Volume 30, August 16 – August 31, 1936

DIARY Book 30 August 16 - August 31, 1936 - A - Book Page Agricultural Adjustment Administration See Agriculture, Department of XXX 76,292,293- 295,295-297, 306-310,311, 342-344,345- 346 Agriculture, Department of HMJr tells Taylor to find out when checks are to be sent to farmers under Soil Conservation plan; 400-500 million should receive checks; has hunch checks will not go out until after election; thinks this a mistake - 8/18/36. 76 Resume of action on Soil Conservation checks 292 a) HMJr tells FDR checks should be out before election b) Conference (requested by Wallace); present: HMJr, Taylor, Oliphant, Norman Thompson, Bartelt, and Wenchel (Agriculture Department) 1. Differences with Comptroller General discussed; HMJr phones Elliott; makes appointment for 8/26/36.. 293-295 2. HMJr also phones Miss Coffin (Government Printing Office) 295-297 Conference in office of Comptroller General; present: HMJr, Elliott, Wenchel (Agriculture Department), Tulloss (Chief, Division of Investigations, General Accounting Office), Bartelt - 8/26/36 306-310 Discussion of: 1. Form of certification requested by General Accounting Office in connection with payment of salaries and expenses of employees of county associations 2. Form of certification on applications of farmers that no payment has been received or applied for under any other Agricultural program based on soil-improving practices 3. Manner of delivery of checks HMJr telegraphs FDR of satisfactory results of conference 311 Further conference with HMJr, who says he wants to help but not interfere - 8/27/36 342-344 Appleby, Paul H. (Assistant to Secretary of Agriculture), stays after above conference; tells HMJr financial set-up 18 in bad shape; HMJr asks Bartelt to go over set-up with Appleby.. 345-346 American Red Cross HMJr asks Bell and Gaston to see Early about letter disapproving purchase of certain utility bonds - 8/25/36 290 (See September 1, 1936, for Gaston's report- Book XXI, page 4) McClintock sees HMJr; fears letter will cast doubt on all trust funds unless invested in Governments 290 a) HMJr resents fact Admiral Grayson had time to consult Early but not to consult him b) HMJr again mentions resignation c) McClintock states when Davidson was head, investment was in Governments only Associated Gas and Electric Company Status report transmitted by Oliphant to HMJr - 8/21/36 103-10/, - B - Book Page Budget Outlook - see Moody's Bond Survey 8/24/36 XXX 285-289 Summation - see Financing, Government 149-166, 266-280 - C - China HMJr Chinese delegation conversations, Book LIXVIII, page 190 Mallet, of British Embassy, delivers personal message on attitude of British Government toward monetary reforms, et cetera, in China - - 8/17/36 2 A-B Chinese Central Bank reorganization: HMJr asks Federal Reserve Bank of New York to assign man to assist; Harrison wants to wait for return of Arthur Young for consultation 8/18/36 70 Admiral Standley reports to HMJr rumors that Chiang Kai-Shek has reached secret agréement with Japanese; HMJr cables Nicholson to ascertain truth - - 8/26/36 312 Countervailing Duties German subsidies: Johnson (Bureau of Customs) memorandum - 8/17/36 80 Customs Agency Service See Narcotics 3-6 Customs Border Patrol Conference at Farm 8/17/36; present: HMJr, Graves, Analinger, Gorman, and Shamhart 3-6 a) Reorganization discussed b) Shamhart's qualifications as head discussed - E - Expenditures, Government HMJr and Bell discuss at Farm - 8/18/36 70 a) HMJr wants reports on 1. Amount of expenditures in excess of last fiscal year by regular departments and larger independent agencies 2. HMJr will suggest to FDR the setting aside of 5%, thus bringing expenditures below last year - F - Federal Alcohol Administration FDR phones HMJr he wants "to name members today" . 8/24/36.. 252 a) HMJr advises waiting for time being; FDR agrees - P - - (Continued) Book Page Financing, Government 8/23/36 - September 15th financing discussed at Hyde Park conference; present: FDR, HMJr, Bell, Heas, Gaston III 149-166 a) HMJr suggests that he simply issue new notes in exchange for the $510 million maturing; thinks Federal Reserve will not approve; market in perfect condition and they will want to raise new funds b) HMJr thinks budget summation should be released o) 5% to be set aside, suggested by HMJr; FDR says Bell "may try his hand at working this out"- (see page 70 also) d) Bell reads main figures from budget summation e) Proposed speech by FDR on general outlook of Government receipts and expenditures over period of years, as drafted by Gaston, read (See pages 153-161) f) Estimate of revenues and receipts, fiscal 1940, as prepared by McLeod (Division of Research and Statistics) shown FDR (See pages 162-166) Budget summation statement, &5 sent to FDR by Bell - 8/25/36 266-280 Budget outlook, as discussed in Moody's Bond Survey 8/24/36.. 285-289 See also Home Owners' Loan Corporation See also National Youth Administration - G - Germany See Countervailing Duties 80 Glass, Carter (Senator, Virginia) HMJr writes concerning Matt Wiltshire appointment as Assistant State Procurement Officer; Peoples takes letter to Glass - 8/25/36 281-283 Class letter to HMJr - - 8/26/36 313 (See also Book XXIX) - H - Hawaiian Islands Roads discussed at Hyde Park conference; War Department wishes roads perfected for military purposes; FDR asks Bell to allocate $600 or $700 thousand immediately 8/23/36 147-148 Home Owners' Loan Corporation HMJr agrees to finance cash requirements for next twelve months by purchase of Home Owners' Loan Corporation bonds not to exceed $150 million - 8/18/36 70 a) HMJr's letter to Preston Delano 74-75 b) Delano letter to Taylor, in connection with financial program 71-73 - I - (Continued) Book Page Hopkins, Harry See Unemployment Relief At lunch, tells HMJr Farley considers him (Hopkins) most unpepular man in Administration 8/24/36 XXX 251 - L- LaGuardia, Fiorello (Mayor - New York City) See Public Works Administration 148 Lever, John I. Treatment by Ickes discussed at Hyde Park conference; Ickes asks investigation by Treasury - 8/23/36 147 - M - Mexico "To raise silver content of all money" 8/31/36 a) Taylor telephones HMJr 357 W b) HMJr telegraphs FDR 359 c) Article in Washington Post 360 Movietone: HMJr, at Farm 8/18/36, on rum-runners and smuggling of narcotics 69 - If - Narcotics Reports of Advisory Committee of League of Nations, Geneva, May and June, 1936 7-68 Smuggling to be stamped out: HMJr in movietone at Farm 8/18/36. 69 Report of several narcotio-amuggling cases, as prepared by Graves - 8/27/36 336-341 Nareotics, Bureau of Conference at Farm 8/17/36; present: HMJr, Graves, Analinger, Gorman, and Shamhart 3-6 a) Analinger told all illicit traffic in narcotics investigative work abroad is to be placed under Customs Agency Service b) HNJr dissatisfied with State Department decision that no investigations be conducted in Japanese Empire o) Assistant Secretary Gibbons to be contact person with State Department on narcotics d) Anslinger told HMJr desires reorganisation of Bureau of Marcotion sharply dividing activities between enforcement and permissive work Commander Thompson advised HMJr wants to employ some outstanding Chinese; asks that Thompson consult Nicholson - 8/20/36 102 - N - - (Continued) Book Page National Youth Administration $13,000,000 OK'ed by FDR. XXX 84-85 New South Vales Premier, Mr. B. L. Stevens, calls on HMJr - 8/26/36 314 Newspaper, Supply of HMr asks Oliphant to investigate owners of mills in United States and names of Canadian and English interests connected with - - 8/19/36 79 - 0 - Opium Reports of Advisory Committee of League of Nations, Geneva, May and June, 1936 7-68 - P - Persons, W. Frank (Chief, United States Employment Service) See Unemployment Relief 76,82-100, 116-141,147, 168-172,173, 174-213,253- 254,298-301, 303-304,315, 316-318,319- 326,327-335 Public Works Administration FDR discusses, at Hyde Park conference, LaGuardia letter concerning Public Works Administration limitations - 8/23/36 148 - R - Resettlement Administration Bell tells HMJr, Division of Accounts and Deposits is doing accounting work for Tugwell; necessary space will cost $16,000; HMJr approves - - 8/18/36 70 Investigation (similar to Hopkins and Ickes) suggested by Bell to FDR; he OK's - 8/19/36 86 "If - S - Secret Service Wilson report discussed by HMJr and Graves at Farm 8/17/36.. s a) HMJr now ready to detail Wilson to act as Assistant Chief HMJr asks McReynolds why Wilson's reports were not shown him - 8/24/36 214 (Reports on pages 215-227, 230-250) Resume 228 - S - (Continued) Book Page Secret Service (Continued) HMJr confers with Chief Moran, Graves, Norman Thompson - 8/24/36 III 229 a) Moran told Wilson is to be Assistant Chief; Moran says he will resign Moran asks for personal conference 8/25/36 265 Soil Conservation See Agriculture, Department of 76,292,293- 295,295-29% 306-310,311, 342-344,345 346 Stabilisation (arranged chronologically) Resume' 7/16/36 to 9/22/36 1-1 F Monick letter from London and translation by Feis sent HMJr - 8/16/36 1G-1P a) In Chamberlain's unsigned letter (to be signed and transmitted officially when France requests same), he states unilateral text rather than 8. tripartite declaration is his preference b) Copy will be sent United States as soon as France determines to act and 80 asks for signed letter from Great Britain c) France does not believe moment now opportune Cable from Cochran - 8/19/36 81-81 $ a) Cariguel not optimistic about general outlook; thinks most of French expect eventual devaluation of franc b) Cariguel not sure Norman (Bank of England) will receive Labeyrie (Bank of France); Norman would not receive Tannery previously c) Cariguel believes British Equalization Fund has withdrawn about one-half of 12 billion francs in earmarked gold; French expect it all to be withdrawn Cochran asked to go to London and get personal estimate of conditions there - 8/20/36 101 Cochran asked to check carefully Paris and London information relative to British gold shipments - 8/21/36 108 Knoke-Cariguel conversation - 8/21/36 109-109 A a) Knoke suggests dollar purchases probably connected with resale to British interests of block of share in British utility corporation and with seasonal requirements of tobacco industry offset to extent of $15 million by sale to American interests of shares in "Philadelphia Inquirer" previously held by Patenotre interests in France Butterworth report on background of Monick's London activities- 8/21/36 110-110 G Morges Bank (Central Bank of Norway) requests Federal Reserve Bank of New York to purchase and hold under earmark $5 million in gold - 8/24/36 167-167 C a) Lochhead, Taylor, Oliphant, Hass, and White discuss with HMr b) HMJr consults Viner 167 E-H c) Further cable from Worges Bank, asking that request be held in abeyance - 8/26/36 304 - S - (Continued) Book Page Stabilization (Continued) Hull transmits Cochran mensage showing he has "run into pointless display of caution at American Embassy in London" - 8/28/36 III 356 1-11 - T - Tax Revision Meeting of Joint Committee on Taxation and Treasury staff 8/18/36 77-78 Viner asked for names of good people for advisory committee of twelve on taxes for Treasury - - 8/24/36 167 D-E, 167 I-0 Conference in HMJr's office; present: HMJr, Heas, Upham, Taylor, Bell, Gaston, Oliphant; Helvering; Parker, of Joint Committee; and Beaman (House Legislative Counsel) 8/25/36.. 255-264 Bliss, Deputy Commissioner of Internal Revenue, to represent Bureau on study - 8/29/36 357 Miscellaneous taxes discussed . - 8/31/36 36$ - U - Unemployment Relief Conference to be held at Hyde Park - 8/19/36 76 a) Reclassification in order to put unemployed back into private industry to be done by United States Employment Service b) Persons unpopular with MoIntyre and Mrs. Roosevelt Conference held at Hyde Park 8/19/36; present: FDR, HMJr, Hopkins, Persons, and Bell 82-100 a) HMJr prepared as result of memorandum by Burr, assistant to Persons (For memorandum, see pages 87-96) b) Hopkins had acquiesced in advance in giving Persons: 1. $1) million to reclassify unemployed 2. Adequate funds to contact employers c) FDR does not understand that Persons, not Hopkins, does classifying of unemployed; HMJr explains d) FDR aska that data for 15-minute speech be prepared and he will explain over radio exactly how unemployment question is handled e) HMJr suggests good publicity man for Persons; Persons embarrassed - says suggestion would have to come from FDR f) Persons really is placing 200,000 men a month g) FDR signs Bell memorandum authorizing Peoples to investigate Tugwell organization as he did Hopkins and Ickes (see page 86) h) $13,000,000 OK'ed by FDR for National Youth Administration 1) Bell memorandum on conference (pages 97-100) U - (Continued) Book Page Unemployment Relief (Continued) Draft of proposed schedule to be used by investigators, together with instructions sent to HMJr by Gill - 8/22/36 XXX 116-141 8/24/36 174-213 Conference, Hyde Park, 8/23/36; present: FDR, HMJr, Bell, Haas, and Gaston 147 a) FDR will announce #1) million for labor reclassification study now and on Labor Day will "shoot the works about the $21 million" et cetera Conference in HMJr's office; present: HMJr, Bell, Upham, Gaston, Miss Roche, Hopkins, and Burr (United States Employment Service) - 8/24/36 168-172 a) HMr reports on Hyde Park conference b) HMJr comments on fact FDR is only just beginning to know about Employment Service - "their fault, not HMJr's" c) Speech on Labor Day discussed (see speech FDR dictated to Bell, pages 171-172) Conference on reinvestigation of relief rolls, in office of Gill, 8/24/36; present: Gill and Miss Lonigan 173 Conference on reinvestigation of relief, in Miss Lonigan's office, 8/25/36; present: Myers (Director of Social Research, Works Progress Administration) and Miss Lonigan.. 253-254 Conference: Gill, Fullaway (representing Bell), Miss Lonigan, and Haas - 8/26/36 298-301 a) HMJr and Gill do not agree on cost of overhead or results; decide to await Hopkins' return b) Special tabulation attached of cases having Works Progress Administration employment in thirteen cities during June, 1936 Conference: HMJr, Mrs. Klots, Haas, Miss Lonigan - 8/26/36.. 303-304 a) Miss Lonigan states study: 1. Will not give HMJr required information 2. No justification for proposed cost of $383,000 3. Will lead to serious criticism of Treasury and perhaps HMJr Upham memorandum stating Persons, of United States Employment Service, wants only "slow, firm growth, no mushrooming, no hurry" - 8/27/36 315 Persons conference with HMJr; also present: Upham and Gaston - 8/26/36 316-318 (Geston memorandum) Second conference; present: the above, Mies Roche, and Mr. Holt (Works Progress Administration) 8/27/36 316-318 Labor Day speech on unemployment: a) Draft read by Persons in HMJr's office - 8/28/36 319-326 b) Draft as submitted by Persons 327-335 - V - (Continued) Book Page United States Employment Service See Unemployment Relief. III 76,82-100,116- 141,147,168-172, 173,174-213,253 254,298-301,303 304,315,316-318, 319-326,327-335 - W - Wianno, Massachusetts Vacation - August, 1936 See HMJr's memoranda 105-107,142-146 Wiltshire, Matt See Glass, Carter (Senator, Virginia) 281-283 Works Progress Administration See Unemployment Relief - Y - Young, Owen D. Letter concerning Post Office at Canton, New York, as prepared by Peoples of Procurement Division - 8/28/36.. 347-348 Peoples discusses matter with HMJr 351-352 Young phones HNJr 353-356 Youth Administration See National Youth Administration Aug. 16, 1936 Translation by Feis of letter from Monick written in London. Mr. Chamberlain in unsigned letter preferred a unilateral text rather tripartite declaration. Mr. Chamberlain according to Monick gave very interesting assurances which will permit France to act at appropriate moment with equivalent declara- tion from U. S. France does not believe moment opportune. UG UST 17 Taylor's memo of conversation with Mallet (answer to question asked Bewley byAug. 19th Sec'y when Bewley was on farm.) Cable from Cochran - Cariguel not optimistic about general outlook. Cariguel is of opinion most French people think eventually there will have to be a devaluation of franc Cariguel not sure Norman would receive Labeyrie because Norman would not receive Tannery when he was Governor, Bank of France, lest Tannery endeavor to discuss stabilization of currencies. Since Cariguel's return to duty he has not checked figures, but believes British equalization fund has withdrawn approximately one half of the 12 billion francs of gold which have been under earmark in France. French, Cariguel said, have boxed up all British gold. in preparation for its entire withdrawal. Aug. 20th Cable to Cochran to go to London to get personal estimate of situation there. Aug. 21st Cable to Cochran to check carefully Paris and London informa- tion relative British gold shipments. Aug. 21st Knoke's telephone conversation with Cariguel. Knoke sug- gested dollar purchases probably had to do with resale for about 15 million dollars to British interests of Philadelphia Inquirer. Cariguel much interested in this transaction. Cariguel British Fund now has under earmark 6,000,000 francs left out of maximum of 12,000,000. Aug. 21st Butterworth's reporting on background of Monick's activities in London. AUR, 24th Conference in Secretary's office to discuss request received by FRB of New York from Norges Bank, Central Bank of Norway for purchase and earmarking of 5 million dollars gold. Aug. 26th Cable to FRB of New York from Norges Bank to hold in abeyance the request for 5 million dollars gold. Ang. 27th Cochran's report of difficulties with Butterworth over his despatches to State Department in re Monick's activities in London. Cochran called on Phillips, British Under Secretary. Phillips expressed opinion that early October might witness crisis in French situation and his definite hope that there will be devaluation of franc, as by that means only can France secure capital. Cochran inquired of Phillips why London was withdraw- ing earmarked gold from Paris and Phillips replied that when Blum Government took office they had not withdrawn it because they expected prompt devaluation, but now because of danger of an embargo and so many Communists they think it better to withdraw gold. Phillips expressed opinion Monick is one of small group favoring devaluation by French but they do not have necessary Government backing. Phillips suggested right level for French devaluation would be 90 francs to the pound. Sept. 4th Cable 826 from Cochran re request of Bank of France for ear- marking of gold was not brought to H.M.Jr.'s attention promptly for the reason that Mr. Lochhead had left the office before it arrived. Sept. 4th Meeting in Secretary's office to discuss inquiry from Cariguel (Cochran's Cable 826) to F R B of New York whether Bank of France could ship $100,000,000 gold to be earmarked for ac- count Bank of France and asking for assurances if Franc should be devalued or leave the gold standard, would there be differ- ence in procedure. Bank of Sweden made similar inquiries. Result of meeting: Cable to Cochran that earmarking of gold is covered by general license issued to F RB. H.M.Jr's telephone call to Cochran - applications from France and Sweden for earmarking would be sympathetically received, but question of acquisition not being discussed at this time. Sept. 4th Meeting in Secretary's office to discuss Cochran's cable 831 reporting call on Auriol in which latter said draft of pre- stabilization agreement ready for submission and inquiring specifically if Secretary Morgenthau would prefer draft pre- sented him secretly and unofficially through Cochran in ad- vance of similar copy to Britain by Monick or simultaneous submission of the two copies. Decided on simultaneous sub- mission. Regraded Unclassified 1B Sept. 4th 1 Lochhead's report of meeting to discuss Cochran's Cable 831. Sept. 5th Cable 833 from Cochran. Text of draft document will be handed Cochran Tuesday and copy to Monick to deliver in London Wednesday, both copies therefore being received simul- taneously. Sept. 5th Letter to the President advising him of Auriol's inquiry about presentation of draft document and quoting latest cable from Cochran on delivery of text, Sept. 5th Meeting between H.M.Jr., Mallet, Lochhead present. Advised Mallet of Auriol's inquiry about delivery of draft document and Treasury's reply. Sept. 8th Cable 843 from Cochran that he has received French text of document. Is making English translation. Monick leaves tonight for London with text for British. Sept. 8th Letter to President advising of receipt of Cochran's cable. Sept. 8th Mallet's letter to Secretary advising message delivered him personally has been communicated to Chancellor of the Exchequer, British Treasury has not received any note from French. Sept. 9th Cable 844 from Cochran giving text of draft document. Hull requested to send someone to assist in preparation of reply. Feis came over. General discussion. H.M.Jr. recommended each nation put up $100,000,000 in form of gentlemen's agreement. If England asks if we will give up gold, answer is yes. H.M.Jr. suggested draft of reply. H.M.Jr. called Secretary Hull and received appointment for 4 o'clock. IC H.M.Jr. called Waesche and ordered plane for 5 o'clock to take draft of reply to President. Also wired McIntyre to deliver message to President tonight. (1) Copy of letter to President transmitting copy of cable from Cochran and copy of proposed reply. (2) Telegram from Starling message delivered to President at 10:30. Archie Lochhead's report of conference with Secretary Hull. Secretary Hull questioned that part of French docu- ment which referred to gold standard. HM,Jr. told Hull he would not give any assurances of this and was not ready at this time to enter into any firm agreement on stabilization. Sept. 9th Meeting at Secretary's home to discuss British French situs- tion. HM,Jr. expressed doubt anything would come of French devaluation because Exchequer would not be likely to receive the plan favorably. Sept. 9th H.M.Jr.'s letter acknowledging Mr. Fisher's message. Sept. 10th H.M.Jr.'s report on telephone call last night from President commending H.M.Jr. on draft of Treasury reply to French note. Feis asked to send coded message to Cochran. H.M.Jr.'s telephone conversation with Cochran. Sept. 10th Letter from Federal Reserve Bank of New York enclosing memor- anda of telephone conversations with Cariguel and Bank of England. Sept. 10th Cable from Cochran asking clarification of one paragraph in Secretary's answer to French draft. Also said quick response from Secretary Morgenthau appreciated by Auriol. American reply being discussed by Auriol with Blum. Baumgartner ad- vised Cochran Monick delivered British text yesterday to Phillips. Sept. 10th Cable to Cochran that Secretary Morgenthau referred to sentence, "The stipulation of such an arrangement" and endod "when the con- ditions necessary are found realized". Regraded Unclassified Sept. 10th Archie Lochhead brought to Secretary's attention telephone call from Cariguel to F R B of New York asking if U.S. Treasury would be willing to earmark $10,000,000 gold. H.M.Jr. refused permission. (Lochhead's memo on this request and disapproval attached, also dated Sept. 10.) Sept. 14th Cable 865 from Cochran that British reply received by Monick. Auriol hopes to have reply for transmission to Secretary of Treasury on Wednesday. Sept. 14th Mallet transmitted Sir Warren Fisher's message to the Secre- tary that French note had been received and considered by the Chancellor and including paraphrase of English reply to French given to Monick. Sept. 14th Mallet called at Secretary's home. HM,Jr. asked his permission to transmit to Cochran the substance of the British reply. Mallet agreed. Dr. Feis, Oliphant and Taylor also present. Cable prepared to Cochran. Sept. 15th HM,Jr. talked to Cochran on phone. Cochran acknowledged re- ceipt of cable sent him last night, giving him substance of British reply. Cochran gave it to Baumgartner before Monick had returned to Paris with British reply. Acknowledgment sent to Chancellor of the Exchequer of his message to the Secretary. Cochran's cable 870 confirming phone conversation of this date. Sept. 16th HM,Jr. talked to Cochran. Because of strike situation, French cabinet probably will not have opportunity to discuss British note until Thursday. Sept. 16th Cable 875 from Cochran that because of French cabinet meeting yesterday and today, Minister of Finance has not yet been able to study message brought from London by Monick. Probably no word for HM,Jr. before Thursday. IE Sept. 16th Mallet called on Secretary. HM,Jr. told him that because of strike situation in Lille, Cabinet was unable to take up dis- cussion of the notes, and earliest we may expect answer is Friday. Mallet inquired if it would be safe for him to carry out his plans to go to Harvard Tercentenary Celebration, but HM,Jr. would not advise him. Offered plane service from Boston to Poughkeepsie. Sept. 17th Cable 882 from Cochran that he will see Auriol at 7 o'clock to receive draft of "joint declaration." Leith-Ross will see Auriol at 6:30. Sept. 17th Cable 884 from Cochran transmitting French draft of proposed text of joint declaration. Meeting at Secretary's house to discuss French draft. HM,Jr. very disappointed at its contents; it leaves in refer- ence to gold standard. Bullitt, at this meeting, told Secretary Reynaud knows all about negotiations and Reynaud fears franc will be cut only about 28%. Draft of reply prepared, but conference adjourned with no action decided upon. Sept. 18th HM,Jr. spoke to the President. President told HM,Jr. to let French know their draft is impossible. HM,Jr. talked to Cochran and told him points on which US could not agree and asked Cochran to try to find out percentages. HM,Jr. also told Cochran United States would prefer simultaneous declarations rather than joint statement. Sept. 18th Meeting in Secretary's office. Viner strongly of opinion Eccles, as Governor of Federal Reserve Board. should be informed of pending negotiations. HM,Jr. positively disagreed. Asked group to work on draft of reply. HM,Jr. spoke to Cochran again. Cochran gave proposed limits of devaluation as probably 100 to 110. Sept. 18th Meeting at Secretary's home to discuss cable 892 from Cochran which confirms telephone conversation of this afternoon. Regraded Unclassified IF Group presented draft of reply. Secretary very pleased. Made suggestion that sentence be included warning other nations not to try to disrupt these arrangements. Sept. 19th Meeting in Secretary's office before he went to White House, Discussed percentage of devaluation. HM,Jr. saw President. President very pleased; made one or two very slight changes in language. Feis took copy of draft of reply to Secretary Hull. Hull suggested two changes. President approved one and disapproved other. Message dispatched to Cochran containing directions to Cochran and giving text of statement. Sept. 20th Cable 898 from Cochran. He had read the message from the Secretary to Baumgartner. Monick leaves today for England. Copy of our reply handed to Broadmead of the British Embassy in Washington. Copy of 898 furnished the President. Sept. 21st HM,Jr. talked to Cochran from farm. French liked first and fourth paragraphs of our reply; also got significance in fourth paragraph and liked it. Sept. 22nd HM,Jr. talked to Cochran from the farm. Chamberlain does not get back until today. Reynaud doing a lot of talking upon his return to Paris and as a result the Paris stock market went up. Bank of England has man in Paris to try to find out if 08 will give up gold. HM,Jr. told Cochran that he had already told Bewley we would. - Cable 907 from Cochran, confirming telephone conversation of yes- terday. Cochran says if agreement can be reached, French hope to have the declaration made some time Friday and French Parlia- ment will probably convene on Sunday. Unclassified IG CORESE OFFICIAL TO THE SECRETARY OF STATE di d I DEPARTMENT OF STATE WASHINGTON In reply refer to August 29, 1936. Li 851.5151/933 Mmick 3/16/06 litter datel My dear Mr. Secretary: I transmit herewith a sealed envelope which Mr. Monick requested the American Embassy in London to forward to you in the diplomatic pouch. Sincerely yours, Enclosure: Sealed envelope. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. Regraded Unclassified Personal. The Honourable Wayne C. Taylor, United States Treasury, Washington, D.C. BRITISH EMBASSY, WASHINGTON, D.C. Regraded Unclassified - ADDRESS OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE WASHINGTON, B.C. DEPARTMENT OF STATE WASHINGTON September 9, 1936. Dear Lochhead: I have made & careful translation of this note and I am returning the original as you requested with two copies of the translation. In accordance with what I am sure is Secretary Morgenthau's wish, I am acquainting Secretary Hull with the text of this communication. Sincerely yours, Herbert teis Herbert Feis, Economic Adviser. Enclosure: Original note and two copies of translation. Mr. Archie Lochhead, Technical Assistant to the Secretary of the Treasury. TRANSLATION EMBASSY OF FRANCE LONDON Financial Attache 1 Hyde Park Gate B.W. 7. London, 16th August, 1936. My dear Mr. Secretary: After the valuable and trustful conversations that I had with you at Washington, I feel that I owe you a word of explanation. I do not wish you .to believe that we have met unex- pected difficulties in England. Such is not the case. Certainly, Mr. Neville Chamberlain preferred & unilateral text (in the form of a letter addressed to us) rather than a tripartite declaration of the sort that I had under consideration in Washington. But apart from the question of procedure, the British letter, over which we negotiated during several days, conveys to us very interesting assur- ances such as in my opinion will permit us to act, at the appropriate moment, with an equivalent declaration on your part. I must say that the delay 28 being caused rather by my own Government which, for serious reasons connected with domestic politios, does not believe the moment is yet opportune, although it is now convinced that an alignment of the frano, accompanied by an "understanding" with England and the United States is both inevitable and desirable. fhis leaves the following situation: Mr. Neville Chamberlain's letter upon which I have reached agreement with the British Treasury has been Regraded Unclassifi -2- unofficially transmitted to us, but unsigned. The original 1s at our disposition at the British Treasury. It will be transmitted to us, however, only when we request it officially, which will mean that we have decided ourselves to take action immediately, the following week, for example. (I understand perfectly this manner of procedure on the part of the British Treasury which does not wish to seem to be pushing France to & monetary alignment which ought to come of our own free will. It is also necessary to avoid indiscretions in connection with & document which gives an indication regarding parity of exchanges.) I have not been able therefore to send you, as I had contemplated, the text of the British letter and to con- tinue the conversations with you, using your Embassy in Paris as intermediary, with the object of obtaining an equivalent text from you. In fact we can transmit the British text to you only at the moment that the French Government will have officially requested the signed text from the British Government. However, to request it officially will mean that we have decided to take action immediately, which the French Government does not wish to declare formally yet. There we are. I wait with patience. I believe there is no instance in which & child which has reached the moment of birth has been prevented from entering the world. And this one obviously is seeking birth. I believe, Mr. Secretary, that it is requisite to get ready to not quickly when the moment arrives, which can Regraded Unclas by -3- 1J hardly be much further delayed. I will do everything pos- sible, however, as far as it is within my power, to avoid precipitate haste in this matter, and to communicate the British text to you if only unofficially, as soon as the French Government considers that it must aot. In any event I take this occasion to say again, Mr. Secretary, how much I have appreciated the cordial welcome that you have extended to me at Washington. I hardly need say with what feeling I have read the magnificant speech of President Roosevelt at Chautauqua. It has made & deep impression in France. Please accept, Mr. Secretary, the expression of my deep respect. MONICE P.S. May I ask you to consider this letter not only secret but absolutely personal on my part. TRANSLATION hurassy OF FRANCE LOUSON Financial Attaché 1 Hyde Park Cafe a.v. 9. London, 10th Augmes, 1936. By door Mr. Secretary: After the valuable and trustful conversations that I lind with you at Nochington, I feel that I owo you a word of explanation. I do not wish you to believe that no have net - posted difficulties is Regland. Such is not the case. Certainly, Hr. Neville Chambsrlain preferred a unilateral text (In the form of a letter addressed to ma) rather than a tripartite declaration of - I had under consideration in Backington. But apart from the question of procedure, the British letter, over which w negotiated during several days, - such as in - opinion will pendt - to not, at the appropriate mement, with - equivalent declaration e your Int. I met ony that the delay to being counced rether we w on which, for cerious receive consected - deasatic politics, date net believe the - so 18 opportune, although 19 is are courtmed that - of the from, accompanied = as "understanting" with Regland and the United States to both Investable and destrable. This Leaves the following situation: Mr. Seville Chasterlain's letter - which I have Regraded Unclassified 12 IL unafficially transmitted to us, but maigned. The original to at our disposition at the British Treasury. n will be transmitted to m, however, only when no request 10 officially, which will - that V0 have decided sureelves to take action immediately, the following week, for example. (I understand perfectly this neaner of prosedure on the part of the British Treasury which does not wish to seen to be pushing France to a monetary alignment which ought to come of our on free will. It is also necessary to avoid indisoretions in commestion with a documents which gives an indication regarding parity of exchanges.) I have not been able therefore to send you, as I had contemplated, the text of the British letter and to - times the conversations with you, using your Lubeasy in Paris as intermediary, with the object of obtaining - equivalent text from you. In fact n can transmit the British text to you only at the mont that the French Government will have officially requested the signed test from the British Government. Newever, to request it efficially will - that we have decided to take action immediately, which the French Government does net wish to declare formally yet. There we are. I wait with patience. I believe there is no instance in which a child which has reached the - of birth has been prevented from entering the world. and this ⑉ ebviously is seeking birth. I believe, Mr. Secretary, that it is requisite to get to not quickly when the moment arrives, which on Regrade Inclassified Im 2 MA 1 2 1 I TIME - $ Septement * sible, housver, M for as st to within my year, to mold provipitate baste in this matter, and to commission the Brittsh test no you if only unafficially, $ INER as the Fronch deverment considers that 10 - act. In any event I take this occasion to my again, M. Secretary, how smok I have appreciated the cordial voleme that you have extended so M at Washington. I hardly need my with what feeling I have read the mynificant speech of President Receivelt at Chandongun. It has made & deep impression in Transe. Please accept, m. Benrebary, the expression of my deep respons. HON IOK P.S. May I ask you $0 emelder this letter not only part. IN I # I w EA:HF:DJW AMBASSADE DE FRANCE in À LONDRES. 1. HYDE PARK GATE, (6 14. QUEEN'S GATE) L'ATTACHÉ FINANCIER. ADR. TELSOR. FINATTAC KENS LONDON. S.W.7. TEL: WESTERN case, WESTERN 0887. LONDRES, le 19 Août 1936. Cher Monsieur le Secrétaire, Après les entretiens si confiants et si précieux que j'ai eus avec vous À Washington j'estime que je vous dois quelques explications. Je ne voudrais pas que vous croyiez que nous avons éprouvé des difficultés inattendues en Angleterre. Tel n'est pas le cas. Sans doute, Nr. Neville Chamberlain a préféré un texte unilatéral (sous la forme d'une lettre qu'11 nous adresse) plutôt qu'une déclaration tripartite telle que celle que j'avais envisagée à Washington. Mais sous réserve de la procé- dure, la lettre britannique, sur laquelle nous avons d'ailleurs négocié pendant plusieurs jours, nous donne des assurances très intéressantes et qui à mon avis nous permettront d'agir, le moment venu, avec une déclaration équivalente de votre part. Je dois dire que le retard vient plutôt de mon propre Gouvernement, qui, pour de sérieuses raisons de politique inté- rieure, ne juge pas encore le moment opportun, bien qu'il goit maintenant convaincu qu'un alignement du franc, accompagné d'un "understanding" avec l'Angleterre et les Etats-Unis est s la fois inévitable et souhaitable. 2 Dès lors nous arrivons à la situation suivante. La lettre de Mr. Neville Chamberlain, sur laquelle je me suis mis d'accord avec la Trésorerie britannique, nous a été officieusement communiquée, mais non signée. L'original est à notre disposition È la Trésorerie britannique. Il no nous sera remis toutefois que lorsque nous le réclamerons officiellement, ce qui voudra dire que nous aurons décidé chez nous de passer à l'action incessamment, dans la semaine qui suivra par exemple. (Je comprends parfaitement cette manière de faire de la Trésorerie britannique qui ne veut pas avoir l'air de pousser la France à un alignement monétaire qui doit venir de notre propre gré. Il y a aussi les indiscrétions à éviter au sujet d'un document qui comporte une indication de parité de changes). Je n'ai donc pu, comme je l'envisageais, vous commu- niquer le texte de la lettre britannique et continuer la conver sation avec yous, par l'intermédiaire de votre Ambassade à Paris, pour obtenir de votre part un texte équivalent. En effet, nous ne pouvons vous communiquer le texte anglais qu'à partir du moment où le Gouvernement français aura réclamé officiellement le texte signé au Gouvernement britannique. Or, le réclamer officiellement cela veut dire que nous avons décidé de passer à l'action immédiatement, ce que le Gouverne- ment français ne veut pas encore déclarer formellement. Nous en sommes 1h. J'attends avec patience. Je songe qu'il n'y a pas d'exemple qu'on ait empêché de venir au monde un enfant qui est 2 terme. Et celui-ci ne demande manifesto- ment plus qu'à naitre. IP 3 Je Crois, Monsieur le Secrétaire, qu'il faudra s'apprê- ter à agir vite, lorsque le moment, qui ne saurait plus tarder beaucoup, sera venu. Je ferai tous mes efforts cependant, autant qu'il dépendra de moi, pour éviter la précipitation dans cette affaire, et pour vous communiquer le texte britannique, ne serait-ce qu'à titre officieux, aussitôt que le Gouvernement français envisagera qu'il doit agir. De toute façon, je saisis cette occasion pour vous redire, Monsieur le Secrétaire, combien j'ai été touché de l'accueil si cordial que vous avezzbien voulu me réserver à Washington. A1-je besoin de vous dire, avec quelle émotion j'ai lu le magnifique discours du Président Roosevelt à Chautauqua. Il di d'ailleurs fait en France une profonde impression. Veuillez trouver ici, je vous prie, Monsieur le Secré- taire, l'expression de mon profond respect. Smm. yoursh P.S. - Puis-je vous demander de considérer cette lettre non seulement comme secrète mais comme absolument personnelle de ma part. P.m. 2 FDIe Now York Hon. Franklin D. Recsevelt, Hyde Park, New York. Dear Mr. President - There is evidence hereabouts that Mr. Leon Crowley, F.D.I.C. Chairman,is quietly under attack in banking oir- cles. They are saying that he is indebted to banks in Wisconsin and has used his position to borrow personally in Washington; Rigge bank is mentioned. They assert he rides about in high priced cars and lords it over people. If these facts be true, concerning his alleged indebtedness, very probably an "exposure" is in the making. of the circumstances as to his securities and practices I know nothing. I have heard this repeated and felt that you should know of it per- sonally. Incidentally, there 1s marked hostility to your administra- tion in bank examining circles. Certainly, this is one department capable of doing much harm and in which political activity should be tabco under pain of dismissal. Respectfully submitted, & SINCERE WELL WISHER. YUM / TEL and AUGIT y KINGS B TA: = 639PM 5 1936 Hon. Franklin D. Roosevelt, Hyde Park, New York. RA TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE August 17, 1936 TO Secretary Morgenthau FROM Mr. Taylor Mr. Mallet, Counselor of the British Embassy, called to deliver to me & personal message for you of the attitude of His Majesty's Government toward monetary reforms, et cetera, in China. I enclose a copy of the message. I had considerable conversation with him about the Far Eastern situation and told him that we understood that September 1st was the date set for introducing the national currency into South China. I also informed him that the Central Bank of China had not utilized any of the silver credit. As I told you over the telephone, Mr. Mallet emphasized the fact that this mensage was a personal one for you in response to your question to Bewley just before the latter's departure. well. LBCN^ST a N + THE 2B C 0 Y Our latest information is that T. L. Soong has been appointed Financial Commissioner for Kuangtung and that Kung who is lending him full support anticipates extension of currency scheme to Canton in the near future. His Majesty's Government fully share desire of United States Government to see strong Government in China and would in consequence welcome successful extension of currency scheme. 3 Deary August 18th, 1936. Memorandum of conference at Secretary Morgenthau's farm on Monday, August 17th at 11 o'cleck. Precent: The Secretary, Messrs. Graves, Analinger, Gorman and Shumbart. The Secretary questioned Mr. Gorman and Mr. Shamhart with regard to the plans for the reorganization of the Customs Border Patrol. He was given a memorandum showing the steps to be taken in the reorganization which he indicated had his approval. At:the Secretary's request, Mr. Shamhart made a statement of his (Mr. Shemhart's) record and experience in the Government service, with a view to his proposed assignment as head of the Border Patrol. Mr. Morgenthan inquired whether Mr. Oliphant had approved the release of Mr. Shamhart from the Tegal Division and was advised that this had not been done pending consideration by the Secretary of Mr. Shamhart's qualifications for the new assignment. The Secretary asked that this be done promptly. Mr. Shamhart vas then excused from the conference. The Secretary advised Mr. Analinger that it was his desire to place all investigative work abroad,having to do with the illicit traffic in marcotics, under the Customs Agency Service. He said that be desired that Mr. Byer and his assistants in France should, under the plan which be had in mind, be responsible to and report through officers of Oustoms. 4 - 2 - Regraded Unclassified He indicated also that he was much dissatisfied with the decisies of the State Department that the Treasury should conduct no narcotic investigations in the Japanese Empire and that be expected to remody this condition as promptly as possible, if need be by personal contact with Secretary Hull. The Secretary said that he wanted the Bureau of Narcotics to discontinue all direct contacts with the State Department with reference to the international aspects of the narcotic traffic. He said that such matters should be handled through Mr. Gibboms' office by someone in that office specially charged with this responsibility. He asked Mr. Graves to see Mr. Gibbons upon the latter's return from abroad and perfect this arrangement. He said that at the proper time a letter should be propared for him to sign to the Secretary of State advising that Mr. Gibbons would hereafter handle all matters with the State Department having to do with law enforcement work, leaving Mr. Taylor to handle Treasury contacts with the State Department on all other subjects. The Secretary requested Mr. Graves to prepare a plan for the transfer of all narcotic investigations abroad to the Customs Service and to submit this to him in writing on Monday, August 24th. He said that be wanted Dr. Analinger to have full oppertunity to state say objections that he might have to this proposed plan. At this point Mr. German was excused from the conference. The Secretary told Mr. Analinger that he was not satisfied with 5 - 3 - the work being done by the Bureau of Narcetics either in this country or abroad, and with reference to the work in this country be told Mr. Analinger that be desired to bring about a reorganization of the Bureau which would more sharply divide its activities between enforcement and permissive work. He said that he wanted Deputy Commissioner Wood to to assigned exclusively to permissive work and that be proposed to detail to the Bureau of Farcetics for an indefinite period Special Agent 1. C. Palmer, of the Intelligence Unit, to have charge under Mr. Anelinger's supervision of all criminal investigations and enforce- ment work. Mr. Analinger made a defense of the record of the Bureau of Narcotics, and stated among other things that the Bureau had put more criminals in Federal penitentiaries per agent employed than any other enforcement organization of the Federal government. Mr. Morgenthau commented on this to the effect that the bulk of the Bureau's defendents were petty violators, chiefly peddlers and addicts, and indicated that he felt the Bureau had not made & sufficient effort against the criminal organizations which were responsible for the distribution of narcotics in wholesale quantities. The Secretary asked Mr. Graves to prepare and have ready for his approval on Monday, August 24th, the necessary orders for the assignment of Mr. Palmer to the Bureau of Narootics as above indicated. Mr. Analinger at this point was excused from the conference. The Secretary told Mr. Graves that he had read the report made by Special Agent Wilson, of the Intelligence Unit, with regard to the Regraded Unclassified 6 - 4 Secret Service and that be considered this a very excellent report. He inquired whether this report had been mis available to Chief Moran. Mr. Graws told him that so far as he know that was the case. The Secretary indicated diseatisfaction that Chief Moran had done nothing to carry into effect the recommendations unde by Special Agent Wilson, and said that be was now ready to detail Wilson to ast as Assistant Chief of the Secret Service. He requested Mr. Graves to prepare the necessary ordere and have them ready for submission to him on Monday, August 24th. The Secretary asked Mr. Graves to secure & small quantity of Hereta for him to exhibit to the President, together with a narrative account of a mumber of interesting narcotic cases. The Secretary turned over to Mr. Graves Mrs. nets' memorandum covering her visits to Paris and Vienna. He asked Mr. Graves to read this memorandum and return it to Mrs. Klets so that it might later be read confidentially by Mr. Gibbons and Mr. McReynolds. The Secretary asked Mr. Graves to have Admiral Peoples prepare and submit to him a complete report of the disposition of seised automobiles, under the provisions of the Liquor Law Repeal and Inferes- ment Ast approved August 27, 1935. Mossrs. Graves, Anelinger, Gorman and Shamhart left the Secretary's farm at approximately 12 e'cleck noon. 00000000 OFFICE OF THE COMMISSIONER OF NARCOTICS Washington, D.C., August 18th. AA Memorandum for the Secretary, I suggest that you read the enclosed minutes of a private meeting of the Opium Advisory Committee. wgansting 7 In order to expedite the preparation of the final text members are requested to send in their corrections of the present minutes within 24 hours of the receipt of the provisional text. LEAGUE OF NATIONS. Confidential. 0.0./21st Session/P.V.3. ADVISORY COMMITTEE ON TRAFFIC IN OPIUM AND OTHER DANGEROUS DRUGS. STRICTLY CONFIDENTIAL TWENTY-FIRST SESSION. Provisional Minutes. THIRD MEETING (Private), held at Geneva on Tuesday, May 19th, 1936 at 3.30 p.m. Chairman: Dr. CHODZKO (Poland). Present: All members who had attended the preceding meeting. CONSIDERATION OF THE REPORT BY THE SUB-COMMITTEE ON SEIZURES (Document 0.0.S./281) (Continuation). Confidential. Annex to Document O.C.S.281. Dr. HOO (China) wished to raise the question of principle whether the discussion of this Annex should take place in private or in public session. He himself held that discussions should always take place in public if possible. The text now under consideration was intended to dispel & certain misunderstanding which had received publicity in the Press and clsewhere. He felt that since the members of the Sub-Committee had taken exception to the opinion expressed by the President of the Central Board, and desired publicly to refute that opinion, those members especially should welcome an opportunity for a public discussion regarding it. Mr. LTALE, Assossor, thought that a private discussion had been suggested out of consideration for his own feelings. is he had made his statement in public, he thought that it should be discussed and criti- cised in public also. Regraded Unclassified 8 + 8 SHANMAN (Canada) thought that are discussion this this eight 1. is (Portugal) said that in his experiance, AS Col. on police efforts and control, as referred to that in there passage was no far - purely political mestings vers concerned, the Press always renaged take place should be hold in private. He thought in public. and to obtain somo account of what had bappened in private meetings. Buch of the report. to the remainder of the discussion being held the end of the accounts ware almost alvage insccurate and there was no means of guarding objection that in any case & public statement should be issued st egainst the The CHATEMAN said that be was in A very difficult position. discussion. N. CASARES (Spain) entirely associated himself with the If the whole discussion were to be held in public, it would be the first observations of the delegate of China. An opinion of a general character in occasion on which one organ of the League nac discussed in public the been expressed in public and had been given a certain publicity activities of another organ. The responsibility that would rest upon had the Press. If any counteracting effect were now to be achieved, com- himself as Chairman would therefore be gress. parable with the effect produced on that carlier occasion, the present He did not share the view of the delegate of China that a discussion must also take place in public. question of principle was involved. It was rather & matter of inter- Mr. HARDY (India) said that all the members of the Committee pretation of statistics, regarding which interpretation the Central must have felt, in view of the considerable publicity that had been Board and the Advisory Committee held divergent opinions. He falt that given to the phrase in question, that some public refutation of it was it would be sufficient to discuss the matter in private and to announce essential. It seemed to him only natural. however, that the Committee the result in public. He thought that in any case the discussion should should discuss in private the form which that refutation should take, be either wholly public or wholly private, for, in the interests of the M. EXSTRAND, Director of the Opium Traffic and Social League, he would deprecate any alternation between private and públic Questions Soctions. entirely agreed with the views expressed by Col. discussion. He felt, however, that be-could not take a decision on this Sharman and Mr. Hardy. Ee thought that there were certain aspects of question on his own responsibility, but would have to put this decision the question which should certainly be discussed in private. It was to a vote. not the discussion itself that the public would be interashed in, but M. de VASCONCELLOS (Portugal) suggested that the decision should the result of the discussion. be left to the officers of the Committee. Mr. DTATE said that if only part of the discussion were to Dr. SCHULTZ (Austria) agreed with the view supressed by the be held in private, be would be placed in a difficult position, at it Chairman, The Advisory Committee and the Central Board ---- not would be necessary for him to repeat in the public menting the grounda independent organisations but were emplamentary within the franswork for his opinion which be would have already stated in the private meeting of the League, Divergence of opinion between the could any, therefore, K. CASANES (Spate) said that be must prece his potal of view. be discussed in public, - quile copposite oplitions had been organized regating 124 K. TELCORNE (Wetherlands) thought it far preferable that the achieved in the campaign against narcotics, and it vas emential that discussion should be private, especially as it would then be possible to the public should be given the facts. He would urge, therefore, that refer freely to police action. at least the main part of the discussion should be held in public. Regraded Unclassified 9 + y. BOURGOIS (France) thought that a public discussion on a question of divergence of opinion between two organs of the League would Mr. LYDALL said that he had stated publicly, as the Dub- in no way further the common purpose which the members of okch bad at Committee had pointed out, that in his opinion'* present eystem of beart. but would on the contrary present marry disadvantages. IN would fighting the illicit traffic had broken down entirely". be most unwise to make public "family quarrels" of this kind. With regard to opium, the signatory powers to the Hague Con- Dr. CARRIERE (Switserland) thought that the word *quarrel* was vention had bound themselves gradually to suppress opium smoking as much too strong a one. He agreed with M. Bourgois, however, that it would far as circumstances permitted. In the last 15 years, the repre- be better to hold the discussion in private and to give only the result sentatives of England, France, Holland, Portugal, India and Siam had informed the Committee that it was impossible for them to suppress in public. Dr. HOO (China) said that there was certainly no dispute between opium smoking because they were utterly unable to deal with the illicit the Central Board and the Advisory Committee. The phrase to which ob- traffic. A more humiliating confession could not well be imagined. joctions had been raised had been only an expression of personal opinion, It meant that for over 15 years it was not the policy of the Govern- ments that had provailed, but the wishes of the gangs of opium amagglers. and had not been adopted by the Board. The CHAIRMAN hoped that those members who wished for public With regard to manufactured drugs, the position was rathor discussion would not press their point of view: otherwise, he would have better. The Committee had learnt A lesson from its failures to check opium smuggling, and had drawn the correct conclusion that if the to put the question to the vote. Be wished to pay a tribute to the courage and sincerity of Mr. muggling of narcotic drugs were to be suppressed, It must be suppressed Iyall. This was not a personal matter, however, but one which primarily at the source, and not after the drugs had passed into the illicit traffic. The Committee had therefore drawn up the Limitation Convention. 4a he concerned the interests of the League. W. CASAFIES (Spain) said that he would not urge his point of had often stated himself, that Convention had done a great doal of good. Europe could no longer be accused of the wholesale poisoning of other view against that of the majority. He asked that it should be put on nations by druge mainfactured in factories authorised and, at any rate record, however, that certain members of the Committee had said that nominally, controlled by Governments. At the time the Convention had the intereste of the League would have been better served if the dis- been drawn up, however, Sir John Campbell had prophesied that the only cussion had been hold in public. recult of the Convention would be that the sunfacture of druge for the CHAIRMAN thanked M. Casares for his decision. the illicit traffic would be transforred to countries where Government It was acceed that the meeting should continue in private. control was ineffective, Unfortunately, this prophesy had proved true, Colonal SHARMAN (Canada), Chairman of the Sub-Commities - As yet the Committoe had no data by which 11 could calculate Seirures, said that It was with regret that the Sub-Committes bell cas the extent of the 1111014 consumption of narcotic druge in most countries itself obliged to bring this matter to the attention of the Advisory in the world. The Committee was now, be was glnd to say, taking stope Committee. The text before the Committee had been carefully considered, to obtain these data. The general belief, correct or incorrect, vas and be now submitted it for ammination. Regraded Unclassified 10 -6- 10 that drug addiction use not common in Europe. Be WAS not surprised In other words, the total seisures effected by the Customs therefore that the representatives of the European countries should be and by the Police had amounted in that year to 0.025 per cent of the content with the situation in their respective countries. But the total amount of drugs amageled into the United States. In 1935 the pro- portion had been almost exactly the same, complacency of the representatives of China and the United States filled his with astonishment. All the information at his disposal led It was evident that seisures of this dimansion could not affect his to believe that the situation with regard to heroin in China WOR the illicit traffic in any way, for the profits made in the illicit traffic absolutoly appalling: la this question, however, formed a special were not counted by decimale of one per centr they were probably several hundred per cont. Item on the Agenda, he would not deal with it now, He would confine For their failure to deal effectively with the illicit traffic his remarks to America, and as the information with regard to the the American Customs officials were not in the least to blame. Be had United States was more complete than that for Canada, he would confins spent 40 years in the Customs Service of a country where the muggling of himself to the former country. Fortunately Mr. Analinger, probably the greatest living opium and narcotic drugs was unfortunately prevalent, and he could say authority on the illicit traffic, was present at this meeting, and if with confidence that it was utterly impossible to suppress the amaggling of narcotic drugs by Customs examination. When England, France, Holland, Mr. Lyall made a mistake in his facts he would be glad if Mr. Analinger Portugal, India and Stam all admitted that they could not even suppress would correct him. opium how was it possible to suppress the, amuggling of morphine TH December 1934, Vr. Analinger had stated in his evidence or heroin, a task which was a hundred times more difficult? before the Sub-Committee of Congross which was to docide the Budget Something could be done with the help of informers. Dut this credit for 1936 for the campaign against the illicit traffic that was a very expensive method, and also a dangerous one. Junior Custome about one in every thousand of the population of the United States was officers, were the men that made seimires, wore not well paid, and when a drug addict, and that the average daily dose taken by an addict are they were brought into business relations with informers, it sometimes approximately 6 grains. Mr. Analinger had also said that practically happened that instead of the informer helping them, the large bribes the whole of this illicit supply came from abroad. He had said that he offered tempted them to enter into collusion with the informer. He had thought addiction was increasing in somo parts of the country. and that himself had quite a mmber of very painful experiences of this sort. there WAS nothing to muggest that it was decreasing classhere. He had no special knowledge of police work: but it semmed to him In 1934 the population of the United States had been 126 that as the packages of morphine the police had to trade were much maller millions. 1 in 1000 would give 126,000 addicte; to take a conservative than the consigments the Quatoms officere had to search for. the police estimate - 100,000. 100,000 addicte taking 6 grains daily, gave an must have an even more difficult task. Be 988 not therefore in the last aggregate enmal consumption of 14,215 kilos - say 14,000 kilos. surprised that the police seisures in the U.S.A. were DO bigger than the In 1934, the seimres vade by the Customs had exempted to 17 kilos 34F. trames, and those made by the police to 17 Hilos 038 grames) Costoms seisures, and he did not believe that the police were any more to taking the two together, 34 kilos, 384 grammes - say 34 kilos. blame for their failure to suppross the illicit traffic than were the Customs. Ee had not therefore been accusing the police, nor reflecting on them in any way, in anything he had said. Regraded Unclassified -8- -9- 11 He was merely drawing attention to the hopeleseness of their position and to the monstrous injustice inflicted on America by other the present police system had entirely broken down had been partly based countries, who poisoned her people by exporting each year 14 tone of on the fact that & armber of Governments had not been able to stamp out morphine, herein and cocaine to the United States. It might soon super- the use of prepared opium in accordance with their obligations under the fluous on his part to draw attention to this question, when the United Hague Convention. For the moment, he would not subv 4 benerat is to States were represented on this Committee. but being & disinterested how far this conclusion was correct, but bis would be quite realy to party, he believed that the United States delegate would welcome his explain and defend the attitude of his Government 1a this respect. He felt that be must point out, however, that under Article 28 of the Geheva doing so. He was convinced that the only effective way to doal with this Convention of 1925 it vas "not within the competence of the Board to menance was to bunt down the factories which supplied the illicit traffic. question or to express any opinion upon the statistics regarding prepared It was much easier to find a haystack than a needle, a factory than a. one optum. cunce packet. Something had been accomplished in this direction, especially With regard to the other observations of Mr. Igall, be would leave it to those members whose countries were more concerned with the in Turkey and Bulgaria. But it was no use for the members of the Committee illicit traffic in manufactured drugs to give their opinion. to shot their ages to the facts. The illicit traffic was continuing. Mr. LTALL wished formally to state that the Central Board bad 14 tone of drugs were introduced yearly into the United States, and in- calculable quantities into other countries. for 10 years or so the passed no opinion whatever on the construction to be placed on the Fujiteuru brand of cocaine had been constantly cropping up in the fllicit statistics regarding prepared opium. Mr. TULLER (United States of America) said that in his country traffic, and it was not yet known where it came from. It was not by con- gratulating themselves on their past successes, considerable as these had this question had not received the same degree of publicity all in other been, that those engaged in the campaign against narcotic drugs would win countries. Only two classes of the population had paid much attention the day, but by devoting their attention to the tasks that still lay to it. On the one hand, there were persons with a special inowledge of before them. the question, who had greated the statement with ridiouls and who con- Mr. Igall proposed therefore that a Sub-Committee should be formed, sidered It to be due to Lgnorance or also in total diaregard of the facts. composed of Mr, Anslinger and certain other members who had similar special On the other hand, there word the traffickers themselves who had crised experience, in order to consider what steps could best be talcan to bont upon the statement as & heaven-sent mians of bringing into discredit all down the illicit factories which were supplying the illicit traffic. supprossive mossured. In conclusion, Mr. Ivall wished to make it quite clear that be He had himself been amount as the publicity closs to this had spoken, not as Chairman of the Central Board, but as Assessor to the statement throughout the world. the most andress consequance would Committee. be that countries who had not been assous to participate in the N. INLCOHOM (Netherlands) said that he admired Mr. Iyall's compaign against the illicit traffic would now seiss upon it perseverance in fighting against the menopolies for prepared opium, justification for relaxing or abandoning their efforts. but that he regretted that he had made use in this connection of his position as Chairman of the Central Board. Mr. Igall's statement that Regraded Unclassif 12 -10- -11- 12 It was most regrettable that such a statement should base Colonel SHARMAN (Gonada) pointed out that the figure 8,000, been made at a public meeting of the Board. and should have been con- representing the mmber of addicte, had boon a missing one. In Its tained in a draft report issued to the Press. The conclusion in report for 1933, the Government of Canada had stated that there had question me, moreover, based upon altogether incomplete data. been a material reduction in addiction in the Intter part of that With regard to the statement which Mr. Lyall had just made, year, and that there had been a similar decrease in previous years. it must be remembered that, nmong the total number of addicte he had Seisures effected inside the country in the year 1934 referred to, opium smokers must also be included. Further, in con- (exclusive of Customs seimures) had been as follows: Morphine, 5 lbs. nection with the average daily dose taken by addicte of six grains, it must 13 oss.: cocains, 2 lbs. 4028.; and heroin, 1 1b,3 oss, not be forgotten that in the case of heroin this drug was now sold in All indications pointed to A marked shortage of narcotic so adulterated a form that its narcotic content represented only about druge on the !llicit market. For instance, in A city 11km Montreal, with a population of a million, addicts were only able to obtain one-fifth. The figures for seizures in the United States during 1934, one or two grains, and often not even that amount. The Canadian are as given in its report for that year, had been 351 kg. in the case of thorities had put a stop to the smuggling of morphino from Japan, which seivures effected by the Customs, and 85 kg. in the case of internal had proviously been taking place on a very Inrgo scale. Thoir work was seivures by the Federal authorities. In addition, 35 kgs. represented reflected in the decrease in the number of prosecutions: La the 0089 of seisures by local authorities, with 41 States and one territory not manufactured drugs, from 835 in 1934 to 226 in 1935, and in that of opium smoking from 373 in 1929 to 42 in 1935. They had overy reason heard from, in seven States alone. Mr. Fuller thought that the Committee was fully justified in to be proud of their work. Sonsational statomonts, such as the ono holding that considerable progress had been made in the campaign. It quoted in the passage under consideration, would not, however, help them in obtaining funds for continuing that work. was felt in the United States that the best index of such progress was the price of drugs in the illicit traffic, and there was no comparison Mr. ANSLINGER (United States of America) said that there between the prices ruling some five or six years age and those now had been ed enormous docronso in the mugging of unmifratured drugs into the United States, as n result of the reduction in the munifacture asked, which were twenty times na high. of these drugs in Europe. In 1930 addicts had been able to obtain as In reply to a question by Col. Sharman, Mr. LIALL said that be had referred also to Canada in his general observations regarding much morphine no they wanted, at a price of $12.00 AD ounce. Its price the situation in North America. Ee understood that the total seisures had now increased encruously, and in the Middle West and may other in 1934 had amounted to only 2 kg., and that there wore 8,000 addicts parts of the country there were no supplies whatever of merphine in the illicit traffic. in Regraded Unclassit -12- -13- 13 13 In 1930 and 1931 there had been asse of individual seisures of The delegate of the United States had explained that, while the post- morphine and heroin of European origin, representing as such as 25,000 tion 16 his country me not 48 perfect as sight be desired, It are not, or 17,000 ounces each. Seizures of this kind were DOW & thing of the on the other hand, as had as Mr. Yell had foared. past. In a short period of fifteen years it she obviously not Rewards were still offered to informers in the case proportions possible ontirely to mbolish the illicit traffic, which mos the result as before, but there seemed to be very few cases on which such informers of vicos that vers rooted in custom, owing to psychological nod could report. pathological reasons. Up to the present, however, a fair massure of Certain powerful gange, 6. 6. the Buliopoulos gang, and Delgracio succoss brid boon achieved. Dirope was no longer manufacturing drugs and his associates. had been suppressed. which were afterwards used to poison the oversons countries. This mas There was no question that in 1930 and 1931 addicts had been ono door that had boen closed. Ho know that there were other doors still able to obtain as much as 5 ounces of morphine & year. At the present open, but this particular aspect of the situation had, after all, been time they could only procure a very thin solution of adulterated heroin. the most immoral one, Burveys which had been made in several States showed an increase of 50% K. BOURGOIS (France) said that just as surgeons received praise in the mumber of addicts coming to the hospitals to be cured. In a ro- for successful operations of amputation whoreas the work of hygienists, cent case in Now York City a trafficker had stated, in evidence, that which had saved thousands of livos passed, unredognised, similarly the there WAS no heroin available in the City, that if any supplies camo preventive work of the Advisory Committoe had failed to receive due they would be highly adulterated, and that there wore a large mumber of recognition. Thanks to that work, important bands of traffickers, oper- addicts who were now 111 as a result of being deprived of their supplies. ating with a huge capital, had now boon broken up. Only the Longue, and The authorities had been struck by the increasing number of no national organisation, could have secured much a rosult. It was, cases of divorgence of drugs into illicit channels through the connivance indood, cortain that but for the work of the Committee the mrober of of doctors. Over 2,000 such casos had been reported in the past year. grage would have increased and the volumo of the illicit traffic would There had also been on increasing number of thefts from pharmacies and have become infinitely greator. It must be admitted, therefore, that from wholesale dealers. This situation was reflected to the increase in the Longue had at lonot arrosted the development of an evil which was the amounts asked for the legitimate traffic, and it had boen Decessary becoming & serious nonace. to exercise special care in examining such requests. Major COLES (United Kingdom) said that he also felt that the To and up, thanks largely to the assistance which the American publicity which had been given to Mr. Igall's statement was most - authorities had received from the police of Canada and of Europe, the fortunate. In the United Kingdom that statement had regaired . publicity situation la the United Rintes bad TOTY grently improved, for la - of estable - E InAgel I to a M. de VASCONURILOS (Fortugal) thought that from one pelat of repaire the illicit traffic. The phrase in question bad area view It vas really n matter for satisfaction that this discussion 204 boen reported to the mall proviscial pepora throughout the country. taken place, since it had proved & very interesting and valuable one. Unclassified -15- 14 Dr. BOO (China) entirely associated himself with the point of 44- view expressed by M. Casares. Since the situation in China FOR to be discussed under c. agreed with M. Bourgois that seizuros soro only a very separate item of the agenda, be would refer later to Mr. Igall's ob- Hold indication of the success achieved in suppressing the illicit servations in this connection. It would then be poesible to establish traffic. The work doze in frustrating that traffic was at loast as the rosponsibilities for that situation. important. Bis own Service had conclusive evidence that AB a result He associated himself with the congratulations that had been of the co-operative action taken during the last year by his own country expressed to the representatives of Buropean countries and be was glad and others, one of the largest and bost known gange bnd now been con- to note that at least officially drugs manufactured in Burope wore not plotaly immobilised. This game had formed en extensivo plan, on which now being divorted into the illicit traffic. Novortholose, the problem large name of money were to be spent, for the transfer of large quanti- for China remained as urgent as before, the only difference being that tics of drugs. It was known, however, that certain of the leaders had the sources of supply had changed and drugs for the illicit traffic were sont messages to the offect that every move they endenvoured to malco how obtained from countries nearer to China. was supervised by the Police and that they might as woll abandon the He wished to support Mr. Iyall's proposal, which was B truly plan. One leader had written that he was unable to move "s single ounce constructive one, that & study should be mde of the best moans for of dope". Preventive work of this kind was at least as Important as suppressing clandestine manufacture in all parts of the world. The the Oustome' scirures that would have occurred had it been possible for problem before the Committee was a world-wide one and must be dealt with the and to carry out their transaction. AS such. He did not wish to imply that the Lenguo had done nothing to M. BOURGOIS (France) remarked also that a single seizure might help China. On the contrary, the Advisory Committee bad shown great have the effect of disorgnnising and thus broaking up a gang. goodwill. The action hitherto taken by the League had, however, been M. CASARES (Spain) thought that it could not be mid that the rather slow. It was true that a special Committee had been est up in present kystem had failed, but only that while the Committee had not order to effect closer collaboration with China, and that this Committee obtained from that system all the results that it had hoped for, it must had adopted cortain resolutions and hnd sent out a questionnaire. Cor- endorvour to obtain fuller results in the future. The Engue Convention, tain Governments, howevern, including somo of those most closoly don- the 1925 Convention and the 1931 Convention bad all marked no many stages cerned, had not even replied to that questionnaire. in the campaign. A conference had now been convened for the purpose of Mr LTALL said that be wished to apologies to Col. for drawing up & Convention which would further supplement those previous having overlooked the reference in the Report of the Government of case, nnd the Committee and also considered the possibility of drawing up Canada to the considerable decrease in the number of Arug addicts. a Convention for the limitation of the production of - materials with regard to the total quantity of acisures in Canada, be had not taken The statement which and been Adopted by the Board had not boen Intended to cost any reflection upon the Police Servious, bir 302 " 1094 intended to disperaço These provious Conventions. It has only trdin Mr tention to the necessity of supplementing the present system. Regraded Unclas into account in his statement seisures made inside the country. He did not quite understand some of the criticiess which Mr. 15 Fuller had made. In taking his figures from the Annual Report of the -17- United States for 1934, be had not taken into account the figures for Be had noted with great pleasure that there was no question of & solvuros of opium, for he could not conceive that any trafficker visab- dispute between the Advisory Committees and the Central Board, especially ing to obtain supplies of morphine would 8° to the trouble of first M Mr. Lyall had made it quite clear that he was speeking not as Chair- muggling opium into the country and afterwards converting it. man of the Board, but only in his capacity of Assessor of the Committee, Mr. Fuller had also said that if the number of addicte were He had listened with great pleasure to the speech of Y. de Vasconcellos, taken as 126,000, this figure must be understood to include opium in which the delegate of Portugal had pointed out that this discussion mokers. Mr. Lyall cruld not suppose, however, that Mr. Analinger, had afforded an opportunity for registoring the progress which had when giving evidonce concerning this number of addicts and stating at actually been made. Moreover, as M. de Casares had justly observed, the same time that each addict took an average daily dose of siz grains, each of the Conventions had represented & step forward. A Conference was referring also to opinn smokers. which would draw up A Convention for further supplementing the methods He had not noticed, when reading Mr. Anslingor's ovidenco, of suppression was to meet shortly, and there was reason to hope that any mention that this doso of six grains was largely diluted, but be the Conference for the limitation of the production of raw materials of course accepted Mr. Analinger's statement that he had in fact would meet at an carlier date than had at first been supposed. mentioned this in his ovidence. Excessive optimiem and excessive pessimism must alike be ayoldod, Major Coles had pointed out that illicit exportation of drugs but thore was no doubt that considerable progress had been made. from England had now become impossible. No doubt this also applied to Illicit traffic in Europe had been in a large measure suppressed, and all well-governed European countries. It was his belief, however, that the same results must now be achieved in the United States and in China. Sir John Campbell's prophecy had proved true and that the clandstino In this task, the work already done by the American authorities W&F manufacture of drugs had now been transferred to other countries in especially encouraging. It were a task that called for the closest which the supervision exercised was loss efficient. Ho still felt, collaboration between all the organs of the Lengue and he was sure therefore, that in spite of the many succosses already achieved, the that that collaboration would contime to be a cordial one. Committee must intensify its offorts. The sources of the illioit traffic must be tracked down, if China and other countries wore to be The meeting rose. seved from polsoning. YOU CEATIFICAN asked Col. Sharman, together with % as Repporteur, to draw up a passage for the Report in the light of the discussion that had takon place. 16 CONFERENCE TO SUPPRESS THE ILLICIT TRAFFIC IN MARCOTIC DRUGS. BACKGROUND. The Draft Convention was conceived in the minds of the Austrian Government, which has for many years desired to make Vienna the headquarters for international police activity, and to direct international investigations into narcotic traffic, counterfeiting, etc. Some years ago X Counterfeiting Convention with almost parallel provisions to those of the Narcotic Conven- tion, was signed at Geneva. To date only twenty governments have ratified this Convention. The American Government signed the Counterfeiting Convention but did not send it to the Senate for ratification, as it contained provisions that were likely to cause criticism of executives. There were several Drafts of the Narcotic Convention. Mr. Anslinger was on a Sub-Committee which considered the Draft for several years. A Conference was finally called for June 8, 1956, in which 40 nations participated. DELEGATES. President Roosevelt appointed Mr. Stuart J. Fuller, Assistant Chief of the Division of Far Eastern Affairs of the State Department, and Mr. Harry J. Anslinger, Commissioner of Marcotics, Treasury Department, as delegates with full powers to sign the treaty if satisfactory to the American devertment. Regraded - 2 - 17 AMERICAN PROPOSALS. Rr. Oliphant's office and the Solicitor's office of the Regraded Unclassi Department of State examined the provisions of the Convention, and agreed on amendments to be submitted by the Delegates. The min American proposal was to substitute for Article I an amendment "to limit narcotic drugs to medical needs." This amendment was to supplant the provisions of Article I, which were very sketchy. The idea of the American Delegation was to get a Conven- tion that would afford a good basis for a criminal narcotic statute instead of the present tax measure, and also to give a basis for controlling Marihuana. The American proposal almost caused the Conference to break up the first day, as nearly all the other delegates stated it was beyond the scope of the Conference and that they did not have instructions to discuss such a proposal. This was, of course, a screen to hide the real purpose of objections, because the American amendment would have obligated the Governments to prohibit smoking opium in their territories. The American Delegation pointed out that they could make reservations about their smoking opium monopolies, but most of the delegates were edement that the proposals be rejected because they were out- side the scope of the Conference. The American Delegation then produced a letter from the Secretary General of the League of Nations, which it had the foresight to obtain before accepting an invitation to attend the Conference, and which letter use to the effect that 16 could make any proposals; that the sky was the limit. This - 5 - 18 placed the President, the Conference and the League of Nations in a very embarrassing position, because none of the other Regraded Unclassi nations had been so notified, and their invitations were extended only to discuss the Draft Convention before the Conference. The American Delegation received an apology from the President and from the Delegates for the ruling that our proposals were outside the scope of the Conference. The President then appointed a Conciliation Committee, on which Mr. Anslinger represented the American Government. The only support he could receive was from Russia and China. Accordingly, the Conciliation Committee re- ported to the Plenary Session that it had been agreed upon by the Conciliation Committee to place the American recommendation in the Final Act of the Convention, which is usually signed by all nations. Mr. Anslinger pointed out to the Conference that the provisions in Final Acts were merely pious promises and were rerely carried out, and that in effect the Conference had started out to hunt elephants and had bagged a rabbit. After disposing of the American proposal, the Conference sailed along under the domination of the English, French, Dutch and Portuguese Delegates, who were all jurists, and who proceeded to write a Convention although they admitted that they had no illicit narcotic traffic in their country and had no experience in handling narcotic cases. The American Delegation remained to serve on committees and sub-sommittees, and to cooperate in drafting the Convention. CONSPIRACY. Knowing that Canada had instructions to sign whatever treaty was produced regardless of its merit, in order to join with the - 19 British Government in keeping the League together in view of the Italian-Sthiopian fissee, Mr. Analinger assisted the Regraded Unclass Canadian Delegate in spirited debate, and obtained a provision to have the crime of conspiracy to violate narcotic laws made extraditable. IF WILLFULLY COMMITTED. These three words almost caused the Conference to break up after the American fight was over. The code of law of a number of nations requires that intention must be proved in every criminal act, whereas in countries like the United States and Canada, violation of narcotic laws is malum per se and not malum prohibitum. Accordingly, in the United States and in Canada, intent does not have to be proved. The American Delegation joined hands with Canada in insisting upon the elimination of these three words, and the American Delegation's debate supporting Canada in having these three words eliminated was construed by the Conference as meaning that the American Government would sign the Convention if they were eliminated. The British Delegates made private proposals to the American Delegation that if the Conference could get the promise of the American Delegation to sign the Convention, these three words would be eliminated. The American Delegation finally had to take the position as to these three words that in or out they would not sign the Convention. This was quite a shock to the Conference. - 5 - 20 AMERICAN DELEGATION'S STATEMENT ON REFUSAL TO SIGN. The substance of the enclosed statement, which was prepared jointly by Delegates Analinger and Fuller, was cabled to the State Department, and was agreed upon by Treasury and State Department legal experts. At no time was there any dissension between the State and Treasury Departments. THE PRESIDENT OF THE CONFERENCE. The President of the Conference was a distinguished jurist, M. Limburg of the Netherlands, who, belonging to a country which maintains an opium smoking monopoly, could hardly conceal his leanings toward the opium bloe proposed by England, Holland, France, Portugal, Japan and Siam. He was prejudiced, arrogant, egotistical, and arbitrary. He was also ignorant of narcotic treaties and laws, and had no knowledge of the illicit traffic. The opium bloc was represented by distinguished jurists. AMERICAN REACTION TO REFUSAL TO SIGN. The editorials in the American papers strongly supported the American Delegation's stand. It will be remembered that the American Delegation to the Narcotic Conference in 1925 walked out on the same grounds, but this Delegation showed a stronger spirit of cooperation. SECRET, The American Delegation was usually supported in all its - 6 - 21 proposals by Canada and the other nations of North and South America; by Russia, Egypt, China, Poland and Spain. The Yugoslav Delegation was disappointing, particularly so since the United States is their best customer for opius for medicinal purposes. Yugoslavia, along with Portugal, is one of the smaller nations which does the dirty work for the larger nations et Geneva, introducing proposals and resolutions which the larger nations dare not present but are able to support. Mr. Anslinger took the Yugoslav Delegation to task for not supporting a good customer, and intimated that American opium business was likely to go to a country like Russia, for instance, which exports crude opium and which supports every American narcotic proposal, and itself limits narcotic drugs to medicinal needs. In the very deep background, Austria and some of the smaller nations attempted to obtain an amendment setting up an international narcotic police office in Vienna where records of all traffickers would be kept. The American Delegation joined with Canada, Great Britain and France to defeat this proposal. VERY SECRETLY, a French Delegate informed the American Delegation that such an office in Vienna containing all of this valuable information, would be & distinct basard to any large nation in time of war. CONTROL OF MARIHUANA. The American Delegation ves not disappointed in failure to get the control of Marihuana incorporated under the tresty in order to form the constitutional basis for a criminal - 7 - 22 statute in the United States. The American Delegation sounded out the Canadian and Mexican Delegates regarding the possibility of obtaining a three-power treaty to control Marihuana, As these two nations are contiguous to the United States and both have the Marihuana problem, such a treaty will, according to the best legal opinion, afford a much better basis for controlling Marihuana by criminal statute. Preliminary discussions on a treaty will soon be under way. Regraded Unclassified MA L3 LEAGUE OF NATIONS (o. C. /21st Session/P.V.13) ADVISORY COMMITTEE ON TRAFFIC IN OPIUM AND OTHER DANGEROUS DRUGS TWENTY-FIRST SESSION Provisional Minutes THIRTERISTH MEETING, (Public), Held at Geneva on May 28th, 1936, at 10:30 a.m. ********** Chairman: Dr. CHODZED (Poland). Present: All the members of the Constitue, except the representatives of Austria, Italy, Sweeden, and Uruguay. Regraded Inclassifi 24 Mr. FELE (W.S.A.) min the following = age - considering the direction is the he met, which includes, as M - recinied by the agents, the groupal situation in this and also the situation in respect w Register IV w the Bagan općum Corrention of 1012, which deals with # operation between the gevernments of China at of where nations) est 10 my be wall to result, at this justime, that is this - 1.0., in China, morth sal south of the Great Mall, one wes of the opium - is the entire world is produced, to my nothing of met quantities of herein may times the world's mede for madionl at setentific purpose. Lost this be questioned, I sall attention to a single reimure, reported by the Chinese Devernment is its 1954 Depost as mis at Priping, of of the usual usets of the world too herein. It is is this area, China, that the prices of trugs sold the the purpose of satisfy- ing addiction are lower then cayaboro also in the world, a circus- stance which I and ast tell you 10 vitally significant. It will doubtless be recalled that at a previous main of this Committee, in syseking of the vast flood of epim product is China - prestically ame of which 10 used to my purpose im the gratification of effiction - I characterized that production M a - to the world. I still consider that production w & - and I report the hope that the Government of China will be able in the to suppress entirely production within the borders. Let M an attempt to mushal the faste available which have a mar- ing a this situation. It my be will to resull that the balk of this production of opium in China taires place in what here been characterized w the "fronkier" provisses, which form a condairels around the country from Terms end Emisher - the south through siburg, Chinghai, Imm, Shoul, Ninghain, Bulyum, Challer, Johol, Reilung- kiong, Xivin, and Liaming. In other winds, China consists of a entral ours which is prostically free from epdem cultivation, an remind by 8. belt in which neet of the world's opin to protneed. It should be - in use that in - of the province in that bolt the National of China has to - time past and 20 eastral. This circumstance should always be - is stat. the Chinese representative, at n last stated that 10 is the object of his Government to - the cultivation of the peyer and the ⑉ of projured option in China w about the end of 1940. 20 to w be hoped that the Overnument of Chinn, in iss annel reports, will keep the other partice to the Limitation Commission of 1001 infund of the progress which se address - these - calls, No here before w the things Annual Report the 1984, - have a INC of military lass and regulations, el W have a enriada - of civil law. Regraded Unclassifi 25 No should not forget that the report in quartion doals only with 1506, the your is which the - of Orders bed musly unde a start in setting - the organization designed to bendle the problem clang the now ml very different Itams which # has decided w fellow, the report deals with a transities period. Incover sach - - regret that 10 contains nothing regarding the production of epium, as figures consenting the - - of opin, prostically no questio information in regust to illieit truffie and elemination - is the interier of the country, and nothing consuming the - derived from the općus trade, - should not, is n opinion, miertdo w base upon a repart for 1994 my conslusions as to the remits assumplished w the - plan to meting the optma and marestic are problem. - inkling to given in the report, - years 14, of the possible value of illiett traffic in herein in Priping, where it december a single which involved n of herein, but the almost total abouse of data conseming the 10- termal illicit truffle subse 10 impossible to base on this report definite conclusions concerning that truffie, er consenting eleminatine of derivatives. w for the law and regulations which have already besn circulated to univers of the Condition, it appoars to be ast yes quite class whether they - part of the addentive law of China M e result of having been passed by the bely constitutionally clothed with activerity to must legislation w are morely military where, the Secretariat informs M that they have - yes been mi to the Secretary-Seased w the Chinnes Government for trues- ulsoion to the other parties to the Limitation Commition of 1981. As to the suppression of općun susting, I to net progress to enter into a dismosion at the procest the other than to m that I still believe that the - to 10 to oxygress, and that I depresate the establishment anywhere of Government assopulies, It to not going to be copy in 1960 to give up the with revenues to be derived by the Invonued from politing opium to its citizens. that I 40 de to apoak about is the production in China of - opten and that of optun derivelives. Relising the - which results from the - - duction of epim in China, the medium authorities culisted the aid of reliable, will-informed VA yehlie spirites Chinage eftimano in every province of China to maint 6 nation-wide - of the - destion of N opdam end of the production of epter This - - nato in - entirely - 28 w mate without the corporation or - the incrivings of diplomatic w - les officers. the figures - lamply obtained from things officials, I 1 their a I 1 1 5 the - corred the cost of production, tention, calling prince, volue of proburtion, I of the opten, and production of deviratives. n covered only province in Gdas, Regraded Unclassified 26 both north call moth of the Great Mall. The figures are illund- asking. the figure for option production - tobulated, the a 2020 total 1 I Regard & 1 destion to 18,061 motris - # over 1 of the workd - dection. M the - estimates been below, the total was 18,000 1 I $ the largest professure is 1998 unres I (shout the club of Folend) which produced 4,646 metris teas and forten (about the sine of France) which proteted 4,354 tens. Mandaria and Johnl accounted tor 1,395 notrie tens. In Tumes, - (which I - informal - effective) - telms in 1999 w cultivation in certain betone 1 f I a a ( $ I given to insuranced sultivation in the rest of the pouvince, as that 10 remine to be - whether the total production will Paypy is - in Yummas in October. Just before the essing - in 1999 an under is reported to have been secure w Mr. Lab Trung-Tee Commissioner of Finance, and, consurently, Head of the Consul Opium Suppression of the prevince. This order is reported to have been widely circulated in various parts of the province ml peoted in public places. since the presentation desped w Superal- issime Ching Kai-shok, calling for the experiencies of eydm in ospited a I $ 1 I a s 1 I in the - of 1935. the yurgess of the order terms me appareably to the public that peyples my still be - and that these the discontime growing them my be subjected to heavy yunishmen. the of the enter in question are reported to here Ism as follows, in treaslation: AL - 1 The public is hereby notified that this provines is the pourect province in the whole I I I 1 18 5 Intern, products which are materiable in other parts of the country with the emeption of Partently - of the ovil of agáin, the - with the interests of w people at hours, realizing the suffering which results true funds and yearly, - $9 expedient to allow cultivation of the you - 4 - to valieve the people of their financial chringthy. - if the cultivation of the - does so - the supply the local consumption of the provises, it only impoire the bealth of the people end a 1 I I result will be that the suffering will become - and the conditions of permity n- 1 Regraded Unclassified 27 In this reason, the Opium Depyrection Issue has formalated a plan for the - - to undertable the sale trunsportation one distribution of optn, at also to limit the smiting atticts in this province. All these plane ⑉ consied a tor the subs of the people - met to eurish the Government. n is very disappointing to - that a - of 1 people in this province has recently circulated the - that st is illegal one ungrafitable to cultivate the you. They have either cultivated other erops is place of the optim your or have laft their old field lie bern. Such proctices estast be of my - to the - the those people will have to pay the rim to: regardless, - cognetly, the less fails upon these people. a the an 1 I q I I resides . funds to the Gevernment to yesh reconstruction along verious lines of Govelopment in the interest of the yuhlie. the people of here been compelled W eircumstances to pay in alvase over fifty years of land tex. If 20 revenue to derived from optum in this province, how could w me) the civil and military expenses? The result THE estimat so I mg in, to 1 & the people, and - suffering will naturally É the public is hareby currently verned against refreising from cultivation of the your. They are edvised to centinue oulti- vation is old yegy fields. They should and be inconsiatems and invegalar in the oulti- optimient = visita, estimo 1 5 igaring Government and offering negative resistance to the authorities. If - - are discovered, the affenders will be subjected to time doubling the rute of regular your - et they will be loched - - cruber- I In under w dispel way doubt as the part of the public, this min will - so politarate the state of the - in this Lease. 20 is haped the yablic - a visite will obey this win onl - PAW all usual. They struld - listen to - and time involve themselves in toeshle. (20aled) Lab Trung-7ce Commissioner 28 In Such - offert me más toward mypression is 1996, but the ton helens (counties) which have in the part - deesd the bulk of the Invistment production wire efficially possitted to continue production. It remine to to men, therefore, wisher and to what extent there will be my resistion in production or me. In ml Johal the production is conservatively optimated u increasing w shout of annually me little e M No festive masures to limit or - cultivation are in oriden anywhere. There m a - in 1995 in to provinces, Emisher (about five time M Large w the Notherlunds) which produced is that year 1993 mirio tens, at Inc (about the also of instria, Hungury and Address together) 194 mirio tess. Oultivation w to have boom totally repyrtent in Inc we the Ountral Covernment has arthorized twenty below (counties) to continue. The decrease in Emichew me - to the renges of Commist bendits. In twalve provinces there ml # production worth notice- ing. These 8901 Empti, Enaging, Publes, Cheklang, Elenged, I Inc 1 1 1 I 1 Is all the other previnces except Ninghola production in- creased is 1995. In Strong, Gainghai, Sulymn and Choker there me as evidence of suppression. In Kansu and Samel the total production increased despite engyressive in limited aread. Is Ninghola the pro- duction, 780 matrie teas, w about average md, with the recent establishment of Government sales agencies in Hopelh, throatons to in- crease, The minero of the Comittoo will doubtlees resall the establishment in April, 1935, by interests comested with the National Covernment of China, of the have Rusk, the real yurgeso and object of which were mis public by the fearless end conselentions M. their Li-semg, of the Onstrol Team, to am I have proviously paid tribute in this committee and would - report that trimis. the amount yeryess of this Bank w to afford tumes assistance in financing their operations. The roal yuryors W to fineste the opium trade. In the past two years, this bot has extended the operations to verious opium protesing dictricto end has opened because is the loading citize of China with a visa to facilitating the opdem treffie. The Bask, which has a $7,000,000 paid-up capital, is M reported to have been authorized to Lease $100,000,000 worth of basketen, 4 dr constrate which indicates that the opins trade has tem a profitchle - for the past three years and that - confidence in its fulure is fals. 15th regard w the amggling of epium into thiss, I should like to call attention to the cotizates más public w the sizion as & result of a stely note w that body of China's foreign trode for the past tea yours. that estimate places the quality of opdum the suggled to 1998 est 1984 et 44,000,000 Chineco - equivalent to 1,637 teme of which about 1,000,000 Chines - aquivalent to about 39 team was octimated to have been amegied into. Regraded Unclassified 29 Mirm. Mile this cotimate - entirely too high, n my w noted that 278 1/5 metris team of Insuries općen left Subtot no a a I 1 I ante B ENT 18 n I I that additional Irenica epin has also been beengist into Give from I OFFICE a justed 1 an 1 s a É Certratives, information M emplote as that in regurd to w ep&m, but the date obtained is illundrating novertholoss. It 10 interesting to note that Years ships ml about 29 motrie teams your - of optum dross. AS to murphine and haveda, the following provinces - apparently free from elentrotine manufacture: Energes, Chokleng, I I a I I I and Cheker. Manufacture of derivatives appeare to exist in all of the other provinces. In Chise, south of the Great Sall, crede maryhine is produced in the principal epim producing previnces at chipyed to Shanghed, Hanker, Tientein and Pelying the refining and conversion into herein. The clandestine of herein is Southern Fekies oppours to centime unstated, In Number's ml Jehal video, of - - informed by the Japanese representative, there is no Ingislation to central - fusture w trade in derivatives, the citantion is terrifying. with regust to the situation in I should like to quote the following trom the "Mastaria Daily Nome, a Jupenase - paper published at Dukron: The them - millim you worth of me- cottes such as moughine, epium, and other drugs - being surgeled into Indom every month, the local police authorities declare. 2 I I I the / ID this city by professional maybers disguised of Importal tourcless, * obtain their gests from illieit is liabine and other - is the district, 10 to said. Thath a to years up, with Deáven of the i sele a at tuttles be form, - e a in this country. met ⑆ the Mg declare in 1 I 1 % I 1 quarters hope. with the entersement of strict regulations to the control w the truffls is the Instrug Loased Turritory following the All- Julicial Conformento last fall, - met of the dams declare is Bairen - fureed to the to Tientsin and Min. the they set I I 1 I Superies a e Regraded Unclassified 30 became the conters of revived drug traffic is this part of the world. Between them they outpured the matests of and Marth Gaine. Durestine product in Tientain mothly trand thair my to Tringine, end other parto of Dorth China, while the Matire dealors guined 0 metaly of the Instruction I The filght of the associate producers al dealars from this city, hourse, has met changed the conditions of supply at - have. 2a fast, the - of muggled drugs has been 1a- oreaning of late, until today 10 is estimated that about 1,000,000 yes worth of the illieit 1 i late 5 the The police authorities have instituted stricter - to storp out the traffic, orders having been issued to all police offi- - at stations mi - the trains to Deives to keep I class watch n all passengers," All - information from this part of the world tends to seafire the above report. Not only this, but also the almost unhaliovable conditions obtaining in the co-called "Smilitarized 1101° in Keyah, the do- grossful state of effairs in Tientain end Poining, the terrifying spread of any eddiction in the Hogela countryside, and the centitions found to exist is Shanghai, for all of which Jaguantee at Kerean trafficiers - responsible, are elegemt tectinumy of the helpless- mess of the authorities is Chine, who are limited by their Less be posalties which are profectly ridionlens. This matter of yearalties has, in the part, reportedly been brought to the sttention of the Jayanese representative by the Committee. For yesrs the matter has been an open he ofter year the Optime Advisory Condition has called attention to this purfectly indefensible state of affairs. It is certainly met unfortunate that in all these yours as effective estion has been tables to realy this situation which mine not only China bab Jupen steelf and all pressarions a heren, a refuge and - beadquarters the callous end Known the are n assessibilly and blithefully prisenting that followse to gain. I speak of this with feeling because I have been brought to regard this failure to discipline end punish these yoursears in Jagen ml China not only # - est of to the Chinseo bet also as on undrissity art temple the nations of the Morth invoicem continue, Canada, and W - cominy. Let w tue forts. Where Jugamose influence elmacao in the Per Butt shot - with 197 Drug traffic. Mast to the received below penalty, a for rest is 4 confortable jail end 8 fine commiting almost to the profits of - day's business of a party trufficher. an atted to effer suggestions in regult to - of # operation with the Chiarse at other Overmants is respect of the China situation, the interious Government cognoted: Regraded Unclassified 31 1) That the things - should publich detailed statistics w youriness of the aw planted with mm. the production of to the - of općun, both M el perpored, the qualities of ⑉ epten und too producting opten propared for I I at % 1 $ 1 1 É - obtained from the traffic; 2) that the Chinese Covernment should rester - effective its prohibition of the inport into China of Treaten w other foreign optim; 5) That the British - should continue to supply, as in the pust, details 12 regard to the novement of sydun from the Persian only; 4) That the Chinese deverment should minit for trummiesion to all the parties to the 1991 Convention initividual reports as all important - of illieit treffic not also- destine discovered in Chinas ml 5) That the authorities of the Inter- national Settlement of Renghal should - time to and reports as individual IN of illieft truffie for distribution to the authorities of parties to the 1991 Commention, and that sinilar reports should continue to be submitted is regurá to other foreign in China. I hope that these suggestions will be followed out. I wish to old to these suggestions another, vis., that the Imm dovernment, whese subjects have been mere widely end - elecely competed with the illiedt traffic in China in meryhine, herein and cossine, then these of - other country, should without further delay take stage to punish effectively the Japanes one Eurous the are responsible the the clanisatine traffic ni illicit and the have the berought the - of Japen iste disroynte. M to Chine, to is to be hoped that this - flood of opins will - to be stomal. that is the 2019 of the treatle. the in these days is going to sumgalo merchine, haredn w results from Burage w Amrica w this - w could sall the in the five times, w is the United Stabes too from sixtem to tenty time what they - cold to at setail in Ris. Kip mgestion to to consentrate, u te as sunggling to concerned, a cossino from Jupen and Frances, and as Ireates epter from whatever part 10 - bob, above all, 90 out dom the met supply of opinn within the country itself. Until this is smo, didne will continue to be a 32 ramestic - to the wes. m. I ashmit - se remise to be - whether - eyetem established to China will seally load to a relection > w - of chists end to 8 - is the production and m of epim w whether 10 viil lead to the perpotantion and advasion in China - of to should not less of the tust that the procest plan, whatever the ultimate results - fail to mise may to the Government. the Me of the unit to - - to the - of Obles and Jagen, 1 I 3 3 I 1 a 1 s I I I If I 1111 1 I 1 1 I r a I % 1 i 1 be equaluaton, the U.S.A. Representative endorsed the lend- able sentizione expressed w the Chinese Control Committee for the Suppression of Opdem and quoted w the Chinces dovernment's represents- tive at the Committee's proceding meetings- ml the Revenued to fimily determined to suppress totally the općun - within the yes- scribed posted of 6 years; =2) the deverment will not allow the patty revenue accounting from the sale of optun to malify its six-year plan to the auggression of optimal =3) The shole nation - support the Gevern- mmt, give $0 guidance et - 10 in 190 compuign against the nieuse of musestic drugs. so foture of the native dependo - the - of this compaign one the whole notion - imadistely - 8 fight so the douth with the - which 1 code I 1 I B a B I I i Galmol - (Cannin) reminded the Committee of the I I & 1 $ 1 1 Principal 1 (er. page or of the Minutes of the Rightesis Secuton): Regraded 33 The a maker of yours past Inc I I 1 I I è I to protection s 1 I i trufficking - the Panific Coart. This effort bet been storonghy oxperted w the Courte is importing many and in that a very large propertion of the in the ponitentieries n the Pastile Coast - - I I I 8 I I 1 r 1 1 I wish - definitely Income to Omain to - from the her 2000, net necessarily from - I H Internal 1 I optim, - meryhine end - herets - salued - the Pasific Const of Genela them in 100m. the Genetian - the that remove and for others upon which deleased - 454 not doem 10 to dilate at the procest and 1 / I 1 $ Improved 1 I I i one - endors to tagreso that mately - the Comdittee." That this statement ass not incurrectly represent the view of the Constion Government me intiented by the fast that 10 - referred to w the Genedian delegation to the 1954 Accountly which - led W the Frime Minister who, in his report, mational that 1 s any # E 1 Colomal - fully realized the unpleanment situation of them the had to tow the - of complaints as oursens as those made today, - be could - the representative that be himself had been in a similar position. Im to yours up Ganada, undertunately, - the chief ember emplying norestice to Insured est thiough is the United States and the Federal atterities and very property complained to the result - a cholahouried - otten between the authorities of both contains colminating in the assest of the big trefficiers and the imposition of heavy penalties. I 1 F a A / 1 I from - particular outstay in the statement already getal, he bed had Jogan particularly in mind, at Mo stress conviction, based upon Regraded Unclassified 31 34 immige w not - grost, m that Genela w the vistin of a wall-empenised traffic true Japan. You that they had the intorm- tim contained in 0.6.5.274 regarding five arrests unde is - met cartein arreets of mis about the - time in Secttle, 10 me pessible to be - - emplicit. the a SoLumes had min a class cively of the information contained in 0.0.5.274 test he would like also to resist the Advioury Condition that the trafficture in Kabe, Jagan, who had coplied all the - cetter, had himself written, later alia. as follows: *Secomse - lourned that there is a very strict Customs inspection at all American and Considien ports, - studied and tenal that the best mothods to everyone this difficulty on as follows: 1. In using maters of ships' - fee this business we will supply the with deuble cossed sales as their chose. This nothed has been adepted in - business with China at India and proved n successful that not a single case - discuvered. m this nothed each person lase 1 I taxes 1 ! # I s 8 B. In - of shipping w - emp, 10 10 sent into the country of conned goods, each - being prefect in weight, size, ebs., to conform with the skipping yours. (20 is à I I s I 2 I I with pickled goods). "with thise above withols you will be absolately free from my - of discovery. Kindly consider this mather cortently ml introductions to w with much of the - as you believe to be and the would like to enter this basiness .... "Price list as follows: (Jayem) L Hydrochlorie Arid-Moryhine (Crystallised like ostima filse) 10 es. bettle at ser your es. & Hursta - Foutured . as M. bettle at - your a 8. Gesains - (Grystallised is onlo form) s n bettle at MY your a - above grode are understand by - 35- mission of the Maister w Interier and are of best quality for injection, or applied in tabacco. they - all in - wes, aspecially funured w Chinese, "If you 40 not wish to handle these goods w suilare, you my hendle them M - - as above nentioned (ez absolutely porfort mothed). In this case if you deposite $2.00 - will ship the goods to you. This is a rether difficult proyecition to begin with, but we have done 10 previously with good results. I THE u Inchemed, Kimmushi-Seri, Kabe, Jugen. Cable abdress: Third, Este. 7.8. When you ender by cable, please - above aldres." There me, - the following statement mis by Termiste, and of the - expected in "The Morphise - from Jagen, where 10 - 'chosp as dirt' and evailable is milimited - titles. n cald that the érage - turned - in Jupen to maters of the ring the - employed at ambers of the - on various Jayaness boute. The - had instructions to three the drugs - board if there - the slightest change of their being discovered as, oning to their low esst in Japen, their less - of little - Amounts further stated that these drugo - not only smogled into Teaseurer but also into Seattle, Portland, for Transisco and other United States ports, and that deals of ton, tenty w fifty yourd late could be estranged if desired. b also said that the - - the beat with when they - at present dealing would and allow the drugs to be brenght ashere values first paid the, and If this ase - happen before the best suiled again from they - tobas beds to Jagan. They had tennedy been dealing with a - the had allowed the to heep the dauge in and dispess of then between verages, but they had had truchle with him e e tume deal at he would no Lengue 40 instress with then that my." Unquestionskly the traffie had Issue expensions by - of curriero - a - x tests, w 6 strety of the tensity- six photociate companying the report indicated. n - - - fortunate that, one thengh this cutrently important and persistent 36 violesale traffictor in Nobe - currected and commisted, m would - to be lichle only to these mothe' inpricement and a smill sine, which, is the end in comparison with the Imposed in end the United States, the vietta commiss, would appear to justify the use of the - "dentoney". - appealed to the Supences atherities, is conslusion, to view the existing situation as a - curtoms miter both from the stanipedat of present punishments and future determants. m. - (India), Vice-tholown, reminded the Committee that India's meet curiene problem in the applate of illicit traffic me the illieit importation of cessize. It - - is Initie that the cocatao - from the for mot, 10 - aurposted, from Jagan, but there - 20 ovidence to provo 18. for five yours up a efficial had been - to the he But the in establishing the incorrectures of the suggestion which had tem alvased that the drugs illicitly extering India under funged labals - of Chinago origin. It had, I proved impossible to - direct evidence in Japan iteelf at to obsther the anys wase or - net of origin. - that the report of the discoveries mis is Teaseurer - available, the Initien authorities fult that their emploien as to the enigin of the oceaine maggies into Initia - - final. Though the Topenoos Government had been supplied with all crailable Information $5 the subject, be segretted no my that - endobance had really toom received true that quarter. B, therefore, enterned the appeals unde by - United States and - seatchives that the Jayantso Government should give the met envious attention to the compleints - and take offective years estion to put a and w the traffic is quotion, Regraded Unclassified 37 n. INTERNATIONAL (Jagan), confirming the explanation already supplied to the mid that, as realising the extensly mine nature of the information contained to 0.8.5. I I I 1 2 2 Injury s it É I I a Information, I I 1 I I 1 E reserved w the Supenson arthorities but no felt - that when 20 entred the police authorities under immidiately tabe estána egainst the truffichers complained w. the - attention had recently been - to the insurance in the illiett treffic is drugs a the American Pusific Geart and instructions had frequatly hoom given to the consuler attention in humplean to cellaberate clearly with the authorities is tracking émm and megressing the illieit traffic. M a confirmence hald at Huskington in Awill last, Tepenson consuler officials had also been instructed to staty the met effective - of coping with the problem. Regarding the incloymey of the ambmess imposed by TITLE Jun, I I I a 1 I E to to overceme is reselying this defect, the problem me, however, being seriously staties end be hoped that in the me feture a start would be unto is uniting the existing legislation en the mhjost. no could - the Committee that the - - by as - indifferent - - giving the problem ito cotiens I Major can (United Einglen) jodned in the appeal. male to the - - to to effective astám against drog - m Signature autionals. though the Valted Elegien m not often (frectly affected, the activities of Jugurese truffience - a goseb may and - to its authorities in the the Regraded Unclassified 38 2001. Evidence is the form of labels, of detailed reports had often been supplied to the Japan ⑉ enthorities proving that cossise w being amagled from Japan or Jaganase possessions. If the Tupaneno Government could take effective action et as early opportunity 11 would be of great assistance to the United Kington authorities is the Far East. The disenssion - adjourned, The mesting 2000, Regraded Unclassif 39 31 STATEMENT MADE BY THE AMERICAN REPRESENTATIVE AT THE TIME WHEN THE CONVENTION OF 1936 FOR THE SUPPRESSION OF THE ILLICIT TRAFFIC IN DANGEROUS DRUGS WAS, ON JUNE 26, 1936, PRESENTED FOR SIG- NATURE. Statement made by Mr, Stuart J. Fuller As you will recall, from the statement which I made shortly after the opening of this assemblage, the American Government sent delegates to participate in the work of this Conference with the understanding that the task of this body was to draft a Convention which would (1) strengthen the measures at present available to prevent infringement of the principles laid down in the opium and drug conventions; and (2) provide international agreement to prevent and to punish in an effective and deterrent manner the illicit traffic in narcotic drugs whether raw or refined. We hoped that the Conference would enlist the in- creased cooperation of other Governments in the interna- tional effort to suppress the abuse of narcotic druge, particularly in the suppression of all kinds of illicit transactions in opium and its derivatives, in ooca and its derivatives and in cannabis and its derivatives. With that end in view, the American Delegation drew up and presented to the Conference certain carefully thought out suggestions which we felt would modify the draft text in a way to promise real and practical results. The Convention now presented to UB for signature, however, contains a number of stipulations which the American Government finds itself quite unable to accept; and I rise to place on record and to present to you the American Delegation's statement concerning the features which render this Convention unacceptable. Law enforcement officers the world over know from experience that the first object for them to attain in combatting and preventing orime 18 to deprive the criminal of the profits of his illegal acts. The Convention con- tains no stipulation in regard to thie. This Conference rejected a proposal for such a provision and must assume the responsibility for that omission. The American Delegation placed before the Conference ite view that embodying in the Convention a specific enumeration of acts required to be penalized as criminal offenses was not practicable and would lead to the very difficulties which have occupied the time of this Confer- ence for days past, that is, questions arising from the difficulty of precisely setting forth these offenses in such a way that the description would accord with all of the different systems of law. Regraded Uncla 40 -2- 40 We also pointed out the inadvisability from a practical point of view of undertaking to dictate thus in detail to legislative assemblies. We regret that the Conference did not see fit to adopt our suggestions, which would have bound each High Contracting Party to enact, within its own framework of law, measures to punish illicit traffic severely and measures designed to aid the officere of the law in their efforts to suppress that traffic. Such frequent reference has been made in the course of the Conference to the Multilateral Treaty for the Suppression of Counterfeiting that it seems pertinent to present & few observations in regard to the bearing which it has been assumed that that Convention has upon the one which we are now asked to sign. Aside from the fact that the connection between falsifying money and poisoning one's fellow man, if it exists at all, is at best tenuous, we cannot forget that the Counterfeiting Convention, signed over seven years 030, has to date been ratified or acceded to by only twenty-three Governments. Only three Governments in the Americas have ratified or acceded to it. For reasons constitutional and otherwise, much the same as those which preclude my Government from sub- scribing to the Convention now presented for signature, the American Executive has not presented the Counterfeiting Convention to the Senate of the United States for consent to ratification. Of the components of the British Empire, we understand that only one, the Irish Free State, has ratified that Convention. We also understand that another one of the great powers, France, has not yet ratified it. As we have already informed the Conference, it 18 our view that the offenses enumerated in the Draft Con- vention are not set forth with sufficient precision to afford a clear and legally adequate basis for the legisla- tion necessary to make their prosecution possible. Law officers of the American Government have held that the embodiment in the Convention of this list of offenses would call upon the American Government to replace its existing system of control, prevention and prosecution - (a system which has proved its worth and has received thorough interpretation in the courts) - by a much weaker system largely devised by those who state that their Governments do not have an illicit traffio problem to handle. Those who have had ample experience in the actual handling of this problem were in attendance at the Confer- ence and presented the results of that experience, but in few instances does it appear that that experience was taken into account. We had hoped that the Convention would be drafted in such a way as to provide a legally adequate basis for the legislation necessary to make possible the punishment of illegal cultivation and gathering of cannabie, a drug the increasing menace of which is causing apprehension throughout Regraded Unclassified 41 -3- 41 the world. The Convention now presented for signature will afford no constitutional basis for federal prosecu- tion in the United States of such offenses in respect of which we must, therefore, continue to rely on the efforts of forty-eight States. The American Delegation stated, in explaining its proposed amendment of the extradition Article, that it considere the final paragraph thereof to be practically a nullification of the entire Article. That paragraph vests discretion in any Government to refuse a request for extradition on the sole ground that "the High Contract- ing Party or its proper tribunal considers that the offense of which the fugitive offender is accused or convicted is not sufficiently serious". When consideration is given to the fact that a number of Governments do not appear to consider 88 "serious" offenses which many nations punish by very severe penalties, it will be apparent that the final paragraph of the extra- dition Article would render that Article practically worthless as a basis for extraditing narcotics offenders from any country which is disposed to deal lightly with such offenses, AB we have pointed out to the Conference, we consider that the first paragraph of the extradition Article raises a serious question as to the effect of the Convention on existing and future extradition agreements. In our opinion the effect of the Convention now presented for signature would be to inject uncertainty into the interpretation of our existing and future extra- dition treaties insofar as narcotics offenses are con- cerned and would seriously impair if not destroy the effectiveness of our extradition conventions in narcotics cases. We came here hoping that a long step forward might be taken by this Conference and that it might draw up a Convention which all could sign -- one which would serve to strengthen the measures intended to prevent infringe- ment of the provisions of the older drug Conventions. It seems to us apparent that some of the nations do not as yet find themselves in a position to take steps along this path any more effective than those embodied in the Convention now presented for signature. We regret that those nations are not able to obligate themselves to any greater extent than this Convention provides but we are impelled to state that the United States cannot, on that account, undertake to discard its existing system, which has been tried and has proved effective, for a system which would impose upon the narcotics administration in the United States the limitations which are embodied in this Convention -- limitations which, in our opinion, would constitute, in our case, a distinct retrograde step and would bring about resulte directly contrary to the purpose of this Convention. To Regraded Unclassified 42 -4- 42 To sum up, the principal reasons why we find our- selves unable to sign the Convention are the following: In the first place, we consider that application of the stipulations of the Convention by governments which at present find themselves the principal victims of 11- licit narcotic traffic would weaken rather than strengthen the international measures available today to suppress the abuse of narcotic drugs. In the second place, we consider that the stipula- tions of the Convention do not tend in any increasing measure effectively to prevent or adequately to punish the illicit traffic. In the third place, we consider the stipulations of the Convention to be impracticable because they attempt by means of a treaty to dictate to legislative bodies the exact terms of legislation which those bodies should pass to meet the obligations of this and of the other drug conventions. In the fourth place, we consider that the Convention fails to meet the situation in countries where extraterri- toriality obtains, those being the countries where the drug situation is at present most acute. In the fifth place, we regard the Convention 8.8 inadequate insofar as cannabis is concerned. In the sixth place, we consider that it would be a retrograde step for the United States to discard its present system of prevention, prosecution and punishment as the ratification of this Convention would require it to do. In the seventh place, ratification of this Convention would jeopardize the established and well tried system which the United States now maintains of extradition for narcotic offenses. We may say, however, that the American Government, while it cannot undertake to sign this Convention, will nevertheless continue to extend to all nations, in the campaign against the abuse of narcotic drugs, the fullest possible cooporation, as it has in the past. We believe that this can be done more effectively under our existing system than under the limitations which this Convention would impose upon us. Regraded-Unclassified 43 OPIUM ADVISORY COMMITTEE KLEY SESSION LEARE or NATIONE E The Subcommittee on Seisures mt from May 11th to May 18th under the Chairmanship of Colonel Sharman, Chief of the Canadian Nareotic Service. All important seizures having an international angle were discussed and e endeaver was made by the Governments concerned to close the evenues of cocape of the drugs into the illicit traffic. The meetings of the Subcommittee are secret and reports of these meetings are made to the Plenary Committee which held a public dis- cussion of the Subcommittee report during which many Governments were criticized for the lax narcotic laws and regulations permitting escaye of drugs into the illieit traffic. BAHAMAS The first subject discussed we Sir Anthony Eden's statement in the League Council to the effect that the American report for 1934 was erroneous in its assertions regarding the illicit traffic between the Bohamas and the United States. Mr. Analinger made a statement of the facts which led the American Government to make those assertions and produced such evidence showing the extent of the treffie between West End and Bimini, Bahamas, and Florida, chiefly by airplane, in 1934. He concluded by saying that this traffie bad now practically consed. Mr. Fuller pointed out that Eden's statement me a reflection on the Opium Advisory Committee, the Seisures Committee, and the United States (British) Government. with the assistance of Major Goles/a pump me inserted in the Subcammittee report taking exception to Eden's statement, point- Regraded Unclassified 2 44 ing out that neither the Subsommittee nor the American Government had accused the British Colomial Authorities of neglect, that illieit traffic not certainly carried on from West Ind and Dimini to the United States in 1934, and that the situation had materially improved in 1935, Test End and Dimini having been practically abandoned u bases. PLEMARY SESSION The Plenary Session started out in private with a discussion of the statement given to the press by Mr. Lyall, British representative and Chairman of the Perument Central Opium Board, who is also - Assessor acting in an expert and advisory capacity on Far Eastern af- faire for the Opium Advisory Committee: LYALL'S STATEMENT This statement was to the effect that the present system of combatting the illicit traffic had completely broken dom. Mr. Fuller and Colonel Sharman (Canada) stated that this statement, based on incomplete and insccurate information, constituted a reflection on the United States and Canada; that it vas based solely on statistics of customs seizures for one year, 1934, those for the United States being given as 39 kilos, whereas the actual figures of all seisures amounted to 351 kiles. Much evidence was adduced to show that the system of controlling the illicit traffis we having very satisfactory results. It was pointed out that the prices in the illieit traffie afforded - excellent burometer and they showed - increase of five hundred por cent. The Subsecumittee was unanimous in condeming Lyall's statement, which TM regarded as meet unfortumate, despite Dr. Hoo's Regraded Unclassifie 5 42 efforts to have the Committee take note merely of the revised version of Lyall's remarks finally published in the Board's Report. The discussion in the Plenary Committee wes equally interesting, Mr. Lyall having taken occasion to repeat the very statement to which objection had been made. Mr. Analinger refuted Lyall's assumption that American addiets were consuming on an average of six grains of morphine a day. Lyall's other assertions in the case of United States were shown to be without foundation. Mr. Fuller deplered the damaging effect of the statement which, he said, me hailed with delight by traffickers and those opposed to control of the illicit or lieit traffie, and with loud guffaws of laughter by those who know anything about the subject. The Canadian and British representatives took the strongest exception to Lyall's remarks. Major Coles (British) said that the erronsous statement had been featured in practically every newspaper in the British Isles. The French, Dutch and Indian repre- sentatives chimed in, and the consensus of opinion vas clearly that Lyall's statement was wrong and entirely uncalled for. The repporteur was instructed to put a full resume of the debates in the Committee's Report. The discussion THE in private session. ACID AGETIC AMHYDRIDE Statistics of importe and exports of Acid Acetie Ankydride, used in the manufacture of herein, were closely examined by the Committee and many cases were traced to Japanese consignees in China and Japen. NURVRILLANCE or SHIPS IN PORT The American observer's statement contained a earefully propared malysis of DEGRIZES to be taken by Governments and by steenship companies with respect to assgling by ships. The Genatian Government Regraded Unclassified 46 outlined the striet masures taken by the Canadism-Facifis, which has apent $24,000 a year for such surveillance, and considers the may well spent. It me amtioned that airplane escorts for incoming and outgoing shipe to abserve my contact with mall boats were sometimes necessary. The practice of fining ships when seimures are nade abourd is carried out only in the United States. In certain cour- tries it is impossible to fine ships and the endoaver is made to held the country of soures and export of the drugs responsible. The Chinese delegate spake of the use of police dogs in Chinese ports. There are three German rolfhounds and two Chinese dogs in service there. The period of training is six months. In twenty actual cases where the dogs were a help, sixty arrests were made for transporting opium illegally. The increasing use of tankers for drug amuggling me noted. The establishment of a Seman's Black List me urged. The case of Reinhold THOMAS, arrested in Baltimore on the 8.8. EXILONA, me the case in point. is a result of the publicity given this debate, the representative of the Amorica-France Line in Paris n instructed to explain to the American representatives the methods employed by that company in watching its ships in port. ANNUAL REPORTS The ensual reports of all Governments were considered and may Governments were seathingly criticized because of lax conditions. Employees of the League of Nations serving since its Corretion openly stated that in no other meeting of the League are nations no hestile and critical of cash other as when they met to discuss eyium problems. Statistics on the drug traffie are theroughly canhot and all discrop- ancies are brought foreibly to the attention of the offending Government, 47 Portugal came in for may bell minutes at the hands of the American observer because of conditions thought to be intelerable in Basse in the Far East, in view of evidence of graft mé corruption in connection with the handling of the Portuguese Opium Monopoly, the United States and Canada suffering from the back-wash from this scandal in the way of illieit drugs. IRAN The representative of Iran took - attitude of indifference to any criticism of the Iranian Government, reiterating that Iran is a sovereign nation and was sending opium to the Far East on legitimate certificates, whereas it was shown that the minor Chinese officials in some provinces sent these certificates to Iran without consulting the National Government in Nanking. It vas shown that 95 tons had been exported to the Far East, not on proper import certificates recognized under existing treaties. & list of ships leaving the port of Bushire was furnished the Iranian representative; two shipe leaving under cover of night, destination unknown. The Irenian representative raised objection to such a list on the ground that it was furnished by the British Government and not by the Iranian Government. After coa- siderable debate it no decided to allow the Iranien representative to present a list of sailings at the next meeting. It the privately agreed, however, that if the list was not forthceming from the Irenien representative, that the British agent at Bushire would furnish such a list which would be made public. CLANDESTINE FACTORIES Am attempt me mde by several nations to bring this miter up for public discussion, but the representatives of natime having had pelice experience, refused to enter into & discussion, stating that 48 they considered the subject are for private discussion mong police only. at that pablie discussion would result in disclosure to the narcotie traffickers the methods used by police to ferret out such factories. CONFERENCE TO CONSIDER THE POSSIBILITY OF CONTROLLING AND LIMITING THE PRODUCTION OF OPTIM AND CULTIVATION AND HARVESTING OF THE COCA LEAF The Committee passed a resolution which will be sent to the Council of the League, urging that preparatory work centinue en the basis of information already obtained from the opium producing com- tries. However, no information has been obtained from the cosm-leaf producing countries, and insumuch as over 90 per cent of the problem is with opium, and as it would be impossible to centrol the production of the coca lear because of its wild growth in South America and in Java, it was resolved to eliminate the cosa leaf from further die- cussion in order to speed up the control of opium. SANNABIS AND DRUGS DERIVED FROM CANNABIS (MARTHUANA) A special committee was set up to consider this problem and it vas unanimously decided that insufficient information me available and that the report would be awaited from the International Research Committee of which the United States has membership. However, this special committee went a record in reporting that the use of Cannabia in medicine could be abandoned. INQUIRY INTO DRUG AUBICTION This subject was explored mé - criticism me direuted at the opium menopely countries for not setting aside a certain part of their revenue for education ase propagands. 49 The Secretarist presented a document giving its findings on the extent of drug addistion in the various countries which brought forth Regraded Unclassifi such loud protest that the League withdrew the document. This caused considerable embarrasement as the newspapers had already pub- lished reports that the League had estimated that there were 30,000 drug addicts in England whereas the British Government has admitted only 780 drug addicts in the British Isles. CONFIDENTIAL. The Head of the Opium Secretariat approached the American delegation and discussed the propriety of withdrawing the League report because it was sausing great embarrasement to the League and to other nations. The American delegation was the only one thus approached as it was felt that would be the only source of objection to the withdrawal. It was stated privately to the Head of the League's Opium Secretariat that public discussion of the report with respect to addiction would not in my way embarrass the United States as the American delegation was fully prepared to enter into 8 full and complete discussion of details of drug ad- dietion in the United States. It appeared that other nations were jittery over a discussion of the problem as it appeared in the League's report. D This is a now drug discovered under the direction of the National Research Council, the patent for which me presented to the Treasury Department by Dr. Lyndon P. Small of the University of Virginia. the drug is 20 times more powerful than morphine and the American deloga- ties presented a lengthy report showing what research had been - dusted in connection therewith and its conclusion that the drug should never be pormitted to be manufactured. & sample of the drug is to be 50 submitted to the Health Committee of the League of Nations to be referred to the Office international d'Hygiene publique in Paris for further study. It is interesting to note that a Swies firm is arranging to take out a patent in Germany on this drug. This situation is being carefully watched, as & drug 20 times more powerful than morphine in the illieit traffic would obviously cause trouble to nations double that caused by heroin. METHODS OF DISTRIBUTING LAWS, REPORTS, AND SEIZURE REPORTS TO MEET THE STIMULATIONS OF THE DRUG CONVENTIONS The American delegation has been extremely critical of the League of Nations in the past for not distributing laws, annual reports, and seizure reports to signatories of drug conventions. These documents have reposed in the League files in spite of provisions in the conventions for distributing them, and before the matter case out for public discussion the League Secretariat presented & document to the American delegation outlining the method which would be followed in the future. This was done to avoid public eriticism of the League and to forestall the American attack known to be forthcoming. GREECE AND TURKEY Important information was received from the Greek and Turkish Governments regarding the fagaries of the Greek s.s. LIMMI, Incom to have earried huge quantities of NW opium catensibly destined for Abyasinia, Paraguay, end Venezuela in 1934 end 1935, but which is thought to have been landed in France clandestinely. The principal smuggler, Nissin TROUBROUT, was senteneed in Istembul to 10 menths in prisen und a find of Mr. 148,049. The Turkish authorities expect eventually to ascertain just where the opium was landed. Regraded Unclassified 51 Some of it was landed at Toulon and mm to account for considerable seimures of 20.0 opium in France subsequently. The Turkish representative stated that Turkey had reduced the area of opium poppy cultivation in the country 50 per cent, but found that other countries were increasing such cultivation. The cartel with Yugoslavia has been reacwed. It was pointed out that clandestine manufacture in Turkey centered in Istembul but was certainly decreas- ing owing to the energetic measures of the authorities who had 20- cently discovered four small factories, with primitive equipment. The elaborate establishments nem to have disappeared from the scene. CHINA AND JAPAN The high spot of the session me a debate on the situation in China and Japan. The American delegate's speech showed the deplorable conditions in Chine, and followed with a scathing indictment of the Japanese Government for tolerating and fostering an extended traffie which was poisoming hundreds of thousands of Chinese, the United States getting the back-wesh of drugs due to such a condition. This speech created a sensation in League circles and was regation as the most vicbus attack ever made on a Government during the history of the League. The Japanese delegate objected to the use of the words "unfriendly ast" in describing the lesses faire attitude of the Japanese Government, such words being usually recorded as meaning as act of war in diplematic parlence. It was urged by may delegates that Japen at least take stope to not up edequate penalties for drug trafficking. 49 the present time the posalty is only two months in jail. The Genedium representative stated that his Government No carded the situation in thise, where neatly (rup of 52 10 manufacture were being sold at prices lower then anywhere plea in the world, as serious and alarming. The terrifying syread of drug addistion was shown by faste at figures. Nine hundred Chincee were executed for drug peddling. The total opium production of the Chinese "exterier provinces" w stated to be 12,500 tons annually. or this, some 2,500 tons were used for the manufacture of drugs, yielding possibly 200 tone of morphine. The improved cooperation between (hinemend foreign authorities in Shanghei and other international settlements wes noted with satisfaction. The representative of India stated that Japanese cogains vas continually being smuggled into India of this traffie was their main preoceupation. The Japanese delegate assured the Committee that his Government was by no means indifferent to the illicit traffie and would most certainly take stops to put an end to it. A resolution was drawn up and passed by the Committee urging Japan to take action to remody the unfortunate situation as soon as possible. Dr. Hoo (China) gave information to the effect that there are four clandestine factories in Hankow, capable of producing seven to eight kiles of red pills daily; and he asked the Japanese delegate to have an investigation made. The use of these herein and morphine pills is said to be spreading to en alarming extent. The American statement on the illicit traffie in China and Japen is attached. syanshign we 1 53 LEAGUE OF NATIONS (o. C. /21st Session/P.V.13) ADVISORY COMMITTEE on TRAFFIC IN OPIUM AND OTHER DANGEROUS DRUGS TWENTY-FIRST SESSION Provisional Minutes THIRTRENTH MEETING, (Public), Held at Geneva on May 28th, 1936, at 10:30 a.m. * Chairman: Dr. CHODSED (Peland). Present: All the musers of the Committee, except the representatives of Austria, 40m Italy, Sweeten and Uruguay. 54 SITUATION IN THE PAR BAST Mr. FULLER (U.S.A.) made the following statement: "To are now considering the situation in the hr East, which includes, as W are reminded by the agenda, the general situation in China and also the situation in respect of Chapter IV of the Hague Opium Convention of 1912, which deals with 00- operation between the governments of China end of other nations; and it may be well to recall, at this juncture, that in this area, 1.0., in China, north and south of the Great Wall, over 90% of the opium grown in the entire world is produced, to say nothing of vast quantities of heroin many times the world's needs for medical and scientific purposes. Lest this be questioned, I call attention to 4. single seizure, reported by the Chinese Government in its 1934 Report as made at Peiping, of one-tenth of the annual needs of the world for heroin. It is in this area, China, that the prices of drugs sold for the purpose of satisfy- ing addiction are lower than anywhere else in the world, a. circum- stance which I need not tell you is vitally significant. It will doubtless be recalled that at a previous session of this Committee, in speaking of the vest flood of opium produced in China - practically none of which is used for any purpose save the gratification of addiction - I characterized that production as a menace to the world. I still consider that production as a menace and I repeat the hope that the Government of China will be able in time to suppress entirely production within its borders. Let us how attempt to marshal the facts available which have 4. bear- ing on this situation. It my be well to recall that the bulk of this production of opium in China takes place in what have been characterized as the "frontier" provinces, which form a semicircle around the country from Tunnan and Dreichow on the south through Sikang, Spechuan, Chinghai, Kansu, Shensi, Ninghsis, Suiyuan, Chahar, Jehol, Heilung- Hang, Kirin, and Lisoning. In other words, Ohina consists of a central core which is practically free from opium cultivation, sur- rounded by a belt in which most of the world's opium is produced. It should be borne in mind that in - of the provinces in that belt the National Government of China has for some time past had no control. This circumstance should always be borne in mind, The Chinese representative, at our last session, stated that it is the object of his Government to suppress the cultivation of the poppy and the use of propared opium in China by about the end of 1940. It 10 to be hoped that the Government of China, in its annual reports, will keep the other parties to the Limitation Convention of 1931 informed of the progress which it achieves Regraded Unclassified toward those two enis. The have before us the Chinese Annual Report for 1934, 199 have & mass of military laws and regulations, mi we have 6 certain amount of civil law. 55 To should not forget that the report in question deals only with 1954, the year in which the Government of Thing had merely más E start in setting up the organization designed to handle the problem along the now end very different lines which it has decided to follow. The report deals with & transition period. Kreever much " may regret that it contains nothing regarding the production of opium, as figures concerning the 2019> ment of opium, practically 200 specific information in regard to illicit traffic and claudestine manufacture in the interior of the country, end nothing concerning the revenue derived from the opium trade, - should not, in By opinion, undertake to base upon & report for 1954 city conclusions as to the results accomplished by the now plan fer meeting the opium and narcotic drug problem, Some inkling is given in the report, on page 14, of the possible volume of illicit traffic in heroin in Peiping, where it describes e. single seizure which involved 90 kg. of heroin, but the almost total absence of data concerning the in- termal illicit traffic makes it impossible to base on this report definite conclusions concerning that traffic, or concerning clandestine manufacture of derivatives. As for the laws and regulations which have already been circulated to members of the Committee, it appears to be not yet quite clear whether they are part of the substantive law of China as & result of having been passed by the body constitutionally clothed with authority to enact legialation or are merely military orders. The Secretariat informs - that they have not yet been sent to the Secretary-Genaral by the Chinese Government for trans- mission to the other parties to the Limitation Convention of 1931. As to the suppression of opium smoking, I do not propose to enter into a discussion at the present time other than to say that I still believe that the way to suppress is to suppress, and that I deprecate the establishment anywhere of Government menspolies. It is not going to be easy in 1940 to give up the rich revenues to be derived by the Government from peddling opium to its citizens. What I do wish to speak about is the production in China of raw opium and that of opium derivatives. Realizing the danger which results from the enormous pro- duotion of opium in China, the American authorities enlisted the sid of reliable, well-informed and public spirited Chinese citizens in every province of China to conduct B. nation-wide survey of the pro- duction of ruw opium and of the production of opium derivatives. This survey no made in an entirely independent manner. It was made without the cooperation or even the knowledge of diplomatis or conse- lar officers. The figures ware largely obtained from Chimese officials, who would naturally speak more freely under those circumstances. The survey covered the cost of production, taxation, selling prices, volume of production, movement of the opim, and production of derivatives. It covered every province is China, Regraded Unclassified 56 both north and south of the Great Wall, The figures are illumi- nating. The figures for opium production wire tabulated, the lowest estimate being taken for each province. The total pro- duction - to 12,261 matrie tons, or over 90% of the world pro- duction. Had the marimum estimates been taken, the total would have been 18,000 teas. The largest producers in 1955 were: Tunnen (about the size of Poland) which produced s,ess metric tons and Sxeekman (about the size of France) which produced 4,334 toms, Manchuria and Jehol accounted for 1,325 metric tens. In Tunnan, masures (which I an informed were effective) were taken in 1935 to suppress cultivation in certain haiens (counties). At the - time, however, official encouragement was given to increased oultivation in the rest of the province, so that it remains to be seen whether the total production will decrease. Poppy is sown in Tunnan in October, Just before the sowing season in 1935 an order is reported to have been issued by Mr. Luh Tsung-Jen Commissioner of Finance, and, concurrently, Head of the General Opium Suppression Bureau of the province. This order is reported to have been widely circulated in various parts of the province and posted in public places. Since the proclamation decreed by General- issimo Chieng Kai-shek, calling for the suppression of opium in Yunnan in the spring, many farmers had hesitated to cultivate poppies in the autumn of 1935. The purpose of the order issued was apparently to assure the public that poppies may still be grown and that those who discontinue growing them may be subjected to heavy punishment. The contents of the order in question are reported to have been as follows, in translation: ORDER OF THE GENERAL OPIUM SUPPRESSION BURRAU YUNNAN The public is hereby notified that this province is the poorest province in the whole nation, and that there are hardly any Tunnan products which are marketable in other parts of the country with the exception of opium, Perfectly usure of the evil of opium, the Government, with the interests of the people at heart, realizing the suffering which results from funds and poverty, doess it expedient to allow cultivation of the poppy as a means to relieve the people of their financial stringency. But if the cultivation of the poppy does 20 more than supply the local consumption of the prevince, it only impairs the health of the people and contributes nothing toward their income. The result will be that the suffering will become mare serious and the conditions of poverty No min. Regraded Unclassified 57 For this reason, the Opium Suppression Bureen has formulated a plan for the Govern- asst to undertake the sole transportation and distribution of opium, and also to limit the making addicts in this province. All these plans EN carried on for the sake of the people and aut to earich the Government. It is very disappointing to know that a group of ignorent people in this province has recently circulated the rumor that it is illegal and unprefitable to cultivate the poppy. They have either cultivated other crops in place of the opium peppy or have left their old peppy field lie barren. Such practices cannot be of any harm to the Government, for these people will have to pay the poypy tax regardless, con- sequently, the loss falls upon these people. Furthermore, the transportation and trade in opium under Government enspices my realise funds for the Government to push reconstruction along various lines of development in the interest of the public. The people of Szechuan have been compelled by circumstances to pay in advance over fifty years of land tax, If no revenue is derived from opium in this province, how could TO met the civil and military expenses? The result will be, of course, to callect more taxes from the people, and more suffering will naturally ensue, The public is hereby earnestly warned against refraining from cultivation of the poppy. They are advised to continue culti- vation in old poppy fields. They should not be inconsistent and irregular in the culti- vation. Such actions are equivalent to ignoring Government orders and offering negative resistance to the authorities. If such cases are discovered, the offenders will be subjected to fined doubling the rate of regular poppy taxes and they will be looked upon as counter- revelutionary. In order to dispel any doubt on the part of the public, this order will serve to reiterate the stand of the Government in this issue. It is hoped the public as & whole will obsy this order and NW poppy as usual. They should not listes to runer and thus involve themselves in trouble. (Sealed) Lah Trang-Jes Commissioner. 58 In Szechuan BORN effort will made toward suppression in 1935, but the tea haiens (counties) which have in the past pro- duesed the bulk of the Szechman production WS20 officially permitted to continue production, It remains to be seen, therefore, whether and to what extent there will be any reduction in Smechman production or not. In Manchuria and Jehol the production is conservatively estimated as increasing by about ex annually ml little or no of- fective measures to limit or suppress cultivation are in evidence anywhere. There was a decrease in 1935 in too provinces, Exeichew (about five times as large us the Metherlands) which produced in that year 2901 metric tons, and Hunan (about the size of Austria, Hungary and Switzerland together) 194 metric tons. Cultivation The to have been totally suppressed in Bunan but the Central Government has authorized twenty haiens (counties) to continue. The decrease in Dweichow was due to the ravages of Communist bandits. In twelve provinces there was no production worth mention- ing. These are: Kwangsi, Drangtung, Fukien, Chekiang, Klangsi, Hupch, Anhui, Kiangsu, Honan, Shansi, Hopeh and Shantung. In all the other provinces except Ninghsia production in- creased in 1935. In Sikang, Chinghai, Suiyuan and Chahar there vus no evidence of suppression. In Kansu and Shansi the total production increased despite suppression in limited areas. In Ninghsia the pro- duction, 780 metric tons, was about average and, with the recent establishment of Government sales agencies in Hopeh, threatens to in- crease, The members of the Committee will doubtless recall the establishment in April, 1933, by interests commected with the National Government of China, of the Farmers' Bank, the real purpose and object of which were made public by the fearless and conscientions Mr. Chow Li-seng, of the Control Tean, to whom I have previously paid tribute in this committee and would now repeat that tribute. The announced purpose of this Bank vas to afford farmers assistance in financing their operations. The real purpose m to finance the opium trade. In the past two years, this Bank has extended its operations to various opium producing districts and has opened branches in the leading cities of China with a view to facilitating the opium traffic. The Bank, which has's $7,000,000 paid-up capital, is now reported to have been authorized to issue $100,000,000 worth of banknotes, & oir- currtance which indicates that the opium trade has been a profitable one for the past three years and that 6000 confidence in its future is felt. With regard to the emaggling of opium into China, I should like to call attention to the estimates made public by the Academica Sinica as e result of & study mis by that tody of China's foreign trade for the past ten years. That estimate places the quantity of opium thus smiggled in 1935 and 1934 at 44,000,000 Chinese cusses, equivalent to 1,637 tens of which about 1,000,000 Chinese ounces, equivalent to about 37 tome ware estimated to have been muggled into 59 Dairen. While this estimate new entirely too high, it my be noted that 272 1/3 netric tons of Iranian opium left Bushire for China in 1933 and 45 metric tons in 1954, and that the rumor persists that additional Iranian opium has also been brought into China from Iran through other countries. OPTUM DERIVATIVES The survey, naturally, did not develop, in regard to opium derivatives, information us complete as that in regard to rew opium, but the data obtained is illuminating nevertheless. It is interesting to note that Tunnan ships out about 19 metric tons per annum of opium dross. As to morphine and heroin, the following provinces are apparently free from clandestine manufacture: Drangsi, Chekiang, Kiangsi, Sikang, Chinghai, Kansu, Shensi, Anhui, Shansi, Ninghsia and Chahar. Manufacture of derivatives appears to exist in all of the other provinces. In China, south of the Great Wall, crude morphine is produced in the principal opium producing provinces and shipped to Shanghai, Hankow, Tientsin and Peiping for refining and conversion into heroin, The clandestine manufacture of heroin in Southern Fukien appears to continue unabated, In Manchuria and Jehol where, as we were informed by the Japanese representative, there is no legislation to control manu- facture or trade in derivatives, the situation is terrifying. With regard to the situation in Menchuria, I should like to quote the following from the "Manchuria Daily News", a Japanese now paper published at Dairen: "More then one million you worth of nar- cotics such U morphine, oplum, and other drugs are being suggled into Dairen every month, the local police authorities declare. "These drugs are being secretly conveyed to this city by professional mugglers disguised as inrocent travelers, who obtain their goods from illicit manufacturers in Mulcdem and other centers in the district, it is said. "Until a few years ago, with Dairon as the base, drug traffic on a huge scale we carried on in this country. Most of the big dealers in and manufacturers of narcotics had their head- quarters here. With the enforcement of striet regulations for the control of the traffic in the Drantung Leased Territory following the All- Manchuria Judicial Conference last fall, however, most of the drug dealers in Dairen were forced to flee to Tientain at Makrien. Here they set up a thriving business, and these cities soon became the centers of revived drug traffic in this part of the world. Between them they captured the markets of Manchuria and Morth Ohina. Narcotios produced in Tientsin mostly found their way to Tsingtas, Shanghei and other parts of North China, while the Madken dealers gained & monopoly of the Manchurien markets. "The flight of the narcotic producers and dealers from this city, however, has not changed the conditions of supply and demand here. In fact, the amount of smuggled drugs has been in- creasing of late, until today it is estimated that about 1,000,000 yea worth of the illicit goods are being smiggled into this district. "The police authorities have instituted stricter neasures to stemp out the traffic, orders having been issued to all police offi- cers at stations and on the trains to Dairen to keep a close watch on all passengers." All our information from this part of the world tends to confirm the above report. Not only this, but also the almost unbelievable conditions obtaining in the so-called "demilitarized zone" in Hopeh, the dis- graceful state of affairs in Tientsin and Peiping, the terrifying spread of drug addiction in the Hopeh countryside, and the conditions found to exist in Shanghei, for all of which Japanese and Korean traffickers are responsible, are eloquent testimony of the helpless- ness of the Japanese authorities in China, who are limited by their law to penalties which are perfectly ridiculous. This matter of penalties has, in the past, repeatedly been brought to the attention of the Japanese representative by the Committee. For years the matter has been an open scendal. Year after year the Opium Advisory Committee has called attention to this perfectly indefensible state of affairs. It is certainly most unfortunate that in all these years no effective action has been taken to remedy this situation which makes not only China but Japan itself and all Japanese possessions a haven, a refuge and an unsurpassed headquarters for callous Japanese and Koreans who are so successfully and blithefully poisoning their followmen for gaine I speak of this with feeling because I have been brought to regard this failure to discipline and punish these poisoners in Japan end China not only as an not of unfriendliness to the Chinese but also as an unfriendly ast towards the nations of the North American contiment, Canada, Maxico and my own country. Lst us face facts. Where Japanese influence advances in the far East what goos with it? Drug traffic. What is the reason? Marimum penalty, a few weeks' rest in a comfortable jail and a fine amounting almost to the profits of one day's business of a petty trafficker, When asked to offer suggestions in regard to manures of 00- operation with the Chinese and other Governments is respect of the China situation, the American Government suggested: Regraded Unclassified 61 1) That the Chinase Government should publish annually detailed statistics by provinces of the ureas planted with poppy, the production of raw opium, the movement of opium, both raw and prepared, the quantities of raw opium used for producing opium prepared for smoking, stocks at the end of each year, and revenues obtained from the traffic; 2) That the Chinese Government should render more effective its prohibition of the import into China of Iranian or other foreign opium; 3) That the British Government should continue to supply, as in the past, details in regard to the movement of opium from the Persian Gulf; 4) That the Chinese Government should submit for transmission to all the parties to the 1931 Convention individual reports on all important cases of illicit traffic and clan- destine manufacture discovered in China; and 5) That the authorities of the Inter- national Settlement of Shanghai should con- tinue to send reports on individual cases of illicit traffic for distribution to the authorities of parties to the 1931 Convention, and that similar reports should continue to be submitted in regard to other foreign concessions in China. I hope that those suggestions will be followed out. I wish to add to those suggestions another, vise, that the Japanese Government, whose subjects have been more widely and more closely connected with the illicit traffic in China in morphine, heroin and cocaine, than those of any other country, should without further delay take steps to punish effectively the Japanese and Kareans who are responsible for the clandestine traffic and illicit mufacture and who have thus brought the NAME of Japan into disrepute. As to China, it is to be hoped that this vast flood of opium will to be stemsed. That is the root of the trouble. Who in these days is going to sanggle morphine, herein or cocaine from Europe or America to China when he could sell them in Europe for five times, or in the United States for from sixteen to twenty times what they are sold for at retail in China. My suggestion is to concentrate, so far as amggling is concerned, en cocaine from Japan and Formesa, and on Iranian opium from whatever port it comes; but, above all, to out does the vast supply of opium within the country itself. Until this is dons, China will continue to be a Regraded 62 narootic masse to the world, Mr. Chairman, I submit that it remains to be HI whether the system established in China will really load to a reduction in the number of addicts and to & decrease in the production and con- sumption of opium or whether it will lead to the perpotuation and extension in China and elsewhere of tericemania. No should not lose sight of the fact that the present plan, whatever its ultimate results may be, cannot fail to make money for the Government, The big problem of the world is now up to the Governments of China and Japan, and may God grant that they my not be led estray by the siren song of profits. Alibis and excuses will not avail them before the bar of world public opinion." In conclusion, the U.S.A. Representative endorsed the land- able sentiments expressed by the Chinese Central Committee for the Suppression of Opium and quoted by the Chinese Government's represents- tive at the Committee's preceding meeting:- #1) The Government is firaly determined to suppress totally the opium scourge within the pre- scribed period of 6 years; #2) The Government will not allow the petty revenue accruing from the sale of opium to modify its six-year plan for the suppression of opium; #3) The whole nation must support the Govern- ment, give it guidance and encourage it in its campaign against the misuse of narcotic drugs. The future of the nation depends on the ELOCOSS of this campaign and the whole nation must immediately wage à fight to the death with the scourge which monaces us until the day when TO shall achieve our purpose." Colomel SHARMAN (Canada) resinded the Committee of the following remarks which he had made at its eighteenth session (of. page 57 of the Minutes of the Eighteenth Seasion): 63 "For a number of years past Canada has made an homest effort, invelving heavy KI- penditure of money, to control narootic trafficking on its Pacific Coast. This effort has been strongly supported by the Courts is imposing heavy sentences, at in fact a very large prepartion of the prisoners in its penitentiaries on the Pacific Coast were in- carcerated on narcotic charges, involving narcotics which undoubtedly came, and much of which were definitely known in Canada to come, from the Far East, not necessarily from one particular country. Yet during 1933 more opium, more morphine and more heroin was seized on the Pacific Coast of Canada than in 1932. The Canadian Government, for that reason and for others upon which Colonel Sharman did not doem it advisable to dilate at the present session, viewed the present situation, and particularly the future, with acute anxiety and was anxious to impress that enxiety upon the Committee," That this statement did not incorrectly represent the view of the Canadian Government was indicated by the fact that it was referred to by the Canadian delegation to the 1934 Assembly which was led by the Prime Minister who, in his report, mentioned that "the position gave rise to grave apprehensions". Colonel Sharman fully realized the unpleasant situation of those who had to bear the brunt of complaints as serious as those made today, but he could assure the Japanese representative that he himself had been in 1 similar position. Some ten years age Canada, unfortunately, ni the chief center supplying narcotics to Detroit and Chicago in the United States and the Federal authorities had very properly complained to Canada. The result we a wholehearted cooper- ation between the authorities of both countries culminating in the arrest of the big traffickers and the imposition of heavy penalties. In using, two years previously, the words "not necessarily from 020 particular country" in the statement already quoted, be had had Japan particularly in mind, as his strong conviction, based upon Regraded 64 knowledge but not upon proof, me that Canada was the victim of a well-organised traffic from Jepan. Now that they had the informa- tion contained in 0.0.8.274 regarding five arrests made in Vancouver and certain arrests of Japanese made about the - time in Seattle, it was possible to be much more explicit. The Sub-Committee en Seizures had made a close study of the information contained in 0.C.S.274 but he would like also to remind the Advisory Committee that the trafficker in Kobe, Japan, who had supplied all the no cotics, had himself written, inter alia, as fellows: "Because - learned that there is a very strict Customs inspection at all American and Canadian ports, 180 studied and found that the best methods to overcome this difficulty are as follows: 1. In using members of ships' crews for this business we will supply them with double cased soles on their shoes. This method has been adopted in our business with China and India and proved so successful that not a single case was discovered. By this method each person can carry one pound or less on each trip ashore. 2. In case of shipping us common eargo, it is sent into the country as canned goods, each can being perfect in weight, size, etc., to conform with the shipping papers. (It is very dangerous to attempt to use this method with pickled goods). "With these above methods you will be absolutely free from any danger of discovery. Kindly consider this matter seriously and arrange introductions to us with such members of the crew as you believe to be trustworthy and who would like to enter this business "Price list as follows: (Japan) 1. Hydrocklerie Acid-Morphine (Crystallized like cettom fibre) 18 05. bettle et 33Y per oz. 1. Beroin - Powdered . R5 ose bottle at SEY per os. S. Cocaine - (Crystallised in scale form) 25 05. bottle at IST per ose Regraded Unclassified The above goods are munufastured by per- 65- mission of the Minister of Interier and are of best quality for injection, # applied in tobacco. They are all in comon use, especially favoured by Chinese, Regraded Unclassifie "If you do not wish to handle these goods by sailors, you my handle them as comon cargo us above mentioned (an absolutely perfect method). In this case if you deposite $1.00 - will ship the goods to you. This is a rather difficult proposition to begin with, but we have done it previously with good results. K. Tuki 53 Inchomei, Kumauchi-dori, Kobe, Japan. Cable address: Yuki, Kobe. "P.S. When you order by cable, please use above address." There ms, moreover, the following statement made by Furumoto, one of the men arrested in Vancouver: "The Morphine came from Japan, where it was 'cheap as dirt' and available in unlimited quan- tities. He said that the drugs were turned over in Japan to members of the ring who were employed as members of the crew on various Japanese boats. The men had instructions to throw the drugs over- board if there w the slightest chance of their being discovered us, owing to their low cost in Japan, their loss was of little consequence. Furumoto further stated that these drugs were not only muggled into Vancouver but also into Seattle, Portland, San Francisco and other United States ports, and that deals of ten, twenty or fifty pound lots could be arranged if desired. He also said that the man on the boat with whom they were at present dealing would not allow the drugs to be brought ashere unless first paid for, and if this did net happen before the boat sailed again from Vanoouver they were taken back to Japan. They had formarly been dealing with a man who had allowed them to keep the drugs in Vencouver and dispose of them between veyages, but they had had trouble with him ca. a former deal and he would no lenger do business with them that way." Unquestionably the traffic had been extensively organized by ⑉ of carriers OR a must of bests, as a study of the twenty- six photostats accompanying the report indicated. It RJ mest u. fortunate that, OTHER though this extremely important and persistent 66 wholesale trafficker in Tabe me arrested end convicted, he would HE to be liable only to three months' imprisoment and a small fine, which, in the circumstances and in comparises with the Regraded Unclassifi sentences imposed in Canada and the United States, the victim countries, would appear to justify the use of the word "derisory". He appealed to the Japanese authorities, in conclusion, to view the existing situation us a very serious matter both from the standpoint of present punishments and future deterrents. Mr. HARDY (India), Vice-Chairman, reminded the Committee that India's most serious problem in the sphere of illicit traffic was the illicit importation of coosine. It was known in India that the cocaine came from the Far East, it was suspected, from Japan, but there ni no evidence to prove it. Some five years ago an official had been sent to the Far East who succeeded in establishing the incorrectness of the suggestion which had been advanced that the drugs illicitly entering India under forged Japanese labels were of Chinese origin. It had, however, proved impossible to secure direct evidence in Japan itself as to whether the drugs were or were not of Japanese origin. Now that the report of the discoveries made in Vencouver was available, the Indian authorities felt that their suspicion as to the Japanese origin of the secaine munggled into India were come firmed. Though the Japanese Government had been supplied with all available information on the subject, be regretted to say that 20 assistance had really been received from that quarter, Be, therefere, endorsed the appeals made by the United States mi Canadian repre- sentatives that the Japanese Government should give the mest serious attention to the complaints más and take effective penal action to put - end to the traffie in question. 67 M. HOTTA (Japan), confirming the explanation already supplied to the Bab-Committee, said that, es realising the extremely serious nature of the information contained in O.C.S. 274, he had immediately cabled to Japan to inquire what action had been taken. The document, unfertunately, had net yet been received by the Japanese authorities but he felt sure that when it arrived the police authorities would immediately take action against the traffickers complained of. The Jayanese Government's attention had recently been drawn to the increase in the illicit traffic in drugs on the American Pacific Coast and instructions had frequently been given to the Japanese consular authorities in American to collaborate closely with the American authorities in tracking down and suppressing the illicit traffic. At a conference hold at Washington in April last, Japanese consular officials had also been instructed to study the most effective more of coping with the problem. Regarding the inadequacy of the sentences imposed by Japanese law, he regretted that there were still may obstacles to be overcome in remodying this defect. The problem me, however, being seriously studied and he hoped that in the mer future a start would be made in amending the existing legialation on the subject. Be could assure the Committee that the Japanese Government was by no mens indifferent and was giving the problem its serious attention, Major CHEMS (United Kingdom) joined is the appeal made to the Japanese Devertment to take effective action against drug trafficking by Jaganese nationals. Though the United Einglen w net often directly affected, the activities of Japanese traffickers were a great werry and embarrasement to its authorities in the hr 68 East. Evidence in the form of labels, packages and detailed reports had often been supplied to the Japanese authorities proving that cocaine was being smuggled from Japan or Japanese possessions. If the Japanese Government could take effective action at an early opportunity it would be of great assistance to the United Kingdom authorities in the Far East. The discussion was adjourned, The meeting rose. Regraded Unclassified 69 August 18, 1936 HMJr made a movietone on August 18 on the Farm For the first time in sixteen years the Treasury has swept the Atlantic and Pacific free of rum-runners. This has been accomplished only through the most inten- sive drive and close cooperation of all Treasury Police Agencies. We are now going to concentrate our efforts on the smuggling of narcotics - the most vicious of all types of smuggling. As a first step we have transferred some 600 men in the Board of Patrol to this work and I am very hopeful that we will be as successful in com- bating narcotic smuggling as we have. been during the past three years in wiping out the overseas smuggling of liquor. Regraded Unclassified 70 August 18, 1936 Mr. Bell was on the Farm today. HM,Jr. told him he wanted to know how much more money was being spent in this fiscal year than during the last fiscal year and how much we would have to save to make it under the last year's figure. HM,Jr. wants this information for the regular Executive departments and the larger independent agencies, such as Farm Credit and Home Owners Loan, but not necessarily the little ones. Based on this information, HM, Jr. will suggest to the President that he, the President, write Bell a letter authorizing him to instruct the various departments and agencies of the Government to set aside 5% "as a kitty" which will bring the expenditures below, or nearly below what they were last year. Bell told the Secretary that his men are doing the accounting work for Tugwell's organization and that he needs space to house the accountants. Necessary space, he said, would cost about $11,000 and HM, Jr. approved this item. On the Farm today, HM,Jr. signed & letter to Preston Delano, in which he agreed to finance the cash requirements of HOLC for the next twelve months by purchasing the bonds of HOLC in an amount not to exceed $150,000,000. By this arrangement it will not be necessary for HOLC to go into the market for the sale of securities. (Copy of the letter to Mr. Delano 18 attached. Also attached 1s copy of letter from Mr. Delano to Mr. Taylor in connection with HOLC's financial program.) In connection with the Treasury's request that the Federal Reserve Bank of New York send one of their men to China to assist in the reorganization of the Chinese Central Bank, Governor Harrison wants to wait until about September 1 for the return of Arthur Young. Young is a former State Department man who has been in China as financial advisor to the Chinese Government. Harrison said he wants to talk things over with Mr. Young before the Federal Reserve sends someone. This was agreeable to HM,Jr. C 0 71 P Y July 22, 1936 Mr. Wayne C. Taylor, Assistant Secretary of the Treasury, Treasury Department, Washington, D. C. Dear Mr. Taylor: The Home Owners' Loan Corporation desires to arrange a program to finance its cash requirements during the ensuing year. The interest collections of the Corporation are at present more than sufficient to cover all operating expenses, including bond interest, but the investments which are being made to support the capital assets of the Corporation, and also to purchase Savings and Loan shares necessitate the entry of the Corporation into the money market sometime within the next thirty days. There is attached herewith a schedule showing in detail the estimated re- quirements of the Corporation and the financing plan by which, subject to the approval of the Secretary of the Treasury, it is proposed to meet them. You will note that for the period July 1, 1936 to August 31, 1937 it is estimated that the Corporation will invest some $118,000,000 in the shares of Savings and Loan societies. It will probably make other capital investments in support of its own assets to the extent of some $83,000,000. While these capital expenditures are being made, the Corporation will be re- ceiving from its mortgagors monthly payments on the principal amount of its mortgages which should amount to e total for the same period of some $178,000,000. These funds are by law ear- marked for the retirement of the Corporation's securities and can not be diverted to any other purpose. It 1a therefore proposed to meet the situation by the monthly issue of short term bonds which will be liquidated as they fall due by payment from the cash available in the bond retirement fund. At the end of the present month of July this bond retire- ment fund will have a cash balance of approximately $65,000,000. It must meet on August 15 of this year a maturity of $49,736,000 due on Series C 13% HOLC bonds which are payable on that date. The balance remaining after this maturity together with the principal payments which the Corporation should receive during the period Regraded Unclassified C 0 72 P Y + under discussion will be just about sufficient to retire the short term bonds which it is proposed to issue, and also the $49,843,000 maturity of the Series D 140HOLC bonds which nature on August 15, 1937. In other words, on August 31, 1937 the Cor- poration will have an operating balance of approximately $10,000,000, a bond retirement fund balance of approximately $5,000,000 and will have outstanding, subject to minor change, the following securities: Series A 3% bonds 1944-1952 $1,097,576,325 B 28% # 1939-1949 1,285,965,075 E 2% = 1958 49,532,100 7 13% If 1939 325,254,750 G 25 # 1942-1944 186,857,175 Matured 4% bonds not presented for redemption 3,231,500 Short term bonds due September 15, 1937 7,711,000 At this point the field can be resurveyed in the light of the then existing information and estimates, and a future financing plan be drawn accordingly. The issuing dates and amounts of the 30 day bonds which the Corporation desires presently to create to accomplish the plan outlined above are as follows: Amount Date of Issuance Maturity $ 2,889,292 August 15,1956 September 15, 1934 4,238,000 September 15,1956 October 15,1956 19,380,000 October 15, 1933 November 15, 1956 5,171,000 November 15, 1936 December 15, 1956 2,617,000 December 16, 1936 January 15, 1937 20,506,000 January 15, 1957 February 15, 1937 2,417,000 February 15, 1937 March 15, 1937 4,739,000 March 15, 1937 April 15, 1937 21,737,000 April 15, 1937 May 15, 1937 7,578,000 May 15, 1937 June 15, 1957 9,446,000 June 15, 1957 July 15, 1937 25,097,000 July 15, 1937 August 15, 1937 7,711,000 August 15, 1937 September 15, 1957 .C 0 P 73 Y -$- We ask your advice as to the interest rate these bonds should carry and the manner in which they should be placed. No would prefer, if consistent with your policy, to place them privately, each month's issue in a single block, as this pro- cedure will overcome the necessity of expensive printing and other costs incident to a public offering. The terms of each one of these transactions would, of course, be subject to your approval. It is understood that the exact amount of these various issues is dependent upon the validity of the estimated expenses and investments, and some variation in accordance with exper- ience will undoubtedly be necessary. The plan is, however, flexible in that the issues are timed thirty days apart, and the exact amounts can be altered to met any changes in require- ments which may develop. Should it become obvious at any time that the estimates are in error to such an extent that the bond retirement fund will not finance the complete operation to August 31, 1937, the situation can then be met by issuing addi- tional Series I 2% HOLC bonds due in 1938, Series F 16% HOLC bonds due in 1939, or longer term bonds, as the Treasury may direct. Very truly yours, Preston Delano Acting Financial Advisor to the Board Regraded Unclassified 74 ifood for Diary 8/18/36 My sear Mr. Delame: I have reseived your letter of July 22, 1938, addressed to Mr. Taylor, advising that the Home Owners' Loan Corporation decires to arrange & program to finance its cash requirements during the ensuing twelve months. I have given careful consideration to three methods of useting your financial requirements, vis. (1) As to whether you could legally use the payments received and to be reseived by the Corporation from its mertgagors and paid into the bond retirement funds (a) whether, as suggested in your letter, it is advisable for the Corporation to sell short-term obligations mater- ing at such times as they may be conveniently retired through the operations of the bend retiresent funds and (3) whether it would be more advisable that all the finan- cial requirements set out in your letter be handled through the Treasury rather than through market operations. I have been advised by my General Councel that the bond retirement fund must be hold intact for the retirement of your outstanding obligations and is not, therefore, available to meet your current cash requirements. I under- stand that the General Commsel of the Corporation commis in this view. As to the second method, the Home Owners' Loan Act does not authorise the Corporation so issue any securities other thrn bends. It does not seen to me to be advisable to offer publicly thirty. sixty or ninety-day bonds. Under all the circumstances I have - to the - elusion that the only prestical nothed available as this time for meeting your current cash requirements is for the Treasury to purchase the cosurities of the Corporation was authority of Section 4 (e) of the Home Last 109 of 1953, as - 2 - a I s I member s I the the bands w the Ilems Owners' seen - to 1 - not w united - aggregate of with 1 met to cassed a ported 1 118 1 Pates s 1 $ 1 - and meditions, as my be systemed w - et the of - yourdress. It is understood that the unterities # that they - be not from the bond 20- the fund and that the Tates of interest - the escurities to to be yourstment will, - the as practicable, outsen to the rate of interest - comparably commition extratending in the provided that in me shall the rate be 1600 the 1/4 of - per esst. If this ATTANGEMENT is satisfactory to your Doord, I should be glad to here you cenfire is me as - there- after as possible minit to the Commissioner of and Deposite as estimate of year sach requirements to the period maing September Josh, It will be approciated if you will also by the fifteenth of ench worth a estimate of your each requirements for the measeding math, Very truly yours, Secretary of the Treasury Progres I Require, Activity Fiamcial Airlaw to the 2009, Base - 30cm Corporation, s I á === -si I Regraded 76 August 18, 1930 HM,Jr. spoke to McIntyre and said, "I hope the Pres- ident or you will handle the press after tomorrow's meeting. (Meeting at Hyde Park on unemployment.) The story in it 16 the reclassification of the unemployed in order to put them back to work in private industry." Mr. McIntyre told the Secretary that he has mental reservations on Mr. Persons, Chief of the U. S. Employ- ment Service. Mrs. Roosevelt 1B also down on Persons because she once asked him to put some young people to work and at that time Persons said that none of the people she sug- gested needed work. They all seem to hate Mr. Persons (although they say he is a good administrator) because he 18 a good friend of the veterans. HM,Jr. called Taylor and told him to get in touch with the Department of Agriculture and contact whoever 18 the Acting Secretary of Agriculture. He suggested that Taylor take the Acting Secretary of Agriculture to lunch and try to find out when they are going to send out checks to farmers on the Soil Conservation plan. HM,Jr. said he was under the impression that there ought to be about 400 or 500 million people who will receive these checks. He also said he had a hunch that under the present set-up the checks will not go out until after election and that he felt it was a great mistake to withhold these payments un- til that time; that every man ought to receive his check before November 1. He told Taylor not to make the purpose of his visit obvious, but to try and find out when the checks will go forward. Unclassifi August 18, 1936 To: Secretary Morgenthau From: Mr. Hans GA to take wh with want H.O. and M g.Haas. 77 TAX REVISION - 1937 Joint Committee on Taxation and Treasury Staff Meeting - August 18, 1936 Present: L. H. Parker, 0. D. Chesteen, and 0. 7. Stam of the Joint Committee Staff. G. C. Hass, L 8. McLood, L. H. Seltzer, and J. S. Zucker of the Treasury Department. This conference was held for the purpose of outlining a program of study preparatory to presentation of information to Congress with respect to tax revision. Mr. Parker stated that he had received instructions from Senator Harrison and Representative Doughton to proceed with a study, in view of letter from the Secretary of the Treasury to the President, dated August 10, 1936. Discussion centered on two basic subjects, vis., "Miscellaneous Taxes" and "Income and Undistributed Profits Taxes." With respect to the miscellaneous taxes it was deemed advisable that factual data be prepared setting forth those excise taxes, result- ing in emall yield, the elimination of which will cause no appreciable loss of revenue and may have a good effect both on the public at large and on general business conditions. Statement is also to be prepared which will show the inequities inherent in some of the miscellaneous taxes, together with suggestions for revision. Distinction will be made between those tax:s which classify as "regulatory" and those which classify as "muisance taxes." Schedules showing revenue yield from all miscellaneous taxes by separate items, followed by & discussion on the cost of administration, difficulties in collection, etc., will be prepared. On the second phase of contemplated study dealing with the income tax on individuals and the flat tax and undistributed profits tax on corporations, it wes the consensus of opinion that consideration be given to the inequities inherent in these taxes, some of which arose by virtue of provisions of the recently enacted Revenue Law of 1936. It is proposed to eliminate hardships and to attempt an equalization of burdens between the separate categories of taxpayers. s partial list of subjects which require study with the object in view of effect- ing coordination between the separate enactments, was discussed. The subjects are (1) not loss carry-over, (2) capital gains, (3) exempt accumulations (Section 102), (6) personal holding companies (Section 351), income, (4) percentage depletion, (5) provisions covering improper (7) the effect of high rates on business activity, and (8) the gift tax in relation to the present income taxes. Regraded Unclassified - Information on emise taxes has already been obtained in STATES to a request from the Secretary, Further contact will be and with Capt. Bliss, Deputy Commissioner of the Miscelleneous 9az Unit, in order to obtain complete and detailed information on all miscoll taxes. gr. s zucker. Regraded Unclassified August 19, 1936 The Secretary asked Oliphant today to find out who owns the newspaper mille in the United States and the names of the Canadian and English interests con- nected with these mills. He also wanted to know to whom the newspaper mills sell in this country. HM, Jr suggested that Oliphant have Irey get this material to- gether, but Oliphant said he had Just the man to do this. The man he has in mind, he said, was formerly with NRA on the paper code. HM,Jr. told Oliphant that this was a rush job and he wanted it taken care of im- mediately. Regraded Unclassified TREASURY DEPARTMENT 80 4 INTER OFFICE COMMUNICATION DATE August 19, 1956 To Secretary Morgenthau FROM Herman Oliphant For your information I enclose memorandum, which I have had from Mr. Johnson. As you will notice, it enumerates certain further questions relating to German imports which will come up for consideration later. Johnson and his family are in the West on vacation. He will be back on September 15, 1956. Nerman Chalams 0 ) wc 100mg 7 7010-c - 9 for informating purposes 8/22 his fune 80 A August 17, 1936. To: Mr. Oliphant: (Through Mr. Manning) From: W. R. Johnson. German subsidies My final conversation with Dr. Baer on August 14 related to his consideration of situations in which he hopes that German goods may enter the commerce of the United States at prices lower (on the 40-cent mark basis) than those obtained in Germany, without application of our countervailing duty law. He is hopeful that blocked-mark balances may be used to finance the exportation of German goods to the United States as follows: 1. Import transaction financed in whole or in part with use of blocked funds originally and continuansly owned by the American importer. 2. Proceeds from sale in Germany of American exports to be mingled with assets of a German concern (probably 8. subsid- iary of an American organization); German goods then to be purchased for export to the United States and paid for from the general assets of the German concern. 3. Direct, two-party barter, without the use of money of any kind. The questions involved require no immediate action by Customs, and Baer requested no opinion concerning the possibilities. Some of the questions will arise soon an actual cases. For example, an importa- tion already made by the Chase National Bank falls under No. 1 above. Baer understands clearly that the Treasury expects some kind of advice from the German Government before blocked marks are permitted to be used in any manner in connection with exports from Germany to the United States pursuant to agreements made after August 2, 1936. I indicated to Baer that there was a. desire in the Treasury that our requirement of special additional information on invoices for countervailing duty purposes should be eliminated as quickly and as completely as possible, in view of the dislike of this feature of our procedure which has been evidenced by the Germans. He apparently does not believe that the German Government is likely to remove sity of its prohibitions against disclosure of the facts necessary to the ment of countervailing duties in those cases where such duties may be payable. In the circumstances, I believe the additional information should be required until other possibilities of getting the necessary information van be thoroughly explored. W.R. Johnson Regraded 84 AU GRAY Paris Dated August 19, 1936 Rec'd 10 a.m. Secretary of State Washington 769, August 19, 2 p.m. (SECTION ONE) FROM COCHRAN First meeting held yesterday afternoon of new general council of Bank of France. Following his address of welcome Governor suggested and it was de- cided that the general council make use of the faculty given it by the banking law of July 24 "to delegate all or part of its powers to a permanent committee made up of the governor, the under governor and four councilors one of them chosen by the Minister of Finance from the ex-officio members of the general council and three designated by the general council" The general council elected as its members to the committee Dalbouzo representative of the Chamber of Commerce; Jouhaux delegate of the General Confederation of Labor; and Gaussel representative of Consumers Co- operatives. Martin, director of the Credit National, was designated by the Minister of Finance. In addition to the above constituted cormittee including the governor, two Regraded Unclassified 81A AU -2- #769,August 19,2 psm.(Sec. 1) from Paris two under governors and four councilors, the three censors are authorized to attend meetings of the committee in a cooperative capacity, This small group will meet every Thursday beginning August 20 and will presumably direct the affairs of the bank while the general council will meet once each month. Various other committees were set up and (END SECTION ONE) WILSON KLP Regraded 81B SECTION The. No. 769 of August 19, 1936, from Paris. the terms of office of the members of the general council were decided by drawing lets in order that each of three years the functions of one-third of them would expire. This morning I called on Cariguel at the Bank of France, who two days age returned from a holiday of & month. He told ne that late yesterday evening the exchange market had begun to weaken and this morning was not good. Over $2,000,000 gold destined for New York was lost by the Bank of France by 11 o'olock. Cariguel said that it was not easy to determine the sources of sales of france. But he reminded me that the French are now practically the only holders of French francs. He thought the immediate cause for this movement might have been an interpretation of a sentence in Governor Labeyrie's speech of yesterday as antinoipating devaluation of the French franc. I quote below the sentence referred to: "What does the technical experience, central banks and their directors' energy, weigh against the vital necessity of safeguarding the national territory's integrity and assuring work and bread to men?" Cariguel told no that practically none of the governors of the bank are known to him, but that these of his colleagues who did know some of them had no high regard for them. Fournier, Cariguel, and others, who are permanent officials, realise that their actions and statements are under the observation of a political organisation, and that they must now be quite discreet. Regraded Unclassified 816 SECTION TEREE. No. 760 from Paris, August 19, 1936. I was informed by Cariguel that no one knows partio- ularly as to who will succeed Lacour-Gayet, who coased functioning in the bank almost immediately after Labeyrie took office, and who returns to the Ministry of Finance, to become a member of the corps of inspectors of finance. I have been told by other contacts that it is likely Laccur-Gayet's successor will be a. professer of law. Cariguel is not optimistic about the general outlook. Most of the French people he said are now of the opinion that eventually there will have to be devaluation of the franc. There is fear en the part of manufacturers that there will also be a levy on capital. In addition to these factors are the worries lest such measures may lead to social troubles bordering on civil war in France, and that international warfare in Europe may be brought on by the Spanish situation. Although all of these possibilities may not develop still the outleok is sufficiently blue to weigh heavily upon the French frano, especially when there is not much on the other side of the picture to inspire confidence in the currency. The details of Labeyrie's visit to Amsterdam and Berlin were not known to Cariguel. However he doubts 007- iously whether there was any significant purpose attached to Unclassified - 3 - Regraded Unclass to the visit. He is convinced that Labeyrie was not charged or authorized by the Ministry of Finance to discuss alignment of currencies or stabilisation. As yet there has been no announcement whether Schacht will repay the call late this month as the press originally suggested. Trip, as I previously reported, informed me personally that the latter half of September he will come to Paris to repay the visit of Labeyrie. As for Labeyrie calling soon on the Governor of the Bank of England, as was predicted in the press at the time of the visit to Berlin and Austerdam, Cariguel said he is not at all sure that Labeyrie would be received by Norman. When Tannery was Governor of the Bank of France Norman com- stantly opposed the idea of his visiting London, lest Tannery endeavor to discuss the matter of stabilization of currencies with him. It is likely that at present Norman might assume the same attitude, especially since the press has construed Labeyrie's trip to Berlin and Amsterdam as inspired by a desire to negotiate currency alignment. In other words, Governor Norman does not want to be drawn into international conversations on a subject concerning which he has not in the past been completely in accord with the British Treasury. I got confirmation from Cariguel that the information to the effect that gold received from the Bank of Spain was merely placed on deposit with the Bank of France was correct. It was his opinion, however, that none of it had 81E - 3 - had come from gold earmarked on the French side of the border. All the gold came from the Bank of Spain itself in Madrid, even though corresponding losses have not been shown on statements of the Spanish institution to date. There is a rumor in the British press that France is granting & new trade credit to Poland, but Cariguel said he is aware of no transaction other than that of renewal to the Bank of Poland of the existing Bank of France credit. As for the Treasury credit to Rumania, the Bank of France has nothing to do with it. Since Cariguel's return to duty he has not yet checked the figures but he is of the opinion that the British stabil- physically ization fund has/withdrawn to date from the Bank of France to London approximately one-half of the twelve billion francs of gold which have been held under earmark in Paris for the British. Weeks ago Cariguel had told no that they knew the British were getting a little nervous because of the campaign certain British newspapers were carrying on against British gold being held in France under the present regime. The French, Cariguel said, had boxed up all of the British gold in complete preparation for its entire with- drawal whenever it might he desirable; he said he would rather ⑉ it all withdrawn than have the press make it & subject of contention. END MESSAGE. WILSON. EA:LWW Regraded Unclassified 82 August 19, 1930 As & result of the survey made at the request of the President by Admiral Peoples (copy of which 16 attached) it was brought to light that there 18 a shortage of skilled workers for the building trade and furthermore brought out the fact that the classification of the unemployed is not what it should be. The President ordered a reclassification made and Aubrey Williams took it upon himself to say that he would do it. On learning this I began to dig into this question myself and soon found out that this responsibility belonged to the United States Employment Service in the Department of Labor. Bell, at my suggestion, got in touch with Mr. Burr, who is an assistant to Mr. Persons and who 18 in charge of this service, and tried to get the facts from Burr. Burr was reluctant. Therefore, last Sunday, I telegraphed Mr. Persons, who was away on vacation, and urged him to instruct Mr. Burr to give Bell all the information he wanted. Mr. Persons said he would and seemed delighted that I was taking an in- terest in this question. When I rode with the President, Sunday afternoon, I told him I wanted two appointments this week, one to dis- cuss the unemployment question with him, Hopkins, Persons and Bell, and the other appointment to take up the question of giving a speech entitled "My Next Four Years.' As a result of this, we got the appointment today. We had to wait one hour for the President, which gave me a chance to briefly outline what I had in mind, In the morning I had gone over & memorandum which Burr furnished Bell. (Copy is attached.) This cleared up the whole picture for me, 80 I was well prepared for the meeting. I thought the memorandum was 80 excellent that I rushed the last three pages up to the President with the message that he read it before the 2 o'clock meeting. I have every reason to believe that he read it, because when we were in his office it lay on the top of his desk. In the discussion which we had together before seeing the President, Hopkins acquiesced that (1) Mr. Persons should be given $10 millions to reclassify the unemployed and (2) that he be given adequate funds to contact the 83 employers Bo that they would use the United States Employ- ment Service. We were with the President about an hour and I sketched briefly what we had come for and then turned the meeting over to Mr. Persons who outlined the history and work of his Bureau. I soon gathered that the President was not really familiar with the work that Persons had been doing because even after he had given the President a lengthy explanation he still was laboring under the belief that the unemployed who work for Hopkins are classified by Hopkins. He suggested that Hopkins write him a letter outlining the needs and that then he would announce that he would give them the necessary funds. Hopkins sat there and did not open his mouth and seemed perfectly willing to leave the President under the impression that this work was being done by him. I burst forth and explained to the President that the work of classification did not belong to Hopkins, but be- longed to Persons. The President then said, "Then I have another idea. He said, "Can't the four of you develop & fifteen minute speech in which I can explain over the radio Just how we handle the whole unemployment question?" I received this suggestion most enthusiastically and said to the President, "The time for you to give this speech 1s on the night of Labor Day." He seemed to like this idea but took quite a little time to digest the suggestion. I think he will do 1t. One of the reasons why I am anxious for him to do it is that before he gives the speech he will have to thoroughly understand this whole question of how the unemployed are handled, which he does not understand now. When Persons did not ask for the money, I asked that he be given $11 millions and the President eaid, "O.K." and that we should have a memorandum prepared for him and he would announce it at his press conference on Friday. I then continued to prese him for a decision to give Persons $250,000 a month for the next ten months with which to build up his organization in order to get private employers to accept more unemployed people through the U. S. Employment Service. The President cross-examined Persons on this at great length. He wanted to make sure that tois money would 84 not go to the States, for some reason which I do not under- stand. He finally agreed to allot $21 millions, but this announcement he would withhold until he made his radio speech although he told Persons he could go ahead as though he had the money. I then said that I thought this particular activity was the most under-publicized in Washington and asked why. The President agreed. I said it seemed to me that what Persons needed was B. good public relations man, Persons seemed quite embarrassed and finally said that Miss Perkins wanted her own publicity man to handle his work and if he was to get somebody to help him the suggestion could not come from him, but would have to come from the President. Persons seemed to ne to have his tail between his legs. Somebody has been giving him an awful licking and certainly nobody has been fighting his battles. He told me privately that he had been to Jim Farley in February and tried to get him to get this very money that he got today. I Just cannot understand why Frances Perkins had not gotten it for him long ago, because, as Perkins said, men are going back to work and the Government 1s not getting credit for placing them. Last December he was placing at the rate of 80,000 men a month. Now he 18 placing over 200,000. I consider what I was able to do today another milestone on the way to real recovery. The whole thing seems unbe- lievable. I just cannot understand why the President per- mitted the Hopkins' organization to pull the wool over his eyes, because that 18 what I feel they have been doing. After Persons left the President turned to me and said, "This 1s fine. What we have done today will answer & lot of questions which have been unanswered 80 far." He seemed very much pleased with the results accomplished. Bell handed me the memorandum (photostat attached) which will give Peoples the authority to make the same investigation of the Tugwell organization that he did of Hopkins and Ickes. I had to press Bell very hard on this as for some reason he seemed timid to present it to the President. He had no trouble to get the President to sign this. This would have been impossible last January. We certainly are making progress along bringing order out of chaos in the unemploy- ment field. Bell told the President that the Youth Administration wanted, I believe, about $27,000,000; that for the first Regraded Unclassified 85 three months of this year they had received $13,000,000. The President hesitated a moment and said, Give them another $13,000,000. This also surprised me because I know that Eleanor Roosevelt had been after him to expand this program and doubt whether they will be able to expand with the allot- ment the President gave them today. bureau OF THE budget WASHINGTON AUG MEMORANDUM FOR THE PRESIDENT. In view of the illuminating and helpful Information 0/- uined by Admiral People in his investigation of the construc- tion projects carried on by P.P.A. end sight it not be a good 1dea for him to look into conditions pertaining to the reseitlement projects of the here ttlement auministration? The investigation hight be limited *0 subsistence hone- stead projects and suburter recellement rojects with i. view to accertaining along with other information - (v) The percentAge of labor taken from relief rolls (b) The COB'. of construction L.S with similar work curried on by other Lovernment councies and by private enterprise (c) The probability of the Federal being ultimately relaburged for i's (u) vortor: decirability of comparils, 3 relfie going projectors full ses, It migh! also be will for him 10 Look into ...... houstry projects. it Name und of July, less than ::., wil, 11) had Main expended out of llocations (f ,501, 5) for The projects. (K.Do' Ch No' 1001 Regraded Unclassified 87 August 17. 1936 Mr. Fundel 1, Dell Acting Director of the Budget Treasury Inpartment s d Treat Walter NET Associate Mrester National Resuplayment service the Act (July. 1933) establishing the United States Employeent Survice, provided for a of State- Federal public employment office, through the affiliation of State Explayment Services (under specified conditions) with the United States Employment service, There were in existance at that time only 150 free (tax-mported) public exployment offices under State control, mL as affiliated State Services, since the process of affiliation - provided is the Ast. the National Industrial Recevery Ast, Title II, Section 206, Subsestion 4, providing for public wests, required that preference be given, where available and qualified, to expervise - with dependents and to residents of the society or political subdivision in which the week - being performed, or residents of the State in which the work - being performed. In order to mistain the preferences of the Act, and to prevent vide-spread signation of withere to projects that would be ensermed from time to time, is June, 1933, the special Board for Public Verize consted regulations instuding the pro- visions that labor required for projects should be chesen from lists of verbere furnished w agencies designated w the Valied States Exployment Service (with certain exemptions is the - of under contracts). 40 the same time the Burnets of Fublic emetted regulations providing that all workers to be exployed is Highway Regraded Unclassified 88 Mr. Duniel & Dell - a 0-17-06 projects financed univer the should be selected from liste Regraded Unclassified furnished w agencies designated w the United States Employment service. the the outsting State-ministetered public exployment effices Ture imeliately designated to refer within to Public Marks projects. the National Resuplayment Service - establish- od to serve all areas there no offices of the State service w isted. 90 date sa States here affiliated wish the Valted States Employment survice to the ministrance of State-controlled w playment office eystems, although - of these mintain only a few employment offices eash, The National Receployment Service functions is 33 States is the areas ast covered w the State Service, and in the balance of the States where me State Service exists. with the expension of the works program 11 because IIIIIP only to place supplamentary - personnel in the State Employment Offices, to the extent that this attet personnel - to carry the added burden placed upon the State offices - w tipe fast of their designation $ agencies to serve in this cepseity. From July, 1933, until July, 1934, local effices of the National Resuployment Service ware staffed largely w persons teken from the relief rells, und paid directly by the Relief Mate- istrations. Headquarters in Washington and is each of the States were supported from funts transferred to the Department of Labor from the Public Herice Advisistration for this modified perpose, Beginning with July, 1934, the entire Service, Including lecal office personnel and cests, as financed w funds administered from headquarters of the National Reamployment Service in Fash- ington. Beginning with July 4 1935, funds the the support of the National heaployment Service very granted ky Imentive Order from funds appropriated w/s the margency Belief Appropriation Ast of 1935. se present the work is supported from funds allocated by Executive Order under the Act of 1935. KIPERING or - UNITED STATES STATES II COMMISSION 1121 PROJECTS FINANCED - THE NATIONAL INSURARIAL RECOVERY ACT. Funds appropriated under the National Injustrial Becovery let were expended under regulations of the Public Works tration and the Durent of Public Reads. The Public Total Adain- intration spproved projects administered by M for Department, the Department of Agriculture, the Reclamation Service and other 89 m. madel & 2011 - 8 0-13-86 Federal agencion, Nutly all of these projects voire emergial - extenst, the United States Evyloyees Service, function- the through its - breach, the National Resplayment service, has - Steelf M a "service - in relation to public withs projects only therefore, has fullowed regulations of the Public with and the of Public Reade as I an s 1 She Replayment office, with emplote mational have intervisori the unexployed, registered the and classified then counting to chills, tratelne, and experiance, and here mis- sained a camplete file as as compatical busis, the discrift- cation system is use was developed w the Division of Standards and Research of the Balled States Explayment Service, with current corporation of the Central Statistical 20ard, the classification used 19, therefore, in line with that anthorized w regular Government agencies, and ⑉ realily w translated late terms usedby the United States barear of the Comman Unter the program of the first tes years of the Lervice, the contractor presented directly to the Exployment Office which served 1 given project, a written requisition for workers the certain qualifications of skills. through a clearance and both intervate ml inter- state, the Employment Offices provided - of special skills visa adght not be svailable in the local - or one within the State, During the entire tooyear poriod trom duly 4 1935, to duly 1, 1985, the relationships of the United States Employment Service and the varives Governmental agencion operating public works under the provisions of Title II of the TIM use fully accparative and antisfactory, and continue to be no telay. - FROM OF was STATES SERVICE IN RELATION 90 THE TOTALS PROCESS with the emainst of the Energency Relief Appropriation 10% of 1935, the the Progress Administration - catablished and w authorized to enstred all youjecto finessed 9a whole or in part under the - of that MA, It me 1 w - who vero is positions of administrative responsibility in the betted States Exployment Service, that processive and methods proviously Regraded Unclassified COPY 190 h. Deniel & Bell - 4 8-17-36 developed over 8 too-year period in comestion with the public who program would be continued in the reforral of workers. The ups, however, developed MY procedures required, it - stated, for payrell and statistical purposes. A description of these procedures follows, 2. The United States Employment Service reselves from local Belief Administrations a copy of vira Perm 600 *Certification of Eligibility* for every person - is dealared eligible for - playmout on the above type of project. This certification my include names of several numbers of the - family. Bach person, however, is registered coparately. 2, The person or persons thus certified as eligible either uppear at the nearest employ- ment office for registration e, if they live at a distance, they are registered by !tinerent interviewers who carry est the registration et a point nearest their place of residence. In interviewing these appli- emas the interview is either - fills out a registration eard. This form is the basis upon which the applicant's competional elassification is determined. 3. n the time of the interview the United States Replayment Service propared "Identification hrs 390 in explicate for each applicant, Coo copy is given to the applicant and the areand eagy is retained in the office of the registration, Later - additional espies of this form are propared by the Employment Service and distributed w follows ⑉ my to the Belief Administration and - copy to the É REFERRAL OF WEEN 1. Upon receipt of a properly approved mak requisition (wa in m) the United States Replayment Service selects qualified applicants Regraded COPY 91 Regraded Unclassified m. Deniel 11, Dell - s 8-17-36 the have bom properly certified, registered, ml eleasified competionally as above. w each applicant the selected the United States Exployment Service propares six copies of USES Im 325 mir. Das copy is given to the applicant and the other five copies are sent to the requisitiening agency to be rested to the various interested agencies. & capy of this form is finally returned to the United States Employment Service with the proper notation made thereon, If the applicant has refused referral the United States Employment Service the properes USES Form 360 Estice of Fullure to Report or to Accept Referral." One my of this form is ours to the Relief office and the accend copy is retained in the registration office. If the applicant is accepted w the requisitiening agency, his registration card, if he is employed at prevailing mges, is removed from the sative filse in the employment office and placed in the insctive file until the United Mates Employment Service reselves notice of termination w employment - form 403." If the my reasons determined W the Belief - intention or the no, a applicant's certification of eligibility is smoelled, or if the applicant is reasongard to mother project, or is realassified, the United States Employment Service receive a notice to this effect. This fast is communicated to the through the use of - w mother of the form listed below, Resulpt of my of those from requires that the United Makes Employment Survice naise - appropriate natation unan the applicant's ⑉ files 1. FINA Pera 601. Totice of Date Change." 2 you Bern w Tensellation of Certification of Rigibility." to IN Form m w wa Form not Total of Grago in Nork Certifi- ustim." so wa Pan was If a certified relief applicant is referred we job the private industry, the United States Employ- 1 Service in addition to the regular referral Seem, prepares - Your 340 to deplicate. This form is Inom w Totice of Placement." Capica are out to the - and the yes, COPY 92 Mr. Darriel & Bell - 6 8-27-36 On May 22, 1935, rebequent to the passage the mor- pay Belief Appropriation Ast of 1935, (April s, 1935) under which the Works Progress Muluistration - established, the Federal hurgeney Relief Administrator Leased an order requiring all n- lief recipients to register with Employment Offices designated w the United States Employment Service. In may parts of the nation, however, relief recipiente did not N register. in order of June 26, 1995, of the Relief Mainistrator required State Belief Administrations to certify to the Employment Offices the - of all employable persons on relief prior to May 1, 1935, (the paried later was extended to November 1, 1935.) This order me in the main carried out. Regulation 2 of Executive Order 7060 (Paso 5, 1935) - vided that persons registered with the United States Employment Service are eligible for employment (on projects financed under the 1935 appropriation): and Insertive Order 7083 of im 24, 1935, provided that at least 90 percent of the persons employed an my project should be taken from the public relief rells. from there two requirements have been ordered by the WA as follows: 1. - Administrative Order 29 of Number 14, 1935, authorized regional field representatives of the WA, ta their discretion, to modify the require- mark in connection with 4 project or portion thereef that only persons certified for assign- next by the uses shall be employed a projects. Orders elizinating the we of employment efflees in commertion with the program were issued in Louisiana, California, and Montana, becoming fully effective in Louisiana, and partially effective in the other to states amal. In coveral other states referrals to their om - contract projects are made entirely 97 is certain areas thereafter by the was without reference to Replayment Offices. 2, Imptime free the requirement that at Least 90 persent of workers on projects fincreed from the 1935 appropriation mist be dream from relief rells ware given from time to time with reference to 93 a. Denial 1. Ball - 7 6-27-36 certain projects, and were given in - to rum with refurence to projects emitated w carteda Federal agencion. & Buytomber 26, 1995, the Vecha Progress Administrator pm discretionary entherity to the several State Works Progress Administratore, w representatives designated w them in withing, to month projects from the requirement that 90 peresat of all the persons working n a project shall have been taken from the public relief rells. (There emmytime min greated w the Marks Progress Administrator, the information w treasmitted to the of the United States Replayment Service and sent through regular chemals to the Directors of the Services is the States concerned.) was Bulletin " of September 28, 1935, provided that *in schoduling the operation of projects, the State Works Progress Administrator shall give preference to projects financed is shale or in part by loans" (contract projects of other Federal agention, such as PRA, Bureen of Public Reads, etc.) It has been partie- ularly required that where orders are received from contractors for verbors as entrast projects, there shall be a transfer of relief workers from upa non-esntract projects. It has been the experience of the Reployment Service that the treasfer of verbers from ups non-sentract projects to yea ml other contract writ has been in may instement scounplished with great difficulty, and has at times failed to naterialise entirely due, (as our - in the field report to -), to the following fasters: 1. The tendency of a forma - a project to wish to retain for the completion of the project Ms best 2. The pressure on the part of the cummity to have thair local projects brought to completion. (This apparently - often - to the fast that the local c mmity had más contribution of materials and constines of repervisors, and, therefore, had is investment in the project.) Regraded Unclassified 94 1411 - w I á I 5-37-36 RELATION or - www - information - e I I = I I I M I I I I MR w 1936. Although total w of the Verbs Progress Administration (or My 3 1936). provided that endiguate of extitied valiet personne to No. yesjects than I a e I 1 1 1 $ - il 1 a lass 1 1 s I 8 I I a I $ information 1 a Tranque s { s josts. h these - the Officer have les glad to corporate, and fellowed ⑉ commitally the - as - s a I 1 É an all other - the - of the Englayement - visa instrudes the followings 2. Refer persons to all m projecto, Inc. of Projects, and all other Federal NEW contract projects financed 6 1 Inc. Information the registration I r 2 latisms). 2. Befor persons, w model, - regular within of the una Motrich Division of Employment, w was m estimate I 1 all s payment, I the 1 operating unles fale of the Mist Appropriation who of 1936. 3. 9a me) the requirements of the - to mintaln active files of registrante, negragabed as to relief states. Administrative Order - of the and states that all carth- fied eligibles are "expected" to register with the - vise, and active registration whether or met they - payment I N 8 di I . In have requested a claimed as w the proced states of elserification of - and as to the destrubility of - interview and realaceification. 9a following - minitteds L the experience - a three-year puriod of the Valted States Employment) Service and the 1 95 Mr. Paniel ". Bell - , 8-17-36 the National Beemployment Service, has developed a system for classification of workers as to experience and skills, which has in actual prestice with both public weeks contractors and private employers preven to be sound and afficient. It is the system concurred is by the Federal departments exacurned with data having to de with intus- trial classification of workers. Many of the persons employed on the staffs of Employ- set Offices have had three years' experience and training is operating this system. It 15, therefore, our streeg conviction that the workers employed on all types of public write should be called in to their Employ- mest Offices for re-interview and for № classification where (a) the rush of referrals on UPA presluded the possibility of adequate time for careful interview, and (b) where - perionse on now types of jobs during the past year my have qualified the worker for skills which do not appear as his previous registration card. 2. a consistent and special effort should nov be más to place the unemployed in private inter- try, including employment with private com- trasters. Since Employment Offices are the agencies for the use of private employers, the ealy my that workers as public works pro- josts, of whatever kind, ⑉ be assured their fair chance with others for placement is private industry is to have then carefully interviewed and classified as to skills in their Employment Offices, no that they my be made available to fill the orders of private employers. Otherwise, it appears to us that they will be stratified as a group - tisusualy dependent upon Federal agencies for jobs. CONCLUNION The United States Employment Service should re-daterview and bring down to date the classification of all workers an public Regraded 96 Regraded Unclassified Mr. Daniel 1. Bell-10 8-17-36 works projects. They should make these immediately available to employers is private industry, and in order to de this should currently contact during the present fiscal year all employers in the United States with the purpose of keying into industry the largest possible unmber of the unemployed, both on relief rolls and self-sustaining. These are two phases of come program. The re-interviewing and reclassifying program could begin at once and be entirely completed in a period of three months. It would cost approximately $1,500,000.00. Beginning also at once should be the special effort to contact private employers everywhere for the placement of these workers. This phase of the expanded progres would cost as additional $3,300,000.00. Im the application presented by the United States m- playment Service on June 16, 1936, for funds for the current fiscal year beginning July 1, 1936, these too items me 18- cluded and the total amount requested to be allocated from emergency funds was $15,000,000.00. On July 9, notification was received that there would be allocated $2,590,000.00, for the first quarter of the fiscal year. This amount is ml- ficient to pay the cest of the National Receployment Service at approximately the rate of present expenditures, without the special effort as represented in the above mentioned two phases of an intensive progrem. It would be necessary, there- fore, in order to continue the work of the National Recemploy- sent Service on its present basis, and to add to the functions as just above indicated, that there be the additional allocation of $12,450,000.00 for the balance of the fiscal year beginning October 1, 1936. 97 CONFERENCE WITH THE PRESIDENT AT HYDE PARK ON AUGUST 19, 1936. Those present besides the President were - Secretary Morganthau, Harry Hopkins, Frank Persons, D.W.Bell. The Secretary of the Treasury started the conference by referring to Admiral Peoples' recent report in which, among other things, he recommended (1) rechecking of WPA rolls to see whether or not persons were employed under the Works Program who had sufficient funds from other sources to maintain them, and (2) a reclassification of the WPA employees BO that the records would show their qualifications for various kinds of work. The Secretary said that Bell and he had been giving the matter a great deal of consideration during the past week and they had come to the con- clusion that the President should indicate whether or not he wants these recommendations carried out. He said that he had talked at some length with Mr. Gill, who had agreed that certainly the reclassification should be done at once and that the rechecking, while a considerable job, might be done on a test basis. He has agreed, therefore, to take two or three States and check the rolls of the wpa. It was understood that this work is now under way. The Secretary said that on the reclassification of the WPA employees there was a question of whether the United States Employment Service should perform this task or the wpa. He told the President that while this group had been waiting for him an opportunity had presented itself for a preliminary discussion of the matter and both Mr. Hopkins and Mr. Persons agreed that the reclassification should be done by the U. 8. Employment Service as it was better qualified than any other organization to do it. Regraded Unclassified 98 The Secretary then said that he would like for Mr. Persons to explain Regraded Unclassifie to the President just what his organisation does - historical background and what he thinks it can do if it has sufficient funds. Mr. Persons gave 1 history of the United States Employment Service and said that the Service administers the Wagner-Peyser Act, which provides for a contribution on a fifty-fifty basis to various States that set up State employment offices. When the emergency program was started in 1933 these offices were not of sufficient size to take care of the program then in- augurated, 80 another service known as the National Reemployment Service was created, the expenses of which have been paid out of emergency funds. This service does not in any way duplicate the other services but is in the nature of & supplement to those services. Mr. Persons explained that the services under his administration have to a certain degree a. continuous reclassification of the unemployed, - that they provide in their regulations that applicants for positions should re-register every 30 days 80 that they have a continuous check on them. He said, however, that difficulty had been experienced with WPA employees - many of them had failed to register and many of them had failed to submit their new qaulifications acquired in the work on wpa projects. He thought, therefore, that it was highly desirable that the WPA employees be reclassified at once. To do this it would cost about $1,500,000 and would require about three months to complete the work. After that it could be kept current with the present force. He then told the President that there was another part of the Employment Service which had not been at all advertised but which had been very sulcessful in a small degree putting people back to work. He said that last December the Employment Service received 85,000 requests from industry for qualified workers. In May and June of 1936 the requests totaled 200,000 each. He said 99 that the Service places approximately 1,250,000 people every year and that if it had sufficient funds 60 that it could employ skilled personnel who would be qualified to contact industry and sell the Employment Service he would be able to double that figure. He estimated that for the next tem months it would require approximately $2,500,000. The President said that the program as outlined seemed reasonable and that he was in favor of carrying it out as suggested. He authorized no to submit to him the necessary papers allocating $4,000,000 to the Employment Service for the two purposes indicated above. DWB 7 100 MIMORAEDUM If UNITED STATES SERVICE 1. RECLASSIFICATION OF W.P.A. WOREERS - $1,500,000 The allesation or the M of $1,500,000 has been approved for the we of the United States Reployment Service is the Department or Labor. This is to provide for an imediate program of refining and bringing dam w date the compational classifications of verbere - here hom employed unler the program of the Works Progress Administration. It to encential that up-te-date data should be unde readily available all a the work histories and elassifi entime of all of these workers whose services are being used and will be used in commetion with work programs provided for the Fiscal Year 1936=37. The allocation of work projects depende upon the availability of workers from relief rolls who have the required skille to de the work which the construction of a project demands. A part of the regular procedure of the employment offices w been to interview the unsuployed, and eleasify them on the basic of their nic histories according to their oscupational d sssifications. Prom time to time reinterviews are mde in order to refine the cosupational data with regard to each applicant. 2. CONTACTING INDUSTRY - $2,500,000 The records of the Employment Service show that to a rapidly increasing degree private employers are availing themselves of the we of their employment exchanges. The program for employment services is the United States is based upon the Wagmer- Payser Act, passedity the 75rd Congress, which provides for - affiliation of State Employment Services with the United States Employment Service. is meassitated by certain phases of the Recovery Program, the United States Employment Service estab- lisbed also in 1933 an mergeney agency known as the National Resuployment Service. this agency has served all areas not covered by State Employment effices, and has placed supplementary personnel in State offices in ao far as such personnel were needed to carry the extra volume or work required by public verbs program. Due to this complete National coverage by employment effices, the major number of the unemployed in the United States, including the majority of recipieme of relief, are registered in these effices, and on be made available for employment not only on public works, but is private injustry. with the mailest inprevement in employment opportunities it is MI a necessity that members of the staffs of these offices contact all employers, ml sequaint them with the apportunities offered by the Service: and that since the record of experience chems that 6 very large increase in employer's orders for workers result from such contacts, there is a further necesity that the offices be more adequately equipped end staffed to respond to the demands of primate industry. The National Rosepleyment Service 10 supported regularly from energency funds allocated from time to time for this purpose. Approval has been given to as allo- cation of the amount of $2,500,000 for the current Fiscal Year additional to the sums regularly allocated, in order be make it possible for the exployment offices to conduct currently a compaign for to plasent er workers in private infustry. 101 C PARAPHRASE OF TELEGRAM SENT TO: American Embassy, Paris, France DATE: August 20, 1936, 7 p.m. NO.: 318 FOR COCHRAN FROM TREASURY. Secretary Morgenthau would like to have you get a personal estimate of the situation in London by going there, to be there by Monday, and you should be prepared to remain for a two-day or three-day stay. PHILLIPS ACTING. EA:LWW Regraded Unclassified OFFICE OF THE SECRETARY OF THE TREASURY diary W August 20, 1936. Memorandum to Mrs. Klotz: For your files I am giving you a copy of a message sent Commander Thompson in code this date. Eas Harold No Graves M Regraded Unclassified 102 of August 20, 1936. P I CONFIDENTIAL "SECRETARY MORGENTHAU HAS UNDER CONSIDERATION EMPLOYMENT IN WASHINGTON OF SOME OUTSTANDING CHINESE CITIZEN AS HIS PERSONAL ADVISOR ON NARCOTIC MATTERS AS AFFECTING CHINA STOP HE DESIRES THAT YOU DISCUSS THIS CONFIDENTIALLY WITH NICHOLSON STOP IN DOING THIS YOU SHOULD CONSIDER WHETHER SECRETARYS OBJECT COULD BEST BE ACCOMPLISHED BY FORMAL INVITATION TO CHINESE GOVERNMENT OR OTHERWISE STOP SECRETARY DESIRES ALSO TO CONSIDER PRECISELY SAME PLAN WITH REFERENCE TO JAPAN STOP PLEASE REPORT FULLY AFTER YOU HAVE DISCUSSED WITH NICHOLSON AND IF POSSIBLE GIVE NAMES OF PERSONS BOTH CHINESE AND JAPANESE WHOM NICHOLSON WOULD CONSIDER AVAILABLE". GRAVES The Security you may your general information see this the A to report on case lo to 8/20/26 Regraded Unclassified 103 August 21, 1936 MEMORANDUM FOR MP. OLIPHANT: Ret Associated Gas & Electric Co. The following status report, concerning the above case, is made in response to your request. In June, 1934, certain creditors of the Associated Gas & Electric Company filed a petition in the District Court, for the Northern Dis- trict of New York, praying, among other things, that the Court appoint a trustee for the company under the provisions of 77A and 77B of the Bankruptcy Act and that the petitioners be permitted to submit one or more plans and suggestions for the reorganization of the debtor cor- poration, including any disposition to be made of its assets and properties pursuant to 77B of the Bankruptcy Act, and that the Court, after hearing such objections as might be made to any plan, confirm the plan, if satisfied that compliance had been made with the provisions of Section 77B of the Bankruptcy Act. The company moved to dismiss the petition, claiming that it had not been filed in good faith. At least three motions of this kind have been made by the company, but all of them have been denied by the lower Court. The company appealed to the Circuit Court of Appeals, from the denial of its last motion, where the matter is now pending. At the present time attorneys for the petitioners and for the company are carrying on negotiations, at the suggestion of Circuit Judge Manton, looking to & possible agreement which would terminate the Court proceedings. The government is not a party to the proceeding except that on December 23, 1935, the Court granted an application of the United States to appear as amicus curiae. Prior to December 23, 1935, jeopardy assessments of federal income taxes were made against the company for 1927 to 1933, inclusive, in an aggregate amount of approximately $51,000,000. The company filed appeals in the Board of Tax Appeals contesting the taxas covered by the jeopardy assessments. These appeals are now pending before the Board and have not been set for hearing. Government agents have been and are engaged in making an investigation of the company's tax liability. It sppears that the investigation may be completed within two and one-half months from this time. One other matter remains to be mentioned. In December, 1935, the United States instituted B. suit in equity against the company in the District Court of the United States, for the Worthern District of Yes York, 104 -2- to foreclose its lien, created by the making of the above jeopardy assessments, and for the appointment of a receiver for the company. The company moved to dismiss this suit and that motion is now pending before the Court. The matter has been continued from time to time on account of the pendency of the bankruptcy proceeding mentioned at the outset of this report. The use of the name "Associated Gas & Electric Company", in this report, is intended to be inclusive of the corporate entities making up the Associated Gas & Electric system. 5 Approved: John Acting WBuus Chief Counsel for the Bureau of Internal Revenue. Regraded Unclassified 105 August 21, 1936 This was written by the Secretary while he was at Wianno, on Cape Cod, for his vacation. Regraded Unclassified any z! 106 call Pas at 11.30 H.M. told him that Cockury informed be that he believed England had mind about half its gold from BKg7r. to England That I did not like it all. Pres. was much interested and cm cened He had m in formation for me. celled Pus 3.4.5. Told him stock market had hoben 4 3/4 Its. That I was nervous. That it seemed that the financial newe centers we were going In have may were telling us that told him that Fed. 107 Reserve n.y. knew nothing rg had talked to Buyess) He said 9 have Senater hye sitting aCCIO from me. I will make sever not to telt- hot I will tell him what you are saying. 4.00 octock called W.C, Jaybr told him to by and find rut then S.E.C. where selling came them. also to ask Fed. Rerain M.Y. harticularly if selling dame funn Europe and from which Corntried 108 TELEGRAM SENT August 21, 1936 1 p.m. AMEMBASSY PARIS (FRANCE) 319. FOR COCHRAN FROM TREASURY. Please check carefully Paris and London information relative British gold shipments contained in your 769. PHILLIPS, ACTING EA:HF:LWW FEDERAL RESERVE BANK OF NEW YORK m OFFICE CORRESPONDENCE DATE August ai, 1936. to CONFIDENTIAL FILES SUBJECT: TELEPHONE CONVERSATION L. 1. Knoke FROM NITH BANK OF FRANCE. I called Mr. Cariguel at 11:42 a. m. today upon learning that he had returned from his vacation early this week. Business was quiet, he said. There was no repatriation of capital whatever as far as he could make out. The balance of trade running against Paris explained the demand for sterling, dollars and other foreign currencies, with the result that gold was going to New York. The British Fund did not seem to have operated in Paris for over a week although he was told that the British were steady and substantial buyers of dollars. I suggested that such dollar purchases probably had to do with the resale to British interests of a block of shares in & British utility corporation previously owned in this country and also with the seasonal requirements of the tobacco industry, offset to the extent of about $15,000,000 by the sale to American interests of a share in the "Philadelphia Inquirer" previously held by the Patemotre interests in France. Cariguel seemed to be such interested in this latter transaction and I made it clear to him that our information was entirely based upon newspaper reports. I made reference to a recent rumor in this market that Ansterdam could net readily get gold from Paris even though the guilder rate in Paris stood above the upper gold point. Cariguel seemed to know about the situation and explained that the ealy reason was that French banks, for political notives, did not care to lend a hand in gold shipments to Amsterdem; since there were no Datah banks in Paris which might be interested in dring this business (the same as the Paris breashes of American banks handle shipments w Regraded Unclassified FEDERAL RESERVE BANK OF NEW YORK 109 A OFFICE CORRESPONDENCE DATE August ai, 1956. TO CONFIDENTIAL FILES SUBJECT: TELEPHONE CONVERSATION be N. Knoke FROM WITH BANK OF FRANCE. - 8 - New York) no gold was be shipped to Helland. He indicated, however, that this problem would be tackled in the near future because it was altogether desirable that gold should flow to Amsterdam just as freely as 1% flows to New York. I inquired what the present total was of the gold held in Paris under earmark for the British Fund. Cariguel replied that about 6,000,000,000 france were left out of & maximum of 12,600,000,000 and added that they were very pleased to see the gold go out because it was one thing for them to have 1,000,000,000 or $,000,000,000 in custody but a totally different proposition when the total ran as high as it had with the British. LWK:KMC Unclassifie 110 1 OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE WASHINGTON, AC DEPARTMENT OF STATE WASHINGTON My dear Mr. Secretary: I am transmitting a copy of a letter which Mr. Walton Butterworth, Secretary of Embassy at London, has recently written which contains a most instruo- tive account of the background of Mr. Monick's ac- tivities in London, and no doubt was primarily intended for the Treasury. Sincerely yours, Enclosure: Letter of August 21, 1936, to Mr. Phillips from Mr. Butterworth. The Honorable Henry Morgenthau, JI., Secretary of the Treasury. 110A EMBASSY or THE UNITED STATES or AMERICA London, August 21, 1936. Strictly Confidential. Dear Mr. Under-Secretary: Perhaps you will reoall our conversation before you left London about the middle of January regarding the discussions which I had had with Monick, French Financial Attaché, about possible developments in French monetary policy, in particular Nonick's prediction that the insvitable French devaluation could only be brought about as & mone- tary re-aligment, based on at least a loose international understanding, and that therefore Washington would sooner or later be approached, but in any case before London. At that time "sodmer" meant the spring, but events in France diotated that such an approach had to come "later", and further information on this question was reported in the Embassy's 285, May 28, noon. Newever, the recent tele- grans sent by "No. 1ª (1.e. Monick) to the Secretary of the Treasury, namely 362, July 23, 10 a.m.; 366, July 23, 7 p.m.; 370, July 24, 6 p.a.; and 376, July 28, 1 p.m., are evidence that that approach has now been mde. I have of course no knowledge as to how actively the Department has participated with the Treasury in the current situation The Benerable Villian Phillips, Under-Secretary of State, Washington, D. c. 110B - 2 - situation, and it is with some hositancy that I take the liberty of writing you this letter on the chance that some of the following information may preve of interest. When Norbert Feis who here in May, I told his all I then knew about Monisk's plans and intentions. Briefly, it was that, through a friend of Madane Blue, Monick had been put in touch with Blue shortly after the French also- tions. The fact that Tannery had tried unsuccessfully to have Momick removed from his London post created in Blum's eyes an initial presumption in his favor. Apparently they got on well together, and had several interviews during the period before Blue assumed power. Monick went far in come vincing Blue of the eventual necessity for action, but Blue took the view that the Right by their repid volte face had mde devaluation a party issue, and that in order to pre- serve his Front Populaire bloo he had to get on with his promised reforms before entering the uncharted sea of monetary change. Novever, at Monick's instance he did put into his "defend the franc" declarations the cavent about you alighment in the event of some international understanding, and on June 14th Monisk, under instructions, left France to make a secret visit to Washington and discuss the situation with Mr. Morgestham and attempt to obtain from his the requisite 110C - $ - requisite assurances. X gather that Noniek was in Wash- ingtom about ten days; that he saw the Secretary of the Treasury on several occasions, and that his talks with him, which were conducted on an informal and personal basis, were eminently satisfactory. Momick's telegraphic reports to the French Government which arrived during the flight from the franc were most welcome to Blum and his Cabinet as offering the most likely means of extricating themselves from the them rapidly deteriorating situation. Neverthebess, by the time Monick had returned to France the flight movement had dissipated itself, and Blue was much less enthusiastic about grasping the nottle. Monick was unable to obtain from Blue the authorisation which he wiched, namely to come to London to initiate official conversations. He was, however, authorized to come here and have dissus- sions similar to those which he had had in Wmshington, but on the same personal and informal basis. This he did, with Waloy and Phillips of the Brittish Treasury, and as a result of these preliminary conversations, on June 24th a meeting was arranged between Neville Chamberlain and Blum, who was in London for the Lecarse talks, with Monick noting as interpreter. I gather that on the basis of the Washington converse- tions, the French felt able to emplep somewhat aggressive tactics with the Britich, fasing them with the tarden of responsibility should they refuse to nove at all. The 110D - 4 British are, of course, worried about the whole situation in France. st any rate, according to Menick, he has - tained from the British the premise of as undertaking the actual taxt of which has been virtually agreed upon. Be was unable to obtain British consent to & tripartite dee- laration and therefore his plan new seems to envicage a Franco-British understanding and a Franso-American under- standing. Whether or when this plan will bear fruit remains to be seen. Monick is of the opinion that "the move will not be postponed such longer", and that this constitutes the final hour of grace for a moderate dovaluation--and he has pressed for a moderate devaluation similar to Belgium's because 1t would not necessitate the. imposition by Great Britain or the United States of further restrictions on the entry of French goods, and it would give force through example to that part of the declarations which will deal with "monetary dumping" on the part of 4ay other country. No is of the opinion that, given such a devaluation, the consequent velecity of turnover will corponsate for the increased French costs arising out of the Blue legislative program. The French Cabinet is not of cue nind, but Monisk mintains that 10 nov includes a substantial number favor- ing 110E - 5 - ing devaluation and a one who complain that the contemplated devaluation is too moderate. The Communists are changing their attitude: the HUMANITÉ for three weeks has not pub- lished any anti-devaluation attacks, and according to Monick that party has now intimated that while they cannot support a devaluation proposal, due to their election pledges, they will not oppose it. The President of the Republic, who, under the French constitution, has certain rights of inter- ference in matters of foreign affairs, is urging Blue to act. Spinasse, the Minister of National Economy, who has been in London this week, has informed Monick that he is under considerable pressure from the Labor Unions to put into effect the legislation governing the for ty-hour week, but that he is afraid to do DO before a devaluation lest 15 or 20$ of French enterprises close down rather than attempt under present conditions to bear the added wage burden. According to Monick, Blue is still relmotant to act, but & renewal of the flight from the franc might effect a wuick change in his attitude. The means by which devaluation could be legally brought about in France is still a difficulty. The gold emberge, or export tax, is apparently not favored by Menick and his collaborators, who desire that the Chamber of Deputies be called, 80 that the Act authorising "re-aligment" will like Regraded Unclassified 110F - 6 - like its American protetype, give power to the Government to devalue further if "menetary dumping" is undertakes by a fourth party (e.g. Germany). I gather that the intention 10 that the declarations by Great Britain and the United States would contain a provision about further depresiation xr each uphetary dumping is undertaken by a fourth party. Monick emphasized that this whole matter had been kept a very close secret, 80 much 80 that the now Governor of the Bank of France was not fully acquainted with the situation, and "that is why he had made mistakes in Berlin and at The Magns." in transmitting the above information, for what it my be with, th, I think I should say, in view of the diff- iculties which arose over the Treasury telegrams and Mr. Morgenthau's recent enquiry No. 379, July 25,12 nosm, and the Ambaseador's reply thereto, No. 394, July 27, 6 p.m., that I was not is London_when these discussions took place, having been at Antiber or leave from July 10th to August 14th. On August 19th Monisk get in touch with Be in order to arrange that his sealed letter to the Secretary of the Treasury be desputched through the poush (telogram me. 405, August 19, s p.m.). At that time he vouchenfed - ya the information given above, book $ - sitmpt to extract from his any further information 12g his negotiations either is London or is Exchington. I do hope " shall have the pleasure of seeing are. Phillips sad you is Lenden before you solse Rame. with kindest regards, Sincerely yours, WALTON BUTTERBORTS. the aug 22, 111 1936 Secretary of Agriculture decretary of Constroo Becretary of the Interior Attorney denoral Secretary of Labor Secretary of the Havy Secretary of State Secretary of the Treasury Secretary of Mar President, Civil Service Commission Director, Emergency Conservation Work Chairman, United States Employees' Compensation Commission Administrator, Resettlement Administration Administrator, Rural Electrification Administration Administrator of Totorano' Affairs Administrator, Puerte Rice Reconstruction Administration Administrator, Works Progress Administration 112 THE WHITE HOUSE WASHINGTON any 22, 1976 My dear Mr. Secretary: I - writing to inform you that all applications for allocation of funds from the $6,880,000,000 appropriation under the Energency Belief Appropriation ist of 1985, approved April 8, 1935, must be in the hands of the Division of Applications and Information of the National Energency Commoil not later than Thursday, September 18, 1935, in such form that they can be presented to the Advisory Committee on Allotments for final action at its meeting of September 19, 1985. No applications for allecation of funds will be received or considered thereafter. It is planned that all allesations recommended by the Advisory Committee on Allotments up to and including September 17, 1985, and approved by - will have boen acted upon by the Secretary w the Treasury and by the Comptreller General prior to September 24, 1985. It is therefore directed that all governmental agencise, Federal, State, municipal, etc., be propared ou or before Ostober 22, 1936, either to ask for bids for construction work or begin operations by direct labor (foree assount) on the project. Where projects are to be carried on under contracts, such contracts must be exarded and signed en or before December 15, 1935. Sincerely yours, 113 By dear m. Administrator: I - writing to inform you that, with respect to Public Works funds available for carrying out the purposes of the National Industrial Recovery sot, as amended, I desire that all future applications for allocations and all concellations, reseiseions and modifications of previous allocations be sub- mitted to the Advisory Committee on Alletments, to be ested upon in the seee GRADOR and to the - extent as that Gest mittee note with respect to allocations made under the Imerg- eney Relief Appropriation Act of 1935. All applications for allocation of any funds must be in the hands of the Division of Applications and Information of the National Emergency Council not later than Thursday, September 12, 1935. in such form that they $05 be presented to the Advisory Committee on/Allotments for final action at its meeting of September 17, 1935. No applications for allo- eation of funds will be received or considered there fter. It is planed that all allosations recomended by the Advisory Committee on Allotments up to and including September 17, 1935. and approved by - will have been noted upon by the Secretary of the Treasury end by the Comptroller General prior to September 24, 1935. It is therefore directed that all governmental agencies, Federal, State, municipal, etc., be prepared on or before October 22, 1935, either to ask for bide for construction work or begin operations by direct labor (force account) on the project. Where projects are to be carried on under contracts, such contracts must be awarded and signed on or before December 15, 1935. Sincerely yours, Honorable Hareld L. Iskes, Administrator, Federal Emergency Administration of Public Works. This letter and enclosure prepared for: Chairman, Advisory Committee on Allotments, Executive Director, The National Emergency Council. 114 My dear Mr. Administrator: I am sending herewith, for your information, a copy of a letter which I have today sent to the head of each Government Department or Agency that has had an allocation of funds from the $4,880,000,000 appro- pristion under the Emergency Relief Appropriation Act of 1935. Sincerely yours, Inclosure The Honorable, The Administrator, Works Progress Administration. Regraded Unclassified 115 WASHINGTON n our Mr. Secretary: = as writing to inform you that all applications fer allocation of funds from the $4,800,000,030 appropriation under the Relief Appropriation Act of 1988, approved April 8. 1950, must be to the hands of the Division of Applications and Information of the I I Tymes Later I 1 si 1985, in such form that they can be presented to the Advisory Condition - Allotments for final action at its meeting of September 17, 1000. no applications for allocation of funds will be reselved w considered thereafter. It is planned that all allocations recommended by the Advicery Committee on Allotments up to and including September 170 1988, and approved by me will have been asted upon w the Secretary of the Treasury and by the Comptroller General wise to Register se, 1988. 10 is therefore directed that all governmental agencion, Federal, State, mudeipal, are. be prepared - w before October as, 1985, either to ask for bide fer construction work w begin operations w direct labor (feree account) a the project. there projecto are to be carried a under contracts, such ecaturacts met be one signed on or before December 18, 1958. Sincerely yours, Regraded 116 WORKS PROGRESS ADMINISTRATION WALKER-JOHNSON BUILDING 1734 NEW YORK AVENUE NW, WASHINGTON, D. c, Regraded Unclassifi HARRY L. HOPKINS August 22, 1936 ADMINISTRATOR Honorable Henry Morgentham, Jr. Secretary of the Treasury Fishkill, New York Dear Mr. Morgentham: I am enclosing herewith for your approval tentative draft of a proposed schedule to be used by investigators together with instructions to be sent to the field. I am also enclosing an estimate of cost which should be handled by an allotment of $383,305 to the Works Progress Adminis- tration over and above our administrative costs. After a careful inquiry I am convinced that we should not make this study in either South Dakota or Chicago for the following reasons: South Dakota was chosen because it was & drought state. We will, in effect, have com- parable data from drought counties in Georgia and Colorado where the problem has been similar but not as great as in the Dakotas. It would be physically impossible to investigate all of the cases in South Dakota without bringing in trained investigators from outside of the State. Governor Tom Berry heard that we were planning to make the study and objected vehe- mently. Our regional staff agrees with the Governor's position, as does Mr. Hopkins. For the past several weeks a carefully worked out plan of investigation has been formulated for all of Illinois including Chicago. This investigation will start in about thirty days and will last for sixty to ninety days thereafter. A hurried investige- tion such as is proposed for Chicago would disrupt present plans and would not be advis- able in our opinion. 117 Hon- Henry Morgenthan, Jr. - 2 - August 28, 1936 The work is realy to proceed as seen as I receive your approval of the instructions and schedule and your approval of the spending of these additional funds as administrative expense. Data drawn from 13 representative cities in which - conduct regular surveys have an bearing on the matter under consideration. An analysis of 2,900 cases with Vorks Program employment in June, which has just been completed, shows that 21 percent of these cases had some private employment during the month. Owing to the high rate of turnover in this group, however, only 14 percent had both private and Works Program employment on June 30th. In most cases the private earnings were small; those cases which had both types of employment on June 30th and earned $50 or more from private industry amounted to only 5 percent of the total number of cases studied. Sincerely yours, ciggis Corrington Gfll Assistant Administrator WORKS PROGRESS ADMINISTRATION 1. of Worker 4. Relief Case Number 4. Schedule haber 1 (Last Name) (Middle) (First Name) 5. Number of Persons. in Household B. State 2. Affiress 6. Color or Hace 4. County 7- Date of Certification D. City or Tom 3. Xema of Household Head E. District luber (Last) (Middle) (First) 8. Certified as Drought Case - Yes No 9. Employable Persons in Family (a) WORK PROGRAM EMPLOYMENT EMPLOYMENT IN PRIVATE INJUSTRY (b) (a) (d) (a) (f) (g) (h) (1) (3) (k) (1) (m) ? 3 Line Employed Type Month- Menth- Employed Month- Employ- Date Se. Into Bez Age Ident. Work of Wage ly ly in ly of Began Im and Address Bade No. Program Work Class Wage Barn- Private lan- August Job of Replayer August Symbol Rate lage Industry ings 85 26 August 2 3 5 10. Halief Incomes 11. Household Income Other Than 12. Relation of Household Income Other Team The Program (Yes or No) Work Program and Reliefs and Relief to Security Wage Standards Seurce Amount (Yes or No) (a) Security Wage Standard for Persons I (a) General Public Relief $ Source Amount (b) Household Income Other Than (b) Pensions (based on need) (a) Total from Private Employment $ Work Progrem and Relief (e) Private Funds (b) Other Non-Relief (Specify (d) Other Aid Source and Amount on Back Below Standard (o) (e) Total Relief Income (o) Total Equal to or Above Standard Interviewer Editor Approved (Signature) (Signature) Regraded Unclassifie Division of Social Research, way 119 Regraded Unclass ROUSEHOLD INCOME SURVEY INSTRUCTIONS TO SUPERVISORS A. Purpose of Study. - The purpose of this servey is to ascertain the amount of income of relief families employed on Works Progress Adminis- tration projects which is derived from private employment and other non- relief sources, and to compare this income with the "Security Wage Stand- ard" which is defined below. The study is based on the schedule which is attached, DRS Form # which is to be filled in part from the assign- ment files of the Employment Division and in part through personal inter- view. B. Households to be Studied - Area Included. - All certified relief house- holds with one or more persons employed on a Works Progress Administration or National Youth Administration project on August 26, 1936, in the States of Colorado, Georgia and Rhode Island and the cities of Baltimore, Cleveland and San Francisco are to be included in this survey. C. Selection of Households to be Studied - Control Cards. - The list of the households to be studied is to be based on the names and addresses of all workers employed on WPA or NYA projects during the payroll period in- cluding August 26th. The assignment files or the August payroll covering August 26th is to serve as the source of this information. A standard 5 I 8 card is to be used for compiling the list of households to be inter- viewed. Each of these control cards is to contain the following informa- tion: 1. Serial Number 2. Relief Case Fusher 3. Identification Number 4. Name of Worker 5. Address 6. County 7. Date Schadule Assigned to Interviewer - 2 - 120 8. Date Schedule Returned by Interviewer 9. Date Schedule Given to Editor 10. Date Schedule Edited and Approved 11. Date Schedule Tabulated Sufficient space is to be left on the control card to permit entering the date on which a rejected schedule is returned to the interviewer for veri- fication or correction and the date of its return for further editing. In general all movements of the schedule until its final disposition are to be recorded on this card so that the location of each schedule is known at all times. A copy of the control card is appended as Exhibit 1. When the control card file has been completed, the cards are to be arranged in alphabetical or relief case number order to determine whether there is more than one worker in any one household who is employed on & Works Progress Administration or National Youth Administration project during the payroll period including August 26. All similarities in name and address or relief case number are to be checked against FERA Form 600 to ascertain whether the workers concerned are certified as members of one household. In instances where they have been certified as members of the same household, the names of such workers are to be posted on the same control card and they are thereafter to be considered as representing & single household unit. After this check has been completed, the cards are to be numbered serially from number one in each district office. Cards with the names of more than one worker in the same household are to receive only one serial number.- The completed control file will contain a serial number for each household which is to be interviewed. D. Preliminary 20 Percent Sample - Areas Included. - In order to obtain reliable results as quickly as possible, schedules are to be filled, edited and tabulated for a random sample of 20 percent of the households in all - 3 - 121 districts which include a city with & population of 50,000 or more persons, except as provided for Rhode Island below. This will include the cities lof Cleveland, Baltimore and San Francisco and the following districts in each of the states included in this survey: Colorado District 2) (Denver) R 4 (Pueblo) Georgia District 5 (Atlanta) If 2 (Augusta) " 7 (Macon) If 3 (Savannah) Rhode Island - District 1 (Providence) " 1 (Pawtucket) " 1 (Woonsocket) In Rhode Island the preliminary 20 percent sample is to be taken only in the cities of Providence, Pawtucket and Woonsocket. The 20 percent sample is not to be taken for the remainder of the state. The sample is to be selected by pulling from the control file all cards with serial numbers ending in the digit "5" or "0". These cards are to be separately filed, and labeled "sample control file". E. Completion of Study in Sample Areas. - In the areas in which the pre- liminary 20 percent sample is to be tabulated the sample schedules are to be filled, edited and tabulated 88 rapidly as is consistent with accurate pro- cedure. In these areas work on the remaining schedules is to 00 begun only after interviewers, editors and tabulation clerks, respectively, have COST- pleted their work on the 20 percent sample. If the work is properly organ- ized and staggered it will be possible to maintain a continuous flow of work from the beginning of the 20 percent sample through the completion of the remaining 80 percent of the schedules. F. Time Schedule. - This study is to be begun u quickly as possible after 4 122 the receipt of these instructions. In the sample areas it is expected that the hand tabulation of the 20% sample will be completed by September 15th. The entire survey is to be finished well before October 1, 1936. G. General Organization. - In the field this survey is to be under the direction of & State Supervisor in the states of Colorado, Georgia, and Rhode Island and a City Supervisor in Cleveland, Baltimore and San Francisco. These supervisors are to work through the Regional Research Supervisors of the Works Progress Administration. In addition there is to be a District Supervisor for each district or sub-district office who is to be responsible to the State or City Super- visor. H. Clearance of Questions. - All questions which arise in the district or sub-district offices relating to the establishment of the control card file, the selection of the 20 percent sample, the preparation of the daily reports, and the filling, editing and hand tabulation of the schedules are to be cleared by wire or telephone with the State or City Supervisor. The State or City Supervisor in turn is to clear all questions with the central office in Washington and shall immediately notify the Regional Research Supervisor of all such inquiries. All wires are to be addressed to Howard B. "yers, Works Progress Administration, 1734 New York Avenue, Washington, D. C., atten- tion P. ii, Hauser. Any telephone calls to the central office which may be necessary are to be directed to Mr. P. M. Hauser, Washington, B. c., DIstrict 0330, Extension 196. Do not hesitate to make an inquiry about any questionable matter. I. Instructions to Personnel. - The value of this study depends almost en- tirely on the following factors: - 5 - 123 1. The reliability and completeness of the schedule returns. 2. The thoroughness of the editing. 3. The accuracy of the hand tabulation. 4. The maintenance of an adequate control system. It is essential that only persons with adequate training and experience be employed for this survey. The supervisor is to become thoroughly familiar with all of the instructions issued relative to this survey. Moreover he is to instruct carefully all interviewers, editors and tabulation clerks and control clerks in their duties. Interviewers and editors are to be thoroughly familiar with the "Instructions for Filling Schedule DRS --" and "Instructions for Editing Schedule DRS - - ". Tabulation clerks are to be thoroughly familiar with "Instructions for Hand Tabulation of Schedule DRS -- ". Copies of these sets of instructions are appended as Exhibits 2, 3, and 4 respectively. Control clerks must be selected carefully and are to work under the immediate supervision of the District Supervisor who is to be responsible personally for the control system. Although the length of the training period will necessarily vary for different individuals, it is recommended that a minimum of 3 days be set aside for the instruction of staff members in their duties. At the end of the training period it is recommended that District Supervisors administer tests to all personnel which are designed to insure a thorough knowledge of the required instructions. J. Assignment of Schedules to Interviewers. - Before being assigned to in- terviewers, all schedules are to be sorted by county, city or town, and street address. So far as possible schedules are to be assigned to inter- viewers for households in contiguous territory. Moreover care should be exercised in making assignments 80 that 80 far as practicable interviewers are familiar with the area and type of people to be interviewed. 6 124 K. Duplicate Schedules. - All schedules, after they are filled, edited, approved and hand tabulated, are to be duplicated. The work of transcrib- ing information from the original schedule to the duplicate copy is to be performed with care and thoroughly verified. All schedules, originals and duplicates, are to be held in the district offices until receipt of instructions for their disposition. L. Control System and Reports. - It has already been stated that all nove- ments of the schedule are to be posted on the 5 X 8 control card 80 that the location of each schedule is known at all times. The only other mendatory control record is the "Tabulation Control Form" which is described in the "Instructions for Tabulating Schedule DRS -". In addition to these office controls all District Supervisors are to prepare a "Daily Progress Report" and a "Weekly Tabulation Summary". The "Daily Progress Report", a copy of which is attached as Exhibit 5, is to be prepared in quadruplicate. The first copy is to be forwarded to Mr. H. B. Myers, Attn. Mr. P. M. Hauser at the address indicated above; the second/ to the Regional Research Supervisor, the third to the State or City Supervisor, and the fourth is to be retained in the district office. The items desired on the Daily Progress Report are self-explanatory. The weekly "Tabulation Summary" is to be prepared as of the close of business of Thursday of each week. It also is to be prepared in quadrup- licate and is to be routed in the same manner as described for the Daily Progress Report. Detailed instructions for filling this form are provided in the "Instructions for the Tabulation of DRS- M. General Procedure. - In general the procedurelsteps which are to be followed in the conduct of this survey arei Regraded Unclassifie - 7 - 125 1. The selection of adequately trained and experienced personnel. 2. The proper instruction and testing of all personnel. 3. The establishment of the control card file and the maintenance of the control system. 4. The selection of the 20 percent sample in the sample areas. (Note: Steps 5 to 10 inclusive, are to be completed for the 20 percent sample schedules in sample areas before step 5 is begun for the remainder of the schedules.) 5. The filling of the schedules. 6. The editing of the schedules and the re- jection of inadequate schedules for veri- fication or correction. 7. The hand tabulation of the desired information. 8. The submission of the Daily Progress Report. 9. The submission of the weekly Tabulation Summary. 10. The submission of the 20 percent sample Tabulation Summary. 11. The submission of the complete Tabulation Summary. 12. Duplication of all schedules. Regraded Unclassified Division of Social Research, WPA 126 INSTRUCTIONS FOR FILLING SCHEDULE DRS. Regraded Unclassifi I. General A. Purpose of Study. - It is the purpose of this survey to ascertain the amount of income of relief families employed on Works Progress Administra- tion Projects which is derived from private employment and other non-relief sources, and to compare this income with the "Security Wage Standard" which is defined below. The study is based on Schedule DRS 8. copy of which is attached. B. Approach and Technique of Interview. - The most important information supplied by this schedule is that obtained through personal interview. Since the value of the survey is almost entirely dependent on the reliability and the completeness of the returns, it is essential that all interviewers be extremely conscientious in the donduct of their work. The success of the interview depends largely on the approach and technique of the interviewer. The favorable impression made by the inter- viewer on the worker or household member, in stating the purpose of the visit, is usually directly responsible for gaining his confidence and cooperation. Politeness, tact and consideration must be displayed. The average person is reluctant to discuss his financial affairs and may in some instances even flatly refuse to answer the inquirer. However it should be possible in all but exceptional instances to obtain the desired information through a busi- ness-like and sympathetic approach. The interviewer is to remember that he is officially authorized to collect the data requested, but be is under as circumstances to use this authority in an overbearing or objectionable manner. Rare resistant cases should be called to the attention of the - 2 - 127 Supervisor for special follow-up work. Normally the logical procedure in obtaining the required information ill be that of following the questions in order, but if answers occur out of order in the course of the interview they should be noted as answered. Avoid making a pure formality of the procedure. It is advisable to ask questions in the briefest possible way, using a simple non-technical vocabu- lary. In the last analysis there is no substitute for experience in successful interviewing. These general remarks are intended to call atten- tion to some of the more important considerations, but it is expected that experienced interviewers will pursue the technique which they have found successful. C. Source of Information. - All schedules are to be filled in part from the control card, in part from the assignment files of the Employment Division and in part through personal interview. 1. Items to be Filled from Control Card. - Preliminary to obtain- ing further information from the assignment files of the Employment Division and through personal interview, the following items are to be transcribed on the schedule from the control card. Schedule Item A. Schedule Number 1. Name of worker (or workers, if there is more than one worker in a household employed on Works Progress Administration or National "outh Administration projects on August 26th) 2. Address 4. Relief case number 3 - 128 The schedule number is to correspond in all instances with the serial number of the household control card. At the time that these items are filled, the name of State, county, city or town, and the district number are also to be entered. 2. Items to Be Filled from Employment Division Files. - As far as possible the following items are to be filled from the Employment Divi- sion files: Schedule Item 3. Name of household head. 5. Number of persons in household. 6. Color or race. 7. Date of certification. 8. Certified as drought case. 9a Name (of other workers) 9b Sex 9c Age 9d Identification number 9e Employed Work Program August 26 9f Wage Class 9g Type of Work Symbol 9h Monthly wage rate 9i Monthly earnings 3. Items to be Filled Through Personal Interview. - All other items on the schedule, except item 12, are to be filled through personal interview. Moreover, the items described above which are transferred from the records are to be verified during the course of the interview. For further instruc- tions for filling item 12, see specific instructions below. - 4 - 129 4. Legibility and Completeness, - n order to facilitate rapid tabulation of results, all entries should be carefully made 80 that they are clearly legible. No spaces on the schedule are to be left blank. If the entry to be made is "None", an "0" should be entered in the proper space. If the data requested are not available, "H.A." (for not ascertain- able) should be entered. However, this entry is to be used only after reasonable efforts to obtain the information have failed. If the question is not applicable, a dash (-) should be intered in the proper space. II. SPECIFIC INSTRUCTIONS FOR FILLING SCHEDULES A. Schedule Number. - The schedule number is to be identical with the number on the control card for the households to be interviewed. (See above, "Selection of Households to be Studied - Control Cards.) B. State. - C. County. - D. City or Town. - E. District numberz - Enter in these spaces the appropriate designations called for. 1. Name of Worker. - Enter the name of the person whose name is listed on the control card for the household to be interviewed. If there is more than one worker for the same household, enter the name of the worker whose surname or given name comes first alphabetically. 2. Address. - Enter the most recent complete address available for the worker. 3. Name of Household Head- - Enter the relief case hase as.in- dicated on FERA Form 600 or equivalent form. Regraded Unclassified 130 4. Relief Case Number. - Enter the relief case number as indicated Regraded Unclassifi on FERA Form 600 or equivalent form. 5. Number of Persons in Household. - Enter the number of persons included in the household on August 26 who contributed to or benefited from the household income. This 18 to be obtained from FERA Form 600 and is to be verified through personal interview. Members of the household away from home temporarily should be included if they ordinarily contribute to or benefit from the household income. A member of the household away from home in a CCC camp should be included. Exclude boarders or roomers unless they are partially dependent upon the household income. 6. Color or Race. - Enter the color or race of the head of the household. For example, White, Negro, Chinese, Japanese, Mexican, etc. 7. Date of Certification. - Enter the date on which the house- hold was certified for Work Progress employment. Enter the most recent date if there is more than one certification. This date is available on FERA Form 600. 8. Certified as Drought Case. Yes No If the household has been certified as a drought case a check is to be placed in the box provided opposite "Yes"; if not the check is to be entered in the box opposite "No". Whether or not the household has been certified as a drought case is indicated on FERA Form 600. 9. Employable Persons in Family. - This block is to be filled for persons 18 or more years of age who are working or seeking work. In addition persons under 18 years of age who are employed on the Work Program or in private industry are also to be entered. Do not include houserives unless they are working or seeking work outside the has. The names of employable persons are to be transcribed from THRA Form 600. It is important however that these entries are verified through personal interview and that & check be made to ascertain whether any ployable persons are net listed on Form 600. a. Name. - Enter the names of all employable persons in the household as defined above. b. Sex. - Enter the sex of each worker listed. C. Age. - Enter the age of each worker on his or har last birth- day preceding August 26. This is recorded on FERA Form 600 but it is to be verified through personal interview. d. Identification Number. - Enter the number by which the worker is identified on WPA records (Form 507) and which appears on the pay roll. e. Employed on Work Program August 26.- Enter for each worker in the household who was employed on the Works Program during the payroll period including August 26 one of the following abbreviations in accordance with the agency of employment: Abbreviation Agency "W.P.A." Works Progress Administration "N.Y.A." National Youth Administration including Student Aid "C.C.C." Civilian Conservation Corps "Other" Other Federal Agencies The WPA District Employment Division can notify interviewers of the location of Federal agency projects operating in or near the district. The following Federal agencies are operating projects in the cities and States covered by this survey: Regraded, Unclassified - 7 - 132 Department of Agriculture Soil Conservation Service Forest Service Bureau of Entomology and Plant Quarantine Bureau of Plant Industry Bureau of Public Roads Weather Bureau Department of Interior Office of ndian Affairs National Park Service Bureau of Reclamation Office of Education Department of Labor United States Employment Service Public Works Administration Resettlement Administration (work projects only) Treasury Department Coast Guard Procurement Division Bureau of Internal Revenue U. S. Public Health Service War Department Corps of Engineers Quartermasters' Corps f. Type of Work Symbol. - Enter the type of work symbol of the project on which the worker was employed during the payroll period including August 26. g. Wage Class. - Enter the wage class in which the worker was employed on the payroll for the period including August 26. The entry will be "U" for unskilled, "I" for intermediate, "S" for skilled, "P & T", for professional and technical, and "N.S.", for non-security. This information is to be obtained from Form 507 or the August pay roll. h. Monthly Wage Rate. - Enter the scheduled maximum monthly earn- ings rate at which the worker was employed during the period covered by the pay roll including August 26, as shown on WPA Form 507 or the August payroll. - 8 1. Monthly Earnings. - Enter here for each worker employed on 133 the Work Program the amount of money he has actually earned on Work Pro- grem employment during the month of August. Enter the number of dollars earned to the nearest dollar. (Fifty cents or more should be considered as another dollar.) The information is available on Form 507 or the August pay roll. It is to be observed (see item 11b) that CCC earnings are also included as part of "Other Non-Relief income". j. Employed in Private ⁿndustry During August. - Enter "Yes" in this column for each worker who was employed in private industry for any length of time during the month of August. Employment by an established municipal, state or federal government agency not operating from relief funds is to be considered as private employment. All farm operators and persons employed on their own account (business, contracting, professional, newsboy, etc.) are to be regarded as employed. Persons who work on home farms without earnings should not be considered as employed. However, persons working on home or other farms for wages should be considered as employed. Persons on strike are to be considered employed. Enter "No" for each worker listed who has had no private employment during the month of August1 k. Monthly Earnings. - Enter here for each worker the total amount of his earnings through private employment during the month of August. Cash earnings only are to be entered. This entry is to be made in dollars rounded to the nearest dollar. (Fifty cents or more should be considered as an addi- tional dollar.) If the worker has not been employed during August (see "j") the proper entry is a dash ".". If the worker has been employed during the month of August but has no earnings the proper entry is a zero no". 1. Employed August 26. - Enter "Yes" for each worker who was - - 134 engaged in private employment as defined above on August 26. This refers to job connection rather than whether person worked sh that particular day. Enter "No" for each worker not 60 engaged. n. Date Began Job. - Enter here the date on which the job to which reference is made in Column K began. Indicate month, day, and year. n. Name and Address of Employer. - Enter the firm name and exact address of the employer for whom the person is working on August 26. If the person worked for other employers during the month of August, the names and addresses of such employers are to be listed on the reverse side of the schedule. In such instances the line number of the worker is to precede the name and address of the employer so that identification can readily be made. It is important to obtain the full and exact firm name 80 that the employers may be contacted readily at some later date if it is deemed necessary. 0. Code. - This column is to be left blank by the interviewer. 10 135 Relief Income. - Enter "Yes" or "No" as called for to indicate whether the household has received any assistance in cash or kind from public or private general relief funds, from pensions based on need, or from any other source of public or private assistance other than employment on the Work Program during the month of August. Surplus commodities should be excluded. Resettlement grants reveived during August are also to be excluded. Do not include bonus or adjusted service certificates as a form of assistance. a. General Public Relief. - Enter the amounts of general relief received from public funds in August. Do not include the cost of hospi- telization or other institutional care, transportation, burials, or surplus commodities. b. Pensions Based on Need. - Enter the total amount reveived in August from pensions based on need whether from public or private funds (as for example to the aged or to the blind). C. Private Funds. - Enter the amount of relief received in August from private funds (for example relief from private family relief agencies, Salvation Army, St. Vincent de Paul, Society of the Catholic Charities, Red Cross, etc. d. Other Aid. - Enter the amount received in August from any other public or private source which cannot be clearly placed in any of the categories above. nciassified 11 - 8. Total Belief Insome. - This itsm is to be obtained by 136 addition of items loe, b, c, and d, 11. Household Income Other Than Work Program and Relief. - a. Total from private genloyment. - Enter here the total amount of income received by members of the household during the month of August from private employment. This is to be obtained by addition of items in Column 8k. b. Other Non-relief income. - Enter here the total amount of income received during the month of August from the Civilian Conservation Corps, own business, sale of farm produce, rent income from roomers or boarders, gifts or inheritance, pensions not based on need, workmen's compensation, or any other non-relief sources. Work Program Earnings from any source other than CCC are not to be entered. Bonus or adjusted service certificates are not to be included as a source of income. The source of income and the amount from each source is to be entered on the reverse side of the schedule. C. Total. - This item is to be obtained by addition of items lla and llb. 12. Relation of Household Income Other Than Work Program and Relief to Security Wage Standard. - This study is primarily interested in the comparison of household income other than that derived from the Work Program (except CCC) and relief with the "Security Wage Standard". a. "Security Wege Standard" for Persons. - The "Security Wage Standard" is the amount of income based on the Work Program monthly wage rate of the worker adjusted for family sise. The family of four persons is to be regarded as an average size family for which the monthly earnings rate of the UPA worker is the "Security Bage Standard". 12 - 137 If the family consists of more than four persons, the "Security Wage Standard" is to be determined by adding 10 percent to the monthly wage rate for each additional member over four. On the other hand, if the household consists of fewer than four persons, the Security Wage Standard is determined by subtracting 10 percent from the monthly wage rate for each member under four. The following is a sample scale of the "Security Wage Standard" for unskilled labor at a monthly wage rate of $55.00. It is to be noted that fractional dollare are to be disregarded. Size of Amount Household Allowed Derivation 1 person $ 39.00 $55.00 minus 30% 2 persons 44.00 55.00 If 20% 3 persons 50.00 55.00 If 10% 4 persons 55.00 Monthly Wage Rate - Basis of "Security Wage Standard" 5 persons 60.00 $55.00 plus 10% 6 persons 66.00 55.00 # 20% 7 persons 71.00 55.00 " 30% 8 persons 77.00 55.00 " 40% 9 persons 82.00 55.00 " 50% 10 persons 88.00 55.00 " 60% 11 persons 93.00 55.00 " 70% In filling item lla the number of persons in the household, as listed in Item 5, is to be inserted in the blank provided in Item 12a, and the Security Wage Standard is to be computed on the basis of the highest monthly wage rate of the workers in the household. b. Amount of Private Employment and Other Non-relief Income. Enter the total amount of household income derived from other than Work Program (except ccc) and relief sources. This has been computed in Item llc. 13 138 C. Below Standard - Equal to or Above Standard - Place 8. check mark in the appropriate space provided to indicate that Item 12b, or Household Income Other Than Work Program and Relief, is below,/equal to or above Item 12a, the "Security Wege Standard" for - persons. Signature of Interviewer. Editor and Supervisor. - The signature of interviewer, editor and supervisor and dates on which the schedule is filled, edited and approved, are to be entered in the space provided. Regraded Unclassified 139 SUMMARY OF CASE LOAD STUDY - COST ESTIMATES CITIES BALTIMORE Case load 9,000 $ 28,300.00 CLEVELAND 35,550 70,620.00 SAN FRANCISCO 17,000 35,660.00 STATES COLORADO 28,689 82,350.00 GEORGIA 36,000 80,250.00 RHODE ISLAND 10,875 36,125.00 $333,305.00 NOTE: Contingent fund to take care of emergencies; to be held in Washington office. This will also cover small additional administrative cost here - maximum of three supervisors for two months, approximately $2,500.00 - 50,000.00 TOTAL $383,305.00 August 20, 1936 Estimate of the cost of the proposed investigation for WPA workers for the following: Cities of - Baltimore, Cleveland and San Francisco 140 States of - Colorado, Georgia and Rhode Island BALTIMORE (Case load - 9,000) Staff Per Month Period Total 1 Director # 300.00 2 mos. $ 600.00 8 Supervisors 150.00 2 mos. 2,400.00 80 Visitors 100.00 12 mos. 12,000.00 2 Secretaries 125.00 2 mos. 500.00 16 Clerical workers 75.00 12 mos, 1,800.00 Total Salaries $17,300.00 Travel 4,000.00 Office space, equipment and incidentals 7,000.00 Total cost of study $28,300.00 CLEVELAND (Case load - 35,550) Staff Per Month Period Total 1 Director $ 200.00 2 mos. $ 400.00 1 Ass't Director 175.00 2 mos. 350.00 18 Supervisors 160.00 18 mos. 4,320.00 263 Visitors 100.00 12 mos. 39,450.00 2 Secretaries 100.00 2 mos. 400.00 1 Office Manager 150.00 2 mos. 300.00 2 Clerical workers (Supervisory) 100.00 2 mos. 400.00 75 Clerical workers 80.00 I& mos. 9,000.00 Total Salaries $54,620.00 Travel 6,000.00 Office space, equipment and incidentals 10,000.00 Total cost of study $70,620.00 RHODE ISLAND (Number persons employed August 1, 1936 - 10,845) Staff Per Month Period Total 1 Director $ 200.00 2 mos. $ 400.00 5 Supervisors 150.00 1a mos. 1,125.00 120 Visitors 110.00 1g mos. 19,800.00 2 Secretaries 100.00 2 mos. 400.00 40 Clerical workers 90.00 11 mos. 5,400.00 Total Salaries $27,125.00 Travel 6,000.00 Office space, equipment and incidentals 3,000.00 Total cost of study $36,125.00 Regraded Unclassified 2 - continued SAN FRANCISCO (Case load - 17,000) 141 Staff Per Month Period Total 1 Director $ 250.00 2 mes. $ 500.00 8 Supervisors 160.00 la mos. 1,920.00 125 Visitors 120.00 lt mos. 22,500.00 2 Secretaries 110.00 2 mos. 440.00 22 Clerical workers 100.00 11 mos. 3,300.00 Total Salaries $28,660.00 Travel 4,000.00 Office space, equipment, incidentals - 3,000.00 Total cost of study $35,660.00 COLORADO (Case load - 28,689) Staff Per Month Period Total 1 Director $ 250.00 2 mos. $ 500.00 12 Supervisors 200.00 12 mos. 3,600.00 300 Visitors 100.00 12 mos. 45,000.00 2 Secretaries 100.00 2 mos. 400.00 50 Clerical workers 80.00 la mos. 6,000.00 Total Salaries $55,500.00 Travel 22,000.00 Office space, equipment and incidentals 4,850.00 Total cost of study $82,350.00 GEORGIA (Case load - 36,000) Staff Per Month Period Total 1 Director $ 300.00 2 mos. $ 600.00 8 Supervisors 150.00 2 mos. 2,400.00 12 Supervisors 125.00 la mos. 2,250.00 250 Visitors 100.00 lg mos. 37,500.00 2 Secretaries 100.00 2 mos, 400.00 190 Clerical workers 60.00 1g mos. 17,100.00 Total Salaries $60,250.00 Travel 15,000.00 Office space, equipment and indidentals 5,000.00 Total cost of study $80,250.00 Regraded Unclassified August 22, 1930 This was written by the Secretary while he ⑉ at Wianno, on Cape Cod, for his vacation. all constries Hus dur. the 143 except Holland which shared small minus get. Butain layest huger. odd lots purchases m balance selling represents stop anders n under m nbet 1 End of Landen Bull 144 market - above in formation was given me by W.C. Tayler over telephone I called Pres. at 1.00 hime. - Iasbed if he and gave him same knew what gallit pole woul of show Sunday, He said it gave him an increase of 1/2% popular note - fan state of michig which gave him 145 needed entoral votes fa election. Iasked him when this information could Lane liaked out. He said Thurs- night a Friday A.M. I said that undrubtly accounted for the selling Friday. Landin's defeat They were dis counting I was quite ex cited about it and total him so. I think 146 he was pleased although he pretended he was not. A I at least convinad him that the setting was not from abroad. He asked whether I had from cochian nuring its gold again about England said I harmot out of France I had time tn hear. . 14m. 147 REMORANDOM FOR THE SECRETARY At the President's Home, Hyde Park, Sunday, August 25, 1936. No arrived at the house about 9:10 (Standard) and waited until about 9:30, until the President called for us end We wist into his small study. There were present Henry Morgenthau, Jr., Dan Bell, George Hass and Herbert Gaston. The President said be had a few things to unload a the Secretary first of all. The first thing was about the labor classification study. Be wanted to announce only the 1s million for reclassification, with no particular story about it, just a routine announcement. Then on Labor Day be would shoot the works about the 28 million and the rest of it. He asked Bell to give MoIntyre a memorandum Monday about the 1$ million. No. 2 was a matter of a man named John I. Lever, who was threatening to make a di sturbance about his treatment by Ickes. Ee could be held off a few days longer only. The President had 8. letter from Tokes, which he turned over to Secretary Morgenthau, stating that he was perfectly willing to have as independent investigation made of the reasons for the dismissel of Lever, preferably by the Treasury Department. H.B.G. said that he had talked to Lever, who had come in ostensibly looking for a job in the Treasury Department and had unburdened himself about hd # troubles. The Secretary told Gastom to take it up with him Monday. No. 8 brought up by the President vas s. mtter of roads in the Hamalian Islands. This should be held very confidential because it we a military matter and had been brought to him by the War Department. The matter was particularly for the attention of Dan Bell. Last year We eyent a million - 2 - 148 dollars in building roads on the Island of Oalm, The War Department the very anxious to have this system of roads perfected for military purposes and they have a 167 program calling for $1,166,000. It is 80 soach more important than other WPA projects in the Islands that the President wov.ld like to give them six hundred to COVER hundred thousand dollars immediately and then see how much we can late for this road purpose by elinination of other WPA projects in the Islands. No. 4 of the President's items, Be had in his hand 6. letter from Mayor LaGuardia, who made several points about the PRA limitation, a couple of which the President thought were perfectly valid and he thought TO would have to make some change in the decision to limit PWA grants exclusively to relief labor. LaGuardia pointed out that many cities had voted on projects and had got popular authorisation for fifty-five per cent bond issues and this referendum approval was based on the prespect of forty-five per cent grants. Any deviation from this system would invalidate alloon- tions. Consequently, the new rule would make it impossible for many of these cities to go ahead with the projects. The government seemed to be under a moral obligation since the city bond issues had been voted under a promise by PWA to provide the grants. The second point did not involve any moral obligation. It was that the debt limits of many localities forbade their operating as the new basis since they could not raise additional funds over might and if the old ratio of grants val not maintained, then there would be 20 PEA projects, The Prosident commented that that depended upon the particular case) some would be able to go shood and - would not. The President thought W eught to approve those projects that écuform reasonably fully to the Regraded Inclassified - S - 149 forty-five per cest labor provision, but be would not stick at thirty-five per cent. Das Bell wanted to lowere where W would get the many. The President said R can 150 as far as TO can with this fifty million that you (Bell) picked out of the air. Ban objected that there wasn't esy fifty million, but the President said he had & memory like a elephant and he know Dan Bell said there m fifty million. Anyway be wanted to go shead for the next month or two on this basis with whatever funds Den could find for the purpose. He said the first thing we ought to do was to find out the amount involved and how many projects had actually been voted 68 and how much labor could be furnished in those communities. He said 10 had to find twenty or thirty million dollars nore for these projects. Bell non- tioned that PWA had twenty-two million for administrative expenses and the President said we can out that wight away to fiftson. He remarked that the law limits the completion of the program to July 1 next and Bell said the money had to be all obligated by July 1 but not necessarily all spent. Secretary Morgenthau them brought up the matters he had to lay before the President. The first TM the financing, which he expected to announce about September 8. His idea was simply to issue new notes in exchange for the 510 million maturing on September 15. Be said he was quite sure there would be contrary advice from the Federal Reserve people. They would west to take advantage of the perfect shape the market was in to raise MT funds, but the Secretary did not think that THE good tacties. He thought the nov notes should be for five years at 1-8/81 the old notes are years at * In that commection the Becretary said that while - de not need the publica- tion of the Budget Summation for financing purposes, still R ought to got 10 out. & remarked that a van acquisitance of the family had teld then that Regraded Unclas 4 she heard the story about the letter that there would be as nor taxes ever the radio eighteen times that day, indicating that it aroused a. whole 106 of interest. The second thing the Secretary had to mggost was that the President order Bell to order all the government departments and activities be not aside five per cent of the current year's appropriations. "Where did you get that from?" the President interjected. He said the Acting Postmaster General motices that postal receipts are up twelve por cent, which means more mail to handle, more work. "Now how in hell can you ask him to save five per cent of his appropriation. Come clean." He admitted that the rule of thumb was a pet of his, but be said here is & case where you can't apply it. Secretary Morgenthau said he realised that all departments could not save an even five per cent, but he thought - ought to aim to get a possible two hundred to three hundred million. He thought the President should give on indication of his purposes to do this in the Budget Summation. Dan Bell thought the President ought to give instructions to the Budget Bureau to try and save BOMO indicated amount. The Secretary remarked that We ought to be careful not to promise more than we can do. The President said it would be very hard to phrase it. "If you make it definite, they will say the same thing to no as has been said to Landon. Where will you SATE and why didn't you de it before? It - to 20 about all you can de is to give instructions that the departments shall hold on to their unexpended balances and not spend them just because they have the If I should start on a policy of not spending the billion four twenty-five it would be taken to Bean that business has been taking up the load. But they have not. I think the figures are about $50,000 employables not employed." The Secretary said let Dan try bis hand at working the thing ent ast itsm on submit it to Regraded Unclassified 150 8 the President. The Secretary said he thought we ought to have the Summation out before September 1. The President saids "Let ms take it on the train. I will read it over on Wednesday, when I will have a. good deal of free time, and will shoot it baok. We should not make it a three-day release." The Secretary asked the President would like to hear the main figures that would appear in the Budget Summation and the President asked Dan Bell to read them. The estimates were for revenues of $5,600,000,000 and for expenditures of $7,700,000,000. Included in these expenditures were approximately $600,000,000 to clean up the bonus payment and $580,000,000 of debt retirement. If these are deducted the net expenditure figure is $6,520,000,000, which would leave a deficit of only $920,000,000, although the entire deficit, including bonus and debt retirement in the expenditures, is $2,100,000,000. Including debt retirement, but without the bonus, the deficit is just a billion and a half. The President asked how thi . net deficit of $920,000,000 less bomus and debt retirement compared with last year's and Bell told him that last year's on the name basis was $2,700,000,000. The President said in substance: "Here you fellows were orying to = a few months ago that we had to save that three hundred on PWA or we were going to have & worse deficit than we had last year and now you como and tell no that We are going to have a deficit of less than a billion against two billiom seven. How do you get that way?" The Secretary said laughingly that the President met have been mistaken about what they said, but the President said no, he had a immory like an elephant. Dear Bell pointed out that the expenditures had been kept down pretty rigorously in this estimate and also that no allowance had been made for extra expenditures on account of the Regraded Unclassifie 151 - 6 drought. He thought TO couldn't include any exact figures for the drought, but we should make some allewance for it in the Budget Summation. In other words, be thought there ought to be a paragraph explaining that there might be need for additional apprepriations on account of the drought and the Secretary said this could well be coupled up with the President's statement in his relief message that the amount of relief appropriation depended pretty largely on what progress business mde in taking up the unemployed. The Secretary then brought up the matter of the proposed speech by the President discussing the general outlook of government receipts and expendi- tures over a period of years. Es told the President that there was same astonishing things in what the Treasury people had gotten together. He thought we had the mterial for a swell speech and he asked Gastom to read the draft he had prepared. Gaston said that it consisted of some general language which he had written and same paragraphs on estimates, for whi oh Mr. Haas was responsible. After two or three pages had been read, the President remarked: "Why this is politioali" He was very great interested in the statement that "Ever since the 1860's the volume of physical production in the United States has shown a most remarkably steady tendency to increase at a rate approximately double the rate of increase in over population." Mr. Hass showed kim a chart on whi ob population and volume of production were plotted, showing approximately a straight line on оспештеной growth of the - on about a two to - ratio, with relatively minor variations for boars and depressions. The President was astomished at the estimate that the level of industrial activity of 1929 increased in proportion to population would bring a total tax yield of 11.8 billions of dollars, including social security taxes, and approximately 20.7 billices excluding social security texas. The Regraded Unclassifie 152 - 7 - President said it might be true, but you can't get enybody to believe it, After the entire draft was read be saids "That's fine. That's great stuff, but I can't say it." He thought he would have to be such nore conservative. People just simply couldn't believe statements of this kind no natter how well fortified they were from a statistical standpoint. The President thought the most he could say would be that our revenues will be adequate or wo within the next year to meet expenditures on the seas basis that - are making them now, thus proving that our tax structure is entirely adequate. The Secretary said that the suggestion was not for anything immediate and the President said a speech along this line should not be delivered until after the first of October. Reference was again made to the proposed Labor Day speech on the - ployment problem and the President agreed that be would like to have the Treasury work out something on it. This ended the talk at the house, but later on the train the President diotated to Dan Bell his idea of some statements he should make in the Labor Day speech. --000-= Regraded Unch 153 Tonight I want to ask you to join with 100 in & look into the future. Let us turn our faces formard, net with the thought of creating fantastic dream castles, but with our feet on the ground and with full realization of where we are, of the road along which me have come and of the direction in which 19 are headed. I remember quite vividly a saving that I saw printed on & placard a few years ago, & rather inspired saying I thought then and I still think. It went this way: "Wasn't the depression awful?" Unfortunately it was just a fow years premature. We then had not by any means touched the depth of the depression and we had before us & rough road to travel. But I call the expression inspired because it seens to me it was and is characteristic of the spirit of the American people. Our people have not conquered a continent and brought about huge advances in science and in industry by fretfully looking backward and complaining that things are not as they used to be; on the contrary they have always cast their eyes ahead. They have always been inspired with hope and with enthusiasm. They have made a jest of difficulty and they have strode boldly on with assured confidence and with assured hope. That is the one phase of history from which we can probably derive the greatest profit. We cannot advance by doing all things just as our ancestors did them, but we can advance by adopting the spirit of hope. of energy, of enthusiasm and of determination to achieve something better, which is responsible for Regraded Unclassified - 2 154 all that they have given up. % have today reached the point where TO can say with real ing. "Wasn't the depression anful?" We have climbed a long my out of the depths. We are in & position where We can make sound plans for the future. To are in a position where W can use what 19 have learned; where we can capitalize adversity to build a sounder prosperity. We have read much and we have talked much of recovery. We have watched the various indicators of business progress as they have been climbing steadily back from the depression lows, and many of us probably have had too firmly fixed in our minds a former normal, or a former pask of business progress, of employment conditions or of standards of living and have regarded these as the final goals to which we are struggling. These indicators have had some usefulness in measuring our progress, but we will make a mistake if we confine ourselves to them. There was never a time when our civilization was as well ordered as it could have been; there was never & time when we reached a peak of production in which the real wants and the real necessities of all our people were satisfied. I don't think the time will ever come when we will reach such & goal, be- cause it is bound to be a moving goal and I an well content that it should be so, I think I speak the spirit of the American people when I say that they will not be satisfied and for long rest content simply with No storing conditions, or with reaching marks of attainment that they have once reached. They will want to @ further and higher and " would have real occasion to despair of the spirit and ambition of our people if they did not. The time has when can come to place 10 much emphasis on the word recevery. when WS can speek instead of 1000- thing better than recovery, of an enlarged prosperity, of a greater wall being and above all greater neasures of social justice than any 10 have experienced in the past. Our national government in the last four years has accepted new and grave responsibilities that go beyond the mere operation of routine government functions. It has accepted responsibilities in connection with the social welfare and the social security of our citizens. It is not only a grave responsibility, it is also an inspiring responsi- biliry and it is my belief that the American people will insist that that responsibility shall be retained and shall be well discharged by these whom they elect to office. You will recall that in the early days of the depression there was an appeal to private philanthropy to come to the rescue. There were heavy demands upon local units of government, upon villages, counties, towns and municipalities. But although there was a powerful and heroic response all along the line, the burden was far too heavy for any or all of these agencies to carry. The taxing power and borrowing power of commodities and local and state governments was strained, It was the will of the nation that the collective resources of all our people, represented in the credit and power of the Federal Government, should be brought into action inm effective my. It me BO brought into action. The national credit was used to reseas the people, to feed the hungry, to give work to the unemployed, to serive the industrial life of the nation. No undertook - our people acting through Regraded Unclassified - 2a - 156 their national government undertook - the thrilling task, the thrilling Regraded Unclassifie experiment, of sustaining the lives and guarding the welfare of our people and of restoring the productive energies of the Nation. The experiment has succeeded; we have restored productive activity; the national income has leaped upward from below forty billions of dollars in 1932, as estimated by the Department of Commerce, at a rate that will mean a sixty billion dollar national income produced in 1936. and the trend is still upward. It is reflected every day in the reports of busi- ness operations and it is reflected in the Federal revenues. But I do not believe the American people will consider their task accomplished when income produced reaches the level of some past peak. The whole history of our country points the other way. It is not necessary to cite figures to prove this. We have evidences of it on every hand. Nevertheless, it is sometimes very useful to turn to the figures, not to assure ourselves of what we. have accomplished, but to indicate more socur- ately where we are likely to be in the near future. Not long ago, I examined with great interest a chart showing the growth of industrial production in the United States in relation to the increase in population. The figures want back year by year as far as 1866. The story told by this chart and the figures underlying it is a very simple but & very important one. It is, briefly, that ever since the 1860's, the volume of physical production in the United States has shown a most remarkably steady tendency to increase at is rate approximately double the rate of increase in our population. The most striking thing about 5 - 157 this chart to me is that thenever this long-term rate of growth has been Regraded Unclassifie interrupted by business depressions, the interruption has been only temporary and the previous pesks of production have been invariably a ceeded in the subsequent recoveries. Some people regard the level of industrial activity in 1929 as a far- off goal to which we may aspire but which we cannot reasonably expect to reach again in the foreseeable future. Such people would do well to examine an historical chart of the type I have described. Were they to do so, they might quickly come to feel, as I do, that it would be surprising if, during the next four years, the United States does not experience such & further measure of business recovery as would bring the industrial indexes well above the levels of 1929. The average level of industrial production in 1929, as measured by the index of the Federal Reserve Board, was expressed as 119 percent of the average of the years 1923-1925. In July 1936, the Federal Reserve Board index was 108. If, in the next four years, that in- dex rose to 140 - or well above the level of 1929 ", it would only reach up to that remarkably regular line of growth that the United States has traced since the 1860's. I was happy to receive only a short time ago from the Secretary of the Treasury the assurance that, in his belief and the belief of those associated with him in the Treasury Department, we shall not need to levy new taxes in the coming year or to increase existing taxes. That opinion coincided with my own judgment that I had expressed in Budget Messages to the Congress of the United States. There were some who prefessed to be skeptical as to the supporting reasons and supporting statements, but if they had looked the facts honestly in the face, there would have been no - 6 - 158 reason for any such skepticism. One has only to look at figures of the growth of revenues over the last three years to 0 how rapidly and how Regraded Unclassifie steadily we are marching to our goal of a balanced budget and & reduction of the Federal debt. In the fiscal year 1934, the first complete year of My Administration and the first fiscal year of the recovery program, the Treasury's receipts from all sources other than processing taxes and trust fund items amounted to 2763 millions of dollars. In the fiscal year 1935, these receipts, on the same basis, rose by 516 millions, or by about 19 percent. In the fiscal year 1936, they exceeded those of 1935 by 760 millions, or by 23 percent. The estimate, on the same basis for the fiscal year 1937, which began on the first of July, is approximately 5,590 Willions of dollars, or about 1,550 millions greater than the comparable receipts of 1936. or & further increase of about 38 percent. With our revenues increasing at this striking rate, with the balk of the bonus outlay behind us, and with the need for relief expenditures facing & substantial decline as private industry continues to expand, the Secretary of the Treasury is clearly justified in believing that no increase in taxation will be necessary. There are some also who have expressed alam at the size of the public debt. But I have not been surprised to note that some of the very insti- tutions and individuals who have expressed such alara have been among the largest purchasers of United States Government securities. The truth is that the hard-headed business men of America know, and cannot ignore the fact, that we have won our battle against the depression, that we are clink- ing steadily out of it toward levels of production that we never have reached before and that they have every good reason to believe in the strength of the credit of the American Government and the American people. 159 - 7 The increase that has taken place in the public debt may - to BOOD large. Tet is is about half the increase in the public debt that occurred during the World Var and when TO masure it, net against national wealth but merely against annual income produced in the present fishal year, M find that the whole of the increase in that debt is wiped out with seven billion dollars to spare by the increase in the national income estimated to be produced in 1936 as Stupared to the national income produced in 1932. I called attention B few minutes ago to the great probability that during the course of the next four years no shall reach levels of business activity substantially in excess of those of 1929, even if we only restore the average long-term rate of growth that has characterized American industry through periods of depression and prosperity since the Civil War. It is interesting to relate this probability to the problems of Federal taxation and debt reduction. The Treasury has estimated that with levels of indus- trial activity no higher than those of 1929 on a per capita basis, the present Federal tax structure would produce annual revenues approximating 11.8 billions of dollars, inclusive of social security taxes, and approx- imating 10.7 billions of dollars, exclusive of social security taxes. Now, I do not contemplate that 10 shall actually raise Federal revenues in these amounts. They will not be necessary. Revenues of this size would, of course, be far in excess of the total expenditures of the Government in any year of the present Administration, OVER including the past year vasa we prepaid the balk of the soldiers' boma. the figures mis it clear, however, that our present tax schedules are mah as will be more than ample in the years that are immediately about to cover all the expenditures Regraded 160 8 - Which we are currently making, both for the ordinary purposes of govern- ment and for what we have classed as recovery and relief, and leave a very large margin for the rapid reduction in the public debt. Our problem will not be how we shall obtain funds to promote recovery, but how fast we shall reduce the public debt, how fast and which taxes we shall reduce, and how much revenue we shall continue to employ in discharge of the new responsi- bilities for the social welfare which have been accepted by the Federal Government under the present Administration. No shall be able to reduce the public debt just as rapidly as, if not nore so, than we did in the years immediately following the World War. We shall be able to eliminate most of the present excise taxes that are paid so largely by wage earners and salaried workers, and to reduce the rates of other Federal taxes. We shall be in a position to consider the advisability of sharing some of the Federal revenues with State and local governments, thereby permitting an enlargement of the services rendered by State and local governments and a reduction in State and local taxation. Most important of all, in my opinion, the Federal Government will be able to continue and to expand the program of social security that we have inaugurated during the past three years. I would not attempt today to outline a budget of governmental expendi- tures for 1938, or 1959, or 1940, but I can indicate scas of the items which would properly appear in such a budget. No are already well advanced with the program of guarding social security by provision for unemployment insurance, for the care of mothers and dependent children, for old-age benefits. We should enlarge and better our facilities for education, for Regraded Inclassified 161 vocational training and for finding employment for those who are unemployed. We must pay more attention to the character of the housing of all our people, especially those whose incomes do not permit them to be decently and ado- quately housed. We must continue to maintain facilities for furnishing emergency employment on useful public works. There has never been & time in this history of the country, unless it was during the war years, when there was not & considerable number and a considerable proportion of employable persons willing to work and in need of it. We have always had an unemployment problem, although the national government has not always recognized it. We must stop the waste of our national physical resources and we must never be discouraged by loose talk to the effect that national planning of physical resources has never been successful. It has succeeded and 10 must make it even more successful. To must do better than we have done in the protection of national health. It is not enough merely to combat pestilence. Ye have the scientific knowledge, if it were made available and effective, to educate and rear our people so that the common standards of health and of physical vigor, and of mental vigor, will be Vastly improved. These are some of the tasks that I 688 before us as a people. A. nation that has fought its way out of & depression can fight its my to higher and better standards of government, of living and of national life than it has ever before attained. To look forward with hope and confidence and with reliance on American democracy, upon American courage and upon American iniative to creato by CORBOR effort a better order and a more secure civilization. Regraded Prepared by Mr. MoLeod Div. of Res. & Statisti Confidential thom sun any to 7.H.K night Estimate of Federal revenues and receipts in the fiscal H park year 1940, assuming & hypothetical pattern of business recovery during the period 1936 to 1940 aug 23,1934 Federal revenues and receipts are chiefly dependent upon the tax structure and the levels of production and business activity. The major indexes of economic activity which are used in the preparation of estimates of Federal revenues are the Federal Reserve Board index of industrial production, the Bursau of Labor Statistics index of wholesale commodity prices, the Bureau of Labor Statistics index of factory pay- rolls, the Standard Statistics average price of 419 stocks, the volume of bank debits outside New York City, and the population of continental United States. Actual data and estimates of these indexes are shown in Table 1. In the preparation of the cotimates of revenue for the fiscal year 1940, it is assumed that the Federal Reserve Board index of industrial production (Chart 2) will average 130 (1923-25-100) in the calendar year 1939. This index averaged 119 in the calendar year 1929 and de- clined to 64 in 1932. From the latter year to the estimated average for 1936, the index has risen to about 102, an average rate of increase of 12.4 percent per year. To attain an average level of 130 in the calendar year 1939, the average annual rate of increase from 1936 would approximate 8.4 percent, and the average rate of increase per year from 1932 to 1939 would amount to 10.7 percent. It will be noted that the assumed average annual rate of increase from 1936 to 1939 is about 4 per- cent less than the actual average ennual rate of increase from 1932 to 1936. Although the enmal rate of increase from the low of the depression to 1939 may appear relatively great, it will be observed from Chart 1 that the index at 130 in 1939 will be 3.2 percent below the long-time relationship between the growth in population and the growth in industrial production, and the per capita production in 1939 would approximate that of 1929. In Chart 1 is shown the average relationship between population and industrial production for the years 1866 through 1930. During this period the growth in industrial production has been slightly more than twice the growth in population. From 1929 to 1932 production fell far below the line of average relationship. but the rapid recovery since the latter year is supporting evidence that the average relationship may again be attained during the next few years, supecially in view of the fact that the recovery time far has been attained with only a moderate increase in building activity and in purchases of railroad equipment. In Table 1 and Charts 3 and 4 are shown total production of motor vehicles and building floor space for past years and the levels which they should reach in 1939 in order to attain a level of 130 in the Fed- eral Reserve Board index of industrial production. Production in these Regraded - 2 - 163 two industries are presented for the reason that they are large con- tributors to recovery in durable goods and are two of the major factors used in estimating the Federal Reserve Board index of in- dustrial production. Building floor space, which averaged 65.4 million square feet in 1929, declined to & monthly average of 13 million square feet in 1932 and is estimated at an average of 35 million square feet for 1936. The projected level for 1939, 81 million square feet will represent more than twice the amount for 1936. Total motor vehicle production in 1929 amounted to 5,358,000 automobiles and trucks and is estimated at 4,550,000 for 1936. For 1939, total production is projected at 6,000,000, or an increase of 12 percent over 1929. Another component which may be expected to be a major factor contributing to further TO covery from present levels is the purchase of railroad equipment. The Bureau of Labor Statistics index of wholesale commodity prices for 1939 is placed at 90 (1926=100) which compares with 95 in 1929 and the present level of 81. The change in this index represents & moderate increase due to the cyclical recovery of general business rather than an inflationary development. The Standard Statistics average price of 419 stocks is assumed to reach an average of 184 in 1939, which compares with 190 in 1929, and about 115 at the present time. The large amount of corporate profits which should result from the high level of industrial activity and low interest rates should result in the indicated level of stock prices. The Bureau of Labor Statistics index of factory payrolls is assumed to reach an average of 109 in 1939, which compares with 109 in 1929 and the present level of about 79. A large increase in employment because of the high level of industrial activity and 8 moderate increase in average wages are the base for the increase in the payrolls' index. Under the above assumed levels of production and business activity, it is estimated that total revenue, general and special accounts, will amount to $11,918 million in the fiscal year 1940. Of this total, $1,078 million are expected from social security taxes and taxes on carriers and their employees. Exclusive of the latter groups, total internal revenue and customs are estimated at $10,840 million. For the fiscal year 1937, total receipts, general and special accounts, are estimated at about $5,595 million. The increase in the estimated revenue for the fiscal year 1940 over that for the fiscal year 1937 amounts to $5,323 million, of which income taxes account for about $4,762 million. This large increase in income taxes reflects higher levels of income and the strong tax structure of present law. Under present law, large individual incomes are taxed at surtax rates ranging from 68 percent on incomes from $100,000 to $150,000 to 75 percent on incomes in excess of $5,000,000. and a normal tax rate of 4 percent as compared with the top surtax rate of 20 percent on incomes - 3 - 164 above $100,000 and rates of normal tax of 1$ percent, 3 percent, and 5 percent under the Revenue Acts of 1926 and 1928. Moreover, the present law exempts single persons end married persons or heads of families in the amounts of $1,000 and $2,500, respectively, as compared with exemptions of $1,500 and $3,500 for such individuals under the Revenue Acts of 1926 and 1928. The present law also imposes the normal tax on dividends received by individuals, whereas under prior laws such form of income was exempt from normal tax. The 1936 Revenue Act imposed in addition to graduated normal tax rates on corporate net income, graduated rates of surtax on undistributed profits of corporations, whereas under the Revenue Acts of 1926 and 1928, corporate incomes were subject to flat rates of 12 percent to 13$ percent. The estimates of revenue assume the continuance of the manufacturers' excise taxes and certain other miscellaneous internal revenue taxes which under present law would terminate in July and August 1937. August 22, 1936 Regraded 165 Estimate of revenues and receipts, general and special accounts, fiscal year 1940 on basis of Federal Reserve Board index of industrial production (130) and related serios in calendar year 1939 (In millions of dollars) General and special accounts Internal revenue Income taxes Current corporation 2,793 Current individual 4,022 Back taxes 250 Total income taxes 7,065 Miscellaneous internal reveme Capital stock tax 128 Excess profits tax 120 Estate tax 685 Gift tax 150 Distilled spirits and wines (domestic and excise on imports, including related taxes) 395 Fermented malt liquors (including special taxes) 335 Tobacco 555 Documentary stamps 126 Manufacturers' excise taxes 478 Miscellaneous taxes 121 Total miscellaneous internal revenue 3,093 Other internal revenue taxes Taxes on carriers and their employees 220 Social security taxes Employment tax (Title VIII) 764 Tax on employers of eight or more (Title IX) 94 Total other internal revenue taxes 1,078 Customs Distilled spirite and wines 32 All other 450 Total customs 482 Total internal revenue and customs 11,718 Miscellaneous revenues and receipts 200 Total receipts, general and special accounts 11,918 Trust accounts Deposits by States under Social Security Act 940 Regraded Major basic economic factors affecting Federal revenues # BLS index : : Standard Total bank : Population :Total floor: Total FEB index I :BLS index : Statistics debits out- : United : space of : of whole- automobile pro- Calendar of indus- : sale com- :of factory: index of : side New States mid-4 building : duction in trial pro-: : payrolls : yes prices of : modity York City year esti- : contracts the United States $ duction : : w 419 stocks : (billion : mate : awarded 2/: 1/ prices (thousand cars) # : 1/ : : 1/ : dollars) (millions) : (million : $ 2 : : : : 1 so, feet) : 1919 83 139 97 71 211.2 105.0 46.7 1,934 1920 87 154 117 64 241.6 106.5 33.5 2,227 1921 67 98 76 55 191.9 108.2 32.3 1,597 1922 85 97 81 68 199.5 109.9 47.8 2,544 1923 101 101 103 69 225.3 111.5 49.3 4,034 1924 95 98 96 73 225.2 113.2 50.1 3,603 1925 104 104 101 90 256.7 114.9 77.0 4,266 1926 108 100 104 100 268.9 116.5 73.1 4,301 1927 106 95 102 118 282.3 118.2 70.1 3,401 1928 111 97 102 150 306.2 119.9 79.9 4,359 1929 119 95 109 190 331.9 121.5 65.4 5,358 1930 96 86 89 150 277.3 123.1 42.5 3,356 1931 81 73 68 94 217.5 124.1 30.6 2,390 1932 64 65 46 48 154.4 125.0 13.0 1,371 1933 76 66 49 63 134.3 125.8 12.3 1,920 1934 79 75 62 72 166.0 126.6 12.7 2,753 1935 90 80 70 78 190.0 127.5 21.0 3.947 2/ 1936 102 80 79 104 213.0 128.4 35.0 4,550 2/ 1939 130 90 109 184 349.0 131.1 51.0 6,000 Monthly averages. 2 Estimated. 166 Regraded Unclassifie August 24,1936 Lochhead, Taylor, Oliphant, Haas and White met with the Secretary to discuss the informal telephone call from the Federal Reserve Bank of New York in which they had advised the Treasury Department of the receipt of a cable from the Norges Bank (the Central Bank of Norway) requesting that the Federal Reserve Bank of New York purchase and hold under earmark for them the sum of $5,000,000 in gold, debiting this to their account on the books of the Federal Reserve Bank. No reason was contained in the cable for the request, and the Federal Reserve Bank was cabling back, in the usual course, asking for a reason in order that they might forward the application to the Secretary of the Treasury for action inasmuch as Norway is not on the gold standard. Mr. Lochhead said, "One interesting thing is the price of gold in New York is about th higher than in London. On the other hand, it 1s possible that Norway may have need for dollars; in other words, they will have to use dollars for forward purposes and there- fore don't want to buy gold in London, but still they could always buy gold in London and ship it over here and get dollars." The Secretary said to the group, "This 1s some- thing that I hoped would happen. I thought it would come from Sweden, but this is just 88 good. If Norway does it, Sweden will want to do it and the next thing, England will want to do it, and we don't want to give England the right to buy gold here unless she gives something to us." Mr. Lochhead said, "It 18 just 8. question of giving the right to buy gold. If they came in and just asked for $5,000,000, after all you might give them the $5,000,000. That would not say you were giving them the right to buy gold; it's just in this one instance." Mr. Taylor said, "It would be all right to put a string on it -- the same kind you would put on the British if the British came in." Oliphant's opinion was, "We are not ready to write our ticket.' The Secretary then said, "I went 80 far as to Regraded 167A -2- tell the British we would consider selling them gold on two conditions -- Just to use some figure, that we would sell them gold when sterling went to $5.00, pro- vided the British Government would guarantee to sell us gold when sterling went to $4.90. That is just an arbitrary figure. They said, 'You can buy gold on the open market.' I said, 'Oh, yes; but we want a guaran- tee that we can buy and the British Government will sell through some agency -- we don't care what agency.' I think this 1s a stalking horse." Mr. Lochhead explained, "Norway 1s in the sterling area. We have to look at it as an independent applica- tion, but it 18 something that ties in with any country in the sterling area. They use kronen, but it 1s tied to sterling. All Scandinavian countries are tied to sterling now -- Norway, Sweden and Denmark." The Secretary then said, "We can say, 'All right. We will sell you gold. Of course, sterling 18 above $5.00 and if sterling goes below $5.00 we would like you to furnish us with an equal amount." Lochhead expressed his opinion as follows: "You could at least hold them for the amount they have here." HM,Jr. then inquired, "Why isn't this & formula, to say, 'Yes, we will let you have $5,000,000 because sterling 18 over $5.00, but if and when any time that we want to buy $5,000,000 worth of gold, at what price may we repurchase 1t?" Dr. White and Dr. Haas came in at this point and HM,Jr. said to them, "Here's the problem, extra, extra confidential. Norway has come in and wants to buy $5,000,000 worth of gold. Our price today 18 In- terrupting him, Mr. Lochhead answered, "The price at which we sell gold 1s $35.00 plus the That's regulation. It works out $35.08 minus too." Continuing his remarks to Dr. White and Dr. Haas, the Secretary said, "Here's the way I an thinking. I think this 16 just a stalking horse for England and as far as we have got, I say that we will let them have this pro- vided that they give us a call on $5,000,000 worth of gold if and when sterling should go to $4.90." Oliphant suggested, "You will want to express that in kronen. Lochhead added, "You will have to express it in kronen. Regraded Unclassified 167B -3- Adding to his remarks, the Secretary said, "We want it delivered here BQ it works out $35.00 less % for handling charges. To give you fellows a little history, Mr. Bewley came to see me the day before he sailed for Europe. At that time I said, 'You never answered me on what I said about gold.' I said, 'Well, Bewley, this 18 the way I feel. Frankly, I would like to see this agreement between France, England and ourselves, but 1 will tell you in case of & great emergency I am not going to let things go smash. If the emergency did get serious I might be willing, I would be willing to let you have gold when sterling went above $5.00 provided you let us have gold when sterling went below $4.90, but the figures are purely theoretical.' He said, 'But what do you mean when you say get gold. You can get gold in the open market.' I said, 'Oh, yes; but I want the British Government to say they will guaran- tee to give us gold. I don't care whose gold it 16 or where they get it.' That seemed to take him back. He's over in England now. Now comes this inquiry from Norway and if we do it for Norway we can't keep it a secret. I wouldn't want to keep it secret. We would have to be prepared to treat any other country in the sterling area the same way and the formula we are talking about 18 this: Norway, you can have it when sterling 18 above $5.00, but we want to call on you at any time for $5,000,000 in gold if and when sterling goes to $4.90 80 it will work out, delivered here, $35.00 less 40." Oliphant's comment was, "I wish it had come up a little later, because it brings up the whole discus- sion of the gold question. As it 18, nobody is saying anything." Haas asked, "Couldn't you stall it for & while?" To Mr. Oliphant and Dr. Haae the Secretary said, "I will tell you something, gentlemen. I have found that the best kind of politice 16 to do your job well and not think about the political effect on the election. I have done that ever since I have been with Rucsevelt and I think I have met with my share of success and to stall this thing because election 16 coming I think is just wrong. I just would hate to do it. I don't think in the long run it's good politics -- politics in the sense of good Government." Taylor agreed, saying, "Check!" Regraded Unclassified 167C The Secretary then said, "I think it's the most marvelous hedge if we could, for instance, all over the world have $5,000,000 spotted here, $50,000,000 in England and different places. And right now they need it. And BO it develops we have a call on gold. I think it is marvelous. I think it's like an insurance pollicy. The way I see it now, it's all for us.Sterling is $5.03, and some day it will go back to $4.90 and let's say we will have $100,000,000 spotted all over the world that we can call on." Dr. Haas inquired, "You have already in substance told England that would be agreeable to you?" The Sec- retary's answer was, "I said 'in case of great emergency' but I have been holding out for a tri-partite agreement." Dr. Haas then asked, "What if England comes back and asks you the same question?" The Secretary replied, "The answer 18 'Yes. Mr. Lochhead asked, "Will you confine this tothe sterling area? For instance, we have given gold to China without any string on it." The Secretary answered, "I would confine it to any governmental bank. I will only do it with the Governments." Mr. Lochhead then remarked, "Yes, but you want a call for gold whenever you sell gold. We have given up some gold to China. The Secretary's responseto this was: "We converted gold into silver. That was Step A. This 18 Step B. We were doing that to strengthen China's hand. We went in and China didn't have & friend. I read on Saturday the last two reports. It's marvelous how they are eoming along. Then he said, "Why don't we do this -- let it simmer?" Dr. White remarked, "They certainly have to let us know why they want it." The Secretary then said, "When the answer comes back, let's have another meeting." Mr. Lochhead said, "There is plenty of time. The Federal had a request from another central bank and they asked for a reason. Then you will have a reasonable time to think it out. Regraded Unclassified 167D Monday August 24, 1936 10:48 a, m. HMjr: - two things. I'm thinking of appointing an advisory committee of twelve people - Jacob Viner: Yes HMjr: - on taxes for the Treasury. V: Yes HMjr: I want three lawyers that teach taxation, like Magill . - Columbia, Maguire - Harvard, and then there is a man out in California - Traynor of California, see? V: Yes HMjr: And I want three accountants - V: Yes HMjr: - three business men, and three economists. - Hello? V: Yes HMjr: What do you think of it? V: I think that could be easily - HMjr: What's that? V: The general idea is fine - HMjr: Yes V: But that's too big a board. HMjr: Well - you'd divide 1t up into sections. V: I see. And also when you say three business men - you need - you see you want to have a farm repre- senatative and a labor representative somewhere in the group for political and in general, really, because taxation doesn't only affect the business -- HMjr: All right we'll have - we'll have one man from the farm, one labor and one business man. Regraded Unclassified 167E -2- V: Yes - I suggest - well, I'll speak to you about suggestions, that's what you want I suppose? HMjr: Yes V: - of me. HMjr: Yes V: And - I'll try and make up a list of suggestions for you. I think it's a good idea. HMjr: Yes - I - I want it fast. V: Right HMjr: I mean I want it air mail tonight. V: Oh, you do? HMjr: Yes V: All right, well then I'll get at it at once. HMjr: What? V: All right, I'll - I'll send you what sug- gestions I can before tonight. HMjr: Will you? V: Yes HMjr: Now, I'm going to take a chance on this on the phone. V: Yes HMjr: Norway has come in and asked us whether we'll sell them five million dollars worth of gold. V: Yes HMjr: The usual thing is we ask them what they want it for, see? V: Yes HMjr: Because I think they're just a 'stalking horse' for another country. Regraded Unclassified 167F -3- V: Yes HMjr: Now this is what we're thinking of now. V: Yes HMjr: That we'll say to them, 'Yes, you can have it because Sterling is above five dollars, but we want a call on you - 1 V: Yes HMjr: 1 - for five million dollars worth of gold if and when Sterling goes to four-ninety'. V: At what price? HMjr: Sterling at - well, it would work out thirty- five dollars less a quarter. V: In other words you want a right of repurchase at the same price? HMjr: Yes V: Well, of course they'll say that's not a sale. And I'd say, - I'd say, 'No'. I'd say that - that we don't see what advantage - HMjr: Hello? V: Hello HMjr: Yes V: I'd say that we don't see what advantage there is to the World at large in allowing unstabilized currencies to operate on stabil ized currencies. - And that - I would say that it was, for the time being at least, the policy of the United States to announce these sales only to countries of stabilized currency. HMjr: Yes V: And use the word 'stabilize', don't use 'gold standard'. That would be an awful - you see? HMjr: Well -- Regraded Unclassified 1676 -4- V: Get me? HMjr: Yes - 1 I don't know whether I agree, but I'll - V: Well, don't you see? - remember? - I don't know whether you remember the argument I had there, that - we want, after all we want stabili- zation of exchanges - HMjr: Yes V: - throughout the World. HMjr: Yes V: And there is no - there is no incentive to it to a country that, like Norway or like England, as long as they know that they can always stabilize without agreement if they want to by fixing the price of gold. And then they have free access to our gold. HMjr: Yes, but supposing they'll give us a call on their gold? V: Oh well, they won't do it. You see, after all, what do they want it for - that isn't a real pur- chase, you see? If you had a repurchase agreement you don't really - you've got to finish it - what you have and you don't know how long you can keep it. HMjr: Yes V: And that would be a physical refusal and they'll wonder - I mean it doesn't - I don't see that it means anything. I'd say that wasn't a genuine sale. HMjr: Yes - Well now, I'll wait until they come back and you might - hello? V: Yes HMjr: You might be writing out in pencil some kind of an answer that we could give them. V: All right, all right - I'll be down there, you know, Monday morning. HMjr: I know, but these things have just broken now. Regraded Unclassified 167H -5- V: Yes - I would hold them off in any case. And I'll - I'll -- HMjr: Well, I won't give them an answer until I've talked to you again. V: All right, I wish you wouldn't because you're opening the door, you see? HMjr: Yes V: This is a small country and a practically unimpor- tant transaction. HMjr: Yes V: But you want to watch out for a general principle HMjr: Yes V: And, in a way, you know, it would - - if they were refused and if a good reason was given for their refusal and that got to be known - HMjr: Yes V: - it would be an important factor in letting the World know just where we stand. HMjr: When you get those names you'd better call me back because I'm going to see the President tomorrow morning. Call me back collect this afternoon. V: All right, I'll call you back collect this afternoon. HMjr: O. K. V: All right. HMjr: Goodbye. Regraded Unclassified 167D Monday August 24, 1936 3:45 P. m. HMjr: Hello Jacob Viner: Jake speaking HMjr: How are you? V: Viner speaking - HMjr: Yes V: I want to give you some names. HMjr: All right. V: Are you writing them down? HMjr: Yes V: Fagan - Professor Fagan of Stanford University - HMjr: How do you spell that? V: F-a-g-a-n HMjr: Yes V: But there are two Fagans, one of them is in the field of Public Finance - HMjr: And which one is this? V: Well I don't know the initials now but Haas will be able to tell you. HMjr: Well, which one is this? V: This is the one that's in the field of Public Finance. HMjr: Public Finance? V: Yes HMjr: Yes V: F-a-g-a-n - I took it for granted that you want distribution over the country. HMjr: Correct Regraded Unclassified 1675 -2- V: - Stanford University - HMjr: Yes V: Haig at Columbia - HMjr: Who? V: Haig - HMjr: Haig at Columbia? V: Yes HMjr: Yes V: Beuhler - B-e-u-h-l-e-r HMjr: Yes V: - at Vermont HMjr: Vermort? V: Luther Gulick - HMjr: Luther Gulick? V: He's on the President's Reorganization Committee. HMjr: Yes V: Merriam of Chicago HMjr: How do you spell that? V: M-e-r-r-i-a-m HMjr: Well he's on the President's - V: He's on the National Resources Board. HMjr: Yes - Merriam of Chicago, yes - V: Leland of Chicago - HMjr: Leland of Chicago? V: Yes Y But Leland is a State Tax Commissioner, I don't know whether that makes any difference. Regraded Unclassified 16755 -3- HMjr: No V: Then - those are the professors. HMjr: Yes V: Then accountants - HMjr: Who? V: Accountants HMjr: Accountants, yes V: I can name two or three here from Chicago. HMjr: Go ahead. V: Eric Kohler, he's - he's my best bet. HMjr: How do you spell that? V: K-o-h-l-e-r HMjr: Is that the same man that makes the bath-tubs? V: No HMjr: Yes V: Eric - E-r-i-c HMjr: Yes V: He's a partner of And - Arthur Andersen, whom you know. HMjr: Yes - he's with Arthur Andersen? V: Yes - or Arthur Andersen HMjr: Or Arthur Andersen? V: Yes HMjr: Yes V: Or Himmelblau - HMjr: Or Himmelblau? V: Three first class men, - Regraded Unclassified 1672 -4- Hijr: Right V: I wouldn't take more than one from Chicago. HMjr: Right V: But for Eastern accountants you'll have to ask other people. HMjr: Right V: Then, as a labor man - HMjr: Yes V: John P. Frey of the Federation of Labor - HMjr: John P. Frey? V: F-r-e-y HMjr: F-r-e-y? V: He's a first class man. HMjr: Yes V: And then as a farmer - HMjr: Farmer, yes - V: John Watson HMjr: John who? V: Watson - W-a-t-s-o-n HMjr: Never heard of him. V: Well, he's - I think he has been President of the Illinois Agricultural Association - HMjr: Yes V: And he's a life-long student of taxation. HMjr: Where is he located? V: Somewhere down-state in Illinois. HMjr: Illinois - Regraded Unclassified 167m -5- V: And he's a. very level headed fellow. HMjr: Yes V: And you want to get a farmer like that on it. HMjr: Yes yes - that's right. V: Then a business man - I have a few names. HMjr: Yes V: H. L. Moekle HMjr: How do you spell it? V: M-o-e-k-l-e HMjr: Yes V: He's the tax man of the Ford Motor Company. HMjr: Oh - V: But he's a - he's a very good man. HMjr: Yes V: He's a- I've checked up with two persons here in town I HMjr: Yes V: He's a fellow with ideas and in any case you wanted an Advisory Board you see? HMjr: That's right. V: So that he's worth considering. HMjr: That's right. V: Then there is R. C. Beckett - HMjr: R. C. Beckett? V: He's the tax attorney for the Illinois Central Railroad. HMjr: How do you spell that? Regraded Unclassified 1677 -6- V: Beckett? - B-e-c-k-e- double t HMjr: Yes - Illinois Central Railroad? V: Yes HMjr: Yes V: Then there is another professor - Mjr: Yes V: Samuel May HMjr: Samuel May? V: M-a-y HMjr: Yes V: University of California HMjr: Yes V: He's a Political Scientist. HMjr: I see. V: It'll help you to get distribution, you see? HMjr: Yes V: All of these are suggestions - I - - then also a practicing lawyer - HMjr: Yes V: - who knows a great deal about taxes - HMjr: Yes V: That's Randolph Paul HMjr: How do you spell that? V: P-a-u-1 HMjr: Yes V: New York City Regraded Unclassified 1670 -7- HMjr: Yes V: He's written a big book on the income tax. HMjr: Has he? V: Yes HMjr: Well, they sound awfully good. V: I think those are pretty good names and you'll get others from other sources. HMjr: Right - and - we haven't heard yet from Norway. V: You haven't? HMjr: No V: All right. HMjr: Thank you, Jake. * V: You're welcome. HMjr: Goodbye V: Will you tell them to charge that to you? There was some misunderstanding at the phone. HMjr: I'll have that done. V: All right. HMjr: Thank you. Regraded Unclassified