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Volume 41, October 20 – October 27, 1936
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Volume 41, October 20 – October 27, 1936
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 41
October 20 - October 27, 1936
Regraded Unclassified
- B - -
Book Page
Belgium
See Stabilization
- F -
Federal Reserve Bank, New York
Upham and Lochhead visit; Upham reports to HMJr - -
10/26/36
XLI 232
Federal Reserve Board
Exchange of information by research staffs again
discussed at luncheon at which Viner is also present-
10/20/36
23-25
Cooperation between Federal Reserve Board and Treasury
again discussed in telephone conversations with Eccles-
10/27/36
260-262,
265-267
France
See also Stabilization
Billion dollar 1937 budget goes before Cabinet today - -
10/27/36
271-273
- G -
Germany
Decree published, placing Goering in charge of four-year
plan - 10/20/36
35-36
Gold
See also Stabilization
"Queen of Spain is taking supply of gold with her to help
finance revolution," so FDR tells HMJr - 10/20/36
22
- M -
Managed Currency
See Stabilization
McCall, Caledonia
Asks Hill (Senator, Florida) to discuss her case with PaJr;
has been in Treasury Department forty years; had one
extension - wants another - 10/26/36
229-231
Mexico
HMJr tells Hull and Feis he prefers to postpone discussion
until Hull returns from Buenos Aires - 10/26/36
217-228
a) Further discussion with Reed and Feis (State Department)
10/27/36
235
- S -
Book Page
Secret Service
FDR asks HMJr to ask Murphy to anke peace with
J. Edgar Hoover; Murphy flatly refuses to do so -
10/22/36
XLI
88
Spain
See Gold - 10/20/36
22
Speeches by HMJr
See also Stabilization, Book XL
Program for dinner under auspices of Good Neighbor League,
at Waldorf-Astoria Hotel, New York, 10/23/36:
Stanley High will introduce Kennedy, who will introduce
FDR, who will speak for eight minutes; Kennedy will then
introduce H/Wr for a fifteen-minute speech
1
a) HMJr's own pencilled notes for speech
1-A 2
Gaston phones HMJr about corrections by High, Corcoran,
et cetera - 10/20/36
19-21
Actual speech - 10/23/36
108-112
a) Hans' drafts
113-148
b) Resting copy
149-160
c) 1100 of the 1500 seats already sold
d) H&Jr clearance from White House not received until
5 o'clock; page 8 (on inflation) ordered deleted
175-176
Stabilization (arranged chronologically)
(See Cochran resume September-December, 1936, Book XLIII)
HMJr tells White, Lochhead, Hass, and Taylor, when announcement
is made on Monday at 4 o'clock that we add Belgium and
Switzerland to our list, there will be simultaneous
announcement that all proclamations having to do with the
handling of gold prior to 10/13/36 are cancelled, and from
that day on, United States is on 8 managed currency basis -
10/20/36
3
H/Jr discusses with Cochran ides of limiting countries which
do not have stabilization funds to taking (10 million worth
of gold out of the country in any one day to protect them
from being "used" by any other country, inasmuch 88 United
States is on 24-hour basis - 10/20/36
4,8-15
Gold supply suffers first reduction since "gentlemen's"
agreement on currency stabilization with France and England
($9 million) - 10/20/36
6
a) Gain of 84 million reported two days later
50
Report as to whether American importers, as a result of
recent devaluations in Europe, had transferred their buying
to those countries with devalued currencies, made by Knoke -
10/21/36
48-49
Belgium:
HAJT shows to Bewley and M: llet, cables from Cochran
describing his visits to Belgium and Switzerland - 10/21/36.. 57-59
a) Both countries willing
- B - (Continued)
Book
Page
Stabilization (Continued)
Belgium (Continued)
Conference; present: Taylor, Oliphant, Lochhead, Heas,
Goldenweiser, Williams (Federal Reserve Bank of
lies York), Upham, and Maite - 10/22/36
XLI
63-68
a) Oliphant reises point of ownership of
Belgian Bank
b) Williems inquires whether there is anything in
agreement with France to prevent Bank of France
from selling gold to private banks; answer is "no"
c) Heas suggests, 8.5 substitute for Stabilization
Fund, acceptance of some form of Treasury guarantee
of operations
d) Oliphant raises point whether statement of
January 31, 1934, is really being superseded or
whether United States is only adhering to old-
fashioned gold standard through 0. new channel
e) Oliphant suggests that Belgian agreement might
serve as precedent for similar agreements with
Germany and Itely
Second conference et 5:15 P.M.; Bell and Feis join group.
83-87
Further conference, with HMJr present - 10/26/36
181-197
HMJr talks to Cochran; says United States is satisfied
with Switzerland but not with Belgium - 10/26/36
201-210
HMJr discusses with Bewley and Wallet, conversion of
balances into gold - 10/26/36
211-216
Feis reports to HMJr that Blun told Bullitt "Freach Premier
very much disturbed because Belginn action came LB
complete surprise" - 10/27/36
235-241
a) HAJr points out that cable is now ten days old
and conditions are a little better
France:
Franc's weakness explained by Bolton (Bank of England)
by general situation in Europe - 10/22/36
76-77
Switzerland:
Cocaren reports on visit to Swiss National Bunk . - 10/20/36
27-34
a) Proposed declaration
29
HMJr shows to Bewley and Mallet, cables from Cochran
describing his visits to Belgium and Switzerland - 10/21/36.. 57-59
a) Both countries willing
Conference; present: Taylor, Oliphant, Lochhead, Hass,
Goldenweiser, Williams (Federal Reserve Bank of New York),
Upham, and White - 10/22/36.
63-68
E) Oliphant raises point of ownership of Belgian Bank
b) Williams inquires whether there is unything in agreement
with France to prevent Bank of France from selling gold
to private banks; enswer is "no"
c) Heas suggests, BE substitute for Stabilization Fund,
acceptance of some form of Treasury guarantee of operations
d) Oliphent raises point whether statement of January 31, 1934,
is really being superseded or whether United States is
only adhering to old-fushioned gold standard through &
new channel
- S - (Continued)
Book Page
Stabilization (Continued)
Switzerland (Continued):
Second conference at 5:15 P.M.; Bell and Feis join
group
XLI 83-87
Further conference, with HMJr present - 10/26/36
181-197
HMJr talks to Cochran; says United States is satisfied
with Switzerland but not with Belgium - 10/26/36
201-210
HMJr discusses with Bewley and Mallet, conversion of
balances into gold - 10/26/36
211-216
Feis reports to H&Jr that Blum told Bullitt "French Premier
very much disturbed because Belgian action came as
complete surprise" - 10/27/36
235-241
a) HMJr points out that cable is now ten days old
and conditions are a little better
Switzerland
See Stabilization
- U - -
Unemployment Relief
Lonigan memorandum showing expenditure of Federal funds by
Federal Emergency Relief Administration Works Progress
Administration in September, 1936, was higher in 46 states
than year ago
60-62
- W -
Works Progress Administration
See Unemployment Relief
Regraded Unclassified
October 20, 1936.
memorandum
TO: FROM: Mr. Secretary Gaston Morgenthau R
Luther J. Reid of Democratic headquarters, Biltmore Hotel,
New York, called me up to tell ne that your time for the Friday
night speech is strictly limited to fifteen minutes. The program
is to be as follows: Dr. Stanley High will introduce Joe Kennedy,
who will then introduce the President, who will be heard by radio for
eight minutes. Kennedy will then introduce you, for 8. fifteen
minute speech, and after that there will be broadcasts from San
Francisco, Chicago and New Orleans of three minutes each. The whole
thing is governed by radio arrangements so that there will be no
opportunity to run over.
I think your speech, in the form in which it was shown to ne
today, is a trifle too long.
Letus ite inventory D1A
V the Matims Busines
1, wilm were weat 312
ys ago - namely Mark4,1933
2. Where are we at now
3 Where may we hipe
bh 3yrs hence.
Misch bratistics 4+1 1933 - -verius
Then trea financial +
has feen flace d an books
fixal legislation than
show how much
what financial sth
we have taken to being
about recovery.
2
How much hait
o
and what hartsof inflation
logislation we have not
What used, Lusit cost the
county to frime
the pump. Hasn't
been worth which
Have the results
justsfied the means 0
financed the eosts
How we
How might we
have financed
through existin V
ligislation (inflation
3
2
We choose the athadox
conservative meth od.
when did are has the
cus financial cusis
Last Jamary when Pres
in the country ?
decided to hay for A.A.A
and terms them taxes
not by using inflation
i that crisis is ton minths
It bok guts to do that
behind us not before us
We have chosen the
tax method based d
on ability its lay ratter
than the inflation method
w ht me here will
disagne with that
will disaper as to the
decision you unduity as
kind of taxes, no one
likes takes,
full. on when does increase
1932 you bill
19 1944-5.6. 5.6.
How Hurt Boddy does it
O
Jax advising Board
Oliver wendel a Holimes on Takes
2201 R STREET
3
October 20, 1936
Mr. White, Mr. Lochhead, Mr. Haas and Mr. Taylor
were in the Secretary's office today. He told them:,
"When we announce on Monday, at four o'clock, that we
added Belgium and Switzerland to our list, I wish to
simultaneously announce that all proclamations that
have to do with handling of gold prior to October 13,
1936, are cancelled and from that day on the United
States is on a managed currency basis. The beauty
of this, If he said, "1s that we are on a 24-hour basis
and we go along as we are just as long as the sterling
bloc behaves itself, but if it misbehaves, then we
take defensive measures. This is very, very secret.
Gradually this thing will sink in. I think I am right,
but I am going to spend tomorrow on it arguing and will
let you all argue at me."
Unclassifie
October 20, 1936
HM,Jr. asked the group at the meeting this morning
what they thought of the idea that with countries that
do not have a stabilization fund, for fear that some
other country might "use them", we would limit them to
taking $10,000,000 gold out of the country in one day,
inasmuch as we are on a 24-hour basis.
Viner thought very well of the idea and the Secre-
tary presented it to Cochran when he spoke to him over
the telephone.
Copy of the conversation with Cochran
follows:
Regraded Unclassified
POSSIBILITY OF PRIVATE GOLD EXPORTS FROM
THIS COUNTRY REMAINED IN DOUBT WHEN SECRETARY
MORGENTHAU DECLINED TO SAY WHETHER TREASURY
CONSIDERS BELGIUM ON GOLD STANDARD- UNLESS
8.55am
BELGIUM THE ONLY COUNTRY BESIDE THE UNITED
STATES WHICH HAS A FIXED GOLD PRICE IS HELD BY
THE TREASURY TO BE ON GOLD STANDARD PRIVATE
GOLD EXPORTS FROM THIS COUNTRY TO ARBITRAGE
THE DOLLAR ARE IMPOSSIBLE
OCT 20 1936
TREASURY GOLD STUCKS DROP 3 000 000
DLS
WASHN - THE TREASURY-S GOLD STOCKS SHOWED
THE FIRST DECREASE IN MANY MONTHS ON OCT 17
WHEN IT DROPPED TO 11 001 565 614 DLS A
DECLINE OF 9 138 579 DLS COMPARED WITH THE
TOTAL FOR THE PREVIOUS DAY
9:55
-0- OCT 201936
)
#
ie
Tearday
20, 1956
WCNS24
THE U. S. TREASURY'S GOLD HOARD REGISTERED A DECLINE OF MORE THAN
$9,000,000 TODAY, MARKING THE FIRST REDUCTION OF THE HUGE GOLD SUPPLY
SINCE THE "GENTLEMEN'S" AGREEMENT ON CURRENCY STABILIZATION
NEGOTIATED WITH FRANCE AND ENGLAND.
10/20--TP1015A
WCNS25
ADD GOLD
TREASURY OFFICIALS DECLINED TO DISCUSS THE SMALL DENT MADE IN THE
HUGE GOLD SUPPLY BUT IT WAS GENERALLY BELIEVED THE $9,138,579 REDUC-
TION SHOWN IN THE BALANCE SHEET FOR OCT. 17 REPRESENTED GOLD EARMARKED
FOR TRANSFER TO ONE OF THE COUNTRIES WHICH HAVE BECOME PARTIES TO THE
STABILIZATION AGREEMENT.
THE TREASURY STATEMENT FOR OCT. 16 SHOWED A GOLD SUPPLY OF $11,-
010,704,192.65, WHILE THE OCT. 17 STATEMENT TOTALED THE GOLD SUPPLY
AT $11,001,565,613.75.
THE STABILIZATION AGREEMENT AND THE SUBSEQUENT REGULATIONS FOR
CARRYING IT INTO EFFECT PROVIDED FOR A REGULATED FLOW OF GOLD BETWEEN
OR AMONG THE COUNTRIES WHO ARE PARTIES TO THE AGREEMENT AND WHO HAVE
ESTABLISHED STABILIZATION FUNDS OF THEIR OWN.
10/20--R1022A
Regraded Unclassified
2:45 BRITISH GOLD MOVEMENT
LONDON - LONDON GAZETTE REPORTS
OCT 20 1936
DURING FOUR DAYS ENDED OCT 19 UNITED KINGDOM
IMPORTS OF GOLD TOTALED 870 743 PDS OF WHICH
171 452 PDS CAME FROM BRITISH WEST AFRICA 342
276 PDS FROM BRITISH INDIA AND 133 186 PDS FROM
SWITZERLAND - EXPORTS TOTALED 671 014 PDS
OF WHICH 386 025 PDS WENT TO SWITZERLAND AND
283 426 PDS TO AMERICA
SILVER IMPORTS WERE VALUED AT 113 751 PDS
OF WHICH 73 329 PDS CAME FROM JAPAN - EXPORTS
WERE VALUED AT 169 809 PDS OF WHICH 150 950
PDS WENT TO AMERICA
-0-
8
October 20, 1936.
11:30 A.M.
H.M.
Cochran:
Hello, Mr. Morgenthau.
HMjr:
Hello, Cochran.
C:
I got back this morning.
HMjr:
Yes
C:
I had a good trip. I was three hours late because of
a wreck on the line.
HMjr:
Is that what they're trying to do to you?
C:
Yes, yes - (laughs) - they got the other train, not me.
HMjr:
Oh, I see.
C:
So I had rather good luck, and I've sent a cablegram
on this through at eleven o'clock -
HMjr:
Yes -
C:
- setting forth the details.
HMjr:
I see.
C:
I followed the same practice there as in Brussels.
HMjr:
Yes.
C:
Went to our Minister first.
HMjr:
Uhhuh.
C:
Then I went to the Central Bank, found the Governor and
his few assistants -
HMjr:
Yes
C:
- and we talked over the, the - a plan of a declaration, -
HMjr:
Yes
C:
- they thought, along the lines of the Belgian budget.
HMjr:
Yes
C:
That is, explaining the Swiss devaluation, showing what
9
-2-
resources they had -
HMjr:
Yes
C:
- as a stabilization fund, -
HMjr:
Yes
C:
- if they haven't anything called a stabilization fund.
HMjr:
Yes
C:
Then we talked over the responsibility for the manage-
ment -
HMjr:
Yes
C:
- of resources -
HMjr:
Yes
C:
- and I wanted them to show the willingness of the
Swiss to grant reciprocity to us.
HMjr:
Yes
C:
And the Bank raised those same technical points -
HMjr:
Yes
C:
- raised in the cablegram to George Harrison.
HMjr:
Yes
C:
I told them, I said, "I - I cant talk on those.
We must first determine a general question of reciprocity, -
HMjr:
Yes
C:
" - those can be worked out later." So we went straight
ahead then on the
Then we went over to see Beyer - is the head of the
Ministry of Finance and Customs.
HMjr:
Yes
C:
He is at the same time the President of the Federal
Council.
10
-3-
HMjr:
Yes
C:
So they - they feel - they elect one of the members
here to serve as President.
HMjr:
Yes
C:
And he was entirely sympathetic, and thankful that our,
our
and accept their cooperation, and so
on, and said to go ahead and draw up the declaration, -
HMjr:
Yes
C:
- but that he could not sign it until he consulted his
colleagues on the Federal Council.
HMjr:
Yes
C:
There are six colleagues and no one of them signed,
for the Government was out
HMjr:
That's all right.
C:
So then we went back to the Bank and they dictated the
statement and they typed it out while we were at lunch
together.
HMjr:
Yes
C:
Then in the afternoon we revised it and I translated it
into English.
HMjr:
Who paid for the lunch?
C:
- and I -
HMjr:
Who paid for the lunch?
C:
HMjr:
Who paid for the lunch?
C:
- devaluation of those funds and resources available
as a fund, so that the Bank is the only one that
controls this. And furthermore, they were willing
to give me their sale and purchase price for gold.
HMjr:
Un huh.
11
-4-
HMjr:
What I asked was who paid for the lunch?
C:
(Laughs) The Swiss.
HMjr:
Good.
C:
Very good luncheon.
HMjr:
Good. All right.
C:
And, so then, I - I didn't think they would quote me
definite prices for gold.
HMjr:
Yes
C:
They could, until further notice.
HMjr:
Yes
C:
So we have something definite to go on.
HMjr:
But they did?
C:
Yes, they did.
HMjr:
Now, they have no stabilization fund, have they?
C:
They have nothing that's labelled as stabilization
fund -
HMjr:
Yes
C:
- but they have the profit from devaluation -
HMjr:
Yes
C:
- still held in the bank -
HMjr:
Yes
C:
- in a special account.-
HMjr:
Yes
C:
It amounts to 538 billion francs.
HMjr:
Uh huh.
C:
And, while it's not called an equalization fund, it is
a special account, and when the Bank operates in gold, it
12
-5-
operates for this special account.
HMjr:
Now, that's all been put in the cable?
C:
It's all in the cable, yes.
HMjr:
Now, I've had an idea that I'd like you to think about -
C:
Yes
HMjr:
And that is, in view of the fact that Belgium does not
have a stabilization fund, and all of these declarations
are on a 24-hour -
C:
Yes
HMjr:
Don't you think it would be perfectly fair to say that
we'd limit the operation for one day to ten million
dollars? - in order that no other country might use them
or work through them, you see?
C:
I see.
HMjr:
You see, some other country like - take - using Belgium
for example, might put a drive on Belgium, you see? -
C:
Yes
HMjr:
- knowing that they had no stabilization fund.
C:
Yes
HMjr:
And therefore, what I'm thinking of is, limit the
operation to ten million dollars, and of course it
would have to be both ways.
C:
Yes, yes - let me think that over.
HMjr:
For one day, I mean.
C:
Yes
HMjr:
See?
C:
Yes
HMjr:
Don't you think that sounds fair? But think it over.
C:
The only thing - I mean to say, would you limit London? -
wouldn't limit London or Paris to that, would you?
13
-6-
HMjr:
No, they have stabilization funds.
C:
Where they have no stabilization fund?
HMjr:
Yes, where they have no stabilization fund.
C:
So then, that's the only country so far we've had
dealings with.
HMjr:
Who? Which country?
C:
Belgium.
HMjr:
Yes, they have no stabilization fund -
C:
No
HMjr:
- and therefore I suggest that we limit the operations
for one day to ten million dollars.
C:
I see. But they have the resources of the Bank which
they -
HMjr:
I know.
C:
- so it's really just the same.
HMjr:
I know. But towards our own public I think it would
look sound.
(Operator): Six minutes.
C:
I see.
HMjr:
Hello. Must be a Scotchman on this phone.
C:
(Laughs) Yes, yes, I see.
HMjr:
Well, you think that over. When we get the cable, we'll
take a look at it, see?
C:
That's fine.
HMjr:
And it's all right to keep our French friends advised.
We - we'll keep the British advised here.
C:
I - I haven't seen them since I came back. I ddn't
want to -
14
-7-
HMjr:
Well, I wouldn't try to see them today, because I
can't get the British today, but I'll show the
British your cable tomorrow, see?
C:
All right.
HMjr:
So you can show the French what you've got tomorrow.
C:
All right, fine.
HMjr:
But I - I wouldn't, in order not to give them too much
head start, I wouldn't do it until tomorrow afternoon.
C:
All right.
HMjr:
See?
C:
Yes
HMjr:
Supposing you ask for an appointment to see the French
Treasury tomorrow afternoon.
C:
All right, fine.
HMjr:
And we'll try to get hold of the British some time
tomorrow.
C:
All right.
HMjr:
- when we have both of your cables, see?
C:
The statement which the Belgians - which the Swiss
made - they're very anxious that no publicity should
be given to it.
HMjr:
Yes
C:
Because they've given us some information in regard
to their fund and so on -
HMjr:
All right.
C:
- not up to date published.
HMjr:
O.K.
C:
And - -
HMjr:
Uh -
15
-8-
C:
- just one other thing. Have you heard anything from
the Dutch?
HMjr:
No, and I don't want to - I don't want to - I don't
want to go out and solicit any business.
C:
I see.
HMjr:
No, I don't want to solicit any business.
C:
No.
HMjr:
Let's just sit tight.
C:
Yes, yes
HMjr:
See?
C:
But there's my point the other day, is they might be
happier if we let them know.
HMjr:
Well, I'll talk that over here and I'll give you an
answer on that, tomorrow.
C:
I can't do anything unless I hear from you?
HMjr:
No.
C:
All right -
HMjr:
But, but -
C:
- then you'll have this this afternoon, and then I'll see
the French.
HMjr:
Well, what you've done sounds very good.
C:
All right, fine.
HMjr:
And I'm very much pleased.
C:
And we ought to have the definite signature by - will
be announced - they're going to telephone me as soon
as the Federal Council approves.
HMjr:
Yes, well -
C:
So, buenos dias Thursday late.
16
-9-
HMjr:
But then they don't give that out there, do they?
C:
No, no, they give out nothing.
HMjr:
Yes
C:
The only thing they want - they should like for us
to tell them when we are going to -
HMjr:
Oh yes - and I'll most likely make it a joint announce-
ment anyway, all around -
C:
Yes
HMjr:
- with the French and English.
C:
Yes, but I mean even though the Swiss may not make the
announcement, they'd want to know -
HMjr:
Oh yes
C:
- when we were going to make ours.
HMjr:
Oh, this is a gentlemen's agreement.
C:
(Laughs) Yes
HMjr:
All right.
C:
Fine.
HMjr:
Fine.
C:
All right, sir.
HMjr:
'Bye.
C:
Goodbye.
17
October 20, 1936.
2:25 P.M.
Lochhead: Well, they're going very well and very quietly. We
haven't had to do a thing. The market is about
489 to an eighth -
HMjr:
Yes
L:
- and decidedly smaller volume than yesterday.
HMjr:
Yes.
L:
There's very little going on in it.
HMjr:
What's happening with the francs?
L:
The francs are holding rather steady, about 465 to
eleven sixteenths, but there's also nothing doing
there. The papers said they hadn't sold any francs
for account of the Bank of France today at all.
HMjr:
What about the guilder?
L:
The guilder has been jumping around a little bit.
It built up today - it's a little stronger again
today.
HMjr:
Yes
L:
I should say about ten points stronger. I mean that
it's swinging in a wider range.
HMjr:
Oh gosh.
L:
And everything is quiet.
HMjr:
Yes.
L:
So - and the stock market is still off -
HMjr:
Yes
L:
- and they say there is a French sale of security bills
in the market today.
HMjr:
Good.
L:
And the bond market, I'd say, would be off about one -
maybe in one or two cases, two thirty-seconds.
HMjr:
Yes
18
-2-
L:
But no activity. Everything is extremely quiet.
HMjr:
How much are bonds off?
L:
The bonds, I'd say, may be one or two thirty-seconds
off.
HMjr:
Well, that's all right.
L:
Oh yes, there's no real action in them at all.
HMjr:
Uh huh.
L:
But they say all around the Street today it looks
much quieter.
HMjr:
All right, Archie.
L:
O.K., Henry.
HMjr:
Goodbye.
Regraded Unclassified
October 20, 1936.
19
2:30 P.M.
Gaston:
Hello.
HMjr:
Herbert?
G:
Yes
HMjr:
How are you getting along?
G:
Oh, all right.
HMjr:
Are you - ?
G:
We're getting along all right. We're looking up a
lot of little specific points for them over there.
HMjr:
Yes. I mean are they taking the corrections you're
giving them?
G:
Well, yes, they are. Yes, so far as I've seen.
I had a few minutes with Sam over there.
HMjr:
You should be honored.
G:
Huh?
HMjr:
You should be honored.
G:
Oh yes (laughs). Well, he seems to be directing the
job, and Stanley High was there, as well as Tom Corcoran.
HMjr:
You'd be interested, in confidence, that I told the
President this morning when I was with the President,
that I told him that I thought for them to give out
and leave in the minds of people that the President is
going to come there Friday night and talk, and sell
tickets on that basis, and then not to do it - I thought
it was terrible.
G:
They're still leaving it that way, are they?
HMjr:
I said, "Mr. President, it only reacts on you."
G:
Yes.
HMjr:
And I think it's just a - a cheap trick.
G:
Well, Steve called me up about that on Monday night.
I said that it's possible that letter went out before
20
-2-
the plans were changed, and that I thought by all
means they ought to get out a new letter immediately
explaining the situation; and -
HMjr:
Don't you want to follow it up with Steve Early?
G:
With Steve Early - yes.
HMjr:
Yes
G:
Yes. I mean it was Steve Gibbons that called me
about it the other -
HMjr:
Don't you want to bring it to Steve Early's attention?
G:
Well, they haven't sent out any new announcement, have
they?
HMjr:
Well, not that I know of.
G:
Did, did -
HMjr:
Somebody told me that the announcement - that the
publicity still seems to be flosting right with the
President and will proceed from there.
G:
Uh huh.
HMjr:
And the only person it's going to react on is the
President.
G:
Surely, surely.
HMjr:
What?
G:
Surely. You didn't see any of the letters of invita-
tion yourself?
HMjr:
Yes, the first one.
G:
What?
HMjr:
I only looked at the first -
G:
You got - you got the first one?
HMjr:
Yes, and I gave it to Steve Gibbons.
G:
Uh huh, uh huh, yes. Yes, I'll take that up with Steve
Regraded Unclassifie
21
-3-
this afternoon.
HMjr:
I - I think SO.
G:
Uh huh.
HMjr:
I think it's - it's one of those things, you know.
If - let's say that they have a thousand or two thou-
sand people there; they come there, they've paid five
dollars with the idea that they're going to hear the
President, and if they don't hear him it reacts on the
President.
G:
Of course, of course.
HMjr:
Right. All right, Herbert.
G:
Are you feeling any better?
HMjr:
Little better, thank you.
G:
That's fine.
HMjr:
Goodbye.
Unclassifie
22
231
October 20, 1936
The President telephoned me at 2 o'clock yesterday,
while I was at home, and said that he had Just learned
that the Queen of Spain, when she sails from the United
States, 1s taking with her a lot of gold to help finance
the revolution.
I was 80 busy yesterday that I did not get a chance
to see McReynolds, but I told him that it was up to him,
Dow and Johnson to handle this matter for me and that if
necessary Dow should go up to New York.
23
October 20, 1936.
Mr. Taylor, Dr. Viner, Mr. Eccles, Governor Ransom and
#
Mr. Upham met at luncheon in the Treasury, Mr. Morgenthau was
unable to be present.
Mr. Eccles brought up the matter of the research staff
of the Federal Reserve Board and expressed the opinion that they
should have a much larger and much better staff of economists
and statisticians than they have. His view is that beginning
about two years hence they will have a good many economic prob-
lems to deal with and that they should have a staff giving
intensive study to them between now and that time. He referred
to their plan to integrate with the research division in Washington
the research divisions of each of the 12 banks.
Dr. Viner agreed with Mr. Eccles and told him that he thought
the Boards present staff is pretty good but mostly made up of
Juniors. Opinions were expressed on the present members of the
staff and there were some suggestions made for additions to it.
Mr. Eccles said that he was interested in securing the
services of a first class tax man and a first class social
security man. He expressed the view that the Federal Reserve
Board cannot operate in a vacuum and that unless they can have
a part in determining tax and general credit policy, their job
is pretty futile.
Dr. Viner said that good tax men were scarce and that he had
been trying for a couple of years to find a man good enough to
recommend to the Treasury.
The matter of government reorganization was mentioned and
-2-
24
Mr. Ecoles indicated that the Federal Reserve Board staff
had been studying for 6 months 8 possible consolidation of
$
Federal banking agencies. They have a plan all worked out,
he said, for combining the FDIC and the Comptroller's office
with the Federal Reserve system.
Mr. Taylor asked Mr. Upham to briefly describe the develop-
ments of the last few days in connection with the banking
situation in Perth Amboy, New Jersey as an illustration of how
the Federal banking agencies might and can work together.
Mr. Eccles said that he had a written report from the
Federal Reserve officials in San Francisco on the national banking
examination situation out there. He related that the former
Chief National Bank Examiner of the 12th District had found working
for the present Comptroller so difficult that he finally had to get
out. In his place, Mr. Eceles said, was a man who in 1932 failed
to pass the regular examination for national bank examiner --
a thoroughly incompetent person. I more or less facetiously
asked Mr. Eccles if he had not learned anything from the Secret
not think
Service incident of last summer and if he did that it was dangerous
for him to investigate another branch of the government.
Mr. Taylor brought Mr. Eccles and Governor Ransom up to date
on developments in the international monetary situation with res-
pect to pending negotiations with Belgium, Switzerlend, Sweden,
Argentina and Bulgaria.
Mr. Eccles was very hopeful that the arrangement for staff
members of the Treasury and the Federal Reserve to get together
and exchange information be consummated promptly. He indicated
25
-3-
that there was not so much interest in weekly or monthly reports
on actual developments but much more interest in a discussion
2
of the vactors involved and the forces under way so the t there
might be intelligent current consideration of developments.
Dr. Viner expressed agreement with Mr. Eccles' views for
the necessity of the Federal Reserve Board being kept informed.
Mr. Eccles read a memorandum which he had prepared for pre-
senation to the Secretary reviewing the financial week as it
appears to them. He thought it might be valuable for the weekly
meetings to include an exchange of such memoranda.
There was some discussion of how the operations of the
Stabilization Fund might be conducted to reduce excess reserves
and Mr. Eccles expressed the opinion that he would like to see
any gold outflow be the outflow of Federal Reserve gold rather
than stabilization fund gold with a consequent reduction in
excess reserves.
Mr. Taylor indicated that some attention was being given
to that problem but that no conclusions had been reached.
The lunch meeting ended with a discussion of the problems
of the Federal Reserve in the field of margin requirements for
stock market transactions.
26
LMS
GRAY
Paris
Dated October 20, 1936
Rec'd 5:15 p. m.
Secretary of State,
Washington.
1024, October 20, 5 P. m.
FROM COCHRAN.
Feature on Paris market today is decline in French
rentes ranging from 1.25 to 1.90 francs; no particular
reason is given for this evidence of pessimism. Forward
francs are offered. While London was an important buyer
of dollars yesterday, Stockholm is said to be selling
dollars and buying sterling today. National Bank of
Belgium reported to be holding rate of belga against
dollar. Market circles believe Bank of France did no
trading in sterling or dollars today but that American
control intervened yesterday evening to offer dollars
against sterling. Florin has declined following reduc-
tion of Dutch Central Bank rate from three to two and a
half per cent.
BULLITT
SMS:NPL
Regraded Unclassifie
27
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: October 20, 1936, 11 a.m.
NO.:
1021
FROM COCHRAN.
I refer to my telegram No. 1010 of October 16.
When I arrived in Bern on Monday morning I called
upon Minister Wilson to acquaint him with the purpose
of my visit there.
Monday morning at 9:30 I was received at the Swiss
National Bank by Bachmann, Schnyder and Weber. Bachmann
is President of the Board of General Managers of the
Swiee National Bank, and Schnyder is Vice-President and
Weber the Third Member.
I made reference to the telegrams which the Swise
National Bank and the Federal Reserve Bank of New York
exchanged recently. I made suggestions as to the lines
of a declaration with a view to explanation of devalua-
of
tion by Switzerland,/the willingness of the Swiss author-
ities to grant reciprocity to the United States in gold
dealings, of the availability of resources which could
be untilized as an exchange equalization fund, and of
the responsibility for the management of such resources.
END SECTION ONE.
BULLITT.
EA:LWW
Regraded Unclassifier
28
PARAPHRASE OF SECTION TWO OF TELEGRAM NO. 1021
of October 20, 1936, from Paris.
Among the questions raised by Bachmann were the technical
points which he had set forth in his telegram to the
Federal Reserve Bank of New York of October 14. I said that
first the general question of reciprocity should be deter-
mined, and that ************ the details could be worked
out with the Federal Reserve Bank later on.
At noon Bachmann and I went to the Swiss Ministry of
Finance where we were received by Meyer, who is chief
of the Federal Department of Finances and Customs, and
is also the Swiss Federal Council's President. The idea
of gold reciprosity was explained to Dr. Meyer, and he
indicated his entire sympathy with and approval of the
plan for cooperation between Switzerland and the United
States. However, he said that it would be necessary,
Federal Council
under Swies practice, to get his/colleagues' approval
to the proposed declaration before he could affix his
signature.
After our visit with Dr. Meyer, Bachmann and I re-
turned to the Bank where a draft declaration was drawn
up; while I lunched with the three Bank officers, the
draft was typed out in French and German. The draft was
revised after lunch and I made an English translation
thereof, which was checked by Schnider. I quote below
the translation of the draft declaration:
END SECTION TWO.
BULLITT.
EA:LWW
Regraded Inclassified
29
IMS
SPECIAL GRAY
Paris
Dated October 20, 1936
Rec'd 4:27 p. m.
Secretary of State,
Washington.
1021, October 20, 11 a. n. (SECTION THREE)
"DECLARATION.
"The Government of the Swiss Confederation, repre-
sented by the Chief of the Federal Department of Finance
and of Customs, the Swiss National Bank, represented by its
General Manager declare and confirm for the information of
the Government of the United States:
One. By virtue of the law governing the Swiss
National Bank of April 7, 1921 and of December 20, 1929,
the Swiss National Bank was obliged to maintain its
metallic coverage at a minimum of forty per cent of its
notes in circulation. The bank was obliged to redeem its
notes in gold or in gold exchange with those countries
having a free gold market. The rate of exchange for
these currencies was calculated upon the basis of the
rate of exchange at the moment of the operation.
Furthermore, the bank was obliged in consultation
with its conditions to purchase gold from banks of issue
upon
30
LMS 2-No. 1021, October 20, 11 a. m., Sec. 3, from Paris.
upon the basis of 3,429.44 francs per kilogram of fine
gold and to sell it at the price of 3,444.44 francs per
kilogram of fine gold.
Two. By the terms of the decree of the Federal Coun-
cil of September 27, 1936, the bank is relieved from
redeeming its notes in gold or in gold exchange but it is
obliged to maintain the legal coverage. It is further-
more obliged to maintain the gold parity of the Swiss
franc between 190 and 215 milligrams of fine gold. A
special instruction obliges the bank to maintain the franc
at a level which (END SECTION THREE)
BULLITT
SMS:CSB
31
LMS
SPECIAL GRAY
Paris
Dated October 20, 1936
Rec'd 4:53 P. m.
Secretary of State,
Washington.
1021, October 20, 11 a. m. (SECTION FOUR)
corresponds to a devaluation of approximately thirty
per cent in relation to the parage fixed by the federal
monetary law of June 3, 1931.
Three. In its relations with the United States of
America the bank undertakes, until further notice, by
virtue of the decree of September 27, 1936, to cede gold
at the price of 4,973.92 francs per kilogram of fine
accepted at Bern and to buy gold at the price of
4,869.80 francs per kilogram fine delivered Bern.
The bank makes this declaration on the basis of the
declaration of reciprocity contained in the statement
of the Secretary of the Treasury Mr. Morgenthau on the
date of the twelve October 1936 by which the United
States undertakes to sell and to buy gold on the basis
of $35 per fine ounco.
Four. The bank conducts its gold oporations for the
account of a special "equalization fund" in the amount
of
Regraded Unclassified
32
LMS 2-No, 1021, October 20, 11 a. m., Sec. 4, from Paris.
of approximately 538 million francs. This sum results
from the rovaluation to the extent of 35.033 per cent
(one franc equals 215 milligram instead of 290.32 milli-
gram of finc gold) of the gold held by the bank as of
September 26, 1936.
The equalization fund is charged with maintaining
the rate of exchange within the new limits through buying
or selling gold or exchange.
Only the bank has the right to dispose of this
fund.
(END OF SECTION FOUR)
BULLITT
CSB
Regraded Unclassified
33
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
SECTION FIVE, of No. 1021 of
October 20, 1936, from Paris
To testify which, the present declaration has been
signed in order to be communicated to the Secretary
of the Treasury in Washington."
The Federal Council it is hoped will approve this
document during the week, most probably at a session
on the 21st or 22nd. As soon as it is approved I will
be informed over the telephone by Bachmann. He will mail
to me the original signed by Meyer, Bachmann and one
of the other bank officers. It was the opinion of the
Swiss officials that no difficulty whatever would be
encountered in completing the agreement. They promised
to let me know promptly if any question should come up.
The Swiss ask that, if the United States decides
after receiving word of the Swiss declaration being
signed that Switzerland 16 eligible to enjoy our gold
facilities, I inform them as to the hour that the
United States Government will make its announcement.
The Swies request that the contents of their declaration
be kept strictly confidential and be not published since
it contains reference to internal instructions to fixing
of and sale prices for gold, and to exact nature of the
exchange equalization resources, which the public does
not know.
The Swiss hope, furthermore, that once the reciproo
ity announcement is made, the information requested
in
Regraded Unclassified
34
- 2 -
in telegram of October 14 from the Swiss National Bank
to the Federal Reserve Bank of New York may be furnished.
Last evening I showed the draft document to Min-
ister Wilson, and this morning I returned to Paris.
END OF MESSAGE.
BULLITT.
EA:LWW
Regraded Unclassified
35
PARAPHRASE OF TELEGRAM RECEIVED
From: American Embassy, Berlin.
To:
Secretary of State, Washington.
Dated:
October 20, 1936, 6 p.m.
No.:
308.
In & decree published this morning Mitler charged
Goering with the execution of the four year plan of
economic self-sufficiency announced is the Nuremburg
Congress. Goering is authorized to issue decrees end
instructions to all officials for the purpose of putting
this program into effect.
Contrary to the press reaction last April the
press this time immediately burst forth in approval of
this action which the VOLKISCHER BEOBACHTER without
once mentioning Schacht's name interprete as placing all
economic power in Goering's hands and emphasizes parti-
cularly that he will be supreme in all questions of
economic policy. Many rumors concerning the position
of Schacht have arisen from this decree but it is not
believed, after canvassing various sources, that his
retirement is imminent or that any alterations of &
radical nature are at present envisaged in Schacht's
system. A parallel may be drawn inthis respect be-
tween this situation and that of last April.
From surface indications, on the other hand, the
increasing insistence of Left Party members on & more
radical program with greater industrial control and
greater
greater emphasis on the necessity for Germany's economic
self-sufficiency may result in diminishing the essentially
dictatorial economic powers of Schacht. It is generally
thought that he would remain as the technician, if this
proves to be the case.
It is also believed, in certain quarters, that the
military aspects of the four year plan are assuming
greater significance and that the army, particularly as
& step toward industrial mobilization, may possibly be
taking added interest in the execution of the program.
Much of the comment at this time, however, is
obviously speculation and when the actual details of the
plan are known and when the conditions upon which it
will be put into operation are clarified, the real signi-
ficance of this decree will only appear.
DODD.
ADDRESS OFFICIAL COMMUNICATIONS TO
36
THE SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
October 21, 1936.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses for his information five copies of partial
paraphrase of telegram No. 308 of October 20, 1936,
from the American Embassy, Berlin, with regard to a
decree published by Hitler concerning a four-year plan
of economic self-sufficiency for Germany.
In the paraphrase of telegram No. 1010 of
October 16, 1936, from the American Embassy, Paris,
page one, the second line of the third paragraph, the
phrase "Bach of the principal" should be changed to
the word "Bachmann".
Enclosure:
No. 308 of October 20
from Berlin.
75
KOOMESS OFFICIAL COMMUNICATIONS TO
36
THE SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
October 21, 1936.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses for his information five copies of partial
paraphrase of telegram No. 308 of October 20, 1936,
from the American Embassy, Berlin, with regard to a
decree published by Hitler concerning a four-year plan
of economic self-sufficiency for Germany.
In the paraphrase of telegram No. 1010 of
October 16, 1936, from the American Embassy, Paris,
page one, the second line of the third paragraph, the
phrase "Bach of the principal" should be changed to
the word "Bachmann".
Enclosure:
No. 308 of October 20
from Berlin.
75
I
41
Paris, October 21, 1936.
37
No.
Subject: French monetary law promulgated in the
JOURNAL OFFICIEL of October 8, 1936.--
Official statements and decrees published.
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
Reference is made to the Embassy's despatch
No. 5090 of September 29, 1936, transmitting, notably,
the text of the declaration on monetary policy simul-
teneously published by the Governments of the United
States, Great Britain and France on September 25, 1936.
I now have the honor to forward herewith, for
the information and records of the Department, the text
of the supplementary announcement by Mr. Morgenthau
setting forth the conditions under which the American
Treasury
Regraded Unclassified
- 6
38
Treasury W&S prepared in buy and sell gold, as 700-
dered public by the French Government and published
in 18 YOUR of October 14, 1936. There is also 02-
closed the text of the comment of the Minister of
Finance, M. Auriol, as embodied in a semi-official
communique published at the sere time, and the text of
a special article on the subject by the financial aditor
of LE THES.
The following is 8. translation of the communiqué
issued by the sinister of Finance:
"It is indicated in the communication from
the Secretary of the Treasury of the United
States that arrengements relating to the techni-
cal co-operation with the monetary authorities
of the United States are completely settled.
nor regulation of the conditions of delivery of
gold is laid down by the Secretary of the Treasury,--
e regulation which will enable all countries which
secord reciprocal Incilities to obtain 601d in the
United States of America against the currency of
that country. The French Government has arranged
that such facilities shall be extended at Paris
to the monetary authorities of the United States.
This arrangement, which will be a day to day arrange-
ment, should creatly facilitate the technical
operations of the Exchange Stabilization Funds.
A similar arrangement has been concluded between
the monetary authorities of Great Britain, DO as to
assure effective co-operation between paris, London
and New York."
The following additional particulars were given:
The principal problem to be settled to allow
effective co-oparation between the monetary
authorities of the three owere parties to the
COREON declaration of September 25 last, concerned
the question as to how each one of the competent
orgenizations of the United States, and of Great
Britsin and of France might procure on the two
other markets gold in exchange for currencies hold
by it. This problem, which is & delicate one on
account of the nonetery régimes which exist
respectively in the three countries, has fortunately
been settled. enceforth. in the relations between
the three great conters, the currencies will be
exchangentle
Regraded Unclassifie
-3-
39
exchangeable against gold.
In Die expression of views on the announcement
of E2. Lorgenthau, the financial editor of 1.2 THEPS,
R. Jenny, observas that prior to the decision of the
Secretary of the Treasury only Belgium could procure
gold from the United States, as the latter only author-
ized gold shipments to countries whose survencies were
convertible and where the export or gold was free.
Under such sircumstances, 00-operation between the
British, French and American Exchange Squalization Funds
would have been almost impossible, he points out.
After emphasizing the importance and significance
of the decision of the Secretary of the Treasury,
M. Jenny expresses his lack of complete understanding
of the indication in the merizen amouncement that gold
will be delivered to foreign countries whose Exchange
Equalization Funds likewise offer to sell gold to the
United States. AS he understands it, the British and
French authorities, and those of the other countries
which desire to buy gold, must fix the price--in their
respective countries--st which they will sell gold to the
American control. This price, he adds, will naturally
depend upon the rate of the exchange.
Turning to the day to day understanding, N. Jenny
contends that the exchange equilibrium will still rensin
very uncertain, as a result. However, be points to the
fact that in the United States the price of gold of 635
per unce has remained fixed for two and one half years,
and that this long period of provisional stability
carries
Regraded Unclassifi
- 4 -
40
carries with it, as concerns the United States, a
guaranty of importance.
Taking all In sll, the financial editor of
13 TEXPS seems to be setisfied and encouraged by the
arrangement, and concludes by stressing the opinion
that "to the extent that the stability of currencies
depends upon international technic end good will, it
seems that the underteking obtained from the United States
is of a nature to facilitate the return to this stability."
The comment of this authority reflects, in a large
measure, the views of most French financial writers on
the announcement of the Secretary of the Treasury of
October 13.
Respectfully yours,
For the Ambassador:
(Signed) EDWIN C. WILSON.
Edwin 0. Wilson,
Counselor of Embassy.
Inclosure:
Text of announcement made
by the Secretary of the
Treasury on October 13,
1936; communiqué of the
French Minister of Finance,
and special article by
V. Jenny, published in
1.2 THEPS dated October 14,
1936.
In quintuplicate.
851.6
HMC/AG/MF
Regraded Unclassifie
41
Enclosure No.
to despoich No.
41
of October 21, 1936
from the Embassy at Paris
11
October 14, 1936.
lés dispositions nécessaires pour que de telles (a-
LA COLLABORATION MONÉTAIRE
ellités soient données à Paris aux autorités mo-
nétaires des Etats-Unis, Cel arrangement, qui sers
franco-anglo-américaine
mis en œuvre au Jour le jour, doil faciliter gran-
dement les opérations techniques du tonds de sta-
billsation des changes. Un arrangement analogue
La déclaration américaine
a dié conclu avec les autorités monétaires de
Grande-Brelagna, de manière a assurer une COO-
Voil le texte de la déclaration de M, Mor-
pération effective entre Paris, Londres et New-
York.
genthag
Comme suite aux avis donnés par lui* las
Les pro Isions officieuses sulvantes soul, au
21 Janvier at 1st février 1934, prévoyant les
surplus, données
achats d'or par la Trésoreria, et le 31 janvier
Le principal problème & resoudre pour permettro la
1934. concernant la vente de l'or pour l'expor-
coopération effective entre Ins autorités monthaires des
lotion. le secrétaire du Trésor déclare que doré-
trols pulesances parties & is déclaration commune du
pavant et tant que, après préavis de 24 heures.
15 septembre deraler, résident dans le point de sevoir
cette déclaration d'intention ne sera pas annulée
comment obacun des organismes qualibés des Blate-
ou modifiée - les Etats-Unia vendront aussi de
Units, de la Grande-Brelages et de la Prance pourrelt
l'or, SUX fine d'exportation immédiate (00 de con-
EL procurer sur les deux autres places de l'or en
signation d'or earmarked) aux fonds d'égalisation
échange des devises qu'll déllandreit. Ge problème,
ou de stabilisation des changes qui sont de la
délical en reison même des régimes mondiaires qui
même manière disposés à vendre de l'or aux
Elate-Unis, pourvu que de telles offres d'or
existent respectivement dans les trols pays, a pu être
heureusement Maola. Dordnavent, dans Iss relations
solent failes h des taux et dans des conditions tell
entre Tes trols grands centres, les devises seroal debail-
que le secrétaire du Trésor puisse les estimer les
goables contre de l'or.
plus avantageures du point de voe de l'intérét
public. Te secrétaire du Trésor fail connaitre en
outro, d'ores et déjà, la liste des pays étrangers
qui rempilssent les conditions ci-desous indiquées.
LE
serélaire du Trésor des Etats-Unis,
et colle liste sera complétée chaque Jour. Toutes
M. Morgenthau, vient de faire au sujet des
les ventes d'or de l'espèce seront failes par Pin-
conditions dans lesquelles les autorités américai-
fermédiaire de la Banque de réserve fédérale de
nos permettront désormais l'exportation de l'or,
New-York, agissant comme agent financier des
use importante déclaration dont le lecteur trou-
Etals-Cois, aux conditions suivantes que le 80-
bera le tezle ci-dessous.
crétaire du Trésor estime les plus avantagouses
Aux termer de cette déclaration, les Etats-Unis
du point de vue de l'intérêt public
s'engagent sous réserve d'annulation ou de
. L'or sera vendu au prix de 35 dollars par oncé
de An. plus 1/4 0/0 pour les frais. et les vantes
modification de cette promesse après un préavis
of consignations seront soumises aux règles ddlc-
de 34 heures - à uendre de For au priz on Di-
tées en application du Gold Reserve Act de 1934.
gueur depuir la stabilisation provisoire du dollar,
c'est-à-dire à 35 dollars l'once, aux fonds étran-
Commentant hier soir Is décision américaine,
M. Morgenthan & déclaré que celle-el Inaugurant
gers de régularisation des changes disposés à
4 une nouvelle application de l'étalon or et une
wondre du métal jaune aur Etats-Unis dans les
nouvelle méthodé de transactions commerciales
mêmes conditions.
internationales 9. Le secrétaire du Trésor a
Avant la dévaluation du frane, les Etats-Unis
ajouté
n'autoriscient en fall la sortie du précieur métal
C'est un pas vare la etabilité dos changes, diminant
qu'à destination des pays dont les monnates
los spécialateurs Interpationaux et placant les mon-
étaient convertibles et où l'exportation de l'or
vements d'or entre les mains des governmements. Les
était, par conséquent, libre. Its refusatent, notem-
gouvernements responsable ecopérerent pour limiter
ment. d'en délivrer au fonds d'égalisation bri-
#12 minimum Tee ductuations des changes.
tennique.
Les bégocients qui vendent ou importent des produits
dirangers pourront opérer par l'intermédiaire de leurs
Si le gouvernement américain acait persiaté
beaques respectives. Le spéculateur international, qui
dans cette attitude après la dévaluation des mon-
n'est responsable dovant personne et ne reconneR
noies du blue or - lesquelles. on Le sail, M sont
suntime patrie, ne pourrs plus transferer repldement
plus rattachées à une base OF fize, - a auroit
ces Tonds d'un marché k l'autre pour récolter dea béné-
protiquement limité l'exportation d'or à une soule
Goes Individuals et same de préocouper des perturba-
destination. celle de la Balgique, out est désor-
tions go'll apporte dans 100 changes internationsix.
main l'unique pays européen pratiquant le no
tème de Editation or. Il est blen duident qu'une telle
Commentaire officiel français
restriction aurait renda is coopération des fonds
En même Lemps qu'll rendall publique la de-
d'égalisation anglals, français of américain di peu
staration américaine, le ministère des finances en
près impossible.
& communiqué le commentaire officieux que
Grâce 4 l'engagement prís par M. Margenthau.
volci
est obstacle " fromme supprime. En méme temps
Il ressort du communiqué ci-dessus du scoré-
- et ceel présente une importance out mérile
taire du Trésor des Etate-Unis d'Amérique que
d'étre soulignée, - la nouvelle politique ameri-
les arrangements relatifs à la corporation techni-
caine de l'or implique we accord entre les orya-
que avec les autorités monétaires des Etata-Unis
niames de contrôle américains et anglais. dont
d'Amérique sont complétement mis su point. Une
l'antaganisme craft did COMPANY une cause de
nouvello régiomentation des conditions de déll-
vrance de For est édictée par 10 secretaire du
trouble sur Le marché des changes.
Trésor, réglementation qui permet à this les pays
On peur an demander ce que le secretaire and
qui accordent des facilités réciproques d'obleair
ricain du Trésor best exactement dire forequ'll
de l'or RUX Etais-Unie d'Amérique contre les de-
précise one de Cur INTER déliveré our fonds d'éas-
vises de es pays. Le gouvernement françate a prio
lisation dirangers qui consentirent a egrao Unclassif
42
42
à l'Amérique de la même manière.
Cela paralt signifier que les autorités anglaises
et françaises, ainsi que celles des autres pays qui
woudront acheter, le cas échéant, du métal moné-
taire aux Etats-Unis, devront, à leur tour, fizer un
priz en leurs monnates respectives assignel
elles vendront de For an fonds de contrôle améri-
cain, prix qui sera bien entendu fonction des cours
du change. De même que le gouvernement de
Washington, elles pourront apparemment modi-
fier ce priz après un préauis de 25 heures. C'est
dire que l'équilibre des changes qui pourra ré-
sulter de cet arrangement sera encore tres prd-
éaire. n convient de tenir compte, toutefois, qu'en
Amérique le prix de l'or de 35 dollars par once est
demeuré immuable depuis deur ans et demi; il
semble que la durée même de cette stabilité provi-
soire comporte déjà, du côté américain, une ga-
rantie non négligeable.
Quoi qu'il en soil, la modification du régime
américain de l'exportation de l'or était le complé-
ment nécessaire de l'accord monétaire tripartite
du 35 septembre, complément grdce auquel la
coopération des divers fonds d'égalisation devient
une possibilité pratique. Et, dans la mesure où
la stabilité des devises dépend de la technique et
de la bonne volonté internationale, il semble que
l'engagement obtenu de l'Amérique soit de nature
à favoriser le retour à cette stabilité
Commentaire officiel britannique
La Trésorerie britannique & publié de son côté
le communiqué suivant
« Des arrangements en vue de la coopération
technique avec les autorités monétaires aux Etate-
Unis sont maintenant complétés et une nouvelle
réglementation sera publice par le secrétaire de
la Trésorerie des Etats-Unis qui permettra à tous
pays accordant des facilités réciproques d'obtenir
de l'or aux Etats-Unis en échange de dollars.
a Le gouvernement de Sn Majesté a pris des
dispositions pour que de telles facilités soient ac-
cordées à Londres aux autorités américaines.
to L'application de cel accord s'effectuera au
jour le jour et devrait grandement faciliter les
opérations techniques du contrôle des changes.
Des arrangements similaires ont été faits avec
la Banque de France afin d'assurer une coopéra-
tion effective entre les trois centres financiérs. -
Dans les milieux financiers anglais, on déclare
qu'il s'agit essentiellement d'un accord tendant à
faciliter les opérations du contrôle des changes,
et que cel accord n'implique aucun changement
dans la politique monétaire de la Grande-Bre-
tagne et n'affecte en rien la liberté de mouvement
de la devise britannique.
Regraded Unclas
43
Paris, October 21, 1938.
Set
41
Subject: French monstary Law prosulgated in the
JOURNAL OFFICIAL of October 2, 1036.--
Official statements end doorees published.
The Monorable
The Secretary of State,
Washington, D. C.
sir:
Reference 18 nade to the abasey's despatch
No. 3090 of September 89, 1936, transmitting, hetably,
the text of the declaration on monstary policy simul-
taneously published by the devermments of the United
States, Great Britain and France on September 25, 1936.
I now have the bonor to forward herewith, for
the information and records of the Department, the text
of the emplementary announcement by BY. Morgenthau
setting forth the conditions under which the Incrican
Treasury
Regraded Unclassified
- a -
Treasury USE prepared to buy and sell gold, 0.0 rea-
dered public by the French Government and published
in II Thin of October 14, 1936. There in also en-
closed the text of the courent of the sinister of
Finance, E. Auriol, 68 embodied in # semi-official
communique published at the same time, and the Lext of
c. special article on the subject by the financial aditor
of LE THIRS.
The following is a translation of the communiqué
issued by the Minister of Finance:
"It is indicated in the communication from
the Secretary of the Treasury of the United
States that arrengements relating to the tochni-
eal 00-operation with the monetary authorities
of the United States are completely settled.
nor regulation of the conditions of delivery of
gold 10 laid down by the Decretary of the Treasury,--
e regulation which will enable all countries which
accord reciprocal facilities to obtain gold in the
United States of America against the currency of
that country. The French Government has exranged
that such facilities shall be extended at Peris
to the secetary authorities of the United States.
This arrangment, which will be a day to day
ment, should greatly facilitate the technical
operations of the Exchange Stabilization Funds.
A similar arrangement has been concluded between
the monetary authorities of Great Britain, DO as to
assure effective co-operation between Paris, London
and Des York."
The following additional porticulars vore given:
The principal problem to be settled to allow
effective 00-operation between the monetary
authorities of the three owers parties to the
consion declaration of september 25 last, concerned
the question 00 to how each one of the competent
organizations of the United intes, and of Great
Britain and of France night procure on the two
other markets gold in exchange for currene 11 held
by it. This problem, which Is a dolicate one on
avooun: of the monetary régimes which exist
respectively in the three countries, bas fortunately
been mettled. enceforte. in the relations between
the three great centers, the currencies will be
exchangeable
Regraded Unclassified
- 3 -
exchangeable against gold.
In his expression of views on the announcement
of HP. sorgenthau, the financial editor of LE TAMPS,
H. Jenny, observes that prior to the decision or the
Secretary of the Treasury only Belgium could procure
gold from the United States, as the latter only author-
ised gold shipments to countries where surrencies were
convertible and where the export of gold was free.
Under such circumstances, 00-operation between the
British, French and American Exchange Agualization Funds
would have been almost impossible, he goints out.
After emphasizing the importance and siguificence
of the decision or the Secretary of the Treasury,
E. Jenny expresses bis lack of complete understanding
of the indication in the morican amouncement that gold
will be delivered to foreign countries whose Exchange
Squalization Funds likewise offer to cell gold to the
United States. AB he understands it, the British and
French suthorities, and those of the other countries
which desire to buy gold, must fix the price--in their
respective scuntries--st which they will sell gold to the
merican control. This price, he adds, will naturally
depend upon the rats of the exchange.
Turning to the day to day understanding, % Jenny
contends that the exchange equilibrium will still resein
V027 uncertain, as 9 result. However, be points to the
feet that in the United States the price of gold of $35
per chose has remained fixed for two and one half years,
and that this loss period of provisional stability
Unclassified
45
- 4 -
carries with it, an concerns the United States, a
guaranty of importance.
Taking all in all, the financial editor of
LA TEMPS seens to be satisfied and encouraged by the
arrangement, and concludes by stressing the opinion
that "to the extent that the stability of currencies
depends upon international technic end good will, it
seess that the underteking obtained from the United States
10 of 8 nature to facilitate the return to this stability."
The counent of this authority reflects, in a large
measure, the views of most French financial writers OR
the ennouncement of the Secretary of the Treasury of
October 18.
Respectfully yours,
For the Ambassador:
(Signed) EDWIN C. WILSON.
Edwin 0. wilson,
Counselor of Embassy.
Inclosure:
Text of ennouncement made
by the Cooretary of the
Treasury on October 13,
1936; consuaiqué of the
French Maister of Finance,
and special article by
V. Jenny, published in
15 THIS dated October 14,
1936.
In quintuplicate.
003.0
Enclosure No.
to despatch No.
41
46
of October 21. 1936,
from the Embassy at Paris
12 TEMPS,
Detober 14, 1936.
LA COLLABORATION MONÉTAIRE
les dispositions nécessaires pour que de tertes Ta-
cilités soient données à Paris aux Abtorités mo-
nétaires des Etats-Unis. Cet arrangement, qui sera
franco-anglo-américaine
mis en œuvre au Jour le jour, dell faciliter gran-
dement les opérations techniques du fonds de até-
billeation des changes. Un arrangement analogue
a été conclu avec les solorilés monétaires On
La déclaration américaine
Grande-Bretagne, de manière à assurer une COO-
Voci Le texte de in déclaration de M. Not-
pération effective entre Paris, Londres et Now-
York.
genthau
Corome suite aux avis donnés par lui les
Les précisions officieuses suivantes sont an
DI janvier et 1" fèvrier 1934, prévoyant les
surplus, données
achate d'or par la Trésorerie, of le 31 janvier
Le principal probléme 1 résoudre pour permetize Is
1931. concernant la vente de l'or pour l'expor-
ecopération effective entre les sularités monétaires des
tation. le secrétaire du Trésor déclare que dorê-
trois pulesances parties 1. la déclaration commune du
navant et lant que, après préavis de 24 houres.
23 septembre deraine, résidait dans le point de davote
cette déclaration d'intention no aera pas annuies
comment chacun des organismes qualities des Etate-
ou modifiée - les Etate-Unis vendront aussi do
Unis, de la Grande-Dretagne et de la Prince pourrait
For. aux fine d'exportation immédiate (ou de con-
BE procurer sur les delit autres places da l'or en
signation d'or earmarked) aux fonds d'égalisation
dohange des devises qu'll délivendralt. Ce probleme,
ou de stabilisation des changes qui sont de is
délicat en Palema même des régimee mondiares qui
même manière disposés à vendre de For aux
existent respectivement dans les trots pays, a pu êtra
Etate-Unis, pourve que de telles offres d'or
résolu. Dorthavant, dans les relations
solent faites à des Laux et dans des conditions LAIS
entre 140 trols grands expires, The devisee échad-
que le secrétaire du Trésor pulitse les estimar les
geables contre de For.
plus avantageuses du point de visa de l'intérét
public, Le secrétaire du Trésor fait connatire en
outre, d'ores et desh. In liste des paya étrangers
LE secrétaire du Trésor des Blats-Unis,
qui remplissent les conditions ci-dessus indiquées,
M. Morgenthau, vient de faire au sujet des
et cette liste sera complétée chaque jour. Toutes
conditions dans lesquelles les autorités américal-
les ventes d'or de l'espèce seront falles par l'In-
nes permettront désormais l'exportation de Por,
termédiaire de is Banque de réserve fédérale de
une importante déclaration dont Le lecteur from-
New-York, agissant comme agent financier des
Elats-Unis, aux conditions suivantes que la se-
pera le terte cl-deasous.
crétaire du Trésor estime les plus avantageuses
Aux termos de cette déclaration, les Stats-Unia
du point de vue de l'intérêt public
s'engagent sous réserve d'annulation ou de
L'or sora vendo au prix de 25 dollars par once
modification de cette promesse après un prévis
de fin. plus 1/6 0/0 pour les frais. et les ventes
de 24 houres - à vendre de For du priz en vi-
et consignations seront soumises aux règles édic-
queur deputs la stabilisation provistre du dollar,
tées en application du Gold Reserve Act de 1934.
c'est-à-dire à 35 dollars l'once, our fonds ftron-
Commentant hier soir la décision américaine,
gene de régularization der changes disposes à
M. Morgenthau a déclaré que celle-oi inaugurant
vendre du mélal juune are Btats-Unia dans les
a une nouvelle application de l'étaion or et une
mémes conditions.
nouvelle méthode de transactions commerciales
Anant la dévaluation du /rane, les Etats-Unis
internationales », Le secrétaire du Trésor &
n'autorizationt en fait la aortie du précious multal
ajouts =
qu'à destination des pays dont les monnaies
C'est un pas vars la stabilité des obanges, diminant
étaient convertibles et où l'exportation de l'or
les spéculateurs Internationaux et placant les mou-
étail, par conséquent, Ubre. Ila refusnient, natem-
vements d'or entre les mains des gouvernements. Lee
gouvernements responsables coopéreront pour limiter
ment. d'en délivrer or fonds d'égalisation bri-
au minimum the Quotuations des changes.
tannique,
Les mil vendent on important des produits
Si le américain avait persiaté
dirangers pourront opérer par l'intermédiaire de leurs
dans celle attitude après la dévaluation des mon-
benques respectives. Le apéculateur International, qui
nates du bloc 07 lesquelles, on le sail, THE sont
n'est responsable devent personne at no reconnalt
plus rattachées à une base or lize, il aurait
sunune patrio. Be pourre plus transfer repldement
protiquement limité l'exportation d'or à une soule
ees Tands J'un marché à l'autre pour récoller des béné-
destination, celle de la Belgique, qui est désor-
Boes individuale et sans - préoceuper des perturbs-
None qu'll apports dans las changes International.
mais l'unique pays européen proliquant le ryle
tôme de l'étalon or. n est bien suident qu'une telle
Commentaire officiel français
restriction aurmit rendu la coopération des fonds
d'égalisation anglais, français of eméricain à pou
En même temps qu'll rendalt publique In dé-
près impossible.
claration américaine, la ministère des finances en
Grice à Z'engagement prix par M. Morgenthau.
communiqué to commentaire officieux que
est obstacle ee (rowee supprime. En même temps
voici
et ceel présente une importance qui mérite
TI ressort du communiqué el-dessus du secró-
d'étre soutignée, la nouvelle politique ameri-
taire du Trésor des Etate-Unis d'Amérique que
les arrangements relatife à la coopération techal-
caine de for implique un accord entre les orga-
que avec les autorités monétaires des Etate-Unis
niames de contrôle américains et anglais, dont
d'Amérique sont complètement mis au point Une
Contagonisme mote été souvent une cluse de
nouvelle réglementation des conditions de déli-
prouble FMF le marché des changes.
vrance de Por est édictée par le secrétaire du
On pout se demander ce que to secrétaire nm/-
Trésor, réglementation qui permet & tous las pays
ricain du Trésor coul agailement dire terraqu'f?
qui accordent des réciproques d'oblenir
précise que de Por MM délivré aux fonds dega-
de for aux Einte-Unis d'Amérique contre les de-
vison de es pays. Le gouvernement français a pris
lication étrangers qui consentiront & en vendre
Regraded Unclassifi
=
à l'Amérique de la même manière,
Cela paratt signifier que les autorités anglaises
et françaises, ainsi que celles des autres pays qui
coudront acheter, le eas échéant, du métal moné-
the are Etate-Unis. devront, à leur tour, fizer Nn
prix en leura monnaies respectives auquet
elles vendront de l'or au fonds de contrôte améri-
cain, prix qui sera bien entendu fonction des cours
du change. De même que Le gouvernement de
Washington, elles pourront apparement modi-
fier ce priz après un préanis de 28 heures. Cext
dire que l'équilibre des changes qui pourra ré-
sulter de cet arrangement sera encore très pré-
caire, n convient de tenir compte, toutefois, qu'en
Amérique le priz de l'or de 35 dollars par once est
demeuré immuable depuis deus one et demi; il
semble que la durée même de cette stabilité provi-
soire comporte déjà, du côté américain, une ga-
rantie non négligeable.
Quoi qu'il en soit, la modification du régime
americain de l'exportation de for était le complé-
ment nécessaire de l'accord monétaire tripartite
du 25 septembre, complément grâce auquel la
coopération des divers fonds d'égatisation devient
une possibilité pratique. Et, dans la mesure où
la stabilité des devises dépend de la technique et
de la bonne volonté internationale, il semble que
l'engagement obtenu de l'Amérique soit de nature
à favoriser le retour à cette stabilité,
J.
Commentaire officiel britannique
La Trésorerie britannique a publié de son côté
le communiqué suivant
Des arrangements en vue de la coopération
technique avec les autorités monétaires aux Etats-
Unis sont maintenant complétés et une nouvelle
réglementation sera publiée par lo secrétaire de
la Trésorerie des Etats-Unis qui permettra à tous
pays accordant des facilités réciproques d'obtenir
de l'or aux Etats-Unis en échange de dollars.
32. Le gouvernement de Sa Majesté a pris des
dispositions pour que de telles facilités soient ac+
cordées à Londres aux autorités américaines.
L'application de cet accord s'effectuera au
jour le jour et devrait grandément faciliter 168
opérations techniques du contrôle des changes.
» Des arrangements similaires ont été faits avec
la Banque de France afin d'assurer une coopéra-
tion effective entre les trois centres financiers. #
Dans les milieux financiers anglais, on déclare
qu'il s'agit essentiellement d'un accord tendant à
faciliter les opérations du contrôle des changes,
et que cet accord n'implique aucun changement
dans la politique monétaire de la Grande-Bre-
tagne et n'affecte en rien la liberté de mouvement
de la devise britannique.
48
FEDERAL RESERVE BANK
OF NEW YORK
October 21, 1936.
Dear Mr. Secretary:
Last Friday you asked me over the telephone to inquire
in the market whether there was evidence that American importers,
as a result of recent devaluations in Europe, had transferred
their buying to these countries with devalued currencies.
I have had inquiries made on this subject through our
information department and am advised as follows:
"(1) An officer of a New York City bank discussed
with one of that bank's 'most important customers' the
question whether or not they were changing the sources
of their imports as a result of changed currency values.
The customer replied that there was no reason to change
anything yet. French prices had risen promptly and were
not 'tempting.' They already did a large import business
with Czechoslovakia, towards which country they had moved
their trade following certain difficulties in dealing with
Germany.
"(2) A member of the Produce Exchange made inquiries
which yielded the following: in general, it is still too
early to say anything decisive. In some cases devaluation
had been anticipated and heavier orders than usual had been
placed by importers with their normal suppliers. Specific-
ally as to Czechoslovakia, prices there had been raised,
Regraded Unclassifie
FEDERAL RESERVE BANK OF NEW YORK 2.
The Honorable,
10/21/36.
The Secretary of the Treasury.
49
e. 8., Bata, the shoe manufacturer, has raised his
Czech-crown prices 11 per cent all round. In Holland
prices of tobacco products have been raised far enough
to permit the continued shipment of Connecticut leaf
tobacco to that country despite the depreciation of the
guilder.
"(8) An American exporter of mining products with
whom I talked generally about the subject informed me, in-
cidentally, that whereas he formerly did a nice barter
business with Woolworth, Kresge, and other such firms,
they taking the mark proceeds of his exports and using
them to pay for imports of German goods, for about three
months past he had been doing no business with them, the
reason being that the Berlin-Washington arrangement had
made such business impossible."
We shall continue our efforts to gather further material
on this subject and advise you as to our success.
Respectfully
Whom
L. W. Knoke,
Assistant Vice President.
The Honorable,
The Secretary of the Treasury,
Washington, D. C.
Regraded Unclassifie
TREASURY GOLD STOCKS UP 4 000 000 DLS
WASHN -
OCT 21 1936 9.55
ADD TREASURY GOLD STOCKS
WASHN - THE TREASURY GOLD STOCKS AFTER
DECLINING BY APPROXIMATELY 9 000 000 DLS ON
OCT 17 SHOWED A GAIN OF MORE THAN 4 000 00C
DLS ON OCT 19 THE TREASURY DAILY STATEMENT
SHOWS
REUTER DISPATCH FROM RIGA SAYS THAT 9:30
FOLLOWING DEVALUATION LATVIA HAS TAKEN
RAPID ACTION TO PREVENT RISE IN PRICES OF IM-
PORTED GOODS BY CUTTING TARIFFS BY FROM 12 1-2
PC TO 80 PC ON RICE SPICES COFFEE TEA TOBACC
-0 AND GASOLINE- THE GOVERNMENT ALSO
HAS MADE A BEGINNING TOWARDS ABOLITION OF QUOTAS
AND CURRENCY RESTRICTIONS WHICH THE FINANCE
MINISTER SAYS ARE MADE POSSIBLE BY IMPROVEMENT
IN LATVIA-S FOREIGN TRADE
OCT 21 1300
52
October 21, 1936.
12:32 p.m.
H.M.Jr:
I understood from Mr. Oliphant that Mr. - Senator
Pittman would be here at twelve.
Pittman's
Well now I tell you - I don't know just - just
Secretary: what has happened. Mr. White, here in the office,
was with the Senator this morning and he left him
about 11:30 or a little later and he said that he
was on his way to your office and that he would go
there immediately. Mr. White came here to this
office.
H.M.Jr:
Oh.
And I just called him (White) and he assured me
that the Senator remembered his appointment with
you and intended to be there at 12 o'clock.
H.M.Jr:
Well now I've got another appointment at 12:30
outside of the office.
I see.
H.M.Jr:
And I'm terribly sorry I missed him but I've sat
here for thirty minutes twiddling my fingers.
(Laughter) I just can't understand that. I don't
know what could possibly have detained him because
he
H.M.Jr:
Well would you explain to him?
I certainly will, sir.
H.M.Jr:
I'm sorry and I understand he's going out west and
when he comes back
Yes, he leaves this afternoon at 3:25.
H.M.Jr:
Well when he comes back the next time I hope that I
can see him
All right.
H.M.Jr:
....and that he won't forget me.
(Laughter) All right. You - you don't plan to be
in your office a little later do you?
Regraded Unclassified
53
- 2 -
H.M.Jr:
No I'm going out now and as a matter of fact I'm
not feeling very well and I'm going home.
Oh I see.
H.M.Jr:
And I told him that I'd leave here and I haven't
felt very well and I'm going home.
I see. All right I'll be very glad to tell him ....
H.M.Jr:
I mean I don't advertise that but the strain has
been so great that I just have to go home.
Well that's - that's too bad I'm - I'm very sorry
that you've waited for him and that he didn't - he
didn't show up but ...
H.M.Jr:
Well I'm sorry too.
....I feel whatever it is, when we find out what has
happened, it will be unavoidable.
H.M.Jr:
Right.
All right, sir, thank you very much for calling.
Goodbye.
54
U
GRAY
Paris
Dated October 21, 1936
Rec'd 2:15 p.m.
Secretary of State
Washington
1027, October 21, 5 p.m.
FROM COCHRAN.
Paris exchange market quiet with no evidence of Bank
of France operating.
At a businessmen's lunch in Paris yesterday Paul
Reynaud is reported by the press to have said in part
"Why is it that our country alone seems to misunderstand
the importance of the tripartite agreement with the
Anglo-Saxon democracies? Whatever may be one's opinion
over what the percentage of devaluation should have
been, let us also refrain from lightly speaking as is
too often the case of a further devaluation. I affirm
that if the Government and the nation do their duty it
will be avoided".
Recent gossip in market circles as to the likelihood
of France's having to devalue the franc further has un-
doubtedly checked to some extent the reflux of French
capital and the improvement in rentes. Responsibility for
this gossip is attributed partly to a speech made last
week
55
U -2- #1027, Oct. 21, 5 p.m. from Peris
week by the Swiss Minister of Finance wherein President
Meyer is reported by the press to have said that France
would have preferred to have gone beyond 30% in de-
preciating the franc but that she was checked from devalu-
ing further by threat of reprisals from England and the
United States.
When talking with my Swiss friends on Monday I let
them know that to the best of my knowledge the French
rate was chos en with entire freedom and without any
coercion on the part of any other country. Incidentally
the Swiss were very happy over the success of their de-
fense loan for which 235,000,000 francs were sought but
which was oversubscribed the total reaching 330,000,000.
Swiss National Bank officials told me the whole amount
would probably be retained partly to facilitate early
conversion of other loans and partly because of the
difficulty in cuttingdown allotments to the more than
100,000 subscribers.
French financial press carries American conjectures
as to whether increase of approximately $10,000,000 in
gold earmarked with Federal Reserve Bank of New York re-
sults from operations under tripartite agreement or from
Chinese silver transaction. Press comment is also made
upon National Bank of Belgium forwarding gold to New
York.
BULLITT
KLP:CSB
56
October 21, 1936.
4:07 p.m.
H.M.Jr:
Yes Knoke.
K:
Last Friday you ask me to look into the question
of shift in trade following gold bloc devaluation.
H.M.Jr:
That's right.
K:
Well I just want to say I mailed a letter to you
this morning giving the first results of our investi-
gation.
H.M.Jr:
Well thank you very much. How are things going
this afternoon?
K:
Very quiet. We've done 91,000 pounds. There's
no life to the market at all.
H.M.Jr:
What's the price?
K:
4.89 we are paying; 4.89-1/16th others are offering.
H.M.Jr:
All right.
K:
All right sir.
H.M.Jr:
Thank you.
K:
Goodbye.
Regraded Unclassified
57
October 21, 1936
At 4:45 today Mr. Bewley and Mr. Mallet came in
to see the Secretary.
He said to them, "I have two cables from Coohran,
one describing his trip to Belgium and the other one
describing his trip to Switzerland, I might suggest
that you go into Taylor's room and copy the cables,
I an trying to write a speech and that is why I am
asking you to 50 into Mr. Taylor's room."
Continuing he said, "Cochran has reported that
the Belgians and the Sw1ss are willing. I have not
yet made up my own mind what I am going to do, The
Swise note does not bother me; the Belgian does.
What we decide on Belgium, the way I look at it, may
be cutting the bridges behind us as to the old gold
standard -- I want to point that out to you -- as far
as the United States is concerned. I am going to
give you the information we have. I would like you
to give it to the Chancellor and I would like his re-
action. Your problem 18 not the same as ours, If
we decide to go through with this, then we would can-
cel all previous decrees. We would be doing business
with Belgium on the decree issued October 13, 1936.
I am being very frank. This does not affect you. Do
you get the significance?"
Mr. Bewley answered, "No, not entirely " The
Secretary explained to him, "The way we used to do
it under the January 31, 1934 proclamation, we oper-
ated between gold points under the old gold standard."
The Secretary then said, "The Belgian Government,
as I understand it, is making available to us and to
England and France the entire gold reserve of the
Government. I will try to make up my mind tomorrow.
For us it 1s a very important step. I would much
rather have you ask me any questions you want if it
18 not clear."
Mr. Bewley inquired, "If Belgium wants to buy
gold in England now, they can?" The Secretary
answered, "Yes. Our attitude is this: here are
three countries who have entered into an agreement.
We are not going to make any move without consulting
Regraded Unclassified
58
-2-
you, Here is some very important information, As
a matter of fact, your Government must consider what
I am telling you about the Swiss as extra, extra con-
fidential. They are giving us a price at which they
will sell gold to us. They are giving us their whole
financial position. By Friday morning I hope to have
an answer as to what I will do. In order to save
time, I want to show you what Switzerland and Belgium
have signed and agreed to do."
Mr. Bewley inquired, "If Switzerland has not got
a fund, how would they do it?" HM, Jr's answer was:
"They do have a fund. I am giving you this informa-
tion in advance of coming to a decision myself. The
decision I have to make 18 not one you have to make,
but in the long run it will be a very important deci-
sion for everyone. We have explained to Belgium that
we do not want to do business on the January 1934 agree-
ment. I hope to spend most of tomorrow on this thing.
My objective is again to try to clean it up by four
o'clock Monday.
"You cable this over -- Just for their information.
Can they see any repercussions to any of the three
countries? One thought I have, and I have not de-
cided to say this as yet, and that 18 where a country
has not got a stabilization fund, that I say to that
country in one day we limit you or ourselves to
$10,000,000. What I am worrying about a little bit
16 that someone might use Belgium and Switzerland to
attack us. We will not approach Holland, but will
let her make up her own mind. Frankly, I do not
like the way Holland 18 acting. I think she 18
trying to make a little money out of this. We do
not want to bring any pressure on anyone to join us.
"I do not consider when Belgium and Switzerland
do come in that they are members of this tri-partite
agreement. I want to call them Junior partners, but
Lochhead does not like this." Mallet suggested,
"Sattelites." HM,Jr. agreed, saying, "Yes, sattelites;
they revolve around us."
To Mr. Bewley, the Secretary said, "I think,
Bewley, you get the distinction. We no longer go
between the gold points." Bewley answered, "Yes,
59
-3-
I understand, but I do not understand the machinery. If
The Secretary's response was, "You will when you read
the cables. I would like to have a reply Friday
morning, because I am leaving here Friday at twelve,
noon. I hope to see the President about 9 or 10
that morning and I would like to have some kind of
an answer to show him."
Mr. Bewley then said, "What you really want are
the Chancellor's observations?" HM, Jr. replied, "I am
saving time by giving you the information in advance.
This afternoon we are giving the same information to the
French."
Regraded Unclassified
60
TREASURY DEPARTMENT
235
INTER OFFICE COMMUNICATION
DATE October 21, 1936
TO
The Secretary
Ef
FROM
Miss Lonigan
Expenditure of Federal funds by FERA-WPA, in September 1936, was
higher in 46 States than in September a year ago.
The average increase for the country was 56 percent. In 27 States,
the increase was more than 56 percent.
The largest increases were 738 percent in New Hampshire, 358 percent
in South Dakota, and 239 percent in North Dakota.
These increases are exclusive of Federal funds spent for relief or
welfare by the Resettlement Administration or the Social Security Board.
*****
Work relief expenditures increased 268 percent in the United States
compared with September a year ago.
In 24 States, the increase in September was more than 300 percent.
The largest increases were Pennsylvania with 3,663 percent increase,
and Missouri with 3.383 percent increase.
WA
Regraded Unclassified
=
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Regraded Unclassifie d
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YEAR
OKLA
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FLA
Persont Increase
1. S. Average Increase
of 2681,
62
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Regraded Unclassifie
October 22, 1936.
63
A group met in the Treasury at 10 A.M. for 8 discussion
of the inclusion of Switzerland and Belgium in the three-power
gentlemans agreement on currency.
Those present were: Mr. Taylor, Mr. Oliphant, Mr. Lochhead,
Mr. Haas, Mr. White, Dr. Goldenweiser, Dr. John H. Williams of
the Federal Reserve Bank of New York and Mr. Upham.
Secretary Morgenthau came in for a few moments at the beginning
and indicated what was desired was a discussion of the proposals made
by Switzerland and Belgium as outlined in cables from Mr. Cochran in
Paris. One of the things that he thought might be given attention was
the possibility of one of the smaller countries being used as an
operating point or channel through which speculation in foreign
exchange and gold might take place. He suggested the possibility of
limiting the daily gold transactions of the smaller countries to
say, 10 million a day.
Mr. Oliphant raised the point of ownership of the Belgian Bank
and suggested as 8 test of whether the arrangement was between the
government of the United States and the government of Belgium or
between the government of the United States and the central bank of
Belgium, a determination of the agency upon which any loss would fall.
Mr. Williams inquired whether there is in contemplation 8. mix-
ture of the old and the new gold standards and asked if there was
anything in the agreement with France to prevent the Bank of France
from selling gold to private banks. This being answered in the
negative, Dr. Goldenweiser stated that he thought it would be B.
violation of the spirit of the agreement.
Mr. Williams raised the point whether, under the new agreement,
-2-
64
private banks would be permitted to operate in gold and if so at
whose risk. He thought it might be possible for us to refuse to
accept gold except from other governments. If the private banks
are eliminated, he said, then gold transactions can be only by
governments or by governments and central banks.
Mr. Taylor observed that 80 long as there is an open gold mar-
ket in London the details of the arrangement with Belgium are not
too important.
Mr. Oliphant agreed that the United States government should
not tell any other country how to operate their own machinery but
suggested that we might make reference to our own pattern as the
desirable one, and perhaps let the Belgians know that discussions
in the Treasury here are being prolonged because of uncertainty
as to whether their government is a principal in daily transactions.
It was agreed that there was not much danger from Belgium or
Switzerland 8.8 a channel for spéculative activities in foreign
exchange or gold and that it was neither necessary nor desirable to
set any limit such as 10 million on daily dealings.
If speculative abuse is developed it was thought that they
could be curbed better without any daily limit than with one. If
daily dealings of 10 million are permitted, there could scarcely
be any objection to transactions each day of that amount, even if
more than normal.
Mr. Oliphant wondered if the 10 million 8 day idea is &
suggestion in a search for a pattern. He asked what limitation
would be acceptable in making up a pattern to meet the absence of 2
stabilization fund.
Regraded Unclassified
-3-
65
Mr. Haas was of the opinion that the stabilization fund per
se 1a not so important and that as a substitute we could accept
some form of Treasury guarantee of operations.
Mr. Taylor thought that might be interpreted as a suggestion
that they keep their books B. certain way in the form of a Treasury
account rather than a central bank account. He feels government
participation in the over-all agreement is enough.
Mr. Oliphant was of the opinion that something more fundamental
was involved -- that it is 8. question of ideology -- involving a
question of whether the risk is to be that of the government and
the people, or of a privately owned central bank.
Mr. Williams agreed and said that we are doing that very thing
and that he 18 for it but thinks the mechanism for doing it relatively
unimportant. Why should it not be through the central bank and
for its risk, he asked. It may be important later, he said, in
connection with impounding of gold and regulation of internal price
levels, but the negotiations are still in an experimental stage
and it does not make much difference in the small countries how it
is set up. It is far more important to extend the area of the agree-
ment than it is to quibble about technicalities and how the currency
is managed. Stability is the main thing.
Mr. Williams and Dr. Goldenweiser were of the opinion that
insistence upon governmental participation in the covering agree-
ment is enough.
Mr. Lochhead raised the point that stabilization funds differ
among themselves, ours not being like the British. A country with
a stabilization fund might be as unlike us in its operations as one
66
-4-
which had no stabilization fund.
Mr. White asked whether dealing with the Treasury means through
contral banks only or through private banks also.
Mr. Williams thought the determination of that mechanism might
be left until later. He thought the questions resolved themselves
into (1) whether we are willing to reciprocate if the other countries
set up 8 stabilization fund, or (2) whether we are willing to recip-
rocate on some other basis.
Dr. Goldenweiser added that he thought a third question might
be whether we are willing to reciprocate if the other governments
agree to abide by the October 13th agreement.
Mr. Oliphant thought the pattern should be that we agree to
do business with another government through any fiscal agent that
they might designate.
Mr. Williams wondered if it was not enough to have an agreement
with the government and leave the day-to-day dealings to the central
bank.
Dr. Goldenweiser agreed.
Mr. Oliphant raised the point whether the statement of January
31, 1934 is really being superseded or whether we are only adhering
to the old fashioned gold standard through a new channel.
It was replied that the new arrangement is quite different from
the 1934 arrangement because under the new arrangement our private
banks can't get gold, it being available for sale to other governments
only.
There was B. good deal of discussion as to whether the cable from
Belgium indicated that the Belgian Treasury would act as principal and
Regraded Unclassified
67
-5-
the central bank as its agent, or whether the central bank itself
is acting as principal.
It was pointed out that the gold is owned by the central bank --
not by the Treasury and accordingly for the Belgian Treasury to act
as principal the gold would have to be transferred to it.
Mr. Williams pointed out that it is only the government which
can change the price of gold or put an embargo on gold and that
since both Belgium and the United States have 8. fixed price for gold
there does not arise any question of stabiliation fund or other
account operations -- that it is really the automatic operation of
the old gold standard but on a new 24-hour basis and transactions
between the United States government and the Belgium central bank.
He asked if the fact that a country was on the old gold standard made
any difference and if what we wanted was for Belgium to go on a
flexible basis which would require a stabilization fund. He asked
if we wanted to operate with the Treasury as a jurisdictional
matter per se or whether we think it to be the proper mechanics.
Mr. Oliphant suggested it might be unfortunate that the United
States is on a fixed basis.
Mr. Williams thought that in the case of a small country like
Belgium it did not make any difference if they had a fixed price for
gold but he stated that in the case of England or France it would
make quite a difference.
Mr. Oliphant raised the point that an agreement with Belgium,
which involved dealings with the central bank as principal, might
serve as a precedent for similar agreements with Germany and Italy.
The principal point of difficulty in the Swiss agreement had to
Regraded Unclassified
68
-6-
do with the spread in their gold price which Mr. Lochhead indicated
was in the neighborhood of 2% whereas the French is 1/10th of 1%,
ours is 1/2 of 1% and the British have practically no spread at all.
Regraded Unclassified
9.55
TREASURY GOLD FUND CONTINUES TO INCREASE
WASHN - THE TREASURY-S GOLD FUND RE
JON OCT 22,1936
^c
HED
II 006 331 402 DLS ON OCT 20 COMPARED WITH
11 005 708 971 DLS THE DAY BEFORE THE TREAS-
URY ANNOUNCED
-0-
BULLS ON AMERICAN & FOREIGN POWER ARE
HOPING THE STABILIZATION AGREEMENT WILL AID
THAT COMPANY-S OPERATIONS BY TAKING MUCH OF
THE CURRENCY RISK OUT OF ITS FOREIGN TRANSAC-
TIONS- THE RECENT EARNINGS TREND HAS NOT
BEEN CALCULATED TO INSPIRE ANY GREAT BULLISH-
NESS AND INTERESTS WHO HAVE BEEN CLOSE TO THAT
COMPANY-S AFFAIRS ARE TAKING A NEUTRAL
POSITION FOR THE PRESENT
10:00
FRENCH FRANCS WEAK
[22 1936
WITH RADICAL SOCIALIST PARTY MEETING
10:23
TODAY TO DECIDE ITS COURSE OF ACTION AT
FORTHCOMING SESSION OF FRENCH PARLIAMENT HEAVY
PRESSURE HAS DEVELOPED AGAINST THE FRENCH
FRANC - A COMBINATION OF BEAR SPECULATION AND
OUTRIGHT FLIGHT OF CAPITAL HAS PRODUCED SHARP
WEAKNESS IN THE FRANC
SPOT FRANCS NOW ARE OFFERED IN LOCAL
MARKET AT 4 61 3-4 CENTS OFF 3 POINTS - THIS
IS SHARPEST BREAK TO HAVE TAKEN PLACE SINCE
THE EARLY DAYS OF DEVALUATION - MARKET IS ON
THE OFFERED SIDE ENTIRELY AND AS YET THE
DROP DOES NOT SEEM TO HAVE PRODUCED OFFICIAL
SUPPORT FROM ANY OF THE THREE CONTROLS DESPITE
THE ANNOUNCED INTENTION OF MAINTAINING STABILI-
71
Regraded Unclassifie
TY IN THE RATES AND CURBING SPECULATION
WEAKNESS IN THE FORWARD FRANC WHICH
BECAME ACUTE SUDDENLY YESTERDAY HAS BECOME
INTENSIFIED THIS MORNING - THIRTY-DAY FRANCS
ARE OFFERED AT A DISCOUNT OF 2 5-8 POINTS
AGAINST 2 1-4 YESTERDAY AND I 1-2 ON TUESDAY -
NINETY-DAY FRANCS ARE OFFERED AT A DISCOUNT
OF 8 1-2 POINTS UNDER SPOT AGAINST 7 AND 5 1-2
POINTS
ACTUAL TURNOVER IN LOCAL MARKET IS SMALL -
LONDON AND PARIS HOWEVER REPORT A GOOD
VOLUME OF BUSINESS
LARGELY UNDER INFLUENCE OF THE FRENCH
DEMAND STERLING IS FIRM IN NEW YORK AT 4 89
3-8 UP 3-8 CENT
72
OFFICIAL SUPPORT FOR FRANCS
10:55
AFTER AN EARLY LOW OF 4 61 5-8 CENTS
FRENCH FRANCS NOW HAVE RECOVERED TO 4 63
I-2 CENTS - IT IS BELIEVED THAT THE RECOVERY
IS DUE TO OFFICIAL SUPPORT THOUGHT TO HAVE
COME FROM THE BANK OF FRANCE
WITH THE FIRMER TENDENCY IN FRANCS WHICH
HAS DEVELOPED IN RECENT TRADING STERLING
HAS REACTED TO 4 89 1-8 AGAINST 4 89 3-8
EARLIER THIS MORNING
LONDON EXCHANGE
9:20
LONDON- FEATURE OF FOREIGN EXCHANGE MARKET
WAS WEAKNESS IN SPOT FRANCS ON RENEWED
NERVOUSNESS IN FRENCH SITUATION- BROKERS RE-
PORTED CONSIDERABLE SALES FROM THE CONTINENT
BUT THE TURNOVER WAS MODERATE
DISCOUNT ON THREE MONTHS PARIS WEAKENED
FURTHER TO I 3-4 FRANCS AFTER OPENING AT I
3-8 FRANCS- DISCOUNT ON ONE MONTH PARIS WAS
5-8 FRANC- THERE HAS BEEN NO CONTROL INTER-
VENTION so FAR
OTHER CURRENCIES WEAKENED SLIGHTLY IN
TERMS OF STERLING- DISCOUNT ON THREE MONTHS
AMSTERDAM WAS 8 1-2 DUTCH CENTS AND ONE MONTH
3 1-4 DUTCH CENTS
ADD LONDON FOREIGN EXCHANGE
11.47
LONDON - FRENCH FRANCS WEAKENED SHARPLY
IN THE FOREIGN EXCHANGE MARKET THIS AFTERNOON
THE RATE AT ONE TIME TOUCHING 106 37 AT
WHICH LEVEL THE FRENCH STABILIZATION FUND
INTERVENED AND BROUGHT THE RATE BACK TO 105 56
74
PARIS EXCHANGE
THE OFFICIAL BOURSE STERLING AND THE
PARIS-SHORTLY AFTER THE CLOSING 220 ON
DOLLAR CONTINUED TO CLIMB REACHING 106 35
AND 21 71 RESPECTIVELY- CONTROL WHICH
HITHERTO HAD BEEN INACTIVE THEN INTERVENED
BOLDLY BRINGING THE RATES TO 105 20 AND 21 52
AND CORRESPONDINGLY BELGAS GUILDERS AND
SWISS FRANCS- THERE WERE HEAVY DEALINGS BUT
TOWARD THE CLOSE THE MARKET BECAME QUIETER/
75
76
FEDERAL RESERVE SANE
OF NEW YORK
FICE CORRESPONDENCE
DATE October 22, 1936.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF ENGLAND.
I called Mr. Bolton at 11:30 with reference to the weskness
of the franc. There was nothing new other than what the newspapers
had presented for days; the whole thing developed from the political
situation in France, where it was believed a split in the Blum
Government was possible. Add to that, Bolton continued, the situa-
tion in Europe in general, Spain, Russia, etc., and you have the
complete reason for the franc's weakness. Nobody was making an at-
tempt to support the franc against which speculative drives had been
engineered from various centers. I mentioned that, according to one
report received here, there was evidence of renewed hoarding of
sterling and dollar notes in France. As far as he knew, Bolton said,
that was not true; the customs control in France was very strint and
importation of gold coin or banknotes not at all easy. To his own
knowledge Bank of England notes were still returning from hoard up to
Monday of this week.
The franc rate seemed to be turning as we were talking;
Bolton quoted me 10580 bid after 106 1/4 offered. The dollar market
was steady all day at about 4.89 3/8. Gold movement was pivoting on
the dollar-sterling rate. Actual business was much in excess of the
figures reported done at fixing. Gold continued to be shipped to
New York to be added to "your poor little gold hoard," as he put it.
I made confidential reference to the Swins expressed willing-
ness to quote us firm buying and selling prices for gold with & spread
of over as and asked him whether a similar proposition had come up with
them now or at some time in the past. Bolton replied that they had made
Regraded Unclassified
7 (0M 5-16
77
FEDERAL RESERVE BANK
OF NEW YORK
FICE CORRESPONDENCE
DATE October 22, 1986.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF ENGLAND.
- 2 -
no attempt with the Swiss along these lines; they were in contract
with eachother; but had left it at that. Quoting a spread of 2%, he
thought, indicated that they were trying to prevent us from trading
here in Swiss francs.
LWK:KMC
Regraded Unclassifie
1034 S-48
78
FEDERAL RESERVE BANK
OF NEW YORK
FFICE CORRESPONDENCE
DATE October 22, 1936.
CONFIDENTIAL FILER
SUBJECT: TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF FRANCE.
I called Mr. Cariguel at 11:55 and reported briefly as to
market quotations here. I hinted that this morning's erratic franc
market here, when for a time there was no buyer in sight, suggested
the advisability of his giving us their gold prices in time to reach
us here at our opening rather than as at present, afternoon. Cariguel
immediately replied "We deliberately allowed the market to run up be-
cause it is all political and we wanted to give speculators a lesson,
which they now have." I thanked him for this information. Any time
they wanted us to operate for them in the morning here, we were of
course ready to do 30. I inquired whether last night's purchase of
francs had been in line with his intentions and explained that, in
my opinion, we had acted in accordance with the purpose of the ar-
rangement. Cariguel replied that that was absolutely correct.
LWK:KMC
79
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, paris, France
DATE: October 22, 1936, 2 p.m.
NO.: 1034
FROM COCHRAN.
I refer to telegram No. 421 of October 21, 5 p.m.,
from the Department.
figures for
The/price of gold for Swiss buying and selling
are correct as given in my telegram No.1021 of October 20,
11 a.m.
At the time I discussed the matter of 8. declaration
with the three Swiss National Bank officers, I gave them
an idea of our day to day working arrangements with London
and Paris for fixing gold price in their respective curren-
cies. These officers told me that in lieu of arriving at
a day to day rate the Swiss preferred to quote definite
prices for buying and selling gold against their currency.
The rates set are subject to change. of course, a wider
difference exists between these prices now that the Swiss
are no longer on the gold standard than there was when
the gold weight was legally fixed for the Swiss franc under
the former bystem. I understand that as stabilization
the
of/currency progresses, the Swiss will seek to compress
this spread.
Today I received a letter from Bachmann, dated Octo-
ber 21, stating that on the twenty-third the Swise Fed-
eral
80
- 2 -
eral Council would pass upon the question of the Swiss
declaration, and that on Tuesday, October 27, the Board
of General Managers of the Swiss National Bank would submit
the question for approval to their board of delegates.
BULLITT.
EA:LWW
81
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: October 32, 1936, 5 p.m.
NO.: 1035
FROM COCHRAN.
Paris exchange market witnessed a wild day with
most currencies fluctuating over one per cent against
the franc. Dollar for instance opened at 21.50; moved
to 21.74 and then was brought back to 21.51. French
control intervened when rate thus soared against franc
and brought them down very effectively through giving
sterling and dollar and taking francs. My market contact
says French control also operated in forward market
reducing discount from 1-13/16 to 1-3/16 for three months.
Pessimism of yesterday and today with respect to franc
attributed generally to political reasons such as pos-
sibility of Little Entente states following Belgium's
neutrality example and uncertainty of Radical Socialists
convention convened today at Biarrits.
This evening I had a telephone conversation with
Cariguel. He had personally supervised the control opm
erations today on the market. It was his opinion that
domestic politics had given the speculators courage to
try to bear the franc down, and his success in cheoking
this move pleased him.
Statement of Bank of France as of October 16 showed
no change in golá holdings; advances against gold up
113,000,000, franos; 30-day advances down 300,000,000;
no change in state items; discounts down 760,000,000;
82
- 2 -
circulation down 407,000,000; deposits down 771,000,000;
coverage 64.15 versus 63.38.
Press today carries evidently officially inspired
denial of rumors that coming financial and budgetary pro-
prosals of French Treasury will contain provisions for
taxes or levies on capital.
Under city note, LONDON TIMES today says in part
smoothly but the Dutch and Swiss rates are still under-
going the readjustment process caused by the devaluation.
These exchanges now show a greater independence of the
French franc than was the case before the gold bloc
dissolved; this independence is of course due to the
better condition of their financing. The tend of the
French franc yesterday again attracted chief attention
in the foreign exchange market and its weakness was ea-
pecially shown in the forward rate. This cannot be
attributed to politics alone; until the awkward budget
corner has been turned, and there are signs of a def-
inite improvement in economic conditions in France, the
return of confidence is bound to be slow."
BULLITT.
EA:LWW
83
October 22, 1936
At 5:15 o'clock, the Secretary had the following
group in his office: Mr. Haas, Mr. Bell, Mr. Upham,
Mr. Taylor, Mr. Oliphant, Mr. Lochhead, Dr. √Feis, Dr.
Goldenweiser and Dr. Williams. They were present to
discuss the action to be taken on the requests of Belgium
and Switzerland to join the tri-partite agreement.
Mr. Taylor expressed the opinion of the group
which had been discussing the matter. He said, "The
first point is, does extending this facility to Belgium
open up very large or serious opportunities for specula-
tion on the part of others using Belgium as the medium?
We don't think 80. Second, having to do with the de-
sire to put a limitation on the amount of operations
from day to day, as far as Belgium goes, such as the
$10, ,000,000 figure which you suggested. We also don't
think 80, The third point, which is the important one
having to do with this question of Belgium having a
central bank rather than a stabilization point and the
completeness -- completeness is the proper word -- of
the undertaking of the Belgian Governments; in other
words, are they actually the principal or is the central
bank the principal, was the subject of great discussion
and I think you had better turn that point over to
Mr. Oliphant."
The Secretary's comment was, "If you don't mind,
that point hits me the least. What I would like to do --
Prof. Williams can't stay here more than a day." Dr.
Williams answered, "Yes, I have classes." The Secretary
asked him, "Have you classes on Monday?" He answered,
"Yes. Perhaps I could do something about them, but I
have classes on Monday."
HM, Jr. then said, "What I want to know -- the thing
I want to get out of you people, especially Dr. Williams,
and should I say 'our guests', is this point: what are
the pros and cons for our putting Belgium on the October
13th basis and cancelling everything, withdrawing every-
thing, that we have issued prior to that for anybody to
sell them gold. That's the point in which I am most
interested. To me the rest of the stuff we can sort
of do in our own shop, but that is the important thing,
84
-2-
because when we cross that we are crossing a very 1m-
portant bridge, in my opinion. Would each of you talk?
Dr. Williams, will you please speak first?"
Dr. Williams said, "I think it is desirable to
do that?" HM,Jr. said, "You do." Dr. Williams said,
"Yes. I see no objection." HM, Jr. asked him, "You
feel that's all right?" Dr. Williams answered, "Yes."
The Secretary then asked Dr. Goldenweiser for
his opinion and he said, "I feel the name way. I feel
in the whole set-up, with the Belgian price being fixed
and it not being in any position for that reason to have
any undestrable fluctuations, I think it is B. very good
thing to do, to say that we are going to admit each
country on its merits without any blanket authority.
Now we are admitting Belgium on such conditions as are
mutually satisfactory and we will admit any other countries
on conditions that are mutually satisfactory. I think
it 18 a good thing to do." The Secretary asked, "you
do?" Dr. Goldenweiser answered, "Yes, sir."
Dr. Williams added, "My reservation would be, I
would favor a somewhat definite arrangement with the
Belgians from the one you now have with the French and
British, but on the question you raised, I certainly am
in agreement." The Secretary remarked, "I will come
back to you in a minute, if I may, but I would like to
get this one point that bothers me the most."
He then asked Dr. Feis for his opinion. Dr.
Feis said, "I agree." Turning to Dr. Williams, the
Secretary asked him to continue his remarks. Dr. Williams
said, "As to the difference, it seems to me it 18 desirable
to have an understanding with the Belgian Government, but
that arrangement would not need to bother the French or
British altogether. There are some differences in the
situation. They are offering us not a fluctuating price
of gold, but a fixed price of gold. As I see it, there
would not be much, and perhaps not any, occasion for
operations in their exchange, It's more like the old
gold standard; in fact, it 18 Just like that. It can
be terminated at the end of 24 hours and that, as I under-
stand it, there would be no private commercial dealings
in gold. In other words, it is not an equalization fund
operation, but more B. gold standard operation and for
85
-3-
that reason I would think that, provided you had &
clear understanding with the Belgian Government that
they enter into the agreement of October 13th in all
its respects, I think it would be unnecessary to in-
eist upon setting up a Treasury fund for operations
because, as I see It, there would be no operations.
I think you could 80 along more or less with their
suggestion that the Bank of Belgium undertake to buy
and sell gold."
The Secretary said to Dr. Williams, "May I put
it this way? As Cochran describes the situation in
his cable, you feel that we can accept 1t?" Dr. Williams
answered, "I would think SO, It may be that you would
want to strengthen the understanding that it 1s an under-
taking between Governments. I personally feel it is
strong enough, but it may be desirable to make it stronger.
If it starts off by saying, 'The Belgium Government de-
clares and certifies that the central bank will do thus
and 80', in my mind I add to that the fact that the Bank
of Belgium has no authority to put an embargo on gold or
change the price of gold. Those are governmental func-
tions and that being so, I cannot see that we need any
strengthening of the agreement. But perhaps I am wrong
about that. I don't see, though, that there is any 00-
casion for insisting on Treasury operations from their
end as the operations would be really the old-fashioned
one of buying and selling gold at fixed points."
The Secretary then asked Dr. Williams, "How do
you feel as to Switzerland?" He replied, "I feel the
same way. They propose to do it there through a stabil-
isstion fund. I think that 1s a matter for them to
decide. If they want that fund, I take it that it
means that they are not certain in their mind what the
exchange is going to be finally; what the price of gold
18 going to be finally. I note that they say in their
most recent telegram that they propose to offer us a
fixed price of gold. I should say that that was ac-
ceptable and that the method of carrying it out, whether
through the bank or the stabilization fund, 16 in such
case & detail; in any case, a domestic question for them."
"I see, the Secretary commented. "Anything you
want to add?" Dr. Williams answered, "I do want to make
it clear that in the case of England, France and the
86
United States that there is a very valid reason for
insisting on a stabilization fund for Treasury opera-
tions, because there you are dealing with a new thing.
You are dealing with a fluctuating price of gold and
contemplating operations in the exchange."
"As I see the picture, the Secretary said, "we
are not bringing into the partnership as a full partner
either Belgium or Switzerland. We are Just offering
them the facilities. We have three partners and it's
B. closed partnership for the moment. We are simply
offering these people the facilities which if we don't
offer they will get in Paris and London and it Just
shuts New York out of that world market." Dr. Williams
added, "And it may raise some awkward questions in the
public mind." HM,Jr. then said, "It might be favoring
these people too much, but I have no intention of bring-
ing them into full partnership." Dr. Williams remarked,
"And if we reject them, it may raise some awkward prob-
lems."
The Secretary asked Dr. Goldenweiser if he wished
to add anything and he said, "I have nothing to add be-
cause I agree entirely on that. There are plenty of
arguments, but I don't think they are necessary at this
time."
When the Secretary asked Dr. Feis, "Have you said
enough on this," the answer was, "I rather was of the
opinion that the commitment of the Belgium Government
needed greater precision and greater fullness and you
indicate an alternative attitude, that 18, that it would
not be a full partnership relation. The object of what
I had in mind had been to make sure that the obligations
resting on the Belgians were no different in order to
make it a full partnership relation. If it 18 viewed
in another way and decided that is the way to do, then
I would come back with even more certainty to the idea
of the daily limit. I wouldn't even put It as high as
$10,000,000. I would put it as low as $5,000,000 which
would certainly represent the full total of legitimate
demands between Belgium and the United States because I
am not sure -- I would like to listen to full discussion,
though I doubt whether it would be conclusive now -- as
to the possibilities of operating through Belgium, for
example, on the pound sterling rate. I think I could
take time and work out some hypothetical situations in
87
-5-
which it might be done, especially if the Belgian au-
thoeirites are not committed as fully to the whole
undertaking as the other partners BO they would not
feel the same sense of responsibility."
Mr. Morgenthau then asked Dr. Feis, "May I ask
you a question. As the representative of the State
Department, do you think if I let this go over until
Monday I am injuring anybody?" Dr. Feis' answer was,
"Certainly not; certainly the other wayaround."
The Secretary said to Dr. Feis, "Would you mind
getting off a cable to Cochran that due to pressure of
business we find that we will not be able to give this
matter of Belgium and Switzerland full consideration
until Monday, or something like that." Mr. Lochhead
suggested, "I would like to say the early part of the
week," Mr. Oliphant agreed, saying "That's good."
Mr. Morgenthau said, "Yes; instead of saying Monday.
The combination of doing my speech and two for the
President has put everybody through the key-hole and
I think this is too important."
Mr. Lochhead remarked, "Wednesday is Dr. Williams'
free day." Dr. Williams said, "That's a very small
point, but I am free on Wednesday and Thursday." The
Secretary then said to Dr. Williams, "You are invited
here for Wednesday. I have other things than this which
I have not had time to talk about. I would be delighted
to have you. All right; I think that's all. I am tre-
mendously obliged to all of you for your patience and
consideration.'
88
200
October 22, 1936
The President told me to tell Joe Murphy to go
over and try to make his peace with J. Edgar Hoover,
the President evidently having in mind to appoint
Joe Murphy as nead of the Secret Service.
I told the President that I had given my word to
Homer Cummings that Murphy would go to the Pacific
Coast and that he, the President, would have to make
peace with Cummings. The President reiterated to me
that Murphy should see Hoover.
I spoke to Murphy this morning and explained to
him what the President's wishes were about his making
up with Hoover and he flatly refused to do it. He
said, "Hoover and his men can never explain why they
shot Green in the back and if and when Senator McKellar
calls on me for an explanation I am going to give him
the facts just as I know them il
I told Murphy that the only suggestion I had was
that after election he have a talk with the President.
89
October 22, 1936
11 a.m.
I know what the President's plans are after
election. I do not want to be here alone.
I
want Jack Garner to be here. I mentioned it to
the President, but he is 80 bush he did not pay
much attention. When the President leaves here
on November 11, I think that Garner should be here.
90
October 23, 1936.
9:53 A. M.
Operator:
Go ahead.
H.M.Jr:
Hello?
Marriner
Eccles:
Hello.
H.M.Jr:
Hello, Marriner?
E:
Yes.
H.M.Jr:
Henry talking.
E:
How are you this morning?
H.M.Jr:
Oh, pretty well. What do you think of the
Government bond market?
E:
Well, I - well, just what do you mean? You mean -
H.M.Jr:
Well, I mean what - what is the way it's been
acting the last couple days?
E:
Well, it's - you can't expect it to always be
exactly steady or to be going up. It's - I don't
think it has - it hasn't shown enough weakness,
do you think, to be - to be important? I know
there's been a good deal of talk among bankers
for some time ever since the stabilization agree-
ment has been made. They've anticipated, of course,
that there'd be some gold go out.
H.M.Jr:
Uh huh.
E:
The psychology of gold going out, of course, would
be to reduce excess reserves and I think it's
purely a psychological reaction.
H.M.Jr:
Is the open market committee doing anything at all
the last day or two?
E:
I don't think SO.
H.M.Jr:
Uh huh.
E:
George is away.
H.M.Jr:
Uh huh; well -
91
- 2 -
E:
George - George is out in - he went over to Kansas
City and then he's going down to Dallas.
H.M.Jr:
George who?
E:
George Harrison.
H.M.Jr:
Oh. Well, when he goes away the bond market falls,
something happens - is that it?
E:
that. (Laughs) No, I wouldn't say that, I wouldn't say
H.M.Jr:
Yes.
E:
We've - he'll be - - we've got a meeting called for
next Friday.
H.M.Jr:
Well, supposing the bond market continues to fall
four or five thirty-seconds every day for next week.
E:
Well, we'd get - we'd get in touch with you and see
what you wanted done.
H.M.Jr:
Oh, I see. Well, I was just curious.
E:
Well, you wouldn't want us to go ahead and support
a market without getting in touch with you, would
you?
H.M.Jr:
Oh, I - no - I - - I - I'd be delighted to talk it
over, but I just wondered what the Board - what the
Board thought of this Government bond market the
last couple days, that's all.
E:
We - what we'd like to do as far as the Reserve
System is concerned is - is increase very substan-
tially our long term holdings.
H.M.Jr:
Yes.
E:
Well, we've we've got a resolution giving the
Executive Committee -
H.M.Jr:
Yes.
E:
- of the Open Market Committee -
H.M.Jr:
Yes,
92
- 3 -
E:
- our support as a Board - wouldn't - wouldn't
take any action on it because it's of course up
to the Open Market Committee.
H.M.Jr:
Yes. But George is away.
E:
What is it?
H.M.Jr:
(Laughs) But George is away.
E:
Oh well, George is - he went - he simply went
over to Kansas City a couple of days ago.
H.M.Jr:
I see.
E:
Of course, the - the - whenever there's ever -
whenever there's been any - any market that you've
been concerned about, you've usually called up
and said something about it.
H.M.Jr:
No -
E:
And I've felt that -
H.M.Jr:
No, no, I've never done that in my life.
E:
Haven't you?
H.M.Jr:
No, no, we've always taken care of the Government
bond market ever since November 19, 1933, without
anybody's help. I never had any help and I never
asked for any help.
E:
Well, of course, the - the market -
H.M.Jr:
I don't -
E:
- the market has shown as much weakness before
as it's shown in the last two or three -
H.M.Jr:
I never called up anybody since I've been here.
E:
Well, I talked to you about it, then.
H.M.Jr:
That's perfectly possible, but I've never called
up and asked for help.
E:
Well, do you - what do you think about it? Do you
think -
93
- 4 -
H.M.Jr:
Oh, well, we're - we're doing what we always do.
We - we're taking care of it. We took care of
it yesterday, we took care of it the day before,
we'll take care of it today, and we take care of
it right straight along. That's the whole point,
and that's just the point that I want to make.
E:
Well, we've - we've got an order to buy up to -
that is, an authority that the
Committee
gave to the - the the Executive Committee to buy
up to five hundred million of long term bonds;
that is, a shift from short to long.
H.M.Jr:
Yes.
E:
And we have had an understanding with Burgess on
it that we would attempt to pick up those long
term bonds so as not to put the market up at times
when the market showed weakness. Now, they've been -
been buying a few long terms. I don't know what
they've done the last few days. But I know here
a while ago while I was away they picked up a few
when the market showed some weakness.
H.M.Jr:
Well, I - I just wanted to register that - what
we're doing - and -
E:
Well -
H.M.Jr:
- and that we - that when - when the things are
critical, the Treasury -
E:
You can -
H.M.Jr:
- takes care of the bond market.
E:
Yes; well, you can - you can figure that so far
as we're concerned - at least, so far as I'm
concerned -
H.M.Jr:
Yes.
E:
- that we're - we'll be - we want to cooperate,
we want to support the market; in fact, we want to
get a lot of long term Governments.
H.M.Jr:
Yes, but just let me register this, Marriner.
We're still doing the operating, see?
- 5 -
94
E:
You what?
H.M.Jr:
We're still doing the operating.
E:
Well, do you want us to do it?
H.M.Jr:
No, but I just want to register, see, with you -
E:
Now, do you mean you're dissatisfied with what
we're doing?
H.M.Jr:
No, no, I - it's - it's no different than it's
been any time since November 133. See? - as
far as we're concerned. And I just want to
register that with you.
E:
Well (laughs) I - I figured from what you said
this morning that you feel that we probably haven't
done what we should do to cooperate.
H.M.Jr:
No, no - I mean - I'm just registering this today.
When I see you next Tuesday, I'll talk to you more
about it, see?
E:
Well - but I'm - here's the -
H.M.Jr:
I mean we've had a weak bond market, the Treasury
steps in on a second's notice and buys for our
account; we have money. You're frank enough to say
you don't know what they've done up there.
E:
No -
H.M.Jr:
Well -
E:
- but they -
H.M.Jr:
You don't even know what your own Open Market Com-
mittee has done, but you do want to know hourly
what the stabilization fund does. And I just want
to register that.
E:
Well -
H.M.Jr:
I know what you people have been doing, because I've
got to keep track of it. And the point is, that I've
- 6 -
95
said before and I'm going to say it now - I want
cooperation, I'm going to give cooperation, but
up to now and up to ten o'clock today, we still
do all the operating. Now just think it over
and when we see too -
E:
Well, if - if - you - you've known of course my
attitude with reference to supporting the
market. You've known -
H.M.Jr:
Yes.
K:
- that we wanted to increase our holdings in long
term government bonds. At the time when we
increased reserve requirements you - I understand
that you made the statement that We had taken
that action and were not - and George Harrison
had said that he knew nothing at all about whether
we had don anything to support the long - to
support the government bond market. That's the
morning that we announced the increase in reserve
requirements. Well now, that isn't true, because
I talked to George Harrison the night before and
had a very definite understanding with both Harrison
and with Burgess that they would buy government bonds
the next morning; so that when you talked to Harrison
on the phone and you said - as I understand it,
Harrison said to you that he didn't know anything
about it.
I.V.Jr:
Yes.
B:
Is that correct?
H.M.Jr:
As I understand it, as I said it, when I talked to
George at five minutes of ten that morning, he
said that he had no understanding and didn't know
what to 'do, wanted to know what we were going to
do and talk it over; he was very nervous and very
excited.
E:
Well, the next time George comes down I think I
better bring - I - -
H.M.Jr:
Uh, well -
E:
George tells you one thing and he tells me another.
96
- 7 -
H.M.Jr:
Well, we can - the three of us can meet.
E:
Huh?
H.M.Jr:
The three of us can meet.
E:
That's what he does.
H.M.Jr:
Well, anyhow -
E:
Of course, I under--
H.M.Jr:
I just wanted to say - I just thought you'd like
to know that we are taking the bonds as the bonds
are dropping and we're - we took four million
dollars yesterday, and it's a very weak market,
and we're the only governmental agency that is
supporting it.
E:
Well, I'll get - I'll - I'll call Burgess and
see what he's doing for the - for the System
account, and if he isn't doing anything why he
isn't.
H.M.Jr:
Yes; well, I know -
E:
This -
H.M.Jr:
We - we've got ample funds; we can take care -
E:
Well, I know, but we've - we've been wanting to
increase our holdings -
H.M.Jr:
The whole thing -
E:
- for the government for months.
H.M.Jr:
But here's the whole point. Here's your own Open
Market Committee and I don't - what you say -
nobody on the Board, including yourself, knows
what they're doing in the government bond market,
but you do want to know hourly what we're doing in
the Stabilization Committee.
E:
No we don't.
H.M.Jr:
Oh yes.
97
to I I
E:
No, that -
H.M.Jr:
Oh yes.
B:
No, that isn't right.
H.M.Jr:
Oh yes, and -
E:
It isn't a question of knowing hourly, and it
isn't a question of - you take on the operation
of the market, we get a report on - on what bonds
they've bought, what bonds they've shifted.
H.M.Jr:
Yes.
E:
We don't get it every day because we didn't figure
that there was any - that we figured that Burgess
would call up if there was any situation there that
required action. Now, Burgess didn't call yesterday
and apparently he should have called.
H.M.Jr:
I don't know; I don't know. As far as Burgess is
concerned, the Treasury does a swell job for him.
We have no complaint.
R:
Well, you - you apparently feel that we - I mean
we haven't done what we should have done.
H.M.Jr:
No, I just feel that conditions are just the way
they've always been. The Treasury has to be on
the firing line and it is on the firing line, and
we've got an operating job here, and we're doing -
M
Well, if the Treasury wants to drop completely out,
we'll take care of the market.
H.M.Jr:
(Laughs) Well, if it did it'd be the last thing -
E:
Well, I've - I've - I've -
H.M.Jr:
It would be the first time since November 133
that we have.
E:
I've given you that assurance time and again that
we were to take some of the increased reserve
requirements when the market went down.
H.M.Jr:
Yes.
98
- 9 -
E:
We would have taken all the bonds but you said
you wanted half of them.
H.M.Jr:
Oh no - no, no, n-n-no. That's incorrect.
E:
Huh?
H.M.Jr:
No, no, n-n-n-no. That's incorrect.
E:
We split the bonds that were purchased during
that period.
H.M.Jr:
True, because George Harrison and I came to that
understanding at Tive minutes of ten on that
morning.
E:
Yes, that's right.
H.M.Jr:
Yes.
E:
But we would have been glad to take all the bonds,
and as I understand it you wanted to - to - you
had some trust funds to invest and you wanted
half of them. You -
H.M.Jr:
If George -
E:
That's what George - that's what George Harrison
reported.
H.M.Jr:
Well, you and George and I better talk that over
the next time he's -
E:
Well, we certainly had, because George has certainly
put me in the wrong light with you.
H.M.Jr:
Yes. Well, let's the three of us sit down and
talk it over.
E:
Yes.
H.M.Jr:
And - then I'll see you next Tuesday.
E:
Well, all right then.
H.M.Jr:
Thank you.
99
October 23, 1936
At 11 o'clock today, Mr. Bewley came in and Mr.
Taylor received him in his office, the Secretary having
left for New York to give his address this evening before
the Business Men's Club, Lochhead was present with
Mr. Taylor and Mr. Bewley,
Mr. Taylor told Mr. Bewley that partly in deference
to the French request for delay in making the announce-
ment here until they have been able to make similar con-
tacts, and partly on account of pressure of business
here, we did not expect to do anything, one way or the
other, about the Belgian and Swiss requests until early
next week or, preferably, sometime next week.
Mr. Bewley then said, "Well, I do not have very
much. In the first place, the Chancellor wanted to
thank the Secretary for the information he had given
him and as regards Switzerland he did not want to offer
any observations at all. He had already said he wel-
comed extension to other countries and has nothing
further to say in regard to Switzerland.
As regards Belgium, while he recognizes that the
decision is entirely one, on this matter, for the
Americans, as Mr. Morgenthau was kind enough to ask
for his reactions he would like to say that he does
not, himself, think that the existence of a stabiliza-
tion fund ought to be treated as 8. necessary condition
for mutual cooperation. It does not seem to him to
be an essential condition, but he feels if the arrange-
ment with Belgium 1s to be really reciprocal it does
go further than the other arrangements in that it seems
to require the conversion into gold of dollar balances
which the National Bank of Belgium might hold at any
time over here, whatever the state of exchange might
be, and that is a bigger thing, really, than merely
to turn into gold balances held. It seems to go a
step further. But he merely points that out, He
does not wish to make any comment in fact and he wouldn't
even point it out only Mr. Morgenthau was good enough to
ask for his reactions.
"That's the gist of the telegram. And I take it
he would like to have the thing go through with Belgium,
but he was Just pointing it out.
100
-2-
Mr. Lochhead's comment was, "I was interested
in that angle, because just because Belgium 1s on
that straight gold standard, one way or the other,
that would necessarily mean they could transfer
balances regardless of the market, I think we
would try to put them on the same basis even though
they don't have a stabilization fund. That wouldn't
bar them out. On the other hand, they could operate
without a stabilization fund on practically the same
basis as the others -- In other words, day to day oper-
ations."
Mr. Taylor said, "We don't think the existence
or non-existence of a stabilization fund 1a important."
Bewley remarked, "We are both agreed on that then."
Taylor added, "Also, the Belgian case as such 13 not
necessarily important, except that it 1s a slightly
different model and for that reason we are giving It
B. whole lot of discussion." Bewley said, "Quite. I
don't think the Chancellor's remarks add very much."
Mr. Taylor then said, "We appreciate them very much.
It is an excellent point and one we would naturally
in our own conclusions, naturally will give full con-
sideration to." Bewley said, "Yes, quite. I think
that covers the contents of this message."
Mr. Lochhead then said to Mr. Bewley, "You would
be interested in the spread of two points. The Swiss
verified those figures and said that their intention
was that they would be more inclined to keep a steady
gold rate with wider spread rather than vary their
currency. That was their idea, though they did say
that the gold rate would be subject to change. In
other words, it was meant to be somewhat steady but
would be subject to change and, secondly, they did
this because they changed from the old gold standard
to this and it would be their idea, in time, to com-
press the spread as they went along." Mr. Bewley
said, "I see."
Continuing, Mr. Lochhead said, "Since that time
I have checked with the Federal Reserve and they agree
with me that it is a little bit out of line no matter
what the explanation. It allows them to work in other
markets on a narrower spread than you could operate in
their market. We know the Swiss are very good exchange
operators, That was not an accident. That calculated
that pretty carefully.
"Incidentally," he added, "the Federal Reserve in
Regraded Unclassifier
101
-3-
talking with the Bank of England, back and forth, asked
if they had done anything with Switzerland and I think
Bolton over there expressed the opinion that you could
do a fair amount of talking, but it's hard to get to-
gether with Switzerland on operations. I am just
passing that along as general gossip to you."
Mr. Bewley's comment was, "Yes, I don't imagine
that our control fund would work with Switzerland un-
1688 at the request of the Swise, because after all we
want to work on the dollar and franc as far as keeping
the pound steady. In point of view of the exchange
fund, there would be no reason to work on the Swiss."
Mr. Lochnead remarked, "It would allow Switzerland
to join in the general agreement and tend to greater
stability all around and close up another avenue and
I think the Swiss are inclined to take advantage of the
London open gold market." Bewley said, "I should
imagine 80."
Mr. Taylor then said, "We think that general desire
for stability and cooperation on the part of these other
nations 1s the thing to be most desired. Bewley's
reply was, "I think we all agree on that. Continuing,
Mr. Taylor said, "So the form of cooperation, as long
as they will indicate their general feelins, 1e not
tremendously important." Bewley answered, "No, I
think that's right."
To Mr. Bewley, Mr. Taylor said, "If you will please
thank the Chancellor on behalf of the Treasury: for his
cooperation." Mr. Lochhead jestingly remarked, "I
think they have a code word for that."
IN
Ke
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
DATE October 23, 1936.
TO CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L. W. Knoke
FROM
BANK OF FRANCE.
Mr. Cariguel called at 11:50 to say that, as a result of
yesterday's operations, his account 8 would be overdrawn tomorrow in
the neighborhood of $170,000. This overdraft should be covered
through the sale of gold. I asked whether he would give us instruc-
tions and he said he would.
Cariguel then reported briefly about today's market. They
had done half of yesterday's turnover; so far they had sold £1,000,000.
As the market looked at the moment, they might be able to buy some of
this sterling back. I asked whether we could do anything for him here
and he replied that he would cable us in a few minutes.
LWK:KMC
Regraded Inclassifie
GOLD STOCK UP I 738 000 DLS
WASHN -
OCT 23 1936 10:00
ADD GOLD STOCK
10°
WASHN - TREASURY-S GOLD STOCK INCREASED BY
I 738 000 DLS ON OCT 21 RISING TO A TOTAL
OF II 008 069 576 DLS
103
WCNS34
GOLD IMPORTS FOR THE WEEK ENDED OCT. 16 FELL TO $53,574,685
FROM $124,938,717 THE PRECEDING WEEK, THE DEPARTMENT OF COMMERCE
REPORTS.
SILVER IMPORTS FOR THE WEEK TOTALLED $1,028,774 AS AGAINST
$1,619,159 THE PREVIOUS WEEK. EXPORTS OF BOTH METALS WERE NEGLIGIBLE.
10/23--R1045A
104
LONDON FOREIGN EXCHANGE MARKET WAS QUIETE
FRENCH FRANCS WERE OFFERED AT 105 I-4 IN THE
EARLY DEALINGS BUT FOLLOWING SUPPORT BY THE
FRENCH STABILIZATION FUND THE RATE RECOVERED
TO 105 5-32 BUT THE TURNOVER WAS SMALL- OTHER
CURRENCIES WERE STEADY- DISCOUNT ON THREE
MONTHS PARIS IMPROVED AT I 3-8 FRANCS AND
AMSTERDAM 8 3-4 DUTCH CENTS- DISCOUNT ON ONE
MONTH PARIS WAS 1-2 FRANC AND AMSTERDAM 3 1-2
DUTCH CENTS
8.40
,
SUBSTANTIALLY EASIER CONDITIONS HAVE
DEVELOPED IN MONEY MARKET IN AMSTERDAM ACCORDING
TO LOCAL PRIVATE CABLE ADVICES- PRIVATE
DISCOUNT RATE HAS BEEN LOWERED TO I 7-8 PC FROM
2 5-8 PC PREVAILING EARLIER IN THE MONTH WHILE
BUYING RATE ON PRIME GUILDER ACCEPTANCES
IS DOWN TO 2 PC AS AGAINST 2 3-4 PC EARLIER IN
THE MONTH
105
281936 13QURIOL
ON FRENCH BUDGET
2,44
PARIS - VINCENT AURIOL MINISTER OF FINANCE
IN AN INTERVIEW WITH L-INTRANSIGEANT DECLARED
THAT ASSERTIONS THAT THE 1936 AND 1937 BUDGET
DEFICITS WILL TOTAL 25 AND 33 BILLIONS ARE
EXAGGERATED
-ALONGSIDE NORMAL EXPENDITURES AGAINST
WHICH I SHALL PUT ACTUAL REVENUES THERE ARE
IMPORTANT DEPARTMENTS LIKE ARMAMENTS WHICH I
HAVE THE RIGHT TO COVER BY LOANS- MR AURIOL
SAID
-THE GOVERNMENT CONTINUES TO BELIEVE IN
ABSORBING UNEMPLOYMENT AND STIMULATING NATION-
AL ACTIVITIES - IT IS WORKING EFFECTIVELY FOR
REDUCTION OF THE DEFICIT WHICH SHOULD NOT
ALARM EITHER THE BOURSE OR THE EXCHANGES-
IT IS COMMONLY UNDERSTOOD THAT IT IS
PROPOSED TO INTRODUCE BOTH ORDINARY AND EX-
TRAORDINARY BUDGETS FOLLOWING THE EXAMPLE
SET BY MARCEL REGNIER AND URGED BY JOSEPH
CAILLAUX
PERSISTENT RUMORS THAT THE EGYPTIAN POUND
WILL BREAK ITS TIE WITH STERLING DESPITE OFFI-
CIAL DENIALS WERE REPORTED ACCOMPANIED BY
HEAVY EXPORTS OF CAPITAL - ACCORDING TO A
L-INTRANSIGEANT DISPATCH FROM CAIRO EXCHANGE
OF STERLING AGAINST THE EGYPTIAN POUND HAS
BECOME IMPRACTICABLE AND SAVINGS BANKS ARE
LOSING DEPOSITS
107
108
TREASURY DEPARTMENT
Washington
FOR RELEASE UPON DELIVERY.
Press Service
10-23-36.
No. 8-74
Address of the Secretary of the Treasury
to be delivered at the Business Men's
Dinner under the auspices of the Good
Neighbor League at the Waldorf-Astoria
Hotel in New York, Friday evening,
October 23, 1936.
I am here to report to you, the stockholders of America, about the
financial management of your great corporation, the United States Government.
What I shall say looks more to the future than to the past, because I believe
it is in the future that you are particularly interested.
Since President Roosevelt took office in March, 1933, manufacturing employ-
ment has risen 50 per cent; manufacturing payrolls have doubled; prices paid to
farmers have more than doubled; the market price of corporate bonds has risen
50 per cent.
The Federal Reserve Board index of industrial production is, I think, the
most comprehensive measure of business activity that we have. It stood at 59
in March, 1933. Today it is approximately 109.
These facts speak for themselves. They are confirmed by the first-hand
experience of every man and woman in the range of my voice. They represent the
combined efforts of the whole Nation --- efforts which were made effective by the
financial policies adopted and carried out by this Administration.
Just what were those policies?
First, we brought the value of our currency into a more satisfactory
relation with the currencies of other countries. By that step we stopped a
disastrous deflation in the United States and brought about an immediate and
still growing revival in our foreign trade. We broke the shackles that were
Regraded Unclassifie
109
a I I
dragging us down. Thirty nations had preceded us in readjusting their curren-
cles: virtually all the rest have followed us.
The soundness and stability of the American dollar are now recognized
throughout the world. That didn't just happen. It is the result of monetary
policies that have been carefully formulated and executed,
In the past month a new step has been taken. Great Britain and France have
joined with us in a common effort to maintain equilibrium in international
exchange. We hope that this cooperation will provide the basis for freeing
international trade from excessive restrictions. We believe it is a real centri-
bution to the cause of international peace. The three nations agree, of course,
that each must, as a first consideration, safeguard its own internal prosperity.
The second major element in our fiscal policies was our decision to pro-
vide safety for bank depositors, protection for farms end homes, jobs for the
unemployed, and relief for the needy, at a time when no other agency in this
country, public or private, was equal to the task.
We restored the buying power of our people.
As the President has so aptly said, we made an investment in the future of
America. It has rebuilt both human and material values. It is now paying large
dividends to every man, woman, and child in the United States.
But some people ask: Could we afford this investment? The answer is:
We couldn't afford not to make it. The future of our country, of our democratic
form of Government, and the lives and well-being of 125 million persons were at
stake.
Others ask: How are we going to pay for it? The fact is, it is being
paid for out of the dividends of recovery. This brings me to the third and
final major financial policy of this Administration - taxation.
Regraded Unclassifi
110
- 3 -
It would have been popular among certain groups of our population to have
raised additional revenues by new excise and sales taxes taxes that would
have fallen most heavily on those least able to pay.
That did we do? First, we borrowed to meet the emergency. Later, when
incomes were growing larger as a result of recovery, we revised the tax system
so as to make it fully adequate to meet the future reverue needs of the Federal
Government. We did this by providing taxes based upon the democratic principle
of ability to pay primarily income and estate taxes. Through the Revenue Acts
of 1934, 1935 and 1936, we lowered the effective rates of taxation on small
individual incomes and on small corporation incomes, but we raised and made more
fully effective the rates of income tax on those best able to pay them.
Our revenue receipts have not yet shown the full effect of these tax changes.
The bulk of collections under the 1935 and the 1936 Revenue Acts will begin to
como in next year. But our increased receipts already show the effects of
business recovery and the great improvement in our tax structure.
Total revenues of the Federal Government have increased substantially in
every year of the present Administration. In the fiscal year ended last June, our
revenues werenearly twice as large as they were in 1933; and, during the
present fiscal year, we count on a further increase of more than one-third.
These facts reveal how groundless are the fears, voiced for campaign
purposes, of the soundness of our fiscal position.
Regraded Unclassifi
111
- 4 -
We have so improved and strengthened the Federal tax structure that
it is providing additional revenues easily sufficient to insure an early
balancing of the budget and thereafter a rapid reduction in the public
debt.
Some persons who, to put it mildly, are not too friendly to this Adminis-
tration, are loudly and frequently asserting that our policies will bring
inflation, and endanger the value of savings bank accounts, life insurance
policies, and other forms of savings,
The facts I have cited, as to the continued and rapid increase of our
revenues, furnish a complete answer to these fears.
If there was anything further needed to clinch the fact that there is
no such danger, it was supplied this year by the President and the Congress.
In January the President in his budget message told Congross that any ex-
penditures added to the budget and any loss of revenues must be financed
by taxes. In June Congress, carrying out the President's recommendations,
provided the supplementary revenues.
It took both courage and statesmanship on the part of the President and
of the Democratic Congress to enact an important piece of revenue legislation
less than five months before R. national election, but it constituted your
final assurance that the fiscal policies of this Administration are and will
continue to be sound.
Four years ago great financial structures ware collapsing and values
of all kinds were disappearing. It was then that life insurance policies
and the people's savings and investments were in danger. They are not in
danger now. The man who says they are is just four years bohind the times.
112
- 5 -
You still hear nicrophone opinions to the effect that our dollar is not
snfo. But the proof of men's real opinions is to be found in the way they
act.
Invustment bankers give to you their real opinions when they offer for
subscription and recommend to their customers 25-year, 35-year, and even
60-year bonds, bearing interest rates of 3½ per cent or even less. Conmercial
and savings benkers give you their real opinion by their actions in buying
these bonds.
What do investors think of the safety of the dollar? Their actions
show what they think. They are buying good-quality, long-term, low interest
bonds, and other high-grade securities.
They are paying 105 today for the snne 3 per cent Government bond that
sold below 83 in 1932.
What do foreignors think about the safety of the American dollar? They
are not influenced by sentiment. They can keep their noney at home, if they
like. Instend, they have been sending it over here to buy participation in
American recovery. Since January, 1935, foreigners have increased their
holdings of American sccurities by more than 700 million dollars.
Today, in every field of finance where the real opinion of bankers,
businessmon, and investors is tested by their actions, we find then proving
their confidence in our future in the only way in which confidence can
really be proved: By laying town their money on the barrel head!
Bole people are broadcasting America short; no one is fool enough to
sell America short.
--000--
6- Hoes drep#!
113
October 23, 1936.
DRAFT SPEECH FOR SECRETARY MORGENTHAU
I am going to talk to you this evening about the fiscal
policies of this Administration, of their results, and of
the present fiscal outlook of the United States. I am going
to do this because I am particularly anxious to correct and
clear up a number of misleading or erroneous statements,
inspired by partisan motives, that have been made in these
connections.
In March 1933, when this Administration took office, the
most inclusive measure of business activity that we have --
the Federal Reserve Board index of industrial production -
was only 59 percent of the 1923-1925 average. Today, it is
approximately 105 percent of that average.
During this Administration, manufacturing employment
has increased by more than 50 percent and manufacturing
pay rolls have more than doubled.
Prices received by farmers at the farms have more
than doubled.
The Dow-Jones index of the prices of industrial
stocks has more than tripled.
The average market rate of interest on all long-term
United States bonds has declined by 30 percent.
The aggregate volume of bank deposits in the member
banks of the Federal Reserve System has increased by about
ten billion dollars.
Regraded Unclassif e
114
- 2 -
These figures, ladies and gentlemen, speak for themselves.
They are in large part the results of the fiscal policies adopted
and carried out by this Administration. Some people would have
you believe that the only result of our fiscal policies has
been an increase in the public debt. The figures that I have
just recited and the first-hand personal knowledge of every indi-
vidual within range of my voice prove the contrary.
Now, what, briefly, have been the major fiscal policies
that have contributed so significantly to the rising tide of
business recovery that this country is now enjoying? There are
three of them: our monetary policy, our spending policy, and our
taxation policy.
First, we brought an immediate stop to the vicious spiral
of deflation in the United States, and an immediate and still
growing revival in our foreign trade, by bringing the domestic
and international value of our currency into alignment with the
currencies of other countries. In doing this, we broke the
shackles that were dragging us down. Thirty nations had preceded
us in breaking away from the old gold standard; virtually all the
rest have followed us.
In consequence, the United States today enjoys a currency
that is backed by greater reserves of gold and silver than are
possessed by any other nation on earth.
Regraded Unclassif e
115
- 3 -
The soundness and stability of the American dollar,
achieved as a result of carefully planned and carefully
executed monetary policies, are now recognized throughout
the world. Just in the past month, Great Britain and France
have decided to join with us in a gentleman's agreement with
of
the object/ achieving a lasting monetary equilibrium. Barring
unforseen developments, which are always possible in the
present international situation, and for which we must of
necessity, like other countries, retain a free hand, this
agreement may prove the basis for a liberation of international
trade from the artificial restraints arising out of monetary
maladjustments.
The second major element in our fiscal policies was our
decision to provide jobs to the unemployed, relief to the
destitute, and financial strength to our banks, railroads, and
insurance companies at a time when no other agency in this
country, public, or private, was willing to put up the necessary
funds.
Some people have called this "priming the pump of recovery."
Other people have called it waste and unsound finance. Still
other people, while agreeing with the program in general, have
disputed over its details. Nobody, however, can doubt, in the
face of the tremendous results in both human and material terms,
that the investment that we were willing to make in the future of
America has proved a most successful investment, and one that is
now paying large dividends to every man, woman, and child in the
United States.
Regraded Unclass
116
- 14 -
But could we afford this investment? And how are we going
to pay for it? are the questions that some people ask.
The answer to the first of these questions I have already
given to you. It could be stated otherwise in these terms:
We could not afford not to underteke these expenditures. The
future of our country, of our democratic form of government,
and the lives and well-being of 125 million persons were at
stake.
The enswer to the second of these questions -- how are we
going to pay -- brings us to our third and final major fiscal
policy - taxation.
There are some persons who are going about the country on
partisan missions, making speeches in which they imply or
actually assert that the fiscal policies of this Administration
have endangered the value of savings bank accounts, life insur-
ance policies, and other forms of savings. They would have you
ignore entirely the effects of the outstanding improvements in
the Federal tax structure, in both fairness and adequacy, that
have been enacted during this Administration; improvements that
insure an early balancing of the budget and a rapid reduction in
the public debt.
It would have been easy and it might have been popular for
this Administration to have resorted to inflationary devices
rather than direct borrowing to meet the temporary deficits;
117
- 5 -
and it would have been easy and it might have been popular to
postpone until a. later date the enactment of additional tax
legislation to increase the Federal revenues. It also would have
been popular among certain favored groups of our population to
have raised additional revenues by new excise and sales taxes
that would have been paid by the masses of our people.
What did we do in these respects? We decided to make ade-
quate, intelligent, and fair provision for the increased revenue
requirements of the Federal Government, by taxes based upon the
principle of ability to pay - -- by income and estate taxes
primarily. Through the Revenue Acts of 1934, 1935, and 1936,
we lowered the effective rates of taxation on small individual
incomes and on small corporation incomes, but we raised and made
more fully effective the rates of income tax on those best able
to pay them.
Through these measures, we not only insured that Federal
revenues would very shortly be fully sufficient to meet all
needs, but we also insured that our people would not pay in-
creased taxes until their incomes -- that means their ability
to pay had increased.
The effects of these tax measures have not yet been fully
reflected in the revenue receipts of the Federal Government,
because of the normal delay of one to two fiscal years in the
receipts of such taxes. Nevertheless, the figures already
Regraded Unclass
118
- 6 -
available afford striking proof of the enormous improvement
that has taken place in the strength of our revenue structure,
and they should lay permanently to rest the ridiculous fears,
voiced for campaign purposes, respecting the soundness of our
fiscal position.
These figures show that the total revenues of the Federal
Government have increased substantially in every year of the
present Administration. In the fiscal year ended last June 30th,
our total revenues were nearly twice as large as they were in
the fiscal year 1933: and during the present fiscal year, we
count on a further increase of more than one-third over the
revenue receipts of the previous fiscal year. In the budget
estimates for the fiscal year that will begin next July, and
which will be submitted by the President to the Congress next
January, I expect that our estimate for total revenue receipts,
without the imposition of any new taxes, will approximate seven
billion dollars. Our expenditures, on the other hand, will have
passed their peak and will be declining.
In the light of this prodigious and continuing improvement
in the revenues of the Federal Government, the fear that continued
budget deficits will produce an inflation of our currency is a
fear that looks silly for any but political purposes. The time
when savings bank accounts and insurance policies were really in
danger was back in the dark days of 1932, when gold was leaving
Regraded Unclassif
119
- 7 -
this country on every outgoing ship; when 90 percent of the
aggregate amount of Government bonds was selling below par:
when the property values and the incomes of this country were
going down day by day. THAT WAS THE TIME TO FEAR INFLATION.
If any of you had any remaining doubte about the sound-
ness of our monetary and fiscal policies, these doubts
should have been definitely and finally laid away by the action
of the President on March 3, 1936.
You will remember that almost at the very moment that
the budget message of January 3, 1936 was transmitted to the
Congress, the Supreme Court invalidated the Agricultural Adjust-
ment Act. Shortly thereafter, the Congress enacted the Soil
Conservation and Domestic Allotment Act, designed to carry on
the major activities that had been started under the AAA, but
lacking the revenue provisions of that Act. In addition, the
Congress voted for the prepayment of the Veterans' Bonus.
These events tore a big hole in the revenue estimates
upon which the President's budget message was based.
In this situation, there was a need for rare courage
and high statesmanship.
The President had both.
It was an election year. You know the kind of political
advice that was given to the President. "Why take the political
risk of imposing new taxes in an election year?"
120
- 8 -
The President, however, again proved his high statesman-
ship. He realized thoroughly that the continuation of a sound
recovery, and the maintenance of a sound currency required a
tax structure that would balance the budget in the near future.
The President's tax message of March 3. 1936 was the result.
The courage and statesmanship of the President in trans-
mitting this message, and the courage and statesmanship of the
Democratic Congress, in enacting an important piece of revenue
legislation just six months before a national election, con-
stituted your final assurance that the fiscal policies of this
Administration are and will continue to be sound. You still
hear campaign opinions to the effect that our dollar is not
safe. But the proof of men's real opinions is to be found in
the way they act.
And, what is the opinion of American bankers, investors,
salary and wage earners, and finally of foreigners about the
safety of the American dollar?
The opinion of our great investment bankers has been given
to you every day in the financial columns of the newspapers
throughout the past year, when they have offered for subscription
Regraded Unclass fie
121
- 9 -
and recommended to their customers 20, 30, and even longer-
term corporation bonds, bearing interest rates of 3½ percent
or 34 percent, or even less. The opinions of the commercial
and savings bankers have been given to you by their actions
in purchasing these bonds, as well as United States Government
bonds, for their own portfolios at the prices offered.
What do investors think of the safety of the dollar?
Their actions show what they think. They are buying all the
good-quality, long-term, low interest bonds that are being
offered to them.
They are paying 105 today for the same 3 percent Govern-
ment bond that sold below 83 in 1932. They are paying 105 for
the same bond of the Pennsylvania Railroad, not due until 1970,
that was sold below 33$ on the dollar in 1932.
What do our salary and wage earners and other purchasers
of life insurance policies think of the safety of the dollar?
Back in 1932, many of them were so afraid for the safety of
the dollar that they borrowed to the hilt on their life insurance
policies and withdrew savings from banks for hoarding. Today,
policy loans are being rapidly reduced, the hoarding of cur-
rency has virtually disappeared; and the sales of new life
insurance policies are again at prosperity levels.
Regraded Unclassit
122
- 10 -
What do foreigners think about the safety of the
American dollar? They have no sentiment of American
patriotism to influence them. Many of them can keep their
money in gold if they like. Instead, they have been sending
it over here to be invested in the bonds of the United States.
Government and the stocks and bonds of American corporations.
Today, in every field of finance where the real opinion
of the most astute bankers, businessmen, and investors, is
tested every day by their actions, we find the whole world
proving its confidence in our currency in the only way in
which that confidence can really be proved: By laying down
money on the barrel head.
8/36
Uncla
Has draft
123
DRAFT SPEECH FOR SECRETARY MORGENTHAU
I am going to talk to you this evening about the fiscal
policies of this Administration, of their results, and of
the present fiscal outlook of the United States. I am going
to do this because I am particularly anxious to correct and
clear up a number of misleading or erroneous statements,
inspired by partisan motives, that have been made in these
connections.
In March 1933, when this Administration took office, the
most inclusive measure of business activity that we have -
the Federal Reserve Board index of industrial production -
was only 59 percent of the 1923-1925 average. Today, it is
approximately 105 percent of that average.
During this Administration, manufacturing employment has
increased by more than 50 percent and manufacturing payrolls
have more than doubled.
Prices received by farmers at the farms have more than
doubled.
The Dow-Jones index of the prices of industrial stocks
has more than tripled.
The average market rate of interest on all long-term United
States bonds has declined by 30 percent.
The aggregate volume of bank deposits in the member banks
of the Federal Reserve System has increased by about ten billion
dollars.
Regraded Unclassif
124
- 2 -
These figures, ladies and gentlemen, speak for themselves.
They are in large part the results of the fiscal policies adopted
and carried out by this Administration. Some people would have
you believe that the only result of our fiscal policies has
been an increase in the public debt. The figures that I have
just recited and the first-hand personal knowledge of every indi-
vidual within range of my voice prove the contrary.
Now, what, briefly, have been the major fiscal policies
that have contributed BO significantly to the rising tide of
business recovery that this country is now enjoying?
First, we brought an immediate stop to the vicious spiral
of deflation in the United States, and an immediate and still
growing revival in our foreign trade, by bringing the domestic
and international value of our currency into alignment with the
currencies of other countries. In doing this, we broke the
shackles that were dragging us down. Thirty nations had preceded
us in breaking away from the old gold standard; virtually all the
rest have followed us.
In consequence, the United States today enjoys & currency
that is backed by greater reserves of gold and silver than are
possessed by any other nation on earth.
125
- 3 -
The soundness and stability of the American dollar,
achieved as a result of carefully planned and carefully
executed monetary policies, are now recognized throughout
the world. Just in the past month, Great Britain and France
have decided to join with us in a gentlemen's agreement with
the object of achieving a lasting monetary equilibrium. Barring
unforeseen developments, which are always possible in the
present international situation, and for which we must of
necessity, like other countries, retain a free hand, this
agreement may prove the basis for a liberation of international
trade from the artificial restraints arising out of monetary
maladjustments.
The second major element in our fiscal policies was our
decision to provide jobs to the unemployed, relief to the
destitute, and financial strength to our banks, railroads, and
insurance companies at a time when no other agency in this
country, public or private, was willing to put up the necessary
funds.
Some people have called this "priming the pump of recovery."
Other people have called it waste and unsound finance. Still
other people, while agreeing with the program in general, have
disputed over its details. Nobody, however, can doubt, in the
face of the tremendous results in both human and material terms,
that the investment that we were willing to make in the future of
America has proved a most successful investment, and one that is
now paying large dividends to every man, woman, and child in the
United States.
Regraded Unclassi
126
- 4 -
But could we afford this investment? And how are we going
to pay for it? are the questions that some people ask,
The answer to the first of these questions I have already
given to you. It could be stated otherwise in these terms:
We could not afford not to undertake these expenditures. The
future of our country, of our democratic form of government,
and the lives and well-being of 125 million persons were at
stake.
The answer to the second of these questions - how are we
-
going to pay brings us to our third and final major fiscal
policy - taxation.
There are some persons who are going about the country on
partisan missions, making speeches in which they imply or
actually assert that the fiscal policies of this Administration
have endangered the value of savings bank accounts, life-insur-
ance policies, and other forms of savings. They would have you
ignore entirely the effects of the outstanding improvements in
the Federal tax structure, in both fairness and adequacy, that
have been enacted during this Administration; improvements that
insure an early balancing of the budget and a rapid reduction in
the public debt.
It would have been easy and it might have been popular for
this Administration to have resorted to inflationary devices
rather than direct borrowing to meet the temporary deficits;
Regraded Unclassi
127
- 5 -
and it would have been easy and it might have been popular to
postpone until a later date the enactment of additional tax
legislation to increase the Federal revenues. It also would have
been popular among certain favored groups of our population to
have raised additional revenues by new excise and sales taxes
that would have been paid by the masses of our people.
What did we do in these respects? We decided to make ade-
quate, intelligent, and fair provision for the increased revenue
requirements of the Federal Government, by taxes based upon the
principle of ability to pay by income and estate taxes
primarily. Through the Revenue Acts of 1934, 1935, and 1936,
we lowered the effective rates of taxation on small individual
incomes and on small corporation incomes, but we raised and made
more fully effective the rates of income tax on those best able
to pay them.
Through these measures, we not only insured that Federal
revenues would very shortly be fully sufficient to meet all
needs, but we also insured that our people would not pay in-
creased taxes until their incomes - that means their ability
to pay -- had increased.
The effects of these tax measures have not yet been fully
reflected in the revenue receipts of the Federal Government,
because of the normal delay of one to two fiscal years in the
receipts of such taxes. Nevertheless, the figures already
128
- 6 -
available afford striking proof of the enormous improvement
that has taken place in the strength of our revenue structure,
and they should lay permanently to rest the ridiculous fears,
voiced for campaign purposes, respecting the soundness of our
fiscal position.
These figures show that the total revenues of the Federal
Government have increased substantially in every year of the
present Administration. In the fiscal year ended last June 30th,
our total revenues were nearly twice as large as they were in
the fiscal year 1933; and during the present fiscal year, we
count on a further increase of more than one-third over the
revenue receipts of the previous fiscal year. In the budget
estimates for the fiscal year that will begin next July, and
which will be submitted by the President to the Congress next
January, I expect that our estimate for total revenue receipts,
without the imposition of any new taxes, will approximate seven
billion dollars. Our expenditures, on the other hand, will be
declining.
In the light of this prodigious and continuing improvement
in the revenues of the Federal Government, the fear that continued
budget deficits will produce an inflation of our currency is a
fear that looks silly for any but political purposes. The time
when savings bank accounts and insurance policies were really in
danger was back in the dark days of 1932, when gold WRS leaving,
129
- 7 -
this country on every outgoing ship; when 90 percent of the
aggregate amount of Government bonds was selling below par;
when the property values and the incomes of this country were
going down day by day. THAT WAS THE TIME TO FEAR INFLATION.
If any of you had any remaining doubts about the sound-
ness of our monetary and fiscal policies, these doubts
should have been definitely and finally laid away by the action
of the President on March 3, 1936.
You will remember that almost at the very moment that
the budget message of January 3. 1936 was transmitted to the
Congress, the Supreme Court invalidated the Agricultural Adjust
ment Act. Shortly thereafter, the Congress enacted the Soil
Conservation and Domestic Allotment Act, designed to carry on
the major activities that had been started under the AAA. but
lacking the revenue provisions of that Act. In addition, the
Congress voted for the prepayment of the Veterans' Bonus.
These events tore a big hole in the revenue estimates
upon which the President's budget message was based.
In this situation, there was a need for rare courage
and high statesmanship.
The President had both.
It was an election year. You know the kind of political
advice that was given to the President. "Why take the political
risk of imposing new taxes in an election year?"
130
- 8 -
The President, however, again proved his high statesman-
ship. He realized thoroughly that the continuation of a sound
recovery, and the maintenance of a sound currency required a
tax structure that would balance the budget in the near future.
The President's tax message of March 3, 1936 was the result.
The courage and statesmanship of the President in trans-
mitting this message, and the courage and statesmanship of the
Democratic Congress in enacting an important piece of revenue
legislation just six months before a national election, con-
stituted your final assurance that the fiscal policies of this
Administration are and will continue to be sound.
You still hear microphone opinions to the effect that our
dollar is not safe. But the proof of men's real opinions is to be
found in the way they act.
The opinion of our great investment bankers has been given
to you every day in the financial columns of the newspapers
throughout the past year, when they have offered for subscription
131
- 9 -
and recommended to their customers 25-year, 50-year, and even
longer-term corporation bonds, bearing interest rates of 3/2
percent or even less. The opinions of the commercial and
savings bankers have been given to you by their actions in
purchasing these bonds, as well as United States Government
bonds, for their own portfolios at the prices offered.
What do investors think of the safety of the dollar?
Their actions show what they think. They are buying all the
good-quality, long-term, low interest bonds that are being
offered to them.
They are paying 105 today for the same 3 percent Govern-
ment bond that sold below 83 in 1932. They are paying 105 for
the same bond of the Pennsylvania Railroad, not due until 1970,
that sold below 33$ on the dollar in 1932.
What do our salary and wage earners and other purchasers
of life insurance policies think of the safety of the dollar?
Back in 1932, many of them were so afraid for the safety of
the dollar that they borrowed to the hilt on their life insurance
policies and withdrew savings from banks for hoarding. Today,
policy loans are being rapidly reduced, and the hoarding of cur-
rency has virtually disappeared.
132
- 10 -
What do foreigners think about the safety of the
American dollar? They have no sentiment of American
patriotism to influence them. Many of them can keep their
money in gold if they like. Instead, they have been sending
it over here to be invested in the bonds of the United States
Government and the stocks and bonds of American corporations.
Today, in every field of finance where the real opinion
of the most astute bankers, businessmen, and investors, is
tested every day by their actions, we find the whole world
proving its confidence in our currency in the only way in
which that confidence can really be proved: By laying down
money on the barrel head.
Hear drapt #3.
133
DRAFT SPESCH FOR SEGRETARY MORGETHAU
I as going to talk to you tonight about the fiscal and senetary
policies of this Administration and what they seen to you for the
future.
Pres Rosevelt
Than time idministration took office in March 1933. the nest
inclusive measure of business activity that 190 have - the Federal
Recerve Board index of industrial production - was only 59 percent
of the 1923-1985 average. Today, it is approximately 106 percent
of that average.
During this Administration, annufacturing employment has increased
by more than 50 percent and manufacturing payrolls have more than
doubled.
Prices received by farmers at the ferms have 2020 than doubled.
The Dow-Jones index of the prices of industrial stocks has nore
than tripled.
The average maricet rate of interest on all long-term United
States bonds has declined by 30 percent. 95
The aggregate volume of bank deposits in all banks in the United
States has increased by more than thirteen billion dollars, or by
about one-third.
These figures, ladies and gentlemen, specir for themselves. They
represent the combined efforts of the whole Nation, and these efforts
were made effective in large part by the fiscel policies adopted and
enroled out by this Administration. Some people would have you
134
- 2 -
believe that the only result of our finant policies has been an
increase in the public debt. the figures that 1 have just resited
and the first-hand personal knowledge of every Individual within range
of ny voice provide eloquent testimony to the contrary.
Now, what, briefly, have been the mejor fiscal policies, that
have contributed no significantly to the rising tide of business
recovery that this country is now enjoying?
First, we brought an imediate stop to the vicious spiral of
deflation in the United States, and an insediate and still growing
revival in our foreign trade, by bringing the domestic and inter-
national value of 0112 currency into alignment with the currencies
of other countries. In doing this, we broke the sheckles that were
dragging us down. Whirty nations had preceded us in breaking away
from the old gold standard; virtually all the rest have followed us.
The United States today enjoye 6. currency that 10 backed by
aw
greater receives of gold and silver than are possessed by any other
nation on earth.
The soundness and stability of the American dollar, achieved
as a result of carefully executed monetary policies, are now
recognized throughout the world. Down Just in the past month, Great
Britein and France have joined with us In 8. gentlemen's agreement
with the object of achieving nonetary equilibrium, ench nation in
its policy toward international monetary relations taking into full
135
- 3 -
account the requirements of internal prosperity. fe hope that this
agreement will provide the basis for & liberation of international
trade from artificial restraints. need the
The second major element in our fiscal policies was our decidion
to provide Jobs to the unemployed, relief to the destitute, and finan-
sial strength to our banks, reilroads, and Insurance compentes -- at a
time when no other agency in this country. public or private, was
willing to put up the necessary funds.
To made on investment in the future of America. It has had
anormous results in both human and material values. It is now paying
large dividends to every man, woman, and child in the United States.
Yet some people have called this waste and unsourd finance.
Some people nake Could 98 afford this investment? The nnswer 1es
Ne could not efford not to undertske these expenditures. The future
of our country, of our democratic form of government, and the lives
and well-being of 125 million persons were at stake.
Others askt Now are we going to pay for this investment? This
brings no to the third and final major fiecel policy of this Adminis-
tration - texation.
It would have been easy and 11 night have been popular for this
Administration to have resorted to inflationary devices rather than
direct borrowing to neet the temporary deficite: and it would have
been easy and it might have been popular to postpone until A later
136
- 4
date the enactment of additional tax legislation to increase the
Federal revenues. It also would have been popular nmong certain
favored groups of our population to have raised additional revenues
by new excise and sales taxes that would have been paid by the
masses of our people,
What did ne do in these respects? We decided to moke adequate,
Intelligent, and fair provision for the increased revenue requirements
democrate
of the Federal Government, by taxes based upon the principle of
ability to pay - by income and estate taxes primarily. Through the
Revenue Acts of 1934, 1935, and 1936, we lowered the effective rates
of taxation on small individual incomes and on small corporation incomes,
but we raised and made more fully effective the rates of Income tax on
those best able to pay them.
Through these measures, we not only insured that Federal revenues
would very shortly be fully sufficient to neet all needs, but - also
insured that no head of & funily with en earned income of less than
$26,000 would DAY more in taxes. His incone - that means his ability
to pay -- had increased.
The effects of these tax measures have not yet been fully reflected
in the revenue receipts of the Federal Government, because of the normal
delay of one to swo fincal years 1a the receipts of such taxes. Never-
rx
theless. the figures already available afford striking proof of the
enormous improvement that has taken place in the strength of our revenue
structure, they should lay permanently to rest the ridioulous fears,
voiced for compaign purposes, respecting the soundness of our fiscal
position.
137
- 5 -
These figures show that the total revenues of the Federal Gevern-
nant have increased substantially in every year of the present Admini -
tration. In the fiscal year ended last June 30th, our total revenues
1820 nearly twice as large as they were in the fiscal year 19331 mL
during the present fincal year. 198 count on R further increase of more
than one-third over the revenue receipts of the previous fiscal year.
In the budget estimates for the fiscal year that will begin next July,
and which will be submitted by the President to the Congress next
January, I expect that our estimate for total revenue receipts. without
the imposition of any new taxes, will approximate seven billion dollare.
Our expenditures. on the other hand, will be declining.
I understand that BOSIS persons who are mt too friendly to this
Administration are loudly and frequently secerting that the budgetary
deficits of this Administration have endangered the value of savings
bank accounts. life insurance policies. and other forms of savings.
They not only disregard the fact that these deficits were investments in
recovery which are already producing their dividends. but that, in addi-
tion. 10 have to improved the Federal tax structure that 19 is providing
additional revenues ensily sufficient to insure a early belancing of
the budget and therenfter 8 rapid reduction in the public debt. I
insist that, thanks to these efforts of the Administration, savings
accounts. life insurance policies, and other forms of eavings. are BOW
more secure than ever before is our country's history.
138
- 6 -
Regraded Unclassified
This prodigious and continuing improvement in the revenues of
the Federal Government sakes the fear expressed by nome that there
would be continued budget deficits a fear that looks silly oven for
the political purposes for which 10 is being raised. The time when
savings bank accounts and insurance policies were really in danger
was in the dark days of 1932 and early in 1933 prior to taking office
by President Recervelt. There ware times in that period when gold vas
leaving this country on every outgoing ship: when 90 percent of the
aggregate amount of Government bonds was selling below par: when the
property values end the income of this country were sinking day by day.
& final demonstration of the determination of this Administration
to pursue a sound fiscal policy was given by the setion of the Presi-
dent on March 3. 1936.
You will remember that almost at the very moment that the budget
message of January 3. 1936 was transmitted to the Congress. the Supreme
Court invelidated the processing taxes under the Agricultural Adjust-
ment Act. Shortly thereafter, the Congress enacted the Soil Conserve-
tion and Donestic Allotment Act, designed to carry on the major
activities that had been started under the Agricultural Adjustment
Act, but lacking the revenue provisions of that Act. In addition. the
Gengress voted for the prepayment of the Veterans' Benus.
These events tore a big hole in the revenue octiuntos upon which
the President's budget neceage me based.
In this situation, there was 6 need for rare courage and high
statemenship.
139
- 7 -
The Precident had both.
It vus an election year. You can guess the kind of political
advice that was given to the President. "Thy take the political risk
of imposing neo taxes in an election year?"
The President was convinced that the continuation of a sound
recovery and the maintenance of 6. sound surrency required a tax
structure that would balance the budget in the near future. The
President's tax message of March 3. 1936 was the result.
The courage and statemenship of the President in transmitting
this message, and of the Democratic Congress in enacting an important
piece of revenue legislation just six months before 8. national election,
constituted your final securence that the fiscal policios of this
Administration are end will continue to be sound.
You still hear microphone opinions to the effect that our dollar
is not enfo. But the proof of men's real opinions is to be found in
the way they act.
Investment bankers give to you every day their real opinions when
they offer for subscription and recomend to their customers 25-year,
50-year, and sven longer-term corporation bonds, bearing interest rates
of 34 percent or even less. Commercial and savings bankers give you
their real opinion by their actions in purchasing these bonds.
what do inventors think of the safety of the dollar? Their
actions show what they think. They are buying good-quality, long-term,
low interest bonds.
140
- 5 -
They are paying 105 today for the ene 3 persent Government
bond that sold below 83 in 1932.
What do foreigners think about the safety of the American dollar!
They have no sentiment of American patriotism to influence them. They
can keep their money in gold if they like. Instend, they have been
sending it over here to be invested in the bonds of the United States
Government and the stocks and bonde of American corporations. In 1935.
foreigners purchased more than one billion dollars of American securi-
tiest and in 1936 these purchases have continued unabated.
Today, in every field of finance where the real opinion of
bankers, businessmen, and investors is tested every day by their
notions, no find the whole world proving its confidence in our future
in the only my in which that confidence can really be proved: By
laying down money on the barrel head! Some are broadcasting America
short, but none are fools enough actually to sell it short.
Regraded Unclassifie
141
DRAFT SPECE FOR SECRETARY
Tenight, I AB going to talk to you about the fiscal and monstary
policies of this Administration and what they mean to you for the
future.
Pres. Roosevelt
When bide Administration took office in March 1933. the neet
inclusive acceure of business activity that se have - the Paderal
Reserve Board index of industrial production - the only 59 persent
of the 1923-1925 average. Today. 1t to approximately 106 percent
of that average.
During this Administration, assufacturing exployment has increased
by more than 50 percent and masufacturing paymells have nore then
doubled.
Prices received by furners at the farms have more than doubled.
The Dow-Jones Index of the prices of industrial stooks has more
than tripled.
The average surket rate of interest on all long-term United
States bonds has deglined by 30 percent.
the estimate volume of bank deposits in all basics 1a the United
States has increased by more United thirteen billion dollars or w
about one-thirl.
These figures, Indies and gentlemen, speek for themeelves. They
regresent the combined efforts of the whole Sution, [4n offorte which
were mês effective is large part w the finant policies adopted and
carried out by this Administration. Bone people would have you
Regraded Unclassifie
142
- 2 -
believe that the only rewalt of OUR flood policies has been an
increase in the public dobt, the figures that I have Just restted
and the first-home personal knowledge of every individual within range
of Ry voice provide eloquent testinony to the contract.
Now, what, briefly, have been the mejor fineal policies, Sixe
have contributed 93 significantly to the rising tide of business
recovery that this country is now enjoying?
First, we brought an imediate stop to the victous optimal of
deflation in the United States, and as invediate and still growing
revivel in our foreign trade, by bringing the desectic and inter-
national value of our currency into alignment with the currencies
of other countries. In doing this, we broke the shadities that were
dragging us down. Thirty nations had preseded the to breaking may
from the old wild standards virtually all the rest have followed M.
The United States today enjoye a currency that 1s begind w
greater receive of grin and filver than are passessed by any other
nation on earth.
The avandness and stability of the American dollar, achieved
as 6 result of carefully essented monetory policies, are now
recognised throughout the world. Just in the past month, Great
Dritain end Prance have joined with or 1a a gentlemen's agreement
with the object of achieving nonetary equilibrium, each nation in
its policy toward international monetary relations taking into full
Regraded Unclassifie
143
- 3 -
account the requirements of internal prosperity. Ye hope that tide
agreement will provide the basis for & liberation of international
trade from crificial restraints.
The second major element In our fineal policies me our desision
to provide jobs to the unemployed, relief to the destitute, and finan-
cial strength to our banks, railroads, and insurance companies - at a
time when no other agency in this country, public or private, was
willing to put w the necessary funds.
Se made an investment in the future of America. It has had
enorooms results in both human and material values. It 10 non paying
large dividends to every mon, voltan, and child in the United States.
Tet some people have called this waste and unsound finance.
Same people asks Could 99 afford this investment The is
9a could not afford not to undertake these expenditures. The fature
of our country, of our democratic form of government, and the Vives
and well-being of 125 million persons were at stake.
Others asks Now are to going to you for this investment? This
brings no to the third and final major fincal policy of this Adminis-
tration - taxation.
It would have been only and it might have been popular for this
Administration to have resorted to inflationary devices rather than
direct borrowing to neet the temporary deficite: and it would have
been may and it might have been popular to postpons until a later
144
- 2
date the enactment of additional to legislation to increase the
Federal revenues. It also would have been popular mong certain
fevered groups of our poyulation to have refeed additional revenue
to DEW excise and anles texas that would have been poid by the
nances of our people.
what ase 80 do 10 these respects? Ye decided to nate adequate,
Intelligent, and fair provision for the increased reverms requirements
of the Federal Government. by taxes based upon the principles of
ability to A - m Income and estate taxes prinarily. Through the
Revenue Acts of 1934, 1935. and 1936. se lowered the affective miss
of termition on small individual incomes and on smill corporation Incomes.
but ve raised and más more fully effective the rates of tooose tax on
those best able so pay then,
Through there mensures. 16 not only Insured that Federal revermes
would very shortly be fully sufficient to neet all needs, but wa also
insured that no hand of & family with as answed Income of loss than
126,000 would you more in taxes. Mo Ingone - that needs his ability
to pay - MM increased.
The effects of these tax sequires have not yet been fully reflected
in the recents receipts of the Federal Government, become of the normal
delay of one to two final years in the receipts of mash taxes. Hower
thelese, the figures already swallable afford striking proof of the
inprovement that has taken place in the strength of our revenue
structure, and they should lar permanently to rest the ridioulous fears.
volued for purposes, respecting the coundnoss of our flocal
position.
145
- 5 -
These figures show that the total revenues of the Federal Govern-
neat have increased substantially in may year of the present Adminis-
tration. In the fiscal year ended last June 30th, our total revenues
ware nearly twice AS large at they were in the fiscal year 1933; and
during the present fiscal year. ve crunt on 6 further increase of mrs
than one-third over the revenue receipts of the previous fiscal year.
In the budget estimates for the fiscal year that will begin next July,
and which will be missitted by the President to the Congress next
Jenuary, 1 expect that our estimate for total revenue receipts, without
the imposition of my new taxes, will approximate seven billion dollars.
Our expenditures. on the other hand. will be declining.
: understand that some persons who are not too friendly to this
Administration are loudly and frequently asserting that the budgetary
deficits of this Administration have endangered the value of savings
bank accrunts. life insurance policies. and other forms of sevings.
They not only dieregard the frot that those deficits were investments in
recevery which are already producing their dividends. but that, in edds-
tion, vs have as improved the Federal tax structure that 11 is providing
additional revenues onsily sufficient to insure 92 early balancing of
the budget and thereafter a rapid reduction in the public dobt.
1-1
insist that thanks to those efforts of the Administration. servings
accounts, life insurance policies. and other forms of envings. are now
more secure than over before in our country's biotory.
believe
146
- 6 -
This prodigious ml continuing improvement in the revenues of
the Federal dovernment makes the fear expressed by - that there
would to contimed budget deficits a fear that looks willy even for
the political purposes for which 11 10 being roleed. The time when
savings bank accounts and insurance policies DUTO really in danger
was in the dark dagre of 1932 and early in 1933 prior to taking office
by President Knosevelt. There vere times in that parted when gold vas
leaving this country on every outgoing ship: when 90 percent of the
aggregate amount of Government bonts was selling below part when the
proporty values and the income of this country were sinking day w day.
& final demonstretion of the determination of this Administration
to pursue a arund fiscal policy was given by the action of the Presi-
dent on March 3. 1936.
You will rember that almost at the very must that the budget
message of January 3. 1936 vas transmitted to the Congress. the Supreme
Court invelidated the processing taxes under the Agricultural Adjust-
nent 100. Shortly thereafter. the Congress ennoted the not1 conserve-
tion and Domestic Allotment not, designed to carry on the major
activities that had been started under the Agricultural Adjustment
Act, but lacking the revenue provisions of that Lot. In addition. the
Gangress voted for the prepagnant of the Veterans' Remue.
These events tore a big hole in the revenue estimates upon which
the President's budget message valid based.
In this situation. there was - need for rare overage at high
statemenship.
147
- 7 -
The President had both.
It was an election year. You can guess the kind of political
advice that was given to the President. "Why take the political risk
of imposing new taxes in an election year!"
The President was convinced that the continuation of a sound
recevery and the maintenance of A sound currency required a tax
structure that would balance the budget in the near future. The
Provident's tax message of March 3. 1936 was the result.
The courage and statesmanship of the President in transmitting
this message, and of the Democratic Congress in enacting an important
piece of revenue legislation just six months before a national election,
constituted your final assurance that the fiscal policies of this
Administration are and will continue to be sound.
You still hear microphone opinions to the effect that our dollar
is not safe. that the proof of men's real opinions is to be found in
the way they act.
Investment bankers give to you every day their real opinions when
they offer for subscription and recomend to their customers 25-year,
50-year, and even longer-tere corporation bonds, bearing interest rates
of 30 percent or even less. Commercial and savings bankers give you
their real opinion by their nctions in purchasing these bonds.
What do investors think of the safety of the doller? Their
actions show what they thank. They are buying good-quality. long-term,
low interest bonds.
148
- to -
They are paying 105 today for the same 3 percent Government
bond that sold below 83 in 1932.
What do foreigners think about the safety of the American dollar?
They have no sentiment of American patriotism to influence them. They
can keep their money in gold If they like. Instead, they have been
sending it over here to be invested in the bonds of the United States
Government and the stocks and bonds of American corporations. In 1935,
foreigners purchased more than one billion dollars of American securi-
ties; and in 1936 these purchases have continued unabated.
Today, in every field of finance where the real opinion of
bankers, businessmen, and investors is tested every day by their
actions, we find the whole world proving its confidence in our future
in the only may in which that confidence can really be proved: By
laying down money on the barrel head! Some are broadcasting America
short, but none are fools enough actually to sell it short.
149
October 23, 1936.
I am here to report to you, the stockholders of
America, about the financial management of your great
corporation, the United States Government. What I shall
say looks more to the future than to the past, because I
believe it is in the future that you are particularly
interested.
Regraded Unclassifie
150
Since President Roosevelt took office in March,
1933, manufacturing employment has risen 50 per cent;
manufacturing payrolls have doubled; prices paid to
farmers have more than doubled; the market price of cor-
porate bonds has risen 50 per cent.
The Federal Reserve Board index of industrial
production is, I think, the most comprehensive measure
of business activity that we have. It stood at 59 in
March, 1933. Today it is approximately 109.
These facts speak for themselves. They are con-
firmed by the first-hand experience of every man and
woman in the range of my voice. They represent the
combined efforts of the whole Nation -- efforts which
were made effective by the financial policies adopted
and carried out by this Administration.
151
- 2 -
Pause
Just what were those policies?
First, we brought the value of our currency into
a more satisfactory relation with the currencies of other
countries. By that step we stopped 8. disastrous deflation
in the United States and brought about an immediate and
still growing revival in our foreign trade. We broke
the shackles that were dragging us down. Thirty nations
had preceded us in readjusting their currencies; virtually
all the rest have followed us.
The soundness and stability of the American dollar
are now recognized throughout the world. That didn't
just happen. It is the result of monetary policies that
carefully
have been carefully formulated and executed.
^
107
1073
Regraded Unclassifi
152
- 3 -
In the past month a new step has been taken.
Great Britain and France have joined with us in a common
effort to maintain equilibrium in international exchange.
We hope that this cooperation will provide the basis for
freeing international trade from excessive restrictions.
We believe it is a real contribution to the cause of
international peace. The three nations agree, of course,
that each must, as a first consideration, safeguard its
own internal prosperity.
ruse
The second major element in air fiscal policies
was our decision to provide safety for bank depositors,
protection for farms and homes, jobs for the unemployed,
and relief for the needy, at a time when no other agency
in this country, public or private, was equal to the
task.
/
/
Pause
We restored the buying power of our people.
132
941
153
- 4 -
As the President has so aptly said, we made an
investment in the future of America. It has rebuilt
both human and material values. It is now paying large
dividends to every man, woman, and child in the United
States.
Pause
But some people ask: Could we afford this in-
vestment? The answer is: We couldn't afford not to
make it. The future of our country, of our democratic
form of Government, and the lives and well-being of 125
million persons were at stake.
Others ask: How are we going to pay for it?
The fact is, it is being paid for out of the dividends of
recovery. This brings me to the third and final major
financial policy of this Administration - -- taxation.
816
Regraded Unclassifie
154
- 5 -
It would have been popular among certain groups
of our population to have raised additional revenues by
new excise and sales taxes -- taxes that would have
fallen most heavily on those least able to pay.
Pause What did we do? First, we borrowed to meet the
emergency. Later, when incomes were growing larger as
a result of recovery, we revised the tax system 30 as to
make it fully adequate to meet the future revenue needs
of the Federal Government. We did this by providing taxes
based upon the democratic principle of ability to pay --
primarily income and estate taxes. Through the Revenue
Acts of 1934, 1935, and 1936, we lowered the effective
rates of taxation on small individual incomes and on small
corporation incomes, but we raised and made more fully
effective the rates of income tax on those best able to
pay them.
665
Regraded Unclassifi
155
- 6 -
Our revenue receipts have not yet shown the full
effect of these tax changes. The bulk of collections
under the 1935 and the 1936 Revenue Acts will begin to
come in next year. But our increased receipts already
show the effects of business recovery and the great
improvement in our tax structure.
Total revenues of the Federal Government have
increased substantially in every year of the present
Administration. In the fiscal year ended last June, our
revenues were nearly twice as large as they were in 1933;
and, during the present fiscal year, we count on a further
increase of more than ne-third.
These facts reveal how groundless are the fears,
voiced for campaign purposes, of the soundness of our
fiscal position.
129
536
156
- 7 -
We have so improved and strengthened the Federal
tax structure that it is providing additional revenues
easily sufficient to insure an early balancing of the
/
budget and thereafter a rapid reduction in the public
debt.
Pause Some persons who, to put it mildly, are not too
friendly to this Administration, are loudly and frequently
asserting that our policies will bring inflation, and
endanger the value of savings bank accounts, life insurance
policies, and other forms of savings.
just
The facts I have cited as to the continued and
rapid increase of our revenues furnish a complete answer
to these fears.
98
438
157
- 8 -
further
If there was anything needed to clinch the fact
such
that there is no danger
,
it was supplied
this year by the President and the Congress. In January
the President in his budget message told Congress that
any expenditures added to the budget and any loss of
revenues must be financed by taxes. In June Congress,
carrying out the President's recommendations, provided
the supplementary revenues.
It took both courage and statesmanship on the part
of the President and of the Democratic Congress to enact
an important piece of revenue legislation less than five
months before a national election, but it constituted
your final assurance that the fiscal policies of this
Administration are and will continue to be sound.
119
319
Regraded Unclassified
158
= 9 -
Paus.
Four years ago great financial structures were
collapsing and values of all kinds were disappearing. It
was then that life insurance policies and the people's
savings and investments were in danger. They are not in
/
danger now. The man who says they are is just four years
behind the times.
You still hear microphone opinions to the effect
that our dollar is not safe. But the proof of men's real
opinions is to be found in the way they act.
Investment bankers give to you their real opinions
when they offer for subscription and recommend to their
customers 25-year, 35-year, and even 60-year bonds,
bearing interest rates of 3) per cent or even less.
Commercial and savings bankers give you their real opinion
by their actions in buying these bonds.
138
181
159
- 10 -
Pause
What do investors think of the safety of the
dollar? Their actions show what they think. They are
buying good-quality, long-term, low interest bonds, and
other high-grade securities.
sery
They are paying 105 today for the same 3 per cent
Government bond that sold below 83 in 1932.
Pause
What do foreigners think about the safety of the
American dollar? They are not influenced by sentiment.
They can keep their money at home, if they like. Instead,
they have been sending it over here to buy participation
in American recovery. Since January, 1935, foreigners
have increased their holdings of American securities by
more than 700 million dollars.
117
64
Regraded
Unclassif
160
- 11 -
Today, in every field of finance where the real
opinion of bankers, businessmen, and investors is tested
by their actions, we find them proving their confidence
in our future in the only way in which confidence can
really be proved: By laying down their money on the
barrel head!
Some people are broadcasting America short; no
one is fool enough to sell America short.
--000--
64
October 23, 1936.
161
I an here to report to you, the stockholders
of America, about the financial management of your
great corporation, the United States Government. What
I shall say looks more to the future than to the past,
because I believe it is in the future that you are
particularly interested.
Regraded 1 Inclassif
162
Since President Roosevelt took office in March,
1933, manufacturing employment has risen 50 per cent;
manufacturing payrolls have doubled; prices paid to
farmers have more than doubled; the market price of
corporate bonds has risen 50 per cent.
The Federal Reserve Board index of industrial
production is, I think, the most comprehensive measure
of business activity that we have. It stood at 59 in
March, 1933. Today it is approximately 109.
These facts speak for themselves. They are con-
firmed by the first-hand experience of every man and
woman in the range of my voice. They represent the
combined efforts of the whole Nation -- efforts which
were made effective by the financial policies adopted
and carried out by this Administration.
- 2 -
Just what were those policies?
First, we brought the value of our currency into
a more satisfactory relation with the currencies of other
countries. By that step we stopped a disastrous deflation
in the United States and brought about an immediate and
still growing revival in our foreign trade. We broke
the shackles that were dragging us down. Thirty nations
had preceded us in readjusting their currencies; virtually
all the rest have followed us.
The soundness and stability of the American dollar
are now recognized throughout the world. That didn't
just happen. It is the result of monetary policies that
have been carefully formulated and executed.
Regraded Unclassifi
163
- 3 -
In the past month a new step has been taken.
Great Britain and France have joined with us in 8 common
effort to maintain equilibrium in international exchange.
lie hope that this cooperation will provide the basis for
freeing international trade from excessive restrictions.
We believe it is a real contribution to the cause of
international peace. The three nations agree, of course,
that each must, as a first consideration, safeguard its
own internal prosperity.
The second major element in our fiscal policies
was our decision to provide safety for bank depositors,
protection for farms and homes, jobs for the unemployed,
and relief for the needy, at a time when no other agency
in this country, public or private, was equal to the
task.
We restored the buying power of our people.
164
- 4 -
As the President has so aptly said, we made an
investment in the future of America. It has rebuilt
both human and material values. It is now paying large
dividends to every man, woman, and child in the United
States.
But some people ask: Could we afford this in-
vestment? The answer is: We couldn't afford not to
make it. The future of our country, of our democratic
form of Government, and the lives and well-being of 125
million persons were at stake.
Others ask: How are we going to pay for it?
The fact is, it is being paid for out of the dividends of
recovery. This brings me to the third and final ma jor
financial policy of this Administration -- taxation.
Regraded Unclassifi
165
- 5 -
It would have been popular among certain groups
of our population to have raised additional revenues by
new excise and sales taxes taxes that would have
fallen most heavily on those least able to pay.
What did we do? First, we borrowed to meet the
emergency. Later, when incomes were growing larger as
a result of recovery, we revised the tax system so as to
make it fully adequate to meet the future revenue needs
of the Federal Government. We did this by providing taxes
based upon the democratic principle of ability to pay --
primarily income and estate taxes. Through the Revenue
Acts of 1934, 1935, and 1936, we lowered the effective
rates of taxation on small individual incomes and on small
corporation incomes, but we raised and made more fully
effective the rates of income tax on those best able to
pay them.
Regraded Unclassifi
166
- 6 -
Our revenue receipts have not yet shown the full
effect of these tax changes. The bulk of collections
under the 1935 and the 1936 Revenue Acts will begin to
come in next year. But our increased receipts already
show the effects of business recovery and the great
improvement in our tax structure.
Total revenues of the Federal Government have
increased substantially in every year of the present
Administration. In the fiscal year ended last June, our
revenues were nearly twice as large as they were in 1933;
and, during the present fiscal year, we count on a further
increase of more than one-third.
These facts reveal how groundless are the fears,
voiced for campaign purposes, of the soundness of our
fiscal position.
Regraded Unclassif
167
- 7 -
We have so improved and strengthened the Federal
tax structure that it is providing additional revenues
easily sufficient to insure an early balancing of the
budget and thereafter a rapid reduction in the public
debt.
Some persons who, to put it mildly, are not too
friendly to this Administration, are loudly and frequently
asserting that our policies will bring inflation, and
endanger the value of savings bank accounts, life insurance
policies, and other forms of savings.
The facts I have oited as to the continued and
rapid increase of our revenues furnish & complete answer
to these fears.
Regraded Unclassifi
168
Simily
-
If there was anything needed to clinch the fact
Such
that there is no danger
1
e,
it was supplied
this year by the President and the Congress. In January
the President in his budget message told Congress that
any expenditures added to the budget and any loss of
revenues must be financed by taxes. In June Congress,
carrying out the President's recommendations, provided
the supplementary revenues.
It took both courage and statesmanship on the part
of the President and of the Democratic Congress to enact
an important piece of revenue legislation less than five
months before a national election, but it constituted
your final assurance that the fiscal policies of this
Administration are and will continue to be sound.
Regraded Unclassifi
169
g
-
-
Four years ago great financial structures were
collapsing and values of all kinds were disappearing. It
was then that life insurance policies and the people's
savings and investments were in danger. They are not in
danger now. The man who says they are is just four years
behind the times.
You still hear microphone opinions to the effect
that our dollar is not safe. But the proof of men's real
opinions is to be found in the way they act.
Investment bankers give to you their real opinions
when they offer for subscription and recommend to their
customers 25-year, 35-year, and even 60-year bonds,
bearing interest rates of 31 per cent or even less.
Commercial and savings bankers give you their real opinion
by their actions in buying these bonds.
Regraded Unclassifi
170
- 100 -
What do investors think of the safety of the
dollar? Their actions show what they think. They are
buying good-quality, long-term, low interest bonds, and
other high-grade securities.
They are paying 105 today for the same 3 per cent
Government bond that sold below 83 in 1932.
What do foreigners think about the safety of the
American dollar? They are not influenced by sentiment.
They can keep their money at home, if they like. Instead,
they have been sending it over here to buy participation
in American recovery. Since January, 1935, foreigners
have increased their holdings of American securities by
more than 700 million dollars.
Regraded Unclassifi
171
-H-
Today, in every field of finance where the real
opinion of bankers, businessmen, and investors is tested
by their actions, we find them proving their confidence
in our future in the only way in which confidence can
really be proved: By laying down their money on the
barrel head!
Some people are broadcasting America short; no
one is fool enough to sell America short.
o0o
Regraded Unclassifi
172
- 8 -
There has been a lot of this loose talk about
inflation. Inflation may mean many things, but to most
the
people it means use of the printing-press method of paying
the Government's bills. This method has been available
to President Roosevelt since the spring of 1933, when the
Congress authorized the issue of three billion dollars in
greenbacks. In spite of the magnitude of the task of
putting America back on its feet, one of the biggest
peace-time tasks any President has ever faced, President
Pause
Roosevelt has not used the printing-press method. I can
assure you that that method will not be used.
There are some who profess to see danger of inflation
are
in our budgetary deficits. Their fears ^ also are groundless.
Regraded Unclassifi
173
TO: FROM: The MR. GASTON'S Senitan OFFICE
10/23/32
MR. GASTON:
Mr. Rose said Mr. Gibbons telephoned
him and asked that you tell the Secretary
that 1100 tickets have been sold for the
dinner up until this morning. They will
probably have a capacity. No more than
1500 can be accommonated. Van
XS 016165
Return to Room 285174
COPY
October 23, 1936
My dear Mr. President:
I am sending you herewith a
copy of the speech which I propose
to give tonight over the radio.
I will telephone you from
New York between 3:30 and 3:45 and
I hope at that time to get your
approval.
Respectfully,
/S/ Henry Morgenthau, Jr.
The President,
The White House.
Regraded Unclassif
175
October 20, 1936
The Secretary addressed the gathering of business
men at the testimonial dinner to the President, arranged
for by the Good Neighbor League, on Friday night, Octo-
ber 23 at the Waldorf Astoria Hotel in New York.
The President was scheduled to arrive back in
Washington on Thursday night, October 22, and HM, Jr.
was to see him Friday morning at 9:15 to get a clearance
on his speech. However, HM, Jr. received word early
Friday morning that the President had arrived after
midnight and could not see him at 9:15, but that he
should send the speech over to Mr. Muir, take en early
train to New York and telephone the President later in
the day. HM, Jr. sent the speech to Mr. Muir with 6.
note that he would call the President between 3:30 and
3:45.
The Secretary, Mrs. Morgenthau and Mrs. Klotz
left Washington on the 11 o'clock train for New York.
Due to heavy traffic from the Pennsylvania Station to
the Hotel, HM,Jr. did not arrive at the hotel until
10 minutes to 4, at which time he telephoned to the
White House. McIntyre came to the 'phone and said
that the President W&S at Cabinet. He did not know
whether the President had read the speech, but said
that he would get word to the President that HM, Jr.
was waiting for a clearance. He wanted to know what
part of the speech HM, Jr. particularly wanted a clear-
ance on and while HM,Jr. did not want to call the
President's attention to page 8, dealing with infla-
tion, but preferred his reading the entire speech,
since McIntyre pressed for this information he felt
he ought to give it to him.
At 4:30, still not having had. any word from
the White House and the time getting short if there
were to be any revisions, HM,Jr. again called the
White House and not being able to get McIntyre on
the 'phone, he spoke to Kannee. Kannee told the
Secretary that they had sent to the President's bed
room for the speech about a half hour ago, but that
the President was working on his own speech and when
he was finished he would read HM,Jr's.
176
-2-
The President called HM, Jr. at 8 minutes to 5. He
said that he definitely did not want HM, Jr. to say any-
thing about inflation and told him to 'kill' page 8. He
said, "Actions speak louder than words If He also said,
"I cannot say that I am not going to use the printing
press method. It would be lots of fun to use it some-
time." The Secretary's reply was, "Well, I wish you
would let me say what I have written on page 8 at this
time, If but the President repeated that he definitely
did not want him to use it.
Page 8, as it was submitted to the President, is
attached hereto.
HM,Jr. was terribly upset over the delay in getting
a clearance from the President. The dinner was scheduled
for 7:30 and he did not get the clearance until 5 and up
to that time he did not know how much the President would
tear the speech apart. The suspense was terrific and
HM, Jr. was under a great strain.
However, he and Mr. Gaston (the latter was at the
hotel when the Secretary arrived and was present throughout
the conversations with the White House) immediately got
busy smoothing out the connection between pages 7 and 8
since page 8 was now out.
Regraded Unclassi
177
October 26, 1936.
10 a.m.
Burgess: Hello
H.M.Jr: How are you?
B:
I just wanted to make sure we understood each other
to-day about what you want us to do.
H.M.Jr: On the bonds?
B:
Yes, that IS right.
H.M.Jr: Well I'd stay right there with the market. I wouldn't
try to put it up but
B:
Yes.
H.M.Jr:
.....I
- I certainly don't want it - I want the orders
under there just about 1/32d under.
B:
Orders 1/32d under, yes.
H.M.Jr: And I'd be fairly aggressive.
B:
Yes.
H.M.Jr = Do you look for any trouble?
B:
No - no everything's all right and there's no real
selling here.
H.M.Jr: Well I'd like to leave it this way - this week I'm
here - if the market at any time has a soft spot
will you call me personally yourself?
B:
Yes - yes.
H.M.Jr: I mean right away.
B:
Yes.
H.M.Jr:
And - ah - hello.
B:
Yep.
H.M.Jr: Ah - I mean if there's any soft spots just let me know.
Regraded Unclassi
178
- 2 -
B:
Yes. Now Marriner - Marriner talked with me after
you talked with him.
H.M.Jr: (Laughter)
B:
(Laughter) I told him you were riding him. (Laughter)
H.M.Jr: What?
B:
I told him you were riding him. (Laughter)
H.M.Jr:
Yea.
B:
(Laughter) But of course if this thing got to the
point where there was any real - real bulk of support
necessary we'd be quite prepared to go in in as he
said.
H.M.Jr: Well he said this - if the market isn't right something
about your letting them know.
B:
That's right, yes.
H.M.Jr: So I said, "listen, don't you worry about Burgess", I
said, "Burgess is taking darn good care of the market
for us".
B:
Yes.
H.M.Jr: And I said, "Don't worry - don't - don't - this isn't
on Burgess".
B:
Yes.
H.M.Jr:
And I said that two or three times.
B:
Good for you.
H.M.Jr:
And I said, "I just wanted to find out what you call the
market and if you've been doing anything".
B:
(Laughter)
H.M.Jr:
And of course he didn't even know that the market was off.
B:
Yes. (Laughter)
Regraded Unclassif
179
3 I I
H.M.Jr: And after all if I just sat here and waited for you
to call me up I might have to wait quite a long time.
B:
That's right we go ahead and do things.
H.M.Jr: What?
B:
We can go ahead and take care of
......
H.M.Jr: No I want to make it perfectly clear I - - I just
wanted to make well I have certain reasons.
B:
Yes I understood it. I thought I understood it
perfectly.
H.M.Jr: And but I made it very plain when he switched and
sort of tried to - wanted to make it as though you
should keep him informed. Well after all he's
Chairman of the Open Market Committee.
B:
Yes.
H.M.Jr: I don't think you're even a member, are you?
B:
No I'm not a member I'm just the hired employee.
H.M.Jr: Pardon me?
B:
I'm the hired man.
H.M.Jr: Well I made it very plain that as far as the Treasury
was concerned and your work there we're more than
pleased.
B:
Yes, well that's fine. I'm glad to hear that.
H.M.Jr: But I also wanted to make the record that when it
comes to supporting the market or - or buying why
we're carrying the ball.
B:
That's right. That's right.
H.M.Jr: We have carried it and I guess we'll have to continue
to carry it.
B:
Well the system - anytime that you feel that we ought
to help why we can work it out you know perfectly well.
H.M.Jr: Well -
180
- 4 -
B:
I think it would confuse things right now though to -
while you've got money that you need to invest.
H.M.Jr: Yes.
B:
And the amounts are small like this.
H.M.Jr: No - I - - I was just making a record that's all.
B:
Yes - surprise ourselves.
H.M.Jr: But - it's - you got that.
B:
Yes, I got it.
H.M.Jr: And I don't know whether Eccles got it or not.
B:
I think he got it. (Laughter)
H.M.Jr: What?
B:
I think he got it, yes.
H.M.Jr: All right Burgess. Well if anything is week
particularly there might be - - people get a little
nervous one way or the other
.....
B:
Yep - yep.
H.M.Jr: ....you call me.
B:
All right we'll be right there under the market.
H.M.Jr:
Thank you.
B:
Very good.
H.M.Jr: Thank you.
B:
Goodbye.
H.M.Jr: Goodbye.
Regraded Unclassi
181
October 26, 1936.
10:25 A.M.
Present: Mr. Taylor
Mr. Gaston
Mr. Upham
Mr. Haas
Mr. White
Mr. Lochhead
E.N.Jr:
This is Belgium and Switzerland. Mr. Oliphant has
got sinus trouble. He says - I'm perfectly
serious - he says, "Mr. Upham is my attorney and
he can represent me."
Upham:
Oliphant said that?
H.M.Jr:
Oliphant said that.
Well now, look. Which one of you fellows? - let's
take Switzerland first. Who's got this thing at
his fingertips? Archie, have you got it at your
fingertips?
Lochhead: Well, Switzerland we haven't discussed in as
great detail as Belgium. But Switzerland has got
a stabilization fund. The question of Switzerland
is a little different than Belgium because they
have that stabilization fund and it isn't just
whether or not you are working with a country
without a stabilization fund.
The second point. They are making up this
declaration and in the cable they mention that it
has to be passed by the Swiss Federation. Now, I
don't know just legally how far, from Mr. Oliphant's
viewpoint, that would cover the question of dealing
with the Government rather than with the Central
Bank.
White:
In any case, it wouldn't be the same thing, because
you are dealing with a stabilization fund which is
owned by the government.
H.M.Jr:
As I understand it - let me see if I understand
this thing. Switzerland says she'll sell us gold
between gold points which vary 2 percent. Is that
2 percent from the mean or 1 percent up from that?
182
- 2 -
Lochhead:
1 percent up from that.
H.M.Jr:
I see. How big a stabilization fund has she
got?
Lochhead:
A stabilization fund only about three - let's
see, I think it gives - 358 it was in the news-
papers. It's 538 million francs resulting from
devaluation to the extent of 35 -
H.M.Jr:
Well now, at the mean how much have they devalued -
Switzerland? If you take the mean -
Lochhead:
At the mean, 30 percent.
H.M.Jr:
That would vary, 1 percent up and 1 percent - ?
Lochhead:
That seems to be their idea.
H.M.Jr:
Does that mean, for instance, that we can buy
between those points?
Lochhead:
Well, we can buy between those points, but if we
did we couldn't convert into gold without a
loss; we have to weit until it runs the full 1
percent either side.
H.M.Jr:
The full 1 percent?
Lochhead: Yes.
H.M.Jr:
That's quite a big margin. What is the mean?
What is it worth in cents, the Swiss franc?
Lochhead:
Well, 1 percent either side -
H.M.Jr:
No, what is it worth at 30 percent devaluation?
Lochhead:
I hate to let my memory - may I get my sheet?
H.M.Jr:
Get everything.
(Lochhead goes out)
Do you know, White?
White:
No, I don't know exactly.
Gaston:
Isn't it about the same as the French franc?
Regraded Unclassif
183
- 3 -
White:
I'm not sure that you quite understand they can
extend that range, if they want to, more than
that by changing their buying and selling.
That's not their definitive devaluation.
H.M.Jr:
You mean they can go more than 30?
White:
Yes, they can more than the French. But they
can change the buying and selling price.
H.M.Jr:
Well, White, from our standpoint there's nothing
in it for us.
White:
On the contrary, I'm afraid I'm in disagreement
with Archie on this.
(Lochhead comes in)
H.M.Jr:
Let's just take this thing. When they devalue
30 percent, what's the Swiss franc?
Lochhead:
They're down to about 23 cents.
H.M.Jr:
How much?
Lochhead:
22.98
H.M.Jr:
Well, we'll call it 23 cents.
Lochhead:
23 cents.
H.M.Jr:
All right, well, it's worth 23 cents.
Lochhead:
Yes, and we'll have to work between, say, 22.75
and 23.25, roughly.
H.M.Jr:
Well now, Archie, what is there in it for us on
this? What do we want to buy or sell Swiss
francs for?
Lochhead:
I wouldn't say that we really want to buy and sell
Swiss francs ourselves at all. I hope that we
don't have to go into the market. But the point
is, if the market should be declining and we wanted
to steady -
H.M.Jr:
You mean the Swiss market?
Regraded Unclassifi
184
- 4 -
Lechhead: - the Swiss franc, we'd have to wait; we couldn't
touch it for 25 points one side or the other on
the buying and selling price they gave us. How-
ever, if they wanted to operate against our dollar,
they can do it at one half of 1 percent spread,
instead of -
E.M.Jr:
Why a half of 1?
Lochhead:
Because it is 8 quarter on either side. But I
wouldn't say that would be something enough to
stop any agreement on it at all.
H.W.Jr:
This is the way I feel. This is what the purpose
of this argument is for. Now, we see, for instance,
that to get this thing through they make three or
four - This is the way they want to do. This is
all on a 24-hour basis. Why not take it the way
they set it up?
White:
I would say more than that. I think that, parti-
cularly because it is an important point to have
the spread such as they desire it, we ought to move
toward their direction and not toward our direction -
for two reasons, which I won't go into for the
moment, unless you wish to.
H.M.Jr:
Please go into it. I've got all morning.
White:
Well, the advantage of having a spread of about
plus and minus one percent is two-fold, of course,
One is it gives the stabilization fund or the
Treasury which is operating 8 greater degree of
control over the discouragement of undesired short
term capital movements, without the necessity of
entering upon any exchange controls.
To demonstrate that the exchange risk of a pos-
sible increase from the low to the high of 2
percent over short term periods is enough to
discourage capital which would otherwise move in
response to varying exchange rates from one center
to another center (of even as much as 2 or 3
percent), one of the disturbing factors has always
been that these liquid funds go from one money
center to the other in response to short term
interest rates. Sometimes that is good - usually
185
5 I I
it isn't - but the Treasury ought to be the
judge as to whether it is desirable; and they
can, by having this opportunity to manipulate
the exchange rate or to control rates between
countries - they can go a long way toward
controlling the movements of that kind of
short term capital. I'm not speaking of short
term capital speculating against possible
devaluation, and SO on - that's another matter.
I'm speaking of the kind of capital movements
that will take place when things tend to settle
down. That is one point which needs a little
expansion, but I won't now.
To conclude with regard to the first point:
Therefore, for us to make a stand, to say to
Switzerland "We would prefer that you have it
the same as we have it," makes it E. little more
difficult to do what I hope we will do, and that
is to increase the spread and not leave it at the
present point or go in a smaller degree.
The second point is, I think, 2 little more funda-
mental and a little more important. You've got
two opposing schools of thought here.
E.M.Jr:
You mean in the Treasury?
White:
Well, let's say in Washington in Washington and
in the subject in general.
One is to push gradually to make those conditions
possible which will result in a return to fixed
exchange rates equivalent to the former gold stan-
dard so far as the exchange rates are concerned;
that is, a stability, a fixity of exchange rates.
The other school believes that there should be
some flexibility so that when conditions warrant,
in the opinion of whatever the monetary authority
is, the Treasury, there shall be some movement pos-
sible without the concomitants and disastrous
effects that accompany a change.
Now, what has that got to do with this particular
point? Something very important. If you have a
fixed exchange rate in which the spread is very
186
- 6 -
narrow, the longer that persists the closer do
you become to E legal gold standard in the sense
that tradition plays the role that law would have
played, and you cannot alter that law without
introducing all kinds of difficulties and politi-
cal considerations and stresses and strains.
You will notice England has kept away from that,
and if you feel in sympathy with the other then
you want to have that kind of B range of flexi-
bility for the purpose that I said before, of
control over international capital movements -
this is a separate, but in order to make it pos-
sible for you to move a little beyond or a little
above if the occasion warrants, without calling
forth all the factors of objection and criticism
and disturbance that would be called forth 1f
you changed the fixed rate.
For example, I'll give you an illustration. When
sterling moves from 490 to 495, or from five
dollars to 490, the British people aren't dis-
turbed at all. But supposing it had still been
fixed at 486, 484 to 489, and then sterling went
to 480. You would get altogether different con-
sequences, and you would get an altogether differ-
ent preliminary before that took place; it would
have to take greater pressure to do it.
Therefore, I would say that, so long as we desire -
we are not certain of wanting to return to a
fixity in the long run - that we want some flexi-
bility - that we oughtn't to take that initial
step ourselves and therefore we oughtn't to
encourage Switzerland to do it and thereby go on
record and make it easier.
And beyond that, there is the further fact that
a spread of plus or minus 1 percent doesn't put
us at any disadvantage at all with regard to
Switzerland. It isn't significant with regard to
Switzerland. It might be a little more significant
with regard to England; and in any case it bears,
I would say, negligible effect upon those whom we
are most concerned with - I mean the importers and
exporters. A potential of plus or minus 1 percent
is El negligible factor.
187
- 7 -
Those are the reasons, in brief. There is more
to be said, but it's technical and I don't want
to bore you.
H.M.Jr:
Let me - Who agrees with White on this?
White:
Here? I don't know.
Boas:
I do.
Lochhead:
May I say this, as far as the spread between the
gold - the gold buying and selling rate. I am
in favor of a wider spread than we used to have.
In other words, we used to buy and sell gold at
20.67 and we were tied to it; so I think when we
said quarter of 1 percent either side, buying or
selling, we made a step in the right direction.
Now, the question as to how wide that spread should
be is one that is pretty difficult to figure out.
It may be better to be 2 percent than B half of 1
percent. In other words, the spread between the
half and 2 percent might make quite a difference
in commercial matters. Now, I can see yours (to
White) on short term capital movements. On the
other hand, you've got your commercial people to
weigh; and, in the same way that a spread of 2
percent discourages the flight of capital from
one country to another, it also does act as a
disturbing influence in commercial transactions.
B.M.Jr:
Well, let me ask you this. In this thing with
Switzerland, is there anything else we've got to
get, for instance, England and France to agree
to? I mean in the case of Angland and France
they give us a fixed price each day at which they
will sell.
Lochhead:
Until further notice -
H.M.Jr:
Between points.
Lochhead:
I would say that it is not significant at all.
The important thing here is that England can
shift from day to day; it isn't what would happen
within the day that is important for the purpose
Ne are discussing.
Regraded Unclassif
188
- 8 -
B.M.Jr:
But this is a little different. Belgium has
given us a fixed price which they have. England
and France have given us a price which shifts each
day.
Lochhead:
And Switzerland has given us a price which - they
are giving us a fixed price, but they may change.
White:
May change it, yes.
H.M.Jr:
Upham, have you got anything on this particular
point?
Upham:
No, I think not. I should think it is a matter of
exchange trading.
H.M.Jr;
Did you have any feeling?
Upham:
No. I will say that the explanation appears to be
all right. I certainly don't think it should stop
any agreement between us.
H.M.Jr:
Wayne?
Taylor:
I think it is desirable to have this other mechanism
here, which we can describe as the Swiss mechanism,
and to see what happens. We can't get hurt very
much, and I think it is a desirable thing to have
another experimental approach, if you want to call
it that, to the problem.
H.M.Jr:
Let me just read this over
Who is it differs, as I call it, with White and
Haas?
White:
Well, I know definitely that Williams and Golden-
weiser would both be on the other side.
Haas:
Can't tell; I'm not sure. A year ago, yes, but I'm
not sure now.
White:
I'm merely repeating what they stated Wednesday.
They did state they preferred the narrower point.
Lochhead:
But that's only a small part; it's only minor.
189
- 9 -
White:
Well, I don't think it's that important.
(Secretary reads part of the Belgian
agreement)
H.M.Jr:
I don't get this yet.
Dochhead:
Well now, he has a feeling that if we accepted
Belgium in here as a gold standard country we
might agree to allow Belgium to convert the
balances they might owe here at any time regard-
less of when they secured them. In other words,
just now we tell England and France "If you buy
dollars today you have to tell us today whether
or not you're going to convert, and if you don't
then you'll have to take the chances later on."
The Chamber of Deputies got the idea that we were
going to allow Belgium the free right to convert
balances into gold at any time.
Now, frankly, that wasn't in my mind. My feeling
is that Belgium should be treated exactly as the
other countries. They have to declare exactly the
same day they operate.
Taylor:
You see, Belgium does offer conversion to everybody,
gold standard countries. DO, to give full recip-
rocal facilities to Belgium -
H.M.Jr:
But only for one day.
Taylor:
But they will do it indefinitely. We only asked
for one day.
White:
There is an enormous difference. We've got nothing
in Belgium; they've got a lot here. It is good
for her here until she stops.
Lochhead:
So we stick to it.
H.M.Jr:
She'd have to do it each day. Well, dil you ex-
plain it in that?
Lochhead: Yes.
Taylor:
We naturally had that in mind were very apprecia-
tive.
190
- 11 -
fiscal agent just as our bank is operating as our
fiscal agent; that the same problem did not arise
with the other three countries because they have
a stabilization fund operated and owned by the
government. But here is & country without a
stabilization fund and we'd like the same type of
arrangement; we'd prefer it. I wouldn't say any-
thing about insisting upon it. We would prefer to
operate with Treasuries, and of course the Treasury
can name the Central Bank as agent.
Now, I think there is something a little more at
stake.
H.M.Jr:
You don't have to argue that. If that point wasn't
clear, I wouldn't - I mean as far as I'm concerned
there's no argument on that. I've crossed that
bridge. I mean I will only do business with the
Treasury.
White:
All right.
Taylor:
And that was fully explained to Cochran before
he went there.
White:
Well, that's not clear from the cable; at least,
there's some doubt in some of our minds that it -
let me put it that way.
H.M.Jr:
Well, as I understand it - does anybody disagree? -
we only ought to do business with the Treasuries,
irrespective of whether they have a stabilization
fund.
White:
There is considerable difference of opinion there.
U.M.Jr:
I mean I crossed that bridge.
Taylor:
You mean anybody here?
H.M.Jr:
Anybody here.
Taylor:
I don't think so.
H.M.Jr:
Is Olighant with us on that?
Lochhead:
He argued it very strongly. That's the point.
191
- 12 -
H.M.Jr:
Who wanted to do business the other way?
Taylor:
I would say that the Federal Reserve people
had some questions in their mind about that.
However, Williams, particularly in the discus-
sions on - when was it? Wednesday or Thursday -
stated very strongly that he thought that it
was desirable to do business between Treasuries.
H.M.Jr:
Williams?
Taylor:
Yes
H.M.Jr:
Well, I've crossed that bridge.
Taylor:
Much more strongly than I have ever heard him
say it before.
White:
But there is a difference which I think the Secre-
tary must be aware of. It seems subtle, but actually
it is fundamental. I think it is subtle because it
is presented in a subtle fashion, but not because
the real differences are subtle. And - I don't
know, I'm not sure - it seems to me that Williams
definitely would say that it would be perfectly all
right for the Central Bank to do business with us
providing the Government there gave it its blessing.
H.M.Jr:
Well, that isn't - we've - we've crossed that bridge.
White:
I mean - is that a fair statement of his position?
Taylor:
I think it is one of those fine lines of shading.
I wouldn't be prepared to take - you get down to a
question of the legal authority, of who owns the
capital stock, what the purpose is, and so on.
White:
That's only on the surface. I think it's -
H.M.Jr:
Yes, it's much more. Now, the other thing. Some-
body - not the President - the King of Belgium, by
decree, withdrew this stabilization -
White:
- and can - as far as we know, can create another
stabilization fund and, it would seem, can also buy and
192
- 13 -
sell gold, so that it doesn't seem as though
they can reise an objection on the ground "Well,
we have to get Parliament, we have to pass a law
in order to make this possible." It doesn't
seem to us that it is necessary to do that.
Upham:
Except that they don't have any dough.
Lochhead:
The point really gets down also to whether or
not, if you made the arrangements, the Treasury -
they say, "Yes, we're dealing with you" and the
next day they say, "We're not dealing with you" -
they turn it over to the Central Bank. Well now,
the legal question there, whether or not that is
satisfactory -
H.N.Jr:
Listen, the minute that they don't do business in
a satisfactory way, we stop doing business with
them. Now look - certainly, you take - no one
outside of the Treasury would have thought that
China would be as scrupulous in her dealings as
she's been with us, and still she's been absolutely
on the up and up. Huh? And anybody that isn't
becomes a financial outlaw, that's all; the hell
with them.
Now, the thing that I wanted to get here today is
whether we could announce that we have added
Switzerland and if Switzerland is ready to go,
and whether we have to wait for Belgium too.
Lochnead:
We don't have to wait for Belgium, but didn't
Cochran mention st one time that France was
anxious, they'd like to see the whole three?
There's no reason we should have to wait, except
whether it will cast a doubt on the other two.
White:
I think it is more effective when you have one
and another one and another one.
H.M.Jr:
It's been in the paper that Amsterdam has been
gaining steadily over the port in Antwerp, and
Antwerp, as I understand, is the big crux of the
Holland-Belgium fight as to which of those ports
do the big business; and they were gaining, and
it looks as though they gained more. So Holland
193
- 14 -
may want to sit back and see what she does.
She may think it is to her advantage in her
relationship with Belgium.
But I think this: that I wouldn't fool around
very much longer and let Belgium have the right
to take gold out of here without cancelling; and
if Belgium didn't come to terms I'd simply cancel
anything prior to October 13.
Well, in talking to Cochran I'll tell him, as
far as Switzerland is concerned, "The minute that
the Swiss pass this thing, send me a cable, will
you." And then we'll take it up as to what we
want.
Then, as to Belgium, if we don't feel as he stated
it in the cable that it is entirely clear that
we are doing business with the Belgian Government,
not with the Central Bank, why, we want to do
business with the Government, make it absolutely
clear that we want to do business only with the
Treasury.
Further, we think we are right in our idea that
through a Royal Decree they could reinstate their
stabilization fund. We are not going to insist
on it, but we'd feel better about it.
Has Holland got a stabilization?
White:
Yes.
H.M.Jr:
That this seems to be the style right now.
White:
There's good reason there for creating a stabili-
zation fund. Well, there's less reason in Belgium -
less reasons where there is fixed exchange. But
there still can be made an excellent case.
Haas:
There's only one question in my mind, Mr. Secre-
tary, on this, and that is that - I think this is
a very satisfactory arrangement - that if 8. country
the size of Belgium doesn't have to have a stabili-
zation fund, I don't think we ought to put pressure
on them for it.
194
- 15 -
H.M.Jr:
No, but I would say that we'd feel a little
better if -
Haas:
But at least, about the dealing with the Govern-
ment, you must deal with the Treasury actually
as the principal. If the Bank comes in, it must
be as the agent.
White:
Seems to me I'd go a little light on that second
point, even that you'd feel E little better about
it, because with their set-up there isn't great
need for it.
H.M.Jr:
Well, there's no harm in saying it.
White:
Well, if you say it, say it lightly.
Dochhead:
You mean say it to Cochran, not to the Belgians.
My feeling is they can explore this and there's
no rush; make sure we understand each other, that's
the main thing,
Taylor:
If it comes down to a question of whether we will
or we won't, I don't think we ought to pay the
slightest attention -
H.M.Jr:
I don't want any of this passed on to the Federal
Reserve here until I give the word - through
Marriner, I mean, what we are doing today. I
mean, after all we see them at lunch tomorrow,
which is time enough. I mean they know enough
about it now. I mean I don't think it is
necessary -
Upham:
- to run across the street every five minutes.
H.M.Jr:
No.
Upham:
No, I don't think so either.
H.M.Jr:
I think they know enough until noon tomorrow.
And George has talked it over and we have agreed
that the thing for George - he's going to get up
the darndest thing for plans - five-year plan,
monetary plan, and all kinds of things, and we'll
lay them all on Marriner's doorstep. We're just
195
- 16 -
going to - George is - in other words, we're
going to make them sweat producing figures for
us.
Taylor:
We're going to cooperate.
H.M.Jr:
"hat's right.
Upham:
That's what you call 80 percent cooperation.
H.M.Jr:
Yes.
And the other thing - George and I decided that
on the 15th of November we're going to release the
1935 figures on the figures for the first of this
year as to the dealings in gold, capital movements,
and so on, and give it out on the 15th of November
for the calendar year of 1935 and the first nine
months of this year. There is a six months' drag
there. And do that every three months and begin
to open up some of this.
White:
You say there's a six months' drag?
H.M.Jr:
Six weeks' drag. Do that every three months.
Upham:
Did you read the Herald-Tribune yesterday?
H.M.Jr:
Yes. Put I mean this is just - I sense that we
should begin to give more; there's no reason in
the world - one of the things I want to do before
the first of January is to release -
Lochhead:
As long as there is a sufficient lag I think it's
all right.
H.M.Jr:
Well, it's six weeks' lag.
White:
-here's no question in my mind that it ought to be
three months.
Lochhead:
It's just a little close. You say six weeks from
the time we receive them or six weeks from the
actual date?
H.M.Jr:
No, you give nine months.
196
- 10 -
6.W.Jr:
Now, we get down to this other business. Let
me just switch a minute to the Belgium thing.
As I understand it, some of the lawyers feel
that this isn't - we haven't got enough backing
of the Government of Belgium, too much Central
Bank.
White:
Not only lawyers. I feel that way.
M.M.Jr:
I talked to George last night at the house,
and he and I had a chance at it. Who wants
to talk on this?
Lochhead:
The only last word, a very short word, is a
question there as to whether or not this is
an agreement of the Central Bank of Belgium with
the United States Treasury containing the bless-
ings of the Belgian Government, or whether or
not the Belgian Government really is the prin-
cipal, using the Central Bank as an agent. Now,
I feel there that, naturally, it is much better
to know we are dealing with the Treasury on the
other side. It is a question, of course, as to
how far their set-up will allow them to deal
direct as a Treasury. But I do not feel there
is any need of rushing and, if necessary, we
ought to explore it, either through Cochran or
other channels and find out just how far we
can go. I don't think we can insist on certain
forms, but we can remove any doubts by asking.
H.M.Jr:
How would you put it? I mean what do I ask for?
White:
Well, I think there 1s something more at stake,
unless you want that answered.
H.M.Jr:
Answer that first.
White:
Well, I should ask Cochran to make inquiries to
the effect of whether or not they do not already
possess the power and whether or not they might
not find it feasible, more desirable, to do exactly
as the other three groups are doing; namely, to
operate from Treasury to Treasury, and namely, that
they appoint a fiscal agent of their Central Bank,
that their Central Bank is operating as their
197
- 17 -
White:
It's a little close, Mr. Secretary.
Haas:
He meant between October -
H.M.Jr:
As to giving it, though - I mean I want to open
up some of the stuff that isn't going to hurt
anybody and give out, say, a summary of the
audit of the stabilization fund.
Taylor:
Very good.
White:
The amount of the profits, you mean, etc.?
H.M.Jr:
Yes.
White:
I should register my objection against that, Mr.
Secretary, very definitely.
H.M.Jr:
Well, that isn't up right now. The other thing
is.
White:
That's different, but as far as that part of it
is concerned, I would like to have an opportunity
to express my objections, which are strong.
TREASURY TRANSFERS GOLD TO FEDERAL RESERVE
WASHN-
WASHN- THE TREASURY TRANSFERRED 12 000
000 DLS OF GOLD TO THE GOLD CERTIFICATE
FUND OF THE FEDERAL RESERVE BOARD ON OCT 23
THE TREASURY STATEMENT FOR THAT DAY SHOWS
FUNDS SO TRANSFERRED ARE USED BY THE
TREASURY FOR GENERAL OPERATIONS INCLUDING
INTERNATIONAL CURRENCY TRANSACTIONS
OCT 26 1936
THE GOLD TRANSFER ON OCT 23 WAS MORE THAN
OFFSET BY TREASURY EXPENDITURES OUT OF ITS
DEPOSITS WITH THE FEDERAL RESERVE BANKS SINCE
THE TREASURY ACCOUNT WITH THE RESERVE BANKS
SHOWED A NET DECLINE OF ABOUT 800 000 DLS ON OCT
23
198
(0.5.4.10)
OCT 26 1936
GOLD MOVEMENT
GOLD AMOUNTING TO 5 292 000 DLS HAS BEEN
ENGAGED IN ENGLAND FOR SHIPMENT TO NEW YORK
OF WHICH I 694 000 DLS WAS ENGAGED TODAY AND
THE BALANCE AS OF SOME PREVIOUS DATE- I 700
000 DLS WAS ENGAGED FROM BELGIUM TODAY
GOLD IMPORTS AT PORT OF NEW YORK UP TO 3
PM TODAY COMPRISED 600 800 DLS FROM ENGLAND
55 300 DLS FROM INDIA AND 10 200 DLS FROM EL
SALVADOR- THERE WERE NO EXPORTS
MONETARY STOCKS GAINED I 475 400 DLS AS A
RESULT OF NET DECREASE IN GOLD HELD UNDER EAR-
MARK FOR FOREIGN ACCOUNT
199
October 27, 1936
(DJ 11:10 a.m.)
T. J. Watson Sees Exchange Agreement Benefit to Trade
Thomas J. Watson, President of International Business
Exchange Corporation, on his arrival from Europe on the
Aquitania, stated he believed conditions in Europe are improv-
ing and that business and financial leaders of the leading
countries are making a determined effort to bring about better
trade relations. The international agreement to hold exchange
rates within reasonable bounds 16 considered practicable and
all agreed that it will improve trade in all countries and
help to bring about a normal flow of goods and services across
the borders of nations.
200
201
October 26, 1936.
11:05 a.m.
C:
Hello Mr. Morgenthau.
H.M.Jr: How are you?
C:
All right, thank you. How are you getting on?
H.M.Jr: Oh pretty well and how about you?
C:
I'm all right.
H.M.Jr: Now this is the way I feel.
C:
Yes.
H.M.Jr: On the Swiss - I take it tomorrow they'll go through
their last motions.
C:
Yes - that was to be at bank to bank tomorrow.
H.M.Jr: Well as far as Switzerland is concerned they're - we're
satisfied.
C:
You're satisfied.
H.M.Jr: As far as Belgium is concerned we're not.
C:
I see.
H.M.Jr: The people here with me in the Treasury do not feel
that we are doing business with the Treasury in
Belgium.
C:
I see.
H.M.Jr: We want to make absolutely sure that we're doing
business with the Treasury and the principals.
C:
Yes.
H.M.Jr:
It's perfectly satisfactory to us to have the Treasury
designate the National Bank of Belgium as their Fiscal
Agents.
C:
Yes.
H.M.Jr: But we want to do business with the Treasury in Belgium
and I feel very strongly on that.
C:
Yes.
Regraded Unclassified
202
- 2 -
H.M.Jr: Now as to - we have tried here with the best facilities
we have to lockup the Belgium law.
C:
Yes.
H.M.Jr: And we are under the impression that the King of
Belgium dissolved the Stabilization Fund
C:
....Yes.
H.M.Jr:
.....through a royal decree.
C:
Well that's true.
H.M.Jr: And that he could re-establish that Stabilization Fund
through a royal decree.
C:
Yes.
H.M.Jr: Now as to their having a Stabilization Fund we'd a
little bit rather have it.
C:
Yes.
H.M.Jr: But we don't feel strongly about it.
C:
No.
H.M.Jr: In other words, we'll do business with them if they can
satisfy us through you that we are doing business with
the Treasury. Now have I made myself perfectly clear?
C:
Yes, yes I get your point.
H.M.Jr: Now do you think you ought to go over there and see them?
C:
Well I - I don't like the point yet because I - I have
that declaration drawn up to go in the Treasury here
at the same time.
H.M.Jr: Yes well this - then we've had a lot of people here
and they've spent all of last week going over iteand
they finally decided that that is not satisfactory.
C:
Yes, I see.
H.M.Jr: See?
203
- 3 -
C:
They consider that they're one step ahead of us,
They say they've had the Stabilization Fund and
will work through that so francs are now back to
a point where the Central Bank is spunky and
didn't
H.M.Jr: Well they may be - well I don't want to get into any
argument - I mean as to what they think but as far as
we are concerned we're not satisfied and we - if - we'd
like to do business with Belgium but we'll have to be
satisfied that we're doing business with the government.
C:
Yes.
H.M.Jri You see?
C:
Of course I had the approval of the Minister of
Finance - his own approval of the Premier of the
country to that arrangement.
H.M.Jr: I know but I mean we've got a lot of people in here -
people like - I mean Central Bank people as well as
Treasury people and they've spent days on this you see?
C:
Yes, yes.
H.M.Jr:
And there's been arguing back and forth and back and
forth and when we get all through
C:
Yes.
H.M.Jr:
the conclusion we come to is that we don't feel
that the government through the Treasury at Belgium
is the principal that we're dealing with.
C:
I see - I see.
H.M.Jr: Now I think the best thing to do would be to go over
there and spend a day and see them.
C:
I see. And you don't insist on a Stabilization Fund
being set up again.
H.M.Jr: No I do not. I'd a little bit prefer it but I do not
insist.
C:
Yes.
204
- 4 -
H.M.Jr: I just asked - I'd a little bit prefer it.
C:
Yes.
H.M.Jr: Now - I see the difference in time - could you still
go tonight?
C:
No I couldn't make it now because the train goes at
6:10.
H.M.Jr: Oh.
C:
And I don't like to go up without making some appointment.
H.M.Jr: No, no. Well then all right. A day won't make any
difference. You could go up there - and anyway you'd
know tomorrow what action Switzerland is taking.
C:
Yes that's it.
H.M.Jr: And then you could go up there Tuesday night.
C:
Yes I could go up tomorrow night all right.
H.M.Jr: Yes, well supposing you do that.
C:
All right. I ought to - I don't know just what time
the Swiss will have their decision.
H.M.Jr: No.
C:
See?
H.M.Jr: But I'd go up to Belgium anyway Tuesday night.
C:
All right.
H.M.Jr: Now just a moment. (Pause - conversation carried on
in H.M.Jr's. office)
C:
Hello.
H.M.Jr:
Just a minute. They're asking me to explain something -
a point that the British have brought up but I tell them
if they think it's necessary they can give you a cable
which you'll get before you leave.
C:
I see.
205
- 5 -
H.M.Jr: We've explained it to the British. There's something
Mr. Chamberlain brought up. It's a technical point
and Mr. Chamberlain misunderstood.
C:
I see.
H.M.Jr: And we've explained it to them and I'll explain it to
them again. Now I'm going to tell the British that
I'm going to ask you to go up there Tuesday night to
see them and I'm going to tell the British why you're
going up, you see?
C:
I see.
H.M.Jr: And you tell our friends in the French Treasury how I
feel.
C:
All right.
H.M.Jr: And I'm going to tell the British that I
C:
Has any of your people there any more specific suggestions
as to what to suggest to the - to the Belgians ...
H.M.Jr: Well it
C:
.... shall I get any sort of a formal document or do you
want
I'll
H.M.Jr: Cochran, if they have anything now/tell them to put it
in writing and get it off in the next hour or two.
C:
All right.
anyway
H.M.Jr: I'll get it to you/so that you have it if there's anything
more other than just the very strong feeling that I have
C:
Yes.
H.M.Jr:
that I want to be sure that it's between governments
and between Treasuries.
C:
I see - I see.
H.M.Jr:
Now I - I - I can't say anything more than that and if
anybody - the technical people have any more technical
way of explaining it I'll have to put it down in black
and white and send it to you.
- 6 -
206
C:
All right just so it will get off tonight.
H.M.Jr: Yes - now....
C:
.....I'll call tonight if I can and make and make
an appointment for Wednesday then and go up from here
tomorrow night.
H.M.Jr: And will you advise the French Treasury of the position
that I'm taking?
C:
Yes.
H.M.Jr:
Please.
C:
I talked to the French Treasury just two minutes ago
and Baumgartner said we'll have no news. I kept him
informed on this trip business.
H.M.Jr: Yes.
C:
And he knows I expect something.
H.M.Jr: Now you might be thinking this over - I'd like your
opinion whether we - if the Belgians hold back should
we go right ahead with Switzerland?
C:
We'll go right ahead.
H.M.Jr:
Should we or shouldn't we?
With Switzerland alone?
C:
The thing looks a little narrow if we only have one
out of the three.
H.M.Jr: Yes.
C:
Gold bloc country.
H.M.Jr: Yes.
C:
I mean that would be my first view.
H.M.Jr: Well I don't think you'll have any trouble with
Belgium.
C:
No my only point was just a technical one as to whether-
I mean we're going to tell themAit isn't possible - as
to what we'd get out of them.
2 I #
207
H.M.Jr: Well it - it goes into a lot - you'd have to be over
here - there's a very important principle which I
have - I mean - I mean a fundamental principle that I
want to do business between governments and not between
Central Banks.
C:
Yes - yes.
H.M.Jr: Now that's - I mean that 1s the fundamental principle.
C:
Yes.
H.M.Jr: And I don't know that I'll ever go back as long as
Mr. Roosevelt and I are here as to having the thing
under the control of the Central Banks rather than the
government.
C:
Yes - yes.
H.M.Jr: But that is, as I might say, the Roosevelt-Morgenthau
policy now.
C:
I see.
H.M.Jr: And it certainly will be for some time to come.
C:
Well I'll read over that Belgian financial law again
before I go up.
H.M.Jr: Yes but I mean that is the fundamental thing and this
thing is going to be between governments rather than
between Central Banks and I've explained that to both
the Federal Reserve Board here and to the Bank in
New York and they understand my position fully.
C:
Yes - yes.
H.M.Jr: And - but the best way I can describe it is the
Roosevelt-Morgenthau policy às to how we're going to
do business.
C:
Yes - all right.
H.M.Jr: Now Cochran
C:
Yes.
- 8 -
208
H.M.Jr: While I have you - ah - ah - if the French want to
bring any pressure on Holland I have no objection
but we'll
C:
Just when I was talking with Baumgartner a
minute ago I said, "Have you people ever heard from
the Dutch on this". I said, "We haven't had a word".
He said, no that we heard last week that Tripp was
coming over here this week and said to-day there had
been no further word of it and he's inclined to think
that nothing was developing.
H.M.Jr: Yes. Well there's been something in our American
papers about the fact that Amsterdam - - the Port of
Amsterdam is going ahead - the Port of Antwerp.
C:
Yes.
H.M.Jr: And I wonder if Holland doesn't feel that she has an
advantage now which she doesn't want to give up.
C:
It's entirely possible and Tripp is pretty wise and the
bank thinks that these funds might get to working in his
pocket some way that would put him at a disadvantage. I
don't know but
H.M.Jr: Yes. Now
C:
I haven't told him - I haven't had a word with him.
H.M.Jr: Ah-ha. Did the French papers carry any of my radio
talk Friday night.
C:
They just summarized it briefly. I have one before me
now. They say that some praise of the financial policy
of the government has occurred from the increase of
receipts has permitted the balancing of the budget next
year.
H.M.Jr: Ah - ha.
C:
That's the gist of the summary.
H.M.Jr: Well I think I'll send you over a copy by mail. You
might like to have it. I'll mail you a copy. Hello
C:
Hello
6 1 I
209
H.M.Jr: Now how are economic conditions right now in France -
I mean are they
C:
Not awfully good. They had this radical-socialist
convention down at Biarritz - lasted several days -
H.M.Jr: Yes.
C:
They ended up by agreeing to support the government.
H.M.Jr: Yes.
C:
You see the radical-socialist are the most conservative
of the three parties constituting the popular front
but they were strongly against any more of these
moves toward occupying factories
and so on.
H.M.Jr: I see.
C:
And there's still quite a lot of criticism of the way in
which the French Treasury has threatened capital, that is,
putting a tax on profits made in exchange in the last
month, see?
H.M.Jr: Uh-huh.
C:
And on the gold returning.
H.M.Jr: Ah-ha.
C:
With the result that there's really a movement of
capital out of France now instead of back into France.
H.M.Jr: Ah-ha.
C:
So they're not getting the full benefits of devaluation.
H.M.Jr: Ah-ha.
C:
But it may improve. They're having a Cabinet Meeting
tomorrow to start the budget.
H.M.Jr: Yes.
C:
Then it looks like he'll get Parliament together on
the 3d of November.
H.M.Jr: Yes.
C:
For probably a very short session.
H.M.Jr: Yes.
210
- 10 -
C:
Then recess a little while.
H.M.Jr: Yes.
C:
And then come back to pass the budget toward the end
of the year.
H.M.Jr: All right.
C:
But it doesn't look like the government is threatened
that's all. But still there's this - then there's
still a lack of confidence. A number of papers
have been saying that they'll have to devalue again
and so on.
H.M.Jr: All right.
C:
All right then - then if you can give me anything by
tomorrow all right. If not, I'll go on up tomorrow
evening.
H.M.Jr: All right.
C:
And I'll see Mann at the Treasury and see what I
can do.
H.M.Jr: And when you get back from Belgium telephone me.
C:
All right fine.
H.M.Jr: Thank you.
C:
All right sir.
H.M.Jr: Goodbye.
C:
Goodbye.
211
October 20, 1936
Mr. Bewley and Mr. Mallet came in to see the Secre-
tary at 11:30 today.
The Secretary said to them, "I take it that when
you gentlemen were kind enough to bring in Mr. Chamberlain's
message where he made a suggestion, that that point has
been cleared up? Has it?" Mr. Bewley asked, "On the
gold?" The Secretary explained, "On Belgium -- whether
or not they would have the right to convert balances into
gold." Mr Bewley said to the Secretary, "It was not 8.
suggestion, It was merely that you were good enough to
ask Mr. Chamberlain and he Just called this to your atten-
tion."
HM,Jr. then said to Mr. Bewley, "I understood that
perfectly. I Just meant that isn't -- how shall I put
it? -- it is not a point that is under discussion because
if we do make arrangements with Belgium 1t will be on the
same basis as with you and France, namely: the conversion
privilege 18 good for that day only. Will you explain
that to Mr. Chamberlain?" Mr. Bewley answered, "Yes."
To Mr Mallet the Secretary said, "Mr. Mallet, you under-
stand?" Mr. Mallet replied, "Yes. It was a question
of the possibility of their wishing to convert the whole
of their balances from the Bank of Belgium." Bewley
added, "It was merely a point that occurred to the Chan-
cellor."
Explaining further, the Secretary said, "It's all
in one day anyway and I still -- some of the people around
the Treasury don't agree with me, but I stillhave it in
the back of my mind that we should limit to to how much
she can do in one day. Some of my advisers don't think
it 16 important. It's still in the back of my head.
But what I asked you gentlemen to come in for today is
to tell you that I am asking Cochran to be in Belgium
Wednesday because after very careful studying the Belgium
message I an not satisfied that we are doing business
with the Belgium treasury. It seems to me that we are
doing business with the Belgium Central Bank, which I
do not want to do." Mr. Bewley's comment was, "Yes."
Continuing his remarks, the Secretary said, "I
don't want to do that. The policy which we have laid
212
-2-
down here now 18 that we wish to do business between
Governments, which means between treasuries; diplo-
matic approach and between Governments, which 18 between
the Government's fiscal agent, which 1s the treasury.
In other words, we want to do business between Govern-
menta and not between central banks which are privately
owned."
Mr. Bewley and Mr. Mallet both commented, "yes;
quite.
Adding to his remarks, the Secretary said, "So I
am sending Cochran -- this 18 Monday; I have given him
instructions to tell them that it is our policy here
that we want to do business between Governments and
between treasuries through diplomatic channcels and
the way we understand it now 18 that the Belgium Govern-
ment will turn it over to the Bank of Belgium and the
Bank of Belgium is the principal and not the Belgium
Government and we are not satisfied." Mr. Bewley and
Mr. Mallet both said, "Yes."
The Secretary then said to the two British gentle-
men, "I want to explain that to you. I don't know
whether it makes much difference to you, but it does
to us. We are definitely not going to go back to the
old way of doing business. We feel that very strongly.
We feel we have made a distinct step in the right d1-
rection and I can say we are pleased with our relation
and we want to keep it between Governments and treasuries
and SO we have it with the three of us this way and we
don't went to on the side do business with the Bank of
Belgium.
Continuing, the Secretary said, "And the other
message was that I would rather -- a very 'mild' rather --
have them have a stab lization fund, but I did not make
it Interrupting, Mr. Mallet said, "Not a sine
qui non." The Secretary then added, "I would a little
bit rather, but it's not a sine qui non. But the other
is. As to Sweden, tomorrow there are steps to go thrai gh
the last motion." Bewley asked, "That's the Federal
Council?" The Secretary answered, "Yes. And then
the question comes up: let's say the Federal Council
passed it. Should we wait for Belgium or should we
50 ahead with Sweden. It does not make much difference
213
-3-
to me, Bewley's reaction was, "It does not seem any
particular reason why the two should be done together
I don't 860 at all." The Secretary added, "Cochran
would have an answer for us, he said, by Thursday And
the other thing -- we looked up and found that the King
of Belgium by decree dissolved the stabilization fund
and he still has that same right to re-create it."
Bewley asked, "He does not have to take it to Parliament?"
The Secretary answered, "No."
Again addressing himself to the British, the Sec-
retary said, "I might also add that the French had hoped
that Holland would Join at this time, but I told them
that I would not approach the Dutch. If the French
wanted to, all right; but I would not approach them.
In other words, I don't want to solicit anybody. The
thing I sort of picked up, and you might check it, it
seems that right now Amsterdam has a little the edge over
Antwerp and that increased business is growing in Amster-
dem daily 80 Holland might think that by holding back
she will keep her competitive advantage, I don't know.
The French feel a little bit that they would like to see
Holland, Switzerland and Belgium all do it at the same
time. I said if they feel that way, all right. Mr.
Tripp, who 1s President of the Bank of Holland, has said
a couple of times he would come to Paris, but he has not
come. But we are not going to solicit." Mr. Mallet's
reaction was, "There 16 no hurry."
Mr. Morgenthau agreed with Mr. Mallet saying, "No.
If Holland wents to come in, all right, and if they don't --
I mean I don't want to be in the position that it can be
said that the United States brought pressure on anybody."
Mr. Bewley's comment was, "Quite. No;quite."
HM,Jr. then said, "I think that's about the whole
story."
Mr Taylor said to the Secretary, "You might tell
them about that other message that we got from a country
in this part of the world." HM, Jr. answered, "No, be-
cause I have not had a chance to read it. I have to read
it first."
Mr. Mallet inquired of the Secretary, "I am not
214
-4-
quite clear -- are you expecting some sort of a declars-
tion to be made in London at the same time you give it
here?" HM, Jr's answer was, "I think it would be nice."
Mr. Mallet then said to Mr. Bewley, I think we had better
put that in our telegram." The Secretary added, "I think
it would be nice together. The French have said they
needed three or four days to get ready from the time we
are ready to do business." Mr. Mallet then inquired,
"The declaration would merely tell the press that similar
arrangements have been made with Sweden and Belgium as
the agreement that was made with the French and British?"
Taylor remarked, "It 16 possible there might be
a difference in this case." Mr. Mallet asked, "Because
of the 1934 regulation?" And Bewley remarked, I am
thinking as far as the British are concerned, they have
not been approached by either Switzerland or Belgium as
far as we know. So it may be that there won't be any
announcement to make. Mr. Mallet added, "Maybe there
will be nothing to say in London." Taylor remarked,
"They are using the open gold market."
To Mr. Taylor, the Secretary said, "I disagree
with you entirely, Wayne. I am sorry. I think the
three ought to 80 through the same motions. I think
it 18 a nice gesture, It does not look as though we
were acting separately."
Mr Bewley said, "We can always put it up to
London and if they have not been approached they would
not want to make an announcement. Mr. Mallet commented,
"We have not been told whether they have approached
London."
Mr. Morgenthau's response to this remark was,
"Well, then, I think I will tell them to. I can do
that. I can say that before + make this move I take
it -- I should imagine, because I was under the die-
tinct impression that they had talked to London and
France." Bewley said, "Of course, I don't know at
all; perhaps they have." Continuing, HM,Jr. said,
"Before I moved I certainly would say, 'Please also
approach the English and French. Oh, very much Bo!
I wouldn't do it unless they did. I am a very good
partner, you know!"
215
-5-
Mr. Mallet's comment was, "I think we had better
telegraph to London to clear that point up." HM, Jr. re-
marked, "I took it perfectly for granted that they had
:alked to them." Bewley said, "We haven't heard one way
or the other." HM,Jr. added, "I think we ought to clear
10 up. I wouldn't enter into this agreement with either
Belgium or Switzerland unless they gave you the same op-
portunity. Absolutely, unless they talked to you, I
would not do it." Mr. Mallet repeated, "We had better
clear it up." The Secretary then said, "I was under the
impression that they had." Mr. Mallet's reply WRB, "I
was under the impression when you first told us about it
that they presumably had, but since then we have had
nothing further and I rather wonder. We had better find
out."
At this point, Mr. Bewley remarked, "The position
is 8 little different from their point of view, if they
epproach you and say they can buy gold in London and can't
here. Mr. Morgenthau replied, "That's all true, but as
a matter of fact, when I talked to you about this second
arrangement, this second step, you had already come to
an agreement with France; on the Saturday previous that we
had the day to day arrangement, and even if you had not
if we should enter into this arrangement with Switzerland
and announce it separately it you -- you would see some
countries say, 'Uh Huh! They ca.'t even last one month
together. The United States has made a separate deal.
They can't even last one month.' Even if it was purely
Just going through the motion."
Mr. Mallet agreed, saying, "Yes; even if you
were doing it, it might be & good thing for us to say
that we were doing it. Announce it at the same time."
Continuing his remarks, the Secretary said, "Because
some country would say, 'They are not in agreement one
month before one steps out and makes a separate arrange-
ment.' If you are doing it, it is Just going through
the motions of saying BO and from your standpoint I
should think it would be a distinct advantage and I
can't see any harm.' Bewley agreed, saving, "I can't
cee any harm." Mallet added, "We will Just say publicly
we will do this. And in that case, it would be neces-
sary to synchronize the announcements?" HM, Jr's answer
was, "Yes, And you see, the French have asked for four
216
-6-
days from the time we come to agreement." Bewley re-
peated, "Four days from the time." And Mr. Mallet
said, "That would not be until the end of this week."
HM, Jr. added, "And if it went that long, it would be
the day before election and I would rather wait until
after election. I wouldn't hold it up for a week, but
if it is a matter of a day or two, why take a chance?
I have taken so many risks I don't want to take any
more. If
Mr. Bewley's reaction was, "Quite, and Mr. Mallet
said, "We will telegraph and get that clear." The Sec-
retary asked, "You have that all right?" and Mr. Bewley
answered, "Yes, I have all the necessary notes. II
Mr. Morgenthau ended the meeting by saying, "Thank you
for coming down. If
217
October 26, 1936.
3 p.m.
H.M.Jr: Hello
Operator: Dr. Feis.
Feis: Hello Henry. I'm sorry I've been so difficult.
H.M.Jr: That's all right. You haven't. Herbert, they
said you wanted to talk to me about this Mexican
thing.
F:
When you're ready, yes.
H.M.Jr: Is there any hurry?
F:
No. The only hurry would arise from the fact that
he's probably expecting an answer before they leave
here for Buenos Aires.
S.M.Jr: I could do it either at half past three or half past
four - either one.
F:
I beg your pardon?
H.M.Jr: I could do it either at 3:30 or 4:30.
F:
Well I was going to ask you whether tomorrow would
be all right.
H.M.Jr:
Tomorrow is all right with me.
F:
Is it? All right. It 's better for us.
H.M.Jr: Because the way I feel - I'm just trying to do it with
all of the people going down there.
F:
You're disinclined to do what?
H.M.Jr: To see this man at the head of the Buenos Aires trip.
F:
Ah - I'm very glad to hear you say that - it's in
substance - I mean the Secretary wanted me to explain
his attitude toward you and that coincides.
H.M.Jr: Well then we won't - supposing you come over and bring
anybody you want at ten.
218
22 I 1
F:
All right. Now another thing I've had on my mind......
H.M.Jr: Is that a good time for you?
F:
Ten tomorrow morning?
H.M.Jr: Yes.
F:
Yep - fine.
H.M.Jr: And then when you - if you bring Reed - - explain to Reed
when we get through I want to talk to you about Europe.
F:
Well that you must be reading my mind.
H.M.Jr: Yes.
F:
We've had some interesting political telegrams.
H.M.Jr: Yes.
F:
And I want to recite on those for you.
H.M.Jr: Good. Well would you do it at that time?
F:
Ten o'clock. Now do you want me to come at ten and have
him come over at 10:15?
H.M.Jr: Well what I - - you can't - well why can't I just ask him -
tell him I want to talk about Europe and ask him to leave.
F:
You can.
H.M.Jr: What?
F:
The other thing might be a little bit easier. Just tell
him to join us over there at 10:15.
H.M.Jr: All right do it your way.
F:
All right.
H.M.Jr: Now the other thing. I spoke to Cochran and asked him
to go to Belgium tomorrow night because I wasn't satis-
fied, see?
F:
Yes.
219
- 3 -
H.M.Jr: Does he need any additional instructions on that?
He didn't raise it.
F:
I'd rather - I'd almost rather not give him any.
H.M.Jr: You'd rather not give him any.
F:
And wait until you get further reports from him.
H.M.Jr: Well - I mean he didn't - he didn't question his
authority to go.
F:
No. I think
H.M.Jr: He's just going to follow up. I don't see why
but I just wanted to make sure.
F:
Well - no - I mean after all Bullitt knows - he was
in on this thing and I don't think right now you'd
have to worry about having Joe Bullitt think you're
pulling one of his men away on this mission. I
think later on if you wanted to do it we can again
do what you've always done.
H.M.Jr: Yes.
F:
Let us say - send a cable to the Ambassador and say
if you have no objection would like Cochran to go
but on this mission it is so closely connected with
the thing that was - I mean it's so much a part -
H.M.Jr: It is a part.
F:
Exactly.
That
I
H.M.Jr: To tell them how I feel and want additional assurances
from Belgium.
F:
Exactly.
H.M.Jr: But
F:
Well it's about the Belgian situation I wanted to talk
with you and..
H.M.Jr: I see.
F:
....and give you that background.
220
- 4 -
H.M.Jr: Well, I'll keep plenty of time and then, after all, if
Reed's here and he waits a few minutes, what of it?
F:
All right.
H.M.Jr: I mean, if we run over that, what of it? I mean -
F:
Precisely -
H.M.Jr: And I just wanted to say - no,- on Mexico, with Mr.
Hull leaving just now, I don't want to start anything.
F:
Well, the suggestion we were going to make -
H.M.Jr: Yes
F:
Except the Secretary didn't feel free, I mean he said -
H.M.Jr: Yes
F:
He instructed me to wait and see what your attitude
was.
E.M.Jr: Well, -
F:
But his own attitude -
H.M.Jr: Yes
F:
- is definitely -
H.M.Jr:
What should I -
F:
- to say this, that this Conference was not going to
talk monetary matters -
H.M.Jr: Yes
F:
- that there was another special financial conference
scheduled to be held in Santiago, Chile, some time in
the future.
H.M.Jr:
Well, why
- excuse me.
F:
Yes
H.M.Jr: You finish first.
F:
Well, that's all.
221
- 5 -
H.M.Jr: Why don't I call up Mr. Hull? - I called up this
morning anyway and he was at his press conference
and I'll call him up and tell him that; and that
ends it.
F:
All right. I think the person you really ought to
talk to on it, if I may suggest, is Wells.
H.M.Jr: I'd rather not it you don't mind.
F:
You'd rather not?
H.M.Jr: I mean, if Hull says so, all right - I - I (Laughs)
I don't want to go into it but I'd rather call -
F:
Well, I mean, the Secretary is editing two speeches
and it's kept us sitting - - -
H.M.Jr: Well, let it go until tomorrow, what the hell, - I -
F:
That's the - let it - let's let it go until tomorrow.
H.M.Jr:
Suits me.
F:
All right, ten o'clock I'll be there.
H.M.Jr: 0. K.
F:
Right.
222
October 26, 1936
At 3:30 this afternoon, HM,Jr. called Secretary
Hull and said to him, "On this Mexican thing, I would
much rather leave it alone until you get back from
Buenos Aires. They wired me that the Mexican Secretary
of the Treasury wants to come up now, but I would much
rather wait until you get back. We did have this matter
up about six months ago with Sumner Welles I feel at
this time, just before you left, that we would not want
to start anything new.
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
223
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 812.515/593
October 23, 1936
The Secretary of State presents his compli-
ments to the Honorable the Secretary of the Treasury,
and encloses for his information a copy of telegram
No. 183 of October 22, 1936, from the American Embassy,
Mexico City, with regard to stabilization of currencies
on the American Continent.
Enclosure:
No. 183 of October 22, 1936,
from Mexico City.
Department of State
EA
BUREAU
DIVISION
ENCLOSURE
TO
Letter drafted
ADDRESSED TO
TREASURY
1.1. ADVERTMENT PRINTING EFFICE
1-1083
224
JS
MEXICO CITY
Dated October 22, 1936
Rec'd 9:56 p.m.
Secretary of State,
Washington, D.C.
183, October 22, 6 p.m. CONFIDENTIAL.
In D. confidential conversation with the Commercial
Attache today, the Finance Ministor pointed out that he
had completely fulfilled his agreements with our
Treasury to replace demonetized silver coins in
circulation and reconstitute the monetary reserve
of the Bank of Mexico on the basis of four parts gold
and one part silver. He expressed the opinion that the
recont arrangements between the United States, France,
and Great Britain had given our Treasury the whip hand
in the financos of Europe and said it appeared to him
that the tremendous monetary power which our Treasury
could now use towards stabilization indicated that the
time was now approaching when C: perative stabilizing
measures in Central and South America might advantage-
ously be undertaken. The Minister expressed the hope
that our Treasury would work toward the end of having
silver form a certain portion of the monetary reserves
of the various countries and also that accertain per-
centage of silver might be accepted for the payment of
international
225
-2-
From Mexico City #183
international balances. The Minister desired to express
to the Secretary of the Treasury his willingness to give
him the fullost cooperation in measures tending towards
stabilization of currencies particularly on this continent.
He said he believed a conference on this subject between
himself and Secretary MorgEnthau might be advisable in
the near future and that he would be ready to make a trip
to Washington at any time Mr. MorgEnthau might indicate.
DANIELS
SMS EMB
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
M
226
DEPARTMENT OF STATE
WASHINGTON
November 12, 1936.
The Acting Secretary of State presents his
compliments to the Honorable the Secretary of the
Treasury, and encloses five copies of despatch No. 4056
of October 31, 1936, from the American Embassy, Mexico,
transmitting a message from Eduardo Suarez, Minister
of Finance of Mexico.
Enclosure:
As stated.
227
EMBASSY OF THE UNITED STATES OF AMERICA
Mexico, October 31, 1936.
No. 4056.
SUBJECT: Message to Secretary Morgenthau from Eduardo
Suarez, Minister of Finance.
The Honorable,
The Secretary of State,
Washington.
Sir:
I have the honor to report that the contents of
Department's telegram number 180 of October 28, 1936, were
transmitted to Mr. Eduardo Suarez, Minister of Finance,
on October 30, 1936, by the Commercial Attache. Mr.
Suarez displayed intense interest in the message from
Secretary Morgenthau and asked that his deepest apprec-
iation be extended to him for his very friendly response.
Mr. Suarez said that he would look forward with pleasure
to a conference with Secretary Morgenthau sometime in
February or March at a date which would be convenient
for the latter and which could be arranged after the termina-
tion of the forthcoming Conference at Buenos Aires.
Respectfully yours,
JOSEPHUS DANIELS.
851.5
228
TELEGRAM SENT
October 28, 1936
Noon
AMEMBASSY
MEXICO, D.F.
180
CONFIDENTIAL
Your telegram No. 183, October 22 six p.m.
Please inform Finance Minister Suarez that Secretary
Morgenthau is most appreciative of his friendly message
and of his offer of cooperation in measures looking toward
international currency stabilization; also that Secretary
Morgenthau will always be glad to receive the Minister and
to confer with him on matters of mutual interest to the
Treasuries of the two countries whenever the Minister may
have occasion to visit Washington. However, it appears
doubtful that a suitable opportunity for profitable dis-
cussions on the matters mentioned in the Minister's message
will present itself prior to the conclusion of the forth-
coming conference at Buenos Aires. It is therefore sugges-
ted that Minister Suarez might wish to consider deferring
his suggested visit until February.
HULL
SW
Regraded Unclassified
Monday
229
October 26, 1936
5:10 p. m.
Senator
Wm. L.
Hill:
- entertainment of the Florida Society -
HMjr:
Oh yes -
H:
A Miss McCall -
HMjr:
Yes
H:
- who has been employed in the Treasury Department
for a long time -
HMjr:
Yes
H:
- attended that function and
us and insisted
that we come and see you and plead in her behalf.
HMjr:
What's the lady's name?
H:
McCall -
HMjr:
McCall? - Miss or Mrs?
H:
Miss McCall -
HMjr:
Oh, Miss -
H:
Yes
HMjr:
- of Florida?
H:
About forty years in the Treasury Department. And
about a year ago, I think perhaps through Senator
Fletcher's talk with you, she was granted an ex-
tension for a year.
HMjr:
Yes
H:
That time expires on the thirty-first of this month.
HMjr:
Yes
H:
She was injured in an accident and was laid up for
about five - four or five or six months.
HMjr:
Do you know which Bureau she's in?
H:
Well, no, I can't tell you. I don't recall right
now.
-2-
230
HMjr:
Yes
H:
Anyway, she's filed a letter with the President
asking for a further extension of six months or
twelve months.
HMjr:
Yes
H:
Someone in your office, I expect, has that file.
HMjr:
I see.
H:
We promised her, Senator Loftin and I, that we'd
talk to you -
HMjr:
Yes
H:
- today if possible.
HMjr:
Right
H:
And ask if you could consistently extend that for
six months or twelve months, or recommend it, rather.
HMjr:
I see.
H:
Now, that - I'm making that -
HMjr:
I understand.
H:
- statement on behalf of Senator Loftin and myself.
HMjr:
Well -
H:
I want to be able to tell her with great sincerity -
HMjr:
You have.
H:
- that we have talked with you about it.
HMjr:
I understand perfectly.
H:
And she also wanted to say that if you couldn't do
it please don't take any action until after the
fourth of November - third of November.
HMjr:
I see.
H:
I'm passing that on to you so that each of us can
tell her that we did everything - or I can tell
her that I -
HMjr:
Well, you -
-3-
231
H:
-
both of us.
HMjr:
You've passed your burden on to me and I accept it.
H:
Thank you so much.
HMjr:
All right, Senator.
H:
Righto
HMjr:
Thank you.
H:
Goodbye.
232
#
October 26, 1936
EXCERPT FROM MR. UPHAM'S REPORT TO SECRETARY
dated October 26, 1936.
I visited at the Federal Reserve Bank of New York
Saturday morning with Mr. Lochhead, One of the stops we
made was at the desk of Mr. Madison, who seems to operate
the market transactions of the Open Market Committee under
the management of Dr. Burgess. Mr. Lochhead explained to
him our interest in coordinating the investments in Govern-
ment bonds made by trust accounts and investment funds for
which the Treasury acts, with the condition. of the market
from day to day. Following that explanation, I asked
Madison purely as an academic matter, what the Open Market
Committee was doing in the market. I referred to the fact
that there is frequently a statement made that the Federal
Reserve is responsible for the domestic dollar and is
interested in exercising an influence over credit conditions.
It seemed to me as B matter of theory that the Open Market
Committee would be interested in active and frequent opera-
tions in the market. Mr. Madison was inclined to think that
they were content to leave that to the Treasury, and stated
that the Open Market Committee does nothing other than re-
place maturities, and occasionally shift their holdings
from one issue to another. They apparently have no thought
of watching the market from minute to minute or day to day,
and supporting it on occasion.
You may have noticed that the man who writes about
Governments in the American Banker uses the Treasury and
the Federal Reserve almost interchangeably. He referred
this week to the fact that "the Reserve was able to turn
the market so easily and still allow the Treasury" to do so
and so, and then goes on to say this "is a tribute to its
discretion", meaning the discretion of the Federal Reserve.
Again he speaks of the "brilliant and fast work by the
Federal Reserve to stem the tide of nervous selling."
233
October 26, 1936.
10:15 A.M.
255
Present: Mr. Gaston
Mr. Taylor
B.M.Jr:
This is what the President said - the President
said to me, you know, about this business of their
saying that Landon's figures were wrong, and he
didn't know anything about the Pat Harrison, see?
So he said, "Now, I understand they want to say -
give out a statement and say that Landon's figures
were right and my figures were right. of course,
that's just silly." And I said it's silly too.
#Of course that's just silly," said. "After all,
Mr. President, last night's speech is cold turkey
today, and what you said at Worcester or what Mr.
"andon said in some place else people have forgotten."
So ne pressed me a little bit. I said, "I'll tell
you what happened." I said, "One of our people in
the Treasury, who was very tired, sat down and got
out a statement, gave it out. The man who did it
called me up Saturday, said he made 8 mistake,
terribly upset. I think the whole thing - " And
that seemed to entirely satisfy him. I said, "I
haven't got the details, but my advice is I'd
forget it."
He said, "All right, let's forget it." See?
Gaston:
Yes
H.M.Jr:
So that has nothing to do with anything else, has
it? What about this hidden tax business? Have
you got that information?
Caston:
Of course, this bore on the question of indirect
taxes. The thing that we thought was the most
that we could possibly do was to say that so many
questions had been received at the Treasury
Department as to the amount of the indirect taxes
and the direct taxes and the record of tax receipts
in the last few years, that the Treasury is here-
with making public the figures as shown from the
official records, classifying taxes - classifying
direct and indirect taxes and the receipts thereof,
and a summary of the changes in the tex laws
affecting these taxes.
234
- 2 -
256
H.V.Jr:
Well, I mean that has nothing to do with -
Gaston:
I don't see that there is any great value of it,
but Sam says that the President wants it.
Taylor:
Well, that must be for this conversation that's
just been -
Gaston:
No, I talked to Sam again this morning.
H.M.Jr:
I just left the President. I just left him. I
know the President hasn't seen anybody but me
this morning.
Gaston:
Well, it seems to me, then, that we are not called
upon to do anything.
H.M.Jr:
Well, I just left the President and he hadn't seen
anybody. He hadn't finished his breakfast. I'm
sure he hadn't seen anybody.
Gaston:
Well, I talked to Sam -
Taylor:
The only way is to get a thoroughly statistical
release.
Gaston:
Such a statement would "be taken as an effort by
the Treasury Department to justify what the
President.
H.M.Jr:
Listen, after talking to the President, I'd
forget the whole thing.
Now, what I am going to go into - - I don't know
whether you want to sit in - I'm going in on this
Belgian and Swiss thing.
Gaston:
Yes, I'd like to.
H.M.Jr:
O.K.
235
October 27, 1936
Mr. Reed and Dr. Feis of the State Department end
Mr. Taylor and Mr. Lochhead of the Treasury met with the
Secretary at 10 o'clock this morning.
The Secretary said to Mr. Reed, "The State Depart-
ment is 60 diplomatic that they want me to talk first.
As far as I am concerned, I would be delighted to let
Suarez postpone his trip until after Mr. Hull's return
from South America. Can you people draft a note to
Ambassador Daniels? This thing came up while the Presi-
dont was on a battleship last spring and at that time
the President wired me, having received word from Welles
about a request that was made by some country that on
the agenda at Buenos Aires be put the stabilization of
currencies. The President telephoned me -- I think it
was last spring -- and I told him at that time that I
felt I would much rather not have any international mone-
tary conversations included in the South American Confer-
ence. Welles said it was a peace conference and that
he did not want to sidetrack it 88 a monetary conference."
Mr. Reed inquired, "Do you think it was Nexico?"
Mr. Taylor replied, "It was and it was while you (Mr. Mor-
genthau) was at Sea Island."
The Secretary agreed, saving, "Yes; it was, and
we covered the thing then. For many reasons I would
Just as well not see Suarez now."
Mr. Reed said, "We can draft a message." "Thank
you very much, If said the Secretary. To Mr. Reed, Dr.
Fels said, "When you have the draft prepared, read it
over the telephone to Mrs. Klotz and she will pass it
along to the Secretary."
At this point Mr. Reed and Mr. Lochhead left the
meeting, Dr. Feis and Mr. Taylor remaining with the Sec-
retary.
Dr. Feis said, "This is on my own initiative. I
want to read a cable which we received from Mr. Bullitt
after he had been to see Blum. The gist of the cable 1s:
"The French Premier was very much dis-
turbed because the Belgium action had come
236
-8-
to him 8.8 8. complete surprise. He
had received information as a result
of conversations between the French
Foreign Minister and the Belgium
Premier that when some action was
contemplated the French would be fully
informed of the action itself and of
its significance before any public
announcement was made. The French
Premier felt that possibly Belgium
had acted contrary to the tentatively
agreed upon procedure because Belgium
might have more up-to-date and specif-
1c information regarding Germany's con-
templated move on the western front
and therefore felt that she must take
independent action rather than rely on
the French to defend certain sections.
There was reference to an article by
Edgar Mowrer of the Chicago Daily Mews
which apparently referred to German
plans for attack or defense on the
western front and the place of Belgium
and Switzerland in these plans. There
was also considerable comment on the
attitude of Poland. The general sense
of this comment was that Poland and
France were working very closely to-
gether and that 38 a result of the
recent visit of the Polish Chief-of-
Staff to Paris that French-Polish re-
lationships had been re-established.
The situation in Czechoslovakia also
was mentioned as a somewhat disturbing
factor, indicating the extent of the
break-up of the Little Entente and the
extension of German influence in that
direction. The French Premier stated
that he saw no reason to attempt to
interfere with the expansion of German
economic relationships in Central
Europe and the Balkans, in fact that
an orderly expansion of these relation-
ships could contribute to the pos sibil-
ities for peace but that steps should
be taken to insure that the economic
237
-3-
development should not become BO ex-
tensive that it carried with it polit-
ical relationships as well.
In commenting on the French domestic
situation he stated that he had relled
in the past on the cooperation of the
Moscow Government to influence the Oom-
munist party in France whenever the
need was very real and that up to the
last two weeks this support had been
forthcoming on the occasions on which
he had invoked it. He now felt that
he himself and his Government were no
longer in the good graces of the Moscow
authorities and that the latter would
like to see his Government fall; that
this was very short-sighted on their
part as the only government which could
replace his would be one much farther
to the Right and that in case of a gen-
eral election the Communist Party would
lose more than half their seats; that
the recent tendency was to increase the
difficulties between the employer and
workers and that the small employers
were much more rigid in their opposi-
tion to needed reforms than had been
the case previously.
He also referred to 8 message re-
ceived from the President and to the
attitude of the United States in the
currency negotiations and that he was
convinced that the United States was
the sincere friend of France.'
Dr. Feis remarked, "This cable 18 ten days old and
only got to me yesterday. Anything might have happened
subsequently."
The Secretary's comment was, "I think conditions
are a little bit better now. This cable 18 ten days old.
I call up Hull regularly. Anything that I have,
I pass on to him. We are absolutely alone and by our-
selves and this sort of thing -- oh, well! what's the
238
-4-
use!" Feis added, "My bringing this stuff over here is
on my own. You understand that."
Continuing his remarks, the Secretary said, "On
this Japanese thing, I have Just begged for information.
I haven't received anything! I guess they Just have
nothing. They know nothing about what 1s going on. The
only message I got was that the Premier of Japan went up
to see the Emperor.
There are two things that are happening: (1) that
the Japanese balances have gone up on deposits in this
country from $30,000,000 to $35,000,000. The other thing
is that the outstanding commodity which has risen since
the devaluation 18 silk. Our boys are studying the reason
for this.
Let me give you something else. I have had two
checks made, from two different sources, and there has been
no big swing of buying or selling of commodities since de-
valuation and for a very interesting reason. There has
already been a sufficient jump in prices abroad so that
there is no distinct advantage for our importers to buy.
The French devaluation and others will not mean that there
will be a dumping of goods on this shore.
After election I am going to invite certain people
in to meet informally with me who will give me the infor-
mation I want. It will be similar to the group we had at
my house the night we explained our recent monetary moves.
This 18 the first flash I have had. The thing is,
to me it is very important because if there had been a
lot of cheap goods come in, when Congress met we would hear
about it. Our boys are working on this and are getting
the information by telegraph and cable."
Dr. Fels remarked, "You will always have difficulty
in getting the political information from abroad.' HM,Jr's
response was, "You do not get many cables like the one you
just read. Dr. Feis agreed, saying, "No; the rest you
can get out of the newspapers. Nine out of ten cebles
you get you already know about."
The Secretary then said, "One man who is new to me
718.6 this man Fox, of the Tariff Commission. He was on
239
-5-
toes and I never knew he existed. I appreciate this
information you have given me.
Do you know that the Port of Amsterdam is now
running ahead of Antwerp? That may possibly be why
Holland does not want to join us. You know what I
have done on the gold business? We have decided to
accept Switzerland and I have asked Cochran to go to
Belgium and say that we were not satisfied and that
we wanted to do business with the Government and not
with the Bank of Belgium. I told this to the British
yesterday." He then gave Dr. Feis the gist of his
conversation yesterday with Mr. Mallet and Mr. Bewley.
After Dr. Feis left, HM, Jr. said, "One of these
days, Schacht will be coming to this country. The next
big move is for somebody to talk to Germany on money and
not on colonies and trade treaties."
240
The French Premier was very disturbed because the Belgium action
had come to him 8.5 a complete surprise. He had received information as
a result of conversations between the French Foreign Minister and the
Belgium Premier that when some acti on was contemplated the French would
be fully informed of the action itself and of its significance before
any public announcement was made. The French Premier felt that possibly
Belgium had acted contrary to the tentatively agreed upon procedure be-
cause Belgium might have more up-to-date and specific information regarding
Cermany's contemplated moves on the western front and therefore folt that
she must take independent action rather than relyi
on the French to
defend certain sections. There WSS reference to an article by Edgar
Mowhirer of the Chicago Daily News which apparently referred to German
plans for attack or defense on the mestern front and the place of Belgium
and Switzerland in these plans. There was also considerable comment on
the attitude of Poland. The general sense of this comment was that Poland
and France were working very closely together and that 88 8. result of the
recent visit of the Polish Chief-of-Staff to Paris that French-Polish
relationships had been re-established.
The situation in Caechoslovakia also was mentioned as & somewhat
disturbing factor, indicating the extent of the break-up of the Little
Entente and the extination of German influence in that direction. The
French Premier stated that he saw no reason to attempt to interfere with
the expansion of German economic relationships in Central Europe and the
Balkans, in fact that an orderly expansion of these relationships could
contribute to the possibilities for peace but that steps should be taken
to insure that the economic development should not become so extensive
241
- 2 -
that it carried with it political relationships 88 well.
In commenting on the French domestic situation he stated that he
had relied in the past on the cooperation of the Moscow Government to
influence the Communist party in France whenever the need was very real
and that up to the last two weeks this support had been forthcoming
on the occasions on which he had invoked it. He now felt that he himself and
his Government were no longer in the good graces of the Moscow authorities
and that the latter would like to see his Government fall, that this
was very short-sighted on their part as the only government which could
replace his would be one much further to the Right and that in case of 8.
general election the Communist Party would lose more than half their
seats; that the recent tendency was to increase the difficulties between
the employer and workers and that the small employers were much more
rigid in their opposition to needed reforms than had been the case
previously.
He also referred to a message received from the President and
to the attitude of the United States in the currency negotiations and
that he was convinced that the United States was the sincere friend
of France.
242
October 27, 1936.
It
Chairman Eccles, Governor Ransom, Mr. Taylor and Mr. Upham
had lunch with the Secretary at 1 o'clock.
Mr. Eccles referred to & telephone conversation which the
Secretary had had with him a few days ago with reference to the
Treasury bearing full responsibility for the Government bond mar-
ket and the fact that the Open Market Committee is not operating
in the market. He stated that he never could tell whether the
Secretary was in earnest or kidding him.
The Secretary interposed to say he was having fun with him.
Secretary Morgenthau went on to say that there is some need
for putting investment and trust funds into the market just now,
that he has been buying fairly heavily during the last few days,
that it may be necessary to continue for B little while, and that
the Federal Reserve system might give some consideration to helping
carry that burden. He related that after the President's Green
Bay speech, for instance, he had purchased $45 million of Govern-
ment bonds within half a day. It appears now that there is some
pressure on the market which can perhaps be linked to the forth-
coming election.
Mr. Morgemthau said that he is supporting the market one
thirty-second below the bid price now, and that if the new bond
gets down to 101 he will fight to keep it there. He does not want
it to break through 101.
Mr. Eccles stated that the Executive Committee of the Open
Market Committee, which is made up of himself and two other members
of the Board of Governors and two Presidents of the Reserve Banks,
-2-
243
can instruct Dr. Burgess, the manager of the fund, to conduct
258
open market operations. He stated that the Executive Committee
has freedom to use $500 million of the fund for investment pur-
poses, and freedom to increase the total reserve system portfolio
by $250 million. They have in the system portfolio bonds in the
amount of $378 million which they want to increase by $122 million
to half a billion. The $378 million represents an increase of
approximately $250 million since March of this year. He indicated
that there is some desire to increase earnings.
Mr. Eccles said that he thinks it would be possible and
proper for the Open Market Committee to share any open market
operations at this time and he suggested that Dr. Burgess could
conduct operations for both accounts. He suggested that if an
unusual situation developed where it was thought that the Federal
Reserve might help out, Dr. Burgess might get in touch with him
and he could authorize purchases for the account of the Open
Market Committee.
Mr. Morgenthau saw one difficulty. He explained that some-
times Dr. Burgess is not in thorough agreement with him as to
the purchases that should be made. In general, Dr. Burgess is
inclined to be 8 little more conservative and, while he does 8.
splendid job and serves as a useful check on Treasury operations,
it must be, after all, a decision of some one person and neither
Dr. Burgess nor anyone else can serve two bosses. Mr. Morgenthau
suggested, therefore, that it might be a good plan for him to
proceed as he has been for the last three years -- to conduct the
244
-3-
market operations for the day, giving the Open Market Committee
250
the option at the end of each day of taking half of the bonds
purchased. Any time they do not want to ,all they have to do
is say 30,
Mr. Eccles agreed to this and Mr. Ransom stated that he
considered it more than fair.
Mr. Eccles agreed to communicate at once with the other
members of the Executive Committee of the Open Market Committee
and to let Mr. Morgenthau know later in the day, or certainly
before the market opens in the morning, their decision.
Mr. Morgenthau asked Mr. Taylor if he were in agreement
with the proposal and Mr. Taylor said that before answering
definitely he would like to clear up one or two points. He
stated that he thought there might be some criticism from the
public if they found out, as they undoubtedly would, that the
Federal Reserve System was supporting the market for Government
bonds.
Mr. Eccles said they need not know, but Mr. Taylor felt that
they would inevitably find out.
Mr. Taylor wondered what reply the Federal Reserve could make
to such a criticism inasmuch as their main interest is long term
credit policy rather than day to day market support.
Both Mr. Eccles and Mr. Ransom were of the opinion that the
Federal Reserve, through its open market operations, had a very
legitimate interest in maintaining the long term Government bond
market.
Mr. Eccles said that he would have no hesitancy in saying that
245
-4-
he considered it essential in the interest of the long term
credit position that there be 8. strong market for Government
bonds.
Mr. Taylor agreed (and explained after the meeting that
his line of questions had been designed to get a commitment
from Mr. Ecoles and Mr. Ransom to the proposition that B. strong
market for Government bonds is a necessary concomitant of a cheap
money policy).
Mr. Morgenthau asked Mr. Upham if he approved of the idea
and he replied that he did but wanted to inquire if the operations
of the Open Market Committee, in participating in Treasury pur-
chases, would serve to increase their portfolio or be washed out
by sales of equal amounts of bills and notes.
Mr. Eccles replied that it would not increase the portfolio
except perhaps from day to day between weekly report periods.
Mr. Upham asked if it would be any disadvantage to the
Open Market Committee to have bonds purchased for them by the
Treasury one day and they be under the necessity of making offsetting
sales of bills and notes on the following day, to which both Mr.
Eccles and Mr. Ransom replied that they thought not -- that they
operate that way in their exchanges at the present time and that
everything adjusts itself within the week, before report date.
Toward the close of the luncheon Mr. Harris came in for a
moment at the Secretary's request and reported that the market is
quiet, and that he had bought $8,875 million bonds during the day.
Before leaving the Treasury, Mr. Eccles and Mr. Ransom
examined the ticker facilities in Mr. Lochhead's room. Mr. Ransom
246
-5-
261
was of the opinion that the Reserve Board should have a duplication
of the facilities and information for their use.
Upm.
247,
SUMMARY OF UNITED - an APPROPRILATION
PIRCAL TEAM. 1936. 1957 - 1996 AND DIFFERENCE SEVEN 2957 - 1958
EXCEPTS
Actual
2937
-
Millers
1956
1996
V
(c) . (-)
Tax
$8,203,363.000
$3,144,000,000
. a
Internal
2,085,160,477.09
2,230,176,000
$,111,687,000
-
181,664,000
Internal
Do -
o
82,000,000
a
-
88,000.000
Social Security
o
324,600,000
774,800,000
. 150,800,000
2
777.486.12
134,532,000
e
. 134,552,000
$86,811,993.40
402,000,000
486,300,000
. 05,300.000
- reselpts
216.293.413.09
199,168,000
189,165,000
o
Total, Reseipts
$4,115,056,615.13
$5,665,839,000
86,965,870.000
$1,880,051,000
- -
666,000,000
705,000,000
750,000,000
- 15,000,000
maries of Columbia revenues
46,010,686
40,073,910
40.073.910
0
Total reference
$4,887,987,301.13
$6,410,912,910
$1,305,051,000
CONDITION
Appropriations
Intimated
1957
Notionales of
Artual
1937
(insleting respire-
Appropriations
Difference
1956
printices)
1938
(+) - (-)
$ 21,516.234
4 23,600,000
8
M
o
office
125,400
$00,000
515,130
515,150
a
- Funds (o, 3. share)
40,500,000
46,550,000
46,550,000
73,067.000
+ . 86,317,000
1 I
406,281.196
500,000,000
300,000,000
y
585,000.000
.
77,000,000
Tar
(M)
and Insurity Board
2.156,182
140,000,000
187,800,000
414,760,292
+
- Tallay betherity
21,016,755
45,000,000
39,000.000
57,709,192
.
17,809.298
DATE -
- administration (enslusive of Adjusted Service
wilfiests had)
575,052.00
600,000,000
635,727,000
507,406,000
- 16,383,000
opentant Offices
52,016,467
85,000,000
95.718,711
139,963,666
-
?
of Agriculture
668,154,378
770,000,000
766,200,823.04
. 893,403,000
Plant of Comires
23,070,569
53,000,000
35.719,200
45,996,933
*
10.877.713
=
at the Interior
79,970,041
105,000,000
156,586,861.16
823.225.160.05
.
of Justice
37,862,358
$8,000,000
V
41,294.185
47,662,101
-
6,305,076
E
privat of Labor
17,131.106
21,000,000
01.76.,700
$5,060,065
.
4,203,955
5
at the Bary
391,426.00
550,000,000
$28,102.552
686,572.054
.
90,509.500
?
Office Department (defisioney)
65,060,912
70,000,000
75,544,589
-
$7,085,200 Make
This of Bate
16,970,756
18,605,300
16,963,550
1,014,194.40 Jaina -
That of the Treasury
5/1,975,800,000
1,939,115.613
. 680,310,510 ?
- of Mar
$11,500,000
579,883,606
000.000,435
.
110,814,771
not of Columbia (v. 1. store)
5,707,500
5,000,000
5,000,000
5,000,000
o
150mg (extimbed)
0
90,000.000
100,000,000
100,000,000
0.
Total, regular
$5,431,035,300
$5,563,987,586.50
.
specifierse free Postal reversed
666,000,000
705,000,000
705,000,000
750,000,000
.
45,000,000
- of Columbia frem District of Colembia
46,010,606
60.073,910
LD.073.910
60.073.910
4
05.060.015,250
$6,176,909.210
M,39,061,LN-50
$7,584,019,562.79
$1,376,050,05.79
- Hollef
- 625,000,000
7
5/2.715.263.103
5/1,771,000,000
1,425,800,000
1,000,000.000
Terried service Fund
560,000,000
o
0
o
- amering prime years
65,483.399
0
e
0
e
- Items sai adjurient disbursing offlows'
Amix internally
-2,375,478
o
o
0
e
Grand Total
$9,591,005,W4
$7,736,051,426.50
lag than temperary theres will be temp 1958, standar there will be . retails of M.79.260,000.
also an reseived, 1937 appropriation and " 1958 artimis.
- - united that Congress will and legislation comining Merginey Commits Sirt,
includes of for 1. s. Court ml Cert of appeals approyriated 16 Market of Columbia is 1937 bet instated la Jundre edimite fee 1998.
Invisive if $65,433,359. adjustment severing prior years.
for Pall La Regist and Industion of Intered lates issuided is Transay,
248
283
October 27th
The following were present at the 9:30 meeting
in Secretary Morgenthau's office this morning:
Mr. Bell
Mr. Gaston
Mr. Gibbons
Mr. Haas
Mr. McReynolds
Mr. Oliphant
Miss Roche
Mr. Taylor
Mr. Upham
H.M.Jr: Well Dan I hope you are ready to be kidded this
morning.
Bell:
I have been already. I was just telling them
(meaning the group outside before the meeting was
called) he decided my vote.
H.M.Jr: What did he call Dan? (This question was addressed
to the group)
Bell:
"Just a room in the White House". He is going to
correct that.
H.M.Jr: He (Landon) said McCarl was the legal check on
spending.
Bell:
Yes and that important position has been vacant
since July and you know what happens when the boss
is away.
Gibbons: Was this his last night's speech?
H.M.Jr: Yes.
H.M.Jr: Mac, O.K. on Hester?
McReynolds: I would like to add another member - Elmer Irey.
H.M.Jr: No I don't think so because I don't think these
investigating boys - they have to make good on
investigation. No. Well Herman put it in better
English - it has reached its judicial stage.
H.M.Jr: Wayne?
Taylor: Nothing.
249
- 2 -
264
H.M.Jr: Wayne, in. Feis will be here at ten. I want you to sit
Taylor: Mex? (meaning Mexicans)
H.M.Jr: Mex.
Gaston: David Lowe, a British cartoonist, is here in town doing
pictures for the English newspapers. He wants to make
a sketch of you while you are talking or working. He
is going to sketch the President this afternoon.
Group: Sure - why not?
Taylor: Trade (Laughter) one of you for two pictures of Mrs. Simpson.
H.M.Jr: What do you recommend?
Gaston: I would like to see him do it - yes.
H.M.Jr: Well let me think about it. Ask me about 11 o'clock.
Gaston: All right.
Gibbons: Have you decided about Saturday night?
Gaston: I will talk to you about that.
Gibbons: I sent Joe Maynard a wire on that Curley thing. Said
he handled himself very well.
H.M.Jr: Herbert walked home with me last night and he told me
about it.
H.M.Jr: How about you?
Roche: I just got back this morning and everything is running
fine - - O.K. Great enthusiasm everywhere.
Gibbons: Cincinnati Inquirer yesterday said Roosevelt would
carry Ohio by one million four hundred twenty four
thousand and one million two hundred twenty eight -
something like that - for Landon. They have been
printing vicious editorials right on the front page.
H.M.Jr: George (Haas) I know you are all right.
250
- 3 -
265
H.M.Jr: Dan, I haven't seen you. Is the money holding up?
Bell:
Pretty good.
H.M.Jr: I would like to see you about 11. Have you a
hearing on?
Bell:
Yes I have a hearing.
H.M.Jr: How about 12?
Bell:
Fine.
H.M.Jr: Did you do any business over the week-end?
Bell:
No sir.
H.M.Jr:
Lose anything?
Bell:
No sir.
Bell:
We have about eight million scattered throughout the
country and it is on demand. The banks have to keep
a reserve against that of 15 per cent. I would like
to make an arrangement whereby these deposits can be
made time instead of demand and that reduces reserve
requirements and gives the bank a little more in
balance.
H.M.Jr: Would you talk that over with Cy Upham?
Bell:
Yes sir.
H.M.Jr: Well Cy is supposed to be the liaison officer between
Federal Reserve and myself. Let the two of you
Bell:
.....Yes sir.
H.M.Jr: What else?
Bell:
The Home Loan Bank System is getting short on funds
and they want to get into
.......
H.M.Jr: Dan, let's do that at noon.
Bell:
Nothing to do now except you to see Delano and
Mr. Taylor the second or third day after election.
251
-4-
265
H.M.Jr: Will you take it up again at 12?
Bell:
Surely.
H.M.Jr:9 Check up with Eccles and Ransom as to whether they
are coming to lunch.
Upham: One o'clock?
H.M.Jr: Yes. You are not coming?
Upham: I don't think they will miss me.
H.M.Jr: You let Mrs. Klotz know so she can order lunch.
H.M.Jr: Oh if you want to go home to vote it is all right.
You want to leave here Friday?
Upham: O.K.
Me Reynolds: I was supposed to talk to you on the way down
this morning about Caledonia McCall.
H.M.Jr: Let me tell the story my way.
Note:
At this point Secretary Morgenthau instructed McHugh
not to take the story down as it was too silly.
H.M.Jr: Well everybody is happy. I guess that is about all.
252
October 27, 1936.
11:25 a.m.
Burgess:
Hello
H.M.Jr:
Hello Burgess.
Burgess:
Oh hello sir.
H.M.Jr:
How are you?
B:
Oh pretty well. We're picking up a little stuff
this morning. I thought I'd let you know.
H.M.Jr:
Good.
B:
We bought about five or six million.
H.M.Jr:
Five or six million?
B:
Yes - they're
H.M.Jr:
....You call that a "little stuff".
B:
(Laughter)
H.M.Jr:
Of course we down here in the Treasury - we watch
the pennies and up in New York you talk in millions.
B:
(Laughter) Well we're ----
H.M.Jr:
Yes.
B:
.....we're, as you said, being fairly courageous.
H.M.Jr:
Yes.
B:
We're buying a hundred and one two - 23.
H.M.Jr:
Oh really.
B:
Yes.
H.M.Jr:
Ah -
B:
Now that was - that was, as you said, a thirty-second
under the market.
- 2 -
253
H.M.Jr:
Well that's all right. I'm glad you are. I
think they're a good buy.
B:
I think they are.
H.M.Jr:
I - I wouldn't be afraid. I - - I - - I'd rather not
see them go below a hundred and one.
B:
Yes - yes. Well that was
.....
H.M.Jr:
In fact when they get to one hundred and one I'd
fight quite hard.
B:
That's what we're working on and we wanted to
leave ourselves a thirty-second or two leeway
so that we wouldn't get in too quick and too
hard on it and we'd have a little leeway to
work on.
H.M.Jr:
Yes. Well I'm glad you called me up. I'll
call you back again in a half an hour.
B:
All right, that's fine.
H.M.Jr:
Are you - are you concentrating on the 56-59?
B:
That's right, yes.
H.M.Jr:
Right.
B:
Yes. We're buying some other stuff we've got
bids in at a thirty-second below the market on
other agencies - other important issues.
H.M.Jr:
And - but this is all for the Treasury.
B:
That's right.
H.M.Jr:
I see.
B:
That's right. Now if the market gets heavy we
can take some of the load
if you want us to.
H.M.Jr:
Well it'll have to get damn heavy.
B:
Yea - you've got a lot of money you want to invest.
H.M.Jr:
Yes and I think they're a good buy.
- 3 -
254
B:
I think so too.
H.M.Jr:
Of course if the President begs me to let him have
else. some of these cheap bonds why that will be something
B:
Yes - yes - yes.
H.M.Jr:
But for the moment I'm glad to buy them. I think
they're a good investment.
B:
I think they are.
H.M.Jr:
Yes. All right, Burgess, I'll call you again a
little later. Thanks for calling.
B:
Very good.
H.M.Jr:
Thank you.
H.M.Jr:
Hello
Operator:
Dr. Burgess. Go ahead.
H.M.Jr:
Hello
B:
Hello.
H.M.Jr:
How they going?
B:
Oh we bought a little more. They're holding
reasonably well.
H.M.Jr:
What are they up to now?
B:
They're.
H.M.Jr:
.....I
mean how many have we bought?
B:
About seven million.
H.M.Jr:
Seven million.
B:
That is about a million more than when I talked to
you last.
H.M.Jr:
Ah-ha.
- 4 -
255
B:
But they're - they're holding pretty well.
H.M.Jr:
All right. Well I'll talk to you a little later.
Of course if anything happens very startling you
call me.
B:
Yep.
All right,
H.M.Jr:
Thank you.
B:
First rate.
H.M.Jr:
Goodbye.
256
October 27, 1936.
3:59 P.M.
H.M.Jr:
Captain Puleston, and if he's not - did we call
him today?
Operator:
Yes, we called him and they said he was ill.
H.M.Jr:
Well, how sick is he?
0:
I don't know. She said he had a very bad throst.
H.M.Jr:
A bad what?
0:
Throat. Sore throat.
H.M.Jr:
Well, did you call up his home?
0:
No, I didn't. I think he can probably come to the
phone.
H.M.Jr:
Ask if he can talk on the phone, will you?
0:
All right.
H.M.Jr:
At home.
0:
All right.
H.M.Jr:
Ask if he can talk.
0:
All right.
(Pause)
H.M.Jr:
Hello.
0:
Captain Puleston.
H.M.Jr:
Hello.
0:
Go ahead.
H.M.Jr:
Hello.
W.D.
Puleston:
Hello, Mr. Secretary. How are you?
H.M.Jr:
I hope I haven't bothered you, but I -
P:
No
257
- 2 -
H.M.Jr:
- I'm a little disturbed. Hello.
P:
Hello.
H.M.Jr:
Have you heard about this case up at Baltimore
where our Customs Agent Cruickshank, where the
newspapers have found -
P:
Wait a minute.
H.M.Jr:
- he was taking numbers on a car - of some Communist
meetings? Hello?
P:
No, no, I haven't heard about that.
H.M.Jr:
Well, as soon as you get well and get back and -
P:
Just a minute.
H.M.Jr:
Your man Dorsey up there -
P:
Yes
H.M.Jr:
- and I - I think Dorsey went too far.
P:
Too far, you think. Is - is he my man - Dorsey?
H.M.Jr:
Yes, you got a man there by the name of Dorsey.
P:
Yes - D-o-r-s-e-y?
H.M.Jr:
D-o-r-s-e-y.
P:
Yes.
H.M.Jr:
Now, we'll have to take the brunt of it and keep
quiet -
P:
Yes
H.M.Jr:
- but he went too far.
P:
Ut. huh.
H.M.Jr:
And he had our man standing out there on the curb
taking numbers of cars going in, so forth and so
on. See?
258
- 3 -
P:
Yes
H.M.Jr:
Well, that's a little bit outside of our line.
P:
Yes
H.M.Jr:
And when you get back -
P:
(Laughs) All right, sir.
H.M.Jr:
I mean - I think you and Harold Graves better get
together and have another talk.
P:
Uh huh, I will. I'm awful sorry about it. I hope
it didn't -
H.M.Jr:
Well, we're not going to - we're not going to talk.
We'll keep our mouth shut, see?
P:
Yes
H.M.Jr:
But as soon as you're well you and Harold get
together.
P:
All right.
H.M.Jr:
But I - - I don't want something like that to happen
again.
P:
All right.
H.M.Jr:
Because - well, it'll spoil your work and it spoils
our work.
P:
Yes
H.M.Jr:
Right?
P:
Righto.
H.M.Jr:
I hope you'll be well soon.
P:
Well, I don't - it's nothing but a heavy cold,
but that doctor thought I'd better stay away from
the office for a couple of days.
259
- 4 -
H.M.Jr:
Well, you - soon as you're well you see Harold
Graves.
P:
I will indeed.
H.M.Jr:
Thank you.
P:
Very well.
H.M.Jr:
Goodbye.
P:
Goodbye.
Regraded Inclassified
260
251
October 27, 1936.
3:55 p.m.
H.M.Jr:
O.K.
Operator:
All right.
Go ahead.
H.M.Jr:
Hello.
Eccles:
Hello.
That - that arrangement is 100% satis-
factory.
H.M.Jr:
Well now that's fine, Marriner. Now we're
partners.
E:
That's right.
We're - we're full fledged
partners.
H.M.Jr:
And if you don't like what I do during the day you
don't have to take it - is that right?
E:
Well that's all right. We - we appreciate that
friendly offer but as a practical matter why we're
not going to take any advantage of it.
H.M.Jr:
Well -
E:
Ah - we - we - I talked to all five members of the
Executive Committee
H.M.Jr:
.... Yes.
E:
and they're all in full accord.
H.M.Jr:
Fine.
E:
I talked to Burgess
H.M.Jr:
Yes.
E:
and Burgess says that that's - he thinks
that's all right - that's perfectly agreeable to
him
H.M.Jr:
Fine.
E:
and he'll start to - operating that way in
the morning and
261
02 I I
252
H.M.Jr:
Oh damn - in the morning!
E:
Sure.
H.M.Jr:
Don't you want to wait till after election?
E:
(Laughter) No of course I don't want to wait -
hell I (laughter)
H.M.Jr:
Oh now, Marriner, let me have a few of these
cheap bonds now. (Laughter).
E:
Well I'll tell you - we've been letting you have
all of them.
H.M.Jr:
Oh go on.
E:
We've been letting you have all of them.
H.M.Jr:
You want to start in the morning, eh?
E:
Yep.
H.M.JrL
All right.
E:
How's that - is that all right?
H.M.Jr:
I let you in on the ground floor.
E:
You might be darn glad to have us in before the
week is out.
H.M.Jr:
Oh (laughter)
E:
What?
H.M.Jr:
Maybe before the year is out but I can take it for
a week anyway.
E:
Well I
....
H.M.Jr:
I - - I like the arrangement. I think it's fine and
I'm serious now and I think it's a move in the right
direction.
E:
Well I - we feel that way about it. I think it's
something that - that - if they'd done that a couple
of years ago when the market really needed some support -
and of course it may need it in the future - if we
establish it now.
262
- 3 -
253
H.M.Jr:
Right.
E:
Ah - - it - it - it means that if we get in a tough
place in the future we've at least established a
precedent.
H.M.Jr:
Now I'm very much pleased, Marriner - I appreciate
E:
......
Well if it doesn't work to your satisfaction
anytime you let me know and if our fellows want to
kick over the traces I'll let you know.
H.M.Jr:
O.K.
E:
All right.
H.M.Jr:
Fair enough.
Thank you for calling.
E:
Goodbye.
Regraded
263
October 27, 1936
3:59 P.M.
H.M.Jr:
How are you?
Prof.
Williams:
I'm fine.
H.M.Jr:
They said you called me.
W:
Yes, I called because I wondered about tomorrow.
You know -
H.M.Jr:
Well -
W:
when I left last week -
H.M.Jr:
Yes
W:
- you thought you might have a meeting tomorrow.
H.M.Jr:
Well, here's the situation. We sent back inquiries
for more information.
W:
Yes
H.M.Jr:
And I doubt whether we'll get that before Thursday
or Friday. Now, you always go to New York Thursday,
don't you?
W:
Yes, I usually go down tonight.
H.M.Jr:
To New York.
W:
Tonight.
H.M.Jr:
To New York.
W:
Yes
H.M.Jr:
Oh, this - today's Tuesday?
W:
Yes, today's Tuesday.
H.M.Jr:
Well - oh - and what daysdo you spend in New York?
W:
I usually spend Wednesday and Thursday there.
H.M.Jr:
Well, I would suggest that you go to New York,
because there's nothing doing here tomorrow -
W:
Yes
264
- 2 -
H.M.Jr:
- and if something breaks I'll call you.
W:
All right.
H.M.Jr:
How's that?
W;
That's fine. I suppose what - has Cochran gone - ?
H.M.Jr:
He's tonight. going to Belgium. He's going to Belgium
W:
Yes
H.M.Jr:
Well -
W:
Well then, I'll go to New York tonight and wait
to hear from you.
H.M.Jr:
Yes. Well, you better call me up from New York.
W:
All right, I'll do that tomorrow.
H.M.Jr:
But he went to Belgium tonight.
W:
Oh yes.
H.M.Jr:
So we won't hear anything until - let's see -
Wednesday, Thursday morning -
W:
Yes
H.M.Jr:
- will be the earliest.
W:
Yes
H.M.Jr:
So will you give me a ring tomorrow?
W:
All right, I will.
H.M.Jr:
Thank you for calling.
W:
All right. Thanks for calling me.
H.M.Jr:
Goodbye.
265
October 27, 1936.
3:55 p.m.
H.M.Jr:
O.K.
Operator:
All right. Go ahead.
H.M.Jr:
Hello.
Eccles:
Hello. That - that arrangement is 100% satis-
factory.
H.M.Jr:
Well now that's fine, Marriner. Now we're
partners.
E:
That's right. We're - we're full fledged partners.
H.M.Jr:
And if you don't like what I do during the day you
don't have to take it - is that right?
E:
Well that's all right. We - we appreciate that
friendly offer but as a practical matter why we're
not going to take any advantage of it.
H.M.Jr:
Well -
E:
Ah - we - we - I talked to all five members of the
Executive Committee
H.M.Jr:
Yes.
E:
and they're all in full accord.
H.M.Jr:
Fine.
E:
I talked to Burgess
H.M.Jr:
Yes.
E:
and Burgess says that that's - he thinks
that's all right - that's perfectly agreeable to
him
H.M.Jr:
Fine.
E:
and he'll start to - operating that way in
the morning and
266
- 2 -
H.M.Jr:
Oh damn - in the morning!
E:
Sure.
H.M.Jr:
Don't you want to wait till after election?
E:
(Laughter) No of course I don't want to wait -
hell I (laughter)
H.M.Jr:
Oh now, Marriner, let me have a few of these
cheap bonds now. (Laughter).
E:
Well I'll tell you - we've been letting you have
all of them.
H.M.Jr:
Oh go on.
E:
We've been letting you have all of them.
H.M.Jr:
You want to start in the morning, eh?
E:
Yep.
H.M.Jr:
All right,
E:
How's that - is that all right?
H.M.Jr:
I let you in on the ground floor.
E:
You might be darn glad to have us in before the
week is out.
H.M.Jr:
Oh (laughter)
E:
What?
H.M.Jr:
Maybe before the year is out but I can take it for
a week anyway.
E:
Well I
....
H.M.Jr:
I - I like the arrangement. I think it's fine and
I'm serious now and I think it's 8 move in the right
direction.
E:
Well I - we feel that way about it. I think it's
something that - that - if they'd done that B couple
of years ago when the market really needed some sup-
port - and of course it may need it in the future -
if we establish it now.
267
- 3 -
H.M.Jr:
Right.
E:
Ah - it - - it - it means that if we get in a tough
place in the future we've at least established a
precedent.
H.M.Jr:
Now I'm very much pleased, Marriner - I appreciate
E:
.....
Well if it doesn't work to your satisfaction
any time you let me know and if our fellows want to
kick over the traces I'll let you know.
H.M.Jr:
O.K.
E:
All right.
H.M.Jr:
Fair enough. Thank you for calling.
E:
Goodbye.
Regraded Unclassified
268
October 27, 1936
4:45 P.M.
H.M.Jr:
Hello.
Operator:
Dr. Burgess - go shead.
H.M.Jr:
Hello.
W.R.
Burgess:
Hello, sir.
H.M.Jr:
Well, I suppose you've heard about the new deal
we've put over.
B:
Yes, Marriner called me up and told me about it.
H.M.Jr:
And you're satisfied?
B:
Yes, I think that's all right.
H.M.Jr:
Of course I think the Treasury's got the bad end
of it, but I suppose I'll have to stand up under
the burden.
B:
Well, I think we - we'll both benefit from it.
Now, I understand we start that with purchases
tomorrow.
H.M.Jr:
That's right. No, I'm joking. I - I think it's
all right.
B:
All right.
H.M.Jr:
And I - seriously, I think from your standpoint
it's - it's good, because you won't have to take
orders from a Board and from an individual both.
B:
That's right.
H.M.Jr:
And I think if - if it had been that way, I think
it would have been - your position would have been
made absolutely impossible.
B:
Well, there's - there's a good old saying somewhere
about no man being able to serve two masters.
269
- 2 -
H.M.Jr:
And this way - just a minute.
(Pause)
Hello.
B:
Yes
H.M.Jr:
I think that this way - well, we'll continue to
work just as we have in the past -
B:
Sure
H.M.Jr:
- as far as I'm concerned.
B:
That's right.
H.M.Jr:
I've been more than pleased with the arrangement.
B:
Yes
H.M.Jr:
And I'm delighted to see the Board come in.
B:
I think so; I think they should really.
H.M.Jr:
Yes
B:
At least in their present position they can afford
to increase their long bonds.
H.M.Jr:
Yes
B:
Now, the time may come when they shouldn't increase
them any more, but it hasn't come yet.
H.M.Jr:
I understand we did thirteen million today.
B:
That's right - 13,708,000.
H.M.Jr:
Fine.
B:
About half of that was at two and three-quarters.
H.M.Jr:
Right.
B:
The rest of it went -
270
- 3 -
H.M.Jr:
How did the tone close? How was the tone of the
market?
B:
Well, not bad. It's - it's fairly steady.
H.M.Jr:
Yes
B:
We only bought a few million toward the end there.
H.M.Jr:
Uh huh. Well -
B:
So it behaved pretty well.
H.M.Jr:
Fine. All right, I'll be talking to you in the
morning.
B:
I don't think there's any very great selling, you
know.
H.M.Jr:
No.
B:
It's just a few sellers.
H.M.Jr:
Right. Right. You might tell me tomorrow where the
selling is coming from. You might sort of look it
up for me.
B:
All right.
H.M.Jr:
Will you do that?
B:
All right.
H.M.Jr:
Thank you, Burgess.
B:
Very good.
H.M.Jr:
Goodbye.
B:
Goodbye.
Tuesda
October 27, 1936
raris
WCNS25
Fruich Situation
PARIS--THE "BILLION DOLLAR" 1937 NATIONAL BUDGET ON WHICH
THE FATE OF THE POPULAR FRONT ADMINISTRATION OF PREMIER BLUM
DEPENDS WILL GO BEFORE THE CABINET TODAY. THE ESTIMATES MUST BE VOTED
BEFORE THE END OF THE YEAR.
THE BUDGET HAS BEEN DRAWN UP BY FINANCE MINISTER AURIOL AND THE
VARIOUS CABINET MEMBERS IN THE GREATEST SECRECY. HOWEVER, THE UNITED
PRESS LEARNED THAT IT WILL BE BETWEEN 20,000,000,000 (B) AND
25,000,000,000 (B) FRANCS--OR FROM $930,000,000 TO $1,162,500,000
AT THE NEW DEPRECIATED RATE OF EXCHANGE.
THE ESTIMATES THIS YEAR TAKE ON ADDITIONAL SIGNIFICANCE IN VIEW OF
THE REVALUATION OF THE FRANC BY APPROXIMATELY ONE-THIRD, FROM ITS
FORMER VALUE OF AROUND 6 1/2 CENTS TO THE PRESENT RATE OF 4 2/3 CENTS
PER FRANC.
10/27--TP1014A
271
Regraded Unclassified
10.47
FRENCH CABINET TO GET BUDGET OCT 27 1936
-BY UNITED PRESS-
PARIS - THE FIGURES OF THE 1937 NATIONAL B
BUDGET ON WHICH THE FATE OF THE POPULAR
FRONT ADMINISTRATION OF PREMIER LEON BLUM
DEPENDS GO BEFORE THE CABINET TODAY - THE
ESTIMATES MUST BE VOTED BEFORE THE END OF
THE YEAR
-0-
Tuesda
October 27, 1936
Paris
BERTRAND ON BANK OF FRANCE REFORMS
3:40
ADD BERTRAND
COMMENTING ON REFORMS RECENTLY INSTITUTED
BY BANK OF FRANCE JULES BERTRAND ADMINISTRA-
TOR OF THE BANK STATED- -IT'IS GENERAL
OPINION THAT THESE REFORMS HAVE BEEN FORCED
BY LEON BLUM-S POLITICAL PARTY AND THAT
DIRECTORS OF BANK OF FRANCE HAVE MADE THESE
REFORMS AGAINST THEIR WISHES-
IT IS MR BERTRAND-S OPINION THESE REFORMS
ARE -CAMOUFLAGE- AND THERE IS NO CHANGE
INWARDLY
-THE POLITICAL PARTY OF LEON BLUM WILL
NOT LAST VERY LONG- MR BERTRAND STATED
-BECAUSE MR BLUM WAS PLACED IN POWER BY
WORKING CLASS AND BENEFITS THEY HAVE RECEIVED
IN FORM OF RISING WAGES ARE ALL BEING SPENT
BECAUSE COST OF LIVING IN FRANCE IS RISING
SO RAPIDLY
-BEFORE THE BLUM GOVERNMENT CAME INTO
POWER THERE WERE SIGNS OF A BUSINESS RECOVERY
BUT AT PRESENT A FEELING OF UNCERTAINTY
PREVAILS IN FRANCE-
-0-
273