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Volume 198, June 20 – June 23, 1939
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Volume 198, June 20 – June 23, 1939
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 198
June 20 - June 23, 1939
Regraded Unclassified
- B -
Book Page
Bickel, Carl
Corcoran tells HMJr about Bickel's experience as
former head of United Press in South America -
6/21/39
198
126
Business Conditions
Mead bill:
Foley memoranda on testimony of various people -
6/22/39
143,145,151
Recovery Program:
Federal Land Authority: FDR requests joint recommendation
of Treasury and Justice concerning proposed bill -
6/19/39
4
Railroad Equipment Program: Treasury group and Currie
discuss - 6/22/39
152
a) HMJr and Currie confer by telephone - - 6/22/39
163
b) HMJr discusses at 9:30 meeting lack of available
information on Currie's part, et cetera, now that
FDR's interest has been aroused - 6/22/39
195
Self-liquidating Projects: conference at White House
with representatives of Senate and House; Reconstruction
Finance Corporation; Rural Electrification Administration;
Treasury, and Bureau of Budget recommended - 6/23/39
285
- C -
China
Keeshin (J. L.) report on projected transportation system -
6/22/39
210
a) Keeshin cannot accept assignment
Cochran, H. Merle
Messersmith tells HMJr Cochran can be assigned to
Treasury - 6/22/39
175
Commodity Credit Corporation
In connection with transfer from Reconstruction Finance
Corporation to Department of Agriculture, Jones offers
continued cooperation - 6/22/39
162
Countervailing Duties
Italy: Welles' memorandum to FDR and request that
Treasury be instructed not to sign order at this time -
6/21/39
103
a) HMJr's conversation with Welles
110
Treasury representatives for conference in Rome: HMJr's
letter to Hull - 6/22/39
161
a) Welles urges that representatives proceed
immediately - 6/22/39
172
Czechoslovakia
Gold balances in London: Complete report from American
Embassy, London - 6/23/39
236
Regraded Unclassified
- F -
Book Page
Federal Land Authority
See Business Conditions: Recovery Program
Financing, Government
Tennessee Valley Authority: letters to Tennessee
Valley Authority and Reconstruction Finance
Corporation concerning financing; Reconstruction
Finance Corporation instructed to hold Tennessee
Valley Authority bonds until maturity and not to
assign them
198
1,2
United States Housing Authority: Treasury letter to
Chairman, Committee on Banking and Currency,
concerning proposed amendment to United States
Housing Act of 1937 increasing funds - 6/20/39
64
Letter to Wagner (Senator, New York) - 6/21/39
83
Federal Housing Administration: Interest rate (5%)
memoranda giving reasons for and against change
presented to FDR - 6/21/39
86
a) HMJr tells McDonald FDR will do nothing
about reduction at this moment - 6/21/39
129
Finland
See War Conditions
Foreign Trade
Recent trends: White memorandum showing that United
States exports have declined more than exports of
any other leading country except Australia - 6/20/39
25
Wallace discusses proposed release on reciprocal
trade agreement program and its relation with
certain other programs in the field of foreign
trade administered by Department of Agriculture
(export subsidy on cotton, et cetera) - 6/21/39
122
- G -
Germany
Czechoslovakian gold balances in London: Complete report
from American Embassy, London - 6/23/39
236
Reichsbank: further report on new statutes from American
Embassy, Berlin - 6/23/39
265
Public Debt: increase during Match and estimate of
expenditures during fiscal year ending 3/31/39:
report of American Embassy, Berlin - 6/23/39
269
- H -
Hanes, John W.
Upon passage of revenue revision, 1939, lauds leadership
of HMJr - 6/23/39
271
Housing
See Financing, Government: United States Housing Authority
Regraded Unclassified
- I -
Book Page
Italy
See Countervailing Duties
- J -
Japan
In connection with purchase of cotton from Brazil and
Brazil's annoyance that New York does not discount
"Japanese paper" HMJr asks Rentschler "how much
Japanese paper is floating about New York at this
time - 6/21/39
198
113
a) Rentschler reports - 6/23/39
328
- M -
Mead bill
See Business Conditions
- R -
Railroads
For equipment program, see Business Conditions:
Recovery Program
Reconstruction Finance Corporation
See Financing, Government
- S -
Silver
See also Stabilization Fund
Resume of silver shipments in London - 6/12-21/39
80
Stabilization Fund
HMJr discusses with 9:30 group delay in extension by
Congress; does not think FDR appreciates seriousness
of situation - 6/22/39
182
McCarran's offer to drop fight if FDR will agree
to increase price of silver from 64.64 per ounce to
76 discussed by FDR, HMJr, Foley, Senators Barkley
and Wagner - 6/23/39
273
Proposed letter from HMJr to Garner discussed by
Treasury group (Viner present) - 6/23/39
274,340
- T -
Tennessee Valley Authority
See Financing, Government
Regraded Unclassified
- U -
Book Page
Unemployment Relief
Works Progress Administration Act of 1939 proposing
allocation of $125 million for loans and grants for
non-Federal public works: FDR's letter to Byrnes
expressing disapproval - 6/21/39
198
93,133
United States Housing Authority
See Financing, Government
U.S.S.R.
HMJr consults Hull about settlement of war debt and
establishment of trade relations - 6/22/39
170
Hull's note to HMJr at Cabinet meeting stating he sees
no objection to plans - 6/23/39
335
- W -
War Conditions
Finland: HMJr confers with Hull concerning request for
loan - 6/22/39
168
Works Progress Administration
See Unemployment Relief
1
June 20, 1939
Honorable Jesse H. Jones,
Chairman, Reconstruction
Finance Corporation,
Washington, D. C.
My dear Mr. Jones:
There is enclosed for your information copy of my
letter of this date to the Chairman of the Board of Directors
of the Tennessee Valley Authority, concerning the proposed
issuance at par by the Authority to the Reconstruction Finance
Corporation of an issue of serial bonds dated June 15, 1939,
maturing June 15. 1959, 1960 and 1961, with interest at 21%
per annum, payable semiannually from the date of issue.
The obligation of the bonds is that the principal
amount specified and the interest thereon shall be paid to
the "Reconstruction Finance Corporation or its registered
assigns". In view of the statutory provisions which accord
to this class of bonds of the Tennessee Valley Authority all
the rights and privileges accorded by law to Panama Canal
bonds, you have agreed with respect to bonds previously
acquired by the Reconstruction Finance Corporation that its
interest in such Tennessee Valley Authority bonds will not
be assigned but will be held by the Corporation until maturity.
Your written confirmation extending this understanding to the
above mentioned issue of series B bonds will be appreciated.
Very truly yours,
Secretary of the Treasury
Enclosure
Mailed today from Mr. Bell's office
(by hand thru Mr. Ager) and complete
file in Bell's office -- 6/22/39
WTH:HBW
Regraded Unclassified
2
June 20. 1939
Honorable H. A. Morgan,
Chairman, Tennessee Valley Authority,
Knoxville, Tennessee.
My dear Mr. Morgant
Pursuant to the authority vested in me by Section 15 of
the Tennessee Valley Authority Act, as amended, I hereby approve
in amount and price the issuance and sale at par and accrued
interest of serial bonds of the Tennessee Valley Authority in the
principal sum of $5,300,000. dated June 15, 1939: bond No. 1 for
$1,300,000 maturing on June 15, 1959. bond No. 2 for $2,000,000
saturing June 15. 1960. and bond No. 3 for $2,000,000. maturing
June 15. 19611 bearing interest at the rate of 2/1% per annum,
payable semianmially on June 15 and December 15 of ench year. payable
to the Reconstruction Finance Corporation or its registered as-
signs. such bonds being all of an authorized serial issue of
$5,300,000 designated Series B.
Very truly yours,
(8g3) H. MORGENTHAU Jr.
Secretary of the Treasury
Mailed today from Mr. Bell's office
WTH:HBW
(by hand thru Mr. Ager) and complete
file in Bell's office -- 6/22/39
Regraded Unclassified
3
June 20, 1939
MEMORANDUM FOR THE FILE
Senator Barkley telephoned that Senator McCarran, and others com-
prising the silver bloe in the Senate, were threatening to filibuster to
prevent the Senate from reaching a vote on the legislation to continue
the President's emergency monetary powers until the Administration,
through the Secretary of the Treasury, stated the price it would pay for
newly mined domestic silver. Senator Barkley asked me to advise him of
the position of Secretary Morgenthau and the President on such a proposal.
I told Senator Barkley that it was my understanding the President
and the Secretary of the Treasury desired to stand on the bill as it
passed the House and make no concession whatsoever as to any increase in
the grice now being paid for newly mined domestic silver. At my suggestion,
Bernstein and White talked to Senator Barkley in Col. Halsey's office and
pointed out that the price of 64.64 cents per ounce now being ,aid by the
Treasury was a subsidy of approximately 23 cents an ounce for the silver
miners since the current world price is around 41 cents per ounce. This
represents the largest subsidy ever paid for silver. When the price was
76 cents per ounce, the world price was in the neighborhood of 65 cents
per ounce and the subsidy was only about 11 or 12 cents an ounce.
Shortly after I spoke to Senetor Barkley, Secretary Morgenthau
called from Princeton and I related to him the substance of my conversation
with Senator Barkley. Secretary Morgenthau stated that this represented
his position, and later so advised the President.
E.157h
JUN 18 1939
My dear Mr. Attorney General:
The President has requested the joint recommendation of
your Department and the Treasury Department with regard to & bill,
which has been prepared by the Legislative Counsel of the Senate at
the request of Senator Hayden, creating a Federal Land Authority with
power to cooperate with the states in securing lands needed for high-
why construction.
The memorandus from the President, together with &
memorandum from Senator Hayden, & copy of the proposed bill, and a
menorandum for the Legislative Counsel are enclosed for your refer-
once.
The Treasury Department has given principal consideration
to the financial provisions of the proposed bill. Beginning with
section 10, the proposed draft follows very closely the language of
the Housing Authority Act of 1937, as amended. Section 10 of the
proposal contains section 17 of the Housing Authority Act, in add!-
tion to an authorisation for an appropriation, and a provision making
capital receipts and assets available until expended. These latter
provisions are taken from section 18 of the Housing Authority Act.
Section 11 follows almost literally section 20 of the
Housing Authority Act, except as to amounts and the omission of the
maximum rate of interest.
File to Mr. Thompson
By hand
Regraded Unclassified
- 2 -
Sections 12(a), (b), and (c) are identical with sections
21(e), (b), and (e) of the Housing Authority Act.
Section 13 is the usual penalty section, and section 14
exempts real property, or any interest therein, from taxation during
the period such property, or interests therein, are held by the
Authority.
The following sinor deletions and additions to the language
of the proposal are suggesteds
On page 13, section 11(a), the omission of the words "not
exceeding
percentux per annum" in lines 10 and 11 is suggested.
The addition of the words "with the approval of the Secre-
tary of the Treasury" at the beginning of section 12(a) is suggested
on page 15. with this addition, section 12(a) will read "with the
approval of the Secretary of the Treasury any money of the Authority",
etc.
The same addition in suggested to section 12(b) so that it
will read "With the approval of the Secretary of the Treasury the
Federal Reserve banks are authorised", etc.
The deletion of the words "except receipts from customs"
from line 18 of section 12(c) on page 15 is also suggested.
As noted above, the financial provisions of the proposed bill
are substantially in secord with similar provisions of the Housing
Authority Act, the most recent legislation establishing on agency
Regraded Unclassified
- 3 -
having authority to issue bonds guaranteed by the United States and,
except in the minor respects just outlined, it is believed that the
provisions are workable.
The Treasury Department is not in possession of information
or evidence to establish the necessity or advisability of creating a
Federal Land Authority for the purposes set out in Senator Hayden's
memorendum.
However, the Treasury Department has recommended to the
President a bill to provide for the construction and financing of
federal express post roads by the issuance of bonds, in the aggregate
amount of a billion dollars, payable from tolls and other charges.
It is suggested that Senator Hayden's bill be considered in the light
of this recommendation by the Treasury.
You may submit this letter to the President together with
whatever report is made by the Department of Justice on Senator Hayden's
proposal.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Honorable,
The Attorney General of the United States.
Enclosures (4)
NOT:lld
Typed 6.16.39
7
Regraded Unclassified
THE WHITE HOUSE Ed. Fale,
WASHINGTON
May 17, 1939.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
THE ATTORNEY GENERAL
Will you let me have your
joint recor endation?
F. D. R.
VALICE
SECRETARY OF ADDRY
1939 N° Y 1939 MY 17 PM 2 08
Ford 2 :45pm
Regraded Unclassified
CARTER GLASS, VA., CHAIRMAN
MC KELLAR, TENM.
PREDERICK HALE, MAINE
MAYDEN, AREL
GERALD P. NYE, NL BAK.
THOMAS OKLA.
AM 6. TOWNSEND, - DEL.
BYRNES,
STYLES BRIDGES, N. H.
c. TYDENES, MO.
HENRY CABOT LOOGE, - MARS.
- a RUSSELL GA.
RUFVI c. HOLMAN, OREG.
United States Senate
a. ADAMS. COLO.
ROBERT A. TAFT, CHIO
SICK MIC CARRAR, NEV.
IL OVERTON, LA.
COMMITTEE ON APPROPRIATIONS
N. BANKHEAD, ALA.
- c. www.
- a. TRUMAN, MO.
- a. BURKE. NEWR.
May 15, 1939
BOORK F. GREEN, a. L
- T. MALONEY, COMPL
- CHAVEL N. MIDL
EVERARD N. SMITH, CLERK
JOHN w. R. BMITH, ABBT. CLERK
MEMORANDUM FOR THE PRESIDENT
I am handing you herewith a committee print of a
bill which has been prepared for me by the Legislative
Counsel of the Senate, proposing to create a Federal
Land Authority. There is also attached hereto my
memorandum for the Legislative Counsel which furnishes
a comparison between what I had in mind in requesting
the preparation of the bill and the language of the
proposed act itself.
The bill creates an independent ex-officio Authority
composed of the Secretary of War, the Secretary of Agri-
culture, and the Federal Works Administrator, with the
Commissioner of Public Roads as Executive Director.
The Authority is empowered:
1. To purchase and condemn lands for rights of
way to be used for Federal Aid Highways;
2. To purchase but not to condemn abutting and
adjoining lands to be retained as an invest-
ment from the returns of which the cost of
condemnation and purchase may be in part
repaid;
3. To issue bonds, the proceeds to be used for
purchases and condemnations;
4. To contract with States and municipalities for
purchases and condemnations, Federal funds so
used to be repaid by the State or municipality
over a long term contract period, if not repaid
from profits realized on l-ands purchased.
May I suggest that you ask the Attorney General
whether the bill would meet any Constitutional tests
which might be raised and that you similarly ask the
Secretary of the Treasury whether the fiscal policy
involved is proper.
Carl Hayden
U.S.S.
Regraded Unclassified
[COMMITTEE PRINT]
MAY 11, 1939
76TH CONGRESS
1ST SESSION
S.
IN THE SENATE OF THE UNITED STATES
MAY
, 1939
Mr.
Hayden
introduced the following bill; which was read twice and referred
to the Committee on Post Offices and Post Roads
A BILL
To create a Federal Land Authority with power to cooperate
with the States in securing lands needed for highway
construction.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That this Act may be cited as the "Federal Land Authority
4 Act".
5
DEFINITION
6
SEC. 2. (a) As used in this Act-
7
(1) The term "State" means any State, the District
8 of Columbia, Alaska, Hawaii, or Puerto Rico.
9
(2) The term "Authority" means the Federal Land
10 Authority.
J. 147392-1
Regraded Unclassified
2
3
1
(3) The term "board" means the board of directors
1 and may exercise any of its powers at any place within the
2 of the Authority.
2 United States.
3
(b) For the purposes of this Act, any real property
3
(b) The powers of the Authority shall be vested in a
4 or interest therein shall be deemed to be required for the
4 board of directors to be composed of the Secretary of War,
5 purpose of providing a right-of-way for a highway, if the
5 the Secretary of Agriculture, and the Federal Works Ad-
6 acquisition of such real property or interest therein is nec-
6 ministrator. The Commissioner of Public Roads in the
7 essary in order to provide for (1) the physical location of
7 Federal Works Agency shall be the executive director of
8 such highway (including any bridges, tunnels, roadside
8 the Authority and shall have such powers as may be dele-
9 ditches, culverts, and other structures or works constituting
9 gated to him by the board. The members of the board
10 a part of such highway); (2) the physical location of such
10 and the executive director shall receive no additional com-
11 additions to much highway ns may reasonably be deemed
11 pensation for their services as such, but may be allowed
12 to be necessary in the future in order to provide adequately
12 travel and subsistence expenses when engaged in business
13 for increased traffic over such highway; (3) roadside
13 of the Authority outside of the District of Columbia,
14 beautification, sanitary facilities, parking spaces, and the
14
(c) The board is authorized, subject to the civil-service
15 elimination of safety hazards along such highway; (4) the
15 laws and the Classification Act of 1923, as amended, to
16 control of access to, and egress from, such highway; and
16 appoint, and to fix the compensation of, such officers and
17 (5) the elimination of undesirable remnants of land adjacent
17 employees as may be necessary to carry out the provisions
18 to such highway.
18 of this Act: Provided, That no person shall be appointed
19
federal LAND AUTHORITY
19 under this subsection to any position in a State or district
20
SEC. 3. (a) There is hereby created, as an independent
20 office of the Authority unless such person has been a bona
&
21 agency of the Federal Government; a body corporate to be
21 fide resident of such State or district for a period of at least
22 known as the Foderal Land Authority, The principal
22 one year immediately preceding the date of his appointment.
33 office of the Authority shall be in the District of Columbia,
23
(d) Officers and employees of the Authority shall be
24
but
it
may
establiah
branch
agencies in any State,
24 entitled to the benefits of the Act entitled "An Act to pro-
4
5
1 vide compensation for employees of the United States suffer-
1 times and in such manner as the Comptroller General may
2 ing injuries while in the performance of their duties, and for
2 by regulations prescribe.
3 other purposes", approved September 7, 1916, as amended
3
(g) The provisions of section 3709 of the Revised
4 and supplemented, to the same extent that employees of
4 Statutes, as amended, shall apply to all contracts of the
5 the executive departments are entitled to such benefits.
5 Authority for the purchase of supplies except when the
6
(e) The Authority may accept and utilize voluntary
6 aggregate amount involved does not exceed $300.
7 and uncompensated services and, with the consent of the
7
(h) The Authority shall have an official seal, which
8 agency concerned, may utilize the officers, employees,
8 shall be judicially noticed.
9 equipment, and information of any agency of the Federal
9
(i) The Authority shall be granted the free use of the
10 Government, or of any State, or any agency or political
10 United States mails in the same nanner as the executive
11 subdivision thereof.
11 departments of the Government.
12
(f) The Authority may make such expenditures, sub-
12
(j) The board shall define the authority and duties of
13 ject to audit under the general law, for the acquisition and
13 the officers and employees of the Authority and may re-
14 maintenance of adequate administrative agencies, offices,
14 quire bonds of such of them as it may designate and fix
15 vehicles, furnishings, equipment, supplies, books, periodicals,
15 the penalties of, and pay the premiums for, such bonds.
16 printing and binding. for attendance at meetings, for neces-
16
GENERAL POWERS OF THE AUTHORITY
17 sary traveling expenses, and for other purposes, as may
17
SEC. 4. The Authority-
18 from time to time be found necessary for the proper admin-
18
(a) Shall have succession in its corporate name.
19 istration of this Act. Financial transactions of the Author-
19
(1) May sue and be sued in its corporate name in any
20 ity with respect to the acquisition or disposition of real
20
court of competent jurisdiction of the United States.
21 property or interests therein, and vouchers approved by the
21
(c) May adopt, amend. and repeal bylaws, rules, and
22 board in connection with such financial transactions, sháll
22
regulations governing the manner in which its business may
23 be final and conclusive upon all officers of the Government;
23 be conducted and the powers vested in it may be exercised
24 except that all such financial transactions of the Authority
24 and enjoyed.
25 shall be audited by the General Accounting Office at such
6
7
1
(d) Shall have such incidental powers as may be nec-
1 section shall, except as otherwise provided by subsection (c)
2 essary or appropriate for the exercise of the powers vested
2 of this section, be sold and conveyed by the Authority to the
3 State or political subdivision thereof which contracted with
3 in it.
(e) May make contracts as herein authorized.
4 the Authority to purchase/such real property or interest
4
5 ACQUISITION AND SALE OF LAND FOR HIGHWAY PURPOSES
5 therein from the Authority. The price at which such real
6
SEC. 5. (a) The Authority shall have power to acquire
6 property or interest therein shall be sold to such State or
7 by purchase or condemnation any real property or interest
7 political subdivision shall be a sum equal to the total of all
8 therein required for the purpose of providing a right-of-
8 sums paid by the Authority for such property or interest
9 way for any highway to be constructed, reconstructed, or
9 therein and all expenses incurred by the Authority in con-
10 relocated, by any State with Federal aid furnished under
10 nection with the acquisition and conveyance thereof minus
11 the provisions of the Federal Highway Act, as amended
11 the sum agreed upon by the Authority and the State or
12 and supplemented. The Authority shall not acquire any
12 political subdivision as the fair value of any part of such real
13 such real property or interest therein unless (1) the acqui-
10
13 property or interest therein which may be retained by the
14 sition of such real property or interest therein has been
14 Authority pursuant to the provisions of subsection (c) of
15 approved by the Public Roads Administration in the Fed-
15 this section. Such price may be paid to the Authority in
16 eral Works Agency and by the highway department of
16 installments, within an agreed period of not to exceed fifty
17 the State in which such real property is located and (2)
17 years. The unpaid balance of the price outstanding shall
18 the Authority has entered into a contract (conforming to
18 bear interest at the rate of per centum per annum.
19 the requirements of subsection (b) of this section) with
19
(c) The Authority may release a State or political
20 the State in which such real property is located, or a
20 subdivision thereof from its contractual obligation to purchase
21 political subdivision thereof, providing for the sale of such
21 any real property or interest therein, or any part of any real
22 real property or interest therein to such State or political
22 property or interest therein, acquired by the Authority under
23 subdivision.
23 the provisions of subsection (a) of this section, if the An-
21
(b) Any real property interest therein acquired by
24 thority finds that such real property or interest therein, or
X
the Authority under the provisioni of subsection (a) of this
25 such part of such real property or interest therein, is (1) in
8
9
1 excess of the requirements of the State for highway right of-
2 way purposes or (2) is no longer needed for right-of-way
1 petitive bidding. The Authority may reserve the right to
2 reject any or all bids made at any such sale which are deemed
3 purposes because of changes in any plan for proposed high-
3 by it to be inadequate.
4 way construction.
4
(c) The Authority shall. except when in its opinion con-
5 ACQUISITION AND SALE OF LAND FOR OTHER THAN HIGH-
5 trary to the public interest, sell any real property or interest
6
WAY PURPOSES
6 therein acquired by it under the provisions of subsection (n)
7
SEC. 6. (a) The Authority shall have power to acquire
7 of this séction, or with respect to which it has, under sub-
8 by purchase, but not by condemnation, for investment pur-
8 section (c) of section 5. released a State or political sub-
9 poses, any real property located in the vicinity of any real
9 division thereof from its contractual obligation to purchase,
10 property acquired by the Authority under the provisions of
10 within a period of not more than twenty years from the date
11 subsection (a) of section 5, if, in the opinion of the board,
11 of its acquisition of such real property or interest therein.
12 the price at which such property may be purchased by the
12
13 Authority is such as to make it probable that the Authority
(d) The amount of any profit realized by the Authority
13 upon the sale of any real property or interest therein sold
14 will, as a result of appreciation in land values resulting from
15 Federal-aid highway construction, be able to dispose of such
14 by it under the provisions of subsection (b) of this section
16 property, within twenty years, at such a price as to result
15 shall be applied as a credit against, but only to the extent
17 in a profit to the Authority.
16 of, any unpaid balance owing to the Authority by a State or
18
(b) The Authority shall have power to sell, under reg-
17 political subdivision thereof for any real property or interest
19 ulations prescribed by the board, any real property or interest
18 therein sold to such State or political subdivision under the
21 20 therein acquired by it under the provisions of subsection (a)
19 provisions of subsection (b) of section 5, if the real property
of this section or with respect to which it has, under sub-
20 or interest therein sold under the provisions of subsection
23 22 section (c) of section 5, released a State or political sub-
21 (b) of this section was acquired by the Authority in connec-
36 division All thereof from its contractual obligation to purchase.
22 tion with the acquisition of any real property or interest
25 and sales under the provisions of this section shall be
23 therein for such State or political subdivision. In determin-
shall be public sales made after advertisement and for com- cash
24 ing the amount of any such profit the Authority shall deduct
10
11
or interest the a
from the sale price of the real
1 COLLECTION OF TOLLS FOR USE OF HIGHWAY FACILITIES
ms expended by the
sum equal to the total of (1)
2
SEC. 8. The Authority is authorized and empowered to
3 Authority for the purpose of
holding. nana
3 grant to any State or political subdivision thereof which
interest therein and
4 and disposing of such real prop
4 owes the Authority any sum. as the result of a transaction
rate
of
5 (2) a sum representing interest
per
centum
5 entered into with the Authority by such State or political
6
per
abbum
upon
investment
the
Authority
in
the
such
6 subdivision under the provisions of subsection (b) of see-
7 property or interest therein. Any credit allowed under the
7 tion 5 or section 7, the power to levy and collect tolls for
8 provisions of this subsection shall be applied against the
8 the use of any highway facility constituting a part of the
9 installment payments owing by such State or political sub-
9. highway constructed, reconstructed, or relocated upon the
10 division thereof and maturing at the most remote date in the
10 right-of-way with respect to which such transaction was
11 future.
11 entered into. The rates of such tolls shall be determined
12 LOANS BY THE AUTHORITY TO STATES AND POLITICAL
12 by the Authority but shall be such, as in the opinion of
13
SUBDIVISIONS THEREOF
13 the Authority, the Public Roads Administration in the Fed-
14
SEC. 7. The Authority may make loans to any State or
14 eral Works Agency, and the highway department of the
15 political subdivision thereof of sums eqnal to the total of the
15 State in which such facility is located, will not result in
16 sums expended by such State or political subdivision for the
16 materially reducing the volume of traffic using such facility.
17 purpose of acquiring by condemnation real property or
17 Such tolls shall be collected by such State or political sub-
18
interests
therein
for
the
purpose
providing rights-of-w.
18 division and the proceeds thereof, after deducting expenses
Я
for highways proposed to be
ted, reconstructed or
19 incurred for eollection, shall be paid by such State or poli-
relocated with Federal aid furn
nder the provisions of
20 tical subdivision to the Authority and stiall be applied by
the Federal Highway Act,
and supplemen d.
21 the Authority in payment of any installment then due, or
Buch loans shall be repaid,
within an age
a
22 next becoming due, upon the indebtedness of such State
period of not to exceed fifty
23 or political subdiyision to the Authority resulting from such
sall bear interes
the unpaid balance outstandin
24 transaction. The Authority shall andit the books of the
ate
of
per
cen
I
25 State or political subdivision with respect to the collection,
12
13
1 and the expenses incurred for collection, of any such tolls,
1 and assets of the Authority, shall be available for the pur-
2 and shall prescribe regulations with respect to the custody
2 poses of this Act until expended.
3 of, and accounting for, any funds derived from such tolls,
3
POWER OF AUTHORITY TO ISSUE OBLIGATIONS
4 No State or political subdivision shall be authorized to con-
4
SEC. 11. (a) The Authority is authorized to issue
5 tinue the collection of any such tolls after it has collected a
5 obligations in an amount not to exceed $500,000,000, in
6 sum sufficient to retire its indebtedness to the Authority
6 the form of notes, bonds, or otherwise, which it may sell
7 resulting from such transaction; and after it has collected
7 to obtain funds for the purposes of this Act. Such obliga-
8 such sum, such facility shall be operated as a toll-free
8 tions shall be in such forms and denominations, mature
9 facility.
9 within such periods not exceeding fifty years from date of
out
7
10
PROHIBITION AGAINST ENGAGING IN HIGHWAY
10 issue, bear such rates of interest not exceeding
per
11
CONSTRUCTION
11 centum per annum, be subject to such terms and conditions,
12
SEC. 9. The Authority shall not engage in, or contract
12 and be issued in such manner and sold at such prices as
13 for, any highway or other construction.
13 may be prescribed by the Authority, with the approval of
14
CAPITAL STOCK OF AUTHORITY
14 the Secretary of the Treasury.
15
SEC. 10. The Authority shall have a capital stock of
15
(b) Such obligations shall be exempt, both as to
16 $100,000,000, which shall be subscribed for by the United
16 principal and interest, from all taxation (except surtaxes,
17 States and paid for by the Secretary of the Treasury out
17 estate, inheritance, and gift taxes) now or hereafter im-
18 of any available funds. Receipts for such payment shall
18 posed by the United States or by any State, county,
19 be issued to the Secretary of the Treasury by the Authority
19 municipality, or local taxing authority.
20 and shall evidence the stock ownership of the United States.
20
(c) Such obligations shall be fully and unconditionally
21 There is hereby authorized to be appropriated, out of any
21 guaranteed upon their face by the United States as to the
22 money in the Treasury not otherwise appropriated, for the
22 payment of both interest and principal, and, in the event
23 fiscal year ending June 30, 1940, sum sufficient to enable
23 that the Authority shall be unable to make any such pay-
24 the Secretary of the Treasury to pay the subscription to the
24 ment with respect to any such obligations upon demand
25 capital stock of the Authority. Such sum, and all receipts
Regraded Unclassified
16
17
(b) Any person who, with latent to defraud the Au-
1 under which he or it shall do business. Any such use shall
1 2 thority or to deceive any director, flicer, or employee thereof
2 constitute a misdemeanor and shall be punishable by a fine
3 or any officer or employee of the United States, makes any
3 not exceeding $1,000.
4 false entry in any book of the Authority or makes any false
4
TAXATION
5 report or statement to, or for, the Authority shall, upon con-
5
SEC. 14. All real property or interests therein acquired
6 viction thereof, be fined not more than $1,000 or imprisoned
6 by the Authority under the provisions of this Act shall, dur-
7 for not more than one year, or both.
7
7 ing the period for which such property or interests therein
8
(c) Any person who shall receive any compensation,
8 is held by the Authority, be exempt from all taxation now
9 rebate, or reward, or shall enter into any conspiracy, collu-
9 or hereafter imposed by any State or political subdivision
10 sion, or agreement, express or implied, with intent to defraud
10 thereof.
11 the Authority or with intent unlawfully to defeat its purposes,
12 shall, upon conviction thereof, be fined not more than $1,000
13 or imprisoned for not more than one year, or both.
14
(d) Any person who induces or influences the Author-
15 ity to purchase or acquire any property or to enter into any
16 contract and willfully fails to disclose any interest, legal or
17 equitable, which he has in such property or in the property
18 to which such contract relates, or any special benefit which
19 he expects to receive as a result of such contract, shall, upon
20 conviction thereof, be fined not more than $1,000 or in-
21 prisoned for not more than one year, or both.
22
(e) No individual, association, partnership, or corpora-
23 tion shall -ase the words "Federal Land Authority", or any
24 combination of such three worda.as the name, or part thereof.
J. 147392-2
Regraded Unclass
15
1 when due, payments shall
to the holder of such
1 by law for the marketing of obligations of the United States.
2 obligations by the Secretary
Treasury with money
2 INVESTMENT AND DEPOSIT OF FUNDS OF THE AUTHORITY
3 hereby authorized to be appropriated for such purpose out
Mrita
the
Say
the
3
SEC. 12. (a) Any money of the Authority not other-
Treasy
4 of any money in the Treasury not otherwise appropriated.
4 wise employed may be deposited, subject to check, with the
5 To the extent of such payment the Secretary of the Treasury
5 Treasurer of the United States or in any Federal Reserve
6 shall succeed to all the rights of such holder.
6 bank, or may be invested in obligations of the United States
3
(d) Such obligations shall be lawful investments and
7 or used in the purchase or retirement or redemption of any
8 may be accepted as security for all fiduciary, trust, and
8 obligations issued by the Authority.
9 public funds the investment or deposit of which shall be
9
(b) The Federal Reserve banks are authorized and
10 under the authority or control of the United States or any
10 directed to act as depositories, custodians, and fiscal agents
with
the
11 officer or agency thereof. The Secretary of the Treasury
11 for the Authority in the general exercise of its powers, and
12 is likewise authorized to purchase any such obligations, and
12 the Authority may reimburse any such bank for its services
13 for such purchases he may use as a public-debt transaction
13 in such manner as may be agreed upon.
Treasury
14 the proceeds from the sale of any securities hereafter issued
14
(c) The Authority may be employed as a financial
15 under the Second Liberty Bond Act, as amended, and the
15 agent of the Government. When designated by the Secre-
16 purposes for which securities may be issued under such
16 tary of the Treasury, and subject to such regulations as he
17 Act, as amended, are extended to include any such pur-
17 may prescribe, the Authority shall be a depository of public
18 chases. The Secretary of the Treasury may at any time
18 money, except receipts from eustoms.
19 sell any of the obligations acquired by him pursuant to
19
PENALTIES
20 this section, and all redempti purchases, and sales by
20
SEC. 13, (a) All general penal statutes relating to the
21 him of such obligations shall
21 larceny, embezzlement, or conversion or to the improper
treated as public-debt trans-
IS
22 handling, retention, use, or disposal of public moneys or
actions of the United States.
23
23 property of the United States shall apply to the moneys and
(e) Such obligations
marketed for the Anthor-
24 ity at its request by the
24 property of the Authority and to moneys and properties of
el
of the Treasury, Hizing
25
25 the United States entrusted to the Authority.
all the facilities of the
partment now authorized
Regraded Unclassified
MAINE
Mnited States Senate
COMMITTEE ON APPROPRIATIONS
1
smith,
CLERK
MEMORANDUM FOR THE LEGISLATIVE COUNSEL
There is desired to be created an independent
agency to be called the Federal Land Authority and
to be composed of the Secretary of Agriculture,
Secretary of War, and the Administrator of the
Federal Works agency. The Federal Land Authority
shall have corporate powers and a capital stock
of $100,000,000, which shall be subscribed by the
United States and authority for the approprition
of which, for the use of the authority, shall be
provided.
The Authority shall be empowered to issue
bonds, indentures, and securities payable in not
to exceed fifty years with an interest rate to be
specified by the Authority. The full credit of the
United States shall be plod ed to repay its bonds,
indéntures, and securities and that shall soistive
on their face. The total limit of such securities
which may be autstanding at any one time shall not.
exceed $500,000,000.
Regraded Unclassified
-2-
The Authority shall have the power to sue
and be sued in any Court of the United States and
shall have the specific power to condemn and take
by eminent domain lands and structures appurtenent
thereto desired to be used as right of way for the
construction of highways under the Federal Aid Act
of 1916 as amended and supplemented. The right of
eminent domain and of condemnation shall be limited
to lands which are to be used for highways and adjacent
right of way purposes but should be broad enough so
as to include lands not specifically used for the
highway but used for planting and beautification
and road side development along the side of the
highway itself.
In addition to this, the Authority shall
have the power to purchase lands whether to be used
for highway purposes or whether merely adjacent to
proposed highways. There should be no power of
condemnation as to such adjacent lands but merely
the power of purchase. Funds to be used for these
purchases and for condemnations should be realized
from the sale of securities.
The Chief of the Bureau of Public Roads should
Regraded Unclassified
-3-
be the Executive Director of the Federal Land
Authority and he should be empowered to utilize
without further compensation the services of such
employees of the Department of Agriculture, U. S.
Housing Authority, War Department, and Bureau of
Public Roads as he may desire. He should also have
some limited authority to appoint clerical and
administrative personnel with due regard to the
Civil Service Classification Act, such personnel to
serve directly under the Federal Land Authority.
All purchases and condemnations of lands
or structures shall be made directly by the Authority
acting through the Chief of the Bureau of Public
Roads as Executive Officer, and no such purchase or
condemnation shall be made without the prior approval
of the State Highway Department of the State in which
such lands are located, the Bureau of Public Roads,
and the Federal Land Authority. Such condemnations
and purchases shall be made in connection with
existing Federal Aid Highways, highways proposed by
the State Highway Departments, and the Federal Bureau
of Public Roads, eventually to be included in the
Federal Aid Highway system and areas proposed by the
Dearede
-4-
State Highway Department and the Bureau of Public
Roads with the approval of the Federal Land Authority
to be utilized for the relocation of the existing
Federal Aid Highways.
The Federal Land Authority shall be empowered
to sell any lands adjacent to condemned or purchased
right of ways which have been purchased by the
Authority but shall not be empowered to sell lands
condemned for right of way purposes. Such sales
may be made at any time desired by the Authority
under regulations to be promulgated by the Authority
but shall be public sales after advertisement and
competitive bidding. The Authority shall be empowered,
however, to set a low limit of cost below which it
will not receive bids for such lands.
The Federal Land Authority shall have the power
to enter into contracts with any municipality or
political subdivision under the terms of which the
Authority shall, after the approval of the State
Highway Department concerned and the Bureau of
Public Roads, condemn or purchase or condemn and
purchase lands desired to be used by the appropriate
State Highway Department and the Federal Bureau of
Regraded Unclassifie
-5-
Public Roads for the construction of highway
facilities. Any such contract shall provide
that the City, municipality, or political sub-
division within which the lands to be condemned or
purchased are located, shall repay to the Federal
Land Authority over a period of forty years in
annual payments the total cost with interest of
such purchases or condemnations made by the Federal
Land Authority. Such contracts shall provide that
the total number of such annual payments shall be
reduced by whatever amount is collected by the Federal
Land Authority from the sale of excess property
purchased adjacent to the highway right of way
or collected from any tolls which may be charged
for the use of such facilities. Any reductions
in payments of this nature shall not serve to
reduce the total annual installment to be made by
the municipality or political subdivision but
shall merely serve to eliminate so much of the
final payment or payments as may equal the amount
so collected by the Authority.
Regraded Unclassifie
-6-
In addition to any revenues which may be
realized by the Federal Land Authority through
the sale of properties purchased adjacent to the
right of way, the Authority shall have the power,
with the consent of the State Highway Department
and the Bureau of Public Roads, to collect tolls
or charges upon any bridge, facility, or portion
of highway deemed appropriate for the levying of
such charges. Such charges if levied shall be
no more than shall be made at a rate, in the opinion
of the State Highway Department, the Bureau of
Public Roads, and the Federal Land Authority, which
will not materially reduce the volume of traffic
-
to be carried by the facility and which will at
the same time return to the Authority a revenue
substantially above the necessary costs of collection
which shall be borne by the Authority and which shall
be deducted from the total revenue realized from such
sources before such revenue is applied to reduce and
eliminate the annual payments to be made by the
municipality or subdivision under the terms of any
contract entered into by the Federal Land Authority
and such municipality or political subdivision.
Regraded Unclassified
24
-7-
Authority should also be granted to the
Executive Secretary of the Federal Land Authority
for the local appointment, under Civil Service
rules and regulations, of employees for the
collection of such tolls and charges as may be
levied on such structures. A limitation should be
put in at an appropriate place in the bill which
will have the effect of preventing the Federal
Land Authority from holding any property purchased
adjacent to a condemned or purchased right of way
for longer than twenty years.
A specific restriction should be placed in
the bill which will prevent the Federal Land
Authority from engaging in any construction of any
type and which will limit all construction to the
State Highway Departments and the Bureau of Public
Roads under the terms of the Federal Aid Highway
Act of 1916 as amended and supplemented.
Regraded Unclassified
25
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 20, 1930
TO
Mr. White
FROM
Miss Kistler
Subject: Recent Trends in Foreign Trade
1. So far this year, United States exports have declined more
than the exports of any other leading country except Australia. Ex-
ports of France and Canada have registered the largest gains.
Exports of Leading Countries
Percentage Change, 1939 over 1938
January-April Month of April
Australia
- 20%
- 39%
United States 1/
- 13
- 3
United Kingdom
- 2
4
Netherlands
- 1
2
Sweden
- 1
- 3
Germany 2/
- 1
4
Switzerland
7
5
Japan
8
3
Canada
15
2
France 1/
27
32
2. Imports of the United States, on the other hand, have increased
more than the imports of any other leading country except Sweden.
Imports of Leading Countries
Percentage Change, 1939 over 1938
January-April Month of April
Sweden
13%
20%
United States 1/
9
22
France 1/
6
5
Japan
4
- 17
Switzerland
3
14
Germany 2/
1
- 6
Netherlands
2
6
United Kingdom
- 7
4
Australia
- 12
- 16
Canada
- 14
- 14
1/
January through May
Excludes trade with Austria, April thruSept. 1938. Since Oct. 1938, trade
of Greater Germany includes Austria and Sudetenland)
Regraded Unclassified
26
June 20, 1939.
5:15 P.M.
Present:
Mr. Bell
Mr. Lochhead
Mr. Hanes
Mr. Foley
Mr. McReynolds
Mr. Gaston
Dr. White
Dr. Haas
H.M.Jr:
Did I spoil your golf game?
McReynolds:
No, I got some in.
Gaston:
I wasn't out.
Bell:
The word I got from the Press was that the
two of them were playing golf.
H.M.Jr:
You got that from the Press?
Bell:
They wanted to know if I could answer some
questions and I said the Senators didn't
let me know anything to-day.
McReynolds:
Herbert had to go to a party tonight so he
couldn't go.
Hanes:
Herbert and I have to be at Oxon Hill at
7 o'clock.
H.M.Jr:
So you want to cut out the kidding and get
down to business.
Hanes:
We haven't any choice in the matter. The
President is going to be there and we have
to be there on time.
H.M.Jr:
How many minutes can you spare me?
Bell:
We have an hour and a half.
Hanes:
We have to leave my house at 6:15.
Regraded Unclassified
- 2 -
27
Foley:
Do you think this is a Senate Finance
Committee meeting.
H.M.Jr:
What I wanted to ask particularly - a lot
of things but I am going to call the President
in a minute and a half before he goes to Oxon
Hill. I have done a lot of thinking about
this bill and particularly since I hear that
Mr. Barkley called up the silver Senators and
wanted to know if they would do a little trading.
Archie, what was the price in silver in cents
about?
Lochhead:
The price was 40.30 in the London market.
H.M.Jr:
How much does it cost to get it overe here?
Lochhead:
One half cent.
H.M.Jr:
I want to give this to the President to sleep
on. At noon we would drop it one cent and
continue to drop it a cent a day until they
pass the bill. Let's say we are paying 40¢
instead of 43c. At a subsidy of 26c it looks
a good deal sweeter than 23c and if these
fellows want to trade - although they are asking
77 - and if they get a subsidy of 26c over the
domestic price I think it is an excellent profit.
There are eight thousand silver miners up and
down the Rocky Mountains. I will give it to
the President to sleep on.
Archie, as my silver trader, what do you think?
Lochhead:
Well the market abroad naturally is looking
for a reduction. Silver is being offered over
there and not taken very heavily because they
are afraid our price will be dropped by the
time they get it over here. There has been
some silver from London. We are getting that
this week but we will get less and less. We
are paying 434 for it now. That's really 24
above parity.
H.M.Jr:
Unless silver does something, I would like to
see what the President thinks. In the first
place, it is darned hard to explain. Silver
tomorrow will be 40 and we will pay 43¢ in
London.
Regraded Unclassified
28
- 3 -
Gaston:
I think that's right and if it is a fact
that our price is what is supporting the
market I don't see why we should spread a
little.
H.M.Jr:
Anything on the boats?
Lochhead:
We got a cable off. The Queen Mary - - that
came in carrying one million ounces and I
don't think it will be heavier than that
because if the stuff comes over here we
would tell them that it had to be in American
bars. That means it all has to go to the
refinery. There is no refinery here that
can turn out more than two hundred fifty bars
a day.
H.M.Jr:
The public doesn't know that. It looks
stupid for us to be paying 43¢.
Harry, have you any feeling on it?
White:
It would be a good idea if you could take
advantage of the decline and you need not
offer them a reason but again I am a little
afraid about giving the silver Senators the
impression that you are putting the screws
on. If you give them the impression you
are going to fight I think they may get their
back up and they may decide to stick with one
another if it will be a fight. They have
seventeen votes. That's my first reaction.
Barkley is going to give them the impression
that silver may go down as well as up.
(H.M.Jr. calls the White House. To
Operator: "Will you tap me?")
H.M.Jr:
(To White) What do you think Barkley is
doing?
White:
I raised this question. I said that I under-
stood that the price is not fixed by law
but by Presidential Proclamation and it
could be raised or lowered.
H.M.Jr:
Who said that, Barkley?
White:
I said that. But the Presidential Proclamation
is setting the price independently of other
considerations in the past. He said why do
,
29
- 4 -
they pay 6414 when they can buy it for 43¢
and I said I don't know.
H.M.Jr:
Didn't you have an answer for that?
Dr. White:
No sir.
Bell:
Same reason we are growing corn.
H.M.Jr:
This is the way I look at it. If there was
no bill pending and silver was two cents
below the natural market I would drop it
one cent.
Lochhead:
That has been our action.
Dr.White:
Are you going to give them the idea that you
are going to fight it?
H.M.Jr:
Simply we do it at 12 o'clock tomorrow. The
chances are it will break 40c tomorrow. We
just say the price will be 42c
(White House phone rings)
H.M.Jr:
Hello - hello Mr. President.
President:
Hello Hen.
H.M.Jr:
How are you?
President:
Fine. What's the news?
H.M.Jr:
I am here at the Treasury. The reason I am
calling you at this hour is I want to give
you a slant on something which I know you
would just want to sleep on.
President:
Yes - yes.
H.M.Jr:
Silver to-day in London is 40-1/3 cents.
President:
Yes.
H.M.Jr:
It costs one half cent to bring it over here.
President:
Yes.
H.M.Jr:
We are paying 43.
President:
Yes.
Regraded Unclassified
30
- 5 -
H.M.Jr:
I would like to talk to you about the possi-
bility of dropping it a cent, see? Now if
there was no legislation on the hill that's
what we would do. Now Barkley called up
this afternoon and wanted to know if the
silver Senators wanted to make a deal. He
spoke to Foley. If I cut our price down to
forty then the price here is twenty-six
instead of twenty-three. If you would sort
of let it get through your brain and give
me your advice tomorrow I would appreciate
it. Here it closed at forty-three - just
under. It has dropped about two cents
within the last few days. So the normal
thing would be to drop it another cent.
Are you free around 9:30 tomorrow morning.
President:
I think that's all right.
H.M.Jr:
Good, I'll drop in for a minute in the
morning.
President:
9:30.
H.M.Jr:
Goodbye.
President:
Goodbye
H.M.Jr:
He thought that was a good idea but you see
that gives me a chance. I wish all the rest
of you would think about it. I have been
thinking hard about it for a week; I think
it is good ball.
Do you want to take two minutes to tell me
what happened on the hill.
Hanes:
This thing came so thick and fast to-day.
We are studying the thing again tonight as
we have to see Doughton in the morning on
whether the Conference Committee will agree
to these amendments.
H.M.Jr:
Do you want to see me before I see the
President?
Regraded Unclassified
31
- 6 -
Hanes:
I will give you a memorandum tonight. It
is quite long. I just dictated it and my
Secretary will give it to you before he
leaves and if you are not here he will send
it to you at your house. In it I gave you
all the changes the Committee made to-day.
H.M.Jr:
Supposing I read it and we will see each
other at 9.
Hanes:
I think it will be ready before I go. It
is just an outline on what the Finance
Committee did to-day.
There is one proposal which I do think is
very drastic. It was an amendment offered
by Senator Byrd, allowing corporations that
had failed to enter deman for refund of
processing taxes to extend the time to
January, 1940.
Foley:
Oh, that's terrible. We have refused to
approve all the private bills for that.
Hanes:
We reported disapproval on that seven or
eight times. We told them we were against
it.
H.M.Jr:
I think if you and I were together at 9
o'clock we'd have a chance to go over things.
Hanes:
Barkley whispered to me, as I went out, if
there is anything here you don't like we
will take it out.
H.M.Jr:
You must be dizzy.
Hanes:
I am - very. We were six hours there;
finished the reading of the bill and all
of those things.
(Hanes & Gaston left the meeting)
As Hanes and Gaston were leaving the Secretary
said: "You turn that silver idea over in your
head - - both of you. The normal thing would be
to drop it a cent - - that would be the normal
thing. "
32
- 7 -
Hanes:
O.K. - see you at 9 o'clock.
H.M.Jr:
What did they do - get you off the golf links?
McReynolds:
My alibi told me you were coming into the
office.
H.M.Jr:
I didn't ask to see you.
McReynolds:
That's quite all right.
H.M.Jr:
How many holes did you get in?
McReynolds:
Eight. My Secretary called me. I hadn't the
least idea that you would want me, nevertheless
I wanted to come.
H.M.Jr:
I always think the best thing on these silver
and monetary things is to do business as usual.
Was I right when I told the President to drop
it two cents?
Lochhead:
Yes.
Dr. White:
If you drop it, you might explain why merely
on that basis.
H.M.Jr:
No, what we do normally. At 12 o'clock we
get out a press release that the price is
42¢.
Dr. White:
Do you explain to Pittman why you
Lochhead:
The Dow Jones would show it every few hours
and we would not have to explain it.
Dr. White:
There is a strong point - they are going to
say they are going to fight - the first bell
of the round - round one.
Bell:
What is the usual spread?
Lochhead:
Roughly, one half cent. Lately it has been
amounting to three quarters of a cent.
Regraded Unclassified
33
- 8 -
Dr. White:
You could boost the price.
H.M.Jr:
You can fight them one cent a day.
Dr. White:
I think that they are ready now. It is a
question it seems to me
H.M.Jr:
The President has to decide if Neutrality
is to be handled by Key Pittman. He has to
make up his mind. He sleeps on a thing; he
is very shrewd on things. When I see him at
9:30 he has had a chance to think it over.
His Neutrality thing is more important than
silver and he knows Key Pittman is Chairman.
What is the next business after this?
Foley:
Just the tax bill.
H.M.Jr:
This bill is our business of the day or
whatever they call it. It's on the calendar?
Foley:
Yes.
Dr.White:
They will talk for days; they are interested
in only one thing - silver.
Foley:
But the tax bill will push them. They have
it out on the calendar.
H.M.Jr:
How is the health of Carter Glass?
Dr. White:
He's dead.
Foley:
They will meet tomorrow at 11 instead of the
regular time. It is taking the form of an
old-fashioned filibuster.
Dr.White:
Why would they let Reynolds make a speech
if that's all they had to do.
Foley:
They just want to make it appear it is a
filibuster.
Dr: White:
I think with all the filibustering we are in
a better position to wait until it got around
that they are filibustering and then everybody
will know what they are doing.
Regraded Unclassified
34
- 9 -
H.M.Jr:
Key Pittman came in here sometime in the last
month and said if you push up the price to
seventy-seven cents I will get eighteen Senators
to go to work on Adams and we will deliver him.
I said thank you very much Key but the price is
too high. If we begin to drop the price of
foreign silver then the subsidy gets bigger
and bigger and makes them really more and more
ridiculous. The difference between forty-four
and sixty-four - the more foreign silver drops -
then sixty-four and a half looks damn sweet.
Bell:
They will be bring other pressure then to
get you and London
Dr. White:
They are afraid you are going to drop to
sixty-four.
H.M.Jr:
And that's why - coming down on the plane my
brain was rested - - and that's why I doped out
this move. I finally came to the conclusion
that the thing was to drop it one cent tomorrow -
but on this kind of thing, with all the weapons
in the President's hand, nobody can make him.
Foley:
You knew the Farm Bureau sent out the speeches
to the Senators acknowledging the contributions
to the plan.
Dr. White:
He called me up the day before and
H.M.Jr:
Ed O'Neil?
Dr. White:
Ogg - and he wanted to know if there was
something more - he would do it.
(Telephone conversation with summer
Welles)
June 20, 1939
35
5:38 p.m.
HMJr:
Hello.
Operator:
All right. Go ahead.
HMJr:
Hello.
Sumner
Welles:
Hello, Henry. How are you?
HMJr:
I thought you were out at Oxon Hill entertaining the
President and all the rest of the important people in
the Administration.
W:
Not yet.
HMJr:
Not yet?
W:
Did you have a good trip?
HMJr:
Very. Saw my
W:
Fine !
HMJr:
son graduate.
W:
Fine 1
HMJr:
A very happy occasion.
W:
Fine! Henry, I wanted to speak to you about this
Italian matter.
HMJr:
Oh yeah?
W:
Today I had word -- I was away myself yesterday, I only
had word today, that you were thinking of issuing that
notice on countervailing duties on the silk question.
HMJr:
That's right.
W:
Now the situation is this, your man 1s in Paris now
prepared to go down to Italy immediately to investigate
all of these questions, including silk.
HMJr:
Yeah.
W:
And the Italian authorities have told us that they would
be willing to offer every facility for him to make the
full investigation.
Regraded Unclassified
- 2 -
36
HMJr:
Yeah.
W:
Now, if you make the announcement tomorrow
HMJr:
Yeah.
W:
it's going to create exactly the effect that we
wanted to avoid if we could, and my suggestion, and a
very urgent one, is that we hold it up until your man
could get down there and can give you a report on the
ground of that.
HMJr:
Well, I'm sorry, Sumner, I can't comply with your
request. I've given the order and I can't back down.
We've just been through exactly the same thing with the
Germans and now the Germans are working very hard to
find some way to correct it; we are giving them very
courteous treatment, glad to discuss the thing with
them; but that is after the order 1s out. And -- this
order -- unless the President gives me formal instruc-
tions not to issue it tomorrow, why I'm going to put
it into effect, and after it's in effect if the Italians
want to change their ways, why we'll be very glad to
listen to them.
V:
Well, why do make the distinction between one and the
other commodities?
HMJr:
Well, we -- we don't.
W:
Well, there are about seven or eight other things.
HMJr:
Well
W:
And my understanding is that this order relates solely
to silk.
HMJr:
Well, because that's the only one that we have complete
information on, and on the others -- that we haven't.
W:
Well you see, from the political standpoint you create
exactly the situation tha t we have been doing our
utmost to avoid.
HMJr:
Well, I'm only interested in carrying out the law. I'm
not interested in the political situation. I can't --
all I can do is to interpret the law and carry it out,
and our own people, plus the Attorney General, advises
me we should do this; and I -- I can't -- I can't bend
the law for political reasons. I've got -- I'm &
policeman. I've got to carry out the law.
Regraded Unclassified
- 3 -
37
W:
Well, nobody is suggesting, naturally, that you bend
the law.
HMJr:
Well
W:
But I understood that the whole effort that we were mak-
ing over a period of two weeks was to avoid this situa-
tion arising if the Italians would correct their
procedure.
HMJr:
Well, that isn't my understanding. I'm sorry, old man,
but this 18 a time -- they were given the 45 days and
they have done nothing to change their methods of
subsidizing the silk which they export to this country.
Now they had 45 days to change their ways and they
didn't choose to do 80.
W:
Well, a matter of that kind, obviously, if one Govern-
ment complains of the commercial policy of another
Government and the second Government says, "Come and
talk it over and I'll show you what I am doing, it
seems to me that's about as far as you can get in
that time.
HMJr:
Well, if -- if Mr. Phillips cor -- correctly reported
Mr. Ciano, Mr. Ciano said he wasn't interested.
W:
Well, you remember that he said he knew nothing about
it and turned him over to what amounted to the Secretary
of Commerce, who was extremely interested, and the
Ambassador here, as you know, I imagine you've had
the memorandum, has gone into it pretty thoroughly.
HMJr:
Yeah. Well, after the order is in effect they can change
it and then we can revoke the order, but I think it's
a great mistake for the United States Government to
tell any Government that's going to do something it --
and then when that Government doesn't change the sub-
sidy that we should back down. And -- there's been
nothing under the law which -- that the Italians have
done to convince me that they are going to change their
ways on -- on silk.
W:
Well, I haven't followed the conversations that the
Italian Embassy has had with your people, so I'm not
HMJr:
Well, I
W:
competent to say.
Regraded Unclassified
38
- 4 -
HMJr:
I've followed it very, very carefully. We've
had -- I've had the best legal advice that we have
available and -- and I'm simply, as I say, -- the
policeman in this case, and then I'm advised not to
carry it out. And barring a written order from the
President directing me not to do it, why I'm going to
sign it at noon tomorrow.
W:
All right. Well, you've given me ample notice.
HMJr:
Well, I'm sorry. I'd like to help but I -- I -- in
this case
W:
Well, then we'll have to do the best we can. Pick up
the pieces, if there are any to pick up.
HMJr:
All right, Sumner.
W:
All right, Henry. I'll see you soon, I hope.
HMJr:
I hope so.
W:
Good bye.
HMJr:
Good bye.
Regraded Unclassified
39
- 10 -
Dr. White:
(After Welles hung up) Since when is it the
custom to ask us to go to Italy to investigate
something? Why don't they come to us?
(The Secretary got up from his chair and strode
over to the window. He had a big smile on his
face).
(Still smiling) I wasn't trying to put on a
show, gentlemen, but I feel ALL RIGHT.
(Very hearty laughter)
How's that, Danny?
Bell:
O.K.
Foley:
I have that order on countervailing duties.
H.M.Jr:
You come in at one minute to two.
Foley:
All we have to do is to put the date on it.
Dr.White:
Before you make any such decision of sending
our man in Paris to Italy I wish you would
speak to my man.
Foley:
The President may say something when you go
over at 9:30.
H.M.Jr:
There isn't any question about the thing.
Foley:
He sent a reply over to Hull and Feis.
Dr. White:
These fellows have plenty of guts when it
comes to some Latin American country.
H.M.Jr:
I told the President at lunch, "You won't
lend any money to Brazil, Columbia and Cuba
but you will lend it to General Franco. It
just doesn't make sense to me. I want
another twenty-four - forty-eight hours;
I just can't understand it."
H.M.Jr:
Are you fellows in a hurry? Has anybody
got a dinner engagement?
Group:
No sir.
Regraded Unclassified
- 11 -
40
(Mr. Foley hands letter dated June 20/39
addressed to the President to Secretary
Morgenthau. This letter is in connection
with the Spanish Silver Litigation. Copy
attached.)
H.M.Jr:
Incidentally, someone pointed out that the
silver we bought equals just the price of
$300,000; one offsets the other. Somebody
pointed it out.
Dr.White:
Isn't the individual loan less than that?
H.M.Jr:
Yes, but they would make payments and it
would come to that.
I will take this with me myself tomorrow
and give it to the President at 9:30. Have
you other copies?
Foley:
I sent one to Harry Hopkins, one to the
Attorney General and one to Walton Moore
and one to Warren Pierson.
H.M.Jr:
Who are the other Chairmen?
Foley:
I will give one to Ben Cohen and one for
your files.
H.M.Jr:
Take the one for my files and give it to
Jesse Jones.
Foley:
Oh no, I don't want to do that - that isn't
right.
H.M.Jr:
Let's get more but tomorrow we will give
one to Jesse Jones and one to Ben Cohen. I
don't want Jesse saying, "Why are you circu-
larizing this town and not giving one to me".
Isn 't it over my signature?
Foley:
No sir, I sent them out over mine.
H.M.Jr:
Well that's all right, do it that way; send
one to Jones and give one to Ben Cohen. You
say Harry (Hopkins) will stick with us?
Regraded Unclassified
- 12 -
41
Foley:
Yes, he's all right - said he would talk to
the President about it.
Dr. White:
When a country does business with another
does a country
Foley:
This Ambassador is now asking the Courts
in this country to review the acts of the
other regime in Spain - international law -
and they are doing it by saying we are
acting outside the law in concert with
these communists which were not the recog-
nized government of Spain and we were con-
spiring with them in the commission of un-
lawful acts.
H.M.Jr:
Well I called up Walton Moore and said, "I
want you to do me a personal favor". He
said, "I don't know what it is but it is
granted". First, as an American citizen
and second as Chairman of the Export-Import
Bank, Warren Pierson calls up Foley and says
if Walton Moore gets this why can't I have
that.
Foley:
He says you can string me up more than the
old man. He says you only have one boss to
work for - I have six or seven.
H.M.Jr:
If old Walton Moore gets his teeth into
this thing - he is a bulldog first and
foremost. That's why I sent it over to the
old boy.
Foley:
That's lowering the good faith of the people
in the Treasury. We instructed them that payment
be made by check to the Spanish Ambassador.
H.M,Jr:
We still have time. What I'd love to do, but
I can't without the President's permission, is
to show that brief to Kintner and Alsop but I
am giving it to Harry or Jake.
As to our Public Works Program, where are we?
That's all, Archie, if you want to go. What
time does the price of silver come over?
Regraded Unclassified
42
- 13 -
Lochhead:
It comes over a little after 9 o'clock.
H.M.Jr:
If Mrs. McHugh or somebody is in there send
me the closing sheet.
(Lochhead then left the office)
(Mr. Foley hands Secretary Morgenthau the
reply to Senatory Byrnes' letter)
H.M.Jr:
Let George (Haas) see it.
Where is Byrnes' letter to the President?
Foley:
We haven't seen it. He switched on it.
We thought we were to write the letter to
Mead and he said he had taken care of that
and Byrnes was writing him.
McReynolds:
We had a draft of a letter to write for
the President but he had already talked to
Jim Byrnes.
H.M.Jr:
Well will this go up then? What does the
President do? Does Jimmy write a letter
based on this? Whichhas to come first?
Foley:
I suppose the letter from Jimmy.
McReynolds:
We were supposed to be there at 12:30; then
they asked us to come at 12:15 and then they
asked us to come at 2:45 tomorrow.
H.M.Jr:
I will go with you when you go. I forgot
the most important man of all, Danny Bell.
I was slipping.
Bell:
I don't think SO.
McReynolds:
He did the most of the work, except for
Foley's boys who did the drafting.
Dr. White:
I saw Danny going out at 8 o'clock last night.
H.M.Jr:
Oh boy, I never would write this this way.
(Second paragraph - first sentence - "I am
opposed to this provision".)
Bell:
It never has to the same extent as WPA.
Regraded Unclassified
- 14 -
43
H.M.Jr:
You don't say that.
Foley:
That's the weakness of the letter.
H.M.Jr:
This leaves the President out on a limb.
You can't do that, gentlemen.
Foley:
It is particularly weak. The point is it
is a hard point to make.
H.M.Jr:
I am awful glad I saw this. This isn't right.
Bell:
The PWA projects to be started were $125,000,000.
That has been set aside. They are limited pro-
jects that can be completed in a year.
Dr. White:
The Secretary takes issue with the thing here -
the Public Works.
H.M.Jr:
Ickes is still talking about $500,000,000 more
and the President has not told him to keep his
mouth shut. Mac, I will give you ten to one
he won't do it. I know the President pretty
well and I think we can accomplish the same
thing and not get him into another Hopkins-Ickes
argument. Why draw him into the middle of that
argument. This will make the Senator from
Arizona - Hayden
Foley:
We can make the same point by saying that
appropriation should not be reduced a single
cent.
H.M.Jr:
I don't know who wrote this but I am tickled
to death I came in tonight. The only sentence
I am taking out is "The allocation of this
money to the Public Works Administration will
not take care of them; it will not provide
jobs for them in their urgent need."
Dr. White:
I think that you will wish to alter the next
paragraph.
H.M.Jr:
But where were all you fellows when you left
that in?
Regraded Unclassified
44
- 15 -
H.M.Jr:
I would say, "All right, Mr. President,
you already have approved four or five
million dollars but in your seventh year
you say it is no good.' How much has
been voted for Public Works - three or
four or five billion?
McReynolds:
Herbert read the draft and he said I
don't want to open up this Public Works
question and give them any more money.
H.M.Jr:
With all due respect to the President,
he never should sign it and he can't sign
it with those two sentences in.
Dr. White:
I read this thing this afternoon and I
didn't see that part at all.
Foley:
We evidently pounded that out.
H.M.Jr:
Once in a while I am right.
McReynolds:
That's O.K. - you are keeping the President
out of a jam. I was surprised at the way
he put it when we went over there yesterday.
The people who were here from the other de-
partments understand thoroughly that the
bill was to be up and they were to testify
before the motion of the extension is taken
up.
Foley:
Rural Electrification is a seven year program
now.
H.M.Jr:
I see Josh Lee has a bill.
Foley:
Yes.
Dr. White:
They want seven hundred million for a two
year program but did not think they would
have difficult times spending much more
than that in the two years but they would
like seven hundred million.
Regraded Unclassified
45
- 16 -
H.M.Jr:
Whatever this Committee did I will have to
stand by.
McReynolds:
Baldwin and Adams - if we left it the way
it was it would be much easier to live up
to.
H.M.Jr:
You fellows spent four hours - you have
done your duty.
Expansion of housing program. Did you take
care of that.
Foley:
I did.
H.M.Jr:
He said he would. He said he would talk to
Stewart MacDonald.
Did you get that chart for me?- FHA?
Haas:
Yes.
H.M.Jr:
Where is it?
Haas:
In my office.
H.M.Jr:
Get it.
(Haas leaves to get chart)
Foley:
This letter is addressed to the Senator in
reply to his letter in which he has asked
about the one hundred twenty five million dollar
funds. Where do we go from here? That whole
question is left in the air.
H.M.Jr:
I think there should be a sentence in there.
I am not trying to dictate it. He wants it.
Foley:
We can say that right here. "I hope I may
count on your assistance now at this session
of the legislature".
H.M.Jr:
Whoever is the opposite member that Jimmy
Byrnes is in the House - that same fellow
should get a letter just like it.
Bell:
Adams is Chairman of the sub-committee.
46
- 17 -
Dr. White:
Would it be possible to answer this by saying,
"I am enclosing a program which I am suggest-
ing to the different committees"?
Foley:
They don't want to do that.
Bell:
I take it, Mr. Secretary, this is another
face-saving proposition.
Foley:
This fellow Starnes - he is from Alabama
and he has already introduced a Public Works
bill for Ickes.
Bell:
It does not review these loans.
Mc Reynolds:
Woodrum?
Bell:
No, Woodrum wouldn't do it.
Foley:
But Starnes is the man that introduced the
PWA bill in the House and he's the man Ickes
is working with.
H.M.Jr:
Let's raise that. Make a note to raise it.
(Haas returns with chart and shows it to the
Secretary)
Haas:
(Points to chart to show Secretary some item)
Two more weeks for that.
H.M.Jr:
Swell.
Haas:
(Pointing at another item) These are mortgages
selected for appraisal.
H.M.Jr:
Which is the better one?
Haas:
That's the stage just before closing. They
are closed already but they have another one
where they are actually paying premiums.
H.M.Jr:
Thank you. Well I think that cleans up for the
day. Got any suggestions, Mac?
McReynolds:
No sir.
Regraded Unclassified
- 18 -
47
Dr. White:
There were two newspaper men outside and
tney said to me, "I hear you are drawing
up a program". I made no comment.
McReynolds:
Berle had his picture in the paper - in
the News as the one who was drawing it up.
H.M.Jr:
Who?
McReynolds:
Berle. They had an article and Berle's
picture as the one who's doing it.
Foley:
He didn't write anything because he couldn't
get anything.
Dr. White:
I couldn't make that crowd out.
McReynolds:
I saw Sandy after we came back from the
White House and he said, "Where were you
fellows? What have you done? Did it have
anything to do with the spending program?"
I told him it was just a meeting on routine
things and he didn't bother me any more.
Dr. White:
The way this is at present - I mean as far
as the President's making it; he could get
by without making it. Does it matter what
form it takes outwardly?
H.M.Jr:
I am convinced now that unless Congress
should go home on the first of July - and
I have a $5.00 bill that they will be here
on the 29th of July - I am convinced the
President wants that in - in his attitude
with me.
Dr. White:
Would that be given out to the press?
Foley:
What I did
H.M.Jr:
I am glad that we did this tonight.
Foley:
(Reading) nI hope I may count on your
assistance in obtaining legislation at
this session necessary to make this program
effective".
H.M.Jr:
Read it again.
Foley:
"I hope I may count on your assistance in
obtaining legislation at this session necessary
to make this program effective".
Regraded Unclassified
- 19 -
48
Dr. White:
That's better. You wouldn't want to go
a little further?
McReynolds:
That's as far as he can go with a fellow
like Jimmy.
Dr. White:
You can work that in in the earlier
paragraph.
Foley:
The types of projects I have in mind are
listed at the bottom.
Dr.White:
These projects are in addition to programs
already submitted.
H.M.Jr:
Who is this Congressman he is seeing?
Foley:
Starnes of Alabama - Joe Starnes.
Dr. White:
When an important message like this goes
to a minor
Bell:
He isn't a minor. As I understood it the
President had it in mind when Barkley was
there. Now Byrnes shows up in the meantime
and he switches to Byrnes.
Foley:
Byrnes is the better man than Mead because
he carries more weight.
H.M.Jr:
That's right - that's what Mrs. Morgenthau
says.
How does it read now?
Foley:
I just added, "These programs are in addition
to those already submitted".
H.M.Jr:
George (Haas) have Larry (Seltzer) go out
to Detroit and then have him go on to Chicago;
he can send me those reports - International
Harvester, Montgomery Ward
Haas:
Sears Roebuck.
H.M.Jr:
Yes.
Foley:
We have rewritten the legislation; we have
put it all in one bill so we won't have a
lot of bills.
49
- 20 -
H.M.Jr:
I am glad I came in tonight. It was nice
and cool in here. I want to thank all
you gentlemen for staying. That's a good
day's work.
50
Thud
Dear Senator Byrnes:
I have your letter of today in which you ask my position as
to the provision of the "Work Relief and Public Works Appropriation
Act of 1939" as passed by the House of Representatives (H.J. Res. 326)
which would allot $125,000,000 to the Public Works Administration for
loans and grants for non-Federal public works.
I em opposed to this provision. It means simply that 165,000
men who are badly in need of work will have to be dropped from the
Works Progress Administration rolls; nen who in the great majority
of cases are the sole support of families whose subsistence depends on
this slender income. The allocation of this money to the Public
Works Administration will not take care of them; it will not provide
jobs for then in their urgent need. What will happen to most of
them is that they will be forced onto the already overburdened direct
relief rolls of the cities, towns and counties.
I believe in encouraging additional needed public works of
various kinds, but I do not think the device employed in the House
Bill is the right way to attack the problem. I have a different
suggestion to make. I think there is a way to provide Federal
assistance in the financing of public enterprises that will give
added employment without stripping the work-relief budget of badly
needed funds and without additional heavy direct charges on the
Federal budget.
Regraded Unclassified
51
- 2 -
At my suggestion, various departments and agencies of the
Government have convessed the situation to find projects which will
meet genuine public needs - projects that can be put under way quickly
and will be self-liquidating. They have found 8 variety of such
projects which have stood the test of careful scrutiny and which
hold the promise of a far greater volume of productive expenditure
and employment then could be provided by the diversion of $125,000,000
of work-relief funds. All can be financed through the issuance of
guaranteed securities by Government agencies with good prospect of
repayment of both principal and interest through earnings.
I have caused estimates to be made of the amounts of idle
funds that can thus be turned into productive, revenue-earning channels.
The estimates are, I believe, conservative. The projects and types of
projects I have in mind are listed below, together with the sums which,
it is estimated, can be put to work to provide employment for men and
machines in diverse lines of industry within the coming fiscal years
Program
Total
Loan
duration
emount
disbursements
of
fiscal year
(years)
program
1940
I/ Federal Works Agency -
(a) Non-Federal public works:
2
#350M
$150M
Projects of the self-finane-
ing type to be financed by loans
at sufficiently low rates of
interest to stimulate borrowing
for this purpose. The type of
projects would be water-works,
sewage disposal plants, bridges,
kospitals, and other municipal
projects.
Regraded Unclassified
52
- 5 -
Program
Total
Loan
duration
amount
disbursements
of
fiscal year
(years)
progrem
1940
(b) Express Post-Roads:
4
$750M
$150M
Self-liquidating toll roads,
bridges, high-speed highways
and city by-passes.
(c) Railroad Equipments
2
750
250
Authority to purchase all types
of railroad equipment which is
to be leased to railreads at a
rate which will return the cost
to the United States over a
period of years. Carriers would
have the option to buy the leased
equipment.
II. Department of Agriculture -
(a) Rural Electrification:
7
860
20
Expension of present rural
electrification program to
reach a maximum of it million
rural families not now receiving
electric service nor likely to
receive such service in the near
future.
(b) Farm Tenant Program:
2
500
350
Expension of the self-liqui-
dating portion of the program of
the Farm Security Administration
for tenant farm purchases, re-
habilitation program, loans for
minor improvements and repairs,
loans to resettlement cooperatives,
and loans for water facilities.
III. Foreign Loans -
2
500
250
Extension of short and longo
term loans to foreign governments
for the purpose of promoting our
foreign trade. The proceeds of
these loans would be spent in the
United States and would be used for
development and reconstruction
purposes.
TOTAL
$3,210M
$1,170M
Regraded Unclassified
53
- 4 -
This program would stimulate a greater amount of productive
expenditure than is indicated by the total estimated loan disbursements
of $1,170 milliors for the fiscal year 1940. Some parts of it will
involve additional local expenditures not financed by Federal funds,
and other indirect expenditures will be generated.
To give effect to the projects outlined above, additional
legislation will be necessary. As a part, however, of the whole
program for stimulating productive employment, I include two other
proposals which will not require legislation in addition to that
already enacted or pending.
The first of these is the expansion of the public housing
program of the United States Housing Authority through extending
its borrowing power by $800,000,000. I have already indicated my
approval of this legislation.
The second supplementary proposal is to cause a further
stimulation of private home construction by lowering the maximum
interest rates on loans insured through the Federal Housing Admin-
istration. I have already discussed this matter with the Administrator.
I hope I may count on your assistance in obtaining legislation
necessary to making this program effective.
Sincerely,
Honorable James F. Byrnes,
Enited States Senate.
Regraded Unclassified
Fourih draft 54
6-20'39
Dear Senator Byrnes:
I have your letter of today in which you ask my position as
to the provision of the "Work Relief and Public Works Appropriation
Act of 1939" as passed by the House of Representatives (H.J. Res. 326)
which would allot $125,000,000 to the Public Works Administration for
loans and grants for non-Federal public works.
I as opposed to this provision. It means simply that 165,000
men who are badly in need of work will have to be dropped from the
Works Progress Administration rolls; men who in the great majority of
cases are the sole support of families whose subsistence depends on
this slender income. What will happen to most of these men is that they
will be forced onto the already overb dened direct relief rolls of the
cities, towns and counties.
I believe in encouraging additional needed public works of
various kinds. But I have & different suggestion to make. I think there
is & way to provide Federal assistance in the financing of public enter-
prises that will give added employment without stripping the work-relief
budget of badly needed funds and without additional heavy direct charges
on the Federal budget.
At my suggestion, various departments and agencies of the Govern-
ment have canvassed the situation to find projects which will meet
genuine public needs - projects that can be put under way quickly and
Regraded Unclassified
55
- 2 -
will be self-liquidating. They have found & variety of such projects
which have stood the test of careful scrutiny and which hold the promise
of a great volume of productive expenditure and employment. I believe
this is a much sounder method of dealing with the problem than the diver-
sion of $125,000,000 of work-relief funds. All can be financed through
the issuance of guaranteed securities by Government agencies with good
prospect of repayment of both principal and interest through earnings,
I have caused estimates to be ande of the extent of the field for
investment of funds in revenue earning channels on a self-liquidating basis.
The estimates are, I believe, conservative. The types of projects I have
in sind are listed below, together with the suns which, it is estimated,
can be put to work to provide employment for sen and machines in diverse
lines of industry within the coming fiscal year. These projects are in
addition to programs already submitted.
Program
Total
Loen
duration
amount
disburcements
of
fiscal year
(years)
program
1940
I. Federal Works Agency -
(a) Non-Federal public works:
2
8350M
8150M
Projects of the self-financ-
ing type to be financed by loans
at sufficiently low rates of
interest to stimulate borrowing
for this purpose. The type of
projects would be water-works,
sonage disposel plants, bridges,
hospitals, and other municipal
projects.
Regraded Unclassified
56
- 3 -
Program
Total
Leen
duration
anount
disbursements
of
fiscal year
(years)
program
1940
(b) Express Post-Reads:
4
$750M
$150M
Self-liquidating toll roads,
bridges, high-speed highways
and city by-passes.
(o) Railroad Equipment:
2
750
250
Authority to purchase all
types of reilroed equipment
which is to be leased to rail-
roads at a rate which will
return the cost to the United
States over a period of years.
Carriers would have the option
to buy the leased equipment.
II. Department of Agriculture -
(a) Rural Electrification:
7
460
20
Expansion of present rural
electrification program to
reach a meximum of it million
rurel families not now receiv-
ing electric service nor likely
to receive such service in the
near future.
(b) Form Tenant Programt
2
500
550
Expansion of the self-liqui-
dating portion of the progrem of
the Farm Security Adminis-
tration for tenant farm
purchases, rehabilitation
program, loans for minor in-
provenents and repairs, loans to
resettlement cooperatives, end
loans for water facilities.
III. Foreign Louns e
2
500
250
Extension of short and long-
term loans to foreign govern-
ments for the purpose of promot-
ing our foreign trade. The
proceeds of these loans would be
spent in the United States and
would be used for development and
reconstruction purposes.
TOTALS
$3,210M $1,170M
Regraded Unclassified
57
- 4 -
This program would stimulate 5. greater amount of productive
expenditure than is indicated by the total estimated loan disburse-
ments of $1,170 millions for the fiscal year 1940. Some parts of
it will involve additional local expenditures not financed by Federal
funds, and other indirect expenditures will be generated.
To give effect to the projects outlined above, additional
legislation will be necessary. As a part, however, of the whole
program for stimulating productive employment, I include two other
proposels which will not require legislation in addition to that
already enacted or pending.
The first of these is the expansion of the public housing
program of the United States Housing Authority through extending
its borrowing power by $800,000,000. I have already indicated By
approval of this legislation.
The second supplementary proposal is to cause a further
stimulation of private home construction by lowering the meximum
interest rates on loans insured through the Federal Housing Adminis-
tration. I have already discussed this matter with the Administrator.
I hope I may count on your assistance in obtaining legislation
at this session necessary to making this program effective.
Sincerely,
Honorable James F. Byrnes
United States Senate.
Regraded Unclassified
58
C
0
P
Y
Dear Mr. President:
I am enclosing documents relating to litigation now
pending in the United States District Court for the
Southern District of New York brought in the name of the
Bank of Spain against various agencies which assisted the
Treasury Department in the purchase of silver from the
then-recognized Loyalist Government of Spain.
You will recall at our luncheon meeting on Monday
that I promised to send you these in c nnection with your
consideration of the proposed extension of credit on the
part of the Export-Import Bank to the present Spanish
Government to aid in financing the export of surplus
cotton.
Faithfully yours,
The President
The White House
Enclosures
1. Statement on Spanish Silver Litigation
2. Excerpts from the Briefs filed by Sullivan & Cromwell
(the More vicious portions)
3. MEMORANDUM ON BEHALF OF PLAINTIFF - Banco de Espane V.
FedemiReserve Bank of New York.
4. REPLY MEMORANDUM ON BEHALF OF DEFENDANTS IN SUPPORT OF
MOTIONS FOR SUMMARY JUDGMENT OR IN THE ALTERNATIVE FOR
DISMISSAL.
FHF:
6/20'39
Regraded Unclassified
59
Spanish Silver Litigation
Fursuant to the provisions of the Silver Purchase Act, the Secre-
tary of the Treasury, acting with the specific approval of the President,
purchased on five separate occasions during 1938 from the then recognized
Government of Spain approximately 35 million ounces of silver et a price
of $15,000,000. Negotiations for the sale of such silver were carried
on by the Secretary of the Treasury and the Ambassador of the then
recognised Loyalist Government. The silver came from Barcelona, Spein,
the seat of the Loyalist Government. Pursuant to the written contracts
of purchase approximately 95% of the purchase price or $14,250,000 was
paid to Spain upon delivery of the silver, the final 5% or $750,000 to
be paid when the exact silver content was determined. Payment on behalf
of the Spanish Government was received by the Spanish Ambassador in
Washington in the form of Treasurer's checks which the Ambassador cashed
at the Treasury Department.
At the time these purchases were made certain persons claiming to
represent the Bank of Spain located at Burgos, the seat of the Franco
government, notified this Government of their claim that the silver was
taken from the Bank of Spain in violation of Spanish law. They there-
upon brought law suits against the Superintendent of the United States
Assay Office at New York, where the silver was located, against the
United States Shipping Lines, the transporter of the silver, end the
Federal Reserve Bank of New York, which acted as fiscal agent of the
United States in connection with the first shipment of silver. These
suits are for the recovery of the silver thus acquired by the United
States or for $15,000,000 in damages.
Regraded Unclassified
80
- 2 -
The plaintiff charges in memorands filed by it with the Court that "the
Regraded Unclassi
silver of the Bank of Spain was stolem in Barcelona, not by government of-
ficials, but by consunist group leaders. Be believe that they used Mr.
de los Rios the Spanish Ambassader] to effect the sale and caused him to
take payment in each which was at once diverted from official chamele by
being turned over to secret agents in the United States." The plaintiff in-
sinuates that the United States Government connived with the Spaniards in
illegal acts.
The present Spanish Ambassador representing the newly recognized
Spanish Government has filed with the Court & document called a "suggestion"
which states in effect that the present Spanish Government desires our courts
to re-examine the question of the validity of the acts of the predecessor
Spanish Government and its officials.
The Government's reply memorandum, prepared by the Department of Justice
and former Secretary of State Stinson who is acting as special counsel for
the Government, characterizes the memorandum filed by the Bank of Spain in
the following menner:
*In its memorandum on this motion the plaintiff not only attacks
the good faith and honesty of the Ambassador and other officials
of the Spanish Government, but also insimuates that our own Govern-
ment connived with them in illegal acts." (p.8 of Covernment's reply
memorandum)
The Government states at p.15 of its reply memorandums
"Plaintiff has unde no use of the contention except as a basis for
its unwerthy sad unjustified accusation that payment was made to the
Spanish Ambassador on behalf of his Government without any authentic
authority and constituted in fact a wrongful diversion, connived at
and made possible by the United States."
Annatteched statement contains quotations from the memorands of the
plaintiff which are illustrative of its attack on the honesty of the
Spanish and American officials that negotiated these sales.
61
Banco de Espana
In the United States District
"A
Court for the Southern
Federal Reserve Bank of New York
District of New York.
The following are excerpts from the main memorendum filed by Bank of Spains
"During the latter phase of the late civil war in Spain, certain persons in
Barcelona appear to have desired to obtain funds outside of Spain. The identity
of these persons is presently unknown. It may be that they were those holding
public office, as defendants would claim. It is equally possible, and there is
evidence to suggest, that they were communistic and anarchistic group leaders who
anticipated defeat and expulsion from Spain." P. 4.
"It is observed, however, on inspection of the cases that they were lettered 'B E 5',
to indicate that the silver was that of 'Banco de Espana' and that the silver was
in the form of 5 peseta coins. Also, that the boxes bore the letters 17 R B' to
indicate the originally intended consignee, Federal Reserve Bank, and bore seals
with the initials 'U G T' to indicate Union General de Trabajadores (General Union
of Workers), a Spanish socialist-communiat organization and the initials 'C N ?'
to indicate Confederacion Nacional de Trabajadores (National Conference of Workers),
a Spanish anarcho-syndicalist organization." P. 10.
"Two facts, as to which there is competent evidence, are, first, an eye-witness
has testified, 48 to the silver containers which he saw, that they bore the seals
and stamps of the Bank of Spain-concededly the source-and of two Spanish com-
munist organizations, which may well have been the despoilers of the Bank.
"The second fact is that the proceeds of the silver-many millions of dollars
--were paid over in cash to Mr. de los Rios. The handling of the transaction in
this way nakes it impossible to affirm or dery that the proceeds were used for the
benefit of the Spanish Government. One certain thing is that no part of the pro-
ceeds went to the Bank of Spain. In the absence of some legitimate explanation
of this abnormal procedure-and the af'idavits on behalf of defendants suggest
none-suso: cion properly attaches to the status and motives of those who instructed
Xr, de los Rios to avoid normal banking and checking practices in relation to
such vast suma.
"Within the United States the negotiations were, superficially at least,
handled by an official of the then recognized Barcelona Government. This, if
other surrounding circumstances were normal, might warrant some inference that
the taking of the silver in Barcelona was official. But the strength of any
inference as to the official character of the seizure is clearly weakened by the
nature of the seals on the containers and by the use of cash. It is further
weakened by the fact, which is a matter of public knowledge, that civil condi-
tions in Barcelona were chaotic and that de facto power was largely exercised
Regraded Unclassified
62
by powerful anarchist and communist organizations which made Barcelona their
headquarters. Desperate conditions breed expedients which would not normally
be resorted to." pp. 15-16. (double underscoring added.)
.....
"The defendants, and the United States, in whose interests the defendants
claim to have acted, are not in the position of innocent holders or purchasers
of the silver." P. 17.
*....
"The doctrine that a domestic court should not inquire into the validity of
the acts of a foreign sovereign within its own territory should not and cannot
come into play unless some sovereign act is involved. Obviously, if a foreigner
holding public office becomes a thief or a surderer, he cannot be heard to say
that comity prevents our courts hearing this case." P. 41.
.....
"As reasons for our attitude in this matter, we may point out that condi-
tions in Barcelona which prevailed during the period in question were natoriously
those of dissension and confusion, of expediency and unscrupulousness.
"The New York Times of February 19, 1939 reported that 'Asana bitterly had
reproached Premier Negrin for having 'faked' his signature on a decree.' It
is the signature of this same Azona which is alleged to give validity to the
'decree' of April 29, 1938. The New York Times statement, of course, is not
evidence, but it explains our state of mind and plaintiff's insistence that its
rights should not be out off by an alleged 'decree' which has not been proved all
required by law." P. 49.
.....
"It is, of course, clear that a legislative enactment authorizing a Minister
of Finance to borrow money does not authorise him to steal it. Equally a law
authorising a Minister of Finance to appropriate property is not authority for a
private individual to do so." P. 53.
.....
"The only trustworthy clew that is afforded as to what took place in Barcelona
is that derived from physical inspection of the packages which arrived in liew
York. An eye witness testifies that the boxes in which the second shipment 87-
rived bore various sets of stamps or markings. Of these the first was 'B E 5', 'B "
standing for 'Banco de Espana' and '5' for the fact that the contents were 5
peseta coins. There were also the initials "U G T' to indicate Union General
de Trabajadores, a Spanish socialist-communist organization, and the initials
°C N T' to indicate Confederacion Nacional de Trabajadores, a Spanish anarcho-
syndicalist organization. There were furthermore the letters 17 R B' to indicate
the Federal Reserve Bank.
Regraded Unclassified
63
"These markings show that 'B B', Bank of Spain, is, as admitted, the source;
'F R B', Federal Reserve Bank, is, as admitted, the originally intended consignee
of the silver; and 'U G T' and 'C N T* are the powerful communist organizations
in Barcelona which may well have been the intermediary between the Bank of Spain
and the Federal Reserve Bank.
"The foregoing is obviously speculation, but we submit that if the defendants,
who are making these motions, elect not to disclose that which was peculiarly
within their ability to disclose and leave the matter to speculation, there is as
good a basis for guessing that the silver was taken by the communist organiza-
tions as that it was taken by Government officials." p. 55.
The following excerpt is from the answering memorandum filed by the Bank of
Spain:
"We believe that when the full facts come out they will show that the silver
of the Bank of Spain was stolen in Barcelona, not by government officials, but
by communist group leaders. We believe that they used Mr. de los Rios to effect
the sale and caused him to take payment in cash which was at once diverted from
official channels by being turned over to secret agents in the United States.
the Bank of Spain brought suit and the United States Treasury and defendants'
counsel asked for proof of acquisition by the Spanish Government of title, we
believe that these persons in Spain concocted and sent over a paper record which
was in good faith relied upon by defendants' counsel, but which, when it came to
the test, they could not prove to be genuine.
"Such an explanation alone seems to explain such admitted facts as:
"1. The fact that the containers of silver bore the markings of the two
Spanish societies 'U.G.T.' and 'C.N.T.'
"2. That Mr. de los Rios took the purchase price, several millions of
dollars, in cash.
"3. That defendants' counsel, with all the resources at their command,
have been unable, for nearly a year, to prove the authenticity of the paper
record sent them.
"4. That the sale concededly violated a statute which prohibits the
alienation of the Bank's silver reserves." pp. 17-18.
Regraded Unclassified
64
JUN 20 1939
My dear Mr. Chairmans
The attention of the Treasury Department has been called
to H. R. 2888, A Bill "To amend the United States Housing Act
of 1937, and for other purposes", which has been referred to
your Committee. A similar bill, S. 591, was introduced in the
Senate, and on May 22 the Senate Committee on Education and
Labor reported S. 591 favorably with amendments (Report No.
463)-
Section 1 of He R. 2888 would authorize the United States
Housing Authority to enter into additional contracts which will
provide for annual contributions aggregating not more than
$45,000,000 per annus. Under Section 2 the Authority is auth-
orised to issue and sell its obligations in an amount not to
exceed $800,000,000 in addition to the amount of such oblign-
tions heretofore authorised, namely, $800,000,000. Section 3
would amend Section 2(10) of the United States Housing Act of
1937 defining the going Federal rate of interest. Section 4
of the Bill would permit national banks and State member banks
By hand
File to Mr. Thompson
Regraded Unclassified
- 2 -
65
of the Federal Reserve System to underwrite or purchase bonds of
public housing agencies which are secured by a pledge of payments
under annual contributions contracts with the Authority. without
regard to the limitations and restrictions provided is section
5136 of the Revised Statutes of 1873, as amended (U.S.C., Sup.
IV, title 12, see. 24),
The Treasury Department is is sympathy with the preposal to
extend and broaden the program of the United States Housing Auth-
crity. The low-rent housing program not only furnishes safe and
sanitary duelling facilities for the lowest income groups and
eliminates the clums in which they now live, but in addition 1t
serves as a such needed stimulus for the construction industry.
Accordingly. the Department recommends that H. R. 2888, with the
exception of section 4, be enneted.
Section 4 of H. R. 2888 provides that "The last sentence of
paragraph Seventh of section 5136 of the Revised Statutes, as
amended, is amended by inserting before the colom, after the
words 'obligations of national mortgage associations', a couna
and the following: 'or such obligations of any public housing
agency (as defined in section 2(11) of the United States Housing
Act of 1937, as amended) as are secured by a pledge of payments
under an samual contributions contract between such agency and
the United States Housing Authority's.
Regraded Unclassified
66
- 3 -
Paragraph Seventh of section 5136 of the Revised Statutes of
1873. as amended (U.S.C., Sup. IV, title 12, sec. 24) provides in
general that national banks (the restrictions are also extended to
State member banks of the Federal Reserve System by section 9 of
the Federal Reserve Act, as amended (U.S.C., title 12, sec. 335))
shall not deal in securities or stocks for their own account or
underwrite securities or stock, but permits national banks to pur-
chase for their own account "investment securities". under limita-
tions and restrictions prescribed by the Comptroller of the Currency,
provided that a bank shall not hold for its own account the invest-
ment securities of any one obliger or maker in excess of 10 per
centum of the bank's unimpaired capital stock and 10 per centus of
its unimpaired surplus. Paragraph Seventh provides further that the
limitations and restrictions contained therein, as to dealing in,
underwriting and purchasing of investment securities, shall not ap-
ply to certain types of obligations, including "obligations which
are insured by the Federal Housing Administrator pursuant to section
207 of the National Housing Act, if the debentures to be issued in
payment of such insured obligations are guaranteed as to principal
and interest by the United States".
If the obligations of public housing agencies are "investment
securities" under section 5136 of the Revised Statutes and the regula-
tions of the Comptroller of the Currency issued pursuant thereto, na-
Regraded Unclassified
67
- 4 -
tional banks could under existing law purchase for their own account
obligations of a local housing agency in an amount up to 10 per centus
of the unimpaired capital and unimpaired surplus of the bank. The of-
feet of the amendment to section 5136, proposed by section Is of H. R.
2888, would be to authorise national banks (and State member banks of
the Federal Reserve System, if not prohibited by State law) to under-
write, and to purchase for their own account, obligations of a public
housing agency in unlimited anounts. since such obligations would be
exempted from the restrictions contained in section 5136.
It may be contended that obligations of public housing agencies
should be exempted from the restrictions in section 5136 because they
are of the same character as certain obligations insured by the Fed-
oral Housing Administration pursuant to section 207 of the National
Housing Act, which are, at present, exempted from the restrictions in
section 5136. the mortgages insured by the Federal Housing Administra-
tion pursuant to section 207 of the National Housing Act, as amended
(U.S.C., Sup. IV, title 12, sec. 1715) are mortgages covering resi-
dential properties hold by public or private agencies, for the purpose
of rehabilitation of slum or blighted areas or providing housing for
rent or sale, the rents or sales being regulated under housing laws or
by the Federal Housing Administrator, and such mortgages may involve
a principal obligation as large as $5,000,000. It is those obligations
which are expressly excepted from the limitations and restrictions oca-
Regraded Unclassified
68
- 5 -
tained in section 5136 of the Revised Statutes by the language therein
covering "chligations which are insured by the Federal Housing Adminis-
trator, pursuant to section 207 of the National Housing Act, if the de-
bentures to be issued in payment of such insured obligations are quar-
anteed as to principal and interest by the United States". The effect
of that exception is to remove obligations insured under section 207 of
the National Housing Act from the restrictions contained in section
5136, including the 10 per centum limit on purchases by national banks,
and further to remove them from any restrictions contained in regula-
tions issued by the Comptroller of the Currency pursuant to section
5136.
In the opinion of this Department bonds of public housing agencies
are not of the same character, in no far as security is concerned, as
obligations insured pursuant to section 207 of the National Housing Act.
In case of default by the mortgagor under a mortgage insured pursuant
to section 207. the mortgagee is entitled to exchange the mortgage for
debentures which are fully and unconditionally guaranteed as to prine-
ipal and interest by the United States. It should be noted that see-
tion 5136 of the Revised Statutes excepts obligations insured under
section 207 of the National Housing Act, provided that "the debentures
to be issued in payment of such insured obligations are cuaranteed as
to principal and interest by the United States.". (Underscoring sup-
plied) On the other hand, bonds of public housing agencies, which 11
Regraded Unclassified
69
- 6 -
is proposed. by section is of H. R. 2858, to except from the restric-
tions contained in section 5136 of the Revised Statutes, "are secured
by a pledge of payments under an annual contributions contract between
such agency and the United States Housing Authority".
It would seen clear that a pledge of payments under an annual con-
tributions contract, made pursuant to section 610 of the United States
Housing Act of 1937. as amended (---, (- Sup. IV, title 42, sec. 1410),
would not be security equal in value to debentures "guaranteed as to
principal and interest by the United States". The bonds of public
housing agencies are not obligations of the United States, nor are they
guaranteed as to the payment of principal or interest by the United
States. Section 10 of the United States Housing Act of 1937. as amended
(U.S.C., Sup. IV. title 42, sec. 1410) provides that the United States
Housing Authority may make annual contributions to public housing
agencies to assist in achieving and maintaining the low-rent character
of their housing projects and the faith of the United States 10 pledged
to the payment of all annual contributions contracted to be made by the
Authority. Section 10 provides, further, that payments under annual
contributions contracts shall be pledged as security for any leans ob-
tained by public housing agencies to assist in the development of the
housing projects to which the namel contributions relate, provided
that annual contributions shall first be used to apply toward the pay-
nent of interest or principal as the same natures on any loan due to
Regraded Unclassified
70
- 7 -
the Authority from the public housing agencies. Thus, under exist-
ing law annual contributions estimated and paid by the Authority
are pledged toward the payment of public housing agencies' bends,
after matured principal and interest on loans owing to the Authority
have been paid. This constitutes the basic security for the payment
of such bonds, and it is understood that under the form of contract
which the Authority contemplates entering into with public housing
agencies it is intended that the annual contributions will be calcu-
lated in such a manner as to be sufficient to amortise the principal
and interest on the public housing agencies' bonds.
Section 10 of the United States Housing Act of 1937. as amended,
in addition to authorising the Authority to determine the amount of
the annual contributions payable to each public housing agency to as-
sist in achieving and maintaining the low-rent character of the pro-
jects, gives the Authority very broad powers to modify a contract
covering annual contributions and to reduce the amount of or terminate
such contributions. That section provides that where a contract for
annual contributions is made for a period exceeding 20 years, the
Authority shall reserve the right to reexamine the status of the hous-
ing project involved at the end of 10 years and every 5 years there-
after. If the Authority is of the opinion that changed conditions so
warrant it may modify the amount of subsequent annual contributions
payable to assist in maintaining the low-rent character of the project.
Regraded Unclassified
71
- 8 -
Section 15(3) of the United States Housing Act of 1937. as
amended (U.S.C., Sup. IV, title 42, sec. 1415(3)) provides that
the Authority shall retain the right, in the event of a sub-
statntial breach of the conditions contained in a contract with
& public housing agency providing for the maintenance of the low-
rent character of the housing project involved, to reduce or termi-
nate the annual contributions payable under such contracts. Also,
in the event of the acquisition of such project by a third party the
annual contributions shall terminate.
The uncertain character of the annual contributions as security
for, or a source of funds for the amortization of the principal and
interest of, bonds of public housing agencies is indicated by the
following language in the report of the Senate Committee on Educa-
tion and Labor relative to s. 591 (Report No. 463):
"The annual contributions are intended to
bridge the GRD between the economic rent which
is the rent which would otherwise have to be
charged for this decent new housing (in order
to neet debt service, maintenance, and operating
expenses) and the social rent, which is the rent
that families now living in the slums can now
afford to pay.
"Under the terms of the present act, the
annual contributions contracts, whenever made
for a period exceeding 20 years, will be 18-
viewed at least at the end of 10 years and every
fifth year thereafter, ia accordance with the
statutory provisions that they be modified as
warrented by changed economic conditions, The
contributions, through such modifications, can
never be raised above the maximum rate at which
Regraded Unclassified
72
- 9 -
annual contributions may be contracted under
the act, Although debt-service requirements
(because necessarily fixed at the very outset
for the life of the project) present e 000-
dition that will not change, other conditions
will change, such as price or wage levels.
Every analysis of normal rent and income trends
in the past, and every reasonable estimate of
probable trends in the future, reinforce the
conviction that the annual contributions neces-
sary to achieve rents within reach of 'low-income
families.' and to insure the financial stability
of housing projects. will gradually decline. For
this reason it must not be presumed that the an-
nual contributions to be contracted for will
last for 60 years." (pp 3-4) (Underscoring sup-
plied)
Thus, under existing law the basic security for the bonds of
public housing agencies is the annual contributions payable by the
Authority to such agencies, which contributions are for the purpose
of maintaining the low-rent character of the projects. Under the
law the Authority has the power to change a contract providing for
annual contributions and to reduce or terminate entirely such an-
nual contributions. Thus, the basic security for these public hous-
ing agencies' bonds could be drastically altered.
As already pointed out above, if section 5136 were anended as
proposed in H. R. 2888, not only would national banks be authorised
to purchase for their own account obligations of public housing
agencies without limit, but they would. also be authorized to under-
write such obligations in unlimited amounts. It should be remembered
that, in enacting the Banking Act of 1933. it was clearly the intention
Regraded Unclassified
73
- 10 -
of Congress to divorce the commercial banking business from "the
business of issuing, underwriting. selling, OF distributing. at
wholesale 07 retail, or through syndicate participation, stocks,
bonds, debentures, notes, or other securities". (Section 21 of
the Banking Act of 1933. as amended (U.S.C., Sup. IV. title 12,
sec. 378)) In its report on the Banking Act of 1933, the Senate
Committee on Banking and Currency stateds
de . "National banks were never intended to under-
take investment banking business on a large scale,
and the whole tenor of legislation and administra-
tive rulings concerning them has been away from
recognition of such a growth in the direction of
investment banking as legitimate. Nevertheless
it has continued; and a very fruitful cause of bank
failures, especially within the past three years,
has been the fact that the funds of various insti-
tutions have been so extensively 'tied up' in long-
term investments." (Senate Report No. 77. 73rd
Cong. 1st Sess., P. 3)
If the bonds of public housing agencies were exempted from the
prohibition against underwriting contained in section 5136, the result
might be the formation of a syndicate, including a number of national
banks, for the purpose of underwriting these bonds. It is believed
that it would not constitute a desirable tendency for national banks to
participate in such an underwriting arrangement.
In view of all the facts, it is the opinion of the Treasury Depart-
ment that it would be unwise to increase the existing exceptions to see-
tion 5136 of the Revised Statutes, by exempting from the restrictions
Regraded Unclassified
74
- 11 -
and limitations contained therein the obligations of public housing
agencies. Accordingly, this Department is of the opinion that see-
tion 4 should not be enacted.
The Treasury recommends that H. R. 2665, with the exception of
section 4. be enacted.
The Department has been advised by the Bureau of the Badget that
there 10 no objection to the submission of this report to your Committee.
Very truly yours,
(Signed) H. Morgenthan, Jr.
Secretary of the Treasury.
Non. Heary 3. Steagall
Chairman, Committee on Banking
and Currency,
House of Representatives.
DJSies typed 5.27.39 - 5.31.39
Copied: fn 6.20.39
Regraded Unclassified
75
TELEGRAM SENT
June 20, 1939
11 a.m.
AMEMBASSY
LONDON (ENGLAND)
460.
The Secretary of the Treasury requests that he
be advised by cable of individual shipments of silver
of 50,000 ounces or more from London to New York
certified by the Embassy from June 12. Please cable
similar information daily until further notice.
HULL
BECEIAED
REDI SS 19:41
TRIMINATED VAURANT
sets in -
(Rinst of - -
Regraded Unclassified
76
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 20, 1939, 5 p.m.
NO.: 1166
FOR THE TREASURY DEPARTMENT.
On the exchange market today there were no important
changes, with trading quiet. A moderate amount of dollars
and sterling was obtained by the fund. Yesterday and
today a substantial amount of sterling was purchased by
the Belgian control. On the security market there was
a more cheerful tone, with improvement in most securities.
There was a gain of around 50 centimes in rentes.
WILSON.
03V13038
offil is MIN
DEPARTMENT
w -
EA:LWW
persons 9 -
77
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE: June 20, 1939, 4 p.m.
NO.: 527
Reference is made to my telegram No. 506 of June 16.
CONFIDENTIAL.
During a conversation which I had with von Wedel
of the Reichsbank yesterday, he gave me the following
information about the new Reichsbank law which will make
it necessary for foreign stockholders of the institution
to exchange their shares for non-voting preferred shares
of the Golddiscountbank - which is a subsidiary of the
Reichsbank - sometime between the fifteenth of August
of this year and the first of April next year. The Gov-
ernment has not yet issued regulations for the execution
of this share conversion.
As far as he knew, von Wedel told me, there were
very few American shareholders of the Reichsbank. He
said he would try to give us information as to the total
amount of those held by Americans, although he claimed
that was strictly confidential information. Von Wedel
believed that American stockholders would be completely
satisfied with the arrangement, as they would get the
same amount of dividends on the par value of their in-
vestment
Regraded Unclassified
78
min.
AMERICAN ford
- 2 -
vestment, 8 percent, which is what they received in recent
years. He said that they would be fully transferable
dividends. Should American investors not be satisfied,
themselves
he said, they would only have to submit/to the Reichsbank and say
that the terms of the conversion were not satisfactory,
and the Reichsbank would then consider whether they
could make some other arrangement.
No mention was made by Von Wedel of what other arrange-
ments might be made, but the question is raised by the
statement outlined above as to whether the Reichsbank
might not permit redemption of shares held by Americans
and allow part and possibly eventually all of the proceeds
to be transferred. The amount of shares held by Americans
is small, it is understood. The Reichsbank directorate
on various occasions in the past has given evidence that
it wanted to keep its good relations and credit standing
with banking and investment circles in the United States.
The press states that some 35 million marks of the
150 million mark share capital of the Reichsbank are
held by foreigners.
According to von Wedel the meeting of Reichsbank stock-
holders which is scheduled for June 30 will be a pure
formality. He said that the proposed share offer would
be ratified without any changes being made.
It is requested that this telegram be repeated to
Treasury as Heath's No. 38.
EA:LWW
KIRK.
Regraded Unclassified
79
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 21, 1939, 8 p.m.
NO.: 1175
FOR THE TREASURY DEPARTMENT.
Today the security and exchange markets were quiet
and inactive. There were no important changes on these
markets. A substantial amount of sterling was obtained
by the French fund.
WILSON.
03V13338
PERS 35 16:11
TRINTRAS30
18 is mind
that Ni e whold evint
EA:LWW
80
CJ
GRAY
LONDON
Dated June 21, 1939
Rec'd 2:55 p.m.
Secretary of State,
Washington.
868. June 21, 6 p.m.
FOR TREASURY FROM BUTTERWORTH.
Replying to your 460, Junz 20 11 a.m., silver
shipments invoiced from June 12th to 21st inclusive tot-
aled 1,086,103.75 fine ounces and 540,278.63 standard
ounces total value $367,267.22 plus pounds 940,746 18
shillings 9 pence consisting of anglo metal to Ameri-
can metal 300,123.50 fine ounces price 42,31 cents per
fine ounce by QUEEN MARY; 100,061.40 fine ounces price
41.97 cents per fine ounce; 150,021 fine ounces price
42.51 cents per fine ounce; 150,002.60 fine ounces price
42.31 cEnts per fine ounce by MANHATTAN; 169,900 fine
ounces price 41.83 cents per fine ounce by MAURETANIA.
Mocatta and Goldsmid to Guaranty Trust 216,065.12
standard ounces price 20 3/16 pence by MAURETANIA; same
to Irvington Smelting and Refining 215,995.25 fine ounces
price 19 7/8 pence per standard ounce by AQUITANIA;
Sharps
Regraded Unclassified
81
-2- #868, June 21, 6 p.m., from London
Sharps and Wilkins to Handy and Harley 107,797.93
standard ounces price 19 3/4 pence by MAURETANIA; same
to Guaranty Trust 118,054.43 standard ounces price
19 3/4 pence; 118,361.15 standard ounces price 19 3/8
pence by AQUITANIA.
Press quotes rumors from NEW York of probabilities
(a) repeal of silver act, (b) cessation of purchase of
foreign silver (c) reduction of buying price for foreign
silver, with the opinion that (c) is the most likely.
Einzig in Lombard Street column of FINANCIAL NEWS points
cut that continuance of purchase of foreign silver now
helps Japan whose accumulations are substantial while
China's available reserves are largely exhausted. Some
market operators EXPECT no further support from arbi-
!
trageurs until future policy is known since the last ship
to reach NEW York before June 30 has now sailed. The
price at today's fixing was 19 pence and the turnover
was not large.
KENNED. MIII
CSB
THINTRATED EMMIGHT VISITED
name
whose
Regraded Unclassified
82
CJ
GRAY
LONDON
Dated June 21, 1939
Rec'd 3:03 p.m.
Secretary of State,
Washington.
870, June 21, 7 p.m.
FOR TREASURY FROM BUTTERWORTH.
As pesterday the British fund has not appeared to
operate in spot or forward dollars, but in contrast to
yesterday when the fund gave about 120 of the 186 bars
dealt in and 60 bars were married, today's gold dealings
at the fixing were all in market gold, a big seller
having appeared. Of the 119 bars dealt in 50 were
married.
Sterling was weak on reports from Tientsin but the
amount of business was small such pressure as there was
being largely counteracted by the demand for dollars
arising from the gold dealings.
KENNEDY
BECEIAED
CSB
PPOI is MIII
ТИЗХТНАЯЗО YSURANT
printed edi la
painted sit til total instruct
83
JUN 21 1939
By dear Senator:
Reference is made to your letter of May 25, 1939, relative
to 5. 591, A Bill "To amend the United States Housing Act of
1937, and for other purposes".
After extended consideration the Treasury Department has
changed its preposed letter to the Director of the Euroau of
the Dudget relative to B. 591, in order to make a positive recom>
mendation that S. 591, with the exception of section 4 thereof,
be enacted.
The assendment to section 5136 of the Revised Statutes, pro-
posed by section 4, has been carefully considered by the officials
in the Treasury Department responsible for the supervision of na-
tional tanks. Although the Treasury is sympathetic to the housing
program and does not desire to esharrase any necessary and appro-
printe expansion of that program, it is of the opinion that the duty
to protect the soundness of the actional banking system obligates
the Department to oppose any arther broadening of the exemptions
to section 5136 in order to permit national banks to purchase for
their own account and to underwrite the bende of public housing
agencies in unlimited amounts. The Treasury is especially de-
sirous that the spirit of section 21 of the Banking Act of 1933,
File to Mr. Thompson
By hand
Regraded Unclassified
84
- 2 -
as amended (Uedetes Supe IV, title 12, sec. 378), which divorced
the countercial banking lusiness from the business of underwriting
or distributing securities, not be violated by any neasure which
would tend to encourage the participation of national tanks in
syndicates organized for the purpose of underwriting and distribut-
ing securities such as the bonds of public housing agencies.
You suggest that the objections contained in the Treasury Doe
partment's proposed letter to the Pureau of the Budget can be not
by amending section 5136 of the Revised Statutes in such a nanner
as to place upon the Comptroller of the Currency the responsibil-
ity of prescribing prohibitions, limitations, and restrictions as
to the dealing in, underwriting,or purchasing of the bonds of pub-
lie housing agencies by national banks. Such a proposal would in-
clude a general authority for national banks to underwrite such
bonds, pursuant to regulations prescribed by the Comptroller of
the Currency, to which the Treasury Department is opposed as al-
ready indiested. In addition, it is the opinion of this Depart-
ment that it would be an unwise procedent so to emend section
5136, and, further, that such an emendment would operate to impose
an unreasonable turden upon the Comptroller of the Currency.
You indicate in your letter that a discussion of the United
States Housing Authority's decision to seek an opinion from the
Attorney General with reference to certain legal questions arising
Regraded Unclassified
- 3 -
85
from a proposed new form of annual contributions contracts, is
not essential to a consideration of the legislation proposed in
Se 591, and that such a discussion may raise confusing issues.
In deference to your personal feeling on that point, I can Mr
ouro you that the Treasury 411 not nake any reference to the
proposed opinion of the Attorney Ceneral in any communication
in the nature of & report on B. 592 which it may transmit to
Congress. However, since it is assumed that the Bureau of the
Budget would not transmit to Congress or make public, without
the consent of the Treasury Department, any consumiention from
this Department to the Bureau with reference to Se 591, it does
not appear necessary to eliminate the reference to the proposed
opinion of the Attorney General from the letter to the Director
of the Burean of the Budget.
Very truly yours,
(Signed) H. Morgenthau, 3r.
Secretary of the Treasury.
Home Robert F. Vagner,
United States Senate.
DJStes typed 6.1.39
Pres read the at 400 PM.
June 11,1939.
86
The FHA has given the matter of reduction in the interest rate
consideration for several months and is now intensively studying the
situation so as to determine what the effect would be on stimulating
or slowing up the present rate of new residential construction.
Owing to the unprecedented delay in getting the Housing Bill through
Congress the entire FHA program has suffered somewhat, as many of the
attractive features of the law were due to expire on July 1st and lenders,
speculative builders, real estate developers, etc., were cautious in
extending themselves not knowing for certain if these sections of the
Act would be renewed.
The Bill was finally signed on June 3rd and only last week were the
revised rules and regulations sent to something like 15,000 lenders.
The feeling here has been that these people have been disarranged
and upset by this and would only be further harassed by a mandatory
rate cut right now.
Our feeling is that the rate cut should be made, but at a time when
the waters have been clarified & little from the present muddiness.
It must be remembered that the FHA exists purely through the
voluntary cooperation of lenders and it is felt that its success has been
due to a great extent to the fact that it has not pursued irritating
policies or issued compulsory mandates.
Interest rates in the large lending centers have already been
voluntarily broken by the lenders to 42% and 41%, so a reduction in the
rate would not increase the business here.
The volume of new residential construction is improving in
the secondary cities and it is felt that the immediate effect of an
arbitrary rate reduction here might have a tendency to slow up lending.
At least this is a thing we would like to study a little further.
87
Form No
IM
FEDERAL HOUSING ADMINISTRATION
MEMORANDUM
DATE June 21, 1939
Reasons for maintaining 5% interest rate.
(a) Reduction of rate would reduce the attractiveness of insured mortgages to
certain groups of institutions.
(b) At the present time many institutions, such as building and loan associa-
tions in different parts of the country, are able to lend their funds on
an uninsured basis at a better rate than 5%.
(c) Initial service fees are not being charged in large money centers due to
competitive situations and the initial cost to the borrower is the lowest
in the history of the country.
(d) Reduction in the maximum yield to lending institutions would stimulate the
charging of initial fee to provide income.
(e) Inter-state foreign money might be cut off due to the fact that the yield
to the parent company would be reduced to a point where it would not be
attractive.
(f) 25 years is a long time for which to establish a maximum rate of 4%. The
lender has no opportunity to re-adjust his interest rate upward if during
that period there is a drastic rise in the general cost of money.
(g) The comparison of bond rate and insured mortgage rate is not equitable due
to the cost of handling a monthly payment mortgage under our plan.
(b) 43% yield on an insured mortgage is not a true 42% yield in the same manner
as & bond yield due to servicing costs.
(1) Reduction of yield to the lending institution would result in the curtail-
ment of their advertising and developing program which would stimulate new
construction.
(j) There has been no great demand from prospective borrowers for reduction in
the present rate.
(x) 5% rate for a 25 year, 90% loan is a fair rate.
(1) Elimination of foreign inter-state money would permit local lending institu-
tions in competiting with insured mortgages to lend at any rate and under any
terms, due to the elimination of the competitive lender.
Regraded Unclassified
88
HA Form No. 13
evised Iss. I. (50%)
FEDERAL HOUSING ADMINISTRATION
MEMORANDUM
DATE
(=) The monthly savings to the borrower by virtue of 2% reduction of
interest rate is not sufficient to stimulate either a new class of
home owner or a great increase in building.
(n) Lenders are becoming bolder in their appraisals in connection with
uninsured loans with a tendency to take their loans direct at the
best yield possible, thus depriving the whole national housing picture
of the benefits accruing from the enforcement of our standards.
(o) Lenders do not receive the true 5% rate since they must bear foreclosure
costs in connection with properties tendered to the Administrator.
(p) Interest rates are being reduced voluntarily in the large money centers
to as low as 41%, and to reduce our maximum rate to 42% would not help
the situation there, but would have a tendency to eliminate lending
institutions in the smaller communities where rates have been generally
higher than in large centers.
(q) Our indices show that our business in large centers is holding even and
would not be greatly affected either way by a reduction in interest rate.
(r) Our indices also show that business is increasing in the secondary cities
where rates in the past have been higher. A reduction in interest rate
might tend to put a check on a continued increase in business.
(s) Due to the delay in the passage of the recent amendments to the National
Housing Act, we are just now changing our rules and regulations, forms,
and procedure, to be effective July 1. This has a tendency to slow up
business during the period of time that the mortgagees are re-adjusting
themselves. To reduce the maximum interest rate at this time would cause
further confusion and have a tendency to further slow up business. There
will also arise a demand by borrowers for & wholesale reduction of the rate
on their present loans which would further upset lenders and have a
tendency to drive them from the insured mortgage program. To reduce our
maximum rate at this time would be untimely.
(t) The Federal Home Loan Bank Board has consistently refused to take steps
to require that member banks reduce interest rates. Any reduction in the
rate of this Administration should be accompanied by similar action on the
part of the Federal Home Loan Bank Board if the movement to lower rates
is to be effective.
Regraded Unclassified
Form No. 13
89
ised Jan. 1, (908)
FEDERAL HOUSING ADMINISTRATION
MEMORANDUM
DATE June 21, 1939
Mr. Stewart McDonald, Administrator
ECT: In accordance with your instructions, I am setting down considerations in
onnection with the proposal to reduce the maximum interest rate on insured mort-
ages from 5% to 42%
Reasons for reducing interest rate:
) Yield on Government bonds and other AAA bonds has been reduced to a figure well
below 5%.
b) Our 5% rate, plus the 2% insurance premium makes the cost to the borrower 5½%.
e) The nature of the insurance guarantees lending institutions against ownership
of real estate by substituting a 2 3/4% tax free debenture, which in itself
is a good yield in the present market.
) Lending institutions may secure the initial service fee, which is an added income,
) Large purchasers of insured mortgages leave 1 $ of 19 and in some cases 3/4 of 1%
to the originator as & service fee, giving a net yield to the purchaser of 42%
to 45% which is an excellent yield lu the present market. However, since a
premium is being paid in many instances this yield may be reduced.
) There is testimony by financial leaders to the effect that 42% and 4% on this
type of mortgage is a desirable rate.
) The tremendous surplus of idle money yielding nothing to the banks indicates
that 4% or 42% yield is still very desirable.
) The reduction of interest rate would reduce the cost to the home buyer and per-
haps stimulate home building.
)
A reduction of interest rate would bring the monthly payment down to a point
where a new level of purchasers might enter the home purchase market.
Mortgage investments yielding more than 42% are scarce and there will be ample
funds at this rate.
)
The FHA is currently doing about as much business as all the State and Federal
Building and Loan Societies put together. In other words, FHA is doing half
of the home mortgage financing and has constantly set the pace for low interest
rates which have been broken from 7 and 8% outside the large financial centers
to between 5 and 6%. These building and loan societies are not equipped to
make drastic reductions in interest rates because of securing their funds from
Regraded Unclassified
Form No. 13
90
ed Jan. 1, (908)
FEDERAL HOUSING ADMINISTRATION
MEMORANDUM
DATE
(CT:
the sale of shares and reductions by them must be made in an orderly manner
or they will not cooperate and therefore, an abrupt reduction in interest
rate might actually slow up new construction on this account.
)
In the last analysis the FHA does not lend money, but its volume depends
upon the voluntary cooperation of the lending institution and the program
to get the best results has to be aggreable and satisfactory to the lender.
Regraded Unclassified
mumber of
wolk FHA
4 new meeply Homes Started Each Week
meported by ising office medy
Week Ending 1938 1939
January 14 7
1,569
2017
"
21
1,766
"
28
N.
1,648
Fabruary 11 4
of
1,448
1,571
18
25
R
1,602
e
1,672
march
4
P
1,970
//
&
2,388
18
T
2,354
25
2
2,551
april 8 h
960
2784
1,138
2,526
15
1,107
3107
22
1,355
2,863
29
1,610
2,880
may
é
1,537
2,9RO
13
1707
3,055
20
1,740
2,946
22
1,711
5,113
June
3
1,603
2,429
10
1,926
2,810
17
1,870
2,945
24
1,969
July
7
1,959
8
1,622
15
1,986
22
2,009
29
1,897
august
5
1,823
12
2,304
19
2,027
26
2,192
September 2 9
2,157
1,841
16
2,085
23
2,084
30
2,288
October
7
2,229
14
2,056
21
0,448
28
2,397
november 4
2,447
11
1,889
18
2324
25
1,892
December
2
0,058
9
1:950
16
2,073
23
1,621
30
1,310
92
COPY OF LETTER TO SENATOR BYRNES
dated June 21, 1939 sent to
following:
Hon. Robert F. Magner,
Chairman, Banking and Currency Come, Senate
Home Carter Glass,
Cha ran, Appropriations Come, Sonate
Hon. Pat Harrison,
Chairman, Senate Finance Committee
lion. Alben N. Barkley
United States Senate
Hon. Sam Rayburn
House of Representatives
Hon. Edward T. Taylor
Chairman, Appropriations Come, House of Rep.
Hon. Robert L. Doughton
Chairman, Ways and Means Com., House of Rep.
Hon. Henry B. Steagall
Chairman, Banking and Currency Com., House of Rep.
Speaker of the House of Representatives
Vice President
93
June 21, 1939.
Dear Senator Byrnes:
I have your letter of the 19th in which you ask my position
as to the provision of the "Work Relief and Public Works Appropriation
Act of 1939" as passed by the House of Representatives (H.J.Res. 326)
which would allot $125,000,000 to the Public Works Administration for
loans and grants for non-Federal public works.
I am opposed to this provision. It means simply that 165,000
men who are badly in need of work will have to be dropped from the
Works Progress Administration rolls; men who in the great majority of
cases are the sole support of families whose subsistence depends on
this slender income. What will happen to most of these men is that
they will be forced onto already overburdened direct relief rolls of
cities, towns and counties, or, if these are insufficient to care for
them, onto private charity.
I believe there is a better way to accomplish the laudable
purposes of this bill. The great majority of people of this country
have come to realize that there are certain types of public improvements
and betterments which should be undertaken at times when there is need
for a stimulus to employment. At such times the Federal Government
should furnish funds for projects of this kind at a low rate of interest,
it being clearly understood that the projects themselves shall be self-
liquidating and of such a nature as to furnish a maximum of employment
per dollar of investment.
Regraded Unclassified
- 2 -
94
There seems no reason why there should not be adopted as a
permanent policy of the Government the development and maintenance
of a revolving fund fed from the earnings of these government invest-
ments and used to finance new projects at times when there is need
of extra stimulus to employment. Such times will recur in the future,
as they have in the past, and there will always be need for public
facilities and improvements in our natural resources which can be
most profitably met by the use at times of greatest need of employment
of the accumulated receipts of such a revolving fund.
At my suggestion, various departments and agencies of the
Government have canvassed the situation to find projects which will
meet genuine public needs - projects that can be put under way quickly
and, of great importance, will be self-liquidating. They have found
a variety of such projects which have stood the test of careful
scrutiny and which hold the promise of a great volume of productive
expenditure and employment. I believe this is a much sounder method
of dealing with the problem than the diversion of $125,000,000 of
work-relief funds. All can be financed through the issuance of
guaranteed securities by Government agencies with good prospect of
repayment of both principal and interest through earnings.
I have caused estimates to be made of the extent of the field
for investment of funds in revenue earning channels on a self-
liquidating basis and in no way competitive with private enterprise.
The estimates are, I believe, conservative. The types of projects
I have in mind are listed below, together with the sums which, it
is estimated, can be put to work to provide employment for men and
Regraded Unclassified
95
- 3 -
machines in diverse lines of industry within the coming fiscal year.
These projects are in addition to programs already submitted.
Program
Total
Loan
duration
Amount
disbursements
of
fiscal year
(years)
program
1940
I. Federal Works Agency -
(a) Non-Federal public works:
2
350M
$150M
Projects of the self-finan-
cing type to be financed by
loans at sufficiently low
rates of interest to stimulate
borrowing for this purpose.
The type of projects would be
water-works, sewage disposal
plants, bridges, hospitals, and
other municipal projects.
(b) Express Post-Roads:
4
750
150
Self-liquidating toll roads;
bridges, high-speed highways
and city by-passes.
(c) Railroad Equipment:
3
500
100
Authority to purchase all
types of railroad equipment
which is to be leased to rail-
roads at a rate which will
return the cost to the United
States over a period of years.
Carriers would have the option
to buy the leased equipment.
II. Department of Agriculture -
(a) Rural Electrification:
7
460
20
Expansion of present rural
electrification program to
reach a maximum of 12 million
rural families not now receiv-
ing electric service nor likely
to receive such service in the
near future.
96
- 4 -
Loan
Program
Total
disbursements
duration
Amount
fiscal year
of
1940
(years)
program
(b) Farm Tenant Program:
2
$500M
$250M
Expansion of the self-liqui-
dating portion of the program of
the Farm Security Administration
for tenant farm purchases,
rehabilitation program, loans
for minor improvements and repairs,
loans to resettlement cooperatives,
and loans for water facilities.
ID. Foreign Loans -
2
500
200
Extension of short and long-
term loans to foreign govern-
ments for the purpose of promot-
ing our foreign trade. The
proceeds of these loans would be
spent in the United States and
would be used for development and
reconstruction purposes in the
foreign country.
TOTALS
3060M
870M
This program would stimulate a greater amount of productive
expenditure than is indicated by the total estimated loan disburse-
ments of $870 millions for the fiscal year 1940. Some parts of
it will involve additional local expenditures not financed by Federal
funds, and other indirect expenditures will be generated.
To give effect to the program outlined above, some supple-
mentary legislation will be necessary. As a part, however, of the
whole program for stimulating productive employment, I include another
proposal which will not require legislation in addition to that now
ponding. This is the expansion of the public housing program of the
37
- 5 -
United states Housing Authority through extending its borrowing
power by $800,000,000. I have already indicated my approval of
this legislation.
If you think well of such a program as I have outlined I
shall be glad to confer with you and your colleagues and with
Members of the House of Representatives. I am sending copies of
this letter to the Chairmen of the Appropriations, Finance and
Banking and Currency Committees of the Senate and to the Chairmen
of the Ways and Means, Banking and Currency and Appropriations
Committees of the House.
Sincerely,
(Signed) Franklin D. Roosevelt
Honorable James F. Byrnes
United States Senate.
THE WHITE HOUSE
WASHINGTON
June
1929
Dear Senator Byrnes:
I have your letter of the 19th in which you ask my position
as to the provision of the "Work Relief and Public Works Appropriation
Act of 1939" as passed by the House of Representatives (H.J.Res. 326)
which would allot $125,000,000 to the Public Works Administration for
loans and grants for non-Federal public works.
I am opposed to this provision. It means simply that 165,000
men who are badly in need of work will have to be dropped from the
Works Progress Administration rolls; men who in the great majority of
cases are the sole support of families whose subsistence depends on
this slender income. What will happen to most of these men is that
they will be forced onto already overburdened direct relief rolls of
cities, towns and counties, or, if these are insufficient to care for
them, onto private charity.
I believe there is a better way to accomplish the laudable
purposes of this bill. The great majority of people of this country
have come to realize that there are certain types of public improvements
and betterments which should be undertaken at times when there is need
for a stimulus to employment. At such times the Federal Government
should furnish funds for projects of this kind at a low rate of interest,
it being clearly understood that the projects themselves shall be self-
liquidating and of such a. nature as to furnish a maximum of employment
per dollar of investment.
Regraded Unclassified
99
- 2 -
There seems no reason why there should not be adopted as a
permanent policy of the Government the development and maintenance
of e revolving fund fed from the earnings of thase government invest-
ments and used to finance new projects at times when there is need
of extra stimulus to employment. Such times will recur in the future,
as they have in the past, and there will always be need for public
facilities and improvements in our natural resources which can be
most profitably met by the use at times of greatest need of employment
of the accumulated receipts of such a revolving fund.
At my suggestion, various departments and agencies of the
Government have canvassed the situation to find projects which will
meet genuine public needs - projects that can be put under way quickly
and, of great importance, will be self-liquidating. They have found
a variety of such projects which have stood the test of careful
scrutiny and which hold the promise of a. great volume of productive
expenditure and employment. I believe this is a much sounder method
of dealing with the problem than the diversion of $125,000,000 of
work-relief funds. All can be financed through the issuance of
guaranteed securities by Government agencies with good prospect of
repayment of both principal and interest through earnings.
I have caused estimates to be made of the extent of the field
for investment of funds in revenue earning channels on a self-
liquidating basis and in no way competitive with private enterprise.
The estimates are, I believe, conservative. The types of projects
1 have in mind are listed below, together with the sume which,it
is estimated, can be put to work to provide employment for men and
100
- 3 -
machines in diverse lines of industry within the coming fiscal year,
These projects are in addition to programs already submitted.
Program
Total
Loan
duration
Amount
disbursements
of
fiscal year
(years)
program
1940
I. Federal Works Agency -
(a) Non-Federal public works:
2
$350M
$150M
Projects of the self-finan-
cing type to be financed by
loans at sufficiently low
rates of interest to stimulate
borrowing for this purpose.
The type of projects would be
water-works, semage disposal
plants, bridges, hospitals, and
other municipal projects.
(b) Express Post-Roads:
4
750
150
Self-liquidating toll roads,
bridges, high-speed highways
and city by-passes.
(c) Railroad Equipment:
3
500
100
Authority to purchase all
types of railroad equipment
which is to be leased to rail-
roads at a rate which will
return the cost to the United
States over a period of years.
Carriers would have the option
to buy the leased equipment.
II. Department of Agriculture -
(a) Rural Electrification:
7
460
20
Expansion of present rural
electrification program to
reach a maximum of 11 million
rural families not now receiv-
ing electric service nor likely
to receive such service in the
near future.
101
- 4 -
Program
Total
Loan
duration
Amount
disbursements
of
fiscal year
(years)
program
1940
(b) Farm Tenant Program:
2
$500M
$250M
Expension of the self-liqui-
dating portion of the program of
the Farm Security Administration
for tenant farm purchases,
rehabilitation program, loans
for minor improvements and repairs,
loans to resettlement cooperatives,
and loans for water facilities.
III. Foreign Loans -
2
500
200
Extension of short and long-
term loans to foreign govern-
ments for the purpose of promot-
ing our foreign trade. The
proceeds of these loans would be
spent in the United States and
would be used for development and
reconstruction purposes in the
foreign country.
TOTALS
3060M
870M
This program would stimulate a greater amount of productive
expenditure than is indicated by the total estimated loan disburse-
ments of $870 millions for the fiscal year 1940. Some parts of
it will involve additional local expenditures not financed by Federal
funds, and other indirect expenditures will be generated.
To give effect to the program outlined above, some supple-
mentary legislation will be necessary. As a part, however, of the
whole program for stimulating productive employment, I include another
proposal which will not require legislation in addition to that now
pending. This is the expansion of the public housing program of the
Regraded Unclassified
102
- 5 -
United States Housing Authority through extending its borrowing
power by $800,000,000. I have already indicated my approval of
this legislation.
If you think well of such a program as I have outlined I
shall be glad to confer with you and your colleagues and with
Members of the House of Representatives. I am sending copies of
this letter to the Chairmen of the Appropriations, Finance and
Banking and Currency Committees of the Senate and to the Chairmen
of the Tays and Means, Banking and Currency and Appropriations
Committees of the House.
Sincerely,
finantion Murwelle
Honorable James F. Byrnes
United States Senate.
103
June 21, 1939
The President gave the original of this to
the Secretary and said , "Go outside and call up
Welles.
If
(The original was returned to the President
on 6/22; see copy of letter of transmittal
attached.)
THE SECRETARY OF STATE
WASHINGTON
June 21, 1939.
MEMORANDUM FOR THE PRESIDENT
I return herewith the memorandum of June 15 on
Italian countervailing duties submitted to you by Secre-
tary Morgenthau which you referred to me on June 16. In
addition to the information in that memorandum I am-also
in receipt of a letter dated June 16 from the Secretary
of the Treasury indicating that the Treasury Department
proposes to announce on June 21 that countervailing
duties will apply to silk goods after the usual thirty
day notice has been given.
In response to your request I submit the following
comments:
1. The Italian Government has agreed to discuss
the entire question of the facts and the trade procedures
involved in the Treasury Department's findings on silk
goods, cotton goods, woolen goods and leather goods and
has agreed that a representative of the Treasury Depart-
ment should visit Rome to discuss these matters. There
is every reason to believe that the Italian officials ex-
pect to include silk goods in the discussions and the
Treasury Department has indicated that it would have no
objection to such discussions with respect to silk goods.
2. If, without waiting for these discussions to
take place, the Treasury Department should issue a counter-
vailing duty order with respect to silk goods, the effect
might well be to upset the arrangements which have been
made for the discussions and investigations by the Treasury
Department representative who is to go to Rome. It might
well be also that the result would be to precipitate some
form of trade retaliation on the part of the Italian Gov-
ernment against American products.
3. The Secretary of the Treasury states that the
information regarding Italian bounties on silk goods is
definite
Regraded Unclassified
-2-
definite whereas the information on the other types of
goods is lacking in details, the clarification of which
would facilitate the ascertainment or estimation of
countervailing duties as required by law. It would seem
reasonable to believe, however, that even as regards
silk goods the Treasury Department would be wholly Just1-
fied in withholding action until its representative could
have visited Rome and made a report on the basis of his
discussions.
4. For these reasons I strongly urge, therefore,
that the Secretary of the Treasury be instructed not to
issue the proposed countervailing duty order on silk
goods from Italy until the Treasury representative has
gone to Rome as arranged and has had opportunity to
discuss all of the categories of goods under considera-
tion with the appropriate Italian authorities.
nich
Enclosure:
Memorandum from Secretary of
the Treasury, June 15, 1939.
Regraded Unclassified
TO
THE OFFICIAL SECRETARY or STATE
DEPARTMENT OF STATE
WASHINGTON
June 21, 1939
My dear Mr. President:
With reference to our conversation of last night
and Secretary Hull's conversation with you of this
morning, I am submitting a memorandum on the Italian
countervailing duty question.
May I remind you that Henry Morgenthau told me
that he would sign the order giving notice that counter-
vailing duties will apply to Italian silk goods at
twelve noon today unless he had a written order from
you to the contrary before that time. The matter,
therefore, 18 very urgent.
Believe me
Faithfully yours,
fills
Enclosure.
The President,
The White House.
Regraded Unclassified
107
June 22, 1939
My dear Mr. President:
I am returning herewith Mr.
Welles' letter to you of June 21
with his memorandum to you of the
same date, on the subject of impos-
ing countervailing duties against
Italian silk. This is the material
you gave me at the White House yester-
day.
Sincerely yours,
The President,
The White House.
108
June 22, 1939
My dear Mr. President:
I an returning herewith Mr.
Welles' letter to you of June 21
with his memorandum to you of the
same date, on the subject of impos-
ing countervailing duties against
Italian silk. This is the material
you gave me at the White House yester-
day.
Sincerely yours,
The President,
The White House.
109
June 22, 1939
ky dear Mr. President:
I an returning herewith Mr.
Welles' letter to you of June 21
with his memorandum to you of the
same date, on the subject of impos-
ing countervailing duties against
Italian silk. This is the material
you gave me at the White House yester-
day.
Sincerely yours,
The President,
The White House.
Regraded Unclassified
110
June 21, 1939
MEMORANDUM FOR THE FILES:
In Miss Le Hand's office in the White House at
12:30 p.m. today, the Secretary, in the presence of Miss
Le Hand, Mr. Foley and Mr. Cairns, telephoned Mr. Summer
Welles at the President's request with respect to the
proposed Treasury Decision imposing countervailing duties
on silk exports from Italy. The Secretary explained to Mr.
Welles that he was telephoning him at the President's re-
quest, and that he wished to emphasize that the proposed
Treasury Decision related only to silk exports and to no
other commodities. The President wished that point made
explicitly to Mr. Welles.
The Secretary explained further that he was under
mandatory duty to issue the Treasury Decision, that he had
already granted the Italian Government 45 days time in
which to consider the matter, and that they would receive
an additional 30 days upon publication of the Treasury
Decision. Mr. Welles asked if the Secretary could grant
five or six days further extension. The Secretary stated
that he would defer the issuance of the Treasury Decision
until noon, July 1, in order to relieve the President of
any embarrassment. It was expressly understood, however,
between Mr. Welles and the Secretary that Mr. Foley's
opinion with respect to the necessity of the issuance of
the Treasury Decision on July 1 would be accepted without
discussion by Mr. Welles.
111
June 21, 1939
MEMORANDUM FOR THE FILES:
In Miss Le Hend's office in the White House at
12:30 p.m. today, the Secretary, in the presence of Miss
Le Hand, Mr. Foley and Mr. Cairus, telephoned Mr. Summer
Welles at the President's request with respect to the
proposed Treasury Decision imposing countervailing duties
on silk exports from Italy. The Secretary explained to Mr.
Welles that he was telephoning him at the President's re-
quest, and that he wished to emphasize that the proposed
Treasury Decision related only to silk exports and to no
other commodities. The Presidant wished that point made
explicitly to Mr. Welles.
The Secretary explained further that he was under
mandatory duty to issue the Treasury Decision, that he had
already granted the Italian Government 45 days time in
which to consider the matter, and that they would receive
en additional 30 days upon publication of the Treasury
Decision. Mr. Welles asked if the Secretary could grant
five or six days further extension. The Secretary stated
that be would defer the issuance of the Treasury Decision
until noon, July 1, in order to relieve the President of
any embarresament. It was expressly understood, however,
between Mr. Welles and the Secretary that Mr. Foley's
opinion with respect to the necessity of the issuance of
the Treasury Decision on July 1 would be accepted without
discussion by Mr. Welles.
HC/cp 6/21/39
it th
Regraded Unclassified
112
June 21, 1939
MHNORANDUM FOR THE FILES:
In Miss Le Hand's office in the White House at
12:30 p.m. today, the Secretary, in the presence of Kiss
Le Hand, Mr. Foley and Mr. Cairns, telephoned Mr. Surner
Welles at the President's request with respect to the
proposed Treasury Decision imposing countervailing duties
on silk exports from Itely. The Secretary explained to Mr.
Welles that he was telephoning him at the President's re-
quest, and that he wished to emphasize that the proposed
Treasury Decision related only to silk exports and to no
other commodities. The President wished that point made
explicitly to Mr. Welles.
The Secretary explained further that he was under
mandatory duty to issue the Treasury Decision, that he had
already granted the Italian Government 45 days time in
which to consider the matter, and that they would receive
an additional 30 days upon publication of the Treasury
Decision. Mr. Welles asked if the Secretary could grant
five or six days further extension. The Secretary stated
that he would defer the issuance of the Treasury Decision
until noon, July 1, in order to relieve the President of
any embarresament. It was expressly understood, however,
between Mr. Welles and the Secretary that Mr. Foley's
opinion with respect to the necessity of the issuence of
the Treasury Decision on July 1 would be accepted without
discussion by Mr. Welles.
HC/cp 6/21/39
Regraded Unclassified
113
June 21, 1939
8:43 a.m.
HMJr:
Hello.
Rentschler: Gordon Hello, Henry. Good morning.
HMJr:
How are you?
R:
Oh, fine! How are you?
HMJr:
I'm all right.
R:
Good!
HMJr:
Gordon, confidentially, we had a funny inquiry out of
Brazil. It seems that they've been selling some cotton
to Japan.
R:
You've what?
HMJr:
Brazil has been selling cotton to Japan.
R:
Brazil is -- yes, they have been selling some.
HMJr:
And -- on ninety-day paper.
R:
Ninety-day -- I don't know about that.
HMJr:
Well, that's what it 1s.
R:
Yes. I know they've been selling some to Japan.
HMJr:
And Brazil seems sort of annoyed that New York doesn't
discount this Japanese paper.
R:
I see.
HMJr:
Now, what I'd like -- which raised the thought, I won-
dered how much Japanese paper 18 floating around New
York, not only on merchandise that we've sold them,
but are we doing e. banking business for other
countries?
R:
I think, Henry, that I can find out pretty nearly that
whole story without much difficulty, and I'll ão it
and call you back.
HMJr:
Yeah, because it -- I think it's very sensible for us
not to finance our competitors in cotton.
- 2 -
114
R:
Quite right.
HMJr:
And I
R:
I tell you, I know this, the Japs here at this bank
paid off all of their loan
HMJr:
Yeah.
R:
and sold their United States Governments and
British Treasury bills to do it.
HMJr:
Who did?
R:
The Japs
HMJr:
Yeah.
R:
banks. We had here -- this is just for yourself,
you -- but it gives you the picture.
HMJr:
Yes.
R:
We had here between four and five million dollars of
Japanese bank loans.
HMJr:
Yes.
R:
Running to two or three different ones.
HMJr:
Yeah.
R:
And they were secured by -- they used to be secured by
Jap bonds and other Jap obligations.
HMJr:
Yeah.
R:
And about a year ago I told them we'd feel more com-
fortable and I thought they would too
HMJr:
Yeah.
R:
if they secured them with American and British
short-time Government obligations.
HMJr:
Ycah.
R:
And then they did -- they put in about fifty per cent
of longs and about fifty per cent of shorts.
HMJr:
Yes.
115
- 3 -
R:
Now, a few months ago they paid off our loans and sold
the bonds.
HMJr:
Yeah.
R:
And now they're carrying cash balances.
HMJr:
Yeah.
R:
Now, the amount of bills, in our own case, we used to
have about 20 to 25 million dollars worth of credits
running to Japan.
HMJr:
Yeah.
R:
I'll check it up again this morning, but the last time
I looked at it there was just a frantion of that. And
then I'll check through and see. I can easily find out
what might be going through the branches.
HMJr:
Yeah.
R:
Because it might well be that -- taking Brazil for in-
stance, there may be certain -- may have certain lines
that they'd use from time to time, and it may well be
that some of that cotton went through us from Brazil to
-- I don't think it would go to Japan because we can't
cover exchange.
HMJr:
Yeah.
R:
But it might have gone through the Japs at Shanghai where
they're paying cash for it.
HMJr:
Yeah.
R:
And there might be some cases where they are opening
against the cash -- opening against cash that they
deposit here with us or with the branch down there.
But you let me look it up and I can get a picture for
you.
HMJr:
Supposing you look it up and give me the picture of
what
R:
I can give you the picture without going too far with
the other fellow.
HMJr:
That's right. And not only to what they're buying in
other countries -- I mean, if they -- if they're try-
ing to finance through New York, what -- if any --
Regraded Unclassified
116
- 4 -
how they're handling their situation in this country.
R:
Yes, I see. Now in England they've quit -- they've
stopped using any credits we have in England. That --
they stopped that about six months ago.
HMJr:
Yeah, and I don't think the English are doing much
financing.
R:
No. Now, the big end of our
credit at the
present time 1s being used in Singapore for the pur-
pose of bringing rubber and tin into this country.
HMJr:
I see.
R:
They're -- I -- but I'll get the whole 8 tory for you.
HMJr:
Do that.
R:
I'll get the whole story and then I'll give you a ring
because it's easier to talk to you than to try to write
it out.
HMJr:
That's right.
R:
What else is going on, Henry?
HMJr:
Oh, plenty!
R:
Are you going to win your fight on silver?
HMJr:
Oh, I'm not
R:
You're just going to sit on the sidelines there.
HMJr:
I'm not worried about that bill. They -- I mean, thanks
to the newspapers it's out in the open that it's a
holdup game, you know?
R:
Yeah, well, I think you've done pretty well in publi-
cizing it, don't you?
HMJr:
I think Bo, and I think the public is with us.
R:
(Aside:) Get me the foreign silver, would you?
HMJr:
I say, I think the public is with us.
R:
Oh, I think the public 1s entirely in accord with not
buying a nickel's worth of stuff abroad.
117
- 5 -
H&Jr:
Well, I didn't mean that. I meant for the Treasury
just to sit tight and not to
K.
Oh, yes. You sit tight on it.
HMJr:
No - I -- I wouldn't mention the thought -- I meant
for us to sit tight and not
R:
That's one of the things you've got to keep your eye
on. If we keep on buying this silver abroad -- at the
Present time we're just buying -- we're buying it for
the Japs, aren't we?
HMJr:
I'm not sure. I'm not
R:
I mean, there's quite & little by way of London.
HMJr:
Yeah. Well, we're watching it very closely.
R:
Yeah. I think they're feeding us quite a little.
HMJr:
But the newspapers have been very helpful.
R:
Yeah, I think it's all right.
HMJr:
Yeah.
R:
And I think your position is a hundred per cent right
on it.
HMJr:
Yeah, I think 80. They -- I think we've got them
where the hair 1s short.
R:
Yeah, but I think that's a hundred per cent right.
HMJr:
All right.
R:
Well, Henry, I'll look this up right away and I'll give
you a ring back either between now and lunch or else
right after lunch.
HMJr:
It isn't -- I mean, this isn't a matter of minutes.
Take your time.
R:
Yeah. Well, I'd rather get it -- I -- I'll get it
pretty promptly for you.
HMJr:
Thank you.
R:
All right.
- 6 -
118
HMJr:
Good bye.
R:
Bye bye.
119
June 21, 1939
9:13 a.m.
Henry
Wallace:
Yes?
HMJr:
You called me yesterday?
W:
Oh, I did, about something. For the moment it's slipped
my mind.
HMJr:
Well, if you think
W:
Let me see -- oh, yes, I tell you what it was. (Talks
aside: Can you get a copy of that press statement I
was making this afternoon?) I wanted to read to you,
if you had the time
HMJr:
Well, I -- I'm just going to the White House. I'd
rather call you back or have you send it over to me,
if you don't mind -- if it's something long.
W:
No, I tell you what it was. It was a statement I was
putting out to the press on cotton policy.
HMJr:
Oh!
V:
It's been cleared with State Department, but I thought
I'd like to read it to you too.
HMJr:
Well, could I call you back when I come back from the
White House?
W:
That'll be fine.
HMJr:
Thank you. Thank you.
June 21, 1939
120
10:58 a.m.
HMJr:
Hello.
Operator: Senator O'Mahoney.
HMJr:
Thank you.
0:
Go ahead.
HMJr:
Hello.
Joseph C.
0'Mahoney: Hello, Henry.
HMJr:
How's the wide open spaces?
0:
Fine and dandy.
HMJr:
Are they?
0:
Henry, I wrote a letter to the President the other day
HMJr:
Yeah.
0:
which I regard as rather important.
HMJr:
Yes.
0:
I think it's more or less down your alley.
HMJr:
Well, It's on my desk. I don't know whether it's down
my alley.
0:
Uh-huh. Well, I sent it down to you this morning, and
I'm calling
HMJr:
Yes.
0:
just to ask you to take five minutes off and read
it.
HMJr:
Well, for you I'll take an hour and five minutes.
0:
All right. You do that, Henry, and then let me know what
you think about it.
HMJr:
Fair enough.
0:
It has to do with the conclusions that I have reached,
after all these studies up here over the year, and some
other things. I know that you've been trying to do the
right thing.
- 2 -
121
HMJr:
Yes.
0:
And I know that there are some other people around here
who want to do something that will only get us in a worse
mess.
HMJr:
I see.
0:
Read it, please.
HMJr:
I'll do it with pleasure.
0:
Thank you, Henry.
HMJr:
Good bye.
June 21, 1939
122
11:33 a.m.
HMJr:
Hello.
Operator:
Secretary Wallace's line is busy; I'm waiting for him.
HMJr:
Well, if I don't get him now, remind me of it.
0:
All right.
HMJr:
Thank you.
11:38 a.m.
HMJr:
Hello.
Henry
Wallace:
Hello, Henry.
HMJr:
Yes, Henry.
V:
Can you listen for about three minutes?
HMJr:
Sure !
W:
This 18 a statement which I would issue this afternoon
which I've cleared with the State.
HMJr:
Right !
V:
Secretary Hull.
"Numerous questions have arisen in regard to
relationship between Reciprocal Trade Agree-
ments program administered by Department of
State and certain programs, current and pro-
posed, administered by the Department of
Agriculture in the field of foreign trade.
"After consultation with the Department, I
believe:
If
You see, I'm issuing this.
II
I believe it appropriate, therefore,
to indicate the position of the two depart-
ments with reference to these questions.
Both departments, I believe, are agreed
that the Trade Agreement program represents
Regraded Unclassified
- 2 -
123
the soundest long-term approach to the solu-
tion of the foreign trade relations of the
United States, including particularly the
problem of disposition of our agricultural
export surpluses.
"This program recognizes concretely the funda-
mental principal that a nation must buy if it
expects to sell. Both departments, I believe,
recognize, however, that other programs of a
strictly agricultural character, involving
conservation of our soil resources, are neces-
sary to the advancement of agricultural welfare
in the United States, and that these programs
contribute to the solution of the export surplus
problem and the welfare of the entire nation.
"With regard to an export subsidy on cotton,
I am informed that Secretary Hull still stands
on his statement of March 28, 1939, a.8 follows:
'The Secretary of State when asked to com-
ment on the President's statement of
today on cotton exports said that of
course the attitude of the Department of
State, in support of our program for
general economic restoration, is well-
known. Secretary Hull said that we are
earnestly carrying it forward and shall
continue to do SO. He said further that
naturally if and when the President and
the Secretary of Agriculture reach a de-
cision to the effect that an emergency
situation exists in a given instance, and
that temporary emergency treatment in
their judgment is necessary, he would
cheerfully recognize and acquiesce in
such a decision."
HMJr:
Yeah.
"There is no question in my mind that emergency II
conditions do exist with respect
I am speaking again with respect to agricultural sur-
pluses arising to a large extent from present unsettled
world conditions, and in the case of cotton from the
enormous production of 19 million bales in 1937.
Regraded Unclassified
- 3 -
124
"Such a situation may require emergency action.
Such action may include the strictly temporary
use of export subsidies to enable the United
States to maintain, during these unsettled times,
its fair share of the export market, But un-
doubtedly a sounder approach to this problem of
agricultural surpluses, which it must be recog-
nized 1s not C.O nf inedto the United States, is
to be found in international collaboration look-
ing toward an ad justment in basic maladjustments
between the supply of these products and the ex-
porting countries and the demand in the importing
countries.
"With certain foreign countries now taking from
the United States only a small fraction of their
former imports of specific agricultural products,
it 18 obvious that those departments of Govern-
ment which have power to deal with this situation
in one way or another should give the problem the
most careful consideration."
This para -- this last paragraph is the only one which
even -- which brings your department into the picture
to some extent, perhaps. Where I say that it's "ob-
vious those departments of Agriculture which have power
to deal with this situation
should give the problem
the most careful consideration."
HMJr:
Yeah. Well
I'll read that paragraph again.
"With certain foreign countries now taking from
the United States only a. small fraction of their
former imports of specific agricultural products,
it is obvious that those departments of Govern-
ment which have power to deal with this situation
in one way or another should give the problem the
most careful consideration."
For instance, your Department might come in through --
well, the countervailing duty thing, and so on, various
things of that sort.
HMJr:
Yeah. Well, I'm glad -- I appreciate your reading it
to me, Henry, but I'd rather not make any comment.
W:
Uh-huh.
Regraded Unclassified
- 4 -
125
HMJr:
I mean, I can't over the 'phone and I don't think it's
up to me anyway, but I appreciate your courtesy.
V:
Yes. Well, you have -- you have no objection to my
putting it out tnis afternoon?
HMJr:
None.
V:
Yeah.
HMJr:
None.
W:
All right, fine.
HMJr:
Thank you.
W:
Good bye.
HMJr:
Good bye.
126
June 21, 1939
2:35 p.m.
Operator: Tommy Corcoran 1s calling you.
HMJr:
Who?
0:
Tommy Corcoran.
HMJr:
Right !
0:
Right.
HMJr:
Hello. Hello.
0:
He'll be right on.
(Brief pause)
HMJr:
Hello.
0:
Mr. Corcoran.
HMJr:
Hello.
Tommy
Corcoran: Mr. Secretary?
HMJr:
Talking.
C:
This is Tom, sir -- Tom Corcoran.
HMJr:
Can I sell you a little silver?
C:
(Laughter)
HMJr:
That ought to help a small business man.
C:
What I wanted to tell you was this.
HMJr:
Yeah.
C:
There's a fellow named Carl Bickel -- B-I-C-K-E-L
HMJr:
Yeah.
C:
who was the former head of the United Press.
HMJr:
Oh, yes.
C:
A fellow of about 55 now retired.
HMJr:
Yeah.
127
- 2 -
C:
He set up the United Press in South America in particular.
HMJr:
Yeah.
C:
He's been terribly excited about the South American
business.
HMJr:
Yes.
C:
And 18 a -- and is a retired owner of Scripps-Howard
HMJr:
Yeah.
C:
with nothing to do except build local projects down
in Sarasota, Florida
HMJr:
For heavens sakes !
C:
who could be probably used in a completely private
capacity
HMJr:
Yeah.
C:
to help tremendously on the South American business.
HMJr:
Fine !
C:
He was in town this morning and I -- and I sent him over,
just to tell some things he knew, to young Cotton.
HMJr:
Yes.
C:
And I wanted to tell you that I'd done that.
HMJr:
Fine !
C:
I think he's gone over to Cotton's office now.
HMJr:
Fine !
C:
I don't know whether you'd want to see him yourself.
HMJr:
Well, that's just
C:
But he's there if you should want to.
HMJr:
Well, I'm on the way over to the White House.
C:
Um-hm.
128
- 3 -
HMJr:
And I'll get word to him. If he can stick around I'd
like to see him.
He's worth -- I think, sir -- I think he has -- I mean,
C:
through that United Press connection
HMJr:
I know.
C:
I think he has something that might be useful to
you.
HMJr:
Fine !
C:
Thank you, sir.
HMJr:
I -- I got your message that you're for A. A. Berle for
Secretary of the Treasury.
C:
(Hearty laughter).
HMJr:
It's O. K. with me. I think it's a good idea.
C:
(More laughter). I thought you got my message that I
wanted to have lunch with you sometime if I could this week.
HMJr:
No, I didn't get that.
C:
Well, may I give you that message now?
HMJr:
Oh, sure.
C:
May I come over sometime?
HMJr:
Sure ! I just -- I'll have to look up the calendar. I'd
love it.
C:
Yeah. All right, sir.
HMJr:
Sure !
C:
Thank you.
HAS:
Righto ! Good bye.
129
June 21, 1939
4:16 p.m.
HMJr:
Hello.
Stewart
McDonald:
Yes, Mr. Secretary.
HMJr:
Stewart, I thought you'd be pleased to know that in
going over the -- this Recovery Program with the Presi-
dent I gave him your memorandum.
M:
Yeah.
HMJr:
And the President said that he will say nothing
X:
Yeah.
HMJr:
about reducing interest rates, but he will descend
on you like a ton of bricks on the 31st of July.
M:
0. K.
HMJr:
See?
M:
Thank you very much.
HMJr:
That gives you a breathing spell.
M:
You bet.
HMJr:
All right.
M:
Thank you very much. Say, Henry
HMJr:
Yeah.
X:
I forgot to tell you on that that we're starting three
hundred houses a week -- three thousand houses a -- a
month -- a week. You knew that, didn't you?
HMJr:
A week or month or
M:
A week -- a week. Three thousand houses a week; about
five hundred a day.
HMJr:
You told me five hundred a day.
X:
That's right.
HMJr:
That's right.
M:
O. K. That's about twice what we did last year.
HMJr:
Righto.
M:
Good bye.
Regraded Unclassified
130
Memorandum of Conference at the White House
2:45 p.m., June 21, 1939.
Present: The President
Secretary Morgenthau
Mr. Gaston
Mr. Foley
Mr. Bell
Mr. McReynolds
The Secretary presented to the President draft of a proposed
letter to Senator Byrnes suggesting the substitution in the Work
Relief Bill, in lieu of the Public Works item, of a program
involving self-liquidating projects to be financed by direct
borrowings which would be guaranteed by the Government. After
the President had made certain minor changes in the letter, he
called Jesse Jones on the telephone and asked his opinion of the
practicability of the proposed project to purchase railroad equip-
ment for leasing to railroads. Mr. Jones stated that in his
opinion there is no demand for such a project. The President
stated that he would undertake to have ascertained from various
railroads the extent to which they would utilize the equipment
if it were made available and pointed out that since many of the
smaller roads are now renting equipment from the larger roads
at rates more than double the charges that would be contemplated
under the proposed project, the demand for such equipment would
seems to be obvious. The President reduced the amount of the
estimate from $750,000,000 to $500,000,000 for the entire project
and from $250,000,000 to $100,000,000 for the first years' dis-
Regraded Unclassified
131
- 2 -
bursements and also extended the duration of the program to
three years instead of two. The President directed that the
reduced estimates be discussed with Mr. Eccles, of the Federal
Reserve Board. He also directed that an effort be made to
ascertain what assurances could be obtained from the railroads
that the equipment, if purchased, would be rented by them.
The President also called Jesse Jones and discussed the
proposed project for foreign loans and Mr. Jones indicated that
in his opinion such a project was not required because the
RF C can provide adequate funds for this purpose under existing
authority.
The President suggested the elimination of the proposed
paragraph relating to the reduction of interest rates of Federal
Housing loans.
The President stated that he had talked with Secretary
Ickes about the question of extending the P W A program with the
understanding that grants would be reduced to 25%. Secretary
Morgenthau stated that there are three reasons he wished to urge
why the President should not approve the extension of the P W A
program as follows:
(1) The President is already on record against it;
(2) Any public works grant would kill this self-
liquidating program; and
(3) On a political and economic basis, the Secretary
Regraded Unclassified
132
- 3 -
stated that he envisaged a two or three billion
revolving fund which would be sufficient to take
care of the Federal and State needs of the
country in times of economic pressure and that
there would not be involved any sign of outright
grants.
After a discussion of this point, the President suggested
that he would like to amplify the statements in the letter to
Senator Byrnes covering justification for the suggested program.
He dictated a draft of the type of material he wanted inserted
which was subsequently worked out and included in the letter as
finally issued. Copy of that letter is attached.
Regraded Unclassified
133
THE WHITE HOUSE
WASHINGTON
Jmn21
1929
Dear Senator Byrnes:
I have your letter of the 19th in which you ask my position
as to the provision of the "Work Relief and Public Works Appropriation
Act of 1939" as passed by the House of Representatives (H.J.Res. 326)
which would allot $125,000,000 to the Public Works Administration for
loans and grants for non-Federal public works.
I am opposed to this provision. It means simply that 165,000
men who are badly in need of work will have to be dropped from the
Works Progress Administration rolls; men who in the great majority of
cases are the sole support of families whose subsistence depends on
this slender income. What will happen to most of these mon is that
they will be forced onto already overburdened direct relief rolls of
cities, towns and counties, or, if these are insufficient to care for
them, onto private charity.
I believe there is a better way to accomplish the laudable
purposes of this bill. The great majority of people of this country
have come to realize that there are certain types of public improvements
and betterments which should be undertaken at times when there is need
for a stimulus to employment. At such times the Federal Government
should furnish funds for projects of this kind at a low rate of interest,
it being clearly understood that the projects themselves shall be self-
liquidating and of such a nature as to furnish a maximum of employment
per dollar of investment.
Regraded Unclassified
134
- 2 -
There seems no reason why there should not be adopted as a
permanent policy of the Government the development and maintenance
of a revolving fund fed from the earnings of those government invest-
ments and used to finance new projects at times when there is need
of extra stimulus to employment. Such times will recur in the future,
as they have in the past, and there will always be need for public
facilities and improvements in our natural resources which can be
most profitably met by the use at times of greatest need of employment
of the accumulated receipts of such a revolving fund.
At my suggestion, various departments and agencies of the
Government have canvassed the situation to find projects which will
meet genuine public needs - projects that can be put under way quickly
and, of great importance, will be self-liquidating. They have found
a variety of such projects which have stood the test of careful
scrutiny and which hold the promise of a great volume of productive
expenditure and employment. I believe this is a much sounder method
of dealing with the problem than the diversion of $125,000,000 of
work-relief funds. All can be financed through the issuance of
guaranteed securities by Government agencies with good prospect of
repayment of both principal and interest through earnings.
I have caused estimates to be made of the extent of the field
for investment of funds in revenue earning channels on a self-
liquidating basis and in no way competitive with private enterprise.
The estimates are, I believe, conservative. The types of projects
I have in mind are listed below, together with the sums which,it
is estimated, can be put to work to provide employment for men and
Regraded Unclassified
135
- 3 -
machines in diverse lines of industry within the coming fiscal year.
These projects are in addition to programs already submitted.
Program
Total
Loan
duration
Amount
disbursements
of
fiscal year
(years)
program
1940
I. Federal Works Agency -
(a) Non-Federal public works:
2
$350M
$150M
Projects of the self-finan-
cing type to be financed by
loans at sufficiently low
rates of interest to stimulate
borrowing for this purpose.
The type of projects would be
water-works, semge disposal
plants, bridges, hospitals, and
other municipal projects.
(b) Express Post-Roads:
4
750
150
Self-liquidating toll roads,
bridges, high-speed highways
and city by-passes.
700
ask
(c) Railroad Equipment:
3
500
100
Authority to purchase all
types of railroad equipment
which is to be leased to rail-
roads at a rate which will
return the cost to the United
States over a period of years.
Carriera would have the option
to buy the leased equipment.
II. Department of Agriculture -
(a) Rural Electrification:
7
460
20
Expansion of present rural
electrification program to
reach a maximum of 11 million
rural families not now receiv-
ing electric service nor likely
to receive such service in the
near future.
136
- 4 -
Program
Total
Loan
duration
Amount
disbursements
of
fiscal year
(years)
program
1940
350
(b) Farm Tenant Program:
2
$500M
$250M
Expansion of the self-liqui-
dating portion of the program of
the Farm Security Administration
for tenant farm purchases,
rehabilitation program, loans
for minor improvements and repairs,
loans to resettlement cooperatives,
and loans for water facilities.
III. Foreign Loans -
2
500
200
Extension of short and long-
term loans to foreign govern-
ments for the purpose of promot-
ing our foreign trade. The
proceeds of these loans would be
spent in the United States and
would be used for development and
reconstruction purposes in the
foreign country.
TOTALS
3060M
870M
This program would stimulate a greater amount of productive
expenditure than is indicated by the total estimated loan disburse-
ments of $870 millions for the fiscal year 1940. Some parts of
it will involve additional local expenditures not financed by Federal
funds, and other indirect expenditures will be generated.
To give effect to the program outlined above, some supple-
mentary legislation will be necessary. As a part, however, of the
whole program for stimulating productive employment, I include another
proposal which will not require legislation in addition to that now
pending. This is the expansion of the public housing program of the
Regraded Unclassified
137
- 5 -
United States Housing Authority through extending its borrowing
power by $800,000,000. I have already indicated my approval of
this legislation.
If you think well of such a program as I have outlined I
shall be glad to confer with you and your colleagues and with
Members of the House of Representatives. I am sending copies of
this letter to the Chairmen of the Appropriations, Finance and
Banking and Currency Committees of the Senate and to the Chairmen
of the Tays and Means, Banking and Currency and Appropriations
Committees of the House.
Sincerely,
finantium Murwelle
Honorable James F. Byrnes
United States Senate.
Regraded Unclassified
138
June 21, 1939
FOR THE SECRETARY:
Ben Cohen 1s telling newspapermen not to
bet that the Mead Bill will be sidetracked. He also
is telling them that, in his opinion, the Bill should
be broadened to insure not only loans made by banks,
but also commercial loans made by "an approved list"
of insurance companies, investment houses, industrial
financing concerns, etc. This is to circumvent the
argument of the bankers that they should not be the
ones who make capital advances to business.
Secretary Hopkins has said that he will make a state-
ment on the Mead Bill and these ideas may be embodied
in his statement.
ESD
Regraded Unclassified
TREASURY DEPARTMENT
139
INTER OFFICE COMMUNICATION
DATE June 21, 1939
TO
The Secretary
FROM
Mr. Hanes
This is a better draft than the one I gave you last night.
140
June 20, 1939
To:
The Secretary
From: Mr. Hanes
The Senate Finance Committee made the following changes in the
bill passed by the House:
1. They extended the privilege of the credit of up to 80 percent
of the 1926 estate tax to the estates of decedents dying in
the Philippines and other possessions, treating them the same
as taxpayers in the States.
2. Also, they allowed corporations and individuals a deduction
for charitable contributions made in possessions of the
United States in the same manner as is now allowed under the
income tax for charitable contributions made in the United
States.
3. They adopted an amendment to allow taxpayers beginning with
the calendar year 1939 the option of adopting last-in first-out
principle of inventory valuation.
4. With respect to the excise tax on cosmetics and toilet articles,
the Committee recommended that where a producing company held
less than 75 percent of the stock of a selling company, trans-
actions between them would be prima facie at arm's length. The
Committee also adopted an amendment, which was suggested to
accomplish the same purpose as the foregoing amendment. which
in effect provided that selling expenses and similar expenses
might be deducted in computing the base upon which the excise
tax on cosmetics applies.
5. They decided that in the case of a domestic corporation doing
business through affiliated subsidiaries in foreign countries,
permission should be granted to file consolidated returns.
6. The Committee decided that in the case of lawyers and others
receiving in one taxable year income from personal services
performed over a period of at least five preceding years, the
maximum tax would be the amount which would have been imposed
if the pro rata amounts had been taxable in each of the years
during which the income was earned.
7. They decided that provided the Treasury should approve the
provision and it could be drafted in time, insurance companies
(other than life and mutual) would be allowed the same deduc-
tions from gross income as are allowed other corporations.
Regraded Unclassified
141
- 2 -
3. They decided to extend, from December 31, 1939, to December 31,
1940, the date for consummation of tax-free reorganizations
of public utility holding companies ordered by the Securities
and Exchange Commission.
9. The Committee decided that in the case of undistributed profits
tax, provide that the renewals of debts shall not be considered
new debts as is the case under the present Internal Revenue
regulation following the report of the House managers in 1938.
This involves an amendment to section 27 (a) (4) to read that
indebtedness represented by a renewal obligation issued after
December 31, 1937. will be classed as indebtedness for the
purposes of section 27 (a) (4).
10. (The House Bill provided that when the Commissioner of Internal
Revenue determines that a corporation is in an unsound financial
condition, it may purchase its outstanding obligations at less
than the issue price without realizing taxable income.) The
Committee decided that where a Federal agency agrees to make
a loan to a corporation for this purpose, the determination by
such agency that the corporation is in an unsound financial
condition shall be accepted by the Commissioner.
11. They extended the time for filing 1939 capital stock tax returns
from July 31, 1939, to September 30, 1939.
12. They voted to permit persons claiming refunds on processing
taxes to file such claims up to January 1, 1940. This privilege
previously expired in 1937.
13. The Committee decided to terminate the requirement that lawyers
file returns as to the formation of foreign corporations which
was enacted in the 1937 Revenue Act.
14. The Committee adopted an amendment under which taxpayers receiving
loans from the Commodity Credit Corporation may at their option
report the loan as income in the year in which the loan is made,
instead of reporting such amount as income in the year in which
the cotton taken over by the Commodity Credit Corporation is sold.
J.W.H.
142
June 22, 1939
To: Mr. Blough
From: Mr. Hanes
At the meeting of the Ways and Means subcommittee today. after
the passage of the tax bill in the Senate, the cosmetics tax question
came in for quite a bit of discussion. Because of the complicated
political nature of this question. and because of the recognition of
the fact that we were licked in our opposition to the cosmetics amend-
ments by a majority in the committees of both houses of Congress, it
seemed foolhardy to hold up passage of the entire revenue bill on a
question the result of which is a known and foregone conclusion.
However, I do feel that this is an important question. and stated
to the subcommittee of the Ways and Means that it is one to which the
Treasury should give the closest study with a view to making a complete
report to the Congress not later than January 1, 1940. I have promised
the subcommittee of the Ways and Heans that I would be personally respons-
ible for having such a study made, and with this end in view I direct
you to take this matter under your personal supervision and make a com-
plete study of the entire cosmetics tax situation. This study should
involve the closest observation of the methods of manufacture. sales,
advertising. gross profits. net profits. and financial condition of all
the units in the industry reporting.
I would like to do a good job on this study as I feel very definitely
that we have been victimized by a political lobby which took us by sur-
prise since we had been led to believe that the legislative and executive
branches of the Government were in agreement that no changes in the excise
taxes would take place at this session of Congress.
This matter places us in a very embarrassing position with all will the
now suffering from sales or excise taxes. I
other nsk manufacturers to me posted from week to week on the progress being of made the
on this you study keep so that I can report such progress to the Chairman
Ways and Means Committee.
J.w.H.
copy Sec. morgenthan
Regraded Unclassified
TREASURY DEPARTMENT
143
INTER OFFICE COMMUNICATION
DATE
JUN 2 2 1939
TO
Secretary Morgenthau
FROM
Mr. Foley
For your information.
Various representatives of small business and several individuals
appeared today before a Subcommittee of the Senate Committee on Banking
and Currency and testified in favor of the Mead bill. Those testifying
included Roland Jones, representing the National Association of Retail
Druggists; Carl P. Bloom, representing the Wearing Apparel Boardof
Pennsylvania; George A. Gottlieb and Henry Modell, representing the
Small Business Men's Association of New York; William I. Shuman, repre-
senting the New York State Federation of Little Business; William Stoddard,
a former Boston banker, and Ralph Nugent, of the RussellSage Foundation.
The witnesses testified that the banks are not adequately supplying
the credit needs of small business enterprises and that in many instances
sound business enterprises are unable to obtain either short or long term
loans. Various witnesses stated that this forced small business men to
resort to loan sharks and that they are unable to compete with chain
stores and other large business enterprises which are able to obtain credit
at very low rates of interest.
William I. Shuman, representing the New York State Federation of
Little Business, and a former chief national bank examiner, stated that
conflicting policy and lack of coordination among the office of the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
144
- 2 -
State Bank Supervisory Agency, and, to a certain extent, the Reconstruction
Finance Corporation, are partially responsible for the failure of banks to
nake loans to small business enterprises.
William Stoddard, a former Boston banker, stated that there is a
very definite need for supplying medium sized business enterprises with
a means of obtaining semi-permanent capital. He stated that there is a
field where expanding business enterprises find themselves unable to supply
their capital needs by short term bank loans and at the same time have not
reached a size where they can float issues of stock. He cited the case
of a New England textile company which found itself in this situation, and
stated that to his knowledge there are many other companies in the same
predicament. He suggested that provision be made in the Mead bill for the
establishment of local organizations to supply the capital needs of such
enterprises.
Ralph Nugent, of the Russell Sage Foundation, presented very con-
vincing data to show that banks are not now supplying the credit needs of
small business. The data presented showed that small business men are
forced to resort to industrial banking companies, small loan companies,
personal loan departments of banks, and similar organizations, and to pay
rates of interest ranging from 7 to 60 per centum per annum. He stated
that the small business borrower's position is today worse than at any
time since 1929 and heartily endorsed the Mead bill as a solution of this
problem.
E.W.th.
Regraded Unclassified
TREASURY DEPARTMENT
An
145
INTER OFFICE COMMUNICATION
DATE
June 22, 1939.
Secretary Morgenthau
TO
Mr. Foley
FROM
For your information.
Further hearings were held today by a Subcommittee of the Senate
Banking and Currency Committee which is considering the Mead bill.
Former Senator Brookhart, representing the Little Business Men's
League of America, testified in favor of the bill and suggested that it
be amended to include the insuring of agricultural loans. Albert Benjamin,
President of the Anglo-American Trading Company of New York, also testified
in favor of the bill and stated that there is a need for additional credit
facilities for small business men, particularly in the importing and ex-
porting trade.
Several members of the National Small Business Men's Association
testified against the bill. They stated that sound business enterprises
can not obtain ample credit and that the Mead bill would only serve to
subsidize inefficient enterprises and encourage unfair competition. All
of these witnesses expressed disapproval of the policies of the present
Administration. The President of the Association, D. F. Emery of Akron,
Ohio, refused to disclose the number of members of the Association and
its organizational details, and other witnesses were equally vague.
Donald Woodard, an economist of Moody's Investment Service, pre-
sented a statistical study of American corporations. This study showed
that 40 per cent of the entire corporate business in this country is done
Regraded Unclassified
146
- 2 -
by corporations with assets of less than $1,000,000, such corporations
numbering some 400,000. The study revealed that the working capital
ratio, 1. e., the ratio of current assets to current liabilities, is
much greater for large corporations than small corporations and that
whereas the larger corporations have almost recovered from the effects
of the depression upon their working capital position, the working capital
position of smaller corporations is becoming progressively worse from year
to year. The study also showed that small corporations in their financing
rely upon short term credits to a much greater extent than do larger cor-
porations.
9.12 7L
Regraded Unclassified
147
June 22, 1939.
Secretary Morgentheu
Mr. Foloy
For your information.
Purther hearings were held today by a Subcommittee of the Senste
Benking and Currency Consittee which is considering the Mend bill.
Former Senator Brookhert, representing the Little Business Man's
League of America, testified in favor of the bill and suggested that it
be amended to include the insuring of agricultural loans. Albort Benjamin,
President of the Anglo-Americen Treding Company of See York, also testified
in favor of the will and stated that there is 4. need for additional credit
facilities for small business non, perticularly in the importing and 000⑉
porting trade.
Several members of the National Small Business Mon's Association
testified against the bill. They stated that sound business enterprises,
osh not obtain emple credit and that the Mead Mll would only serve to
subsidize inefficient enterprises and encourage unfair competition. All
of these witnesses expressed disapprovel of the policies of the present
Administration. The President of the Association, D. F. Easry of Akron,
Ohio, refused to disclose the number of members of the Association end
its organizational details, and other witnesses were equally regue.
Donald Woodard, on economist of Moody's Investment Service, pre-
sented 0. statistical study of America corporations. This study showed
that 40 por cent of the entire corporate business in this country is done
148
- 2 -
by corporations with assets of less then $1,000,000, such corporations
membering some 400,000. The study revealed this the working copital
rotio, 1. Oog the ratio of current cosets to current liabilities, is
such greater for large corporations than small corporations end that
sherens the lergercerporations have almost recevered from the effects
of the depression upon their working capital position, the working capital
position of smaller corporations 10 becoming progressively worse from your
to year. The study also showed that small corporations in their financing
rely upon short tera credits to & such greater extent than do larger 005-
porations.
(Initialed) 1. B. B.C 2v.
GFRains
Regraded Unclassified
149
June 22, 1939.
Secretary Morgenthau
Mr. Foley
For your information.
Further hearings ware hold today by a Subcommittee of the Senete
Banking end Currency Committee which is considering the Mend bill.
Former Senator Brookhart, representing the Little Business Men's
Leegue of America, testified in fever of the bill and suggested that it
be emended to include the insuring of agricultural losns. Albert Behjamin,
President of the Anglo-Americon Trading Company of New York, also testified
in favor of the Hill and stated that there is 4. need for additional credit
facilities for small business non, particularly in the importing and 0%-
porting trade.
Several members of the National Small Business Ron's Association
testified against the bill. They stated that sound business enterprises
can not obtain ample credit and that the Head bill would only serve to
subsidize inafficient enterprises and encourage unfair competition. All
of these witnesses expressed disapproval of the policies of the present
Administration. The President of the Association, D. F. Emery of Akron,
Ohio, refused to disclose the member of members of the Association end
its organisational details, and other witnesses were equally vagus.
Donald Woodard, on economist of Moody's Investment Service, pre-
sented a statistical study of American corporations. This study showed
that 40 por cent of the entire corporate business in this country is done
Regraded Unclassified
150
- 2 -
by corporations with assets of less than $1,000,000, such corporations
ambering some 400,000. The study revealed that the working capital
ratio, 1. O., the ratio of current assets to current liabilities, to
such greater for large corporations than small corporations and that
whereas the lorgercorporations have almost recovered from the effects
of the depression upon their working capital position, the working capital
position of smaller corporations 1s becoming progressively worse from your
to year. The study also showed that small corporations in their financing
rely upon short term credits to & much groater extent than do larger car-
porations.
(Initialed) &. a. 8., Jr.
GFRaims
151
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
JUN 22 1939
Secretary Morgenthau
TO
Mr. Foley
FROM
For your information.
Mr. Leonard P. Ayres, Vice President of the Cleveland Trust Company,
appeared today before a Subcommittee of the Senate Committee on Banking
and Currency and testified concerning the economic aspects of the Mead
bill. It is his belief that the insurance of loans to business would
not be likely to contribute to more rapid recovery.
Mr. Ayres, who is a statistician, stated that during the period
between 1909 and 1929, 60 per cent of all business enterprises operated
at a profit, whereas at the present time only 30 per cent of such enter-
prises are operating at a profit. He stated that periods of recovery
in the past have always been characterized by great increases in the
marketing of common stock equities and that conditions should be re-
stored so that the sale of equity capital in business enterprises will be
enlarged. It is his belief that the issue of common stock equities would
be increased, and recovery aided, if issues of less than $1,000,000
were exempted from the registration requirements of the Securities and
Exchange Commission, and if income from stocks were taxed less heavily
than income from bonds or other investments.
9-15-7h.
Regraded Unclassified
152
RE RAILROAD EQUIPMENT PROGRAM
June 22, 1939.
10:00 A. M.
Present:
Mr. Hanes
Mr. Bell
Mr. White
Mr. Foley
Mr. Gaston
Mr. McReynolds
Mr. Currie
Mr. Lochhead (very brief period)
H.M.Jr:
Hello, Currie.
Currie:
Good morning, Mr. Secretary.
H.M.Jr:
How are you? We're in a kind of jam. Come up here
and sit down.
Currie, you see, the impression was gotten over to
the President by - I don't know who was doing the
talking - they mentioned, kept mentioning your
name, that you had this man out on the road and
that you have contacted the railroads and that you
knew that they wanted this thing. And then the
President said, "Well, get Currie to give me the
names of the railroads, And there we are, see?
Now, this letter that goes up only mentions a hundred
million. Now, we are doing this supposedly as a
Fiscal and Monetary Committee. Which is the best
way from your standpoint? Should I - because Mr. Eccles
mentioned it in his speech, did mention it in Boston
on Saturday, didn't he?
Currie:
Just in the form of railway equipment, I believe,
but nothing specific at all.
H.M.Jr:
No. Well now, do you want me to take it up with
him and say, 'Well now, what railroads are there?
The President wants to know"?
Currie:
I think the
H.M.Jr:
You see, I'm the person - in the Treasury, when some-
thing like this is recommended to the President,
if it isn't there, it's my responsibility. I can't
go all the way down and say, "There was a meeting
Monday night and the men misunderstood you, so forth
and so on." But there seemed to be a misunderstanding
153
- 2 -
here as to what you claimed.
Now, from your standpoint what we want is this.
The President - at 11:00 o'clock this will be out,
that he recommends this thing, and there is a
hundred million dollars worth of business. Now,
as I understood, everybody said he could defend
his particular item, and I understand - I think
Bell said so - they'll be looking to you to go
on the Hill and defend this thing.
Currie:
Well, that was made clear the other night, that I
didn't think I'd be able to; and I don't know where
the impression got around that I had a man on the
road, because I certainly haven't got such a person.
McR:
Didn't you say you had somebody out making inquiries,
that someone was making inquiries?
Currie:
One of my assistants had been going around town
working on the technical details, question of the
age of cars and the repair costs, but I haven't
had any authority - I couldn't go out contacting
roads; I'd be exceeding my authority badly 1f I
did such a thing.
Now, Mr. Secretary, the history of this thing -
this was worked up for Mr. Eccles a year ago and
at that time he did recommend it to the President,
in the spring of 1938. Since then, and more
recently, he has felt that although the idea is
sound, it's a good one, it probably is not politically
feasible, there will be a lot of opposition, so he's
been stressing more the possibilities of working
out loans from the RFC. Now we put that in, as
you remember, the initial form as a possible sug-
gestion for the President's consideration; he could
either do this or he could do that.
H.M.Jr:
We had (a) or (b) and he took (b).
Currie:
He took (b).
H.M.Jr:
That's right.
Currie:
I don't think Mr. Eccles would feel he is actually
sponsoring or that he proposed or recommended this
154
- 3 -
plan at this time. It's in the realm of 8. sugges-
tion to the President. I don't think he'd feel,
being in the Federal Reserve, that - I can't speak
for him, but I'm just assuming what he would feel -
that he can go out and do all the contacting and
pushing through and sponsoring and preparing the
testimony and things like that. That's outside
his bailiwick. On the other hand, I have talked
to Mr. Hopkins, who is quite onthusiastic about
the thing, who is prepared to assume sponsorship,
who is prepared to get people down here, railway
men and equipment people, and talk to them. And
I said I'd be glad to help in any way I could, on
the side - to help him in any way I could.
H.M.Jr:
Well, do you mind, Bell or somebody, because I
wasn't here, unfortunately - isn't it - wasn't it
or is it your understanding that each one of these
items - that there is somebody that's going to go
up on the Hill and defend them?
Bell:
Yes. I thought we talked to Currie the other night -
that he would be the one to defend it, because we
were trying to talk to the people who would have to
defend these items. That's the reason we wanted
them to give their best estimates, something they
would defend before a committee. If I'm not correct
on that
Foley:
That's right.
Caston:
Is there somebody in ICC who could defend this idea?
Currie:
We discussed that the other night. Mr. Foley particu-
larly asked me about that point, a question on the
technical testimony. I have one or two men that
might be permitted to go up - Mr. Terbourg.
Foley:
That's right. And I asked you whether, even though
Eccles was not in favor of this, you thought you
could do this. You said yes.
Currie:
Yes. Of course, that depends on the Board - whether
they'd sanction it.
Then, I think there might be people - 1f Commerce
really assumes sponsorship of this thing, I assume
Regraded Unclassified
155
- 4 -
they'd have people over there that would be pre-
pared to see it right through. And Mr. Hopkins
said that he is prepared to take sponsorship of
it, actually do the contacting and interviewing.
He's meeting with the president of American Car
and Foundry and president of American Locomotive
tomorrow morning, I happen to know.
H.M.Jr:
Are those the people that would like to see this
thing go through?
Currie:
The equipment people would naturally be the most
enthusiastic.
Foley:
The most benefited by it.
Currie:
So he thought he'd see them first, see 1f he could
talk in terms of price, see what they could do on
a large order spread over time, and then talk to
the border-line roads, the roads we know are in need
0.° equipment.
H.M.Jr:
Well, unquestionably - as I say, I didn't join in
the conversation because I wasn't present, but
they quoted you at least twice during the day to
the President as being the father and mother of
this plan, and last night the President said, "Well,
get Currie and give me the list of the roads."
Currie:
That was a grave misunderstanding, Mr. Secretary,
because it was no more than a bright idea. I mean
I couldn't do more than that with it.
White:
Let's put it this way. Would you be willing to
defend your estimates and your position on the basis
of the data which is available?
Currie:
(Nods yes).
White:
That's all you said. That's a very different thing
from saying he has promises, guaranties from rail-
roads that they will take this equipment.
McR:
I don't know that anybody said he had such promises.
Gaston:
I didn't get that impression.
McR:
It wasn't my impression that anybody told the Presi-
dent that.
156
- 5 -
Gaston:
My understanding was that when the President asked
for names, he asked for names of roads that would
be & potential market for this equipment.
McR:
I don't think the President understood at all that
there would be any promises from railroads.
H.M.Jr:
Look at your notes, Mac. The smaller roads - there
were several roads mentioned by name.
Well now, look
Currie:
I have a table prepared of the roads on the age of
their equipment.
H.M.Jr:
All right, look, this is - as I say, I don't know
how they work over in the Fed. The boys know how
I work here. The Treasury is in a jam on this thing.
Publicly I'm committed to it, you see. I'm committed
to everything. I'm publicly committed. Now, let's
get busy and see 1f there are any railroads that
want to do this thing, and what I'd like you to do,
as far as - and you're on the spot right over - along
with the President of the United States. Therefore,
what I would like you to do for the President and
for the Treasury is to find out from Hopkins whether
he - not so much the railroads, and so forth, but how
far he'll go; and then, 1f you can find out, I'll
contact him. But I'd like you to contact him first.
Then let's - I mean we work under this terrific
pressure, and if he'll go to bat and if he'd like
me to call him up - but I think 1f you could get
over there now and see him as soon as possible
Have you got access to him?
Currie:
Yes.
H.M.Jr:
And I think the truth is always the best, and tell
him what the situation is, and then if he'd want
to assume this part of the program and would be
willing to defend it on the Hill, fine and dandy.
But I don't want to have Jimmy Byrnes call hearings
and, let's say, start on this thing Monday and then
have nobody willing to defend this thing. We've
just got to make the best of what appears at the
moment - of a bad bargain. Now, maybe it's all
right. Fortunately, it's only down for 8. hundred
million.
157
- 6 -
But if you'll do that today, so that in the next
24 hours we can have somebody get busy who will
contact the railroads as well, then we can comply
with the President's request so that he can have
a list of the railroads. And then if you tell me,
"Mr. Hopkins would like to talk to you, or "will
you call Mr. Hopkins?" I'll do it. So we can get
busy and find out what railroads there are, 30
that within a reasonable time we can give the Presi-
dent what he wants, so he can say, "Well, there
are 30 many railroads that want this thing," if
that is so.
Currie:
Yes. I think that is very important before we go
ahead, that we have at least an indication that
they would be interested in taking so many freight
cars if they could get them at such and such a
price.
H.M.Jr:
I thought Mr. Eccles, when we had the (a) and (b) -
I thought he leaned toward the Government corpora-
tion for this.
Bell:
Oh, he did.
H.M.Jr:
I thought that he leaned toward the Government cor-
poration rather than through the RFC, at our last
meeting.
Bell:
The President said, "I favor (b), and both Mr. Delano
and Mr. Eccles said, "I go along with that." It's
in my notes.
H.M.Jr:
You wrote up the notes. That's what I thought.
Currie:
I think I certainly would like to tell Mr. Eccles
about this.
H.M.Jr:
Will you tell Eccles the whole story, and maybe he'll
want to jump in and say he'll do it.
Currie:
That would be fine.
H.M.Jr:
But I don't want - the way it is now, the President,
you and I are responsible. You see? Now, somebody's
got to go up on the Hill and defend this thing. I
158
- 7 -
want to know who will actually talk to the rail-
roads and who will do this job. I'm sorry I wasn't
here.
Foley:
How about Frank Wright in the RFC?
Currie:
I haven't talked to him recently. Last year he was
in favor of loans from the RFC, not this proposal.
But Mr. Delano, I know, is in support of this pro-
posal.
H.M.Jr:
I think we're all right on everything else.
Currie:
Well, I'll get right after that, Mr. Secretary, and
let you know.
H.M.Jr:
Has anybody else got any other ideas?
Thanks for coming over. Will you call me personally?
Currie:
Yes, I'll get in touch with you as soon as I have
something to report.
H.M.Jr:
Thank you very much.
(Currie leaves)
Anybody want a last word?
Gaston:
Only that I didn't understand that the President got
any such definite impression as that there were
certain roads that were in the market and ready,
guaranteeing that they were ready to lease equipment.
H.M.Jr:
Well then, why should he have asked for the names,
Herbert?
Gaston:
I should suppose he'd want to know what are the types
of roads that have the minimum of equipment and worn
out equipment, where there would be a potential
market for good new cars at a low leasing rate.
H.M.Jr:
Certain names were mentioned and he said, "Well,
If
I want
" - he said, "Get Currie to give you.
The statement was made that Currie had a man out
on the road contacting the railroads and that there
are these - I mean on this sort of thing I don't -
159
- 8 -
my memory hasn't failed me yet. And then the
President said, "Well, tell Currie that I want &
list of those railroads."
Well, we've been on the spot before and I'm not
going to let this thing spoil a plan which is a
wonderful plan, and I think it's going to do a
lot of good.
Harry, what - to leave this thing - what's the next
move now on the silver thing? What happens next?
White:
Well, apparently there is a possibility that the
tax discussion may take place, as you probably know,
on the floor, which would postpone this other. But
1f you had a chance to see the papers this morning
H.M.Jr:
Yes.
White:
Plastered over the papers.
H.M.Jr:
I did, but I'm not
White:
Beyond that, I'm not familiar
H.M.Jr:
You or Foley - do you think there's any use of my
talking to anybody?
White:
I don't.
Foley:
Not this morning.
H.M.Jr:
Now, you people know what I'm doing. I'm sitting
tight. Let me see if I can get the President and
tell him that. You stay a minute on this equipment
thing.
(On White House phone) Hello. - the President, please.
- - - Hello. - the President. - Thank you. - - Yes. -
Well, I would kind of like to talk to him before
10:30, before my press conference, 1f you could send
that slip in, please. - Thank you.
Lochhead:
There have been quite a few inquiries in Philadelphia
whether they'l hold the Mint open after the usual
closing hour on June 30th to take transfers. I told
160
- 9 -
them we don't know of anything. - I mean business
as usual unless they hear something to the contrary.
H.M.Jr:
You know my policy on Nellie Ross. McReynolds takes
care of her.
Lochhead:
I don't think it has to go as far as that even.
H.M.Jr:
All right.
Well, Currie's - he'll get busy and we'll see what
happens.
161
JUN 2 2 1939
My dear Mr. Secretary:
Reference is made to By letter of June 16, 1939, in
reply to your communication of June 14, 1939 (EA 611.653/103)
with further reference to the proposed imposition of counter-
vailing duties on certain imports from Italy.
In my letter I stated, among other things, that this De-
partment hed comminicated by cable with the Supervising Treasury
Attache at Peris in respect of the name of the Treasury repre-
sentative who will go to Rome end the date of his arrivel in
that city, and that your office would be furnished with that
information upon receipt of the Supervising Treasury Attache's
reply.
I an informed by cable of June 19, 1939, from the Super-
vising Treasury Attache at Paris that the names of the repre-
sentatives of this Department who will go to Rome to confer with
the Itelian officials are Bernard Wait, William A. Conkright and
N. Paterniti. They will arrive in Rome on June 25.
I an enclosing 8 copy of the cable sont today to Mr. Wait.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury
The Honorable
The Secretary of State
File to Mr. Thompson
20C/HG/cp 6/22/39
By hand
Regraded Unclassified
COPY
162
REGONSTRUCTION FINANCE CORPORATION
WASHINGTON
Just H. JONES
- of THE BOARD
June 22, 1939
Dear Mr. Secretary:
In connection with the transfer to your Depart-
ment of Commodity Credit Corporation and its management, under
the President's First Plan on Government Reorganization, the
RFC stands ready to cooperate with you in the interest of its
continued economical and efficient operation.
The administrative expenses of Commodity Credit
Corporation from 1933 to 1939 have been less than 1/4 of 1% of
the aggregate principal amount disbursed on loans and commit-
ments. This low operating cost has been possible only by using
the Agency force of the RFC, as well as the advice and counsel
of its executives in the Washington office. The service has
been rendered on a reimbursable basis without profit or loss
to the RFC.
Most commodity loans have been made by local
banks under arrangements by Commodity Credit Corporation and
the RFC to take the loans up on demand, or on specified dates.
I do not know what your plans are, but in the
interests of efficiency and economy the RFC will be glad to
continue serving Commodity Credit Corporation on a reimbursable
basis.
It is my impression that 3,000,000 loans to a
million and a half farmers have, upon the whole, been handled
in 8. manner satisfactory to the borrowers, as well as the banks,
warehouses, and others that have cooperated in making the loans.
Sincerely yours,
(Signed) Jesse H. Jones
Chairman
Honorable Henry A. Wallace
Secretary of Agriculture
Washington, D. C.
163
June 22, 1939
9:03 a.m.
HMJr:
Hello.
Operator:
They expect Mr. Currie in about a half hour.
HMr:
All right. See if he's at his home.
0:
All right.
HMJr:
Don't call me until you get him.
0:
Right!
9:10 a.m.
HMJr:
Hello.
Lauchlin
Currie:
Good morning, Mr. Secretary.
HWr:
How are you?
C:
Fine, thank you.
HMJr:
Currie, you'll be pleased to know that the President
signed a letter last night
C:
Yes?
HMJr:
it goes up -- to be released by the White House at
eleven o'clock, -- to the Hill on this recovery program.
C:
Oh, really?
HMJr:
Yes.
Q:
Oh well, that'
HMJr:
Now
0:
that's splendid!
HMJr:
Now, in discussing the thing -- I wasn't here when the
boys asked you about the railroads, or what railroads
would borrow, you see?
C:
Yeah.
Regraded Unclassified
164
- 2 -
HMJr:
And that was the program the the President questioned
the most closely. And they said -- where -- he said --
"Where did you get it from?" And they said, "Lauchlin
Currie."
C:
Yes.
HMJr:
They didn't say Eccles, they said Currie. That's why
I'm calling you.
C:
(Chuckle)
HMr:
Now, the President asked last night and he'd like to have
a list of the railroads that you know will use this de-
vice of getting new equipment.
C:
Well, you know, Mr. Secretary, that I've been very handi-
capped in doing with that -- anything with that, because
the -- Mr. Eccles has kind of lost some interest in it,
so I couldn't very well go out and contact the railways.
HMJr:
Well now
C:
I spoke to Mr. Hopkins about a week ago about it -- the
conversation; he took a great deal of interest in it
and he said he'd like to follow it up. He had some
people on his Advisory Council and he was a very good
friend of Mr. Kelley's and I think he -- he has been
taking some
HMJr:
Well, the boys told the President -- I mean, when I --
my men last night told the President flatly that you've
been contacting, that you had somebody out, and that
you could furnish the names of the railroads that would
borrow.
C:
I can't do that, Mr. Secretary.
HMJr:
Gee, that's terrible!
CC:
I mean, we -- we know the -- the borderline roads. We
think that it would be profitable to them to rent on a
short-term lease at a low rate.
HMJr:
I'll ask the -- when they come in at nine thirty. I
can't remember whether it was Foley or McReynolds or
Bell, but one of them quoted you as saying that you
had a man out and that you could name the railroads.
C:
Well, I don't see how he could have said that because I
haven't had any -- I haven't contacted any -- any of the
- 3 -
165
railroads at all. I've been indirectly sounding out
some of the equipment people. Now there's two equip-
ment men coming down to the Commerce tomorrow. Bill
Thorp 1s going to talk to them, - the President of the
American Locomotive, the President of the American Car
and Foundry and Mr. -- and the Baldwin President is
coming down the first of the week. They thought they'd
sound out the equipment people first, where they get a
good reduction on a very large order over a period of
years and then take up the question with some of the
borderline roads, like the Illinois Central, the B. and
0., and others.
HMJr:
But -- but you can't give the President a list. When
you say you can't -- Currie -- I can't remember -- there
were four of our men. I don't know which one, but one
of them quoted you and quoted you to the President. I
didn't because I
C:
That's very unfortunate that he -- he certainly must
have misunderstood me on that because I
HMJr:
And he mentioned the name definitely that Currie has
this list and has contacted them and so forth and so on.
I'm sorry
C:
You see, I had no authority to contact anybody on the
outside and talk about this thing at all. I mean, I
might have got in trouble for doing such a thing.
HMJr:
Yeah.
C:
And
HMJr:
Well, after my men come in, I'll find out which one said
it and -- I'm sorry for you, but I'm more sorry fqr the
President.
C:
Yes. I mean, it makes it even more important that we
try to
HMJr:
Because they
C:
push this thing through I suppose.
HMJr:
Two or three times -- I mean, they said, "Currie has
the answer."
Regraded Unclassified
- 4 -
166
C:
Dear, dear, dear, dear. All I had, Mr. Secretary, was
the bright idea, you know. I mean, I've done a lot of
the technical work
HMJr:
Yeah.
C:
in working out the details and how it might be set
up and how this objection might be met and how that. But
I mean, I haven't had any authority or permission to go
out and see if I -- it could be sold.
HMJr:
Well, who did you see the night that you were here --
wasn't it Monday night?
C:
That was a -- quite a big gang. I was in there just
while they were discussing the railway thing. All --
it was all your people.
HMJr:
Well, I - I
C:
Bell, McReynolds, Gaston
HMJr:
I don't question you, but I wish I had talked to you
myself.
C:
It 1s a shame, yes.
HMJr:
Yeah. All right, Currie.
C:
That has actually gone in the program and is gone? That
has actually gone up to
HMJr:
Yes.
C:
the Hill?
HMJr:
Yes.
C:
Well, we've got to pull it off then, don't we?
701 Jr:
What?
C:
We'll have to pull it off.
HMJr:
Yeah. You're on the spot.
C:
I am. (Laughter)
HMJr:
Because everybody -- well, the President was told it was
you. Now, I didn't tell him that because I couldn't.
I'll find out; I'll call you back after ten o'clock.
Regraded Unclassified
- 5 -
167
I'm afraid that won't help. I wouldn't be interested
C:
because -- on what basis I've said that
HMJr:
Excuse me?
C:
I say, I'm afraid that won't help an awful lot the
immediate problem if I know who said it, but I would
be interested.
HMJr:
Well, would you do this. Would you come over to the
office at ten and I'll have here whoever is here and
let's see if we can't make good for the President.
That's what I want to do.
C:
Yes.
HMJr:
I'm not interested in who said what, but I want to make
good for him.
C:
Yeah.
HMJr:
So would you drop over here if you have
C:
Yes, I'll do that.
HMJr:
Thank you.
C:
All right. Thanks.
168
June 22, 1939
9:20 a.m.
Hull's
Secretary: Just one moment please, Mr. Secretary. Secretary
Hull 18 coming right on.
HMJr:
Hello. Hello.
Operator: He'll be right on.
HMJr:
Hello.
Cordell
Hull:
Hello.
HMr:
Hello, Cordell.
H:
How are you?
HMJr:
I'm pretty well.
H:
That's good.
HMJr:
And you?
H:
Fine!
HMr:
There are two things that I'd like to have your advice
and approval if you think well of them.
H:
Yeah.
HMJr:
One, the Finnish Minister has been in here two or three
times talking to us about his Government getting a
Government loan from the United States and he wanted
me now to sound out the Democratic leaders confidentially
to find out, and if they asked us formally for such a
loan, would they have a good chance of getting it through
Congress.
E:
Yeah.
HMJr:
I think I mentioned this to you before. I'm not sure.
H:
I -- I don't remember about it. I guess you have.
HMJr:
Well, I -- maybe I did to some of your people.
H:
Yeah.
HMJr:
Now, I spoke to the President about it and he said pro-
vided that they spend all the money in the United States
he had no objection to my sounding out the Democ ratic
leaders.
- 2 -
169
H:
Yeah.
HMJr:
How -- do you
H:
That would be for Congress to authorize you?
HMJr:
Yes, sir.
H:
Yeah.
HMJr:
Treasury -- Government to Government authorization from
Congress.
E:
Yeah. Well, I would write the check in just a little
more with that Russian-Finnish situation.
HWr:
Fine !
H:
The Russians have made demands on them, as I stated one
day in the Cabinet
HMJr:
Yeah.
H:
for control of those Islands in the Gulf of Finland.
HMJr:
I understand.
H:
And so on.
HMJr:
Well, I don't -- I don't want to do it unless you're
H:
Well
HMJr:
you'd be entirely happy about it.
H:
Yes. Of course, we all sympathize very much with the
Czechs and with the soundness of their credit.
HMJr:
Well, this is the Finns.
H:
How's that?
HMJr:
Finland.
H:
I mean the Finns, I didn't mean the Czechs, of course.
HMJr:
Yes.
H:
Suppose I check -- check on -- on the -- those other
points a little and then I'll call you back.
170
- 3 -
HMJr;
Yes, would -- now, number two: would you care to have me
take up with the Russians, after six years, the question
of their debt and try to come to a settlement with them?
H:
Yes.
HMJr:
Now, that's -- and now I'm -- I'm raising that.
H:
Yes. Well, now I'll call you back on that.
HMJr:
On both.
H:
We may say that at one time
HMr:
Yeah.
H:
the Ambassador, Russian Ambassador, agreed with
what all of us together over there in the White House
and here talked up
HMJr:
Yes.
H:
as a method of settlement.
HMJr:
Yes.
H:
They agreed -- he agreed on that but he couldn't get his
Government to.
HMJr:
Well
H:
I don't know where that proposition 1s.
HMJr:
On the Russian debt thing, I simply figured that if I
got nowhere again why there would be nothing lost.
H:
Yeah.
HMJr:
If we were successful -- great!
H:
Yeah.
HMJr:
I think there's a chance of extending the trade between
the two countries on quite a large scale.
H:
Oh, they could buy hundreds of millions from us to a fine
advantage to themselves.
HMJr:
Yes, and
171
- 4 -
H:
I'll call you back on these two things, Henry, sometime
-- sometime a little later.
HMJr:
Well -- at -- at your convenience. But I don't want to
do either unless you're entirely happy.
H:
Well, I'll give you anything I've got that would be
helpful to you.
HMr:
Thank you very much.
H:
Yeah.
172
June 22, 1939
11:40 a.m.
HMJr:
Hello.
Operator:
Mr. Welles. Go ahead.
HMJr:
Hello.
Sumner
Welles:
Good morning, Henry. How are you?
HMJr:
Oh, wonderful ! How are you?
V:
Good! I'm equally wonderful.
HMJr:
(Laughter) I'll sell out for five cents. What's your
price?
V:
No, I'll be a little more demanding, I think.
HMJr:
I hate
V:
Henry, Listen
HMJr:
Yes.
V:
with regard to our conversation of yesterday
HMJr:
Yeah.
W:
Yesterday evening I had a telegram from Bill
Phillips in Rome saying that your Treasury man was due
to arrive on the 28th of June.
HMJr:
Yeah.
V:
Now, my very urgent request is that instructions be sent
to him to proceed immediately.
HMJr:
Yeah.
V:
Because if he gets there the 28th he'll only have 48
hours before the dead line, and that doesn't help.
HMJr:
Well, today is Thursday
W:
Today 18 Thursday, the 22nd.
HMr:
I'll tell him to be there -- well, he -- Monday morning.
V:
Could you do that?
Regraded Unclassified
173
- 2 -
HMr:
I'll order him there Monday morning.
V:
Fine ! Thanks a lot.
HMJr:
I thought he'd gone.
V:
So did I. But this -- this gives a reasonable time.
HMJr:
Well, you'll be satisfied if he's there Monday morning?
W:
Yes, indeed.
HMJr:
Well, he'll be there.
V:
But that means that ready to begin work Monday morning.
HMJr:
Well, I'll tell him to get there -- I'll tell him to
arrive in Rome Sunday.
W:
That's fine. Then he can start in Monday morning.
HMJr:
I'll tell him to get an order he 18 to be -- arrive in
Rome Sunday.
V:
Thank you very much indeed. That will settle that.
HMJr:
Righto!
Y:
Thank you, Henry.
HMJr:
Good bye.
W:
Good bye.
Regraded Unclassified
174
June 22, 1939
11:41 a.m.
HMJr:
Ed, Sumner Welles just called up and says he got a
letter -- it came from Bill Phillips, that our Treasury
man wasn't going to arrive in Rome until the 28th.
Ed
Foley:
I see.
HMr:
Please issue instructions to whoever's job it 18 that
he should arrive in Rome on Sunday, the 25th.
F:
The 25th.
HMJr:
Ready to go to work on the morning of the 26th.
F:
All right, sir. I'll take care of it right away.
HMJr:
Arrive in Rome on Sunday, the 25th.
F:
And be prepared to start on the 26th.
HMr:
Yeah.
F:
All right, sir.
HMr:
That's a "must" order.
F:
I'll do it right away.
HMJr:
Right.
F:
Yeah.
Regraded Unclassified
175
June 22, 1939
3:20 p.m.
HMr:
Hello.
Operator: Mr. Messersmith is at an official luncheon.
HMJr:
Well
0:
He'll call you when he comes in.
3:52 p.m.
George S.
Messersmith: Yes, Mr. Morgenthau.
H(Jr:
Hello, Mr. Messersmith. I had Mr. Merle Cochran in
this morning.
M:
Yeah.
HKJr:
And he suggested that I call you and find out whether
the State Department has or has not given their formal
approval to assigning him to the Treasury.
M:
Oh! Well, I told him to tell you that I thought I
wouldn't bother you with it. He said he was going to
see you -- that we find that we can assign him under
the law here to the Department and then detail him to
the Treasury.
HMJr:
Fine.
M:
It's just a matter of form, you know.
HMJr:
I see.
N:
And we would -- he would get his salary as a foreign
service officer here, you see, assigned to the Depart-
ment.
HMJr:
Yes.
M:
But that doesn't make any difference.
HMJr:
Well
X:
To all intents and purposes, you see, he would be --
he's altogether over in your department.
HMJr:
Fine. And the other matter
- 2 -
176
What's that?
M:
HMr:
The other matter that he raised which I think would be
nice, that if before he did come over he could be given
the rank of Counselor.
M:
Oh, yeah. (chuckling)
HWr:
What?
M:
Well, he raised that with me and we talked it over in
the Board yesterday and it's -- it really doesn't make
very much sense, you know, because he's a foreign ser-
vice officer of class one
HMJr:
Yeah.
M:
and the -- in giving him the distinction that
you're conveying -- that you're giving him as -- giving
him this important assignment in the Treasury, it seems
to me 18 more than any designation that he can get.
And it's almost impossible for us -- the title of
Counselor is given to a man in the field, you know.
HMJr:
Well I don't know. I -- I'm unfamiliar.
M:
What's that?
HMJr:
I'm not familiar with those things.
X:
No. Well, we tried to find yesterday a way by which we
could do it, but I really don't see how we could do it.
I'm still studying that part of it.
HMJr:
0. K.
M:
We're trying to do what we can, you see, but
HMJr:
Well, that's -- that's you business. I'm just
M:
Yeah.
HMJr:
raising it, and it's something that he would like, if
he could
M:
Yeah. Well, I'll -- I tell you, I want to do it if we
can do it.
HMJr:
Well, I'm just -- I'm not pressing it, but
M:
Yeah.
Regraded Unclassified
177
- 3 -
HMJr:
I'm just raising raising the point.
Yeah.
X:
HMJr:
And if not he'd-- I told him this, that there was no use
coming to a definite agreement with the Department un-
til we had a Stabilization Fund, see?
K:
Yeah. Right! Yeah.
HMJr:
The way it looks now, I don't know whether I'll have one
on the First of July or not.
M:
(Chuckling) Well, I hope that they'll stick -- quit
their fooling.
HMJr:
So he thought he'd stick around and wait and see what
happens.
M:
Well, I
HMJr:
And that's what I advised him.
M:
Well, that's not a bad idea. There's no reason why he
shouldn't do that. His wife is sick anyway.
HMJr:
I -- he wanted to know different things about Bullitt
and 80 forth, and I told him nothing.
M:
No, I wouldn't. He wantsto forget those things. I'll
have a good talk with him when he comes.
HMJr:
Now, I figured that that wasn't up to me.
M:
No, sir. No.
HMr:
I mean, that's none of my business.
X:
No. Well, and he wants to forget all about that.
HMJr:
Right.
M:
Yeah.
HMJr:
Well, I think some
M:
Well, so far as we're concerned, Mr. Secretary, why he
can -- we'll be glad to make him available to you here.
HMr:
Fine !
178
- 4 -
X:
There won be any difficulty about that.
HMJr:
Now, here's the thing. We can't pay him any extra
money when he's in Washington. You see?
M:
No.
HMJr:
He's raised that.
M:
Well, I don't see -- he's just like any other officer.
I -- I'm here and my salary 1s out in half by my being
here. His salary at least remains unchanged, you know.
HdJr:
I can't -- what I can do and what my people tell me is
perfectly proper, that we could assist him, sort of on
the cancellation -- would be give him a sum which he
could use for the cancellation of his lease, et cetera,
et cetera.
M:
Yeah.
HMr:
I mean, we have the right to give people money
M:
Yeah.
HMJr:
who are in the foreign service abroad
M:
Yes.
HKJr:
to spend, and he could use that money, which will
help him
M:
Yeah.
HMJr:
cancel his lease.
M:
Yes.
HMJr:
Now that, I'm willing to do and do cheerfully
M:
Yes.
HMJr:
which I think is fair. Don't you?
M:
Yes, that's all right.
HMJr:
But when he comes back to Washington my people advise
me that
M:
Yes, I think it would be difficult. Yeah.
Regraded Unclassified
- 5 -
179
HMJr:
Yes, that
Yeah.
N:
that -- we never do that.
HMJr:
X:
No.
HMJr:
And I guess you don't do it
X:
No, sir. We don't do it either. No.
HMJr:
Well, he ought to know that.
M:
No, he can't expect that. No.
HMJr:
All right. Well, thank you very much.
M:
Good bye.
HMJr:
Good bye.
June 22, 1939
180
4:15 p.m.
HWr:
Hello.
Operator:
Senator Harrison.
HMJr:
Hello.
Pat
Harrison: Hello.
HMJr:
Pat?
H:
Yeah.
HMJr:
My heartiest congratulations!
H:
Oh, hello, Henry. How are you, sir?
HMJr:
Fine !
H:
Well, we got through without any trouble.
HMJr:
Oh, you're wonderful!
H:
We got through all right.
HMJr:
Won't you take hold of my Stabilization Fund bill now?
H:
What's that?
HMJr:
Won't you put through my Stabilization Fund bill for me
now?
H:
Well, they got back on it now.
HMJr:
Have they? I think you did a magnificent job, Pat.
H:
Thank you, Henry. I think you fellows did a wonderful
job and you had -- you showed a lot of "guts". And I've
just got Bo in my old age I admire "guts".
HMJr:
Well, I admire a southern gentleman.
H:
Well, good luck to you, Henry.
HMJr:
And that's what you are and I think that through the
whole thing you've showed great patience and today
you've had your reward.
H:
Well, everything worked out all right.
Regraded Unclassified
- 2 -
181
HMJr:
Good bye.
H:
Good luck to you.
182
June 22, 1939
10:50 am
Present:
Mr. Hanes
Mr. Gaston
Mr. Foley
Mr. Lochhead
Dr. White
Mr. McReynolds
Mr. Bernstein
Mrs. Klotz
HM,Jr: Gentlemen, this is terribly important.
I called up the President and told him that
silver was selling at half a cent above the market.
He said, Well, let's hold everything.
He said, Now I am going to write a letter to
the Vice President on Monday that while it's none of
my business what the Senate does, but six Senators
are holding up -- you fellow better make some notes --
are holding up the Relief Bill, the Stabilization Bill
and the Tax Bill.
Now, the President said when it comes to the
Relief Bill, the Tax Bill, we just got to have it.
Stabilization Fund, we can re-enact it. This is the
second time he has said this. He does not seem to
understand what will happen if the Stabilization Fund
Bill does not pass. I said, in the first place the
men all go off the payroll and I think the Tripartite
goes out the window. I said, furthermore under the
present law we are buying silver under the Thomas
amendment, but after the first of July we will be
buying under the Silver Purchase Act which only di-
rects me to buy silver when it is in the public inter-
est and will it be in the public interest to buy sil-
ver after the first of July?
He said, Well, get me everything together go
I can use it to base a letter. So I said, Mr. Pres-
ident, there are ways we can circumvent some of these
things if we did not have a Stabilization Bill or I
Regraded Unclassified.
183
-2-
show you various things that can happen and point
out the way we can circumvent. So he said, Well,
make it just as black as possible.
This is terrifically important! The reason
I asked Hanes in, I wanted him naturally to know
what's going on in case they ask you on the Hill,
but I want to pin this on Archie Lochhead and Foley.
How busy are you, White, today on getting ready this
stuff for Wagner?
Mr. Foley: He will probably have a breathing
spell today because it's gone over.
HM,Jr: Well, the President did not ask me to
include in this memorandum about unemployment. I
would throw that in gratuitously and show him that
that bill 18 going to go out. Guess I had better
not. He did not ask us.
The thing I want to show -- he 18 asking, and
I ask you, to draw on your imaginati on 80 he can make
this thing just as strong on Stabilization Fund. I
am going to say on the first of July I will have to
notify these countries that we can't carry out our
gentlemen's agreement on the Tripartite. Is that
right?
Mr. Lochhead: It's being operated at the pres-
ent time under Stabilization.
Dr. White: I would want to think that over.
HM,Jr: I will tell you what you fellows do:
draw me up two kinds of memorandum; one, which 1s
what will happen and what we could do. You can do
this, that and the other thing. Then we will slide
around it a little bit. See? But I would be ready
early tomorrow morning to sit down with you people.
I will say 9 o' clock if you people will come in with
this thing and let's get this thing because the Presi-
dent is leaving. I think we ought to get it over to
him -- he's going to write it Monday; he's leaving
tomorrow afternoon. I wonder if we should get it
over still tonight? I think it's terribly important.
I think we ought to get it over tonight. Or is that
crowding you too much?
Regraded Unclassified
184
-3-
Mr. Foley: You want a memorandum from you
to the President?
HM,Jr: Memorandum from me to the President.
Mr. Foley:
.... stating what the position
of the Treasury will be if these powers are not ex-
tended.
HM,Jr: If the Tax Bill and the Stabilization
Fund are not passed by June 30th. That's what he
is asking us, an he said paint it as black as pos-
sible.
Dr. White: And you want to leave out the Re-
lief B1117
HM,Jr: He said the Relief Bill.
Mr. Foley: That's the least important, I think,
Mr. Secretary, because these other powers lapse and our
relief stuff, if it isn't passed July 1, they still
have some funds they can use until these other funds
are available.
HM,Jr: I don't want to be immodest, but would
like to draw attention that I don't leave a stone un-
turned on these things and the President seems to be
under the impression that it is not important if the
Stabilization Fund Just dies on the first of July; it
can be re-enacted.
And Mac, for me -- this has nothing to do with
this -- I want you, if you ever were good, and you are
good, at your work, to find a way for me -- and this
is not an if, and or but -- how I can take care of the
men on the Stabilization Fund out of some other Fund
in case it does not pass. This is not for the Presi-
dent, but for me. In other words, if the Bill does
not pass -- 1s the Emergency Banking Roll still in ex-
istence?
Mr. McReynolds: No. We have no Emergency
Banking Roll. We would have to put them on regular
185
-4-
rolls. Would have to be done by Executive Order
in most of the cases. But I will get the roll and
find out how it 1s.
HM,Jr: And tomorrow morning I want to know
so I can -- you have got to find me a way how I can
pay these men on the first of July. They have got
to be paid, because I don't want it to happen like
in Alcohol Tax that for three months they were without
pay. You haven't thought about it?
Mr. McReynolds: No, I haven't, but they can
be paid. In order to make them eligible you may
not be able to pay if there is more than -- well, we
may not be able to pay more than $9,000 or $10,000
in any case.
HM,Jr: Well, there isn't any one but Archie.
Archie goes on as Assistant to the Secretary, 80 he's
taken care of.
Mr. McReynolds: The others can be taken care
of and it will take an Executive Order to make them
eligible, but it can be done in that way. But I will
get the roll and
HM,Jr: Congress would not be interested. No-
body would be interested in that except myself because
they are cruel and they don't care, but I want them
taken care of and I don't want them to worry.
Dr. White: I will pass that on with your per-
mission.
HM,Jr: If they can't do it any other way, I
personally will advance their salary and lend them the
money personally, but they will be taken care of, one
way or anotherr.
Now you fellows go out and do a job. Make
this thing dramatic. Tripartite goes out the window!
Sterling -- we don't know where she will go! As the
President said, that six fellows can hold up the whole
thing is a most outrageous performance and I will tell
Regraded Unclassified
187
-6-
Mr. Foley: I am not worried about the tax
bill going on today, but I would be terribly worried
1f they moved the Relief B111 ahead of Stabilization,
but I don't think they can because they won't be ready,
so if we come back on the calendar Friday, then with
the Relief Bill behind us, they will have to take some
action on the Stabilization Bill.
HM,Jr: But, Ed. What I am worried about 18
that they won't let the Tax Bill pass and that's what
the President is worried about.
Mr. Hanes: They will pass the Tax Bill today.
Mr. Foley: Biffle told me they would have the
Tax Bill off the floor tonight and if it wasn't for
the La Follette amendments it would be through in 20
minutes.
Dr. White: I wonder if emphasis should not be
confined exclusively to the Stabilization Fund.
HM,Jr: If these gentlemen are right, -- we will
know by tonight if they are right or wrong -- then it's
all Stabilization.
Dr. White: If they heard your last remark it
would be infinitely more effective!
HM,Jr: The President told me to do nothing and
say nothing on silver today.
Mrs. Klotz: That's right. "Hold everything on
silver today.
Dr. White: And I wish you would not make your
remark outside, because you are buying silver and you
are buying it in the public interest and you would have
a difficult time proving it was in the public interest
on Monday and not on Tuesday.
HM,Jr: You will be surprised, Harry.
Mr. Gaston: We have tackled more difficult things
than that.
Regraded Unclassified
188
-7-
HM,Jr: I think if we get through the Tax
Bill today, then the whole Treasury will go to work
on this Stabilization thing. I hope Hanes 1s right!
Mr. Hanes: Senator Barkleytold me last night
that he Just had to get the Tax Bill before they could
move a thing, because if it went over to next week
there was no possibility of getting your Stabilization
out.
HM,Jr: I hope you are right. But I know
McCarran and Thomas and they may hold the whole busi-
ness up because from their standpoint, if they had
the Tax Bill and a Relief Bill, and the Stabilization
Fund all backed off
Mr. Hanes:
...
they could drive a bargain.
HM,Jr: That's right.
Now, gentlemen, we meet tomorrow morning on this
thing at 9 o' clock.
o0o-o0o
189
GROUP MEETING
June 22, 1939.
9:30 A. M.
Present:
Mr. Hanes
Mr. Gaston
Mr. Foley
Mr. Duffield
Mr. Gibbons
Mr. Haas
Mrs. Klotz
Mr. White
Mr. Lochhead
Mr. Bell
Mr. Graves
Mr. McReynolds
Mr. Viner
H.M.Jr:
Did you (McReynolds) get my memorandum about these
three plaques for these battleships?
McR:
Several of them.
H.M.Jr:
When do I get the plaques? Where is the hitch?
McR:
Well, Herbert's got to get something
H.M.Jr:
Well, I think it's ridiculous; I've asked for this
now for six months, and I can't get three plaques
for three battleships.
McR:
Well, I got hold of the Procurement boys and they
wanted the wording, wanted to know whether they were
to be other than just plain plaques, what inscription
on them, and
H.M.Jr:
Well, Mac, before I go home tonight I want the order,
I want the design, I want the thing finished - before
I go home tonight - and I'm not going to take any
more excuses. I wait six months to get three plaques.
If necessary - I don't have to go outside the Govern-
ment to get them, do I?
McR:
No, no.
H.M.Jr:
It seems that somebody
McR:
They can make them.
H.M.Jr:
You know my - I like to ask for a thing once. These
people have done this thing, and I've got to ask
190
- 2 -
over and over again for three plaques for three
battleships. Perfectly ridiculous. I mean I
McR:
Have you any definite 1dea about the form of the
plaques?
H.M.Jr:
Well, the whole thing - my God, can't the Treasury
organization - I told you to ask Admiral Peoples.
What?
McR:
I did that. I asked Ned Bruce. I couldn't get
any enthusiasm on anybody's part. They all wanted
to be told what to put on, what form we wanted.
H.M.Jr:
Well, what have I got assistants for? At 9:30
tomorrow morning I want three plaques, and some-
body around here can write something. I mean they
got - we got one for the Crown Prince of Denmark
to put on the Post Office at Rhinebeck, because
the President wanted it.
(On phone) Tell Mr. Hanes I'm waiting.
Mac, please - 9:30 tomorrow morning, the finished
thing - the design, everything finished. Somebody
around this place ought to be able to - I'm not
going to write it myself.
Who is missing here?
Klotz:
Hanes and Foley.
H.M.Jr:
(On phone) I'm waiting for Hanes and Foley. - -
Where's Foley?
Will you have it in at 9:30 tomorrow morning, the
finished thing, everything? - if I've got to pay
for it myself.
McR:
I'll give you something 1f I have to write it myself.
It won't be much if I have to do it myself. I'll
get it done for you.
H.M.Jr:
Hasn't the Navy got some people? Well, anyway, Mac,
out of the whole Treasury organization there ought
to be
Regraded Unclassified
191
- 3 -
McR:
We'll have something for you.
H.M.Jr:
Herbert, you got anything?
Gaston:
No, I haven't got anything.
H.M.Jr:
What?
Gaston:
You'll hold a press conference, I suppose, at
10:30 this morning.
H.M.Jr:
Yes.
Gaston:
And I don't think I'd better go across the street.
H.M.Jr:
Well, check to make sure, because if the boys press
me on this thing I want to be able to say he'll do
it at 11:00 'clock at the White House.
Gaston:
Say we won't do it at this time.
H.M.Jr:
I'll say they'll have to get it from the White House.
Gaston:
Have to get it from the White House. Said probably
would have it by Friday.
Duffield:
(Nods nothing).
Gibbons:
Did you get the report from Bullitt on Wait in Paris?
Did he give you that?
H.M.Jr:
Yes.
Gibbons:
Oppie told me about it. In answering it
Seemed
to be pretty bad.
H.M.Jr:
Well, I gave it to somebody, I don't know who.
Gibbons:
I haven't seen it.
H.M.Jr:
Who did I
Gibbons:
Want me to handle it, to check him up?
Klotz:
It was so bad?
H.M.Jr:
It was a letter. Who can find out
192
- 4 -
Klotz:
It's there (pointing to stack of correspondence
on back table).
H.M.Jr:
No. Will you speak to me about it afterwards.
I don't know just where the letter is. Let me
get the letter. It was a formal letter.
Gibbons:
I took the liberty of asking Corman if he had a
report on it. He said no. Apparently Wait hadn't
reported it.
H.M.Jr:
Let me get hold of Bullitt's letter.
Gibbons:
Nothing else.
Haas:
I have nothing.
H.M.Jr:
Harry?
White:
Senator Wagner called up yesterday and wanted us to
prepare a statement for him that he might use on the
floor, as his own, not as a Treasury statement, on
Senator Thomas's bill. Now, that bill includes the
demand for increased use of silver, on which we can
get him something. It also includes a demand that
gold in the stabilization fund, a billion and a half
of that gold plus 500 million in the free gold, be
set aside as a special fund to be used for the reduc-
tion of outstanding debtaas bills run off, et cetera.
Do you want to say anything about that or take any
position on it?
H.M.Jr:
My thought is that as far as I am concerned I'm
going to be a sphinx. The President of the United
States told me he personally would handle this
matter with Key Pittman yesterday, and he also told
me he wanted - in discussing this thing, he wants
to make the neutrality legislation part of the
bargain.
So, as far as the Treasury is concerned, my consult position
with the President as to what price is, to be set,
is that on the evening of June 30th I will
1f have the legislation, the Thomas amendment. the
Now, we if we don't have the legislation, then on and
first of July I'll go and see the President
say, "Now, we are acting under a mandate of Congress
193
- 5 -
to buy 1f it is in the public interest, and then
the question is what we'll do - well, 1s it in
the public interest to buy any silver?"
Now, as of the night of June 30th, if they pass
this thing, then we act one way. On July 1st, it's
a question, is it in the public interest to buy any
silver? But as far as I'm concerned, I don't want
to drop any hint at all as to what my position is.
White:
Yes, that's quite clear and I think quite defensible.
I wasn't referring to silver. I think that's what
I understood as to the position you were going to
take. I am referring now to that section of the bill
which relates to the use of gold for the purpose of
retiring outstanding debt. Now, we have a choice
either of saying nothing at all or of taking the
position - this is for Wagner to come out on the
floor with, not
H.M.Jr:
Well, my position and the position of the President
of the United States is that the ultimate use of
the gold in the stabilization fund, the two billion
dollars - the ultimate use will be to retire the
outstanding debt. That's obvious. Does that
answer your question?
White:
Yes. The reason I'm asking is, I don't think my
position and yours is the same. I want to give
them yours.
H.M.Jr:
You're giving them the position of the President of
the United States.
White:
I want to give them the Treasury's position.
H.M.Jr:
The position of the President of the United States
and the Secretary of the Treasury is that the ultimate
use will be used for retirement of the outstanding debt.
of the gold in the stabilization fund - solely
White:
That's not wholly clear in that bill. That's what
want. The only question is, what is "ultimate"? for
They anything different. They want to let the is
they are not asking in that portion of the bills bill run
off. Now, the position you take and I'll give
that you're not ready
Regraded Unclassified
194
- 6 -
H.M.Jr:
No, I'll go further - for use either in the stabili-
zation fund or retirement of the debt and for
nothing else.
Bell:
You made that quite clear in your August 6 speech.
H.M.Jr:
(on phone) Send in word to Hanes's secretary it's
important that he be here, please.
Bell:
You said when the stabilization fund had served its
purpose you would use the fund to retire debt.
White:
Well, when it will have served its purpose - I think
that's a vulnerable position, but that's the one
I'm going to give 1f that's what you want.
H.M.Jr:
Well, unquestionably that's the position that I've
taken - I've said this now for about three years
running.
White:
0. K.
You might be interested in trade reports, because
the comparison is rather significant. If we compare
our trade for the first four months of this year,
which is the latest figure that we can get for other
countries as well as our own, with the exception
of Australia, which is a small competitor, the
United States exports have dropped more than any
other of the leading countries and our imports have
risen much more than any other. country - substantially
more, with the exception of Sweden.
H.H.Jr:
Now, could I have that on one page.
White:
Well, it is; it's just a table.
H.M.Jr:
Please.
(White hands table to Secretary)
H.M.Jr:
Let me see 1f I've got it. Our exports have dropped
substantially more, and our imports have
White:
risen substantially more.
H.M.Jr:
Right.
Regraded Unclassified
135
- 7 -
White:
With the exception of Australia.
(Hanes comes in)
Hanes:
Sorry. Telephoned old man Doughton.
H.M.Jr:
All right. I want you to get this.
White:
Capital continues to flow out.
H.M.Jr:
Twenty-one million.
White:
And I'd like to take up the question of the
dumping cases, unless you're in & hurry, in which
case I can postpone it.
H.M.Jr:
Postpone it.
Now, just for the record, I want to know if - I
want to get this on the record, and it's very im-
portant. Who saw Currie Monday night and who got
assurances from Currie as to what the railroads
would do in the way of borrowing money to buy new
equipment?
White:
Well, I saw him first, talked to him while waiting
until some of the men who were with the Committee
were interviewed, because according to your in-
structions we didn't want to get them together.
And I stepped out to talk with him for a while until
they got through, and then he waited about an hour
until they were through with everybody else and then
he came in and the whole Committee spoke to him.
H.M.Jr:
Well, to the best of your recollection, or anybody
else's recollection, what statements did he make
in support of this plan?
White:
He made a lot
At the time? I couldn't - I'm
so familiar with the statements in support of it,
that whether he made them at that point or at any
other point, I don't know. But there is the whole -
there's his written statement right in the memoran-
dum. The report that went to the President is a
complete defense of that position.
H.M.Jr:
Well, to the best of your recollection, what is it?
Regraded Unclassified
136
- 8 -
White:
As to what he said that night?
H.M.Jr:
That night or any other.
White:
On what are the merits of the plan, what is his
defense of the plan?
H.M.Jr:
As to the need, not as to the merit.
White:
As to the need.
H.M.Jr:
The need.
White:
His position was that the good roads have adequate
and surplus of freight cars. In fact, they loan
out, they hire, they lease out their surplus cars
to less prosperous roads. And the poor roads have
a great deal of equipment in which the upkeep is
greater than would be the estimated price at which
this corporation could lease the new equipment on
a yearly basis; and that the inducement for those
railroads to lease this new equipment, again at these
low figures, would be the fact that it would be
less than the upkeep, plus the fact that they get
an equity in the particular equipment that they
hire by virtue of the arrangement by which they
pay depreciation as well as the interest cost.
H.M.Jr:
May I interrupt? But what I'm trying to get at is,
what assurances did you get from Currie that there
was a market for this, a need?
White:
Oh, it's only his opinion. Assurances from him? He
couldn't give any assurances. He hasn't had any
Bell:
He did say this, Harry, that he had a man who had
traveled all over the country and had interviewed
many of the railroad officials, particularly the
smaller and weaker roads, and he said that they
were paying at the present time a dollar to a
dollar and a quarter a day for cars which they
are renting from the larger roads which you state
have the surplus. Now, he contended that this
organization that we are proposing here could build
new cars for about twenty-five hundred dollars and
rent them for less than half what they are now
paying as rent to the larger carriers. He thought
a hundred thousand cars could be built and rented
197
- 9 -
in the year 1940, for 40 or 50 cents a day; that
fifty thousand cars could certainly be built, and
there would be less surplus in the following year;
and that there were several thousand locomotives
that could be built.
White:
I don't remember that, but if you
Bell:
Is that about right, Ed?
Foley:
That's right. He said there were two schools of
thought. The larger roads said there wasn't any
need because they were renting their surplus
equipment to the weaker roads. The weaker roads
said they were paying a dollar or more a day for
cars from the larger roads and there was a great
need. So you have the conflicting stories and
you just had to take your choice.
White:
Well, there was some support - well, there's more
support of the over-all picture, not as to the
specific figures, because his men has made a study,
probably the most comprehensive study that's been
made of the equipment in existence, the length
of years in which that same equipment has been in
existence, and the need for - the number of cars
which would be needed at a given flow of traffic,
and the amount of traffic that might be needed
under given conditions. And they conclude several
things. They conclude - one is that the equipment
over much of our railroad system is very old and
very bad and that these companies would gladly
acquire new equipment if they were financially
able to do so, and many others would buy more
equipment.
H.M.Jr:
What companies?
White:
Didn't specify.
Bell:
He gave as one example the Denver and Rio Grande.
White:
That was the only one he mentioned. If there were
others, I don't remember them.
H.M.Jr:
Well, as I remember it, one or two of you gentlemen
reported this to the President, mentioning Currie
Regraded Unclassified
198
- 10 -
by name, saying he had this.
Foley:
Both of us - Dan and I both said that.
H.M.Jr:
All right, and you remember last night the Presi-
dent said, "Get hold of Currie and let him give
us the names of the railroads that want to do this.
Foley:
Yes.
H.M.Jr:
Well, I called up Currie this morning and told h im
this. Currie said, "I have no names." He said,
"I've contacted no railroads." He said, "I just
had a 11 - I think he used the word "happy idea -
happy thought.'
White:
I didn't understand him to say he contacted rail-
roads, but he did say
H.M.Jr:
Well, I wasn't there. These people were. Now, Mac
took this, and this is what we told the President
of the United States, that he had a man out on the
road, that he had contacted the people.
McR:
That's right. He unquestionably said that.
H.M.Jr:
Now, this morning I called him up. He said, "Well,
I just had a happy thought. If He said, "The Chair-
man has lost interest in this." He said, "I haven't
contacted a single railroad." And he said, "This is
terrible.'
So I said, "Currie, I can't remember because I wasn't
there, but one or two of our men quoted you & number
of times to the President. Now the President wants
you to give us the names of the roads." And Currie
said, "I have no names. He said, "The Chairman has
lost interest. " He said, "About a week or ten days
ago I went around to see Mr. Hopkins and asked him
if he'd take it up. Mr. Hopkins was interested. But,"
he said, "I can't give you any names. I haven't con-
tacted anybody. It's just a happy idea."
Foley:
I asked him if he would appear before the Committee
and defend it and he said, "Yes." And I said, "I
thought - can you defend that even though Eccles
isn't in favor of 1t?" He said, "Yes."
Regraded Unclassified
199
- 11 -
H.M.Jr:
Here's the position I'm in. I go to the President
of the United States, asking for - after five of
my people investigate this thing: McReynolds, Bell,
White, Foley and Gaston - and I tell him that this
is all right. Now I call up Currie and he tells me -
I don't know the exact phrases - he's got & happy
thought, he's got no facts, nothing. And I've got
to take this. I can't say, "I had five men say
this thing and now they can't give you the names
of the railroads and there is no railroad that is
going to borrow." And I'm in the worst position I
have ever been in almost since I've been in Washing-
ton.
White:
Have they done the same thing with the other esti-
mates, with regard to toll roads and the others?
All we did in each case, as I understood it, was
call in the man who knew most about it or who was
working on it, to get his estimate as to what he
thought would be the case. I don't think we made
any attempt in any of the cases, though some of
them didn't lend themselves to it, to find out
whether we could have this, whether it would work
out. When we put down 500 million dollars of loans,
we didn't find out whether those companies would
buy it. We assumed that was a situation in which
it could go through.
Bell:
We did make it quite clear, Harry, to whoever we
talked to that the estimates they were furnishing
to this group would have to be defended by them
before a committee in Congress, and that we wanted
them to be sure they could defend them and not
get the President out on a limb.
White:
Certainly said that several times; I don't know
whether to Currie
Bell:
We said that to everybody.
H.M.Jr:
The President personally called Jesse Jones on the
Stewart McDonald. So everything has been cleared
foreign loan. He cleared that. I cleared with
except this one.
It's exactly the same as though I was president of
a corporation and my sales staff said, "Now. Mr. Mor-
we can sell 50 million dollars worth of shoes,
genthau, if you spend a million dollars for advertising be-
cause the market is there. I place my advertising
Regraded Unclassified
200
- 12 -
and I find that the market isn't there. Well, I
know what would happen in a private corporation.
I've never been in a position like this before.
White:
I don't quite see the point, if I may say so,
Mr. Secretary.
H.M.Jr:
Well, if you don't see it, Harry, then there's
something the matter with you. For one year you've
been selling this yourself to me.
White:
I've been saying it was an excellent idea. Now,
do you presume that for one moment we can go around
to various railroads and ask them if, as, and when
such a plan goes into effect, under what conditions
they would participate? Would that be our privilege?
And consequently, we set this up as an idea which
is worthy of consideration and value, and that's the
way it was sent the President. And it still remains
a good idea.
H.M.Jr:
Oh, Harry, don't talk like that to me, don't tell me
to have the President of the United States to recom-
mend a form of corporation to do things when we don't
know whether there is a single railroad that wants
to borrow. And these people have been told they are
to go up to defend this thing. I mean there's a
limit to my patience and also I have a slight amount
of intelligenco. I've asked Currie to come over
here at 10:00 o'clock, and as I told Currie, I'm on
the spot and I want help now, in order that we can
make the best of this thing. I mean I talked very
me - and I want to do the best job that I can in
quietly to Currie - I mean Currie doesn't work for
order to get the President out of this hole.
McR:
Now, Currie said that he
H.M.Jr:
I didn't contact Currie. And Currie was on the
phone and he said - I mean just kept repeating -
I don't know what he said to you gentlemen, and I've
got no right to hold Currie to anything, but you
people saw him and I'm relying on you people.
Gaston:
He said he had been studying this matter, I think,
for something over a year, gathering a great deal
of statistics on the amount of railroad equipment
Regraded Unclassified
201
- 13 -
and the need for railroad equipment
McR:
Well, Herbert
Foloy:
Herbert said last night, Mr. Secretary, when we
went back, as I remember it, that we hadn't gotten
the names of the roads.
H.M.Jr:
Well, the President has asked us to.
Foley:
He told that to the President last night after we
went back, said, "Mr. President, we didn't get the
names of the roads that would use this stuff."
Caston:
No, I didn't say that.
H.M.Jr:
No, he didn't - excuse me.
Foley:
Was it you (Bell)
Bell:
I said to the President that I had not checked the
figure of expenditures for 1940, which he suggested
might be rechecked, but I said, "It's less - your
figure is less than what Currie originally gave us."
So he said, "Well, all right, we'll accept it then,
if it's less than what he said." So the President
reduced it.
Gaston:
Very certainly said that we were satisfied that you
could lease that amount of equipment.
Bell:
And it was based on a study of this main who has been
around the country - they had contacted people in
the Interstate Commerce Commission, and he mentioned
Mr. De Groot by name, who was satisfied that it could
be done. He mentioned one typical example of the
Denver and Rio Grande, equipment of which was built
in 1896 and in a terribly dilapidated condition.
White:
I got a very different impression out of his testi-
mony. I was there during his testimony. I know
exactly how he feels. It 50 happens I remember
very clearly what he said. He stated - he mentioned
this Rio Grande as being one of the illustrations
of the type of road that could use the equipment.
He mentioned the fact that the large roads had a
surplus and that they were opposed to the 1dea.
Regraded Unclassified
202
- 14 -
He made clear the fact that his estimates were
based on an over-all study, and the fact that
his man had been going around gathering statistics
and data. And I don't remember him saying at any
time - it will be up to him to say whether or not
he did - but I definitely don't remember his saying
at any time that he contacted railroad men over
the country to find out whether they want this or
not. In fact, I remember him saying something to
the contrary, that he hadn't, and - well, he'll
be here, he can speak for himself. But that's my
recollection of it. In fact
MeR:
Harry, it seems to me that the key to this lies in
the fact that Currie's statement - Currie's state-
ment was that someone for him, not he himself, had
contacted not only the roads but the manufacturers
of railroad equipment.
White:
Railroad equipment, yes.
McR:
He said, "You'll find the manufacturers of railroad
equipment with statistics as to the amount of
equipment in existence and its age, and they'll
prove to you
"
Foley:
He said they 11 testify.
MoR:
"
and they'll testify as to the need for new
equipment. And the smaller roads will do the same
thing.
If
H.M.Jr:
He said that this morning.
White:
That's very true. That's a very different thing
from saying he went around or his men went around
to railroads to find out how much equipment they
would use.
H.M.Jr:
That's what we told the President.
White:
That's not what he said.
H.M.Jr:
I didn't tell him, because I couldn't. But, 8.8 I
told Currie, his name was used two or three times
by two of our people in reporting what he said.
Now, furthermore, in Mr. Eccles' speech in Boston
on Saturday, this is one of the things that he
203
- 15 -
recommends, and 1f you'll remember, when we
went over the program, I was against this thing
because I didn't have enough things and I wanted
to leave it with the RFC and see what we could do.
But that's neither here - and when we get all
washed up, whatever it is, I'll take it, the
way I always do. But I want to try to make the
best of what seems like a very bad bargain. And
I'm going to caution everybody extra, extra, that
this whole discussion in this room mustn't get
out of this room.
White:
Well, but I think there is a certain amount of mis-
understanding. Despite the fact that my continued
reiteration of that might be irritating, I think
it is important enough to make clear just what
the position is that Currie has taken in this and
the position I have taken in this, and I take it
the position that Committee had taken in recommend-
ing these measures. They had never gone - we
never - one of the things that we didn't know was
how much they could use. As a matter of fact,
that night Currie thought they could use 350 million,
and you remember I said - I was pressing for him to
reduce it, said, "We don't know, you don't know; let's
make it 200 million - more certain." I said, "After
all, you're discussing how much they would use from
an economic point of view, not because you have any
leases in your pockets."
H.M.Jr:
What is the figure in the President's letter? How
much?
White:
Two fifty that night; I don't know what
Foley:
A hundred million. He cut it in two.
H.M.Jr:
Well, the point
Bell:
But Currie did have 250.
Foley:
After he talked to Jesse Jones, he cut it in two.
H.M.Jr:
But the point is that we go over there - two of
these gentlemen, I can't remember who, told the
President and kept quoting Currie that he had
somebody out on the road contacting the railroads,
204
- 16 -
and said that these railroads said so and so.
Am I right, Ed?
Poley:
Dan Bell, Herbert Gaston and I talked to the
President. I talked first. I said there were
two schools of thought. The big roads were leasing
their surplus equipment to the small roads, and
they were satisfied there wasn't any need for this.
There were the small roads that were paying & high
rental charge to the big roads, and they would say
there was. And there were the two schools of thought
and you had to pay your money and take your choice.
I think those were the exact words I used. Then
Dan talked and a little bit later Herbert talked
a little about it.
Saston:
I think I merely repeated that Currie said the
larger roads would be opposed to this because they
had at this time surplus equipment; that he antici-
pated that with a pick-up in freight traffic there
would be a shortage and there would be an ultimate
demand for a large number of ordinary freight cars.
Foley:
That's right. I think Dan went on from there, and
then he called Jesse Jones.
Haas:
Mr. Secretary, on this, when I made the rounds of
these reporting companies, Hardy, who is President
of the American Car and Foundry, told me this was
his 1dea when Woodin was here - tried to get it
over and somebody killed it. He was still enthusi-
astic when I called him.
Foley:
He brought it to the PWA in 1933.
Sans:
I think he said Ickes killed it.
Foley:
Sure he did. Hardy was too close to American Car
and Foundry.
Gaston:
I didn't understand Currie to say there was an
assured market in the sense that any of these
smaller roads had assured anybody that they would
lease cars, but he said he did know it to be a
fact that some of the smaller roads were leasing
cars from the richer roads at a high - at a dollar
a day.
Regraded Unclassified
205
- 17 -
H.M.Jr:
That isn't what these gentlemen told the President.
White:
I would go further and say he definitely did not
know whether they would. He was basing it entirely
on these grounds that you stated, on a study of
what they were doing, what the traffic was. In
other words, it's an economic study, not a field
study. He's not in a position to make that field
study.
Gaston:
I understood that it's an economic study. I under-
stood him to say he had made some of these contracts
with some of the railroads and gotten these different
points of view.
White:
That's right. Last year Mr. Eccles was interested
in it and they had some railroad men come down here
and Eccles had Currie in on the discussion, and
that was, so far as I know, the sole contact that
he had with any men who would be actually the ones
to make a decision as to whether or not they want
equipment or do not want equipment.
Gaston:
I understand the central idea is to build something
now that surely will be needed later.
White:
Sometime in the future - in the near future; and that
he had hoped they would take 300 million or 350
million, thought they would take 350 million dollars
worth of equipment. And after some discussion we
reduced it to 250 or 200, I don't know.
H.M.Jr:
(To Kieley) Is Mr. Currie here?
Kieley:
Yes.
H.M.Jr:
Well, I wish - I'll see him in a minute.
That isn't what was told the President, is it?
Bell:
I don't remember the exact words that were said,
but I thought what Herbert said was along the line
that he had made a sufficient study and contact
with the industry and the people concerned to enable
him to make an estimate of this kind, that there
was a market, there would be a market.
Regraded Unclassified
206
- 18 -
H.M.Jr:
Well now, I'd like Bell and White and Foley
-
you (Viner) care to stay?
Viner:
(Nods no).
H.M.Jr:
Gaston and Hanes - if you'll stay, and we'll
talk this thing over now with Currie.
207
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 22, 1939, 4 p.m.
NO.: 1177
FOR THE TREASURY DEPARTMENT.
The statement of the Bank of France published today
(dated June 15) shows that commercial advances decreased
by 678,000,000 francs. There was a decrease of
1,072,000,000 in note circulation, and a decrease of
40,000,000 in deposits. Gold cover ratio was 64.21%
as compared with 63.72%.
On the exchange market quiet conditions continue to
prevail. A substantial amount of sterling was again
obtained by the fund. On the security market yesterday
there was a more cheerful tendency but in today's trading
this was lacking, and there were generally lower prices.
There is a semi-official denial in the financial
press of rumors that the Government envisages reimburse-
ment of the 0% 1925 exchange guaranty loan in connection
with a foreign loan issue.
According to the press Bonnet told the Chamber Foreign
Affairs Committee yesterday that the Board of Directors
of the BIS had not been consulted about the Czech gold
transfer and that the matter had been handled by the
President
208
- 2 -
President of the Bank. He added that the French directors
had protested against the transfer. Bonnet also told the
Committee that the position of the French Government had
not changed with respect to the Spanish gold deposited
here and that he had undertaken to hasten the judicial
proceedings which would decide the question of its
disposition.
During May revenue from indirect taxation was about
92 million francs more than budgetary estimates; for the
month of May this year budgetary revenue was about 509
millions more than for the same month last year.
END MESSAGE.
WILSON.
HECEIAED
PERS RS will
YOURGHT
on " willo
valued siti of NUMBER issued
EA:LWW
Regraded Unclassified
Ra
209
this should
all be filed
together as of
June 22 me
genl dury
210
REPORT
PROJECTED TRANSPORTATION SYSTEM
PROPOSED BY
J. L. KEESHIN
THE
Carlton
211
WASHINGTON, D.C.
June 22, 1939
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
The enclosed rather hastily prepared
recommendations are offered for your consideration
in connection with the establishment of motorized
transport throughout Southwest China, pursuant to
our recent conversation.
It is with sincere regret that preservation
of my properties compel me to forego undertaking
this most difficult but interesting task. I have
given the problem considerable thought and can
recommend to you personnel capable of handling this
important administrative assignment. Of course,
I shall be glad to act in an advisory capacity and
give them the benefit of the experience of myself
and associates to the end that their mission would
succeed.
Your thoughtfulness in offering me this
opportunity is most sincerely appreciated.
Yours very truly,
J L Keshine
L
Enc.
Regraded Unclassified
212
In the selection of a competent man to head up the
organization as contemplated in these proposals. I am assuming
that constant and diplomatic liason must be maintained with
representatives of the various governments, both civilian and
military, and provincial authorities; the various transport arl
communication agencies, i.e., rail, water, mail, air, telegraph
and radio; highway engineers, 1.e., construction, maintenance
and bridge; industrial and agricultural interests. In addition
to the foregoing requirements, such a man must possess to a marked
degree tolerance and understanding combined with firmness and
demonstrated leadership that will assure loyalty and respect;
complete and detailed knowledge of the mechanical and operating
problems, and above all, a man thoroughly familiar with trans-
portation in all its phases. Resourcefulness and natural ability
are essential if the operations are to be conducted in the most
economic and expeditious manner.
Qualified transporation men possessing these essential
attributes are few in number, in my opinion, and those men whom
I might suggest are presently well placed. Nevertheless, I
should like to offer the following suggestions and recommendation,
In view of the very limited time within which to analyze
the problem of the magnitude of that presented, and the lack of
information concerning the manner of operation, ownership, 1.e.
whether or not transportation is to be conducted on a revenue
basis or on an emergency expense basis, and if on a revenue basis,
whether or not the present plans should lead toward the establish-
ment of a permanent agency of transport, and if so, on what basis.
If on an emergency basis, whether or not essential goods are to
be moved irrespective of costs. Other questions come to mind
concerning adequate housing and subsistence with proper medical
care for large groups of men, the procurement of necessary sup-
plies and equipment and a complete study of the class of traffic
to be handled.
While the above questions are of the utmost importance
in a proper approach, and particularly in the selection of personnel,
the actual physical operations, in my opinion, could well be con-
ducted through the office of an executive head in direct control
of the properties. The form of organization I believe could be
divided into the following classifications:
1. Superintendent of Operations
2. Superintendent of Maintenance
3. Supply Agent
4. Accountant
The superintendent of operations to establish operating
control under the direction of a chief dispatcher in constant
communication via a two-way short wave radio with all strategic
points and through dispatchers at each such point. Units should
n. 213
be dispatched in caravans having in mind barrack, supply and
road facilities in their direction of travel. Also military
protection when necessary. Each caravan should be under the
supervision of a boss-driver with two-way short wave radio
equipment capable of reaching the nearest control dispatcher.
Mobile maintenance unit might be similarly equipped.
Through the use of radio reports to control dispatchers
at thirty-minute or hourly intervals, giving location and trip
progression reports, there would result complete picturization
of all traffic through the office of the chief dispatcher,
effecting centralized dispatch control for the entire operation.
It is conceivable that the superintendent of operations
would also be in complete charge of terminals, warehouses and
drivers' quarters. There follows an exhibit portraying the
complete operation, location and classification of shops and
assignment of the various classes of equipment, with due con-
sideration to the terrain, climate and road conditions of each
locality.
440Miks
NA
7000
Legend
Central Shop AA"
JIAN
ask
"
Major Shop A
Major Shop B"
/
Mobile Shop C'
GMC.
Mobile Shop D"
twhealDr
ACK-353
International Harvic
Section
which
"D"
GMO Equipt
49" 2,800m.
Dodge Equipt
65 M
of
B
(SeeNate) Despension Bridges
105
58MIKS
o
a
*B B
eas
Section
Sention B
Miles
SHIAKWAN
- 2400Mi
245
162
BANYEH
KUNMING
368 MI Mi
GMC
Ack 353
o
ONEW
Section
A
Commission MANDA
NOTE: Sections A, B, C are D. as shown
To Ranyoon
herem NY sore fully described
in the following text.
Regraded Unclassifi
215
1-14
Regraded Unclassified
216
IN ERNATIONAL
Industrial Tractor
I-14
S
INTERNATIONAL
I
Regraded Unclassified
for Factory-St
Municipalities of all -ize- find year-
around use for International 1-11 trac-
tur-puiling road maintaines, hanting
trailers, operating snouplows, shouch,
brushes, and many other pieces of
equipment.
and I' highway type industrial scores of mobile mowing of other power and applications. work maintenance, Today in reception factory, Hase about fleet shop tendered ninde airports, and vant, railmad for musicipal patters
immediate is doubtful and if any universal item of power equipment Isas Firt
International Harvester industrial power family is the addition el
Further proof of the performance of these jumior members
Fleets of Model 1.14 tractors are speeding
(Below) The nimble 1-14 tractors-flexible, mobile power for
pushing. pulling, hoisting. and hauling.
International engine cylinders can be
replaced without removing the engine
where individual I-IT's have been placed in service, Severs of of
Invedoring Below) operations at many river and ocean ports.
from the chassis.
end shovels and loaders, revolvin brushes, mines, snowplows,
facturers have designed equipment for them. Street maintaines, Be
and flushers, special ficring and skid-londing device, trailers, sprintly pro
movers, and many other types of equipment an in operation
The International 1-11 is a very economical tractor to
will work continuously day in and day out un about a galke operate of
schedules on from 6 to N gallons a day.
an hour. In fact, many owners claim they are maintaining pain
The 1-11 is of the same high-quality construction as other Islang
tional Harvester industrial products International trucks, who
crawler tractors, This compart unit embodies all the distinctive fratined
that have gained such wide popularity for the larger units The trané
is only (I) inches long from tip to tip. slightly net I feet wide, and lini
within a circle having a radius of B36 feet,
The engine embodies all the distinctive features of the larger
gines, Cylinders are replaceable: the main and connecting-rod Intia
are of prevision-type, steel-backed, removable shell construction: res
The oil filter, air cleaner, and high-ten-
shaft is drilled for pressure lubrication: air cleaner, fuel strainer. and les
sion magneto are readily accessible,
litter protect the engine.
The heavy duty crankshaft. made of special climme-nickel stat la
univial strength to withstand the stresses of lard and notinal
tractor service, II is drop-forged and electrically The
most accurate and modern practices are employed throught
marbining and hardening and every crankshaft is accurately baland
in motion and at rest.
The International 1-11 is our of a family of five models of
type tractors, They are backed by nearly thirty five years of endor
tractor-building experience and more than in century of manufactives
activity. Continued performance of International power is good
a nation-wide network of more than 200 authorized industrial drain
and Company-owned branches in the I nited States and Canada.
in principal industrial centers,
Prinp plates are a convenience when
A handy device for factories, foundries, and municipalitie
ling on and off the tractor or for driving get-
many communities 1-14 and snowplow combinations
for loading material in quick order.
the Inter while standing.
(Below) Fleets of International tractors are rapidly taking over lumber
spen and drives following snowstorms.
hauling and other transportation jobs in factories and sbout the yards.
and similar grounds
buih
de
maintained completely
Internal
1-11 tracturs and the
7
t
Hig equipment designed
with
them.
International Industria
Power
for Every
Power Job
Brief Specifications
International Wheel-Type Industrial Tractors
WHEEL TRACTORS
MODEL
I-II
29
1-30
1-11
The
Maximum engine horsepower
::
30
6
Engine Speed, r.p.m.
2000*
to
1000
125e
a
Number of cylinders
1
ITS
I
I
On
Hore, in.
1
4.
11,
%
Stroke, in
I
3%
5
5
IV
Forward speeds, m.p.h.
335.6,
216.1,
45
2%.1%
%/₂
10%*
2,3%
7,10
85,13%
No,
Reverse speed, m.p.b
335
20%
3
335
7%
3
Pulley spend, r.p.m
7801
615
Tão
11
[Belt speed, ft. p.m
615
2593)
2525
2995
F
Pulley diameter, in
2823
135
15%
20
15%
Pulley face, in,
16%
4%
T
:
M
,
Power take-off shaft spend, Γ pm
5381
513)
,
6001
Front wheels (porumatic time)
6,00-9
5.50-20
4/4
5.50-20
The I-14, handy power for factory, shop,
THE
Tread, front, in
39%
The
as
and yard.
=
$1
Bear wherls (pneumatic time
11.25.21
14.
11.25.2016
11.25.20
Tread, rear, in
12%
125,21
620
wige
TIE
Turning radius, in
full
103
CI
180
201
Wheelbase, in
M
60
TM
78
as
E
Length overall, in
99
123
121
De
De
Height, steering wheel, in
52
62
62
P
:-
Fuel tank capacity, gallors
11
21
21
31
=
Approximate shipping weight lies
3200
6780
7550
8725
901
*At engine speed of 2000 r.jr.m. At engine speed of 1100 r.p.m. forward spends an
and 7% m.p.h., and revene speed, 235 m.p.h. (Suplied at extra net.
(Dual preumatie tires, Hear tread shown is distance apart of center lises between -
1M engine speed of I 100 r.p.m.
The Model 20 is used in practically all branches
of industry.
Regular Equipment
High-tension magneto with automatic impulse starter, pintle book dran)
spring cushion seat, hand and foot brakes (foot brakes with parking lock Hf
foot accelerator, muffler, air cleaner, oil filter, radiator curtain, states
equipment (ID-10-Diesel-only).
Special Equipment
Lighting equipment, belt pulley, fenders (regular on I-14), power take
(regular on I-14), special " heel and tire equipment. steering brakes (I-Hash)
tire pump, etc.
The I-30, larger member of the International
family of wheel-type tractors.
TRACTRACTORS
POWER UN
reational T-20 TracTracTor, smallest of aix
els of TracTracTors. The range of models
International TD TracTracTor, one of three models
to all requirements calling for crawler-type
powered by Diesel engines, International Diesels
PD-8
power.
can be started as readily na gasoline engines of
tiona
elses and from 15
power power 1
utails
corresponding alse,
100
-140-CC. 3-28.
INTERNATIONAL UNCORPORATEDI HARVESTER COMPANY
INTER is UNITED STATES OF AMERICA
180 NORTH MICHIGAN Ave.
CHICAGO, ILLINOIS
217
From Rangoon to Lashio, the terminus of the Burma Railroad, there are
means of transportation; namely the subject railway and the highway. The rela-
tive two proportion of the total tonnage consigned into the interior by either agency is
unknown.
Dodge units now and contemplated are suggested for use over this six
hundred and seventeen mile highway. The total number assigned to be determined by
the percentage of total tonnage to be carried by this agency.
Rangoon to Lashio is approximately six hundred and sixteen miles. We
feel that a truck-rail combination whereby semitrailers are loaded on flat cars and
transported by rail to terminus where tractors haul the loaded units beyond terminus
to its final destination could be incorporated eventually in this operation. This
method has been successful in freight operation in America. We submit herewith prints
which are typical of those in use today.
It is further recommended that this operation be converted as soon as
possible to 8. tractor-trailer (articulated) service, using same type of equipment as
is specified for Section "B" - Lashow to Sanyeh, thereby completing an eighteen hundred
mile operation uniformly divided as to power units expediting all movements into and
out of the interior after consolidation of freight. This recommendation is to permit
of continuity of operation regardless of location of power unit failure, provided
emergency tractor equipment is made available at strategic positions.
"B"
Beyond Lashio everything to be transported is dependent upon motor
transport for movement into the interior. Therefore, from Lashio to Tsanyeh, where
the Chengtu highway joins the Kweiyang highway, a distance of approximately twelve
hundred miles, it is assumed that a tractor-trailer (articulated unit) operation is
most logical.
Where the recently built suspension bridges are located and whose
capacity is limited to a ten ton load, it is suggested that shuttle trucks be perman-
ently assigned to relieve semi-trailer units of the excessive loading above the ten
ton limit. For suggested methods to accomplish this as an alternative to hand labor
or where time is 8. vital element, we submit the attached folder.
logical terminus of tractor-trailer operation, a total distance of 1,171 miles from
From Kunming to Tsanyeh, where highway division is made, seems a more
Lashio, the railhead.
Alternates
1,787 miles
1. Rangoon to Tsanyoh
2. Lashio to Tsanyeh
1,171 miles
"C"
Eweian, Liuchow and Tsanyeh Chengnankwan, embracing approximately twenty five be the
From eastward encompassing Kikiang, Yuanling, Chingsa, hundred Hengyang, miles
of main highway, it is suggested that the motor trucks assigned to this area
CMC-AC403 type.
Regraded Unclassified
218
"D"
From Tsanyeh northward encompassing Chingking, Sian, Lanchow (including
Chengtu) embracing approximately twenty three hundred miles of main highway, it is
suggested that Dodge Chrysler TH-47s be assigned to this area. This suggestion is
made with a view toward as ideal a maintenance situation as can be accomplished where
various makes and models of equipment is specified.
Should the volume of freight at Lashio from Rangoon by both rail and
truck exceed the capacity of the tractor-trailer units, the 160" wheel base Dodges
could be equipped with sleepercabs so that they could continue on to Tsanyeh over
Section "B" as additional equipment over this section.
Laok of information on the total mileage or tonnage in and out of
Russia precludes a definite assignment of trucks to that area. Therefore, a read-
justment of the total mileage embraced in Section "C" can be made so that Dodge units
only, along with International articulated units, would move within the sections
"A", "B", "D" and northwest beyond Langchow. This would assure a uniformity of ser-
vioing and repairs and precludes the necessity of duplicating repair parts in all
shops and warehouses.
219
OPTIONAL PROCEDURE TO OPERATION IN SECTION "B" SHUTTLE
SERVICE
(Refer to 2nd paragraph section "B")
If lading on semi-trailers, without road tractors,
is sufficiently within the safe limits of suspension bridge
capacity, I. H. C. tractor Model I-14 with drawbar, fifth
wheel and dolly could be used to negotiate bridge, tractor
recoupling to semi-trailer after crossing, eliminating time
lost in load transfer.
220
The superintendent of maintenance, in my opinion, should
be in charge of the truck assembly plants at Rangoon, Burma and
Haiphong, French Indo China, as well as shops of the several
classes as noted on the map exhibit and on following pages, and
located as follows:
1 Central Shop
Kweiyang
2 Major Shops Class "A"
Shiakwan
Hangchung
10 Major Shops, Class "B"
Lashio
Tsahyeh
Chengtu
Lanchow
Sian
Chungking
Yuanling
Changsha
Liuchow
Chengnankwan
5 Mobile Shops, Class "C" Between Lashio and Shiakwan
II
Tsanyeh and Lunchang
If
Yuanling and Changha
"
Hanyang and Liuchow
At Kunming
14 Mobile Shops, Class "D"
Between
Lashio and Shiakwan
II
Shiakwan and Kunming
II
Chengtu and Hangchung
II
Kweiyang and Chungking
"
Hangchung and Lanchow
II
Mahtsanping and Yanling
II
Lanchow and Sian
II
Liuchow and Chengnankwan
If
Hangchow and Chungking
n
Lunchow and Mahtsanping
If
Chungking and Yuanling
If
Hanyang and Lunchow
At Lunchang
221
SHOPS
We have segregated shops into four classes designated
as A, B, C, and D. This in addition to a main shop to be
established in the headquarter city of Kweiyang. It is
proposed that the Kweiyang shop be fully equipped with all
necessary machinery to properly overhaul trucks, truck-
tractors, and trailers. It should be equipped with a full
line of woodworking machinery to take care of all body work.
Woodworking machinery enabling complete body repairs should
also be included in the equipment for the shop to be
located in the town of Shiakwan, approximately 845 miles
from Kweiyang. Additional facilities for body repairs
are suggested for inclusion in the shop machinery in the
town of Hangchung, some 800 miles to the north of Kweiyang.
These main shops are designated on the map as Class A.
Shops designated as Class B are general repair shops
but without woodworking machinery for body repairs. The
Class C mobile shops are large repair shops at important
intermediate points where heavy grades, road construction,
or extreme climatic conditions indicate the need thereof.
The Class D mobile shops are smaller repair shops where
ordinary running repairs could be effected.
Again referring to the map exhibit you will observe
that the suggested assignment of equipment has been made
with a view toward adapting automotive equipment to the
anticipated conditions and yet maintain uniformity in a
given region. With this thought in mind the mobile
ordinance repair shops are suggested for the eastern region
or Section C on the map exhibit, specifically to care for
the four-wheel drive GMC's assigned to that region. All
shops, other than the general shops and the shops at
Shiakwan and Hangchung, will be equipped with a full line
of tools but without woodworking machinery.
There follows alist of the electrical equipment
considered essential to effect electrical repairs. Also
a list of machine shop machinery and tools that the shops
should be equipped with. The tool room in each shop should
not only issue tools to the mechanics and men but should
maintain and repair batteries and in addition do brake work.
The three large shops planned for body repairs should
be equipped to take care of all cushion and tarpaulin repair
work. They should also be equipped to do all classes of
painting.
Regraded Unclassified
222
-2-
It is further suggested that each of the shops
in Classes A, B, and C and the general shop at Kweiyang
be furnished with a mobile wrecker equipped with a winch,
driven though power take-off. These wreckers to be used
in bringing disabled units to larger shops for repairs.
The larger shops, Class B, contemplated at Changshaw
and Liuchow may not be advisable although the selections
are strategic due to their location at rail heads.
Operations in the contiguous area may present insurmountable
difficulties at this time.
MAINTENANCE EQUIPMENT FOR SHOPS
ELECTRICAL AND FUEL-DEPT.
224
ST-232 Autolite Voltage & Current Regulator Tester
Armature under outters
Fuel pump vacuur and pressure testers
Armature growler testers
Bear Condensor Testers
Weidenhoff electric test bench
Lantz Phelps exhaust gas tester
Set voltage regulator toole-
Electro magnet
Soldering iron furnace
Set Carburetor tools
Set Field forms
Armature winding jig
Armature baking oven
Small arbor press
Commutator soldering j1g
Armature lathe
BODY SHOP
Marquett Arch welder
Large metal shear
Blacksmith forge
Set Blacksmith tools
Large drill press
36" Band saw
Lerge electric grinder
Model 6 American rip saw
Large Northfield jointer
Set Body tools, outters, etc.
1/4" electric drill
3/8"
Large cross out swing saw
Mortis machine
1/2" Electric drills - Heavy Duty
Electric metal cutter
Large hand metal snips
Punch press
MACHINE SHOP
Set spiral reamers
Set Hone tools
Hydraulic brake cylinder hone set
Sunner Honeing machine
Reamer lathe drive
Valve hard seat grinders
1/2" electric drills
Valve C lifters
Set valve guide reamers
Valve spring testers
Souix valve grinder
Quick-way valve refacer
Conn. rod aligner
Quick-way line boring outfit
Regraded Unclassified
MACHINE SHOP (CONTINUED)
22
Machinist vise
set numbering & lettering stamps
set valve insert tools
Metal motor rebuild stands
Cylinder boring bars
set Starrett Micrometers - inside & outside
Work benches
Paint spray gun
Front axle rebuilding rack
Differential rebuilding racks
20-ton Hydraulic press
Motor test stands
Motor test panels with gauges
Differential rebuild racks
Large emery & buffer (electric)
12" American lathe
16" South Bend lathe
Tool rest grinder - No. 12
Clutch rebuilding outfit
Drill presses
Piston grinder
Chain hoist & swinging beam
Ring gear rivet set
Crankshaft grinding machine
Set 1/16" to 3/4" high speed drills
Cleaning tank with burners
Power hack saw
TOOL ROOM & BATTERY DEPT.
Brake lining riveting machine
Tungar battery chargers
Battery separator cutter
#
plate burning racks
Set battery moulds
Vise and stand
Battery high rate discharge
5/8" electric drill
1/2"
-
20-ton Hydraulic jack
Weaver wheel aligner
011 pressure tank and hose
Blackhawk portable hydraulic press
Set heavy duty sockets
Set SAE Dies 1/4" to ⑇
Set USS R 1/4" to 1"
Set SAE Small Dies 1/4" to 3/4"
Set USS
#
.
1/4" to 3/4"
Set SAE Taps
Set USS
à
Set Pipe dies & stock 1/8" to 1"
Tubing outter & flaring tool
36" pipe wrench
Ford bushing remover
Snap-on gear puller
Ford valve lifter
Brake anchor box wrench
Regraded Unclassified
TOOL ROOM & BATTERY DEPT. (CONT'D.)
226
Int. sleeve puller
Branding iron
Lead melting pot
Set drill bits
set front axle alignment gauges
Pair large calipers
Timing gear puller set
Pneumatic fender tool & adapters
Steering wheel puller
Compression gauge
set screw extractors
set valve seat cutters & pilots
6
Expansion reamers
Fender jack
Rear ax le sleeve puller
Extension cord stands
GENERAL SHOP
1
Spark plug cleaner
1
Small grinder & buffer
1
Large air compressor
2
Welding & outting outfits
3
Large vise
1
Work bench
40 Metal tool lockers
3
Chain hoists
3
Heavy duty floor jacks
Tube vulcenizing plates
Electric sewing machine for making tarps
Cutting and fitting table
1
Set ring and eyelet dies
2
Tube vulcanisi plates
1
Air tire spreader
1
Paint spray
1
Portable spray outfit
1
Electric sewing machine
3
Work benches (repairing & making seats)
1
Air hammer for riveting
1
Frame straightening rack
1
Set vulcanizing moulds and equipment
2
Electric Grease Guns
4
011 pump tanks
8
Stand jacks
2
Paint spray outfits
1
Portable spray outfits
1
50-gal. portable gas tank
1
Diff. & trans. jack
Regraded Unclassified
227
SUPPLY AGENT
The supply agent's duties, in my opinion, should embrace
the securing of adequate housing facilities for bothmen and
machinery, employees' subsistence, the securing of essential
material and supplies including fuel and oil, tires and spare
units, as well as shop machinery and tools, and the establish-
ment of proper medical facilities throughout the area to be
served.
ACCOUNTANT
It is recommended that accounting be centralized at
Aweiyang for all departments, with division accountants
strates ically located, as action and necessity arise.
GENERAL
In connection with equipment specifications, it is noted
that fuel capacity is unusually low for the mileage and I
believe separates fuel supplies, and I am firmly of the
opinion that safety fireproof gasoline tanks of not less
thsn No. 12 guage steel with proper air control pipe to
assure air cushion in tank of 12% to 15% even when full,
will eliminate seepage and loss of fuel due to changes in
temperature and altitude; such tanks on smaller units
should have a minimum capacity of 60 gallons, larger units,
80 gallons.
228
EQUIPMENT DATA
Equipment selected:
Purchased or contemplated
Based on maximum torque requirement of 165 foot pounds (minimum torque between
800 and 200 RPM, 160 foot pounds)
1st Group - 1,000 units - Purchased
500 GMC AC-403
248 engine, value in head
G.V.W. 14,000 lbs.
1573/4" wheelbase
Chassis 4,225 lbs
Gas tank 18 gal. under seat
"
Body,cab,fuel,
20 gal. side tank
etc.
2,680 lbs.
Net payload 7,070 lbs.
Transmission - 4 speed (ClarkGMC)
Final drive - Timken F.F. 11,500 lbs. rating 6.67 to 1, Model 53,526
Tires 34 X 7 H.P. lo ply
500 Chrysler-Dodge TH-47 (two ton)
G.V.W. 14,000 lbs
160" wheelbase
Chassis 3,500 lbs
Gas tank 20 gal.
If
20 gal. (side)
Net payload 6,450 lbs.
Single plate B & B oluth 10-9-39
Transmission five forward and one reverse
Hypoidgear final drive T-78FF - 12,000 lbs maximum rating 6.28 to 1
Springs rear 52" X 28 X 5.49 - 12 leaf
Helper 36" X 2% X 2.1 - 7 leaf
Tung Oil Trucks
2nd Group - 1,000 units - Purchased
500 Dodge TH-47 (same specifications as above except 153" wheelbase
No cabs except
Bodies
12' X 7' X 42" high stake
150 bodies built up
200 metal (set) parts
Balance to be built locally
229
BQUIPMENT DATA (2)
500 Ford "958" - "COE" (Meroury engine) 239 cubic inches
100 complete with Ford stake bodies, 134" wheelbase
50 complete with wood bodies
Balance to be built locally
Final drive #125 Eaton Dual ratio 8.00 and 5.83 to 1
3rd Group - 1015 units - Purchased
500 Dodge TH-47 (same as 2nd 500) except Pintle Hook and Rear "Army" bumpers
Search light (swiveled) Bodies 12' X 7' X 42" complete
515 GMC - AC-K 353, 4 wheel drive
G.V.W. 12,000 lbs.
1573/4" wheelbase
Net payload 5,000 lbs
228 engine
Transmission GMC 350 with dual ratio transfer box 1.1 and 1.87 ration to 1
Final timken front F.30B-28-4, 4000 lbs "B" rating
Rear 53,616,
9000 lbs
6.67 to 1 ratio
200 D-50 International tractors
Maximum gross weight on tractor 17,000 lbs (FB215 engine 97 HP)
278.7 cubic inch
Final Eaton Axle 7.16 to 1
200 Trailmobile semi-trailers (6 ton normal capacity 50% overload 9 ton maximum)
22' X 8' x 48" open top stake
Axle - Tinken, 13,000 series
Regraded Unclassified
230
SHOP EQUIPMENT
Not Mobile
8 complete (Main)
16 kilowatts powered complete with machine tools
6 complete (large auxiliary) 10 kilowatts powered complete with machine
tools
For 1st thousand Dodge and GMC and 3rd five hundred Dodge and two hundred
Internationals, tractors and trailers and units now in service
There is contemplated 8. duplication of above for purchase when, as and if
500 units for Ministry of War are purchased
Not Mobile
Supposed to be now existing for service and maintenance of 1000 Tung Oil
units under supervision of Mr. Grove. This shop is designed and designated
as Central shop located at Kweyoung. Auxiliary light repair shops already
purchased and probably in operation - scattered along routes.
(Tung Oil Units - 500 Dodge and 500 Fords)
Mobile
35 "Couse" GMC 4 wheel drive (elaborate wrecker)
*10 GMC (Military) heavy units, consisting of two units,
Power and tools, machine tools and equipment
16 Supply trucks
The above is to be GMC 4 wheel drive to be used between front lines and
central shops for servicing especially contemplated 500 units for the
Ministry of War and the 500 (purchased) 4 wheel drive GMCs.
*These ten units have electric welder and acetylene welder as well as
machine tool equipment.
44(e)
MISC.
FEDERAL RESERVE BANK
231
OF NEW YORK
OFFICE CORRESPONDENCE
DATE June 23, 1939.
CONFIDENTIAL FILES
SUBJECT:
TELEPHONE CONVERSATION WITH
TO
L. W. Knoke
BANK OF ENGLAND.
FROM
I called Mr. Bolton at 11:20 a.m. to give him the replies
to the questions asked by him on June 19. We were ready, I told him,
to receive a ****** request from the Irish Currency Commission for
the earmarking of gold. The transaction would, of course, require
the approval of our directors but I was hopeful that such a request
would be acted upon favorably upon receipt, but, of course, I could
not give him any definite assurances on this. Details 85 to the
form of instructions in case the transaction was agreed upon, the
channel through which to be given (possibly Bank of England or the
Irish Winister in Washington), would, of course, have to be worked
out. Our charge for earmarking would be 1/2 per mil per annum as is
customary in cases where we carry no account. On this question of
en account I had to repeat what I had already said on June 19; it
YES not our custom to take foreign accounts other than those of
foreign central banks. Accordingly we would not be prepared to take
on account from the Irish Currency Commission. His third question
as to whether any gold received by us for account of this commission
would come under the terms of our general export license we had
discussed, I said, with the Treasury lawyers and we were all satisfied
that our license would cover the Irish Currency Commission's gold
Just as it covers the Bank of England's gold. In this connection I
wented to refer him to the Provisional Regulations under which this
Regraded Unclassified
232
use 1.2 60M-18
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
DATE June 23, 1939.
CONFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
TO
L. W. Knoke
BANK OF ENGLAND.
FROM.
2
license was issued, copy of which was sent to him the last time on
July 8, 1937 and its receipt acknowledged by the Bank of England by
letter of July 16, 1937. In reply to his fourth (tentative) question,
namely, would the Treasury be willing to sell gold to the Irish
Currency Commission, I stated again that I was personally confident
that the Treasury would not be disinclined.
Bolton had just learned from one of the American banks in
London that closing of our banks on Saturdays during July and August
was under consideration. Was it likely to happen? I replied that no
final answer could be given until after the New York Clearing House
Association had voted on this matter at the next meeting scheduled
for this afternoon. I had learned, however, in the street that the
chances for voting in favor of closing were better than a to 1.
Assuming that all members of the New York Clearing House Association
would vote in favor of closing, our directors would presumably decide
similarly with regard to this bank at their next meeting next week.
I had tentatively drafted 8 cable this morning, I said, which we
would send to all our foreign central bank correspondents in case
closing was decided upon and in which we would advise them of the
action taken by this bank and the Clearing House banks.
As regards the situation in Europe, Bolton thought there
was no change. They were still having some tension. Normal business
was reduced all over Europe. Bankers and traders were doing no
Regraded Unclassified
gc 12 60M-6-38
233
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
DATE
June 23, 1939.
CONFIDENTIAL FILES
SUBJECT
TELEPHONE CONVERSATION WITH
To
L. W. Knoke
BANK OF ENGLAND.
FROM
8
business unless practically forced. There were no news about the
Far East and the feeling was growing in the city that the British
Government was taking things lying down too much.
LWK:KW
HECEIAED
11104 se loss
TIGNTRATE
off) to mill0
norm wif of terminal total/art
234
JR
PLAIN
London
Dated June 23, 1939
Rec'd 1:30 p.m.
Secretary of State,
Washington.
887, June 23, 7 p.m.
FOR TREASURY FROM BUTTERWORTH.
Business on both the foreign exchange and stock
markets continues restricted, the general attitude bEing
one of caution and watchful waiting for further
developments in the Far Eastern situation.
The British fund has sold practically no dollars
in the past two days but continues to support sterling
by giving gold at the fixing. Yesterday it gave 62 of
the 133 bars sold and 13 were married. Today the total
dealt in was 172 bars only 3 of which were married, and
the British fund gave practically all of the balance of
169 bars.
The silver market is calmer spot being 19 7/16 D and
forward 19-1/2D at today's дзузозя
prop ES MIII
KENNEDY
ТИЗИТНАЯЗО YRUPARIT
CSB
original adt to
name wit si testant wast
Unid
235
EG
GRAY
Berlin
Dated June 23, 1939
Rec'd 8:50 c.m.
Secretary of State,
Washington.
541, June 23, 11 a.m.
NUMBER 39 FOR TREASURY FROM HEATH.
I spoke with Puhl, Acting Vice President of the
Reichsbank yesterday who said hE had had a further
interchange of telegrams with Lamont (Embassy's 494,
June 14, 2 p.m.) whose latest request had been for
Puhl to meet him in Evian the End of June to discuss
the situation of defaulted Austrian dollar bonds.
Puhl said that his attendance at the International
Chamber of Commerce meeting at Copenhagen and the Reichs-
bank meeting of June 30 made such an Encounter impossible
and that. hE had cabled suggesting that Lamont meet him
at Brussels on July 4.
HE also remarked that he hoped very much that
"the situation" would permit him to attend the next
meeting of the Standstill creditors scheduled to bE
03V13038
held in NEW York next October.
KIRK
PPOI ES Mill
THERTRA930 YOURANT
CSB
extrast ontil to will
nature vi of
Regraded Unclassified
- OFFICIAL COMMUNICATIONS TO
- SECRETARY OF STATE
236
WASHINGTON, D.C.
Noted
F. Dietrich
DEPARTMENT OF STATE
WASHINGTON
June 23, 1939.
My dear Mr. Dietrich:
In connection with our telephone conversation of
this morning, regarding the instruction to Butterworth
to make a cabled report on the disposition of Czecho-
slovak gold in London, I am enclosing copies of three
despatches which have been received from the Embassy in
London on this subject. I am also making a further check
of our files to see if there is anything else on this
subject.
In the meanwhile, the cable to Butterworth has gone
on.
Sincerely yours,
Levoy D Stinebown
Leroy D. Stinebower,
Assistant to the Adviser on
International Economic
Affairs.
Enclosures:
No. 2387 of April 3
from London.
No. 2731 of May 23
from London.
No. 2742 of May 25
from London.
Mr. Frank Dietrich,
Mr. Lochhead's Office,
Treasury Department.
Regraded Unclassified
237 EA
TRIPLICATE
No. 2387
London, April 3, 1939.
SUBJECT: The Impounding of Czechoslovak Assets
in the United Kingdom
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to telegram No.346 of
March 16, 7 p.m., and subsequent reports regarding the
impounding by the British authorities of Czechoslovakian
assets in the United Kingdom, and to transmit herewith
1-6/
copies of the various instructions issued by the British
Treasury and the Bank of England to the banking insti-
tutions in the United Kingdom, which are self-explanatory.
7/
There is also enclosed a copy of the "Act to post-
pone the making of payments out of certain banking
accounts
Regraded Unclassified
238
-2-
238
accounts and certain transfers of securities and gold
connected with the Czecho-Slovak Republic; and for
purposes connected with the matters aforesaid", to-
8-10/
gether with copies of the official debates which took
place in the House of Commons and the House of Lords
on March 22, 23 and 27, 1939.
Incidentally, the passage of this Act illustrates
the speed at which the British Parliamentary machine
can be driven. Only four Parliamentary days were needed
to complete the passage of the legislation through both
Houses. This rapidity of passage has only been exceeded
in recent years by the emergency legislation of 1931,
which required three days, and the Abdication Act, which
required two hours.
The speeches in the House of Commons and the House
of Lords contained little information that was new.
However, the Chancellor of the Exchequer did make clear
that of the £3,250,000 which had been drawn by the
Czechoslovak authorities on the £10,000,000 credit in
the Bank of England (which arose out of the arrange-
ments reported in despatch No.2163 of February 27, 1939),
£750,000 was drawn against the £4,000,000 refugee allot-
ment and £2,500,000 against the loan allotment.
Mr. Boothby's speech, which may be found in columns
1320-1324, undoubtedly produced the Bank of England's
circular dated April 3, 1939 (Enclosure 6).
In view of the present European situation, the
British monetary authorities have not yet formulated
any
Down
239
-3-
any specific plan of dealing with the Czechoslovak
assets thus impounded, the extent of which was re-
ported in telegram No.382 of March 21, 7 p.m.
Respectfully yours,
For the Ambassador:
Herschel V. Johnson
Counselor of Embassy
Enclosures:
1-2. Copies of letters dated March 15 and 17,
respectively, from the Chancellor of
the Exchequer to the Governors of the
Bank of England;
3. Notice dated March 20;
4-5. Circulars dated March 22 and 25, respectively;
6. Bank of England's Circular dated April 3;
7. Czecho-Slovakia (Restrictions on Banking
Accounts, etc.) Act, 1939 (Chapter 11);
8-9. Texts of debates in the House of Commons
on March 22 and 23, respectively;
10. Text of debate in the House of Lords on
March 27.
TRUE capy
as THE nw BICKED
WWB/MW
240
Enclosure 1 in despatch No.2387 of April 3, 1939
from the Embassy in London.
(COPY)
TREASURY CHAMBERS.
13th March, 1939.
Centlemen,
Current events in Czecho-Slovakia make it
necessary in the public interest to follow an exceptional
course in certain particulars which have been the subject
of discussion between us, and I now write to ask you to
be good enough to comply with the three following
requests, viz.:
1.
That you will not make any further payments
out of the two special accounts relating to
the Government gift and advance to Czecho-
Slovakia until the Treasury request otherwise.
2.
That you will not make to the order of that
Bank any exceptional transfers out of the
ordinary course of business without reference
to the Treasury.
3.
That you will furnish me confidentially with
particulars of sterling balances, gold and
other assets that you may hold on behalf of
the National Bank of Czecho-Slovakia or the
Government of that country.
His Majesty's Government will indemnify you in
respect of your compliance with this request and will
ask Parliament for all necessary powers.
I need not say that the problems which have
arisen will be examined with the least possible delay
with
The Governor and Deputy Governor,
Bank of England.
Regraded Unclassified
241
+
with a view to definite decisions being reached on
the appropriate course of further action.
I am,
Gentlemen,
Your obedient Servant,
(sd.) JOHN SIMON.
242
Enclosure 2 in despatch No.2387 of April 3, 1939
from the Embassy in London.
(COPY)
TREASURY CHAMBERS,
Whitehall, S.W.1.
17th March, 1939.
Gentlemen,
In continuation of my letter of the 15th
instant, His Majesty's Government consider that it
is desirable that banks and other financial institu-
tions who hold balances, securities or gold on behalf
of persons in the former Czecho-Slovak Republic,
including the former Czecho-Slovak Government and
the National Bank of Czecho-Slovakia, should not
make any payments from such balances or part with
securities or gold without the assent in writing
of His Majesty's Treasury.
I am to request that you will be so good
as to communicate immediately with the financial
institutions concerned, adding that His Majesty's
Government will indemnify them in respect of their
compliance with this request and will ask Parliament
for all necessary powers.
I am,
Gentlemen,
Your obedient Servant,
(sd.) JOHN SIMON.
The Governor and Deputy Governor,
Bank of England.
Regraded Unclassified
243
Enclosure 3 in despatch No.2387 of April 3, 1939
from the Embassy in London.
(COPY)
CONFIDENTIAL
CZECHO-SLOVAKIA
Notice to Bankers and others concerned, relating to the
Chancellor of the Exchequer's letter dated
17th March 1939.
1. The request made by the Chancellor of the
Exchequer relates only to balances, securities and gold
held on behalf of residents* in Czecho-Slovakia. It
does not therefore relate to the assets of any citizen
of the former Czecho-Slovakia Republic not so resident.
The Chancellor's request does not relate to the payment
of commercial debts nor to remittances to residents in
Czecho-Slovakia other than by debit to the account of a
resident in Czecho-Slovakia.
2. The Bank of England have been authorised by
H.M. Treasury to grant permission for certain transactions.
IN ANY CASE OF UNCERTAINTY OR OF AN APPARENTLY AHNORMAL
TRANSACTION APPLICATION SHOULD BE MADE TO THE CHIEF CASHIER'S
OFFICE, BANK OF ENGLAND: but where a Banker or firm is
satisfied that a transaction falls properly under one of
the following headings the Bank of England's permission may
be
"Throughout this notice the phrase "residents in Czecho-
Slovakia" means -
1. The Government of the Czecho-Slovak Republic.
2. Any Corporation incorporated under the law of
that Republic.
3. Any person ordinarily resident in the territories
of that Republic on the 15th March 1939.
Regraded Unclassified
244
244
-2-
be assumed without further reference -
(a) The amount of any bill of exchange accepted
prior to the 15th March 1939 by & firm in
the United Kingdom on behalf of a resident
in Czecho-Slovakia may on maturity be
debited to the account of that customer.
(b) Any cheques drawn or instructions for payment
issued before the 15th March 1939 may be
acted upon.
(c) Any payment 18 permitted which is necessary
to meet a debt or obligation to a British
subject or to a person in the United Kingdom
(other than a person resident in Czecho-
Slovakia). Any payment necessary to meet a
debt or obligation to a person (other than
a British subject) in a country abroad should
be referred, but permission will be freely
given in suitable cases.
(d) Assets belonging to British subjects resident
in the territories of the former Czecho-
Slovak-Repurlic may be freely disposed of.
Assets belonging to nationals of other
countries so resident should not be disposed
of without reference, but permission will be
freely given in suitable cases.
20th March, 1939.
Regraded Unclassified
245
Enclosure 4 in despatch No.2387 of April 3, 1939
from the Embassy in London.
(COPY)
CONFIDENTIAL
CZECHO-SLOVAKIA
With reference to Paragraph 2(c) of the
Notice dated the 20th March 1939, payments to British
subjects or to a person in the United Kingdom (other
than a person resident in Czecho-Slovakia) should be
permitted without reference only in respect of debts
or obligations arising out of a contract made before
the 15th March 1939.
Monies, gold and securities received on and
after the 15th March 1939 may, provided that they are
held on a new account, be freely disposed of, but this
provision shall not apply to funds forming part of
balances, etc., held on behalf of residents in Czecho-
Slovakia on the 14th March 1939 which by permission
in certain cases have been transferred since that date
to similar accounts.
22nd March 1939.
Regraded Unclassified
246
Enclosure 5 in despatch No.2387 of April 3, 1939 from
the Embassy in London.
(COPY)
CZECHO-SLOVAKIA
Certain questions have been raised regarding the
Circular sent out at the request of the Bank of England
on the 23rd instant.
As regards paragraph (1), it should be pointed out
that this is not intended to refer to Exchange Contracts,
which are covered by the special circular of the 22nd
instant.
As regards paragraph (2), this should be interpreted
as dealing with moneys, gold and securities received after
close of business on the 14th March, not on and after the
15th March. As regards moneys, gold and securities which
have already been received since the 14th March, the
Receivers should put themselves into touch with the Payers
to ascertain whether such moneys, gold and securities were
held on behalf of residents in Czecho-Slovakia on the 14th
March, 1939. The onus of saying whether moneys, etc.,
hereafter are to be held for new or old account is on the
Payer and not Receiver and must be clearly indicated at
the time of payment or delivery.
Proceeds of Treasury Bills, bullion, securities and
assets other than commercial bills held for account of
residents
Regraded Unclassified
247
-2-
residents in Czecho-Slovakia at close of business
on 14th March can only be credited to old account,
and remain blooked and subject to permission of the
Bank of England.
Commercial bills are free and proceeds may be
placed to free account.
25th March, 1939.
Circulated by the Foreign Exchange Committee.
Enclosure 6 in despatch No.2387 of April 3, 1939
from the Embassy in London.
248
(COPY)
CZECHO-SLOVAK FINANCIAL OBLIGATIONS.
The Governor and Company of the Bank of England are
authorised to announce that His Majesty's Treasury desire
to obtain information in regard to certain financial
obligations due from Czecho-Slovakia to British holders
(including persons ordinarily resident or ordinarily
carrying on business in the United Kingdom) and held by
them at the close of business on the 14th March, 1939.
This request for information does not, of course, imply
that the Treasury accept any responsibility for obtaining
satisfaction in regard to such obligations.
Forms on which information should be given can be
obtained from the Bank of England and its branches or
through the medium of any other bank in the United Kingdom.
These forms should be completed and sent to the Chief
Cashier's Office, Bank of England, London, E.C.2, envelopes
being marked "Czecho-Slovak obligations."
The financial obligations in regard to which it is
desired to obtain information are the following:-
(a) Loans issued by the Czecho-Slovak Government,
by any public authority in Ozecho-Slovakia or by
any corporation incorporated before 15th March,
1939, under Czecho-Slovak law;
incorporated before 15th March, 1939, under Czecho-
(b) Shares or participations in any corporation
Alovak law;
the close of business on the 14th March, 1939;
(o) Balances with banks in Czecho-Slovakia as at
(d)
Regraded Unclassified
249
-2-
(d) Miscellaneous financial obligations such
as interest-bearing or revenue-producing claims
on persons or institutions in Czecho-Slovakia
(but EXCLUDING TRADE OBLIGATIONS).
NOTE.
1. Information is not required at present in regard
to trade debts or any debts other than those
described above. These must not be included
in any return.
2. The individual items of information given will
be treated as strictly private and confidential
and no information other than the totals of each
category will be made available for publication.
3. Banks and financial institutions which have already
reported their claims should not report them
again.
4. Obligations due from Sudetenland should not be
included.
Bank of England, London, E.C.2.
3rd April, 1939.
Regraded
No
2387
3
APR
1939
at
England.
& 3 GEO. 6.
Czecho-Slovakia
CH. 11.
(Restrictions on Banking Accounts, dec.)
250
Act, 1939.
CHAPTER 11.
An Act to postpone the making of payments out
of certain banking accounts and certain
transfers of securities and gold connected with
the Czecho-Slovak Republic; and for purposes
connected with the matters aforesaid.
[27th March 1939.]
B'
E it enacted by the King's most Excellent Majesty,
by and with the advice and consent of the Lords
Spiritual and Temporal, and Commons, in this present
Parliament assembled, and by the authority of the same,
as follows :-
1.-(1) Until the Treasury by order direct that this Postpone-
subsection shall cease to have effect, it shall not be
ment of
lawful-
certain
financial
(a) for any person carrying on the business of
obligations.
banking in the United Kingdom with whom on
the fifteenth day of March nineteen hundred
and thirty-nine the Government of the Czecho-
Slovak Republic, or any person being a body
corporate incorporated under the law of that
Republic, or any person (not being a body
corporate) ordinarily resident in the territories
of that Republic, or any person on behalf of
the said Government or any such person, had
an account, to make any payments out of that
account without the consent in writing of the
Treasury or some person authorised by the
Treasury for the purpose; or
1
CH. 11.
(Restrictions Czecho-Slovakia on Banking Accounts, 2 dec.) & 3 GEO. 6.
2 & 3 GEO. 6.
Czecho-Slovakia
CH. 11.
Act, 1939.
(Restrictions on Banking Accounts, &c.)
Act, 1939.
(b) for any person, who on the said date held in
document of title relating thereto, and
incorporated as aforesaid, or any person corporate
ment, or any person being a body
United Kingdom on behalf of the said Govern. the
Treasury bills;
(b) the expression "gold" means goid coin or
being a body corporate) ordinarily resident (not
gold bullion;
aforesaid, any securities or gold, to part with as
aforesaid. the securities or gold without such consent as
(c) references to the refusal to do any act shall
be construed as including references to failure
to do the act.
March and before the commencement of this Act
(2) Where on or after the said fifteenth day of
2.-(1) This Act may be cited as the Czecho-Slovakia Short title
(Restrictions on Banking Accounts, &c.) Act, 1939.
and extent.
person has refused to do any act which he could any not
lawfully have done if this Act had then been in force, the
(2) It is hereby declared that this Act extends to
refusal shall be deemed to have been lawful.
Northern Ireland.
think fit to indemnify any person against any loss or
(3) The Treasury may agree on such terms as they
damage suffered by him-
Printed by EYRE AND SPOTTISWOODE LIMITED
FOR
(a) by reason of his refusal to do any act on or after
Sin WILLIAM RICHARD CODLING, C.B., C.V.O., C.B.E., the King's Printer of
Acts of Parliament
the said fifteenth day of March and before the
commencement of this Act, if he intended and
reasonably believed the refusal to be in com-
pliance with any request made by the Treasury
with respect to banking accounts, gold and
securities connected with Czecho-Slovakia; or
(b) by reason of his refusal to do any act after the
commencement of this Act, if he intended and
reasonably believed the refusal to be in com-
pliance with the provisions of this Act.
(4) Any money required by the Treasury for the
purpose of fulfilling any agreement made under the last
foregoing subsection shall be charged on and issued out
of the Consolidated Fund of the United Kingdom or the
growing produce thereof.
(5) If in any period of three months beginning on
the first day of January, April, July or October any
sums are issued under the last foregoing subsection, the
Treasury shall, as soon as may be after the expiration of
that period, lay before Parliament an account of those
sums.
(6) In this section-
(a) the expression "securities" includes stocks,
shares, annuities, bonds, debentures and de-
benture stock, and any certificate or other
2
251
CH. 11.
1305 Carcho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1306
(Restrictions Czecho-Slovakia on Banking Accounts, 2 dec.) & 3 GEO. 6.
than that and to settle details at the
Act, 1939.
ORDERS OF THE DAY.
moment. This is a very complicated busi-
ness and will require close examination,
no doubt both as regards what we owe to
CZECHO-SLOVAKIA (RESTRICTIONS
Czecho-Slovakia and what is owed from
ON BANKING ACCOUNTS, &C.) BILL.
Czecho-Slovakia to this country, and,
Order for Second Reading read.
except in very general terms, I do not
believe that it is possible for anybody to
3-45 p.m.
say at this moment how the accounts will
The Chancellor of the Exchequer (Sir
work out; but knowing, as we did, that
John Simon): I beg to move, That the
there was in this country a substantial
Bill be now read a Second time."
amount on Czecho-Slovakia account, and
This is the urgent Bill which I mentioned
knowing that there were also securities
to the House at Question Time a day or
and balances in the charge of these
two ago. As the House knows, it arises
British institutions, it did appear to the
from action which we have asked the
Government and myself to be right at
banking institutions to take, and, I think,
once to ask that an embargo should be
put on their transfer, and then, at the
is generally approved by the sense of the
earliest moment, to come to the House
House. The Bill is a very simple one
and does nothing more than validate the
and ask Parliament to ratify and approve
it. I am sure that I shall have the
compliance with the requests that have
been made to banks and to holders of
approval of my right hon. Friend the
gold, or securities which they are holding,
Member for Gorton (Mr. Benn), who is
on Czecho-Slovakian account. The
always so watchful over points of consti-
House will, no doubt, remember that I
tutional procedure. I do not think the
informed hon. Members of the communi-
Bill can be a matter of controversy, and I
To he purchased directly from H.M. STATIONERY OFFICE at the following?addressess:
York House, Kingsway, London, W.C.S; 120 George Street, Edinburgh 2:
hope very much that before the end of
26 York Street, Manchester 1: 1 St. Andrew's Crescent, Cardiff:
cation we made to the Bank of England
80 Chichester Street, Belfast;
in that respect, and I think it was later
the week we shall have got this authority,
or through any bookseller
in the week that I was able to inform
and that things will be on a legal footing.
Price Id. net
them that we had also communicated in
the same sense with the joint stock banks
Mr. Logan: Suppose this Bill does go
and other financial institutions in order to
through, as I believe it will, will any
block transfers which otherwise might be
refugee having any money invested or in
called for from this country to Czecho-
a banking account have the power of
Slovakia.
drawing upon that account through the
English banks?
The action which we then asked for has
been universally complied with, and we
Sir J. Simon: I am obliged to the hon.
have no case in which any objection has
Member, who has mentioned an import-
been raised. On the other hand, as the
ant matter. If he will just let me go on
House will understand, the authority of
to say something more about the present
Parliament is needed before the action
position I think that will be the best way
which we asked them to take could
of dealing with his point. I was going
become valid, and those institutions are
to observe, by way of introduction to that
naturally entitled to have from Parlia-
part of the matter, that of course there
ment-if Parliament is prepared to give
has already been drawn from London out
its approval-the authority which will
of that fund of £10,000,000 which the
make their action unchallengeable; and if
House will recall, a sum of something
there be any case in which they could be
like £3,250,000. I am not sure that I
held responsible this Bill will afford them
have ever made it plain to the House
an adequate indemnity. I do not antici-
that that £3,250,000 which passed from
pate that there will be any case for an
the Bank of England to Czecho-Slovakia
indemnity, because if we alter the law of
before these recent events-the invasion
this country on a subject of that sort it
of Czecho-Slovakia by Germany-was
would appear to me that these institutions
composed in part of drawings from what
would have a perfectly good answer to
anybody who claimed the transfer of the
we may call the free gift, £4,000,000,
which was directly to assist refugees, and
property they held.
in part from the other amount, which was
That is the whole object of this Bill,
in the nature of a loan and which the
because it is not possible to go further
former Czecho-Slovakia Government had
Regraded Unclassified
1307
Crecho-Slovakia
(Banking
HOUSE
OF
COMMONS
Accounts,
[Sir J. Simon.]
etc.)
Bill
undertaken to repay. That is the case.
Hailey, who is chairman of that 1308
1309 Crecho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1310
It appears to me that, so far as the
ties, ordinating committee of voluntary (1)-
still without the means to provide
which the House had no intention of in-
amount is in the nature of part payment
ties asking whether the voluntary socie-
are themselves with transport or with the
cluding, and sometimes they are found
of loan, we should be entitled to regard it
refugees can continue to arrange to socie-
necessary landing money. If we are pre-
to be quite ineffective for carrying out the
as an amount to be recovered. On the
who have already left help
Slovakia ments or have got all their Czecho-
pared to devote this £4,000,000 to such
purpose which the House wanted ful-
other hand, as far as this large sum of
a purpose, limiting it strictly to the cases
filled. Though that is my general view,
£4,000,000 to help refugees can be
made to leave for this arrange-
of refugees who are eligible, we shall be
I am not in the least dissenting from
devoted to that purpose it ought to con-
on
acting in accordance with the spirit and
the view that there are occasions which
tinue to be devoted to it. I think that is
not this
the intention of this House. This matter
are so abnormal and where celerity is so
a principle on which we ought to try to
to be
is one which has greatly exercised the
much of the essence of the matter that
act.
have taken place in Europe, the
mind of His Majesty's Government. I
the usual procedure must be departed
but would, by one means or another,
hope that hon. Members will appreciate
from and quick action must be taken. In
I would like to inform the House that
continue to be available to provide for
my point that there will be plenty of
such cases it is of supreme importance
there is one rather special reason which
the needs of those refugees, in particular
cases in which assistance would be very
that the whole House should address itself
I wish to make clear now. Hon. Mem-
for the passage money to pay for their
valuable in the form of foreign exchange,
to three questions: First of all, whether
bers will know that there is a most im-
tickets if they are going by steamer, or
and I hope that we shall be able to make
the Bill does in fact achieve the purpose
portant body which is co-ordinating the
for the landing money which they will
arrangements to meet that sort of case,
for which it is designed; secondly, whether
require when they leave their temporary
even although it may go beyond the
at the same time inadvertently it achieves
various private societies and enterprises
working in relation to the refugees and
place of settlement in Europe.
particular class of case for which the
other purposes which may be most un-
money was provided.
desirable; and, thirdly, whether it carries
which has collected a very substantial
Mr. Wedgwood Benn: Does that mean
That is all I can usefully say now. I
as a consequence developments for the
sum of money, and that over this com-
that the funds of the Prague Institute will
have explained to the House that this is
future which may be entirely unforeseen.
mittee there presides a very distinguished
dry up?
a very urgent matter for the purpose of
figure, Lord Hailey. I have had a letter
I have applied my mind, as far as is
protecting the banks. It is not right to
from Lord Hailey calling attention to the
Sir J. Simon: The right hon. Gentleman
ask the great institutions to abstain from
possible for an outsider who has no inside
fact that that committee, which is helping
means the refugee institute?
information, to this very serious and
acting in accordance with the demands
refugees to come to this country, is in
Mr. Benn: Yes.
made upon them by those who have de-
grave Bill. It seems to me that in one
danger of exhausting its immediate re-
posited funds with them and then to leave
respect the Chancellor of the Exchequer
sources and suggesting that it would be
those institutions to face the racket. If
was not quite fair to the House. He did
Sir J. Simon: That is a matter on
the Bill is passed, they will have a good
not give any description of the Bill. He
a very great help to the work which it is
which, no doubt, we shall get more in-
trying to do if it were possible to con-
answer, and the result will be that we
said it was to implement a decision which
formation, but I think we ought to pro-
template that this £4,000,000 would con-
ceed in the spirit of that letter and
shall have to answer for it. That is
he had asked the Bank to take. That
enlarge our purposes, if necessary, as
right, because this House is prepared to
was putting the cart before the horse.
tinue to be available in some way or other
for the assistance of refugees. As the
regards the £4,000,000. We shall not fail
do it. I hope that we shall get the Bill
The real fact is that the Government,
right hon. Gentleman opposite suggested.
to assist every case that can be assisted,
through rapidly. I have no doubt that
having come to the conclusion that it was
such a proposal might involve legislation.
but it looks as though the need, which is
all sorts of difficulties will have to be got
necessary to take an exceedingly import-
but I do not think it would be objected
certainly not less than it was before,
over before the matter is finally con-
ant and grave step, and in order to see
to by the House.
would be better expressed if we regarded
cluded, because this is a very complicated
that their intention was not frustrated,
those efforts of the voluntary societies as
business. I hope that the principle of the
gave on Monday last or during the week-
This free gift of £4,000,000 was to help
included; and perhaps that is the best
Second Reading will be accepted by
end an instruction to the Bank, or made
refugees from Czecho-Slovakia who might
answer to Lord Hailey's question. A
everybody. I am very much encouraged
a request to the Bank in anticipation of
need currency in sterling or in foreign
good deal of thought has been given to
by indications I have already received
subsequent action by this House, and to-
exchange, to enable them to go. Already
this matter and there is a good deal of
that this request which I have urgently
day the House is called upon to pass this
something like £750,000 of that sum has
real sentiment about it, and it will prob-
made is one which the House would like
Bill, and if it passes the Bill it is not
been actually used for that purpose. Mr.
ably be along those lines that we shall
to see met.
because of that instruction by the Govern-
ment but because the House in its en-
Stopford has been out in Prague and has
be able most practically and effectively to
4.0 p.m.
give this help.
Mr. Pethick-Lawrence: In normal cir-
tirety approves of the principle of the
been in close touch with the Treasury,
action which the Government have taken.
and a very substantial amount of assist-
Sir Ernest Shepperson: Can the right
cumstances I am always very strongly op-
The Bill is incidentally also an indemnity
ance has been given in the form of foreign
exchange to a large number of refugees.
hon. Gentleman say whether it is possible
posed to hasty legislation. Unless there
to the Bank for what has already been
now for a Czech to leave Czecho-
is a wide measure of agreement between
So far, so good. His Majesty's Govern-
Slovakia? We have been led to believe
all parties in the House it is never pos-
done.
that no further passports are being given,
sible to carry a Bill with great speed, and
It is no good pretending that it is not
ment think that this money should still,
if possible, remain available for the gen-
that wide measure of agreement is in
a very grave and very stern Bill. As far
eral purpose for which it was intended,
and that they are bound to stop in their
itself a sort of danger, because when
as I know this is absolutely unprecedented
the provision of foreign exchange for re-
own country.
there is no opposition any point that may
action on the part of the Government.
fugees. But we must, of course, see that
Sir J. Simon: That is a matter that can
have been overlooked is liable sometimes
It is action taken in view of a very grave
there are adequate safeguards that the
be looked into, but it does not invalidate can
to go by default. My experience of Bills
emergency but it is action which I do
what I was saying that this money to
carried through the House with great ex-
not think has ever been taken before in
money for will be really used for the purpose
which it was dedicated. As I have
be used in many other cases in order and
pedition is that very often they are not
peace time. Therefore the House should
assist refugees who have already left
wholly satisfactory. Sometimes they are
devote its attention to the three points
said, I have had a letter from Lord
found subsequently to include proposals
that I have mentioned. It is particularly
1311 Crecho-Slovakia (Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
1313 Crecho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1314
Bill
[Mr. Pethick-Lawrence.]
important that all Members of the House
they expenses found to carry them through the 1312
recognise that this moratorium, as it is
unfortunate people turned out of the coun-
should bring their minds to bear on the
the that they could not week,
in effect, is desirable, and even neces-
try penniless; and, as any provident-
question, because owing to the hasty
intention money. That was not the wish withdraw
action, and I ask for an assurance from
sary, but I consider that it is a very grave
minded men or women would, they have
what of the Government but or the
been endeavouring to get a little money
character of the legislation Members are
deprived of the assistance which is usually
having happened. Naturally the that is
the Government that they have contem-
into the country to which they expected
afforded to them by expert persons
from the received this rather sudden banks,
plated all the consequences that may flow
to have to fly in the course of a very few
to break Government, were anxious request
from it.
weeks or months. When the occupation
throughout the country who, knowing the
the Government, and they put an embargo the
in any way the intention of not
of the Sudeten area took place, many
facts better than any Member of Parlia-
people in Czecho-Slovakia realised that it
ment can know them, are generally able
4.15 p.m.
that drawings. I am given to understand on
Lieut.-Colonel Sir A. Lambert Ward:
was more than likely that similar action
to advise Members of this House. We
now the text of this Bill is
I should like to congratulate the Chan-
would be taken in regard to the rest of
have to act to-day without that advice.
us-presumably Bill in the form in which before
cellor of the Exchequer on the prompti-
the country, and when they got a certain
As far as I can see the Bill does achieve
will pass into law-these people the
tude which he has shown in introducing
amount of money away into the country
the main purpose which the Government
not be subject to such consequences. will
this legislation, and, as the case is one in
to which they would have to escape, they
have in view. That main purpose, as I
There will, however, be border-line
which speed is the essence of the contract,
were only taking what might be regarded
understand it, has nothing whatever to do
and no doubt the Government will cases, do
on the still greater promptitude which he
as a reasonable precaution.
with the Government loan or gift of
anything they can to prevent undue hard.
has shown in giving instructions to the
The transfers of money from there to
£10,000,000 to Czecho-Slovakia. I am
ship arising by accident as a result of the
banks to take the necessary executive
here have, as far as I have been able to
passing of the Bill.
not taking the smallest exception to the
action, which has been done. It is true
find out, mostly taken one of three forms.
very interesting and important remarks
In my judgment most important of all
that, as was pointed out by the right
Either an account was opened with a
is the question, what ulterior con-
hon. Gentleman the Member for East
of the Chancellor of the Exchequer. The
British bank, or lease of a strong box was
House was only too anxious to hear what
Edinburgh (Mr. Pethick-Lawrence), this
sequences may flow from this action? It
taken at one of the numerous safe
he had to tell us and what was the Gov-
is quite impossible to disguise from our-
is an unprecedented case as far as this
deposits in this country. That, however,
ernment view with regard to the
selves that the Bill will not be regarded
country is concerned, but it is not un-
in the majority of cases, meant paying a
£10,000,000, but I think the Chancellor
with exceptional favour and approval by
precedented in the world; it is not unpre-
visit to this country, and a great many of
will agree that what the Bill is concerned
the Reich Government. It is designed
cedented in Europe. Most countries have
these people have not been able to do
with is not in any way that £10,000,000.
obviously to prevent the Reich Govern-
already taken similar steps with regard to
that. The third method, which has been
It is concerned with entirely different
ment taking undue advantage, so far as
British balances lying there, and I think
adopted by people in a small way who
it is regrettable that action was not taken
sums of money, which for other reasons
this country is concerned, of the military
were fortunate enough to have a friend
are at the present time either at the Bank
occupation of Czecho-Slovakia. There-
earlier by our Government to put those
or relation in this country on whom they
fore it is the duty of the Government and
countries which had placed an embargo
of England or in other banks to the credit
could rely, has been simply to put their
of the Government of Czecho-Slovakia or
of this House to make sure that they are
on British balances in a similar position.
securities into a registered envelope and
prepared to face such action as may be
The Chancellor will no doubt say that
of certain firms, companies, and private
address it to a friend over here, accom-
taken in retaliation. In the Debate a few
the answer is simple-that there were no
individuals in Czecho-Slovakia. Looking
panying or preceding it by a letter asking
balances in this country to block. If that
at the Bill without possessing any inside
days back I pointed out that foreign
their friend to be kind enough to look
be so, he is even more to be congratu-
knowledge and with only a limited experi-
affairs to-day were like a game of chess.
after their money for them. Such is the
lated on having taken time by the fore-
ence, it does seem to me that the Bill
A player starts with a plan but it is
confidence which people abroad have in
lock-on having locked the stable door
covers the necessities of the case. If any
necessary for him to alter that plan
the honesty and integrity of people in this
before the horse has escaped.
Members of the House think otherwise I
according to the moves of the player on
country that that sort of thing, I am told,
hope they will take this opportunity of
the other side. It is necessary, before
With regard to the balances and gold
has gone on to an amazing extent.
expressing their views. I will not say
rigorous action is taken, to make sure
which are still lying at the Bank of Eng-
I want to ask the Chancellor of the Ex-
that if they fail to do 50 they must for
that you are in a position to make a
land and in joint stock banks in this
chequer what is going to be the position
ever after hold their peace,' but, at any
later move if an intermediate move by
country, I think we can be perfectly
of a refugee arriving in this country, who
rate, now is the moment for them to
your opponent is intended to upset your
easy in our minds as regards the balances
has money here, but who finds on
speak, for the day after to-morrow it will
plan. It would be most improper for
in gold in the name of the National Bank
arriving here that he cannot obtain it. In
be too late.
the Government to explain to the House
of Czecho-Slovakia, because the National
spite of the fact that no one is now
in detail what they will do on some sub-
Bank of Czecho-Slovakia is every bit as
allowed out of Czecho-Slovakia, refugees
I come now to the second of my two
sequent occasion if the Reich Government
much a Government institution as is the
are undoubtedly slipping over the frontier
questions: Does the Bill, in doing what
take a certain course, how they will meet
Post Office of Czecho-Slovakia. With re-
in two or three directions. They have
it is obviously the intention of the Gov-
this, that and the other, but I think it
ernment and the House to do, at the same
gard, however, to private balances, pri-
slipped over in considerable numbers into
is up to the Government to tell us in
broad general terms that they have given
vate funds and private securities which
Poland, and have also been getting into
time do nothing undesirable? According
to my information the instructions given
are at the moment in this country, I
Yugoslavia. In a short time, probably,
detailed and meticulous consideration to
to the Bank earlier in the week did pro-
this point, and have come to the conclu-
do not feel quite so easy in my mind.
some of these unfortunate people will be
duce certain consequences which were not
sion, in taking this very grave step, that
Ever since the occupation of Sudetenland,
arriving here, and they will find that their
intended. Persons who had come to this
if there is any attempt to meet it by
a good many Czechs have been getting
balance, which has been placed in a bank
money out of the country. No one can
in London or elsewhere in this country,
country from Czecho-Slovakia and who
retaliatory action they are in a position
blame them for that. They have seen
has been blocked; or, if they have money
were residing here found themselves in a
to act so that the retaliatory action will
what has happened to the Jews in Ger-
at a safe deposit, they will not be allowed
peculiar predicament. When they went
do no injury to this country. The House I
many and Austria; they have seen those
access to their strong box; or, if they
to the Bank for small sums for ordinary
is entitled to that general assurance.
1315
Czecho-Slovakia
(Banking
HOUSE
OF
COMMONS
[Sir A. Lambert Ward.]
Accounts,
etc.)
Bill
1317 Crecho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1318
have sent securities to a friend, that
taking over here them away, which shows 1316
friend, if he interprets this legislation as
he should interpret it, will not be allowed
different possible moment. It is at the
earliest were right in acting that we
which they can take over when, as it
Czecho-Slovak banks or exporters of
surely will, the free democratic State of
Czecho-Slovak goods. Could my right
to hand them over to the original owner.
in the situation from what a very
Czecho-Slovakia arises once again.
hon. Friend give some indication of the
Nor will anyone be in a position to ad-
no case of Austria. Then there happened
I should like to put one or two ques-
amount of Czech balances which it is
vance money on the security of that pro-
and question I of taking any such was
tions to the Chancellor of the Exchequer,
envisaged that this Measure will cover?
perty, because at any moment the
over longing to the Austrian State were be-
understand that all the funds action,
though 1 think that in his intervention
Could he subdivide it into two-how
Treasury may insist that securities held
just now he made the position clear. I
much is owing to the National Bank of
privately which belong to Czcho-Slovak
is automatically by Germany. taken
gather that in all reasonable cases
Czecho-Slovakia and how much to firms
nationals must be declared, and, if neces-
mention another matter, which I can only There
refugees, both those in this country at
and private citizens in this country? I
the present time and those who may
would like to reinforce the plea of the
sary, handed over and placed in the
in Chancellor has in mind, I trust sure
the in a word, but which I feel just
arrive later, if they can prove their case,
h. Member for East Wolverhampton
general hotch-potch of Czecho-Slovak
the case of Memel, he will, if that,
will be permitted to draw out their re-
(Mr. Mander) on the subject of Memel.
money.
sources here. There is also the case of
It is a different case, but I think it is
with the same celerity as in this case.
sary, act in exactly the same way neces- and
persons in Czecho-Slovakia who own
well worth examination. Although it may
Sir J. Simon: Perhaps my hon. and
gallant Friend will forgive me for inter-
property in this country as shareholders
not be possible for the Government to
rupting him, because I do not want other
In the case of Austria, of course,
in companies. Could it not be arranged
give an answer during this Debate, I hope
attempts were made by the German
for such persons, provided they can prove
they will consider it. There was one point
Members of the House to dwell on this
Government to put pressure upon
that prior to 14th March, let us say, they
on which I did not agree with the hon.
difficulty. I had that point most clearly
Austrians who had money over here, by
owned such property, and disregarding
Member. He suggested that, after the
in mind when I helped. as Chancellors
putting them in concentration camps and
all changes since, that facilities should
allocation which my right hon. Friend
of the Exchequer do, to draft this Bill,
asking them to say where their money
be given to them to draw out funds to
has made, any balances which may be
and partly for that reason there is intro-
duced, and I think there must be intro-
was banked in England and to sign
which they may be entitled? Another
left should be, perhaps, held over in trust
cheques handing it over to the German
question which has been raised is as to
for a possible Czech refugee government.
duced, a provision that this embargo, the
Government: and no doubt a number of
whether it will be possible for persons
I do not think that is either advisable
prohibition to pay out, shall not operate
these poor people were obliged to accede
having money in the blocked account to
or possible. It would not be possible to
without the consent in writing of the
to that pressure. The present proposals
move it from one bank to another, pro-
tell whether that government in fact
Treasury. It is essential that we should
will make it impossible to exercise that
viding that it remains blocked. 1 cannot
represented the Czech people, because no
put some confidence in the administration
sec any objection to that. We shall do
mandate would be given to them, and it
pressure, because obviously the money is
of the Treasury, who are naturally in
everything possible to facilitate the
would be very difficult for a government,
not going to be paid out, whatever the
touch with the benks, and I have not the
owner may do. A good many changes
passage of this Bill at the earliest possible
or shall we say the trustees who might
slightest doubt that if any such cases
have already taken place in the control
moment, and I hope the Government, in
hold this surplus, to know anything about
all their dealings with this grave inter-
the personalities of the refugee govern-
arise, they will be dealt with on their
of Czech businesses in Germany, and
national crisis, will show the same spirit
ment.
merits. They must be dealt with on their
instructions have already been sent to
of action and resolution as they have in
merits, and I think the House may trust
banks here notifying those changes. That
Mr. Mander: I really did not mean that
this case.
us to deal with them properly and
is another reason for stopping the whole
a lump sum should be handed over to
rapidly.
thing short.
4.31 p.m.
this Provisional Government. I meant
Mr. Petherick: In common with other
that it should be held in trust for the
Sir A. Lambert Ward: I am very much
When the whole question is balanced
hon. Members who have spoken. I wel-
day when there should arise once again
obliged to the right hon. Gentleman; he
up, and the necessary compensations and
come this Bill. I share with the right
a Czech government in Czecho-Slovakia.
has met the case that I had in mind.
adjustments are made on the two sides, I
hon. Gentleman who spoke from the
take it that there will be left over in this
Mr. Petherick: I understood the hon.
What I particularly wanted was an
Opposition Front Bench some nervous-
assurance that refugees who arrive here
country a substantial sum in favour of
ness over the Bill being thrust through
Member. when he mentioned a refugee
owning money of their own will be placed
what was the Czecho-Slovak Government.
with such haste, but in this case I recog-
Czech government being in existence, to
in a position in which they can live in
I hope that a considerable amount of that
mean that the trust fund should devolve
nise that haste is absolutely essential.
reasonable comfort, and not become a
money will be used, as far as may be
My first point is quite a small one; it
on that government, and not to be held
necessary, for the support of refugees,
for the eventual government which might
charge on their friends or on refugee
may be a Committee point, but I should
funds which have been subscribed for
and I should also like to throw out a
like the Chancellor to take note of it.
be set up for the State of Czecho-Slovakia,
that purpose.
suggestion. I do not know whether it is
Under Sub-section I of Clause I, persons
or Bohemia. The Chancellor of the Ex-
practicable or not, but I think it may be
in this country who own securities are
chequer mentioned that some £4,000,000
4.26 p.m.
worth considering. It is that, if there
would be, in effect, allocated to the
not allowed to part with them without the
Mr. Mander: We on these benches
is left available a still further sum
consent of the Treasury. At the end of
refugees, and he mentioned a co-ordinat-
desire to give hearty support to this Bill,
belonging to Czecho-Slovakia, with
that Sub-section, the words securities or
ing committee of refugees. I hope he
and congratulate the Government on the
which it is not quite clear how to deal.
gold are used, and further on, securi-
will give an assurance that His Majesty's
celerity with which they have acted. It
the Government might at any rate con-
Government will be represented on the
ties are defined as including
shows that, if necessary. We can act in
sider placing it in trust for the provisional
board, because it would not be right for
stocks, shares, annuities, bonds, debentures
this country just as rapidly in the pro-
Czecho-Slovak Government which pos-
and debenture stock, and any certificate or
any body to have such an amount under
tection of our interests as can those in
sibly will be formed. as in the old days, when
other document of title relating thereto, and
its control without any Treasury repre-
the Fascist States, I understand that the
Treasury bills."
sentation whatever. I hope the Bill will
German Government have already been
in America, pending the time
Czecho-Slovakia comes into her own. a
I wonder whether that covers the case of
pass through all stages, here and in
collecting gold and securities from the
Prague National Bank in lorries, and
They will then have awaiting them funds.
an ordinary commercial firm in this
another place, at the earliest possible
country which has money owing to
moment.
nest-egg in the form of their own
Regraded Unclassified
1319
Czecho-Slovakia
(Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
Bill
1321 Caecho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1322
4.36 p.m.
Mr. Edmund Harvey: I want to sup-
sums special can be drawn on an account 1320
port the plea made by the hon. and
doctor application to the Treasury. without
matter. But there are British banks and
unit together with the assets of the Czech
pounds has he to this country and he wants
poor has come with a few hundred If a
others doing business in this country who
National Bank. By Czech law, as it pre-
gallant Member for North-West Hull (Sir
also have credit balances in Czecho-
vailed before the occupation, every resi-
A. Lambert Ward) with regard to the
Slovakia, and they must not suffer either.
dent, firm, or individual in Czecho-
effect of this Bill on private individuals.
to the first to make a special application Es.
deal Treasury? All of us who have
It is clear that the realisation of these
Slovakia was obliged to deliver all foreign
I think it is an almost unexampled thing
in the history of our legislation to pass
with refugees know that, with to
balances held by British firms, institu-
devizen to the Czech National Bank,
a Bill taking away the rights of private
greatest good will-and there is good the
tions, banks and individuals in Prague
which in effect became the owner of all
takes weeks or months to see that
on the part of Government officials_it will
has been made quite impossible by what
such devizen. Every holding had to be
individuals, not through any fault of
has taken place. Even if the debtor in
disclosed to, and registered at, the Czech
theirs but for the fault of another State,
Czecho-Slovakia wished to pay, he un-
National Bank; and no bank in Czecho-
of which in some cases they are the
thing I is all right before any grant is every- made.
doubtedly would not be allowed to do so.
Slovakia and no individual citizen had the
victims. It surely is a most lamentable
am sure the Noble Lord opposite knows
I do not want to detain the House for
right to dispose of it without the permis-
thing that we should do this, and I hope
faced. I do not doubt the good will of
the immense difficulties that have to be
long, but I would like to make one or two
sion of the Czech National Bank. There-
that, before the House parts with the
that, before the Bill takes its final form,
the Government in this matter, but I beg
suggestions as to what should be, or might
fore, for all practical purposes, you can
Bill, the Chancellor will see his way so
be, done with the very considerable sum
say that all foreign devizen was in fact
to amend it that we shall materially safe-
guard the rights of private individuals
the utmost will be done to see that it does
of money of which my right hon. Friend
owned by the Czech National Bank,
not involve an injustice to individuals
is now possessed-which will prove in the
which to-day has a complete check on all
who will suffer-I am sure, against his
which I am sure no Member wishes to
end, I believe, to be much more sub-
devizen held in London. Had it not been
wishes-under the Bill.
come to pass.
stantial than was originally thought.
for the action of the right hon. Gentleman
Sir J. Simon: What sort of individual
4.40 p.m.
Many people in the City originally
the Chancellor of the Exchequer, this
thought that the sum involved, belonging
devizen would be finding its way back to
has the hon. Member in mind?
Mr. Boothby: I am not sure whether
Mr. Harvey: Clearly, both refugees in
the hon. Member for the English Univer-
to private concerns, would be £2,000,000
Prague, and into the pockets of the Nazi
or £3,000,000. I think that ultimately it
party, at this very moment.
this country and in other countries, and
sities (Mr. Harvey) was referring to
will be found to be considerably larger
members of private business firms who
Czechs in Czecho-Slovakia or in this
than that. I would suggest that, as this
There should be a single fund estab-
did not wish to have themselves incor-
country.
is a matter of the greatest urgency, a
lished as quickly as possible of all the
porated in the Reich, and were in no
Mr. Harvey: Both.
register should be made as speedily as
Czech assets in London, in order to pay
way responsible, but who are compelled
possible of all Czech holdings in London
off those British creditors who either left
to go on living where they are in Czecho-
Mr. Boothby: There is a great difference
and all British holdings in Prague. Then
funds in Czecho-Slovakia or invested
Slovakia, and who may have accounts in
between the two. With regard to Czech
you will be able to ascertain the balance
funds in Czecho-Slovakia, relying upon
this country. Why should they have to
nationals in Czecho-Slovakia, they might
between the money owed and the money
the assurances of the British Government
suffer for the misfortunes that have fallen
get a portion of any money the payment
now held, or blocked, in this country.
and the other Governments signatory to
on the country?
of which was sanctioned by the Treasury,
but I doubt whether it would be very sub-
I think it is important to set up as
the Munich Pact. This is a point well
Sir J. Simon: They have not.
soon as possible some kind of clearing
worth making. There are a number of
stantial. With regard to Czech nationals
institution to deal with these important
British investors, and other investors,
Mr. Harvey: But their accounts will be
who have the good fortune to live in this
questions as quickly as possible, either in
who, after the Munich Pact, regarded
blocked.
country, I think they may congratulate
themselves, even if they have, for a brief
the form of a public trustee, or some other
Czecho-Slovakia in some respects one of
period to live, if I may put it vulgarly,
institution set up by the Government,
the safest places in which to put their
Sir J. Simon: Special cases will be con-
on tick," that they are out of Czecho-
empowered to decide what money should
money.-[Laughter.]-Hon. Gentlemen
sidered by the Treasury. I cannot define
Slovakia and in this country.
be distributed in the immediate future
may laugh. I know it may be said that
such cases except by saying that if there
to those who have immediate claims. It
the average investor is not a very intelli-
is such a case it will be dealt with on its
I do not find myself in agreement with
is obvious that you cannot have a fluid
gent person; but to the ordinary man,
merits.
my right hon. Friend the Chancellor on
situation continuing indefinitely, where
who is not a trained politician, it seemed
every subject, but in this case I would
most sincerely congratulate him on the
such a large sum of money is involved,
that Czecho-Slovakia was going to become
Mr. Harvey: If you are doing injustice,
it is not sufficient to say, I will con-
speed with which he has acted, and the
and where considerable hardship may be
a sort of Switzerland, with a four-Power
caused in the immediate future to com-
guarantee of its frontiers, and everything
sider, in special cases, whether I will re-
great courage he has shown. The
move that injustice." I entirely agree
annexation of Czecho-Slovakia has un-
paratively small creditors. I suggest that
else. It was to be a veritable harbour of
nothing should be liberated from the fund
refuge for capital in Central Europe. I
with the intention of the Government, in
doubtedly affected British interests. The
seeing that money which was granted to
Chancellor has dealt with the direct
until such a. balance sheet has been estab-
think His Majesty's Government at one
the Czecho-Slovak State does not go to
British Government interest in this
lished; and therefore the sooner that
time sincerely believed that this was going
another State for which it was never in-
balance sheet is made up, the more satis-
to be the case.
matter, arising out of our payment of
tended, and that money meant for the
£3,250,000, and he has dealt with it in a
view. factory it will be from every point of
Mr. Ede: They believed it.
Czecho-Slovak banks is not taken away
manner highly satisfactory to hon. Mem-
by the banks of another country, but why
bers on both sides. Hon. Members
I would like to answer one statement
Mr. Boothby: I think they did. But
should the honest individual, who is in
would wish that, in so far as it is prac-
of my hon, Friend sitting behind me with
it has not turned out to be the case; and
no way concerned with the horrible events
ticable and possible, the bulk of this
regard to the Czech National Bank hold-
it ought to be borne in mind that a lot of
that have occurred, have to pay the
money should be applied to the assistance
ings in London. It is very important that
private investors, not actively engaged
penalty of coming as a suppliant for jus-
of the refugees; and I am sure the Chan-
all the assets of private institutions in
in politics, genuinely believed, when they
tice? The Treasury should see that small
cellor met the desire of the House in this
Czecho-Slovakia should be treated as one
read the terms of the Munich Pact, and
No. 70
C
1323
Carcho-Slovakia
(Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
Bill
Cardw-Stovakia
(Banking
22 MARCH 1939
Accounts, etc.) Bill
1326
[Mr. Boothby.]
the declarations of the Governments con-
the then credit arise, of the fund. The question 1324
cerned, that Cezcho-Slovakia was a
for the as the hon, Member who will
1325 The Bill. especially in view of the short
been insured with a British insurance
time available for drafting it, seems to
company, to apply to the British insur-
reasonably safe place in which to invest
what Liberal party pointed out, spoke
be admirably adapted to its purpose. But
ance company to accept a surrender of
money. These people ought now to be
I have is to be done with the surplus, as to
no doubt at all will exist, which
there are one or two points in it which
the policy against the payment of a
protected from the "onsequences of their
after met all existing claims have been even
seem to provide some loopholes. For
surrender value in sterling. The German
action. Every person-and I would
apply this to Czech residents in this coun-
all out of the fund. I think we fully
instance, in Clause I, Sub-section (I, a),
subject has been very unwilling to do
try as well as to British subjects-who
desire that these credits should would
the persons who are prohibited are per-
that. He has to act under the compulsion
sons carrying on the business of banking.
of the Government under whom he lives,
maintained in a suspense fund of be
now to be paid out of the fund, at the
kind, either for the use or benefit some
Bankers are prohibited from making pay-
and the same thing, I imagine, will apply
can prove assets held in Prague ought
ment out of accounts to persons ordinarily
to the Czecho-Slovak. Where the Czecho-
last quoted rate of exchange prevailing
refugees, or for such other purposes of
resident in Czecho-Slovakia. I do not
Slovak subject has a life insurance in this
prior to the seizure of Czecho-Slovakia.
this House and His Majesty's Government as
know whether a person carrying on the
country, the German Government will call
This applies particularly to Czech bonds.
may at a later date determine. One thing
is perfectly certain, in view of what is
business of banking would include an
upon him to surrender the policy and
acceptance house. If I am right, there
hand over the sterling proceeds to the
Czech sterling bonds lying in London
happening in Europe now, and that is
would be nothing to prevent the meeting
German Government. Great pressure is
will, of course, be paid in full out of the
that the refugee problem is not going to
of an acceptance for the benefit of a per-
brought to bear upon such persons to act
fund. But there is one technical point
diminish with the passage of time; and it
son ordinarily resident in Czecho-
in the way I have indicated, a pressure
I would like to put to the right hon.
may well be that the Government will be
Slovakia. Obviously, the draftsman has
which they find it impossible to resist.
Gentleman. The Czech Government re-
glad in a few months, or a few years
been alert on this point as he has pro-
purchased about half of their outstanding
time, to have this money at their disposal.
ceeded with the Bill, because in the next
There are substantial book debts due
bonds in the City of London, and these
4-54 p.m.
paragraph he makes another restriction
from this country to Czecho-Slovakia and
bonds are back in Prague. I do not
Colonel Nathan: I join with other hon.
with reference to any person or persons
they are not covered by the Bill.
I
want to see them realised now for devizen
Members in congratulating the Govern-
ordinarily resident in Czecho-Slovakia by
would suggest the desirability of covering
in the London market by the German
ment on doing something highly uncon-
including any securities or gold." Even
them speedily, because the German
Government. 1, therefore, suggest to the
so he has not covered the whole of the
Government have a pretty little habit of
stitutional, and doing it very speedily. I
right hon. Gentleman that he ought to
am glad that the Government have come
ground. There are certain amounts of
appointing commissars, or persons of
consider whether it would not be advis-
gold and securities held by Czecho-
some such kind, to control businesses
to the House so swiftly with a Bill for the
confirmation of their action. I should
Slovak subjects here in the vaults of
within German territories-and Czecho-
able that while paying out of the fund
which must be established those Czech
banks, in private safes in banks and
Slovakia is now within German territory
like to pay my tribute to the Treasury for
bonds still held in London, dealings in
minor banks, and also in private safe
for this purpose-and the commissar then
its alertness and for the speed of its action
Czech bonds on the Stock Exchange
in this matter, and for the courage it has
deposits.
comes to the English debtor and says,
should be temporarily suspended. I cer-
I am the person who is authorised to
displayed in acting without legislative
As far as gold or securities deposited by
clear the debt and I am the only person
tainly do not want to give any money
sanction. There is one point which I con-
a person in a safe, or a bank or a safe
arising out of the situation in Czecho-
authorised. Pay it to me." Some rather
fess occasions me a little anxiety with
deposit are concerned, the bank or
Slovakia to Germany at the present time.
regard to this Bill, the whole purpose of
misguided people sometimes do it, though
owner of the safe deposit does not hold
which, naturally, I support. As my right
if they took the decision of the courts
I feel, and I am sure the House as a
the securities or gold for the Czecho-
hon. Friend the Member for East Edin-
they would probably find that they were
whole feels, that there is really great
Slovak at all. He is merely in the posi-
under no such compulsion. It may be
necessity for speed in this matter. We
burgh (Mr. Pethick-Lawrence) said, this is
tion of the hirer of the safe, and under
desirable to cover, in addition to the
are rightly giving an indemnity to the
an important thing to do, and it is a very
this Bill there will be nothing that I can
unusual method of procedure. The City
matters mentioned in the Bill, the
Government and to the banks in respect
see to prevent the Czecho-Slovak
insurances and book debts which I have
of the wise, courageous and quick action
of London depends for its financial reputa-
depositor from going to the bank or the
mentioned. Another hon. Member has
they have taken. But it is very neces-
tion upon the fact that money deposited
safe deposit, opening his safe and re-
here can in normal circumstances be with-
referred to shares held in British com-
sary, especially in view of what my hon.
moving his gold and securities, the reason
drawn at will. I would ask the Chan-
panies. I wish that some restriction
Friend above the Gangway said, that the
being that the bank and the safe deposit
cellor of the Exchequer whether he would
could be placed-I do not think it would
position arising out of the credits held
are not persons who hold the gold or
consider prefacing the Bill by a Preamble
be difficult to devise a formula-on deal-
at present by British citizens in Prague,
securities, but simply, in the circum-
stating that the seizure of Czecho-Slovakia
ings in shares in English companies by
stances I have indicated, the hirers of
and by other citizens resident in this coun-
by Herr Hitler was a breach of a solemn
persons ordinarily resident in Czecho-
safes. They have no answer under this
try, should be cleared up at the earliest
undertaking. and that the British Govern-
Slovakia.
Bill to any action that may be brought
possible moment, and that the minimum
of hardship should be involved.
ment regard that seizure as unlawful and
against them by the depositor. That I
I have heard with a great deal of appre-
do not recognise it. That would give a
conceive to be the position.
ciation, as no doubt have others, what the
I beg of the right hon. Gentleman, if he
basis for this Bill, which it is very desir-
contemplates, as I imagine he does, set-
able to have, so as to show, if nothing
While it is true that there are relatively
right hon. Gentleman has said with regard
ting up a fund, that this should be done,
else, that this is a very exceptional occur-
large balances in this country and
to refugees and the application of funds
rence taking place under most unusual the
deposits of gold, they are by no means
for their assistance. As he said, that
and the fund distributed as quickly as
conditions. Perhaps the Chancellor of
the only sources of sterling which the
question does not, strictly speaking, arise
possible. Even after all the creditors have
Exchequer will be good enough to give
German Government would like. It is
under the Bill, and I will not mention it
been paid off, there will still be, accord-
the matter some thought.
within my experience that the German
except to express my appreciation. But
ing to my information, a substantial
There are a number of small points in
Government have, in the case of German
there does arise a question about refugees
balance lying in London to the credit of
the Bill to which I wish to draw attention.
subjects, called upon them, if they have
which has been touched upon more than
His Majesty's Government, or rather to
C 2
No. 70
Regraded Unclassified
1327
Crecho-Slovakia
(Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
Bill
1319 Cascho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
[Colonel Nathan.]
once and was referred to by the Chan-
future ment will under 1328
1330
cellor of the Exchequer himself, and that
be be arrange-
Mr. Deputy-Speaker (Colonel Clifton
2,000 have reached this country and only
matter done with any ultimate balance should is
Brown): I think the hon. and gallant
about I,000 have reached other countries,
is the operation of their banking accounts.
balance that can be considered when a
Gentleman is going a long way outside the
thanks to interminable delays in the
The Chancellor gave an explanation as
to how the Bill would work, which may
it has been ascertained, but I the
scope of the Bill.
Foreign Office making up its mind as to
be satisfactory to a number of Mem-
gratification to those in this country
sure will be a matter of prolound am
Captain Cazalet: I was only referring
its policy and conducting negotiations for
to a specific point which the Chancellor
the loan, and to delays in the Home
bers, especially those who raised the
Slovakia to know that there are resources
whom money is owed from Czecho- to
raised. I hope that the Czech refugees
Office. To many of us it is a bitter
question, but the matter is not by any
who are not in this country, and have
thought that thousands of those refugees
means so simple as all that. I hope the
to which under proper clearing arrange-
DO means whatever of getting to this
are now probably in the hands of the
right hon. Gentleman will not allow a
country or to the Dominions, for whom
Gestapo.
general rule to be made that Czecho-
ments they will look for reimbursement.
I hope we may be told that legislation
we have a direct responsibility, will be
Mr. Deputy-Speaker: We cannot have
Slovak refugees in this country may at
directed to that end is contemplated in
allowed to be assisted out of this
a Debate on refugees as a whole.
once draw out the whole of their banking
the not too distant future.
(4,000,000. I am grateful for what the
accounts. Very often the German Gov-
Chancellor has said and I hope the
Miss Rathbone: I was only referring to
ernment brings pressure to bear upon
5-7 p.m.
Government will come to some decision
that very briefly to make this point, that
refugees in this country to draw out
quickly and generously on the point.
many have not got out for whom it is
Captain Cazalet: I also warmly welcome
money and remit it to Czecho-Slovakia
the Bill. Naturally it is bound to lead to
too late, and that there are about 250,000
5.10 p.m.
or to Germany, and it is only on con-
Jewish refugees now in Czecho-Slovakia.
certain complications, but I accept the
Miss Rathbone: I join with other
All this money will be wanted and more
dition of the refugee acting in that way
fact that the Treasury must be given
speakers in congratulating the Govern-
than wanted. We have now to deal with
that they will either allow some near
authority and power to deal with those
ment on the celerity with which they
relation to leave Germany or refrain from
complications that arise. I think the
have acted. I share the fears of my
a number of potential refugees infinitely
putting some relation into a concentra-
mere fact that balances cannot be with-
colleague in the representation of the
larger than we expected to deal with only
tion camp. In fact it is a method of
drawn without the consent of the Treasury
Combined Universities that it may work
a brief IO days ago. It may or may not
blackmail, and I am sure notwithstand-
will be the greatest protection to many
hard on some individuals who would not
be possible to extricate those people, but
individuals in Czecho-Slovakia and
be able to draw their balances, but I
probably the whole of those 250,000
ing what the hon. Member for the Com-
elsewhere who have balances in this
recognise that it is a necessity. May I
Czecho-Slovakian Jews are likely soon to
bined Universities (Mr. E. Harvey) has
country. I knew several cases in respect
submit this small point? It would be
be subjected to the Nuremburg laws. It
said, that the refugees will welcome the
of Austria where individuals were forced
a still further advantage if a balance
is most essential that we should not only
fact that they are prohibited from draw-
to sign papers transferring their balances
which a refugee now in Czecho-Slovakia
regard this £4,000,000 as a debt of
ing their money out except with the con-
sent of the Treasury, because it is a com-
in this country to the German bank.
has in a London bank could be transferred
honour to be kept for the use of refugees
from Czecho-Slovakia. We have also to
plete reply by them to the pressure
There is only one point that I want to
to another bank. It may fall into the
hands of the Gestapo, and then pressure
consider what is going to happen to the
brought to bear on them by the German
stress. If I understood the Chancellot
Government. One could multiply in-
of the Exchequer aright, out of the
may be brought to bear on him and,
£4,000,000, or what has not been ex-
original £10,000,000 loan and gift to
although it is true that the blocking of
pended of it, which was not a gift but a
stances in which the pressure is so great
Czecho-Slovakia so far only £3,250,000
his balance in one bank may be one safe-
loan. We do not want to make money
that the Czechs, although they have fled
out of this miserable affair. Out of the
from Czecho-Slovakia, are only too glad
has been expended. Some of it has
guard, it is really a greater safeguard if
be can conceal from the German authori-
whole of the money originally intended
to be prevented from drawing their own
already been spent on refugee work. An
I to understand that the part which has
ties as far as possible the amount of his
for the assistance of refugees only
money.
potential resources. What would be the
£4,000,000 was for the emigration of
The hon. Member also referred to the
been spent on refugees is going to be
position of persons who have not left
counted as part of the £4,000,000 gift
difficulty of permitting a transfer from
refugees.
one banking firm to another if the
Mr. Deputy-Speaker: The hon. Member
Czecho-Slovakia but are still there, and
which we have promised to make for
balance remained blocked?
.he commiserated with them as unhappy
refugee work. I was very glad to hear.
is really getting out of order now.
in regard to the remaining part of the
1 am glad to hear that the Chancellor
of the Exchequer intends to reserve the
Miss Rathbone: I was just finishing.
persons whose private rights were being
interfered with. I do not hesitate to say
£4,000,000, that the Government will give
whole of this money, but I was rather
There was £8,000,000 allotted for the
a wider and more generous interpretation
assistance of refugees in some shape or
that those private traders who are still
as to the way in which it is to be spent in
stonished to hear several Members say
assisting the refugees. I hope that the
they anticipated that at the end there
another, and all this money will be
in Czecho-Slovakia and who have bank
wanted.
deposits here are only too glad to have
co-ordinating committee and the Czed
would be a considerable credit, and
them blocked, because it is a complete
arious suggestions have been made as
5.16 p.m.
answer when they are called upon to trans-
committee will be given the greatest por
how the amount left in the fund should
Mr. F. Anderson: I desire to raise a
fer their balances to Czecho-Slovakia, and
sible latitude in dealing with this
used. Why is it anticipated that there
few points which have not so far been
when they do transfer them they do not
It is impossible to exaggerate the work
vill be more than enough, or indeed
touched upon. I want to raise the ques-
get what they have drawn from the
that the Committee have done and an
hough, to deal with the problem of the
tion of industrialists who reached this
British bankers; they get Czech currency
doing for refugees and they alone cat the
efugees? What happened last week has
country before 15th March with the object
only. There will undoubtedly be a large
know what are the circumstances of
hormously increased the number of
of establishing new industries in the
sum available to be dealt with and I very
refugees. Some of them are not in Czecha
otential refugees. Up to last week it
Special Areas. These people have entered
much hope, though it is not contemplated
Slovakia.
Some are in Hungary
as anticipated that there were something
into certain commitments, and I want to
by the terms of the Bill, which is merely
Rumania.
I know of some for who whom are
6,000 or 7,000 persons who might
ask whether they are entitled to have
of a negative character, that the Govern-
Holland.
These
people,
ovakia. their own safety leave Czecho-
these commitments met without having
ment will introduce legislation in the near
have direct responsibility-
Of that number only about
to make application to the bank where
1331
Crecho-Slovakia
(Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
But
1333 Crecho-Slovakia (Banking
22 MARCH 1939
Accounts, etc.) Bill
1334
[Mr. Anderson.]
they have accounts in this country. The
people, this who are anxious to establish 1332
dealt with expeditiously by the Treasury,
hon. Friend the Member for East Aber-
Bill refers to residence and qualifications
ful country industries which will find in
employment for many of our people. use-
generally within 24 hours. If any hon.
deen (Mr. Boothby), will forgive me if
-it says ordinarily resident."
Member has any cases of this kind-
I do not attempt to deal in detail with
5.22 p.m.
they are probably bound to arise-and
a number of extremely interesting sug-
Sir J. Simon: Are the people to whom
The Financial Secretary to
will communicate with the chief cashier of
gestions which have been made regarding
the hon. Member is referring in this coun-
Treasury (Captain Euan Wallace): line
the Bank of England or the Treasury we
our future action. As the hon. Member
try now?
right hon. Member for East Edinburgh The
will do everything we can to put the
for East Aberdeen said, speed is the
(Mr. Pethick-Lawrence) began his
matter right and see that their cases are
essence of the case, and we have been
Mr. Anderson: Yes, they arrived about
the 12th March. I think the Treasury
marks by saying that the Bill is à re-
dealt with. As regards the particular
obliged to act in what perhaps might
have already had some correspondence
measure. I agree; it is, for we are living stem
point put by the hon. Member for White-
haven, people who came from Czecho-
seem a rather rough and ready manner.
with regard to the points I am putting.
for the Bill. He asked whether there
in stern times. That is the justification
Slovakia before the 15th March are not
I have listened very carefully to the
These people are industrialists and have
within the scope of the Bill at all, and
Debate this afternoon, and I am glad that
entered into certain commitments. What
lation in peace time. The answer is that
was any precedent for this form of legis-
they should have no difficulty whatever
I have failed to discover in any part of
is their position? From my knowledge of
as far as this country is concerned there
in dealing with any money or assets they
the House the view that there is any
what has been done it appears that no-
have in this country.
other method of dealing with the present
thing has been said for these people in
is, so far as I know, none; but it must
situation save the method that we have
regard to their application to the bank
be recognised that other countries have
Mr. Anderson: Only to-day a person
adopted of putting an embargo on those
for the release of money from their
frequently done precisely what we are
who arrived on 12th March went to the
assets which would be liable to be trans-
accounts in order to meet these commit-
doing in this Bill by means of exchange
bank and has only been granted a few
ferred out of this country. In these
ments. Two applications have been made,
restrictions. Therefore I do not think that
pounds, whereas he required £200 or
circumstances, I hope the House will now
and the bank, a well known bank, is not
our withers should be unduly wrung on
that score. The right hon. Gentleman
£300. The bank people say that they are
give the Bill a Second Reading, remem-
in a position to say what can be done.
not at liberty to do any more.
bering that on this occasion my right hon,
went on to ask whether the Bill was
Is that position covered by the Bill? Is
Friend and I have been obliged to cut
concerned with other accounts and other
it one of the points which will have to
balances besides the £10,000,000 COD-
Captain Wallace: I, of course, accept
into one of the days allotted to the Oppo-
be considered on its merits by the Trea-
what the hon. Member says, but I give
sition, and that any time which we spend
cerned in the Government free gift and
sury? If these people who are entering
this assurance to him in all good faith,
on this Bill is taken away from the time
loan, about which we have recently been
that we will deal with these cases as ex-
available for the discussion of another
this country to establish new industries
legislating. It is, but the House must
peditiously as we can. The House will
very interesting subject.
have on every occasion to go to the
recognise that the effect of the Bill is to
Treasury for the purpose of obtaining
block-and it does block-the accounts
recognise that in a Measure of this kind,
Mr. Mander: Will the right hon. and
sanction to spend money in certain ways
relating to the £10,000,000, both the
introduced as a matter of urgency, diffi-
gallant Gentleman be good enough to
it will make it impossible for them to
£4,000,000 gift and the £6,000,000 loan.
culties of this kind are bound to crop
deal with the question of moving a
carry out their business ideas.
Hon. Members will also realise that this
up in the first few days. The right hon.
blocked account from one bank to
My second point is this. Some persons
legislation, which is to deal with an urgent
Member for East Edinburgh talked about
another? Would it be permissible for
have arrived-I am not speaking of
situation, must deal with it on broad lines,
the ultimate consequences of this legisla-
that to be done?
ordinary refugees but of people who desire
and I do not suppose that anyone will
tion. My right hon. Friend appreciates
to establish industries in this country-
assume that the provisions of the Bill
the attitude which the right hon. Gentle-
Colonel Nathan: Would the right hon.
represent finality in dealing with this diffi-
man took on this matter and his un-
and gallant Gentleman also look into the
after 15th March. What is their position?
I have had a case in the last day or two
cult problem.
willingness to press us for any detailed
question I raised as to safes in banks and
reply. When he asks whether we have
safe deposits?
of a person who has many thousands of
A question which has agitated hon
pounds in a bank in this country. He
Members in all parts of the House, and
contemplated the consequences of any
has had to go to the bank and say that
which has been raised by the bon. Mem-
retaliatory action, I would point out that
Captain Wallace: Certainly, I will look
he wants permission to pay his hotel bill.
ber for Whitehaven (Mr. Anderson), is,
foreign balances in Germany are at this
into that point and also the other interest-
ing points raised by the hon. and gallant
Surely it cannot be intended that such a
to put it in a perhaps rather flippant way.
moment subject to exchange restrictions,
Member for Central Wandsworth (Colonel
person has on every occasion to make
the difficulty at the present time for the
and retaliatory action is going on at the
Nathan). All I will say to him at the
application to the Treasury in order to
Czechs to cash cheques. It is an unfor-
present moment.
moment is that the most important thing.
meet his hotel expenses? What is going
tunate situation, but it is only temporary.
A question which has been raised is the
and the object of this Bill, is to stop the
to be the position of people who have
It is the direct result of an obligation to
big loopholes, and that we are doing,
arrived after 15th March? Is there going
bring in legislation quickly and in general
amount of the assets of the Czecho-
Slovakian Government which are held in
although we may have to let some small
terms. I may say without disclosing any
ones remain. I assure the hon. and
to be a general acknowledgment that they
can establish their businesses, and that
confidences that the right hon. Member for
this country. We do not know what they
gallant Member that any suggestions that
in the circumstances they will not be
East Edinburgh approached me on the
are, and it will obviously take some time
may have been made in this Debate, or
asked, every time they want £100 or £200
subject two nights ago. I have made in-
to find out, but I would like hon. Mem-
that may be made outside, will not go un-
some general and some particular under-
bers not to get any exaggerated idea as
considered. As regards the question put
from the bank, to go to the Treasury for
quiries into the whole position. I
to the amount these assets may be. We
by the hon. Member for East Wolver-
sanction? I would like these points
stand that where individual applications the
have had a number of speeches dealing
hampton (Mr. Mander), certainly we
cleared up, because there are a number
of industrialists, from Czecho-Slovakia in
have been made to get money out of
with aspects of this question which, if I
shall consider the question of the removal
banks by people resident in this country. get
may say with all respect, deal with opera-
of blocked accounts from one bank to
particular, who are in this predicament
who obviously have every right to been
tions subsequent to this Bill, and there-
another, while keeping them blocked. If
to-day and unless the matter is cleared up
serious injury might be caused to these
money out, the applications have
fore I hope hon. Members, notably my
they are accounts belonging to people in
1335 Czecho-Slovakia (Banking) HOUSE OF COMMONS
Consolidated Fund Bill
[Captain Wallace.]
Czecho-Slovakia, obviously it cannot be
blocking have given to the banks regarding 1336
done unless they give authority. If the
cases of accounts. Therefore, the
people are in this country, we shall con-
individual ex hypothesi cases. must be dealt with these as
sider every case on its merits, as we are
anxious to do, and as, in fact, we shall
a Second time," put, and agreed to,
Question, " That the Bill be now read
be obliged to do, because the whole effect
of the Bill will be inevitably to give us
Bill read a Second time.
a large number of individual cases to deal
Bill committed
with as a result of the general measure
for the protection of these assets in this
James
Whole the the
country.
Miss Rathbone: I was sorry to hear the
right hon. and gallant Gentleman say that
CZECHO-SLOVAKIA (RESTRICTIONS
the question of allowing a blocked account
to be transferred from one bank to
ON [Money]. BANKING ACCOUNTS, ETC.)
another will be considered only if the
Considered in Committee under Stand-
refugee is already in this country. There
ing Order No. 69.
may be cases where he is not in this
country and yet may be able to make his
[Sir DENNIS HERBERT in the Chair.]
wishes known, through relatives or
Resolved,
organisations in this country, in a com-
That, for the purposes of any Act of the
pletely unmistakable manner. This is a
present Session to postpone the making of
payments out of certain banking accounts
matter on which some of those who have
and certain transfers of securities and gold
had practical experience with regard to
connected with the Crecho-Slovak Republic,
this subject feel strongly that it would be
it is expedient to authorise the issue out of
a safeguard if the balances could be trans-
the Consolidated Fund of any money required
by the Treasury for the purpose of any
ferred from one bank to another.
indemnity given under the said Act."-
King's Recommendation signified.)-[Captain
Captain Wallace: If it is possible for
Wallace.]
somebody who is not here to give us his
Resolution to be reported To-morrow.
consent in an unmistakable manner, I am
certain that the Treasury will consider
that individual case on its merits.
CONSOLIDATED FUND (No. 1) BILL.
Mr. E. Harvey: I should be obliged if
Order for Second Reading read.
the right hon. and gallant Gentleman
Motion made, and Question proposed,
would give some further information
That the Bill be now read a Second
regarding the present restriction on
time."
banks paying out even small amounts to
refugees. I am sure the Government do
not wish to cause any hardship in those
ANTI - TUBERCULOSIS SERVICE,
cases, and therefore, before the Treasury
WALES AND MONMOUTHSHIRE.
have decided on the question of the with-
drawal of larger amounts, would it not
5-37 p.m.
Mr. James Griffiths: I am sure that all
be possible for general instructions to be
hon. Members, not only those who come
given to the banks that they are not pre-
from Wales, but hon. Members from every
cluded from paying out small amounts
that may be urgently required in order
part of the Kingdom, would desire that
to provide maintenance?
my first words this afternoon, in opening
the Debate on the report of the Committee
Captain Wallace: I do not think I can
of Inquiry into the Anti-Tuberculosis Ser-
say more than I have done on that matter.
vice in Wales and Monmouthshire, should
In reply to the hon, Member for White-
haven, I sought to make it clear that
and learned Member for Montgomery (Mr.
be to express our gratitude to the hon.
we recognise these hardships and are
anxious to deal with them as rapidly as
for the work they have done in hearing
C. Davies) and his colleague, Dr. Coutts,
we can. We think we are doing that.
and collecting evidence, and in presenting on
It would defeat the object of the Bill if
we were able to drive a coach and four
an behalf, I am sure, of all Members of
extremely valuable report. I wish, this
through the general instructions that we
House and also on behalf of the people
No. 8 to despatch No 2387 3 APR 1939
from the Embusay at London, England.
SOURCE: PARLIAMENTARY DEBATES
251
NUMBER:
House of Commons
22, March, 1939.
London, Cols. 1305-1336.
1487 Carcho-Slovakia (Banking HOUSE OF COMMONS Accounts, etc.) Bill
1488
my power to get general and as far as
ORDERS OF THE DAY.
may be universal authority for the
passage of this urgent Bill. First, as to
the question which the right hon. Gentle-
CZECHO-SLOVAKIA (RESTRICTIONS
man has just repeated regarding the rela-
ON BANKING ACCOUNTS, ETC.)
tion between the amount of £10,000,000
[Money].
standing to the credit of the National
Resolution reported,
Bank of Czecho-Slovakia at the Bank of
That, for the purposes of any Act of the
England and the present Measure, I agree
present Session to postpone the making of
with him that it is desirable to make the
payments out of certain banking accounts
plainest possible statement on that sub-
and certain transfers of securities and gold
connected with the Czecho-Slovak Republic,
ject, and I think the correct answer would
it is expedient to authorise the issue out of
be as follows: As the Committee know,
the Consolidated Fund of any money required
the £10,000,000, to the extent of about
by the Treasury for the purpose of any in-
£3,250,000, has been drawn upon, and,
demnity given under the said Act."
therefore, £6,750,000 or thereabouts re-
Resolution agreed to.
mains in the Bank of England at the
present moment to the credit of the
National Bank of Czecho-Slovakia. This
CZECHO-SLOVAKIA (RESTRICTIONS
balance of £6,750,000, held at the Bank
ON BANKING ACCOUNTS, ETC.)
of England for the account of the National
BILL.
Bank of Czecho-Slovakia, comes directly
Considered in Committee.
and precisely within the provisions of this
Bill, and I think the right hon. Gentle-
[Sir DENNIS HERBERT in the Chair.]
man indicated that he thought it did, but
he wished to be assured that it did. That
CLAUSE 1.-(Postponement of certain
balance is covered by the terms of the
financial obligations.)
Bill, and is blocked, being an account
Motion made, and Question proposed,
held for a corporation incorporated under
That the Clause stand part of the Bill."
Czecho-Slovakian law, just as completely
3-55 p.m.
and effectively as any of the other
Mr. Pethick-Lawrence: I should like to
accounts dealt with by the Bill. The posi-
ask the Chancellor of the Exchequer
tion, therefore, will be, as soon as Parlia-
whether, after having had the opportunity
ment has passed this Measure, that that
of considering the points raised yesterday,
account will be held blocked in exactly
he has any further statement to make
the same way as any other account which
with regard to them. There were several
is blocked by the Bill. That is a matter
questions which I raised myself, including
on which we ought all to be perfectly
the relationship of the Bill to the Govern-
clear, and I am very glad now to have
ment loan and gift to Czecho-Slovakia;
the opportunity of giving the answer for
and there was also the question raised by
which the right hon. Gentleman asks.
my hon. and gallant Friend the Member
One or two other matters were men-
for Central Wandsworth (Colonel
Nathan) relating to possible procedure in
tioned in the Debate with regard to which,
the case of sums of money that are held in
perhaps, it would be well that I should
safe deposits.
make a statement. With regard to the
question of moving money from one
3.56 p.m.
blocked account to another, which was
The Chancellor of the Exchequer (Sir
raised by the hon. Lady the Member for
John Simon): I think it will be convenient
the English Universities (Miss Rathbone),
if I answer the question of the right hon.
and was also mentioned by the hon.
Gentleman at once, We had a discussion
Member for East Wolverhampton (Mr.
yesterday, in which we went over the
Mander), I think the best way to deal
ground pretty fully. A number of points
with it is to recognise that, if such a case
were made, and a number of questions
does present itself, it must, of course, be
were asked. My right hon. and gallant
judged on its merits, but permission will
Friend the Financial Secretary, at the end
be given in all cases where it is clear that
of the Debate, dealt with most of them,
the money will remain blocked; we could
but I agree that there are one or two to
not, of course, allow it to pass out of
which it would be right to make reference
control. We shall be prepared to deal
now, because I desire by every means in
with these cases according to their merits.
Regraded Unclassified
1485
Written Answers
23 MARCH 1939
Written Answers
COMMISSIONS (1938 STATISTICS).
Cadets
1486
1489 Crecho-Slovakia (Banking
23 MARCH 1939
Accounts, etc.) Bill
1490
Mr. Parker asked the Secretary of State
Short Branches) Service Entrants (All
66
I was asked an important question
it, I do not think it is possible for us at
for Air what was the total number of
about payments to industrialists who have
this moment to put forward a practicable
commissions granted in 1938, showing
Apprentices
1,339
come over here from Czecho-Slovakia.
proposal in regard to it.
separate figures for cadet entry, short-
Airman Pilots
II
The hon. Member who put the question
I think it is much more important to
service entries, ex-apprentice cadets, air-
Warrant Officers
said that some came over here before
have this Bill quickly operating and
men pilots, and warrant officers?
University Entrants
77
15th March and others have come since
effecting its main purpose than to have
Miscellaneous
19
that date, and have started businesses
an elaborate Bill which produces a lot
Sir K. Wood: During the calendar year
1938, 1,571 appointments to commissions
The 1938 entry to commissioned 59
here. Some, I am very glad to say, are
of difficulties. The hon. Member for
from airman pilots was anticipated rank
starting businesses in the Special Areas.
the English Universities (Mr. E. Harvey)
in the Royal Air Force were made from
the sources specified below:
towards the end of 1937, and the number
The hon. Member asked whether people
thought that the Bill might inflict in-
was IO.
who have done that would find themselves
justice on individuals in this country who
beld up in their business transactions by
had come from Czecho-Slovakia and on
the terms of the Bill or whether he could
individuals in Czecho-Slovakia itself. I
get an assurance that that would not be
am entirely at one with the moral prin-
50. My right hon. Friend the Financial
ciple that you should not do wrong so
Secretary dealt with the point, but I would
that right may come. I do not want to
repeat it because it is important. It would
inflict injustice on individuals any more
be plainly impossible in such cases for
than the hon. Member does, but I think
these people to carry on their negotiations
that the matter is not really quite as
with the banks if they had to go to the
serious as he supposes. We are taking
Treasury each time they wished to make a
every step to consider both classes of
payment. Nor would that be necessary.
cases. As regards persons who have
Therefore the answer to the hon. Member
come over here from Czecho-Slovakia, I
is this, that where the Treasury are satis-
am confident that we have in the
fied that there is a proper case for more
Treasury an organisation which will deal
general permission to enable business to
with the cases which arise extremely
be carried through properly, such permis-
promptly. As regards those in Czecho-
sion will be given to draw on the blocked
Slovakia, I am not quite convinced that
account; and it can be given in a general
we are necessarily serving their interests
form which will not require that every one
if we say that we will facilitate the with-
should come back for permission every
drawal of money which stands to their
time.
account. I think that that is the general
A question was asked about safe
feeling of the Committee.
deposits. The hon. and gallant Member
Miss Rathbone: I am not clear from the
for Central Wandsworth (Colonel Nathan)
and another hon. Member mentioned it.
statement made yesterday whether the
I have been looking into the matter and I
money, the balance, will be available for
thoroughly understand the importance of
refugees who have not yet become
the suggestion that there might be a loop-
refugees or only for those who are already
hole to be stopped. We must clearly have
refugees. That is not settled in the Bill.
in our minds what is the nature of the
Is the whole £10,000,000 and not merely
safe deposit business. It is the very
the £4,000,000 intended for the benefit
of refugees inside or outside Czecho-
essence of a safe deposit business that it
should give to each person who rents a
Slovakia, and will the Chancellor of the
strong box or a safe, first of all, a key,
Exchequer consider arranging that the
by means of which he can get in and out
whole £10,000,000 will eventually be
available for refugees?
and others cannot, and, secondly, that the
safe is one which he opens and shuts as
Sir J. Simon: I must be careful here,
he pleases without the permission or
because this is getting very near the
authority of the proprietor or anyone
territory which the hon. Lady was in-
else, and that he alone knows what is in-
formed by Mr. Deputy-Speaker yesterday
side. I do not think that the safe deposit
was forbidden ground. I can only
business could go on if there was any
answer in a sentence. The matter was
alteration in that fundamental arrange-
mentioned yesterday and is not strictly
ment. I therefore question very much
the subject-matter of the Bill. I referred
whether the suggestion made could very
yesterday to Lord Hailey's Committee.
well be carried out. I think it would be a
I have now communicated with Lord
very difficult matter as a practicable pro-
Hailey in accordance with what I said
position, and while I see the importance
yesterday, and I have reason to believe
of testing the point and we shall watch
that my communication is welcome to that
1491 Czecho-Slovakia (Banking
HOUSE
OF
COMMONS
Accounts,
etc.)
Bill
[Sir J. Simon.]
Sir J. Simon: The point was 1492
1493 Carcho-Slovakia (Banking)
23
MARCH
1939
committee. We cannot discuss here how
Nutrition
yesterday ber for by the hon. and gallant mentioned
done. either directly with British insurance
1494
much will be available to assist refugees,
because strictly speaking the Bill does not
which Central Wandsworth. It is Mem-
companies or through German companies
to draw from their accounts. That will
deal with that subject. It is a Bill which
that has been looked into, and I a point
and then by way of re-insurance here.
German subjects have had to cash policies
of whom are very poor.
relieve the anxiety of these people, many
blocks various credits and assets in this
the answer must be the same think
country and prevents their being drawn
answer safe I gave to another question as the
and transfer the proceeds to Germany. I
away. It does not make positive pro-
deposits. We have examined about
do not know how far that applies to
further, I ought to say that on Clause I
The Chairman: Before the Debate goes
possible loophole. The really important this
Czecho-Slovakia, but I would urge the
visions as to what is to be done with
of the Bill we ought not to discuss what
them. That is a matter which will have
and important assets are covered and that
thing here is to make sure that the hig
right hon. Gentleman to look into it as
it may involve a substantial sum. I would
will Government. be the administration or policy of the
to be considered further. It may be that
if we are going to make the sum which
that should be done rapidly in a practical
like to know whether Clause I covers the
way. It is conceivable that there may be
case of branches of foreign banks operat-
4.19 p.m.
we provided in the earlier Measure to
a case or two that we shall come across
ing in London, and whether they will be
Sir J. Simon: I see that, and I will
assist refugees available in the new
circumstances, we may need legislation to
that is not covered, but I do not think
indemnified in the same manner as British
endeavour to put my answer to the hon.
that without a very great deal more exam-
banks.
Member for East Wolverhampton (Mr.
authorise it. That is a matter which is
being examined and I cannot do more
ination we can make provisions of that
Mander) in a form that will not trans-
Sir J. Simon: Yes, it covers bank
sort. It is a very technical matter on
gress, As the Clause provides that cer-
now than say that 1 entirely share the
which we should have to consult many
branches in London whether they are
tain things may be done with the consent
view of hon. Members generally that we
foreign banks or not.
ought to try to devise a useful way of
people. I do not think that the proceeds
of the Treasury, it is rather difficult not
can be anything at all in proportion to
4.16 p.m.
to consider possible cases and the way
employing this money sympathetically
for the refugees, as far as we can.
the important sums which we are engaged
Mr. Mander: There is the point I put
they are likely to work out. The hon.
in putting under an embargo.
yesterday, the case of business men in
Member for East Wolverhampton put the
Mr. F. Anderson: It may be inoppor-
Czecho-Slovakia who, in connection with
case, for example, of a Czecho-Slovak
tune to ask the question straightaway, but
Mr. Boothby: There was one point
their businesses, hold balances over here.
subject who came over here, and was able
there are Czech subjects who have sent
which I raised yesterday, and that was in
It may be that under the new German
to show the authorities that a balance or
money to this country in various ways,
reference to the outstanding Czech sterling
administration the whole ownership has
an asset, which was standing blocked
and it has been turned into bar gold. Is
loans, of which the Czech Government did
now been changed, that these people have
under this Bill, was his, and that he
any provision made that when these
repurchase about half. If the Chancellor
been dispossessed and the shares deemed
wanted it. I do not feel any doubt that,
people arrive in this country they can
will bear that in mind I shall be very
in Czecho-Slovakia to belong to some-
assuming that it was a genuine applica-
withdraw their assets when they are in
glad.
body else, If those individuals come over
tion, the Bill would not operate to prevent
here and satisfy the Treasury that before
him from getting his property.
bar gold?
I would like also to make one correction
14th March, or whatever was the date of
Question, That the Clause stand part
Sir J. Simon: If I followed the hon.
in my observations yesterday with regard
the invasion, they did own such property,
of the Bill," put, and agreed to,
Member's question correctly, I must
to British investments in Czecho-Slovakia.
will it be possible for them to obtain
When I referred to these investments I
Clause 2 ordered to stand part of the
answer that I am not quite clear how the
possession of it?
Bill.
Bill would apply, because of course the
was not, of course, referring to British
Bill is in the nature of a prohibition
investments in industrial companies, or
4.17 p.m.
Bill reported, without Amendment;
addressed to certain classes of persons-
in real property in Czecho-Slovakia, which
Mr. Edmund Harvey: I desire to thank
read the Third time, and passed.
to banks, to finance houses, to any person
have been seized by Germany for the time
the Chancellor of the Exchequer for the
who is answerable on an account. I will
being, and which obviously come under
information he gave to the Committee,
look and see whether the case mentioned
a completely different category. I was
and for the spirit in which he gave it. If
is covered, and I dare say if the hon. Mem-
referring to British balances in Czech
the country realises that this Bill, in spite
ber will speak to me or to the Financial
banks in the form of cash and bonds
of the seemingly harsh form it takes, is
against which we now hold equivalent
designed to operate in the interests of the
Secretary about it we can clear the matter
up entirely. I shall be glad if we can now
assets. A clear distinction must obviously
Czechs themselves, it will make all the
be made between the two. I also threw
difference to the way it is received. The
carry this Measure with the general good
will of the Committee. It has been rightly
out a suggestion to set up some form of
Bill seems harsh, but all the difference is
public trust to administer this fund, but
made by the fact that we realise that the
described by hon. Gentlemen opposite as
an important Measure, and if we can pass
an hon. and learned colleague told me
Government, in introducing this Measure,
afterwards that if we could deal only with
propose to act as trustees in the interests
it with general assent I believe that we
the Treasury, the whole matter would be
of the original holders of the money.
shall add very greatly to its force.
handled much more expeditiously and
Where it is the money that once belonged
Mr. Bracken: I want to raise a techni-
satisfactorily. and I entirely agree.
to the Czecho-Slovak State, it will be held
cal question. I am told that a number of
blocked for a time, and ultimately used
Czecho-Slovakian subjects have insurance
4.15 p.m.
for the benefit of the Czech people, and
policies in London, If these policies are
Mr. Bellenger: I want to raise a point of
where it was held by Czech individuals,
to be surrendered at the behest of the Nazi
which was put previously in the form
the Government, in blocking it now,
dictators in Czecho-Slovakia and the pro-
a question, and it has been put again by
regard themselves as trustees, and there
ceeds forwarded to Czecho-Slovakia,
the hon. Member for North Paddington
will be no attempt to confiscate the
surely that is against the policy which the
(Mr. Bracken). There has been, at any
property. I am glad to have the assur-
Chancellor of the Exchequer expressed
rate as far as Germany is concerned. 2
ance that there will be expedition in deal-
to us just now.
considerable amount of life insurance
ing with the requests of refugees for leave
So.
71
Regraded Unclassified
palamare
No.
9
to
despatch
No
APR 1939
of
Nutrition
HOUSE OF COMMONS
1495
Nutrition
at London, England.
[Mr. Lees-Smith.]
opposite, are taking towards the new
by how its much it weighs, and then 1496
SOURCE: PARLIAMENTARY DEBATES
NUMBER:
is general appearance. This judging
House of Commons
252
science of nutrition which the medical
health, nurses, teachers and anybody of
carried out by medical officers method
23, March, 1939.
profession has lately adopted.
London, Cols. 1487-1494.
The first fact that these medical men
cal Officer to the Board published a short
who may be interested, The Chief Medi- else
who are bringing this question of nutri-
tion before the country are impressing on
time ago his annual report on the health
us, is that they believe that our whole
of the school child, and there he
sense of perspective on this question is
particulars for the year 1937 of gave the
still distorted. They insist that by far
routine medical examination among
the most important element in the health
elementary school children with regard to
and well-being of the people at large is
their nutrition. These are most im-
the actual intake of food-the right quan-
portant figures. By this method it is
tities and the right proportions by which
found that the nutrition of 15 per cent.
people should build up their muscles,
of the children is excellent, that of 74 per
bones, sinews and blood-and that if this
cent. is normal, that of TO per cent.
intake is insufficient, or in the wrong
slightly abnormal and that of -7 per cent.
proportions, we produce jerry-built
-really only about one in almost 200-
bodies. Their view, broadly, is that half
is bad. Those are the results of the
the people are sent into the world with
Board of Education.
jerry-built bodies, and that no amount of
The doctors who are responsible for the
tinkering and dosing will give them a
policy of nutrition say that these results
sound structure in which to pass the rest
are not only wrong, but that they are
of their lives. This fact of the importance
fantastically wrong; they are wrong by
of nutrition as against other elements
100 per cent. They put forward, in order
has been rather strikingly revealed by
to maintain that position, their alternative
the number of inquiries taking place on
method which leads to extraordinarily
the housing estates of the country, par-
different results. I am not a doctor, but
ticularly those where slum populations
I have tried to understand this alternative
have been taken. It was found in an
method, which broadly comes to this
inquiry in 1933. and in others since, that
They calculate the actual quantity of
when you take a slum population and
proteins, vitamins, carbohydrates and
put it in a new housing estate, if the
minerals, and so on, required by a child
rents in that estate are substantially
at different ages in order that it may have
higher than the rents that were paid in
a full and complete standard of nutrition
the slums, the death rate actually goes
They then calculate what it actually costi
up; the fact that less is spent on nutri-
per week to buy the food which will COD-
tain the ingredients for this prope
standard of nutrition and they come to the
conclusion that, if the family is not sufi
ciently well off to be able to spend the
particular sum of money upon the fool
week after week, you may say with abse
lute certainty that in 90 per cent. of 6
cases the children in that family will sufit
from malnutrition. They say that 0
best and by far the safest policy for di
Board of Éducation to pursue would il
to feed and to give free milk to all childre
coming from these families in that stat
or range of income. Even if, oct
sionally, they made a mistake and M
some child who had a sufficient standa
of nutrition, the money would not
wasted. The only reason might be of
the mother of the child would be live
on margarine and tea.
The figures of Sir John Orr are class
and I am going to quote the figures
the British Medical Association beca
Czecho-Slovakia
24 & 27 MARCH 1939 ] (Restrictions, etc.) Bill
416
215
HOUSE OF LORDS.
HOUSE OF LORDS.
Friday, 24th March, 1939.
Monday, 27th March, 1939.
-
The House met at a quarter past four
The House met at a quarter past four
of the clock, the EARL OF LUCAN on the
of the clock, the LORD CHANCELLOR on the
Woolsack.
Woolsack.
ZECHO-SLOVAKIA (RESTRICTIONS
BUSINESS OF THE HOUSE,
ON BANKING ACCOUNTS, ETC.)
THE FIRST LORD OF THE
BILL.
ADMIRALTY (EARL STANHOPE): My
Brought from the Commons; read 1*;
Lords, I beg to move the Motion that
and to be printed.
stands in my name.
Moved, That Standing Order No.
CHINA (CURRENCY
XXXIX be considered in order to its
STABILISATION) BILL.
being suspended until the House do
adjourn for the Recess at Easter.-(Earl
Brought from the Commons, endorsed
Stanhope.)
with the Certificate from the Speaker that
the Bill is a Money Bill within the mean-
On Question, Motion agreed to: Stand-
ing of the Parliament Act, 1911; read I ᵃ;
ing Order No. XXXIX suspended accord-
and to be printed.
ingly.
CANCER BILL.
CONSOLIDATED FUND (No. 1)
BILL.
Read 3" (according to Order), with
the Amendment, and passed, and returned
Brought from the Commons, endorsed
to the Commons.
with the Certificate from the Speaker that
the Bill is a Money Bill within the mean-
ng of the Parliament Act, 1911; and
tead 1ª.
CZECHO-SLOVAKIA (RESTRICTIONS
ON BANKING ACCOUNTS, ETC.)
House adjourned at eighteen
BILL.
minutes past four o'clock.
Order of the Day for the Second Read-
ing read.
LORD TEMPLEMORE: My Lords, the
circumstances which gave rise to this Bill
will be familiar to your Lordships.
Czecho-Slovakia had various financial
obligations to this country and possessed
certain financial assets in this country,
and until it might be possible to make
arrangements for meeting the obligations
it seemed proper to His Majesty's Govern-
ment that a temporary embargo should
be placed on the assets. My right honour-
able friend the Chancellor of the Ex-
chequer accordingly approached the Bank
of England, the joint stock banks and
other financial institutions, and requested
them to block Czecho-Slovak accounts,
gold and securities. Although the action
for which the Government asked was
taken promptly and efficiently, statutory
authority is needed in order to validate
that action and to render the position of
A
ILL No. 41
Czecho-Slovakia
LORDS
417
(Restrictions, etc.) Bill
415
Crecho-Slovakia
27
MARCH
1939
(Restrictions,
etc.)
Bill
[Lord Templemore.]
£3,250,000, being the
419
420
banks and financial institutions unchal-
free gift
I am sorry that, in a way, there is loss
industry-a statement from the Govern-
lengeable. That is the purpose of this
and in
of Parliamentary control in that the next
ment, one way or the other, as to what
Bill-to put this restriction on a statutory
amount which was regarded as a loan and
initiative lies with the Treasury. I think
their trade policy with regard to Germany
basis, to validate the action taken in
which the Czecho-Slovak Government had
it would have been better if the Treasury,
is going to be in the future.
compliance with the Chancellor's request
undertaken to repay. That part of the
having had to come to Parliament for an
before the Bill passes into law, and to
indemnify any person in the event of his
money still undrawn, which represents
indemnity for those who made illegal
On that I venture to make a very few
part of the loan, is a debt due to His
orders-I am using the word in no
observations. There are plenty of reasons
suffering any loss or damage as the result
Majesty's Government, and it therefore
obnoxious sense at all; they had to act
why we should continue to trade with Ger-
of his compliance with the Chancellor's
quickly and that is appreciated-it would
many. My Party have always, as a
seems proper to suspend all payments
request or the provisions of the Act.
have been better, I repeat, if the Treasury
matter of principle, advocated trade with
from that account.
had had to come to Parliament to repeal
all countries irrespective of the form of
The Bill consists of two clauses, the
only operative clause being Clause I. The
The House will also observe that the
the Bill. if so desired later on. I do
government which rules them. We pressed
criterion for the application of the
not want to make a great deal of that
for years for trade with Russia and we
first subsection provides for the temporary
blocking of banking accounts, gold and
embargo is residence and not nationality.
because the circumstances are unusual
consider that a great mistake was made in
securities in this country which were
Thus, although the assets of persons
and I hope they will be unusual in the
not opening the channels of trade with
owned on March 15 by the Czecho-Slovak
ordinarily resident in Czecho-Slovakia 20c
future.
Russia much sooner. On the other hand,
blocked, there is nothing to prevent a
we have plenty of reasons now not to en-
Government or any persons ordinarily
The other matters I venture to raise
Czech resident in this country from draw.
courage British trade with Germany. The
resident in Czecho-Slovakia on that date,
ing on his bank balance in the normal
are as follows-and they are all germane
Federation of British Industries conducted
or any body corporate incorporated under
to the substance of this Bill. Under the
the law of Czecho-Slovakia. It will con-
way, or a national who was not ordinarily
a mission to Germany and made a tenta-
resident in Czecho-Slovakia on March
Bill we do put an embargo on certain
tive trade agreement with the correspond-
tinue in force until the Treasury issues
an order that it shall cease to have effect.
15 from drawing on his bank balance
property and gold in this country which
ing body in Germany. I do not want to
the heirs of the Czecho-Slovaka Govern-
in that way. Refugees who were
express any opinion about that. In cer-
Subsection (2) provides that where, on or
ment might choose to claim. The first
ordinarily resident in Czecho-Slovakia (0)
tain circumstances apparently, they were
after March 15, any person has refused
question I would like to ask the noble
going to combine with German indus-
March 15 and since then have been able
or failed to do any act which he could
Lord is this. Have we any information
to come to this country do fall within the
trialists in regard to trade in foreign
not lawfully have done if the Bill had
about the intention of the Reich Govern-
scope of the Bill; but it has already been
markets. That may have been a good
passed into law, his refusal or failure
ment with regard to the external loans to
agreement or it may have been a bad
shall be deemed to have been lawful. This
announced that His Majesty's Government
Czecho-Slovakia? In perfectly good faith
agreement. It has now been held up or
subsection will validate the action taken
have no desire to prevent refugees in this
the Czecho-Slovak Government raised
abandoned, A trade mission which was
by banks in conformity with the Chan-
country from operating their bank
loans on London and other money mar-
to have gone to Berlin, we are told, is
cellor's request. Subsection (3) provides
accounts, and the Treasury will consider
kets. Are these to be cancelled? Or is
no longer to be sent. What I suggest is
for the indemnification of banks and other
all such cases with the utmost sympathy.
responsibility for them to be assumed and,
that further guidance is required. Is it
persons for any loss or damage they may
I beg to move that the Bill be now read
if not, do we propose to take any re-
the policy of the British Government to
have suffered as the result of complying
a second time.
prisals if they are repudiated? If these
encourage trade with Germany or do they
with the Chancellor's request or with the
Moved, That the Bill be now read 2°.-
loans are repudiated it will be simply a
propose to follow the example of the
terms of the Bill after it is passed into
(Lord Templemore.)
matter of one more act of robbery affect-
United States of America, which very
law. The fourth subsection provides that
ing British nationals who purchased these
promptly-just as promptly as the British
any sums payable by way of indemnifica-
LORD STRABOLGI: My Lords, this
bonds and script in perfectly good faith;
Government have acted on this occasion
tion shall be charged on the Consolidated
Bill is a very important one, as I am sure
and we can, if we wish, take very serious
-used their tariff powers practically to
Fund, and the fifth subsection enacts that
the noble Lord who has introduced it
reprisals.
stop all trade coming into the United
recognises, and I have been asked by
States from German factories?
a quarterly return of sums so paid shall
my noble friends to say a few words about
As your Lordships are well aware, the
be laid before Parliament. Your Lord-
it. The position of course is that His
economic situation of Germany is vulner-
I cannot refrain from reminding your
ships will observe that the Treasury have
able and if we are to have more of this
authority to waive the embargo in cases
Majesty's Government have not recoge
lordships that when the Russian Govern-
nised the annexation of Czecho-Slovakia
kind of robbery affecting our own
ment some years ago arrested and brought
where it sees fit, and this authority will
nationals, I suggest that it is the duty of
to trial certain British subjects who were
be so employed as to avoid the infliction
and we do not, amongst other measures. this
His Majesty's Government to take re-
of any injustice or damage to interests in
propose to pay out the assets held in
connected with the Vickers engineering
prisals. In connection with this matter
country on account of the Czecho-Slovak
concern, we promptly broke off all
this country.
I am going to venture to suggest to your
economic relations and, I think I am
There are one or two details about
Government or other persons or corpora want
tions in Czecho-Slovakia. Now 1
Lordships that a policy of pinpricks will
right in saying, diplomatic relations as
which I think your Lordships may wish
be useless, This is not a pinprick. This
well. The thing was done whole-
to have a few words of further explana-
to make it clear at once that we other as
is a necessity. I do not criticise the Bill.
heartedly and although I did not on that
tion. Part of the resources of the National
Party supported this Bill in the to
If we are to do this thing properly, if we
occasion agree with it, I could under-
Bank of Czecho-Slovakia held in London
House and we offer no opposition
but it raises certain matters of prin- will
are going to use economic means, to bring
stand it. I could understand it now if
consisted of the balance of the {10,000,000
justice to our own nationals, then I
we decided not to encourage any economic
advanced to Czecho-Slovakia under the
here, ciple and also certain details that I and
suggest it will have to be done in a com-
relations with Germany; but we ought to
Czecho-Slovakia (Financial Assistance)
venture to put to the Government give
plete manner. In this connection I think
know the policy of His Majesty's Govern-
Act. passed the other day. Of this sum
perhaps me such answer as they are in a
they will be good enough position to
We ought to have, as soon as possible-I
ment, and we ought to know soon. I
do not press for it this afternoon. but I
suggest that it is only fair to our own
about £6,750,000 remains undrawn. This
think it is due to British business and
nationals, whose business it is to keep
£6,750,000 is composed, in part, of
to give.
421
Carcho-Slovakia
LORDS ]
[Lord Strabolgi.]
(Restrictions, etc.) Bill
their workpeople in employment and
weapons British companies. I understand 422
China (Currency
123
47 MARCH 1939 ]
Stabilisation) Bill
424
encourage trade.
forces in now arming the that
many questions, and although I do not
whether he overlooked the question of the
Germany Spain came from Germany, Republican
complain about that I think some of them
In this connection may I ask the noble
fact their is supplying arms to China. and
were rather outside the scope of the Bill
Czecho-Slovak bonds and the possibility
Lord-I venture to give notice to the
great that need for foreign currency is In
--his question, for instance, about whether
of market? their being unloaded on the London
Treasury that I intended to raise this
But is they will trade with SO
we are going to trade with Germany-and
matter-whether it is a fact that British
that any reason why we anyone.
I am afraid I cannot give an answer to
LORD TEMPLEMORE: Yes, I had
firms owning banking accounts and other
assets in the part of Czecho-Slovakia
Germany? and others to do business insurance with
brokers encourage our bankers and should
that now. He asked me whether the
forgotten to answer that question. I
German Government had assumed respon-
have not been able to obtain an answer
known as Sudetenland have so far been
sibility for the Czecho-Slovak internal
to it.
unable even to secure an application of
debt. On that I have to tell him that my
the Anglo-German Payment Agreement
My next question is whether other
information from the Foreign Office is that
attention? LORD STRABOLGI: It is engaging
of 1934 and 1938 to these claims? Is it
tries are taking similar action. Are coun-
we have no information on that point yet.
true that six months after the invasion
action. There may not be Czech banking
good friends the French taking similar our
He then asked me whether it was a fact
LORD TEMPLEMORE: Certainly it is
-or the occupation by agreement-of
that British firms who owned banking
engaging attention, but I have not been
Sudetenland this property of British
accounts and deposits in Paris_] do
accounts and other assets in Czecho-
able to obtain the information.
nationals is still blocked and held?
know-but I should like to know whether not
Slovakia last September had been unable
Following on that, have the Government
the British Dominions or India
to get payment. When the Sudetenland
On Question, Bill read 2"; Committee
information of the amounts due to British
affected in the same way. I know that are
became part of Germany, bank accounts
negatived: Then, Standing Order No.
merchants from firms in the rest of
there was considerable trade between the
and other assets became subject to the
XXXIX having been suspended, Bill
Czecho-Slovakia, the part just invaded?
old Czecho-Slovakia and British India,
ordinary German exchange control, and
read 3". and passed.
Is there to be some clearing house
so presumably there would be consider-
therefore to that extent it is true to say
arrangement? I have read the report of
able balances held in Indian banks on
that the payment has been restricted.
the debate in another place and I under-
behalf of Czecho-Slovak subjects. I hope,
His next question was whether France
stand that help will still be given to
too, that if the usual devices are followed
and our Dominions had taken similar
of putting Nazi Commissars in charge of
action to restrict payments out of the
Czecho-Slovakian refugees-which I am
Czech businesses, they will not be allowed
Czech accounts. I am informed that the
very glad to know is to be given-and
that original creditors will be entitled to
to come along here and ask for assets held
French Minister of Finance has sent a
on account of the former owners to be
circular to the French banks to ask them
recompense from these funds which are
now blocked. Will there be some clear-
handed over to them. If that is attempted
to block Czecho-Slovak accounts. No
I presume steps will be taken or suggested
Bill has yet been introduced into the
ing house arrangement to enable British
to prevent it.
French Parliament and the amounts con-
merchants who have perfectly good debts
cerned are said to be very small, but
which they cannot recover in the ordinary
Finally, although this is a matter only
legislation will be introduced if the neces-
way to be compensated? The next ques-
of principle, and I do not suppose is of
sity arises. As regards the Dominions
tion I want to ask is what is going to
great material importance, I should like
and the Government of India, they have
happen in regard to Czecho-Slovak Gov-
to ask whether it is proposed to take
all been informed of the action taken by
ernment bonds held outside this country?
similar action with regard to Memel. We
His Majesty's Government in the United
Are they going to be unloaded on to the
did a very large amount of trade with
Kingdom, but we have not yet heard
London Stock Exchange? Is there going
Lithuania through Memel and I presume
whether any of them propose to take
to be any embargo against that sort of
some money is held on account of that
similar action.
transaction?
Is it proposed to take action in regard to
As regards his last question concerning
Reverting for a moment to the general
that money held in this country? The
Memel, that happened such a short time
principles which affect this Bill, I think
events in Memel, of course, have only
ago that I have to say I cannot give him
Czecho-Slovakia now might be described
happened in the last few days and per-
an answer at this moment. My noble
as a German Colony. It has been
haps the noble Lord may not be in a
friend the Earl of Plymouth is in his place,
annexed. We are picking out this annexed
position to-day to say anything about it.
but I think I am right in what I say: that
territory and putting an embargo on sums
If so I would not press it. But if be
we do not know yet what we shall do in
held in this country by firms there. Why
can give any information it would be of
that case. In conclusion I may say that
pick out this particular territory. In logic
interest to those engaged in trade with
we can make no announcement about
I should have thought there was no par-
that territory who are likely to suffer in-
what we shall do to protect British
ticular reason. Why, in other words,
jury. Apart from those questions which
interests in Czecho-Slovakia until the
should we encourage banking, insurance
I put in a perfectly friendly way. we on
situation is much clearer. This Bill and
and other facilities with Germany as a
this side of the House support this Bill.
the Government action refer, however,
whole as things are to-day? The Ger-
We are able to congratulate the Govern-
only to Czecho-Slovakia and not to our
mans have obviously no sort of inhibi-
ment on their prompt action and we hope
trade policy with Germany, which does
tion on their side. I observe that they
it may be a promise of equally prompt
not arise under this Bill on this occasion.
are anxious to trade with anyone and
action if other emergencies arise.
I hope I have answered the points which
everyone. They trade with Russia, and
LORD TEMPLEMORE: My Lords, I
the noble Lord raised.
they trade with Mexico. They buy oil
general support. He has raised a good
am obliged to the noble Lord for bis
LORD STRABOLGI: Before the Ques-
annexed by Mexico or expropriated from
tion is put, might I ask the noble Lord
Regraded Unclassified
No
10
No.
3
to
APR
enclosare
1939
LORDS ]
Commission
Royal
426
Crow the Embassy at London, England.
253
fluctuations in the exchange value of their
constituted and managed
currency, in which a British trade, lan
SOURCE: PARLIAMENTARY DEBATES,
NUMBER:
for exchange opera-
portant even now, and potentially yet
House of Lords
the purchase and sale
more important after the present hostilities
with the object of
have come to an end, is conducted. I
27, March, 1939.
ctuations in the sterling
beg to move that this Bill be now read a
London, Cols. 416-424.
dollar. For instance,
second time.
mporary demand for ster-
Moved, That the Bill be now read
of holders of Chinese
(Lord Templemore.)
night otherwise depress the
of the Chinese dollar, the
LORD SNELL: My Lords, when this
to provide the sterling
Bill was being considered in another place
versely, if there is a de-
its main principles received the support
dollars which might
of friends of ours there. I have, on
the Chinese dollar to
behalf of my noble friends in this House,
the Fund will be able
to say that we give to the main principles
so replenish its holdings
of this Bill our general support and feel
function of minimising
gratified that this gesture of help to a
will be evident to your
sorely-tried nation is at last being made.
Any help that we can give to the Bill
during its remaining stages we shall be
glad to contribute.
On Question, Bill read 2ª and com-
mitted to a Committee of the Whole
House.
-
House adjourned during pleasure.
House resumed.
-
ROYAL COMMISSION.
The Royal Assent was given to the fol
lowing Bills:
Defence Loans,
Mining Industry (Welfare Fund),
Bacon Industry (Amendment).
Czecho-Slovakia (Restrictions on Bank
ing Accounts, etc.),
Kirkcaldy Corporation Order Con
Ministry firmation. of Health Provisional Orde
Confirmation (South Staffordship
Joint Hospital District),
Ministry of Health Provisional Orde
Confirmation (Blackburn),
Ministry of Health Provisional Order
Confirmation (Hastings),
Ministry of Health Provisional Orde
Confirmation (Leyton),
Ministry of Health Provisional Ord
Confirmation (Luton Extension).
Maryport Harbour.
House adjourned at eights
minutes before six o'clock.
his
254 DUPLICATE
EA
LONDON, May 23, 1939.
N 0. 2731.
SUBJECT: Caschoslovak Assets in the United
Kingdom.
TEL ms
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to despatch No. 2387 of
April 3, 1939, regarding the impounding of Caechoslovak
assets in the United Kingdom and to paragraph numbered 2
of telegram No. 694, May 16, 9 p.m. and 712, May 19, 5 p.m.
1/ and to transmit herewith a Hansard text of questions asked
in the House of Commons on May 22 together with the answers
made thereto.
Criticism has been directed at the British Treasury
on two scores: first, its failure clearly to indicate that
Regraded leratory Unclassified
255
-2-
exploratory negotiations are now in progress with a
German delegation headed by Herr Rutter of the German
Foreign office to determine whether a basis for agreement
exists in the matter of liquidating Anglo-Czech financial
obligations and secondly, its decision not to apply the
Czechoslovakia (Restrictions on Banking Accounts, etc.)
Act, 1939, to gold held in London by the Bank for Inter-
national Settlements on behalf of the Czechoslovak National
Bank. As regards the former the criticism was perhaps
2/
avoidable as the enclosed article from the City column of
the Times of May 23 implies. As regards the latter the
critical comment has been confined to the opposition parties
and newspapers and appears to be without legal basis in
view of the provisions of article I of the Brussels Protocol:
"The property and assets of third parties,
held by any other institution or person, on the
instructions, in the name or for the account of
the Bank for International Settlements, shall
be considered as entrusted to the Bank for
International Settlements and as enjoying the
immunities laid down by the articles above
mentioned by the same right as the property
and assets which the Bank for International
Settlements holds for the account of others, in
the premises set apart for this purpose by the
Bank, its branches, or agencies."
It will be noted, however, that the Parliamentary
Secretary of the Treasury did not give a direct answer to
Mr. Strauss' questions as to "why the British Directors on
the Bank for International Settlements, Mr. Montagu Norman
and sir otto Niemeyer, did not inform the Government of
this proposed transfer and whether they agreed as members
of the Bank for International Settlements for this transfer
to
Regraded Unclassified
256
-3-
to take place." The answer that the Chancellor of the
Exchequer "has no means of knowing" about such matters is
founded on the theory that the Bank of England is not a
national but a private institution. In point of fact its
private character only comes to the fore on occasions of
this kind when it serves the Treasury's convenience.
Respectfully yours,
For the Ambassador:
Herschel V. Johnson
Counselor of Embassy
Enclosures:
1. Parliamentary Debates, Hansard of
May 22, 1939, Columns 1927-1930,
in quintuplicate.
2. Article from the city column of
The Times of May 23, 1939, on-
titled "Caech Assets in London",
in quintuplicate.
WWB/JC
a 'RUE CC**
OF THE BIGNED
ORISINA
X
Regraded Unclassified
PARLIAMENTARY DEBATES
NUMBER:
House of Commons
257
22, May, 1939.
London, Cols. 1927-1930,
COMMONS
Oral Answers
1928
1929
Oral Answers
22 MAY 1939
Oral Answers
1930
have no power, either under the Act re-
hon. Member has put. As I have said,
Captain Crookshank: I think the hon.
ferred to or otherwise, to obtain informa-
it is beyond the power of my right hon.
and learned Gentleman had better refresh
tion as to the assets held by the Bank
Friend, because be has no means of
for International Settlements or any other
his mind as to the position under the
knowing whether the statements made by
Protocols under which the Bank for
private institution for the account of in-
the hon. Member are correct or not.
International Settlements acts.
dividual customers, and I should like to
make it clear that my right hon. Friend
Mr. Sandys: May I ask whether, in
Mr. Benn: May I ask the Prime
has no means of knowing whether the
regard to these negotiations, it will be
Minister whether he was in possession of
facts are, or are not, as stated by the
made quite clear that they in no wise
this information when be described the
CZECHO-SLOVAKIA (ASSETS,
hon. Member for North Lambeth (Mr.
constitute a de facto recognition of Ger-
speech of the right hon. Member for
GREAT BRITAIN).
G. Strauss).
many's annexation of Czecho-Slovakia;
and, secondly, whether it is a fact that
Carnarvon Boroughs (Mr. Lloyd George)
57 and 58. Mr. G. Strauss asked the
as a mare's nest?
Chancellor of the Exchequer (I) whether
As regards assets blocked by the Act,
since the taking over by Germany of the
he will give an assurance that no part
the position is that they cannot be re-
Czecho-Slovakian and Austrian shares
The Prime Minister: I did not
of the money held under the Czecho-
leased except with the consent of the
Germany with Italy is now in control of
describe the speech as a mare's nest. I
Slovakia (Restrictions on Banking
Treasury. The Treasury has not con-
the bank?
described an account to which the right
Accounts, etc.) Act, 1939, will be re-
sented to the release of any such assets
Captain Crookshank: I am afraid that I
hon. Gentleman had referred as a mare's
leased to the German Government either
except in the case of amounts to assist
nest, and I said that on the basis of
refugees from Czecho-Slovakia and for
cannot answer the last question without
directly or through the Bank for Inter-
the payment of trade debts due under
notice. As regards the first part, these
information supplied to me by the
national Settlements without the prior
are purely informal conversations between
Treasury.
contracts made before 15th March last.
approval of Parliament;
Apart from such individual cases, there
officials to see whether there is a basis
Mr. Aneurin Bevan: Under what part
(2) whether gold amounting approxi-
will be no general release of such assets
for more formal discussions to deal with
of the Protocols does Czecho-Slovakia
mately to 800,000 ounces, held in London
unless and until a satisfactory arrange-
matters arising out of the act.
lose its status with the Bank for Inter-
in the name of the Bank for Inter-
ment has been made in regard to financial
Mr. Sandys: May I have an answer to
national Settlements, and under what part
national Settlements on behalf of the
obligations due from Czecho-Slovakia to
of the Protocols is the status of Czecho-
my supplementary question? Did the
Czech National Bank, is an account
British holders.
Government make it quite clear, or will
Slovakia transferred to Germany?
falling within the provisions of the
Informal conversations are taking place
they now make it quite clear, that these
Captain Crookshank: I have not said
Czecho-Slovakia (Restrictions on Bank-
between the Treasury and representatives
negotiations, which are of some import-
anything about the status of Czecho-
ing Accounts, etc.) Act, 1939; and
of the German Foreign Office and German
ance, do not in any way constitute a
Slovakia. I merely said what is the posi-
whether any transfer in respect of this
Ministry of Economics in regard to the
change of policy as regards the non-
tion of the Bank for International Settle-
deposit has recently taken place?
assets covered by the Act and cognate
recognition of the German position in
ments with regard to any assets it may
questions. The object of these conver-
Czecho-Slovakia?
have.
59. Mr. Sandys asked the Chancellor
of the Exchequer whether any conversa-
sations is to see whether a basis exists
Captain Crookshank: That is a ques-
Mr. Bevan: If the assets are trans-
tions or negotiations have recently taken
for more formal discussions which would
tion which raises a much wider issue. I
ferred, will not Czecho-Slovakia lose its
place between British Government
be held early next month.
cannot imagine that informal discussions
status there?
officials and representatives of the
Mr. Strauss: May I ask whether, in
between officials would be held by any-
Mr. G. Strauss: In view of the very un-
German Government or of German finan-
body to involve a change in major policy.
point of fact, assets to the value of ap-
satisfactory nature of the reply, I intend
cial interests, regarding the disposal of
proximately £5,000,000 or £6,000,000,
Sir Percy Harris: Is there not the dan-
to give notice that I intend to raise this
Czecho-Slovak gold or other assets held
held by the Bank for International Settle-
ger that while the informal discussions
matter on the Adjournment at the earliest
in this country?
ments on behalf of the Czecho-Slovakian
and talks are going on, action will be
opportunity.
National Bank, have been transferred to
taken by the German Government?
The Financial Secretary to the Treasury
(Captain Crookshank): Assets held to the
the German account, in spite of the fact
Captain Crookshank: As I have ex-
order of the Bank for International
that the Prime Minister designated this
plained, no action can be taken in this
Settlements do not fall within the Czecho-
story as a mare's nest? May I also ask
matter. Apart from such individual cases
Slovakia (Restrictions on Banking
why the British directors on the Bank for
as those to which I have referred, no
Accounts, etc.) Act, and any mandate of
International Settlements, Mr. Montagu
general release of these assets will be
the Bank for International Settlements
Norman and Sir Otto Niemeyer, did not
made by the Treasury.
for the transfer of such assets, of course,
inform the Government of this proposed
has to be complied with. Indeed, having
transfer; whether they agreed, as mem-
Mr. A. Henderson: In view of the fact
bers of the Bank for International Settle-
that His Majesty's Government have two
regard to the undertakings given by His
Majesty's Government for the protection
ments, for this transfer to take place and,
representatives on the board of the Bank
of the assets of the Bank for Inter-
finally, whether the Bank for Inter-
for International Settlements, will not the
national Settlements embodied in the
national Settlements is the only institution
right hon. Gentleman express the Gov-
Hague Protocol of 1930 and the Brussels
in the world which has recognised the
emment's disapproval of the suggestion
Protocol of 1936, assets held to the order
transfer of Czecho-Slovakia to Germany?
that any part of the assets of the Bank
for International Settlements belonging to
of the Bank for International Settlements
could not properly have been made sub-
Captain Crookshank: I think that a
the late Czecho-Slovak Government
careful study of the reply I have given
should be transferred to a Government
ject to such restrictions as those imposed
will answer all the questions which the
which has no right to them?
by the Act. His Majesty's Government
No. 107
Reclosure
No
to
despatch
No
of
MAY
23.1936
from the Embassy at London, England.
258
PAPER:
THE TIMES
NUMBER:
CITY:
LONDON
DATE:
MAY 23 1939
CITY NOTES
CZECH ASSETS IN
LONDON
A Needless Air of Mystery
As regards the gold balances held here
on direct Czech which do con-
cern the British Government-it seems
that an unnecessary atmosphere of
THE SUGAR SHORTAGE
mystery has been created. The Govern-
ment was naturally quite entitled to deny
the statement made in one quarter that
Captain Crookshank's statement re-
the Treasury had transferred gold held
garding the Czecho-Slovak assets in
through the B.I.S. to Germany, and that
London, made yesterday in answer to a
this was the result of the conclusion of
series of questions in the House of
negotiations with Here Wohltat. But it
Commons, confirmed the interpretation
could have done no harm to add that in
which was given in these columns on
fact preliminary negotiations with Herr
Saturday. As we pointed out, the Govern-
Rüter were taking place. It is, to say the
ment cannot in any way block any assets
least of it, difficult to conceal for many
held here by the Bank for International
days the presence in London of delegates
Settlements, and the question for whose
who have very wide circles of acquaint-
account any such assets may be held is not
ance in London, and rumours were inevit-
one with which the Government can con-
able.
cern itself. Captain Crookshank reminded
Actually no reasonable person could
the House that in any case the Govern-
do anything but approve efforts to
ment had given special undertakings for
negotiate concerning the blocked gold and
the protection of B.I.S. assets in London
balances. For it would be difficult to con-
under The Hague Protocol of 1930 and the
template keeping these assets blocked in-
Brussels Protocol of 1936. The immuni-
definitely, and equally difficult in practice
ties of the B.I.S. under the 1930 agreement
to use them for settlement of ex-Czect
were unconditional and complete, and
debts to British nationals-which is the
Article I of the Brussels Protocol lays
only useful purpose they could serve-
down that:-
except by negotiation with the Germans,
The property and assets of third parties,
The Treasury is in fact fulfilling an
held by any other institution or person, on the
essential and valuable purpose in conduct-
instructions, in the name or for the account of
ing these negotiations, and it would have
the Bank for International Settlements, shall
been quite easy to point this out when the
bc considered as entrusted to the Bank for
International Settlements and as enjoying the
matter was raised in the House of Com-
immunities laid down by the articles above
mons. As it was, however. the obscure
mentioned by the same right as the property
nature of the replies given only succeeded
and assets which the Bank for International
in creating an air of mystery and sus-
Settlements holds for the account of others, in
picion where nothing of the kind was jus-
the premises set apart for this purpose by the
tified. After all, there is no question of
Bank, its branches, or agencies.
It is clear enough in the circumstances
making any special or spontaneous cons
that whatever has been done or will be
cessions to Germany. To refuse to nego-
done with the Czech gold deposit (believed
tiate would be merely a matter of vin-
to amount to between £5,000,000 and
dictiveness without any practical object.
£6,000,000), the Government can hardly
and no question of the recognition of
be called to account. On the other hand,
Germany's annexation of Czecho-Slovakia
is involved. Whether it will be possible
there does not seem to be any strong case
for withholding information (which pre-
to reach agreement remains to be seen,
sumably could be obtained) concerning
but certainly it is the only method of
the decision taken by the B.I.S. If, as is
attempting to combine the satisfaction of
reported, the B.I.S. has transferred the
British creditors with reasonable fairness
Czech gold deposit to the Reichsbank,
to the individual Czech owners of sterling
there could be no harm in saying so,
The B.I.S. is not, after all, answerable to
or controlled by the Government, and may
be guided by quite different considera-
tions. Account must be taken of the very
large body of votes controlled by the Axis
Powers, and account must also be taken
of the fact that, to quote a note to the last
balance-sheet, the capital, reserves, and
surplus are represented, to a large extent,
by assets in countries where exchange
restrictions now prevail." It only requires
a moment's consideration of the countries
in which exchange restrictions prevail to
appreciate that the Bank may not be in
quite the same position as the British
Government, and may indeed have made
special arrangements of its own. The
matter is, however, sufficiently bound up
with public policy to suggest the desir-
ability of giving any information which
259
TRIPLICATE
LONDON, May 25, 1939.
No. 2742.
SUBJECT: Csechoslovak Assets in the United
Kingdom.
The Honorable
The secretary of State,
Washington.
Sir:
I have the honor to refer to despatch No. 2731 of
May 23, 1939, regarding the questions which have arisen
out of the British Government's action in impounding
Csechoslovak asseta in the United Kingdom and to trans-
1/
mit herewith copies of further questions asked in the
House of Commons on May as and 24 together with the
answers made thereto.
1
It will be noted that in emphasizing the non-govern-
mental sharacter of the Governor of the Bank of England's
position as a Director of the Bank for International
Settlemonts
Regraded Unclassified
260
-2-
Settlements the Chancellor of the Exchequer went very
far - so far, in fact, that further grounds for future
criticism have doubtless been thus laid bare. It will
also be noted that the question of recognition of the
new status of Bohemia and Moravia has come to the fore
and that the Prime Minister has stated "that the ques-
tion of recognition is being considered in connection
with the future representation of His Majesty's Govern-
ment in Prague".
No doubt the solution to both the recognition and
the financial problems will be affected by the considera-
tions of policy set forth in the last paragraph of my
telegram No. 734 of May 24, 8 p.m.
Respectfully yours,
For the Ambassador:
Herschel V. Johnson
Counselor of Embassy
Enclosure:
1. Parliamentary Debates, Hansard of
May 23, 1939, columns 2088-2092,
and May 24, 1939, columns 2284-2288,
in quintuplicate.
WWB/JC
A TRUE COPY
OP THE SIGNED
ORIGINAL
8
Regraded Unclassified
he cellor 55. has of Mr. the A. Henderson asked
Oral Answers
23 MAY 1939
Oral Answers
German received
2090
2080
Slovak Government debts? to
unless and until a satisfactory arrange-
quite outside the Czecho-Slovakia (Re-
ment has been made in regard to financial
strictions of Banking Accounts) Act and
obligations due from Czecho-Slovakia to
it was clear that no such intervention
versations Sir J. Simon: In the course of
referred to in the the con-
British holders. If an agreement is
would be possible in view of the formal
for yesterday to my hon. Friend reply given
reached, it will be laid before Parliament
and explicit undertakings given in the
in the usual way.
Protocols of 1930 and 1936 as to the
Norwood (Mr Sandys), the it Member
immunity of the assets of the Bank for
depadiating Czecho-Storak aypediating a has not
Mr. Pethick-Lawrence: With regard to
International Settlements from every form
intention Government
the first part of the answer, do I under-
of interference and restriction.
stand from the Chancellor of the Ex-
Mr. Henderson: Is the right
chequer that when the Governor of the
Replying directly to the question put
Gentleman was aware of the statement hon.
Bank of England, in his position as a
to me, it is certainly not the fact that
director of the Bank for International
the Governor of the Bank of England re-
Minister made by the French that
Settlements has to come to a decision,
ports to the British Government on a
French two or three days ago Finance in
that he makes no report whatever to the
matter of this sort. It is a mistake to
the Chamber, in which he stated the
Treasury, and that therefore the Treasury
suppose that the Governor of the Bank
German Government were that
and the Chancellor of the Exchequer are
of England serves on the Board of the
plating the repudiation of these debts contem-
Bank for International Settlements as a
ignorant of most important international
that the French Government proposed and
events that are happening in the Bank for
nominee of the British Government. That
raise France? the tax on German imports into to
International Settlements?
is not so at all. He is there as governor
of one of the central banks, just as other
Sir J. Simon: I think the right hon.
eminent bankers who serve on the Board.
Sir J. Simon: I have not had my atten-
Gentleman is referring to a matter which
I had this information, but not from the
tion called to that, but I think the hon.
was mentioned at Question Time yester-
Governor of the Bank or the Bank. It
and learned Gentleman will regard the
day, and I am very glad of the oppor-
came, indirectly, I think from a Conti-
information I have given him as being
tunity to deal with it in a short answer.
nental source. As soon as I heard it I
more positive than that.
There are two quite distinct things. There
considered with my advisers whether
are, as the House knows, the assets, which
there was any way in which we could
53. Mr. Pethick-Lawrence (for Mr.
have been blocked in this country, held
put restraint on the matter. It was plain
Dalton) asked the Chancellor of the Ex-
on behalf of and at the order of Czecho-
there was not, and it is clear that the
chequer the purpose of the conversations
Slovakian institutions or individuals.
London bank has got to obey the mandate
now taking place between His Majesty's
Those we hold, and except in the case of
given to it by its customer the bank in
Treasury and representatives of the Ger-
helping refugees and the like we do not
Basle.
man Government regarding the disposal
part with them, and we are engaged in
of Czech balances held by the Bank of
seeing whether we cannot, by means of
Mr. Pethick-Lawrence: Are we to under-
England and other institutions and per-
those assets, repay the debts due from
stand that in a matter of this supreme
sons in this country; and whether be will
Czecho-Slovakia, to provide a fund that
international importance the Governor of
undertake that no part of such balances
will continue to be available for refugees,
the Bank of England acts entirely in his
shall be paid over to the German Govern-
and to meet the claims of British holders
individual capacity, and that he does not
ment, or to the Reichsbank, or to any
who had, for example, bank balances in
officially inform the Government: and
subsidiary or agent thereof without the
Czecho-Slovakia before the German
even if the Government only heard of it
previous consent of this House?
annexation. That is the object of the dis-
unofficially, how could that justify the
cussion I have mentioned.
Prime Minister in the very sweeping state-
Sir J. Simon: In reply to the first part
ment he made last Friday that the whole
The other matter is, as I understand,
of the question I would refer the hon.
matter of this payment to Germany
Member to the reply given by my right
an asset-it was gold, I think-which was
held by the Bank of England for the
through the medium of the Bank for
hon. Friend the Financial Secretary to
Bank for International Settlements at
International Settlements was a mare's
the Treasury to the hon. Member for
Basle. I should like to make it plain to
nest?
North Lambeth (Mr. G. Strauss) yester-
the House that the Treasury did hear in-
day. In reply to the second part of the
Sir J. Simon: There is no difficulty in
directly that it was believed that the Ger-
question, there will, as stated in that
understanding that. The statement that
man Reichsbank was seeking to get from
reply, be no general release of assets
was made in the newspaper was that the
the Bank for International Settlements an
British Treasury had agreed to release this
amount of gold with which it had been
sum. That was not true. The statement
entrusted by the Czech National Bank:
but the House will appreciate that that
made by the right hon. Member for Car-
was a matter quite outside the blocking
narvon Boroughs (Mr. Lloyd George) was
of Czech assets. Consideration was given
that the Treasury had agreed to the trans-
in the Treasury to the question whether
fer. He pointed to me and said that I,
His Majesty's Government could in any
as Chancellor of the Exchequer. had sanc-
way intervene. We had no desire to see
tioned the transfer. I had done nothing
the transfer made, but the matter was
of the kind. Nobody had ever asked me
Regraded Unclassified
Enclosure No
to despatch No247201
2091
Oral Answers
HOUSE OF COMMONS
from the Embassy at London, England.
Oral Answers
261
[Sir J. Simon.]
for leave and I had not given leave. If
this might be the result, and 2001
PARLIAMENTARY DEBATES
NUMBER:
it had been within my power I would
we everything had we could to find out we did
House of Commons
not have given leave, but the matter was
not think a
23 May 1939.
wholly outside my power, and in the cir-
London. Cols. 2088-2092.
expect me to more that.
could
cumstances I thought the right hon. Gen-
tleman's statement was a moastrous sug-
of be ignored by the Treasury?
Mr. Commons De la Bère: Why should the House
gestion to make.
Mr. Sandys: Are we to understand from
my right hon. Friend's reply that no
Minister that it was a mare's nest? I
of the Treasury to inform the Prime
Mr. Pethick-Lawrence: Was it candid
Czech assets under the Act will be re-
leased without the prior consent of this
understand it being said that what can
House?
right hon. Member for Carnarvon the
Sir J. Simon: Without the prior consent
inexact, but to suggest that the whole
Boroughs had said was terminologically
of the Treasury. I stated in my first
thing was a mare's nest is surely very far
answer that we certainly shall not release
from the facts.
any assets at all except for the purposes
which I have mentioned, and about
Sir J. Simon: I am afraid that I must
which, I trust, there is no difference of
ask the right hon. Gentleman to look at
opinion.
what was stated. It was stated in the
Press and stated in this House that the
Mr. Benn: The Chancellor of the Ex-
Treasury had been facilitating. or autho-
chequer said he would lay such an agree-
rising, or assisting this transfer. There
ment before the House. What did he
was not a syllable of truth in that state-
mean by that? Will he recollect that we
ment, and I think my right hon. Friend
had an unfortunate experience of his pri-
the Prime Minister was perfectly justified
vate arrangements for loans for Czecho-
in saying what he did say.
Slovakia, under which money was lost?
Mr. De Chair: In view of the fact that
Mr. Stokes: Is it not about time that
Germany repudiated the Treaty, along
the Government took over the Bank of
with other Treaties, how can she have
England?
any claim on the Bank for International
Settlements at Basle, which was set up in
Mr. G. Strauss: Do we understand that
connection with the Reparation Clauses
the Bank for International Settlements
of the Treaty of Versailles?
are holding this gold in trust for the
Sir J. Simon: Officially, all that I any
people of Czecho-Slovakia, and by hand-
aware of is that a bank in London was
ing it over to another nation that has
called upon to hand over that which had
annexed Czecho-Slovakia they were, in
been deposited with it by a bank in
fact, committing a breach of trust, and
Switzerland, and that is all I am con-
that our Government, hearing about it
cerned with, and, I should have thought.
and agreeing to the transfer, are, in fact,
it is all that anyone who understands
conniving at a breach of trust committed
by the Bank for International Settle-
banking could only be concerned with.
London will not remain the banking
ments?
centre of the world for long if banks do
Sir J. Simon: If the hon. Member will
not obey the cheques and orders of their
excuse me he is getting this matter quite
customers.
wrong. The question was whether the
Mr. Kirkwood: Are the British Govern-
Bank of England, which held a particu-
ment going to hand to British citizens the
lar asset, had to obey the mandate of its
money which they invested in Czecho-
customer the Basle Bank and hand that
Slovakia and have now lost?
asset over. I did not know then, and I
do not know now, what is the state of the
Sir J. Simon: The object of blocking
account between the bank in Basle and
this money and of the discussions now
Czecho-Slovakia. Why should I know?
Slovakian funds here shall be made avail-
going on is to secure that Czecho-
It has nothing to do with me. I told the
House perfectly candidly that indirectly
able to repay debts owing by Czecho-
the Treasury had some information that
Slovakia. to citizens in this country.
Regraded Unclassified
Mr. Sandys asked the Prime the House Min-
ister His Majesty's Government with
23. (1) whether he will assure will not
that into any formal discussions of
enter German Government on the subject in this
the release of Czecho-Slovak assets
country not thereby be according facto of
the unless they are satisfied that de they
recognition will to the German annexation
Czecho-Slovakia; (2) why Treasury officials have been
ermitted to enter into conversations with
German foreign office on the subject
2285
Oral Answers
24 MAY 1939
Oral Answers
2286
of the release of Czecho-Slovak assets in
Mr. Bracken: Is the right hon. Gen-
this country, in view of the fact that the
tleman aware that " informal conversa-
German Government has no authority or
tions is only a euphemistic description
status to negotiate in a matter solely
of conversations between Treasury officials
concerning Czecho-Slovakia; and whether
and the Germans regarding the property
the Czecho-Slovak legation in London
of the Czech people, the savings of 20
was informed or consulted before the con-
years, which are to be handed over to the
versations began?
Germans? Surely, if these are called
informal conversations it is a great re-
The Prime Minister: The informal con-
flection upon England because they cer-
versations which have taken place did not
tainly could not be formal.
imply de facto recognition of the new
status of Bohemia and Moravia, and my
Mr. A. Henderson: Were any represen-
hon. Friend will have appreciated from
tatives of the Czecho-Slovakia Bank
the answer which I have just given to
associated with these conversations?
the hon. Members for Nuneaton (Lieut.-
The Frime Minister: Not with the in-
Commander Fletcher) and South-West
formal discussions. I think they would
Bethnal Green (Sir P. Harris) that the
be with formal discussions.
question of recognition is being considered
in connection with the future of the repre-
Mr. Sandys: Can the Prime Minister
sentation of His Majesty's Government in
give us an assurance that no de facto
Prague. It will be understood from what
recognition will be given without this
I have said that there was no occasion
House first being consulted?
to consult the Czecho-Slovak Legation
The Prime Minister: I cannot give such
in London in connection with the informal
an assurance.
conversations referred to.
Mr. Attlee: Are we to understand that
Mr. Sandys: Arising out of the answer.
the Government are contemplating giving
First, may I ask whether it is not a fact
formal recognition to the annexation of
that when informal negotiations are con-
Czecho-Slovakia by Germany?
templated, as indicated in the Prime
Minister's answer yesterday, there is not
The Prime Minister: No, Sir. I did
a danger that these informal conversa-
not say that. .I am not sure whether the
tions will in fact imply a de facto recog-
right hon. Gentleman was in his place
nition? Secondly, is it not a fact that
when I gave the earlier answer. I said
the Czecho-Slovakian Legation still enjoys
that the position was being considered.
full diplomatic status, and would it not
The question of giving an assurance as to
be normal to consult and inform them
what we would or would not do before
before entering into formal negotiations
asking the House is another matter alto-
with other Governments?
gether.
The Prime Minister: I have explained
Mr. Attlee: I think this is a point upon
that the question of the de facto recogni-
which the House wants to be clear. Can
tion of the new status of Bohemia and
we have an assurance that no decision
Moravia was being considered in connec-
will be taken in this matter until the
tion with the future representation of His
House has had an opportunity of dis-
Majesty's Government at Prague, and not
cussing it?
in connection with any formal discussions.
The Prime Minister: I cannot give that
assurance, and it is not usual for an assur-
Sir A. Sinclair: Is it not quite incon-
ance of that kind to be given, as the right
sistent with the policy of collective resist-
hon. Gentleman knows. The House has
ance to aggression that His Majesty's
its own way of expressing its approval
Government should be considering the
or not.
question of recognising the German
annexation of Bohemia and Moravia?
Mr. Attlee: The Prime Minister will
Will the Prime Minister not give us an
realise that it is not usual to have one
assurance that the Government will not
Government forcibly seized by another.
recognise the German annexation?
Mr. Sandys: In view of the fact that
The Prime Minister: I have said that
the Prime Minister told the House after
the matter is being considered.
the annexation of Czecho-Slovakia that
Regraded Unclassified
Oral Answers
HOUSE OF COMMONS
2287
Oral Answers
[Mr. Sandys.]
The Prime Minister: When the
the Government did not recognise the
legality or the validity of the act-an
had the been reached. The position is point
announcement which was received with
Act Treasury are empowered under the
widespread approval, may we now have
a satisfactory agreement being made.
to restrict balances and assets pending the
a statement that the House will be con-
sulted before that policy is reversed?
perfectly unobjectionable releases,
was to find out whether, apart from these
Mr. Sandys: The point of my question
Mr. Benn: Are the Government still
pursuing a policy of appeasement?
could be assured that no money would " be
Mr. Attlee: In view of the very unsatis-
released to Germany-that is not the
factory replies we have received I give
matter to which my right hon. Friend
notice that I will raise this matter on the
referred-without consulted. this House first being
Adjournment on Friday.
The Prime Minister: I can say this, that
45- Mr. Sandys asked the Prime
Minister whether, before the Government
there Germany. is no intention of releasing money to
consent to the release of any Czecho-
slovak assets in this country which are
Mr. Bracken: What is the point of a
covered by the Czecho-Slovakia (Restric-
agreement with Germany? We are, I pre-
tions on Banking Accounts, etc.) Act,
sume, exchanging real assets in Londa
1939, an opportunity will be afforded for
for promises of the German Government
consulting the opinion of the House?
Would the Prime Minister tell us whether
he thinks that is a satisfactory arrange-
The Prime Minister: I would refer my
ment, and whether he would not prefer
hon. Friend to the reply given yesterday
to retain assets rather than to have
by my right hon. Friend the Chancellor
promises?
of the Exchequer to the right hon. Mem-
ber for Edinburgh, East (Mr. Pethick-
CIVIL AIR GUARD.
Lawrence).
Mr. Sandys: In view of the fact that
25. Mr. Perkins asked the Secretary d
State for Air the total number of mea
the Chancellor of the Exchequer did not
under the age of 25 who have been unable
answer this point yesterday, may I ask
to learn to fly under the Civil Air Guard
my right hon. Friend, while there can be
scheme owing to the Civil Air Guard
no objection to the release of money of
being full up; and the total number of
this kind to assist refugees or to satisfy
women over the age of 25 at present under
British claims, whether we may be assured
instruction under the Civil Air Guard
that any balance that may be left over
scheme, or holding A licences as a result
will not be released for transfer to Ger-
of training under this scheme?
many without prior consultation with this
House?
The Under-Secretary of State for Air
(Captain Harold Balfour): Applicants to
The Prime Minister: I understand that
my right hon. Friend said that if an agree-
join the Civil Air Guard are not required
to state their age at the time of applica-
ent was reached, it would be laid before
tion, but only when examined for vacat-
rliament in the usual way. The pur-
cies for definite enrolment. The total
pose of the agreement would be to ensure
number of women over the age of 25 É
that British holders of these bonds, etc.,
would be paid their due rates of interest.
present under instruction is 338. Of this
total, II8 are in possession of pilot's
My right hon. Friend said that if an
licences of whom 59 have gained their
agreement was reached, it would be laid
licences since joining the Civil Air Guard
before Parliament in the usual way.
Mr. Benn: What is meant by " in the
Mr. Perkins: Has there been any alten-
usual way "?
tion in the scheme?
The Prime Minister: It would be laid
between the Ministry and the Civil loot
Captain Balfour: After consultation At
before Parliament, which would prob-
ably have an opportunity of taking cog-
Guard it has been approved that as render
nisance of it.
as them suitable for entering one of the Force
there are men whose age may all
Mr. Benn: Before it became effective?
gories for service in the Royal Air
Regraded Unclassified
SOURCE: PARLIAMENTARY DEBATES,
262
NUMBER:
House of Commons,
24 May 1939.
London. Cols. 2284-2288.
263
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, London, England
DATE: June 23, 1939, 11 a.m.
NO.: 474
FOR BUTTERWORTH.
You are requested by the Secretary of the
Treasury to send him by telegram to reach him not
later than the morning of June 26 the whole account
of the disposition of the gold held in London for
Ozechoslovakia.
HULL.
BECEIAED
proj 18 VIII
VISITANT
- +4) 10 -
- with MAIN
EA: LWW
264
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 23, 1939, 5 p.m.
NO.: 1185
FOR THE TREASURY DEPARTMENT.
Today on the exchange and security markets business
was almost at a standstill. There were no important
changes recorded.
WILSON.
EA:LWW
265
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE: June 23, 1939, noon
NO.: 542
I refer to my telegram No. 506 of June 16, 4 p.m.
Yesterday Heath had a talk with Puhl, the administra-
tive head of the Reichsbank under Funk. Puhl said that
under the new statutes there is no change in the system
which has governed the operation of the Bank for the last
six months. He insisted, however, that the formulation
of the new Reichsbank law and the publicity which was given
to it did offer some protection against radical demands
for further weakening the Bank's position and policies.
After Schacht was dismissed, he said, there had been a
strong effort to make the Central Bank merely a subsidiary
department of a ministry - the Economics Ministry - as
is the case of the U.S.S.R. 's Central Bank. As for the
provision which gives full power to decide to the Reichsbank
President instead of leaving it subject to the directorate's
majority vote, Puhl said that it was an "irony of history"
under the previous system, because of Schacht's dominating
personality he exercised dictatorial control, whereas
under Funk, who had dictatorial powers under the new law,
decisions in practice were reached only after the Board
had been consulted and had agreed.
Le
Regraded Unclassified
266
- 2 -
As for the provision which permits the Chief of
State to increase the amount of the "working credit*
(100,000,000 marks) of the Government with the Reichsbank,
Puhl remarked that while apparently a check against Gov-
ernment extravagance and inflation is removed thereby,
France's experience and that of other countries had shown
that again if a government is determined to pursue in-
flationary policies, formal checks of this nature were
worthless. However, a safeguard remained, he said, in
that merely a request of the Minister of Finance was not
sufficient to increase the working credit; the Chief of
State himself must issue a written order.
Furthermore, Puhl said, the new statutes of the
Reichsbank in his opinion are a (omission) for conservative
capitalist methods, in that against opposition it was
finally decided that the Bank should remain a stock
company in which the shares were privately owned.
There were no American shareholders of the Reichsbank,
as far as Puhl knew, with the possible exception of shares
held by Germans who had emigrated to the United States in
the last few years. People in England and Holland hold
the greater part of the foreign owned shares of the Reichs-
bank, he said, and in his opinion the foreign shareholders
were in a better position under the new scheme in that they
were sure of getting the full transfer of the same dividends
on
267
- 3 -
on their investment as before. He added that there was
even some possibility that they might receive increased
earnings in the future, since there was no legal limita-
tion on dividends on the Gold Discount Bank shares which
they would receive.
END SECTIONS ONE, TWO AND THREE.
KIRK.
EA:LWW
Regraded Unclassified
268
PARAPHRASE, SECTION FOUR OF TELEGRAM NO. 542 OF
JUNE 23, 1939, FROM THE AMERICAN EMBASSY, BERLIN
The statement was made that since the new tax certifi-
cates were legal tender in certain instances, the weekly
statements of the Reichsbank on note issue and sight
liability of the Reichsbank no longer presented a full
picture of monetary circulation. Puhl replied that 80
far the certificates which had been issued had been completely
absorbed for the following purposes: (a) medium-term in-
vestment in the case of class two, three-year certificates;
(b) long-term investment because of the tax privileges
attached to them in the case of class one certificates.
Therefore up to the present there had been no increased
monetary circulation from these certificates. Puhl ad-
mitted that if there are heavy issues of these certificates
in the future there would be presented dangers of inflation.
However, he insisted that to prevent any such development
the Reichsbank was carefully following their issuance.
Puhl stated that the tax certificates should be looked on
as an interim measure, the purpose of which was to facilitate
borrowing by the Government during the present period of
extraordinary financial needs of the Government.
It is requested that this telegram be repeated to the
Treasury as Heath's No. 40.
KIRK.
EA:LWW
Regraded Unclassified
269
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlib, Germany
DATE: June 23, 1939, 6 p.m.
NO.: 548
FOR TREASURY FROM HEATH. No. 41.
The disclosed public debt of the Reich increased
1,140,000,000 marks during March. Nearly one-half of
the increase (516,000,000 marks) was a "paper increase"
in the sense that it did not represent new borrowing but
merely the issue of Reich bonds in exchange for old
Austrian internal bonds. Subtracting this amount the
net increase in the Reich debt as a result of new borrow-
ing was 624,000,000 of which 620.5 million was in the form
of short term debt (treasury bills) and 3.5 million marks
the net increase in long term debt.
The March debt statement enables a correction in
my estimate of the Reich expenditures during the fiscal
year ended March 31, 1939 given in my No. 25, May 9, 6 p.m.
That estimate of 26.6 billion marks was based on a fore-
cast that net Government borrowing in March would be
700,000,000 marks. This forecast was too high by 74,000,000
marks but on the other hand the approximate calculations
of the year's debt increase were too low by 34,000,000.
My revised minimum estimate of Reich expending for the last
fiscal year is accordingly slightly reduced to
26,558,000,000 marks. It is still my belief, however,
that
Regraded Unclassified
270
- 2 -
that there was some hidden borrowing, taking the form
of increasing delays of payment on orders of the Govern-
ment, and so on. Therefore the foregoing estimate may
well be below the expenditures which actually were made.
The disclosed debt of the Reich rose 11,578,000,000
marks to a total of 30,676,000,000 marks during the fiscal
year ended March 31, last. Of this increase however,
1,342,000,000 was a "paper increase" caused by the issuance
of Reich bonds for old Austrian internal obligations and
presumably offset by the acquisition of the assets back of
those obligations.
Subtracting these conversion bonds the disclosed net
borrowing of the Reich during the fiscal year was
10,226,000,000 marks. The monthly average of net govern-
ment borrowing during the year was therefore roughly
853,000,000 marks. Net government borrowing during March -
624,000,000 marks - fell below this average but March
is a month of unusually heavy tax payments.
KIRK.
EA:LWW 03V13038
PFRI is MISH
YSUPARTE
enterned with be out
- at -
Regraded Unclassified
271
June 23, 1939
Dear Henry:
Your tax bill has now passed successfully through
both Houses of Congress. One of the major tasks in which
ve have been so deeply interested since I came to work
with you is therefore completed.
Your constructive leadership has been an inspiration
to me. I have never been associated with anyone more
devoted to the public interest. Your conscientious perform-
ance of duty as exemplified in your daily work as Secretary
of the Treasury, your courage and unselfishness, have become
as apparent to others as they have always been to me.
I realize that I will never be able to properly impress
upon you my gratitude for the opportunity of serving as your
Under Secretary during this important period.
With varmest regards, believe me,
Faithfully yours,
(88) John Hames
The Honorable
Henry Morgenthau, Jr.
Secretary of the Treasury
JWH:jr
retyped 6-29-39
Regraded Unclassified
272
June 23, 1939
MEMORANDUM FOR THE FILES
After the meeting at the White House on the proposed legislation
for the self-liquidating program of public works, Senators Barkley and
Wagner, and Secretary Morgenthau and Foley stayed behind to discuss
with the President the filibuster on the Stabilization legislation.
Senator Wagner told the President that Senator McCarran had sent him
word that he would drop the fight if the President would agree to
increase the price of silver from 64.64 cents per ounce to 76 cents per
ounce. The President flatly refused to go along with such a proposal.
Then Senators Wagner and Barkley told the President that they were of
the opinion that the fight would be dropped by Senators McCarran and
Pittman if the President would authorize them to announce that the price
of 64.64 cents per ounce now being paid for newly-mined domestic silver
would be continued for an additional period of one year after June 30, 1939.
Mr. Foley assured Secretary Morgenthau that legally the proclamation could
be issued for a period of one year or longer. Secretary Morgenthau then
suggested to the President that he go along with such a proposal since
he was giving up very little and obtaining much. The President countered
that he would be willing to sign a proclamation on June 30, 1939 extending
the price of 64.64 cents per ounce for newly-mined domestic silver for an
additional period of six months, and would agree on December 31, 1939 to
extend it again for an additional period of six months. Senators Barkley
end Wagner indicated to the President that it would be more palatable if it
273
- 2 -
could be done all at once on June 30. The President pointed out that
he didn't like to have a pistol held to his head, and preferred to do it
in two periods of six months each since he didn't want to create the
precedent of doing it for longer periods. He pointed out that next year
they would come back and say since you have done it for & year, this
next time you should do it for two years, or maybe for three years,
end he wanted to avoid such a situation if possible. Senators Barkley
and Wagner then indicated that they should be authorized, if necessary,
to tell Senators Pittman and McCarren that the President would sign &
proclamation on June 30, extending the price of 64.64 cents per ounce for
newly-mined domestic silver for an additional period of one year if
the situation, in their opinion, required it. The President went along
with this, but cautioned them not to use the one year assurance unless
it was absolutely necessary.
Senators Barkley and Wagner indicated that the fight, in all
probability, would be abated upon the giving of such assurance, end
action on the amendments and final passage of the bill could be expected
early next week.
i.1.th
274
RE STABILIZATION FUND BILL
June 23, 1939.
11:05 A. M.
Present:
Mr. Gaston
Mr. Foley
Mr. White
Mr. Bernstein
Mr. Lochhead
Mr. Viner
Mr. McReynolds
H.M.Jr:
So I don't have to read it out loud, give Mac a
copy.
(All read silently draft of letter from
President to Vice President)
Here's one suggestion on the top of page 3. "This
would occur at the very time when, because of the
condition of international affairs, there may be
an even greater need for gentlemen's agreements
of this sort"?
White:
The difficulty is that this agreement would still
remain. It's very difficult to get away from that.
This would not break the agreement. Herbert had
a happy thought of handling it this way.
H.M.Jr:
I had this happy idea of bringing in "gentlemen's
agreements."
Gaston:
It tends to weaken the force of the Tripartite Accord;
it makes it less important than we'd like to have
it appear, I think.
Foley:
"Understanding"?
Lochhead:
Got to have a word like "voluntary agreements" or
something.
H.M.Jr:
Well, it isn't important. It's a peach of a letter.
It's a peach of a letter. I don't have to have it.
It's not important. It's a peach of a letter.
Now, have you got a memorandum?
White:
I have. We have time to cut out, change anything
you want to, before 12:00.
H.M.Jr:
(After reading silently for a minute or two) I think
275
- 2 -
my best bet is just to leave it - you know, these
memorandums - I always go on the assumption that
they some day will see the light of day.
White:
I think it's better to give as much of that orally
as you can and indicate that you didn't want to
write it. That's my own feeling. I think you can
give it orally much more effectively. It isn't on
the record, you don't have to pull your punches
so much.
H.M.Jr:
This is a peach of a letter, and I'm delighted.
Viner:
That ought to get out of the files here, too.
H.M.Jr:
Which?
Viner:
Oughtn't to be any carbon copies.
White:
This isn't a candle to some of the things we've
said in our files.
H.M.Jr:
Where are you going?
White:
I've got to get something up to Wagner by 12:00
o'clock. May I be excused now?
H.M.Jr:
Let's take a vote on it. All those in favor of
excusing Harry
Caston:
No.
Viner:
No.
H.M.Jr:
Harry, wait a minute. This letter for the President
to sign to the Vice President, the decision being
wholly his - I mean there's nothing in here that
White:
No, I feel that it shouldn't ever - I'm dubious
about its being sent unless as a last, last resort,
because it means that he'll make some substantial
enemies, and in the kind of legislation to come -
but that's his decision.
H.M.Jr:
No, that wasn't my question. I'm glad to have it.
White:
Excuse me.
276
- 3 -
H.M.Jr:
My question is, if he sends it, the decision being
entirely his, are you entirely satisfied with the
letter?
White:
Oh yes.
H.M.Jr:
What?
White:
Quite. Entirely.
H.M.Jr:
Thanks, Harry. Harry, don't work Saturday and Sunday.
White:
Thank you.
H.M.Jr:
That's all I've got.
note: sent shen to was the President not
_77
MEMORANDUM TO THE PRESIDENT:
with the possession of the present powers the Treasury
feels it can meet any reasonable emergency that any arise
in the field of international monetary affairs. Should the
powers be permitted to lapse, this would not be the case.
In the event of an acute political crisis the Treasury would
have inadequate facilities, for example, for preventing
panie conditions in the exchange market such as might have
occurred during the Munich episode had the Treasury not
stepped into the breach.
Failure to continue the Stabilization Fund and the
powers to elter the gold content of the dollar will, aside
from its possible repercussions on international currency
relationships and weakening the foreign monetary systems by
stimulating a flow of speculative funds to the dollar, could
have & profound and far reaching ffeet on the role the
Government plays in its control of the monetary system. The
power that the Government has acquired during the last six
years in controlling the country's monetary system would
begin to revert to Wall Street and to the private banks via
the Federal Reserve Bank of New York.
On the surface the change would not be noticeable but
actually the maneuvering for control of the monetary systems
which has been going on throughout the world between private
banking system on the one hand and the governments on the
other hand would again be cast in favor of the privately
owned banks in the United States. There are innumerable
remifications to the day to day control over foreign
exchang, and to the authority related to the possession
and existence of the Stabilization Fund and executive power
to devalue the dollar. For this power to pass from the
hands of the Government would in time greatly enhance the
subtle yet potent power of the private banks over monetary
matters.
Although the effects may not be immediate, the United
States monetary system will soon realize that important son-
etary decisions have been transferred from Washington to
New York. The Federal Reserve Bank of New York has already
Regraded Unclassified
278
- 2 -
given exidence the t it would welcome the lapse of the powers
and they fully recognize the fundamental importance of the
change which we cannot emphasize too strongly goes far beyond
the questions of who carries out the day to day operations.
C
279
0
P
Y
Dear Mr. Vice President:
In my letter of January 19, 1939, I wrote to you of the need
for extending the Stabilization Fund and the power to fix the metellic
content of the dollar. Since that time the House of Representatives
has passed a bill (H.R. 3325) extending these powers until June 30,
1941. That bill has been reported out by the Senate Committee on
Banking and Currency and is now before the Senate for consideration.
As you know, under the existing Silver Proclamation, which
expires on June 30, 1939, the Government is paying 64.64/ cents an
ounce for newly-mined domestic silver, as compared to 43 cents for
silver of foreign origin. I am informed that 8. small group of Senators
is preventing any vote being taken on H. R. 3325 end on the proposed
amendments to the bill until a commitment is made that the Government
will pay an even higher price for domestic silver mined after June 30.
I have given the matter careful consideration and it is my considered
judgment that in the present situation a higher price for domestic
silver is not warranted and that I would not be justified in yielding
to this demand. of course, the situation would be different if Congress
by legislation should fix the price to be returned for domestic silver.
Congress has the opportunity to express its views as to whether a
price higher than the prevailing price should be returned for domestic
silver by voting on the amendments which have been offered by Senators
McCarran, Thomas and Pittman.
280
- 2 -
Whatever may be the decision of the Congress on this
question, how ever, I feel that I should be remiss if I failed to
point out the serious consequences that would flow from a failure
to extend before June 30, 1939, the Stabilization Fund and the power
to fix the metallic content of the dollar.
The need for the continuation of the Stabilization Fund has
been recognized by the Congress and the public. Failure to renew the
Stabilization Fund powers would deal a serious blow to international
monetery stability and to the protection and advancement of American
agricultural and commercial interests. Only one group would profit
by the termination of these powers, namely, international currency
speculators. The powerful weapon which this country, in conjunction
with other democratic countries, has been developing for more than
five years to help maintain some measure of stability in international
exchange and to check the predatory tactics of foreign exchange
speculators would be gone overnight. The resulting monetary uncertsinty,
with its threat of increased currency fluctuations, would greatly hamper
American and international commerce and industry.
In September, 1936, amidst universal acclaim in democratic
countries, Great Britain and France joined us in the Tripartite
and
Declaration. Soon thereafter Belgium, Holland/Switzerland declared
their adherence to it. No one can question the great contribution
which this Accord has made to stability and equilibrium in the
international economic and monetery fields. The possession of these
Regraded Unclassified
281
- 3 -
powers made possible the negotiation of the Tripartite Accord and the
failure to renew them would inevitably menace the monetary equilibrium
to which the Accord has contributed so powerfully. This would occur
at the very time when, because of the condition of international affairs,
there is en even greater need for an arrangement of this sort between
the great commercial countries.
I am convinced that the existing power to change the gold
content of the dollar is essential to the proper protection of American
domestic and foreign trade against the danger of depreciation of
important foreign currencies. The views of this Administration on
this matter have been fully presented to the Senate through the
testimony of the Secretary of the Treasury and similar conclusions
were voiced by Senator Wagner in his speech on the floor of the Senate
on June 19.
It is urgent that Congress express its views on these matters
on or before June 30. It seems too clear for argument that to obstruct
a vote on the monetery bill now before the Senate does not promote the
orderly process of democratic government.
For the foregoing reasons I urge most earnestly that the
Senate act before June 30 on the monetery powers bill (H. R. 3325)
now pending before it.
very truly yours,
Honorable John N. Garner,
President of the United States Senate.
Regraded Unclassified
282
C
0
P
Y
Dear Mr. Vice President:
In ay letter of January 19, 1939, I wrote to you of the need
for extending the Stabilization Fund and the ower to fix the metallic
content of the dollar. Since that time the House of Representatives
has passed a bill (H.R. 3325) extending these powers until June 30,
1941. That bill has been reported out by the Senate Committee on
Banking and Currency and 18 nov before the Senate for consideration.
As you know, under the existing Silver Proclamation, which
expires on June 30, 1939, the Government is paying 64.64/ cents an
ounce for newly-mined domestic silver, as compared to 43 cents for
silver of foreign origin. I am informed that a small group of Senators
is preventing any vote being taken on H. R. 3325 and on the proposed
amendments to the bill until a commitment 18 mdde that the Government
will pay an even higher price for domestic silver mined after June 80.
I have given the matter careful consideration and it is my considered
judgment that in the present situation ai higher price for domestic
silver is not warranted and that I would not be justified in yielding
to this demand. of course, the situation would be different if Congress
by legislation should fix the price to be returned for domestic silver.
Congress has the opportunity to express its views as to whether e.
price higher than the prevailing price should be returned for domestic
silver by voting on the amendments which have been offered by Senators
McCarran, Thomas and Pittman.
Regraded Unclassified
283
Whatever may be the decision of the Congress on this
question, however, I feel that I should be remiss if I failed to
point out the serious consequences that would flow from a failure
to extend before June 30, 1939, the Stabilization Fund and the power
to fix the metellic content of the dollar.
The need for the continuation of the Stabilization Fund has
been recognized by the Congress and the public. Failure to renow the
Stabilization Fund powers would deal a serious blow to international
monetary stability and to the protection and advencement of American
agricultural and commercial interests. Only one group would profit
by the termination of these powers, namely, international currency
speculators. The powerful weapon which this country, in conjunction
with other democratic countries, has been developing for more than
five years to help maintain some measure of stability in international
exchange and to check the predatory tactics of foreign exchange
speculators would be gone overnight. The resulting monetary uncertainty,
with its threat of increased currency fluctuations, would greatly hamper
American and international commerce and industry.
In September, 1936, amidat universal acclaim in democratic
countries, Great Britain and France joined us in and the Tripartite
Declaration. Soon thereafter Belgium, Holland/Switzerland declared
their adherence to it. No one can question the great contribution
which this Accord has made to stability and equilibrium in the
international economic end monetary fields. The possession of these
Regraded Unclassified
284
- 3 -
powers made possible the negotiation of the Tripartite Accord and the
failure to renew them would inevitably menace the monetery equilibrium
to which the Accord has contributed so powerfully. This would occur
at the very time when, because of the condition of international affairs,
there 18 en even greater need for an arrangement of this sort between
the great commercial countries.
I am convinced that the existing power to change the gold
content of the dollar 18 essential to the proper protection of American
domestic end foreign trude against the danger of depreciation of
important foreign currencies. The views of this Administration on
this matter have been fully presented to the Senate through the
testimony of the Secretary of the Treasury and similar conclusions
were voiced by Senator Wagner in his speech on the floor of the Senate
on June 19.
It is urgent that Congress express its views on these matters
on or before June 30. It seems too clear for argument that to obstruct
a vote on the monetary bill now before the Senate does not promote the
orderly process of democratic government.
For the foregoing reasons I urge most earnestly that the
Senate act before June 30 on the monetary powers bill (H. R. 3325)
now pending before it.
very truly yours,
Honoroble John N. Garner,
President of the United States Senate.
Regraded Unclassified
285
June 23, 1939.
MEMORANDUM FOR THE FILES
Secretary Morgenthau and Foley attended a conference at the
White House at 5:00 P.M. today on the legislation for the self-liquidating
program outlined in the President's letter of June 21 to Senator Byrnes.
There were present:
From the Senate -
Senator Alben W. Barkley
"
James F. Byrnes
=
Pat Harrison
=
Robert F. Wagner
From the House of Representatives -
Representative Sam Rayburn
E
Robert L. Doughton
"
Edward T. Taylor
"
Henry B. Steegall
From the Administration -
RFC - Jesse H. Jones and Claude E. Hamilton, Jr.
REA - John Carmody
Treasury - Secretary Henry Morgenthau, Jr., and
Edward H. Foley, Jr.
Bureau of the Budget - Harold D. Smith.
The President started the conference with a general recital of
the objectives of his proposal. He then read the attached summary of
the legislation, which was distributed. After some discussion, he read
the attached memorandum on the reasons for the supplemental legislation,
which was distributed. At the President's suggestion, the attached
draft of the proposed legislation was also handed around to those present.
286
- 2 -
Senator Byrnes, and Representative Reyburn pointed out that no
powers should be included in the legislation which were not absolutely
necessary. The President agreed, and designated Edward H. Foley, Jr.,
and Claude E. Hamilton, Jr., as a committee to get together and eliminate
from the legislation any duplications or over-lapping of powers. It was
agreed, after this was accomplished, that the bill would be made available
to Senator Barkley and Representative Rayburn. Senator Barkley told
Foley that he would call him tomorrow morning as soon as he was available.
Claude Hamilton promised to study the bill over night and get in touch
with Foley the first thing in the morning.
A discussion ensued as to the committees in the Senate and the
House to which the bill should be referred. Since it contained no
provisions for new taxes, and none for appropriations, it was generally
agreed that the legislation should be referred to the benking and currency
committees. However, Senator Barkley and Representative Rayburn promised
to canvass the situation and indicate to Foley and Hamilton tomorrow
definitely the committees to which the bill would be referred.
Senators Byrnes and Wagner indicated there would be strong objection
from the isolationists to the provision for increasing the powers of the
Export-Import Bank. The President recognized that this was an objection in-
herent in the proposal and suggested to Hamilton and Foley that they try
to devise other ways of securing the ends suggested in the letter to
Senator Byrnes and to limit the legislation to the extension of the life
287
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of the Export-Import Bank to February 11, 1944, and to increase its
landing margin by $500,000,000.
Senator Byrnes pointed out that it would be impossible to add
the legislation to the pending relief bill which would be marked up by
his subcommittee tomorrow. In order to restrain pressure on the Floor
to increase the $125,000,000 which had been earmarked by the House for
PWA projects, Senator Byrnes indicated that the legislation should be
introduced as soon as possible. Senator Byrnes also suggested that
additional time to consider the self-liquidating legislation could be
obtained through the introduction of a Joint Resolution continuing the
availability of all PWA and WPA funds for an additional month beyond
June 30, 1939. It was agreed that this was a meritorious thing to do.
The meeting broke up a little after 7:00 P.M.
E.N.Th.
This has been superseded
288
NECESSITY FOR SUPPLEMENTARY LEGISLATION AS TO
ALL ASPECTS OF SELF-LIQUIDATING PROGRAM
1. Powers delegated to Commissioner of Public Roads. The existing
authority of the Commissioner of Public Roads is derived from the various
federal-aid acts pursuant to which the Bureau of Public Roads approves
projects submitted by state highway departments and makes grants in aid
thereof. Hence, it is necessary that power be conferred upon the
Commissioner of Public Roads on behalf of the United States Works and
Finance Authority to be created by the proposed Self-liquidating Projects
Act of 1939 to construct, operate, and maintain federally owned highways
and bridges and charge and collect tolls for the use thereof. Other
powers which are necessary in order to carry out the functions of a pro-
gram of self-liquidating toll roads, bridges, high speed highways and
city by-passes are conferred by the bill.
2. Powers dolegated to Commissioner of Public Works. Under existing
provision of law the Cormissioner of Public Works will be limited in his
powers to those conferred upon the Federal Emergency Administrator of
Public Works by the Work Relief and Public Works Appropriation Act of 1938.
This Act contains restrictions relating to the time in which funds can be
alloted for projects, the date on which such projects must be completed,
and the receipt of applications by public bodies which make it essential
for a well-rounded program to confer powers as provided in the proposed
Self-liquidating Projects Act of 1939. In addition, certain powers and
duties which enable the Commissioner of Fublic Works to keep the securities
which he purchases on a self-liquidating basis are imposed. It is also,
of course, necessary to have legislation in order to provide the Commissioner
of Public Works with funds to carry out on behalf of the proposed United
States Works and Finance Authority any program of non-federal public works
as the funds of the Public Works Administration are said to be exhausted.
3. Powers delegated to Reconstruction Finance Corporation as to
railroad construction. Existing powers of the Reconstruction Finance
Corporation to finance railroads are limited to loans in aid thereof the and,
Reconstruction Finance Corporation on behalf of the United States Works
consequently, supplementary legislation is necessary to authorize
and Finance Authority to enter into contracts for the construction of
plan to the railroads or to companies presently engaged in leasing equip-
new rolling stock which can be leased or sold on the installment purchase
ment to railroads.
289
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4. Powers delegated to Rural Electrification Administration.
Under existing legislation the program of the Rural Electrification
Administration is limited to $40,000,000 per year for the next seven
years. In addition, the Rural Electrification Act contains quota and
interest rate restrictions and other limitations which make new legis-
lation advisable. It may be noted that the present program is also
limited to the use of funds appropriated by Congress. The bill permits
the Rural Electrification Administrator to make loans on behalf of the
proposed United States Works and Finance Authority and does not affect
the powers of the Administrator.
5. Powers delegated to Secretary of Agriculture. It seems advis-
able to include in the bill legislation expanding the self-liquidating
portion of the Bankhead-Jones Farm Tenant Act rather than to amend that
Act. In order that this program may be coordinated with the other phases
of the self-liquidating program and because the Act not only provides
the Secretary of Agriculture with additional funds but also establishes
a rovolving fund which is available to the Secretary of Agriculture for
lonns under the Bankhead-Jones Farm Tenant Act on behalf of the United
States Works and Finance Authority.
6. Powers delegated to Reconstruction Finance Corporation in
relation to the Export-Import Bank of Washington. Supplementary legisla-
tion is also required in order to provide for short and long term loans
to foreign governments for development and reconstruction purposes in
the foreign country. This is pretty clear.
The Export-Import Bank of Washington is a banking corporation
organized under the laws of the District of Columbia (D.C. Code, title
5. sec. 261). It was organized pursuant to Executive Order No. 6581,
February 2, 1934. The Certificate of Incorporation, as amended April 3.
1936, provides, in section 2, that the term of existence of the corpora-
tion shall be ten years from the date of its incorporation. Therefore,
by the force of its own charter, the bank will cease to exist as a
corporate entity at the close of business on Fobruary 11, 1944.
By section 9 of the Act of January 31, 1935, 49 Stat. 4. the
Export-Import Bank of Washington was continued 08 an agency of the United
States until June 16, 1937. By section 2 of the Act of January 26, 1937.
50 Stat. 5, it was continued ns an agency of the United States until
June 30, 1939. Py the Act of March 4, 1939 (Pub., No. 3. 76th Cong.),
it is continued as an agency of the United States until June 30, 1941.
By section 9 of the Act of January 31, 1935, 49 Stat. 4. the
Export-Import Bank of Washington WAS given power, in addition to its
existing charter powers, and without limitation no to the total amount
of obligations thereto of any borrower, to discount notes, drafts, bills
of exchange, and other evidence of debt for the purpose of aiding in the
financing and facilitating exports and imports and the exchange of com-
modities between the United States and any foreign country or the agencies
or nationals thereof.
Regraded Unclassified
- 3 -
290
In view of the limitation on the power of the Export-Import Bank
which is underlined above it is very doubtful whether making a loan to a
foreign country with a view to enabling it to develop its industrial
activities falls within the scope of the authority which the bank now has.
It also seems necessary to have supplementary legislation in order
that sufficient funds will be available to the Export-Import Bank.
The Act of March 4, 1939 (Pub., No. 3, 76th Cong.), added a proviso
at the end of section 9 of the Act of January 31, 1935, 49 Stat. 4, which
limits the amount of obligations which the Export-Import Bank of Washington
may have outstanding at any one time to $100,000,000. The same proviso
authorizes the Reconstruction Finance Corporation to supply the capital
for such obligations, when requested by the Secretary of the Treasury, with
the approval of the President, through loans or by subscription to preferred
stock.
The existing powers of the Reconstruction Finance Corporation are
also limited to making loans "in order that the surpluses of agricultural
products may not have a depressing effect upon current prices of such
products, the corporation is authorized and directed to make loans, in such
amounts as may in its judgment be necessary, for the purpose of financing
sales of such surpluses in the markets of foreign countries in which such
sales cannot be financed in the normal course of commerce; but no such sales
shall be financed by the corporation if, in its judgment, such sales will
affect adversely the world markets for such products: Provided, however,
That no such loan shall be made to finance the sale in the markets of
foreign countries of cotton owned by the Federal Farm Board [Name changed
to Farm Credit Administration by Executive Order No. 6084, Mar. 27, 1933]
or the Cotton Stabilization Corporation." (Reconstruction Finance Corpora-
tion Act, Sec. 201 (c)).
Likewise, it would appear that section 5(a) of the Reconstruction
Finance Corporation Act in terms and intent permits the Reconstruction
Finance Corporation to make foreign loans only in connection with exports
and not to further the industrial development and economic reconstruction
of any foreign country.
Regraded Unclassified
This has been superseded
291
Proposed "Self-liquidating Projects Act of 1939. "
The purpose of this draft bill is to increase employment without increas-
ing the public debt or present appropriations by providing a method for financing
on a self-liquidating basis (1) construction of Federal express post-roads, (2)
loans for non-Federal public works, (3) construction and leasing of locomotives,
freight cars and other railroad rolling stock, (4) loans for rural electrifica-
tion, (5) loans to farm tenants, sharecroppers and migratory farmers for the
purchase of farms, livestock, seeds and other necessary equipment, and for
rural rehabilitation, and (6) loans for industrial development in Latin America
and elsewhere which will stimulate productive enterprise in the United States.
I
Title I of the bill creates a non-stock government corporate instrumen-
tality called the United States Works and Finance Authority. The Authority
consists of the Secretary of the Treasury, the Secretary of Agriculture,
the Federal Works Administrator and the Federal Loan Administrator. These
members of the Authority exercise their functions separately on behalf of the
Authority. In order to avoid the necessity for action as a Board and to CO-
ordinate and supervise the activities of the Authority, provision is made for
the appointment by the members of the Authority of a Managing Director. The
Managing Director exercises all powers not specifically granted by the bill to
other officers in the Government.
The Authority has the following principal functions:
(1) To construct and operate post-roads, highways, bridges,
tunnels and airports for the use of which it is empowered
to fix tolls and other charges;
(2) To make loans to states and municipalities and other public
bodies at low interest rates for the construction of non-
Federal public works;
(3) To make contracts for the construction of rolling stock and
to lease with or without the option to purchase such rolling
stock;
(4) To make loans for the purpose of financing rural electrifica-
tion; and
(5) To make loans and carry out the self-liquidating features of
the farm tenancy and rural rehabilitation program contemplated
by the Bankhead-Jones Farm Tenant Act.
To provide the Authority with sufficient funds, power is conferred upon
it to issue bonds or other obligations guaranteed as to both principal and
interest by the United States. The Authority may not have more than
292
- 2 -
$750,000,000 of these bonds outstanding at any one time for the toll roads
and bridges, not more than $350,000,000 for financing non-Federal public works,
not more than $500,000,000 for the acquisition of rolling stock, not more than
$500,000,000 for the farm tenant and rural rehabilitation program, and not more
than $460,000,000 for the rural electrification program.
As a means of preventing the industries which will benefit from the opera-
tions of the Authority entering into unlawful combinations to fix prices, the
ability of the Authority to sue for treble damages under the Sherman Act is
made clear and unambiguous. In this connection the submission of identical
bids is made prima facie evidence of an agreement to fix prices. This carries
out & much needed sanction recommended by the President in his message to
Congress of April 29, 1938.
The Authority is also given power to organize under the laws of the various
states operating corporations to assist it in constructing and operating its
enterprises and to utilize such corporations as well as Federal, state, and
local officials and agencies in carrying out its functions.
In connection with the powers of the Authority relating to railroad equip-
ment, it is provided in the bill that the Reconstruction Finance Corporation,
on behalf of the Authority, may enter into contracts for the purchase of old
rolling stock either for lease or resale in its existing state or for rebuild-
ing. repairing or scrapping the same. This will enable the Authority to aid
in disposing of old rolling stock to agencies of the Government such as the
War Department which can utilize scrap iron.
The bill eliminates the existing restriction for rural electrification
loans which establishes state quotas and which requires an interest rate on
such loans equal to the rate on 10 year Federal bonds. Otherwise, it leaves
untouched existing legislation relating to rural electrification and to the
farm tenancy and rural rehabilitation program. The $40,000,000 appropriation
to the Rural Electrification Administration for the fiscal year 1940 is left
available to that Administration.
The President is authorized to transfer not to exceed $100,000,000 from
existing appropriations for the farm tenancy and rural rehabilitation program
to the Authority for self-liquidating loans. Of the amount so transferred
the Authority may also use for administrative expenses such amounts as the
Director of the Bureau of the Budget may approve. The amounts so allowed by
the Bureau of the Budget for administrative expenses are to be included in
the budget estimates for the fiscal year 1941 so that the Authority may be
maintained upon a self-liquidating basis.
Regraded Unclassified
293
- 3 -
The bill contains provisions relative to the use and disposition of moneys
of the Authority in such a manner that, after adequate provision has been made
to assure the self-liquidating character of the projects constructed and financed
by the Authority, its revenues and receipts may be used 8.8 & revolving fund for
further improvements and loans subject to the limitations of the bill.
The Comptroller General is given power to examine all the financial trans-
actions of the Authority but only for the purpose of reporting to Congress
departures from the provisions of the Act.
No appropriation is made or required by the bill for the Authority which
is authorized to use from the proceeds of the sale of its obligations such amounts
for administrative expenses as the Director of the Bureau of the Budget is will-
ing to approve.
II
Title II of the bill extends the powers of the Export-Import Bank of
Washington and provides it with funds to enable it to make loans not to exceed
$500,000,000 to any foreign government not in default in the payment of its
obligations to the United States. Such loans are intended to aid in the in-
dustrial development of such countries and thereby to provide a new market for
productive enterprise in the United States with its accompanying advantages.
The total amount which may be loaned to any one government may not exceed
$100,000,000.
The bill also continues the functions of the Export-Import Bank of
Washington until February 11, 1944, this being the expiration date of its
charter under the laws of the District of Columbia; by Executive Order, however,
the President can terminate its authority prior to such date.
The method provided for such financing will not require additional ap-
propriations, since available funds of the Reconstruction Finance Corporation
are utilized.
This has been superseded
294
Confidential Draft Bill for
Self-liquidating Works Program
A BILL
To provide for the construction and financing of
self-liquidating projects, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That this Act may be
cited as the "Self-liquidating Projects Act of 1939."
TITLE I
United States Works and Finance Authority
SECTION 1. There is hereby created & body corporate of perpetual
duration to be known as the United States Works and Finance Authority
(herein called the "Authority"), which shall be an agency and instru-
mentality of the United States with its office in the District of
Columbia and with power to function in any place, and the members of
which shall consist of the Secretary of the Treasury, the Secretary
of Agriculture, the Federal Loan Administrator, and the Federal Works
Administrator. The Authority shall appoint an officer to be known as
the managing director of the Authority. The managing director shall be
receive a salary of $10,000 a year to be paid by the Authority., subject
to the direction and control of the Authority, and shall exercise all
powers of the Authority not delegated by this Title to any other officer.
295
- 2 -
General Corporate Powers
SEC. 2. Subject to the provisions of this Title, the Authority
shall have power:
(a) To sue and be sued in its corporate name and
in this connection sue in the appropriate
district court of the United States for the
recovery of damages pursuant to the provisions
of Section 7 of the Act entitled "An Act to
protect trade and commerce against unlawful
restraints and monopolies," approved July 2,
1890; and whenever the Authority shows in
such suit that any bidder has submitted a bid
or bids identical with bids submitted by any
competitor in response to a particular invita-
tion for bids, such bids or such prices shall
be presumed to have been a result of or in
furtherance of an agreement to fix prices,
and the existence of such agreement shall for
purposes of such civil suit be regarded as
proved, unless the non-existence thereof is
established to the satisfaction of the trier
of fact:
(b) To adopt, alter, and use a corporate seal,
which shall be judicially noticed;
296
- 3 -
(c) To use the United States mails in like manner
as the executive departments of the Government:
(d) To acquire by gift, purchase, exchange, or by
the exercise of the power of eminent domain,
or otherwise, and to hold, lease (as lessor or
as lessee), use, sell, exchange or otherwise
dispose of real property necessary or con-
venient for carrying out any of its functions
hereunder;
(e) To acquire, hold, and dispose of personal prop-
erty for any corporate purpose, including the
power to purchase prospective or tentative
awards in connection with the taking of real
property by the exercise of the power of eminent
domain;
(f) To enter on any lands and premises for the purpose
of making surveys and examinations;
(g) To make contracts and to execute all instruments
necessary or convenient to carry out any corporate
purpose;
(h) With the approval of the Secretary of the Treasury,
to incur indebtedness, to borrow money and to
issue debentures, bonds or other obligations,
including interim receipts and certificates,
297
- 4 -
as hereinafter provided (any of the foregoing
instruments being herein called the "bonds"),
to provide for the payment of the bonds and
the interest thereon and to provide for the
rights of the holders thereof;
(1) With the approval of the Secretary of the Treasury,
to sell or otherwise dispose of any securities
acquired on behalf of the Authority. and in con-
nection with any such sale to make such contracts
and agreements, including covenants and conditions
for the repurchase at par of any such securities
in the event of a default in the payment of the
interest thereon or principal thereof, as seem
advisable;
(j) To utilize the services of federal, state and local
agencies and their employees and, notwithstanding
any other provision of law, to reimburse such
agencies and their employees for services rendered
for such purposes:
(k) To organize under the laws of the District of
Columbia or of any State or Territory and to make
loans and advances to A corporation or corporations
(herein called "operating corporations") to aid the
Authority in carrying out its corporate purposes:
Regraded
298
- 5 -
(1) To use its moneys from whatever source derived
for any corporate purpose;
(m) To perform all acts and to do all things neces-
sary or convenient or desirable to carry out the
powers now or hereafter conferred by law.
Specific Powers AB to Post-road Improvements
SEC. 3. Subject to the provisions of this Title, the Commissioner
of Public Roads on behalf of the Authority shall have power:
(a) To construct, reconstruct, alter, better, extend,
improve, repair, maintain, and operate post-roads,
highways, grade-crossings, parkways, bridges,
viaducts, tunnels, airports, traffic terminals,
and other transportation facilities, including
works, undertakings or projects incidental thereto
or to encourage the use thereof, with A view to
promoting interstate commerce, aiding in the
national defense, facilitating the use of the
mails, or promoting the general welfare (all or
any part of any of the foregoing and appurtenances
thereto, such as land, rights in land, water rights,
buildings, equipment. and machinery, being herein
called a "post-road improvement");
(b) To fix, maintain, and collect tolls and other
charges for the use of any post-road improvement
Regraded Unclassified
299
- 6 -
which shall be sufficient (after making reason-
able allowances for operation and maintenance
expenses, f or the amortization of the cost of
such post-road improvement, and interest thereon,
and for dopreciation to the extent not provided
for by amortization, and contingencies, to provide
for the payment of such amount of bonds and in-
terest thoreon as may have been issued to provide
funds for the post-road improvement.
(c) To acquire, make, produce, buy, and sell build-
ing materials, supplies, and equipment, and use
or lense the same 80 far as necessary to carry
out its corporate purposes;
(d) To use the tolls and other charges collected by
it for further post-road improvements to the ex-
tent the same are not needed by the Authority in
the judgment of the managing director to meet
reasonable allowances for operation and nain-
tenance expenses or for the amortization of the
cost of post-road improvements, and interest
thereon, or for depreciation to the extent not
provided for by amortization and contingencies;
(e) To adopt rules and regulations for the management
and operation of post-road improvements.
300
- 7 -
Specific Limitations on Post-road Improvements
SEC. 4. The Commissioner of Public Roade shall not construct
any post-road improvement, unless (a) he has submitted to the managing
director an analysis indicating the estimated annual earnings of such
post-road improvement from all sources will amount to over a reasonable
period of time, having due regard to the possibility of A margin of
error on the estimated revenues and expenses, making due allowance for
operation and maintenance expenses and for depreciation to the extent
not provided by amortization, and contingencies; and (b) the Commissioner
of Public Roads and the managing director of the Authority are of the
opinion that on the basis of such analysis the bonds proposed to be
issued to finance the post-road improvement, together with interest
thereon, may reasonably be expected to be paid out of such earnings.
Regraded Unclassified
301
- 8 -
Specific Powers as to Non-Federal Public Works
SEC. 5. Subject to the provisions of this Title, the Commissioner
of Public Works on behalf of the Authority shall have power:
(a) To make loans at an interest cost to the bor-
rower not to exceed two percent per annum,
payable semiannually, to finance or aid in
financing the construction, reconstruction,
extension, or improvement of projects of the
character heretofore financed by loan or grant
or both by the Federal Emergency Administration
of Public Works (such projects being herein called
"non-federal public works");
(b) To purchase securities to evidence loans for
non-fodoral public works, and to exchange such
securities for other securities if the Commissioner
of Public Works shall determine that such exchange
is advisable to assure repayment of any loan mado
horounder or interost thereon;
(c) To provide funds sufficiont for the temporary
operation of any non-federal public works for
such period as it shall doom reasonable, if the
Commissioner of Public Works shall dotermino
that the same is advisable for the security of
any securities acquired by it under this Act;
302
- 9 -
(d) To uso the proceeds realized from the salo of
any securities acquired by it under this Title
or any other law for the making of further loans
for non-federal public works to the extent such
proceeds are not needed by the Authority in the
judgment of the managing director to maintain the
loans for non-federal public works on a self-
liquidating basis.
Specific Limitations on Non-Fodoral Public Works
SEC. 6. The Commissioner of Public Works shall not finance or aid
in financing any non-foderal public works, unloss (a) the Commissioner
of Public Works has found and determined that the non-federal public works
is economically sound and socially desirable, and (b) the Commissioner of
Public Works and the managing director of the Authority are of the opinion
that the loan which the Commissionor will make to finance or aid in financing
such non-federal public works may reasonably be expected to be repaid,
together with interest thereon, as the same shall become due.
Specific Powers as to Railroad Equipment
SEC. 7. Subject to the provisions of this Title, the Reconstruction
Finance Corporation on behalf of the Authority shall have power:
(a) To propare plans and designs for the construction,
rebuilding, or ropair of engines, locomotives, tenders,
freight and passenger cars of all types and classes,
Regraded
303
- I0 - -
or parts thereof or appurtenances thoreto (any
or all of the foregoing being herein referred to
as "rolling stock");
(b) To enter into contracts for the construction, ro-
building, repair, or scrapping of any rolling
stock upon such terms and conditions as may be
agreed upon pursuant to public bidding or private
negotiation:
(c) To loase, with or without option to purchase, or
to sell at home or abroad, upon such terms and
conditions as it shall prescribe, any such rolling
stock so acquired;
(a) To enter into contracts for the purchase of old
rolling stock for the purpose of lease or resale
in its existing state or for the purpose of re-
building, repairing, or scrapping the same for
lease or resale.
Specific Limitation on Powers Relating to Railroad Equipment
SEC. 8. The Reconstruction Finance Corporation shall exercise its
powers with regard to rolling stock with a view to recovering the cost
to the Authority of such rolling stock with interest sufficient to re-
imburse the Authority for the cost to it of the capital required for
such operations.
304
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Specific Powers as to Rural Electrification Projects
SEC. 9. The Rural Electrification Administrator on behalf of the
Authority shall have power:
(a) To make loans to finance or aid in financing
projects of the character heretofore financed by
the Rural Electrification Administration (such
projects being herein called "rural electri-
fication projects");
(b) To purchase socurities to evidence loans made
by it and use the proceeds realized from the sale
of any securities acquired under this Title and,
to the extent not otherwise pledged, under any
other law for the making of further loans for
rural electrification projects to the extent such
proceeds are not neoded by the Authority, in the
judgment of the managing director, to maintain
the loans for rural electrification on a self-
liquidating basis;
(c) To exercise the powers granted by this Title
without regard to the provisions of subdivisions
(b), (c) and (a) of section 3 and the last
sentence of section 5 of the Rural Electrifica-
tion Act of 1936.
305
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Specific Limitations on Rural Electrification Projects
SEC. 10. The Rural Electrification Administrator shall not finance
or aid in financing any rural electrification project, unless (a) the
Rural Electrification Administrator has found and determined that the
rural electrification project will furnish electric energy to persons
in rural areas who are not now receiving central station service and
(b) the Rural Electrification Administrator and the managing director
of the Authority are of the opinion that the loan which the Administrator
will make to finance or aid in financing such rural electrification
project may reasonably be expected to be repaid, together with interest
thereon, as the same shall become due.
306
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Powers as to Rural Security Projects
SEC. 11. The Secretary of Agriculture on behalf of the Authority
shall have power:
(a) To make loans and otherwise to finance and furnish
facilities for share croppers, and other individuals
who obtain, or who have in the past obtained, the
major portion of their income from farm operations,
including rural rehabilitation loans, projects for
the provision of additional water facilities, and
farm tenant loans as provided for in Title I of the
Bankhead-Jones Farm Tenant Act, approved July 22,
1937 (any or all of the foregoing being herein called
"rural security projects");
(b) To purchase securities to evidence such loans and to
use the proceeds realized from their sale for the
making of further loans for rural security projects
to the extent such proceeds are not needed by the
Authority, in the judgment of the managing director,
to maintain the loans for rural security projects on
a self-liquidating basis;
(c) To allot and transfer sums available to the Secretary
of Agriculture under this title to the bureaus and
offices of the Department of Agriculture which the
Secretary of Agriculture may call upon to assist or
307
- 14 -
cooperate in carrying out purposes of the Authority or for services
rendered or to be rendered in connection therewith.
Limitation on Rural Security Projects
SEC. 18. 12 The Secretary of Agriculture shall not finance or aid in
financing any rural security project, unless the Secretary of Agriculture
and the managing director of the Authority are of the opinion that the
loan which the Administrator will make to finance or aid in financing such
rural security project may reasonably be expected to be repaid, together
with interest thereon, as the same shall become due.
Bonds of the Authority
SEC.
14.
Subject to the provisions of this Title, the Secretary of
the Treasury on behalf of the Authority shall have power:
(a) To issue bonds of the Authority from time to time
in one or more series, bearing such date or dates,
maturing at such time or times, bearing interest at
such rate or rates payable at such time or times,
in such denomination or denominations, in such form,
carrying such registration, conversion, or inter-
changeability privileges, subject to such terms of
redemption, with or without premium, payable at such
place or places, providing for the replacement of
mutilated, destroyed, stolen, or lost bonds, executed
and delivered in such manner, and containing and sub-
ject to such terms, covenants, and conditions as the
Secretary of the Treasury may prescribe:
Regraded Unclassified
308
- 15 -
(b) To market bonds of the Authority, utilizing all the
facilities of the Department of the Treasury now or
hereafter authorized by law for the marketing of ob-
ligations of the United States and to sell the same
at such price or prices as he deens in its best
interests;
(c) To issue bonds of the Authority in exchange for, or
to retire from the proceeds thereof, any of its bonds
then outstanding;
(d) To purchase bonds of the Authority for investment or
collection and for such purposes the Secretary of the
Treasury is authorized to use as a public debt trans-
action the proceeds from the sale of any securities
hereafter issued under the Second Liberty Bond Act,
as amended, the purposes for which securities may be
issued under said Act, as amended, being horeby ex-
tended to include issuing such securities for the pur-
pose of purchasing bonds of the Authority, or in ex-
change for bonds of the Authority as provided herein;
and at any time sell any bonds acquired by hin for
investment under this section;
(a) To treat as public debt transactions of the United
States all retirements or purchases of, or dealings by,
the Secretary of the Treasury in bonds of the Authority:
309
- 16 -
(f) To prepare such forms, including engraved plates,
dies, bed pieces, and other materials as shall be
suitable for bonds of the Authority, and for any
expenses incurred in the preparation, custody, and
delivery of bonds the Authority shall reimburse the
Secretary of the Treasury.
Specific Limitations on Issuance of Bonds
SEC. 14. The Authority shall at no time apply the proceeds of out-
standing bonds in amounts exceeding the following sums for the following
purposes, in addition to sums available for such purposes from tolls,
charges, and the sale of securities acquired in carrying out its functions
hereunder:
(a) $750,000,000 for the purpose of carrying out post-
road improvements;
(b) $350,000,000 for the purpose of aiding in financing
the construction of non-federal public works;
(c) $500,000,000 for the purpose of providing funds for
the acquisition of rolling stock:
(d) $460,000,000 for rural electrification projects;
(e) $500,000,000 for rural security projects.
The Authority shall not have bonds outstanding at any one time for all
purposes in excess of the aggregate principal amount of $2,560,000,000.
Regraded Unclassified
- 17 -
310
Security of Bonds
SEC. 15. The bonds of the Authority shall be direct and general ob-
ligations of the Authority, fully and unconditionally guaranteed, as to
both principal and interest by the United States, and such guaranty shall
be expressed on the face thereof. In the event that the Authority shall
be unable to pay upon demand, when due, the principal of, or interest on,
such bonds, or discharge any covenant made or indebtedness incurred by it,
the Secretary of the Treasury shall pay the amount due by the Authority
which is hereby authorized to be appropriated, out of any money in the
Treasury not otherwise appropriated, and thereupon to the extent of the
amount 80 paid the Secretary of the Treasury shall succeed to all the
rights of the creditors so paid. The Secretary of the Treasury shall sub-
mit annually to the Bureau of the Budget an estimnte of the amount which
may be needed for such purpose during the succeeding fiscal year and shall
include in his annual report the amount so paid by him.
Purchase of Bonds
SEC. 16. (a) The bonds shall be lawful investments and may be
accepted as security for all fiduciary, trust, and public funds the in-
vestment or deposit of which shall be under the authority or control of
the United States or any officer or officers or agency or agencies thereof.
(b) With the approval of the Secretary of the Treasury, the Authority
may purchase out of any funds available therefor any obligations of the
United States including its own bonds at any price and may sell such ob-
lightions at any time. If the Authority purchases its own bonds it may
hold the same for investment or retire and cancel them, ns it shall deter-
mine to be in its best interests.
Regraded Unclassified
311
- 18 -
Moneys of the Authority
SEC. 17. Moneys of the Authority from whatever source derived shall
be deposited by it with the Treasurer of the United States or with any
Federal Reserve Bank. The said Treasurer and the Federal Reserve Banks
are hereby authorized to receive and hold the sane in a special account
or accounts in the nano of the Authority and to disburse the sano without
further appropriation upon the check or other order of the Authority.
Vouchers approved by the managing director for expenditures from such
accounts shall be final and conclusive upon all officers of the Government,
but, except as provided in this Title as to the fiscal year 1940, (a) no
funds nade available for administrative expenses of the Authority shall
be obligated or expended unless and until an appropriate appropriation
account shall have been established therefor pursuant to an appropriation
warrant or a covering warrant, and all such expenditures for administra-
tive expenses shall be accounted for and audited in accordance with the
terms and provisions of the Budget and Accounting Act of 1921, as
anended, and (b) all financial transactions of the Authority shall be
examined by the Comptroller Genoral of the United States at such times
and in such mannor as he shall prescribe for the sole purpose of naking
a report to the Congress of any supposed departure from the provisions
of this Act, together with his specific recommendations with respect
thereto. The Federal Reserve Banks shall also act as fiscal agents or
custodians for the Authority upon such terms as may be agreed upon with
the Authority.
Regraded Unclassified
- 19 -
312
Mode for Exercise of Eminent Domain
SEC. 18. (a) The Authority may exercise the power of eminent
domain in any way the United States is authorized to condemn real
property, including, but without limitation, the mode or method of
procedure provided by an act entitled, "An Act To expedite the
construction of public buildings and works outside of the District
of Columbia by enabling possession and title of sites to be taken in
advance of final judgment in proceedings for the acquisition thereof
under the power of eminent domain", approved February 26, 1931, as
amended.
(b) In any case in which the Authority has taken possession of
any real property or interest therein during the course of condemna-
tion proceedings and in advance of final judgment therein, it shall
be lawful to expend moneys for the particular purpose for which the
proceedings are instituted in demolishing existing structures on the
land, impreving the same, or in constructing new improvements thereon,
notwithstanding the provisions of section 355 of the Revised Statutes
(U.S.C. title 34, sec. 520). or any other law restricting the expendi-
ture of public moneys upon land, the title to which has been acquired
by the United States.
Reports
SEC. 1j- The Authority shall submit to the President and to
Congress, in January of each year, a financial statement and complete
report of the Authority for the preceding governmental fiscal year.
Regraded Unclassified
313
- 20 -
The Authority shall at all times keep complete and accurate accounts
of all its operations, including all funds expended or received for
the account of the Authority.
Penal Provisions
SEC. 20. (a) All general penal statutes relating to the larceny,
embezzlement, conversion, or improper handling, retention, use or dis-
posal of public moneys or property of the United States, shall apply to
the moneys and property of the Authority and to moneys and properties
of the United States entrusted to it, and all laws for the prevention
of counterfeiting, whether penal or otherwise, shall apply to the bonds
of the Authority.
(b) It shall be unlawful for any person to do any act or thing, or
to enter into any conspiracy, collusion, or agreement, express or implied,
with intent to defraud the Authority or wrongfully or unlawfully to
defeat its purposes. It shall be unlawful for any individual, associa-
tion, partnership, trust, or corporation to use the words "United States
Work and Finance Authority", or any combination of those six words, as
the name, or part of a name, under which he or it shall do business.
Any person who violates any provision of this subsection shall be guilty
of an offense against the United States, and, upon conviction thereof,
shall be subject to a fine not more than $10,000 or imprisonment not
exceeding ten years, or both.
Regraded Unclassified
- 31-
314
Appropriations
SEC. 21, (a) There is hereby authorized to be appropriated from
time to time such sums as may be necessary to carry out the provisions
of this Act.
(b) The President is hereby authorized to transfer not to exceed
$100,000,000 to the Authority from such portion of all unexpended -
balances of sums heretofore appropriated to the Secretary of Agriculture
to enable him to carry cut the provisions of Title I of the Bankhead-
Jones Farm Tenant Act, the Emergency Relief Appropriation Act of 1938,
or the Work Relief and Public Works Appropriation Act of 1939 which
the President, in his discretion, shall deem desirable in order to
enable the Secretary of Agriculture to carry out the functions to be
exercised by him on behalf of the Authority under this Title.
(c) Administrative expenses of the Authority for the fiscal year
ending June 30, 1940 shall be paid from such amounts as may with the
approval of the Director of the Bureau of the Budget be reserved from
the proceeds realized from the sale of bonds of the Authority for the
payment thereof, any provision in this or any other law to the contrary
notwithstanding.
(d) The amount of administrative expenses so paid from the proceeds
of such bonds shall be reported to Congress by the Director of the
Bureau of the Budget and included in the budget estimates for the
Authority for the fiscal year 1941, in order to enable the Authority
to maintain unimpaired the self-liquidating basis of its operations.
315
- 22 -
TITLE II
Export-Import Bank of Washington
SEC. 201. Section 9 of the Act approved January 31, 1935 (49 Stat.
amended
4), as amended, is hereby/ to read as follows: "Notwithstanding any other
provision of law, the Export-Import Bank of Washington, a banking corpora-
tion organized under the laws of the District of Columbia as an agency of
the United States, pursuant to an Executive order of the President, shall
continue, until February 11, 1944, or such earlier date as may be fixed
by the President by Executive order, to be an agency of the United States,
and in addition to existing charter powers, and without linitation as to
the total anount of obligations thereto of any borrower, endorser,
acceptor, obligor, or guarantor at any time outstanding, said banking
corporation is hereby authorized and empowered to discount notes, drafts,
bills of exchange, and other evidences of debt for the purpose of aiding
in industrial development or rehabilitation in foreign countries not in
default on their obligations to the United States or its agencies, and
aiding in the financing and facilitating exports and inports and the
exchange of commodities between the United States and any of its
territories and insular possessions and any foreign country or the agencies
or nationals thereof, and, with the approval of the Secretary of the
Treasury, to borrow money and rediscount notes, drafts, bills of exchange,
and other evidences of debt for the purposes aforesaid. During the con-
tinuance of such agency, the Secretary of State and the Secretary of
Commerce are authorized and directed to continue, for the use and benefit
Regraded Unclassified
316
- 23 -
of the United States, the present investment in the capital stock of
said banking corporation, and they are hereby authorized to use all of
its assets, including capital and net earnings thorefrom, except such
earnings as may be required from time to time to pay dividends upon its
preferred capital stock, and to use all moneys which have been or may
hereafter be allocated to or borrowed by it, in the exercise of its
functions as such agency. Provided further, That the Export-Import Bank
of Washington shall not have outstanding at any one time loans or other
obligations to it in excess of $600,000,000, the capital for which the
Reconstruction Finance Corporation, when requested by the Secretary of
the Treasury with the approval of the President, shall supply from time
to time through loans or by subscription to preferred stock. Not more
than $100,000,000 shall be loaned or advanced to any foreign country
under the authority granted in this section, or under the charter
authority of the Export-Import Bank of Washington."
Regraded Unclassified
317
June 23, 1939
9:50 a.m.
Operator:
Operator.
HMJr:
McReynolds, please.
0:
Right.
(Brief pause)
0:
Mr. McReynolds.
HMJr:
Mac
William
McReynolds: Yes, Henry.
HMJr:
Would you get the draft of the bill backing up the
President's letter to Jimmy Byrnes and personally
walk it over and put it in Kannee's lap?
M:
A draft of the bill?
HMJr:
The bill.
M:
Yes, sir.
HMJr:
I called Kannee. He knows you're bringing it. Now,
there's one thing. I understand there were two alterna-
tives in there
M:
Yeah.
HMJr:
One suggesting that the foreign money be put in the hands
-- lending in the Treasury. I don't want it.
M:
Yeah. You don't want that.
HMJr:
I don't want that.
M:
You don't want that. O. K. I'll take the other one.
I'll -- I'll take it right over.
HMJr:
Yes, and -- now, you see, Jimmy Byrnes called up last
night. I wasn't here and he talked to Johnny Hanes.
M:
Yes.
HMJr:
Now, he hasn't got this thing and I suppose the Presi-
dent wants to send this draft up.
it
M:
Yeah. Well, I'll -- I'll get/in Kannee's hands in the
next few minutes.
Regraded Unclassified
318
- 2 -
HMJr:
But I think it should go from the White House and not
M:
I think 80.
HMJr:
from the Treasury.
M:
Oh, yes, it should.
HMJr:
Will you take care of it, please?
M:
I certainly shall.
HMJr:
Thank you.
319
June 23, 1939
11:39 a.m.
Operator: Go ahead.
HMJr:
Hello.
Alben
Barkley:
Is this Sir Henry Morgenthau?
HMJr:
This 1s Henry Morgenthau, Jr.
B:
Is your middle name McCarran?
HMJr:
(Hearty laughter) Absolutely, I want to
B:
Say
HMJr:
Yeah.
B:
We've got a situation over here. Probably you are
familiar with it.
HMJr:
I've been reading about it.
B:
We've got this -- this double-pronged situation.
HMJr:
Yeah.
B:
Of course the Relief Bill 18 coming in here Monday or
Tuesday.
HMJr:
Yeah.
B:
And that's got to go through by the 30th.
HMJr:
Yeah.
B:
Now that's -- between relief and this silver proposition,
why it seems to me that relief takes precedence.
HMJr:
Well
B:
But I realize that you've got some -- something that
expires down there too, the 30th. What is the situation
now with respect to the law and also the proclamation
fixing the present price of silver at 64.64?
HMJr:
Well, here's the situation, Alben. On -- on the silver
proclamation we -- the President has two devices. Now
the one -- the silver proclamation works under is the
so-called Thomas Amendment. You see?
- 2 -
320
B:
Yeah.
HMJr:
Which expires.
B:
Expires next Friday?
HMJr:
June 30th.
B:
That's right.
HMJr:
Now -- then we have the old Silver Purchase Act, which
directs me to buy when it's in the public interest.
B:
Yeah.
HMJr:
And, on the first of July, I wouldn't have to buy any
silver, domestic or foreign,
B:
Yeah.
HMJr:
if the President didn't want me to.
B:
Yeah.
HMJr:
You see?
B:
Yeah.
HMJr:
I don't have to buy any silver.
B:
Yeah.
HMJr:
on the first of July, at all.
Does that answer
that?
B:
Yeah. Now -- well of course, I don't -- you don't -- you
don't know what would happen, whether you would or
wouldn't?
HMJr:
No.
B:
But, of course, we can revive -- even after it expires,
we can revive this Stabilization.
HMJr:
Yeah, I think
B:
And the devaluation.
HMJr:
We can, but I think it would be very difficult.
B:
Well, it might be, but as between getting -- if we can't
get a vote through by the 30th, it looks to me like we're
321
- 3 -
relief. going to have to sidetrack this bill and try to pass
HMJr:
Have you talked to the President recently?
B:
I talked to him day before yesterday, and that's his
view.
HMJr:
Well
B:
Now, here's what they're trying to do. I guess you
know what they're trying to do.
HMJr:
I'm not sure.
B:
Well, Key wants you to raise the silver up to 77
HMJr:
Yeah.
B:
cents. He says this amendment here 18 providing
for $1.27
HMJr:
Yeah.
B:
which he claims is the monetary value of silver.
HMJr:
Yeah.
B:
That the Government ought not to make this profit that
it's making out of buying silver at 64 cents and putting
it out at $1.27
HMJr:
Yeah.
B:
in the form of money.
HMJr:
Of course, we put it out at $1.29. I don't know whether
B:
Well, 29 -- whatever it is.
HMJr:
Yeah.
B:
What's a penny !
HMJr:
That's right.
B:
Between friends.
HMJr:
Right!
322
- 4 -
B:
And so -- but what he really wants is 77, what it was
up until December.
HMJr:
That's right.
B:
McCarran 1s apparently willing to take -- go ahead with
continue. the 64.64, which the President said he is willing to
HMJr:
Yeah.
B:
But McCarran wants it put in the law.
HMJr:
Yeah.
B:
He doesn't know whether the President will do it or not.
HMJr:
Yeah.
B:
So -- what have you got on your mind about it?
HMJr:
Well, I -- I'm
B:
I don't see myself any -- I don't see any wisdom in under-
taking to say in the law what the President shall pay for
silver.
HMJr:
Well, let me -- let me tell you. I talked to the Presi-
dent about it Monday and I talked to him again yesterday.
B:
I tried to get you the other day and you were galavanting
around over in New Jersey somewhere.
HMJr:
Well, I -- my oldest son graduated from Princeton.
B:
Oh, I see.
HMJr:
That comes before
B:
Well, I'll withdraw the word "galavanting".
HMJr:
Right!
B:
Yeah.
HMJr:
And -- incidentally, he graduated with honors.
B:
Fine !
HAJr:
Now, the President said he wanted to handle this silver
thing with Key and try to make a deal with him on the
neutrality.
323
- 5 -
B:
Well
HMJr:
See?
B:
I don't know. Of course, I told him I didn't see how
he could tie that in, because this thing has got to be
decided before the Committee meets next Wednesday
HMJr:
Yeah.
B:
on that other.
HMJr:
You mean on the neutrality?
B:
Yeah.
HMJr:
Oh, it does?
B:
They postponed anything -- any action until next Wednesday.
HMJr:
Well, now I don't
B:
I don't know whether they'll even take it up then or not
unless the House has acted.
HMJr:
I'm not quite sure what you're asking me. If I was sure
I'd -- I'd try to give you an answer.
B:
Yeah.
HMJr:
It's just -- what would you like me to say "Yes" or "No"
on?
B:
Well, I want to know what -- what you and the President
are willing to do in regard to this silver price so as
to see whether these people can be satisfied. They are
threatening to prevent passage -- or anything --
if they can, I don't think they can; I think if it comes
to the point where we've got to move to substitute the
relief bill for this bill that the majority of the
Senate will vote to do it.
HMJr:
Yeah. How -- you have to go on the floor at twelve?
B:
No, we're -- we met today at eleven. We're in session
now.
HMJr:
Well, I tell you what I'm going to do. I'm going there to call
the White House and ask if I can -- go over now,
would up the President see me and whether he'u call you up
while I'm over there
How's that?
Regraded Unclassified
- 6 -
324
B:
Yeah.
HMJr:
How would that be?
B:
That's all right. I -- all I want to do -- you see he's
leaving here today and won't be back until Wednesday.
HMJr:
I'll ask him and I think he will.
B:
And this thing's brewing here now and we've got these
two things -- with a stop watch on them.
HMJr:
Well, let me walk across the street and see if I can't
get him to call you up right away.
B:
Yeah. He told me he was willing to go ahead with the
price like it 1s, but Key wants it 77, although it was
introduced -- an amendment for $1.29, or 27.
HMJr:
Well, he hasn'
B:
McCarran told me yesterday that if he -- if he was
given any official assurance that he could rely on it
would help and he says he'd try to put it in the law
itself that it shouldn't be left at 64.64.
HMJr:
Uh-huh.
B:
And I told him I didn't see how he could insist on putting
it any lower. I don't know what kind of assurance,
whether he wants a letter or a statement or an announce-
ment, that there'll be no reduction in the price. Now,
those are the things that they are talking about over
here. So he
HMJr:
Well -- ......
B:
So he'll -- he'll talk to him about all those.
HMJr:
I'm -- I'm going to -- the minute you hang up -- can he
get you if he calls you?
B:
Yeah, I'll be on the floor.
HMJr:
I'll walk across. I'm sure he'll see me. I appreciate
the street and see if I can't get the President to call
the opportunity of talking to you and I'll walk across
you.
B:
All right.
Regraded Unclassified
325
- 7 -
HMJr:
I see what you want.
B:
But I -- I tell you this. I tell you, General Watson
is going to try to get him to call me about another
matter.
HMJr:
Well, he can do both.
B:
And BO -- he can do both of them by phone.
HMJr:
But the thing that bothers me is that I'm afraid that if
we don't get this bill through that the business is going
to get ahead of itself.
B:
Well -- I'm anxious to get it through too and we've tried
here
two or three times to get an
agreement before.
HMJr:
Yes.
B:
You see, Adams has offered an amendment to strike out
the devaluation
HMJr:
Yeah.
B:
section.
HMJr:
But if they put 64 and a half cents into the bill, Mc-
Carran would go along?
B:
Well, he said so yesterday.
HMJr:
Uh-huh.
B:
That is, a minimum of that.
HMJr:
I get you.
B:
Yeah.
HMJr:
Well, then let's -- give me a couple of minutes.
B:
Yeah, all right. I've got plenty of time because we're
going to talk all afternoon.
HMJr:
Well, thank you.
B:
Yeah.
HMJr:
Thank you.
B:
All right.
326
June 23, 1939
3:12 p.m.
HMJr:
Hello.
Operator: Mr. Gibbons. Go ahead.
Stephen
Gibbons: Hello.
HMJr:
Yes, Steve?
G:
I wanted to check with you on something. You know this
fellow Tripp has been trying to get Johnny Hanes, and
Gaston, and McReynolds and myself to fly across the
ocean.
HMJr:
Yeah. I didn't know it, no.
G:
Huh?
HMJr:
I did not -- I didn't know anything about it.
G:
And Waesche like a -- if you'll pardon the expression --
a damn fool, without consulting me or you or anybody
else has accepted. Now I told him this morning I was
going to disapprove. I asked him if he'd asked his
wife. He said, "No." Well, I don't want to appear
adamant on the thing and -- but he's got this reorganiza-
tion on his shoulders that he's carrying the ball on,
and we've got this appropriation for three new cutters
and fifteen planes and I just felt that I wouldn't do
a thing like that without consulting you. And I felt
that it was a little bit -- I suppose they took him at
a weak moment and he thought it would be a thrill or
something, but at the same time I don't want to appear
adamant and small in the matter. Now the President 18
letting Steve Early go. What is
HMJr:
He's letting -- and he also -- Walton Moore is going.
G:
Yes. Well, Walton, of course, 18 an old man and a
bachelor, but I wouldn't go without consulting my wife
HMJr:
No.
G:
or -- you know. But that isn't your affair or
mine. However, I'm merely asking you as
HMJr:
Well, I have no objection to his going.
Regraded Unclassified
327
- 2 -
G:
Well, I'll -- I'm going to tell him then to -- let him
go. If he wants to go, all right -- but
HMJr:
I have no objection.
G:
I thought that he would consult either you or me,
yes or no.
HMJr:
Well, I -- I -- no one'
G:
No -- no one said anything to you, no.
HMJr:
No, you -- he didn't ask me. I
G:
No. No, he called -- he called -- he had his office
call Mac and Mac said, "I don't care what he does."
In other words, personally, he didn't care but he
didn't say anything
HMJr:
That's up to you. I have no objection.
G:
Well, I just -- you don't think -- I thought afterwards
it might look as though I were rather small and that I
was selfish and I was holding back for selfish reasons,
but
HMJr:
No, if he wants to go it's all right.
G:
O. K. Well then, I think I'll approve it.
HMJr:
Thank you.
G:
O. K. Good bye.
328
June 23, 1939
3:15 p.m.
HMJr:
Hello.
Operator: Gordon Rentschler.
HMJr:
Thank you.
0:
Go ahead.
HMJr:
Hello.
Gordon
Rentschler: Hello, Henry.
HMJr:
Yeah.
R:
Gordon speaking.
HMJr:
Righto!
R:
I didn't get this information as quickly as I thought I
would.
HMJr:
That's all right.
R:
But I want to give you just some high spote on it
HMJr:
Yeah.
R:
in our own branch business of Japan.
HMJr:
Yeah.
R:
We're down some four -- take on ex -- export bills
HMJr:
Yeah.
R:
from Japan, we're down from last year this time
four million two to one million eight. That's stuff
coming this way.
HMJr:
Yeah.
R:
Stuff going into Japan, five hundred and forty thousand
dollars.
HMJr:
Yeah.
R:
Imports-unused credits are six hundred thousand. with They
are -- they are unused because they can't cover
exchange.
Regraded Unclassified
- 2 -
329
HMJr:
Yeah.
R:
We insist on having the dollars transferred to us at
New York before they can use the credit.
HMr:
Yeah.
R:
Now then, the total import finance is down to sixty
thousand dollars.
HMJr:
Yes.
R:
And then in the -- in the local cash situation, we're
down three million four dollars' worth again, and our
total risk in Japan at the present time is down to five
hundred and eighty-five thousand dollars.
HMJr:
I see.
R:
Now, I just thought I'd give you those figures because
that would give you some -- a -- a picture of it.
HMJr:
Yeah.
R:
Now, with respect to export bills, this million eight,
they are bills drawn on the United States, Great Britain,
and South America, and represent about sixty per cent of
the -- of credit to other first-class banks; they come
in to us through banks, you see?
HMJr:
Yeah.
R:
Now the imports covering cotton from the United States
and Peru, and silver -- there's some silver and other
metals from Canada, they are ninety-day bills in every
instance in which exchange is settled, that is dollars
admitted from Japan in payment before funds are dis-
bursed here.
HMJr:
Yeah.
R:
And that's the total item of all of those put together --
are down to five hundred and forty thousand dollars.
HMJr:
I see.
R:
Now, we know of no cotton that's going from - -- through
any bank that we could touch up here.
HMJr:
Yeah.
- 3 -
330
R:
from Brazil to Japan.
HMJr:
I see.
R:
There is a line of five hundred thousand dollars out-
standing for cotton from Brazil to Shanghai that has
not used. been used and we understand will probably not be
HMJr:
I see.
R:
Then, with respect to the other banks, I can't report
in detail on them but I've chatted informally
HMJr:
Yeah.
R:
without telling them what I wanted.
HMJr:
Yeah.
R:
Just to check our own position.
HMJr:
Yeah.
R:
The only thing that I can find 18 the Chase Bank has
some credit which they give for the purpose of the
1m -- importation of gold from Japan to the United
States.
HMJr:
Well
R:
And everything else they have over there, they tell me,
18 on a covered basis, and I have reason to believe
that's correct.
HMJr:
I see.
R:
Now, there's still some pulp shipments going over.
HMJr:
Yeah.
R:
But that's been practically held up. It's down -- it
looks like in the last six months that probably there's
just a third as much as has gone before.
HMJr:
I see.
R:
And of that there's-about forty per cent 18 going to
Scandinavia.
Regraded Unclassified
- 4 -
331
HMJr:
Yeah.
R:
And about twenty-five per cent from the Pacific coast
HMJr:
Yeah.
R:
and -- or from Canada.
HMJr:
Yeah.
R:
And the balance from the Pacific coast.
HMJr:
I see.
R:
So that our American exports on pulp are very markedly
curtailed and as far as we can find out no American
financing for it.
HMJr:
I see.
R:
Now, these accounted -- you'll find here with us a
certain amount of bills outstanding from Mitsui and
Company.
HMJr:
Yeah.
R:
And in checking back in them I find that they are for
the purpose of bringing rubber and tin from Singapore
HMJr:
Uh-huh.
2:
to the United States and in one or two instances
to London.
HMJr:
I see.
R:
Apparently they are competing in there with the British.
HMr:
Oh, yes.
R:
So it looks very much, Henry, as though the whole thing
has died down quite completely in that trade between
Japan and the United States, -- the figures when the
year 18 up must show a very heavy shrinkage.
HMJr:
Right.
R:
Now then, one final thing, and that 18 on their loans in
New York, not only to us but other banks
HMJr:
Yeah.
Regraded Unclassified
332
- 5 -
R:
we can't find any loans that they've got in the
other banks.
HMJr:
I see.
R:
They've got credit balances with us now, about two and
a half million dollars as against loans last year of
about six million, and the only unpaid loan we have 1s
a ten-day loan of two hundred thousand dollars.
HMJr:
I see.
R:
And that's secured by United States Governments.
HMJr:
That ought to be good.
R:
Now it -- 1thot rather interesting that apparently they
are not only/doing business but again they're keeping out
of this market to ask for accommodations.
HMJr:
I see.
R:
When they find that we're rather not interested in giving
them accommodations, they don't want to be turned down.
HMJr:
I see.
R:
Now that's about the picture.
HMJr:
O. K.
R:
What else do you know, young fellow?
HMJr:
Nothing I can talk about.
R:
All right. Well, that's -- what you can't talk about
won't do me any good.
HMJr:
All right.
R:
I hope you win on your silver though..
HMJr:
Yeah. Key Pittman gets
R:
YOU've got to watch that pretty carefully because you
might find a lot of silver coming out of -- out of China,
which, after all, 1s the Japanese silver.
HMJr:
Well, they're having & good
- 6 -
333
is
I can tell you.
HMJr:
a good time on the Hill calling me names, but
R:
That's all right, but you can afford to be called names.
HMJr:
That's right.
R:
It's -- it's damned expensive not to be called names if
that's what they're going to do with the money.
HMJr:
That's right.
R:
All right, Henry.
HMJr:
Thank you.
M.
I'll be away for a couple of weeks but Randolph will be
here if there's anything that turns up that you want.
HMJr:
All right.
R:
All right, fellow.
HMJr:
Good bye.
R:
Good bye and good luck.
HMJr:
Thank you.
other is 6-23-39)
334
335
THE WHITE HOUSE
WASHINGTON
as to Russian debto-I &
u Mi objection to your
,
laus 2 shomed Say Heat over
ubast ador Stanhart will
t, of Cresse, supoliate in any Sense,
be will too urge them
Take matter up here -
(6-23-39 at Cabret, see'ng
thall gave the above to Hop. )
336
June 23, 1939
My dear Mr. Secretary:
Before talking with the represen-
tative of the U. B. 5. H., I would appre-
ciate if you would make available to Mr.
Bell and Mr. Cotton the complete file on
this Administration's negotiations with
the Russian Government on both the Govern-
mental and private debt in order that I may
bring myself up to date.
I an asking Mr. Cotton to bring
this letter over by hand and would appre-
ciate your putting him in touch with the
proper person in the State Department.
Yours sincerely,
The Honorable
The Secretary of State.
TREASURY DEPARTMENT
Office of the Secretary
103
Secret Service Division
337
MEMORANDUM
2
June 23, 1939
To:
Mrs. Klotz
From: Chief Wilson
For your information there is
attached schedule of the President's
trip to Hyde Park, June 23 and June
24, 1939.
CONFIDENTIAL
Trip of the President
to Hyde Park, New York.
Friday, June 23, 1939.
Lv. Washington. (Baltimore & Ohio RR.) 11:25 p.m.E.S.T.
Saturday, June 24, 1939.
Ar. Highland, N.Y. (West Shore N.Y.C.RR.) 8:00 a.m.E.S.T.
(9:00 a.m.D.S.T.)
Members of the party;
The President.
Miss M. A. LeHand.
Mr. William D. Hassett.
Miss Grace Tully.
Mr. Henry M. Hannee.
Miss Roberta Barrows.
Mrs. Mary A. Eben.
Miss Louise Hachméister.
Mr. Dewey E. Long.
Mr. Leo A. de Waard.
Secret Service Agents.
Newspaper men:
Mr. George E. Durno,
International News.
Mr. Douglas B. Cornell,
Associated Press.
Mr. Sandor S. Klein,
United Press.
Mr. Walter Trohan,
Chicago Tribune.
Mr. Felix Belair,
New York Times.
Mr. John O'Donnell,
New York Daily News.
Mr. R. L. Harkness,
Philadelphia Inquirer.
Mr. Bruce Pinter,
New York Herald Tribune.
Picture men:
Mr. George Skadding,
Associated Press Photos.
Mr. F. I. Thompson,
International News Photos.
Mr. John Tondra,
Fox Movietone News.
Mr. Urban Santone,
Paramount News.
Telegraph representatives:
Mr. C. S. Linkins,
Western Union Tel. Co.
Postal Telegraph Co.
Mr. T. B. Bowen,
Mr. D. L. Moorman, G.P.A.,
Baltimore & Chio Railroad,
In charge of Transportation.
Regraded Unclassified
CONFIDENTIAL
Trip of the President
to Hyde Park, New York.
Friday, June 23, 1939.
Lv.
Washington
(Baltimore & Ohio RR.)
11:25 p.m.E.S.T.
Saturday, June 24, 1939.
Ar. Highland, N.Y. (West Shore N.Y.C.RR.) 8:00 a.m.E.S.T.
(9:00 a.m.D.S.T.)
Members of the party;
The President.
Miss M. A. LeHand.
Mr. William D. Hassett.
Miss Grace Tully.
Mr. Henry M. Hannee.
Miss Roberta Barrows.
Mrs. Mary A. Eben.
Miss Louise Hachméister.
Mr. Dewey E. Long.
Mr. Leo A. de Waard.
Secret Service Agents.
Newspaper men:
Mr. George E. Durno,
International News.
Mr. Douglas B. Cornell,
Associated Press.
Mr. Sandor S. Klein,
United Press.
Mr. Walter Trohan,
Chicago Tribune.
Mr. Felix Belair,
New York Times.
Mr. John O'Donnell,
New York Daily News.
Mr. R. L. Harkness,
Philadelphia Inquirer.
Mr. Bruce Pinter,
New York Herald Tribune.
Picture men:
Mr. George Skadding,
Associated Press Photos.
Mr. F. I. Thompson,
International News Photos.
Mr. John Tondra,
Fox Movietone News.
Mr. Urban Santone,
Paramount News.
Telegraph representatives:
Mr. C. S. Linkins,
Western Union Tel. Co.
Postal Telegraph Co.
Mr. T. B. Bowen,
Mr. D. L. Moorman, G.P.A.,
Baltimore & Chio Railroad,
In charge of Transportation.
Regraded Unclassified
339
June 23, 1939
They overlooked inviting John Carmody to
the 5 o'clock meeting at the White House tonight
and I telephoned Kannee and asked him to suggest
it to the President.
340
RE STABILIZATION FUND BILL
June 23, 1939.
Mr. Hanes
9:10 A. M.
Present:
Mr. Gaston
Mr. Foley
Mr. White
Mr. Viner
Mr. Lochhead
Mr. Bernstein
H.M.Jr:
Now, what have you got for the President?
White:
This is the memorandum. There are a couple of
changes. It's being retyped, will be ready in a
minute. But that's the gist of it.
H.K.Jr:
"Memorandum to the President:
"The failure to continue the stabilization fund
and the powers to alter the gold content of the
dollar might have serious consequences for the
following reasons:"
"
might have serious consequences"?
Well, I'll read what you've got first.
"1. I do not think I am exaggerating the possibilities
when I say that 1f at this time we go back to the
pre-1933 gold policy we may be spelling the doom of
free exchange in the rest of the world. The apparent
return to the fixed gold value would greatly increase
the speculative security and attractiveness of the
dollar to the foreigner and would stimulate continued
flights of capital and gold to this country. The
resultant persistent pressure on the monetary systems
of foreign countries - which would become especially
large during periods of acute political disturbance -
would force countries either to depreciate their
currency or adopt exchange controls 11 in an effort to
safeguard their gold stocks.
By the way, when do you go on the H111?
Hanes:
Not until next Wednesday,
H.M.Jr:
Oh, then you have time this morning.
Hanes:
Yes.
Regraded Unclassified
341
- 2 -
H.M.Jr:
You don't have to go any more.
Hanes:
Going to vote on the bill now at 10:00 o'clock -
Senate amendment.
Lochhead:
At 10:00?
H.M.Jr:
Marvelous.
"2. Even if the pressure on foreign currencies
were not sufficient to force certain foreign
countries to depreciate, some foreign countries
may wish to take advantage of our weakened bargain-
ing position and permit their currencies to decline
at the first opportunity. The most important bar-
gaining weapon we have to prevent this contingency
is the existence of the executive power to devalue
the dollar. You may remember our negotiations
with England last Fall in which we induced her to
check the decline of the pound. In these negotia-
tions our strongest weapon was the Presidential
power to reduce the gold content of the dollar.
"3. Should an important foreign currency decline,
either because the country wished to strengthen its
trade position or because it was forced to do so in
order to protect its remaining gold holdings, the
effect would be serious to both our foreign and
domestic trade. It would expose our domestic market
to intensified foreign competition and would make
it more difficult for our exporters to maintain our
share of the world market.
"Our entire commercial policy is based on the premise
and the expectation that the dominant type of world
trade is conducted by free exchange. If a major
group of countries drops free exchange we will be
forced to completely alter our commercial policy and
practices.
"4. The dollar will become a perfect exchange specu-
lator's risk. The speculator can gain but cannot
lose. The flow of gold to the United States may be
only a trickle at first but sooner or later it would
reach substantial magnitudes. In addition to the
effect such a flow would have on weakening foreign
monetary systems, it would give rise to widespread
342
- 3 -
serious questions as to the wisdom of New Deal
monetary policy and to the desirability and
absurdity gold. of piling up such enormous hoards of
"5. The Tripartite Accord would cease to have any
protective value and would in time become a dead
letter. The basis of the Tripartite Accord lies
in the possession of each country of reciprocal
powers of monetary action. Any one familiar with
international monetary situations will realize that
there is not the slightest chance that other
countries will follow our example of tying their
currencies at this time to a rigid gold standard
or to the dollar.
"In evaluating the harmful effects which may result
from a lapse of the monetary powers it is important
to bear in mind that the more significant aspects
of these powers are the public's evaluation of the
role which such powers play and not the technical
day to day financial operations.
"Should these monetary powers lapse for a few days
or a few weeks there may or may not be serious reper-
cussions during that period. What will happen cannot
be foreseen with certainty. Much depends upon the
public's expectation as to the likelihood of the
revival of those powers. It is entirely possible
that the international exchange may remain stable
for a considerable period after the lapse of some
powers but sooner or later, particularly should a
political crisis develop abroad, the effects will
be felt. The danger of permitting the powers to
lapse even for a short period is that should a quiet
period ensue some people might interpret that as
indicating a lack of need, for these monetary powers
and the opposition to the granting 11 of these powers
will thereby become strengthened.
This isn't what I want at all.
"It is true that should the present powers lapse
the Treasury could execute most of the technical
operations through other powers it possesses or
through the Federal Reserve Bank. But 1f this
were to be the procedure, then the power that the
343
- 4 -
government has acquired during the last six years
in controlling the country's monetary affairs would
revert to Wall Street via the Federal Reserve Bank
of N. Y."
This is entirely I don't know what's the matter
with it. Don't tell me who wrote it. I don't have
to hurt anybody's feelings. It isn't what I want.
White:
Oh no. I wrote most of it - Bernie and I. Perfectly
H.M.Jr:
I mean the President can't use this. I mean he can't
wade through it any more than I can. I thought we
were going to give him a memorandum and a letter
based upon the memorandum.
White:
They said you didn't want the letter.
H.M.Jr:
I said I did want it.
Foley:
We have a letter. We decided last night, as a result
of the passage of the tax bill and the assurance that
we got from Biffle that they'd get it out either
today or tomorrow, perhaps a letter wasn't necessary
at this stage.
H.M.Jr:
No, the President - supposing he - this is - I wouldn't
see him again, and he wants this for Monday in case
he should want to send a letter. Have you got a
letter?
Foley:
Yes. It hasn't been worked over.
Lochhead:
Mr. Morgenthau, the point is, when we worked on this
thing - is this. When you say, "If this expires
tomorrow - I mean on the 30th how are we blocked,
what can't we do?" Unfortunately, we can do, or the
Federal Reserve Bank can do, most of the little
technical things, it can carry through. And I'll
tell you rather an odd reaction I got yesterday
when I was checking with Knoke. I said to him,
"I want you to check up on the Tripartite as an
agent, and if we haven't got the powers on the
30th what serious repercussions will it have?"
Well, he came back and they checked up and they
figured they could do most of the things that were
necessary.
344
- 5 -
Then he said, "I was speaking to George Harrison
on this and, he said, "you know, if this thing
doesn't go through on the 30th, we're back to a
gold standard. And just the expression - I
gathered that it would be very nice, that it would
be just the very best thing that could happen, if
the silver boys here did just exactly what they
wanted to do. And so I'm afraid that it's not
the Senate people that are not in the silver bloc
that you can use pressure on. I think Thomas is
doing exactly what they would like to do and haven't
been successful in doing. In other words, Thomas
is playing right into their hands by blocking it
and I think that they are very complacent about it.
White:
Let me say a word about this. It is easy to make -
we may have - this is about the tenth draft - it
is very easy to make a spectacular, effective state-
ment. But that statement (a) would not be true; (b)
would be vulnerable in case somebody else tells the
President what might be done; and (c) there is this
danger which troubled us: supposing that the powers
do lapse; if you tell the President that certain
things are likely to happen or will happen, and don't
put in your qualifications, then it seems to me it
looks pretty bad when those things don't happen, as
they almost certainly will not happen. Therefore,
I think the thing has to be couched bearing in mind
(a) that we possess the effective powers under
Section 8; (b) that the Federal Reserve Bank can do
almost everything that we can do, and that we can do
the rest of it; and (c) that nothing serious will
happen if the thing does fall through, except in the
larger political realm, which cannot be forecast.
H.M.Jr:
Did you see what I said at my press conference?
White:
No.
H.M.Jr:
Why didn't you give them, Herbert, what I said at
my press conference, so they'd know?
This is what I said: "The situation is a serious
one. We like to think in the Treasury that we are
ready for any emergency."
Viner:
That's the attitude I think you should take.
345
- 6 -
H.M.Jr:
Harry?
White:
Yes.
H.M.Jr:
I say: "The situation is a serious one. We like
to think in the Treasury that we are ready for any
emergency. " Now, that's the note that I struck.
I don't know. It looks as though you fellows haven't
been together. I certainly made it most emphatic
that I wanted a finished thing.
White:
No, we worked together - Ed, Bernie and I.
Lochhead:
There's a couple other aspects
H.M.Jr:
Who's done this (attached letter)? Whose work is
this?
Foley:
Bernie's.
H.M.Jr:
By yourself?
Bernie:
No, I worked it over with Harry, but Harry didn't
see this last draft.
H.M.Jr:
Well, let me read this, see 1f this approaches what
I want. And you people have got to realize that it's
difficult - I mean for me - my brain is tired; I've
got the full responsibility here and I just - I mean
I'm disappointed. Maybe this is what I want. Let's
just see.
"In my letter of January 19, 1939, I wrote to you
of the need for extending the powers relative to the
stabilization fund and the fixing of the metallic
content of the dollar. Since that time the House
of Representatives has passed a bill (H.R. 3325)
extending these powers until June 30, 1941. That
bill has been reported out by the Senate Committee
on Banking and Currency and is now before the Senate
for consideration.
"As know, under the existing Silver Proclamation, is
which you expires on June 30, 1939, the Government
paying I am advised that a small group of
64.64 cents an ounce for newly-mined domestic Senators
have any vote being taken on H.R. 3325 and on the proposed
silver. blocked, and threaten to continue to block,
Regraded Unclassified
346
- 7 -
amendments to such bill until I shall have made
a commitment that the Government will pay an
even higher price for domestic silver mined after
June 30. I have given the matter careful consider-
ation and it is my considered judgment that in
the present situation I would not be warranted in
proclaiming a higher price for domestic silver,
and I cannot permit the threatened block to the
passage of this much needed legislation to compel
me to proclaim such higher price for domestic
silver.'
If
the threatened block"?
Viner:
"
the threat to block.
Foley:
I think that's an unfortunate usage of the word.
H.M.Jr:
Just make a note there. I'm thinking the bloc
is the people that are opposing him. It isn't
quite clear.
"
the threat to block the passage of this much
needed legislation to compel me to proclaim such
higher price for domestic silver. Of course, the
matter would be different if Congress by legislation
fixed the price to be returned for domestic silver.
Congress has the opportunity to express its views
as to whether a price higher than the prevailing
price should be returned for domestic silver by
voting on the amendments which have been offered
by Senators McCarran, Thomas and Pittman.
"However, I feel it to be appropriate to point out
the serious consequences that will flow from a
failure to extend these monetary powers on or before
June 30, 1939.
"The need for the continuation of the stabilization
fund has been universally recognized by the Congress
and the public. The expiration of the stabilization
fund powers on June 30 will deal a serious blow to
international monetary stability and to the protection
and advancement of American business interests. Only
one group will profit by the termination of these
powers, namely, the international currency speculators."
This is what I wanted. This is & good letter. Did
you help on this, Harry?
347
- 8 -
White:
Yes.
H.M.Jr:
This 1s what I want.
"The powerful weapon which this country, in con-
junction with other leading democratic commercial
countries, has been developing for more than five
years to help maintain some measure of stability
in international exchange and to help minimize the
predatory tactics of foreign exchange speculators
will be gone over night. The resulting increased
currency fluctuations and monetary uncertainty will
greatly hamper international and American trade and
commerce.
If
This is a good letter.
Hanes:
Yes.
H.M.Jr:
"In September 1936, amidst universal acclaim in
democratic countries, this country joined with
Great Britain and France in the Tripartite Declara-
tion. Soon thereafter Belgium, Holland and Switzer-
land joined this Accord. No one can question the
great contribution which this Accord has made to
attain some measure of stability and equilibrium
in the international economic and monetary fields.
If this country had not had the powers which are
now being permitted to expire, it would have never
been able to participate in this Tripartite Accord.
This country, economically and financially, is the
most powerful member of the Tripartite Accord.
If these monetary powers are now permitted to expire,
this Tripartite Accord must inevitably cease to play
the beneficial role which it has up to now performed,
and at the very time when, because of the condition
of international affairs, there may be an éven
greater need for an arrangement between the great
commercial countries along the lines of the existing
Tripartite Accord.
I think it is slightly repetitious. But this is
what I wanted, and I've got it.
"I realize that there is some difference of opinion
in the Congress as to the merits of continuing the
existing power to change the gold content of the
dollar. I am of the view that this power is essential
to the proper protection of American domestic and
Regraded Unclassified
348
- 9 -
foreign trade against the depreciation, or the
threatened depreciation, of the currencies of
important foreign commercial countries. The views
of this Administration on this matter have been
fully presented to the Senate through the testimony
of the Secretary of the Treasury and are also
reflected in the address by Senator Wagner to the
Senate on June 19. There also appears to be a
difference of opinion as to the desirability of con-
tinuing the existing program relative to newly-mined
domestic silver and as to the price to be returned
therefor.
"I consider it to be of great importance that Congress
express its views on these matters on or before June 30,
and it seems too clear for argument that the measures
now being undertaken to prevent the Senate from voting
on the monetary till and amendments now before it
are not in the interest of the orderly process of
democratic government.
"For the foregoing reasons I urge that the Senate
take decisive action with respect to the monetary
measure now pending before it."
Now, that's a swell letter. I'm delighted. I was
White:
Bernie wrote most of it. We helped him with the
original draft.
H.M.Jr:
Well, I don't
White:
Yes.
H.M.Jr:
I just was bothered, because this thing is a good
economic
White:
Performs & very different function.
H.M.Jr:
Now, this is terribly important. Let's just stop
a minute. With the exception of maybe a few phrases,
I personally would cheerfully recommend that the
President sign this. How about you (Hanes)'
Hanes:
It sounds good to me. I'm not expert enough to
know whether everything you are saying there is
beyond doubt.
H.M.Jr:
But as to the approach?
349
- 10 -
Hanes:
much. As to the letter, the approach, I like it very
H.M.Jr:
Have you (Viner) had a chance to work it over?
Viner:
First I've heard of it.
H.M.Jr:
I see.
Viner:
Sounds good to me. I'd like to read it carefully,
but it sounds good to me.
H.M.Jr:
What I'd like to do is this. Have you (White) had
a chance to look at this carefully?
White:
Not the final draft.
H.M.Jr:
Would you do this for me, gentlemen, those who are
working on it. Could you come back at 11:00 o'clock?
It gives you an hour and a half. What? And weigh
every word of this.
There is only one question, and the President can
decide that. Does he want to sort of dare them to
go ahead and vote on this silver price? I kind of
like it. I like it. I think it's a damn good letter.
Does anybody not like it?
Lochhead:
Mr. Morgenthau
Gaston:
The only question in my mind is the desirability of
Foley:
If it's necessary.
Caston:
The only question in my mind is the desirability of
sending any letter at all, because the leaders up
there seem to be handling things pretty well, at
least from the report that Biffle gave to Ed. Cer-
tainly I wouldn't send a letter out before Tuesday,
1f any is sent. I think it is good to have on his
desk, and it would fit the situation even if we
waited until Tuesday.
H.M.Jr:
He asked for it Monday - whether it's Monday or
Tuesday that he's leaving - I want to give it to
him at 2:00 o'clock. He can put it in his pocket.
Hanes:
I don't think you need a memorandum if that letter
goes.
350
- 11 -
H.M.Jr:
No. This bothered me. But this is all right.
Now, Harry, to give you time before - do you want
to argue for this?
White:
No, no, this served 8. different function. My under-
standing - we first worked on this letter and we
got a first draft done, and then one of the boys
joined them - I had to go out - called me in. They
finished that draft. Then in the evening, when we
were going to re-work on the accompanying memorandum,
I heard that the letter was no longer necessary.
So we dropped the letter and began working on the
memorandum, which I understood fulfilled a different
function. The memorandum was to inform the President
of exactly what would happen in the event these
powers lapsed. I didn't know it was - I thought
you wanted to give him just what would happen.
H.M.Jr:
Somebody gave you the wrong information.
White:
I got that impression about the memorandum from
being here. I thought you wanted to inform the
President exactly what would happen.
H.M.Jr:
What I thought - I said - was, "Let's have a memoran-
dum, but let's give him a letter and then the
memorandum would be details supporting the letter."
White:
Yes, that's as I understood it. Then the letter
dropped out, and I thought the memorandum was to be
from you to the President, SO....
H.M.Jr:
Well, it's a happy ending. It's a happy ending.
And could you fellows come back at 11:00? I mean
this is
White:
For example, one of the most important reasons why
we should object to the lapsing of the powers isn't
in the letter and isn't something you could put in
the letter.
Foley:
Nothing in there about relief. I don't think there
should be.
White:
"It is true that should the present powers lapse
the Treasury could execute most of the technical
operations through other powers it possesses this or
through the Federal Reserve Bank. But if
351
- 12 -
were to be the procedure, then the power that the
Government has acquired during the last six years
in controlling the country's monetary affairs
would revert to Wall Street via the Federal Reserve
Bank of N. Y."
H.M.Jr:
Now, on that, not in the letter but by word of mouth,
I'd like to get that in - in the memorandum to the
President - that thought in a memorandum from me.
And plus - and this - I'll pull a "Roosevelt" on you.
It's been going through my mind that there was an
element that would just as lief not see this thing
pass and, in the room here, I wasn't thinking of
the Fed of New York, I was thinking of the Federal
Reserve Board.
White:
Oh, I think both - for different reasons.
H.M.Jr:
For different reasons. And therefore, there is
always this undercurrent, and this thing that, 1f
Harrison is right, we'll goback to a fixed dollar.
Now, I think in this memorandum to the President -
we might mark it highly confidential for him to
see - put it in the form of gossip. I'd say, "It
is gossip that the Federal Reserve of New York
feel that if this thing fails to pass it will give
them a great return of power; furthermore, that they
seem to be under the impression that gold will go
back once more to a fixed standard, and with all
the implications, which I needn't enlarge on to
you, Mr. President." I mean what it means - all
the implications.
"And also it is my - my intuition tells me that I
think it would not be entirely displeasing to the
Federal Reserve Board to see this power lapse and
have the whole thing thrown out, with the possi-
billity that in the rescrambling they would gain
considerable additional power, monetary power.
See?
White:
I'm a little more skeptical about the last part of
the statement.
H.M.Jr:
You heard how I put it. I said "intuition."
But that's for me to write - now, that kind of a
thing.
Regraded Unclassified
352
- 13 -
White:
But the fight is between the New York Bank and you,
and not - I mean on this matter.
H.M.Jr:
All right. But this thing oughtn't to be very diffi-
cult to polish up. Jake, will you sit in with the
rest? And then we won't do anything on relief, see?
I think we'll let Harrison handle that.
Foley:
Well, they don't expect to get the bill through on
the 30th. They're going to ask for a continuation.
H.M.Jr:
They don't?
Foley:
No. So you're not going to get much help from that.
H.M.Jr:
Well, that's all right. No, that
Foley:
They're going to extend the availability of the
existing funds beyond the 30th of June.
H.M.Jr:
That's in our favor, because the less things that
Pat McCarran has to use to hold a pistol to the
President's head, the weaker he is. That's the
way I argue.
Foley:
Oh yes, that's all right on strategy.
H.M.Jr:
Now, he hasn't got the tax bill, and if he hasn't
got the relief bill, then the only thing he's got
is the price of silver, and he can't hold this
thing up. Do you (Hanes) agree with me on that?
Hanes:
(Nods yes).
Foley:
I think they'll get rid of it today or tomorrow.
H.M.Jr:
Fine, again, but I'm here today and I want to at get
this thing out of the way. When I walk over
o'clock I want to hand this to the President.
Then 2:00 everybody can have a quiet Saturday and Sunday.
Caston:
I feel quite
Foley:
Herbert and I think there ought not to be any letter.
I in don't this situation. It seems to me that the thing
believe that a letter is the right thing
Caston:
Regraded Unclassified
353
- 14 -
that's needed most now is to get word to Pat McCarran
and his crowd that 1f they continue acting up they
are .endangering any preferential price for domestic
silver after July 1.
H.M.Jr:
Herbert, if you don't mind, I'm not going to argue
with you at this stage. The President said two
things to me.
"Henry, let me handle the question of silver with
Key Pittman, because I want to make a deal with
him on neutrality." That's number one.
Number two. He said, "Please have a letter for me
that I could send to the Vice President on Monday
if I wanted to.' So there's nothing to argue about.
Right?
Gaston:
No.
H.M.Jr:
Now, on this sort of a fight, where the thing flows
to him from all directions - just like I left him
at 1:30 and at 2:30 Monday he three-quarters or
half way promised Harold Ickes another Public Works
Program of 500 million dollars; he told me he wanted
to write the letter to Senator Mead, and at 4:00
o'clock the Public Works Program was out, and the
letter went to Jimmy Byrnes. I mean the things
move like chain lightning, and he's the center of
the wheel, that's all. But I want to give him
the tool in case he wants it, so that he can use
it, that's all. On this thing his judgment is so
much better than mine; all I want to do is give
him the tool.
Caston:
Well, for that reason I felt we ought to give him
a good memorandum and no letter. I was afraid that
if he got the letter he would sign it, and it would
be a mistake.
H.M.Jr:
I like this letter. And if Harry could change the
memorandum down to the
White:
Well, it would be very brief, just one paragraph
stressing that point.
H.M.Jr:
And I think, on second thought, no reference to
the Federal Reserve of Washington.
354
- 15 -
White:
Yes, because that's the big issue, the one which is
worthy of a fight.
H.M.Jr:
Which?
White:
Between New York and you, because that's between
the Government and the central bank.
H.M.Jr:
Now, will I see you gentlemen at 11:00?
355
THE SECRETARY OF THE TREASURY
WASHINGTON
MEMORANDUM TO THE PRESIDENT:
The failure to continue the Stabilization Fund and
the powers to alter the gold content of the dollar might
have serious consequences:
1. I do not think I am exaggerating the possibil-
ities when I say that if at this time we go back to the
pre-1933 gold policy we may be spelling the doom of
free exchange in the rest of the world. The apparent
return to the fixed gold value would greatly increase
the speculative security and attractiveness of the
dollar to the foreigner and would stimulate continued
flights of capital and gold to this country. The re-
sultant persistent pressure on the monetary systems of
foreign countries -- which would become especially
large during periods of acute political disturbance --
would force countries either to depreciate their currency
or adopt exchange controls in an effort to safeguard
their gold stocks.
2. Even if the pressure on foreign currencies
were not sufficient to force certain foreign countries
to depreciate, some foreign countries may wish to take
advantage of our weakened bargaining position and per-
mit their currencies to decline at the first opportunity.
The most important bargaining weapon we have to prevent
this contingency is the existence of the executive power
to devalue the dollar. You may remember our negotiations
with England last Fall in which we induced her to check
the decline of the pound. In these negotiations our
strongest weapon was the Presidential power to reduce
the gold content of the dollar.
either because the country wished to strengthen its
3. Should an important foreign currency decline,
order to protect its remaining gold holdings, the trade. effect
trade position or because it was forced to do so in
would be serious to both our foreign and domestic for-
It would expose our domestic market to intensified for
our eign exporters to maintain our share of the world market.
competition and would make it more difficult
Regraded Unclassified
356
- 2 -
Our entire commercial policy is based on the premise
and the expectation that the dominant type of world trade
1s conducted by free exchange. If a major group of countries
drops free exchange we will be forced to completely alter
our commercial policy and practices.
4. The dollar will become a perfect exchange specu-
lator's risk. The speculator can gain but cannot lose.
The flow of gold to the United States may be only a trickle
at first but sooner or later it would reach substantial
magnitudes. In addition to the effect such a flow would
have on weakening foreign monetary systems, it would give
rise to widespread serious questions as to the wisdom of
New Deal monetary policy and to the desirability and
absurdity of piling up such enormous hoards of gold.
5. The Tripartite Accord would cease to have any
protective value and would in time become 8. dead letter.
The basis of the Tripartite Accord lies in the possession
of each country of reciprocal powers of monetary action.
Any one familiar with international monetary situations will
realize that there is not the slightest chance that other
countries will follow our example of tying their currencies
at this time to a rigid gold standard or to the dollar.
In evaluating the harmful effects which may result
from a lapse of the monetary powers it is important to bear
in mind that the more significant aspects of these powers
are the public's evaluation of the role which such powers
play and not the technical day to day financial operations.
Should these monetary powers lapse for a few days or
a few weeks there may or may not be serious repercussions
during that period. What will happen cannot be foreseen
with certainty. Much depends upon the public's expectation
as to the likelihood of the revival of those powers. It is
entirely possible that the international exchange may remain
stable for a considerable period after the lapse of some
powers but sooner or later, particularly should & political
crisis develop abroad, the effects will be felt. The
danger of permitting the powers to lapse even for a short
period is that should a quiet period ensue some people might
interpret that 8.8 indicating a lack of need for these
monetary powers and the opposition to the granting of these
powers will thereby become strengthened.
357
- 3 -
It is true that should the present powers lapse the
Treasury could execute most of the technical operations
through other powers it possesses or through the Federal
Reserve Bank. But 1f this were to be the procedure, then
the power that the government has acquired during the last
six years in controlling the country's monetary affairs
would revert to Wall Street via the Federal Reserve Bank of
N. Y.
The Relief Bill
It should also be noted that any Senate filibuster
beyond June 30 will prevent consideration of the Emergeno
Relief B111. The funds appropriated under the Emergency
Relief Appropriation Act of 1938 will not be available for
further obligation after June 30, 1939. If no action 1s
taken by Congress prior to that time on the pending Relief
bill, it means that WPA and all of its related activities
(including Treasury Accounts, Disbursing and Procurement
activities) will cease to exist at the end of this fiscal
year. This will throw off the roles which are paid from
the funds appropriated under this Act approximately
2,600,000 people.
Regraded Unclassified
Read maling st give
358
THE WHITE HOUSE
WASHINGTON
Dear Mr. Vice President:
In my letter of January 19, 1939, I wrote to you of the need
for extending the powers relative to the stabilization fund and the
fixing of the metallic content of the dollar. Since that time the
House of Representatives has passed a bill (H.R. 3325) extending these
powers until June 30, 1941. That bill has been reported out by the
Senate Committee on Banking and Currency and is now before the Senate
for consideration.
As you know, under the existing Silver Proclamation, which expires
on June 30, 1939, the Government is paying 64.64/ cents an ounce for
newly-mined domestic silver. I am advised that a small group of
Senators have blocked, and threaten to continue to block, any vote
being taken on H. R. 3325 and on the proposed amendments to such bill
until I shall have made a commitment that the Government will pay an
even higher price for domestic silver mined after June 30. I have
given the matter careful consideration and it is my considered judgment
that in the present situation I would not be warranted in proclaiming
a higher price for domestic silver, and I cannot permit the threatened
block to the passage of this much needed legislation to compel me to
proclaim such higher price for domestic silver. Of course, the matter
would be different if Congress by legislation fixed the price to be
returned for domestic silver. Congress has the opportunity to express
its views as to whether a price higher than the prevailing price should
Regraded Unclassified
359
- 2 -
be returned for domestic silver by voting on the amendments which have
been offered by Senators McCarran, Thomas and Pittman.
However, I feel it to be appropriate to point out the serious
consequences that will flow from a failure to extend these monetary
powers on or before June 30, 1939.
The need for the continuation of the stabilization fund has been
universally recognized by the Congress and the public. The expiration
of the stabilization fund powers on June 30 will deal a serious blow
to international monetary stability and to the protection and advance-
ment of American business interests. Only one group will profit by
the termination of these powers, namely, the international currency
speculators. The powerful weapon which this country, in conjunction
with other leading democratic commercial countries, has been developing
for more than five years to help maintain some measure of stability in
international exchange and to help minimize the predatory tactics of
foreign exchange speculators will be gone overnight. The resulting
increased currency fluctuations and monetary uncertainty will greatly
hamper international and American trade and commerce.
In September 1936, amidst universal acclaim in democratic countries,
this country joined with Great Britain and France in the Tripartite
Declaration. Soon thereafter Belgium, Holland and Switzerland joined
this Accord. No one can question the great contribution which this
Accord has made to attain some measure of stability and equilibrium in
the international economic and monetary fields. If this country had
360
- 3 -
not had the powers which are now being permitted to expire, it would
have never been able to participate in this Tripartite Accord. This
country, economically and financially, is the most powerful member of
the Tripartite Accord. If these monetary powers are now permitted to
expire, this Tripartite Accord must inevitably cease to play the bene-
ficial role which it has up to now performed, and at the very time when,
because of the condition of international affairs, there may be an
even greater need for an arrangement between the great commercial
countries along the lines of the existing Tripartite Accord.
I realize that there is some difference of opinion in the Congress
as to the merits of continuing the existing power to change the gold
content of the dollar. I am of the view that this power is essential
to the proper protection of American domestic and foreign trade against
the depreciation, or the threatened depreciation, of the currencies of
important foreign commercial countries. The views of this Administration
on this matter have been fully presented to the Senate through the
testimony of the Secretary of the Treasury and are also reflected in
the address by Senator Wagner to the Senate on June 19. There also
appears to be a difference of opinion as to the desirability of continuing
the existing program relative to newly-mined domestic silver and as to
the price to be returned therefor.
I consider it to be of great importance that Congress express
its views on these matters on or before June 30, and it seems too clear
for argument that the measures now being undertaken to prevent the
Senate from voting on the monetary bill and amendments now before it
are not in the interest of the orderly process of democratic government.
Regraded Unclassified
361
- 4 -
For the foregoing reasons I urge that the Senate take decisive
action with respect to the monetary measure now pending before it.
Very truly yours,
Honorable John N. Garner,
President of the United States Senate.
262
RECONSTRUCTION FINANCE CORPORATION
WASHINGTON
JESSE H. JONES
CHAIRMAN OF THE BOARD
June 23, 1939
Dear Henry:
Your letter of the 9th received.
I told you several weeks ago that we were negotiating
the sale of the San Francisco-Oakland Bay Bridge bonds. We have
been trying to sell these bonds almost continuously for two years,
but one thing after another interfered.
First it was an earthquake in California, then a bond
market depressed because of uncertainties in Europe, then the threat
of cancellation of insurance by London underwriters, then a refunding
to provide funds for a bridge railway, then the ham and eggs movement
in California, then dealing with & change of administration in Cali-
fornia the first of this year, & public demand for a reduction in tolls
and a demand for a lower interest rate on the bonds. The toll and in-
terest rate reductions were accomplished through consummation of the
sale.
Many factors were involved in dealing with this situation
and it was a coincidence that the sale culminated the day it did. It
was probably three weeks between the time we agreed to sell the bonds
and the date the sale was concluded. We could not know how long it would
take for the necessary actions, resolutions, et cetera, by the Toll Bridge
Authority, bankers' counsel, our own counsel, et cetera.
We endeavor always to respect your suggestions in selling
securities, and you have agreed with me right along that we should sell
when the market will absorb them at satisfactory prices.
Sincerely yours,
Jones Jones
Chairmen
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Unclassified