 24, Souther, Frank L de Jan. at, a Reinstated na regulative impectors, Bureau of Industria] Alcohol, February-April 1024. Atrickland, e do Gel. 16, Wright, Howard P Benior investigator Mar. 1. Kinnsird, William H. Investigator in charge Peb. (10) July 21,1998 The CHAIRMAN. The committee will adjourn until Monday. Disney, William B. Investigator Grime, George B. do Did 4,1229 (The hour of 12: 45 p. m. having arrived, the subcommittee on- Larkin, Edumpt & de Dec 15,1008 Phillips, Jumph do Apr. 2,1229 nounced that the hearings were closed, and adjourned until next Shodner. William B. do Jan 1,109 Monday.) Shages, Twyman of do June 16, Smallwood, Arthur M. do 7sa. 27,1001 Statten, Edward M do Apr. 7,1980 Thomas, do De Brusse, Wither E Assistant supervisor (Enf.) Peb. 18,1000 Nam, Ellot Investigator in charge Apr. 1,1000 Anderso, Charles H. Investigator Die. Baned, Utrie il do Sept. Holock, Helph W. do Apr. 19,1920 Retostated - regulative inspective, Bereau of Industrial Algohol, Potruary-Aprit 1934. Regraded Unclassified 6 STATEMENT OF SECRETARY OF THE TREASURY MORGENTHAU TO THE COMMITTEE ON APPROPRIATIONS OF THE SENATE, MARCH 2, 1935. On February 11, 1935, the President submitted to the Senate a request that an additional sum of $1,763,827 be added to the Treasury estimates for appropriation for next year, and that this sum be made immediately available for payment for personal services after November 30, 1934, as follows: Bureau of Customs $ 3,000 Internal Revenue 1,739,827 Narcotic Bureau 11,000 Secret Service 10,000 The purpose of this request was to enable the Treasury to pay the salaries of approximately 1,300 employees of the several bureaus specified from December 1, 1934 to June 30, 1935, no funds being now available for this purpose because of the following proviso which was incorporated in the Emergency Appropriation Act of June 19, 1934: "Provided, That after December 1, 1934, no part of the appropriation made herein or heretofore made for the fiscal year 1935 shall be used to pay the salary of any person formerly employed as investigator, special agent, senior warehouseman, deputy prohibition administrator, agent, assistant attorney, assistant prohibition administrator, senior investigator, deputy production administrator, storekeeper or gauger, or any other position in the Prohibition Bureau or Alcoholic Beverage Unit, Department of Justice, who was separated from the service of such Bureau or Unit between June 10, 1933, and December 31, 1933, while in any such position in the Treasury Department, unless and until such person shall be appointed thereto as a result of an open, competitive examination to be hereafter held by the Civil Service Commission." After obtaining the advice of the Attorney General as to the effect of the proviso in question, and the decision of the Comptroller General with respect to the availability of Treasury appropriations for personal services, it has been determined that beginning December 1, 1934, no salary payments may be paid from existing appropriations to the several Regraded - 2 - groups of employees covered by this estimate. However, the Attorney General held in his opinion dated November 30th, 1934, that - "This proviso does not in express terms direct or require removal from the service of the employees included within its scope. Nor does it, in my opinion, do so by implication. The positions occupied by these employees and the salaries apper- taining thereto were created and established under general statutes theretofore enacted by the Congress. "The proviso does not purport to abolish these positions. On the contrary, its language clearly indicates that the Congress did not intend to abolish them. It provides only that after December 1, 1934, no part of the appropriation made under the Act or theretofore made for the fiscal year 1935, shall be used to pay the salary of any employee falling with- in its provisions unless and until such employee shall have been appointed to the position occupied by him as a result of an open competitive examination thereafter to be held by the Civil Service Commission. "In view of the foregoing, and since it appears that the employees involved had been appointed to their positions in the Treasury Department pursuant to statutory authority at the time of the enactment of the proviso, it is clear that the proviso does not change or affect their status as employees in the Treasury Department, except with respect to the payment of their salaries. "Since this is so, it is my opinion that the proviso does not require the Secretary of the Treasury to remove these employees from the service, either by outright separation or by a partial dismissal in the form of a furlough. For the same reason, and as a necessary corollary, it is my further opinion that they may be continued in the service in a duty status without pay." There were two outstanding reasons why it seemed to us urgently necessary to retain the services of the employees in question: (1) There were thousands of cases in the various stages of investigation by these employees, and to dispense with the services of so large a group would have meant an incalculable loss of revenue as well as the practical abandonment of criminal prosecutions then in process. Regraded Unclassified - 3 - The advantage of the headway already gained would have been lost and it would have been necessary to start all over with & new and relatively untrained force, facing the handicap of uncompleted and therefore unsuccessful previous attempts in the difficult task of eradicating traffic in illicit and non-tax-paid alcoholic beverages; (2) Although, as I understand it, the Civil Service Commission announced new examinations for positions in the Alcohol Tax Unit promptly after the enactment of the Emergency Appropriation Act, it was not until November that the rating of examination papers was completed so that eligibles could be certified to the Department for appointment. In other words, the Department would have had a period of less than one month to make new appointments to replace the old men and to train the new men in the performance of their duties. The work of investigators in the Alcohol Tax Unit is complicated and difficult. It requires months of experience before green men can begin to do their work with reasonable effectiveness. To have dropped those of the old force who failed to qualify on the new examination would have put us under the necessity of attempting to enforce the liquor laws with a green and inexperienced force and would unquestionably have resulted in a collapse of the enforcement effort which the Department was making, at a most critical time. This in turn would have resulted in an increase of illicit operations in every part of the country and would have created a condition from which it would have taken many months to recovere Regraded - 4 - There is also a third reason, which is in my opinion of very great importance, and that is the question of integrity of the Civil Service system as it applies to Federal employees. The group of employees affected by this proviso were recruited through regular Civil Service channels and had, with scarcely an exception, acquired Civil Service status through open competitive examination, plus a very search- ing character investigation made by the Civil Service Commission which resulted in the elimination of a majority of the candidates who had successfully passed the written test. This is the first time since the enactment of the Civil Service law more than fifty years ago that the Congress has undertaken to encroach upon the jurisdiction of the Civil Service Commission in the administration of that law, or to undertake by statutory enactment to destroy the Civil Service status and right to employment of a group which had successfully met and complied with the law and the regulations of the Civil Service Commission with respect to eligibility for a particular type of employment. I can think of nothing more likely to demoralize and discourage the rank and file of Civil Service employees generally than for them to realize that the eligibility for employment of any group of employees may be destroyed by congressional action at any time. Regraded Unclassifie 7 March 4th H. M. Jr. phoned the President 9:30, told him that Sterling went down to 4.74 and Francs were up to 6.674. He told the President that we have $18,000,000 worth of gold in London end it was H.M.Jr's. thought to begin to offer Francs in Paris and ship gold across to pay for it, with this in mind, that if the next two or three weeks gold began to rush out of this country all the writers in the financial papers would say that people were scared and have begun to ship gold across. The President agreed. Financial attache of the French Embassy by the name of Jean Appert came in to see Mr. Coolidge. He wanted to know what we are going to do about the fall of the pound and H. M. Jr. told Coolidge to tell him to make an appointment through State Department to discuss this matter with us. Regraded Unclassif 8 March 5th Governor Murphy of Detroit came in to see me and told me that he had spent all of Sunday with Father Coughlin and the only person he has any confidence in in Washington is myself. He thought I ought to, in some way, keep in touch with Father Coughlin. Murphy said that it is entirely due to me that last Monday night Father Coughlin came out in favor of Roosevelt. Regraded Unclassifie 9 March 5th H.M.Jr. called in Chief Moran and told him not to do anything about making an investigation on the private life of Huey Long. He told him to forget it. the 8523 7,00 regard to activity 0902 open earner m the 1033 E. Enties declared that the beet M M hundle Code is PUB place the compensibility & See Program board as W 2001n and 25 provide for 9 addition of FEXA of Reserve S advise with the Invoice Ste 5. week 600 The VenIce against via 2. V, in. VIII form --- agreement DI provided TO the Website 20.00) TMR wt the Secural Insure and LTD - or Name mole control the open market operations. 1. 5. - VIA madital wyset at the fill that Vr. ww Filth. Colophoned R. Crose on and This B - of YOUR which he Yest pith E. Cardinal of the DATE 12 new It is altrohal herevith. Copyrightics 000 - New with Mr. Proter of the Bank WE Le 01% attached hereith. E ST the zunk of France was N 1957 us their correction the attached M will 5. 9. in phones The President. Se 101d 2016 modive that 50 bad RD Enformation (If) the Standlism stan Pash which is very important and very *pecuraging, The Twice of factor lold the Federal Reserve 10 New Tark that 40 they 2010 tea Hillion dollare weth of Prode and VASA Starting and Priday they spent 15 Millins dollars in Sherling, This talk about their wenting to 1st the THE EW 54 the Misk. The other thing tald the Prestdent PER then the countries bed A meeting to decide thay was to the phonosives form stating. This 12 7677 intervating. 1014 the Provident the during the day storling rect Prio 4.78 to 4.77 and Propic stayed Tamby UNIT d'e 2001 THE Shin 86 said 12 AND sales to not if Prince Smill 87 above 4.63 29 will sell Princes with gald, phoned Smill Manley who to on *WE washitten of the See York 0148 Federal 70002 project. the selted Mr. to enke decision on the extract wording 2020 insurance 58 10. and not the senting at the Tatte Sugss be wanted to have the report MORE Yes, Vanley 10 March 5th 1995 H.M.Jr. called in Coolidge this morning and discussed with him the statement made by Eccles on the hill in regard to authority over open market operations. On the hill Mr. Eccles declared that the best way to handle these operations is to place the responsibility in the Federal Reserve Board as a whole and to provide for a committee of five Governors of Reserve Banks to advise with the Board in this matter. About a week ago Mr. Eccles agreed with H. M. Jr. and others, (and this agreement was presented to the White House) that three members of the Federal Reserve Board and two Governors of Reserve Banks would control the open market operations. Therefore, H. M. Jr. was quite upset at the fact that Mr. Eccles had broken faith. H.M.Jr. telephoned Mr. Crane and asked for a copy of the conversation which he had with Mr. Cariguel of the Bank of France yesterday. It is attached herewith. Conversation which Governor Harrison had with Mr. Fraser of the Bank of International Settlements is also attached herewith. Mr. Cariguel of the Bank of France telephoned Mr. Crane to-day and copy of their conversation is attached herewith. At 9:15 H. M. Jr. phoned the President. He told the President that we had some information on the Stabiliza- tion Fund which is very important and very encouraging. The Bank of France told the Federal Reserve in New York that on Thursday they sold ten million dollars worth of Francs and bought Sterling and Friday they spent 15 million dollars in supporting Sterling. This talk about their wanting to let the thing go is the bunk. The other thing H.M.Jr. told the President was that the Scandinavian countries had a meeting to decide whether they want to free themselves from Sterling. This is very interesting. H.M.Jr. told the President that during the day yesterday Sterling went from 4.73 to 4.77 and Francs stayed at 6.68. To-day they are just the same. He said we are going to continue and if Francs should go above 6.68 we will sell Francs and cover with gold. H.M.Jr. phoned Basil Manley who is on the committee of the New York City Federal Power project. The President asked Mr. Morgenthau to make a áecision on the contract pending and inasmuch as Mr. Morgenthau did not sttend the original meeting at the White House he wanted to have the report which Mr. Manley had. Regraded Unclassi 10A H.M.Jr: Crane, am I getting a copy of that telephone conversation of yesterday? C: Well we had two or three. Which one -- H.M.Jr: Well I'm talking about the one with the Bank of France. C: The Bank of France? H.M.Jr: Yes. C: Yes, alright. The Governor tried to get you late yesterday afternoon. H.M.Jr: I talked to him. C: Oh did you? H.M.Jr: Late - yes. C: Alright, we'll do that and he also had a talk with Fraser. H.M.Jr: Yes, he told me about that. C: Yes and I talked also with the Bank of England. I didn't get a great deal but-- H.M.Jr: Well you talked on this -- C: Yes this silver - Mexican silver. H.M.Jr: Yes. Who approached who on the Bank of France thing? C: Oh I called Cariguel. H.M.Jr: Oh I see. C: Just to tell him I hadn't talked with him in some while and to find out what was on his mind, that's all. H.M.Jr: I see. C: He was pretty blue. H.M.Jr: He was. C: Yes. Regraded Unclass 10B - 2 - H.M.Jr: Well that was - I consider it very important news. I mean the fact that the British are in there. C: Oh yes. Well I thought you ought to know about that because apparently they were in very heavily both Thursday and Friday and there is so much irresponsible talk around I thought you ought to get that. H.M.Jr: Yes, well I was very - and if you talk with Cariguel - if you have that I'd appreciate a copy of that. C: Yes alright I'll do that. H.M.Jr: Thank you. C: Alright sir. H.M.Jr: Thank you. March 5, 1935. Tuesday. Regraded Unclassi 11 Federal Reserve Bank of New York OFFICE CORRESPONDENCE Date March 4, 1935. To CONFIDENTIAL FILES Subject: Telephone Conversation with From J. E. Crane Mr. Cariguel of the Bank of France. I telephoned to Mr. Cariguel at the Bank of France this morning to inquire about the attitude of the Paris market in view of the sharp decline in sterling. Mr. Cariguel said that the feeling in Paris was very bad and he appeared to be blue and discouraged. I asked him whether he had seen any intervention by the British Equalization Fund and he told me in strict con- fidence that he had bought for them on Friday last L3,500,000 in an effort to arrest the fall of sterling. He added that those were the only operations he knew about but that he considered the British had made quite a stand to stem the tide. He did not know how much ammunition they had left, he said, but apparently they had decided after Friday's experience to let the rate fall further on Saturday and this morning. I explained to him that we might make moderate sales of francs in the next few days against some gold which we had in London and he remarked that such action on our part was all to the good. He said that he thought we were to be complimented in making these sales of francs below gold export point. Mr. Cariguel inquired whether I thought we would give up gold freely for ex- port in case the franc should reach gold export point and I told him that I had every reason to believe that gold exports would be freely permitted and regarded with favor here. JEC:KMC Regraded Unclassi Federal Reserve Bank 12 of New York OFFICE CORRESPONDENCE Date March 4, 1935. To CONFIDENTIAL FILES Subject: Telephone Conversation with Mr. Fraser of the Bank for In- From J. E. Crane ternational Settlements. Governor Harrison telephoned to Mr. Fraser at the Bank for International Settlements this morning to inquire about the effect on the Continent of the recent drop in sterling. Mr. Fraser said that part of the sterling area (the Scandinavian countries) were getting nervous and wondering whether they should continue to hold on to the pound. These countries, he said, had held a conference over the weekend to discuss the matter as they did not like being tied to a currency which was fluctuating as much as sterling. They had decided, Mr. Fraser said, to stand pat for the present but it was clear that they were uneasy and that some of the Scandinavian banks were con- verting their sterling into gold. The reaction of the gold bloc to the sharp decline in sterling, Mr. Fraser said, was rather curious. The feeling seemed to be, he stated, that if sterling continued to decline it would bring exchange matters to a head and lead to negotiations and ultimately stabilization. Mr. Fraser added that the gold bloc did not appear to be as unhappy as one might expect and that it was generally believed that Belgium could not last much longer. With respect to the British, Mr. Fraser said, that they had been making efforts to stop the decline of the pound and that he had been reliably informed that the British Equalization Fund had bought £2,000,000 on Thurs- day last to support the rate. The reasons for the decline in sterling, he said, were numerous, the principal ones being Chamberlain's statement in Parliament last week which was generally interpreted as meaning that the British Government was in favor of 8. lower pound, also talk of a labor government in England, recent failures in the London commodity markets and also the fact that the sterling area as & whole had an adverse trade balance and was therefore constantly a seller of sterling. In conclusion Mr. Fraser said that he was surprised there was not more nervousness in Europe over the fall of the pound than there appeared to be. He said that he had heard a rumor to the effect that South Africa was withholding its gold and not shipping it to London. JEC: KMC Regraded Unclassi 13 Federal Reserve Bank of New York OFFICE CORRESPONDENCE Date March 5, 1935. To CONFIDENTIAL FILES Subject: Telephone Conversation with From J. E. Crane Mr. Cariguel of the Bank of France Mr. Cariguel of the Bank of France called me on the telephone this morning to report that the exchange market in Paris was much quieter today and sterling fairly steady. He indicated that he was afraid sterling might go lower and said that further depreciation of the pound should be averted at all costs as it would add to the existing confusion, provoke further discouragement and probably result in the French public giving up the struggle to maintain the franc. Mr. Cariguel said that he thought the majority of business men in France were willing to make the sacrifices necessary to adjust to something like the present level of sterling but that if the pound depreciated further they would probably regard adjustment as hopeless and be unwilling to make further sacrifices to that end. For the first time during my telephone conver- sations with him, Mr. Cariguel clearly implied that devaluation of the franc might be necessary to adjust their position vis-a-vis sterling. Heretofore he has always maintained that devaluation in France was un- necessary and unwanted by B. majority of the people, but today he certainly envisaged some such action in France in case the pound was further depreciated. Mr. Cariguel said that if the British wanted them to help in maintaining the pound at its present level, the French would be glad to do 80 but he added that the British did not appear to want any such help and while the Bank of England probably was not in favor of lower sterling, nevertheless it appeared that the British Government would rather like the pound to go lower. Mr. Cariguel said that conditions in Belgium were somewhat better and that the belga had lately re- quired very little support. On the other hand, he said that the lira continued to be under pressure. JEC:KMC Regraded Unclassit 13A H.M.Jr: You're going to take that letter up on the hill to-day? Peoples: That's what he wanted me to do sir. H.M.Jr: Well those were my instructions. P: Yes sir. H.M.Jr: The point is this - there was some mixup in my mail room and I never saw the letter. P: I see . H.M.Jr: And it never came down to my office and, as I understand it, the fight is on to-day and if they have a copy of your letter - those two letters - it's Senator Robinson and if he should start attacking the Procurement Division well he's got the answer, you see? P: I see. H.M.Jr: See ? P: Yes sir. H.M.Jr: So I think its very important to get up there this morning to see Joe Robinson. P: Mr. Secretary the - I planned on being in Senator Robinson's office about a quarter to ten. H.M.Jr: Yes. P: Now it may be a little early for him. H.M.Jr: I think that's about right. P: The only point is this - I am still on the stand in my hearings on the Naval bill. That's two solid days running now and I'll have all of to-day too from 10 o'clock this morning until - well it will be 5 o'clock or later this afternoon. H.M.Jr: Well if he's not there I'd leave it with his Secretary or have somebody with you who could wait for him. P: That's what I wanted to do Mr. Secretary and I wanted to make it plain that these - well the letters are self-explanatory. Regraded Unclass 13B - 2 - M.M.Jrs Mulle Jacky Bolto INSURE H.M.Jr: Yes but I have somebody with you to make sure to get it into the Senator's hands. P: Sure to be. I will sir. [1] with M 0274 H.M.Jr: And after he's seen you, if he has any comment, I wish you'd let me know. to 2009 P: I will. clking V the corre check for 1. verrice DE be H.M.Jr: Thank you. the VILLE online Le to gue shoot the P: Yes indeed Mr. Secretary. you was H.M.Jr: Thank you. Ye EAJ 9 be 200 - P: Thank you sir. 8611 hit THE 19 16/10 The DATE sant be now is 2018 The had you and 2 aught H Res Mall - 1601 NO be BOLL - to sepend ANY Student) You 001 130 to Of - you and of to 540 with all MI Com there yeu, WILL have to spend 9.72A of it, 9031 visio would 11 be committent for di to drop around and - good MM Sixe CHECK 10 d'alace Subtotal mirsing? 300mg Time got hearings mening. mades Watch Now visions 10 Thursday? March 5, 1935. Sell give 80% may day this WESB Tuesday. week WIN to the oftssover or before 10 9.8.221 I N2 Date It a SAY nating 07 I could UNITED it within in the 8.M.204 Wall with in - time knowt 9:35 numsing? Regraded Unclass 13C H.M.Jr: Hello Marvin Jones: Hello Henry H.M.Jr: Hello Marvin, how are you? J: Alright, how are you? I'm looking for more money. H.M.Jr: Oh you son of a gun. What are you up to now? J: I was talking to the Chief yesterday about some provision for making small bonds and he talked like he was going to talk to you about the best way to get the money ---- H.M.Jr: I don't hear you very well J: He said he was going to talk to you yesterday -- H.M.Jr: Well he told me this - he said that he had an interesting talk with you and you and I ought to get together. J: Well -- H.M.Jr: But he didn't tell me to spend any money. J: (Hearty laughter) You know its up to us - you and me to get together with all that money down there around you, we'll have to spend some of it. Well when would it be convenient for me to drop around and see you? H.M.Jr: How about 10 o'clock tomorrow morning? J: Henry I've got hearings tomorrow morning. H.M.Jr: Well how about 10 o'clock Thursday? J: Well I've got hearings every day this week until Friday. Anytime in the afternoon or before 10 o'clock. H.M.Jr: Well J:: I can make it 9 o'clock any morning or I could make it anytime in the afternoon. H.M.Jr: Well make it - how about 9:15 tomorrow morning? 13D - 2 - 9:15? H.M.Jr: Tomorrow morning. J: Alright. H.M.Jr: What? J: Alright. H.M.Jr: 9:15. J: 9:15 at your office. H.M.Jr: O.K. J: I'll be there. Listen. H.M.Jr: Yes. J: How about coming by and having breakfast with me somewhere down there. H.M.Jr: Well I'll tell you what I do. I have breafast at 7:30 at home. J; That's pretty early forme. H.M.Jr: With my daughter and --- J: I'll see you at 9:15 then Henry. H.M.Jr: Thank you. J: Alright. March 5, 1935. Tuesday. Regraded 13 É H.M.Jr: Hello - hello Harry. Senator Byrd: How are you? H.M.Jr: Alright, how are you? B: Fine. H.M.Jr: I read in the paper that you say you can't get anything out of the Treasury. B: Well I said I called up there and tried to get this information and couldn't get it. H.M.Jr: Well you didn't call the right fellow. B: Wait a minute - who did I - H.M.Jr: Hello - hello B: He said that the information wasn't available there and I called up over to the PWA and they didn't seem to have it and the records of the Treasury didn't show these commitments, etc. H.M.Jr: Well that's right but if you had called either Danny Bell or me we'd have told you. B: I think that ought all to be made public anyway. H.M.Jr: Well - Dan Bell is here with me now - we don't have that but if that's what you want - I mean PWA does have it. B: Well somebody ought to have it. H.M.Jr: But I'm kind of jealous of our reputation, especially in the hands of our friends. B: Well I didn't mean to reflect any on you because probably you haven't got it but I thought you could get it. I've got a letter here from you Department but I can't put my hands on it for the moment, telling me what information they've got which is entirely inadequate. H.M.Jr: Well Bell says, he's sitting right here, he says we don't have. what you want. I mean I just want to - my attitude is B: The newspaper misquoted me -- Regraded Unclass 13F - 2 - H.M.F: Hello - my attitude is that anybody on the hill that wants any information that we've got its always available. B: I know that - its no reflection on you but it was just the difficulty of getting the information. I feel that you should have it. H.M.Jr: Alright Harry. B: Don't you? H.M.Jr: Thank you. B: I say don't you think Henry --- H.M.Jr: I feel anything that we do down at this end in the way of spending money should be an open book. Hello. B: I say I didn't read the newspaper's statement. H.M.Jr: I feel that any spending that the Executive end does should be an open book. B: Well I'll correct that fact about the Treasury not furnishing me with the Information. They furnished me all that they had, but I put in the record to-day what they furnished me but they didn't because they couldn't get it. H.M.Jr: Well our attitude is anything that we've got here, with the exception of the Stabilization Fund, is an open book. B: Well I'll state that on the floor to-day Henry. H.M.Jr: Alright, thank you. Goodby. March 5, 1935. Tuesday. Regraded Unclass 14 March 6th Mr. Crane telephoned Mr. Morgenthau this morning and the following is their exact conversation: C: Good morning Mr. Secretary. H.M.Jr: Hello Crane. C: I just talked with Cariguel. H.M.Jr: Oh you just talked to him. C: About five minutes ago. H.M.Jr: Oh yes. C: He said that the Sterling situation looked bad. H.M.Jr: Yes. C: Sterling was weak, he thought it was going lower and that there was trouble ahead. He said that some of the countries in the Sterling area - H.M.Jr: What's that? C: He said some of the countries in the Sterling area were getting restless about the the decline in the pound and were considering breaking off from Sterling. H.M.Jr: Yes. C: He referred particularly to the Scandinavian countries and to South Africa. That he said - he told me this he said in the strictest con- fidence and he said not to mention it to anybody. H.M.Jr: Yes. C: So I'll have to ask you to protect me on this. H.M.Jr: Yes. C: He said that the Bank of France - the Governor of the Bank of France - is considering offering a credit to the British; that they were con- sidering doing it through diplomatic channels, that is, to have the French Treasury approach Regraded Unclass 15 the British Treasury and ask them whether they'd like to have a credit to support Sterling. The amount they had in mind was five billion Francs - that's 330 million dollars. He said that before the Bank of France did anything about it, they'd have to get the approval of their Government. H.M.Jr: Yes. C: And that they were talking with the Prime Minister about it now; that he thought the British would refuse the credit but that if they did it would put the responsibility right on them. He said he thought that if anything like that were done, it should be done as an American-Franco movement. In other words, that the United States and France should do it together. He said "Do you think you'd be interested in it" and I said "I don't know - I couldn't answer that". I said "All I can tell you is that I think you'd get a sympathetic hearing over here on any question which would tend to stabilize exchanges and prevent a further drop in the pound" but I said I really couldn't say what the attitude would be". That's about what I told him on that. H.M.Jr: I see. C: I gather that's about the way you feel. H.M.Jr: Yes. I want to think this over. C: Yes. Well I didn't make any commitment at all. I said I really didn't know what the attitude would be and that I couldn't speak for the bank or the Treasury, but that I could say that we were interested and would give sympathetic hearing to anything which would tend to stop the decline in Sterling and bring about stable exchanges. Now that's about the - let me see H.M.Jr: That's about it - hello. C: That's - oh he did say this. He said that if they offered the credit, and they haven't even decided that they'll do it yet, that they would want some understanding with the British that they were going to hold the pound somewhere around the present level. He said they probably wouldn't make that a hard and fast condition, but that they'd want at least some informal under- standing with the British that they weren't going to let the pound go on down. Regraded Unclassi 16 H.M.Jr: I see. C: Now that's about the gist of it. H.M.Jr: Well I think I got it. C: I'll -- H.M.Jr: Have you told Governor Harrison about it? C: No I haven't. He's in a meeting and I was just going in the meeting as a matter of fact when you called. I'd like to talk it over with him and then perhaps talk to you a little later about it. H.M.Jr: Yes. C: Because this is just right hot off the wires and I really haven't had time to consider it. H.M.Jr: Alright. Thank you very much. I'll call you back between now and 12 o'clock. C: Yes, alright. After talking to Crane, Mr. Morgenthau called in Coolidge, Oliphant and Lochhead and gave them the gist of Crane's conversation. He then went over to see the President at 11 o'clock. At a quarter to twelve H. M. Jr. returned and called in Coolidge, Oliphant and Lochhead and told them that the President and he felt that we have no authority and believe that it will be unwise to participate in a loan to Great Britain, and read to them the statement which he and the President prepared to answer the French. It is as follows: "We view the objective with sympathy but we doubt Treasury authority formally to participate. But if with the ultimate objective of keeping sterling above 4.86 we would do nothing to bloc Franco-British arrange- ment. We would give sympathetic support to this objective whenever possible". H. M. Jr. telephoned Mr. Crane and read the message to him. The following is their exact conversation: H.M.Jr: Crane, very confidentially, I've had a half an hour with the President. C: I see. Regraded Unclass 17 H.M.Jr: Have you got a pencil? C: Yes. H.M.Jr: This is the message that you can give Cariguel, see? C: Yes. H.M.Jr: "We view the objective with sympathy but we doubt the Treasury authority formally to participate. H.M.Jr: Paragraph. H.M.Jr: "But if with the ultimate objective of keeping Sterling above 4.86 we would do nothing to bloc the Franco-British arrangement. H.M.Jr: Paragraph. H.M.Jr: "We would give sympathetic support to this objective whenever possible". C: Yes. H.M.Jr: Well that's the whole story and now I'm glad to discuss it if --- C: The first question that comes to my mind is whether you would want to transmit that to the French before they make up their mind to do anything. Cariguel said that they were merely considering it and that his Governor was dis- cussing it or going to discuss it with the Prime Minister before they decided to do anything. H.M.Jr: I see. C: He said that if they decided to do anything, he would let me know. H.M.Jr: Oh. C: So that as far as the French are concerned its still in a preliminary stage. H.M.Jr: I think you're right. C: And it raises a question as to whether we would want to show our hand now or to wait until they approach us more formally and definitely. Regraded Unclassit 18 H.M.Jr: Well now just a minute. I've got my group here and I'll just ask them. I think - will you hold - just wait a second will you? C: Right. H.M.Jr: Hello. C: Hello H.M.Jr: We agree until Cariguel tells you that they're definitely going to go ahead. Unless they ask you what our position is there's no use shooting off our mouth. C: Well we all agree to that. The Governor agrees to that. H.M.Jr: Right. C: We'll just keep this a closed story until we hear from Cariguel. H.M.Jr: That's right. C: Yes. H.M.Jr: Now the other thing is since the President has made a statement I see that things have changed quite a lot. C: Yes we sold 125 million Francs in the last hour. H.M.Jr: You sold 125 million Francs. Well that's peanuts isn't it. C: Yes. Well we've got about 270 million Francs in gold in London so we haven't sold half yet, but still that's a pretty sizeable amount. H.M.Jr: Ch well now maybe I didn't understand - one hundred and how much? C: 125 million Francs. H.M.Jr: Oh I thought you said 125 thousand. C: No 125 million. H.M.Jr: Oh 125 million. Regraded Unclassit 19 C: Yes. That's about 8 billion dollars I should say. H.M.Jr: I see. C: And we're selling that against the gold you know that you have in London. H.M.Jr: Yes that was my idea. C: You've got about 18 million (?) there. H.M.Jr: Well now will that have any help? Will that help Sterling at all? C: Well Sterling has gone up a little as a result of this pressure on the dollar - Sterling has gone up to 4.76. H.M.Jr: Good. C: But there isn't a great deal of change there. H.M.Jr: Anything happen in silver? C: No. I just talked with Cattern of the Bank of England with reference to the shipment of the gold in Paris and he brought up the question of this Mexican Eagle 011 Company in silver and he said he hasn't any final answer from the others as to whether they would sell the silver to us, but I indicated to him that we would probably be interested in buying it if they wanted to sell and that we would give them gold here in New York against it if they wanted it. H.M.Jr: Yes. C: And he's going to let me know about that. H.M.Jr: I see. Well did he make any remark when you told him that we were sending this gold there? C: No. The only question he raised was that the possibility that the shipping of gold now by the Bank of England from London to Paris might be regarded as being for the account of the British Equalization Fund and might give the impression that the British had no more ammunition in Paris and it might therefore weaken Sterling and I told him that if it would embarrass him to make the shipment we would try to work out some other arrangement. I didn't know just what. Regraded Unclassity 20 H.M.Jr: I don't know either. C: And - well he only mentioned that very tentatively and he said he'd like to think it over and talk to his people and call me back. H.M.Jr: Right. C: So that there's nothing to be done on that now. I think I'll hear from him in a short time and he'll probably tell me that they'll go ahead and make the shipment. H.M.Jr: I see. C: But if I want anything further from you I'll let you know on that. H.M.Jr: Alright. C: Goodby. H.M.Jr: Hello - wait a minute. C: Alright. H.M.Jr: Does Governor Harrison want to say anything about the government bond market? C: Just a second. He's here. Harrison: Well it got quite a shock Henry. H.M.Jr: Yes. H: After that statement but Burgess tells me that it is leveling out a little now. H.M.Jr: Leveling out. H: And that we haven't done anything by way of supporting it. I don't think there is anything to do at the moment except this. I think that unless the President's message gives that impression there has been a definite misunder- standing that he was going to correct the disparity between gold and prices, not by a further increase in prices but by a - rather an increase in the price of gold. H.M.Jr: No he didn't have anything like that in mind. Regraded Unclassit 21 H: I know but that was the way it was interpreted. H.M.Jr: Oh. H: The interpretation was that he was going to crush this thing possibly by lowering the price of the dollar. H.M.Jr: Well I don't -- H: That would cause the flurry both in the exchanges and in the government bond market. H.M.Jr: Well after all the flurry in the government bond market wasn't very bad. H: Well it got your called fourth by -- H.M.Jr: 10/32's. H: 10/32's and the bends - there are no bends for a little while there. Its better now. H.M.Jr: Its better now. H: I think it'll get over it. Why I think it'll get over it because they're reading the statement carefully and they've sort of drawn the con- clusion they didn't mean devaluation but, on second thought, if there's any way of correcting that impression there in Washington that it was referring simply to prices and wasn't referring to devaluation it would be very helpful. Now I've talked to some of the dealers --- H.M.Jr: Well did they carry it that way on the ticker? I have the ticker here. H: Yes. H.M.Jr: It says here President Roosevelt to-day expressed belief that the purchasing power of the dollar should be lifted further to ease the burden of debt. The President expressed belief that while the so forth and so on. Asked whether the fact that the dollar was not yet readjusted meant further devaluation the President laughed, held up his hand and shook his head in the negative. H: Yes. Well they didn't get here the shook his head in the negative. Regraded Unclassi 22 H.M.Jr: Well this is U.P. H: Yes. H.M.Jr: Its on the U.P. ticker. H: Dow Jones said he just said hold on. H.M.Jr: Well this is the - what? H: And finally he said "Hold on - don't ask me any more questions". That Dow Jones fellow was sitting somewhere where he couldn't see him shake his head, I think. H.M.Jr: I see. Well I think if we asked the President to correct it, it would be too much - too much importance. H: What's that? H.M.Jr: Its too much important. I mean I don't know whether he's ever before made a corrected statement. H: Well he's going to get some editorials and blasts on this. I'm pretty sure. H.M.Jr: Yes. H: You might be able to say something Henry sometime that you didn't understand that he meant that. H.M.Jr: Yes. That's in that statement that you meant he was going to devalue the dollar further. H: Yes. H.M.Jr: Well I'll see if I can do anything about it. H: Alright. H.M.Jr: Thank you. Regraded Unclassi 23 He then called the President and gave him Crane's suggestion. The President agreed. He also told the President that he had talked to Harrison and that it is Harrison's belief that the bond market is off due to the statement which he made at the Press to-day which is as follows: "President Reosevelt to-day expressed belief that the purchasing power of the dollar should be lifted further to ease the burden of debts. The President expressed belief that while the debt burden had been relieved enormously, it had not yet been reduced to a sufficient level. In other words, he explained, the debt column of the national balance sheet is still much too high. Asked whether the fact that the dollar was not yet readjusted to debts meant further devaluation, the President laughed, held up his hands and shook his head in the negative. His observations on the monetary situation came when he was asked as to whether commodity prices had been stabilized". Wall Street interpreted the President's remarks to indicate that he was thinking of further devalu- ation. H.M.Jr. suggested that the President have Steve Early correct this interpretation. The following statement was given out at the White House 10 minutes after Mr. Mor- genthau made the suggestion. "President Roosevelt feels there should be further adjustment between the dollar and the Nation's debt structure, but suggestions that he contemplates further devaluation are absolutely unfounded, the White House said this noon. A White House attache declared that any inferences that he contemplated further devaluation were absolutely untrue. Any reports that such a step was planned or indicated were made out of whole cloth, it was asserted. The White House position was made clear as a result of apparent misinterpretation in some quarters of the President's observation that he felt the dollar and the debt burden were not yet fully adjusted. The White House attache said nothing that Mr. Roosevelt said could be construed as containing the slightest suggestion of any intention to further devalue the dollar. H. M. Jr. called in Coolidge at a quarter to one and said that he wanted to buy ten million dollars of bonds for Postal Savings to help bring the market up. He told him to buy at the present market and, he said, "1f that will put the market up then let it go". When H.M.Jr. spoke to the President this morning he said: "Pending hearing from the other side as to what they are going to do the only thing we can do is to go after silver just as hard as we can and cover immediately 24 with Sterling. I think if we can hold our line in commodities one of these countries is going to crack within the week - it may be France, England or some Scandinavian country". H.M.Jr. dictated the following paragraph to Bob: Mr. McConlhe said to me that if he could get a job from me that he could rent the house to me cheaper so I told him that he could not get any job in the Treasury after making a remark like that and I don't want him to see Mrs. Klotz. He said will you forget that I made such a remark and I said that having passed such a remark you can't have a job in the Treasury. Regraded Unclassif 25 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Paris, France DATE: March 7, 1935, 4 p.m. NO: 182 FROM COCHRAN ULTRA CONFIDENTIAL. Re my telegram No. 181 of March 6, 4 p.m., the first paragraph. I was called to the Bank of France this forenoon by Lacour-Gayet. I was told that he had a suggestion which the Bank of France desired that I submit to Washington, and Lacour-Gayet explained that he was speaking to me in behalf of the Bank of France with the authority of the Governor. The matter he said appears to be one for of- ficial transmission to the Embassy through the Foreign Office, but he said he felt confident that the suggestion of the Bank of France which he was advancing would be approved of by the French Government. The Bank of France thought, on the other hand, that it was best not to trans- mit it to the Federal Reserve Bank of New York because it was too much B matter of governmental scope. As a result this informal method of communicating the suggestion was chosen. The disastrous results that may follow the decline of sterling were emphasized by Lacour-Gayet. Two major results were mentioned: First. Continuation of monetary instability may possibly result in further diminution of world trade. Second. Gold prices will be further devalued, with world wide deflationary effects as a result. It is Lacour-Gayet's opinion, nevertheless, that the present is no time for holding a general conference on stabilization; it is his opinion that the matter is too urgent to await the deliberations of any general conference, which might have a questionable outcome, in any event. With regard to the question of France and/or the United States approaching England directly with the sole view of ascertaining the attitude of the British toward stabiliza- tion, he feels the usual reply would be given by the British - i.e., they would emphasize the fact that until the outcome of the American situation is clearly seen, it would be in- advisable for Great Britain to take any definite step. My friend said he thinks the United States and France have a special responsibility in cooperating toward pre- venting the disorders which the decline of sterling must Regraded Unclassi 26 - 2 - inevitably bring about, These are the only two countries, he said, in a position to take the initiative in such action, since France is the leader of the gold bloc and the United States holds such immense gold resources. The common democratic ideals of France and the United States were mentioned by Lacour-Gayet, and he pictured the European situation as being 80 unsettled that a further monetary upset might have repercussions which our two countries would not find to their liking. The suggestion of the Bank of France is 8.8 follows: A credit of very large proportions should be offered to Great Britain jointly by the American and French Govern- ment; this would be a joint central bank credit. The American and French Governments would not make the offer of this credit contingent on & promise of definite stabilization by Great Britain as a means of defending the pound's international exchange value. Should the British accept the proposition, Lacour-Gayet thinks that flight from sterling or sterling securities would be stop- ed and there would be no further decline of the pound. Should the offer be refused by the British, then the responsibility is definitely placed on them for contributing to the continuing uncertainty of the international currency situation and the consequences it may have. Should the answer be that their monetary reserves are sufficient to obviate any need of such & help, then it seems the British would thereafter feel obliged to use effectively such reserves in view of preventing the pound's further decline. Lacour-Gayet thinks it probable that sterling will con- tinue to depreciate in the absence of such a credit. Itis his opinion that the decline may be progressive, as during the recent months, even if Great Britain brings about temporary halts. Counter steps have been taken by the countries of the gold bloc in their individual economic systems, and they are strongly decided to do the utmost in defense of their present currency values. Lacour-Gayet predicts that if the countries of the gold bloc are drawn off the gold standard there will be an international race in currency depreciation. This he said would not only be contrary to the interests of the United States, but of the whole world. It is the wish of the Bank of France that this sug- gestion be regarded as ultra-confidential, but the Bank would genuinely appreciate an early indication of the American reaction thereto. The Bank is not submitting the suggestion through the French Embassy at Washington nor through the Financial Attache stationed in New York City. Should there be favorable action upon it, the French opinion is that the best results could be achieved if the two Governments made the announcement in 8 spectacular fashion. 27 - 3 - I informed Lacour-Gayet that I had no idea as to the reception that the above suggestion would receive, but I reminded him that the United States had undoubtedly re- ceived cabled reports of the press stories of two days ago, to the effect that on February 3 Flandin had made a definite proposal for stabilization at London and that the British had refused it. Lacour-Gayet then told me that Governor Tannery had stated yesterday that Flandin denied to him the making of any stabilization proposition when he was in London. I was reminded by Lacour-Gayet of the consistent tone of the statements of the Premier on this subject, including that made on his latest appearance two days ago when a vote of confidence was being sought by him. The above suggestion and discussion is submitted with the urgent request that there be strict observance of its confidential character. The latest decline of sterling considerably upset the money, stock and commodity markets during the last few days. This confusion is indicative of what would ensue now should a mad race in currency depreciation face a nervous and despairing world. I therefore gladly forward the above asking that it have full consideration because of its origin. STRAUS. EA:LEW 27A 27 March 11, 1935. Monday. H.M.Jr: Hello - George. George Harrison: Yes, Henry. H.M.Jr: Jeff's on the phone with me. Now - hello - George H. I can't hear you. H.M.Jr: Can you hear me? H. Yes, now I can, H.M.Jr: All right. Jeff's on the phone. H. Yes. H.M.Jr: You know about that message that came through the Diplomatic Channel? See - H. Yes. H.M.Jr: Well Jeff and I were over and saw the President and he decided that we'd answer it through you to the Bank of France rather than through diplomatic channels. H. Yes. H.M.Jr: See. H. Yes. H.M.Jr: And - we'd like to, if you would, phone them to-morrow. H. Yes. H.M.Jr: Now, we've changed the message a little bit. H. Yes. H.M.Jr: Have you got a stenographer - it's very short. H. Yes. - I haven't got a stenographer but I can take it down. H.M.Jr: Well, it's very short. "We view the objective with sympathy - H. Yes. H.M.Jr: But doubt American authority H. Yes. Regraded 27B - 2 - H.M.Jr: Formally to participate. Period. H. Yes. H.M.Jr: Assuming that what 1s presently aimed at H. Yes. H.M.Jr: Is an exchange relation H. Yes. H.M.Jr: Among the pound, franc and dollar, H. Yes. H.M.Jr: At a level H. Yes. H.M.Jr: Substantially where it has been H. Yes. H.M.Jr: During the past year, H. Yes. H.M.Jr: We would do nothing H. Yes. H.M.Jr: To bloc a Franco-British arrangement H. Yes. H.M.Jr: And would give sympathetic support H. Yes. H.M.Jr: To this objective whenever possible." H. Yes. H.M.Jr: Now I'll read it again. "We view the objective with sympathy but doubt American authority formally to participate. Assuming that what 16 presently aimed at is an exchange relation among the pound, franc and dollar, at a level substantially where it has been during the past year, we would do nothing to bloo & Franco-British arrangement, and would give sympathetic support to this objective whenever possible." Regraded Unclassit 27C - 3 - H. Yes. H.M.Jr: How does it sound to you? H. Well I don't - I think the present effect 18 - I don't like to claim that we would do nothing to bloc -- H.M.Jr: Well that's the President's own language. H. What? H.M.Jr: That's his own language. H. Well I know, but you asked me. (Laughter) H.M.Jr: Right and I'm explaining too. H. What? H.M.Jr: I'm explaining - that's his own language. H. Well but I-I think, I think it's a - I think it's a little unnecessarily -- H.M.Jr: Well he went over -- You're right to tell me, but on the other hand that - he went over it twice, you see. H. Yes. H.M.Jr: And that's what - he dictated that. H. Yes. H.M.Jr: Now, what I thought was this. -- H. Well how - - I don't quite understand what the set-up 1s. What am I to do, just -- H.M.Jr: Well you can simply tell them if you want to. What's the use of kidding them that we got this message from Cochran? H. Yes. H.M.Jr: To the State Department, and that we feel that this 18 - inasmuch as it comes from the Bank of France, the Treasury 1s answering it through our Central Bank. H. I see. H.M.Jr: See? Regraded Unclassit 2TD - 4 - H. I see, H.M.Jr: I mean, what's the use of kidding them. H. Yes. But I mean this is the message from you? H.M.Jr: This is the message from the Treasury to the Bank of France. H. Now -- H.M.Jr: Which lets them know that we don't want to take it up through diplomatic channels. H. Yes. H.M.Jr: I had that out, which I think 1s very important. H. Yes. Well now still assuming that your question as to whether I had any suggestions to make. When you say about American authority formally to participate H.M.Jr: Yes. H. They'll know that that is not a fact, 80 far as the Federal Reserve Bank 18 concerned. H.M.Jr: But Jeff Coolidge covered that. You can't do it either on account of the Johnson Act. Jeff pointed that out. And that's why - that's why we changed the wording from the way we had it. Originally it read Treasury and we changed it to American because Jeff pointed out that you can't do it either. H. Yes. Coolidge: Now you might be able to George, but there's some doubt there. I don't think you could loan the English Government - you might loan the Bank of England. H. Well that's all this is. C. Well we don't know what it 18. H. But the - that message says the Bank of England. H.M.Jr: But we simply - we don't make a flat statement. We say we "doubt" American authority. H.M.Jr: Hello. H. Yes. Regraded Unclassif 3/2 - 5 - H.M.Jr: To formally to participate. See. We don't say a flat statement but it was Jeff that made that sug- gestion that he questioned whether you, under the Johnson Act, could do it. H. Yes, H.M.Jr: See. H. Yes. H.M.Jr: I mean, that if we made the flat statement that no American Agency could do that, but we say we "doubt". H. Yes. H.M.Jr: Sleep on it and if you've got any ideas call me up to-morrow. H. All right. Let me do that, will you? H.M.Jr: Will you sleep on it? H. Because I'll tell you, we've got - they're plenty of good reasons for turning it down on a basis of being too fishy. H.M.Jr: Yes. -- You haven't had a chance to think it over and it's too late to call them anyway. H. Yes. H.M.Jr: But the point is I had it out that if we're going into this thing quite frankly and very confidentially, I wanted the Treasury to handle this matter and not the State Department. H. Yes. H.M.Jr: And as a result of that the President said all right do it this way - see? H. Yes. All right sir. Well, let me think it over and call you back in the morning. May I? H.M.Jr: If you would, please. H. All right. Thank you. 27F March 12, 1935. Tuesday Harrison: Good morning, Henry. H.M.Jr: Good morning. H: Can I talk to you a minute? H.M.Jr: Surely. H: Henry, I've been thinking over that message and you were good enough to say that I might comment on it. H.M.Jr: Please. H: Now, first of all, I personally feel that the first sentence is of doubtful accuracy and - certainly so far as the Federal Reserve Bank is concerned, which 18 the question that was put up to you. I feel that definitely because the John- son Act talked about Government and this was specified to be a credit to a bank. Furthermore, we have given similar credit to the bank of Bel- giúm in recent months without any question to the Johnson Amendment and the French know that. H.M.Jr: I see. H: So I think that they would call - think we were different generally -- H.M.Jr: I see. H: Now, Fraser, who called me yesterday and who knew about this thing through Tannery says for God's sake be awfully sure to give reason why you're not going to participate, because otherwise they are going to misunderstand it into thinking that you're going to do something with the dollar. He says that this thing might be enough to smoke you out too and therefore if you turn it down, be sure to give reasons, otherwise they'll think, well it's just because America wants to feel free to do something themselves. I have taken the liberty therefore of dictating just this slight change. H.M.Jr: Right. H: To Jeff's Secretary - 27G - 2 - H.M.Jr: Well, have you given it to Mrs. Klotz? H: No, I didn't give it to Mrs. Klotz -- I didn't know what to do, but I tried to get Jeff and couldn't so I -- H.M.Jr: Well, give it -- How much is it? Give it to me. H: Well, I'll read it to you now, it's not much, You remember the other message? H.M.Jr: Well, I've it before me. H: We view the objective with sympathy -- now here comes the change -- but would prefer not to parti- cipate in a Joint offer of B. credit to the bank of England which had not been requested by them. H.M.Jr: That's your position from the beginning, that they ought to take anyway. H: -- which has not been requested by them and which we understand would not likely be accepted by them and might therefore be both futile and embarrassing. Then I go on the way the message was. Assuming that what is presently aimed at is an exchange re- lation among the pound, franc and the dollar at a level substantially where it has been in the past year, we would do nothing to hinder a Franco-Britiah arrangement and would give sympathetic support to this objective whenever possible. I feel a little stubborn about the word hinder in place of bloc only because the French are so damn sensitive, and are looking for trouble anyway. But bloc looks to be a matter of interfering whereas hinder means that you won't do anything either by action or any other way to oppose. And bloc just might hit them the wrong way. Hinder does the things just as well. H.M.Jr: Just & minute. (To messenger) Get Mrs. Klotz -- I'm in a hurry. If she's not there, get Bob McHugh. I need one or the other right away -- I'll have one or the other take it down H: Well, Jeff's Secretary's probably got it by now. H.M.Jr: Who? H: Jeff's secretary's probably got it written out by now. H.M.Jr: Oh, you gave it to Jeff's secretary. H: Yes. Regraded Unclassit - 3 - H.M.Jr: Oh, I didn't understand that. H; Yes. H.M.Jr: Well, then just give it to me. Do you think she has it. H: Yes, I know she's got it. H.M.Jr: How long ago did you give it to her? H: Oh, about within, oh about five or ten minutes ago. H.M.Jr: Well, then let me send for her. Just a second. Just a minute. he Date of As for of 10% VA haven's 009 any subjects morenge yes, mit 10 the CAPARAL valu OPAN their buth Druver setd they 1824 disapporated - they $100'S 492 under an the Shek they vers the appointed and whether Live reference to eap belog that Kg voice have Any realing about bate address an offer nil 213 Street Arias stad that no understand character aut Bank WAR 23 nais and and that that -- Due is Way supted D to summering alene, et students 99 couldr's have my decling abroad is. Date Fixed this value with deriguali 81 Yes, wetly sould Crasse and us, WE be dows date No Inc. Regraded Unclassi 270 March 12, 1935. Tuesday. George Harrison: Henry? H.M.Jr: Yes. H: Fraser called me this morning. H.M.Jr: Oh, did he? H: -- To tell me that he had heard that the French were very disappointed with the message they got. H.M.Jr: Yes. H: -- That they had hoped that it would be favorable. H.M.Jr: I see. H: -- And indicated that he thought we would probably get another message from them. Possibly asking whether we would object to some sort of a joint inquiry of the British. H.M.Jr: I see. H: -- As to the possibility of some kind of cooper- ation. H.M.Jr: Yes. H: -- Smoke them out that way. H.M.Jr: I see, H: Now, we haven't got any such message yet, but in the meantime, Cariguel told Crane that - but Fraser said they were disappointed -- they didn't say much on the telephone -- that they were dis- appointed and wondered whether the reference to our being sympathetic meant that we would have any feeling about their making an offer all by them- selves. Crane said that he understood that that meant just what it said and meant just that -- that if they wanted to do something alone, of course we wouldn't have any feeling about it. H.M.Jr: Crane had this talk with Cariguel? H: Yes, H.M.Jr: Well, could Crane send me down, as he does always, his conversation? H: Yes. Regraded - 2 - H.M.Jr: W111 you make E. note of that? H: Yes. I'll tell him now -- he's right here. H.M.Jr: Right. Well, I simply feel what they're doing now is -- after all, they first sent a message through you people and then they sent 8. message through the Embassy hello - and now they send a message through Barr. H: No, they didn't. They didn't send any message through Barr. Fraser is just being nice and helpful in pointing out to me what he heard off the record. H.M.Jr: Oh! Well, I think the thing to do is just sit tight. H: Oh, sure -- we can't do anything else until we hear from them. H.M.Jr: -- They asked the question -- do I understand they asked have we any objection to their going ahead alone? H: Oh well, they haven't officially asked us anything. H.M.Jr: Well, I mean Cariguel. H: Well, Cariguel asked Crane during the course of the conversation he had with him whether it was his understanding that that word sympathetic meant that we would have any objection to their going ahead alone. Crane said he didn't see how they could have any objection to going ahead alone if they wanted to. That's all he said on it. H.M.Jr: Well, we could get this down and see what comes. H: Yes. O.K. H.M.Jr: Now, let me ask you this. I just got through with the Open Market Committee. H: Yes. H.M.Jr: You people think that -- I mean you as an individual -- we could call the 4a or the 38 or nothing? H: Well -- you know, I from the beginning, have been very much in favor of calling as much as you can get away with. But this thing has got a little shock Regraded Unclassif 21K - 3 - at the moment and I wouldn't push it too hard. Therefore, as I see it today, I don't think I would make any general call or big call until this thing clears up 8. bit. H.M.Jr: I see. H: I think you just -- in fighting Now,-- I wouldn't object to the 500,000,000 or the 32. I don't think that's anything. I think that would be all right. But I doubt if I would go much beyond that as I see things today, unless present con- version speeds up much more rapidly than it appears to be. H.M.Jr: Of course, I think the present conversion is going awfully well. We got 75,000,000 yesterday. H: Yes. Well -- I -- I'm not discouraged about it, Henry. H.M.Jr: I think it's going awfully well. H: But -- H.M.Jr: You know, all we got to do is to bring out a con- version and then to get a good dose of bad news. H: Yes. H.M.Jr: They always seem to go together. (Laughter) H: Well, I don't know how much that misunderstanding of the statement cost the Street -- H.M.Jr: But, we got that straightened out as quickly as is humanly possible. H: Yes, I think you did. Although some people -- H.M.Jr: -- Think he meant what he said when he said it. H: Yes. (Laughter). H.M.Jr: Well -- H: Some people just won't be convinced. My present reaction would be to go only for & small issue if you are going to do anything at all. Now, maybe you don't -- Regraded Unclassifi 272 - 4 - H.M.Jr: We'll make up our minds tomorrow. H: Yes. H.M.Jr: Now, George, could you come down Friday? Be here Friday evening? H: Yes. H.M.Jr: You could? H: Yes. H.M.Jr: At my house? H: Yes. H.M.Jr: Seven-thirty? H: Yes. H.M.Jr: Business suit. H: All right. H.M.Jr: Do you want to bring Crane with you? H: I'd like to. H.M.Jr: And how about Williams? H: Well, let me talk to -- are there going to be many there? H.M.Jr: Well, I want to keep it down to eight or ten if I can. H: I think so -- I think -- Henry, I don't think you get anywhere when you get a big crowd. H.M.Jr: Well, then, suppose we confine it to you and Crane. H: All right. H.M.Jr: Now, I was talking to Jeff -- he mentions Goodhue. What do you think of that? H: Well, I think that he's all right on the theory that he's just come over from Europe and perhaps can tell you about the conditions over there and give you gossip. Regraded Unclassifil zzm - 5 - H.M.Jr: Well, I don't want any gossip. I get plenty of that. Can he contribute anything? H: I doubt it. H.M.Jr: I mean is he an expert? H: No. H.M.Jr: What? H: No, I don't think he is. H.M.Jr: That fellow he's got there is -- his Vice Presi- dent. H: Who is that? H.M.Jr: I forget his name. H: You don't mean Warbeck, do you? (Laughter) H.M.Jr: No - no - no- (Laughter). No, the fellow in charge of Foreign Exchange. Crane would know his name. H: I see. My own feeling is that the time is not ripe yet to call in fellows of that type. H.M.Jr: We could always get them down on Saturday and Sun- day. H: What? H.M.Jr: We could always get them here Saturday and Sunday. H: Yes. I don't think you need them. H.M.Jr: If it's just a question of gossip, I don't need any gossip. H: Yes. H.M.Jr: Well, let's leave it to you and Crane, shall we? H: Well, I think that's all right. H.M.Jr: You can sleep on it. H: Yes. H.M.Jr: All right. H: And we'll be down there Friday evening then. Regraded Unclassifie - 6 - Name or - H.M.Jr: If you would. H: What? Tate TO 1938. H.M.Jr: If you will. Conversation with H: All right. mc Now Finale of France. H.M.Jr: Thank you. H: O.K. % w 1 w w ******* worset me - This self in No AM best (5) De Visa ⑈⑈ 2 Lim visa valida the his went M left) - 8. - details RESE 179 usta Not 100 Deaft 410 HOLI and 12 RIDS Class are wills, VIDE DE 18 of Your 19 Sin with blan made 1 05 NO to. brood Hostbir the wild offer OF give AM be X of PUS 45 206, USA mane still being - Mr. caregual works X I 11 and be sympathable 11 the Primes ands the 01792 Not 3 cold him that $ 508 1148 Treasury Department to -- that $ votic de NO long 15 the sterlings sales roomt Involv. 71% NADE sate 20 mold Lot do their destated the 02 M to the Dritish, 2000 egraded Unclassifier 28 Federal Reserve Bank of New York OFFICE CORRESPONDENCE Date March 13, 1935. To CONFIDENTIAL FILES Subject: Telephone Conversation with From J. E. Crane Mr. Cariguel of the Bank of France. I telephoned to Mr. Cariguel at the Bank of France this morning to inquire about the exchange market in Paris. He said that things were quiet, that the dollar was fairly strong and was being bought for Belgian and Swiss account. I asked Mr. Cariguel whether he had had an opportunity to read our cable of last night which had been sent in reply to Mr. Cochran's message and he said that he had seen our cable and felt it was unfortunate that we could not see our way clear to join with the French. I asked Mr. Cariguel whether they would offer the credit alone and he said he did not know as yet, the matter still being under consideration. Mr. Cariguel asked me whether I thought we would be sympathetic if the French made the offer alone and I told him that I understood the message from the Treasury Department to be that we would be sympathetic as long as the sterling- franc-dollar rates remained around recent levels. Mr. Cariguel said that he would let me know their decision regarding the offer of a credit to the British. JEC:KMC Regraded Unclassif 28A March 14, 1935. Thursday. H.M.Jr: Jeff's on the - we're on the wire together. The franc seems to be getting to be low and we're approaching a week-end and I wanted to suggest that you call up Cariguel, see?- Crane: Yes. H.M.Jr: - and tell him that if the gold - if the franc should go below the gold export point and our American banks didn't act or their banks didn't act, why, we would be glad to, see? Crane: Yes, I see. Well, I should think the American banks would. H.M.Jr: Well, they might not over a week-end. Crane: Yes. H.M.Jr: I just thought you might tell them that. Crane: Yes. H.M.Jr: See? Crane: Yes, all right, I'll call him up. H.M.Jr: And then when you call him up I wish you would ask him - he told you for two days how much the English spent - I'd like to know how much they spent all together. You know - Crane: You mean to support sterling. H.M.Jr: Yes. Crane: We've got a pretty good indication of that in a report that we get each week from the Bank in France and it appears to be about $25,000,000. H.M.Jr: Well, that was just that one Thursday and Friday they spent $25,000,000. Crane: Yes. Well, I think that's about all they spent. H.M.Jr: Do you want to ask them? Crane: Yes, I'll ask him, I - about how much they spent. Regraded Unclassif OB2 - 2 - H.M.Jr: Yes. Crane: I'm not sure he'll tell me. He's very - he's not apt to tell me - H.M.Jr: Well, hell he might tell you that in return for this. Crane: Yes. All right - I'll H.M.Jr: Right. Crane: And I'll let you know. H.M.Jr: O.K. Crane: All right. Goodbye. bir as wellbow the A E THE two DUE THE would WE out. a bran Ea FOR Stort ** with De better On 12 right, - / The DATE Tub 79 staties the be in 115 Lich that If U.S. Afforts relied 1 need LA the Date: will Ref - Fine the 2a mis Class be have it. De should OH 002 wine friends bed dons AA. or - about Tive million MM so eChi provide, street $23,000,000 and that Has rigure That VP THIS suite Pignatures that the back to Proper serve vit, Te that the provide de 200, the the Ruini amount or storling that they tright Dd acpport the thise bere n. 100k 00 20 Ago When S DAS runk. Then they HTS only in for time days? CJ Day THE only 10 as to 13 be Improo For typo days. Regraded Unclassifi 2815 March 14, 1935. Thursday. Crane: Hello. H.M.Jr: Hello, Crane. C: I just talked with Cariguel - H.M.Jr: Yes. C: - and he said he thought that was fine and that he was glad to hear that we'd step in in case of necessity. H.M.Jr: That's right. C: He said that he didn't know what attitude the banks were going to take. He hadn't had occasion to talk to any of them today, but he would tomorrow - sort of sound them out. I told him that our feeling here was that it would be better to have the market do it - H.M.Jr: That's right. C: - but that I thought that both he and we should encourage them to do it - H.M.Jr: That's right. C: - but that if all efforts failed we'd stand in the breach. H.M.Jr: Absolutely. C: He said that was fine and he was glad to hear it. I asked him about what our British friends had done and he said that he thought about five million pounds. H.M.Jr: Five million pounds. C: That's about $25,000,000 and that same figure that we deduced from some figures that the bank in France sent us. H.M.Jr: Is that the total? C: Yes. That's the total amount of sterling that they bought to support the rate here a week or 80 ago when it was weak. H.M.Jr: Then they were only in for two days? C: They were only in as far as he knows for two days. Regraded Unclassifi 2 - 2 - H.M.Jr: Right. C: Said he doesn't think they were in more. H.M.Jr: Right. You're coming down tomorrow, aren't you? C: Well, I'm coming down tonight. I - I thought I'd spend the day down there. H.M.Jr: Good, good. All right, well, then - C: I'll be in the Treasury most of the day tomorrow. H.M.Jr: Well, then at least they know we're ready in case of necessity. C: Yes. He seemed to be very grateful. H.M.Jr: Well, thanks, Crane. C: All right, sir. H.M.Jr: Goodbye. C: Goodbye. Regraded Unclassifi 1A1 March 4, 1935. My dear Mr. Chairman: In accordance with the understanding reached at naturday's hearing I am enclosing, herewith, a report given me by Deputy Commissioner Wellott of the Alcohol Tax Unit of the Bureau of Internal Revenue with relation to the civil service status of the personnel affected by the proviso found in the Emergency Appropriation Act of 1935, in the item "Collecting the Internal Revenue". I think that you will find from this report that there is no foundation in fact for the suggestion that these men had been blanketed into the former Bureau of Prohibition without civil service examination. They had all qualified by open competitive examination in complete secord with the civil service rules. 1 believe that you will find also that the appointment of approximately 700 of these nen in the sureau of Industrial Alcohol, by reinstatement, was like- wise in full compliance with the civil service rules. Your attention is specially invited in this connection to the quoted extract from the Attorney General's opinion addressed to the President on May 26, 1934, advising him that the classified status of employees separated from the service under the provisions of the Executive order of June 10, 1933, was in no wise affected by such soparation. I will very much appreciate your favorable consider- ation of the pending estimate for funds from which this per- sonnel may be compensated. should the Committee desire further information upon any phase of the matter 1 shall be only too glad to furnish it. Very truly yours, Secretary. Honorable Carter Class, Chairman, Committee oñ Appropriations, United States Senate. Regraded Unclassified 30 March 2, 1935 MEMORANIUM for the Secretary of the Treasury: In accordance with your instructions, I submit below a resume of the history of the Alcohol Tax Unit and its prede- cessor agencies from the standpoint of the application of the civil service laws: From the adoption of the Mighteenth Amendment until April 1, 1927, the enforcement of the Prohibition laws was car- ried on by the Bureau of Internal Revenue, in & special division known as the Prohibition Unit. By the Act of March 3. 1927, which became effective April 1, 1927, the Prohibition Unit of the Bureau of Internal Revenue was abolished and until July 1, 1930, the duty of the prohibition enforcement was performed by a separate bureau in the Treasury Department, known as the Buresu of Prohibition. By the Act of May 27. 1930, which became of- fective July 1, 1930, the Bureau of Prohibition was transferred to the Department of Justice. Those of its functions, however, which had to do with the supervision of the production and dis- tribution of alcohol for industrial and scientific uses were transferred to a new buresu in the Treasury Department which was given the name Bureau of Industrial Alcohol. The Bureau of Prohibition in the Department of Justice was abolished on August 9. 1933. pursuant to the provi- sions of the President's Order of June 10th, effecting a general reorganization of the Executive Departments. Its functions, however, were continued without substantial change in a separate division called the Alcoholic Beverage Unit. The Executive Order of March 10, 1934. abolished the Bureau of Industrial Alcohol in the Treasury Department and the Aleoholic Beverage Unit in the Department of Justice, and trans- ferred their functions, records and personnel to the Bureau of Internal Revenue. This Order became effective May 10, 1934, Regraded Unclassified - 2 - and to carry out its provisions a special unit was created in the Bureau of Internal Revenue under the name Alcohol Tax Unit. With minor exceptions, this Unit, under the direction of the Commissioner of Internal Revenue, is now charged with the enforcement of all Federal liquor laws. CIVIL SERVICE REQUIREMENTS From the establishmont of the Prohibition Unit in the Bureau of Internal Revenue in 1920, until 1927, the ap- pointments in the Prohibition Service, with the exception of clerical personnel, were, by special provision of law, made without reference to the civil service rules. By the Act of March 3. 1927, which became effective April 1, 1927, Congress provided that all appointmente should be subject to the provi- sions of the civil service laws, and provided further that the term of office of any person in the Prohibition Service who was not appointed subject to the civil service laws should ex- pire October 1, 1927. The mumber of employees in the Bureau of Prohibition when this law become effective was approximate- ly 4,300, of whom approximately 2,600 were officers, agents, administrators, inspectors and investigators who had been an pointed without regard to the civil service Following the Act of March 3. 1927. the civil Serv- ice Commission announced open competitive examinations for all positions in the Bureau of Prohibition, excepting clerical positions already hold by prsons with a classified civil serv- ice status. The certification of eligibles from these open competitive examinations was not completed by the Civil Service Commission until September, 1928, and in the meantime the com- mission found it necessary, pending the establishment of eligible lists, to authorise an indefinite extension of the employment of persons then in the Bureau without civil service status, this to be terminated in any individual case upon an adverse finding by the Commission in respect to the incumbent's character. From the lists of eligibles certified by the Cost- mission in September, 1928, the Department proceeded to make "Of this mumber, approximately 400 were inspectors assigned to the supervision of permittees licensed under the provisions of the National Prohibition Act. appointments as required by law, replacing those of the exist- ing force who had not qualified in the examination, and within a few months had exhausted the lists of eligibles in practically all field districts. In most districts, however, 1t developed that there were insufficient eligibles to fill all positions and it became necessary for the Civil Service Commission to announce further examinations to most this deficiency, from which eligibles were certified and appointments made late in the year 1929. By April 30, 1930, the whole force of the Bureau of Prohibition, consisting of about 4,750 employees, were in their positions in full accord with the civil service rules. A certain mumber of positions had been filled by the transfer of classified employees from other government departments or by reinstatement of classified employees, with the approval of the Civil Service Commission, but with these exceptions the entire personnel had qualified under the open competitive examinations conducted by the Civil Service Commission pursuant to the TO- quiremente of the Act of March 3. 1927. These examinations were of the type regularly given by the civil Service Commission for appointments in the clas- sified civil service. For approximately 500 positions above the grade of investigator, that is, administrators, assistant administrators, deputy administrators, senior investigators, attorneys and chemists, the examinations were nonassembled, consisting of a showing by each applicant of his education, training and experience. For all other positions the examina- tions were assembled and consisted of a mental test in three sections calculated to determine the applicant's general intel- ligence all will as his special fitness for the duties of & prohibition officer. All candidates in the case of the non- assembled, as well as the assembled, examinations were sub- jected to & searching character investigation and to an oral examination to determine the applicant's personal characteristics and address, quickness of understanding, adaptability and judg- ment. The examinations were in all particulars as strict and comprehensive as any which had been given by the Commission up to that time for analogous positions in any branch of the government service. Same evidence of the difficulty of the examinations will be found in the fact that the first of the two tests was talcen by 12,436 persons of whom only 4,504 10- coived eligible ratings on the mental requirements, and from Regraded Unclassified the further fact that of this latter mumber 1,865 were later declared ineligible by the Commission as a result of the personality, character and fitness investigations. It is to be understood, of course, that virtually all the 2,600 non-civil service employees in the Buresu of Pro- hibition at the time competed in these examinations. In this commetion, it is to be noted that only thirty per cent, or about 800, of these old employees survived the first examina- tion and received ratings making them eligible to hold their positions. Of those failing in the first examination, how- ever, almost 500 successfully completed the second examination, In other words. about half the old personnel of the Prohibition Service were ultimately able to retain their positions under the civil service requirements imposed by the Act of March 3. 1927. In view of the foregoing facts it will be correct to say that at the time the Bureau of Prohibition was trans- ferred from the Treasury Department to the Department of Justice on July 1, 1930. its personnel was entirely a civil service personnel, recruited in full compliance with all the laws and regulations pertaining to the civil service system. THE EXECUTIVE ORDER OF JUNE 10, 1933 From July 1, 1930, when the Bureau of Prohibition became a part of the Department of Justice, until July 1, 1933, appointments to positions in the Prohibition Service continued to be made exclusively from the lists of eligibles established by the Civil Service Commission, with the exception, of course, of instances of transfers or reinstatements of persons with a classified civil service status. Until July 1, 1932, the tendency was to increase the Buresn's personnel to keep pace with the continued efforts of the Department to give effective enforcement to the Prohibition laws. With the enactment of the first Economy Law some slight reduction in the force of field agents was made on July 1, 1932, following which the Bureau's total force stood at a figure of about 3.300. By June 30, 1933, this personnel had been reduced by normal separa- tions to 3,100. At that time, partly to met the reduced AP- propriations available for the fiscal year 1934, and partly in Regraded Unclassified anticipation of the repeal of the Prohibition Amendment, it was found advisable to males a drastic reduction in the number of employees. Almost 1,400 field agents and clerks were fur- loughed at the close of business on June 30, 1933. or shortly thereafter, of which mumber about 160 were subsequently re- instated. Approximately 100 now appointments were made, and the Bureau's personnel in active-duty status on August 9th con- sisted of slightly less than 2,000 employees of all classes. As has been seen the Bureau of Prohibition was abol- ished by Executive Order No. 6166, dated June 10, 1933. This Executive Order, which became effective on August 9. 1933. abolished or consolidated a large number of agencies in many departments of the government, and with regard to all such abolished agencies it contained the following provision re- specting the disposition to be made of the personnel: "All personnel employed in connection with the work of an abolished agency or function dis- posed of shall be separated from the service of the United States, except that the head of any successor agency, subject to my approval, may, within a period of 4 menths after transfer or consolidation, reappoint any of such personnel required for the work of the successor agency without reexamination or 10ss of civil-service status." Pursuant to this provision the entire force of the Bureau of Prohibition, consisting of approximately 2,000 on- Ployees of all classes in active-duty status and approximately 1,240 who had previously been placed on furlough, were separated from the service at the close of business on August 9th. is authorised by the Executive Order, 1,191* of this musber were reappointed on August 10th, in the Alcoholic Beverage Unit, to which the functions of the Prohibition Service were now assigned. During the period which intervened between August 9th and the transfer of the personnel to the Bureau of Internal Revenue a considerable number of those separated from the service on August 9th were reinstated and a number of new appointments were *Including approximately 300 clerical employees. Exact records of the personnel transactions which occurred in the Department of Justice during the period under discussion are not available in the Treasury Department. Regraded Unclassified made, under special Executive authorization, without regard to the civil service rules. In the same period upwards of 300 additional clerks and investigators were separated from the service. On May 10, 1934, when the personnel was transferred to the Bureen of Internal Revenue it consisted of 977 persons, exclusive of approximately 70 who were retained in the Depart- ment of Justice, of this mumber 639 were investigators or field agents. The remainder were clerical and technical 6b- ployses of various classifications. THE ALCOHOL TAX UNIT with the repeal of the Prohibition Amendment in December, 1933. it was determined by the President, upon the advice of the Attorney General and the Secretary of the Treasury, that responsibility for the enforcement of Federal laws relating to the production and distribution of alcoholic beverages should properly be transferred from the Department of Justice to the Bureau of Internal Revenue and this transfer was ultimately consumnated by Executive Order No. 6639, dated March 10, 1934, which became effective on May 10, 1934. Pending this transfer it was also determined that the Treasury Depart- ment, through the Bureau of Industrical Alcohol, should at once lay plans for the enforcement of the internal reveme laws relating to intoxicating beverages and to recruit personnel which could be used in enforcement work in different parts of the country. After conference with the Civil Service Commis- sion it was determined by the Department that the only avail- able mane of recruiting an experienced force would be by mk- ing appointments, by reinstatement, from among the approximately 2,000 investigators and agents who had been separated from the Department of Juntice under the provisions of the Executive Order of June 10, 1933, as above noted. Accordingly, the re- cords of all such investigators and agents were carefully examined by the Commissioner of Industrial Alcohol and during the period from February 1 to April 10, 1934. 698 ISSN were selected for appointment to the rolls of the Bureau of Industrial Alcohol in this way, and their reinstatement was authorised by the Civil Service Commission. In making these appointments the sole basis taken Tas the efficiency, character Regraded Unclassified -7- and disciplinary records of the mon and no consideration was given to any other factor." To aid him in passing upon these records the Commissioner of Industrial Alcohol made use of a committee informally designated by him and consisting of experienced officers selected from the Bureau of Industrial Alcohol, the Intelligence Unit of the Bureau of Internal Revenue, and the Alcoholic Beverage Unit of the Department of Justice. On May 10, 1934, under the provisions of Precutive Order No. 6639, the personnel of the Bureau of Industrial Alcohol and the Alcoholic Beverage Unit of the Department of Justice were transferred to the Buresu of Internal Revenue and consolidated in the Alcohol Tax Unit, Under this Order the 698 agents who had been appointed by the Commissioner of Industrial Alcohol, as above indicated, were merged with the 639 investigatory transferred from the Alcoholic Beverage Unit of the Department of Justice into a single field investigative organization. THE PROVISIONS OF THE EMERGENCY APPROPRIATION ACT The Emergency Appropriation Act, approved June 19, 1934, contained an appropriation of $10,000,000 for the Buresu of Internal Revenue, to which was attached the following proviso: "Provided, That after December 1, 1934, no part of the appropriation made herein or hereto- fore made for the fiscal year 1935 shall be used "The reinstatement eligibility of classified employees who are separated from the service without fault is determined by Execu- tive Order. Employees eligible for reinstatement are not listed by the Civil Service Commission in the order of their eligibility, and reinstatement must in any case be made upon the judgment and opinion of the appointing officer as to the qualifications of those eligible, subject to the approval of the Civil Service Com- mission. Regraded Unclassified to pay the salary of any person formarly employ- ed M investigator, special agent, senior ware- Regraded Unclassified housemen, depaty prohibition administrator, agent, assistant attorney, assistant prohibition adminis- trater, senior investigator, deputy production administrator, storekeeper or genger, or any other position in the Prohibition Bureau or Alcoholie Beverage Unit, Department of Justice, who was separated from the service of such Bureau or Unit between June 10, 1933. and December 31, 1933, while in any such position in the Treasury Depart- ment, unless and until such person shall be ap- pointed thereto as a result of an open, competi- tive examination to be hereafter held by the Civil Service Commission." Although the purpose of this legislation is not evi- dont from the terms of the statute, it is to be assumed from contemporary discussions that its framers were of the opinion, first, that the employees of the classes enumerated had not secured their positions in the former Bureau of Prohibition through proper civil service examination, and, second, that the employees of these classes who were separated from the service under the provisions of the Executive Order of June 10, 1933, who had not been reappointed prior to the expiration of the four months period defined in that Order, had lost their eligibility for reinstatement under the civil service rules and that, therefore, the appointment of 698 of such persons in the Bureau of Industrial Alcohol, as above described, was not authorized by law. As to the first of these points, it has already been observed that the field agents who were in the service of the Bureau of Prohibition prior to the abolishment of that Bureau by the Executive Order of June 10, 1933, had, without exception, received their appointments as the result of regular open competitive civil service examinations or, in rare instances, by transfer from positions in the classified civil service, or by reinstatement in accordance with the civil service rules. The claim has been unde that the civil service examinations to which this personnel were subjected amounted to nothing more than so-called character tests, or, in other words, that they were not required to pass a mental examination but were virtually blanketed into the service. There is no - 9 - evidence to support this charge. The record shows no instance of blasksting into the service. The facts with reference to the examinations given have been set forth above, but it will be well to add that of the persons who were employed in the former Buresa of Prohibition prior to the establishment of civil service requirements only 268 remained on May 10, 1934, when the residue of the Prohibition organization vas consoli- dated in the Alcohol Tax Unit of the Treasury Department, these survivors, of course, having qualified in the meantime on open competitive civil service examination. of this number 138 were reinstated in the Bureau of Industrial Alcohol during February and March, 1934, and 136 were transferred from the Alesholic Beverage Unit of the Department of Justice. There is attached hereto a list of such employees. is to the second point, that is, the charge that is- pleyees of the classes emmmerated who were separated from the service by operation of the Executive Order of June 10, 1933, unless reappointed in the Alcoholic Beverage Unit thin the four months' period named in that order, were ineligible to be reinstated under the civil service rules, it must be said that this is & point which received no attention by the Depart- ment at the time 698 of these employees were reinstated in the Bureau of Industrial Alcohol, as above described. It will be remembered that the Executive Order of June 10th had applies. tion to a large mmber of agencies in various Executive Depart- nonts which were either abolished or consolidated by its provi- sions. Thousands of employees in various branches of the government were affected by the provisions of the Order requir- ing their separation from the service: and it was a matter of common knowledge at the time that all mah employees from what- over agencies separated were considered not only by the appoint- ing officers in the Executive Departments generally, but by the civil Service Commission also, as retaining their eligibility for reinstatement under the civil service rules without any regard to the four months' limitation found in the Executive Order. The appointments were made by the Bureau of Industrial Alcohol in good faith in accordance with the common practice which provailed at the time. It wasnot until weeks after the consumention of these appointments that it name to the notice of - 10 - the Treasury Department that the eligibility of the persons selected for reinstatement in the Bureau of Industrial Aloohol had been brought into question. The merits of this contention must, of course, de- pend upon the meaning and intent of the provision of the Executive Order of June 10th, which was quoted on page 5, above. A construction of this provision was requested of the Atterney General by the President following the raising of the question during the month of May, 1934. In response to the President's request the Attorney General, under date of May 26, 1934, rendered an opinion reading, in part, as follows: "The language of the paragraph in question is plain and unambiguous, It speaks for itself. Under the provisions of the paragraph the person- nel employed in connection with any abolished agency or function disposed of are separated from the service, but the head of any successor agency is authorized to reappoint within a certain period without reexamination or loss of Civil Service Status, any of such personnel required for the work of the successor agency. The purpose of this provision, as its language clearly indicates, is to enable the head of the successor agency with- in a limited period to make resppointments from among such personnel without regard to the Civil Serv- ice Act and Rules. Not even by the remotest implication of the language employed can it be said that it deprives or attempts to deprive those who are not reappointed within the prescribed period of the Civil Service status possessed by them at the time of their separation from the service." At least from the standpoint of the appointing officers this is believed to dispose of any question which may have been raised with respect toethe civil service eligibility of persons separated from classified positions pursuant to the provisions of the Executive Order of June 10th. Such persons must be deem- od to have retained their eligibility for reinstatement in no- cordanse with the usual civil service rules. Certainly there can be no greater reason for questioning the status of the 698 nen who were reinstated in the Bureau of Industrial Alcohol Regraded Unclassified - 11 - under the circumstances surrounding this particular case than to raise a similar question with regard to former classified employees of any agency abclished by the Executive Order of June 10th, who may have received employment, by reinstate- ment, in classified positions in other branches of the Federal service. Respectfully submitted, Arthur J. Mellott, Deputy Commissioner of Internal Revenue. Regraded Unclassified 31 Present Defersement Officers of the Alsohol Tax Unit was cooupied excepted positions in the Prehibition Unit, Treasury Department, prior to April 1. 1927, and who have acquired civil Service status as result of competitive comminations hold since that date. Regraded Date of Probational Present appointment from 00m- Name Position petitive examination Goyse, Robert V. Investigator in Charge 10-16-28 Henneberry. Harold L. Investigator 1-31-29 Recee, Josiah L. Investigator in Charge 2-16-29 Shea, Frank T. Investigator 10-6-28 Weaver, Henry P. Investigator in Charge 2-7-29 *Bird, Edward S. Investigator 4-1-30 Sewditch, 3dward A. Investigator 11-15-30 DeAngelo, Thomas Investigator 2-26-29 Eager, Harold 1. Investigator 1-28-28 *Graves, Pay B. Investigator 2-28-29 Hall, John Investigator 3-1-29 "Titchoock, William Investigator 6-22-31 Kelley. Edward F. Investigator 1-31-29 *Kent. James N. Investigator 3-26-31 Lordan, Dennis T. Investigator 1-31-29 Mydic, George B. Investigator 3-4-29 MacBrayne, Winfred C. Investigator 5-4-29 Murphy, Thomas F. Investigator 2-26-29 Norton. John 2. Investigator 2-27-29 Pallas, Felix C. Senior Investigator 10-27-28 Sullivan, Walter 8. Investigator 6-28-29 Sanson, Martin O. Investigator in Charge 1-14-29 Araitage, Victor L. Senior Investigator 2-16-29 Bernetein, Carlos M. Senior Investigator 5- 1-29 "Brinokerhoff, Clifford Investigator 2-4-29 grederick, James J. Investigator 2-8-29 Brown, Joseph R. Investigator 9-18-29 Carrico, Andrew. Jr. Investigator 1-7-29 Cusack, Warren B. Investigator 2-4-29 opaly, villiam E. Investigator 5-1-30 "Davis, Richard Investigator 10-1-31 "D'Angelion, Pellegrino Investigator 3-21-30 «Deardeff, Edward E. Investigator 12-1-28 "Deleng, J. Cjark Investigator 2-26-30 Direcce, Joseph M. Investigator 2-4-30 Dumn, william 3. Jr. Investigator 18-21-28 *Felix, Frederick Investigator 2-4-29 Forbes, Charles M. Investigator 1-7-89 Prayne, Joseph A. Senior Investigator 2-1-29 *Gallagher, John P. Investigator 2-4-29 *Gicaler, William H. Investigator 3-16-31 Date of Probational Present appointment from competi- I Position tive emmination Regraded Unclassified Ournison, Laurence W. Investigator 5-8-29 "Hall, Charles L. Investigator 4-5-29 Hanlen, Arthur J. Investigator 3-19-28 "Hartwell, Perley B. Investigator 5-16-29 Heary, Lawrence T. Investigator 3-21-30 "Hildreth, James W. Investigator 3-3-30 Journesy, Henry F. Investigator 9-8-28 Keating, Eltch T. Investigator 3-7-29 *Kelly, Francis J. Investigator 2-4-29 "Kandall, Harry W. Investigator 6-22-31 "Lennon, John P. Investigator 4-2-31 "Lupton, Charles W. Investigator 3-9-31 McConn, William F. Investigator 3-5-30 "MeIntyre, Ambrose As Investigator 2-4-29 Mealy, Joseph J., Jr. Investigator 2-11-29 "Morrissey, Jemes B. Investigator 2-4-29 Mullaney, Charles Ào Investigator 1-25-29 Murphy, Edward J. Investigator 3-19-30 "Nowman, Harry Investigator 2-4-29 Newton, Raymond Me Investigator 5-7-29 "O'hrien, William Investigator 6-16-31 Olson, Herbert Wire Technician 1-9-30 "Patton, Harold T. Investigator 5-13-29 Petitte, James K. Investigator 11-19-28 Reager, Peter Investigator 1-25-29 *Rice, John D. Investigetor 5-1-31 Risse, Terry S. Investigator 9-7-28 Smith, Lowell R. Senior Investigator 1-16-28 "Specs, Joseph Investigator 6-10-30 *Stevenson, Hereven " Investigator 2-24-30 *Sweeney, John P. Investigator 2-12-30 Smanki, Harry Investigator 4-1-30 "Tensey, Michael Investigator 3-24-30 Tatro, Joseph As Investigator 4-25-29 Ford, Robert De Investigator in Charge 2-14-28 Gralton, Gregory de Investigator 9-11-28 Hickman, L. Dane Senior Investigator 5-1-29 Shirley, Lambert O. Investigator in Charge 3-8-29 Chidester, Thurmen L. Investigator 10-1-29 "Coreoren, Date He Investigator 5-19-30 *Oodfrey, Roland As Investigator 1-16-29 "Herr, Cyrus As Investigator 3-P4-31 Hill, Burr Investigator 2-20-30 Johnson, Julius N. Investigator 1-21-29 "Jones, Orville Investigator 2-14-89 Montgomery, John G. Investigator 4-1-29 *Paris, Edgar De Investigator 1-21-29 Raney, Harry We Investigator 3-1-29 "Regen, Leonard Investigator 2-23-29 Date of Probational Present appointment from competitive lhan Position examination Regraded Unclassified Dunigan, William B. Assistant Supervisor 4-16-29 "Barnhart, Charles B. Investigator 10-16-28 *Bressler, Arthur D. . 1- 6-30 "Cimbelists, Michael P. # 10 9-30 Could, George J. - 10-28-28 "Hubert, Frank z. . 10- 1-28 "Isler, Samuel G. - 1- 9-50 "Kramar, George C. . 2-16-31 Langford, Harold A. # 1-21-30 MeCandless, Park R. 10-16-28 Malloy, Edward C. go 9-30 Shane, Harry C. 4-24-28 "Uptograff, Frank B. 10-16-28 "Uptograff, Thomas 4. 10-16-28 "Weible, Charles H. 1. 9-30 wills, Francis v. 8-14-28 Young, Robert B. 1- 6-30 Heddens, Warren A. Assistant Supervisor 7-31-26 Wickham, John H. Investigator in Charge 12- 1-28 "Alezander, Nethaniel C.Investigator 2-16-28 Arnold, Alexander M. - 1-16-29 *Banks, John B. . 12-16-29 Barton, John M. - 1-29-30 *Bishop, Louis J. - 12- 1-28 *Burgess, Samuel C. - 12- 1-28 Caffey, Myron M. - 4. 1-29 *Cash, John T. 12-16-29 *Cooper, Jate 7. 10-16-28 Crush, William B. 11- 6-28 "Dirting, John L. 12- 1-28 *Gates, LeRoy L. . 1-10-30 *Oriffin, Cyril T. 12- 1-28 Harman, George G. 2-18-32 Harvey, William R. "- 1-31 "Hood, Cheeser A. 12- 1-28 "Burst, Jumes ". # 12- 1-28 King, Marion A. R. 12-16-29 "London, John J. 12- 1-28 "Lumpkin, Frank D. 12- 1-28 *Mitchell, Lawrence o. 7- 1-31 *More, James L. 1- 2-30 Malball, William B. 3-15-29 Ovens, John R. 2- 5-32 Feul, David B. - 12- 1-28 *Entledge, 3. 1. - 90 1-31 Schults, Walter R. Wire Technician 12- 1-28 White, Samuel 0. Investigator 12- 1-28 *Wilkins, Thomas C. 18- 1-28 Food, William I. - 7-17-29 Date of Probational Present appointment from competitive Name Position exemination Pennington, John De Diss. Supervisor 2-20-28 Koshler, Narie B. Investigator in Charge 1-16-29 Regraded Comingham, Mm. F. # # # 4-12-28 Tonicay, Pm. Mak. # a # 2-19-29 Anglin, Fronk 5. Investigator 2-4-29 Book, Kenneth G. # 10-19-28 Claffey. Joseph He # 11-1-28 Avans, Goo. R. # 10-1-28 Flaherty, Hugh R. # 3-11-29 Hommes, Jos. 7. # 4-15-29 "Kerstotter, Meredith B. # 1-16-30 Ward, 3dw. M. A 3-14-32 Ray, 7, L. Asst. Supervisor (Enf.) 3-16-29 Maloney, Lane Investigator in Charge 11-7-28 Simons, Gustame J. . # # 2-2-29 Beandrie, Howard C. Investigator 12-1-28 *Bennett, will M. Wire Technician 11-22-28 *Browning, James G. Investigator 11-1-28 Campbell, Francis J. # 12-1-28 Casserly, Ray J. # 12-1-28 Dowd, Victor J. . 2-13-31 Ford, Robert 1. # 3-1-29 *Koesjan, William R. # 12-1-28 Kominokis, Junes a 5-5-31 Kuemerlein, John F. # 2-1-29 "Larson, Arthur R. " 7-14-31 *McCoole, John es 12-1-28 McCullum, John, Jr. " 12-1-28 Miller, Walter T. # 1-11-29 Mills, Bend. yo e 12-1-28 *][ebelsick, Albert 1. If 8-2-28 Skallerup, Harry N. # 12-18-28 *Stime, Glann 11. - 2-14-31 Prank L. White # 10-8-28 Chapman, Ellie S. Investigator in Charge 3-27-28 *Anderman, Smile J. Investigator 1-9-30 "Bryant, George F. # 11-16-28 Cooper, Clamd 3. # 7-1-29 Guinn, Walter c. # 10-15-28 Holland, Lake # 1-7-30 Rudepeth, Goo. # 2-16-30 Landry, Mr. 0. # 10-16-28 Newman, Was s. # 1-31-31 *Schrasder, Sidney # 11-24-28 Smith, Edwin 7. # 3-15-30 wright, Wiley He - 1-14-30 Date of Probational Present appointment from competitive Name Position examination Tuttle, Robert 5. District Supervisor 3- 7-29 Hearington, William D. Investigator in Charge 2-16-29 Andrews, James E. Investigator 1- 6-30 Austin, 1. No # 12- 1-28 Barrenbrugge, James H. = 2- 1-30 "Clark, Frank B. # 10-16-28 *Day, William T. # 3- 3-28 Grabbs, Walter C. # 2- 1-30 Kimsey, Joseph R. # 1-29-31 *McPherson, Samuel 0. . 7- 1-29 "Merrick, Remaine to # 2-16-28 *Myrick, Elvis W. or 8-21-30 Souther, Frank L. # 1-31-31 Strickland, Owen C. = 10-16-28 Wright, Howard P. Senior Investigator 3- 1-28 *Kinnaird, William H. Investigator in Charge 2- 8-29 *Disney, William B. Investigator 7-21-28 Criffin, George S. # 12- 4-29 "Larkin, Edmund 4. # 12-15-28 *Phillips, Joseph - 4- 2-28 *Shofner, William B. = 1- 2-29 *Stongs, Twyman C. # 6-16-30 *Seallwood, Arthur M. # 1-27-31 Statton, Edward M. # 40 7-30 "Thomas, Joe J. E 4- 7-30 Bruner, Wilbur K. Assistant Supervisor (Enf.)2-16-29 Nees, Kliot Investigator in Charge 4- 1-29 Anderson, Charles H. Investigator 12-27-28 Berard, Ulrie H. # 9-15-28 *Robuck, Ralph 1. # 4-19-30 *Scully, Arthur Q. . 5-28-29 "Ton Batchelder, Linus . 3-30-31 Cowan, L. Morell # go 3-29 Morrill, John We Assistant Supervisor 3. 4-29 White, James L. Investigator in Charge 1-25-29 *Haff, William L. Investigator 1- 6-30 Mitchell, John J. Wire Technician 12- 1-28 "Taylor, Frederic M. Investigator 1-21-29 Regraded Unclassified Date of Probational Present appointment from competitive Ama Position examination Duman, Harvey L. Invest. in Charge 3-30-28 Herrick, Ralph 2. . # e 7-1-27 Beasell, Samel D. Wire technicism 2>7-29 *frown, Date F. Investigator 2⑉1⑉29 Cole, Louis P. - 3-16-29 *DeArmond, Norval L. # 2-1-29 *Ellis, William F. - 7-1-29 Erkilla, Jasob B. # 1-7-29 *Gill, Paul X. # 2-1-29 "Harris, Thomas L. # 1=24=30 *Knapp. Otis B. et 2-1-29 Pollan, Ulous # 1=1=30 *Rowden, Thad No # 5-5-28 *Small, George P. n 1-25-30 egutterfield, Artiser # 2-1-29 Whitenack, Lester C. # 1-13-30 ewright, Wellington Investigator 3-20-30 *Campbell, Charles x. # 3-19-30 *Depew, Charles n. e 1-7-29 *Hastland, Howard We a 6-28-30 *Hormann, Nicholas No # 1-7-29 *Hoselton, Reginald J. # 6-17-30 *Xmutson, Martin A. a 12-1-28 *Lippold, Burton V. # 1-5-29 - "May, Gas 6-25-30 *Nelson, Nathen H. 11-26-20 *Peterson, Edward Le 2-16-31 *Rhoades, Robert L. # 1-7-29 *Benson, Charles B. 2-17-31 *Schroeder, Herman V. 5-6-29 - 11-1-28 Silverman, Mauries *Splam, Newton # 5-16-29 Viitala, Matt a 3-15-30 *weld, Kenneth I. 3-1-29 *Williams, Clarence R. # 1-4-29 - 10-16-28 *Wood, Homer F. *Baker, Leurnel L. Investigator 6-1-31 Cohoon, Burton No. Jr. # 2-16-29 # 12-1-28 Drew, Harry 2. # Lawrence, David R. 3-1-29 *Reeves, Clarence H. . 7-1-30 # 1-12-29 "Searer, George H. # 1-15-29 Seeet, George H. # 8-2-28 *Tingle, Benjemin H. # 3-18-30 *Ure. John X. *Reinstated at Regulative Inspecters, Duresp of Industrial Alsohol, February e April. 1934. Regraded Unclassified 78D CONGRESS } HOUSE OF REPRESENTATIVES DOCUMENT 1st Session No. 69 CONSOLIDATION, TRANSFERS, AND ABOLITION OF EXECUTIVE AGENCIES MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING AN EXECUTIVE ORDER FOR CERTAIN REGROUPINGS, CONSOLI- DATIONS, TRANSFERS, AND ABOLITIONS OF EXECUTIVE AGEN- CIES AND FUNCTIONS THEREOF JUNE 10, 1933.-Referred to the Committee on Expenditures in Executive Departments and ordered to be printed To the Congress: Pursuant to the provisions of section 1, title III, of the act entitled "An act to maintain the credit of the United States Government", approved March 20, 1933, I am transmitting herewith an Executive order for certain regroupings, consolidations, transfers, and abolitions of executive agencies and functions thereof. Please let me tell you very simply and frankly that in transmitting this Executive order at this late hour in the special session, I have had no thought of taking what might be considered an advantage of the Congress. The very urgent demands of the public business, both legislative and administrative, during the past few weeks have made it literally impossible to complete the study of consolidation. Many other changes are in contemplation and I have selected only those which I believe should be put into effect ne quickly as possible. These additional changes I do not feel it right to submit until the next regular session of the Congress. May I suggest that if the changes proposed in the present Executive order are not concurred in by the Congress they can be restored or otherwise changed at the beginning of the next regular session a few months hence. The justification for sending this Executive order up, even at this late hour, is that it will effect a saving of more than $25,000,000. This is well worth while. FRANKLIN D. ROOSEVELT. THE WHITE HOUSE, June 10, 1938. Regraded Unclassified 2 CONSOLIDATION AND ABOLITION OF EXECUTIVE AGENCIES CONSOLIDATION AND ABOLITION OF EXECUTIVE AGENCIES 3 EXECUTIVE ORDER SECTION 2.-Nutional parks, buildings, and reservations ORGANIZATION OF EXECUTIVE AGENCIES All functions of administration of public buildings, reservations, Wheress section 16 of the act of March 3, 1933 (Publie, No. 428, national parks, national monuments, and national cemetéries are 47 Stat. 1517), provides for reorganizations within the executive consolidated in an Office of National Parks, Buildings, and Reserva- branch of the Government; requires the President to investigate and tions in the Department of the Interior, at the head of which shall determine what reorganizations are necessary to effectuate the pur- be a director of national parks, buildings, and reservations: except poses of the statute: and authorizes the President to make such reor- that where deemed desirable there may be excluded from this pro- ganizations by Executive order; and vision any public building or reservation which is chiefly employed as Whereas I have investigated the organization of all executive and B. facility in the work of & particular agency. This transfer and con- administrative agencies of the Governme nt and have determined that solidation of functions ehnll include, among others, those of the certain regroupings, consolidations, transfers, and abolitions of National Park Service of the Department of the Interior and the executive agencios and functions thereof are necessary to accomplish National Cemeteries and Parks of the War Department which are the purposes of section 16; located within the continental limite of the United States, National Now, Therefore, by virtue of the aforeanid authority, I do hereby cemeteries located in foreign countries shall be transferred to the order that: Department of State, and those located in insular possessions under SECTION 1.-Procurement the jorisdiction of the War Department shell be administered by the Bureau of Insular Affairs of the War Department. The function of determination of policies and methods of procure- The functions of the following agencies are transferred to the office ment, warehousing, and distribution of property, facilities, structures, of National Parks, Buildings, and Reservations of the Deparment improvements, machinery, equipment, atores, and supplies exercised of the Interior, and the agencies are abolished: Arlington Memorial by any agency is transferred to a procurement division in the Treasury Bridge Commission, Public Buildings Commission, Public Buildings Department, at the head of which shall be a director of procurement. and Public Parks of the National Capital, National Memorial Com- The Office of the Supervising Architect of the Treasury Depart- mission, and Rock Creek and Potomae Parkway Commission. ment is transferred to the Procurement Division, except that the build- Expenditures by the Federal Government for the purposes of the logs of the Treasury Department shall be administered by the Treas- Commission of Fine Arts, the George Rogers Clark Sesquicentennial tiry Department and the administration of post-office buildings is Commission, and the Rushmore National Commission shall be transferred to the Post Office Department. The General Supply administered by the Department of the Interior. Committee of the Treasury Department is abolished. In respect of any kind of procurement, warebousing, or distribu- SECTION 3.-Inrestigations tion for any agency the Procurement Division may, with the approval, of the President, (a) undertake the performance of such procurement, All functions now exercised by the Bureau of Prohibition of the warehousing, or distribution itaelf, or (b) permit such agency to per- Department of Justice with respect to the granting of permita under form such procurement, warehousing, or distribution, or (0) entrust the national prohibition laws are transferred to the Division of such performance to some other agency, or (d) avail itself in part of Internal Revenue in the Treasury Department. any of these recourses, according as it may deem desirable in the All functions now exercised by the Bureau of Prohibition with interest of economy and efficiency. When the Procurement Divi- respect to investigations and all the functions now performed by the sion has prescribed the manner of procurement, warehousing, or dis- Bureau of Investigation of the Department of Justice are transferred tribution of any thing, no agency shall thereafter procure, ware- to and consolidated in a Division of Investigation in the Department house, or distribute such thing in any manner other than so prescribed. of Justice, at the head of which shall be a Director of Investigation. The execution of work now performed by the Corps of Engineers All other functions now performed by the Bureau of Prohibition are transferred to such divisions in the Department of Justice as in of the Army shall remain with said corps, subject to the responsibili- ties herein vested in the Procurement Division. the judgment of the Attorney General may be desirable. The Procurement Division shall also have control of all property, facilities, structures, machinery, equipment, stores, and supplies SECTION 4.-Disbursement not necessary to the work of any agency; may have custody thereof The function of disbursement of moneys of the United States exer- or entrust custody to any other agency; and shall furnish the same to cised by any agency is transferred to the Treasury Department and, agencies as need therefor may arise. together with the Office of Disbursing Clerk of that Department, is The fuel yards of the Bureau of Mines of the Department of consolidated in 5. Division of Disbursement, at the head of which Commerce are transferred to the Procurement Office. shall be B Chief Disbursing Officer. The Federal Employment Stabilization Board is abolished, and its The Division of Disbursement of the Trensury Department is records are transferred to the Federal Emergency Administration of authorized to establish local offices, or to delegate the exercise of its Public Works if and when said administration is authorized and functions locally to officers or employees of other agencies, according established. as the interests of efficiency and economy may require. Regraded Unclassified 4 CONSOLIDATION AND ABOLITION OF EXECUTIVE AGENCIES CONSOLIDATION AND ABOLITION OF EXNOUTIVE AGENCIES 5 The Division of Disbursement shall disburse moneys only upon the SECTION 10.-Official Register certification of persons by law duly authorized to incur obligations upon behalf of the United States. The function of accountability for The function of prepuration of the Official Register is transferred improper certification shall be transferred to such persons, and no from the Bureau of the Cersus to the Civil Service Commission. disbursing officer shall be held accountable therefor, SECTION 11.-Statistice of cities SECTION 5.-Claims by or against the United States The function of the Bureau of the Census of the Department of The functions of prosecuting in the courts of the United States Commerce of compiling statistics of cities under 100,000 population claims and demands by, and offenses against, the Government of the is abolished for the period ending June 30, 1935. United States, and of defending claims and demands against the Government, and of supervising the work of United States attorneys, SECTION 12.-Shipping Board marshals, and clerks in connection therewith, now exercised by any The functions of the United States Shipping Board, including those agency or officer, are transferred to the Department of Justice. over and in respect to the United States Shipping Board Merchant As to any case referred to the Department of Justice for prosecu- tion or defense in the courts, the function of decision whether and in Fleet Corporation, are transferred to the Department of Commerce, what manner to prosecute, or to defend, or to compromise, or to and the United States Shipping Board is abolished. appeal, or to abandon prosecution or defense, now exercised by any SECTION 13.-National Screw Thread Commission agency or officer, is transferred to the Department of Justice, For the exercise of such of his functions BE are not transferred to the The National Screw Thread Commission is abolished, and its Department of Justice by the foregoing two paragraphs, the Solicitor records, property, facilities, equipment, and supplies are transferred of the Treasury is transferred from the Department of Justice to the to the Department of Commerce. Treasury Department. Nothing in this section shall be construed to affect the function of SECTION 14.-Immigration and Naturalization any agency or officer with respect to cases at any stage prior to refer- ence to the Department of Justice for prosecution or defense. The Bureaus of Immigration and of Naturalization of the Depart- ment of Labor are consolidated as an Immigration and Naturalization SECTION 6.-Inxular courts Service of the Department of Labor, at the head of which shall be a Commissioner of Immigration and Naturalization. The United States Court for China, the District Court of the United States for the Panama Canal Zone, and the District Court SECTION 15.-Vocational education of the Virgin Islands of the United States are transferred to the Department of Justice, The functions of the Federal Board for Vocational Education are transferred to the Department of the Interior, and the Board shall SECTION 7.-Solicitors act in an advisory capacity without compensation. The Solicitor for the Department of Commerce is transferred from SECTION 16.-Apportionment of appropriations the Department of Justice to the Department of Commerce. The Solicitor for the Department of Labor in transferred from the The functions of making, waiving, and modifying apportionments Department of Justice to the Department of Labor. of appropriations are transferred to the Director of the Bureau of the Budget. SECTION 8.-Internal Revenue SECTION 17.-Coordinating Service The Bureaus of Internal Revenue and of Industrial Alcohol of the The Federal Coordinating Service is abolished. Treasury Department are consolidated in a Division of Internal Revenue, at the head of which shall be B. Commissioner of Internal SECTION 18 Revenue. SECTION 9.-Assistant Secretary of Commerce The following functions are abolished in part: Cooperative vocational education and rehabilitation, 25 percent The Assistant Secretary of Commerce for Aeronautics shall be an thereof. Assistant Secretary of Commerce and shall perform such functions Payments for agricultural experiment stations, 28 percent thereof. as the Secretary of Commerce may designate. Cooperative agricultural extension work, 25 percent thereof. Endowment and maintenance of colleges for the benefit of agricul- ture and the mechanic arts, 25 percent thereof. Regraded Unclassified 6 OONSOLIDATION AND ABOLITION OF EXECUTIVE AGENCIES SECTION 19.-General provisions Each agency, all the functions of which are transferred to or con- solidated with another agency, is abolished. The records pertaining to an abolished agency or a function dis- posed of, disposition of which is not elsewhere herein provided for, shall be transferred to the successor. If there be no successor agency, and such abolished agency be within B. department, said records shall be disposed of as the head of such department may direct. The property, facilities, equipment, and supplies employed in the work of an abolished agency or the exercise of a function disposed of, disposition of which is not elsewhere herein provided for, shall, to the extent required, be transferred to the successor agency. Other such property, facilities, equipment, and supplies shall be transferred to the Procurement Division. All personnel employed in connection with the work of an abolished agency or function disposed of shall be separated from the service of the United States, except that the head of any successor agency, subject to my approval, may, within a period of 4 months after transfer or consolidation, reappoint any of such personnel required for the work of the successor agency without reexamination or loss of civil-service status. SECTION 20.-Appropriations Such portions of the unexpended balances of appropriations for any abolished agency or function disposed of shall be transferred to the successor agency as the Director of the Budget shall deem necessary. Unexpended balances of appropriations for an abolished agency or function disposed of, not so transferred by the Director of the Budget, shall, in accordance with law, be impounded and returned to the Treasury. SECTION 21.-Definitions As used in this order- "Agency" means any commission, independent establishment, board, bureau, division, service, or office in the executive branch of the Government. "Abolished agency" means any agency which is abolished, trans- ferred, or consolidated. "Successor agency' means any agency to which is transferred some other agency or function, or which results from the consolidation of other agencies or functions. "Function disposed of" means any function eliminated or trans- ferred. SECTION 22.-Effective date In accordance with law, this order shall become effective 61 days from its date: Provided, That in case it shall appear to the President that the interésts of economy require that any transfer, consolidation, or elimination be delayed beyond the date this order becomes effec- tive, he may, in his discretion, fix a later date therefor, and be may for like cause further defer such date from time to time. FRANKLIN D. ROOSEVELT. THE WHITE HOUSE, June 10, 1933. o Regraded Unclassified COPY 32 EXECUTIVE ORDER POSTPOMEMENT or GERTAIN PROVISIONS OF EXECUTIVE ORDER NO. 6166, or JUNE 10, 1933. whetever it appears that the interests of economy require that the transfery, commelidations, and eliminations provided for under sections 1, 4, and 8 of Executive Order No. 6166, of June 10, 1933, be delayed boyond the effective date of said order; NOW, THEREFORE, pursuant to the provisions of section 22 of said order, I hereby order that, except as hereinafter provided, the transfers, consolidations, and eliminations contemplated by sections 1 (except the abolition of the Federal Employment Stabilisation Heard), 4, and 8 of Executive Order No. 6166, of June 10, 1933, to- gether with the operation of all other provisions of the said Order in no far as they relate to any of the said sections, shall be do- layed will December 31, 1933: Provided, That any transfer, consol- idation, or elimination in whole or in part under any of the said sections (except the abolition of the Federal Employment Stabiliza- tion Board) including my other previsions of the said Order in so far as they relate to any of the said sections may be más operative and in foree between August 10, 1933, and December 31, 1933, by order of the Secretary of the Treasury, approved by the President. FREANKLIN D. ROOSEVELT. The White House, July 27, 1935. (6224) Regraded Unclassified 33 EXECUTIVE ORDER POSTPONEMENT OF CERTAIN 1 ROVISIONS OF EXECUTIVE ORDER NO. 6166 OF JUNE 10, 1935 WHEREAS, it appears that the interests of economy require that certain transfers, consolidations, and eliminations pro- vided for under sections 4 and B of Executive Order 110. 6166 of June 10, 1933, be further delayed beyond the effective date of said orders NOW, Therefore, pursuant to the provisions of section 22 of said order, I hereby order that, except as hereinafter pro- vided, the transfers, consolidations, and eliminations con- templated by sections 4 and 8 of Executive Order No. 6168 of June 10, 1933, which are not effected prior to December 31, 1953, pursuant to Executive Order No. 6234, dated July 29, 1933, together with the operation of all other provisions of Emeu- tive Order No. 6166, of June 10, 1933, insofar as they relate to said mestions 4 and B, shall be further delayed until June 30, 1954: Provided, That any transfer, consolidation, or elimination, in whole or in part, under said sections 4 and s, including any other provisions of the said order of June 10, 1933, insofar u they relate to sections 4 and 8 thereof, may be made operative and in force between January 1, 1954, and June so, 1934, by order of the incretary of the Treasury, ap- proved by the President. FRANKLIN D. HOOSEVELT. THE WHITE HOUSE, December 28, 1933. (No. 6540) Section 41 Disbursement . S1 Internal Revenue Regraded Unclassified 730 CONGRESS HOUSE OF REPRESENTATIVES DOCUMENT Ed Session No. 281 EXECUTIVE ORDER CONSOLIDATING THE EXECUTIVE AGENCIES ENGAGED IN ENFORCEMENT OF INTERNAL REVENUE LAWS MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING AN EXECUTIVE ORDER CONSOLIDATING THE EXECUTIVE AGEN- CIES WHICH ARE ENGAGED IN THE ENFORCEMENT OF THE INTERNAL REVENUE LAWS MARCH 10, 1934.-Referred to the Committee on Expenditures in the Executive Departments and ordered to be printed To the Congress of the United States: Pursuant to the provisions of section 1 of title III of the act of March 20, 1933 (ch. 3, 48 Stat. 8, 16), I am transmitting herewith an Executive order consolidating the executive agencies which are en- gaged in the enforcement of the internal revenue laws. The need for such a consolidation at this time springs primarily from the repeal of the eighteenth amendment. The tax and enforce- ment agencies of the Government should be reorganized in harmony with the changes which have occurred in the laws relating to the manu- facture, transportation, and sale of intoxicating liquors. The changes made by this order will permit a more efficient administration of the internal revenue laws as well as the laws carrying out the protective features of the twenty-first amendment. Because of the obvious desirability of accomplishing the proposed. changes at the earliest possible moment, I recommend that the order be given consideration by Congress with 8 view to the enactment of a Joint Resolution making its provisions immediately effective. FRANKLIN D. ROOSEVELT. THE WHITE HOUSE, March 10, 1934. Regraded Unclassified 2 EXECUTIVE ORDER CONSOLIDATING EXECUTIVE AGENCIES EXECUTIVE ORDER CONSOLIDATING EXECUTIVE AGENCIES 8 EXECUTIVE ORDER permits, and be shall prescribe the form of all applications, bonds, CONSOLIDATION OF EXECUTIVE AGENCIES ENGAGED IN THE ENFORCE- permits, records, and reports under such acts. MENT OF THE INTERNAL REVENUE Laws TRANSFER OF OFFICIAL RECORDS AND PROPERTY Whereas section 16 of the act of March 3, 1933 (ch. 213, 47 Stat. 2 (a), The official records and papers on file in, and pertaining to 1489, 1517), provides for reorganizations within the executive branch of the business of, the Bureau of Industrial Alcohol, together with the the Government; requires the President to investigate and determine supplies, furniture, equipment, and other property of the United what reorganizations are necessary to effectuate the purposes of States in use in such Bureau, are transferred to the Bureau of Internal section 16; and authorizes the President to make such reorganiza- tions by Executive order; and Revenue. (b) The official records and papers on file in the Department of Whereas I have investigated the organization of the executive and Justice pertaining to the functions transferred by this order to the administrative agencies of the Government which are engaged in the Commissioner of Internal Revenue, together with the supplies, enforcement of the internal-revenue laws, and have determined that furniture, equipment, and other property of the United States in use à consolidation of such agencies is necessary to accomplish the pur- in said Department in connection with the performance of such funo- poses of section 16; tions, are transferred to the Bureau of Internal Revenue. Now, therefore, by vitue of and pursuant to the authority vested in me by the aforesaid action 16 of the not of March 8, 1933, it is TRANSFER or PERSONNEL hereby ordered as follows: 3, (a) The officers and employees employed in, or under the juris- TRANSPER OF FUNCTIONS diction of, the Bureau of Industrial Alcohol, are transferred to the Bureau of Internal Revenue, without change in classification or I (a), The Bureau of Industrial Alcohol and the Office of Commis- sioner of Industrial Alcohol are abolished, and the authority, rights, compensation. (b) The officers and employees employed in, or under the jurísdic- privileges, powers, and duties conferred and imposed by law upon tion of, the Alcoholic Beverage Unit of the Division of Investigation, the Commissioner of Industrial Alcohol are transferred to and shall Department of Justice, except those employed in, or under the juris- be held, exercised, and performed by the Commissioner of Internal diction of, the taxes and penalties section of said unit, are transferred Revenue, and his assistante, agents, and inspectors, under the direc- to the Bureau of Internal Revenue without change in classification tion of the Secretary of the Treasury. or compensation. (b) The authority, rights, privileges, powers, and duties conferred (c) Officers and employees transferred to the Bureau of Internal and imposed upon the Attorney General by the act of May 27, 1930 Revenue hereunder, who do not already possess n. competitive classi- (ch. 342, 46 Stat. 427), entitled "An act to transfer to the Attorney fied civil-service status, shall not acquire such status by reason of such General certain functions in the administration of the National Pro- transfer, except upon recommendation by the Secretary of the Treas- hibition Act, to create a Bureau of Prohibition in the Department of ury to the Civil Service Commission, subject to such noncompetitive Justice, and for other purposes," 60 far as they are required to, or tests of fitness as the Commission may prescribe; and no officer or may, be exercised and performed under existing law, are transferred employee so transferred may be retained in the Bureau of Internal to and shall be held, exercised, and performed by the Commissioner Revenue without appropriate civil-service status for a period longer of Internal Revenue, and his assistants, agents, and inspectors, under than 60 days from the effective date of this order. the direction of the Secretary of the Treasury: Provided, That the Attorney General shall continue to exercise the power and authority TRANSFER OF APPROPRIATIONS (a) to remit or mitigate forfeitures under the internal-revenue laws and to determine liability for internal-revenue taxes and penalties, 4. The unexpended balances of appropriations for the Bureau of in connection with violations of the National Prohibition Act occur- Industrial Alcohol and the field service thereunder, and the unex- ring prior to the repeal of the eighteenth amendment, and (0) to insti- pended balances of the appropriations made for salaries and expenses, tute suits upon any cause of action under the National Prohibition Bureau of Prohibition, Department of Justice, including the field Act or under the internal-revenue Inwo involving n violation of the service thereof, insofar as may be required for the performance of the National Prohibition Act, arising prior to, and/or not affected by, functions transferred by this order to the Commissioner of Internal the repeal of the eighteenth amendment, and to compromise any such Revenue, shall be transferred on the books of the Treasury Depart- cause of action before or after quit is brought: And provided further, ment to the appropriation entitled Collecting the Internal Revenue", That the Commissioner of Internal Revenue, subject to the approval which shall thereafter be available in the Bureau of Internal Revenue of the Secretary of the Treasury, shall prescribe all regulations under 88 A single fund for expenditure for the purposes named in the laws the provisions of the National Probibition Act, and all laws amenda- making the separate appropriations for Salaries and expenses, tory thereof or supplementary thereto, which were not rendered in- Bureau of Industrial Alcohol, Treasury Department", "Salaries and operative by the repeal of the eighteenth amendment, relating to expenses, Bureau of Prohibition, Department of Justice", and Regraded Unclassified EXECUTIVE ORDER CONSULIDATING EXECUTIVE AGENCIES the Enternal revenue' respectively, used appropriations, if any, made to the Bureau of Industrial Alcohol and the Department of Justice, respectively, for the fiscal year 1935, for the performance of the functions transferred by this order to the Bureau of Internal Revenue shall likewise be transferred on the books of the Treasury Department to the appropriation "Collecting the internal revenue' strbject to the conditions herein set forth. located envel ods GENERAL PROVISIONS to 5. Executive Orders Nos. 6166, 6224, and 6540, dated June 10, 1983, July 27, 1938, and December 28, 1933, respectively, are revoked insolar as they are in conflict with the provisions of this order. (SB 6. This order shall take effect upon the sixty-first calendar day after its transmission to Congress, unless otherwise determined in accordance with law. Internal to will of FRANKLIN D. ROOSEVELT. THE WHITE House, March 10, 1934. will the are multin (D) sule of Interniewer an Judesit to wast Do TO at organismic InviDive Information 20 will no and Do colorum bin marilla and AT to will mid odi to milk not when sult 16 the blue to required med off to destributo nil My current 2 Increased to not or Instruction) box - - el who n/n tour done To mem will dear the Unite Date -earn't Hill to (latemed nda not amount services 50001417 avitimento of INVOICE STM 70 250/10 Oil hrs into M 00 state to offi ITE byninam of (libt - N 101 winin TOW Pilli in which off that ml (if 3414 10 to Month 0,00 14) lo insurated Information ST .. the order 0116 SERVICE 1000 MART Lorisation) base of odi In involved Security RINO VIII statement to In unit to vehr tol and tem M Gerumb in will KAZ voli id où In attord will of will 03 - to and License doing mill OF Liotted vita vol in above - - 501 will Rus to normal 60m 10 to 34 March 4, 1935 H.M.,Jr. had lunch with the President and upon his re- turn to the office he called in Chief Mor jan, Colonel Starling and McReynolds. He told them that the President is very anxious and nervous about the protection at the White House. Chief Moran was very resentful of this criticism. He says that the President gets every kind of protection and that Gus Gennerick has been telling the President a lot of things that are making him unnecessarily nervous and that if Gus has any suggestions to make they ought to be made to him and not to the President. H.M.,Jr. gave orders that every secret service man should have a physical examination three times a year, should have target practice regularly once a week, after he qualifies, and if he does not qualify he should be removed; every man should carry a tear gas outfit; machine guns should be put into the White House with operators on duty at all times. Chief Moran has been in his job for forty years and therefore any new suggestions are just all wrong. H.M., Jr. has been most kind and patient because of his age - but very emphatic about carrying out his orders insofar as protection for the President is concerned. H.M.Jr. told the President about his orders on "drinking" and he was very much pleased. Regraded Unclassified 34 A TREASURY DEPARTMENT Washington RELEASE UPON DELIVERY Press Service 3-2-35. No. 4-41 A speech to be delivered Monday, March 4, 1935, by the Secretary of the Treasury, Henry Morgenthau, Jr., as part of an Anniversary Day broadcast, arranged by the Solumbia Broadcasting System, to review the first two years of President Roosevelt's Administration. SECRETARY MORGENTHAU: I think I can best use the time that I have on this Anniversary Day breadcast by telling a fow facts about the United States Treasury- and what it has been doing in the last two years. I want to say right at the start of my talk that during the first year of the period under review, the Treasury was under the able leadership of the late William H. Woodin, Secretary of the Treasury from March, 1933, to the end if that year. The country owes a great debt to the memory of Mr. Woodin for wise and hereic service during a most difficult period. The functions and activities of the Department fall under four goneral heads. Under the first of theso are the agencies primarily concerned with bringing into the Treasury the funds with which to meet the expenses of the Gevernment, and with keeping the recerds of fiscal transactions. These units of the Treasury barrew money by issuing securities, collect the taxes, pay the bills and keep the books. The second group includes the six units which have pelice functions. Through their investigating activities they protect your Government and you from tax evasion, from fraud and decoit, and they guard against violations of laws enacted far the protection of the revenues and monies of the Government. The third group consists of our manufacturing plants. They make our coins, print our paper currency, our bonds, our checks, our postage stamps and tax stamps. They build our public buildings. They purchase supplies for the Government. The protection life and health are activities which fall under the fourth heading. Regraded Unclassified 34 B -2- ANNOUNCER: This is a remarkable array ef activities for one Department of the Government, Mr. Secretary, and I think it will be surorising to mest people. Would you mind giving us just a glimpse of some of the work these agencies have been doing in the last two years? SECRETARY :.ORGENTHAU: I shall be glad to. Suppose we look first into the office of the Treasurer, Mr. W.A. Julian. It is right here in this building. The Treasurer cashes checks which are drawn on the Treasury. I will give you just one instance of the size of his job. In the peried of three months during which the Civil Works Administration was spending its original allotment of $400,000,000, the Treasurer cashed 58,000,000 checks drawn by the ngency. To take care of this sudden increase in the work of his office, the Treasurer hired a thousand of the unemployed to run adding machines and help in clearing the checks. The Treasurer, among his other duties, cashes the interest coupons which are clipped from Gevernment bonds on interest dates, and forwarded to the Treasury for redemption. On another floor is the man who has been called the Nation's biggest book- keeper, Daniel W. Bell, the Commissioner of Accounts and Deposits. On his books are kept approximately 8,000 accounts relating to the receipts, appropria- tions, and expenditures of all departments and establishments of the Gevernment. By centralizing this information and bringing payrell disbursing into the Treasury, we have achieved greater efficiency and economy, and have made informa- tion mere promptly available to our citizens. I have demonstrated my belief that we owe a duty to the public to keep them currently informed as to our fiscal activities. We have expanded and clarified the Daily Treasury Statement, which gives the assets and liabilities, the receipts and expenditures of the Gevern- ment. The Public Debt Statement has been improved both as to form and information. Regraded Unclassified 34C -3- Once each menth we publish a combined statement of the assets and liabilities of the cerporations and credit agencies in which the Government has a preprietary interest and for whose obligations it has a contingent liability. The Public Debt Service, hoaded by Cemmissioner William S. Broughten, has had an extraordinary record of activity in the last two years. The public debt taday stands at appreximately $28,500,000,000. During the past two years this effice has refunded some $15,000,000,000 of the public deht and has issued ever $7,000,000,000 of Treasury bligations for new money. ANNOUNCE.: That do you regard as the outstanding accomplishment of Government financing during the past two years, Mr. Secretary? SECRETARY MORGENTHAU: There is no question about that. The outstanding accom- plishment of the two year period has been our ability to borrow this great amount of new money, and to refund such a large amount of existing debt and at the same time to reduce the average rate of interest paid on the whole dett. In the two year period the average rate has been brought down by nearly half of one per cent. The saving in interest to the Government by reason of this reduction is $120,000,000 & year. The reason that the price of Government bonds has been steadily going up is because the American people have a feeling of complete confidence in their Gevernment in Washington. When I came to the Treasury a little error a year ago, we had to pay 2-1/2 per. cent to berrow money for thirteen months. In sharp contrast, only the other day we berrewed money for nine months at one-sixth of one per cent. This is ono of many proofs tirt business is better. Before passing on to the next subject, I want to be sure to draw your atten- tion to the latest of our Treasury securities, the United States Savings bond, which are now en sale at some 14,000 post ffices. Regraded Unclassified 34D 4- Turning to dur other source of funds, tax collection, I want to tell you haw they have increased, due in part to better business, and in part to the fact that the 73rd Congress struped up many of the holes in the revenue system. We pursue a fair and impartial attitude toward all tax debters, but we are determined to cellect what is rightfully due the Gevernment. We are also determined to protect the taxpayers against unscrupulous tax lawyers and accountants who feed off the body of the Treasury. The Bureau of Internal Revenue, under the direction of Commissioner Guy T. Helvering, has made an enviable record. In 1932 it cest $2.17 to collect $100 of taxes. In 1934 it cost only $1.25 to collect $100 in taxes. Included in the group of Treasury units which are concerned with fiscal sperations is the effice of the Cemptreller of the Currency, J.F.T. Q'Cenner. While it is net directly connected with financing the Government, it dees form an important line of contact between the Treasury and the private banking system of the country. In Mr. O'Cenner's effice was centered the work of licensing banks following the holiday of 1933. Since March, 1933, the Comptreller has been faced with three major problems, the reppening of unlicensed national banks, the distribution of dividends tm depesiters in national banks closed for liquidation, and the strengthening of the capital structures of all open national banks. If the 1,400 national banks remaining unlicensed in March, 1933, it was found possible to rearganize nearly 1,100 under old or new charters. Splendid progress has been made in making available to depesiters substantial partiens of their deposits tied up in closed and unlicensed banks. Through cooperation with the Reconstruction Finance Corporation, the Federal Government has added mere than $400,000,000 to the capital funds of our national banks in the form of preferred stock, placing those institutions in better pesition to take care of the credit Regraded Unclassified 34E -5- needs of their communities and lend to deserving borrowers. In addition to these extraordinary duties, the Comptreller has carried on his regular functions of examining the national banks, and enfercing the national Lanking laws. ALRIOUNCER: Will you tell us something about the police activities of the Depart- ment, Mr. Secretary? SECRETARY MORGENTHAU: There are six Treasury units whose- jeb it is to protect the revenues-and menies of the Government. They are the Secret Service, headed by Chief W.H. Moran, the Customs Service, under Commissioner James H. Moyle, the Coast Guard, commanded by Admiral H.G. Hamlet, the Narcotics Bureau under Commissioner H.J. Anslinger, the Alcohol Tax Unit, supervised by Deputy Commissioner Arthur J. Mellett, and the Intelligence Unit of the Bureau of Internal Revenue, headed by Elmer L. Irey. These agencies wage unceasing warfare by land and sea and air against criminals who conspire to cheat Uncle Sam-and who, when they succeed in cheating Uncle San, cheat you and me as well. Our men combat a particularly vicious and heartless breed of public enemies-tax evaders, counterfeiters, smugglers, boot- loggers, racketeers, gamblers and dope poddlers. Besides defrauding the Govern- ment, these criminals. sell peisonous liquer, pass begus money, prey on the por and prefit by the weakness of their fellow man. You have every right to be proud of the courage and loyalty your Treasury agents display in fighting these criminals. ANNOUNCER: What are some of the famous cases which they have developed PI selved, Mr. Secretary? SECRETARY MORGENTHAU: I cannet, of course, 6° into details for obvious reasons. To publicize their accomplishments would be to warn present and potential evil- decrs. But I can speak of cases which have been "closed". It was our Internal Revenue agents who sent Al Capena to the penitentiary, and jailed pretenders to Regraded Unclassified 34F + his crown in other cities. When I came to the Treasury there were five famous gangsters on the Intelligence Unit's list of "men to get". One by one they have been eliminated-John Lazia, the All Capene of Kansas City, Leon Gleckman, loading racketeer of St. Paul, Waxey Gerdon, ef New York, loading beer baran of the East, Murray Humphreys of Chicago, successor to Capene, and Dutch Schultz of New York, neterious liquer runner charged with many crimes. The Coast Guard and Customs Service have smashed numerous rings which tried to evade our laws. With their aid the Narcotics Bureau has curtailed quantity amuggling of ferbidden drugs and narcotics. The Alcohol Tax Unit has carried on a continuous campaign against bootleggers and illicit distillers, and the recerds show that it is getting results. And this in spite of the fact that when the whele task of cellecting liquor taxes and suppressing tax evaders was Given to the Treasury following repeal, we inherited along with it a tradition of fourteen years of public disregard for law. Naturally it has taken time to break dewn public prejudice against enforcement activities too eften tainted by cerruption and graft and to gain respect for and support of honest and straightforward afforts to compel those who manufacture and sell liquor to pay taxes. A whole generation had grown up with the idea that there is nothing unpatristic about disrespect for liquer laws. We honestly believe that We have made some progress in ever- ceming this prejudice on the part of the people. The handicap of half-hearted attempts at enforcement during Prehibition is being slowly overcome. During the dark days of Prohibition, there was no evidence of an honest effort at enforcement. It is now a question of suppressing the tax-evader for the benefit of the Government and in protection of the law-abiding maker and dealer. With the cooperation of the public, we can and will succeed. I have spoken of our manufacturing plants. One of these is the Bureau of Engraving and Printing, directed by Mr. A.W. Hall. The Bureau prints our currency, Regraded Unclassified 34 -7- our stamps and our bends. They are new engaged in printing the United States Savings Bonds. Another is the Bureau of the Mint, under the direction of Mrs. Nellie Taylee Ress. It mints our coins, The demand for coins during the last two years has been heavier than at any time in our history. It has recently completed the Herculean task of meving two and a half billion of gold from the San Francisco mint to the mint at Denver, the largest body of the yellow metal ever to have been moved so great a distance. The duties of the Procurement Division, under Admiral C.J. Peoples, bring it within this third group of Treasury activities. It supervises the construct- ion of our public buildings. ANNOUNCER: One more question, Mr. Secretary. You spoke of the protection of life and health as a Treasury activity. To what did you refer? SECRETARY MORGENTHAU: The Public Health Service, under Surgeon General H.S. Cumming, safeguards us from the spread of disease and epidemic. It engages in constant research and experiment, and in the past two years had made vast contributions to our store of medical knowledge. Whether it be an epidemic of dyssentery in Chicago, sleeping sickness in St. Louis, infantile paralysis in California, or Rocky Meuntain fever in some Eastern section, the Treasury dectors are on the jet. The Coast Guard, too, has a splendid record for saving and protecting lives. This agency, sometimes called the Red Cress of the Sea has rescued some 12,000 persons from positions of peril at sea during the last two years, and has assisted in saving preperty worth millions of dellars. * May, 1937; Present Head: - Secret Service - Frank J. Wilson; Coast Guard - Admiral R. R. Waesche; Aloohol Tax Unit, Deputy Commissioner - Stewart Berkshire. Regraded Unclassified 34 H TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service MONDAY, MARCH 4, 1935. No. 4-35 3/2/35 Secretary of the Treasury Morgenthau today announced an offering of 20-25 year 2-7/8 percent Treasury bonds of 1955-60 in exchange for Fourth Liberty Loan 4-1/4 percent bonds of 1933-38 called for redemption on April 15, 1935 (Third-called Fourth 4-1/4's): and 5 year 1-5/8 percent Treasury notes of Series A-1940 in exchange for Treasury notos of Series C-1935, maturing March 15, 1935. The two offerings are entirely on an exchange bacis, and the issues of bonds and notes will be limited to the amount of Third-called Fourth 4-1/4's and Treasury notes of Series C-1935, respectively, tendered in payment and accepted. Cash subscriptions will not be received. About $1,850,000,000 of the Fourth Liberty Loan bonds are included in the third call for redemption on April 15, 1935, and about $528,000,000 of the Treasury notes of Series C-1935 mature on March 15, 1935. The Treasury tonds, now offered in exchange for Third-called Fourth 4-1/4's, will be dated March 15, 1935 and will bear interest from that date at the rate of 2-7/8 percent per annum payable semiannually. They will mature March 15, 1960, but may be redeemed at the option of the United States on and after Merch 15, 1955. The Treasury notes of Series A-1940, now offered in exchange for Treasury notes of Series C-1935 maturing March 15, 1935, will be dated March 15, 1935, and will bear interest from that date at the rate of 1-5/8 percent per annum, payable semiannually. They will mature March 15, 1940 and will not be subject to call for redemption prior to that date. Regraded Unclassifi -2- As more specifically set forth in the official circulars issued today, the Treasury bonds will be exempt, both as to principal and interest, from all taxation, except estate or inheritance taxes, surtaxes, excess-profits and war-profits taxes; the interest on bonds (issued under the Second Liberty Bond Act) up to $5,000 total principal amount under one ownership will be exempt from all taxation; and the Treasury notes will be exempt, both as to principal and interest, from all taxation except estate or inhoritance taxes. The Treasury bonds will be issued in two forms, hearer bonds with interest coupons attached, and bonds registered both as to principal and interest; both forms will be issued in the denominations of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. The Treasury notes will be issued only in bearer form with coupons attached, and in the denominations of $100, $500, $1,000, $5,000, $10,000 and $100,000. Applications will be received at the Federal reserve banks and branches at the Treasury Department, Washington. Banking institutions generally will handle applications for subscribers, but only the Federal reserve banks and the Treasury Department are authorized to act as official agencies. Applications for Treasury bonds of 1955-60 should be accompanied by a like face amount of Third-called Fourth 4-1/4's tendered in payment, and applications for Treasury notes of Serios A-1940 should be accompanied by a like face amount of Treasury notes of Series 0-1935 maturing March 15, 1935 tendered in payment. Subject to the reservations set forth in the official circulars, all exchange subscriptions for Treasury bonds in payment of which Third-called Fourth 4-1/4's are tendered, and all subscriptions for Treasury notes of Series A-1940 in payment of which Treasury notes of Series C-1935 are tendered, will be allotted in full. Regraded Unclassified -3- Interest on Third-called Fourth 4-1/4's tendered in payment for 2-7/8 percent Treasury bonds of 1955-60 will be paid up to March 15, 1935. In the case of coupon bonds, which must be surrendered with coupons dated April 15, 1935, and all subsequent coupons attached, this accrued interest to March 15, 1935, will be paid to the subscriber. In the case of registered bonds a different procedure is necessary. Because of the large number of registered bonds it would not be feasible for the registered accounts to be adjusted to take account of exchanges in time to assure different payment of interest on April 15 with respect to registered bonds which have been exchanged. Accordingly, to all holders of record on March 15, 1935, of registered Fourth 4-1/4's checks will be mailed for interest on their registered bonds covering the full six months period from October 15, 1934 to April 15, 1935. It will therefore be necessary for holders to accompany the tender of their registered bonds for exchange with payment of an amount equal to the interest on their bonds from March 15 to April 15, 1935. The present offering of 2-7/8 percent Treasury bonds of 1955-60 affords the holders of the Third-called Fourth 4-1/4's an opportunity to exchange their bonds for other long term bonds of the United States. The holders of the third called bonds who wish to take advantage of the present exchange offering should act promptly. No further exchange offering will be made to holders of these called bonds, and if such bonds are not exchanged under the present offering, they should be presented for redemption on April 15, 1935. The texts of the official circulars follow: Regraded Unclassified 2-7/8 PERCENT TREASURY BONDS OF 1955-60 Treasury Department Circular No. 531 March 4, 1935. Public Debt Service The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, approved September 24, 1917, as amended, for refunding purposes, invites subscriptions from the people of the United States, for two and seven-eighths per cent bonds of the United States, designated Treasury bonds of 1955-60, in payment of which only Fourth Liberty Loan 4-1/4 per cent bonds of 1933-38 included in the third call for redemption on April 15, 1935 (hereinafter referred to as 1. Third-called Fourth 4-1/4's) may be tendered. Treasury bonds of 1955-60 will be issued at par and accrued interest, if any, and Third-called Fourth 4-1/4's will he received in payment at par, with an adjustment of accrued interest as of March 15, 1935, on the Third-called Fourth 4-1/4's sn received. The amount of the offering will be limited to the amount of Third-called Fourth 4-1/4's tendered and accepted. Fourth Liberty Loan bonds not included in the third call for redemption on April 15, 1935, will not be accepted for exchange under this 2 circular. 1 Pursuant to the third call for partial redemption (see Department Circular No. 525, dated October 12, 1934) all outstanding Fourth Liberty Loan 4-1/4 per cent bonds of 1933-38 bearing serial numbers ending in 5, 6, or 7 (in the case of per- manent coupon bonds preceded by the distinguishing letter E, F, or G, respectively) have been called for redemption on April 15, 1935, on which date interest on such bonds will cease, 2 First-called Fourth 4-1/4's (which ceased to bear interest on April 15, 1934) hear serial numbers ending in 9, O, OF 1 (in the case of permanent coupon bonds preceded by the distinguishing letter J, K, or A, respectively), Second-called Fourth 4-1/4's (which coased to bear interest on October 15, 1934) bear serial numbers ending in 2 or 8 (in the case of permanent coupon bonds preceded by the distinguishing letter B or E, respectively), and uncalled Fourth 4-1/4's bear serial numbers ending in 3 or 4 (in the case of permanent coupon bonds preceded by the distinguishing letter C or D, respectively). Regraded Unclassified -2- Description of Bonds The bonds will be dated March 15, 1935, and will hear interest from that date at the rate of two and seven-eighths per cent per annum, payable semiannually, on September 15, 1935, and thereafter on March 15 and September 15 in each year until the principal amount becomes payable. They will mature March 15, 1960, but may be redeemed at the option of the United States on and after March 15, 1955, in whole or in part, at par and accrued interest, on any interest day or days, on four months' notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease. The bonds shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partner- ships, associations, or cerporations. The:interest on an amount of bonds authorized by the Second Liberty Bond Act, approved September 24, 1917, as amended, the principal of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from the taxes provided for in clause (b) above. The bends will be acceptable to secure deposits of public moneys, and will bear the circulation privilege only to the extent provided in the act approved July 22, 1932, as amended. They will not be entitled to any privilege of conversion. Regraded Unclassified -3- Bearer bonds with interest coupons attached, and bonds registered as to principal and interest, will be issued in denominations of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. Provision will be made for the interchange of bonds of different donominations and of coupon and registered bonds, and fer the transfer of registered bonds under rules and regulations prescribed by the Secretary of the Treasury. The bends will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds. Application and Allotment Applications will be received at the Federal reserve banks and branches and at the Treasury Department, Washington. Banking institutions generally will handle applications for subscribers, but only the Federal reserve banks and the Treasury Department are authorized to act as official agencies. The Secretary of the Treasury reserves the right to close the books as to any or all subscriptions or classes of subscriptions at any time without notice, The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allet less than the amount of bonds applied for, to make alletments in full upon applications for smaller amounts and to make reduced allotments upon, or to reject, applications for larger amounts, to make classified allotments or to make alletments upon a graduated scale, or to adept any or all of said mathods or such other methods of allotment and classification nf allotments as shall be deemed by him to be in the public intorest; and his action in any or all of these respects shall be final. Subject to these reservations, all subscriptions will be alletted in full. Allotment notices will be sent out promptly upon allotment. Terms of Payment Payment at par and accrued interest, if any, for honds allotted hereunder Regraded Unclassified -4- must be made or completed on or before March 15, 1935, or on later alletment, and my be made only in Third-callod Fourth 4-1/4's, which will be accepted at par with an adjustment of accrued interest thereen as of March 15, 1935, and should accompany the subscription. If any subscription is rejected, in whole or in part, the Third-called Fourth 4-1/4's tendered therewith and not accepted will be returned to the subscriber. Coupon bends.- Third-called Fourth 4-1/4's in coupon form tendered in payment should have coupons dated April 15, 1935, as well as all subsequent coupons 3 attached, and accrued interest from October 15, 1934, to March 15, 1935, will be paid to the subscribers. Registered bonds.- As checks for interest covering the full six months period from October 15, 1934, to April 15, 1935, will be issued on April 15, 1935, to holders of record on March15, 1935, of Third-called Fourth 4-1/4's in registered form, tenders of such registered bonds hereunder must be accompanied by payment of an 4 amount equal to the interest to accrue thereon from March 15 tn April 15, 1935. Surrender of Third-Called Fourth 4-1/4's on Exchange Coupon bonds, Third-called Fourth 4-1/4's in coupon form tendored in exchange for Treasury bonds offered hereunder, should be presented and surrendered to a Federal reserve bank or to the Treasurer of the United States, and should accompany the application. Coupons dated April 15, 1935, and all coupons bearing dates sub- sequent to April 15, 1935, should be attached to such coupon bonds when surrendered, and if any such coupons are missing, the application must be accompanied by cash 5 payment equal to the face amount of the missing coupons. The bonds must be 3 Accrued interest at 4-1/4 per cent from October 15, 1934, to March 15, 1935, on $1,000 Third-called Fourth 4-1/4's (151 days) is $17,8304945. 4 Interest from March 15 to April 15, 1935, on $1,000 Third-called Fourth 4-1% (31 days) is $3.6195055. 5 The final coupon attached to temporary coupon bonds became dua on October 15, 1920. The holders of any such temporary bends which are included in the third call for partial redemption on April 15, 1935, will receive the past due interest from October 15, 1920, if such bonds are tendered for exchange under this circular. Regraded Unclassified -15- delivered at the expense and risk of the holder. Facilities for transportation of bonds by registered mail insured may be arranged between incorporated banks and trust companies and the Federal reserve banks, and holders may take advantage of such arrangements when available, utilizing such incorporated banks and trust companies as their agents. Incorporated banks and trust companies are not agents of the United States under this circular. Registered bonds.- Third-called Fourth 4-1/4's in registered form tendered in exchange for Treasury bonds offered hereunder should be assigned by the registered payee or assigns thereof in accordance with the general regulations of the Treasury Department governing assignments for transfer or exchange in one of the forms hereafter set forth, and thereafter should be presented and surrendered with the application to a Federal reserve bank or to the Treasury Department, Division of Loans and Currency, Washington. The bonds must be delivered at the expense and risk of the holder. If Treasury bonds are desired registered in the same name as the Third-called Fourth 4-1/4's surrendered, the assignment should be to"The Secretary of the Treasury for exchange for Treasury bonds of 1955-60"; if Treasury bonds are desired registered in another name, the assignment should be to "The Secretary of the Treasury for exchange for Treasury bonds of 1955-60 in the name of "; if Treasury bonds in coupon form are desired, the assignment should be to "The Secretary of the Treasury for exchange for Treasury bonds of 1955-60 in coupon form to be delivered to General Provisions As fiscal agents of the United States, Federal Reserve banks are authorized and requesti ton receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal reserve banks of the respective districts, to isrue allotment notices, to receive payment Regraded Unclassified -6- for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive bonds. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering which will be communicated premptly to the Federal reserve banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. Regraded Unclassified 1-5/8 PERCENT TREASURY NOTES OF SERIES A-1940 Treasury Department Circular No. 532 March 4, 1935. Public Debt Service The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par, from the people of the United States, for one and five-cighths percent notes of the United States, designated Treasury notes of Series A-1940, in pay- ment of which only Treasury notes of Series C-1935, maturing March 15, 1935, may be tendered. The amount of the offering will be limited to the amount of Treasury notes of Series 0-1935 tendered and accepted. Description of Notes The notes will be dated March 15, 1935, and will bear interest from that date at the rate of one and five-eighths percent per annum, payable semi- annually, on September 15, 1935, and thereafter on March 15 and September 15 in each year. They will mature March 15, 1940, and will not be subject to call for redemption prior to maturity. The notes shall be exempt, both as to principal and interest, from all taxation (except estate or inheritance taxes) now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority. The notes will be accepted at par during such time and under such rules and regulations as shall be prescribed or approved by the Secretary of the Treasury in payment of income and profits taxes payable at the maturity of the notes. The notes will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege. Regraded Unclassified - 2 - Bearer notes with interest coupons attached will be issued in denomina- tions of $100, $500, $1,000, $5,000, $10,000 and $100,000. The notes will not be issued in registered form. Application and Allotment Applications will be received et the Federal reserve banks and branches and at the Treasury Department, Washington. Banking institutions generally will handle applications for subscribers, but only the Federal reserve banks and the Treasury Department are authorized to act as official agencies. The Secretary of the Treasury reserves the right to close the books as to any or all subscriptions or classes of subscriptions at any time without notice, The Secretary of the Treasury reserves the right to reject any sub- scription, in whole or in part, to allot less than the amount of notes applied for, to make allotments in full upon applications for smaller amounts and to make reduced allotments upon, or to reject, applications for larger amounts, to malce classified allotments or to make allotments upon a graduated scale, or to adopt any or all of said methods or such other methods of allotment and classification of allotments as shall be decmed by him to be in the public interest; and his action in any or all of these respects shall be final. Sub- ject to these reservations, all subscriptions will be allotted in full. Allotment notices will be sent out promptly upon allotment. Payment Payment at par for notes allotted hereunder must be made or completed on or before March 15, 1935, or on later allotment, and may be made only in 2-1/2 percent Treasury notes of Series C-1935, maturing March 15, 1935, which will be accepted at par and should accompany the subscription. Regraded Unclassified - 3 - General Provisions As fiscal agents of the United States, Federal reserve banks are author- ized and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal reserve banks of the respective districts, to issue allotment notices, to receive payment for notes allotted, to make delivery of notes on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive notes. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Federal reserve banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. Regraded Unclassified 34D TREASURY DEPARTMENT Washington FOR IMMEDIATE RELEASE, Press Service Monday, March 4, 1935. No. 4-42 More than $6,000,000 worth of United States Savings Bonds were sold in the first day and a half of their sale, according to preliminary reports which reached the Post Office Department today. Actual sales reported by 4,000 post offices amounted to $5,520,000, but the 10,000 post offices still to be heard from are expected to bring the total above $6,000,000. As this figure represents the purchase price, it means that the maturity value of the bonds sold amounts to about $8,000,000. Sales would have been larger, according to Post Office officials, if the supply of bonds had not been exhausted in many places early on Friday, the first day of the offering to the public. Many purchasers showed a preference for denominations which were not in stock or were soon sold, the $25 and $1000 units apparently proving the most popular. In response to specific requests for additional supplies, the Post Office Department has shipped $10,500,000 worth of bonds in addition to the original consignments. Contrary to expectations, the larger denominations seemed to be most popular in small towns and cities, and the $25 bond sold better in the metropolitan cen- ters. Post Office officials believed that the demand for $500 and $1000 bonds came from people with accumulated savings, and that the smaller denominations will have a better sale in the long run. Although preliminary reports are not detailed, it is believed that the average amount invested will be about $200. The new type of savings bonds attracted all classes of customers, according to postmasters' reports. In many small cities and towns banks and corporations took the maximum of $10,000 which is the total any individual or corporation may buy in a single calendar year. On the other hand, many women and children bought the $25 -2- bond, which costs $18.75, with pennies and other coins pourod out on post office counters and windows from bags and banks. Many people bought bonds for their children and trand-children, as did President Roosevelt when he purchased the first six bonds of the $25 denomination. Others had the bonds made payable to beneficiaries by writing in the latter's names along with their own. The majority of purchasers preforred to take the bonds with them, and did not avail themselves of the Government's offer to safe- guard them. Fifty leading cities accounted for $2,895,035.50, or almost half of the total. This figure does not give any true indication ni the division of sales as between rural and urban sections, however, because many large cities not included in the list of fifty bought large amounts. In general, reports indicated that the bonds sold better in the West than in the East. New York City led in sales with a total of $505,134.751 The New York total includes sales of $91,697.25 in Brooklyn, which is a separate post office from that in Manhattan. If the New York total is divided as between the two post offices, then Chicago gains first place with a total of $472,275 and Detroit stands third with $413,519. Salos in some of the other large cities were as follows: Cleveland, $103,822.50; St. Louis, $103,143.75; Boston, $97,818.75; Kansas City, $94,443.75; Cincinnati, $90,575; Washington, D.C. $86,288; Minncapolis, $78,125; Toledo, $72,243.75; Philadelphia, $62,781.25; Los Angeles, $58,968.75; Omaha, $58,800; Dallas, 350,800; Denver, $43,143.75; Baltimore, $41,684.25; San Francisco, $41,375; Louisville, $39,150; Columbus, O., $37,556.25; Pittsburgh, $32,068.75; New Orleans, $28,200; Dayton, $28,143.75, Indianapolis, $28,125; Jacksonville, $28,031.25; Milwaukee, $26,450; Portland, Ore., $23,456.25. Regraded Unclassifi 35 UNITED STATES SENATE Committee on Post Offices and Post Roads March 6, 1935. Hon. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. My dear Mr. Secretary: Enclosed I hand you a copy of a letter which Senator Long read into the Congressional Record today. Please note the charges with reference to your Department. Will you be good enough to furnish the Senate Committee on Post Offices and Post Roads, if con- venient, by one o'clock tomorrow, Thursday, March 7th, with such statement as you may care to make in reply. Very sincerely yours, (Signed) Kenneth McKellar Chairman. Regraded Unclassi 36 March 6, 1935. To the Committee on Post Offices and Post Roads, Washington, D. C. Gentlemen: In response to the letter received from your Chairman, Senator McKellar, asking for information as to names of witnesses and what they would testify relative to James A. Farley, and his connections and transactions handled under and with his authority, I beg leave to submit the following: Your Committee, I am sure, on reflection will not come to the conclusion that I should expose all witnesses and persons who are prepared to give testimony with regard to Mr. Farley, but who must of necessity be protected if there is to be an investigation. Further, some of these witnesses have asked that they be called and placed under oath before their names are in any manner disclosed. Further, surely your committee will understand that to B. large extent the verification of the charges which I make and others which could be made, would be shown from public and private records, the production and examination of which would be asked in ordinary course. However, in order that this committee may know that to some extent I can offer to be specific, I state the following which I expect to produce and prove: 1. Witnesses: Officers of the concerns listed on the building directory at 205 East Forty-Second Street, as occupying office No. 1701 (being the private headquarters of James A. Farley), to show that more than twenty-odd con- cerns there operating, including six holding companies, have been organized, combined and affiliated for practically the sole purpose of transacting and dealingin matters with which Page #2 - March 6, 1935. Post Office & Post Roads Committee. 37 the United States Government is identified for the purpose of making private profit, 8. large part of which inures to James A. Farley, in violation of four criminal statutes of the United States insofar as concerns said Farley; said witnesses to prove the said purpose of concerns affiliated with said Farley and occupying space in his office by reason of the same, and that they were in position of financial bankruptcy pricr to Farley's ascendency and since that time have become financially affluent; to prove that Farley interposed his brother-in-law 8,8 B. poor simulation as the head of concerns, and that any pretense to show the disposition of his interests 1s a further simulation; to prove that through the various concerns there enumerated as affiliated with James A. Farley, contracts for materials have been listed in advance of the awarding of contracts by the United States Government, and that contracts to low bidders have been refused until the bids could be awarded to firms buying materials from the concerns of the said James A. Farley. In this connection the officers and records of Stewart & Company, of Driscoll and Company and of Severin & Company will be produced. The testimony of Commissioner Robert Moses of New York, and the data which he has assembled will be called for the purpose of proving such sales have been made by firms with which Farley is identified, of the appropriation of funds on the jobs where Farley's firms were furnishers of materials, for the expansion of sub-divisions under the guise of being projects for alum removal; for the paying of excessive prices for property and retaining its frontage so its enhanced value may be enjoyed by interests with which Farley is affiliated, even after the work has been done and the development made. Numerous witnesses I do not here mention will be produced to show, along with public records, that each and every appointment, directly or indirectly had the approval of Farley if the same were con- nected with the building projects above mentioned. We further expect to show from said witnesses and the production of their records, papers and accounts, that these concerns and persons have manipulated manifold market transactions, reaping large profits, by taking advantage of information which could only be had by one close to the authority of government and which would have made them aware of sudden falls and rises on exchanges. 2. Witness "A" and if necessary Witness "B", whom we expect to testify that an important official of the Baltimore & Ohio Railroad previously with no connection with Regraded Unclassified Page #3 - March 6, 1935. Post Office & Post Roads Committee. 38 James A. Farley, received a telephone call from the said Farley, informing him that he desired him to support one Clem Shaver for the United States Senate from West Virginia. The records of the Reconstruction Finance Corporation will show that about the time there had been pending, and for causes otherwise unexplained, there had been held up a decision relative to a loan to be made to the Baltimore & Ohio Railroad for approximately fifty million dollars. Witness "A", and if necessary Witness "B", to further testify that party called by said Farley hesitated, hoping the loan would come through, but finally disclosed that action on the same was held in abeyance and that he had no way to dodge the responsibility, but would have to declare for Shaver in accordance with Farley's instruc- tions, and immediately upon so doing, the Reconstruction Finance Corporation loan of $52,000,000. was announced. 3. While the report of the Secretary of Interior states they have no records showing contractors and sub- contractors in matters wherein the P.W.A. is participating, none the less the "Manual for Engineer Inspectors, Inspection Division P.W.A., July 3, 1934", on pages 25 and 26 requires the pay rolls, unpaid bills, invoices, vouchers, etc., for both materials furnished and persons hired, from contractors, sub-contractors, on plant equipment, rental and maintenance, bond and insurance premiums, and requiring the same to be neatly arranged and forwarded to the Director of the Inspec- tion Division at Washington for final audit. By reason of the neglect of the Secretary of the Interior to locate such source wherefrom information might be had, we expect to call for production of such papers and their examination. It is commented on in said Manual for Engineer Inspectors, that a break-down report is required whereby everything is segregated to the smallest item and units, and if it is too difficult for same to be examined by the Secretary of the Interior, and he is not so fully aware of the exact concerns and firms with which James A. Farley is identified, as to recognize the connection with firms and items found on said rolls, we propose to examine the same and orderly and regularly ascertain information that may be disclosed on such matters as are not forwarded by Mr. Ickes, and as to which witnesses whom we will not mention, have given us to understand do exist. That nearly all engineers of influence in charge of and supervising public works or in which the United States Government is in any manner concerned, 18 engineered through a combination which the said Farley has effected through the firm of Stone & Webster, who are operating the various Farley firms above named and mentioned, have formed B. network of supervision of projects to inure to the advantage and control Regraded Unclassifi Page #4 - March 6, 1935. 39 Post Office & Post Roads Committee. of said Farley, extending even to the N.R.A. and its functions. Examination of the records of said concerns will bear out said facts. Witnesses whose names cannot be given, will be offered for said purpose. 4. Letters, checks, vouchers and witnesses, including Mr. Edwin P. Knotts and others, to show that Clyde 0. Eastus, now United States Attorney in Texas, while in Washington, D. C., in the month of April, 1933, arranged for his appointment as said United States Attorney in consultation with Mr. Farley, wired Edwin P. Knott and otherwise gave to understand that the said Edwin P. Knott's case was being arranged through Mr. Farley, provided said Edwin P. Knotts wired immediately $1,000. to go to Mr. Farley for politics; that in connection with the said matter, a telegram was sent by said Eastus saying: "Everything looks good." And at another time the said Eastus wired, saying: "Case continued. Must have one thousand dollars I wired you about Saturday. Wire now and I don't mean maybe." And when the said Knotts sent the money requested, the same was acknowledged in writing by the said James A. Farley. Later the said Eastus was made United States Attorney and assured the said Knotts that matters were going all right, even suggesting that he enter a plea of guilty, which he assured the said Knotts would be a mere formality, but upon securing the said plea, hav- ing already turned the money over to Farley, the said Knotts was left to the mercies and sent to jail. The witnesses to swear to these matters came to Washington and interviewed me, and while I did not announce their names, but gave certain facts about it on the floor of the Senate, when they had returned to their homes they were immediately set upon by Post Office Inspectors sent there through the effort of James A. Farley, giving them B. scare, their records and papers were called for, and all such manner of things done as to prevent the disclosure of the facts and to put said Farley in position to suppress development of the truth. These witnesses inform me they are standing firm, regardless of such efforts, but this should be & fair reason why this committee should not require too many disclosures be- fore investigation starts. 5. Witnesses Richard M. Atkinson, former Attorney General in the State of Tennessee; Wayne Williams, former United States Attorney in the State of Tennessee; and A. V. McLane and many others, including four former members of a United States grand jury in the State of Tennessee, who will testify that in the affairs of the American National Bank in Nashville, Tennessee, one Paul N. Davis and his brother, Page #5 - March 6, 1935. Post Office & Post Roads Committee. Norman Davis, organized many groups for floating and financ- ing matters and concerns, including one called the American National Company; that through multifarious violations of the law, stockholders of the bank were caused to lose large sums of money; that the said multifarious concerns organized and floated through the said banks blew up in smoke with a terrible loss to everybody except the Davis brothers and their inside associates; that hundreds of forgeries, erasures, false statements, publications and representations were made by the said Davises and their associates; some of the same were published and some were sent to Government agencies, and that as a result thereof, prosecutions were being instituted; that the government started on the prosecutions and the Department of Justice in Washington and the United States Attorney in Nashville declared that indictments must be had immediately; that there suddenly stepped into the picture James A. Farley, who immediately began to maneuver the personnel and conduct of the personnel of those connected with the Department of Justice having the matter in hand, both in person and through agents whom he selected, and as a result thereof on the eve of the matter being presented to the United States Grand Jury in Nashville, the United States Attorney was removed and a special man sent at Farley's instance from Washington, D. C., who went before the United States Grand Jury and made a long and vigorous speech as to the harm that it would do to have the indivi- duals guilty of violating the law indicted; that said agent after making said address to the Grand Jury for more than one hour, called several witnesses to be heard, in- terfered with their testimony and threw the matter out with- in a day's time. That the said witnesses have in their possession and have exhibited to me, Huey P. Long, photostats and innumerable documents and records and point to the source where others may be had, showing the admitted state of affairs, showing rampant violations of the law, protected in the manner aforesaid. 6. That further to prove the extent of the said Farley's control of the Department of Justice and the purposes to which it is manipulated, that when 8. gangster was about to be indicted in Kansas City by the United States grand jury, appeal was made to Farley to prevent the same and Farley took the same in hand, upturned the course of justice, caused agents to be sent to Kansas City, 80 much so that the grand jury was informed that it could not indict the party, where- upon grand jurors went into open court and informed the court of said interference, whereupon the court instructed the jury it could return the indictment, which was done and conviction resulted. That T. J. Pendergast and James A. Farley will be called to substantiate statements heretofore made, admit the foregoing to be true, and further that records of the Depart- ment of Justice will be searched, proving said state of Regraded Unclassifie Page #6 - March 6, 1935. Post Office & Post Roads Committee. 41 affairs. 7. That witnesses have been hounded, telephones have been tapped, every device and scare cloud used to brow- beat and intimidate witnesses against the production of such facts as are above disclosed, and it should not be the purpose of the committee to now require same. If investi- gation is ordered, proof will follow in rapid consequence. Respectfully submitted to you in my humble and official capacity, and for the cause of public good in this country, Sincerely, (Signed) Huey P. Long U. S. SENATOR. HPL:EJC Oniging : and shey of lud that Regraded Unclassified 42 February 28, 1935 MEMORANDUM FOR THE FILES: On February 25, Mr. Foley, Director of the Legal Division of the Public Works Administration, called me on the telephone and said that he had been asked by the Secretary of the Treasury to take up with me the result of a conference at the White House, held on February 22. He said that he had the records and sug- gested that I call at his office. I did 80 about noon and he and a Mr. O'Connell, presumably of the legal division, showed me photostatic copies of the material that was to be forwarded to the Senate in response to the Joint Resolution for investi- gation of Mr. Farley. Mr. Foley told me that the conference on the 22nd had been attended by five Senators - Robinson, Bailey, Byrnes, 0'Mahoney, and, I think, McKellar - Secretary Morgenthau, Mr. Ickes and Mr. Foley: that Mr. Foley read the ten items in Glavis' letter of August 22, and that the Senators Immediately asked the Secretary of the Treasury whether an investigation of these charges had been made; that Secretary Morgenthau replied that he assumed it had been; and that when asked what the investigation had shown, Secretary Morgenthau said that he assumed it had shown that there was no basis for the charges. Mr. Foley stated that it was the President's desire to pre- vent the present investigation from developing into a further investigation of the Procurement Division and that, therefore, he, Foley, was requested to see that Senator Robinson was fur- nished with sufficient information so that he had specifically been given this assignment by the President and that Secretary Morgenthau had asked him to get in touch with me about it. He said that the two matters particularly to be given Senator Robinson were (1) an explanation of the so-called missing letter of January 12 from the Post Office Department; and (2) a statement whether General Builders Supply Company had furnished any material to either of the projects and, if so, full information about this, including a copy of the subcontract. When I said that I did not presume that the Procurement Divi- sion had a copy, he suggested that one be obtained from Stewart and Company. He stated further that Public Works Administration's housing project, Hillside Gardens, which was being conducted by the Housing Division, had let a contract to General Builders Supply Company and they were sending this information forward, but that they had taken competitive bids, that the General Build- ers Supply Company had been one of three low bidders, and that the contract had been split into three parts, and they had been awarded one-third. I told him that I did not assume that any such procedure had been followed in connection with any sub- contract on the Stewart job because of the fact that Stewart and Company had a contract and it would presumably not be A matter of interest to the Procurement Division what the terms of its subcontracts were. 43 - 2 - Mr. Foley also said that at the meeting Secretary Morthenthau had a photostatic copy of the letter of January 12, but that it was a copy showing a written signature of Silliman Evans, the Fourth Assistant Postmaster General, and that therefore it could not have been a copy of the 30- called missing letter, because the statement had been made that Evans had torn off his signature from that letter. I stated to him that I did not believe the Secretary could have had such a letter, because I had seen what I thought were all the photostatic copies in the Treasury Department's files and that they showed a copy of a letter which had the bottom torn off. I pointed out to Mr. Foley that it was not apparent what bearing the subcontract with the General Builders Sup- ply Company could have on whether or not the procedure in connection with the bidding had been proper. He suggested that such an arrangement might have been the "pay-off". I answered that there were any number of other ways by which Stewart and Company could have made payments to General Builders Supply Company and that it seemed to me the question was whether or not the bidding had been handled properly that would be the con srn of the Treasury Department, and that the Treasury Department's position on this point was complicated by the letter of December 27, 1934 and the subsequent memo- randa, all of which were in the file and all of which would be submitted to the Senate, wherein it was indicated that the Division of Investigations felt that there was still some irregularity that required further investigation. Mr. Foley stated that there was nothing that could be done under the circumstances since the Public Works Administration did not want to hold anything back; and I made it clear to him that the Treasury Department did not want them to hold anything back. I was hoping that he would make some explanation as to why this matter had been reopened by the Division of In- vestigations after go many months, but he did not volunteer any. I told Mr. Foley that I understood the Treasury would be given an opportunity to examine the material before it was sent to the Senate and that I had hoped that, as long as photostatic copies were being made an extra set could be prepared for the Treasury Department; that I asked Mr. Glavis for such copies and he said that he would send them 1f the Secretary of the Interior permitted, but that we had never received them. Mr. Foley said he thought we had received them and, in my presence, called Mr. Burlew and asked whether they could be sent. After the conversation he told me that Mr. Burlew said he had copies for us and Mr. Foley promised that they would be sent over. They were received the next day. Mr. Foley stated that the Public Works Administration had no question about the propriety of the rejection of the Regraded Unclassified - 3- 44 second set of bids (in which the question was raised as to whether Driscoll, the low bidder, had complied with N. R. A. requirements) and agreed with the position that nothing else could have been done except reject all bids in view of the conflict between the Attorney General and the Comptroller General. He said he knew about the opinion of Mr. Hunt, P. W. A.'s General Counsel, advising this procedure. He indicated, however, that they did question the propriety of rejecting the third set of bids in view of the fact that prior to rejection an application had been made to P. W. A. for additional funds with which to complete the building and such application had been granted. I pointed out to him the statement in Dresser's memorandum that charges were made of influence being brought to bear in favor of Driscoll and he said he knew of that statement. He also referred to Dresser's "damn' fool" comment about the dangerous practice of destroy- ing letters. In discussing the letter of December 27, 1934, I asked to look at the photostatic copies which Mr. O'Connell had. I found that subsequent to the letter of December 27 there were memoranda of January 8, 1935, January 22, 1935 and February 20, 1935, all bearing on the same question. None of these memo- randa were in the file that was shown to us on February 16, 1935 when Mr. McReynolds, Admiral Peoples, Mr. Laws and I call- ed on Mr. Glavis for the purpose of examining the records. Of course neither the memorandum of February 20 nor a further memorandum from Dresser of February 19, 1935 - which is now in the file - should properly have been in the file at that time. As I was leaving, Mr. Foley said that he had been in- structed to await word from Senator Robinson before sending the material to the Senate, but that Secretary Ickes had directed him to send it immediately upon receipt of that word. (Initialed) cvo Regraded Unclassifi 44 A 3-6-35 - H.M.Jr: How are you? Bulkley: Fine. I wanted to talk to you and I don't know whether I ought to come down there or - we can save both of us time by trying to do it on the phone. H.M.Jr: Well try and do it on the phone and save your time. B: Yes. About Judge Ferneding and the Board of Tax Appeals. I understand that you're interested in getting a prompt and good appointment. H.M.Jr: Yes. B: And I thought I'd call you up and see if I can contribute anything in behalf of my candidate or whether you can tell me anything. H.M.Jr: Well you've given us his name, haven't you? B: Yes and I sent him down there to see you. H.M.Jr: Yes. Well now we're getting them all together and I suppose one of these days the President will send for me and we'll go over them but we haven't done that yet. He's been so busy on this Work Relief bill that I haven't had time to talk to him. B: Well now it already appears in the file that I very highly recommended this gentleman and you have seen him for yourself. About the only thing that I can add, that hasn't been called to your attention, is the fact that Ohio has languished probably more than any other big state in getting appointments. H.M.Jr: Well have you written a letter on it to the White House? B: I have written letters to the White House commending Judge Ferneding and that's been joined in by all of our Democratic Congressmen except the Congressmen at large. They have their ideas about not making a recommendation but all the district Democrats recommended this man. H.M.Jr: Well then there's nothing you can do until the White House makes up its mind. B: That's right but I just wanted you to have in the back of your mind this fact that Ohio has not Regraded Unclassified 44B - 2 - yet had any Democratic appointment from this administration. H.M.Jr: Alright sir. B: We got a Republican Ambassador to Turkey and one or two good Republican appointments and a Republican Member of the Communications Commission but outside of Julian, Treasurer of the United States, we have had nothing at all. H.M.Jr: I see. Alright Senator I'll keep that in mind. B: And is there any question that you can ask me that will help any? H.M.Jr: Not right now because we're studying them all and we're just sitting here waiting. I'll be perfectly honest with you and you know he's been entirely taken up with this Work Relief bill and until that's out of the way I doubt if he'll take anything up. B: Well now I'm so damn busy I don't know where to stand next and I know you're worse so I'm going to let it go at this without bothering to see you. H.M.Jr: Well I appreciate your calling me. B: Thank you very much. H.M.Jr: Alright sir. Goodby. March 6, 1935. Wednesday. Regraded Unclassif 4&C H.M.Jr: Good morning. Doughton: How are you? H.M.Jr: I'm fine. D: That's good. Are there any figures here that ought to be assured on the Board of Tax Appeals? H.M.Jr: Yes there's two vacancies. D: Have you got men tentatively selected to fill them? H.M.Jr: No. D: What? H.M.Jr: No we have not. D: Well I'll tell you a man in whom I'm very deeply interested and I believe he possesses the qualifications, but I don't want to recommend anybody unless what I think about him is firmly supported by the most reliable information because I know how important that position is. H.M.Jr: Yes. D: Now of course you know well of the great standing and ability of Milli Ritzhin not only as one of the ablest men in Congress but one of the ablest men in tax matters. He's had long ex- perience with tax matters. He's been an attorney here for a long time. He's now in the Department of Justice doing some work with Mr. Stanley. He's one of the brightest minded boys I've ever seen. I suppose he's about 40 or 45 years old. H.M.Jr: Yes. I wish you'd check with Mr. Stanley and see what he thinks of his ability and qualification to fill that job. If we can establish his qualifi- cation, then I want to make the most insistent appeal that I consistently can for his appointment. H.M.Jr: Now what - I didn't get his name very well. D: What's that? Regraded Unclassifie 44D - 2 - H.M.Jr: I didn't get his name very well. D: His name is Mills H.M.Jr: Mills? D: Mills- Mills H.M.Jr: Yes. D: Mitchin H.M.Jr: Michin D: He's son of the late Claude Richin you know. H.M.Jr: Oh yes. D: Who was Chairman of Ways and Means Committee. D: Now I want you to check on his qualifications and have a talk with him. H.M.Jr: Right. D: And will you talk with Mr. Stanley of the Department of Justice? H.M.Jr: Yes. D: He's at work up there now. H.M.Jr: Right. D: And if we can thoroughly establish his qualifi- cations, why then I want to insist as strong as I consistently can - I'm very anxious, but unless we can fully establish his qualifications of course I don't want him appointed. H.M.Jr: Alright sir. D: But I believe we can. H.M.Jr: Alright sir. Regraded Unclassifie 4&E - 3 - D: Will you check that with Stanley first? H.M.Jr: I'll do that. D: I thank you so much and I want to you about another matter. I think we'll be able to get around your smuggling bill now pretty soon. H.M.Jr: Oh that's grand. D: We'll keep it right in mind. We've got to take up this pink slip matter to-day and we're through with the bonus matter and ready to report on that and we're ready to go back to the Economic Recovery just as soon as I finish the question and can catch up. H.M.Jr: I see. D: We've got our hands full. H.M.Jr: Alright. D: We're not fogetting you. H.M. Jr: That's good. Thank you. D: Goodby. March 6, 1935. Wednesda y. Regraded Unclassified 45 March 7, 1935. Dear Senator McKellar: I beg to acknowledge receipt of your LS letter of March 6th which has reached my desk Rivi- this morning. tads As you suggest, I have read through Senator Long's letter very carefully and I cannot NEW Depart- 13- find any charges against the Treasury in it. this If at any time your Committee or Senator Long wish any information in regard to DO your any matters affecting the Treasury I wish to assure you that we will be glad to furnish you my at your further promptly any and all information that we have realn in our records. are Middle Sincerely, all THE = posts. 1 is Information Dal, included La 13th micorial (Treat) to your medical, 1: 100, Letter 1200 Sex Louis nievis, Diractor x Investitions of MAY Public Todice lited 1936, addressed to the - In with Mr. Giarts lists ten Items Tye TAXIN should be mought to the Directoria clientic N WIS 10 Mr. Glavis' organd- Honorable Kenneth McKellar, United States Senate, your x1.th the factual Washington, D. C. X Code to tier ne the shorthear I 36 to endluee for your Inter- 0607 of 5 Insurance mitsua 10 Yt, Divertor of Programs die Pobruary 11, 1833. It 1.00 TIME init letter will club you wish sufficient MM mill Informative Designs agon thees questions. While - specific statement bo that La made La Company Antiter, 1 X properad to from TOTAL Iss: è Company and 2 Company That be wind 9a Yes / the adding or the of V49 Print 06/100 Lecon, The billing oz this Regraded Unclassified 46 March 7, 1935. My dear Mr. Chairman: Pursuant to your verbal request, I hasten to reply further to your letter of March 6, which I received at nine- thirty this morning, to comply with your request that my statement be submitted to you by one o'clock today. I note on examining Senator Long's letter of March 6, a copy of which you enclose, that no specific reference is made to the Treasury Department or to the Procurement Divi- sion. However, it is not my desire to suggest any technical or formal difficulties, and I assume from your letter that you feel if there is the slightest implication of any 1r- regularity reflecting, even by indirection, upon this Depart- ment, the matter should be gone into fully and the complete facts be put at the disposal of your committee. With this position I am thoroughly in accord and shall reply to your letter at this time as fully as the urgency of your request permits, upon the understanding, of course, that any further informa tion desired by your committee is entirely at your disposal and that, if there are any questions which remain unanswered as a result of this letter, or any records or files of the Treasury Department or the Procurement Division which your committee desires, your further request will be complied with to the fullest extent that is within my power. I am informed that, included in the material already forwarded to your committee, is a letter from Mr. Louis Glavis, Director of Investigations of the Public Works Administration, dated August 22, 1934, addressed to the Director of Procurement, in which Mr. Glavis lists ten items which he feels should be brought to the Director's attention as a result of the investigation made by Mr. Glavis' organi- zation. In order to acquaint you with the factual background on these ten points, I feel that, in view of the shortness of time, I can not do better than to enclose for your infor- mation a photostatic copy of a letter written to Mr. Glavis by the Director of Procurement on February 27, 1935. It is my hope that this letter will give you with sufficient par- ticularity all information bearing upon these questions. While no specific statement to that effect is made in Senator Long's letter, I am prepared to assume from his refer- ence to Stewart & Company and Driscoll & Company that he makes reference to the matter of the bidding on the superstructure of the New York Post Office Annex. The history of this incident Regraded Unclassified 47 - 2 - is somewhat complicated, but the following are the principal actions leading to the final result: On February 28, 1933, bids for this project were opened. The matter was held in abeyance without the accept- ance of any bid pending the inauguration of the new adminis- tration on March 4th, and thereafter during the consideration of the comprehensive public works program being developed by the present administration. After the passage of the National Industrial Recovery Act it was determined that further Federal buildings would be erected out of funds allotted by the Public Works Administration. Such funds were allotted for this pro- ject, but by reason of the additional requirements of the National Industrial Recovery Act it was necessary to change somewhat the terms of contracts for public works. For this reason supplemental bids were requested from the bidders on the original project. On October 2, 1933 these supplemental bids were opened. Geo. F. Driscoll & Company was found to be the low bidder and James A. Stewart & Company the second low bidder. Stewart & Company protested that the low bidder was disqualified by reason of its failure to comply with the requirements surround- ing the President's reemployment agreement. Conflicting de- cisions of the Attorney General and the Comptroller General resulted in my decision that the only practical course to follow was to reject both bids and to readvertise. I should state at this point that the basis for bidding on both the original and supplemental bids had been for alterna- tive requirements, including on the one hand a completed build- ing and on the other a building with the fourth and fifth floors incomplete, due to the fact that it had not yet been determined whether the additional space would be necessary to meet immediate requirements. For this reason the readvertising was also made on the basis of these same alternatives. On December 27, 1933 the bids on the basis of this re- advertisement were opened and it was found that Geo. F. Driscoll & Company was the low bidder for the completed building with the fourth and fifth floors uncompleted. On account of this development, it became necessary to determine finally which type of building should be selected. While the matter was being considered, open charges of inequity and favoritism were made in connection with both low bidders. It was now evident that & determination of which type of build- ing should be built would automatically result in the conclusion as to which contractor would become the successful bidder. In order to avoid any charges that the administrative officials of Regraded Unclassified 48 - 3 - the Government were in that way guilty of favoritism or bad faith, it was again decided to reject both bids and to re- advertise. However, to avoid a repetition of the incident just described, these bids were called for not on the basis of alternatives, but only for the construction of a com- pleted building. When, after public advertisement, these bids were opened on February 21, 1934, Stewart & Company was found to be low bidder and for that reason the contract was awarded to it. Following is & list of these bidders, with the amounts of their bids: James Stewart & Company $4,287,700. Geo. F. Driscoll Company 4,378,580. Kenney Bros., Incorporated 4,393,000. Joseph Meltzer, Incorporated 4,678,000. Charles T. Wills 4,836,500. I might, in passing, make two further observations: First, that on both the original bid and the supplemental bid the same bidder was low on both alternatives and it was only when the bids of December 27, 1933 were opened that it was found that different bidders were low on the two alterna- tives; and second, that the final contracts awarded resulted in a saving to the Government, over the previous lowest bid for comparable work, of over $100,000. Finally, I note that Senator Long refers on page 4 of his letter to 8. charge that engineers supervising public works have formed a network of supervision "to enure to the advantage and control of said Farley". If this charge 18 intended to refer to the engineers of the Procurement Div- ision of the Treasury Department, I have every confidence that it 1s without foundation, but I shall be most pleased to have Senator Long submit to me any evidential foundation for such a charge which, so far as I know, is now being made for the first time; and I shall immediately institute a thorough and comprehensive investigation of this allegation, the results of which will be entirely at the disposal of your committee. Respectfully yours, Secretary of the Treasury. Honorable Kenneth McKellar United States Senate Regraded Unclassifie 48A Hello Mr. Secretary. Hello Senator. Couzens talking. H.M.Jr: How are you? C: Pretty well thank you. Say I haven't seen in the press whether you've made any statements or commitment oh the repeal of the so-called pink slip. Have you made any commitment yet. H.M.Jr: No. I've spoken to both - Senator Harrison called me and Mr. Doughton and I told both the gentlemen that the Treasury's position was that we were here to carry out the orders of Congress. C: Well I understood that they were going to ask you to make some recommendations. Are you? H.M.Jr: No I'm not going to. C: Well I thank you very much. I'm glad you're not going to get into it. H.M.Jr: No. I've very definitely kept out of it, I said we were going right ahead with our preparations and if Congress wished to change it why that was alright but that we were going right ahead and that we absolutely were neutral. C: Well I thank you very much. I just wanted to know because I know there's going to be a fight on it and I didn't want to -- H.M.Jr: No we've taken no position. C: Yes. H.M.Jr: While I've got you on the phone, how do you like the way the Mellon case is going? C: Well say this is the first time in all my 13 years here that I've ever seen a clean cut fight. Now I'm glad you brought that up Mr. Secretary. I wonder if there's anyway I can get a transcript of the testimony? H.M.Jr: Oh yes. C: I'd like to get a transcript, if you'll make a note of it, because I think its going to be very helpful in our legislative program. Regraded Unclassified 48B S.M.J. Holls, 2-10 Mr. Doughtens Mello MH. Secretary. H.M.Jr: Oh yes. thank C: And will you see that I get a copy? time 10 H.M.Jr: I'll take care of it at once. C: Thank you Mr. Secretary very much. HM.Jr: Alright. I've got that so if you VICE 11 ruse; X not the Completes to C: Goodby. 15, 10:50 tomorrow. Dr 10:30 toeation and the Wast's that 20 - De On the you're been rather enxious about that. R.M.Irt Yes - here. That's time. We'll be there. Dr I sensor to give 2014 the hearing you income That's time. Dr 20170 the the Boom In the DMV House Office Butteing - Maria right, March 7, 1935. Thursday. Thank you very essets. March 7, 1935. Thursday, Regraded Unclassified 48C H.M.Jr: Hello - hello Mr. Doughton. Doughton: Hello Mr. Secretary. H.M.Jr: Morgenthau. D: Yes. Would it suit you to come in the morning at 10:30 to explain your anti-smuggling bill? H.M.Jr: Sure. D: Well alright. I've got that arrangement 30 if you want to come: I got the Committee to agree to it. H.M.Jr: 10:30 tomorrow. D: 10:30 tomorrow morning. H.M.Jr: On the anti-smuggling. D: What's that? H.M.Jr: 10 - D: On the anti-smuggling you've been rather anxious about that. H.M.Jr: Yes we have. That's fine. We'll be there. D: Alright. I wanted to give you the hearing you know. H.M.Jr: That's fine. D: 10:30 in the Committee Room in the new House Office Building . H.M.Jr: That's right. D: Alright. Thank you very much. March 7, 1935. Thursday. Regraded Unclassifie 48E March 7, 1935. Thursday. Opper. H.M.Jr: Oh yes Opper. He feels very strongly that we ought to give him more information. H.M.Jr: He does. 0: Now I'd like to come back. All I wanted to find out was whether you'd be around for the next ten minutes. H.M.Jr: Oh yes. 0: All right sir I'll be right back. H.M.Jr: Did you bring your letter back? O: No I left it with him. H.M.Jr. But it wasn't satisfactory? 0: That's right. 0: And he suggested that we get another letter down to him immediately. The Committee is going in session and he says he'd like to have it in half hour. H.M.Jr: All right. 0: I'll come back. H.M.Jr: Right. Regraded Unclassifie 48F March 7, 1935. Thursday. H.M.Jr: Got your message to Mr. Opper. McKellar: Yes sir. H.M.Jr: And I've just - we've just fixed up another letter and he's leaving now. McK: All right, fine. H.M.Jr: You'll be in the room? McK: Yes sir. Tell him to knock on the door and we'll let him in. H.M.Jr: Now I want you to feel this, that anything here in the Treasury you want, you can have it. MeK; All right. Thank you very much, that's fine. Say you saw where it was indirectly reported to the Treasury? H.M.Jr: Yes, I didn't know you see I -- McK: I know that. H.M.Jr: I simply thought there was no direct implication. McK: Well I can readily understand how you'd feel about it from the language. H.M.Jr: But anything that your Committee wants - they can have the Treasury. McK: Oh all right thank you. H.M.Jr: All right. Regraded Unclassified A8G Fahey: Henry, John Fahey. H.M.Jr: Yes. F: They said you were trying to get me. H.M.Jr: Yes. I have in my room here Bell and Coolidge. F: Yes. H.M.Jr: And McIntyre wants us to get together with you and give the White House a decision on your bill as it was reported out. Do you suppose you could come over? F: Yes. Well now what about that meeting at 11 o'clock this morning? Well Bell is here and McIntyre says we've got to get word up on the hill by when? By 11. There are two things in the bill. One is the fact that you can take application for another 60 days and the other that it jumped to 250 million dollars. F: You mean 2 billion 500 million. H.M.Jr: Two what? F: They raised it to 2 billion 500 million more? H.M.Jr: Well they raised it to a billion and three quarters, isn't that what it is? A billion and three quarters. F: A billion and three quarters? H.M.Jr: Yes. F: They had it at a billion and a half you know. H.M.Jr: Yes but - and also that you can take application in 60 days for more. F: Yes. Well -- H.M.Jr: Well you're familiar with what they've done aren't you? F: Well I'm familiar with their having - no the 60 day thing is a new one. I haven't had anything about that. Regraded Unclassifie 4TH - 2 - H.M.Jr: Well can't you come over and see the men so that we can advise the White House? F: Oh yes. Well I can tell you right off the bat what to advise the White House about it. The White House ought to tell them no on both of them. H.M.Jr: No on both of them? F: Why absolutely. H.M.Jr: Well would you stick on that? F: Yes certainly. That's what we told them flat up there. H.M.Jr: Alright. Well then - F: But here I'll tell you - I'm not so sure -- H.M.Jr: Just a minute. Coolidge is on the phone with me,, see. F: Yes. H.M.Jr: He's listening. F: Yes. H.M.Jr: Go ahead. F: I told them flat up there in the Committee you know and I told them privately for Bulkley and Stegall that that figure ought not to go beyond the 1 - 250 which was originally in that. H.M.Jr: A billion and a quarter? F: Right. Well then they went ahead. They were - they had some of these projects and wanted to make it two and all kinds of things and they finally compromised and they called - they checked with the President and they made it one and a half but the understanding was that that was the limit to which they were going to go, see? I mean that was what they talked. So I don't take much stock in this 60 day business as dangerous. H.M.Jr: Oh well its outrageous. F: Well of course it is very dangerous because it Regraded Unclassifie - 3 - will bring a flood of applications, don't you know. H.M.Jr: Well now will you do this. Will you tell this yourself to McIntyre. F: Oh yes. H.M.Jr: And then we'll talk to him too. I wish you'd call him right away. They're very much con- cerned about this over there. F: Oh well I'll call him right away. H.M.Jr: I wish you would. F: Alright. Is the meeting on for 11? H.M.Jr: Oh yes. F: What? H.M.Jr: Yes something - the President asked me to call it. F: Alright I'll be there at 11. H.M.Jr: He asked me to call it. F: Yes. Now say, let me add this. H.M.Jr: Yes. F: On this thing I'm not so sure that there is much to be disturbed about this because some of this is horseplay as far as the Committee is concerned, to satisfy some of these people on the floor and they expect that the bill is going to go to conference and that some of this stuff will be knocked out. H.M.Jr: I know. That's what they always tell us and its never knocked out in conference. F: Well that's of course I know we know that too. H.M.Jr: Sure. That's a great trick you know "don't worry we'll take care of it in conference" and it never happens. F: Well you're quite right about that. Regraded Unclassifie 48D - 4 - H.M.Jr: I mean you can't take their word on that. Now I think if we tell them now they'll take care of it on the floor. That's my understanding. F: Well that - that will -- H.M.Jr: If you'll get hold of Mac - he is very much concerned about this. F: I'll get Mac right now. H.M.Jr: O.K. F: Now say - there's one other thing about this. H.M.Jr: Yes. F: Of course that is its just full of dynamite and that's the 31% business in the Farm Credit bill you know. H.M.Jr: Yes well that isn't in this. F: What? No but they'll do it. H.M.Jr: Yes well we'll talk about that at 11 o'clock. F: Well alright because I think we ought to bring all the pressure we can to bear to head that thing off. H.M.Jr: O.K. F: All along the line. Alright I'll see you at 11 o'clock. I'll get McIntyre on this other right away. H.M.Jr: Thank you. F: Alright. Goodby. H.M.Jr: Goodby. March 7, 1935. Thursday. Regraded Unclassifie 485 Senator Byrd: How are you? H.M.Jr: I'm alright. Now what we're doing is this, on that resolution of yours. B: Yes. H.M.Jr: We've got to get the information and if we have luck we'll have it for you by Monday noon. B: Fine. H.M.Jr: But we're absolutely turning everything upsidedown to get it. B: Fine. H.M.Jr: The latest will be Tuesday though but we ought to have it by Monday and I just wanted to tell you. We haven't got any of it. We've got to get it all. B: Well that's fine. You mean you haven't got the balance unexpended. Of course that's what I really want. H.M.Jr: No. We've set up a chart - Bell has - and I've just signed it this minute although we haven't even yet got the thing presented. It hasn't come down. I mean I haven't officially been notified. B: Alright. I'm going to make it clear on the floor so that there'll be no criticism of you, you know in any way. H.M.Jr: But I mean we had none of that information in the shop. I just wanted to let you know that Bell is doing everything he can. B: That's fine. H.M.Jr: And if - they'll work all Sunday - and if we have luck we'll have it Monday noon but cer- tainly Tuesday noon. B:: That's fine Henry. I certainly do appreciate it. H.M.Jr: Alright. Regraded Unclassifie 48K - 2 - B: I'll make it clear that that newspaper statement given out wasn't correct. H.M.Jr: Alright. B: Because I didn't say that. H.M.Jr: Alright. Thank you. B: Alright. Thank you Henry. March 7, 1935. Thursday. Regraded Unclassified March 7, 1935. 49 The Interdepartmental Loan Committee met in the office of the Secretary of the Treasury at 11:00 A.M. Those present were: Henry Morgenthau, Jr. Secretary of the Treasury, Harry Hopkins, Administrator, Federal Emergency Relief Administration. Jesse H. Jones, Chairman of the Reconstruction Finance Corporation, Marriner 3. Eccles, Governor, Federal Reserve Board, James A. Moffett, Administrator, Federal Housing Administration, John H. Fahey, Chairman, Federal Home Loan Bank Board, Wm. I. Myers, Governor, Farm Credit Administration. George N. Peek, President, Export-Import Bank, Colonel Horatio B. Hackett, Division of Housing, P.W.A. Stanley Reed, General Counsel of the Reconstruction Finance Corporation, Leo T. Crowley, Chairman, Federal Deposit Insurance Corporation, Lynn P. Talley, President, Commodity Credit Corporation. Ward M. Buckles, Director of Finance, Agricultural Adjustment Adm, Colonel Lawrence Westbrook, General Counsel, Federal Emergency Relief Administration, T.J. Coolidge, Under Secretary of the Treasury, Herman Oliphant, General Counsel for the Treasury Department, D.W. Bell, Acting Director of the Bureau of the Budget. G.B. Upham, Secretary of the Committee. Mr. Hopkins read a proposed amendment to the pending Works Relief Bill and asked for discussion and comment. It would permit the RFC, the HOLC and the FCA to loan to state rehabilitation Regraded Unclassifie -2- 50 corporations in connection with work relief. Mr. Hopkins explained that under the Work Relief Bill, the President, if he wanted to, could say to the RFC or to any other lending agency, that he would give them, say $500,000,000 for lending purposes. It 1s desirable that the lending agencies have the power to lend under the Act. No additional funds for any of the agencies are desired. Mr. Hopkins said he knew the HOLC had some money and perhaps some of the other agencies did also, The idea, Mr. Hopkins said, was developed a month or so ago. The President has approved it in principle. If it is presented it will be presented as an Administration measure. It would have no chance without Administration support. Mr. Hopkins mentioned as at specific example e slum clearing project. Instead of using all of the money out of the $4,000,000,000, he said, a lending agency might lend to the housing authority out of an existing fund. It would, of course, have a good many deci- sions to make in connection with such a transaction as to interest rates, etc. Thus, he said, the lending agencies would be working jointly with any operating agencies set up under the Work Relief Bill. The whole force of the Government would be behind the project. Maybe there is not much free money but there is some. The President would like to use the powers of the lending agencies, if possible, to get an emphasis on loans as well as grants. He emphasized that the President could give a part of the $1,000,000,000 to the RFC for lending purposes. Mr. Morgenthau asked Mr. Bell how the proposal would fit into Regraded Unclassifie -3- 51 the existing machinery. Mr. Bell said that it would certainly increase the amount of funds available. As the bill passed the House, the President could give part of the $4,000,000,000 to the RFC but in the present form of the bill that might not be possible. Mr. Morgenthau said that as he saw the thing there were two purposes in view, (1) to use existing machinery for disposing of the money, and (2) to make use of any additional money that happens to be on hand. Mr. Oliphant asked if the primary purpose was to secure 8 larger total fund or to make the type of funds available move out more quickly. Mr. Hopkins replied that both are primary purposes. Mr. Hopkins said that a lending agency might desire to make a loan where $500,000 was required but the security offered justi- fied a loan of $400,000 only. In that case, he said, there might be a grant of $100,000 and a loan of $400,000. Mr. Morgenthau asked if an idea being sponsored by Marvin Jones under which & man will be loaned $5,000 to buy a new ferm against 8. 2% First mortgage would fit into the proposed scheme. Colonel Westbrook thought that might be taken care of indirectly but Mr. Bell thought not unless the family was on relief. Mr. Fahey said he saw some possibilities and advantages to the suggestion. He thought the HOLC might have some money left over to use in this manner 1f thought desirable. Mr. Coolidge said he thought the idea was entirely appropriate for the RFC but not for the HOLC or the FCA. Regraded Unclassified 52 Mr. Myers agreed with this position. Mr. Morgenthau said he had the idea that guaranteed bonds could be sold under the Work Relief Bill, but Mr. Hopkins said not. Mr. Morgenthau thought originally the President had the idea of selling guaranteed bonds for self liquidating purposes. Mr. Bell said that had been discussed but couldn't be put on an appropriation bill. Mr. Morgenthau said that he had hoped for a gradual unscramb- ling of the emergency financial agencies and 8 return to direct appropriations. If the proposal under review would put more it money to work that would be fine but if/merely complicated the financial picture he had his doubts. Mr. Hopkins said it would put money to work and that of the total sum put in more would be returned to the Government than if the lending agencies remained outside the picture. The President may want Treasury or lending agency approval of all loans. Mr. Morgenthau referred to some differences of opinion between the FCA and the RFC on cotton and corn loans. Because it didn't seem right to mix relief and farm credit, the RFC had taken the loans over. He said he thought it was alright for the RFC to go along on the proposal but that self-sustaining permanent agencies shouldn't and that they wouldn't be of any help anyway. The reaction would be unfavorable on all farm credit securities. Mr. Morgenthau approved the idea if confined to the R.F.C. Mr. Jones agreed and there was no disagreement. Mr. Coolidge, Mr. Bell, Mr. Talley, Mr. Reed and Mr. Oliphant Regraded Unclassified «5- SRA were appointed as a sub-committee to redraft the proposal. Mr. Morgenthau asked Mr. Myers about the amendment to the Farm Credit Bill which would reduce farm credit interest to 3-1/2%. Mr. Myers said this was equivalent to putting farm credit on the dole. The bill 1s being held up, he said, waiting for senity to return. Marvin Jones is considering an amendment for 2% money to send operators of small farms as a sort of 8 compromise on the Frazier-Lemke Bill. Mr. Morgenthau was of the opinion that if the Administration can win on the Works Relief amedments being supported by McCarran, Wheeler, Byrd and others, there need be no compromise on the 3-1/2% farm interest proposal. If the Administration loses on the Works Relief amendments it doesn't matter much what happens anyway. Mr. Myers said that Marvin Jones was of the opinion that Mr. Morgenthau was friendly to his proposal. Mr. Morgenthau said that he had told Marvin Jones that the Treasury had no money for the purpose but that he was friendly toward the idea of giving the small farmer a chance. He said that Marvin Jones had told him he was going to advance his pro- posal anyway and suggest using the gold profit. Mr. Myers said that he had understood from Marvin Jones that the President had expressed friendly interest and it might be well to do some spade work at the White House. Referring again to the amendment suggested by Mr. Hopkins, Mr. Bell expressed the view that he thought the whole Works Relief Bill might be complicated seriously if the Administration offered this emendment at this time. Regraded Unclassified march 8,1935 52C 52B TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Thursday, March 7. 1935. No. 4-46 3-6-35. Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of Treasury notes of Series A-1940 will close at the close of business Friday, March 8, 1935. Subscriptions placed in the mail before 12 o'clock midnight, Friday, March 8, will be considered as having been entered before the close of the subscription books. This offering is upen only to the holders of Treasury notes of Series C-1935, maturing March 15, 1935. The subscription books for the Treasury bonds of 1955-60 will remain open until further notice for the exchange of Fourth Liberty Loan bonds called for redemption on April 15, 1935. Announcement of the amount of subscriptions for the Treasury notes and their division among the several Federal Reserve Districts will be made later. Regraded Unclassified 52C march 8,1935. ANTI-SMUGGLING ACT HEARINGS BEFORE THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES SEVENTY-FOURTH CONGRESS FIRST SESSION ON H.R. 5496 MARCH 8, 13 AND MAY 1, 2, 1935 (CONSOLIDATION) UNITED STATES GOVERNMENT PRINTING OFFICE 133176 WASHINGTON : 1933 Regraded Unclassified TOA ИАЛИ IDA 8800H COMMITTEE ON WAYS AND MEANS ROBERT L. DOUGHTON, North Carolina, Chairman SAMUEL B. HILL, Washington ALLEN T. TREADWAY, Massachusetts CONTENTS THOMAS H. CULLEN, New York ISAAC BACHARACH, New Jersey CHRISTOPHER D. SULLIVAN, New York FRANK CROWTHER, New York MORGAN G. SANDERS, Texas HAROLD KNUTSON, Minnesota JOHN W. McCORMACK, Massachusetts DANIEL A. REED, New York Statements of- Page DAVID J. LEWIS, Maryland ROY 0. WOODRUFF, Michigan Hester, C. M., Treasury Department 3, 29, 53, 125, 165 FRED M. VINSON, Kentucky THOMAS A. JENKINS, Obio Morgenthau, Hon. Henry, Jr., Secretary of the Treasury 1 JERE COOPER, Tennessee Parker, 8. V., Commander, United States Coast Guard 29,53 JOHN W. BOEHNE, Ja., Indiana CLAUDE A. FULLER, Arkansas Tyrer, Arthur J., Department of Commerce 159 WESLEY E. DISNEY, Oklahoma Yntema, Dr. H. E., professor of law, University of Michigan 3,82 ARTHUR P. LAMNECK, Ohio III FRANK H. BUCK, California RICHARD M. DUNCAN, Missouri CHESTER THOMPSON, Illinois J. TWING BROOKS, Pennsylvania JOHN D. DINGELL, Michigan E. W. G. HUFFMAN, Clerk II Regraded Unclassified ANTI-SMUGGLING ACT FRIDAY, MARCH 8, 1935 HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, Washington, D. C. The committee met at 10:30 a. m., Hon. Robert L. Doughton (chairman) presiding. The CHAIRMAN. The committee will be in order. The meeting this morning is called for the purpose of conducting hearings on H. R. 5496, a bill introduced by the chairman at the request of the Secre- tary of the Treasury, on February 7, 1935. The title of the bill is, " To protect the revenue of the United States and provide measures for the more effective enforcement of the laws respecting the revenue, to prevent smuggling, to authorize customs-enforcement areas, and for other purposes." We are honored this morning by the presence of the Secretary of the Treasury, Mr. Morgenthau, and other distinguished witnesses. We should be glad to hear the Secretary at this time, if he will make such explanation of the bill as he deems proper. STATEMENT OF HON. HENRY MORGENTHAU, JR., SECRETARY OF THE TREASURY Secretary MORGENTHAU. Mr. Chairman and gentlemen, I have a rather brief statement to make. Prior to prohibition this country was not troubled much with smuggling. During the 14 years of prohibition the business of smug- gling liquor into the United States from all parts of the world devel- oped to very serious and troublesome proportions. It was generally expected that with the repeal of prohibition liquor-smuggling operations and frauds on our revenue would be ma- terially reduced. How widespread this opinion was may be evi- denced by the fact that the appropriation for the Coast Guard, the first line of defense against the rumrunners, was reduced from $25,772,950 for the fiscal year of 1934 to $18,046,400 for 1935. This drastic reduction resulted from a belief that repeal would largely relieve the Coast Guard of those portions of its law-enforcement activities which were directed against smuggling. For a time after repeal such proved to be the case, but, commencing with the spring of 1934, liquor smugglers again appeared along our coasts, and their operations have now increased to alarming proportions. Thus, in March 1934, only 2 smuggling vessels were observed off the coast, but by February of this year this number had increased to 22. Thirty-nine foreign vessels are presently known to the Coast Guard 1 Regraded Unclassified 2 ANTI-SMUGGLING ACT ANTI-SMUGGLING ACT 3 to be regularly engaged in the illieit-liquor traffic. Inasmuch actual experience in dealing with smuggling and also by Dr Hessel these vessels are hovering beyond our customs waters, they are not as E. Yntema of the University of Michigan Law School, an expert in smuggling operations almost with impunity. subject to seizure under existing laws, and hence they carry on their those phases of international and maritime laws that are involved. Alcohol constitutes almost the entire cargo of these vessels. This Representatives of the Department and Dr. Yntema are here this is due to several things, It is very cheap. It can be produced abroad morning and will be glad to render your committee any assistance at costs ranging from 20 to 50 cents a gallon. It is highly concen- possible. I cannot urge too strongly upon you the importance of this legis- trated. Two and one-half gallons of whisky can be made from lation. In fact, the enactment of this bill is imperative if the Gov- gallon of alcohol, It enjoys a large price differential due to the eus- il ernment of the United States is to wipe out smuggling and collect toms duties and internal-revenue taxes, which amount to $13.30 on the millions of dollars in revenue lost annually through the successful a gallon of 190° proof, operations of the liquor smugglers who are now able to carry on A summary of the movements of known alcohol smugglers for the their illicit trade near our shores largely because of the inadequacy last 4 months of 1934 indicates an outward movement from the prin- of present antismuggling laws. cipal ports of supply to the coast of the United States of over three- Mr. COOPER. Mr. Chairman, I should like to nsk the Secretary this quarters of a million gallons of alcohol. At this rate there would question: I assume, Mr. Secretary, that you would probably prefer The annual internal-revenue loss on this amount of alcohol, at $3.80 be ao annual movement of over two and a quarter million gallons. that some of the gentlemen with you undertake a brief analysis of the bill itself, in order that we may clearly comprehend the scope of the per gallon, would be almost $9,000,000; the loss in customs duties, at measure as well as the purposes to be accomplished. $30,000,000. $9.50 per gallon, would be over $21,000,000, making a total loss of over Secretary MORGENTHAU. Not being a lawyer, and this being an alto- gether legal matter, I would appreciate it if I may be allowed to ask The principal enforcement agencies engaged in the prevention of some of the lawyers who have worked on this to outline the bill. smuggling are the Coast Guard and the Bureau of Customs. The Mr. COOPER. I think that is a very fair position to take, Mr. Chair- appropriations for the Coast Guard for 1935 are $18,346,400; those man. I suggest the Secretary be permitted at this point to present for the Bureau of Customs (omitting the refund and drawback fig- the witness he desires to be heard on that phase of the matter. ures) are $18,500,000. It is estimated that of these appropriations The CHAIRMAN. With the understanding that if later any members about 20 percent, or between seven and eight million dollars, is desire to question the Secretary he will be available for such ques- properly chargeable to our efforts to prevent smuggling. tioning. The practical difficulties in checking smuggling can hardly be Secretary MORGENTHAU. Of course, May I present Mr. Hester, exaggerated. Our 10,000-mile coastline with the many opportunities from the Treasury. it affords for concealment; our comparatively small Coast Guard The CHAIRMAN, Mr. Hester, will you come forward, give your offi- force of about 10,000 men: the seamanship and daring of the runi- cial connection, and what experience you have that qualifies you to runners; and the highly efficient and well-financed smuggling organ- testify on this bill. izations that have grown up since the advent of prohibition. are all prime factors in making the smuggling problem one difficult of STATEMENTS OF 0. M. HESTER, ATTORNEY, OFFICE OF THE solution. Another, and not the least important factor, is the in- GENERAL COUNSEL; AND DR. H. E. YNTEMA, PROFESSOR OF adequacy of existing antismuggling legislation. The ineffective leg- LAW, UNIVERSITY OF MICHIGAN islative weapons at present at our disposal for this work have time and time again permitted the escape from punishment of vessels Mr. HESTER Mr. Chairman and gentlemen, my name is C. M. which were violating every principle behind our customs enforcement Hester. I am an attorney in the office of the General Counsel of the laws. ressels, in fact, which had never earned an honest dollar in Treasury, I would like to call up here, to collaborate with me, Dr. their entire sengoing lives, but had been designed, built, and used Yntema, exclusively for smuggling into the United States. The CHAIRMAN. I am sure there is no objection to that. To arm and equip the Coast Guard LO B. point where it could com- Mr. COOPER. I would suggest to Mr. Hester, ne I view the situa- pletely wipe ont all smuggling by sea would be an expensive business. tion, that it would be helpful to the committee if you would kindly But it will cost nothing to give them adequate legislation with which follow the suggestion incorporated in my question to the Secretary. to fight smuggling. The proposed legislation which your committee Mr. HESTER, I intend to do so, has under consideration is designed to do this. It provides for no Mr. COOPER. This is a new matter to many of us. We understand appropriation by Congress. Its sole purpose is to give enforcement the purposes to be accomplished from the splendid statement of the officers of the Government adequate weapons with which to fight a Secretary. We want to know the methods sought to be employed traffic that yearly is robbing the United States of millions of dollars under this pending bill. of revenue, Mr. Hn. Will the gentleman from Tennessee yield! The Treasury Department has submitted to your committee sug- Mr. COOPER. I yield. gestions for legislation dealing with this problem. These sugges- Mr. Has Would it not be a good idea for the witness to take the tions are the product of several months of work both by the experts bill up section by section and go through it that way! in the various bureaus of the Department who have had years of Regraded Unclassified 4 ANTI-SMUGGLING ACT ANTI-SMUGGLING ACT 5 Mr. COOPER. I had it in mind for the witness to make a brief state- ment of the manner in which the subject is treated and then have ILD Under section 1, extension of customs control into the high sens explanation of the bill as indicated by Mr. Hill. may be limited by administrative action-that is, by the President- The CHAIRMAN. The Chair thinks that would be a proper course to those areas beyond the 12-mile limit, where smuggling operations to pursue. are particularly and notoriously troublesome. This will make it Mr. HESTER. As a preface to a discussion of the various sections of unmistakably clear that the proposed legislation complies with the the bill, I will state the general purposes of the proposed legislation requirement that extraterritorial jurisdiction provisions be reason- The major purposes of this bill are (1) to extend customs control ably necessary to the protection of the revenue and the national beyond the 12-mile limit, (2) to provide for more rigid enforcement within the 12-mile limit, and (3) to encourage reciprocal legislation welfare. Now, just briefly for a moment to stop here, so that the chairman on the part of foreign countries principally by making it an offense and the members of the committee will see the questions of law pre- for our nationals and vessels to violate the revenue laws of such for- sented by this first section. We expect to supply you with authori- eign countries as punish their nationals and vessels for violations of ties which establish the proposition that a nation is authorized to extend its customs control such distance from its shores as may be our revenue laws. The proposed legislation is divided into four titles. Section 1, under title 1, authorizes the President, as may be required reasonably necessary to protect its revenue and the general welfare; to protect the revenue, to declare customs-enforcement areus upon the and, I say, we will supply those authorities to you 05 we go along. constal waters of the United States beyond the present chstoms waters Section 2 (a) of the bill subjects to a fine of not more than $5,000, whenever he finds that such action is justified by the presence of or to imprisonment for not more than 2 years, or to both, any per- hovering vessels off the coast; that is, smuggling vessels, son owning in whole or in part any vessel of the United States or Mr. HILL. Just 80 that I may have a better understanding of this- controlling it, directly or indirectly, who permits such vessel to be you are taking the 12-mile limit as the limit within which you can employed in smuggling merchandise into any foreign country if such operate without this legislation? foreign country provides any penalty for violation of the revenue laws of the United States. Persons on board assisting in such smilg- Mr. HESTER. That is right. This section at the same time specifi- cally preserves, as the fundamental principle in the entire act, the gling activities are subject to the same penalties, and the vessel itself rights of foreign vessels under the various liquor treaties; that is, is subject to seizure and forfeiture. Section 9 (b) makes it an offense to charter a vessel with actual or under the hour's sailing distance liquor treaties. implied knowledge that the vessel is going to be used for the purposes Except by special arrangement with the power concerned, no for- eign-treaty vessel can be seized under any provisions of the proposed prohibited by section 2 (a). This whole section is designed to encourage legislation on the legislation beyond the treaty limits. Within such customs-enforcement areas officers of the customs may part of foreign countries penalizing their nationals and vessels for violating our revenue laws. It is modeled after a Norwegian law be directed by the President to enforce any applicable law; that is, the law must already apply. It must be there. Then the President, of June 25, 1926. The necessity for that will be obvious to you when we take a hypo- by the various sections of this proposed legislation, may take action if thetical case. Outside our 12-mile limit, we will say, are notorious certain acts are committed outside the 12-mile limit, which nets are rumrunners, flying foreign flags. made offenses. We appeal to the foreign country. They say, We have no laws Then, if it is discovered that beyond the 12-mile limit we find which prohibit our vessels from violating your laws." smuggling vessels hovering with impunity, maybe just a few miles So the purpose of this section is to initiate reciprocal legislation. beyond the limit, the President is authorized to declare that particn- That is, we make it an offense to violate the laws of a foreign lar limit a customs-enforcement area and to direct officers of the country by our citizens and our vessels in the hope that they will customs to seize the vessels, to board them, search them, and if enact reciprocal legislation. they have violated the law, to bring them into port. Mr. McCormack. You say, LE in the hope." Is this for the purpose The effect of the customs-enforcement-area provision is not de- of bringing about negotiations with these foreign countries, or what signed to extend any law of the United States but to permit a flex- is the purpose? ible administrative control of enforcement on the high seas of such Mr. HESTER. No; the purpose is to enact this legislation. laws as already extend beyond customs waters. Mr. McCormack. There is a big difference between hoping and This is designed to answer the possible protest of any foreign enacting, as you know. power that the provisions of the proposed legislation violate any Mr. HESTER. Oh, perhaps I did not make myself clear on that principle of international law. We ask that this legislation be enacted because We hope that the Mr. Hur. I did not quite get that. Would you mind repeating foreign country will enact similar legislation. that? Mr. LEWIS. You mean, this provides the inducement? Mr. HESTER. This is designed to answer the possible protest of any Mr. HESTER. That is right. foreign power that the provisions of the proposed legislation violate Mr. REED. May I ask this question Has there been any assurance any principle of international law. A little later on we will discuss given that they will cooperate at all? that question of law. Mr. HESTER. May I ask Dr. Yntema to answer that question? Regraded Unclassified 6 ANTI-SMUGGLING ACT ANTI-SMUGGLING ACT 7 The CHAIRMAN. Will you state for the record who Dr. Yutema is! Mr. HESTER. Dr. Yntema is professor of law in the University of instance, 15 give-away of the nature of their illicit activities. This Michigan and on authority on international law, who is assisting as section will also stimulate reciprocal legislation by other countries. in connection with this bill. Section 4 authorizes collectors of customs to revoke or refuse to Dr. YNTEMA. My understanding is that the question asked is document (i. e, to register, enroll, license, or number) any vessel whether, if this proposed section 2 (a) were enacted, similar legisla- when it appears, from its build or otherwise, that the vessel is going tion would be enacted by other countries. to be employed in smuggling. At present this authority does not Mr. REED. The question is whether any assurance has been given, exist even though the master of a vessel on applying for documenta- either formal or informal. tion should apnounce that he were going to use the vessel ns B. rum- Dr. YNTEMA. As far as I know, there has been no formal assur- runner. This section is also reciprocal in that it will serve as a base ance, of course. It was, however, stated informally that there was n for requests to other powers to take similar action. Mr. Hull Were your remarks directed to American-registered chance; that one of the difficulties that the Government had in deal- vessels entirely, or did you include within this scope the vessels of ing with the problem resulted from some of the limitations in its own legislation. and one of the limitations was the fact that there was no foreign registry? Mr. HESTER. This would be devoted solely to American vessels, provision under which the Government of the United States could Mr. HnL Why would that induce reciprocal legislation by foreign take any measures to suppress illicit activities on the part of Ameri- can citizens, for example, who were engaged in rumrunning into governments? Mr. HESTER. We are revoking the registry of American vessels for Canada. The suggestion was made that Norway has a statute of this violating foreign laws, and they might do likewise. general character and that it would be a good thing to facilitate the Mr. HILL I thought you had reference to their operations within negotiations to incorporate this provision. the waters of the United States. Mr. REED. Would you mind telling its for the record, unless it is Mr. HESTER. No. It would extend beyond. I am glad you brought against the public interest. which nation is the most flagrant violator? I do not want to press the question if the information should not be that point up. Thank you. Section 5 permits vessels forfeited for violation of the revenue laws disclosed. to be destroyed whenever the Secretary of the Treasury is of the Mr. HESTER. Commander Parker, will you step forward and give opinion that they are likely to be returned to the smuggling traffic the committee that information! May say to the committee, this if sold. is Commander Parker, of the Coast Guard. At present forfeited rumrunners, being practically useless for The CHAIRMAN. Commander, can you answer the question asked legitimate commerce, are sold very cheaply at condemnation sales, by Representative Reed! usually to their former owner or some other rumrunner, and in the Commander PARKER. The vessels employed in rumrunning and majority of cases return shortly to the líquor traffic. hovering off our coasts are almost exclusively under the British flag. Mr. REED. I am sorry to interrupt, but-- Mr. HESTER. Does that answer the question? Mr. HESTER. We are very glad to have you interrupt, sir. Mr. REED. Yes, Mr. REED. Just to clear up some point in my own mind. Az I Mr. HESTER. Section 3 subjects to forfeiture when found at any understand the law, 3 miles is now the limit fixed by international place where it may be examined by an officer of the customs in the law, is it not? enforcement of any revenue law (1) any vessel, foreign or domestic, Mr. HESTER. The 3-mile limit is the limit within which under in- built OF fitted out for the purpose of being employed to defraud the ternational law a country exercises exclusive and absolute jurisdic- revenue or to smuggle merchandise into the United States or into tion. such foreign countries as have reciprocal legislation of the type Mr. REED, Exactly. Under the tariff act that I have here, section already discussed, or employed within the United States for any such 581, boarding vessels, enforcement provisions, that is when this so- purpose, (2) any vessel of the United States employed at any place called 12-mile limit went into effect. for any such purpose. Mr. HESTER, No; the 12-mile limit went into éffect as long ago no For the purpose of the section vessels which are de facto owned 1790. or controlled by American citizens or corporations are deemed vessels Mr. COOPER. What was that! of the United States. Mr. HESTER. The 12-mile limit with reference to customs admin- Also for the purposes of this section the fact that a vessel is dis- istrative control has been in effect since 1790. playing certain typical indicia of smuggling activities, such 0.5 not Mr. REED. Just one moment. This 12-mile zone-wns that created stopping as required to by customs officers, or hovering suspiciously by treaty or by statute? off the coast of the United States, or failing to display lights, raises Mr. HESTER. By statute. After we have finislied the bill we hope the presumption that the vessel is being employed to defraud the to be able to supply you with some authorities of the Supreme Court revenue of the United States. which uphold the right of the United States to extend its customs This section is patterned after on old statute relating to piratical control not only to the 12-mile limit, which has been on the statute vessels. It is believed that this statute will prove very useful since books since 1790, but which also would permit the United States. if the build and dimensions of smuggling craft are, in almost every necessary to protect its revenue, to extend its limit beyond the 12-mile zone. Regraded Unclassified X ANTI-SMUGOLING ACT ANTI-SMUGGLING ACT Mr. REED. Do you mean to say that the United States, by statute; For certain offenses these acts would render it vessel liable to can control foreign shipping beyond the 3-mile limit; that ia, that it forfeiture if the vessel was found within 2 leagues of the coast, or can fix any limit that it wants to for these purposes? Do you have 6 miles; for other purposes, if the vessel were found within 3 leagues authorities for that opinion? of the coast, or 9 miles; for other purposes if the vessel were found Mr. HESTER. Yes. We have an opinion by Chief Justice Marshall within 4 leagues of the coast, or 12 miles; for still other purposes, which is to the effect that a nation has the right to extend its Cus- if the vissel were found 8 leagues off the coast, and even in some toms control such distance from its shores as may be reasonably- PILSOS a hundred leagues off the coust, the vessel would be liable to there is the test right there-reasonably necessary to protect its revenue, and to enforce its laws. forfeiture, Mr. REED. For instance, have those so-called "regulations" of Mr. Reso. Did he go beyond that? Does not the 3-mile Timit Great Britain been brought into the courts in connection with any stand as an international law? cases? Mr. HESTER. Dr. Yntema will answer you on that. Dr. YNTEMA. You mean in the British courts? Dr. Y NTEMA. May I just make a few comments? The first is Mr. REED. Yes, That is, with relation to the ships of other with reference to the 3-mile limit. As you perhaps know, that has been the policy or the doctrine followed by the British Government nationals? Dr. YNTEMA. A large number of foreign vessels have been for- and by this Government with respect to the extent of the terri- feited in the British courts under the British hovering laws for acts torial jurisdiction of the Nation. That is the theory of the British committed beyond the 3-mile zone. Did you also mean international Government and of this Government BS enunciated, for example, in the recent liquor treaty between this country and the British Gov- arbitrations! Mr. REED. Yes, with reference to seizures under these limitations ernment, so that within a 8-mile zone outside of the coast a nation fixed by Great Britain. has the same control as it has over the land. Dr. Y NTEMA. I made a careful search of that, and I do not think However, it is to be said that it is by no means accepted that that there is any arbitration which directly involved the validity of limit might not be lurger. There are various countries which claim a these regulations. There are some arbitral proceedings which are wider zone. And in illustration of the difference of opinion that discussed in connection with this sort of question, the fur seals exists, I might cite the fact that in 1930 there was a conference for the arbitration, in which the British counsel, Sir Charles Russell, ad- codification of international law held at The Hague, and the Second mitted that the hovering act formed an exception to what he claimed Commission, which dealt with the question of territorial waters, were was the general rule. unable to reach an agreement as to the extent of the marginal zone. Mr. REED. That is what I want to know. Have there been any They were unable to agree that this distance should be 3 miles for the cases? This is so very important from the international standpoint. reason that there were a number of powers-the Scandinavian powers, Are the Treasury Department and the State Department working in Italy, Spain, and others-that claimed more than an miles as the extent harmony on the matter of these extensions? of the territorial waters, Dr. YNTEMA. I do not think I should answer that question, if you It seems to me, however, that this question is outside of that. The will excuse ine. question is whether a nation has for any purposes, outside of the terri- May I add one comment to my last remarks, Mr. Chairman? torial waters in special cases where the exigencies of its own needs I think it should be understood, in considering this question, that demand it, is special right to exercise measures beyond the 3-mile zone, you have three kinds of vessels. or whatever the distance may be, that is taken for territorial waters, First, there are American vessels. There is no question about the Our own legislation, which goes back to 1790, has been uniformly right of the United States to deal with American vessels anywhere enneted on the principle that for the protection of the revenue the upon the high seas, American Government does have the right to take reasonable meas- Second, the treaty vessels; the vessels belonging to the powers with ures beyond the territorial waters. which the United States has entered into a treaty relating to the dis- tance within which such vessels can be boarded and seized. Mr. REED. Do the other nations also recognize the same principle of law with reference to their revenuel As you will notice, this legislation adopts throughout the prin- Dr. YNTEMA. You are asking me a question which is a very compli- eiple-or these proposals which have been put into this bill, as I cated one to answer, but let me illustrate the situation by reference to understand it, adopt throughout the principle that the treaty shall the British laws. The British have had on their statute books since control. So you do not have any question there. In other words, you are talking about the ships of those powers such 03 Mexico, such 05 1700 various hovering laws, designed to deal with smuggling, to deal with vessels bovering off the coasts of Great Britain in order to Spanish Honduras, and so forth, with which the United States has not entered into a treaty. smuggle goods into British territory. In other words, there are 16 powers with which the United States I suppose there are 25 or 40-some number that I cannot state has entered into treaties settling this question, and they are all the precisely-of those acts that have had a very long history. Those nets principal maritime powers: Great Britain, France, Germany, Spain. were finally consolidated in 1876, about 25 years after smuggling had Portugal, the Scandinavian powers, Belgium, and the Nethorland#: ceased off the British coasts. of course, Canada and Cubs, and so forth. Prior to that time these acts bad fixed various distances for various offenses, and the whole story is a very technical and complicated one. Regraded Unclassified 10 ANTI-SMUGGLING ACT ANTI-SMUQGLING ACT 11 Third, there are the nontreaty foreign vessels. suize such a sel, and it could be condemned in the courts of this Mr. REED, Now, if I may just press the question. As this involves country. Of course, if the seizure were made, and it was found out an international situation, I just wanted to know if you are working that the vessel was not a piratical vessel it would be unfortunate. in harmony with the State Department on this proposed legislation. Mr. LEWIS. The definition of piracy is to be found in the law of Mr. HESTER. We have worked in cooperation with the State Department. nations, generally speaking. Doctor YNTEMA. Yes, except that for the purpose of our own limits! Mr. REED. Are they in accord with your proposal to extend these law it is defined in our own statutes, as you know. We have specific statutes dealing with pirates. Mr. HESTER. They have not yet advised us officially. Mr. LEWIS. I happen to remember from reading that while Mr. Rxm. Mr. Chairman, this appears to be a very important piece slavery plagued the world, the British Parliament declared the sea of legislation. Of course, if we pass this legislation, We want it to traffic in slaves to be piracy, and applied the law of piracy to such be effective. I think we should hear from the State Department and pirates when they were captured. get their views. What is the hmit to which a nation-I mean not an irresponsible The CHAIRMAN, The Chair will be very glad to address a com- nation that simply wants to work its will, but 15 nation having due minication to the State Department and ask for nn expression of opinion on this bill. to which a nation can go through domestic legislation in defining regard for the rights and feelings of other nations-what is the limit Mr. BACHARACH, If we are to go ahead with this kind of an inves- offenses and punishing offenders on the high seas without regard to tigation, I think we should hear from the State Department, and have their citizenship? them make n. very definite statement. I do not think this idea of Dr. YNTEMA. As I understand your question, you mean by ex- hearing indirectly is the way to proceed. The CHAIRMAN. The gentleman does not insist upon that at this tending Mr. LEWIS. Could we call smuggling "piracy", as the British juncture! called the slave traffic? Mr. BACHARACH. No; of course not. Dr. YNTEMA. The answer to your question is that the British did The CHAIRMAN. We will be able to take care of that. not succeed in doing it that way. As you know, it was a very sore Mr. LEWIS. I would like to ask the doctor a question or two, Mr. point in the relations between this country and Great Britain over B. Chairman. period of some 50 years, and the problem was not finally solved until Doctor, I am obliged to ask you some elementary questions for my the trenty of 1862 between this country and Great Britain, under the own information. terms of which the vessels of this country and the vessels of Great Dr. YNTEMA. They are usually the most difficult to answer. Britain were antually given the right to visit the vessels of the other Mr. LEWIS. They probably will not be for you. Up to 8 miles, by general agreement among nations, the waters may be regarded as nation. The slave traffic offers a very individual set of questions. As you domestic waters, and you would enforce your domestic laws there as know, an effort was made to seize the slaves off the coast of Africa. you would on the lakes or the rivers, generally speaking! There were American putrols and British patrols off the coast of Dr. YNTEMA. You have to be careful even as to that statement. Africa, and an effort was made there to stop the traffic at its source. There is a difference of opinion as to the nature of the control that The British did succeed in treaties with some other countries at an a nation has over the territorial waters. But in general, I think it earlier date in getting this right to séarch vessels on the high seas can be said, subject to this qualification, if I may make it, that it is off the coast of Africa. But it seems to me that is quite a different generally agreed that even within the 3-mile zone the vessels of question from the one here where you are simply asking, a Does the other countries have a right of innocent passage. In other words, United States have in international law the right to do what is if a British vessel or a French vessel, in its ordinary course, should reasonably necessary to prevent goods from being smuggled into pass within 3 miles, it would be a breach of our obligations under the United States?" international law for the United States to say that it was improper Mr. LEWIS. It has that reasonable right. It must, of course, go for is merchant vessel in its ordinary innocent voyage to pass within as far as it can to protect its revenue. a miles. That right of passage is recognized. Dr. YNTEMA, Yes. I think the answer to that question is yes." Mr. LEWIS. Then we will go to the other boundary. Let us say Mr. LEWIS. But. to begin with, you would say that the 3-mile limit there are pirates on the ocean. Under international law have we qualifies it, and if we are to go beyond 3 miles and arrest offenders a right to pursue them wherever we find them and apply the laws to and apply our laws, it must be with the consent of the nations of them? which-the offender is a subject or a citizen! Doctor YNTEMA. As I understand it, a pirate is regarded as an Dr. YNTEMA. Well, that is one way of stating it. It seems to me offender against the law of nations, and every nation has the right the consent, though, has been generally given. For example, there to enforce the law of nations as against a pirate. In other words, are the 4-league provisions or 12-mile provisions; the fact that those if there were a pirate on the high seas, sailing, let us say, the flag statutes give this right to board B. foreign vessel bound to a port of of any other country, the vessels of the United States could properly the United States within 12 miles shows that from the point of view of international law, there is a general agreement that such a pro- Regraded Unclassified 12 ANTI-SMUOGLING ACT ANTI-SMUGOLING ACT 13 vision is 12. reasonable provision. That is, the United States, if it Mr. McCormack. I thought [ heard the commander say that most so desires, as Secretary Fish once said when he was Secretary of of the trouble is with British ships. Is that right! State, does have some right to control trade with the United States, Commander PARKER. Yes, sir; practically all of the vessela. It certainly has the right within the 3-mile limit, because at least Mr. McConmack. I understood the doctor to say that the United that is the territory of the United States. But it seems generally States and England have a treaty, If that is so, what is the neces- agreed that it also has the right outside of that territory to that sity of this legislation? If they have a treaty agreement with the reasonable extent, that is, to take reasonable measures. principal offender, why does not the treaty cover the situation? Mr. LEWIS. Under the bill before us, with respect to the area be- Dr. YNTEMA. The treaty does not make any law. AM that the youd 8 miles and up to 12 miles, do you make the penalties positively treaty does is to say that the British Government will not make any applicable whether the nation of the offender has agreed or not, or claims in the event- is that to be reciprocal subject-matter. Mr. McCormack. You have not explained what the treaty pro- Dr. YNTEMA. No. vides. You said there were three classes of vessels, Mr. LEWIS. Under the bill? Dr. YNTEMA. That is right. Dr. YNTEMA. It is not tame under our present unlading provisions. Mr. McCormack. One of the group was a treaty vessel. You offender? Mr. LEWIS. Up to 12 miles we apply our domestic will to the have treaties with 16 nations. Dr. YNTEMA. Quite right. Dr. YNTUMA. That is the principle of our present law. Mr. McCormAck. The commander said that the principal trouble Mr. LEWIS. Where, then, and in what respect does the reciprocity was with England, and you say we have a treaty with England. I condition enter? Is it in this regard, that if they find our citizens assumed the treaty would cover it. smuggling into the country, American smugglers, and bring the evi- Dr. YNTEMA. The treaty covers it insofar as the determination of dence to 115, that we will punish those smugglers in our country! the distance within which action can be taken is concerned. Is that the reciprocal feature of the bill, or is that the only recip- Mr. McCormack. What is the agreement with reference to that, rocal fenture of the bill? with England? Dr. YNTEMA. If I could take just a moment to explain that. There Dr. YNTEMA. In all these treaties the distance is the same, It is are, I think, four chief provisions which are intended to deal with the 1-hour sailing distance of the vessel, or, if there is n. contact this question, or to lay the basis for more effective international ar- boat which has a higher speed, the provision is 1 hour's sailing dis- rangements with other nations, and in general I may say that these tance of the contact boat. If, for example, the contact boat has a suggestions are the result of suggestions which came informally speed of 25 miles an hour there is a gap of 13 miles between the dis- from the talks which we had with various persons in the State tance within which you are permitted, under the treaty, to board, and Department. search, and seize the vessel, if there is reasonable grounds of suspicion, One of these is a provision giving a more effective control of clear- and the distance within which, under present Laws, our officers are ances of all vessels, including foreign vessels. authorized to act. One of the difficulties in the present situation is that adequate The treaty does not confer any power upon anybody. It simply information ILS to the activities of the rum carriers cannot be had says that the British Government will not make any objection if because of difficulties in our own laws, and the other laws as to certain things happen to British vessels within a certain distance. clearances. Simple administrative regulations governing clearances, Mr. McCoHMacK. The treaty does not cover the specific actions, which we believe will improve this situation, are contained in section It gives no power. It is a general treaty with reference to the dis- 208. tance within which a vessel may be boarded. Another provision is this one in section 4 which has been referred Dr. YNTEMA. It is a limitation, you might any n definition, of the to, namely, giving a discretionary power to the collector of customs international right. upon proper showing, before appeal to the Secretary of Commerce, Mr. COOPER. Will the gentleman yield on that point? to revoke the registry of a vessel which is engaged in smuggling, Mr. McCormack. Yes, whether into the United States or into another country. Mr. COOPER, What would the enactment of the proposed measure do That again gives another method of control which it is to be 80 far as changing the provisions of existing treaties is concerned? hoped other nations might follow with respect to their vessels. Dr. Y X TEMA. In the first place, of course, it would not change the Of course, that only applies to American vessels, because no other provision of any treaty. It assumes that those treatics are valid until vessels are registered in this country. they are changed by a new agreement or by an amendment duly педо- The third provision provides on a reciprocal basis that American tinted with the foreign power involved. It does, however, do this: vessels which smuggle goods into other countries can be forfeited It extends in the case of a foreign vessel the power of the American if that country has an analogous law applying to their vessels, officer to make a search, for example, within the limit contemplated Mr. LEWIS. That is the reciprocal one, What is the other! in the treaty. Dr. YNTEMA. The other one is an analogous one but providing for Mr. Coorin. It will necessitate the negotiation of other treaties, will punishment upon American citizens who engage in smuggling into it not another country. Regraded Unclassified 14 ANTI-SMUGGLING ACT ASTI-SMUGOLING ACT 15 Dr. YNTEMA. I do not see why it should. Mr. COOPER. I respectfully submit that au answer could be made Mr. COOPER What reason do you have to assume that the other countries would have entered into the treaty if those provisions of law yes or no, so that we might get something that we can take hold of. had been in effect! That is the difficulty I have. Every unswer made confuses me more Mr. HILL. Will the gentleman yield to me? and more. Dr. YNTEMA. May I suggest that Mr. Hoster will answer that Mr. McCormack. I yield to Mr. Hill. Mr. HILL, If I understand this proposition, the legislation here question. Mr. HESTER. Let me seo if I do not interpret your question cor- proposed is the enactment of provisions within the existing treaty; rectly. You have in mind that the enactment of this proposed is that correct? Dr. YNTEMA, As I say, there are three categories; as far as the legislation would repeal the treaty provisions and prake it necessary for our Government to negotiate new treaties. treaty vessels are concerned, that is true. Mr. COOPER. I just want to know whether in your opinion that Mr. HILL In other words, the treaty is simply an enabling act, you result would come about. might say, within which this country and the other country to the Mr. HISTER. No; it cannot, because the proposed legislation ex- treaty can enact legislation for the control of commerce to its own pressly excepts treaties. country. Secretary MORGENTHAU. Mr. Chairman, if it is agreeable to the Dr. YNTEMA. That is the assumption of these proposals. committee, may I amplify my statement a little. and then if there Mr. COOPER. Just one other word, if I may. Is it not true that the are any questions you would like to ask me, I shall be glad to answer last act passed by Congress is a controlling act in relation to treaty them. If not, I shall then ask to be excused. negotiations? The CHAIRMAN. We shall be glad to hear you further, Mr. Sec- Dr. YNTEMA. As I understood the question, it was whether this legislation necessarily involved a change in treaties. My answer was retury. Secretary MORGENTHAU. I would like to amplify the statement that that I did not see why it should. There might be reasons why this I made in the beginning, if that is agreeable to the committee. Government, for example, or other governments might find it desir- The CHAIRMAN. Anything you wish to submit, Mr. Secretary, we able to reconsider their treaties. The I-hour's sailing distance, for shall be glad to have. example, is palpably an inadequate distance, and it might be that if Secretary MORGENTHAU. I do not think I made it quite clear why proper representations were made as to the situation with respect to we wanted this kind of legislation. particular vessels, the 1-hour's sailing distance might be extended. It The CHAIRMAN. That is a very important point. seems to me that any provision that was made in the law should con- Secretary MORGENTHAU. So I want to take a minute or two to ex- template that possibility. I do not know that it is probable, but I say plain why we feel we need this kind of legislation. it is a possibility. During the period of prohibition we bad this vast amount of Mr. COOPER. With all due respect-it is all probably my fault, but smuggling of liquor from the high seas into this country. We were the answer just confuses me further. If you have a treaty with a only able to cope with it in a very limited way. foreign nation and then pass n. law in this country that changes the Now we can sell tax-paid liquor; that is, it is lawful to do it. situation that exists under that treaty, why do you not have to nego- We still find that they are trying to smuggle alcohol into the United tiate another treaty with that country to make it effective? How can States from the high seas. you escape that very practical conclusion? The attitude that I took when I went after this problem of en- Dr. YNTEMA. It seems to me the treaty reference is in its first forcement, and the suppression of non-tax-paid liquor was this: section-if, for example- I said, the fact that something had not been done heretofore or had there is reasonable cause for belief that the vessel has committed, or is com- not been tried did not mean that we could not try it. mitting, or attempting to commit an offense against the laws of the United For instance, thanks to the last Congress, it was made possible States- for us to trace the source of the molasses sugar that was being used it is true that since the time when this treaty was ratified, which in the illicit manufacture and sale of whisky, and that was of tre- was 1924, there have been one or two laws passed by the Congress of mendous help to us. One company, for instance, that was selling the United States. Therefore, the phrase, " offenses against the molasses, we found was putting 85 percent of its output into the laws of the United States' as used in the treaty, probably now has a hands of bootleggers. We have been able to put that company out different content. But it does not follow that because the contents of business, But we had to use methods which we had never used of that phrase have been changed, therefore you have to have a new before, during prohibition days to combat this traffic. treaty. Now we are faced with this overseas smuggling. Mr. COOPER. One more question, from a very practical viewpoint, The fact that somebody said that we could not go out and take as I see it. It is your opinion that the enactment of this statute a look at is vessel that we knew was bootlegging alcohol. that it had would require negotiation of treaties between the countries with never been done, was no reason why we should not try to do it. which we already have treaties? It was no reason why we should just sit back and say, " It is just Dr. YNTEMA. I should imagine, 89 I said before, in the enforce- too bad. but these boats are outside the 12-mile limit", and then ment- when a foggy night comes around they will just run the stuff in. Regraded Unclassified 16 AXTI-SMUOGLING ACT ANTI SMUGGLING AUT 17 We had an example of that with the Mogal, off the enast of south- ern California last year. They had the audacity to wire nie and say, Mr. МсСоймаск. May I suggest that I yielded the floor not to my of If you do not let us come in and put this stuff through the customs, friend from New Jersey but to the Secretary. we are going to run it in anyway. The Customs, The Secretary will please proceed with his state- I thought that was such an affront to the United States Govern- ment that we sent 11 Coast Guard boats outside of the 12-mile limit ment. Secretary MORGENTHAU. What I wish to say in the case of Canada to hover around that boat, and we used Navy airplanes and kept a is this: They have offered us every possible cooperation and have not constant watch over that boat and finally starved her out, so that asked anything in return. The Canadian Government has been she ran out of water and had to go buck to Mexico, But it was 18 magnificent in their cooperation with us in suppressing smuggling. very expensive operation, and we do not have the equipment to do When the Const Guard approaches Canadian territorial waters, we that every time we learn that there is a rummy" outside the 12- notify the marine division of the Royal Mounted Police, and they mile limit. We cannot send the whole fleet out to surround that take up the pursuit, and vice versa. For instance, we can fly an American airplane along the Canadian border with a Const Guards- boat and just sit there. In this particular case it took months to do min and Royal Mounted Police man in it, and we can land on either it, but we starved the boat out, side of the border. That is something that has never happened A few months ago, most of this smuggling of alcohol was taking before in international relations. So Canada is doing everything place from Cuba over to Central America, then from Central Amer- they can to cooperate with 115. ica up to this country. We approached the Cuban Government and Cabs has come along. But 08 sonn us we stop smuggling from Cuba told them that some 800,000 gallons of alcohol per year were being these smugglers shift to sime other country. If we stop them from shipped from Cuba via some other country-Hondurns-to this shipping from one country, they go to another. We stopped them, country. They shipped it from Cuba to Honduras and from Hon- for instance, shipping from Newfoundland. Newfoundland has co- duras to us. We approached the Cuban Government. They were operated. They shifted immediately to some other ports, They go worried at the time about arms being smuggled from this country from one small country or one big country to another, and it is into Cuba so we were able to offer them an inducement to stop extremely difficult to suppress them. smnggling of alcohol into this country, and they stopped it. They I just wanted to explain what my atttitude was. 1 then nsked the will not permit any boat to sail from Cuba with alcohol which they legal division of the Treasury whether they could devise some scheme know is going into the smuggling trade. which would enable the United States Treasury to protect its revenue When we-approach some of these countries they any, It is not and its shores, and this is the method which they have devised. But I our job to defend your shores for you. What will you do for us?" wanted to let you know that I do not care how big the Coast Guard In many cases we have nothing to offer them. They say, This may be, if we have a foggy night, and there is a boat 30 or 40 miles has always been the case. Boats smuggle. It has been customary. out, and the fog suddenly shuts down, that boat can send small hoats If you people cannot defend your shores it is just too bad for you." ashore and run that stuff in. But if on n. clear day we can see a boat So our hands are tied, and just as soon as a boat sees that they 30 or -40 miles out that we know is a smuggler, just as the Mogul was are being watched or pursued. they just drift away outside of the a smuggler, and we know that it has alcohol on board, why should we 12-mile limit and we cannot follow them. not be able to 20 aboard and examine that hoat? Mr. BACHARACH. May I interrupt you, Mr. Secretary? Our legal division, without going into the various complicated Secretary MORGESTHAU. Yes, principles of the law, think that Congress can give us that authority. Mr. BACHARACH. You were saying that we cannot offer them any- This is simply a method which they have devised to enable us to stop thing. We are offering Belgium quite a bit now in the way of a this high-seas smuggling. tariff agreement. The CHAIRMAN. Mr. Secretary, have you ne the Secretary of the Secretary MORGENTHAU. In connection with the Belgian agreement Treasury taken this matter up with the State Department! we have asked the State Department to bring this to the attention Secretary Morgenthau. We have taken it up with the State De- of the Belgian Government, that they put into effect the so-called partment. We have kept them posted. We have consulted with them. 40 landing certificates which means that any bout sailing from Bel- But they simply felt that this WAS Я matter of protecting our revenue gium will put up a bond that the cargo of alcohol will be landed and they wanted 118 to take the leadership in the matter. But they are at the port of destination. entirely informed as to what we are doing. Mr. BACHARACH. What I have in mind is this: I am speaking only The CHAIRMAN. There has been no objection raised by them? for myself and not for my party. I wonder if we should not make Secretary MORGENTHAU. Let 118 put it this way: They have not a deal with them, as long as we are making a tariff agreement? objected and they have not approved. I think that is on accurate The CHAIRMAN. These reciprocal trade agreements are being made statement. with relation to legitimate trade and merchandise. Mr. KNUTSON. Mr. Secretary, ns I understand, this legislation Mr. Влспаваси. It happens that the people in New Jersey and proposes to extend the 12-mile limit out. I want to any that I am Pennsylvania and New York, the enstern section of the country, are in entire sympathy with you. You are dealing with n. crowd of affected by this Belgian treaty. I presume even Massachusetts, the outlaws, I cannot see why we should be so very meticulous in our State of my good friend, Mr. McCormack, is affected. treatment of them. It is my recollection that during the slavo days Regraded Unclassified 18 ANTI-SMUGGLING ACT we sent frigates over to the coast of Africa to intercept slave traders. It is my recollection that Great Britain did likewise. I would be in favor of extending the limit 500 miles if it would put a stop to this illegal, illicit trade in spirituous liquors from other countries. Cer- tainly I think it is up to this committee to lend the Treasury Depart- ment every assistance to protect the revenues of this country as well as our sovereignty. Secretary MORGENTHAU. Thank you. Mr. COOPER. I assume that completes the Secretary's statement! Secretary MORGENTHAU. Yes, sir. Mr. COOPER. I want to ask Mr. Hester another question. The CHAIRMAN. Mr. Secretary, have you completed your remarks! Secretary MORGENTHAU. Yes, sir. I would like to know whether I may be excused now. The CHAIRMAN. Of course. Mr. COOPER. It had originally been my purpose not to interrupt the explanation of this bill. We have drifted off so far that I want to ask you this question, if I may. What are the treaty limits as distinguished from the 12-mile-limit discussion here? Mr. HESTER. The treaty limit, as Dr. Yntema pointed out, are 1 hour's sailing distance as measured by the speed of the boat. The speed of the boat may be 20 miles. Mr. COOPER. That is obvious, of course. Mr. HESTER. But we have our 12-mile limit. The countries which have entered into these liquor treaties with us have stated that they will not object if we arrest their boats for violations of our laws within 1 hour's sailing. But the difficulty is that our laws do not extend beyond the 12-mile limit, Mr. COOPER. The 12-mile limit is fixed by a statute of this country! Mr. HESTER. That is right. Mr. COOPER. And the treaties provide for 1 hour's sailing distance? Mr. HESTER. That is right. Mr. COOPER. In practical effect, the treaty provision is on an aver- age about double what our domestic law provides. Is not that sub- stantially correct? Mr. HESTER. Often it is that much. Mr. COOPER. Is the purpose sought to be accomplished here to increase the distance embraced in the statutory limit fixed in this country to conform to the treaty limit? Mr. HESTER. That is correct. But the proposed legislation has one other purpose, and that is to permit us to go beyond the 12-mile limit, beyond these treaty limits, with respect to the vessels of those foreign countries with which we have no treaties. Mr. COOPER. On that point, will that necessitate negotiation of any treaties to cover that space beyond the present treaty limita- tions? Mr. HESTER. I do not see why it should. for this reason. The purpose of this bill, as you have just pointed out yourself. is to extend our laws so that they will be coextensive with the 1-hour's sailing distance in all of the treaties that we have with foreign countries. There are 16. The proposed legislation does not go beyond the 1-hour's sailing limit with respect to countries with which we have those treaties, But with respect to countries with which we do not have treaties, it may go beyond that. Regraded Unclassified ANTI-SMUGGLING.ACT frigutes OTHER to the coast of Africa to intercept slave traders. N is my recollection that Great Britain did likewise. I would be in famore of extending the limit 500 miles if it would put a stop to this illegal, illicit trade in spirituous liquors from other countries. Cer- taiply think it is up to this committee to lend the Treasury Depart- AWAY assistance to protect the revenues of this country as well M our sovereignty Secretary MORGENTHAU. Thank you. Mr. COOPER. I assume that completes the Secretary's statement! Secretary MORNENTHAU. Yes, sir, Mr. COOPER I want to ask Mr. Hester another question. The CHAIRMAN. Mr. Secretary, have you completed your remarks! Secretary MORGENTHAU. Yes, air. I would like to know whether I may be excused now. The CHAIRMAN. Of course. Mr. COOPER. It had originally been my purpose not to interrupt the explanation of this bill. We have drifted off so far that I want to ask you this question, if I may. What are the treaty limits as distinguished from the 12-mile-limit discussion here! Mr. HESTER. The treaty limit, as Dr. Yntema pointed out, are 1 hour's sailing distance as measured by the speed of the buat, The speed of the boat may be 20 miles. Mr. COOPER. That is obvious, of course. Mr. HESTER. But we have our 12-mile limit. The countries which have entered into these liquor treaties with us have stated that they will not object if we arrest their boats for violations of our laws within 1 hour's sailing. But the difficulty is that our laws do not extend beyond the 12-mile limit, Mr. COOPER. The 12-mile limit is fixed by a statute of this country Mr. HESTER. That is right. Mr. COOPER. And the treaties provide for 1 hour's sailing distance? Mr. HISTER. That is right, Mr. COOPER. In practical effect, the treaty provision is on an aver- age about double what our domestic law provides. Is not that sub- stantially correcti Mr. HESTER. Often it is that much. Mr. COOPER. Is the purpose sought to be accomplished here to increase the distance embraced in the statutory limit fixed in this country to conform to the treaty limit? Mr. HESTER. That is correct. But the proposed legislation has one other purpose, and that is to permit us to go beyond the 12-mile limit, beyond these treaty limits, with respect to the vessels of those foreign countries with which we have no treaties. Mr. COOPER. On that point, will that necessitate negotiation of any treaties to cover that space beyond the present treaty limita- tions! Mr. HESTER. I do not see why it should, for this reason. The purpose of this bill, as you have just pointed out yourself. is to extend our laws so that they will be coextensive with the 1-hour's miling distance in all of the treaties that we have with foreign countries. There are 16. The proposed legislation does not go beyond the 1-hour's sailing limit with respect to countries with which have those treaties. But with respect to countries with which we donot have treaties, it may go beyond that. march ANTI-SMUGGLING ACT HEARINGS BEFORE THE COMMITTEE ON WAYS AND MEANS HOUSE OF REPRESENTATIVES SEVENTY-FOURTH CONGRESS FIRST SESSION ON H.R. 5496 MARCH 8, 13 AND MAY 1, 2, 1935 (CONSOLIDATION) VALUE UNITED STATES GOVERNMENT PRINTING OFFICE 133170 WASHINGTON : 1933 Regraded Unclassified TOA ЗОИШАЛН ЗИЛИ GNA 15" 20 TO аглон COMMITTEE ON WAYS AND MEANS ROBERT L DOUGHTON, North Carolina, Chairman SAMUEL B. HILL, Washington ALLEN T. TREADWAY, Mannachusetts CONTENTS THOMAS H. CULLEN, New York ISAAC BACHARACH, New Jersey CHRISTOPHER D. SULLIVAN, New York FRANK CROWTHER, New York MORGAN G. SANDERS, Texas HAROLD KNUTSON, Minnesota JOHN W. McCORMACK, Mannachusetts DANIEL A. REED, New York Statements of- Page DAVID J. LEWIS, Maryland ROY 0. WOODRUFF, Michigan Hester, C. M., Treasury Department 8, 29, 53, 125, 165 FRED M. VINSON. Kentucky THOMAS A. JENKINS, Oble Morgenthau, Hon. Henry, Jr., Secretary of the Treasury 1 JERE COOPER, Tennetaee Parker, 8. V., Commander, United States Coast Guard 29,53 JOHN W. BOEHNE, Ja, Indiana CLAUDE A. FULLER, Arkansas Tyrer, Arthur J., Department of Commerce 159 WESLEY E. DISNEY, Oklahoma Yntema, Dr. H. E., professor of law, University of Michigan 8,82 ARTHUR P. LAMNECK, Ohio FRANK H. BUCK, California RICHARD M. DUNCAN, Missouri CHESTER THOMPSON, Illinois J. TWING BROOKS, Pennsylvania JOHN D. DINGELL, Michigan E. W.G. HUFFMAN, Clerk II Regraded Unclassif ANTI-SMUGGLING ACT FRIDAY, MARCH 8, 1935 House OF REPRESENTATIVES, COMMITTEE ON WAY3 AND MEANS, Washington, D. C. The committee met at 10:30 a. m., Hon. Robert L. Doughton (chairman) presiding. The CHAIRMAN. The committee will be in order. The meeting this morning is called for the purpose of conducting hearings on H. R. 5496, a bill introduced by the chairman at the request of the Secre- tary of the Treasury, on February 7, 1935. The title of the bill is, " To protect the revenue of the United States and provide measures for the more effective enforcement of the laws respecting the revenue, to prevent smuggling, to authorize customs-enforcement areas, and for other purposes." We are honored this morning by the presence of the Secretary of the Treasury, Mr. Morgenthau, and other distinguished witnesses. We should be glad to hear the Secretary at this time, if he will make well such explanation of the bill as he deems proper. STATEMENT OF HON. HENRY MORGENTHAU, JR., SECRETARY OF THE TREASURY Secretary MORGENTHAU. Mr. Chairman and gentlemen, I have a rather brief statement to make. Prior to prohibition this country was not troubled much with smuggling. During the 14 years of prohibition the business of smug- gling liquor into the United States from all parts of the world devel- oped to very serious and troublesome proportions. It was generally expected that with the repeal of prohibition liquor-smuggling operations and frauds on our revenue would be ma- terially reduced. How widespread this opinion was may be evi- denced by the fact that the appropriation for the Coast Guard, the first line of defense against the rumrunners, was reduced from $25,772,950 for the fiscal year of 1934 to $18,046,400 for 1935. This drastic reduction resulted from a belief that repeal would largely relieve the Coast Guard of those portions of its law-enforcement activities which were directed against smuggling. For a time after repeal such proved to be the case, but, commencing with the spring of 1934, liquor smugglers again appeared along our coasts, and their operations have now increased to alarming proportions. Thus, in March 1934, only 2 smuggling vessels were observed off the coast, but by February of this year this number had increased to 22. Thirty-nine foreign vessels are presently known to the Coast Guard 1 Regraded Unclassified 2 ANTI-SMUGOLING ACT ANTI-SMUGGLING ACT 3 to be regularly engaged in the illicit-liquor traffic. Inasmuch as actual experience in dealing with smuggling and also by Dr. Hessel these vessels are hovering beyond our enstoms waters, they are not E. Yntema of the University of Michigan Law School, an expert in subject to seizure under existing laws, and hence they carry on their those phases of international and maritime laws that are involved. smuggling operations almost with impunity. Representatives of the Department and Dr. Yntema are here this Alcohol constitutes almost the entire cargo of these vessels, This morning and will be glad to render your committee any assistance is due to several things. It is very cheap. It CHD be produced abroad at costs ranging from 20 to 50 cents a gallon. It is highly concen- possible. I cannot urge too strongly upon you the importance of this legis- trated. Two and one-half gallons of whisky can be made from a lation. In fact, the enactment of this bill is imperative if the Gov- gallon of alcohol. It enjoys a large price differential due to the cus- ernment of the United States is to wipe out smuggling and collect toms duties and internal-revenue taxes, which amount to $13.30 on the millions of dollars in revenue lost annually through the successful a gallon of 190° proof. operations of the liquor smugglers who are now able to carry on A summary of the movements of known alcohol smugglers for the their illicit trade near our shores largely because of the inadequacy last 4 months of 1934 indicates an outward movement from the prin- of present antismuggling laws. cipal ports of supply to the const of the United States of over three- Mr. COOPER. Mr. Chairman, I should like to ask the Secretary this quarters of a million gallons of alcohol. At this rate there would question: I assume, Mr. Secretary, that you would probably prefer be an annual movement of over two and a quarter million gallons. that some of the gentlemen with you undertake a brief analysis of the The annual internal-revenue loss on this amount of alcohol, at $8.80 bill itself, in order that we may clearly comprehend the scope of the per gallon, would be almost $9,000,000; the loss in customs duties, at measure as well as the purposes to be accomplished. $80,000,000. $9.50 per gallon, would be over $21,000,000, making a total loss of over Secretary MOBGENTHAU. Not being a lawyer, and this being an alto- gether legal matter, I would appreciate it if I may be allowed to ask The principal enforcement agencies engaged in the prevention of some of the lawyers who have worked on this to outline the bill. smuggling are the Coast Guard and the Bureau of Customs. The Mr. COOPER. I think that is a very fair position to take, Mr. Chair- appropriations for the Coast Guard for 1935 are $18,346,400; those man. I suggest the Secretary be permitted at this point to present for the Bureeu of Customs (omitting the refund and drawback fig- the witness he desires to be heard on that phase of the matter. ures) are $18,500,000. It is estimated that of these appropriations The CHAIRMAN. With the understanding that if later any members about 20 percent, or between seven and eight million dollars, is desire to question the Secretary he will be available for such ques- properly chargeable to our efforts to prevent smuggling. The practical difficulties in checking smuggling can hardly be tioning. Secretary MORGENTUAU. Of course. May I present Mr. Hester, exaggerated. Our 10,000-mile coastline with the mony opportunities from the Treasury. it affords for concealment; our comparatively small Const Guard The CHAIRMAN. Mr. Hester, will you come forward, give your offi- force of about 10,000 men; the seamanship and daring of the rum- cial connection, and what experience you have that qualifies you to runners; and the highly efficient and well-financed smuggling organ- testify on this bill. izations that have grown up since the advent of prohibition, are all prime factors in making the smuggling problem one difficult of STATEMENTS OF C. M. HESTER, ATTORNEY, OFFICE OF THE solution. Another, and not the least important factor, is the in- GENERAL COUNSEL: AND DR. H. E. YNTEMA, PROFESSOR OF adequacy of existing antismuggling legislation. The ineffective leg- LAW, UNIVERSITY OF MICHIGAN islative weapons at present at our disposal for this work have time and time again permitted the escape from punishment of vessels Mr. HESTER. Mr. Chairman and gentlemen, my name is C. M. which were violating every principle behind our customs enforcement Hester. I am an attorney in the office of the General Counsel of the laws, vessels, in fact, which had never earned an honest dollar in Treasury. I would like to call up here, to collaborate with me, Dr. their entire seagoing lives, but had been designed, built, and used Yntema. exclusively for smuggling into the United States. The CHAIRMAN. I am sure there is no objection to that. To arm and equip the Coast Guard to a point where it could com- Mr. COOPER. I would suggest to Mr. Hester, as I view the situa- pletely wipe out all smuggling by sea would be an expensive business. tion, that it would be helpful to the committee if you would kindly But if will cost nothing to give them adequate legislation with which follow the suggestion incorporated in my question to the Secretary. to fight smuggling. The proposed legislation which your committee Mr. HESTER, I intend to do so, Mr. COOPER. This is a new matter to many of us. We understand has under consideration is designed to do this. It provides for no appropriation by Congress. Its sole purpose is to give enforcement the purposes to be accomplished from the splendid statement of the officers of the Government adequate weapons with which to fight a Secretary. We want to know the methods sought to be employed traffic that yearly is robbing the United States of millions of dollars under this pending bill. of revenue. Mr. HILL. Will the gentleman from Tennessee yield The Treasury Department has submitted to your committee sug- Mr. COOPER. I yield. Mr. Hul. Would it not be a good idea for the witness to take the gestions for legislation dealing with this problem. These sugges- tions are the product of several months of work both by the experts bill up section by section and go through it that way? in the various bureaus of the Department who have had years of Regraded Unclassified ANTI-SMUGOLING ACT ANTI-SMUGOLING ACT 5 Mr. COOPER. I had it in mind for the witness to make B. brief state- Under section 1, extension of customs control into the high seas ment of the manner in which the subject is treated and then have an be limited by administrative action-that is, by the President- explanation of the bill as indicated by Mr. Hill. may to those areas beyond the 19-mile limit, where smuggling operations The CHAIRMAN. The Chair thinks that would be a proper course are unmistakably clear that the proposed legislation complies with the particularly and notoriously troublesome. This will make it to pursue. Mr. HESTER. As a preface to a discussion of the various sections of requirement that extraterritorial jurisdiction provisions be reason- the bill, I will state the general purposes of the proposed legislation. ably necessary to the protection of the revenue and the national The major purposes of this bill are (1) to extend customs control beyond the 12-mile limit, (2) to provide for more rigid enforcement welfare. Now, just briefly for a moment to stop here, so that the chairman within the 12-mile limit, and (8) to encourage reciprocal legislation and the members of the committee will see the questions of law pre- on the part of foreign countries principally by making it on offense sented by this first section. We expect to supply you with authori- for our nationals and vessels to violate the revenue laws of such for- ties which establish the proposition that a nation is authorized to eign countries as punish their nationals and vessels for violations of extend its customs control such distance from its shores as may be our revenue laws. The proposed legislation is divided into four titles. reasonably necessary to protect its revenue and the general welfare; Section: 1, under title 1, authorizes the President, as may be required and, I say, we will supply those authorities to you as we go along. to protect the revenue, to declare customs-enforcement arens upon the Section 2 (a) of the bill subjects to a fine of not more than $5,000, constal waters of the United States beyond the present customs waters or to imprisonment for not more than 2 years, or to both, any per- whenever he finds that such action is justified by the presence of son owning in whole or in part any vessel of the United States or hovering vessels off the coast that is, smuggling vessels. controlling it, directly or indirectly, who permits such vessel to be Mr. Hull. Just so that I may have a better understanding of this- employed in smuggling merchandise into any foreign country if such you are taking the 12-mile limit as the limit within which you can foreign country provides any penalty for violation of the revenue operate without this legislation! laws of the United States. Persons on board assisting in such smug- Mr. HESTER. That is right. This section at the same time specifi- gling activities are subject to the same penalties, and the vessel itself cally preserves, as the fundamental principle in the entire act, the is subject to seizure and forfeiture. rights of foreign vessels under the various liquor treaties; that is, Section 2 (b) makes it an offense to charter a vessel with actual or under the hour's sailing distance liquor treatics. implied knowledge that the vessel is going to be used for the purposes Except by special arrangement with the power concerned, no for- prohibited by section 2 (a). eign-treaty vessel can be seized under any provisions of the proposed This whole section is designed to encourage legislation on the legislation beyond the treaty limits part of foreign countries penalizing their nationals and vessels for Within such customs-enforcement areas officers of the customs may violating our revenue laws. It is modeled after a Norwegian law be directed by the President to enforce any applicable law; that is, of June 25, 1926. the law must already apply. It must be there. Then the President, The necessity for that will be obvious to you when we take a hypo- by the various sections of this proposed legislation, may take action if thetical case. Outside our 12-mile limit, we will say, are notorious certain acts are committed outside the 12-mile limit, which nets are rumrunners, flying foreign flags. made offenses. We appeal to the foreign country. They say, "We have no laws Then, if it is discovered that beyond the 12-mile limit we find which prohibit our vessels from violating your laws." smuggling vessels hovering with impunity, maybe just a few miles So the purpose of this section is to initiate reciprocal legislation. beyond the limit, the President is authorized to declare that particu- That is, we make it an offense to violate the laws of a foreign lar limit a customs-enforcement area and to direct officers of the country by our citizens and our vessels in the hope that they will customs to seize the vessels, to board them, search them, and if enact reciprocal legislation. they have violated the law, to bring them into port. Mr. McCoRMACK. You say, in the hope." Is this for the purpose The effect of the customs-enforcement-ares provision is not de- of bringing about negotiations with these foreign countries, or what signed to extend any law of the United States but to permit is flex- is the purpose? ible administrative control of enforcement on the high seas of such Mr. HESTER. No; the purpose is to enact this legislation. laws as already extend beyond customs waters. Mr. McCoRMACK. There is B. big difference between hoping and This is designed to answer the possible protest of any foreign enacting, as you know. power that the provisions of the proposed legislation violate any Mr. HESTER. Oh, perhaps I did not make myself clear on that principle of international law. We ask that this legislation be enacted because we hope that the Mr. HILL I did not quite get that. Would you mind repeating foreign country will enact similar legislation. that? Mr. LEWIS. You mean, this provides the inducement? Mr. HESTER. This is designed to answer the possible protest of any Mr. Hester. That is right, foreign power that the provisions of the proposed legislation violate Mr. REED. May I ask this question! Has there been any assurance any principle of international law. A little Inter on we will discuss given that they will cooperate at all? that question of law. Mr. HESTER. May I ask Dr. Yntema to answer that question! Regraded Unclassified 6 SMUGGLING ACT ANTI-SMUCGLING ACT 7 The CHAIRMAN. Will you state for the record who Dr. Yntema is! instance, a give-away of the nature of their illicit activities This Mr. HESTER. Dr. Yntema is professor of law in the University of Michigan and an authority on international law, who is assisting us section will also stimulate reciprocal legislation by other countries, in connection with this bill. Section 4 authorizes collectors of customs to revolre or refuse to Dr. YNTEMA. My understanding is that the question asked is document (i. e., to register, enroll, license, or number) any vessel when it appears, from its build or otherwise, that the vessel is going whether, if this proposed section 2 (a) were enacted, similar legisla- tion would be enacted by other countries. to be employed in smuggling. At present this authority does not exist even though the master of a vessel on applying for documenta- Mr. REED. The question is whether any assurance has been given, tion should announce that he were going to use the vessel as a rum- either formal or informal. runner. This section is also reciprocal in that it will serve as 8. base Dr. YNTEMA. As far as I know, there has been no formal assur- for requests to other powers to take similar action. ance, of course. It was, however, stated informally that there was a Mr. HILL Were your remarks directed to American-registered chance; that one of the difficulties that the Government had in deal- vessels entirely, or did you include within this scope the vessels of ing with the problem resulted from some of the limitations in its own legislation, and one of the limitations was the fact that there was no foreign registry? Mr. HISTER. This would be devoted solely to American vessels. provision under which the Government of the United States could Mr. HILL. Why would that induce reciprocal Ingislation by foreign take any measures to suppress illicit activities on the part of Ameri- can citizens, for example, who were engaged in rumrunning into governments! Mr. HESTER. We are revoking the registry of American vessels for Canada. The suggestion was made that Norway has a statute of this violating foreign laws, and they might do likewise. general character and that it would be a good thing to facilitate the Mr. HILL I thought you had reference to their operations within negotiations to incorporate this provision. the waters of the United States, Mr. REED. Would you mind telling us for the record, unless it is Mr. HESTER. No. It would extend beyond. I am glad you brought against the public interest. which nation is the most flagrant violator? that point up. Thank you. I do not want to press the question if the information should not be Section 5 permits vessels forfeited for violation of the revenue laws disclosed. to be destroyed whenever the Secretary of the Treasury is of the Mr. HESTER. Commander Parker, will you step forward and give opinion that they are likely to be returned to the smuggling traffic the committee that information May I say to the committee, this if sold. is Commander Parker, of the Coast Guard. At present forfeited rumrunners, being practically useless for The CHAIRMAN. Commander, can you answer the question asked legitimate commerce, are sold very cheaply at condemnation sales, by Representative Reed? usually to their former owner or some other rumrunner, and in the Commander PARKER. The vessels employed in rumrunning and majority of cases return shortly to the liquor traffic. hovering off our coasts are almost exclusively under the British flag. Mr. REED. I am sorry to interrupt, but- Mr. HESTER. Does that answer the question? Mr. HESTEN. We are very glad to have you interrupt, sir. Mr. REED. Yes, Mr. REED Just to clear up some point in my own mind. As I Mr. HESTER. Section 8 subjects to forfeiture when found at any understand the law, I miles is now the limit fixed by international place where it may be examined by an officer of the customs in the law, is it not? enforcement of any revenue law (1) any vessel, foreign or domestic, Mr. HESTER. The 3-mile limit is the limit within which under in- built or fitted out for the purpose of being employed to defraud the ternational law a country exercises exclusive end absolute jurisdic- revenue or to smuggle merchandise into the United States or into tion. such foreign countries 0.5 have reciprocal legislation of the type Mr. REED. Exactly. Under the tariff act that I have here, section already discussed, or employed within the United States for any such 581, boarding vessels, enforcement provisions, that is when this so- purpose, (2) any vessel of the United States employed at any place called 12-mile limit went into effect. for any such purpose. Mr. HESTER, No; the 12-mile limit went into effect as long ago AS For the purpose of the section vessels which are de facto owned 1790. or controlled by American citizens or corporations are deemed vessels Mr. Cooren. What was that? of the United States. Mr. HESTER. The 12-mile limit with reference to customs admin- Also for the purposes of this section the fact that n vessel is dis- istrative control has been in effect since 1790. playing certain typical indicia of smuggling activities, such as not Mr. REED. Just one moment. This 12-mile zone-was that created stopping as required to by customs officers, or hovering suspiciously by treaty or by statute? off the coast of the United States. or failing to display lights, raises Mr. HESTER. By statute. After We have finished the bill we hope the presumption that the vessel is being employed to defraud the to be able to supply you with some authorities of the Supreme Court revenue of the United States. which uphold the right of the United States to extend its customs This section is patterned after an old statute relating to piratical control not only to the 12-mile limit, which has been on the statute vessels. It is believed that this statute will prove very useful since books since 1790, but which also would pérmit the United States. if the build and dimensions of smuggling craft are, in almost every necessary to protect its revenue, to extend its limit beyond the 12-mile zone. Regraded Unclassified 9 8 ANTI-SMUGGLING ACT ANTI-SMUCGLING ACT Mr. REED. Do you mean to say that the United States, by statuté, For certain offenses these acta would render a vessel liable to can control foreign shipping beyond the 3-mile limit; that is, that it forfeiture if the vessel was found within 2 leagues of the coast, or can fix any limit that it wants to for these purposes Do you have 6 miles; for other purposes, if the vessel were found within a leagues authorities for that opinion? of the coast, or 9 miles; for other purposes if the vessel were found Mr. HESTER. Yes. We have an opinion by Chief Justice Marshall within 4 leagues of the coast, or 12 miles; for still other purposes, which is to the effect that a nation has the right to extend its cus- if the vessel were found 8 leagues off the coast, and even in some toms control such distance from its shores as may be reasonably- cases B. hundred leagues off the coast, the vessel would be liable to there is the test right there-reasonably necessary to protect its revenue, and to enforce its laws. forfeiture, Mr. REED. For instance, have those so-called "regulations" of Mr. REED. Did he go beyond that? Does not the 3-mile limit Great Britain been brought into the courts in connection with any stand as an international law! Mr. HESTER. Dr. Yntema will answer you on that. cases? Dr. YNTEMA. You mean in the British courts! Dr. YNTEMA. May I just make a few comments! The first is Mr. REED. Yes. That is, with relation to the ships of other with reference to the 3-mile limit. As you perhaps know, that has nationals? Dr. YNTEMA. A large number of foreign vessels have been for- been the policy or the doctrine followed by the British Government and by this Government with respect to the extent of the terri- feited in the British courts under the British hovering laws for nots torial jurisdiction of the Nation. That is the theory of the British committed beyond the 3-mile zone. Did you alsó mean international Government and of this Government ns enunciated, for example, in arbitrations? Mr. REED. Yes, with reference to seizures under these limitations the recent liquor treaty between this country and the British Gov- ernment, 80 that within n. 3-mile zone outside of the coast a nation fixed by Great Britain. has the same control as it has over the land. Dr. YNTEMA. I made a careful search of that, and I do not think However, it is to be said that it is by no means accepted that that there is any arbitration which directly involved the validity of limit might not be larger. There are various countries which claim a these regulations. There are some arbitral proceedings which are wider zone. And in illustration of the difference of opinion that discussed in connection with this sort of question, the fur seals exists, I might cite the fact that in 1930 there was a conference for the arbitration, in which the British counsel, Sir Char'es Russell, ad- codification of international law held at The Hague, and the Second mitted that the hovering act formed an exception to what be claimed Commission, which dealt with the question of territorial waters, were Was the general rule, Mr. REED. That is what I want to know. Have there been any unable to reach an agreement BS to the extent of the marginal zone. They were unable to agree that this distance should be 3 miles for the cases? This is so very important from the international standpoint. reason that there were a number of powers-the Seandinavian powers, Are the Treasury Department and the State Department working in Italy, Spain, and others-that claimed more than 3 miles as the extent harmony on the matter of these extensions? Dr. Y NTHMA. I do not think I should answer that question, if you of the territorial waters. It seems to me, however, that this question is ontside of that. The will excuse me. question is whether a nation has for any purposes, outside of the terri- May I add one comment to my last remarks, Mr. Chairman! I think it should be understood, in considering this question, that torial waters in special cases where the exigencies of its own needs demand it, a special right to exercise measures beyond the 8-mile zone, you have three kinds of vessels. First there are American vessels. There is no question about the or whatever the distance may be, that is taken for territorial waters, Our own legislation, which goes back to 1790, has been uniformly right of the United States to deal with American vessels anywhere enacted on the principle that for the protection of the revenue the upon the high seas, American Government does have the right to take reasonable meas- Second, the treaty vessels; the vessels belonging to the powers with which the United States has entered into a treaty relating to the dis- ures beyond the territorial waters. tance within which such vessels can be boarded and seized. Mr. REED. Do the other nations also recognize the same principle of law with reference to their revenue? As you will notice, this legislation adopts throughout the prin- Dr. YNTEMA. You are asking me a question which is a very compli- ciple-or these proposals which have been put into this bin, 68 I cated one to answer, but let me illustrate the situation by reference to understand it, adopt throughout the principle that the treaty shall the British Jaws. The British have had on their statute books since control. So you do not have any question there. In other words, you 1700 various hovering laws, designed to deal with smuggling, to deal are talking about the ships of those powers such as Mexico, such as with vessels hovering off the consts of Great Britain in order to Spanish Honduras, and so forth, with which the United States has amuggle goods into British territory. not entered into a treaty. I suppose there are 28 or 40-some number that I cannot state In other words, there are 16 powers with which the United States has entered into treaties settling this question, and they are all the precisely-of those acts that have had a very long history. Those acts were finally consolidated in 1876, about 25 years after smuggling had principal maritime powers; Great Britain, France, Germany, Spain. Portugal, the Scandinavian powers, Belgium, and the Netherlands: ceased off the British coasts. Prior to that time these acts had fisea various distances for various of course, Canada and Cuba, and 80 forth. offenses, and the whole story is EL very technical and complicated one. Regraded Unclassified 11 10 ANTI-SMUGOLING ACT ANTI-SMUGGLING ACT Third, there are the nontreaty foreign vessels. Mr. REED. Now, if I may just press the question. As this involves country. seize Of course, if the seizure were made, and it was found such IL vessel, and it could be condemned in the courts of this out an international situation, I just wanted to know if you are working that the vessel was not & piratical vessel it would be unfortunate. in harmony with the State Department on this proposed legislation. Mr. LEWIS. The definition of piracy is to be found in the law of Mr. HESTER. We have worked in cooperation with the State nations, generally speaking. Department. Mr. REM. Are they in accord with your proposal to extend these law it is defined in our own statutes, as you know. We have specific Doctor YNTEMA. Yes, except that for the purpose of our own limits? statutes dealing with pirates. Mr. HESTER. They have not yet advised us officially. Mr. LEWIS. I happen to remember from reading that while Mr. REED. Mr. Chairman, this appears to be a very important piece slavery plagned the world, the British Parliament declared the sea of legislation. Of course, if we pass this legislation, we want it to traffic in slaves to be piracy, and applied the law of piracy to such be effective, I think we should hear from the State Department and pirates when they were captured. get their views. What is the limit to which a nation-I mean not an irresponsible The CHAIRMAN. The Chair will be very glad to address a com- nation that simply wants to work ite will, but a nation having due munication to the State Department and ask for an expression of opinion on this bill, to which a nation can go through domestic legislation in defining regard for the rights and feelings of other nations-what is the limit Mr. Васнаваси. If we are to go ahead with this kind of no inves- offenses and punishing offenders on the high seas without regard to tigation, 1 think we should hear from the State Department, and have their citizenship? them make il very definite statement. I do not think this iden of Dr. YNTEMA. As I understand your question, you mean by ex- hearing indirectly is the way to proceed. The CHAIRMAN. The gentleman does not insist upon that at this tending- Mr. LEWIS. Could we call smuggling "piracy", as the British juncture! called the slave traffic? Mr. BACHARACH. No; of course not. Dr. YNTEMA. The answer to your question is that the British did The CHAIRMAN, We will be able to take care of that not succeed in doing it that way. As you know, it was a very sore Mr. LEWIS. I would like to ask the doctor a question or two, Mr. point in the relations between this country and Great Britsin over a Chairman. period of some 50 years, and the problem was not finally solved until Doctor, I am obliged to ask you some elementary questions for my the trenty of 1862 between this country and Great Britain, under the own information. terms of which the vessels of this country and the vessels of Great Dr. YNTEMA. They are usually the most difficult to answer. Britain were mutually given the right to visit the vessels of the other Mr. LEWIS. They probably will not be for you. Up to 3 miles, by general agreement among nations, the waters may be regurded as nation. The slave traffic offers B. very individual set of questions. As you domestic waters, and you would enforce your domestic laws there as know, an effort was made to seize the slaves off the coast of Africa. you would on the lakes or the rivers, generally speaking? There were American patrols and British patrols off the coast of Dr. YNTEMA. You have to be careful even as to that statement. Africa, and an effort was made there to stop the traffic at its source. There is a difference of opinion as to the nature of the control that The British did succeed in treaties with some other countries at an a nation has over the territorial waters. But in general, I think it earlier date in getting this right to search vessels on the high seas can be said, subject to this qualification, if I may make it, that it is off the coast of Africa. But it seems to me that is quite a different generally agreed that even within the 3-mile zone the vessels of question from the one here where you are simply asking, 44 Does the other countries have a right of innocent passage. In other words, United States have in international law the right to do what is if a British vessel or a French vessel, in its ordinary course, should reasonably necessary to prevent goods from being smuggled into pass within 3 miles, it would be IL breach of our obligations under the United States?" international law for the United States to say that it was improper Mr. LEWIS. It has that reasonable right. It must, of course, go for a merchant vessel in its ordinary innoçent voyage to pass within as far as it can to protect its revenue. 3 miles. That right of passage is recognized. Dr. YNTEMA. Yes. I think the answer to that question is " yes." Mr. LEWIS. Then we will go to the other boundary. Let us say Mr. LEWIS. But. to begin with, you would say that the 3-mile limit there are pirates on the ocean. Under international law have we qualifies it, and if we are to go beyond 3 miles and arrest offenders a right to pursue them wherever we find them and apply the laws to and apply our laws, it must be with the consent of the nations of them! which the offender is a subject or a citizen? Doctor Y STEMA. As I understand it, a pirate is regarded as an Dr. YNTEMA. Well, that is one way of stating it. It seems to me offender against the law of nations, and every nation has the right the consent, though, has been generally given. For example, there to enforce the law of nations as against a pirate. In other words, are the 4-lengue provisions or 12-mile provisions; the fact that those if there were fL pirate on the high seas, sailing, let us say, the Beg statutes give this right to board a foreign vessel bound to a port of of any other country, the vessels of the United States could properly the United States within 12 miles shows that from the point of view of international law, there is a general agreement that such a pro- Regraded Unclassified 12 ANTI-SMUOGLING ACT ANTI-SMUGGLING ACT 13 vision is a reasonable provision. That is, the United States, if it Mr. McCoRMACK. I thought I heard the commander say that most so desires, as Secretary Fish once said when he was Secretary of of the trouble is with British ships. Is that right! State, does have some right to control trade with the United States. Mr. McCoRMACK. I understood the doctor to say that the United Commander PARKER. Yes, oir: practically all of the vessela. It certainly bas the right within the 3-mile limit, because at least that is the territory of the United States. But it seems generally States and England have A treaty. If that is so, what is the neces- agreed that it also has the right outside of that territory to that sity of this legislation! If they have IL treaty agreement with the reasonable extent, that is, to take reasonable measures. principal offender, why does not the treaty cover the situation? Mr. LEWIS. Under the bill before us, with respect to the area be- Dr. YNTEMA. The treaty does not make any law. Ail that the yond 3 miles and up to 12 miles, do you make the penalties positively treaty does is to say that the British Government will not make any applicable whother the nation of the offender has agreed or not, or claims in the event- is that to be reciprocal subject-matter. Mr. McCormack. You have not explained what the treaty pro- Dr. YNTEMA. No. vides. You said there were three classes of vessels. Mr. LEWIS. Under the bill? Dr. YNTEMA. That is right, Dr. YNTEMA. It is not true under our present unlading provisions. Mr. McConmack. One of the group was X treaty vessel. You Mr. LEWIS. Up to 12 miles we apply our domestic will to the have treaties with 16 nations. offender! Dr. YNTEMA, Quite right. Dr. YNTEMA. That is the principle of our present law. Mr. McCoRMACK. The commander said that the principal trouble Mr. LEWIS. Where, then, and in what respect does the reciprocity was with England, and you say we have a treaty with England. I condition enter? Is it in this regard, that if they find our citizens assumed the treaty would cover it. smuggling into the country, American smugglers, and bring the evi- Dr. YNTEMA. The treaty covers it insofar, us the determination of dence to us, that we will punish those smugglers in our country! the distance within which action can be taken is concerned. Is that the reciprocal feature of the bill, or is that the only recip- Mr. MCCORMACK. What is the agreement with reference to that, rocal feature of the bill? with England? Dr. YNTEMA. If I could take just a moment to explain that. There Dr. YNTEMA. In all these trenties the distance is the same. It is are, I think, four chief provisions which are intended to deal with the 1-hour sailing distance of the vessel, or, if there is B. contact this question, or to lay the basis for more effective international ar- boat which has a higher speed, the provision is 1 hour's sailing dis- rangements with other nations, and in general I may say that these tance of the contact boat, If, for example, the contact boat has a suggestions are the result of suggestions which came informally speed of 25 miles an hour there is a gup of 13 miles between the dis- from the talks which we had with various persons in the State tance within which you are permitted, under the treaty, to board, and Department. search, and seize the vessel, if there is reasonable grounds of suspicion, One of these is a provision giving a more effective control of clear- and the distance within which, under present laws, our officers are ances of all vessels, including foreign vessels. authorized to act. One of the difficulties in the present situation is that adequate The treaty does not confer any power upon anybody. It simply information AS to the activities of the rum carriers cannot be had says that the British Government will not make any objection if because of difficulties in our own laws, and the other laws as to certain things happen to British vessels within a certain distance. clearances. Shaple administrative regulations governing clearances, Mr. McCoRMACK. The treaty does not cover the specific actions. which we believe will improve this situation, are contained in section It. gives no power. It is it general treaty with reference to the dis- 209. tance within which a vessel may be boarded. Another provision is this one in section 1 which has been referred Dr. YNTEMA, It is a limitation, you might say a definition, of the to, namely, giving a discretionary power to the collector of customs international right, upon proper showing, before appeal to the Secretary of Commerce, Mr. COOPER. Will the gentleman yield on that point? to revoke the registry of a vessel which is engaged in smuggling, Mr. McConmack. Yes. whether into the United States or into another country. Mr. COOPER. What would the enactment of the proposed measure do That again gives another method of control which it is to be so far as changing the provisions of existing treaties is concerned! hoped other nations might follow with respect to their vessela. Dr. STEMA. In the first place, of course, it would not change the Of course, that only applies to American vessels, because no other provision of any treaty. It assumes that those treaties are valid until vessels are registered in this country. they are changed by a new agreement or by an amendment duly nego- The third provision provides on 8. reciprocal basis that American tiated with the foreign power involved. It does, however, do this: vessels which smuggle goods into other countries can be forfeited It extends in the case of n. foreign vessel the power of the American if that country has an analogons law applying to their vessels. officer to make a search, for example, within the limit contemplated Mr. LEWIS. That is the reciprocal one. What is the other? in the treaty. Dr. NTEMA. The other one is an analogous one but providing for Mr. COOPER. It will necessitate the negotiation of other treaties, will punishment upon American citizens who engage in smuggling into- it not? another country. an Regraded Unclassified 14 ANTI+SMUGGLING ACT ANTI-SMUCOLING ACT 15 Dr. YNTEMA. I do not see why it should. Mr. COOPER. I respectfully submit that un answer could be made Mr. COOPER. What reason do you have to assame that the other yes or no, so that we might get something that we can take hold of. countries would have entered into the treaty if those provisions of law That is the difficulty I have. Every answer made confuses me more had been in effect? and more. Mr. HILL. Will the gentleman yield to me? Dr. YNTEMA. May I suggest that Mr. Hester will nnswer that Mr. МсСонмлск. I yield to Mr. Hill. Mr. HILL. If I understand this proposition, the legislation here question. Mr. HESTER. Let me see if I do not interpret your question cor- proposed is the enactment of provisions within the existing treaty; rectly. You have in mind that the enactment of this proposed is that correct? legislation would repeal the treaty provisions and make it necessary Dr. YNTEMA, As I say, there are three categories; as far as the for our Government to negotiate new treaties. treaty vessels are concerned, that is true. Mr. COOPER. I just want to know whether in your opinion that Mr. HuL. In other words, the treaty is simply an enabling act, you result would come about. might say, within which this country and the other country to the Mr. HESTER. No; it cannot, because the proposed legislation ex- treaty can enact legislation for the control of commerce to its own pressly excepts treaties. country. Secretary MORGENTHAU. Mr. Chairman, if it is agreeable to the Dr. YNTEMA, That is the assumption of these proposals. committee, may I amplify my statement a little, and then if there Mr. COOPER. Just one other word, if I may. Is it. not true that the are any questions you would like to ask me, I shall be glad to answer last act passed by Congress is 8 controlling net in relation to treaty them. If not, I shall then ask to be excused. negotiations! The CHAIRMAN, We shall be glad to hear you further, Mr. Sec- Dr. YNTEMA. As I understood the question, it was whether this legislation necessarily involved a change in trenties. My answer was retary. Secretary MORGENTHAU. I would like to amplify the statement that that I did not see why it should. There might be reasons why this I made in the beginning, if that is agreeable to the committee. Government, for example, or other governments might find it desir- The CHAIRMAN. Anything you wish to submit, Mr. Secretary, we able to reconaider their treaties. The I-hour's sailing distance, for shall be glad to have. example, is palpably an inadequate distance, and it might be that if Secretary MORGENTHAU. I do not think I made it quite clear why proper representations were made as to the situation with respect to we wanted this kind of legislation. particular vessels, the 1-hour's sailing distance might be extended. It The CHAIRMAN. That is a very important point. seems to me that any provision that was made in the law should con- Secretary MOBIENTHAU. So I want to take a minute or two to ex- template that possibility. I do not know that it is probable, but I say plain why we feel we need this kind of legislation. it is a possibility. During the period of prohibition we had this vast amount of Mr. COOPER. With all due respect-it is all probably my fault, but smuggling of liquor from the high seas into this country. We were the answer just confuses me further. If you have a treaty with a only able to cope with it in a very limited way. foreign nation and then pass a law in this country that changes the Now we can sell tax-paid liquor; that is, it is lawful to do it. situation that exists under that treaty, why do you not have to nego- We still find that they are trying to smuggle alcohol into the United tiate another treaty with that country to make it effective? How can States from the high seas. you escape that very practical conclusion? The attitude that I took when I went after this problem of en- Dr. YNTEMA. It seems to me the treaty reference is in its first forcement, and the suppression of non-tax-paid liquor was this: section-if, for example- I said, the fact that something had not been done heretofore or had there is reasonable cause for belief that the reasel has committed, or la com- not been tried did not mean that we could not try it. mitting, or attempting to commit an offense against the laws of the United For instance, thanks to the last Congress, it was made possible States- for us to trace the source of the molasses sugar that was being used it is true that since the time when this treaty was ratified, which in the illicit manufacture and sale of whisky, and that was of tre- was 1924, there have been one or two laws passed by the Congress of mendous help to us. One company, for instance, that was selling the United States. Therefore, the phrase, " offenses against the molasses, we found was putting 85 percent of its output into the laws of the United States 08 used in the treaty, probably now has & hands of bootleggers. We have been able to put that company out different content, But it does not follow that because the contents of business. But we had to use methods which we had never used of that phrase have been changed, therefore you have to have a new before, during prohibition days to combat this traffic. Now we are faced with this overseas smuggling. treaty. Mr. COOPER. One more question, from a very practical viewpoint, The fact that somebody said that we could not go out and take as I see it. It is your opinion that the enactment of this statute B. look at a vessel that we knew was bootlegging alcohol, that it had would require negotiation of treaties between the countries with never been done, was no reason why We should not try to do it. which we already have treaties? It was no reason why we should just sit back and say, 14 It is just Dr. YNTEMA. I should imagine, as I said before, in the enforce- too bad, but these bonts are cutside the 12-mile limit", and then when a foggy night comes around they will just run the stuff in. ment- Regraded Unclassified 16 ANTI-SM COGLING ACT ANTI SMUGGLING ACT 17 We had MD example of that with the Mogul, off the coast of south- ern California last year. They had the audacity Lo wire me and say, Mr. MoCoHMacK, May I suggest that I yielded the floor not to my If you do not let us come in and put this stuff through the customs, friend from New Jersey but to the Secretary. The CHAIRMAN. The Secretary will please proceed with his state- we are going to run it in anyway. I thought that was such an affront to the United States Govern- ment. Secretary MORGENTHAU. What I wish to say in the case of Canada ment that we sent 11 Coast Guard bonts outside of the 12-mile limit is this: They have offered DS every possible cooperation and have not to hover around that boat, and we used Navy airplanes and kept is asked anything in return. The Canadian Government has been constant watch over that boat and finally starved her out, so that magnificent in their cooperation with us in suppressing smuggling. she ran out of water and had to go back to Mexico. But it was a When the Coast Guard appronches Canadian territorial waters, we very expensive operation, and We do not have the equipment to do notify the marine division of the Royal Mounted Police, and they that every time we learn that there is a rummy outside the 12- take up the pursuit, and vice versa. For instance, we can Ay an mile limit. We cannot send the whole Heet out to surround that American airplane along the Canadian border with a Coast Guards- boat and just sit there. In this particular case it took months to do man and Royal Mounted Police man in it, and we can land on either it, but we starved the boat out. side of the border. That is something that has never happened A few months ago, most of this smuggling of alcohol was taking before in international relations. So Canada is doing everything place from Cuba over to Central America, then from Central Amer- they can to cooperate with us. ica up to this country. We approached the Cuban Government and Coba has come along. But as soon 119 we stop smuggling from Cuba told them that some 800,000 gallons of alcohol per year were being these smugglers shift to some other country. If we stop them from shipped from Cuba via some other country-Honduras-to this shipping from one country. they 20 to another. We stopped them, country. They shipped it from Cuba to Honduras and from Hon- for instance, shipping from Newfoundland. Newfoundland has co- duras to us. We approached the Cuban Government. They were operated. They shifted immediately to some other ports. They go worried at the time about arms being smuggled from this country from one small country or one big country to another, and it is into Cuba so we were able to offer them an inducement to stop extremely difficult to suppress them. smuggling of alcohol into this country, and they stopped it. They I just wanted to explain what my atttitude was. I then asked the will not permit any boat to sail from Cuba with alcohol which they legal division of the Treasury whether they could devise some scheme know is going into the smuggling trade, which would enable the United States Treasury to protect its revenue When we approach some of these countries they say, It is not and its shores, and this is the method which they have devised. But I our job to defend your shores for you. What will you do for us?" wanted to let you know that I do not care how big the Coast Guard In many cases we have nothing to offer them. They say, This may be. if we have a foggy night, and there is n. boat 30 or 40 miles has always beeu the case. Boats smuggle. It has been customary. out, and the fog suddenly shuts down, that boat can send small boats If you people cannot defend your shores it is just too bad for you. ashore and run that stuff in. But if on a clear day we can see a boat So our hands are tied, and just as soon as a boat sees that they 30 or 40 miles out that we know is a smuggler, just as the Mogul was are being watched or pursued, they just drift away outside of the a smuggler, and we know that it has alcohol on boord, why should we 12-mile limit and we cannot follow them. not be able to go aboard and examine that boat? Mr. BACHARACIL May I interrupt you, Mr. Secretary! Our legal division, without going into the various complicated Secretary MOBSENTHAU. Yes. principles of the law, think that Congress can give us that authority. Mr. BACHARACH, You were saying that we cannot offer them any- This is simply a method which they have devised to enable us to stop thing. We are offering Belgion quite a bit now in the way of a this high-seas smuggling. tariff agreement. The CHAIRMAN. Mr. Secretary, have you as the Secretary of the Secretary MORGENTHAU. In connection with the Belgian agreement Treasury taken this matter up with the State Department? we have asked the State Department to bring this to the attention Secretary MORGENTHAU. We have taken it up with the State De- of the Belgian Government, that they put into effect the so-called partment. We bave kept them posted. We have consulted with them. "landing certificates which means that any bont sailing from Bel- But they simply felt that this was a matter of protecting our revenue gium will put up a bond that the cargo of alcohol will be landed and they wanted 119 to take the leadership in the matter. But they are at the port of destination. entirely informed as to what we are doing. Mr. BACHARACH, What I have in mind is this: I em speaking only The CHAIRMAN, There has been no objection raised by them? for myself and not for my party. I wonder if we should not make Secretary MORGENTHAU. Let be put it this way: They have not a denl with them, as long us we are making IL tariff agreement! objected and they have not approved. I think that is on accurate The CHAIRMAN. These reciprocal trade agreements are being made statement. with relation to legitimate trade and merchandise. Mr. KNUTSON. Mr. Secretary, as I understand, this legislation Mr. BACHARACH. It happens that the people in New Jersey and proposes to extend the 12-mile limit out. I want to say that I am Pennsylvania and New York, the eastern section of the country, are in entire sympathy with you. You are dealing with a crowd of offected by this Belgian treaty, I presume even Massachusetta, the outlaws. I cannot see why we should be so very meticulous in our State of my good friend. Mr. MeCormack, is affected. treatment of them. It is my recollection that during the slave days Regraded Unclassified 18 ANTI-SMUGGLING ACT we sent frigates over to the coast of Africa to intercept slave traders. It is my recollection that Great Britain did likewise. I would be in favor of extending the limit 500 miles if it would put a stop to this illegal, illicit trade in spirituous liquors from other countries. Cer- tainly I think it is up to this committee to lend the Treasury Depart- ment every assistance to protect the revenues of this country as well as our sovereignty. Secretary MORGENTHAU. Thank you. Mr. COOPER. I assume that completes the Secretary's statement! Secretary MORGENTHAU. Yes, sir. Mr. COOPER. I want to ask Mr. Hester another question. The CHAIRMAN. Mr. Secretary, have you completed your remarks! Secretary MORGENTHAU. Yes, sir. I would like to know whether I may be excused now. The CHAIRMAN. Of course. Mr. COOPER. It had originally been my purpose not to interrupt the explanation of this bill. We have drifted off so far that I want to ask you this question, if I may. What are the treaty limits as distinguished from the 12-mile-limit discussion here? Mr. HESTER. The treaty limit, as Dr. Yntema pointed out, are 1 hour's sailing distance as measured by the speed of the boat. The speed of the boat may be 20 miles. Mr. COOPER. That is obvious, of course. Mr. HESTER. But we have our 12-mile limit. The countries which have entered into these liquor treaties with us have stated that they will not object if we arrest their boats for violations of our laws within 1 hour's sailing. But the difficulty is that our laws do not extend beyond the 12-mile limit. Mr. COOPER. The 12-mile limit is fixed by a statute of this country Mr. HESTER. That is right. Mr. COOPER. And the treaties provide for 1 hour's sailing distance? Mr. HESTER. That is right. Mr. COOPER. In practical effect, the treaty provision is on an aver- age about double what our domestic law provides. Is not that sub- stantially correct? Mr. HESTER. Often it is that much. Mr. COOPER. Is the purpose sought to be accomplished here to increase the distance embraced in the statutory limit fixed in this country to conform to the treaty limit? Mr. HESTER. That is correct. But the proposed legislation has one other purpose, and that is to permit us to go beyond the 12-mile limit, beyond these treaty limits, with respect to the vessels of those foreign countries with which we have no treaties. Mr. COOPER. On that point, will that necessitate negotiation of any treaties to cover that space beyond the present treaty limita- tions? Mr. HESTER. I do not see why it should, for this reason. The purpose of this bill, as you have just pointed out yourself. is to extend our laws so that they will be coextensive with the 1-hour's sailing distance in all of the treaties that we have with foreign countries. There are 16. The proposed legislation does not go beyond the 1-hour's sailing limit with respect to countries with which we have those treaties. But with respect to countries with which we do not have treaties, it may go beyond that. Regraded Unclassifie