Volume 116, March 21 – March 24, 1938

DIARY Book 116 March 21 - March 24, 1938 Regraded Unclassified Book Page Alpha Portland Cement Company (Easton, Pennsylvania) See Housing: Cement - B - Budget Collections: HMJr instructs Gaston that after this quarter Helvering's figures will not be used - only Bell's - 3/23/38 CXVI 250 Business Conditions See also Housing Haas memorandum on business situation for week ending 3/19/38 184 Loans to Industry: HMJr asks group to study manner in which the gold in Federal Reserve could be used - 3/23/36 249 Conference on industrial financing; present: HMJr, Taylor, Oliphant, Bell, Haas, Upham, Foley, and Aarons - 3/23/38 276 a) Agenda for meeting concerning Government assistance in industrial financing 292,295,297 b) Copy of Reconstruction Finance Corporation letter to all banks, bankers, and insurance companies 299 c) Copy of "Industrial Finance Act of 1938" transmitted by Securities and Exchange Commission to Treasury for examination 302 d) New draft of above bill 306 Luncheon conference; present: HMJr, James Roosevelt, Jones, Douglas, Ransom, Taylor, Bell, Oliphant, Haas, and Upham - 3/23/38 307 HMJr consults Wagner at FDR's suggestion - 3/24/38 384 - C - Cement See Housing - E - Eccles, Marriner S, Summary of article in Fortune, April 1937, entitled "Controlling Booms and Depressions" 235 Summary of statement of 3/15/37 on credit and monetary policies 238 Regraded Unclassified - 7 Book Page Federal Housing Administration Report on weekly volume of insuring operations through 3/19/38 CIVI 254 Financing, Government Conference to review situation; present: HMJr, Taylor, Bell, and Haas - 3/23/38 256 France See Stabilization - G - Gold Memorandum: "Which countries are gaining and which losing gold?" - 3/21/38 139 HMJr memorandum to FDR stating reasons why Treasury feels gold buying program should not be changed at this time - 3/23/38 260 - H - Housing Walker (L. R.) memorandum on comprehensive study of construction costs in Cincinnati - 3/21/38 164 Report on weekly volume of Federal Housing Administration insuring operations through 3/19/38 254 Cement: Conference; present: representatives of Treasury, Procurement, Tariff, Works Pregress Administration, Federal Reserve, Agriculture, Public Roads, et cetera - 3/21/38 1 a) Revised report embodying two modifications read: (1) in view of feeling of Secretary of State regarding opening of Belgian trade agreement, that section has now been deleted; no indication of any action under reciprocal trade agreement program; (2) deletion of certain of the suggestions regarding public roads b) Recommendations 56 c) Resume of cement industry 65 d) Federal Trade Commission complaint (7/5/37) 98 e) Financial and operating data of five large cement companies, 1929-1937 103 Alpha Portland Cement Company 104 Lehigh Portland Cement Company 109 Lone Star Cement Corporation 113 Pennsylvania-Dixie Cement Corporation 119 Universal Atlas Cement Company 124 f) Legal opinions 129 Regraded Unclassified - I- - (Continued) Book Page Housing (Continued) Cement (Continued): Oliphant memorandum of conference with Wallace (Secretary of Agriculture), Blaisdell, Lubin, McDonald, and Evans - 3/21/38 CXVI 140 a) Special group meeting to discuss; present: HMJr, Oliphant, Magill, Gaston, Haas, White, McReynolds, and Upham - 3/21/38 144 Order signed by FDR over protest of Wallace: a) HMJr tells Jackson - 3/21/38 192 b) N " Peoples 195 a) If a Blaisdell 197 Conference by various departments also attended by Thurman Arnold - 3/24/38 336 Report of Committee on certain uneconomic practices within the building industry 361 - I - Industrial Financing See Business Conditions - L - Lehigh Portland Cement Company (Allentown, Pennsylvania) See Housing: Cement Loans to Industry See Business Conditions Lone Star Cement Corporation (342 Madison Avenue - - New York City) See Housing: Cement - M - Mexico See Silver - P - Pennsylvania HMJr confers with Governor Earle and Harzenstein; also present: Oliphant, Wenchel, and Irey - - 3/24/38 332 a) Alleged corruption in Philadelphia about to be investigated HMJr describes conference to Helvering - - 3/24/38 393 Pennsylvania-Dixie Cement Corporation (60 East 42nd St. - New York City) See Housing: Cement Public Health Parran memorandum concerning conference with FDR and Abel Wolman in regard to stream pollution bill (passed by both Houses but tied up in conference since last year) - 3/21/38 181 Regraded Unclassified - R - Book Page Refugees Welles tells HMJr it has been decided to include Italy; Papal Legate to be approached in order that Pope may be informed - 3/23/38 CXVI 253 Welles transmits copies of two memoranda taken up with FDR and confidential copies of circular telegrame to United States missions in Europe and United States missions in the other American republics, sent in accordance with FDR's instructions - 3/23/38 264 Revenue Revision Statement of Roswell Magill before Finance Committee of the Senate - 3/22/38 365 Roosevelt, James Oliphant memorandum stating that a valid commission as Secret Service operative would give right to carry firearms - 3/21/38 163 - S - Silver HMJr consults Senator Pittman about renewing agreement to buy silver from Mexico - 3/24/38 382,389 Resume of objectives of Silver Purchase Act as contained in the Act itself, in Congressional debates, and in statements of the Administration - 3/24/38 409 Stabilization France: Exchange market movements resume - - 3/21/38 204,314, 315,319 Tripartite Agreement: Resume of statements by Blum and Auriol prior to Tripartite Accord regarding realignment of currencies - 3/21/38 199 - T - Taxation See Revenue Revision Tripartite Agreement See Stabilization - U - Universal Atlas Cement Company (208 South LaSalle Street - - Chicago) See Housing: Cement Regraded Unclassified RE CEMENT PROGRAM March 21, 1938. 10:30 A. M. Present: Mr. Oliphant Mr. Gaston Mr. McReynolds Mr. Haas Mr. Daggit Mr. Viner Mr. Peoples Mr. Reynolds Mr. Lubin Mr. Barton Mr. Collins Mr. Lawes (Procurement) Mr. O'Connell (Procurement) Mr. Fisher Mr. Piquet (Tariff) Mr. Stone (W. P. A.) Mr. Loomis Mr. Hinrichs Mr. Stinebower Mr. Currie Mr. Edwards Mr. Blaisdell Mr. MacDonald (Public Roads) H.M.Jr: All right, Mr. Blaisdell, do you want to go ahead? (Speaks privately with Mr. Blaisdell.) Blaisdell: We have here a report, slightly revised from the report of the last time, in that it has taken into consideration certain of the clearances which were asked for at the last meeting. H.M.Jr: Excuse me just - George, would you mind going out and getting the letter from the Acting Attorney General on this price business - must have it outside. Will you? Haas: Yes sir. Blaisdell: The report involves two modifications, and I'll call attention to those modifications, Mr. Secretary, rather than reading the complete report. Regraded Unclassified 2 N I I In view of the feeling of the Secretary of State regarding the opening of the Belgian Trade Agreement, that section has been deleted from the report, so that as the report now stands there is no indication of any action under the reciprocal trade agree- ment program. The second modification involves deletion of certain of the original suggestions regarding Public Roads, and that modification has shortened the recommendation there, to the following: "That in negotiation of contracts with suppliers of cement, contracts be so drawn as to permit the purchase of cement by contractors on Public Roads at prices obtained by the Federal Govern- ment. This authorization is not intended to tie the hands of a contractor who may be able to purchase at a lower price than that quoted the Government." Mr. MacDonald is here - speak for himself, but it is my understanding that he is in complete agreement with this particular recommendation. H.M.Jr: He is or is not? Blaisdell: I don't see Mr. MacDonald. Viner: Here he is. Blaisdell: Oh, here he is. Sorry. The rest of the document H.M.Jr: Which part is Mr. MacDonald's? Blaisdell: He is in agreement with the specific recommenda- tion as regards the Bureau of Public Roads. H.M.Jr: Which would do what? Blaisdell: Which would enable us to use an open contract for purchase by contractors on Public Roads financed in part by the state, and financed in part by the Federal Government. H.M.Jr: Use round figures - price of a dollar a barrel. That price is available to contractors working in states on roads subsidized by the Federal Government. Regraded Unclassified - 3 MacDonald: Yes. Oliphant: Would you mind reading it again? Blaisdell: "That in the negotiation of contracts with suppliers of cement, contracts be so drawn as to permit the purchase of cement by contractors on Public Roads at prices obtained by the Federal Government. This authorization is not intended to tie the hands of a contractor who may be able to purchase at a lower price than that quoted the Government." The rest of the report is essentially as it was, Mr. Secretary, and the document covering it is presented to you there. H.M.Jr: That whole document? Blaisdell: You will notice the dissent which is attached, namely, the feeling of the Department of Agriculture that this is not a ripe time for anti-trust actions. And that is attached to the document as we are handing it to you. H.M.Jr: Well, before we go into that, I'd like to read the letter from Mr. Robert Jackson, Acting Attorney General: "My dear Mr. Secretary: I have examined the confidential copy of the report of the Inter- departmental Committee project for reducing the price of cement, particularly the third paragraph thereof which relates to cooperation by the Department of Justice. "Personally, I think the plan an excellent one, and while I have not had an opportunity to dis- cuss it with Thurman Arnold, I will do so as soon as he reaches here. "I can promise you complete cooperation of the Anti-Trust Division of the Department as outlined in the memorandum." Well, the reason Mr. Thurman Arnold can't be here at ten-thirty is because he is being sworn in, but we have the complete backing of the Department. Regraded Unclassified 4 - 4 - Now, you say Mr. MacDonald is not in favor of what we outlined? Maybe he'd like to explain. Blaisdell: I think Mr. MacDonald can speak for himself. MacDonald: Mr. Secretary, Mr. Blaisdell spoke for it not as a personal matter, although I am in full agreement with the position which I am authorized to state for the Secretary, and the other men that have been called into consulta- tion by him in this matter: That if this pro- cedure leads inevitably to a trust suit, that this is a bad time to institute such a suit. In the large purchases of cement which we have been making indirectly for Public Roads, we find that the price of our concrete paving is now - the average for the years 130 to '37 is about five thousand dollars per mile under the '24 - 129 average, so that we have a distinctly lower price for cement and other materials, apparently. But we do not purchase directly. We are convinced that we do receive, through the purchase by the contractor of all the materials, lower prices and established market prices. But I think that the position of the Department is somewhat more constructive than one of opposition, Mr. Secretary. We all agree with the desirability of lowering the price of cement, if possible, but even more important is to prevent a price increase with increased volume. H.M.Jr: I don't get that; I don't get that, Mr. MacDonald. MacDonald: We have frequently had the experience, as you, as volume of construction has increased of having an advance in the cement prices, and it, I think, is the proper statement of the position of the Department that we should like to see, if possible, a stabilization of price at a level that will not be increased with increased production or with the advancing months. We have had that experience of increased prices during the advancing months of the year. I think our most constructive suggestion would be that we attempt to work out, with the Government purchasing power behind it - and perhaps even going so far as to establish, for cement and perhaps some of the other commodities, a certain Regraded Unclassified - 5 - 5 minimum consumption during the year, and then attempt to work out a plan with labor that would guarantee labor a wage throughout the year - that is, a wage fixed on annual income rather than the month to month basis. H.M.Jr: Well now, you are getting something entirely different. May I ask you just this question? You, representing Roads in the Department of Agriculture, do you approve or disapprove the move of putting the purchasing of all cement by the United States Government under Procurement? MacDonald: Not say - well, that wouldn't affect us, Mr. Secretary. H.M.Jr: It wouldn't? MacDonald: It would affect the Department of Agriculture, if they buy a lot of cement. H.M.Jr: I just want to know in order MacDonald: Insofar as H.M.Jr: Where is that order, Mr. Blaisdell - the order that the President should sign in regard to ..... McReynolds: It is on top - isn't it on top there? Blaisdell: Here it is. H.M.Jr: Sit down, Mr. MacDonald. Now, do they concur to this? Blaisdell: Covers the statement as made in the recommendation. H.M.Jr: And this here? Blaisdell: That is where they dissent. H.M.Jr: Well, now, I sign here or I sign here? Mac, (McReynolds) look over my shoulder. Do I sign here and the President here? McReynolds: You sign the letter of transmittal. H.M.Jr: I see. Regraded Unclassified - 6 - 6 McReynolds: That is prepared so that the President will be the only one to sign that. That is his approval of your recommendation. H.M.Jr: But where does Peoples get his orders from? McReynolds: This would be in connection with the report - the approval of the President for the extension - of Peoples extending his direct purchases. H.M.Jr: George, has anybody here got that four-page letter from Mr. Hull to me, on the question of tariffs? Stinebower: I have a carbon of it, Mr. Secretary. H.M.Jr: Who's got the original? Haas: Want me to go out and see if I can find it? H.M.Jr: Yes. It is - I tell you, I'll tell Mrs. Klotz. (On telephone.) Tell Mrs. Klotz, on that letter from Mr. Hull, - I don't need it now - but it may be in Mr. Taylor's office. That is where it may be - either Taylor - it's apt to be in Taylor's office, but I' don't need it for this meeting. That's all right. I don't need it now, but I did need this. Well, the point that I want to get from Mr. MacDonald is - let me read this thing out loud. This is what I am sending to the President. "1. Cement requirements for all Government agencies to be contracted for by the Procurement Division of the Treasury Department, thus obtaining the benefits inherent in large-scale buying." The Department of Agriculture has no objection to that, have they? MacDonald: Oh no; no, none whatever. H.M.Jr: "2. Further expand Government control over cement by including that used on highways, the construction of which is financed in part by the Government through the Bureau of Public Roads of the Department of Agriculture." Regraded Unclassified 7 - 7 - I presume they concur and would cooperate in working out the details. MacDonald: Well, if that means handling the cement through the Procurement Division, that is purchased - I mean the actual purchasing H.M.Jr: Yes. MacDonald: We have very decided and determined objections to that because it involves McReynolds: But the report doesn't recommend that. H.M.Jr: What? McReynolds: The report doesn't recommend that Procurement Division purchase that direct. MacDonald: That is all right; we concur in taking advantage of Government purchasing for everything into which Government money goes. H.M.Jr: That's what it says, doesn't it? McReynolds: The Committee's recommendation now is that you merely make - you put all direct purchases under Procurement so you can get volume purchase prices, and that you make some contracts so that they will be available to your contractors to purchase cement at those low Government prices. MacDonald: Full concurrence, Mr. Secretary. McReynolds: So that when your contractors are bidding they are bidding on the price of cement at the Govern- ment price. You get the advantage there; I don't see how you folks possibly object. H.M.Jr: Now the part that you object to is Three, which says: "Grand Jury Investigations by the Depart- ment of Justice should facts developed in negotiating cement contracts warrant it." MacDonald: Mr. Secretary, it seems to go in contrary direction from good Government to take a position of opposition to a statement of that kind. Our statement, I think, is more properly that we are opposed at this time, and without a very grave Regraded Unclassified - 8 - 8 effort being made to work out this problem with the industry, to going into a suit of this character. H.M.Jr: Well, if you don't mind my saying, I don't think Mr. Wallace can be aware of the fact - and I am correct in this statement, that there is such a suit pending already, and it's been under way for how long? Oliphant: It's being tried now. MacDonald: That is by the Federal Trade Commission. Oliphant: I'd just like to be sure I understood it. Let me state it - if in the process of carrying out this program, it comes to our attention that there's been a criminal conspiracy in violation of the criminal statutes of the United States, do I understand you are opposed to prosecuting? MacDonald: No, certainly not. Oliphant: Well, that is the proposition on the paper, and nothing more. MacDonald: The position of the Secretary is that - and he is fully aware of the Federal Trade Commission's suit, that in view of the - I think in view of the statement made by the President that the Administration would seek to hold conversations with the industries in an endeavor to reduce prices that he - to obtain prices - this was made some time ago, you recall - that his position H.M.Jr: Pardon my interrupting you - the President never made such a statement. Excuse me for saying so bluntly, but he never made any such statement. MacDonald: Well, in one of the - perhaps I don't quote the matter correctly, Mr. Secretary. It certainly isn't an intention not to quote him rightly. H.M.Jr: I think there is a misunderstanding. Regraded Unclassified 9 - 9 - MacDonald: Don't you remember he made the statement some prices were too high and some too low? That was the implication carried, was it not? H.M.Jr: Well, that statement is just one page, and that can be gotten. I don't know who helped the President prepare that, but Herbert, get that, will you? That one that preceded the one that was prepared by this group. Gaston: That was in reply about fairness. I'll get the two of them. Oliphant: May I say, Mr. Secretary, that I have followed all the statements of the President carefully and he has nowhere suggested that he would be willing to participate in compounding WILD a crime. That is what you are dealing/here, is a violation of criminal law. H.M.Jr: Mr. MacDonald, if you don't mind my saying, I think there is a misunderstanding somewhere on the part of the Secretary of Agriculture, because no member of the Cabinet can object that if Procurement - the way I see - I think somebody has made this thing look much more difficult than it is. Now what this - all that we are doing is this: This group has made a study, and they are trying - over - I don't know what it is - two or three years, that the price of cement has been absolutely fixed - something like that, isn't it? Blaisdell: It's been very, very stable. H.M.Jr: I mean, it's an absolutely fixed thing. Now all that we are suggesting to the President is this: That he sign a supplementary Executive Order giving Admiral Peoples, Director of Procurement, the authority to buy all cement which the United States Government buys, plus making that - whatever price he gets - available to any state contractor who is working on a Federal-aid high- way. Now, isn't that boiling the whole thing down? Regraded Unclassified - 10 - Now if - and if you don't mind my saying so, we don't have to ask anybody's approval. If, in asking for these bids, Admiral Peoples gets all tie bids, under the understanding that we have with the Department of Justice, we immediately ask their advice and refer the matter to them, and we don't have to ask anybody's approval. It is just automatic. That is my understanding. No matter how any other department works, that if we get tie bids And if what we have been doing - we again ask - we usually give the people a second time, as the way we did in the tires. We didn't immediately refer - gave them a second - again asked for a bid, and the second time we got competition. Now if this is handled in the usual way that the Treasury handles it, we would go back to them a second time, and if after the second time they didn't see day-light, why, then in the normal course of events this thing would be a breach of law, and it would be referred to the Department of Justice. Now we don't need anybody's approval, and I personally - if you don't mind my saying so - I think somebody has advised the Secretary of Agriculture badly, through lack of full informa- tion, because I don't think the Secretary of Agriculture wants to put himself in the position that the Procurement Division shouldn't carry out the Federal statutes. MacDonald: Oh, certainly not, Mr. Secretary. N.M.Jr: That is all that it is, and therefore, in view of this I have asked Mr. Wallace to see Mr. Oliphant and Mr. Lubin and Mr. Blaisdell at twelve, and I think you better be there. MacDonald: Yes. Well, I'll be glad to be there. H.N.Jr: And give him a chance to consider this thing, because I don't - Henry Wallace is a friend of mine of long standing, and I don't want him to put himself in that position, because I am sure, when he once understands - it is just as though we buy automobiles for everybody - don't we, Admiral? Peoples: Yes, Mr. Secretary. Regraded Unclassified 11 1 I H.M.Jr: Now we get tie bids for Agriculture. If the Secretary of Agriculture is going to say that after we have asked for bids twice and all the companies say the same price - that that shouldn't be referred to the Department of Justice? I mean, he isn't going MacDonald: I don't think that is his position at all, Mr. Secretary. H.M.Jr: I'm sure it isn't. MacDonald: And I must have presented it very badly if that is the impression. H.M.Jr: No, maybe our people presented it badly to you. MacDonald: I think the whole point involved is a matter of timing. H.M.Jr: Well, we have been doing this thing - I don't know how long - since N. R. A. was declared unconstitutional - but the Treasury has been trying to make this fight ever since N. R. A. was declared unconstitutional, and both Admiral Peoples and myself have been very much disturbed that we have been getting all these tie bids, and while this Committee wasn't set up for that, I mean, we were to study the important component parts of building - and the one situation which seems to be the easiest one to tackle first is cement. Now all we have been trying to do is get all the weapons necessary to convince these cement manufacturers that when they bid on cement for the United States Government that they give us competitive bids, as the law says they should. Now that is all we are trying to do. We want competitive bids, and when the cement industry, as a whole, month after month, puts in exactly the same bids, they are breaking the law. I am no lawyer, but it is just a matter of "horse- sense." MacDonald: The Department of Agriculture, Mr. Secretary - every member of the Department, is fully in favor of the Government's position in that matter. No question about that. Regraded Unclassified - 12 - 12 H.M.Jr: There can't be any other position. MacDonald: No, there isn't any other position. H.M.Jr: When you say it is a bad time - if I don't do anything, the Federal Trade Commission - if that is who's got it - going to go right ahead just the same - I mean they are going to go ahead, and I am sure that Mr. Jackson is going to go ahead - he tries the case for them, doesn't he? Oliphant: No. No, not that. But they are cooperating with him. H.M.Jr: I mean, who is here from the Federal Trade? You'll go ahead anyway, won't you? Edwards: We have a case now in progress. Peoples: It is in the court, Mr. Secretary. H.M.Jr: So the time thing was settled long ago. Oliphant: No, it isn't in court. H.M.Jr: And I say we are not looking for a case. I certainly, sincerely, hope that the cement industry will see the light of day and give us competitive bids - and that is all we want, as I understand it. Isn't that right, Mr. Blaisdell? Blaisdell: Absolutely. H.M.Jr: But lacking that we are not certainly going to sit here spineless and say, "Well, that's awfully nice, gentlemen, and you write the ticket, and you continue That's all MacDonald: I think the Secretary's position would be, Mr. Secretary, that he assures himself that a canvassing of the situation will be made before it is projected into the courts. That is the only implication. H.M.Jr: Excuse me. Will be what? Regraded Unclassified - 13 - MacDonald: A very careful consideration will be made before it is projected into the court. I think that is all that he wents. H.M.Jr: Well, again, I think that that decision has been made by the Federal Trade Commission, and that is water over the dam. MacDonald: Yes. Well, I think it was on that - is there a difference, Mr. Secretary, in this - of the Federal Trade Commission going ahead with its suit as it should, unquestionably. That is, there mustn't anything appear in this meeting, from the Department of Agriculture - from me personally - that would take any exception. We have helped them all we could on that suit. Is there a difference between that action which will come through the courts and the Administration at this time moving into the situation from another angle? H.M.Jr: Well, I am not Edwards: May I suggest, Mr. Secretary, that our case is specifically exempted in this report, and the provision, as I read it, in the report, is addressed to a situation in which the cement industry continues with some new conspiracy beyond the things that we are now discussing in our case. H.M.Jr: If they should Edwards:: In other words, the recommendation would become effective only if the industry were persistently and doggedly to violate the law. H.M.Jr: Right - and we sincerely hope that they won't. Edwards: Certainly. H.M.Jr: But if they do we are not going to sit here and take it on the chin - that is all. I don't want to make a soap-box speech, but I am through - but it doesn't seem to me that one can time - say this is a good time or a bad time to carry out the Federal law, that is all. I just don't see Regraded Unclassified - 14 - 14 MacDonald: Oh well, I agree with you. H.M.Jr: Want to say "This is a good time - business is fine, let's be righteous;" but, "Business is bad, and let's withhold being righteous." I mean, I just don't see how that position is tenable, and Henry Wallace, of all people, once it is explained to him, I am sure MacDonald: You have arranged this? H.M.Jr: I am sure ..... We can't time our righteousness as to good and bad business, and after all, this is - we are doing cement because we want a case which is just as good as possible, and then after we have taken cement I hope these wentlemen are going to take something up like plaster ord structural steel. And again I say, Mr. MacDonald, in all due courtesy, possibly the thing was badly explained to you, see? So there will be a chance once again at twelve o'clock. MacDonald: Yes. Very well, Mr. Secretary. H.M.Jr: Mac, have I signed where I should sign? McReynolds: Yes. That is the only place you requested. H.M.Jr: Will you take out all the tissues so I can take this, and the memorandum I got from the President - sharp one - because he is having T. V. A. at one thirty. Oliphant: Blaisdell can telephone you. H.M.Jr: I don't know, after he gets this, whether Mr. Wallace will sign this thing, see, but I mean I hate to take it over like that, but if he main- tains his position Oliphant: Well, suppose we make another copy, and take it over and he can sign it if he wants to. H.M.Jr: Well, I think I'll hang on to it and if Mr. Wallace changes his mind somebody can phone me. How's that? Regraded Unclassified - 15 - 15 Blaisdell: Phone you after the conference, Mr. Secretary. Reynolds: Mr. Secretary, may I ask a question? Is this sufficiently inclusive to cover contracts other than Roads? In other words, a contractor on a building, would this price be made applicable to him, as well as H.H.Jr: Someone else - a good question - someone else will have to answer. O'Connell: It was intended, as I understand it, to apply primarily to the Bureau of Public Roads, because that is such a large user of cement, but it is sufficiently broad, I believe, so that it could be made applicable to any contract in which the Government is participating - financing it - such as a W. P. A. job. Oliphant: Maybe I should take time to say just a word about that, Mr. Secretary. I have signed a formal opinion on it. You recall that in connection with some conversation with Mayor LaGuardia the question was up as to whether or not we could buy generally for the states or municipalities, and we didn't look favorably upon that proposal because that would involve our buying for all sorts of projects in which the Federal Government had no interest. Now what my opinion says is that we can malte open-end contracts available - require the companies - cement companies submitting their bids, to agree that if the bid is accepted they will make the cement available at those prices on all cement used in any project in which the Government is contributing money, so that in those cases where we have an immediate and substantial financial interest, it is competent for us to require that bidders - the bidders to - so I should say, that coming to the question of public buildings, if it is a building toward which we are contributing money, since we are interested in getting the best building possible at the lowest possible price, the same rule would apply. Viner: You mean automatically. Regraded Unclassified - 16 - 16 Biaisdell: May I ask, Mr. Oliphant, is it not the fact that that authority is in the hands of the Secretary at the present minute, and requires no special action? Oliphant: Yes. Reynolds: Not at the present time. We could go out and buy cement in the open market and tell the contractor, "We'll furnish cement on the job," but my question was directed to whether any contract entered into by the United States for the purchase of cement, would be made applicable to any contractor on any of our jobs. Blaisdell: That was my question, Mr. Reynolds. Is it not within the authority of the Secretary at the present time to so draw contracts through the Procurement Division so that that is practicable. Not that it is now so done, but that it can be done under authority now in the hands of the Secretary. Reynolds: I wouldn't know. I don't know. Oliphant: (Nods "Yes.") MacDonald: That was just the question that Oliphant was answering. Reynolds: Yes, according to him. H.M.Jr: Well, this is a Treasury matter for our General Counsel. Let him take it under consideration, and you will get a ruling from him. MacDonald: Do it there because of Roads. H.M.Jr: Anything else on cement? Blaisdell: No sir. H.M.Jr: May I again thank you people for this very excellent report. I think it is a beautiful job and I am very proud to take 1t over to the President. I would normally ask you people to go with me, but he's allowed me thirty minutes today in which to eat lunch and talk to him, and so it doesn't give me an awful lot of time, but I think if - that if he has any Regraded Unclassified - 17 - doubts then we can all of us go over and explain it, but if he hasn't any doubts, why, I think the kindest thing to do today is just to let him sign it, 50 I'll do that. I got a message to be prompt at one, and he's doing T. V. A. at one-thirty, so I imagine that I won't get very much chance to do any business, if any at all. Now before me leave cement, is there anything else? I mean, I want to take up rackets next. Does anybody - Dr. Lubin, any question on cement? You are perfectly happy on it? Lubin: (Nods "Yes.") H.M.Jr: Anybody besides the Department of Agriculture isn't perfectly satisfied? Well, I might say I got a most courteous letter from Secretary Hull, and I can understand his difficulties, and I an perfectly satisfied. (To Mr. Stinebower:) Do you know who wrote it? If you wrote it, it is a very good letter - being courteous - entirely satisfactory. Now, you want to be excused? MacDonald: Oh H.M.Jr: You want to listen to some rackets - buildings? What? MacDonald: Sure. Collins: May I be excused from the rackets, sir? H.M.Jr: All right. Collins: (Goes out.) Thank you, sir. Reynolds: Here's a report, Mr. Secretary. It is not exceedingly long. H.M.Jr: Can you do it - how long will it take you? Reynolds: I'll read it pretty fast. H.M.Jr: All right, go ahead. You got a copy of your own? Regraded Unclassified 18 18 I I Reynolds: I have a copy. H.M.Jr: All right, go ahead. MecDonald: We have these same things to contend with, Mr. Secretary. H.M.Jr: What's that, rackets? All right, you can add a couple. Reynolds: "This report is limited to a discussion of several practices within the building industry which appear to add unnecessarily to the cost of construction and which, if continued and extended, may largely nullify the effects of those steps which have been taken to increase the volume of building, particularly of low cost dwellings. "The conditions and methods described do not, by their nature, lend themselves readily to investiga- tion by this committee, and consideration has, therefore, been given only to practices which are generally recognized by those femiliar with the industry as being objectionable and which, if eliminated, would offer the largest reductions in the cost of building. "Most of these practices have been established over a period of years and, although the original motive in some instances may have been ethical, the developments in more recent years have been restrictive of competition. "A summary of the practices considered follows: "1. Distribution Practices of Manufacturers or Producers "The distribution of many building products from the manufacturer or producer to the contractor or subcontractor appear to be restricted by the introduction of subsidiary or independent sales agencies which, in turn, control prices and restrict distribution to contractors or subcontractors in the corresponding trade. "This method may be useful and beneficial for the physical distribution of goods but it affords an opportunity for price fixing and collusive agree- ments between the manufacturer or producer and Regraded Unclassified - 19 - 19 the agency on the one hand and between the agency and the contractor or subcontractor on the other. Such a condition appears to exist to a rather large extent in the mechanical branch of the industry which includes plumbing, heating and electrical equipment. "2. Building Code Control: "Manufacturers of building products have exercised a considerable influence in the preparation and revision of municipal building codes. The object has been to limit the permitted products or methods to those produced or controlled by the manufacturers, thus eliminating undesired competition and main- taining prices. In some instances, meritorious products or methods have been barred from approval and use by methods which, if not always corrupt, are at least not in the public interest. "3. General Contractors: "The custom of awarding building construction operations to general contractors has become wide- spread and is generally considered advantageous. There appears to be little evidence of collusive bidding or of restrictive competition among this type of contractor, but the method of operation is not without other serious abuses. In some instances this class of contractor operates as a subcontractor in one or more of the subordinate trades by means of a subsidiary organization and thus may participate in the practices outlined under paragraphs one and four. The general contractor may operate as a 'broker' and thus offer but slight excuse for his employment. He may and frequently does engage in the 'chiseling' of subcontractors' bids and individually or through an association he may attempt to coerce labor with the resulting economic losses to the industry and the consumer. "4- Subcontractors: "Many of the objectionable practices found within the building industry are inherent to this class of contractor. In addition to being the largest purchasers of material, in the industry, the sub- contractors employ the greatest amount of labor. Regraded Unclassified 20 - 20 - Operating both in the shop and in the field, the importance of the various branches in this category has increased proportionately with the many advances made in building construction and equip- ment. The effect has been a general strengthen- ing of the subcontractors' position in the industry and the organization of numerous associations of subcontractors under various titles. These organizations have developed into operating bodies primarily engaged in price fixing and the control of that branch of the industry within the city or region. Organization members are restricted and penalized in bidding by rule and regulation to the end that competition is extremely limited or non-existent; non-members are driven from the field; and labor is used as. the most effective means of control. "Under such conditions, the 'bid depository' has developed from its original purpose as a means to prevent 'chiseling' to a corrupt and collusive method for maintaining 8 scale of prices and the award of contracts by lot. "5. Labor Practices: "Labor in the building industry has suffered, for many years, from exploitation by its employers. Subject to seasonal and limited employment, to the hazards incident to its occupation, and to an over supply of skilled and unskilled workers, it endeavored to obtain the strength and security afforded by organization. Only in very recent years has it received recognition and protection through the enactment of appropriate Federal legislation. Prior to this time, organized labor depended upon certain self protective measures which, due to necessity, have developed into many working rules and customs which under present conditions may prove not only economically disadvantageous for the employee but discouraging to an increased building activity. "Correction of abuses found throughout the building industry does not appear probable by action within the industry. Publicity might not be unbiased and it might create an undesirable delay in starting work. Due to the widespread operations of the industry, the facilities of the Federal Government can be employed to advantage where other methods are not available. Regraded Unclassified 21 - 21 - "RECOMMENDATIONS "For these reasons, the Committee recommends the facilities of the Federal Government be utilized as may be appropriate for the following action: (a) Investigation of the distribution practices of manufacturers or producers of building products and especially manufacturers engaged in the mechanical equipment branch. (b) Illegal practices involving collusive or restrictive bidding by subcontractors through 'bid depository' or other methods and especially by contractors engaged in the mechanical trades. "As a point of departure, it is suggested that future contracts for buildings constructed under the control of the Government departments be utilized for the purpose of obtaining evidence of the abuses described under 1a' and 'b' above and, also, under paragraph 3. The methods adopted should be uniform in all departments. "For the purpose of obtaining local cooperation and interest in low cost housing, it has been suggested that local committees operating under a national committee might be beneficial in dealing with both material and labor problems as they affect this particular type of construction. The Committee, also, recommends this course of action and believe that useful results could be accomplished by local committees in relaxing some of the building code requirements for low cost dwelling. "There is attached a memorandum suggesting a method by which the use of the Government's purchasing power might be used to advantage in coping with these problems." Regraded Inclassified - 22 - 22 "I "SCOPE OF STUDY "The problem considered in this memorandum is as to how the purchasing power of the Government may be best utilized in the elimination of collusive practices which exist in the building industry and are particularly engaged in by those who supply building materials. There is excluded from its scope, however, consideration of purchases of materials by the Government, which method falls within the scope of another inquiry. There is also excluded any consideration of the problems arising out of unfair practices believed, in some instances, to be engaged in by organized labor. II TYPE OF SITUATION WHICH IT IS BELIEVED EXISTS "In order to make the problem clear, the following situation is outlined, which it is believed represents a typical case in the mechanical trades, which include plumbing, heating, and electrical work: (1) The bids received by the Government from general contractors for the construc- tion of the building are not collusive. (2) The bids of the general contractors, however, are compiled from subbids received from a number of contractors in the various building trades. (3) The plumbing subcontractors make up their subbids on the basis of material prices furnished by jobbers or local distributors for particular manufacturers. Normally, each subcontractor does his business with a single jobber. (4) The jobbers furnish materials for small jobs from stock. On larger projects, they file special orders with manufacturers for shipment directly to the site. (5) It is believed that the manufacturers, by collusive agreements among themselves, fix the price at which they sell to jobbers, Regraded Unclassified .23 23 I # and at which the jobbers are permitted to sell to subcontractors. There are also collusive agreements between jobbers and associations of subcontractors restricting sales prices, to whom sales may be made, etc. (6) A subcontractor frequently cannot purchase directly from a manufacturer. (7) In some of the large communities there are so-called 'bid depositaries. The plumbing subcontractor-participants file copies of their subbids with this clearing house. The major purpose is to divide the work among the participants. In other words, the members take turns at being low. Those contractors who do not participate are confronted with the difficulty or impossibility of securing materials or labor or both. III CONCLUSIONS OF FACT (1) The bids received by the Government are not collusive. '(2) On their face, the bids received directly by general contractors are not collusive. (3) The bids received directly by general con- tractors are not in fact collusive except where the systems described in paragraphs (5) and (7) of II are operative. (4) The bids received by subcontractors from jobbers would probably, in many cases, indicate on their face that they were the result of price- fixing agreements. This would not necessarily be the case, however, as the superior credit of a particular subcontractor might result in certain concessions of price to him over the prices to another subcontractor whose credit standing was not as high. Normally, each subcontractor would have 8 bid from one jobber alone, the one with whom his dealings have been transacted over a period of time. Regraded Unclassified 24 - 24 - (5) It is believed that the existence of price fixing would be established conclusively by a study of the prices paid by the jobber to the manufacturer, of the restrictions on resale price imposed by the manufacturer upon the jobber, and of operations between subcontractor associations and jobbers. IV "POSSIBLE COURSES OF ACTION AND RECOMMENDA- TIONS WITH RESPECT TO REQUIRING THE FILING OF BIDS WITH THE GOVERNMENT." H.M.Jr: Just a moment, please. (Reading news clippings.) All right. Thank you. Reynolds: "The following alternative courses of proceeding may be followed: "(1) Require all bidders to submit with their bids all bids on the basis of which any work or materials will be furnished on the project." H.M.Jr: Just a moment. "Require all bidders to submit with their bids all bids " What does that mean? Reynolds: All bids that they receive themselves. "(2) Require the successful bidder, as a condi- tion of award, to file all such bids with the Government. "(3) Require the successful bidder, as a condi- tion of award, to file with the Government all such bids which pertain to any of the three mechanical trades." H.M.Jr: I still don't - are you going to tell me what you are going to do? I don't get it yet - I mean, up to now, I still don't know what you are going to do. I mean, you recommend something, then suggest you eliminate --- Reynolds: All except three. We take three. H.M.Jr: So much paper work. You don't want to do it. Regraded Unclassified - 25 - 25 Reynolds: "RECOMMENDATION: It is recommended that the procedure outlined in paragraph (3) above be adopted for the following reasons: "(a) The proposal set forth in paragraph (1) would create an administrative burden of tremendous proportions and, over a period of time, would not add substantially to the informa- tion which would be available to the Government as the result of following the alternative course proposed by paragraph (2). "(b) It is believed that the mechanical trades are those in which the improper practices are the most prevalent; and that concentration on them, rather than an attempt to cover the entire field, would be more likely to give results." H.M.Jr: Well, you recommend doing one, two, and three? Reynolds: No, three. Recommend three, and throw out one and two, and give you the reasons we throw out one and two. H.M.Jr: You are suggesting three. All right, three is suggested. Better read it again. Reynolds: "Require the successful bidder, as a condition of award, to file with the Government all such bids which pertain to any of the three mechanical trades." H.M.Jr: That is what you are recommending? Reynolds: That's right. H.M.Jr: What's the rest? Reynolds: "POSSIBLE ADDITIONAL COURSES OF PROCEDURE "The following courses of procedure should be considered as supplemental to that recommended in IV above. "(1) Submit all information obtained as the result of the filing of bids to the Department of Justice and to the Federal Trade Commission for such action as they may deem appropriate. Regraded Unclassified 26 - 26 - (2) Require each bidder to certify to the Govern- ment: (a) that his bid is neither directly nor indirectly the result of any agreement with any other bidder and (b) that he has received a similar certificate from each bidder on the basis of whose bid any work or materials in the mechanical trades will be furnished on the project. (3) Provide that the general contractor and each subcontractor, sub-subcontractor and materialman in the mechanical trades, upon request by the Govern- ment, will make available for inspection all records in their possession which affected in any way the prices bid. (4) Provide that the right of a contractor to proceed may be terminated by the Government, with the usual consequences, in the event that the representation of the contractor is found to be false in fact; and require the general contractor and each subcontractor, sub-subcontractor, and materialman in the mechanical trades to make a similar arrangement for termination of the right to proceed of anyone with whom they have contracted, for work or materials in the mechanical trades, whose representation is found to be false in fact. "(5) Provide a penalty in the form of liquidated damages in the event that the representation of the contractor or any subcontractor, sub-subcon- tractor or materialman in the mechanical trades is found to be false in fact. "(6) Require a representation from each subcon- tractor in the mechanical trades that he has not filed his bid with any 'bid depositary' or other similar group. "RECO MENDATION: It is recommended that the courses of procedure suggested in paragraphs (1) to (5), inclusive, be followed. The suggestion contained in paragraph (6) is not recommended as it might appear to be directed against organized labor; the representation suggested in paragraph (2) really covers it, although in a general form; and the desirability of a specific representation could be considered after the results of the recommended program are available." 27 - 27 - H.M.Jr: Now wait a minute. You've got ten pages. Tell me what the hell you're talking about, if you can, and if you get it all boiled down, what? Do you think it is practical? Reynolds: I think it is very practical to require the bidders, as a condition of award, to file with the subcontractor - or file with the Government, rather, a list of the subcontract bids that they are using on the mechanical trades, so we will know definitely the amounts. That is a matter of information. We can check whether that is a fair price or not. H.M.Jr: You think that will get us somewhere? Reynolds: That will get us a great deal of information, and secondly, out of these five paragraphs here, the major point of interest is that you can require a statement by the general contractor that he nor the people - nor his subcontractors - have entered into collusive price arrangements in determining their bid. That is on the last page. H.M.Jr: I see, and on page four and five you recommend all except. (6). Is that right. Reynolds: That's right. H.M.Jr: And (6) you don't recommend. Reynolds: On page three we recommend that paragraph (3). H.M.Jr: Paragraph (3), and on page four, do you recommend ? Reynolds: Four. Recommend all except the last paragraph; that is, sixth paragraph on page five. Now, I think that before a final decision would be made on that, we would want to explore a little bit further. just the point - how far it's going to take us - but I can see great benefit coming from the requirement, at least that the contractor and subcontractors file an affidavit that this bid was made up without collusive agreement. Anyway it will have a deterrent effect and we know that they do enter into collusive agreements before they file their bids. 28 - 28 - H.M.Jr: Well, let me ask you this, Admiral. Supposing we do this in Procurement. Does that mean that the Army engineers are going to do this too, or just Procurement? Peoples: Committee recommends that it be uniform throughout the Government service. H.M.Jr: We'll have to submit it to other people. Peoples: It ought to be done in Procurement any way. We ought to make a beginning there. H.M.Jr: The whole business - everything as he suggested - accept? Peoples: Yes sir. H.M.Jr: What? Peoples: Yes sir. H.M.Jr: Are you satisfied? Peoples: Yes, I am. H.M.Jr: Has this group had a chance to digest it? Peoples: No. Oliphant: This is the work of a sub-committee. H.M.Jr: What I suggest is this: That the people that have been working with me regularly take this thing - kind of chew this thing over, because I don't know how you feel - it's kind of left me dizzy, and you people are willing to put the time in on it, and we might come back and have another talk. I don't want to go off half-cocked; I'd like to have the benefit of the advice of the people that'd be willing to give the time on it, I mean, so - I mean, first place it is going to get - I am on the spot and I am perfectly willing to use Procurement as the "guinea-pig" but I want to make sure that we are going to get something worth while out of it, see? and I'd like you people to go over it and go into it, if you would. Say, come back eleven o'clock Thursday. That gives you Monday until Thursday. What? But this - for us, I mean, it is a serious step, and I just 29 - 29 - want to know. And then possibly, Mac, you and the Admiral might show this to some of the other big contracting agencies in the Government between now and Thursday, and get their criticisms, see? How many other contracting agencies will be willing to go along with us on it? Take Straus - his outfit, for instance - would he agree with a thing like this? Reynolds: Well, Straus is a financial agent. H.M.Jr: Is what? Reynolds: Straus is a financial agent. He is not entering into contracts. About the only agency really affected is Procurement Division. Your proclama- tion has no plumbing, heating, or electric H.M.Jr: Doesn't Straus' agency review all contracts? But they don't determine them? Viner: Why wouldn't the previous report have bearing on this? Why couldn't you expand the principle of the previous one for this? Straus uses Federal funds, doesn't he? Reynolds: Yes sir. Oliphant: I'd have to look into his legislation to see whether or not he could make the grant conditioned upon H.M.Jr: Well, as I understand, if he thinks the contract is too high he can reject it. McReynolds: That's correct. Peoples: Always. Reynolds: All this report does is first give us some information. H.M.Jr: But I am thinking - Straus, if he gets under way he is going to have several hundred million dollars worth of buildings, and I just wondered - they are going to be in it much bigger than Procurement. MacDonald: Mr. Secretary, remember we require that substantially now, under our general authority to regulate or Regraded Unclassified - 30 - 30 put out regulations for state contractors. H.M.Jr: You do? MacDonald: Yes, we do. That is, where there is a subcontract we require them to file the subcontract along with it. H.M.Jr: Do you find any racketeering in this thing? MacDonald: We have not been troubled very much with these same features, because we require contractors to do eighty per cent of all contracts with his own organization. See, we don't deal very much with general contractors. Reynolds: We require twenty-five. H.M.Jr: Well, I mean, I think this is a start, but I don't want to say "Yes" or "No" until you gentlemen have gone into this thing further, because I am not 50 dumb - I realize what I am getting in to, but after all, if you people say, "All right, this is the right thing to do," I am willing to go ahead - in fact, Admiral Peoples, the way I always do, but I just want to make sure, and I'd also like to know how some of the other - whether we are going to do this alone, the way we do all of these things, or whether some of the other agencies Peoples: They will have some job giving reasons why they can't, Mr. Secretary. H.M.Jr: Well, let's give them a chance, between now and Thursday. Peoples: Uh huh. H.M.Jr: What? Barton: It would be more effective if all of them were working together. Lubin: What other agencies have the power to let con- tracts - private contracts? Army, Navy. Any other? Peoples: Some little in Veterans Administration. Regraded Unclassified 31 - 31 - Loomis: We do, yes. Stone: Covered in this report. Loomis: There is an element in this, Mr. Secretary, that I think, in the situation - which I think should be canvassed further. The great trouble with our buyers - that is, the home owners who are buying - to recondition their homes or build new homes, is the difficulty they have with jurisdictional disputes which enter after the contract is made, and if there were some means by which those could be discouraged it would affect the price a great deal. Peoples: As between trade unions? Loomis: Yes, and they rise out of collusion with materials people as well. Oliphant: Are those public buildings? Loomis: No, they are all private. Reynolds: We have the same thing. Loomis: But it affects the price as much as a thousand dollars in some cases on a five or six thousand dollar house. H.M.Jr: Well, that is - well, I would say Reynolds was making progress, but I think he'd want to do a little more. Reynolds: I haven't been able to spend a great deal of time on it. H.M.Jr: I know. You've been sick. You feeling all right? Reynolds: Better. H.M.Jr: Can you work on this between now and Thursday? Reynolds: Oh yes, indeed. H.M.Jr: All right. Well why not - anybody got any bright ideas - I'd get this group together somewhere a Regraded Unclassified 32 I I 32 couple times between now and Thursday and let's see how much cooperation the rest of the United States Government will give us. Reynolds: Could I suggest that we have a copy prepared for each of the people here and then ask them to meet, say Wednesday at ten-thirty, or some- thing like that, in this room over here in the Treasury Building. H.M.Jr: 296. Reynolds: Would that be proper? H.N.Jr: Perfectly proper. Peoples: I think better, Mr. Secretary, to leave it in the hands of the Committee, sir. Get the representatives in from the Army and Navy and Veterans Bureau - and so forth. Be less duplica- tion. H.M.Jr: Well, you and Reynolds - and talk it over, and you other gentlemen work it out, but come back with a little more progress between now and eleven o'clock Thursday. How's that? Peoples: Fine. H.M.Jr: Again, thank you very much for all your time. 33 SUMMARY OF RECOMMENDATI( OF COMMITTEE ON CEMENT 1. Cement requirements for all Government agencies to be contracted for by the Procurement Division of the Treasury Department, thus obtaining the benefits inherent in large-scale buying. 2. Increase the amount of cement to which the Federal Government price, as a maximum, applies by requiring successful bidders on contracts for cement for the Federal Government to make the price given to the Government available to any and all people and agencies using cement on, or supplying cement to, projects for which the Government is paying in whole or in part. It will be the duty of the various Departments and agencies of the Government to see that the contractors and other people concerned do not buy cement at a price in excess of that at which it would be obtainable under the Federal Government bid. 3. Grand Jury Investigations by the Department of Justice should facts developed in negotiating cement contracts warrant it (this has been taken up with the Department of Justice and they are in complete accord). APPROVED: March 21, 1938. Regraded 34 March 21, 1938 REPORT OF THE SUBCOMMITTEE ON PRACTICES IN THE BUILDING INDUSTRY. This report is limited to a discussion of several practices within the building industry which appear to add unnecessarily to the cost of construction and which, if continued and extended, may lergely nullify the effects of those steps which have been taken to increase the volume of building, particularly of low cost dwellings. The conditions and methods described do not, by their nature, lend themselves readily to investigation by this committee, and consideration has, therefore, been given only to practices which are generally recog- nized by those familiar with the industry as being objectionable and which, if eliminated, would offer the largest reductions in the cost of .building. Most of these practices have been established over a period of years and, although the original motive in some instances may have been ethical, the developments in more recent years have been restrictive of competition. A summary of the practices considered follows: 1. Distribution Practices of Manufacturers or Producers The distribution of many building products from the manu- facturer or producer to the contractor or subcontractor appear to be restricted by the introduction of subsidiary or independent 35 -2- sales agencies which, in turn, control prices and restrict distribution to contractors or subcontractors in the correspond- ing trade. This method may be useful and beneficial for the physical distribution of goods but it affords an opportunity for price fixing and collusive agreements between the manufacturer or producer and the agency on the one hand and between the agency and the contractor or subcontractor on the other. Such a con- dition appears to exist to a rather large extent in the mechanical branch of the industry which includes plumbing, heat- ing and electrical equipment. 2. Building Code Control: Manufacturers of building products have exercised B. con- siderable influence in the preparation and revision of municipal building codes. The object has been to limit the permitted products or methods to those produced or controlled by the manufacturers, thus eliminating undesired competition and main- taining prices. In some instances, meritorious products or methods have been barred from approval and use by methods which, if not always corrupt, are at least not in the public interest. 3. General Contractors: The custom of awarding building construction operations to general contractors has become widespread and is generally considered advantageous. There appears to be little evidence of collusive bidding or of restrictive competition among this type of contractor, but the method of operation is not without -3- 3.6 other serious abuses, In some instances this class of con- tractor operates as a subcontractor in one or more of the subordinate trades by means of a subsidiary organization and thus may participate in the practices outlined under paragraphs one and four. The general contractor may operate as a "broker" and thus offer but slight excuse for his employment. He may and frequently does engage in the "chiseling" of subcontractors' bids and individually or through an association he may attempt to coerce labor with the resulting economic losses to the industry and the consumer. 4. Subcontractors: Many of the objectionable practices found within the build- ing industry are inherent to this class of contractor. In addition to being the largest purchasers of material in the industry, the subcontractors employ the greatest amount of labor. Operating both in the shop and in the field, the importance of the various branches in this category has increased proportion- ately with the many advances made in building construction and equipment. The effect has been a general strengthening of the subcontractors' position in the industry and the organization of numerous associations of subcontractors under various titles. These organizations have developed into operating bodies primarily engaged in price fixing and the control of that branch of the industry within the city or region. Organization members are restricted and penalized in bidding by rule and regulation to the end that competition is extremely limited or non-existent; -4- 37 non-members are driven from the field; and labor is used as the most effective means of control. Under such conditions, the "bid depository" has developed from its original purpose as a means to prevent "chiseling" to a corrupt and collusive method for maintaining a scale of prices and the award of contracts by lot. 5. Labor Practices: Labor in the building industry has suffered, for many years, from exploitation by its employers. Subject to seasonal and limited employment, to the hazards incident to its occupa- tion, and to an over supply of skilled and unskilled workers, it endeavored to obtain the strength and security afforded by organization. Only in very recent years has it received recognition and protection through the enactment of appropriate Federal legislation. Prior to this time, organized labor de- pended upon certain self protective measures which, due to necessity, have developed into many working rules and customs which under present conditions may prove not only economically disadvantageous for the employee but discouraging to an increased building activity. Correction of abuses found throughout the building industry does not appear probable by action within the industry. Publicity might not be unbiased and it might create an undesirable delay in starting work. Due to the widespread operations of the industry, the facilities of the Federal Government can be employed to advantage where other methods are not available. Regraded -5- 38 RECOMMENDATIONS For these reasons, the Committee recommends the facilities of the Federal Government be utilized as may be appropriate for the following action: (a) Investigation of the distribution practices of manufacturers or producers of building products and especially manufacturers engaged in the mechanical equipment branch. (b) Illegel practices involving collusive or restrictive bidding by subcontractors through "bid depository" or other methods and especially by contractors engaged in the mechanical trades. As B. point of departure, it is suggested that future contracts for buildings constructed under the control of the Government depart- ments be utilized for the purpose of obtaining evidence of the abuses described under "a" and "b" above and, also, under paragraph 3. The methods adopted should be uniform in all departments. For the purpose of obtaining local cooperation and interest in low cost housing, it has been suggested that local committees opera- ting under a national committee might be beneficial in dealing with both material and labor problems as they affect this particular type of construction. The Committee, also, recommends this course of ection and believe that useful results could be accomplished by local committees in relaxing some of the building code requirements for low cost dwelling. Regraded Unclassified 39 -6- There is attached a memorandum suggesting a method by which the use of the Government's purchasing power might be used to advantage in coping with these problems. 40 March 21, 1938. I SCOPE OF STUDY The problem considered in this memorandum is as to how the purchasing power of the Government may be best utilized in the elimina- tion of collusive practices which exist in the building industry and are particularly engaged in by those who supply building materials. There is excluded from its scope, however, consideration of purchases of materials by the Government, which method falls within the scope of another inquiry. There is also excluded any consideration of the problems arising out of unfair practices believed, in some instances, to be engaged in by organized labor. II TYPE OF SITUATION WHICH IT IS BELIEVED EXISTS In order to make the problem clear, the following situation is outlined, which it is believed represents a typical case in the mechan- ical trades, which include plumbing, heating, and electrical work: (1) The bids received by the Government from general contractors for the construction of the building are not collusive. (2) The bide of the general contractors, however, are compiled from subbids received from a number of contractors in the various build- ing trades. (3) The plumbing subcontractors make up their subbids on the basis of material prices furnished by jobbers or local distributors for particular manufacturers. Normally, each subcontractor does his business with a single jobber. Regraded Unclassified 41 -2- (4) The jobbers furnish materials for small jobs from stock. On larger projects, they file special orders with manufacturers for ship- ment directly to the site. (5) It is believed that the manufacturers, by collusive agree- ments among themselves, fix the price at which they sell to jobbers, and at which the jobbers are permitted to sell to subcontractors. There are also collusive agreements between jobbers and associations of sub- contractors restricting sales prices, to whom sales may be made, etc. (6) A subcontractor frequently cannot purchase directly from a manufacturer. (7) In some of the large communities there are so-called "bid depositaries." The plumbing subcontractor-participants file copies of their subbids with this clearing house. The major purpose is to divide the work among the participants. In other words, the members take turns at being low. Those contractors who do not participate are confronted with the difficulty or impossibility of securing materials or labor or both. III CONCLUSIONS OF FACT (1) The bids received by the Government are not collusive. (2) On their face, the bids received directly by general con- tractors are not collusive. (3) The bids received directly by general contractors are not in fact collusive except where the systems described in paragraphs (5) and (7) of II are operative. (4) The bids received by subcontractors from jobbers would probably, in many cases, indicate on their face that they were the result Regraded Unclassifie 42 -3- of price-fixing agreements. This would not necessarily be the case, how- ever, as the superior credit of a particular subcontractor might result in certain concessions of price to him over the prices to another sub- contractor whose credit standing was not as high. Normally, each sub- contractor would have a bid from one jobber alone, the one with whom hie dealings have been transacted over a period of time. (5) It is believed that the existence of price fixing would be established conclusively by a study of the prices paid by the jobber to the manufacturer, of the restrictions on resale price imposed by the manufacturer upon the jobber, and of operations between subcontractor associations and jobbers. IV POSSIBLE COURSES OF ACTION AND RECOMMENDATIONS WITH RESPECT TO REQUIRING THE FILING OF BIDS WITH THE GOVERNMENT The following alternative courses of proceeding may be followed: (1) Require all bidders to submit with their bids all bida on the basis of which any work or materials will be furnished on the project. (2) Require the successful bidder, as a condition of award, to file all such bids with the Government. (3) Require the successful bidder, as a condition of award, to file with the Government all such bids which pertain to any of the three mechanical trades. RECOMMENDATION: It is recommended that the procedure outlined in paragraph (3) above be adopted for the following reasons: (a) The proposal set forth in paragraph (1) would create an administrative burden of tremendous proportions and, over a period of time, would not add substantially to the information which would be Regraded Unclassified 43 available to the Government as the result of following the alternative course proposed by paragraph (2). (b) It 18 believed that the mechanical trades are those in which the improper practices are the most prevalent; and that concentra- tion on them, rather than an attempt to cover the entire field, would be more likely to give results. V POSSIBLE ADDITIONAL COURSES OF PROCEDURE The following courses of procedure should be considered as sup- plemental to that recommended in IV above. (1) Submit all information obtained as the result of the filing of bids to the Department of Justice and to the Federal Trade Commission for such action as they may deem appropriate. (2) Require each bidder to certify to the Government: (a) that his bid is neither directly nor indirectly the result of any agreement with any other bidder and (b) that he has received a similar certificate from each bidder on the basis of whose bid any work or materials in the mechanical trades will be furnished on the project. (3) Provide that the general contractor and each subcontractor, sub-subcontractor and materialman in the mechanical trades, upon request by the Government, will make available for inspection all records in their possession which affected in any way the prices bid. (4) Provide that the right of & contractor to proceed may be terminated by the Government, with the usual consequences, in the event that the representation of the contractor is found to be false in fact; and require the general contractor and each subcontractor, sub-subcontractor, and materialman in the mechanical trades to make a. similar arrangement for Regraded Unclassified 44 termination of the right to proceed of anyone with whom they have contracted, for work or materials in the mechanical trades, whose representation 1a found to be false in fact. (5) Provide & penalty in the form of liquidated damages in the event that the representation of the contractor or any subcontractor, sub-subcon- tractor or materialman in the mechanical trades is found to be false in fact. + (6) Require a representation from each subcontractor in the mechan- ical trades that he has not filed his bid with any "bid depositary" or other similar group. RECOMMENDATION: It is recommended that the courses of procedure suggested in paragraphs (1) to (5), inclusive, be followed. The suggestion contained in paragraph (6) is not recommended as it might appear to be directed against organized labor; the representation suggested in para- graph (2) really covers it, although in a general form; and the desirability of a specific representation could be considered after the results of the recommended program are available. Regraded Unclassified 45 SUMMARY OF RECOMMENDATIONS OF COMMITTEE ON CEMENT 1. Cement requirements for all Government agencies to be contracted for by the Procurement Division of the Treasury Department, thus obtaining the benefits inherent in large-scale buying. 2. Increase the amount of cement to which the Federal Government price, as 8. maximum, applies by requiring successful bidders on contracts for cement for the Federal Government to make the price given to the Government available to any and all people and agencies using cement on, or supplying cement to, projects for which the Government is paying in whole or in part. It will be the duty of the various Departments and agencies of the Government to see that the contractors and other people concerned do not buy cement at a price in excess of that at which it would be obtainable under the Federal Government bid. 3. Grand Jury Investigations by the Department of Justice should facts doveloped in negotiating cement contracts warrant it (this has been taken up with the Department of Justice and they are in complete accord). APPROVED: March 21, 1938. Regraded Unclassified between 462-9 and 3-21 Report of the Sub-Committee on Collusive Practices in the Building Industry. This report is limited to practices within the building industry which add to the burden of costs and which, if continued and extended, will largely nullify the effects of those steps which have been taken to increase the volume of residential construction. Present costs of building are probably lower than in 1926, with retail prices of building materials as a whole about as low as can be expected without reduction in wages. Wages of skilled labor are slightly above the 1926 level, probably 5%; wages of unskilled labor have increased probably 15 to 20% since 1926. Caution must be exercised in the use of much of the published data regarding the cost of building. Today the market is highly competitive from the consumer standpoint and published price indexes covering build- ing may not accurately reflect the actual cost to the consumer. Restrictive and collusive practices pervade the entire building industry and are more prevalent in the larger centers of population and are made effective through: (1) Distribution practices of producers. (2) Practices between producers, contractors, and sub- contractors associations. In many instances, these practices are made effective through arrangements with organized labor groups. (3) Restrictions practiced by labor. These objectionable practices, some of which are long established, vary from trade customs to the corrupt and criminal "rackets." Some of them may be legal, practically all are difficult to prove, and some can be cured only by drastic punitive measures. Their elimination would, in the opinion of this committee, effect B saving to consumers of between 20% and 30%, possibly even more. These practices may be summarized as follows: 1. Manufacturers Distribution Practices The following are typical practices under this classification. Restricting the trade through concealed discounts and rebates to certain groups of contractors to prevent lower costs which might be gained 47 in competition. This practice prevails widely in plumbing, heating, and other mechanical equipment. The activities of manufacturers in securing uneconomic provisions in building codes and other legislation for purposes of increasing the sale of their own equipment and restricting use of other types which may be more economical is one manifestation of the operation of this type of activity. 2. Contractors and subcontractors practices. General contractors' bids appear to be highly competitive. One of the most vicious and most recent types of practice 0. the part of sub- contractors' associations is the establishment in some places of "bid depositories." In order to operate in a territory, & subcontractor must become B. member of such a depository. Bids of subcontractors must be submitted to the depository, where they are examined by officers prior to their submission to the general contractor. Apparently & scale of prices is maintained by the depository and any bidder whose bid does not conform to this scale is penalized by fines and other punitive measures. Organized labor is usually represented in the control of these depositories, and the penalties exacted of the subcontractor may extend to 8. refusal to furnish lebor on the job. In some cases, subcontractors associations operate in open collusion with labor. This collusion may take the form of agreements with labor not to operate or supply any help to subcontractors who are not members of the association or who violate an agreement not to bid on certain jobs in order to maintain a system of rotation. 3. Labor Restrictions. The third class of restrictive measures revolves around working rules of organized labor, which tend to: (a) Increase the number of craftsmen required by measures tending to restrict output, and requiring unnecessary helpers and unnecessary foremen and sub-foremen. Requiring to be done on the site that might be more economically done in the shop. (b) Maintain operations that might ordinarily be done in the lower priced labor class in the high-priced labor class. (c) Require contractors to pay wage rates prevailing at their place of business regardless of the location of the operation especially where contractors doing business in a large city having high wage rates must pay these wage rates in country districts having lower wage rates. 48 (d) Limit the supply by failure to provide for apprentices and limiting apprentices in both the number and excessive requirements of apprentice training. The excessive fees charged for apprentices. (e) Unnecessary losses due to jurisdictional disputes. There are many other abuses than the ones noted, but these furnish 8 partial picture of the many reasons for increased costs in the building industry aside from the increase due to materials prices. Recommendations: Correction of the abuses found throughout the building-industry would be a lengthy task. In some cases immediate punitive action may be taken where such punitive action is indicated by illegalities. As a point of departure, the committee recommends: (1) That the Department of Justice be requested to investigate with a view to prosecution: (a) the distribution methods of the manu- facturers of plumbing fixtures and supplies; (b) illegal practices of subcontractors in the plumbing industry, with particular reference to the organization and operation of bid depositories. (2) That the machinery be established for negotiating with labor organizations for the waiver of restrictive practices in connection with the construction of low-priced dwelling units. This machinery might well take the form of & national committee with headquarters in Washington and local sub-committees in different regions or areas. The Department of Justice should be represented on such committees. (3) That a similar method of action be followed in connection with the practices in other trades. Regraded Unclassified 49 MEMORANDUM TO THE PRESIDENT: Accempanying this memorandum is a report prepared by e Committee designated by me to investigate and report on the pessibilities for an immediate drive on cenent. I concur wholeheartedly in the recommendations of the Committee and, if you also concur, will you please 60 advise no. A summary of the Committee's recommendations is appended to the report, with a space provided thereon for your approval if you de approve and are willing that ve proceed along the lines indicated. Secretary of the Treasury. JJO'C:CB your to Mar 50 MEMORANTUM TO THE PRESITIENT Accempanying this memorandum is a report prepared w e Committee designated w me to investigate and report on the possibilities for an imediste drive on coment. I sensur wholeheartedly in the recommendations of the Committee and, if you also consur, will you please 96 advise m. A sumary of the Committee's recommendations is appended to the report, with a space provided thereen for your approval if you de approve and are willing that we preseed along the lines indicated. Secretary of the Treasury. JJO'0,CB Regraded Unclassified 51 MEMORANIUM TO THE PRESINENT Accompanying this is & report prepared w a Committee designated w - to investigate and report on the pessibilities for as immediate drive on coment. I concur wholeheartedly in the recommendations of the Consittee and, if you also concur, will you please 00 advise s. A summary of the Committee's recommendations is appended to the report, with a syace provided thereon for your approval if you de approve and are willing that 90 pressed along the lines indicated. Secretary of the Treasury. JJO'G,CB Regraded 52 MISSORANTUM TO THE PRESINENT: Accompanying this memorandum 10 & report prepared w a. Committee designated by - to investigate and report on the pessibilities for an immediate drive on coment. I consur wholeheartedly in the recommendations of the Committee and, if you also consur, will you please ⑉ advise s. A summary of the Committee's recommendations is appended to the report, with a synes provided thereom for your approval if you de approve and are willing that we pressed along the lines indicated. Secretary of the Treasury. JJO'0,03 : 53 MEMORANTUM TO THE PASSINGS: Assempanying this reservantes is a report prepared w . Committee designated w - to investigate and report on the pessibilities for an insediate drive on coment. I connur wholeheartedly in the recommendations of the Committee and, if you also consur, will you please 00 advise m. A remary of the Committee's recommentations is appended to the report, with a space provided thereen for your approval If you do approve and are willing that w preesed along the lines indicated. Secretary of the Treasury. 54 MISSORANTUM TO THE PRESIMENT: Accompanying this is a report prepared w a Committee designated w me to investigate and report on the possibilities for an immediate drive on consent. I esur_wholeheartedly in the recommendations of the Consittee and, if you also consur, will you please se advise m. A summary of the Connittee's recommendations is appended to the report, with a syme provided thereon for your approval if you do spprove and are willing that w pressed along the lines indicated. Secretary of the Treasury. JJO'GECE Regraded Unclassified RECOMMENDATIONS 56 March 21, 1938. To: The Secretary of the Treasury From: Sub-Committee on Cement Prices The attached report on cement prices is herewith respectfully submitted. time Thomas P. C. Thairee J Blaisdell, Jr Counin DEdwarde Corwin D. Edwards Howards Howard S Piquet Pignt Heperein H. E. Collins Olighood Herman Oliphant Thomas H. MacDonald Dissent: For the Department of Agriculture I wish to record the judgment that at present the time is not ripe for an anti-trust suit in view of the disturbed conditions of business. Thomas H. MacDonald Regraded Unclassified 57 March 21, 1938. REPORT OF THE SUBCOMMITTEE ON CEMENT PRICES I. 1. Centralized Purchase. That there be immediately centralized in the hands of the Director of Procurement the maximum amount of purchases of cement, including - (a) All cement now being purchased by any Federal agency in the regular course. A list of such agencies and the amounts they purchased is attached. (b) All cement which, by change in the present practice of any agency, could be purchased by the Government rather than by the contractor. A list of such agencies and the amounts they purchased is attached. These two combined would give the Procurement Division a total of 15,730,000 bbls per annum, which constituted about 14 percent of yearly sales. For the rest of the fiscal year the Government has approximately 3,395,000 bbls to purchase. -2- 58 2. Anti-Trust Action. That the program of coordinated purchases be carried out in such EL fashion as to preserve all evidence of B. new and distinct illegal combination or of any continuance of any practice which may be found to be illegal (as distinct from evidence pertinent to the pending FTC complaint) encountered in the course of carrying out this program, having in mind immediate action by the Department of Justice in the event such combination 1s so disclosed. As a corollary to this, all conferences and communications with the cement manufacturers and dealers should be carried on in such a way as to avoid anything which would be later cited as formal or informal official approval of illegal practices or combinations in the industry. 3. Public Roads. That in the negotiation of contracts with the suppliers of cement, the contracts be so drawn as to permit the purchase of cement by contractors on public roads at the prices obtained by the Federal Government. This authorization is not intended to tie the hands of a contractor who may be Regraded Unclassified -3- 59 able to purchase at a lower price than that quoted the Government. II. PROCEDURE 1. Personnel. The Secretary of the Treasury should name one or more men thoroughly familiar with the cement industry, including the organization, banking, and other financial connections of cement concerns, and the marketing of cement. This person should function in the Procurement Division. 2. Competitive Bidding. All purchases should be made in such a manner as to secure bona fide competitive bidding, 1.e., prices f.o.b. the mill. 3. Collusion. If indications of collusion appear in the original bidding, these bids should be rejected and readvertised. 4. Independent Negotiation. If tie bids or other evidences of collusion are still present, negotiations for the letting of independent contracts should be undertaken. 5. Preservation of Evidence. While the preceding steps are being taken the Department of Justice should be in constant consultation + 60 with the Treasury Department in order that legal action under the anti-trust laws may be taken if illegal actions are found. 6. Public Roads. Action in connection with the public roads program as to detail should be developed between the Procurement Division and the Bureau of Public Roads. 7. Effective Coordination. All persons participating in the program should be aware of the fundamental objectives involved, 8. Publicity. There is no reason for any "publicity" in carrying out this program. However, in view of the possible misinter- pretation which might be given to the program, every effort should be directed toward emphasizing that this is not an attack on business. On the contrary the intent is to promote business recovery and encourage healthy competition. III. OBJECTIVES 1. Cement prices at present are regarded as being "out of line" and hence are a blook to business recovery. 2. The fundamental aim of the program is to lower the price of cement for all purchasers, not only the Federal Government. Regraded Unclassified -5- 61 3. The secondary purpose is to establish competitive conditions in the industry. attachMENTS: I. Amounts of cement purchased by Government agencies. II. A brief, descriptive, economic summary of the cement industry. III. Legal opinions. 1. Concentration of all Government cement purchases in the Procurement Division of the Treasury. 2. Expansion of Government purchasing power to include cement used on projects under the supervision of the Secretary of Agriculture. Regraded Unclassified CEMENT USED IN CONSTRUCTION CONTRACTS 1937 AGENCY Value of Contracts Cement in Barrels Navy Department $ 6,654,641 72,004 Veterans Administration 12,829,973 138,820 War Department 32,226,882 348,695 Department of Agriculture 3,500,000 37,870 Department of the Interior 9,962,763 107,797 Procurement Division 34,471,008 373,003 TOTALS $ 99,645,267 1,078,189 62 Regraded Unclassified CEMENT Est. Balance Fiscal Year 1938 AGENCY Barrels Value Barrels Value Veterans Administration 31,147 $ 68,523* 5,000 $ 11,000* Department of the Interior 1,250,000 2,750,000* 850,000 1,870,000* Department of Agriculture 219,541 842,990* 102,670 225,874* War Department 1,170,663 2,575,458* 421,620 927,564* Navy Department 97,615** 214,753* 22,865 50,303* Farm Security Admn. 94,000* 206,094** 1,400* 3,000* D. C. Government 27,170* 59.778 9,090* 20,000* Works Progress Admn. 11,000,000* 24,200,000 1,818,181* 4,000,000* Tennessee Valley Authority 762,514** 1,372,321** 164,400 292,557 TOTALS 14,652,650 $31,929,917 3,395,226 $7,400,298 Denotes figure estimated by Procurement Division : Denotes calendar year In estimating values and quantities price has been figured at $2.20 per barrel. One barrel equals 376 pounds. 63 Regraded Unclassified 64 CEMENT INDUSTRY 65 PORTLAND CEMENT Use in building industries About one-third of the United States production of Portland cement is used in the building industries, the rest being used largely in paving and in sewerage, water, and power developments. The estimated distribution of the total production in 1936 is shown in the following table, based on analyses of construction figures and other data: Percent Classification of total Barrels Residential - One and two-family dwellings and housing projects 10 11,257,000 Structures - Commercial, industrial, educational, etc., including hotels and apartment houses ! 24 27,016,000 Paving - Highways, streets, runways, etc. 23 25,890,000 Bridges 4 4,503,000 Railroads 2 2,251,000 Sewers and water supply 7 7,880,000 Conservation - Waterfront developments, irriga- tion, drainage, flood control, light and power projects 14 15,758,000 Rural 9 10,131,000 Miscellaneous - Incinerators, airports, miscel- laneous public works, small uses, etc. 7 7,880,000 Total 100.0 112,566,000 Source: Cement and Concrete Reference Book, 1937 (published by Portland Cement Association, Chicago). The bulk of the Portland cement is used in concrete, 8 mixture of cement, sand and gravel or crushed stone, the cement normally consti- tuting by volume only about one-ninth to one-seventh of the total mix. Large quantities of cement are used in the manufacture of many types of concrete products such as blocks, tile, cast stone, and numerous other Regraded Unclassified 86 - 2 - articles. According to the Census Bureau, about $10,000,000 of all concrete products, which totaled $43,000,000 in 1935, were classified as "building materials." The quantity of cement used in residential dwellings varies greatly, depending upon the type of construction. The cost of cement used in a house may very from & few dollars in those using only a small amount for foundation work, to several hundred dollars in those built of concrete blocks or reinforced concrete. Organization of the domestic industry The 160 or 80 Portland cement plants in the United States are located in 35 States and are owned by 89 companies. The accompanying map, Chart 1, based on the year 1929, shows the locations of practically all these plants. There has been relatively little change in manufactur- ing centers since that year. In 1936, 149 of these plants produced and shipped cement. Slightly more than one-third of the total output in that year WELS produced by five large concerns which normally operate about 50 plants throughout the country. It is estimated that the capacity of these five companies accounts for about 38 percent of the total cement capacity of the country. The relative importance of each, as indicated by total plant capacity, is shown below: Company Total capacity, barrels Universal Atlas Cement Company 31,000,000 Lone Star Portland Cement Company 20,000,000 Lehigh Portland Cement Company 22,000,000 Alpha Portland Cement Company 13,000,000 Penn-dixie Cement Company 12,000,000 Regraded Unclassified 67 - 3 - About 20 other companies operate two or more plants: the remain- ing number, about 60, operate one plant each. According to the Federal Trade Commission, 75 cement manufacturing concerns belong to the Cement Institute, a very active trade association, the policies of which are influenced in considerable degree by the five large companies previously mentioned. About 14 companies, the names of which are given in the Appendix, Table 1, were not among those cited by the Commission in its complaint of unfair price combination, pre- sumably not being members of the Institute. The cement industry is burdened by high surplus capacity, operating even in the peak year of 1927 at only 76.1 percent of capacity. It dropped to a low of 23.5 percent in 1933, and rose to 44.1 percent in 1936. The principal raw materials for cement manufacture, obtained from limestone, cement rock, clay, etc., are fairly widely dis- tributed over the country, and raw material cost is of less importance than fuel (usually coal or natural gas) and trans- portation cost. Production, imports and exports The total production of Portland cement in the United States is shown in Chart 2, compared with imports and with production in the six coastal areas, where competition is provided by imported cement. The relative importance of the various cement producing areas in the United States, based on the year 1936, is shown in the Appendix, Table 2. The coastal districts are segregated from those in the interior, as imported cement competes directly only with plants situ- ated in the six seaboard or cosstal areas. Regraded Unclassified E8 - 4 - In the appendix, we show in Table 3 the United States production and shipments of hydraulic cement (practically all Portland) by years from 1926 through 1937. In Table 4 wa show the importe into continental United States for these same years, and in Table 5 the total exports. As compared with a domestic production of 116,478,000 barrels in 1937, we imported 1,257,852 barrels, and exported only 200,096 barrels. Table 6 shows the importe from principal sources in specified years. Belgium is the principal source of our cement imports, supplying 56 per- cent of our imports in 1937. Transportation problems The cost of transportation is sufficiently high in relation to the value of the product that most areas are served by nearby plants. An average railroad revenue of 51 cents per barrel, or about 34 percent of the average factory value, was shown by ICC studies of revenue re- ceived by Class I railroads from cement hauling in 1929 and in 1937. The average haul was found to be 195 miles. Comparisons indicate that in recent years the freight burden has tended to increase, which has been intensified by recent freight rate increases. In view of the relatively high transportation costs, competition from foreign cement has been limited largely to Boston, New York City, and Florida. The combined importations into these three markets in 1936 and 1937 accounted for 77 percent of total imports, the remainder being distributed at many ports of entry. Regraded Unclassified €9 - 5 - For many years Boston has been one of the most important, if not the most important, United States market for imported cement, This has been largely because of two factors: (1) metropolitan Boston is a sizeable market for cement, normally accounting for over a million barrels annually, (2) the principal sources of domestic supply, namely, "the Hudson River District of New York State" and the "Lehigh Valley of eastern Pennsylvania, New Jersey, and Maryland", are located at points from which rail hauls to the above market range from 58 to 72 cente per barrel, as compared with ocean rates from Antwerp, Belgium, to the same point of about 50 cents per barrel. To a considerable extent, the same two factors apply to the situ- ation in New York City. However, this is a much larger market than Boston, normally using over 6,000,000 barrels annually, and is more advantageously located with respect to domestic sources of supply. Imports have never supplied as large & share of the huge consumption in New York City as they have in the case of Boston. A factor of considerable importance in connection with the competition offered by foreign cement at such a large market as New York City is the reluc- tance on the part of domestic producers to cut prices in that area. In Florida the competitive situation between domestic and foreign cement has changed greatly since 1934. Imports into that State in- creased from 10,000 barrels in that year to 351,000 and 298,500 barrels, Regraded 70 - 6 - respectively, in 1936 and 1937. These imports supplied about one-fifth of the State's total cement consumption in those 2 years. Before the only cement plant in Florida was established (at Tampa) in 1927. the bulk of that State's requirements of domestic cement was obtained from Georgia and Alabama plants at rail rates ranging from about 60 cents to $1 per barrel. During the Florida building boom of 1925-26, however, about 2 mil- lion barrels of foreign cement (largely from Belgium) entered that State. Prices and pricing policies $ Following a price war in the industry in 1931 and 1932, cement prices rose sharply in 1933 and 1934 due largely to price fixing under the NRA code. The industry was operating at the time at a low rate of capacity. Prices in recent years have remained at about the 1934 level. In Chart 3 the average factory price of cement in bulk as reported by the Bureau of Mines is compared with the operating rate and with payrolls in the cement industry. A further comparison 1s made in Chart 4 with prices of building materials as a group and with the all-commodity index. A more detailed picture of cement price trends 1e shown in Chart 5. The price to dealers in one city (Chicago), as reported by the Engineering News Record, & trade journal, 1s shown to give an exhibit of changes in quoted prices. On the same chart is shown the average United States price F.O.B. mill, as computed by the Bureau of Mines. From three-fifths to two-thirds of the domestic Portland cement is normally sold through building supply dealers who handle it along with many other building materials. The remainder is generally sold direct ed 71 - 7 - to large consumers such as the United States Government, State Governments, municipalities, and railroads, sometimes at lower prices than those quoted to dealers. The great bulk of the United States cement is sold on the basis of prices F.O.B. destination. The mill nearest the market generally establishes the price, which is usually met by competing mills less advantageously located. In large cities on the seaboard, the laid- down price of foreign cement has considerable bearing on the local price, but such effects are always of a highly localized nature. High transportation charges prohibit foreign cement from reaching interior markets. The domestic cement industry, in setting prices, generally has operated on the multiple-basing-point system, there being in the neighbor- hood of 65 basing points. The five largest companies, operating about 50 plants in the United States and accounting for about 40 percent of the country's total capacity, wield considerable influence on the prices at which cement is sold throughout a large portion of the American market Price combination The Federal Trade Commission is now studying price combination among United States cement producers. The Commission's complaint has been issued against the Cement Institute and 75 cement manufacturing member corporations, reported to produce 95 percent or more of all the cement made in the United States. About 14 companies operating roughly the Regraded Unclassified 72 - 8 - name number of plants are not included in this investigation. The complaint alleges violation of the Federal Trade Commission Act and Section 2 of the Clayton Act, as amended by the Robinson-Patman Act. Reasons for believing prices too high Our belief that cement prices are too high is based on the fol- lowing considerations: 1. Known price-making policies of the industry, in which a few large companies wield considerable influence on prices through 8. trade association, which prices are adhered to by all producers, suggest the maintenance of semi-monopoly price levels. 2. Inefficient marketing policies developed under the basing-point system tend to keep prices unduly high. In attempt- ing to expand sales without reducing prices to consumers, cement companies compete in territories outside their natural bounderies, absorbing the increased freight costs. Under freely competitive conditions the extra freight costs absorbed by the cement companies would go to the benefit of consumers in nearby areas in the form of lower prices. Regraded Unclassified 73 - 9 - 3. The Federal Trade Commission's etudy of the cement industry resulted in their charge that the Cement Institute, the trade associa- tion of the industry, was 8. combination to eliminate price competition, resulting in increased prices for cement. (See Appendix, Exhibit A). Tariff considerations Under the Tariff Act of 1930, Portland cement was dutiable at b cents per 100 lbs.; equivalent to 22.7 cents per barrel. This rate was reduced on May 1, 1935, by the Belgium Trade Agreement, to 43 cents per 100 lbs. or 17 cents per barrel. The ad valorem equivalent of the present duty averaged 21 percent in 1936 and 1937. This duty is equal only to about 1/3 of the average rail charge per barrel for shipping cement in the United States. The maximum reduction permitted by law would be to 3 cents per 100 lbs. This reduction, amounting to 5.67 cents per barrel, would not even be equal to the usual railway switching charge in carload lote within metropolitan centers on the seaboard. A maximum reduction in the duty would tend to lower prices slightly at seaboard markets, but probably would have little effect in interior markets, Even when cement was entered free of duty under the Tariff Acts of 1913 and 1932, relatively little was consumed at markets other than those on or adjacent to the seaboard. Regraded Unclassified 74 - 10 - Profits of cement companies The net incomes of leading cement companies are shown in the appendix (Exhibit B). A study of the earnings of these companies in relation to cement prices and to the rate of operations in the industry suggests that while the price received for cement is an important factor in earnings, the volume of sales is perhaps of equal importance. Earnings improved sharply in 1936, with no in- crease in cement prices, as the result of an increase in produc- tive activity to 44.1 percentof capacity from 29.3 percent in 1935. Activity in 1937 averaged about 45 percent of capacity, suggesting that considerable possibilities exist for further improvement in earnings through increased volume. Regraded Unclassified 75 art 1 - CHART 6 $ I MUITHEAD 1 Regraded Unclassified is - 1 GEOLOGICAL LEGEND- I . I , $ , 1 I I I 1 I I J in 1 - - I Termers - PORTLAND CEMENT PLANTS of the UNITED STATES By Ellis C. Soper 1929 UMBAM bood "I If can - DAROTA I I 1 BIA TEMP GEOLOGICAL DATA By Herbert P. Woodward FOLOWING I D UTAH # 77 Chart 2 73 CHART 2 PORTLAND Cament U.S. PRODUCTION AND IMPORTS MILLION BARRELS 180 170 160 150 PRODUCTION 140 130 120 110 100 90 80 PRODUCTION IN 6 COASTAL AREAS 70 S AGREEMENT 50 40 30 20 IMPORTS BELGIUM 10 0 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 Regraded Unclassified : : 79 Chart 3 80 CHART 3 PORTLAND CEMENT PRICE TREND AND ACTIVITY OF INDUSTRY (1926=100) INDEX NUMBERS PAYROLLS 1925-27 AVERAGE a 100 PRODUCTION 100 90 PRICE 80 70 PAYROLLS 60 Бо PER CENT 40 OF CAPACITY 30 20 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 YEARS IS Regraded Unclassifie Chart 4 82 CH PRICE TRENDS: PORTLAND CEMENT (BURGAU OF MINES) INDEX NUMBERS BUILDING MATERIALS (BUREAU OF LABOR STATISTICS) (1926=100) ALL COMMODITIES ( M - II - ) 110 100 BUILDING MATERIALS 90 80 PORTLAND CEMENT 70 ALL COMMODITIES 60 50 40 30 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 Regraded Unclassified 5 e / CHART 5 CEMENT PRICES 84 1921 1923 1925 1927 1929 1931 1933 1935 1937 DOLLARS DOLLARS PER PER BARREL BARREL 2.40 2.40 PRICE TO DEALERS IN CHICAGO * ENGINEERING News RECORD 2.20 2.20 2.00 2.00 1.80 1.80 1.60 1.60 1.40 1.40 1.20 1.20 PRICE F.O.B. MILLT BUREAU OF MINES 1.00 1.00 .80 .80 1921 1923 1925 1927 1929 1931 1933 1935 1937 TANNUAL 1921 TO 1932, QUARTERLY THEREAFTER e MONTHLY Office of the Secretary of the Treasury Division of - end Statistics P 158 Table 1 86 Table 1. Portland cement companies not included in the study of the cement industry now being conducted by the Federal Trade Commission American Portland Cement Co., West New York, N.J. (Foreman, Ark.) Cowell Portland Cement, Cowell (San Francisco), California. United States Portland Cement Co., Denver, Colorado. Washington-Idaho Lime Products Co., Spokane, Wash. Louisville Cement Co., Louisville, Ky. Allentown Portland Cement, Catasauqua, Pa. South Dakota Cement Plant, Rapid City, S. Dakota San Antonio Portland Cement Co., San Antonio, Texas (Cementville). Gulf Portland Cement Co., Houston, Texas. Longhorn Portland Cement Co., San Antonio, Texas (Longhorn) Western Portland Cement Co., Salt Lake City, Utah. (Bakers) Olympic Portland Cement Co., Seattle, Wash. (Bellingham). Standard Lime & Stone Co., Baltimore, Md. (Martinsburg, W. Va.) National Portland Cement Co. (Philadelphia, Pa.) Regraded Unclassified 87 Table 2 88 Table 2. - Portland coment: United States production, estimated capacity, and percentage of capacities utilized by producing districts in 1936 : Number : : Estimated :Percentage ratio United States : of I I capacity : producing areas Output of output to : active : : rated end :estimated capa- 1 plants 1 : of year 1/1city end of year : : Thousand : Thousand : Percent : : barrels : barrels : : : : - Coastal districts : : : : New York and Maine : 11 : 6,111 : 17,024 : 35.9 Eastern Pa., N.J., and Md. : 23 : 21,360 : 50,756 : 42.1 Va., Tenn., Ala., Ga., Fla., : : # : and La. : 17 : 10,078 : 25,555 : 30.0 Texas : 9 : 5,840 : 11,492 : 34.2 California : 10 : 13,379 : 22,980 : 35.0 Oregon and Washington : 9 : 4,003 : 7.295 : 25.7 = : : : Total, coastal districts : 79 : 60,791 : 135,102 : 45.0 : : : : Interior districts : : : : Ohio, western Pa., and V. Va. : 18 : 10,641 : 28,177 : 26.0 Michigan : 10 : 7,673 : 16,400 : 26.8 Ind., Ill., Wis., Ky. : 11 : 11,795 : 29,502 : 27.5 Eastern Mo., Iowa, Minn., : : : : and S. Dak. : 11 : 10,515 : 22,867 : 33.9 1. Mo., Nebr., Kans., Okla., : : : : and Ark. : 12 : 8,219 : 17,157 : 34.3 Colo., Mont., Utah, Wyo., and : : : : Idaho : 8 : 3.016 : 6,217 : 37.6 : : : : Total, interior districts : 70 : 51,859 : 120,402 : 43.1 : : : : Grand total : 149 : 112,650 : 255,504 : 44.1 : : : : 1/ As reported by individual producers to the Bureau of Mines. Source: U.S. Department of Interior, Bureau of Mines. Regraded Unclassified 89 Table 3 and 90 Table 3. - Portland cement: United States production and shipments : Number : Shipments Year : of active : Production : : plants : : Quantity : Value :Unit value : : Barrels : Barrela : Per barrel : : : : : 1926 : 140 : 164,530,170 : 162,187,090 : $277,965,473 : $1.71 1927 : 153 : 173,206,513 : 171,864,728 : 278,854,647 : 1.62 1928 : 156 : 176,298,846 : 175,838,332 : 275,972,945 : 1.57 1929 : 163 : 170,646,036 : 169,868,322 : 252,153,789 : 1.48 1930 : 163 : 161,197,228 : 159,059,334 : 228,719,756 : 1.44 1931 : 160 : 125,429,071 : 127,150,534 : 140,959.906 : 1.11 1932 : 160 : 76,740,945 : 80,843,187 : 82,021,723 : 1.01 1933 : 152 : 63,473,189 : 64,282,756 : 85,600,717 : 1.33 1934 : 150 : 77,747,765 : 75,901,279 : 116,921,084 : 1.54 1935 : 150 : 76,741,570 : 75,232,917 : 113,372,182 : 1.51 1936 : 149 : 112,649,782 : 112,849,979 : 170,415,302 : 1.51 1937 : 1/ : 116,478,000 : 114,010,000 : 2/169,807,000 : 1.49 : : : : : 1/ Not available. 2/ Preliminary. Source: United States Department of Interior, Bureau of Mines. Regraded Unclassified Table 4 C 92 Table 4. - Portland and other hydraulic cements Imports entered into continental United States and those into territorial possessions : : Into : Percent : Into :Percent : Into :Percent Year : Total : continental : of Hawaii and : of Virgin : of : :United States : total :Puerto Rico: total : Islands: total : Barrels : Barrels : : Barrels : : Barrels: : : : : : : : 1926 : 3,232,386 : 2,842,774 : 87.9 : 389,612 : 12.1 : 2/ - 1927 : 2,050,180 : 1,693,201 : 82.6 - 356,979 : 17.4 : - 1928 : 2,284,085 : 1,922,355 : 84.2 : 361,730 : 15.8 : 1929 1,727,900 : 1,449,586 : 83.9 : 278,314 : 16.1 : 1930 4/ and - - 975,546 4/ 749,653 : 76.8 : 225,893 : 23.2 : - 1931 : 457,238 : 271,240 : 59.3 : 185,998 -- 40.7 : - 1932 : 462,496 : 297,389 : 64.3 : 165,107 : 35.7 : - 1933 : 472,550 : 315,261 : 66.7 : 157,289 : 33.3 : - 1934 : 261,884 : 200,054 : 76.4 : 61,830 : 23.6 : 2/: - 1935 : 616,423 : 463,645 : 75.2 : 147,963 : 24.0 : 4,815: 0.8 1936 : 1,654,504 : 1,367,868 : 82.7 : 284,149 : 17.2 : 2,487: .1 1937 : 1,779,211 : 1,257,852 : 70.7 : 510,905 2 28.7 : 10,454: .6 : : : : : : : General imports, 1926-33, and imports for consumption 1934-37. 2/ Not available. 3/ Includes 474,095 barrels of cement clinker. 4/ Includes 143,623 barrels of cement clinker. Source: Compiled from official statistics of the United States Department of Commerce. Regraded Unclassified 93 Table 5 94 Table 5. - Portland and other hydraulic cement: United States exports : : : Value : Percentage Year : Quantity : : Value : per : of domestic : : : barrel : production : Barrels : : : Percent : : : = 1926 : 974,326 : $2,995,833 : $3.07 : 0.59 1927 : 816,726 2. 2,796,717 : 3.42 : .47 1928 : 824,656 : 2,938,702 : 3.56 : .47 1929 : 886,172 : 3,083,911 : 3.48 : .52 755.708 - 1930 : -- 2,454,605 : 3.25 : .47 1931 : 429,653 : 1,220,600 : 2.84 : .34 1932 : 374,581 -- 802,205 : 2.14 : .49 1933 : 680,302 -- 1,487,707 : 2.17 : 1.07 1934 : 566,171 HE 1,333,381 : 2.35 : .73 1935 : 416,099 : 1,012,942 : 2.43 : .54 1936 : 152,803 : 271,031 : 1.77 : .14 1937 : 200,096 : 397,615 : 1.99 : 2/ .17 : : : : : : : : Exports shown for years 1926-35 consist largely of relatively expensive specialized types of portland cement; for 1936 and 1937 they consist largely of the standard product. 2/ Percentages not comparable with previous years since figures do not in- clude the preponderant specialised cements. Source: Foreign Commerce and Navigation of the United States. Imports are very small compared to either total United States production or to production of the seaboard areas in which they compete. (See chart I). Regraded Unclassified Table 6 96 Table 6. - Portland and other hydraulic cement and cement clinkers; Imports into the United States, from principal sources : 1927 : 1929 : 1933 1/ : 1936 2/ : : : 1937 : : : : : : : Quantity (barrels) 3/ : : : : : Belgium : 1,487,014: 4/1,186,166 : 154,953 : 846,172 : 1,004,290 Denmark : 238,663: 319,679 : 221,071 : 328,958 : 280,140 United Kingdom : 55,022: 178,415 : 51,225 : 15,286 : 6,782 Germany : 7,623: 18,186 : 15,188 : 257,048 : 159,210 Other : 261.858: 25.454 : 30.113 : 207.040 : 328.789 Total : 2,050,180: 1,727,900 : 472,550 :1,654,504 : 1,779,211 : : : : : Percent of total quantity : : : : : Belgium : 72.5 : 68.6 : 32.8 : 51.2 : 56.4 Denmark : 11.6 : 18.5 : 46.8 : 19.9 : 15.7 United Kingdom : 2.7 : 10.3 : 10.8 : .9 : _4 Germany : .4 : 1.1 : 3.2 : 15.5 : 9.0 Other : 12.8 = 1.5 : 6.4 : 12.5 : 18.5 Total : 100.0 : 100.0 : 100.0 : 100.0 : 100.0 : : : : : 1/ General imports. 2/ Imports for consumption. 31 Quantities reported in tons or pounds converted into barrels at 376 pounds per barrel. 4/ Includes 474,095 barrels of cement clinker. Regraded Unclassified Appendix A F.T.C. Complaint 98 Appendix & For Release in MORNING NEWSPAPERS of Monday, July 5. 1937. FEIERAL TRADE COMMISSION Washington PRICE COMBINATION AMONG CEMENT PRODUCERS ALLEGED IN F. T. C. COMPLAINT Charging EL combination to eliminate price competition, resulting in increased prices for cement, the Federal Trade Commission has issued a complaint against The Cement Institute, an unincorporated association, its officers, and 75 cement manufacturing member corporations, producing 95 per cent or more of all of the cement made in the United States. The complaint alleges violation of the Federal Trade Commission Aot and Section 2 of the Clayton Aot, as amended by the Robinson-Patman Act. The complaint charges that the chief means employed for carrying the cement combination into effect is ocnoerted use of the multiple basing point system of quoting prices. Under this system, it is alleged, identical delivered prices are made by every quoting producer entering into the oan- bination, to any given destination in the United States, Instances of identical bida made by many producers to various Federal and State agencies are set forth in the complaint. The Commission's complaint sets out, in effect, that each producing company knows that, when it refrains from offering competitive prices in the consuming areas where it has B. natural advantage and receives its highest actual price, it will receive the same freedom from price competi- tion when the situation is reversed. In this way there 1s everywhere a anywhere. reciprocal waiver of natural advantages with no competition in price COOPERATIVE METHODS EMPLOYED the producers in support of their combination: The following cooperative methods, it is alleged, have been used by They have refused to sell 1.0.b. mill and will sell only at formula delivered prices; They have employed the Institute's freight rate books for the computation of identical delivered prices regardless of whether the rates contained in the books are officially correct or not; They have penalized customers whore customers use truoka for delivery, but have monopolized for themselves the benefit of cheaper transportation when available by highways and waterways; They have prohibited diversion of coment in transit, They have resorted to misleading propaganda a.e to the compe= titive character of their practices; Regraded Unclassified - 2 - 99 They have deprived branches of the Federal government buying cement for numerous western projects of part of the benefit of land grant railroad rates; They have arbitrarily divided customers into classes # those who may buy direct and those who may not, They have made arbitrary definition of what middlemen shall be regarded 6.8 "cement dealers". Others have not been permitted to buy, They have made uniform terms and discounts; They have at times used boyoott and espionage of dealers to eliminate the competition of foreign cement importers. The system is also alleged to be one of price discrimination since under it the true or net prices received by each producer, from various customers, are substantially different. Customers nearest the mills are obliged to pay higher net prices than are made by a local mill to distant customers. As to the public interest in support of the case. the following allegations are mado: The direct and immediate result of the said combination has been and is restraint upon interstate commerce with respect to cement manufactured by any of the producing respondents to be transported beyond the State in which the oemant was made. Such confederated action exercises fi. power which individual action could not exercise or possess, and the necessary tendenoy and the direct and substantial effect of the combination are injury to the public. The effect of the respondents' combination upon the public interest has been and now is: (1) To bring about the disappearance of prices arrived at through the play of competitive forces, and the adoption by concert of organized producers of prices calculated to preserve the more poorly located, squipped, and conducted units at the expense of the buying public; (2) To lessen the demand for cement and the volume of public and private construction in which cement is used; (3) Correspondingly to lessen the opportunities for employment, both in the cement industry and in the construction industry; (4) To raise the cost of public roads and projects and private structures in which coment is used and thereby oither to male them less available to the public or to raise the taxes and rents by which the public pays for them; (5) To encourage the development of excess capacity by the Inducement of high prices and of fictitious freight sharges obtainable by mills not loonted at basing points. Regraded Unclassified - 3 - 100 RESPONDENTS NAMED IN THE COMPLAINT The Cement Institute, an uninoorporated association, whose membership comprises practically every producer of cement in the country, divided into Northeastern, Southoastern, Chicago, and Kansas City divisions, each with its office, with freight rate bureaus located at Bothlehem, Pa., and Chicago, is named as a respondent, as are S. W. Storey and G. H. Reiter, president and sooretary, respectively, of the Institute. Manufacturing companies named as respondents are: Actna Portland Cement Company, Detroit; Alpha Portland Coment Company, Easton, Penna,: Arkansas Portland Cement Company, Denver, Colo,; Ash Grove Lime 25 Portland Cement Company, Kansas City, Mo.; Beaver Portland Cement Company, Portland, Ore.: Bessemer Limestane & Cement Company, Toungstown, Chio: Calaveras Cement Company, San Francisco; California Portland Coment Company, Los Angeles: Castalia Portland Cement Company, Pittsburgh; Colorado Portland Cement Company, Denver, Colo.; Consolidated Cement Corporation, Chicagor Coplay Coment Manufacturing Company, Coplay, Penna., Cumberland Portland Coment Company, Cowan, Tenn.; Deway Portland Coment Company, Kansas City: Diamond Portland Cement Company, Middle Branch, Ohio: Edison Cement Corporation, New York; Federal Portland Cement Company, Ino., Buffelo, N. Y., Florida Portland Cement Company, Chicago: Georgia Coment & Products Company, Atlanta; Giant Portland Cement Company, Philadelphia, Glens Fells Portland Cement Company, Glens Falls, N. I.; Great Lakes Portland Cement Corporation, Duffalo, N. Y.1 Green Bag Cement Company of West Virginia, Pittsburgh, Penna.) Hawkeys Portland Cement Company, Des Moines, Iowa; Horoules Coment Corporation, Philadelphia: Hermitage Portland Cement Company, Nashville, Tenn., Huron Portland Cement Company, Dotroit: Idaho Portland Cement Company, Inkoom, Idaho; International Cement Corporation, New York; Keystone Portland Cement Company. Philadelphia; Koumos Portland Cement Company, Louisville, Ky.; Lawrence Portland Cement Company, Siegfried, Penna.: Lehigh Portland Cement Company, Allentown, Penna,: Marquotte Cement Manufacturing Company, Chicago; Medusa Portland Coment Company, Cleveland, Chior Missouri Portland Cement Company, St. Louis; Monarch Cement Company, Humbolit, Kansas) Monolith Portland Cemont Company, Los Angeles, Monolith Portland Midwest Company, Los Angeles: National Coment Company, Birmingham, Ala.: Nazareth Cement Co., Nazareth, Penna. Nebraska Coment Company, Denver, Colo., North American Cement Corporation, Albany, N. Y.S Northwestern Portland Cement Company, Seattle, Wash.] Northwestern States Portland Cement Company, Mason City, Iown; Oklahoma Portland Cement Company, Denver, Colo.1 Oregon Portland Comont Company, Portland, Ore.; Pacific Portland Cement Company, San Francisco, Peerleas Coment Corporation, Detroit; Pennsylvania-Dixie Cement Corporation, New York; Petoskey Portland Cement Company, Petoskey. Mich.: Pittsburgh Plate Glass Company, Pittsburgh; Portland Cement Company of Utah, Salt Lake City: Riverside Coment Company, Los Angeles: Santa Cruz Portland Coment Company, 3an Francisco; Signal Mountain Portland Cement Company, Chicago, Southern States Portland Coment Company, Rookmart, GR., Southwestern Portland Comant Company, E1 Paso, Texas: Regraded Unclassified - 4 - 101 Spokane Portland Cement Company, Spokane, Wash.; Standard Portland Cement Company, Cleveland, Ohio; Superior Cement Corporation, Portsmouth, Ohio, Superior Portland Cement, Inc., Seattle, Wash,1 Three Forks Portland Cement Company, Denver, Colo.; Trinity Portland Cement Company, Chicago; Union Portland Cement Company, Denver, Colo.; Universal Atlas Cement Company, Chicago; Valley Forge Cement Company, Catasauqua, Penna.: Volunteer Portland Cement Company, Knoxville, Tenn.; Vulcanite Portland Cement Company, Philadelphia; Wabash Portland Cement Company, Detroit; West Penn Cement Company, Butler, Penna.; Whitehall Cement Manufacturing Company, Philadelphia, Wolverine Portland Cement Company, Coldwater, Mich.; and Yosemite Portland Cement Corporation, Merced, Calif. All of the foregoing named corporate respondents are producers of cement and members of the Institute. Many of them have mills in more than one locality. The respondents have been allowed twenty days from date of service of the complaint in which to file answer to the allegations contained therein. (3167) o0o Regraded Unclassified 102 Appendix B 103 B Attached are tables showing for the years 1929 to 1937 the financial and operating data available in published reports for the following five large pesent companies: Alpha Portland Cement Company, Easton, Pennsylvania Lehigh Portland Cement Company, Allentown, Pennsylvania Lone Star Cement Corporation, 342 Madison Ave., New York, N.Y. Pemmsylvania-Dirie Cement Corporation, 60 1. 42nd St., Yes York, N.Y. Universal Atlas Cement Company, 205 So. LeSalle St., Chicago, 111. The last-named company is a. subsidiary of the United States Steel Corporation, which controlled 71.72 percent of the voting power on May 2, 1935. according to information available at the Securities and Exchange Commission. No separate financial information for the company is available. In terms of the size of financial operations, the Lone Star Cement Corporation is the largeet of these companies, reporting net sales of $21 millions in 1937, and net income of $3.9 millions. In 1936 the company had 10 plants, employed 3,800 people, and had total assete of $46 millions. The second largest company, the Lehigh Portland Cement Company, reported net sales of $12 millions in 1937, and net earnings of $1.3 millions. In 1936 it operated 13 plants, employed 2,900 people, and had total monets of $36 millions. No evidence was found, from the information available, that the directors of these five companies were directors of other non-subsidiary cement companies. The interlocking directorates were mainly with subsid- iaries and with banking and local affiliations. The table below shows for the four companies for which the data are available, the net sales, the net operating profit, and the net income for the years 1929 to 1937. Four Large Cement Companies : Year Net Sales : Net Operating : I : Profit Net Ingone (Millions of dollars) 1929 68.7 11.4 9.8 1930 62.3 10.6 8.5 1931 44.5 ..6 - +7 1932 24.8 - 5.7 - 7.1 1933 24.1 - 1.6 - 3.4 1934 32.5 2.2 -7 1935 33.1 2.1 .6 1936 44.8 7.8 5.7 1937 46.4 7.0 5.6 Regraded Unclassified 104 Alpha Portland Cement Company Regraded Unclassified Alpha Portland Cement Company Easton, Pennsylvania : : : 1929 : : : : : : : 1930 : 1931 : 1932 : 1933 : 1934 I 1935 = 1936 : 1937* Balance Sheet Date (Thousands of dollars) Total assets 32,730 31,684 29,011 26,960 26,197 25,757 21,439 21,457 21,239 Bonded debt - - - - - - - - - Proferred stock 2,000 2,000 2,000 2,000 2,000 2,500 - - - Common stock 24,135 24,135 18,486 18,486 18,486 18,486 16,760 16,760 16,760 Minority interest - - I 76 66 57 55 - - Surplus 4,715 3,896 7,500 5.602 4,761 3,681 3,455 3,603 3,249 Net working capital 9,220 9,396 8,145 7.534 7.550 5,082 5,407 6,840 Operating Data (Thousands of dollars) 6,632 Net sales 11,369 9,937 6,013 3.858 4,075 4,712 4,971 7,140 6,724 Operating profit 1.733 1,233 - 1,003 - 1,862 - 735 - 367 - 265 879 330 Not income 1,815 1,248 - 779 - 1,764 - 750 - 163 - 180 862 353 Preferred dividends 140 140 140 140 140 163 - - - Common dividends 2,133 1,600 711 171 - 161 645 645 645 Other Financial Date Earnings per share - common $ 236 $1.56 d.$1.33 d.$2.84 d.$ 1.35 d.$ 0.51 d.$ 0.30 $1.34 $0.55 Preferred - high low Common - high 36% 421 18 118 10 24 201/8 22 z 341 398 low 23 11g 7 5/8 43 54 11} 14 192 84 Other Date Number of employees 1,448 1,223 1,081 Number of plants 10 10 10 10 10 10 9 9 Annual capacity (Millions of barrels) 13 13 13 13 13 13 13 13 Number of stockholders Preferred Common Plants: Owne 9 plants, 1 in Cementon, N. Y., 1 in Jamesville, N. I., 1 in Manheim, Y. Ta., 1 in La Salle, ni., 1 in Ironton, Chio, 1 in Alpha, Mo., 2 in Martin's Creek, Pa., 1 in Birmingham, Ala. . 1937 data for year ending September 30. Source: Moody's Manual of Investments. Regraded Unclassified 106 ALPHA PORTLAND CEMENT COMPANY Easton, Pennsylvania Chairman of Board - a S. Brown, Easton, Pennsylvania President - F. G. McKelvy, Baston, Pennsylvania Vice-President - Γ. M. Coogan, Easton, Pennsylvania Vice-President - J. 7. Magee, Easton, Pennsylvania Secretary -- Robert S. Gerstell, Easton, Pennsylvania Treasurer - J. J. Matthes, Easton, Pennsylvania Sales Manager - J. G. Bragg, Easton, Pennsylvania Accountants Certifying Statements - Haskins & Sells, 15 Broad Street, New York City Directors - G. S. Brown, Easton, Pennaylvania; F. G. McKelvy, Easton, Pennaylvania; 1. M. Coogan, Easton, Pennaylvania; Robert S. Gerstell, Easton, Pennsylvania; C. K. Boettcher, 828-17th Street, Denver: Robert Struthers, 20 Pine Street, New York City: Louis H. Porter, 60 East 42nd Street, New York City: J. 14. Lockhart, 1507 Union Bank Building, Pittsburgh; J. E. Lockhart, 1507 Union Bank Building, Pittsburgh; J. F. Magee, Easton, Pennsylvania. Regraded Unclassified 107 Alpha Portland Cemant Co., Baston, Pa. - 1938 Brown, G. S. - (Chairman of Board and Director) First National Bank & Trust Co., Baston, Pa. - Vice-president and Director. Iale & Towne Manufacturing Co., Stamford, Conn. - Director. Vendor Slate Co., Easton, Pa. - Director. General Supply Co., Easton, Pa. - Director. McKelvy. F. G. - (President and Director) No other connections. Coogan. P.M. - (Vice-president and Director) 2nd National Bank, Phillipsburg, N. J. - President and Director. Magee. J.Y. - (Vice-president and Director) not listed. Gerstell, Robert 8. - (Secretary and Director) General Supply Co. - President and Director. Alpha Supply Co. - President and Director. Phoenix Gypsum Co. - Vice-president and Director. Riverwood Beach, Inc. - President and Director. Easton Trust Co. - Director. Hotel Easton Co. - Vice-president and Director. Green Pond Country Club, Inc. - President and Director. Matthes. J.J. - (Treasurer) Phoenix Gypsum Co., Inc. - (President and Director) Bragg, J. G. - (Sales Manager) not listed. Haskins & Sells, Accountants Boettcher, C. K. - (Director) - President and Director of Bosttcher Corp., Denver, Colorado. American Crystal Sugar Co. - Chairman of Board, Cheirman of Executive Committee and Director. Boettcher & Go. - Chairman of Board and Director. Denver Tranway Co. - Director. Denver & Intermountain Ry. - Chairman of Board and Director. General Securities Oo. - President and Director. C. Boettcher Investment Co. - President and Director. Fifteenth St. Investment Do. - President and Director. New Markham Investment Co. - President and Director. New Windsor Investment Co. - President and Director. Big Horn Cattle Co. - President and Director. Regraded Unclassified 103 Alpha Portland Cement 00., Easton, Pa. - 1938 (continued) Bootscher C.K. (continued) Brown Palace Hotel Do. - President and Director. Dome Investment Co. - Vice-president and Director. Ideal Corp. - President and Director. Ideal Cement Co. - Vice-president, Treasurer and Director. Sixteenth St. Realty 00. - President and Director. Colorado Portland Cement Oo. - Vice-president and Director. Nebraska Portland Cement - Vice-president and Director. Union Portland Cement Co. - Vice-president and Director. Three Forks Portland Cement Co. - Vice-president and Director. Oklahoma Portland Coment Co. - Vice-president and Director. United States Portland Cement Co. - Vice-president and Director Ritz Carlton Investment Co. - Vice-president and Director Denver Day Goods Co. - Director. Alpha Portland Cement Co. - Director Rocky Mountain Motor Co. - Director. Graysonia, Mashville & Ashdown Railroad - Vice-president and Director. Moffat Coal Co. - Director San Luis Valley Southern Railway - Vice-president and Director Boattcher Realty Co. - President and Director Cement Investors Inc. - President and Director Potash Co. of America - Director Struthers. Robert - (Director) Wood, Struthers & Co. - Partner. Rans Rees' Sons, Inc., Ashville. J. C. - Director. Tale & Towne Manufacturing 00. - Director Alpha Portland Cement Oo. - Director. Porter. Louis H. - (Director) Porter & Taylor - Senior partner. Tale & Towne Manufacturing 00. - General Counsel and Director. Alpha Portland Cement Oo. - General Counsel and Director. Hans Roos' Sone, Inc. - General Counsel and Director. Atlantic, Gulf & Pacific Co. - Director. Lockhart L.M. - (Director) not listed Lockhart J.H. - (Director) Union Savings Bank - Director. Union Trust Co. - Director. Wellon National Bank - Director. Lockhart Iron a Steel Co. - Vice-president and Director. Pittsburgh Steel Foundry 80. - Director. Alpha Portland Coment Oo. - Airector. Regraded Unclassified - 109 Lehigh Portland Cement Company Regraded Unclassified Lealgh Portland Coment Company Allentown, Pennsylvania : : : 1929 1930 a 1931 = : 1932 : = 1933 : 1934 1 : : : : 1935 : 1936 1937 Balance Sheet Data (Thousands of dollars) Total assete 55,122 53,800 50,946 45,599 Bonded debt 42,861 42,777 37,122 36,480 35,878 Preferred stock 21,119 20,497 19,759 15,956 15,782 Cheste stock 14,885 12,174 22,517 9,076 22,517 5,675 22.517 22,517 22,517 Surplus 22,517 8,424 8,360 22,517 15,848 6,980 19,249 5,386 2,617 3,149 466 Not working capital 16,963 17,419 9,396 14,835 9,303 11,365 11,281 Operating Data (Thousands of dollars) 12,867 11,516 12,087 12,583 Net sales 19,347 16,700 12,292 6,386 6,456 9,492 9,002 Operating profit 12,779 12,401 2,316 1,848 - 262 # 2,318 - 891 577 206 Set income 2,201 2,106 1,005 2,737 79 - 1,998 - 847 849 496 2,161 Proferred dividends 1,251 1,485 1,450 1,404 1,137 557 535 438 334 Common dividends 245 1,124 786 112 - - - # 1,127 1,099 Other Financial Data Bernings per share counce $2.78 $1.46 12.96 d$7.09 d$4.43 4$0.44 4$0.82 $2.91 $1.33 Preferred - high 1102 108} 101} 75 78 90 107 180 203 Preferred - lov 100 98 5/8 72 40 34 73 5/8 89% 943 97 Common - high 65 40 18 11 27 20 17 3/8 451 51/ Common - low 30 12 5 3 5/8 5 7/8 11 10 5/8 15% 14 Other Data Number of employees 3.264 3,071 2,533 1,900 2,100 2,400 2,700 2,900 Number of plante 16 16 16 16 16 16 13 13 Annual espacity (Millions of barrels) 25 25 late of stockholders Preferred Common Date: Owns 13 plants: Orwrod (2), Fogelaville, New Castle, Pas, Sandt's Eddy, Pas, Mitchell, Ind., Oglesty, n., Mason City, Iown, Iola, Kansas, Metaline Falls, Washington, Union Bridge, Md., Fordwick, Tax, Birmingham, Ala., Owne 50.2 percent interest in Great Lakes Portland Cement Corp., which operates & plant at Buffalo, I. Y. Allen County Supply Co- Controls the Inland Portland Coment Go., Lehigh Line Co., Eclipse Lighterage & Transportation Do., and Source: Moody's Manual of Investments. Regraded Unclassified 111 LEHIGH PORTLAND CEMENT COMPANY Allentown, Pennsylvania President -- Joseph S. Young, Young Building, Allentown Pennsylvania. Vice-President & General Manager - R. R. Bear, Young Building, Allentown, Pennsylvania. Vice-President - B. L. Swett, Young Building, Allentown, Pennsylvania. Vice-President - B. H. Rader, 111 West Washington Street, Chicago, Illinois. Vice-President -- John C. Bowen, Young Building, Allentown, Pennaylvania. Secretary - C. C. Long, Young Building, Allentown, Pennsylvania. Sales Managers -- B. L. Swett, (Eastern Sales Manager), Allentown, Pennsylvania; B. H. Rader, (Western Sales Manager), Chicago, Illinois. Accountants Certifying Statements -- Price, Waterhouse & Company, 56 Pine Street, New York City. Directors: Joseph S. Young, Young Building, Allentown, Pennaylvania. R. R. Bear, Young Building, Allentown, Pennsylvania. George L Mosser, Jr., Commonwealth Building, Allentown, Pennaylvania. B. F. Fackenthal, Jr., Riegelsville, Pennsylvania. Robert 4. Young, M. S. Young & Company, Allentown, Pennsylvania. Regraded Unclassified 112 Lehigh Portland Censent Do. - 1938 Allentown, Pennsylvania Toune. Joseph 8. - (President and Director) Allentown Steam Heating and Power Co., (President and Director) Great Lakes Portland Cement Corp., (Director) Lehigh Line 00., (President and Director) Eclipse Lighterage and Transportation Co., (President and Director) Inland Portland Cement Co., (President and Trustee) Pennsylvania Water and Power Do., (Director) Bear. R.B. - (Vice-President, General Manager and Director) No other connections Swett. B.L. - (Vice-President and Sales Manager) No other connections Bader. B. H. - (Vice-President and Sales Manager) No other connections Bowen. John C. - (Vice-President) Great Lakes Portland Cement Corp., (Director) Holipse Lighterage and Transportation Co., (Director) Long. C.C. - (Secretary) - not listed Price. Waterhouse and Co., Accounts Morrer. George I., - (Director) Lehigh Valley Trust Co., (Chairman of heard and Director) Lehigh Brick Works (Partner) Lehigh Lime Co., (Director) Inland Portland Cement Co., (Trustee) Allen County Supply Co., (Director) Eclipse Lighterage and Transportation Co., (Director) Tackenthal. R. L Jr., (Director) Eclipse Lighterage and Transportation Co., (Director) Lebigh Lime Co., (Director) Inland Portland Coment Co., (Trustee) Easton (Pa.) Trust Co., (Vice-President, Chairman Eme. Com. and Director) Young. Robert 1. - (Director) M. 5. Young and Co., (Partner) Lohigh Valley Trust Co., (President and Director) Regraded Unclassified 113 Lone Star Cement Corp. Regraded Unclassified Lone Star Cement Corporation (Formerly International Cement Corporation) 342 Madison Avenue, New York City : : 1929 : : : : : : 1930 1931 1932 1934 : 1933 : : : : : 1935 1936 1937 Balance Sheet Data (thousands of dollars) Total nesets 55,625 57,675 54,251 52,413 51,721 51,763 44,695 Bonded debt 46,189 17,996 17,996 17,996 17,996 17,996 17.730 12,000 428 Preferred stock - - - - - - - - Common stock 21,449 21,851 21,885 21,546 21,410 21,410 21,410 32,559 Surplus 13,802 15,008 12,879 11,128 Net working capital 10,577 10,973 9,610 10,862 8,210 9.779 8,343 7.457 8,544 11,711 6,853 9,994 Operating Data (thousands of dollars) Net sales 28,370 27,038 20,067 11,109 10,852 13,649 14,085 18,516 21,249 Operating profit 6,200 6,130 2,556 - 197 1,091 2,162 2,437 4,238 5,208 Net income 4,950 4,540 1,358 - 1,436 - 102 667 1,048 2,893 3.914 Common dividends 2,485 2,529 2,357 313 - 157 626 1,947 Other financial data Earnings per share common $ 7.58 $ 7.19 $ 2.16 d$ 2.29 d$ 0.16 $ 1.06 $ 1.67 $ 3.02 $ 4.07 Common - high 1024 75-3/8 62h 154 40 37% 36-7/8 61-7/8 low 48 TSt 49-1/2 16 3-5/8 6-1/8 18-3/8 22-7/8 35-1/2 32 Other data Number of employees 3,800 Number of plants 10 Annual Capacity (millions of barrels) 24 Number of stockholders Preferred Gemmon Plants: Owns 10 cement plants loonted in Now York, Pennsylvania, Kansas, Teras (2), Virginia, Indians, Louisiana, Alabama (2), and controls through stock ownership four others located in Cuba, Uraguay, Argentine and Brasil. During 1936 domestic plants operated at 38.5 percent of capacity and foreign plants at 72 per- cent of capacity, an average of 48 percent of capacity. Source: Moody's Menual of Investments. Regraded Unclassified 115 LONE STAR CEMENT CORPORATION 342 Madison Avenue, New York City President - Charles L. Hogan, 342 Madison Avenue, New York City. Vice-President - Harry C. Koch, 342 Madison Avenue, New York City. Vice-President - Ejnar Posselt, 342 Madison Avenue, New York City. Vice-President -- Thorkild Avnsoe, 342 Madison Avenue, New York City. Vice-President - Ragnar A. Hummel, 342 Madison Avenue, New York City. Vice-President - John R. Dillon, 25 Broad Street, New York City. Secretary & Treasurer -- Hans H. Muehlke, 342 Madison Avenue. New York City. Accountants Certifying Statements -- Loomis, Suffern & Fernald, 60 Broad Street, New York City. Directors: Charles L. Hogan, 342 Madison Avenue, New York City. Leavenworth P. Sperry, Materbury, Connecticut. Rosser J. Coke, First National Bank, Dallas, Texas. Henry J. Wolff, 25 Broadway, New York City. Robert G. Stone, 75 Federal Street, Boston, Massachusetts. John R. Dillon, 25 Broad Street, New York City. Erle V. Daveler, 120 Broadway, New York City. Louis 3. Carter, 50 Church Street, New York City. Irving M. Felt, 25 Broad Street, New York City. Regraded Unclassified 116 Lone Star Commit Corporation - 1938 TATA Chorles L. - President, General Manager and Director. Manufacturers Trust Company, New York City, Director. Argentine Portland Cement Company, President and Director. Uruguay Portland Cement Company, President and Director. National Portland Cement Company (Brasil), President and Director. Cuban Portland Cement Corp., President. h. Harry C. - Vice-president. International Cement Corp., Vice-president. Lone Star Cement Co., New York, Inc., Vice-president and Director. Lone Star Cenent Co., Texas, Vice-president. Lone Star Cement 00., Indiana, Inc., Vice-president and Director. Lone Star Coment Corp., Vice-president. Cuban Portland Cement Corp., Vice-president. me. Einar - Vice-president. International Cement Corp., Vice-president. Lone Star Cement Corp., Vice-president. Lone Star Cement 00., New York, Inc., Vice-president. Lone Star Cement Co., Indians, Inc., Vice-president. Lone Star Cement Co.; Texas, Vice-president. 0800. Thorkild - Vice-president Cuban Portland Cement Corp., Vice-president. amel. Bacnar A. - Vice-president. Cuban Portland Cement Corp., Vice-president and Director. National Portland Cement 8. (Brasil), Vice-president and Director. Argentine Portland Cement Co., Director. Uruguay Portland Cement Co., Director. llon. John R. - Vice-president and Director. Reyden, Stone & Co., Partner. Continental-Diamond Fibre Co., Director. Crocker-Wheeler Eleo. KSB. Co., Member Executive Comm. and Director. Lone Star Cement Corp., Vice-president, Chairman Exec. Com. & Director. National Theatres Corp., Director. Southern Phosphate Corp., Director. Raybestos-Manhattan, Inc., Member Finance Committee & Mrector. Twentieth Century-Fox Film Corp., Member of Executive Committee, and Director. American Agricultural Chemical Co., Director. Curtis-Wright Corp., Member Executive Committee and Director. Wright Aeronautical Corp., Director. Regraded Unclassified Lone Star Cement Corporation - 1938 (Continued) 117 imehlke. Hans H. - Secretary and Treasurer. Cuban Portland Cement Corp., Secretary-Treasurer & Director. Loomis Sufferns & Fernald. Accountants. Sperry Leavenworth P. - Director. Scovill VIB. Co., Treasurer, Comptroller & Director. Hamilton Beach HIB. Co., Vice-president and Director. Waterbury Button Co., Director. Citisens & Mfrs. National Bank, Director. Waterbury Savings Bank, Director. A. Schraders Son, Inc., Vice-president and Director. Union Hardware Co., Director. Lone Star Coment Co., Director. American Hardware Co., Director. Coke. Rossar J. - Director Coke & Coke, Senior Member. Universal Mills, Fort Worth, Texas, Attorney. Vice-president & Director. (First National Bank in Dallas, Dallas, Texas, Attorney. ( Member Trust Committee & Director. Dallas By. & Terminal Co., Director. Lone Star Cement Co., (Texas) Director. Automotive General Corp., Attorney. Secretary-Treasurer & Director. International Cement Corp., Director. Olmsted-Kirk Co., Dallas, Texas, Director. Wolff. Benry J. - Director - Not listed. Stone. Robt. G. - Director. Hayden, Stone & Co., Partner. Adams Express Co., Member Board of Managers & Precutive Committee. American International Corp., Member of Precutive Committee & Director. American Pneumatic Service Co., Director. Amoskeng Co., Trustee. Arlington Mills, Director. Atlantic Gulf & Went Indies S.S. Lines, Director. Colombian S.S. Co., Director. Eastern S.S. Lines, Chairman of Board,- Director. International Cement Corp., Director. Iennicott Copper Corp., Director. Mathieson Alkali Works, Inc., Director. Arthur D. Little, Inc., Director. Waltham Watch Co., Director. Regraded Unclassified 118 Lone Star Cement Corporation - 1938 (Continued) Daveler, Erle V. - Director. Nevada Consolidated Copper Corp., Vice-president & Director. Utah Copper Co., Vice-president, Treasurer, Assistant General Manager & Director. Bingham & Garfield Railway, Vice-president, Treasuruer & Director. Nevada Northern Railway, Vice-president & Treasurer. Butte & Superior Mining Co., Director. Ray & Gila Valley R. R., Treasurer and Director. Santa Rita Store Co., President & Director. Ray Electric & Telephone Co., First Vice-president & Director. Gibson Stores Co., President & Director. Gallup American Coal Co., Vice-president, Treasurer & Director. Lone Star Cement Corp., Director. Carter, Louis H. - Director. American Agric. Chem. Co., President & Director. Felt, Irving M. - Director. Adams Express Co., Vice-president. Southern Express Co., Vice-president. General Realty & Utilities Corp., Director. Regraded Unclassified 119 Pennsylvania-Dixie Cement Corp. - Pennaylvanis-Dixie Cement Corporation 60 I 1:2nd Street, New York City : : : : : : : 1929 1930 1931 1932 1933 1034 1935 1936 : : : 1937 Balance Sheet Data (Thousands of dollars) Total Assets 31,869 31,621 29,296 27,099 25,426 24,410 23,099 22,745 12,460 Bonded debt 11,564 10,743 10,123 0,655 9.557 9,242 8,634 5,288 7,476 Preferred stock 13,589 13,589 13,099 12,500 12,120 12,120 12,120 12,120 3,030 Comes stock 4,000 4,000 4,000 4,000 400 400 400 400 400 Surplus 1,936 2,596 1,552 516 2,839 2,174 1,465 1,261 1,005 Not working capital 5,591 6,119 5,458 4,705 4,118 3.991 3,915 4,567 4,295 Operating Date (Thousands of dollars) Let sales 9,611 ₹,625 6,118 3,477 2,736 4,642 5,025 6,392 5.977 Operating profit 1,101 1,361 - 730 - 1,276 - 1,098 - 160 - 325 435 502 Net income 1/ 332 587 -1,359 - 1,866 - 1,675 - 692 - 797 - 250 25 Proferred dividends 712 - - - - - - - - Common dividends - + - - - - - - - Other financial date Marnings per shore common d.$1.55 d.$0.91 d.$5.68 d.$6.85 d.$6.31 d.$3.85 d.$4.11 d.$2.74 Preferred. high 94 554 20 8 32 32 304 74 764 low 2n 1/8 16 21 3 b. 1/8 124 18 284 15 Common - high 27 12 59 24 94 72 54 100 124 lew 34 at + 4 - 2 7/8 3 48 21 Other Data Number of employees 1,500 Number of plants 8 Annual capacity (willions of barrels) 12.2 Number of stockholders Preferred 1,834 Common 3,808 Plants: owns 8 plants - 2 in Navareth, Pa. 1 each in Bath, Pa., Portland Pt., W. Y., Richard City & Kingsport, Tena. Clinchfield, Ga., and Des Woines, Ia. Subsidiaries: Dixie Send & Gravel Corp. (Tenn.): Marces Quarrier Corp. (Va.): Winterset Limestone Co. (Ia.). 1/ After Federal income tares but before surplus adjustments. Source: Moody's Manual of Investments. Regraded Unclassified 121 PENNSYLVAUIA-DIXIE CEMENT CORPORATION 60 East 42nd Street, New York City Chairman of Board - Victor No Roadstrum, 60 East 42nd Street, New York City. President - John L Miller, 60 last 42nd Street, New York City. Secretary & Treasurer - George Kilian, 60 East 42nd Street, New York City. Vice-President & Sales Manager - Walter S. Wing, 60 East 42nd Street, New York City. Vice-President & General Manager - William H. Klein, Mazareth, Pennaylvania. Accountants Certifying Statements - Price, Waterhouse & Company, 56 Pine Street, New York City. Directors: Edward P. Alker, 60 East 42nd Street, New York City. Guy Cary, Shearman & Sterling, 55 Wall Street, New York City. George Kilian, 60 East 42nd Street, New York City. William H. Klein, Nasareth, Pennsylvania. John L Miller, 60 East 42nd Street, New York City. Jansen Noyes, Hemphill, Noyes & Company, 15 Broad Street, New York City. T. R. Preston, Hamilton National Bank, Chattanooga, Tennessee. Victor N. Roadstrum, 60 East 42nd Street, New York City. Stanley & Russell, Lazard, Preres & Company, Inc., 15 Nassau Street, Yes York City. Walter S. Wing, 60 East 42nd Street, New York City. N. Baxter Jackson, Chemical Bank & Trust Company, 165 Broadway, New York City. Regraded Unclassified 122 Pennsylvania Dixie Ossent Corp. - 1938 Roadstrum, Victor I. - Chairman of Board Abercrombie & Fitch Co., Member Executive Comm. and Director. Gotham Silk Hosiery Oo., Director. Clinchfield Coal Corp., Director. Securities Investing Fund. Inc., New York City. Vice-president and Director. Miller, John A. - President Nazareth National Bank, Director. Kilian, George - Secretary and Treasurer. None Wing, Walter S. - Vice-president and Sales Manager. - Not listed. Klein, In. H. - Vice-president and General Manager - Not listed. Price, Waterhouse and Company - Accountants - Not listed. Directors Alker, Edward P. Anderson, Reilly & Company, Partner. Bank of Great Neck, Director. Cary, Guy Air Reduction Company. Inc., Director. Alabama Great Southern R.R. Oo., Director. National City Bank of New York, Director. National City Safe Deposit Co., Director. Southern Railway Co., Director. Virginia and Southwestern Railway Co., Director. Noyes, Jansen American Chain and Cable Oo., Inc., Director. Doehler Die Casting Go., Director. Fishers Island Corp., Director. White Sewing Machine Corp., Director. Merritt-Chapman & Scott Corp. Director. North American Cement Corp., Director. National Horse Show of America. Inc., Treasurer and Director. Madison Square Garden Corp., Director. Regraded Unclassified 123 Pennsylvania Dixie Cement Corp. - 1938 (Continued) Preston, T. R. Hamilton National Associates, Inc., President and Director. Nashville, Chattanooga & St. Louis Railway, Director. Provident Life & Accident Insurance Co., Director. Ross-Mechan Foundries, Director. Tennessee Electric Power Co., Director. Standard-Coosa-Thatcher Co., Director. 0. B. Andrews Co., Director. Hamilton National Bank, Knoxville. Tennessee, Director. U. S. Chamber of Commerce, Director. Crown Cotton Mills, Dalton, Georgia, Director. Russel, Stanley A. - No other directorships. Jackson, N. Baxter - American Water Works & Electric Co. Inc., Director. Chemical Safe Deposit Co., Inc. North Star Insurance Oo., Director. General Reinsurance Corp., Director. McCrory Stores Corp., Director. Gulf, Mobile & Northern R.R., Director. Standard Surety & Casualty Co., Director. Regraded Unclassified 124 Universal Atlas Cement Company Regraded Unclassified 125 UNIVERSAL ATLAS CEMENT COMPANY Subsidiary of U. S. Steel formed October 1, 1906 as the Universal Portland Cement Co., name changed to present title after acquisition of Atlas Portland Cement Co., on January 1. 1930. Payment for the acquisi- tion of this company was made in the form of 176,265 common shares of the U. S. Steel Corporation. According to S. 8. C., U. 3. Steel controlled 71.72 percent of the voting power on May 2, 1935. The Universal Atlas Cement Company operates nine plants located as follows: Sudson. I. Y. Buffington, Ind. Independence, Kans. Northampton, Pa. Duluth, Minn. Lends, Ala. Universal, Pa. Hannibal, Mo. Waco, Texas Annual productive capacity totaled 12,114,000 barrels. Source: Moody's Manual of Investments. Regraded Unclassified 126 UNIVERSAL ATLAS CREWT COMPANY 208 South LaSalle Street, Chicago, Illinois President - Blaine S. Smith, 135 East 42nd Street, New York City. Vice-President -- A. C. Cronkrite, 206 South LaSalle Street, Chicago, Illimois. Vice-President - George H. Reiter 208 South LaSalle Street, Chicago, Illinois. Vice-Presidant -- 0. H. D. Rohwer. 206 South LaSalle Street, Chicago, Illinois. Vice-President -- 4. O. Stark, 135 East 42nd Street, New York City. Vice-President - F. L. Stone, 208 South LaSalle Street, Chicago, Illinois. Vice-President -- P. c. Tan Zandt, 208 South Lasalle Street, Chicago, Illinois. Comptroller & Secretary - 0. 1. Lindabl, 208 South LaBalle Street, Chicago, Illinois. Treasurer - T. 1. 0'Comner, 206 South LaSalle Street, Chicago, Illinois. Accountants Certifying Statements - Price, Waterhouse & Company, 56 Fine Street, New York City. Directors: B. 1. Affleck, 205 South LaSalle Street, Chicago, Illinois. W. A. Irvin, United States Steel Corporation, 71 Broadway. New York City. J. H. Kempster, Buffington, Indiana. I. I. Knapp. 208 South LaSalle Street, Chicago, Illinois. Elaine 8. Smith, 135 last 42nd Street, New York City. 0. N. Lindahl, 205 South LaSalle Street, Chicago, Illinois. Edward R. Stettinius, Jr., United States Steel Corporation, 71 Broadway, New York City. 127 Universal Atlas Cement Co. - 1938 Smith, Blaine S. - (President) Atlas Lumnite Cement Co., New York City, President and Director. Republic Portland Cement Co., S. A., Havana, Ouba, President and Director. Potomac Cement Storage Co., Washington, D. C., President and Director. Walworth Co., New York City, Director. Cronkrite, A.C. - (Vice-President) - Not listed. Reiter, George H.- (Vice President) - Not listed. Rohwer, 0, H. D. - (Vice President) - Not listed. Stark, A. O. - (Vice President) - Not listed. Stone, Y, L. - (Vice President) - Not listed. Van Zandt, P. C. - (Vice-President)-Not listed. Lindahl, 0. J. - (Comptroller and Secretary) Atlas Lumnite Cement Co., Auditor, Secretary, and Director. O'Connor, T.K. - (Treasurer) Atlas Lumnite Cement Co., Treasurer Price, Waterhouse and Co. - (Accountants) Arfleck, B. F. - (Director). Not listed. Irvin, LA. - (Director) American Iron and Steel Inst., Director. American Bridge Co., Director. American Steel and Wire Co. of N. J., Director. Bradley Transportation Co., Director. Canadian Steel Corp., Ltd., Director. Carnegie-Illinois Steel Corp., Director. Chichasaw Shipbuilding and Car Co., Director. Chichasaw Land Co., Director. Chickasew Utilities, Co., Director. Columbia Steel Co., Director. Oumberland Coal Co., Director. Cyclone Fence Co., Director. sairfield Steel Co., Director. Fairfield Utilities Co., Director. rederal Steel Co., Director. Regraded Unclassified 128 Universal Atlas Cement Co. - 1938 (Continued) Irvin, T.A. - (continued) H. C. Frick Coke Co., Director. Gary Land Co., Director. Illinois Steel Co., Director. Istamian Steamship Co., Director. Lake Superior Consolidated Iron Mines, Director. Micnigan Limestone and Chemical Co., Director. Winnesots Iron Co., Director. Minnesota Steel Co., Director. Morgan Park Co., Director. National Tube Co., Director. N, J. Steel and Iron Co., Director. Oil Well Supply Co., Director. Pittsburgh Steamship Co., Director. Scully Steel and Iron Co., Director. Seventy-One Broadway Corp., Director. Snaron Coal and Limestone Co., Director. Tennessee Coal, Iron and R. R'd. Co., Director. Trotter Water Co., Director. U. S. Coal and Coke Co., Director. U. S. Steel and Carnegie Pension Rund, Director. U. S. Steel Corp. of Del., Director. U. S. Steel Products. Co., Director. Universal Atlas Cement Co., Director. Universal Exploration Co., Director. Virginia Bridge Co., Director. Kempster, J. H. - (Director) Not listed. Knapp, K, I. - (Director) Knapp, Beye, Allen and Cushing, Partner. Carnegie Illinois Steel Corp., Dir. Counsel. Gery State Bank, Gen. Counsel and Director. South Chicago Savings Bank, Gen. Counsel and Director. Universal Portland Cement Co., Attorney and Director. Clark Equipment Co., Attorney and Director. Interlake Iron Corp., Gen. Counsel. U. S, Fuel Co., Attorney and Director. Stettinius, Edward R. - (Director) National Industrial Conference Board, Member Executive Committee and Director. Regraded Unclassified x SNOINIJO TVOST 130 OFFICE OF GENERAL COUNSEL TREASURY DEPARTMENT WASHINGTON GENERAL COUNTY MAR I 0 1938 MEMORKNDUM TO: Secretary Morganthau FROM: Herman Oliphant SUBJECT Concentration of all Government cement purchases in the Procure- ment Division. My opinion has been requested as to the authority of the Procurement Division of the Treasury Department to act as the sole purchasing agency for cement for all Government departments and establishments. The Act of March 3, 1933, 47 Stat. 1517, authorized the President to make reorganizations within the executive branch of the Government. Pursuant to the authority conferred in said Act Executive Order No. 6166, dated June 16, 1933, WBB issued. Said Executive Order, to the extent therein set forth, vests the func- tion of Government purchases in the Procurement Division of the Treasury Department. The pertinent provisions of the Order are as follows: "The function of determination of policies and methods of procurement, warehousing, and distribution of property, facilities, structures, improvements, machinery, equipment, stores, and supplies exercised by any agency is transferred to a Procurement Division in the Treasury Department, at the head of which shall be a Director of Procurement. "In respect of any kind of procurement, warehousing, or distribution for any agency the Procurement Division may, with the approval of the President, (a) undertake the performance of such procurement, warehousing, or distribution itself, or (b) permit such agency to per- form such procurement, warehousing, or distribution, or (c) entrust such performance to some other agency, or (d) avail itself in part of any of these recourses, according as it may deem desirable in the interest of Regraded Unclassified & 131 economy and efficiency. When the Procurement Division has prescribed the manner of procurement, warehousing, or dis- tribution of any thing, no agency shall thereafter procure, warehouse, or distribute such thing in any manner other than so prescribed." In accordance with the provisions of the above referred to Executive Order, regulations were issued by the Director of the Procurement Division end were approved by the Secretary of the Treasury and by the President. Among other things, the regulations provide as follows: "1. The policies end methods of coordination and consolidation of the functions of the various depart- ments. and independent establishments, hereinafter referred to as executive departments, relating to the purchasing, warehousing, and distribution of material, supplies, and equipment hereinafter referred to 8.8 supplies, shall be under the direction of the Director of Procurement, and, after approval, shall be carried out by the Assistant Director, Branch of Supply. "2. After approval of the general policy by the Director of Procurement, the method of procedure to be followed in the purchase, warehousing, or distribution of supplies shall be designated by the Assistant Director, and may be applied to items or groups of items, geographi- cal areas, or activities affected and may be modified or changed as conditions warrant. "3. Those supplies for which requirements can be anticipated and consolidated shall be purchased in definite quantities through the Branch of Supply, either directly or by one or more designated executive depart- ments. Before a consolidated purchase of any commodity is made effective, there may be conducted a study of ell of the factors entering into its procurement to determine whether the Branch of Supply can procure the article more economically or efficiently than other agencies, due con- sideration being given to any statute authorizing B. specific agency to procure the particular commodity. "4" Those supplies for which requirements cannot be consolidated for definite quantity purchase but for which common contracts can be made with advantage shall be contracted for through the Branch of Supply either direct- ly or by one or more designated executive departments. "5. In those areas where two or more services are located and where common requirements exist for frequent- ly used supplies, stocks may be maintained at one or more points in the area from which requirements can be met by direct distribution. Regraded Unclassified 132 "6. Those supplies of which the procurement, warebousing, or distribution is to be controlled by the Branch of Supply under one of the methods outlined above, will be listed and communicated to the executive departments as may be necessary, and thereafter no individual procurement, warehousing, or dis- tribution of those articles shall take place except in emer- gencies. Supplies other than those so listed and including those peculiar to the needs of the particular executive depart- ment shall continue to be procured, warehoused, or distributed by them, except that the facilities of the Branch of Supply or any designated activity may be availed of in connection there- with. "12. These regulations may be amended by the Director of Procurement with the approval of the Secretary of the Treasury. Such amendments shall be promilgated by the Director of Procure- ment." In view of the foregoing, it is my opinion that the Procurement Division is presently authorized to purchase all cement needed by Government departments and establishments, and its authority in this regard can be exercised without either legislation or a further Executive Order. Regraded Unclassified 133 OFFICE OF GENERAL COUNSEL TREASURY DEPARTMENT WASHINGTON E GENERAL COUNTY MAR 1 9 1938 MEMORANDUM TO: Secretary Morganthau FROM: Herman Oliphant SUBJECT Expansion of Government purchasing power to include cement used on projects under the supervision of the Secretary of Agriculture (through the Bureau of Public Roads.) It appears that more than 10% of the total amount of cement produced in the United States annually is used on highways for the construction of which financial aid is rendered by the Federal Government through the Bureau of Public Roads. In view of this fact, consideration has been given to the possibility of extending Government purchasing power so as to control the pur- chase of cement used by state highway departments or contractors on such projects. Assuming that the Procurement Division proceeds with the suggested plan of handling all Government cement purchases, and that it develops that the needs of the various Government agen- cies can best be obtained by means of an open contract covering all their needs for a term of months or longer, B question has been raised B.B. to whether a contract can be negotiated in such a way that the benefits of it can be made available to states and political subdivisions thereof and to contractors in connection with roads financed in part by the Federal Government. It is my opinion that there is no legal objection to a require- ment to the effect that the provisions of the contract entered into by the Procurement Division are to be available to the highwey de- pertment of any state, or to any contractor entering into a con- tract with a state highway department after the effective date of the cement purchase contract, for any work involving construction which is being financed in part by a contribution from the Govern- ment through the Bureau of Public Roads. It also my opinion that the acceptability of a cement bid can be made contingent upon the prices bid being available to state highway departments and their contractors on such projects, and that the cement contract can be Regraded Unclassified -2- 134 made on that basis. The basie for this opinion is that such a requirement can reasonably be said to be in the best intereste of the Federal Government in that it is reasonably calculated to produce lower cement prices. In this the interest of the Federal Government is immediate and substantial. The lower the price of cement used in building roads the Federal Government in part f1- nances the more roads it gete for its money. No opinion is expressed as to whether existing legislation in & particular state might prevent the state highway department from taking advantage of such & contract were one written (many state statutes require competitive bidding by the highway department in the purchase of materials). However, nothing would prevent B. con- tractor from doing 80, and practically all highway work now done under the supervision of the Bureau of Public Roads is done by con- tract. In this manner the benefits, if any, of such an arrangement for the purchase of cement could be made available to contractors and, any saving so effected being reflected in their bids, such savings would be passed on to the state and to the Federal Govern- ment. As I have indicated, an open contract covering the needs of Federal agencies for any given period of time may provide that its benefits may be taken advantage of by state highway departments or by contractors entering into contracts with such state highway do- partments subsequent to the effective date of the cement purchase contract, provided the Federal Government, through the Bureau of Public Roads, is aiding in financing the construction of such work. Such 8. provision would not, of course, be obligatory on either a state highway department or one of its contractors but its benefits, if any, could be taken advantage of by them should they BO desire. The Federal Government has for years encouraged a program of highway construction in the several states by making cash grants to states in accordance with the provisions of the Federal Aid Act, ap- proved July 11, 1916, 39 Stat. 355 and to the Federal Highway Act, approved November 9, 1921, 42 Stat. 212, as amended. In 60 doing, the Congress has adopted a policy of making provision, at two year intervals, for Federal aid for highways, each statute relating to the next ensuing two fiscal years. Such statutes do not purport to to constitute appropriations but, in the words of one of the statutes (Act of June 16, 1936, 49 Stat. 1519) provide that there is "author- ized to be appropriated out of any moneya in the Treasury not other- wise appropriated" funds for the next two fiscal years (in the case of the 1936 statute, $125,000,000 for the fiscal year 1938 and $125,000,000 for the fiscal year 1939). Regraded Unclassified 135 The Secretary of Agriculture is required to apportion among the several states, on or before January 1 in each year, the sums Bu- thorized to be appropriated for the fiscal year immediately follow- ing (according to 6 formula for apportionment contained in the Tederal Highway Act of 1921). Thus, on or before January 1, 1937 the Secretary of Agriculture apportioned the sum authorized to be appropriated for the fiscal year 1938, and on or before January 1. 1938 he apportioned the sum authorized to be appropriated for the fiscal year 1939. The 1936 Act above referred to provides for B. submission of proj- ects to the Secretary of Agriculture for his approval, and further provides that "The Secretary of Agriculture shall act upon the projects submitted to him under any such apportionment and his approval of any such project shall be deemed = contractual obligation of the Federal Government for the payment of its proportional contribution thereto." From the foregoing it is apparent that the Federal Government be- comes obligated to make a proportional contribution to the cost of such projects, not when the Secretary of Agriculture has apportioned the suma authorized to be appropriated, but rather when he has ap- proved projects submitted "under any such apportionment." Obviously, appropriations to meet the Government's obligations are At some time necessary and, therefore, each year the Department of Agriculture Appropriation Act for the ensuing fiscal year carries an appropriation designed to provide the funds it is estimated the Federal Government will be called upon to disburse for highways during said year. Thus, looking at Federal participation in highway construction as a whole, at any given time there is (a) a total sum which has been authorised to be appropriated; (b) B. total sum apportioned to the several states by the Secretary of Agriculture (based, 88 above indi- cated, on the amounts authorized, but with the apportionments, in point of time, lagging as much as two years behind the authorizations; (o) another sum which has been obligated by the Secretary of Agriculture by the approval of specific projects under apportionments theretofore cade - which sum, at any given time, is less than the total sum appor- tioned; and (a) & total sum appropriated which bears no necessary rala- tion in amount to either (a), (b). or (c), though it is bound to be less than (e) or (b) and would in all probability always be less than (c)- To illustrate, the Department of Agriculture Appropriation Act, 1938, appropriated $150,000,000 for roads, $25,000,000 being the remainder of the sum authorized to be apportioned for the fiscal year 1936, and $125,000,000 being the amount authorized to be ap- propriated for the fiscal year 1937 (in the meantime, as above indicated, legislation passed in 1936 had already authorized funds to be appropriated for the fiscal years 1938 and 1939). This fact, together with the fact that testimony before the House Committee or 136 Appropriations by the Chief of the Bureau of Public Roads last year was to the effect that the time elapsed between the approval of a project and the disbursement of Federal funds therefor is, on the average, 12 to 13 months, indicates that the total sum ap- propriated 18 always less than the total amount authorized to be appropriated as well as less than the amount which the Federal Government has been obligated to pay by the action of the Secretary of Agriculture in approving projects. Under the existing legislation, after approval of B. project by the Secretary of Agriculture he so certifies to the Secretary of the Treasury and the Secretary of the Treasury is then required to "get aside the share of the United States payable on account of such projects." (Federal Highway Act of 1921, supra). Section 13 of the same statute provides that when the Secretary of Agriculture finds that any project approved by him has been constructed in a satisfactory manner "he shall cause to be paid to the proper authorities of said state the amount set aside for said project." From the foregoing and from & detailed examination of the relevant statutes it 1e apparent that the grants made to the several states to aid in the construction of highways are cash grants paid out of the Treasury when the Secretary of Agriculture le satisfied that the amount set aside for that purpose has been earned. In the absence of legislation authorizing it, no way is apparent by which the Federal Government can make any payment on account of the Federal-Aid Highway grant otherwise than by the payment of money. In other words, Federal legislation is necessary before there can be any expansion of Government cement purchases to include coment used on highway projects constructed by states under the supervision of the Bureau of Public Roads. There are two bills pending in the Congress at this time which have & bearing on this subject. One is the Department of Agriculture Appropriation Act for the fiscal year 1939, which will undoubtedly contain an appropriation for roads (the bill is still under considera- tion in the Committee on Appropriations in the House of Representatives, and no information is presently available as to what sum will be con- tained in the bill for this purpose when it is reported). The other bill 1a an amendment to the Federal Highway Act of 1921 which, among other things, authorizes an appropriation for the fiscal years 1940 and 1941. The bill last above referred to is still before the Committee on Roads in the House. Hearings have been concluded, the transcript ie being printed, and it is expected that the Committee will consider the bill in executive session within a week or 80, in which event the bill will probably be reported out within the next two or three weeks. Regraded Unclassified to 137 If an effort is to be made to extend Government purchases of cement 60 as to include cement now purchased by state highway de- partments or by contractors on their projects, the possibility of obtaining legal authority to do so by amending either or both of the above referred to bills now pending before the Congress should be made the subject of immediate study. In this connection it should be pointed out that any such amendment to the pending ap- propriation bill would be subject to a point of order, as it would be legislation in an appropriation measure, whereas an amendment to the other bill could not be BO attacked. Insofar as such a change in the law might affect existing obligations of the Federal Government (that is to say the obliga- tions created by the approval, by the Secretary of Agriculture, of projects submitted to him) it seems clear that legislation could only go so far as to authorize the negotiation of sutually satis- factory agreements with individual state highway departments rela- tive to the purchase of cement for use on such projects. To the extent that the Federal Government is not yet legally committed to pay grants in accordance with existing legislation, such legislation could go further and affirmatively impose, as a condition of approval of projects, such requirement as to cement purchases as would seem appropriate to effectuate the desired rs- sult. The extent to which such legislation (assuming it could be presed at this Session of the Congress) would increase Government purchasing power in cement in the immediate future would depend to & large extent upon facts not presently available. To the extent that a particular state program 18 under contract, with the contractors supplying cement, there is no practical way of extend- ing Government purchasing power to cement to be used on such work. To determine the facts Be regards this as well as other elements in the situation would involve more detailed study by the Bureau of Public Roads than has yet been made. Furthermore, in view of the fact that the whole Federal-Aid highway program has been under the jurisdiction of the Department of Agriculture for many years, It would seem advisable to take the matter up with that department before either drafting or recommending specific legislation on the subject. Legislation which would have the effect of permitting the Government, should it BO desire, to contract for cement for use on this type of project, in which its financial participation is SQ great (ranging from $75,000,000 authorized for the fiscal year 1929 to $200,000,000 authorised for the fiscal year 1938 - in addition to $1,200,000.000 of emergency funds appropriated for that Regraded Unclassified 138 6- purpose between 1931 and 1936), should be given immediate con- sideration and, therefore, I recommend that this Department communicate with the Department of Agriculture with a view to obtaining its cooperation in securing the passage of legisla- tion which will enable the Government, should it so desire, to contract with reference to cement to be used on Federal Aid High- way projects, the exact details of the legislation and the manner in which the control can best be exercised to obtain the desired result to be worked out in conference. Herman Cliphandy Unclassifi March 21, 1938. 139 WHICH COUNTRIES ARE GAINING AND WHICH LOSING GOLD? 1. The United States, United Kingdom and The Netherlands together gained almost twice as much gold as was produced in 1937. Together they gained about $2900 million (world production was $1250 million). The United States gained $1,502 million (of which $1,310 mil- lion was imported gold). The United Kingdom gained at least $420 million and probably double that amount. (The British Empire produced during 1937 about $700 million of gold.) We have to estimate British gold gains because earmarking operations which were heavy in the United Kingdom last year are not reported. We do know that the Exchange Equalization Account increased its holdings in the six months' period, March to September 1937, by about $460 million and the Bank of England increased its holdings over the whole year by $105 million. We also know that countries other than United Kingdom lost or exported on balance approximately $1000 million. The Bank of Netherlands gained about $440 million. Netherland's importe of gold are not recorded 80 we cannot say whether this sum represents more than the imports or something less than the imports. 2. Most of the other large countries lost gold during 1937. France lost $1,000 million Italy (est.) $35 million Spain (est.) 250 # Belgium 33 = Japan 202 # Norway 16 # Switzerland 57 W Mexico 15 British India 50 # U.S.S.R. sold during 1937 about $200 million worth of gold, which is probably about her annual production. Countries not mentioned gained or lost only small amounts. 3. The gold flow into the United States ceased in November 1937. Since then only about $14 million has come in. The recession here, and fear of possible further devaluation of the dollar checked the flow to the United States and even caused a little to flow out. 4. During the first two months of this year France lost about $180 million, Belgium $4 million. United Kingdom imported $50 mil- lion. Switzerland gained $51 million, and Netherlands #47 million. 5. During the past two weeks the Bank of Switzerland converted $10 million into gold, and the Bank of Sweden likewise converted $10 million into gold. Regraded Unclassified TREASURY DEPARTMENT 140 INTER OFFICE COMMUNICATION DATE TO Secretary Morgenthau March 21, 1938 FROM Herman Oliphant For your file Pursuant to your instructions, I saw the Secretary of Agriculture at 12 o'clock today in company with Mr. Blaisdell and Mr. Lubin. Mr. McDonald of Public Roads and Mr. Evans, Mr. Wallace's assistant, were also present. The Secretary ran over a copy of the report of the Committee on prices which dr. Blaisdell gave him, and then there was read to him point "covering the relation of the Department of Justice to this whole program. From that point forward he more or less took the floor and what he said was, at one moment, addressed to the broad aspects of the question, and, at another moment, to the exact phrasing of point 3. On the former score, he said such things as, that he wes opposed to any and all reforms at this stage of the business cycle; that if we did not get recovery pretty soon, e Democratic President would not be elected in 1940, and that the whole antitrust approach was, to use his word, "cock-eyed." On the latter score, he seened to be groping for some slight change in phraseology that would enable him to prove point 3. In the course of the conversation, I remarked that I had difficulty in seeing that enforcing the law was reform. When I left his office at 12:40, I called you but you had left for the White House. When I returned to my office with Blaisdell, I had a call from Lubin who said that he had stayed on to talk with Wallace; that Wallace had softened on the thing and was trying to get you on the telephone. I had the page which the President was to sign retyped changing the words "Grand jury investigations" to the words "Appropriate action" in point 3, with the thought of satisfying Secretary Wallace in the matter of exact phrasing. This I sent to you at the White House with a penciled note to the effect that I thought Wallace might approve with this verbal change. Kurman Regraded Unclassified March 21, 1938. 141 2:00 P.M. H.M.Jr: Hello. hairman William Douglas: Good afternoon Mr. Secretary. H.M.Jr: Ah, Bill Douglas. D. Yeah. H.M.Jr: Morgenthau. Listen, now, look, the President has just dumped about all New York City's financial - that he's had for two weeks in my lap. D. (Laughs) H.M.Jr: And, in connection with that, of course, 1s this loans to !ndustry. And if you don't mind, in order to save time, because I'm going to leave town Friday night. D. Yeah. H.W.Jr: I'd like to have Jones and somebody from Federal Reserve and yourself for lunch on Wednesday. D. Well, anything you say 16 all right with me. Let me bring you up to date. Jimmy Roosevelt - did he talk to you? H.W.Jr: Has he what? D. Has Jimmy talked to you? H.M.Jr: Ah, Jimmy called me up and said if we did something he'd like to sit in on it. D. Well now, Jimmy - I've been out of town; I Just got back. H.M.Jr: Yeah. D. And he told me, ah, Friday night that what he would like to do would be to, ah, ah, have a, a committee, you and Eccles, and I think he said myself, ah, to ah, work this thing out right away - decide on policy and what not. Now, ah, I Just thought that out. I don't know whether he, he had discarded that or not. I've been away. Regraded Unclassified - 2 - 142 H.M.Jr: Well, he talked to me on Saturday, but the President's given me every document that every- body in the Government has written him on it. D. Yeah. H.M.Jr: And he just gave me this thing; now what I'll do with it, I'll ask Jimmy whether he wants to come over here for lunch on Wednesday. D. Yeah. I'll be there. H.M.Jr: How's that? D. I'll be there. H.M.Jr: And, ah, but ah, frankly I think it's much better as long as the President gave me this job that we all talk at one time. D. Yeah. H.M.Jr: And, ah, it'll save everybody's time. D. Sure. H.M.Jr: And, ah, evidently the President decided to ask me to do it D. Well ..... H.M.Jr: And ..... D. Well ..... H.M.Jr: Just to get together and then I've got all the stuff down. D. Swell. H.M.Jr: And he's tying this up also with flood control. D. Swell. H.M.Jr: And I think he said he'd had a message from you on flood control. D. o sure. I got - I worked out some stuff there, that ah ..... Regraded Unclassified - 3 - 143 H.M.Jr: Well, he's given me everything that anybody's written within the last month. D. (Laughs) H.M.Jr: So I ..... D. I know how you feel. H.M.Jr: Yeah. D. (Laughs) H.M.Jr: So we'll say Wednesday. D. Swell. I'll be there. H.M.Jr: Thank you. D. One o'clock? H.M.Jr: Right. D. 0. K. H.M.Jr: Thank you. Regraded Unclassified 144 SPECIAL GROUP MEETING March 21, 1938. 2:00 p.m. Present: Mr. Magill Mr. Oliphant' Mr. Gaston' Mr. Haas Mr. White Mrs Klotz Miss Chauncey Mr. McReynolds Mr. Upham ' M.Jr: Now, who all is here, who's missing? Where's Magill? Communcey: I think they had trouble finding Magill and Upham. m...Jr: what happened? Olighant: why, ne led off by saying he was opposed to any and all reforms until after recovery. I suggested that we marrow the issue down to this: if this evidence appeared on our desks during the course of this pro- cedure, that it should be turned over to Justice for annaling the regular way, so forth. And he said, "Well, we have known all along they've been violating the Law, and the thing to do is get them together, see if them." they won't listen to reason, talk to them, persuade ....Jr: Who? Olignant: The cement people. a...Jr: Who? all_nant: The cement people. And that any ... 6.6.dr: One second. I'll be back. (H.M.Jr leaves) waite: Herbert, did Roper give that statement out? Geston: I don't know. It's to be used on the radio tonight. Olignant: What's the statement? Juston: on, saying that prosperity is just around the corner. International situation is particularly encouraging. (Laughter) Unclassifi 145 -2- wish That's going to pull the domestic up? Giston: Yes. It is because our domestic economy is so intimately tied up with the foreign one that we have cause for optimism. distun: Yes, yes, HALS: Just the reverse. McH: I read in the paper some place yesterday that pros- perity is Just around the corner but they didn't /LIVOW which way to turn. Thet's like the statement "upward pressure on the bottom" - whatever they're talking about as the bottom. (H.M.Jr returns with Mrs Klotz) Ollphant: The other general statement he made was that if we sidn't get recovery, the country wouldn't elect a Democratic President in 1940. Now, that was the general talk. Then at other times he Was talking sbout the text of Paragraph Three. After I left - I telephoned you as soon as I got over to his office; then when I got back over nere, Lubin called me and stid Decretary Wallace W&S trying to get you on the telephone. H...Jr: Me? Yes. M.E.Jr: He did. 011phant: That he nad softened on the thing. And I thought maybe that that one change in language - I knew it was pretty late to try to do it - that that change in those two words might pull it out of the fire. Well, you just took the guts out of the whole thing. Slipment: No. -...Jr: Oh yes. Oh sure. You just softened the whole thing Regraded Unclassified 146 -3- down now. ligmant: I werely changed grand jury action" to appropriate action." No, tue way I got the thing illiment: So, no, not changed. Not enanged at all. The last paragraph isn't the way it was at all. "Appropriate action by the Department of Justice should facts developed in negotiating cement con- tracts warrant it." Ollmont: Now, the only change there was - changed "grand Jury action" to "appropriate action." Well, anyway, this is the interesting thing. Wallace cylls DE up and says tast - in short, that we've got to get together with big business, we've got to sit down und talk things over with them, 1f we do something Like this it's just going to irritate them. And he 3810, "This is just the kind of stuff that the President loves. This Is red mest for the President. Ye mustr't give anything like that to the President it tais time. M Then I go in and I tell the President, the way I always 00 - this 13 the reason I got this group here; I picked It carefully; triple confidential - what Wallace said, He suid, "Thet's practically what Wallace tola me on on automobile ride, that WE mustn't do anything at this time to irritate business and we must get together with them.' So the President said, "Well, what, Henry?" "Well, we just must get together with them.' 200? Now that I've nad B little fun kidding you, I just wanted to let you know that, (Shows order signed by F.D.R.) I woulon't even snow it to him, wouldn't even let the President know what happened. The reason I called - this is tae crossing of the Rubicon. The President of the United States told me that he isn't going to let down the flag for anybody. And ES long ES I'm here - I said, "The first time I let it down, you send me home.' And I told him, "The only thing that keeps me going is the moral uplift in this thing." I said, "I can't work with people that are going to Regraded Unclassif 147 -4- talk about getting together with big business and all the rest of the stuff. Life isn't worth while. I'd want to go home," He said, "Where is that? Let me sign that." And that's one of the most important things that have happened around here since I've been in this town. He said, "My God!" - he got so mad; I was sorry, because he pushed me - couldn't talk. He said, "What's the matter with Wallace?" I said, "Well, what Wallace is saying - when business is good, enforce the law; when business is bad, don't enforce the law. " I just don't know what's the matter with the man, Now, the President didn't date this, Mac. He said I could. Do you think so? How would you handle this? Jliphant: Type the date on. M.M.Jr: well then, I'd type it. Now, here it is. Now, here's everything. Wighent: Let me have back my .... d.M.Jr: The whole business is here. It's all a matter of history. Ollohant: I'd like to add à footnote to it to explain it. (Magill comes in) H.m.Jr: Come in here. Don't scowl, sit down. H.H.Jr: Now, just so we get the thing - from now on, Miss Chauncey, once a day you go through that pile. There isn't to be any pile, see? There isn't to be any more pile on that desk. Have to go through that once t. day. \To Upham, coming in) Sit down. Ollphant: May I dictate for that file a summary of this interview with Wallace, and Blaisdell and I will both sign it. B.M.Jr: Here's the only thing. Mac, you know what our arrange- ments are with what's-his-name over there. Regraded Unclassified 148 -5- Yes. I'm going to give you the whole business. I'll give nim b photostat. No: Here's everything I got on that. And the President sald, "What about publicity?" Herbert. I said, "No publicity now, until we get tie bids." There's no sense of having any publicity. No, it would tip off the whole thing. Ind therefore - but the President mage one suggestion - put It on nere, to give this personally now to Mr. lat's-nis-name -: the cement prices should be asked for f.o.b. will. The President says so. I'll cive that to nim personally. name tual in effect today. I'll give It to Peoples. You sit lown wh that. But there is that whole thing. ACC don't let Herman tamper with it. I'm coing to attach on that my account of that interview over there. .Jr: Init's all right. That's all right. Somebooy can tell Magill afterwards. Herbert, you tell Jagill afterwards what happened. Yes. The other thing the President said was, "Now get plenty strong, because I'll need you when I get back. We're going into training for the heavyweight enampionship." Now, what the President did, which is the reason I'm 6 little bit more confused than usual - he picked up ell the papers on his desk that have anything to do - financial - and dumped them into my lap. Want to civide them up. Regraded Unclassified 149 -6- You (Upham) got a pencil and paper? I've got here every thing that has to do with loans to industry. The President asked me to handle it, and he - you've got to tell Bell about this, because he wants this particularly - a message sent down to him at Warm Syrings on a loan to industry. "This should include creation of industrial banks or : substitute. It also should include " - Ena this ls where Bell comes in; ne's got all this stuff - this so-called flood control plan, which is that the states put up two percent. But ne said, "If, for instance, due to this flood control plan we generate some electricity, why, the net credit - net receipts that we should receive during the 50 years for electricity should go to tue states, and their contribution would be deducted by that amount." See? In other words, if they take in 10, 15 million dollars net, why, the states would have to pay that much. This would be 6 message on industrial banks, flood control, reforestation - anything. Now, I don't know wno's been working on this thing, but here - the President's got everything here from enybody that's given him a clue - Douglas, Eccles, and everything. And I thought at lunch - I've already called Douglas, so you don't have to, but I'll have Douglas, Jesse Jones, for lunch Wednesday, one o'clock. Bell? d.M.Jr: lino? -EX: Bell. Bell. Somebody from the R.F.C. - I mean Ransom. Jimmy Roosevelt. Douglas said, "Jimmy said he was going to handle this Friday." So I said, "Well, Jimmy called me Saturday, could he sit in on this. I said, "Inasmuch as nis father has given me every- thing, we'll invite him to come over if he wants to come." Who else? You better be there, Herman. That's industrial banks - industrial loans, I mean. Yes. Wayne Taylor, are you in on this? Upham? Banking? Upon: Yes, I have a good many things Regraded Unclassified 150 -7- d.s.dr: All right. Well, we'll have one more. Upham: on it. n.w.Jr: All right. well now, here's the portfolio on this thing, and what I'm going to do Is, I'm going to have Miss Chauncey make notations of this thing, you see, because here's Wallace, here's Eccles, here's Bill Douglas - everybody - and I think you better kind of get It all together, you see. Comuncey: Uh-huh. M.M.Jr: And then the people in the Treasury who are going to work on this thing have copies. You (Magill) doing monopoly message? Who's doing monopoly message, including taxes? Well, both of you guys (Megill and Oliphant). Negill: First I'á known of it, but Ollgarnt: You mean tox-exempts? R.M.Jr: No. Oltgaent: well, Herbert did the bank holding company part of the mossage. ..Jr: well, let me Ollymntr Monopoly message. Taxes - nere - "My desr Mr. President: " The President says - I first told him how tired I was feeling. Re says, "Good." So I said, "Well, if this is what you give me when I feel tired, what would you say if I felt well?" This is from Robert H. Jackson on the question of a tax message, in regard to tax- exempts, see? And what the President said - "If everyone agrees, send a draft to Warm Springs and I'll send A seperate message." So he said that you (Magill) would take a group - I don't know whether you (Oliphant) are in it or not; don't be beshful around here, because I'm moving too fast - get together with Bob Jackson and fix him up a message on tax-exempts. But it's up to Bob Jackson to show it to Homer Cummings, so Homer when ne gets back can't say, "I never heard about it." 151 -8- degill: Well, we prepared a message and Herman cleared it with Homer. Didn't you? 011ghant: And it went to the White House and the White House sent it to Justice. This came back from Justice. 11.2.Jr: Here it is back again. Accept? D.K. J.S.Jr: All right. This is fun for somebody. "Prepare monopoly message." Here's the one on the bank holding, which he says - here's the whole business. Now, the bank holding - this is the way I look at it: the bank holding and the monopoly should be thrown into one thing. And I SEW Ben Cohen over there, was kidding wim about it. And you fellows throw it together, and this should be cleared with Homer, and this should be sent down to Warm Springs. Now, Mr. Magill, you're not in on this, are you - bank message? [111: (Nous no) Now we have it together. And remember when you tsked me how this should come? Isn't this much nicer? Allment: Check. Jr: Isn't it a much nicer way to have it come? George, is this - Secretary of the Navy - he says that 70 percent of all the inventories are frozen and the R.F.C. should make a loan on those provided the fellows will go ahead and buy new stuff. Now, who would that be? Be part of the industrial banks? Aould that be part of industrial banks? bite: What's frozen? miss. Inventories. Custon: Is it all kinds of inventories, everywhere? Regraded Unclassif 152 -9- Tell, wouldn't that go up - wno's got the industrial brnks thing? They're over mere on the side. well, wait a minute. Miss Chauncey, if you'd get nold of Commissioner Splawn, of the I.C.C. its. and ask aim when ne thinks I'm going to get : copy of nis Thursday report to the President on railroads. And then the President said that Douglas una Jones and I should get together and meat comments - on it and send it down to the President at Warm Springs, so the President in turn can ask - can throw together a message, put it in the lap of the Senate, And ask for sction. So what I would suggest is if Solaen is going to have that ready Thursday, so that I'm not going to be - if I could get 2 copy of it Thursday morning, I would have Splawn, Jones, and Lougles and myself for lunch either Thursday or Friday. Ve can't have it Thursday - Mrs. Morgenthau is coming Thursuay - so it will be Friday. That will be as last chance. I just wanted everybody, so you wouldn't have - together at once. But I naven't been lifted up as much at one time LS to have the President take that taing the way he did on cement. That's the thing, gentlemen that makes - it was marvelous - it makes life worth living. Bizisdell will be tickleu to dentn to hear that. I sent for Bleisdell to tell nim personally. I thought ne deserved that. I'll tell Lubin, buck nim up a little bit. Againt: Lubin was ewful blue. (On phone) Dr. Lubin. The boss is all right. This thing isn't going to get nim down. Last night, when the fellow sold me my ticket et the Regraded Unclassified 153 -10- window - the Pennsylvania Railroad - he said, "Mr. Morgenthau, I don't know how hard you're working, but for the sake of all of us," he said, "just give everything you got. We're all counting on you people down there. Just give everything you got. I know you're working, but give just a little bit more." Olipment: nailroad? H.1.Jr: 11cket agent in the Pennsylvania Station. He says, "The only difference between this and '32 is that the people now are still cheerful." And he said, "There was a discussion took place in front of my window - bunch of Pullman Conductors - fellow complaining about his income tax. I said, 'I want to make the suggestion - every one of us men be tickled to death to pay a dollar & month to the Federal tax, just to help out.' Just to let you know we're interested." He said, "Tax us a dollar a month as a minimum, just to show that we're taking an interest in it." (On phone) Hello. - Lubin, I thought it would buck you up to know that the President (recorded conversation follows:) 154 Monday March 21, 1938 2:25 p.m. HMJr: - signed the thing just as I took it over to him. INFORMATION Dubin: Did Wallace talk to you? HMJr: He did. And all he succeeded in doing was to make me ask the President that much quicker to sign it. I see. HMJr: And the President is aware of Mr. Wallace's attitude because Mr. Wallace told him about it himself when he was out driving with him. Oh, I see. HMJr: I thought you'd like to know the President said there isn't going to be any let down in the morale of the Government as long as he's here. Fine. Swell. HMJr: And And - good business or bad business we can't compromise with justice. Well, I think you're perfectly right. HMJr: And I thought you'd like to know it. And again I want to thank you for all you've done. Oh, heavens, that's part of my job. HMJr: I know That's what you're paying me for. HMJr: But the fact that the President - we all know he's that way but it's just a little bit reassuring to know that he's that way. Well, I'm glad that he - I mean now that he has actually enuncisted the principle. HMJr: Pardon me? I say, he's actually enunciated the principle. HMJr: Yes. Well, we're not going to give it any publicity until we get tie-bids. In other words we'll give 155 -2- industry a chance. Yes, I think you're perfectly right. HMJr: And then if we get tie-bids Well, that's the thing I tried to tell Wallace after Herman left him. And he said, "Well, can't we get industry to work voluntarily?" And I told him of about a thousand different instances where it's been tried and failed and I said the only way I knew of now was to let them know the Govern- ment's going to enforce the law. HMJr: Well, perfectly frankly, I think we should have done that the day the N.R.A. was declared unconstitutional, I agree with you. HMJr: And we're just about four years late. Yes. HMJr: But that doesn't mean that we shouldn't. And I know it's done a lot for me and I thought that you'd like to get it from me Thanks ever so much for calling me. HMJr: All right. All righty. HMJr: Goodbye. Regraded 156 -11- a..Jr: Just spread like wildfire amongst all these pro- fessional people in Washington, see? And when the President makes nis speech down there on this tax bill, that's just going to - he's going to let them have it. Will: Is he? ....Jr: Oh yes. He wanted to use this. I said, "Don't use this cement thing." Genton: By the way, Lubin is going to talk on prices before the Press Club on Thursday. well, he's all right. But this is so important. Now, is everybody - and don't be bashful - have I overlooked anybody? Can enybody help - anybody around that wants to get in on this taing that I didn't ask? Now, for God's sake, emongst these people, anybody who wants to help whom + haven't asked, raise his hand - I mean if you want to get in on this. I'm dolng a little bit on that bank stuff. H.V.Jr: shat? That Industrial bank bill. All right. When did N.E. say we'd meet? Upnion: Wednesday. George is in on this. Less: No, not necessary for me to be. George, don't be mealy-mouthed. Upnom: You want me to ask those people to come to lunch on Wednesday? W.D.Jr: Yes, and you're there. Now, who else? What the President did is take all the difficult things he's got on his desk and dump them in the Treasury's lap. Regraded Unclassified 157 -12- Let's see if we can't come through. Allyment: That matérial on the industrial banks is going to be inveluable to us in our study of the problem. m.2.Jr: You mean what everybody's been writing? (lighant: Oh yes, be invaluable. Upham: Better distribute this, I think. ....Jr: She will. No., who else? Please don't - who wants to get in on something? And the thing that's worrying you (White) so much I Just mentioned, and the President smiled, didn't even want to discuss it. salte: Are you keenly interested in the railroad matter? H.J.Jr: Hell, I'm in it. I'm just - I told you I'm going to do these things in here (to Chauncey); then, if you don't understand it, it's up to you to ask me. This should be mailed back to the President. Mark it "Confidential." Oliphant: Is there somebody working for you on the railroed thing? 1...Jr: No, there is not. Unite: I have an old standing interest in it. I'd like to see it before it goes forward - chance for comment. 4./.Jr: All right, you're in. Anybody else got anything else? This is a good day for me. And, again very confidentially, the President saw Magill and myself Saturday and we discussed which was the best way for him to let the country know that he wanted to stend by the House bill and the principles in there - message, so forth - and we went through all the Regraded Unclassified 158 -13- "ifs, ands and buts," finally decided that he'd have a more favorable audience and a more favorable press if he'd do it from Gainesville. So he's going to sound off at Gainesville. Magill sent the stuff over Saturday afternoon. And at Gainesville he's going to make his message on taxes, and he's going to give it right from the shoulder. Gaston: What day is that? H.2.Jr: Wednesday. Goston: Next week. H.M.Jr: Pardon me, this week. caston: Oh, this week. H.M.Jr: Instead of sending it up and letting Pat Harrison bury it, ne's just going to handle it. And you (Chauncey) and I understand each other. Chauncey: Uh-huh. H.I.Jr: And if I don't answer you, it's my fault. All right. Olipnant: Our work on the Douglas bank plan is neld up pending Wayne's getting back tomorrow. Regraded Unclassified 159 TREASURY DEPARTMENT In INTER OFFICE COMMUNICATION DATE March 21, 1938 To Secretary Morgenthau FROM M. A. Harris A short weekly review of the U. S, Government security market After moving to slightly higher levels the first two days of the past week, the U. S. Government security market turned weak along with other markets on Wednesday and remained soft until Saturday when a partial recovery took place. During the three days of weakness, the foreign news appeared to be the most disturbing factor in the market and, due to the resulting nervousness, dealers marked down prices rather sharply at times. Activity in the market was largely professional although B. limited volume of outside selling was evident. However, the complete reluctance of buyers to make purchases contributed as much to the weak- ness as the selling. Nevertheless, declines were confined to small fractions on each of the three days due to the joint purchases by the Treasury and the Federal Reserve System. Thus, in the past week or more, prices have fluctuated in sympathy with the tenor of European news, moving up when the news was favorable and down when the tension tightened. For the week as 8. whole, Treasury bonds lost about 6/32nds in the average. Individual losses ranging from 1/32nd to 9/32nds were shown, with the longer issues having the larger loases. Short Treasury notes were about unchanged while those issues maturing in 1940, 1941 and 1942 declined 2 to 6/32nds, with the exception of the 1 1/40 of December, 1941 which were up 3/32nds. Regraded Unclassified -2- 160 NOTE: The recovery Saturday, plus the advance today (Monday), places prices about back and in many cases above the closing prices last Tuesday. Corporate Bonds The course of the market was similar to that of the government bond market but the period of weakness was much more severe. As a result, further substantial declines were recorded during the past week. Below is given Moody's averages for various groups of bonds: AAA Bonds Industrials Rails Utilities All March 11 122.17 104.67 117.94 114.51 March 18 121.49 103,38 117.72 113,89 Net Change - 0.68 - 1.29 - 0.22 - 0.62 BAA Bonds March 11 89.84 44.92 75.24 65.56 March 18 89,25 42.34 74,89 63.64 Net Change - 0.59 - 2.58 - 0.35 - 1.92 From these changes it can readily be seen that the rails continue as the weak spot in the market. The average of all AAA bonds, at 113,89, is still within 2-1/8 points of the January high, but the average of all BAA bonds, at 63.64, is lower than any time since January 1934. Dealers' Portfolio From the figures given below it can be seen that dealers were quite heavy sellers of bonds and long notes as their holdings decreased 23.8 million and 33.7 million, respectively. These decreases were partially offset by an increase in their holdings of notes maturing in one year. Other changes, as usual, were minor. Regraded Unclassified 161 (In millions of dollars) Holdings Holdings Mar, 12 Mar. 19 Change Treasury bonds 32.7 8.9 - 23.8 Treasury notes (maturing within 1 yr.) 21.9 39.7 + 17.8 # M ( # # 1-5 yrs.) 59.2 25.5 - 33.7 Treasury bills 0.9 2.5 + 1,6 H.O.L.C. bonds 8.3 4,5 - 3,8 F.F.M.C. bonds 3,9 .8 - 3,1 126.9 81.9 - 45,0 Treasury Accounts The following transactions were executed in the market during the past week: Purchases $ 19,224,000 (a) Various Treasury bonds - e/c Federal Deposit Insurance Corp. 1,000,000 - 2-7/86 Treas. bonds 1955/60- a/c Government Life Ins. Fund 150,000 - 2-7/8% If # 1955/60- a/c Alien Property Bureau 58,000 - 27/8% 8 all 1955/60- a/c D.of C. Teachers' Retirement Fund Sales $ 33,500 - 2-3/4% Treas. bonds 1951/54- a/c Pershing Hall Memorial Fund (a) The above amount represents the Treasury's portion of the joint purchases made with the Federal Reserve System on Wednesday, Thursday and Friday in support of the market. As the Federal Deposit Insurance Corp. desired to keep uninvested their cash of about $20 million, payment for the purchases was arranged by redeeming 20 million of the special 2% securities, thus reducing the amount of these securities hold from 115 million to 95 million. System Account The only transactions of importance by the Federal Reserve System was their purchase of $19,225,000 various Treasury bonds. This amount repre- sents the System's portion of the purchases made with the Treasury Department in support of the market. No offsetting sales have been made but it 1s my Regraded Unclassified 162 understanding that bills maturing on Wednesday will be permitted to run- off in an amount equivalent to the above purchases. As a result, no increase will be shown in the total holding of the account. 163 OFFICE OF GENERAL COUNSEL TREASURY DEPARTMENT WASHINGTON GENERAL COUNTRY MAR 21 1938 My dear Mr. Secretary: I have been requested to advise as to whether the issuance of a valid commission as a Secret Service operative to Mr. James Roosevelt would give him the right to carry a firearm. In my opinion, it is entirely clear that validly commissioned operatives of the Secret Service Division are authorized, in connection with their official duties and specifically in protecting the person of the President and the members of his immediate family, to carry firearms, irrespective of the provisions of State or local laws restricting the carrying of firearms. A memorandum has been prepared for our files citing the authorities for this opinion. This opinion is not concerned with the authority to issue & commission under the circumstances. Very truly yours, General Counsel. The Honorable, The Secretary of the Treasury. Regraded Unclassified 184 L.R. WALKER GEB 5. HOMAN AVE CHICAGO Mar. 21 19 38 Hon. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. My dear Mr. Secretary: There has been a very comprehensive study made of the construction costs in the ci ty of Cincinnati. The cost of the construction of a home in Cincinnati is 14.8% higher today than it was in 1926. The attached charts analyze the reason for this imrease, and they are BO comprehensive that I felt they would be of service to you in the study you are making. These charts show that the material costs are 3.8% higher, but that labor and taxation are the two big factors, Respectfully, L. R. Walker b 165 COST OF CONSTRUCTION IN CINCINNATI IN 1938 AS COMPARED TO 1926 STATEMENT OF THE PROBLEM The following paragraphs present the findings and supporting evidence concerning the question of the present day cost of construction as compared to the year 1926, and intervening years, and the relative part played by the several major factors of cost in any changes that might have taken place. LIMITATIONS OF THE STUDY The wide variety in the kinds and types of buildings compelled out of practical necessity, the selection of a single type for study. The type selected was "concrete and brick" from the Commercial and Factory Classification of the Boeckh Indexes of Construction Costs. The Boeckh index is widely recognized as one of the most accu- rate of construction cost neasures. It is carried regularly by the Survey of Current Business published by the Department of Commerce and also ap- pears in B number of trade papers. Due to the fact that the E.H. Boeckh & Associates, Inc., maintain offices in Cincinnati, Mr. Boeckh was person- ally available and was of inveluable assistance. In the text the cost of construction is broken down into four broad classi fications: materials, labor, overhead and profit, and taxation. The Cost Index for Materials is based on the prices (March 1, 1938) of common brick, lumber (1" X 6" - 2" I 10" - 2" I 4" - #2 S.P. - lots of 5000 B.M.), cement, structural steel, plumbing fixtures, steam heating equipment (including pipe and boilers, hardware (rough and finished, ) roofing and glass. 166 -2- The Cost Index for Labor is based on union scale rates for common labor, bricklayers, carpenters, iron workers, plumbers, steem fitters, painters, electricians, sheet metal workers and tile setters. The Overhead and Profit Index includes general operating overhead, architects fees, licenses and other fees, and profit if any. The Taxation Index includes workmen's compensation, sales tax, unemployment insurance and the employer's contribution to old age benefits. SUMMARY OF CONCLUSIONS (1) The cost of construction in Cincinnati for the type of building under consideration is 14.8 per cent higher today than in 1926. (2) Since material costs are 2.8 per cent less today than in 1926 and overhead is but alightly higher the increase can be attributed to higher labor costs and increased taxation. (3) The responsibility for the gross increase in cost of con- struction in 1938 over 1926 is divided as follows: overhead, 12 per cent; labor 47.4 per cent; and taxation 40.6 per cent. 167 DISCUSSION Attention is called to the Charts depicting "Construction Cost Changes" and "Division of the Construction Dollars". The charts were developed from the Index of Construction Cost Date furnished by 3. E. Boeckh & Associates. ATERIALS The materials in a concrete and brick factory building cost- ing $100,000 in 1926 would have cost on the average $35,600. Those same materials today would cost on the average $34,600; a net decline over the period of 2,8 per cent in spite of the absorption of increased trans- portation costs, increased and new taxes by the material suppliers. The high for the period occurred in 1931 when the cost would have been 36,000 and the low in 1933 at $31,000. of interest to the potential builder as well as the broader economic view is the portion of the dollar spent that goos to the material supplier. In 1926 this was 35.5 cents; in 1938, it was 30 cents, a de- crease of 18.3 per cent. The observations based on the averages are borne out in the attached tabulation showing actual prices of the more common materials for the two years under discussion. OVERHEAD AND PROFIT This item on a $100,000 building would have amounted to $13,800 in 1926, and on the same building in 1938 would be 15,700. This is an increase of 13.7 per cent, brought about by the increased cost of doing business under present conditions. In terms of the building dollar this item took 13.7 cents in 1926 and the same amount in 1938. Unclassifi 168 LABOR In 1916 the cost of labor on a $100,000 building amounted on the average to $49,000. In 1938 to build this same building, labor would receive $56,500. This is an increase of 15.3 per cent. This increase on the average is substantiated by the tabu- lation of the union scales for two years under construction. Expressed in terms of the building dollar, labor in 1926 would have received 49.3 cents. at this point an interesting fact nakes its appearance. In 1938 labor would receive 49.3 centa or exact- ly the relative proportion of the total spent on building that it re- ceived in 1926. The fact that labor would receive in total wages 15.3 per cent more for the same building in 1938 than in 1926 but would receive no greater proportion of the building dollar in 1938 than in 1926 raises the very pertinent question -- why? The answer to which may be the partial answer to the increased costs of building and the resulting lack of activity. TAXATION Aa a matter of convenience all forms will be lumped together including workmen's compensation. (Income tax is not included since it is dependent on profit; nor are fees, licenses, etc., they being classed 8.8 overhead). In 1926 on a $100,000 building this item ould have con- sisted solely of workmen's compensation and would have amounted to 31,600. In 1938 this item not only includes workmen's compensation but also us- employment insurance, old age benefits, and sales tax. For the sume building in 1938, this cost would be $6,040, an increase of 40% per cent. In this connection it must be understood that in the case of old age benefits the rate progressively increases and at the close of the next 169 -5- decade will be three times its present rate. Also, while the present rate on unemployment insurance is at the meximum rate provided in the Federal law, the State of Ohio provides a penalty on poor performance that has a maximum limit of four per cent. The likelihood of avoiding some panalty in an industry of this nature is not great. An answer to the question raised under the labor discussion may be provided when the proportion of the building dollar taken by taxes is examined. In 1926 taxation took 1.5 cents of the building dollar. In 1938 taxation would take 7.0 cents. This is an increase of 366 per cent. Whether the increased proportion of the building dollar taken by taxes should be considered as being absorbed by the material suppliers who are getting less, or whether it should be considered in the light of an added increment available to labor, should the tax proportion be less, is a matter of viewpoint and raises questions beyond the scope of this study. However, it should be remembered that material prices are set by the stress of competition, while labor rates are set by collective bar- gaining under threat of strike. The methods by which these two costs are determined would at least suggest the opinion that taxation is taking a portion of the building dollar that might otherwise be available to labor. 170 CONCLUSION The following tabulation makes clear that:- Cost of Building Portion of the Building Dollar 1926 1958 1926 1938 Material $35,600 $34,600 Material $0,355 0,300 Overhead & Pr. 13,800 15,700 Overhead & Pr. 0.137 0.137 Labor 49,000 56,500 Labor 0.493 0.493 Taxation Taxation Workmen's Comp. 1,600 4,700 Workmen's Comp.0.015 0,040 Sales Tax None 1,040 Sales Tax 0.010 Social Security None 2,300 Social Security 0,020 Total $100,000 $114,840 Total $1,000 $1.000 (1) The cost of construction in 1938 is 14.8 per cent more than in 1926; (2) Since material costs are 2.8 per cent less today than in 1926, and overhead is but slightly higher, the increase can be attributed to higher labor costa and increased taxation; (3) of the gross increase of $15,840 in cost, overhead is responsible for 12 per cent, labor 47.4 per cent, and taxation 40.6 per cent. Regraded Unclassified 171 HOURLY WAGE RATES Average Summer Summer January 1926 1936 1937 1938 Bricklayer $1,535 1.375 1.625 1.625 Carpenter 1,297 1.20 1,425 1.45 Cement Finisher 1.22 1.175 1.325 1.375 Electrician 1.297 1,25 1.40 1.40 Engineer Hoisting 1.297 1.35 1.50 1.525 Hodcarrier .943 .80 1.00 1.00 Glazier 1,225 1.35 1.55 1.55 Ironworker 1.297 1.25 1.50 1.525 Laborer .573 .60 .75 .75 Lather 1.297 1.314 1.40 1.40 Painter 1,231 1.20 1.35 1.35 Plaster 1.500 1.375 1.625 1.625 Plumber 1.317 1.25 1.40 1.50 Rodworker 1,097 1.10 1.35 1.375 Roofer Comp. 1.047 1.05 1.15 1,25 Roofer Slate 1.297 1.20 1.325 1.40 Sheet Metal Worker 1.147 1.175 1.30 1.375 Steamfitter 1.313 1.25 1.40 1.40 Stone Mason 1.250 1,375 1.50 1.625 PRICES - F.O.B. CARS, CINCINNATI 172 June 1926 June 1936 Dec. 1937 Portland Cement per Bbl. $ 2,51 $ 2.25 $ 2.31 Sand per Ton 1.05 1.10 1.10 Gravel per Ton 1.50 1.20 1.20 Mason's Mortar per Bbl. 1.74 1.89 1.91 Plaster per Ton 14.40 16.10 15.00 Finish Lime per Ton 16.80 14.35 14.40 Keenes Cement per Ton 25.10 (1929) 25.20 25.00 Mason's Lime per Ton 11.90 11.42 11.30 Flue Lining Off List 71% 73% 77% Gypsum Block 4" per Ft. .0725 (1930) .0725 .07 1/2" Insulation Brd. per M. Ft. 45.00 39.00 39.00 Gypsum Lath per M. Ft. 18.93 (1928) 17.06 17.33 Metal Lath 3.4# per Yd. .29 .20 .215 Common brick per M 19.00 17.50 17.50 Sewer Pipe Off List 69% 73% 77% Face Brick Smooth Red per M. 29.50 26.00 25.00 Smooth Buff per M. 33.00 31.00 29.00 Rough Red per M. 27.00 25.00 24.00 Rough Mingled per M. 26.50 25.00 23.00 Hollow Tile 4 I 12 I 12 per M. 75.80 59.55 60.00 SOCIAL DEPARTM TAX INSURANCE 173 PASMD "A 1100.00 milled by-- with Construction Industries Hizeina, Name: 1012 1934 1938 1036 1939 1938 1939 (041) 1041 1947 I043 1944 1945 1946 1040 . 1949 $145 1950 1951 1902 $9.00 20.00 $1.00 PAID BY EMPLOYERS 16.00 20.00 $4.00 PAID BY EMPLOYERS 33.00 84.00 $1.00 PAID BY EMPLOYERS diva E EMPLOYEES J.A.B. S-T * 175 X 2% 7 0% of y X $ # PAID E IMPLUYERS O.A.B. o o a o 15 $1 15 X f $ y y 0.0.8. * X * * c o o 15 ST ST KIT 14 M * * É = 0 IMPLITERS O.A.B. I E PAID o o o 15 W X X - % % y Y) * * * X U.I. Dala * * X Regraded Unclassified Clay:104 By--- Alliet Construction industrive J.h. Signature Manager Year 1913 1914 1915 1914 1917 AISI 1019 1920 19F1 1989 1962 19:4 1925 10% IVET HEAT 1979 1977 JAM 1924 STAT "9" best 3XT 1-41 - W 1941 1544 - 1540 _947 1945 1950 TGAT 1958 $14.00 14.00 $15.00 $14.00 212.00 - 11.00 *11.00 $10.00 *10.00 $9.00 *9.00 $6.00 ₹8.00 $7.00 97.20 16.00 *6.00 $5.00 *:.00 $4.00 $4.00 $1.00 4.00 $4.00 NO $1.60 $1.38 $2.52 $2.44 26"22 $1.39 33.90 2517 83.98 82.91 $2.91 32.96 $3.73 23.75 83.58 83.00 24.54 0.42 37.9 39.72 28.73 80.07 $9.28 Regraded Unclassified AVERAGE EXTRY UNION FACE PAIS Complied by--- CINCINNATI - 38:0 Allied Construction Intestries 1913 - 1968 J.A. diggine, Manager Tear 1913 1014 1918 1916 1917 stat stat 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1950 1931 1932 1933 1954 1935 1936 1937 1958 1938 1940 1961 2961 1945 1944 1945 1960 1947 1948 1949 1950 1961 1982 Year 1.90 1.90 -1.80 1.80 1.70 1.70 1.60 1.60 1.50 1.50 1.40 1.40 1.50 1.30 1.20 1.10 4.10 1.10 4.00 1.00 .90 -90 ,20 .80 ,70 .70 .60 .60 ,50 .BO 40 A .4950 .6261 .5512 .5627 5969 .6362 .6917 5596 .9321 .9289 1,7241 1,1461 1,2005 1.2485 1.3113 1,3379 1.3473 1,1585 1.3691 1.1914 1.1403 1.1378 1.1307 1,1777 1.3224 14 Regraded Unclassified 176 CONSTRUCTION COST CHANGES DIVISION OF GONSTRUCTION DOLLAR BRICK I CONCRETE FACTORY BUILDING BRICK e CONGRETE FACTORY BUIL DING CINCINNATI 30 40 50 60 70 80 so 100 110 un INDEX CINCINNATI a o 20 100.00 1926 100.36 1926 1927 1928 1929 1930 1831 1932 1933 1934 1935 1836 1937 1938 12/ 1.00 100 100.16 - so NO 10137 IND 80 ao 11.52 and 70 70 10145 so ao 9072 av so 20 as 0621 40 - BEAT so X au 92.02 no 20 as HAS 10 10 all? o 0 (SMP THE REV The 4 AMONT IN 100.00 REY ASUBANCE SALES nur 300ML LECURITY DATE ATY NATERIALS THE AND AD 4 PROFIT SLABOR ACT COMPENSATION INSURANCE SALES TAX SOCIAL SECURITY TAX Regraded Unclassified Tempiled or allied Caminet inn insurer tax Manager E IND 1989 1950 1931 1932 1953 19.36 1935 LOVE 1927 19v8 live 124c TWE Less 1243 1954 INS 1940 1947 1948 1969 1950 1951 1902 0% ,70 .60 .60 .70 .90 1,26 1.10 145 ... 1.10 JYM 8.00 1.30 2.20 2,30 2.30 5.20 1.20 1.10 -.10 3.10 1000 3.00 3.00 3.50 4.50 6,00 6.50 6.70 10.00 will 1022 1.00 1.40 1.10 1.50 2.00 2.80 3,50 AS 1.00 0010 7.50 8.00 10,00 13.00 15.00 20.00 8:20 21-20 22.00 NILL 4.00 140 4.00 3.50 4.29 4.10 0,10 T.CO e.70 4.00 0100 2.00 2.00 2.00 2.00 2.00 2,00 2.30 --- - .50 0,00 5160 1,60 1.60 1.80 K.30 2.50 2.00 J.D 2.20 12:20 5,60 NIL ,00 -90 ,90 1.80 1.50 1,90 2.22 and -... 2.00 ALB2 40 ,80 ,90 1,10 1.00 5.00 1,80 2.20 0.30 2,40 1944 .70 .00 .00 .80 1.20 1.00 1.00 we -,20 2.60 MOL 1.10 1,30 1.10 1.50 1.30 4,00 2.50 2430 2.00 4.50 507 .00 .00 .80 1.10 1.40 2.20 2.00 2.00 2,22 3.10 MIL 8.50 8.50 3,00 2.00 3,50 4.00 1.00 4.00 4,10 ,N .90 ,80 1,10 1.40 2.00 2.40 1.70 .... 2.20 MM 3.00 4.00 1.50 5.00 6.60 5.30 9.20 0.20 7.00 MI 2.10 8.50 2.50 4.00 4.00 5.00 6.50 7.35 7,10 T.JO MO 1.0 1.50 1.00 1.00 2.20 2.20 3.00 3.20 1,8 -..0 1701 80,00 30.00 48.00 26.00 26,20 34.00 4.0 A.N $4.00 20.10 10.00 10.00 10.00 13.00 15.00 13.02 20,000 46,00 AND 44.00 0.00 10.00 10.00 10.00 10.00 20.20 40.00 26.00 2000 4,00 3,50 1.00 4.50 2.20 8.20 1.99 AN 6010 1.50 1.00 2.00 2,60 3.20 4.50 1.00 1.00 : 00 5.00 1044 1,60 2.00 1.60 2.20 2.30 n.90 J.X 0.20 AND LAS 2.30 2.00 1.00 2.00 5.30 :,20 we will 7,00 ATOR J.M 4.00 0.00 6.50 7.00 10.00 and - 5.30 8.20 AND 2.20 2.40 2.00 0.00 2.30 4.20 4.00 and 1... .... E-M 1.00 2.00 2.50 1.20 3.50 1.50 - ind 1.0 6300 7.00 7.00 2.00 12.00 15.00 40.00 10.00 10.00 18.12 had Mn 2.10 2.10 2.50 4.50 4.20 6.0 ",50 7.22 1.30 7534 1.00 1.00 1.20 1.60 1,60 1.02 1.00 1,30 1.80 10 JAID ,00 .00 ,00 .60 ,00 1.1: 1.72 1,70 ind MD 8.00 9.00 2.00 2.800 12.20 17,00 20.12 23.00 65.00 time 2.38 3.58 3.92 4.64 5.42 7.09 7.71 9.72 8.67 6.38 7730 2.00 2.00 2.50 2.10 2000 -.42 0111 2.40 0.60 3.20 248 JO 1.00 1.00 1.20 1,20 1.60 1.60 1,00 1.80 1,00 0205 2.20 2-20 2.20 AZOY 1.00 2.20 6.00 2.10 -.00 1.00 2,60 1.30 1.50 2.00 2.50 2.60 2.00 2,50 ... GOD de 40 All ,40 is use .80 NO E .02 .93 .02 .04 - DE .00 +0; : JE Regraded Unclassified AVENUE HOURLY UNION WILL WATER PH: 411269 Intertries 1910 1952 Himpine, have The of craft 1913 :914 291° 1138 11:2 17:9 1500 1241 45- the 114 13M 1900 19% Type 1940 1931 1938 4022 1:000 =020 J:30 X 04% SJB .8751 100 12:14 Ashestor Workers 1,2000 1.2125 1.2220 1,3850 1.1781 P210 6212 ser TAX The -7500 NC sur 9617 1-2:00 1.2368 Lake botter MAKORA 1.175 LATE 1,200 :,8000 1,2000 2416 sein 7520 -7000 9355 9004 11:55 1.32 his 1.5TO 1163 1,520 1.5mg 1.6250 1.4.175 ,5000 -1:04 AD 12 2.20 25 $ 20 AN USA -10 1,4000 1,2269 Curpensare 1.5417 2,2750 1.387: 1,4300 1.4000 1.2000 Coment Ministers ,5000 A 2020 will -2000 22799 200 -Y/II - 11750 1,2119 1,2614 1.200 1,0100 1.222 1.3250 1,0750 ,4823 -5000 .5209 RA coss 211 JAN 20 1.0520 112500 1,0359 1.2417 Descriptions Late 1,4000 1.4000 1,3000 Eleva:or Constructors .5000 5002 ,5000 -10-70 -0000 -5000 -7:30 -740 1.0000 1,100 1.251° have 1.4084 1,4255 Lases 1,4625 1.4000 1,300 1.4406 "A" .5000 .1665 -.6166 .6250 -6815 - 146 -9916 9002 -9936 ,nic 1.0% 1.000 1,0259 LAP 1,4975 1,400 1.4000 3917 "B" ,5000 .6466 .016£ .9210 .41 -6.16 203 19:0 - 1142 1,03.0 1,7:00 1,1969 1,3417 1.3075 1.4000 1,4500 1,1417 Ingineers-Class - 1,000 ,5656 4158 1540 ,6366 216 ,VRD 1.4 was 1,2962 LALT 1,5750 1.2875 1,4000 Cindlers .2000 -3000 was -3-71 1250 13395 ,com -9521 will 1.1700 1,220 Light 1.Aizt 1.229 1.2374 : 1000 .4220 4000 ,4000 4620 -1512 ..026 in - .94.27 91.00 9520 37:0 1,000 Resparciers 1,0000 -7500 .5160 .6000 ,6417 .0156 1.0000 1.2202 .9,43 1.2102 who 1,969 iron Borkers 1,3750 1.4675 1,4000 1.3000 1,2666 ,2250 -2500 :Pfu0 -2-1 -3675 -4706 4358 AM 407 5296 ,2955 .6200 $000 .5000 laterary ::500 -4500 fathers .693A 17% .6210 .6417 ,7166 .6166 -1500.00 1.206 2:43 1.2417 1.2500 1,2989 1.3417 1,3750 1,3075 1,4000 LAZOR 1,0000 100 1,2291 1,3959 Martie Betters .4156 20156 .6:10 .687: -7\50 .7813 1,0000 1,2000 1,0000 1,200 1,500 1,300 1,5000 Palatara ,5000 ,5000 .5000 .0075 ,2871 JAM 0710 -0710 2721 1,1750 1.2312 1,2917 1.3125 1,3325 1.2478 1,1473 1,1771 1,3142 1,5000 1,5000 1,5000 Plasterate .6200 ,6820 ,7500 7500 .7:00 2125 93% 1.01-1 1,2000 1.500 1,5625 1.6250 1.4166 flatters ,6250 ,6250 ,6250 ,5250 -7:00 7500 7120 2500 7500 1,1250 1,2063 1,4500 1,3166 1,3666 1,4720 1,4000 1,4000 1,4000 1,2000 1,000 1,0959 ,2260 ,UN with ,2708 ...06 ,3071 ,9145 -8000 .8500 ,8417 1,1417 1.1750 2500 1,1975 1,000 1.2000 1,1003 4158 --- -5300 5000 ,5129 -6.12 7000 7042 12912 -947- 1,0000 1.0469 1.0977 4075 1,18% 1,1370 1.1500 1,1000 JUA A000 _2000 5104 -9546 39:4 9542 1.0412 1.2969 LAIZ 1,3750 15000 1.3975 1.4000 1.4000 LIME & File 4000 4166 4500 4875 4500 .5000 .5104 ,1271 - L 1,000 1,1000 :.1469 1,1979 1,8500 .4675 1,2375 1,000 1,2000 1,1042 Best Misl Forkers 4000 4166 ,4500 .7414 -BURT JULY 1,20 1.2000 1,1500 1.3120 1.3646 1.5750 1,4875 LAXO 1,4000 1,3780 -5281 6381 .6550 6292 16450 7870 BAEL 1 NAC 1.0957 1,1979 L.PSIN 1,2000 1,5000 1,500 1,5000 1.5000 1.5000 1.3258 Dess Cuixera 3400 1850 6000 6000 6175 2:30 None DELL 54.00 15850 ,0000 6000 7220 7674 .0665 ,9666 1,0000 1.09JZ 1,1979 1,2500 1.2500 1,5000 1,5000 1.5000 1,5000 1.2000 1,233 1,000 1,5000 1.0002 1,620 1,6250 1,62+0 1,6850 1,000 LAED Date hist ,5400 .5850 .8000 .6000 6333 .6833 7666 .0710 1,100G 1,2500 1,312 Secrease .6200 .6875 .6075 -607: .6075 .7500 ,8000 .9300 ,2200 1920 1,000 1,0607 1,1250 1,0053 1.2000 1.3710 1.1750 1,370 1 3700 1,18th 1,1000 1,000 1,1000 Mia leases 6075 6075 6675 5554 7750 3625 1,0000 1.000 1-2200 1-50 1.3402 1.5000 1.00 6750 .4956 ,5261 .5518 -0627 .5969 6917 -6598 9321 .9289 1.3241 1,145 1.000 1.2485 1.3113 1.3379 1,3673 1.3685 1.3691 1,1964 6.452 Regraded Unclassified ATEAGE EOURT.T UNION WAGE RATER Compt Led CINCINNATI - OHIO Alliet Construction 1912 - 1958 :, A. Higgins, Manager 1935 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1944 1947 1948 1949 1950 1951 1952 - of was 1,1500 1,1500 1.1500 1,2500 1,3250 1.4188 alle SANCA 1,800 1,2000 1,200 1,2700 1.4200 1,3021 1.3333 1.3760 1,0760 1.0417 1,6200 1,5000 1,2000 1,2000 1.2642 1,3096 Consentate cami rigisters 1.020 1,0850 1.0250 1.1168 1,3979 Descriptions 1,2500 1,2500 1.2500 1,2500 1,3685 New Constructors 1,3058 1,2650 1,2971 1,4170 1.4050 "1" -8000 .8000 -BOOO .0685 .979% no 1,1000 1,1000 1,1000 1.1625 1,5104 1,8500 1,2500 1,2500 1.3125 1.4604 Masters 1,1760 1,8075 1,2500 1.3085 1.4633 1,0600 -7000 -7000 7000 .7626 .9375 1.2600 1,2120 1.1504 less Busines 1.2500 1,2500 ADOR ADOO -1500 5375 .6875 1.31.85 1.3125 1.0125 1-3635 Martie Setters 1,3750 1,3750 1,3750 1,5750 1,4593 1,1500 1,1500 1.1791 1.2000 1,2875 1.3750 1,2750 1,4759 1.3750 1.5200 Zimbers 1,8500 1-2600 1,2600 1.2500 1.3833 1,1000 1,1000 1,1000 1,1625 1,3104 -3250 -1210 -9250 1.00.1 1.1475 A Tile 1,0750 1.0750 1,3750 1.1212 1,3000 that 1,0750 1,3750 1,0760 1.1375 1,2712 1.4479 1,1870 1,1252 1.2500 1,4000 1,5000 Store 1,2500 1,2600 1.0003 1.1656 1.4/75 Stene 1,2500 1.2500 1.0833 1,1666 3.4375 Stone Sectore 1,3750 1.3720 1,3720 1,0700 1,1771 Norbara 1,1000 1.1500 1,1500 1,1500 1,2156 THE laymen 1.0625 1.0000 1.0000 1.0000 1,253 1.4166 1.5000 AVERAGE 1.1400 1.1478 1.1007 1.1777 1.5224 1,4% Regraded Unclassified Invoice Higgins, Nanager Banual Description of Injustry 12/1 1920 1921 1922 1923 1924 1920 1926 1101 Failer avainess - Shop 5 Presting 2000 1.20 1.2% di 190 .90 2076 .10 ,20 ,70 Bollers - Installat ou 05 antero if 1,2 5.00 3.40 - .00 2,73 2.70 3725 2.00 2.00 1,70 2.00 Magoner York . 3.119 net chimneys anly 2,42 -.12 ",At 8.20 0,30 6.00 4.60 4.00 5000 4.00 1,22 3.00 Fork . le other classification 0.85 1.90 2.10 2.40 1,80 1,00 5022 2,10 1,40 1,20 trad Work - Prestine structure) : 3) H.T2 9.00 5.00 7,30 6.00 6.00 5010 6.00 7.60 7.50 Iron fore - Outside erecting - Not strittlest 1,5 1.10 the as 1.2 5031 3.75 A.TD 2,50 2.02 2.20 Minnies-Pice Received .... 1.85 6,42 CARD 4.00 3103 2,00 3.00 8.50 2.25 1.25 Eleratora - Prectice de tapair 10% vali 3.10 2.10 5.00 2.00 5160 1.30 1.30 1.20 5101 Heating & Ventilating .Y. ,70 ... .60 120 ,N ,60 .60 .70 .80 quilit will - ... you 1,01 1.80 1.00 22 ,60 .60 att 40 5190 ,00 5344 purble & Stone Sestece - native - Builting N - ,75 20 ,70 ,70 ,75 NO .90 .80 ,60 .70 Carpentry - Interior A Exterior 1.74 2.10 and 0.00 2.10 2.00 2.20 1,50 1,20 1,00 1,80 1.00 2408 cell all C.S. 1.15 1,20 1.65 1,45 1.00 .7: .75 195 .75 5437 JR. cast will ... 4,91 2.20 4.00 2,90 2.30 5461 1,60 1.00 8.00 2.30 Congrete Bork - (Plas) Sujermike - floors. as +%- .U! ,92 1,05 ,05 .72 .10 1.00 1,30 1.10 5504 504,2 - SECRETAR - Carolge dork 0,42 2.40 4.4: 5.32 0.45 0.20 4,50 3,50 3,50 3.50 3.80 4.00 5401 Cegaral Bullding Construction - No struct. Iron STATE 45 1,9; 1.95 2,65 1,60 5,30 1.70 1,70 2,00 1.00 2.00 Residence Construction - Private - LA 1,00 1.00 2.00 1,20 1.00 1,00 1,10 1.18 1,30 1,36 5640 STOL 3.0 1,50 2.20 back 12.7, 17,25 17.65 17.00 14.30 14.00 15.00 17.00 #rocking 18.00 80,00 1+1 FLUE 7.81 8.1t 6.00 5.00 7,50 0704 Building Mo.ars 7.00 0.20 10.00 6003 ,,:8 belo ind 7,3 7,00 6,20 7.00 7.00 7.00 2.20 8.00 PU- Delvers 3.00 0,00 2.50 1.40 2.60 2.00 2.00 1.22 6005 Jatie Au treatmation 100 was 4,46 ...: . imp 21.2 ml - critention Plants ant we 4.00 1.11 4.90 4.77 2.50 2.70 4.8t 1.70 2.25 3.00 and 1.22 an ,72 LAN 1,00 1.60 1.5% 1.10 WE 1.19 JR 1.20 1.00 LOSA fort 6048 Subdivision All 1sent - Trankly Drating 1.42 1,00 17. ... END 1.60 2.7c 2.42 1.70 2.00 1.70 1.00 2.00 Leis 4,45 will 2.60 1,20 2.26 2.00 2.40 5.00 AIGH Heart Construction & Higher - 2.12 1.10 1,50 1.10 8.20 1.20 5202 1,65 1.21 8.20 Sell Drilline - -ringing was C.D. 2.15 1.18 1,50 1,20 1.50 1,20 1,50 1.58 1220 Cellar :.00 6.00 -.yo 8,60 Nio 6.00 4.00 5.50 6.00 6200 Sever Construction & Twording all SAR P.M. 2.40 2,30 1.00 1.00 2.00 3.80 L.H. 6301 Laving of Maine - - Pater Confeits 75M - Free ien A .... Leda Lada 2.11 2.05 1.00 1.62 1,00 1,00 1,00 1,00 --- we ,20 ,to ,12 -45 .45 is .50 9581 Hower 1.20 4.0 1,12 :.14 1.75 0.20 2.00 6.00 we 2530 AVERAGE .44 2,90 -:-0 3.26 2.91 2.91 2.96 1.13 1.35 -.- dut Jult 2.10 2.60 2.00 1,60 1,20 1,60 TTED fatchmen - Policement - Disputton .70 .00 ,60 MI BITT , $ 1-5 1.05 60 .70 Plusting Sucul- Dealers -48 2.40 2,25 1.80 1.00 1.50 1.80 1,70 1.10 0205 Bulline Naterial Senters fart 1,42 -10 --10 1.95 1.86 1,00 1.00 1.70 1.50 AMT Loator Taris - Concernial it 1620 10:3 LE -90 ,40 .00 ,00 1403 - Supervising - J. -14 di - ,06 .05 ,04 e .00 .001 2010 office Employees Regraded Unclassified TREASURY DEPARTMENT 181 U. S. PUBLIC HEALTH SERVICE MEMORANDUM DATE March 21, 1938. FROM THE SURGEON GENERAL: TO. The Secretary of the Treasury. On Monday, March 7th, Mr. Abel Wolman and I discussed with the President the Barkley-Vinson Stream Pollution Bill which has passed both Houses of Congress but has been tied up in conference since last year. The Senate and House conferees are in disagreement on the provisions of Section 8, particularly the following language: "After the expiration of three years after the date of enactment of this Act an action to prevent or abate any such nuisance (from pollution of navigable waters or tributaries thereto, by sewage, oil, or industrial wastes) may be brought in the name of the United States by any United States attorney, and it shall be the duty of such attorneys to bring such an action when directed to do so by the Attorney General of the United States." Our purpose in conferring with the President was to get his views concerning the desirability of legislation of this type and speci- fically to get his views concerning the extent and type of Federal regula- tion which is desirable. The President expressed himself as favoring the general princi- plas of the bill; believed the states should have the primary right and responsibility for control subject to the approval of the Public Health Service: should be encouraged to make rules to clean up stream pollution, but if after a suitable period, say five years, the cities and industries have not taken steps to abate pollution, then the law should provide that the Attorney General on recommendation of the Surgeon General may proceed with court action. The President does not favor having Federal court action taken only on recommendation of the State Health authorities since, in his opinion, this would mullify any effective control. The President believes that the Public Health Service is the appropriate agency in the Federal government to handle the problem of streum pollution. Re agreed to the statement by Mr. Wolman that uniform rules and standards of purity cannot be applied on all streams and water- sheús but should be flexible to meet the particular circumstances. On the question of financing sewage treatment works, the Presi- dent discussed confidentially 8. new method of financing which he is con- sidering. He requested Mr. Wolman and me to confer with you and the Budget Director and discuss his suggestions of financing if you are agreed that the method he suggested is more appropriate than the grant-in-aid and loan principle. Be instructed ne then to 806 Senator Barkley and 182 - 2 - Senator Lonergan and bring to their attention the specific changes which the President wished to see made in the pending legislation. In view of the President's request for confidential considera- tion of his proposed method of financing, the details are omitted from this memorandum. After seeing the President, Mr. Wolman and I reported verbally to Mr. McReynolds the substance of this memorandum, discussed with him the proposed financing plan, and asked the Secretary's office for an appointment at the Secretary's convenience. A similar memorandum is being sent to the Budget Director. Surgeon General. TPMTL 4 passed by both Houses 183 75TH CONGRESS IST SESSION H. R. 2711 IN THE HOUSE OF REPRESENTATIVES AUGUST 18, 1937 Ordered to be printed with the amendment of the Senate AN ACT To create a Division of Water Pollution Control in the United States Public Health Service, and for other purposes. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 That there is hereby established in the United States Public 4 Health Service & Division of Water Pollution Control (here- 5 inafter referred to as the Division). The Division shall be 6 in charge of & Director, who shall be & commissioned engineer T officer of the United States Public Health Service detailed 8 by the Surgeon General of the Public Health Service (here- 9 inafter referred to as the Surgeon General). Such engineer 10 officer, while serving as Director, shall have the rank of an 11 Assistant Surgeon General of the Public Health Service, Regraded Unclassified 2 1 subject to the provisions of law applicable to Assistent Sur 2 geons General in charge of administrative divisions in the 3 District of Columbia of the Public Health Service. 4 SEe. 2. (a) The Division shall, after careful investi- 5 gation, and in cooperation with the agencies of the several 6 States authorized by law or duly designated to deal with 7 water pollution, and in cooperation with the municipalities 8 and industries involved, prepare comprehensive plans for 9 eliminating OF reducing the pollution and improving the 10 sanitary condition of the navigable waters of the United 11 States and strenms tributory thereto. In the development 12 of such comprehensive plans due regard shall be given to 13 the improvements which are necessary to conserve such 14 waters end promote their use for public water supplies, 15 propagation of fish and aquatie life, recreational purposes, 16 agricultural, industrial, and other legitimate uses, and for 17 this purpose the Division is authorized to make joint investi 18 gations with the aforesaid agencies of any State OF States 19 of the condition of any waters of the United States, either 20 unvigable OF otherwise, and the discharges of any sewage, 21 industrial wastes, OF substances which may deleteriously 22 affect such waters. 23 (b) The Division shall encourage cooperative activities 24 by the several States for the prevention and abatement of 25 water pollution; encourage the enactment of uniform State Regraded Unclassifie 3 1 laws relating to water pollution; encourage compacts be 2 tween the several States for the prevention and abatoment 3 of water pollution; collect and disseminate information; 4 make available to State agencies, municipalities, industries, 5 and individuals, the results of surveys, studies, investiga- 6 tions, and experiments conducted by the Division end by 7 other agencies, public and private; and furnish such 8 assistance to State agencies as may be authorized by law. 9 Sec. 3. The Division, upon request of any State health 10 authority and subject to the approval of the Surgeon General, 11 shall conduct investigations and make surveys of any specific 12 problem of water pollution confronting any State, drainages 13 basin authority, community, or municipality with & view to 14 effecting & solution of such problem, and shall make definite 15 recommendations for the correction and elimination of the 16 deleterious conditions found to exist. DI 17 Sec. 4. The Public Health Service shall prepare and 18 publish, from time to time, reports of such surveys, studies, 19 investigations, and experiments as shall be made under the 20 authority of this Act, together with appropriate recommenda- 21 tions with regard to the control of pollution of the waters of 22 the United States. 23 Sue. 5. Any State, municipality, or other public body 24 which in discharging untreated OF inadequately treated sewage 25 or wastes into navigable waters of the United States OF Regraded Unclassified 4 1 streams tributory thereto is hereby declared to be eligible to 2 Federal aid in the form of grants in aid and/or loans for 3 the construction of necessary treatment works, in accordance 4 with plans approved by the respective State health authority 5 and the Surgeon General. Such loans and grants in aid shall 6 be made upon such terms and conditions as the Secretary of 7 the Treasury with the approval of the President may pre- 8 seribe, subject to the following limitations: (1) Loans OF 9 grants in shall be made only upon the certification of 10 the State health authority having jurisdiction and upon ap- 11 proval and recommendation of the Surgeon General; (2) no 12 grant in aid shall be made in respect of any project of AB 13 amount in excess of 331 per eentum of the cost of the labor 14 and materials employed upon such project, including the 15 cost of preparation of plans and the carrying of same into 16 execution. 17 SEC. 6. Any person discharging untreated OF inade- 18 quately treated sewage OF waste in character or quantity 19 suflicient to be deleterious to the navigable waters of the 20 United States OF streams tributary thereto is hereby de- 21 elared to be eligible to Federal aid in the form of lonns for 22 the construction el necessary treatment works in accordance 23 with plans approved by the respective State health authority 24 and the Surgeon General. Such loans shall be made upon 25 such terms and conditions Be the Secretary of the Treasury Regraded Unclassif 5 1 with the approval of the President may preseribe, subject 2 to the following limitations: Leans shall be made only 3 upon the certification of the State health authority having 4 jurisdiction and upon approval and recommendation of the 5 Surgeon General. 6 See. 7. (a) There is hereby established in the Divi- 7 sion, by detail from time to time, & board of five commis- 8 sioned engineer officers of the Public Health Service, A 9 majority of whom shull be experienced in sanitary engi- 10 neering, whose duties shall be fixed by the Surgeon Gen- 11 eral and to which board shall be referred for consideration 12 and recommendations, in addition to any other duties as 13 signed, se far as in the opinion of the Surgeon General 14 may be necessary, all reports of examinations, investign- 15 tions, plans, and surveys made pursuant to the provisions 16 of this Act or hereafter provided for by Congress, and all 17 applications for grants-in-aid or leans for the construction 18 of necessary treatment works made pursuant to sections 5 19 and 6 of this Act, and all other matters in connection 20 therewith upon which report is desired by the Surgeon 21 General. The board shell submit to the Surgeon General 22 recommendations as to the desirability of commencing, 23 continuing, or extending any and all projects for treatment 24 works upon which reports are desired and for which grants- 25 in-aid or loans have been applied. In the consideration Regraded Unclassified 6 1 of such proposed treatment works and projects the board 2 shall have in view the benefits to be derived by the con- 3 struction thereof in accomplishing the purposes of this Act, 4 and the relation of the altimate cost of such works, both 5 as to the eost of construction and maintenance, to the public 6 interests involved, the public necessity for such works and 7 propriety of construction in part at the expense of the United 8 States, and the adequacy of the provisions made or agreed 9 upon by the applicant for the grant in nid OF loan for assuring 10 proper and efficient operation and maintenance of the works 11 after completion of the construction thereof. The board shall, 12 when it considers the same necessary, and with the approval 13 and under orders from the Surgeon General, make as & board 14 OF through its members, personal examinations of localities 15 where the proposed treatment works are to be located. All 16 plans, eost estimates, information, and arguments which are 17 presented to the board for its consideration in connection 18 with any matter referred to it by the Surgeon General shall 19 be reduced to and submitted in writing, and shall be made e 20 part of the records of the Office of the Surgeen General. 21 (b) All special reports ordered by the Congress pur 22 suont to the provisions of this Act shall, at the discretion 23 of the Surgeon General be reviewed in like manner by 24 the said board; and the said board shall also on request 25 by resolution of the Committee 00 Commerce of the Senate Regraded Unclassi 7 1 or the Committee on Rivers and Harbore of the House of 2 Representatives submitted to the Surgeon General, examine 3 and review the report of any examination, investigation, 4 survey, OF project for the elimination OF reduction of 5 water pollution or for treatment works made pursuant to 6 any Act or resolution of the Congress, end shall report 7 through the Surgeon General, who shall submit bie conclu- 8 sions thereon 89 in other eases. The said board shall, at 9 the diseretion of the Surgeon General, make estimates of 10 the amount of money required each year for each and all 11 project applications for treatment works which have been 12 approved under the provisions of sections 5 and 6 of this 13 Act, for AA extension of Federal aid in the form of grants- 14 in aid OF loans to any States, municipalities, or other public 15 bodies or in the form of loans to persons, as provided for 16 in said sections. The board shall recommend the order OF 17 sequence of priority for such individual projects in accord- 18 ance with their estimated importance or value in the clim- 19 ination of reduction of water pollution as determined by the 20 said board as hereinbefore provided, and shall report thereon 21 through the Surgeon General, who shall submit his con- 22 clusions as in other eases. 23 (e) The Secretary of the Treasury shall enuse the mann 24 script of that portion of the annual report of the Surgeon 25 General as is concerned with the Division, including It Regraded Unclassified 8 1 schedule of approved projects for treatment works and east 3 estimates thereof for grants-in-aid and loans together with 3 such supplementary reports ## may be pertinent thereto, to 4 be placed in the hands of the Public Printer on or before 5 the fifteenth day of October in each year, and the Public 6 Printer shall enuse such portion of the annual report of the 7 Surgeon General and supplementary reports to be printed 8 with en accurate and comprehensive index thereof, on OF 9 before the third day of January in each year, for the use 10 of the Congress; and all special reports of investigations of 11 surveys which may be prepared during the recèss of the 12 Congress shall, in the discretion of the Secretary of the 13 Treasury, be printed by the Public Printer as documents 14 of the following session of the Congress. 15 (d) There are authorized to be appropriated such sums 16 as may be necessary to earry out such projects or portions 17 thereof for treatment works as are authorized annually by 18 the Congress from the schedule of approved projects and 19 cost estimates submitted to the Congress as hereinbefore 20 provided, and the appropriations therefor shall be included 21 in the ennual appropriation bill for the Treasury Depart 22 ment or in any other supplementary OF deficiency appropria- 23 tion bill. Grants and loans thus provided for shall be made 24 by the Secretary of the Treasury under the conditions set 25 forth in sections 5 and 6 of this Act. Any moneya appro Regraded Unclassified 9 1 printed for such projects shall remain available for expendi- 2 ture for such purpose until the expiration of the fiscal year 3 next succeeding the fiscal year for which the appropriation 4 is made. In case that the eosts of construction of treatment 5 works are less than the original estimates as appropriated 6 for by Congress, the proportionate part of such moneys be 7 longing to the United States 00 has not been expended shall 8 be refunded or returned to the Treasury of the United States, 9 under such rules end regulations as the Secretary of the 10 Treasury may prescribe. In ease that the costs of construé- 11 tion of treatment works exceed, or appear likely to exceed, 12 the original estimates as appropriated for by Congress, the 13 Surgeon General may submit to Congress, as in other eases, 14 estimates of the additional moneys necessary to meet in- 15 creased costs arising because of unforescen contingencies, 16 structural difficulties, OF other eauses, which, in the opinion 17 of the Surgeon General, require consideration by Congress. 18 Alterations of, amendments, OF revisions to approved project 19 plans for treatment works which de not inerease the total 20 east of the projects may be authorized at the discretion of 21 the Surgeon General: 22 See. & There is hereby authorized to be appropriated 23 for each fiscal year, beginning with the fiscal year ending 24 June 30, 1988, the of $800,000, for all necessary a 25 penses of the Division in administering the provisions of Regraded Unclassified 10 1 this Act, including: (n) Expenses of investigations made 2 under this Aet, including (1) printing and binding of the 3 findings of such investigations, (2) the pay and allowances 4 and travel expenses of personnel of the Public Health Service 5 (including commissioned officers)- while engaged in field in- 6 vestigation, (3) (upon the approval of the Surgeon Gen- 7 eral)- the expenses of packing, ernting, drayago, and trans- 8 portation of the personal effects of such personnel and per- 9 sonnel of other Government departments on duty with the 10 Public Health Service upon permanent change of station 11 under competent orders in connection therewith while en- 12 guged in such investigntions, and (4) purchases required 13 (or such investigations, without regard to the provisions of 14 section 3709 of the Revised Statutes (U. S. C., 1934 ed:, 15 title 41, see, 5), when the aggregate amount involved does 16 not exceed $100; (b) upon approval of the Surgeon Gen- 17 erol, the necessary expenses of the board of engineer officers 18 provided for in section it of this Act; (e) the pay and at 19 lowances and travel expenses of reserve engineer officers 20 while on active duty under section 10 (a) of this Act; and 21 (d) for the reimbursement of appropriations insofar as ex- 22 pended for pay and allowances of personnel detailed to the 23 Division under section 10 (e) or 10 (d) of this Act. 24 See. 9. There is hereby authorized to be appropriated 25 for each fiscal year, beginning with the fiscal year ending Regraded Unclassif 11 1 June 30, 1938, the sum of $700,000, to be paid to the 2 States for expenditures by or under the direction of their 3 respective State health authorities in the promotion, investi- 4 gation, surveys, and studies necessary in the prevention and 5 control of water pollution; this sum to be allotted, under 6 the supervision of the Surgeon General, to the States in 7 accordance with rules and regulations prescribed by the 8 Secretary of the Treasury. The amount of any allotment 9 for any fiscal year remaining unpaid at the end of such 10 fiscal year shall be available for allotment hereunder for the 11 succeeding fiscal year, in addition to the amount appro- 12 printed for such year. 13 See. 10. (n) For the administration of this Act the 14 Secretary of the Treasury may, upon recommendation of the 15 Surgeon General, appoint such engineers, attorneys, experts, 16 research assistants, examiners, and consultants 88 may be 17 necessary, and fix their compensation, in the manner pro- 18 vided by law for the appointment and fixing of compensation 19 of such personnel of the Public Health Service: and the 20 Surgeon General is authorized to transfer, assign, OF detail 21 to the Division, from any other division of the Public Health 22 Service, such professional and scientifie personnel ne may be 23 available. Not exceeding ten engineer officers in the reserve 24 of the Public Health Service may be ordered to active duty 25 for such periods of time as may be desirable, extending not Regraded Unclassified 12 1 more than five years bevond the date of enactment of this 2 Act, to assist in enrrying out the purposes thereof. 3 (b) Such elerks, stenographers, and other employees 4 AS may be necessary to discharge the duties of the Division 5 and for the investigations in the field shall be appointed 6 by the Secretary of the Treasury in accordance with the 7 eivil-service laws and their compensation shall be fixed 8 in accordance with the Classification Aet of 1923, AS 9 amended, and he shell prescribe such rules and regulations 10 with respect to their duties AS he may find necessary. 11 (e) The personnel of the Publie Health Service paid 12 from my appropriation not made pursuant to section 8 may 13 be detailed to assist in enrrying out the purposes of this 14 Act. 15 (d) The Secretary of the Trensury, with the consert 16 of the Secretary of any other department of the Federal 17 Government, may utilize such officers and employees of said 18 department as may be found necessary to assist in carrying 19 out the purposes of this Act. 20 See. H. When used in this Act, the term "State health 21 authority" means the official State health department, State 22 bonrd of henlth, or such other official State agency 89 is em- 23 powered with the duties of enforcing State laws pertaining 24 * health: the term "treatment works" means the various 25 devices used in the treatment of sewage or industrial waste el Regraded Unclassified 13 1 & liquid nature including the necessary interecpting sewers, 2 outfall sewers, pumping and power equipment and their 3 appurtenances; the term "person" means an individual in the 4 enpacity of proprietor of an industrial enterprise, e partner- 5 ship, & private corporation, an association, A joint stock 6 company, & trust, or an estate. 7 See. 12. If any provision of this Act, or the application 8 thereof to any person or circumstance, is held invalid, the 9 remainder of the Act, and the application of such provision 10 to other persons or circumstances, shall not be affected 11 thereby. 12 SEC. 13. This Act may be eited no the Water Pollution 13 Act. 14 That there is hereby established in the United States 15 Public Health Service a Division of Water Pollution Control 16 (hereinafter referred to as the Division). The Division shall 17 be in charge of a Director, who shall be a commissioned 18 engineer officer of the United States Public Health Service 19 detailed by the Surgeon General of the Public Health Service 20 (hereinafter referred to as the Surgeon General). Such 21 engineer officer, while serving as Director, shall have the 22 rank of an Assistant Surgeon General of the Public Health 23 Service, subject to the provisions of law applicable to Assist- 24 ant Surgeons General in charge of administrative divisions 25 in the District of Columbia of the Public Health Service. Regraded Unclassified 14 1 SEC. 2. (a) The Division shall, after careful investi- 2 gation, and in cooperation with the Chief of Engineers of 3 the War Department and the agencies of the several States 4 authorized by law or duly designated to deal with water 5 pollution, and in cooperation with the municipalities and 6 industries involved, prepare comprehensive plans for elimi- 7 nating or reducing the pollution and improving the sani- 8 tary condition of the navigable waters of the United States 9 and streams tributary thereto. In the development of such 10 comprehensive plans due regard shall be given to the im- 11 provements which are necessary to conserve such waters 12 and promote their use for public water supplies, propaga- 13 tion of fish and aquatic life, recreational purposes, agri- 14 cultural, industrial, and other legitimate uses, and for this 15 purpose the Division is authorized to make joint investiga- 16 tions with the aforesaid agencies of any State or States of 17 the condition of any waters of the United States, either 18 navigable or otherwise, and the discharges of any sewage, 19 industrial wastes, or substances which may deleteriously 20 affect such waters. 21 (b) The Division shall encourage cooperative activities 22 by the several States for the prevention and abatement of 23 water pollution; encourage the enactment of uniform State 24 laws relating to water pollution; encourage compacts be- 25 tween the several States for the prevention and abatement Regraded Unclassi 16 1 of water pollution; collect and disseminate information; make 2 available to State agencies, municipalities, industries, and 3 individuals the results of surveys, studies, investigations, and 4 experiments conducted by the Division and by other agencies, 5 public and private; and furnish such assistance to State 6 agencies as may be authorized by law. 7 (c) The consent of Congress is hereby given to two or 8 more States to enter into agreements or compacts, not in 9 conflict with any law of the United States, for cooperative 10 effort and mutual assistance for the prevention and abate- 11 ment of water pollution and the enforcement of their respec- 12 tive laws relating thereto, and to establish such agencies, 13 joint or otherwise, as they may deem desirable for making 14 effective such agreements and compacts. 15 SEC. 3. The Division, upon request of any State health 16 authority and subject to the approval of the Surgeon General, 17 shall conduct investigations and make surveys of any specific 18 problem of water pollution confronting any State, drainage- 19 basin authority, community, or municipality with a view to 20 effecting a solution of such problem, and shall make definite 21 recommendations for the correction and elimination of the 22 deleterious conditions found to exist. 23 SEC, 4. The Public Health Service shall prepare and 24 publish, from time to time, reports of such surveys, studies, 25 investigations, and experiments as shall be made under the Regraded Unclassified 16 1 authority of this Act, together with appropriate recommenda- 2. tions with regard to the control of pollution of the waters 3 of the United States. 4 SEC. 5. Any State, municipality, or other public body 5 which is discharging untreated or inadequately treated sew- 6 age or wastes into navigable waters of the United States 7 or streams tributary thereto is hereby declared to be eligible 8 to Federal aid in the form of grants-in-aid or loans for 9 the construction of necessary treatment works, in accordance 10 with plans approved by the respective State health authority 11 and the Surgeon General. Such loans and grants-in-aid 12 shall be made upon such terms and conditions as the Secre- 13 lary of the Treasury with the approval of the President 14 may prescribe, subject to the following limitations: (1) 15 Loans or grants-in-aid shall be made only upon the certi- 16 fication of the State health authority having jurisdiction and 17 upon approval and recommendation of the Surgeon General; 18 (2) no grant-in-aid shall be made in respect of any project 19 of an amount in excess of 33₫ per centum of the cost of the 20 labor and materials employed upon such project, including 21 the cost of preparation of plans and the carrying of same 22 into erecution. 23 SEC. 6. Any person discharging untreated or inade- 24 quately treated sewage or waste in character or quantity 25 sufficient to be deleterious to the navigable waters of the Regraded Unclassi 17 1 United States or streams tributary thereto is hereby declared 2 to be eligible to Federal aid in the form of grants-in-aid 3 or loans for the construction of necessary treatment works 4 in accordance with plans approved by the respective State 5 health authority and the Surgeon General. Such grants- 6 in-aid or loans shall be made upon such terms and conditions 7 as the Secretary of the Treasury with the approval of the 8 President may prescribe, subject to the following limitations: 9 Grants-in-aid or loans shall be made only upon the certifica- 10 tion of the State health authority having jurisdiction and 11 upon approval and recommendation of the Surgeon General. 12 SEC. 7. (a) There is hereby established in the Divi- 13 sion, by detail from time to time, a board of five commis 14 sioned engineer officers of the Public Health Service, a major 15 ity of whom shall be experienced in sanitary engineering, 16 whose duties shall be fixed by the Surgeon General and to 17 which board shall be referred for consideration and recom- 18 mendations, in addition to any other duties assigned, 80 far 19 as in the opinion of the Surgeon General may be necessary, 20 all reports of examinations, investigations, plans, and surveys 21 made pursuant to the provisions of this Act or hereafter pro- 22 vided for by Congress, and all applications for grants-in-aid 23 or loans for the construction of necessary treatment works 24 made pursuant to sections 5 and 6 of this Act, and all other 25 matters in connection therewith upon which report is desired H.R. 2711-2 Regraded Unclassified 18 1 by the Surgeon General. The board shall submit to the 2 Surgeon General recommendations as to the desirability 3 of commencing, continuing, or extending any and all projects 4 for treatment works upon which reports are desired and for 5 which grants-in-aid or loans have been applied. In the con- 6 sideration of such proposed treatment works and projects the 7 board shall have in view the benefits to be derived by the 8 construction thereof in accomplishing the purposes of this 9 Act, and the relation of the ultimate cost of such works, both 10 as to the cost of construction and maintenance, to the public 11 interests involved, the public necessity for such works and 12 propriety of construction in part at the expense of the United 13 States, and the adequacy of the provisions made or agreed 14 upon by the applicant for the grant-in-aid or loan for assur- 15 ing proper and efficient operation and maintenance of the 16 works after completion of the construction thereof. The 17 board shall, when it considers the same necessary, and with 18 the approval and under orders from the Surgeon General, 19 make as a board or through its members, personal examina- 20 tions of localities where the proposed treatment works are 21 to be located. All plans, costs estimates, information, and 22 arguments which are presented to the board for its consid- 23 eration in connection with any matter referred to it by the 24 Surgeon General shall be reduced to and submitted in writ- Regraded Unclassi 19 1 ing, and shall be made a part of the records of the Office 2 of the Surgeon General. 3 (b) As soon as practicable, the board shall classify 4 the navigable waters of the continental United States into 5 districts to be known as sanitary water districts. The board 6 shall fix and define the boundaries of each such district and 7 may from time to time alter such boundaries. The areas of 8 such districts shall, insofar as practicable, conform to the 9 areas of watersheds not wholly contained within the bound- 10 aries of one State. 11 (c) The board shall fix standards of purity in each such 12 district for the navigable waters thereof and for such tribu- 13 taries from which pollution may flow, be washed or carried 14 into such navigable waters; shall establish minimum require- 15 ments as to the treatment of polluting material before it is 16 discharged into such waters; and shall promulgate regulations 17 governing the discharge of any matter or materials into such 18 waters. 19 (d) All special reports ordered by the Congress pur- 20 suant to the provisions of this Act shall, at the discretion 21 of the Surgeon General, be reviewed in like manner by the 22 said board; and the said board shall also, on request by 23 resolution of the Committee on Commerce of the Senate or 24 the Committee on Rivers and Harbors of the House of 25 Representatives submitted to the Surgeon General, examine Regraded Unclassified 20 1 and review the report of any examination, investigation, 2 survey, or project for the elimination or reduction of water 3 pollution or for treatment works made pursuant to any Act 4 or resolution of the Congress, and shall report through the 5 Surgeon General, who shall submit its conclusions thereon 6 as in other cases. The said board shall, at the discretion of 7 the Surgeon General, make estimates of the amount of money 8 required each year for each and all project applications for 9 treatment works which have been approved under the pro- 10 visions of sections 5 and 6 of this Act, for an extension of 11 Federal aid in the form of grants-in-aid or loans to any 12 Stutes, municipalities, or other public bodies or in the form 13 of loans to persons, as provided for in said sections. The 14 board shall recommend the order or sequence of priority for 15 such individual projects in accordance with their estimated 16 importance or value in the elimination or reduction of water 17 pollution as determined by the said board as hereinbefore 18 provided, and shall report thereon through the Surgeon 19 General, who shall submit his conclusions as in other cases. 20 (e) The Secretary of the Treasury shall cause the manu- 21 script of that portion of the annual report of the Surgeon 22 General 118 is concerned with the Division, including a 23 schedule of approved projects for treatment works and 24 cost estimates thereof for grants-in-aid and loans together 25 with such supplementary reports as may be pertinent thereto, Regraded Unclassifi 21 1 to be placed in the hands of the Public Printer on or before 2 the 15th day of October in each year, and the Public Printer 3 shall cause such portion of the annual report of the Surgeon 4 General and supplementary reports to be printed with an 5 accurate and comprehensive index thereof, on or before the 6 3d day of January in each year, for the use of the Congress; 7 and all special reports of investigations of surveys which 8 may be prepared during the recess of the Congress shall, 9 in the discretion of the Secretary of the Treasury, be printed 10 by the Public Printer as documents of the following session 11 of the Congress. 12 (f) There are authorized to be appropriated such sums 13 as may be necessary to carry out such projects or portions 14 thereof for treatment works as are authorized annually by 15 the Congress from the schedule of approved projects and 16 cost estimates submitted to the Congress as hereinbefore 17 provided, and the appropriations therefor shall be included 18 in the annual appropriation bill for the Treasury Depart- 19 ment or in any other supplementary or deficiency appro- 20 priation bill. Grants and loans thus provided for shall be 21 made by the Secretary of the Treasury under the conditions 22 set forth in sections 5 and 6 of this Act. Any moneys 23 appropriated for such projects shall remain available for 24 expenditure for such purpose until the expiration of the 25 fiscal year next succeeding the fiscal year for which the Regraded Unclass 22 1 appropriation is made. In case that the costs of construc- 2 tion of treatment works are less than the original estimates 3 as appropriated for by Congress, the proportionate part of 4 such moneys belonging to the United States as has not been 5 expended shall be refunded or returned to the Treasury 6 of the United States, under such rules and regulations as 7 the Secretary of the Treasury may prescribe. In case that 8 the costs of construction of treatment works exceed, or ap- 9 pour likely to exceed, the original estimates as appropriated 10 for by Congress, the Surgeon General may submit to Con- 11 gress, as in other cases, estimates of the additional moneys 12 necessary to meet increased costs arising because of unfore- 13 scen contingencies, structural difficulties, or other causes, 14 which, in the opinion of the Surgeon General, require con- 15 sideration by Congress. Alterations of, amendments, or 16 revisions to approved project plans for treatment works 17 which do not increase the total cost of the projects may be 18 authorized at the discretion of the Surgeon General. 19 Skc. 8. Pursuant to the powers of the United States to 20 regulate interstate commerce and navigation; to extend, 21 change, and amend the Admiralty and Maritime Act; to give 22 due effect to the Migratory Bird Treaty; and to protect the 23 fisheries, particularly the anadromous fish, Congress hereby 24 declares the discharge or deposit of any waste, except the 25 normal discharge of sewage from toilets of boats or from Regraded Unclassifi 28 1 the galley sink drains or the normal amount of oil that may 2 be discharged from the exhaust pipe of a motorboat, or other 3 substance, whether in a solid, gaseous, or liquid state, into 4 any of the navigable waters of the United States, or into 5 any tributary from which the same may flow, be washed, 6 or carried into any of such navigable waters, in violation 7 of regulations promulgated by the board, if such waste or 8 other substance is or may be injurious to human health or 9 to any other form of life, including aquatic life, or to migra- 10 tory birds as defined in the Migratory Bird Treaty of August 11 16, 1916, or impairs in any manner the utility of such waters 12 for navigation purposes, to be against the public policy of 13 the United States and to be a public and common nuisance. 14 After the expiration of three years after the date of enact- 15 ment of this Act an action to prevent or abate any such 16 nuisance may be brought in the name of the United States 17 by any United States attorney, and it shall be the duty of such 18 attorneys to bring such an action when directed to do 80 by 19 the Attorney General of the United States. Such action shall 20 be brought as an action in equity and may be brought in any 21 court of the United States in the district where the alleged 22 nuisance exists. 23 SEC. 9. Nothing contained in this Act shall be con- 24 strued to limit in any manner the rights of any person or 25 public body to bring actions for damages on account of the Regraded Unclassified 24 1 pollution of any waters, or for the abatement of such 2 pollution. 3 SEC. 10. There is hereby authorized to be appropri- 4 ated for each fiscal year, beginning with the fiscal year 5 ending June 30, 1938, the sum of $300,000, for all neces- 6 sary expenses of the Division in administering the pro- 7 visions of this Act, including: (a) Expenses of investiga- 8 tions made under this Act, including (1) printing and 9 binding of the findings of such investigations, (2) the pay 10 and allowances and travel expenses of personnel of the 11 Public Health Service (including commissioned officers) 12 while engaged in field investigation, (3) (upon the 13 approval of the Surgeon General) the expenses of packing, 14 crating, drayage, and transportation of the personal effects 15 of such personnel and personnel of other Government de- 16 partments on duty with the Public Health Service upon 17 permanent change of station under competent orders in 18 connection therewith while engaged in such investigations, 19 and (4) purchases required for such investigations, with- 20 out regard to the provisions of section 3709 of the Revised 21 Statutes (Ú.S.C., 1934 edition, title 41, sec. 5), when the 22 aggregate amount involved does not exceed $100; (b) 23 upon approval of the Surgeon General, the necessary er- 24 penses of the board of engineer officers provided for in 25 section 7 of this Act; (c) the pay and allowances and Regraded Unclassifi 25 1 travel expenses of reserve engineer officers while on active 2 duty under section 10 (a) of this Act; and (d) for the 3 reimbursement of appropriations insofar as expended for 4 pay and allowances of personnel detailed to the Division 5 under section 10 (c) or 10 (d) of this Act. DI 6 SEC. 11. There is hereby authorized to be appropriated 7 for each fiscal year, beginning with the fiscal year ending 8 June 30, 1938, the sum of $700,000, to be paid to the 9 States for expenditures by or under the direction of their 10 respective State health authorities in the promotion, investic 11 gation, surveys, and studies necessary in the prevention and 12 control of water pollution; this sum to be allotted, under 13 the supervision of the Surgeon General, to the States in 14 accordance with rules and regulations prescribed by the 15 Secretary of the Treasury. The amount of any allotment for 16 any fiscal year remaining unpaid at the end of such fiscal 17 year shall be available for allotment hereunder for the suc 18 ceeding fiscal year, in addition to the amount appropriated 19 for such year 20 Sec. 12. (a) For the administration of this Act the 21 Secretary of the Treasury may, upon recommendation of the 22 Surgeon General, appoint such engineers, attorneys, experts, 23 research assistants, examiners, and consultants as may be 24 necessary, and fix their compensation, in the manner pro- 25 vided by law for the appointment and fixing of compensa H.R. 2711-3 Regraded Unclassified 26 1 tion of such personnel of the Public Health Service; and the 2 Surgeon General is authorized to transfer, assign, or detail 3 to the Division, from any other division of the Public Health 4 Service, such professional and scientific personnel as may be 5 available. Not exceeding ten engineer officers in the reserve 6 of the Public Health Service may be ordered to active duty 7 for such periods of time as may be desirable, extending not 8 more than five years beyond the date of enactment of this 9 Act, to assist in carrying out the purposes thereof. 10 (b) Such clerks, stenographers, and other employees 11 ns may be necessary to discharge the duties of the Division 12 and for the investigations in the field shall be appointed by 13 the Secretary of the Treasury in accordance with the civil- 14 service laws and their compensation shall be fixed in ao- 15 cordance with the Classification Act of 1923, as amended, 16 and he shall prescribe such rules and regulations with respect 17 to their duties as he may find necessary. 18 (c) The personnel of the Public Health Service paid 19 from any appropriation not made pursuant to section 8 may 20 be detailed to assist in carrying out the purposes of this Act. 21 (d) The Secretary of the Treasury, with the consent of 22 the Secretary of any other department of the Federal Govern- 23 ment, may utilize such officers and employees of said 24 department as may be found necessary to assist in carrying 25 out the purposes of this Act. TI Regraded Unclassifi 27 1 SEC. 13. When used in this Act, the term "State health 2 authority" means the official State health department, State 3 board of health, or such other official State agency as is 4 empowered with the duties of enforcing State laws pertaining 5 to health; the term "treatment works" means the various 6 devices used in the treatment of sewage or industrial waste 7 of a liquid nature including the necessary intercepting sewers, 8 outfall sewers, pumping and power equipment and their 9 appurtenances; the term "person" means an individual in 10 the capacity of proprietor of an industrial enterprise, a 11 partnership, a private corporation, an association, a joint- 12 stock company, a trust, or an estate. 13 SEC. 14. If any provision of this Act, or the applica- 14 tion thereof to any person or circumstance, is held invalid, 15 the remainder of the Act, and the application of such 16 provision to other persons or circumstances, shall not be 17 affected thereby. 18 SEC. 15. This Act may be cited as the Water Pollution 19 Act. Passed the House of Representatives April 21, 1937. Attest: SOUTH TRIMBLE, Clerk. Passed the Senate with an amendment August 16, 1937. Attest: EDWIN A. HALSEY, Secretary. Regraded Unclassified 75TH CONGRESS 1sr SESSION H.R. 2711 AN ACT To create a Division of Water Pollution Con- trol in the United States Public Health with TO in (m) DAS instant or Service, and for other purposes. Joh wills in hour mill .Et DER As ni least IN THE HOUSE OF REPRESENTATIVES : JaultA :TROILA AUGUST 18, 1937 mink all Allen VISION Ordered to be printed with the amendment of the who Senate wash? will What - all = 31 Regraded Unclassifie n 184 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE March 21, 1938 TO Secretary Morgenthau FROM Mr. Heas Subject: The Business Situation, week ending March 19, 1938 Conclusions Business activity in the United States exclusive of the possible effects of this week's developments in Europe, contin- 1108 steply m1th evidence of improvement in several directions. Improving business in certain lines during the week ended Farsh 12 18 indicated by a. continued greater than seasonal rise in lumber production, by a rise in carloadings when a decline wee to have been expected, and by greater than seasonal improve- ment in steel and cotton mill activity. Electric power produc- tion, however, showed more than the sessonal drop, and the increase in automobile production was less than would normally have been expected. Following a three-month period of business stability, during which material progress has apparently been made in reducing inventories and adjusting business operations, conditions in this country favor a gradual improvement in business activity from present levels. With no unfavorable outside influences, the improving trend should continue through the summer and gain modentum during the second half of the year. The possibility of a setback during the summer has been materially reduced, since the continuation of a low level of business during February end early March while inventories in various industries were being thoroughly liquidated tends to insure against a decline later. A secondary decline would likely have developed during the summer 1f 8 greater than seasonal spring recovery had lifted production above the level of consumer demand. This week, however, a new factor has come into the picture on the unfevorable side, the effect of which can not yet be determined. The sudden turn in developments in Europe, which has led to widespread fear of 8. major war, introduces the pos- sibility of further commodity price deflation and curtailment of long-term commitments at a time when business in this country is empecially sensitive to either favorable or unfavorable influ- ences. This may prove sufficient to offset, or more than offset, the fevorable influences that have been developing within our own economy. Regraded Unclassified 185 - 2 - Effect of European developments The shock to hopes of European peace which the annexation of Austria and developments in Spain and Lithuania have provided this week, introduces a new factor into our business outlook which 18 difficult to evaluate but potentially unfavorable. Uncertainty in regard to the future may lead to curtailment of long-term commitments in this country. Fear of war in countries now relatively prosperous would tend to halt industrial buying, thereby reducing the world demand for commodities, and weakening the price structure. A decline in foreign currencies against the dollar, particularly sterling, would also act as a deflationary price influence in this country and tend to reduce our export demand. This. was the key situation in the fall of 1931, when England's abandonment of the gold standard helped to force this country into deeper depression. The decline in security prices and weskening in foreign currencies this week 1s probably exerting some deflationary pressure on commodity prices here and contrib- uting to business uncertainty abroad. Although war demand might be expected in the long run to raise commodity prices in this country, its immediate effect would be minimized by several offsetting factors: (1) While the rearmament movement will undoubtedly be speeded up throughout Europe by this week's developments, as evidenced in announcements already made by England, France, Sweden and Yugo-Slavia, it will require time for these to effect an increase in commodity buying. (2) A decline in foreign currencies against the dollar would tend to divert buying from this country to those countries whose currencies had weakened. (3) The present world supply situation for many commodities 1s less favorable than that ex- isting last winter, when competition between armament demand and industrial demand at a time of light supplies brought a speculative boom in commodity prices. Regraded Unclassified 186 - 3 - (4) The possibility of severe business curtailment in Europe in the event of war would reduce the industrial demand for commodities, which in the houregate 18 more important than the armament gesend. Industrial activity in both England and France declined substantially during the year following the outbreak of war in July, 1914, end commodity prices in this country, except for S few exceptions, did not start to rise until the early part of 1915. The security markets Comparative steadiness in the American security markets iss reelt (Chart 1), in contrast with the violent declines which have in markets abroad and in Canada, is believed to reflect (1) a strong fundamental situation in our markete grow* Any DUE of the heavy liquidation which they have already under- I. 20 neil 88 the improving business outlook, and (2) the poter sofety for investment funds provided by our markets, E.6 print the in any other country of the world. The effect of 8. major conflict upon our security markets The invesictable, especially in view of the possibility of irrotional liquidation from domestic sources. The price situation Prices of sensitive commodities have sagged slightly this net CE foreign exchange rates weakened and security markets declined, though the undertone has remained generally steady. Octton prices, which are particularly sensitive to fluctuations In storling exchange because of the competitive balance between American and British-grown cotton, declined sharply on Friday :10/- R drop of about 2 cents in sterling, but later recovered cost of the loss 8,8 sterling improved. Further declines in ribber and wheat resulted largely from prospects of increasing supplies, while hides, cocoa, and some other commodities were 13versaly affected by general weakness in the security markets. The trend of commodity prices, in our opinion, will have an important bearing on the trend of business activity over the next fee months. While orices during the past three months have impently been establis ing a foundation for EL general rise, and have held un well this week under the weakness in security prices hare and abroad, the war developments in Europe introduce a new factor, the effect of which 18 difficult to estimate. Regraded Unclassified - 4 - 187 Current business developments Steel operations Operations in the steel industry this week increased 2 points to 32 per cent of capacity, which, with the exception of one week in January, was the highest rate since the week of November 15. New orders for steel appear slightly higher than current production. Ordere received by the U. 8. Steel Corporation during the week ended March 10 were maintained for the second successive week at a level equivalent to about 33 per cent of capacity, while operations of the corporation last week were at 29 per cent. Current predic- tions in the steel trade are that the spring peak in steel opera- tions may not occur until June, and that the operating rate for the second quarter should average around 42 per cent of capacity. While an upturn in steel operations has occurred in 4 of the 6 leading districts, the output in the Youngstown district has decreased because of an easing in the tin plate demand (See Chart 2), and output has remained unchanged in the relatively small Buffalo district. An easing of steel scrap prices recently in most districts (shown on the chart) appears somewhat unfavor- able. Steel buying 1s held to minimum levels by the knowledge of consumers that prices on steel products will not increase and may decline. They also know that with the present low operating rate there will be no difficulty in getting deliveries when needed. Hence present conditions favor a continuation of hand-to-mouth buying policies. In the meantime, inventories of steel consumers are going down steadily, according to reports of sales executives of the steel companies. In this connection, it 18 pointed out that companies reporting their inventories 88 adequate or excessive generally are measuring them against the current low levels of sales. and any sharp increase in sales would find inventories too low. Retail Sales Department store sales continue to improve gradually from the low level reached the latter part of January, but on the whole the improvement has not been as much as the normal seasonal increase. Sales during the week ended March 12 were 15 per cent below those for the same week last year, a slightly more favorable comparison than in the previous week. Comparisons with last year are likely to be increasingly unfavorable this month, especially during the week ending March 26, since sales in March last year were stimulated by 188 - 5 - buying. Easter 18 three weeks later this year, which will threw the heaviest retail buying into April. Weekly depart- gent store sales during that month should therefore make more fevorable comperisons with last year. Automobile production The estimated production of automobiles this week increased coly 200 units to a total of 57,600, apparently reflecting the slowness of expansion in retail buying and the previous stocking of dealers by the automobile companies. Ward's Reports mentions that production 16 remaining slightly behind the pace of retail deliveries. Although the success of the used car sales drive has apparently not yet been reflected in new car buying, it 18 con- orded by sutomobile companies to have met all expectations, Ascording to early tabulations, and final figures may prove even more favorable. Processing tax A factor which would tend to stimulate near-term business activity is seen in the introduction of a processing tax proposal by Senator Pope of Idaho, to cover cotton, synthetic yarn, corn, theat, rice and tobacco, intended as an amendment to the revenue Mll of 1938. Since it contains no provision for a floor tax on manufactured products, its effect will be to stimulate buying in alvance of the effective date of the tax, at the expense of later business. Its most important effect would be temporarily to larrease activity in the textile industry. Carloadings An improvement in carloadings. which began in the previous reek continued in the week ended Merch 12, contrary to the recsonal trend which 1s downward at this period of the year. Miscellaneous carloadings, usually considered more indicative of bustness trends, made a better showing than total loadings. Construction Residential construction during February showed B. greater the "2 somel increase from the low January level, with an Improving trend throughout the month. The daily average value of contracts awarded increased from $1,448,000 in January to 819 in February, with the last period of the month averaging $1,949,000. A sharp seasonal increase in contract usually occurs during March and April. 189 - 6 - Another greater than seasonal rise in lumber production during the week ended March 12 to an index (adjusted) of 64.6 as compared with 62.1 during the previous week provides further con- firmation of an increasing demand from the building industry. Prices of building materials resumed their downward movement during the week ended March 5, following a short period of stable quotations. The Department of Commerce index, covering a group of leading construction materials, dropped 0.3 to 90.8 in that week. This compares with a peak of 96.7 reached last July. Unclassifie Chart, 1S0 OSCURITY PRICES EM U.E., FRANCE AND U.S. AND FOREIGN TRADING IN AMERICAN STOCKS 1937 1938 DECEMACA JANUARY FEBRUARY - APRIL H 18 25 6 15 22 a 3 12 19 26 5 a 12 19 26 2 9 16 23 30 PER - GENT MENT Government Bond Prices 100 U.K. 28% Gawsols ix 104 U.S. di 1955-60 100 100 IS FRANCE - RENTES 96 M 92 100 100 Stock Prices NEW YORK 30 INDUSTRIAL STOCKS Mr. IDSCR TOU 100 (04 NO 100 * 96 PARIS BOURSE w 92 Lowos 36 INDUSTRIAL STOCKS M as - 64 to 80 75 76 DECORES JANUARY FEBRUARY MASCH APRIL HULING BOLLARS Purchases and Sales, U. 6. Stocks MILLIONS 1.5 1.5 NET PURCHASES 1.0 1.0 a :- : 0 1 in 1.0 1.0 NOT SALES 1.5 1.5 1.6 MM 4 1111 MM = 2.0 18 25 - - 15 22 a 5 12 19 26 $ 12 IS 26 2 9 16 25 30 DECOMER JANUARY 1937 FORMARY - MAIL 1930 / , / I . 2 I - # - - - F 159 STEEL INGOT OUTPUT AND SCRAP PRICES By Districts 1937 1938 JFMAMJJASONOJFMAMJJASOND PER DOLLARS CENT PER TON 80 20 Scrap Prices 60 All Districts is 40 10 Ingot Output 20 5 100 25 80 20 60 Pittsburgh IS 40 10 20 5 80 20 Scrap Prices 60 IS Chicago 40 10 Ingot Output 20 5 60 20 40 15 Philadelphia 20 10 80 20 Scrap Prices 60 15 Ingot Output 40 10 Youngstown 20 5 80 20 60 15 40 10 Cleveland 20 5 100 25 80 20 Scrap Prices 60 15 Buffalo 40 10 # Ingot Output 20 5 o 0 J F M A M J J A s o N D J F M A M J J A SOND 1937 1938 "In * In percent of capacity Office of the Secretary of the Treasury - # I - - C-190-1 Regraded Unclassified 192 Monday March 21, 1938 2:38 p.m. MJr: Hello. T.O: Robert Jackson. Go ahead. HMJr: Hello. Robert Jackson: Hello. HMJr: Bob? J: Yes. HMJr: Henry Morgenthau. J: Yes. How are you today? HMJr: I'm fine. Bob, the President signed that order on cement. J: Yes. HMJr: As written. J: Yes. HMJr: Over the protest of Henry Wallace, - who didn't think that this was the time to stir up big business. J: I see. HMJr: And he made a grievous protest against our going through with it at this time. And I thought it would backyou up to know that the President just simply disregarded it and isn't going to let himself be governed by whether business is good or bad as far as the enforcement of the law is concerned. J: Well, that's fine. I'm glad to know that. EMJr: And I thought - I showed him your letter which pleased him very much. So we're in it and we're not going to give it any publicity until we get tie-bids because we may not get tie-bids. J: Yes. HMJr: You see? Regraded Unclassifie 193 -2- J: No, they may - they may heed the warning. AMJr: Yes. But I wanted to let you know that he un- hesitatingly signed it. J: Yes. Well, that's fine. That's very encouraging. HMJr: And now we're going to count on you and Thurman Arnold for support if we need it, J: Yes. Well, he - we got him sworn in this morning SO he's ready to do business. HMJr: And the other thing, the President gave me all this stuff on the monopoly and banks thing. J: Yes. AMJr: And said that you and Herman Oliphant should get together and fix something up for him and send it down to Warm Springs. J: What? HMJr: Before it came down please to let Homer Cummings know about it - I'll repeat just what he said - so that he subsequently couldn't say he hadn't heard about it. So he gave me your letter to him, see? J: Yes. HMJr: Plus everything that we've done and I've dumped it all in Herman Oliphant's lap. J: Yes. All right. Well, is Herman here or has he gone south? HMJr: No, he's here. J: Oh, I thought he was going south. HMJr: Well, he's not going until at least Friday night. J: I see. MJr: He's not going until he gets this cleaned up. J: Yes. All right, that's fine. 194 -3- HMJr: But the fact that the President went through so fast on this cement thing just tickled me pink. J: Yes. That is very encouraging. HMJr: Right. J: All right, fine. HMJr: Goodbye. J: Thank you. Goodbye. Regraded Unclassified 195 Monday March 21, 1938 2:40 p.m. HMJr: Hello. T.O.: Admiral Peoples. HMJr: Hello. Admiral C. J. Peoples: Hello, Mr. Secretary. HMJr: Admiral. P: Yes, sir. HMJr: The President of the United States signed that statement giving you the power to buy all cement. P: Yes, sir. HMJr: And Mr. McReynolds has that now and he'll get that over to you. So that's effective today. P: Yes, sir. HMJr: And I'm counting on you now to see that we get results. We're not going to give out any publicity until it's necessary. By necessary I mean in case we get tie bids. In other words we'll keep our powder dry, see? P: Absolutely, Mr. Secretary. HMJr: And we'll wait until we see the whites of their eyes. P: Absolutely, sir. HMJr: And there's no sense of blowing off a lot of publicity because these boys - this will leak out and maybe they'll come through with competitive bids. P: You mean handle it like an ordinary routine matter, Mr. Secretary? HMJr: That's right. But the President signed it and McReynolds has it. P: Sure to be, sir. HMJr: The rest is up to you. P: Yes, indeed, Mr. Secretary. Regraded Unclassified 196 -2- HMJr: All right. Give it your personal attention, please. P: We'll get to work on - jump on it right away, sir. HMJr: And get in the requirements for the various depart- ments. P: We'll jump on it right away, sir. HMJr: And watch this fellow McDonald particularly. P: Yes. He's a little tougher. HMJr: Well, I hope that's the kind of thing that you can say about him. P: Yes. (Laughs) Yes, Mr. Secretary. HMJr: All right. P: I quite understand, sir. HMJr: All right. P: Thank you very much, sir. Bye bye, Mr. Secretary. Regraded Unclassified Monday 197 March 21, 1938 2:44 p.m. HMJr: Hello. Thomas Blaisdell: Hello. Blaisdell speaking, sir. HMJr: Blaisdell, I thought you'd like to know that the President unhesitatingly signed the memorandum as it was written at the meeting here, not as it was rewritten by Oliphant. B: Well, that's fine. HMJr: And no question at all although I explained to him of Mr. Wallace's position. B: Well, I'm very much pleased, and I HMJr: I thought you would be. B: And I wish to congratulate you. HMJr: No, we congratulate ourselves on the kind of President we've got. B: Well, that's fine. I quite agree with you. HMJr: And Wallace had already told him how he felt about this B: Yes. HMJr: ...kind of thing. B: Yes. HMJr: But I thought you'd to know because when a fellow works hard he of course likes to know what happened to the thing. B: Well, I certainly appreciate your thoughtfulness, sir. HMJr: All right. Cheero. B: Goodbye. Regraded Unclassified Monday 198 March 21, 1938 2:46 p.m. H.S. Klotz: Hello. T.O.: Hello. K: The Secretary is going downstairs. He doesn't want any calls here until three-thirty. T.O.: All right. Regraded Unclassified 199 MA March 21, 1938 Some statements by Blum and Auriol prior to the Tripartite Accord regarding realignment of currencies. Auriol and Blum had taken the position through the summer of 1936 that the French Government "did not want alignment without security or unilateral devaluation, both of which were forms of monetary war". Blum was reported to feel strongly the political impossibility of devaluing the franc unless and until Great Britain and the United States agree to stabilize. On June 18, 1936, in an interview which Auriol 1s reported to have given to the press he stated: "You see that I am fundamentally hostile to deval- uation because of the very precautions which are taken to camouflage its repulsive character in the eyes of the public. In fact speaking of devaluation there 18 the question of alignment. Are the devaluers, who would not be satisfied with a timid out in our currency, under the illusion of thinking that a strong lowering of the legal definition of the franc would leave the dollar and pound on their present bases? To align there must be a fixed point. But the monetary policies of the Anglo-Saxon countries are in the first place opportunist and every- thing indicates that they envisage currency conditions and behavior only in relation to themselves. Scarcely aligned, we would immediately be unaligned. For such uncertainties should we sacrifice by devaluing one of the essential articles of a political program and prom nounce ourselves against that part of the population which the acts of a government such as ours propose to favor precisely because it 18 equitable and socially equilibriating to decide 80? On June 17, 1936, Blum was reported (Cablegram 509. June 17, 5 p.m., From Paris) to have stated that he did not think "any one present, commencing with Caillaux, wanted that /devaluation of the franc/ outside of international agreements and a general contractual alignment". During the debates in French Chamber on September 28, 1936, the Minister of Finance (Auriol) in reply to assertions that the terms of the Tripartite declaration were vague, stated: M. Auriol: "At the beginning, we had suggested the drafting of the document along traditional lines. We realized that France favors explicit undertakings, raded 200 - 2 - and that our Latin temperament is entirely impregnated with juridical tendencies and conceptions which, some- times, have not been beneficial. "The other countries took a different view, As they saw it, the community of interests, reciprocal comprehension, the loyal respect of the given word, and above all cordial and practical cooperation, was of more importance. "That is why I say that the fact of securing this practical cooperation between the Governments and the banks of issue is without doubt preferable to the proclamation of the principles which have guided us. The spirit is often worth more than the word, and cooperation in action is worth more than even & formal agreement." "I render hommage to Mr. Chamberlain who was good enough to cooperate personally with us and with the Government of the United States in the elabor- ation of this arrangement. I shall never forget, 8.8 far as I am concerned, the impressive moment when, at midnight on Friday, Mr. Morgenthau asked to talk with me from Washington by telephone, just as we had completed the last terms of the declaration. He spoke these simple words in French: "I wish you success, and I also wish success for France'." 201 JR GRAY Bern Dated March 21, 1938 Rec'd 1:23 p.m. Secretary of State, Washington, 22, March 21, 5 p.m. Your 8, March 16, 5 p.m. OnE, National Bank's next weekly statement as of March 22 is EXPECTED to show large gold loss, approximately one hundred million francs, reflecting loss of confidence in Switzerland as depository for foreign capital as a result of German action in Austria. It is believed that outgoing transfers would have been greater EXCEPT for further gent]Emen's agreement designed to limit influx and now serving useful purpose in stemming precipitous outflow of foreign money. Two. It is estimated on good authority that loss of foreign capital in the near future may amount to between five hundred million and one billion Swiss francs. Approximately sixty per cent of foreign flight money believed to bE of French origin, the remainder German, Italian, Austrian, Rumanian, Etc. American short time money in Switzerland probably does not amount to more than one to two per cent of Swiss capital in the United States. Three. 202 ⑉2⑉ #22, March 21, 5 p.m., from Bern. Three. My information is confirmatory of view that foreign Exchange control in France is inevitable. One unusually well informed Swiss banker states that French general staff has now COME to share Socialists desire for Exchange control to keep gold in the country. HE believes that it would take four or five months before foreign Exchange control plans could bE Effectively installed in France. Four. Public subscriptions to four hundred million Swiss francs Federal Railway Loan are understood to have been disappointing. Conversion of holdings of the old railway loans (four hundred and twelve millions) inadequate to cover three hundred million public part of new issue; cash subscriptions being called in at once. HARRISON MLP:HPD 03913070 / / / / VEHICLES 203 JR GRAY London Dated March 21, 1938 Rec'd 2:15 p.m. Secretary of State, Vashington. 232, March 21, 6 p.m. FOR TREASURY FROM BUTTERWORTH. With the settlement nt lenst temporarily of the Polish Lithuanian dispute the sequence of adverse developments has been broken and British security markets have been stronger today. Likewise the demand for dollars disappeared. Exchange dealers were mostly caught out by the weekness of the dollar against sterling but most of them are nevertheless continuing to operate under instructions not to be short of dollars and to neglect any reversal of the EXPECTED trend which may occur on a given day or days. The volume of trading has been much smaller than during last WEEK. I am told by a source unusually well informed about France that there is every likelihood that a bronder based government will bE formed but not during the next four or five days and that upon its announcement of the assumption of office the franc rate will bE moved to and held at 170 or 175 to the pound. CSB KENNEDY 204 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Paris, France DATE: March 21, 1938, 5 p.m. NO.: 440 RUSH FROM COCHRAN STRICTLY CONFIDENTIAL. This evening at 5:00 o'clock I visited the Bank of France. At that time the French control had lost 110,000 pounds in a day in which trading was fairly light. The control was trying to have the franc rate close a little under 163. Today's feature in European trading was the strength of the dollar versus sterling. On Sunday and again this morning Blum consulted the Bank of France Governor regarding the urgent need of raising Treasury funds. The March 24 statement of the Bank 1s to show an additional drawing by the Treasury of 1,600,000,000 france on its credit with the Bank of France. ) This means that 1,780,000,000 france constituted the balance in this credit as of March 17. The running needs of the Treasury can just barely be met for the present week with this balance. Under existing law, this is the limit of the borrowing permitted to the Treasury. In the present political circumstances, it is manifestly not possible for the Government to ask for any new loan which would bring in sufficient funds soon enough to meet 205 - 2 - meet the requirements of the Treasury. The Finance Ministry has indicated to the Bank of France its desire to raise funds and has asked the Bank to put in writing at once the technical methods which might be followed to carry out such procedure. At the moment the Bank 18 working on a memorandum which will be submitted with a covering letter. In this covering letter the Bank will point out the possible repercussions from the various alternatives which it may put forward in accordance with the request of the Treasury. I understand that the method most likely to be selected by the Treasury is that of asking for immediate legisla- tion which would give the Treasury a new credit with the Bank of France; it 1s entirely possible that on Tuesday evening such 8. meagure may be introduced before the Parlia- ment. I understand that the Government hesitates to suggest gold stocks revaluation and the turning over of its profits to the State, feeling that objections thereto would be raised by the Senate. It is reported that Government of- ficials think, however, that & new credit with the Bank of France might be given to the Government by the Senate rather than force Blum out merely on the size of his borrowing 206 - 3 - borrowing and assume the responsibility for doing 80, The Government would likely ask for enough funds to run it for the next two and 8. half months. It may be that Blum is sincere in his avowal that he favors a Government of National Union; however, this desire for funds to run two and a half months would confirm the growing impression that he is determined to maintain his position 8.8 Prime Minister and not to let a National Union Government In unless it is one constituted around himself and the Popular Front party. I believe that the Bank of France will point out to the Finance Ministry that the request for legislation for a new or larger credit with the Bank will likely cause an immediate run on the currency. The Bank believes, fur- thermore, that should the credit be granted, putting this many new france into circulation would simply facilitate capital export; therefore pressure on the franc 1s expected by the Bank. Should things develop as above suggested, and especially if this Thursday's Bank statement appears as anticipated, it would seem that shortly the Government will have to face the problem of either losing gold from the reserves of the Bank of France, or seeking control of exchange. Operations of the past few days in gold and foreign exchange have not been Regraded Unclassifie 207 - 4 - been large, back therefore these holdings in the stabiliza- tion fund are still approximately 2,000,000,000 francs. END OF MESSAGE. WILSON. BECEIAED seen SS BAN EA:LWW THEMTRA930 VRUDAIRT I I If I I mêr le willia 208 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Paris, France DATE: March 22, 1938, 1 p.m. NO.: 442 CONFIDENTIAL. I give below my impressions of certain aspects of the situation here: Before the end of the month the financial situation may cause another political crisis. The French Treasury is perhaps without funds and some way to provide funds for month and quarter end requirements must be found. In the Chamber of Deputies measures may be introduced today or tomorrow to provide funds for the Treasury. The procedure most likely to be followed is to ask for authorization to increase the amount which can be borrowed from the Bank of France by the Treasury. Today it is reported that the Government will seek an increase of five billion francs. The Chamber of Deputies would pass such a bill, but it is not certain what the attitude of the Senate would be. The forming of a Government of National Union is still as problematical as it ever was. On the seventhenth of March the debate in the Chamber of Deputies widened the breach between the Popular Front parties and the opposition; on that date the opposition turned down Blum's repeated appeals for the formation of such a Government. As reported in 209 - 2 - in a previous telegram, it seems that the formation of n. Government of National Union will be possible only in the event of actual danger from abroad or in the event of domestic financial panic. Since last week there has been a marked diminishing in the tension over the foreign situation; Austria seems to have been forgotten by the people. Reassuring factors have been the settlement of the dispute between Poland and Lith- uania, and the statement of Franco with regard to Spain's territorial integrity. The French have indefinitely post- poned the debate on interpellations on foreign affairs which was to have taken place today. I am told by members of the Government that the postponement was requested by the interpellators themselves. On the other hand, the opposition states that it was requested by Paul-Boncour. As a matter of fact, the truth probably is that everybody agrees that a public debate on foreign affairs would at the present time be unwise. There will be a secret hearing in the Foreign Relations Committee of the Senate probably tomorrow instead of 8. debate. There seems to be less fear over the likelihood of early aggressive action against Ozechoslovakia by the Germans. However, should there be another political crisis here with the country again without a Government for several 210 - 2 - several days, Hitler would have another invitation to take action. END MESSAGE. WILSON. EA:LWW 211 PARTIAL PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Paris, France DATE: March 22, 1938, 5 p.m. NO.: 443 RUSH FROM COCHRAN. Reference my 440, March 21, 5 p.m. Legislative measures for increasing Treasury's credit with Bank of France by five billion france and for trans- ferring profits (amounting to around three billion france) of stabilization fund to newly created national defense fund were approved in this morning's Cabinet meeting. Finance Committee of Chamber passed them this afternoon and debate thereon in the Chamber of Deputies is scheduled for tonight. These measures comprise two separate bills, together with conventions with the Bank of France, which are charac- terized as provisional means for meeting immediate Treasury needs, to be followed by a general financial program, some indication of which may be given in a speech tonight by budget Minister Spinasse. Profits of stabilization fund are estimated on holdings as of March 22 compared with original endowment of ten billion francs. At 5 p.m. I had a talk with the Bank of France. All day the market was rather nervous but there was a light turnover. 212 - 2- turnover. This evening the control purchased slightly more than enough sterling to offset the amount which had been sold earlier today. My contact at the Bank said he is sure that the Chamber will pass the above-mentioned measures. In banking circles the outlook for passing the Senate is also considered in- creasingly favorable, since the funds are demanded on the ground of national defense. WILSON. EA:LWW BECEIAED 8601 88 min TRANTRAN20 YRU34397 1 MIX - - I I 3 I 213 GROUP MEETING March 22, 1938. 9:30 A. M. Present: Mr. Oliphant Mr. Gaston Mr. Haas Mr. Taylor Mr. Gibbons Mr. Lochhead Mr. Bell Mr. McReynolds Mrs. Klotz Mr. Magill (For brief period) H.M.Jr: Herbert, did you call the White House about the bank holdings? Gaston: Yes sir. I talked to Hassett. H.M.Jr: It doesn't look as though the Wall Street Journal quite played fair with us. Where is McReynolds? (To Mr. Taylor:) I'm glad you're back. McReynolds: (Entering room) The House Banking and Currency Committee phoned that they will be glad to hear Mr. Morgenthau on the Patman bill next week. H.M.Jr: In the absence of Mr. Morgenthau, Mr. Taylor will report. Taylor: I had the same note from Mr. Upham. H.M.Jr: Between you and Mac we'll take care of it. Mac will tell them I'm out of town. I am not saying you have to go up or anything, but I am saying Mac will tell them I'm out of town. Oliphant: What's that - taking over the tax ? Taylor: Yes. I think if we started ..... H.M.Jr: (To Mr. Oliphant) Do you want to testify? Oliphant: No. Glass was on it a good while. - 2 - 214 H.M.Jr: I didn't know whether you wanted to testify. All right, that's that. Mac, what have you got there? McReynolds: Wall, Steve promised Jimmy Roosevelt yesterday morning he'd send these things over so the President could send them up today - about that fellow Lafferty being appointed Comptroller of Customs at Philadelphia and that fellow McGrath being appointed Collector of Customs at Boston. While they are not enthusiastic about either one of them they both cleared. H.M.Jr: In other words we are to make a good "woman" out of Steve. Gibbons: I didn't promise anything. I told them they were enroute; that you hadn't signed them. McReynolds: That's my way of putting it while you are present, Steve; here. that's a safe statement as long as you are H.M.Jr: Well, as far as you know they haven't committed grand larceny? McReynolds: We could be almost certain of that. Gibbons: They cant either - in either of the jobs. McReynolds: They won't have any chance of stealing anything. H.M.Jr: That's all right. Gibbons: If they were Collectors of Internal Revenue it would be different. H.M.Jr: Mac, what I talked to you about last night, I talked to Magill and he's satisfied. I said for you to draw up everything and you'd show it to him tomorrow. He's satisfied. It's up to that other fellow then to get busy, see? Huh? McReynolds: Yes sir. 0. K. H.M.Jr: In the next twenty-four hours will you show it to Jake while he's here? Regraded Unclassified - 3 - 215 McReynolds: Is Jake going to be here tomorrow? H.M.Jr: No. McReynolds: I'll talk to him today. H.M.Jr: Is Harold (Graves) back? McReynolds: I just talked to him on the phone. That's why I was late. H.M.Jr: Were you late? McReynolds: Well, everybody was seated when I came in. H.M.Jr: That's funny - - I hadn't noticed. (Laughter) McReynolds: He said everything's all right over there, and needs - the personnal assignments are not so hot; they can make some improvements in it, but there is really nothing to worry about. H.M.Jr: No grand larceny? McReynolds: No grand larceny. H.M.Jr: Mr. Bell? Bell: I don't believe we are going to get more than - receive even seven ten in taxes - will be about forty-six million below the estimate. H.M.Jr: All right, and so what? Bell: Well, I understood Mr. Magill to say he was going to make a statement this morning before the Committee and if a lot of figures - did he have in mind giving any estimate George? Haas: I don't know. I don't think so. H.M.Jr: (Over telephone) Ask Magill if he could step in here a moment - tell him to step in here a moment. Bell: I think it would be better if he could avoid that a few days. Haas: You get the Bureau report this morning? 218 - 4 - Bell: Eleven o'clock, yes. H.M.Jr: What else? Bell: That's all. H.M.Jr: Now tomorrow - gosh, I wanted to talk to Mr. (Mr. Magill enters.) (To Mr. Magill.) Magill, before you go on the Hill I thought you'd like to know that Bell's best estimate is seven ten. Magill: Instead of seven forty-six? H.M.Jr: And he also said he thought you'd better keep away from them entirely. He had these figures for you this morning before you went up. Would he be safe in saying a minimum of seven hundred? Bell: Oh yes, I think he'd be safe on that. Magill: Suppose I say nothing about it unless they ask me about it? B.M.Jr: That's all right. If I were going up I'd say "All I can say, gentlemen, is as of today; I think we will get at least seven hundred, but how much more I don't know. We'll know in another week." That's what I'd say. Magill: (To Mr. Bell) Have you got a paper there for me? Bell: No, just a rough estimate showing how the five eighty-seven to date compares on the basis of last year. Take that if you want to. H.M.Jr: (Over telephone while Mr. Magill and Mr. Bell were talking.) who's coming tomorrow for lunch and who's heard from and who hasn't. Give it to Miss Chauncey. (To Mr. Magill) I thought you might want that. Magill: I'll add that to my collection - in my files. That will take place right after the Lehman letter I had Saturday. - 5 - 217 H.M.Jr: And Berkshire? Magill: Berkshire said he'd be up there this morning. H.M.Jr: Is he in favor of keeping it down to two dollars? Magill: I told him he was. (Laughter) H.M.Jr: All right. You're a good fellow. Klotz: That is marvelous. H.M.Jr: This is getting to be a good crowd. Klotz: Oh, I love it. H.M.Jr: (Nods to Mr. Lochhead.) Lochhead: Although the exchanges are quiet, the reports coming in now show the gold movements are starting this way. We feel there are fairly good totals. I don't know whether or not we will arrive at the end of the month, to go beyond a hundred million or not but it will be a typical situation. I am in touch with Bell's office to determine whether there is any leeway. H.M.Jr: As Magill said of Mr. Berkshire, you will see that there is a hundred million. Lochhead: I have tried to. I was asking him if that wasn't through. H.M.Jr: The New York Times had it - I can't look at Bell and Gaston both at the same time. Bell: I had nothing to do with it. It's news to me. Gaston: We didn't give them out anything since the day we announced this policy. We gave them the whole story about reduction of national currency. H.M.Jr: Well, the Times had it. (To Mr. Gibbons) You didn't have anything to do with it? Gibbons: It's all Greek to me. H.M.Jr: To me too, and the New York Times. Regraded Unclassified 218 - 6 - Bell: We have twenty million leeway now. H.M.Jr: How about reduction of national currency - do we or don't we? Bell: I think we can. H.M.Jr: What do you mean - can't you? Huh? Well listen, you and Archie and one Taylor discuss the thing tomorrow morning and come in and give me the answer, will you? See if you can get together. Bell: Are you going to see them in the meantime and inform them to tell me how I think about it? H.M.Jr: No, I'll play fair with you. I promise not to see them. Of course, the more (inaudible) I'll let you have them in their winter coat. All right? Bell: All right. Lochhead: All right. H.M.Jr: What else. Lochhead: (Nods "No.") Nothing more just now. Gibbons: I wrote the letter to Mr. Ickes about the Coast Guard plane that we were sending. H.M.Jr: And told him what? Gibbons: Told him there was an order came over that Dean Acheson acknowledged and I had never seen it, and it goes a lot further than I thought - you or I ever thought of. I told him nobody, except in case of life or death was to be flown, outside of military and naval service. H.M.Jr: I was right then. There is such an Executive Order? Gibbons: The question, even I thought - Mac thinks I'm wrong, but without having that modified there is a question as to whether or not we could fly alcohol tax people and narcotic men - it goes all the way. I am going to turn it over to Oliphant. But, however --- H.M.Jr: Can you and I fly? 210 - 7 - Gibbons: Yes, you and I can fly. Bell: You interpreted it right. Gibiions: I told Mr. Ickes he undoubtedly had a copy of it - he had been sent a copy by Mr. Dern. McReynolds: You are entirely familiar with the way we handled (inaudible) down at Fort Belvoir. It doesn't limit, as via the authority of you, to designate anybody within your Department. Gibbons: I think that is right. McReynolds: I think the limitations go through to somebody outside your Department and not within. Gibbons: I am going to turn it over to Oliphant. H.M.Jr: Mrs. Klotz asked a good question. She said, "Why don't we take them on a cutter?" Gibbons: That is a point I'm asking Mr. Waesche to determine. I don't see the line of demarkation. McReynolds: Of course the order - it wasn't a Presidential order - it was merely a report made by Dern, the Secretary of War; Navy, and Commerce, and the President transmitted it and said, "I wish you'd carry this out." Gibbons: Well that is a question that suggests itself to me. H.V.Jr: Well, between you Gibbons: Well, the letter went out to Mr. Ickes. H.M.Jr: and the thousand lawyers we've got, fix it up. Oliphant: Elven hundred this morning. H.M.Jr: Eleven hundred now? All right. Gibbons: That letter can go out to Copeland. H.M.Jr: Oh, I think I can get this thing straightened up. A day or so won't make any difference? Regraded Unclassified 220 - 8 - Gibbons: No. H.M.Jr: I can get this thing straightened up. Gibbons: It's just one of those things. H.M.Jr: I told Mrs. Klotz to pass the word on it to you people. Klotz: We just decided it about ten minutes or so ago. Gibbons: Well, that same question came up in my mind - "Why one and not the other?" H.M.Jr; You otherwise? What I was going to say to you, Mac, I think I'd call up Burlew and explain to him on the cement thing. He gets a message from Peoples that they are going to buy cement and everything. After all, Agriculture knows all. about it, but Ickes doesn't, and Ickes might just as well come out and say that - well, I don't know what. I mean, that is the way - he made a long statement on T. V. A. and retracted it about building municipal plants. So tell Burlew what it's all about. Wayne, did you go below sixty? Paylor: (Nods "No.") Just a few little touches, and I think H.M.Jr: Wayne, tomorrow at one o'clock Ransom, Jesse Jones, Taylor, Oliphant, Haas, Upham - on the question of one James Roosevelt for lunch to discuss loans, and I wish - oh, and one Bell. McReynolds: Also Taylor. H.M.Jr: Taylor is down, but not Bell. Now I wish my group would get together before then and have an agenda for me. Oliphant: I have here an analysis of Yes, but put that in form of an agenda. Have it ready for me tomorrow morning. Huh? Unclassified - 9 - 221 Taylor: Right. Oliphant: Tomorrow morning - nine-thirty. IL.M.Jr: Will you, fellows? Taylor: How would quarter of eleven do as a practice run today? Belli I have a hearing at eleven o'clock, but I don't have to be there. Is that just the agenda on the bill or the whole subject? H.M.Jr: What the President did, he picked up every piece of paper on his desk - in his basket - and sent it over - "Everybody's written us on this thing." (Holds side conversation with Mrs. Klotz.) And so then he said, "Whip this thing into shape and see what you can do on it for me." He sent it down, you see, - so Douglas wanted to work with us alone, but I told him I didn't have the time, and I think if we handled it just the way we did that bank bill we'll get something on the thing, but I think we ought to have en agenda, so if you fellows would do that for me I'd appreciate it. All right? Taylor: (Nods "Yes.") T.M.Jr: Incidentally, I was just congratulating myself on the way the Treasury assumed the leadership in the Government bond market. The Government bond market is back to where it was, and I compared it on George Haas' chart as to what the English Consul had done and my chest swelled up with pride. Every time they were meeting over there the Govern- ment bond market was going up, so the discussion was kind of Taylor: Academic. H.M.Jr: ***** academic, yes. Well, work on it anyway+ George, that was a good report on business. Haas: Thank you. 222 - 10 - H.M.Jr: What else? Haas: I have nothing new. You no doubt have seen the steel activity figure, which is 34.7. That is ex-automobile - there is practically no automobile. I have nothing else. H.M.Jr: Two things I am looking for. One is the report that comes in every day from Mr. ..... Bell: Ross. H.M.Jr: ..... Ross on unemployment, and the one from Clark on figures on housing - those two things. (Speaks aside to Mrs. Klotz.) Haas: Oh yes, that reminds me. On this thing Miss Lonigan - you want her to take Illinois and Chicago? H.M.Jr: I don't care about that. Take that and Byron - it's a big city. Anything else, George? Haas: Nothing. H.M.Jr: Gaston, you got any more foolish figures on tax receipts? Gaston: I expect to get some about by one o'clock. We expect to make good by one o'clock. Seven fifty, Dan? H.M.Jr: How much? Gaston: Seven fifty. H.M.Jr: Listen - (Points to Mr. Gaston) a dime to a nickel that it won't be seven forty-five. Gaston: All right, I'll take you. H.M.Jr: Put up the dime. Mrs. Klotz will take the money. Gaston: That is collection basis for the --- (inaudible - too many talking) H.M.Jr: What is the other way? Klotz: I can't take a bet that I don't know anything about. 223 - 11 - Gaston: The other way is the daily Treasury statement. H.M.Jr: Which is clearer? Bell: Basis of the statement I send down to you which represents (inaudible)-- actual collections credited to the Treasury account in the Federal Reserve Banks. Gaston: That's a daily statement. Bell: The daily statement has the daily hang-over at the end of the month. Gaston: It isn't credited until the banks are clear. H.M.Jr: I'm betting you ten cents to a nickel. Gaston: All right, I want a nickel (change). It won't go to forty-five? H.M.Jr: On the statements that come down to ..... Bell: Including figures for the thirty-first of March. H.M.Jr: That it will not show seven hundred forty-six million receipts. Klotz: I see. H.M.Jr: I'm betting ten cents to a nickel that it will not equal forty-six. Gaston: I thought it was seven forty-five. H.M.Jr: Seven forty-five. Gaston: Seven forty-six was the estimate, but you said seven forty-five. H.M.Jr: Anybody want to half that bet? Taylor: Yes - on your side. H.M.Jr: Well, put up the nickel. (Laughter) (Mr. Taylor puts up the nickel.) Now you know why I am Secretary of the Treasury. All right. Regraded Unclassified 224 12 I I Gaston: Well, somebody's got to cover Wayne's nickel. Haas: I'll cover it. (Mr. Gaston starts to put up another nickel.) H.M.Jr: No, I'm betting ten cents to a nickel. Gaston: Oh, he sold half of his bet. Lochhead: He is reinsured. H.M.Jr: I've got one with Irey. All right. Any more business. Gaston: No, I don't think so, H.M.Jr: Mr. Oliphant? Oliphant: No. H.M.Jr: The most important thing, Wayne, that happened while you were gone was that yesterday the boys came in with a swell report that the Procurement should buy all cement for the Government and that if we should get time in - we refer the matter to the Department of Justice, and Mr. Wallace wouldn't sign the report. The other people signed it, but he said he thought this was the wrong time to do anything; it might irritate big business, and he put up a big plea that we shouldn't do it. We said we've got to sit down on big business shortly to fight out this thing. We couldn't look at our charts to see whether the charts going up or down. Told the President about it - Wallace had had the same talk with the President. The President said he just couldn't understand what Wallace was getting at. When he asked Wallace two or three times what he meant Wallace was sort of glossy over the whole thing, but the result was that the President signed it. A most amazing performance. Oliphant went to see Wallace, to plead with him, with Lubin and Blaisdell, but unsuccessfully - he wouldn't change his position. Most amazing. Nobody around could understand it. Taylor: Thurman Arnold going to work on that? - 13 - 225 H.M.Jr: Only if - yes, but it may never happen. Only if they break the law. Anything else? Oliphant: No. H.M.Jr: morning. I've got you down at ten fifteen, George, this Haas: That was yesterday morning. H.M.Jr: You come back at ten fifteen. I want to talk to you. All right. 226 2 Weekly IPA Employment Not Confidential for Publication Sories - Table 1 12625 EXPLOYMENT ON /PA PROJECTS, BY STATE UNITED STATES AND TERRITORIES Weeks Ending March 19 and March 12, 1938 (Partly Estimated - Subject to Revision) Number of Persons Employed Week Wook Increase State Ending Ending or March 19 March 12 Decrease (-) GRAND TOTAL 2,356,875 2,243,865 + 113,010 CONTINENTAL UNITED STATES 2,354,350 2,241,329 + 113,021 Alohana 35,071 33,025 + 2,046 Rizons 8,370 8,206 # 164 drinnes 31,941 29,551 + 2,390 Culifornia - Total 91,080 89,186 + 1,894 Northern 49,623 48,556 + 1,067 Southern 41,457 40,630 + 827 Colorado 27,484 26,47% + 1,010 Connecticut 21,386 21,006 + 380 Delawire 2,986 2,781 + 205 District of Columbia 7.739 7,568 + 171 Florida 30,712 30,023 + 689 Georgia 36,047 35,597 + 1,350 Ideho 11,164 11,228 1 64 Illinois 191,326 166,800 - 24,526 Indiana 93,768 81,555 + 2,233 Iow. 29,070 27,555 + 1,515 Ransue 35,508 35,04 - 254 Kentucky 48,042 47,394 + 648 Louiziona 31,319 31,001 + 318 Maine 7,015 7,382 - 367 Naryland 11,900 11,794 + 116 Massachusetts 96,677 94,422 + 2,255 Mohigan 114,201 104,472 + 9,729 Minnerote 58,387 58,004 + 383 Virciasipoi 29,463 28,137 + 1,276 Issouri 83,190 77,040 + 6,118 Vontuna 18,044 17,734 + 310 Nobraska 28,563 28,550 . 13 Sevida 2,668 2,626 . 42 You Euroshire 7.727 7,605 . 122 New Jersey 77,726 74,716 + 3,010 New Lexico 9,451 9,031 . 420 New York City 148,738 145,990 + 2,748 York (Excl. N.Y.C.) 52,399 52,503 - 104 Borth Carolina 30,574 29,883 + 691 North Dikots 19,065 14,88G + 179 Chio 197,322 172,853 + 34,469 Oklahoma 59,642 57,466 + 2,176 Oregon 16,410 16,244 + 166 Pennsylvania 210,237 200,775 + 9,462 Phode Island 12,431 12,216 + 215 South Carolina 29,414 28,194 + 1,220 South 17,575 17,646 I 71 Tennessee 30,451 29,994 + 457 Texas Utah 74,665 73,383 + 1,282 9,430 9,316 * 112 Vermont 5,110 4,884 + 226 Virginia Teshington 22,497 22,447 + 50 West Virginia 45,903 13,628 + 2,275 Tisaonsin 40,138 39,456 + 682 Wyoming 62,903 59,417 + 3,486 4,533 4,389 + 144 Haveli 2,525 2,536 - 11 WORKS PROGRESS ADMINISTRATION Division of Research graded Studiation and assified Records March 22, 1938 227 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE: March 22, 1938 To Secretary Morgenthau FROM M. A. Harris The Federal Reserve System has sold this morning 7 million of various long term Treasury bonds. In the last few mimutes, prices have eased 1 and 2/32nds from their highs of the morning but remain steady at levels 1 to 3/32nds up from last night's close. Mr. Matteson at the same time asked me if we wished to participate in these sales. Regraded Unclassified Tuesday March 22, 1938 228 11:27 a.m. N. R. Burgess: Oh, hello, Henry. AMJr: Hello. Randolph? B: Yes, sir. HMJr: No, I have no bonds for sale today, thank you. B: (Laughs) How did you know that's what I was going to ask? HMJr: Yes - gosh, what a man! B: (Laughs) HMJr: Up to-day and down tomorrow, the same old Wall Street racket. I suppose you're feeling a little bullish today. B: That's the way the market behaves. HMJr: Yeah. B: You know we've been selling some separately. HMJr: No, I didn't. But I just took it perfectly for granted that if you could make a three thirty-seconds profit you'd grab it. B: : We get more than three thirty-seconds. HMJr: Yes. B: We get about a half or three-quarters. HMJr: Yes. B: Well, it's going too fast, it shouldn't go as far - as fast on this upside. HMJr: Yeah. B: It's darn hear up at the very top, you know. HMJr: Yeah. Well, as long as the System has long-term Government bonds to sell, why, why worry me? B: Well, I just wanted to ask you the question, that's all. Unclassified -2- 229 HMJr: All right. You want me to share the opportunity? B: That's right, yes. I didn't think you'd want to sell because I knew you had some pockets which were kind of empty of securities. HMJr: Yes. Well, the profit isn't quite enough for us. B: (Laughs) O.K. HMJr: We can't get around under a point you know. B: I see. HMJr: After all this is just feeding the brokers - on a thirty-second. B: Well, you let us know any time you want to do it. HMJr: I see. Kind of hungry down there? B: And I'll let you know when we need to buy. HMJr: (Laughs) B: (Laughs) HMJr: Well, it worked all right, Randolph, didn't it? B: I think it worked very well indeed,- yes. HMJr: Now B: We're getting some compliments from the market here. HMJr: Oh really? B: Yes. They like the way we've handled it... HMJr: Yes. B: They like - they like the selling as well as the buying. HMJr: You're getting the compliments? B: Well, we - we. HMJr: We -3- 230 B: (Laughs) We're all partners in this enterprise. HMJr: What? B: We're all partners in this enterprise. H&Jr: Yes. Because I notice when you do the buying it's, "That damn Treasury!" B: (Laughs) Oh, no, no. No, it's, "The damn Federal Reserve" very often. HMr: I see. B: Yes. HMJr: Well, I tell you, the Fed needs the ompliments more than we do, we're glad to let you have them. B: (Laughs) There's something in that. HMJr: Well, I'm tickled to death anyway that one thing should come through stable. B: Well, that's very nice. I saw your statement about the tax receipts. That looks pretty good, doesn't it? HMJr: I hope so. (Laughs) B: Well, it's still got a few days before the end of the month, hasn't it? HMJr: Yes. The boys are - I think - I'm afraid the boys are a little over enthusiastic / the figures they gave me. from B: I see. Yes. HMJr: Not too much, but maybe ten or fifteen million. B: Yeah. Yeah. Yes. Well, it's within range anyway. RMJr: Yeah. B: Yeah. HMJr: Yes. B: Yes. -4- 231 HMJr: And we'll make up our mind tomorrow about the bill business. B: I see. Yes. Well, the market needs more bills, the way they took these things. HMJr: Oh, that's what you called me up for, hey? B: No it isn't. HMJr: (Laughs) B: No, I didn't have that in mind at all. HMJr: I see. Well I can't see you so it's not fair. B: (Laughs) HMJr: I think I'll put in television. B: (Laughs) We ought to have that you know. HMJr: Absolutely. B: That would help a lot. HMJr: Absolutely. B: I'd like to have that. HMJr: Well, I'm glad to see the Government bond market is putting its stamp of approval on the Roosevelt Administration. B: Well, it's very nice, isn't it? HMJr: Yes, it is. B: Yes, sir. HMJr: 0. K., Randolph. B: Fine. HMJr: Goodbye. B: Goodbye, Henry. Regraded Unclassified 232 Tuesday March 22, 1938 4:28 p.m. HMJr: Hello. T.O.: Mr. Jones. Go ahead. HMJr: Hello. Jesse Jones: Hello, Henry. HMJr: How are you? J: All right. HMJr: Are you alone? J: Yes. HMJr: Jesse, there's the usual lot of little politics going on over this loans to industry, see? J: Yes. HMJr: And I don't know whether you saw this story about Wagner's having a meeting tonight. J: I was called up by the newspaper fellows about it. HMJr: Well, the fellow who is doing it - I don't know - maybe you know. Do you know who's doing it with him? J: No, I don't. Well, HMJr: It's John Fahey. J: I Oh, it is. HMJr: That's who's going up there. And I did not ask him tomorrow. It was suggested a little while ago that I should ask him for lunch tomorrow, and I said, "Well, what thehell has John Fahey got to do with loans to J: That's right. HMJr: And I said, "The President gave me all the documents from everybody who has written him anything and told me who to have," and I said, "he didn't mention John Fahey." Regraded Unclassified 233 -2- J: Yes. HMJr: And I said, "Anyway, some of the rest of us would like to have a chance to talk." J: We wouldn't have under those circumstances. HMJr: No. J: Absolutely. HMJr: I thought you'd like to know. And - just like that time that they were going to build - J: Build houses. MMJr: - houses and as far as I'm concerned I've made no commitments to anybody. J: Yes. HMJr: And I'm not going to until I listen - and I'm not getting excited either. J: That's right. HMJr: And it's just the same kind of drive that we had last time. J: All right then,- I think it's wise not to have him. HMJr: I don't... J: I don't see - and, Henry, if everybody is going to do it why nobody's going to do it. HMJr: Well J: Isn't that right, - ? HMJr: That's right. And I don't see where - Fahey had better look after his foreclosures. J: I think he's got enough to do. HMJr: Well, I think so. And I just wanted to check with you - I mean... J: Well, that's - Well, I'm glad you did. Now... Regraded Unclassified 234 -3- HMJr: Because I saw the President yesterday and today - you saw me come out - J: Yes. HMJr: And he gave me the list - who I should have. J: Yes. Who are you having? HMJr: Well, we're having Ransom, Douglas, yourself and then the people from the Treasury. J: Well, that's enough. HMJr: Including Bell. J: That's enough. HMr: What? J: That's enough. HMJr: As a matter of fact when we sit down ten strong anyway. J: That's all right. HMJr: I had to ask my wife to have a couple of chickens killed. J: Good for you! HMJr: (Laughs) J: Good for you. I like her - tell her, I like her cooking. HMJr: (Laughs) J: (Laughs) HMJr: All right. J: Thank you, Henry. HMJr: Goodbye.