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Volume 202, July 7 – July 12, 1939
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Volume 202, July 7 – July 12, 1939
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 202
July 7 - July 12, 1939
- A -
Book Page
American Car and Foundry Company
See Self-liquidating Projects: Railroads
Austria
Puhl reports to American Embassy, Berlin, on
conference with Lamont in Brussels concerning
defaulted Austrian dollar bond situation - 7/7/39. 202
77
- B -
Business Conditions
Haas memorandum on situation for week ending 7/8/39
120
Steel and Cement: HMJr asks Haas to make a study
extending back three or four years showing proportion
going to private industry and proportion going to
governmental units - 7/10/39
129
a) Haas memorandum - 7/11/39
188
Time Magazine: Proposed HMJr answer to article appearing
7/10/39
139
- C -
Cameras
See Customs, Bureau of
Cement
See Business Conditions
China
Japanese currency war in China and Tientsin incident:
White memorandum - 7/10/39
155
Chen gives HMJr progress report on negotiations with
Keeshin
237
a) HMJr acknowledges . - 7/12/39
234
Clark, Sam (proposed as head of Tax Bureau, Department of
Justice)
Murphy asks HMJr to check on Clark - 7/7/39
63
a) HMJr consults staff
128
Cochran, H. Merle
HMJr calls on Hull with regard to making Cochran
Counselor - 7/7/39
1
Commodity Credit Corporation
Following transfer to Department of Agriculture,
conference held on set-up; present: HWJr, Bell, Foley,
McReynolds, Wallace, White (Solicitor, Agriculture) -
7/10/39
118
FDR and HMJr discuss situation: HMJr discusses creation
of new Farm Lending Agency - HMJr reports to Gaston,
Foley, McReynolds, and Bell - 7/11/39
170
Wallace asks HMJr to consider agreement by which HMJr, as
holder of stock, would certify hominees for directors
as made by Agriculture - 7/11/39
205
- - C - - (Continued)
Book Page
Commodity Credit Corporation - (Continued)
HMJr asks Jones to give him whole background picture -
7/11/39
202
206
HMJr's letter to Wallace stating that FDR wishes him
to continue to exercise ***** all rights *****
over capital stock 7/11/39
210
Cotton
See Spain
Cuba
Further information on bill covering dollar transactions,
et cetera - 7/9/39
109,111,114
Cotton memorandum on discussion with Walton Moore (State
Department); United States Ambassador to be recalled
for consultation 7/11/39
180
Customs, Bureau of
Gibbons' report on disposition of cameras (German)
seized and forfeited by Customs Service 7/8/39
88
- D -
Danzig, City of
Dumping: HMJr asks Hull to send representative over for
conference on - 7/11/39
181
Dickerman, Mr. (National Locomotive Works)
See Self-liquidating Projects: Railroads
- F -
Federal Security Agency
Appointment of Paul V. McNutt as Administrator discussed
by Mellett and HMJr - 7/10/39
145
France
See Monetary Legislation
- G -
Germany
Puhl reports to American Embassy, Berlin, on conference
with Lamont in Brussels concerning defaulted Austrian
dollar bond situation - 7/7/39
77
Danzig, City of:
Dumping: HaJr asks Hull to send representative over
for conference on - 7/11/39
181
Government Bond Market
Haas memorandum: "Recent developments affecting United
States securities" - 7/7/39
46
Great Britain
Butterworth reports on Overseas Trade Guarantees Bill -
7/7/39
80
- H -
Book Page
Hardy, C. J. (President, American Car and Foundry Company)
See Self-liquidating Projects: Railroads
Housing
Haas memorandum on reduced average size of mortgages
on new homes accepted for insurance: memorandum
prepared in response to letter from McDonald (Federal
Housing Administration) - 7/11/39
202 183
- J -
Japan
Japanese currency war in China and Tientsin incident:
White memorandum - 7/10/39
155
Jones, Jesse H.
In discussion of re-drawn plan for Federal Loan Agency
with HMJr, death of Swanson is also mentioned and
fact that Secretaryship of Navy was offered Jones
.
within immediate past - 7/7/39
16
- L -
Lighthouse Service
Waesche memorandum on proposed savings to be effected
by merger with Coast Guard - 7/11/39
191
- M -
McNutt, Paul V.
Appointment as Administrator of Federal Security Agency
discussed by Mellett and HMJr - 7/10/39
145
Monetary Legislation
France:
Leroy-Beaulieu discusses with HMJr and Lochhead
assistance France was able to render while legislation
was in balance - 7/7/39
2
Correspondence between Ogg (Farm Bureau) and HMJr
concerning Capper vote - 7/7/39
4
FDR signs bill 7/6/39
11
Mongolia, Outer
HMJr asks General Marshall for map of description of
fighting between Russians and Japanese - 7/10/39
142
- N - -
National Locomotive Works
See Self-liquidating Projects: Railroads
- R -
Book Page
Railroads
See Self-liquidating Projects
Revenue Revision
Dividends, Withholding of: Graves' study in answer
to FDR's request - 7/10/39
202
162
- S -
Scandinavia
H/Jr discusses with Wadsted vacation there - 7/10/39
147
Self-Help Cooperatives
HMJr asks Carmody to consider establishment on national
basis - 7/11/39
202
Self-liquidating Projects (Barkley-Steagall Bill)
Jones still far from well; offers HMJr every cooperation
but asks that Foley come to his hotel so they can
discuss certain points in re-drawn plan - 7/7/39
12,54,58
Draft of bill as OK'd by FDR - 7/7/39
65
a) Foley memorandum on presentation to FDR
67
Railroads: Conference on equipment needs; present: HMJr,
Currie, White, Dickerman (National Locomotive Works)
and Hardy (President, American Car and Foundry Company) -
7/7/39
69
Chart and explanation of program
71
Treasury press release to be prepared by Treasury as
requested by Barkley discussed with White House by
Duffield - 7/8/39
99
a) Proposed release
100
1) HMJr discusses with Mellett - 7/10/39
143
HMJr suggests to FDR that he give pep talk to Cabinet
and heads of independent agencies - 7/10/39
159
Conference on strategy on Hill; present: HMJr, Foley,
Gaston, White, and Duffield - 7/11/39
167
Silver
Barkley discusses with HMJr meeting of subcommittee of
Banking Committee to consider Townsend plan to repeal
Silver Purchase Act of 1934 with especial regard to
purchase of foreign silver - 7/7/39
19
a) HMJr, Lochhead, and White discuss what HMJr's
attitude should be - 7/7/39
23
Sunshine Mining Company: Resumé of situation as prepared
by White - 7/7/39
33
White memoranda: "Treasury position with respect to
continued purchases of foreign silver" - 7/11/39
177,178
Separate treaty with each silver mining country:
FDR suggests to HMJr, who discusses with Hull - 7/11/39
181
- 8 - - (Continued)
Book Page
Spain
Negrin thanks HMJr for courtesy and encloses letter
concerning cotton loan through Export-Import Bank . -
7/10/39
202
153
Cotton memorandum on conference with Walton Moore
(State Department) - 7/11/39
180
Bullitt reports on French - Spanish agreement for
returning gold to Spain and in return Spanish
agreement to accept refugees now in France - - 7/12/39
244
Stabilization Fund
Letter to Harrison (Chairman, Senate Committee on
Finance) concerning amendment to be proposed by
Shipstead reducing Fund from $2 billion to $500
million in connection with retirement of special
obligations held in Federal Old-Age *** Trust Fund,
Railroad Retirement Account, and Unemployment
Trust Fund - 7/12/39
213
Foley memorandum on payment of expenses, midnight
June 30 to July 6 - 7/12/39
239
Steel
See Business Conditions
Sunshine Mining Company
See Silver
Swanson, Claude A. (Secretary of Navy)
Death discussed by Jones and HMJr - 7/7/39
12
Funeral plans - 7/7/39
37,158
- T -
Taxation
See Revenue Revision
= - - I I
U.S.S.R.
Hull acknowledges receipt of information from Treasury
concerning consultations on debt situation - 7/7/39
42
Universal Trading Corporation
See China
1
July 7, 1939
Called on Secretary Hull at 9:30.
Told him I came over to see him in regard
to Merle Cochran. He said, "Well, we are glad to
let you have him." So I said, "Well, that's put-
ting the cart before the horse. I said, "You know
under what circumstances I took him." He said no.
I said, "For about a year, Bullitt has been putting
the pressure on to get Cochran out of his Embassy.
Hull said, "I did not know that." And I said,
"Nobody has done a better job for the American
Government than Cochran.' Hull said, "That's right."
And I said, "What I am over here for, in recognition
of his work, to make Cochran Counselor because he 18
the only First Secretary in his class who isn't
Counselor." Hull said, "Unless it means a hammer
and tong fight, I will see that it is done."
He said, "The trouble with Bullitt is he
always stirs up trouble wherever he is and, he
said, "I guess Cochran did not try to smooth Bullitt
down enough." I said, "I guess that's right." And
I said, "If ever anybody deserves recognition for
what he has done, it was Cochran."
2
July 7, 1939
11:20 am
Present:
Mr. Leroy-Beauliew
Mr. Lochhead
Mr. Beaulieu: I have a message from Mr. Paul
Reynaud for you to say how very glad we were to be of
small help to you in the last week. What we did was
the only thing we could so; was only business between
Equalization Funds and the Spirit of the Tripartite
and we were pleased to be helpful in a very small way
and of course we are glad that it turned out as it
did because I think we will be able to work in the
future as we did in the past.
HM,Jr: Well, will you please thank Mr. Paul
Reynaud for me for his cooperation and it was par-
ticularly helpful just at that time. And I think
now that that is over, that's better.
Some day I am going to the Fair. I don't
know when. How do I make reservations at the French
Pavilion.
Mr. Beaulieu: Ask me about it.
HM,Jr: Ask you? Have you any influence?
Mr. Beaulieu: I will have a little for you.
HM,Jr: They say it is the best place to see
the lights.
I still have my passage on the NORMADIE on
the second of August. I hope to go to the Scandinavian
countries.
Mr. Beaulieu: Oh! You won't stay in France?
HM,Jr: I don't even land there this time.
Mr. Beaulieu: Well, I am sorry. You were
3
-2-
not pleased with Cap Antibes last year?
HM,Jr: Most pleased! In fact, my sons had
too good a time. They very much want to know why
can't t we go back there. So I think for a chance we
will go, this time, to the Scandinavian countries.
000-000
4
July 7, 1930.
My dear Mr. Ogg:
I - writing to acknowledge receipt of
your memorandum of July 6th, with which you on-
closed a copy of your letter to Senator Capper
and a elipping reporting the vote on the monetary
powers bill.
To are, of course, all greatly gratified
with the result, which has, I believe, averted
very serious dangers to our monetary system and to
our whole economy. I appreciate greatly the help
that you and your associates rendered.
Sincerely THE yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Mr. W. R. Ogg.
Director, Legislative Department,
American Form Bureau Federation,
Mussey Building,
Washington, D.C.
HEG/mah
wr
5:40 p.m.
5
July 6, 1939.
Miss Chauncey brought this in with the following
essage:
"The Secretary would like you to write a
bry nice thank you to Mr. 0gg, but at the same
line a very carefully prepared reply, for the
eason that he takes all the credit for switching
he vote on the monetary bill."
MAH
6
IERAL OFFICES
LEGISLATIVE DEPARTMENT
E. WASHINGTON Sr.
MUNSEY BUILDING
CHICAGO ILL.
WASHINGTON, D.C.
AMI
FLBU
Richt
55 fast.
FEDERATION
TELEPHONE NATIONAL 3342
WASHINGTON, D.C.
July 6, 1939
MEMORANDUM for Secretary Morgenthaur
I am sending you a copy of a statement placed in the
hands of several Senators before the vote yesterday on the
conference report on the monetary bill. I also made several
telephone calls appealing for support of the conference re-
port.
I concentrated on six Senators, five of whom voted
against continuing the President's power to revalue the
dollar and one who was absent in the vote on June 26.
of these six Senators, two (Hayden and Herring) who
voted "nay" in the vote on June 26 voted for the conference
report and one (Senator Gillette) who did not vote on June
26 voted for the conference report. If they had not changed
their positions the conference report would have been lost.
It is interesting to note from the attached clipping
that the opposition claimed an equal mumber of votes before
the vote was taken and seemingly were greatly surprised at
the defeat by four votes.
W. onc Dgg R. Ogg Director
WRO:de.
Same letter sent to Senators Hayden, Lundeen, and Shipstead.
July 5, 1939
Senator Arthur Capper,
Washington, D.C.
My dear Senator:
The American Farm Bureau Federation is very much
concerned lest the President's power to revalue our
gold dollar be terminated. We feel that it would be
calamitous to the farmers and to the country general-
ly at this time to go back to the fixed gold standard.
I enclose a copy of & letter sent to the Senate by
President O'Neal on June 19, which sets forth in de-
tail why the American Farm Bureau Federation believes
this authority should be continued.
I sincerely hope you will give this your favorable
consideration and support the conference report on
H.R. 3325 in order that our domestic and foreign markets
for farm products may be protected against competitive
currency devaluation by competing nations.
Sincerely yours,
W. R. Ogg
Director of Research.
WRO:de.
a
He was Joined by several silver
MONEY POWER
State Democrats, and Republicans
immediately claimed - victory.
Ashurst condemned the report as
"a miserable compromise."
"The conferees are servants of
RESTORED TO
the Senate: not its master." be
declared, contending that the do
mestic price of silver must be
pagged at 77.57 cents per ounce.
The first vote was on a con-
ROOSEVELT
ference report, designed to extend
the President's powers, which ex-
ptred last Friday midnight After a
filibuster prevented action before
that time.
Senate by Close Margin Votes
Senator Austin and other Re
publican leaders claimed the fill-
To Accept Conferees Report
buster had killed the conference
report, but the Administration
After Sharp Partisan Clash
held that even if passed (pow It
would extend the President's
(Continued from First Page)
powers.
Senators Austin, Wiley of Wis-
Gibson, Gurney, Hale. Holman
consin, of Kansas. Danaher
Johnson (Cal), Lodge, Nge, Taft.
of Connecticut and Bridges of
Tobey. Townsend, Vendenberg.
New Hampshire, Republicans, took
White and Wiley.
the floor to plead with their col-
Farmer-Labor (2) Lundeen
leagues to reject the conference
and Shipstead.
report. Speaking for it were Sen-
abore McKellar (D.) of Tennessee,
G.O.P. Had Claimed Victory
Nortis (I-R) of Nebraska, Malo-
The vote today was a stunning
ney (D.) of Connecticut and nu-
merous others.
defeat for a coalition of conserva-
Senator Ashurst engaged in a
Live Democrate and Republicane.
heated exchange with Senate
Republicans had claimed vistory
Democratic Leader Barkley.
up to the hour of the vote, but
when the showdown came they
Challenged by Barkley
lost by Your votes.
The Vote came on A conference
Ashurst's prediction that If the
report compromising differences
conference report is again sent to
between the House and Senate on
conference the conferees will fix
the monetary legislation. The Sen-
the price of domestic silver at 77
ate previously had voted to end
cents per ounce, brought from
the President's dollar devaluation
Barkley a challenge to prove his
power and to end the purchase of
prediction.
foreign silver. These provisions
Vigorous criticism of the man-
were restored to the bill and the
ner in which the legislation was
conference report approved by the
handled in conference with the
House last week.
House WAS volced by Senator Alva
Senator Austin of Vermont act-
B. Adams (D.) of Colorado, one
the Republican leader in the
of the Senate conferees,
Senate, announced he had palled
Adams said that a breakdown
his forces and found they could
of the original Senate votes
contrand exactly as many votes
against devaluation and for the
BS Administration followers.
higher domestic silver price
Them a time later. Sena-
showed that 60 Senators voled for
for Ashurst (D.) of Arizona, an
one oz both of those proposals.
Administration leader, announced
and only 18 Senators voted against
during bitter over the
both of them,
monetary legislation that he would
vote against giving President
Raps Choice of Conferees
Roosevelt the emergency powers.
"However," he added, "three of
"Miserable Compromise"
the five Senate conferees were np-
pointed from among the 18 Bena-
tors who voted against both
amendments. I was the only
conferee who voted for all the
amendments which the conferees
were charged with upholding.
"If I were a lawyer in court, I
wouldn't want these gentlemen
on & jury."
Barkley said Adams had served
on the relief conference despite
the fact that he voted against
some of the amendments. Adams
replied that there were 132 amend-
ments involved in the relief bill,
where only three amendments
were involved in the money bill.
YORK HERALD TRIBUNE - July 6, 1939.
9
RooseveltRegains Power
On Dollar; Senate, 43-39,
Reverses Self on Money
Stabilization Fund Wins,
All varinties of optnion were
Independent-1
Domestic Silver Price
pressed in & als-hour debate on the
Nome
Benate floor as to the legality of the
Progressive-1
of 71.1 Cents Is Set Up
extension of the Presidential mous
La Fulletse
clary powers. but Ibere was perfod
AGAINST-39
agreement on all sides that nothing
Democrate-19
Silverites Forsake
effective contid be CODE by cillerns Le
Adams
Geórgo
Maloney
question the law in suite against the
Ashirtret
Gerry
McCarran
Balter
Cham
Rüssell
Ranks of Coalition
government.
Bulow
Holt
Tydings
The polities of the dituation today
Burke
Johnson.
Van Nuys
justified the predición that mail
Byrd
Colo,
Weish
All but Four Run Out on
of the "silver Sebators" would "Till
Clark. Mo.
King
out" on the Republicans with whom
Republicans-19
Republicans in Final
Austin
Gurney
Tult
they had previously made an agree»
Barbour
Hain
Twong
ment to beast the price of silver and
Test on Monetary Bill
Capper
Holman
Turniend
to regalts for Congress emergency
Dansher
Johnson,
Vandenberg
powers conferred on the President.
Davis
Calif.
White
Gibson
Lodge
Weley
By Jack Beall
only tour of the silverites
Nya
WASHINGTON, July 5.-Prest-
Senstors Alva B. Adams and Edwin
dent Ropseyelt regained actual if not
C. Johnson, both of Colorado, and
Linders Shipelesd
legal control over the dollar and the
Henry F. Ashurat, of Arizona. and
Palm-Thoms. of UIAB. Democrat,
$2,000,000,000 stabilization Fund in libe
Pal of Neyada, all Demo-
for. and Bridges. Depublican, against;
Sens to today B-3 the New Deal reilled
mais.
Truman, Democrat. for, and Prazier,
its forces and reversed a defeat of
Up until the last moment is sp-
Bepublican. against: Audrews: Demo-
week aço. by adopting a conference
pearod that the coalition Turber
grat. for, and Smith. Democrat,
report on the monetary bill by I vote
might prevail, although Use vote
against: Bill, Democrat for, and Rewd,
of 43 to 39.
areas known to be extremely tighs.
Republican against: McNary, Expub-
They counted on Senators Guy M.
licen, vas accounted - opposing the
The report extends mill June 20,
measure.
(941, the authority to continue the
Gillette and Clyde L Herring. of
Only one Republican, Senstor Wil-
stabilization fund and to devalue the
town, and on Senstor George L.
Ham E Borsh, voted against the
gold: content of the dollar from an 00
Radellife, of Maryland, all Demo-
Republican majority and for the
to 50 per cent of its furmer value; is
crab. When these Separate re-
conference report. He carried with
remonetizes domestic suver in-
sponded in favor of the conference
him his colleague, the new Demo-
report, all hope departed.
cratic Senator from Idaho, Worth
definitely by statute at a priof of 714
D, Clark.
cents an office and permite continue
How Senate Voted
sling of the foreign after-buying
Tite situation which permitted of
The vote by which the Senate ap-
grave doubts of legality on & bill
program.
proved and sent to the While House
which Congress bas just passed
After suspending earller in the day
the Administration's compramise
arom through . fillbuster last Fri-
day virtually. all purchases of for-
monelary legislation. as reported by
day which "killed" the monetary
eign and domestic silver, Ibe Treas-
The Associated Pres. follows:
bill. the powers of which expired
uary prepared to announce new Mids
POR-11
automatically at midnight June 30.
regulations on the while metal as
In spite of the fact that IL had
Demorrato-10
been "kined." the Administration m-
oon as the bill la alqued. This ac-
Bankhead
Hatch
Pepper
sisted that those powers could be
Unin Was delayed to await the sign
Birthy
Hayden
nature of Speaker William B. Bank-
Búbo
Itadulifie
revited by a favorable vote even
Herring
Bone
Hugben
Bchwarts
after midnight. II set today ai à
head. expected by DOOD tomorrow.
Byrnes
End
Schwellen-
p. m. for that vote.
Dumestic Sliver al 11 Cents
Chavez
Lopin
beah
In taking this stand the Admin-
From the time Use President
Clark,
Lane
Shappare
istration reversed the position that
Inabo
MoTollar
Blackery
36 had held up to noon, at least. on
Roceivelt the bill the Mint will
Connaily
Mead
Smithers
Friday. that this mode of procedure
be forced to accept domestic and
Donahey
Miller
Stewart
could not be followed and that to
newly minst NOTIVER and to give the
Ellender
Mintoa
Thomas,
save the President's powers It would
produce cent of the statutory
Giflette
Murray
Okis.
Orea
Neely
Wagnet
be necessary to submit and pass DEW:
value In coin. retaining a
legislation. President Roosevelt
Outley
O'Mebone)
timelt aubscribed to this view at a.
of, 45 per eent. The works out at
Iterries
Overton
press conference, as did Heury Mar-
easily The centa an euror to the
Republicie-1.
genibau Ir. Secretary of the Treas-
productional
Borsh
ary, in e previous Interview.
10
At the and of the long-drawn-out
Ewastor Backley explained that
Rebt Benetor Adams. who led the
there was great need for basic be-
nght sgainst the conference report
callese of the deadiline which both the
agreed with Sepator Robert P. Was-
monetary bill and the relief bill were
Def. Democrat. of New York, who
up against 4ac admitted the "an
led the name for like extension of
informal talk and beaut held by the
like President's powers, that Chere
Chree Sensions mentioned by Bills-
was absolutely nothing that could
tot Adams buil contended that there
be dont to question the Treasury's
vas DO action taken officially with
handling of the stabilization fund.
House conferem,
Law Sulta Unlikely
Sena tor Adams said be thought
"How did you manage to reach an
the courts might adjudicate the Je-
adjustment en the ettver purchases
gality of the dévaluation law, should
if not with the House conferent
the Fresident exercise the power,
Senator Adams aboj in to the AD-
and a depositor sue a bank for the
parent leader. discomfiture of the majorny
difference between the value of the
money he formarly deposited and
Senatore Ashurst and McCorran
what he later drew out. But this
threw their weight against the cou-
would not be a milt against the gov-
ference report on the produc the
ernment in such & way 0.0 to get. a
they felt sure they would be bble
declaration voiding the law.
to get e higher price for sliver it
In the hest of . bitter debate Swn-
the Senate rejected the pending Te-
stor Adams outlined how the Senate
part and asked for a new confer-
monetary bill, which drastleally
ence.
amended the Holise bill by cutting
Senstar Key Pittman, Democrat,
out the devaluation power entirely
of Nevada, who originally voted
and forbade the buying of foreign
with the Republicrn condition only
silver. while raising the price of do-
to change bis attitude soon after
méstle allver to 77.57 centa a. ounce,
Presidential displeasure WAS made
had been done to death.
known from Hyde Park, declared
He showed that while there were
that in . new conference the allver
sixty Senators who voted for the
price would be "mundered" Br
ab-called Adams amendments that
said that Uneve would never spain
be a chance to write into law a
acenmplished these purposes, never-
price of silver as high M that pet-
théless three out of the ave Senate
mitted by the conference report.
conferees name from the mail on-
Senator H. Styles Bridges, Repub-
position group of eighteen. This
Beari, of New Hampshire, attacked
constituted . majority.
the opinion rendered last Friday by
The appointments were made by
Attorney General Frank Murphy, at
Benator Sherman Minton. Demo-
the request of the President, to the
erat. of Indians. and one of the
affect that a post-mortem revival
mest rigid of New Dealers. who oc-
might be accomplished by voling
eupled the chair at the time.
favorably on a bill even after the
or the five conferees, only he. said
hour of midriight of June 30.
Senator Adams, had voted to unhold
"Why didn't they bring up & DEW
the Sensie as against the House
MD rather than go around to the
conferées. Re strongly intimated
back door and by trickery week to
that the Senate conference commit-
gain the same results?" be de-
bee had been "packed" and said
memded.
that Senator Wagner, who WM not
Senaior Warren E. Austin, Re-
a member of be Banking and Cur-
gublican, of Verment, who 38 acting
mancy Subcommittee. had no bual-
falmority leader, presented a state-
DESS being in on the conference
ment against the legality of the
at all
proceedings, declaring that when 1
Coming to the chrenology of
statute If under a cloud of doubt,
eventa, Senstor Adams and that an
the doubts should be resolved
hour and . half conference 18
ugainst IL and in favor of newly
held with the House on Thursday
introduced legislation.
alterpoon at which no decision was
Senator Robert & Talt, Repub-
reached. Pollowing that. an en-
llcan, of Ohio, contended that the
tirely unofficial meeting of three
itabilization fund could not be put
Senate conferces. Senators Wayner,
seain at the disposal of the Ad-
Barkley and James F. Byrnes, Dem-
ministration to knep the prices of
ocrat. of South Carolina. was held
the dollar, pound and frane as rele-
while Benefor Adams was attending
Live values opce the $2,000,000,000 of
altother conference on an courty the fund had reverted to the sen-
different subject, relief, and "de- eral fund of the Treasury BO the
cided" to Field to the House on pric-
stroke of midnight last Friday. Hin
cleatly everything except that they
said that no opinion of the Attorney
retained an increased price for do-
General could change the fact that
mestic silver,
the stabilization Thind and cessed
The first Intimation he had of
LO be.
the signation via. when
Benstor Barkley, in predicting
Byrnes came to Jalm, said Senator
that the President resuld not use
Adams, and remarked that be
his devaluation powers EYED If they
thought the Coloradan ought to
WET' extended. disectored that the
know what bed sales place
threat DOP the Pr. sident last year to
use them had dissuaded the British
Later in a very short conference
from attempting & further develus-
with House "we were not saked
non of The prisod sterling
we were told what WE would do.
mid Benater Adams, "and that after
decidode that were not him in the
official conference committee
11
July 6, 1939
At 3:40 Forster phoned the Secretary from the
White House and told him the President had signed the
Monetary Bill.
12
July 7, 1939
8:52 a.m.
HMJr:
Hello.
Operator: Mr. Jones. Go ahead.
HMJr:
Hello.
Jesse
Jones:
Hello, Henry.
HMJr:
Are you feeling better?
J:
Yeah, I haven't gottenout yet, but I feel so much
HMJr:
What?
J:
Yes, I do. I have not gotten out yet.
HMJr:
Oh!
J:
But, the boys left me here last night at the hotel a copy
of the redrawn paper.
HMJr:
Yeah.
J:
I have read it over.
HMJr:
Yeah.
J:
And asked Claude Hamilton to come by my apartment. And --
it seems to me like they've got it in pretty good shape.
HMJr:
Good!
J:
There are e. few little changes that I want to suggest.
HMJr:
Uh-huh:
J:
But they're not -- I don't think they are serious.
HMJr:
Well, when can we tell the President it will go up on the
Hill?
J:
Well -- when?
HMJr:
Yeah.
J:
I think it can go Monday morning or
HMJr:
Oh, gosh!
- 2 -
13
J:
Well, Congress has adjourned, aren't they?
HMJr:
I know, but he wanted it yesterday.
J:
Yes, I understand.
HMJr:
I don't --hello?
J:
Well then, you can send it up any time, Henry.
HMJr:
I mean, I don't -- I mean, he asked for it at one or
two o'clock yesterday.
J:
What?
HMJr:
He wanted it by one or two o'clock yesterday.
J:
Well, you know where we were yesterday. Now, I can't
help it that I was not down yesterday.
HMJr:
No.
J:
And BO you Just do whatever you want to do about it.
HMJr:
Well, I mean, how
J:
I'm willing to help any way that I can.
HMJr:
Well, how about finishing it
J:
There's & limit to my physical endurance.
HMJr:
I understand, but I don't -- I mean, can't we clean it
up this morning?
J:
We can if we -- if -- I don't see why we can not.
HMJr:
Uh-huh.
J:
That's the reason I'm -- I've already read it this morn-
ing. I got up at six o'clock and I read that paper.
HMJr:
Yeah.
J:
Almost thirty -- twenty-five pages, and some are long
pages.
HMJr:
Yeah.
J:
I read it carefully and I just want to ask the boys a few
questions about it and make one or two suggestions to you.
44
- 3 -
HMJr:
Yeah.
J:
I'll be glad to do that in a little while.
HMJr:
You see, I don't know whether he's going to put on that
show that he spoke of at his press conference this morn-
ing or not. That's what's bothering me.
J:
Well, I -- I think it's -- I think it's inadvisable,
Henry.
HMJr:
You do?
J:
Yes.
HMJr:
Uh-huh.
J:
I think it's -- I don't think you need that.
HMJr:
Uh-huh.
J:
I think the way we've got this thing that I believe it
will go through with very. -- very -- with very little
trouble, Henry.
HMJr:
Well, here's
J:
That is, if we can just show that it's done the way we've
been doing things.
HMJr:
Yeah.
J:
And that's the -- there's no pride in my wanting it --
in my suggesting the R.F.C.
HMJr:
Yeah.
J:
It's only to help to get the bill through.
HMJr:
Yeah.
J:
And I believe that -- I don't believe we'll have a great
deal of trouble.
HMJr:
Well, may I suggest this. I don't know how you're fixed,
but I -- the only time I've got this morning is from
11:15 until 12:00, when I go to the White House with
Doughton and Harrison.
J:
Yeah.
Regraded Unclassified
- 4 -
15
HMJr:
And I'm going to save that 45 minutes. See?
J:
Now, that's from when to when?
HMJr:
11:15 to 12:00.
J:
All right.
HMJr:
See?
J:
Yeah.
HMJr:
Is that
J:
That's the only time you've got open?
HMJr:
That's the only time I've got open. Now, 1s that
crowding you too much?
J:
No, that doesn't crowd me at all, Henry.
HMJr:
Well, I don't want -- I don't want to crowd you, - I mean
J:
I haven't gotten up and if I don't feel like getting up
I won't.
HMJr:
You're right.
J:
But I'll communicate just the same, don't you see? And
I'll either -- I'll call you up.
HMJr:
I'm awfully sorry -- I -- that you're not feeling better.
J:
Well, I just got a little over -- well, I was pretty
tired yesterday at lunch.
HMJr:
Yeah.
J:
Our lunch, and then -- I don't know - in the crowd dis-
cussing things I just
HMJr:
Yeah.
J:
I got a little bit nervous about it.
HMJr:
When are you going to get away?
J:
God knows !
HMJr:
Huh?
J:
I said, God knows !
HMJr:
Well, I -- I'm going
Regraded Unclassified
16
- 5 -
J:
There's a lot of things to do. I see -- well, Swanson
just died.
HMJr:
What?
J:
Swanson.
HMJr:
No !
J:
He just died this morning.
HMJr:
Well -- what was that, on the radio?
J:
Yeah.
HMJr:
Well, I'll be damned.
J:
Well, I -- wait a minute, I said the radio, but my
operator called me and told me.
HMJr:
Uh-huh.
J:
So that may still make some little change.
HMJr:
oh !
J:
I don't -- I mean, in the present plans. Not anything
else.
HMJr:
Well, he originally offered you Navy, didn't he?
J:
Yeah.
HMJr:
What?
J:
Yes. Yes. What I meantwas it might. -- what I was think-
ing about was today.
HMJr:
Oh !
it
J:
Whether he --/might change his plans.today.
HMJr:
Yeah, but he did -- didn't he offer you Navy once?
J:
He talked about it.
HMJr:
Yeah.
J:
Yeah.
- 6 -
HMJr:
I think you told me, didn't you?
J:
How's that?
HMJr:
I think you told me.
J:
Probably I did.
HMJr:
Yeah.
J:
I didn't remember it. I tried not to tell anybody. I
didn't
HMJr:
Yeah. Well
J:
Well, anyway that's -- I'll keep -- that's the only time -
could I get you on the phone in the meantime or
HMJr:
Oh, yes. I -- but I've just -- I've just got these
different people coming in from out of town.
J:
Yeah.
HMJr:
And I go to the White House at 12:00 and then there's
Cabinet at 2:00.
J:
Yeah.
HMJr:
So I have from 11:15 to 12:00 that I -- I'm free, but
any time you call I'll answer the telephone.
J:
All right, and I'll -- are you at the office now?
HMJr:
Yes.
J:
Oh !
HMJr:
Hello?
J:
Wait Just a minute -- I was Just going to -- well, I won't
attempt to -- this paper 1s too long, I won't attempt to
discuss it on the telephone.
HMJr:
No, but if you want -- for instance, Ed Foley to come up
to your hotel he'll be glad to do that.
J:
Well, I can talk to Ed on the telephone or
HMJr:
Well, it's difficult. He'll run up there and see you.
Regraded Unclassified
18
- 7 -
J:
All right. Well, I'll -- I'll call him.
HMJr:
And if necessary, I'll be glad to come up to your hotel.
J:
Well, thank you very much. That won't be necessary.
HMJr:
But I'll be glad to.
J:
Thank you very much.
HMJr:
All right.
J:
Good bye.
July 7, 1939
$9
10:01 a.m.
HMJr:
Hello.
Alben
Barkley:
Henry?
HMJr:
Yes, Alben.
B:
This sub-committee over here, the Banking Committee, is
meeting at ten o'clock to take some action or consider
this bill of old man Townsend's to repeal the silver
purchase act of '34, especially insofar as the purchase
of foreign silver 16 concerned.
HMJr:
Yeah.
B:
Now, in talking to the President the other day, he was
very much against cutting that purchase off because
of certain diplomatic situations existing between us
and Mexico right now, and of course also in the event
that there's a European war, the purchase of silver
from Canada would help them.
HMJr:
Yeah.
B:
Now, I'm going to try to get the thing put off on the
ground that there ought to be some statement from the
Treasury or somebody on that view of it.
HMJr:
Oh, no. Don't put me on that spot because I -- I can't --
I'd have to
myself.
B:
Well, I don't want you to do that, of course, but -- but
somebody certainly ought to be able to present the
President's view about it.
HMJr:
Well, I -- he hasn't given me & chance and -- on that
thing. I mean, I can't -- everything else we've sent
you on this Monetary Bill we believe in.
B:
What's that?
HMJr:
We believe in everything else that we've done that you
people have done up there, but I -- I can't -- I can't
give you a statement justifying the sale
B:
Well, I'm not -- I didn't know whether you could or not.
HMJr:
No, and
Regraded Unclassified
ID
- 2 -
B:
I -- I thought that certainly somebody ought to be able
to present the President's view about it. If he still
entertains that view
HMJr:
Well
B:
I don't see how he could sign the bill.
HMJr:
Well, I wonder -- I wonder if he feels that way since
he got his Monetary legislation through.
B:
Well, I don't know. I -- I assumed he was sincere about
it when he discussed it with me.
HMJr:
Yeah.
B:
Well, I'm going to try to get it put off anyhow.
HMJr:
Well, you always want me to tell you how I feel.
B:
Why, of course. I'm not going to mention you. I just 4
I'm not going to get you in
HMJr:
Yeah.
B:
dutch on it but I -- I don't think they ought to
take action on it now.
HMJr:
Yes. Well, I just wanted you to know. I mean, it's --
I don't know what -- what the hell we'd do, see? But
as far as I'm concerned, I couldn't sign any statement
saying that I think we've got to buy foreign silver.
B:
Well, I don't -- I'm not suggesting that you do.
HMJr:
No. But, I -- I get what you want. You also -- if I
called you up and -- you appreciate I -- I'm
B:
Well, here's the thing, the President can't come down
here; he can't sign the statement
HMJr:
No, no.
B:
down here.
HMJr:
No, no.
B:
But if there's any validity to his view that it is
important from that standpoint, why it ought -- somebody
ought to be in a position to present it.
28
- 3 -
HMJr:
Well, if it's a foreign affair matter, maybe the State
Department will.
B:
Well
HMJr:
They're good at it.
B:
Yeah. That might be.
HMJr:
(Hearty laughter).
B:
They've got their hands full right now
HMJr:
Well
B:
with another matter.
HMJr:
Well listen, Alben
B:
Huh?
HMJr:
March a year ago, just remember -- without even
saying "By your leave" they came out and canceled --
announced that we'd stop buying silver from Mexico; the
State Department did.
B:
Um-hm.
HMJr:
They Just kioked the bucket out from under me a year ago
last March, and now they're all hot and bothered because
we don't pay them enough.
B:
Yeah. Well
HMJr:
It don't -- it don't make sense.
B:
You departments better get together.
HMJr:
You're telling me !
B:
Yeah.
HMJr:
0. K. How do you feel? You sound awful tough this
morning.
B:
Tough?
HMJr:
Yeah.
B:
I'm tough!
- 4 -
22
HMJr:
(Laughter).
B:
Yeah.
HMJr:
Did you see that cartoon in the Star last night?
B:
Yeah, wasn't that good?
HMJr:
That was awful good.
B:
(Laughter).
HMJr:
You certainly were perspiring freely.
B:
Yeah. Well, it all worked out.
HMJr:
All right, Alben.
B:
Good bye.
HMJr:
Thank you.
23
July 7, 1939
About 10:10 (Immediately
following the Secretary's
conversation over phone with Barkley)
Present:
Mr. Lochhead
Dr. White
Mrs. Klotz
(This took place after the Secretary's conver-
sation over the phone with Senator Barkley. At this
meeting, the Secretary prefaced his remarks by repeating
the gist of Barkley's request for a statement on foreign
silver purchases.)
Dr. White: Well, I think there is another
choice.
HM,Jr: Sure! We knew you would have one.
Dr. White: I mean I think there is. Merely
explaining the facts without tieing yourself to any
policy and let them deduce their own policy from the
facts and I think the conclusion will be rather ob-
vious from the facts.
HM,Jr: What are the facts?
Dr. White: We can state that our purchases
of silver from Mexico, what it means to Mexico, what
it means to us in the way of trade. And do the same
thing with Canada, what it means to Canada, Canadian
business; our business, without in any way raising the
issue as to whether the monetary objectives or aims or
what not, and I think after they have those facts ,
their position will be easier.
HM,Jr: Which way?
Mr. Lochhead: Which way will it be easier?
Dr. White: To buy foreign silver.
Regraded Unclassified
2A
-2-
Mr. Lochhead: Canada is your strong point, and
that's just a speck in the ocean. Mexico 1s the big
one and that's the one they Jumped all over and said,
"Look at the trade figures. What did they do? They
cut down on us." Peru 1s the next one and that's not
80 hot.
Dr. White: There are answers to that.
HM,Jr: Just for a minute, let's be intellectu-
ally honest. I am asking your advice at this stage
of the game. With what has happened, everything else,
I am asking you do you recommend to me what should my
position be in regard to tontinuance of purchase of
foreign silver.
Dr. White: Under the existing legislation I
would, and I take it that's your question.
HM,Jr: No, that's not my question. My ques-
tion is this: if I have to go up there Monday and
testify on a bill whose sole purpose 18 to stop the
purchase of foreign silver and I am pressed and I
cannot avoid answering this: "Mr. Morgenthau, are you
in favor or are you opposed to 1t?" That's what I am
asking you.
Dr. White: That's a tough question. Well,
I could only say what I believe. In the light of
the whole situation, if I were you, I would not favor
it unless you wished to do 80 for the present.
HM,Jr: No. I am Henry Morgenthau, Jr. I
am charged with the responsibility. I have to go up
and they press me to say. "Mr. Morgenthau, we demand
for you to say yes or no. Don't equivocate. Are you
or are you not in favor of this policy?"
Dr. Whote: My answer would be "At this time" --
I would stress "at this particular time" --"in view of
the general situation, I think it is desirable to con-
tinue for a while."
HM,Jr: You want me to say that?
Dr. White: Yes. That's what I would say.
Regraded Unclassified
25
-3-
HM,Jr: I am asking what you would recommend.
Dr. White: I can't give you that advice in-
dependent of your relationship to the Administration
and the view they have taken. Your view 1s not in
accord with the Administration position and whether
you, as Secretary of the Treasury
HM,Jr: Oh, wait State a minute! I am in accord
with the position the Department took March a year
ago.
Dr. White: They wanted you to stop buying
silver from Mexico.
HM.Jr: That's right.
Dr. White: Well, I don't quite see that that
1s the particular issue.
The issue ....
HM,Jr: Who 1s the Administration?
Dr. White: Well, I take it the President's
pronouncements, Democratic party pronouncements. The
fact that you have a silver history of five years be-
hind you and it would be possible for you to come out
and say you are opposed, you are not in favor of it,
then you raise the question as to why you were 80
equivocal about it previously. You never came out
publicly and said you were opposed to it and I don't
think there is enough at stake to raise that issue.
And moreover, I am pretty certain that I could demon-
strate to your satisfaction that it is economically
beneficial, to a minor degree; matter of second im-
portant, but within that range of minor importance
it puts more men to work. If you had your blue card
I would say yes.
HM,Jr: We took the blue card down. It
served its purpose.
Dr. White: It puts more men to work.
HM,Jr: Wait a minute, Harry. If you don't
mind my using an expression, I don't want a "slick"
answer.
26
-4-
Dr. White: No. I am not trying to give
you a slick answer. I am trying to give you an
honest answer. Two reasons why I find it difficult
to give an answer; one I feel can be objectively
given and the next can be given on economic grounds:
that it 18 of minor advantage and it's not an economic
loss in any way. However, there is much more involved
than that there is a general attitude of the public,
of the press and of the bankers towards silver and
there 1s the possibility that they might regard, without
knowing the merits of the case and most don't understand
it -- I mean to say that categorically -- they don't
understand the merits of it; -- they may regard any
pronouncement by you in favor as indicating that you
are unsound, unorthodox. I have to weigh that against
the fact that if you come out flatly against it, you
are coming out flatly against the Administration pro-
gram.
HM,Jr: Wait a minute! Don't forget -- and
look it up because I will ask you over the weekend
to have something ready for me -- the President of
the United States said, within the last week -- look
up exactly what he said -- "why not a price for hogs,
what and corn?".
Dr. White: That's a good question.
HM,Jr: Now, that's within the week and
that's
Dr. White: Of course, that's the first time
he has ever said that.
HM,Jr: But you did see it?
Dr. White: Yes. Surprised, too.
HM.Jr: My record, as far as an individual
is concerned, 1s much better than the President be-
cause I have not made all of these
Dr. White: ... you have never gone that far.
HM,Jr: And I have never gone much "agin"" it.
When he made that, I almost sent him a copy of what
zp
-5-
he said in 1933-1934 on silver but I thought' he
need not have me tell him what he said. When he
made that statement I thought my hands were untied and
what I said to Barkley this morning "When didhe make
this statement to you before or after the monetary
bill passed?" and he said before. He said, "I take
it the President meant what he said." He said, "And
then he would mean it now. I said, "I think it 1s
a horse of an entirely different color.
Dr. White: Let me think it over over the
weekend.
HM,Jr: Here's the thing. This 1s the way
I feel and this 1s the way you can take as the way
I feel. If I have to go up -- and there are two
things -- and testify as Secretary of the Secretary
I would simply say, "Gentlemen, as far as I am con-
cerned, whatever useful purpose silver served, foreign
silver is through and
.....
Dr. White: :: if you say that it would not be
accurate.
HM,Jr: What I am thinking about I am thinking
about China. "From today on, I don't see that it serves
any useful purpose.'
Dr. White: Well, let me point out briefly where
it does.
HM,Jr: All right. But you do that in a memo-
randum.
Dr. White: But I don't think that even answers
the question. Even if it did serve a useful purpose,
the answer in this broad case is not clear because there
1s 80 much opposition to the purchase of foreign silver
and it is regarded in the realm of category of -- you
ask the man in the street "Are you in favor of foreign
silver?" -- "That's monetary" and doesn't know what
he's talking about. Therefore, since the economics
of the matter is pretty unimportant in the realm of the
larger things, the other aspect coming from the Secre-
tary of the Treasury assumes greater importance and
28
-6-
it's a question of weighing pros and cons.
HM.Jr: We have been smart politically. I
will put it the other way -- we have been intelligent,
I believe, on the various taxes, Social Security, etc.,
and having been intelligent, fortunately it happened
to be good politically. And in those things we have
taken three of the major things out of the hands of
the Republicans as campaign issues.
Now I am going to talk politics. Now Barkley,
if he was smart, 90% or 95% of the people are opposed
to our purchase of foreign silver and if he was smart
he would work out some way that our Party would Just
grab this thing away from Townsend, because if they
are going to make this a straight Party issue -- I am
thinking as I go along -- we are going to offset all
the good we have gained from having Lodge and Vanden-
berg vote for 77 cents if the Democratic Party on the
line votes for foreign silver.
Dr. White: If you stop buying foreign silver
I think we agree the price would drop 20 - 25 cents
eventually and the Republicans would be able to come :-
you are speaking of politics now -- come to the public
and say "For five years they bought 3,000,000,000 ounces
of silver. They paid an average of 55 cents and 50
cents for foreign silver. What's the price of foreign
silver today? Today it's 25 cents and the Government
paid 50 cents."
HM,Jr: And you know what my answer 1s? The
same as on Social Security -- we were wrong.
Dr. White: Yes; that's the best answer.
HM,Jr: "We were wrong. We were wrong on
Social Security. I said "I admit we are wrong. Yes;
gentlement, we are wrong."
Dr. White: Well, you ....
HM,Jr:
... and I believe we were wrong.
Dr. White: Would the President take that posi-
tion?
29
-7-
HM,Jr: Of course (again talking) about the
President -- which Barkley doesnot know -- the night
before last he said, "Don't hurry that bill through.
I don't want to do anything for the blankety-blank
blackmailers", referring to the silver senators. He
said, "Why hurry the thing through?" His position
today is one of great cynicism on this whole thing
and his very gesture, which I told you about "with
my strong right arm, nothing; but with my left, come
and get it" -- at this stage, Harry, I am going to do
publicly only that thing which I believe in 100% and
I am not going to give in, to do something, just be-
cause somebody else made a mistake.
Dr. White: You have held that position, but
the alternative which may be open to you 1s not to
say anything, the way you have in the past. Do you
have to go up and testify?
HM.Jr: No. Barkley, after he heard this
thing, 1sn't going ....
Mr. Lochhead: I am sure Barkley would not
insist on you personally, but he's looking for some-
body
Dr. White: Again 18 it better for you to go
up and testify or is it better to let a dead dog die.
HM,Jr: I want you to toy with another memor-
andum making the best out of a bad situation, which
should go up from the White House if they wish. An
economic document giving the best face it can, but not
over my signature.
Dr. White: Let me prepare three documents and
they will all be intellectually honest. I won't say
anything I don't believe in any of them, curious as
that might sound. There will be three different de-
cisions. One 1s in favor of the President's position;
another going on record as opposed to it, and the third
is if you are called on and you merely set forth what
you regard as an analysis and let them take the position.
Let me try three different ways for you.
30
-8-
HM,Jr: Remember, the old man 1s not going
to say anything, in the 18th months I have left, for
anybody that I don't believe in. I haven't done
it in 7 years.
Dr. White: But you don't want to believe any-
thing that you don't believe is sound. Therefore,
if we can make a good case, that it's not as economic-
ally bad as you say it is
HM,Jr: In the room here -- this comes over yes-
terday and I am going to show it to Lauchlin Currie and
say it smells like him -- from the President "New loan
agency to borrow on its books from (a) free gold fund
(b) free silver fund." Will you make a note of that.
Incidentally, keep the price of silver as 1s.
This is what I tell people who come in. This
is what I tell people who come in criticizing the lend-
ing program and so on. "Until we get peace or war,
approximately half of the world 1s putting 75% of its
expenditures into non-productive purposes and just as
long as that continues, our markets will continue to
shrink" and with that picture, I always say my figures
are approximate, and"with that picture I am in favor
of doing things in this Federal Government to offset
our loss of markets until we get peace or war." I
have yet to find the first person to challenge it.
-00000-
31
the as of
7/7 date of
memo
SUNSHINE MINE TO RESUME
JUL 6 1939
32
WALLACE IDAHO - THE SUNSHINE MINING CO MINE
LANS TO RESUME OPERATIONS IMMEDIATELY AND WILL
NCREASE THE WAGES OF EACH OF ITS 550 EMPLOYES
5C A DAY - THE MINE WAS CLOSED JUNE 30 BECAUSE
F THE UNCERTAINTY OF THE SILVER SITUATION
0-
33
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 7, 1939.
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Sunshine Mining Company
The appended memorandum (prepared by Mr. Brown) reveals
the following facts with respect to the Sunshine Mining Company:
1. It 1s the largest and most profitable silver mine in
the world - it produces about one-fifth of the total silver
mined in the United States.
2. It makes a net profit of silver produced of about 456
per ounce (excluding taxes) when silver sells at 666 an ounce.
At 716 an ounce it will make a profit of about 506 an ounce.
3. The mine employe between 500 and 600 workers and made
an annual net operating profit per worker of $9,000 a year in
1938 (exclusive of taxes).
The increase in the price of silver to 71.11 cents will
increase their revenue by over one-half million dollars a year.
By increasing the wages 25 a day less than 10. percent of this
increased revenue will be passed on to the workers in form of
higher wages, the remaining 90 percent going to the owners of
the mine in the form of earnings.
4. If, as reported over the ticker, the Sunshine Mining
Company closed down on June 30, it certainly could not have
been for the reason alleged in the press - that of uncertainty
of the silver situation. The mine was highly profitable. Its
shares rose 50 percent between June 1, 1939, and July 6, 1939.
Even had the price of silver dropped to one-half, the mine could
have continued to operate. If they did close on June 30, it
must have been done for political effect or/and to give the
workers & longer weekend.
5. We do not know whether the mine will continue to be
profitable for any length of time or not because we have no
adequate information with respect to the reserves of ore the
mine has. However, judging from the fact that the value of its
stock has just risen 50 percent in price, the chances are that
it will continue to be profitable for some time to come.
Regraded Unclassified
34
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 6, 1939
TO
Mr. White
FROM
P. S. Brown
Subject: Sunshine Mining Company
Place in industry
The Sunshine Mining Company, located at Shouts, Idaho, is the only
large "straight silver" producer in the United States. In 1938 it pro-
duced 11.2 million ounces of silver, equal to about one-fifth of the
total mine output of silver in the United States.
This company, which was virtually abandoned a few years ago 1/, has
become the largest and most profitable silver mine in the world as a
result of the recent fortuitous discovery of a very rich ore body. Sil-
ver production since 1931 (the first year for which a production figure
is available) has been as follows:
Millions of ounces
1931
2.4
1932
3.0
1933
3.2
1934
3.7
1935
5.9
1936
9.1
1937
12.1
1938
11.2
Costs of production and earnings
This company produced 12.1 million ounces of silver in 1937 at
an average cost (including depreciation bonuses to employees and all
overhead but excepting taxes) of 17.6 cents an ounce. In 1938, costs
rose to 18.9 cents per ounce on account of a decline in the average
grade of ore milled.
I have been told that the stock of this company is owned largely by
a group of Washington State apple growers and lumber men, to whom the
stock was sold a few years ago when it was generally supposed that the
mine was about to be exhausted, The president of the company is a prom-
inent banker in Yakima, Washington.
35
Mr. White - 2
In the past five years this company, the nominal value of whose
capital stock is $149,000, has paid out $14.2 million and has accu-
mulated $3.5 million of current assets,
The company's financial record is indicated by the following
figures:
see table appended
Number of Employees and Shareholders
This company, which produces one-fifth of the domestic silver out-
put, employed 639 persons on December 31, 1937. More recently this
number is reported as only 550.
The number of shareholders on December 31, 1935, the only date
for which a figure is available, was 2,265.
Ore Reserves and Future Prospects
Ore reserves, as stated in the company's annual report for 1938
were 270,000 tons on December 31, 1938, equal to less than the volume
of ore milled in 1938, which was 318,000 tons. New ore reserves are
constantly being developed 80 that little information can be gained
from the annual report in regard to potential ore reserves. It is at
least possible that the ore bodies now being worked may be soon exhausted
and the mine may fade out as rapidly as it came into prominence.
As far as can be learned the volume of low grade ore is not very
great. Consequently, the increase in the price of silver since 1933
has not added greatly to the company's ore reserves; certainly the in-
crease in price has not been an important factor in expanding production.
Share prices during the recent debate in Congress
FluctuationSin the price of Sunshine shares during the recent
debate on silver in Congress have been very great.
June 1
7-7/8
19
8-5/8
23
9
26
9 (day on which Senate voted to increase the
price to 77.6 cents)
27
11-1/4
28
10-1/4
29
10
30
10-1/2
July 5
10-3/8 (Final fixing of price at 71 cents)
6
11-1/2
July,
9/7/8
36
Net income
Earnings
Gross income
Operating
Total
per OZ. of
per share
Dividends
expense
silver in
(in dollars)
(thousands
(in thousands of dollars)
cents
of dollars)
1932
736
458
92
3.1
.06
149
1933
1,078
495
329
10.2
.22
372
1934
2,080
628
1,208
32.7
.81
1,012
1935
4,155
1,031
2,403
40.9
1.61
2,084
1936
6,774
1,649
3,909
42.9
2.63
3,350
1937
9,165
2,093
5,401
44.4
3.63
4,446
1938
6,927
2,113
3,653
32.6
2.43
3,275
6
37
In the Senate of the United States
July 7, 1939.
Resolbed, That invitations be extended to
the President of the United States and the
members of the Cabinet, the Chief Justice and
Associate Justices of the Supreme Court of the
United States, the Diplomatic Corps (through
the Secretary of State), the Chief of Staff of
the Army, the Chief of Naval Operations of
the Navy, the Major General Commandant
of the Marine Corps, and the Commandant
of the Coast Guard to attend the funeral of
the bonorable Claube Augustus Swanson,
late Secretary of the Navy and former Senator
from the State of Virginia, in the Senate
Chamber, at 1 o'clock p. m., Monday, July
10, 1939.
Attest:
Secretary.
38
Order of Services at the Funeral
of
Claude Augustus Swanson
Late Secretary of the Raby and former Senator
from the State of Virginia
Order of Services at the Funeral
of
Claude Augustus Swanson
Late Secretary of the Raby anb former Senator
from the State of Virginia
The services will be held at 1:00 o'clock p. m., Monday,
July the tenth, Nineteen Hundred and Thirty-nine.
The body of the late Secretary will be placed in the Senate
Chamber prior to the services.
The President of the United States and his Cabinet, the
Chief Justice and Associate Justices of the Supreme Court, the
Diplomatic Corps, the Members of the House of Representatives,
the Chief of Staff of the Army, the Chief of Naval Operations
of the Navy, the Major General Commandant of the Marine
Corps, and the Commandant of the Coast Guard have been
invited to attend the services in the Chamber and will occupy
the seats on the floor of the Senate assigned them by the
Sergeant-at-Arms.
The President and his Cabinet will meet in the President's
Room.
The Supreme Court will meet in its former chambers in
the Capitol.
The Diplomatic Corps, the Chief of Staff of the Army, the
Chief of Naval Operations of the Navy, the Major General
Commandant of the Marine Corps, and the Commandant of
the Coast Guard will meet in the Senate Reception Room.
The Vice President's Room will be reserved for the mem-
bers of the family of the late Secretary and the officiating clergy,
whence they will be escorted to seats on the Senate floor.
Seats will be reserved for those entitled to them upon the
floor, to which they will be shown by the attachés of the Senate.
United States Senate
39
The Honorable
Secretary of The Treasury
40
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses herewith copy of the Order issued by direction
of the President officially announcing the death of
Claude A. Swanson, Secretary of the Navy, which oc-
curred on the morning of Friday, July 7, 1939, at
six minutes after eight o'clock.
Enclosure:
Copy of Order.
Department of State,
Washington, July 7, 1939.
MRS.
Regraded Unclassified
TO THE PEOPLE OF THE UNITED STATES:
Claude Augustus Swanson, Secretary of the Navy, died
at his camp on the Rapidan River in the Shenandoah National
Forest on the morning of Friday, July 7, 1939, at six
minutes after eight o'clock.
Greatly loved by those who were privileged to know him
and widely honored for his many years of faithful public
service, this distinguished member of the President's
Cabinet will be mourned throughout the nation.
Born and educated in the Old Dominion, he represented
Virginia in Congress from 1893 until he resigned to become
governor in 1906. Four years later he became & member of
the United States Senate where he continued to serve until
he was appointed Secretary of the Navy by President Roosevelt
in 1933. It was a career which exemplifies the finest tradi-
tions of American public life.
As an expression of national mourning, the President
directs that the flag of the United States be displayed at
half-mast until sunset of the day of interment on all public
buildings and at all military posts and naval stations and
on all vessels of the United States.
By direction of the President,
CORDELL HULL
Secretary of State
Department of State,
Washington, July 7, 1939.
Regraded Unclassified
- OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, B.C.
DEPARTMENT OF STATE
WASHINGTON
July 7, 1939.
My dear Mr. Secretary:
I appreciate your courtesy in informing me in your
letter of June thirtieth of your conversation with the
Soviet Ambassador on the subject of the Russian debt.
Since the debt problem is closely interwoven with
other problems affecting American-Soviet relations, I
would be grateful if you would keep me fully informed
regarding any developments which might follow your talk
with the Ambassador.
Sincerely yours,
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
HO
m
"
SAMME
EG
GRAY
Habana
Dated July 7, 1939
Rec'd 6:25 p.m.
Secretary of State,
Washington.
73, July 7, 5 p.m.
The peso closed at a nominal discount of 8.
Four leading Cuban business men including the
President of the Cuban Chamber of Commerce and the
President of the Produce Exchange were arrested
yesterday afternoon on the charge of raising prices
of commodities and later released.
Senator Casanova, after a meeting of the Presi-
dent Colonel Batista the Cabinet and Congressional
leaders yesterday, met with clearing house members
and said that decisions had bEEn reached.
(ONE) To ask Congress to authorize the Executive
to take steps to protect the peso.
(TWO) Not to establish exchange control.
(THREE) Not to undertake any new coinage.
(FOUR) To balance the budget by new tax legis-
lation (information from another source indicates
that the legislation is that transmitted with the
Embassy's despatch No. 2059 of June 6).
(FIVE)
-2- #73, July 7, 5 p.m. from Habana
(FIVE) All obligations to continue to bE met
in currency contracted.
(SIX) Social defense code to bE modified so as
to Establish penalties for CASES such as the raising
of prices of Essential commodities and speculation
in Exchange.
The Government's general attitude as outlined
above is considered to mark an improvement in the
situation, although partly because of the last de-
cision referred to very few exchange transactions
have taken place and business is naturally greatly
slowed up.
There has been a considerable withdrawal of
dollar funds from savings banks and transfer of
dollar accounts to the United States during the
last three days but there has been less nervousness
in this respect today than yesterday.
WRIGHT
RR
BECEIAED
peop 8:11PM
AS
Prepared by: H. C. Murphy
Assisted by: Wesley Lindow
and V. L. Eyre
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 7, 1939.
TO
Secretary Margenthau
FROM
Mr. Haas
Subject: Recent Developments Affecting United States
Securities
SUMMARY
(1) After reaching a low on Monday, July 3, the
Government bond market rallied sharply after
the Fourth of July holiday. Rallies of ap-
proximately the same proportions occurred in
the Government bond markets of Great Britain
and France (Chart I).
(2) The United States security portfolio of the
Federal Reserve banks decreased by $13 mil-
lions in the week ending June 28. The de-
crease occurred entirely in bills, and is
understood to be due to the difficulty of
replacing maturing bills at better than a
zero yield basis. This 18 the first change
which has occurred in the total amount of
the portfolio since November 1937 (Chart II).
(3) The June 30, 1939 statements of the eight
New York City banks reporting United States
security holdings of more than $200 millions
all show increases in their Government port-
folios over March 30 (Chart III). These in-
creases aggregate $395 millions, and are ac-
counted for mainly by the Chase National Bank
with $185 millions, J. P. Morgan and Oo. with
$60 millions, and Bankers Trust Co. with
$52 millions. Although New York City banks as
a class still hold fewer Government securities
than at the peak of June 1936, Chase National
and J. P. Morgan and Co. have substantially
larger holdings than at that time.
As reported on Wednesdays, when the portfolio is "evened"
for statement purposes. There have been minor changes in
the month-end totals shown in the chart.
Regraded Unclassified
Secretary Morgenthau - 2
Movements in the United States
and Foreign Government Bond Markets
After reaching a low on Monday, July 3, the United
States Government bond market rallied sharply after the
Fourth of July holiday. At the close on Thursday, the long
term issues had recovered their entire net loss since the
latter part of June, the average yield on all long-term
Treasury bonds standing at 2.17 percent. Rallies of ao-
proximately the same proportions occurred in the Govern-
ment markets of both Great Britain and France, commencing
on Tuesday, when our own markets were closed Chart I).
The present rally in United States Government securities
has been confined particularly to long-term bonds, and to
some extent to short-term notes. Neither the longer notes
nor five to ten year bonds had shown much improvement through
the close on Thursday.
Federal Reserve Bank Holdings
of United States Securities
The United States security portfolio of the Federal
Reserve banks decreased by $13 millions between Wednesday,
June 21, and Wednesday, June 28. The decrease was from
$2, 564 millions to $2,551 millions, and occurred entirely in
bills. No further change in either the portfolio a8 A whole
or in its component elements occurred between June 28 and
July 5.
This is the first change which has occurred in the total
amount of the portfolio since November 24, 1937. It 18 the
first decrease (other than minor fluctuations, never more
than $2 millions) since March 1933. In order to avert any
fear on the part of the market that the decrease might be
the harbinger of a tight money policy, the Board of Governors
announced in a formal statement that:
"This action 18 in response to technical
conditions in the bill market, and does not
represent a change in general credit policy.
As reported on Wednesday, when the portfolio is "evened"
for statement purposes. There have been minor changes in
the month-end totals shown in Chart II.
Regraded Unclassified
4E
Secretary Morgenthau - 3
Immediately before the $13 millions decrease, Reserve
bank holdings of bills amounted to $477 millions, or about
36 percent of the total outstanding supply. The "technical"
condition in the bill market referred to in the Board of
Governors' statement 18 understood to be the difficulty of
replacing maturing issues at better than 8. zero yield basis.
Since November 1937, when the portfolio was stabilized
at $2,564 millions, Federal Reserve holdings of bills had de-
creased by $181 millions, while those of notes had increased
by $8 millions and those of bonds by $173 millions. During
this period, there had been a decrease of $1,095 millions in
the outstanding supply of Treasury bills, & decrease of
$3,332 millions in the outstanding supply of Treasury notes,
and an increase of $5,282 millions in the outstanding supply
of Treasury bonds.
Monthly figures on the total amount and composition of
Federal Reserve bank holdings of United States securities
since the beginning of 1929 are shown in Chart II. The main
changes during this period in the total amount of the port-
folio have been sharp upward surges in the fall of 1929
(after the stock market crash), in the spring of 1932, and in
the fall of 1933. In November 1933, the portfolio became
stabilized at around $2,430 millions. The increase from that
time, up until the present decrease, amounted to only about
3135 millions in all, and occurred in two instalments - one
during the spring of 1937, and the other in the fall of the
same year -- both in response to pressure on the Board and
the Open Market Committee for an easier credit policy.
New York City Bank Holdings of
United States Securities
In the past few days, the large New York banks have pub-
lished their statements of condition 8.8 of June 30, 1939, and
it 1s now possible to see what these banks individually have
been doing with respect to Government securities in the last
three months.
Chart III shows, for selected dates, the holdings of
direct and guaranteed Government securities of each of the
seven New York City member banks reporting holdings of more
than $200 millions on June 30, 1939. These banks account
for about 80 percent of the holdings of all New York City
weekly reporting member banks. The chart also shows, for
Regraded Unclassified
Secretary Morgenthau - 4
the enmo dates, the holdings of all weekly reporting member
banks in New York City. The combined holdings of J. P. Morgan
and Co. and Drexel and Co. are also shown, although these
institutions are, of course, not weekly reporting member
banks. The dates used in the chart are June 30, 1936, when
New York City weekly reporting member banks reached an all-
time peak in their holdings of Government securities;
September 30, 1937, the date which marked the subsequent low
point; and the last three dates of quarterly reports of oon-
dition.
In the last three months, weekly reporting New York City
member banks increased their holdings of Government securities
by 8414 millions, of which $335 millions Was accounted for by
the seven member banks shown separately in the chart. The
Chase National Bank alone accounted for $185 millions of the
increase, and every one of the other banks shown separately
in the chart reported some increase during the period. The
large amount of acquisitions by Chase National increased its
holdings to $835 millions, or about $100 millions more than
it had held on June 30, 1936, when New York City weekly re-
porting member banks established their all-time peak.
The purchases by Chase National in the June quarter came
after only a small net gain in the March quarter, but some of
the other banks showed large increases in both quarters.
Guaranty Trust, for example, acquired $117 millions of Gov-
ernment securities in the March quarter, and then added &
further $34 millions in the June quarter. In spite of these
purchases, however, Guaranty still held $181 millions less in
its Government portfolio than it did three years ago.
The Central Hanover Bank and Trust Company practically
doubled its holdings during the first six months of this
year. As of June 30, 1939, this institution had $303 mil-
lions of Government securities, as compared with $153 mil-
lions on December 31, 1938. Despite this large increase,
however, Central Hanover's holdings were still $95 millions
lower than three years ago.
Similarly, the Bankers Trust Company portfolio of Govern-
ment securities 1s lower than three years ago, although it
was increased by $63 millions during the first six months of
the year. Present holdings aggregate $445 millions, or
8136 millions less than in June 1936.
The only bank shown in Chart III which did not increase
its Government portfolio during the last six months is the
National City Bank, which showed a net reduction for the
Regraded Unclassified
so
Secretary Morgenthau - 5
period of 843 millions, bringing its total holdings down to
about the same level as three years ago. The entire reduo-
tion occurred during the first quarter, however, the hold-
ings of this institution increasing by $7 millions during
the past three months.
J. P. Morgan and Co. (including Drexel and Co.) also
showed large increases in the first six months of this year,
the figures being 834 millions for the first quarter and
$60 millions for the second quarter. Total holdings are
now $393 millions, or $68 millions larger than on June 30,
1936.
Attachments
Chart I
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM US TREASURY
BONDS AND U.K. 2½% CONSOLS
Weekly. Average of Daily Figures
1938
1939
JAN. - FEB - I MAR - # APR. is - MAY M as JUNE BF as JULY . a # AUG ⑉ a SEPT. a , OCT. il " NOV. a 26 - DEC au , JAN a e FEB MAR. a . APR. is " MAY il " JUNE a 24 . JULY at , AUG. if # SEPT. - se OCT - 28 NOV H a DEC.
inverted Scale
is
.
Inverted Scale
PER CENT
PER CENT
2.2
2.2
2.4
Long Term Treasury" (12 years or more - cortiest salf done/
2.4
2.6
26
2.8
2.8
30
3.0
3.2
3.2
U.K. 2½% Consols
24
34
3.6
3.6
3.8
3.8
4.0
4,0
4.2
4.2
PER
PER
CENT
CENT
1.6
1.6
-
1.4
1.4
1.2
1.2
1.0
1.0
Differential
8
8
6
4
4
4
2
2.
o
o
. JAN a . FEB # I MAR - , APR - - MAY - = JUNE " is JULY , II . AUG 10 # SEPT e # OCT # " NOV is DEC H JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC
of
.
,
a
.
if
-
-
,
.
"
-
#7
10
-
#
If
-
t
-
#
"
:
:
"
=
*
"
1938
1939
- line indicates change - compasition - Lang Term Treasury average
Nate intest figures shown are for July &
Ohe of the Secretary of the Treasury
FO-176
- of - - -
Regraded Unclassified
Chart II
FEDERAL RESERVE BANK HOLDINGS OF U.S. SECURITIES
End of Month Figures
1929
1930
1931
1932
1933
1934
1935
1936
1937
1938
1939
1940
DOLLARS
DOLLARS
Billions
Billions
28
28
Total
24
2.4
Certificates and Bills
20
20
1.6
16
1.2
12
Notes
8
@
4
4
Bonds
0
1929
1930
1931
1932
1933
1934
o
1935
1936
1937
1938
1939
1940
nate Longed - - - - -
Regraded
Chart III
NEW YORK CITY BANK HOLDINGS OF U.S SECURITIES
Including Guaranteed Obligations
DOLLARS
DOLLARS
Billions
All Weekly Reporting Member
Briliums
Banks in NYC
5
s
4
4
3
3
2
2
-
I
o
o
June
Sept
Dac
Mar
June
193A
1937
1938
1939
1939
Selected New York City Banks
DOLLARS
DOLLARS
DOLLARS
DOLLARS
Millians
Chass National
Millions
National City
Millinds
Guaranty Trust
Milliams
400
900
900
960
400
800
000
BGD
100
700
700
POD
t00
600
600
600
SOO
500
500
500
400
400
400
400
300
300
300
300
100
200
200
200
+
100
100
100
IDO
.
o
o
D
o
June
Sept.
Dec
Mar
June
June
Sept
Des
Mar
June
Jane
3404
Das
Mar
Are
1936
H37
1138
1924
1934
1936
1437
1938
1939
1539
113A
1937
não
1939
nn
AOD
600
-
500
NOR
Bankers Trust
F Morgan a Co
Central Hanover
son
500
Drexel B Ce
500
son
400
400
400
#06
soa
300
300
300
200
200
200
200
100
100
100
100
o
o
1.0
o
o
june
Sept.
Des
Mar
June
June
Sept.
¿
that
June
June
Lept
Bec
Mar
1936
1937
1938
1939
1939
1936
1937
1938
ass
1939
rise
HIST
1938
19,89
1939
DOLLARS
DOLL ARE
DOLLARS
Millions
Manufacturers Trust
Millions
Piret National
Millions
300
100
100
200
200
200
100
100
.00
a
0
e
June
Sept
The
Mar
June
Sept
be
Más
-
1996
19.55
1989
11.00
VELA
1937
1958
-
1430
Name figures - Pail end - ------ -
I ,
Regraded Unclassified
54
July 7, 1939
11:38 a.m.
HMJr:
Hello.
Jesse
Jones:
Hello, Henry.
HMJr:
Feeling any better?
J:
Yeah.
HMJr:
Good!
J:
Could I be over in about fifteen minutes?
HMJr:
No, you know I said I had to be at the White House at
twelve.
J:
Yeah.
HMJr:
And -- a meeting with the President.
J:
Well now, can I come and talk then with Ed, or have him
come over here, or what?
HMJr:
Sure | Because
J:
Well, I'm just going over this now, Henry.
HMJr:
Well, all right. Because
J:
What time were you going to -- were you coming back from
the White House?
HMJr:
I suppose it will last 15 minutes to half an hour.
J:
Why wouldn't I come then?
HMJr:
That's all right. I tell you we could save time --
supposing
J:
I suppose I could get Ed in the meantime and then get
over there with you about twelve thirty.
HMJr:
I tell you what we'll do. I'll have Ed come over to see
you and then when I leave the White House I'll give you
a ring.
J:
All right.
HMJr:
How's that?
Regraded Unclassified
- 2 -
55
J:
Fine.
HMJr:
0. K.
J:
O. K.
56
July 7, 1939
11:48 a.m.
HMJr:
Hello.
Operator: Secretary Wallace is busy talking. I'm waiting for him.
HMJr:
0. K. Thank you.
11:50 a.m.
Operator: Go ahead.
HMJr:
Hello.
Henry
Wellace:
Hello.
HMJr:
Henry?
W:
Yeah.
HMJr:
I hear that you have designs on me this afternoon?
W:
Well, I didn't -- at your convenience, of course.
HMJr:
Would you mind saying what's in your mind?
W:
Yes, I'd like very much to say. I just thought if I
could bring over our Solicitor, Mr. White, we could --
maybe we could talk about this commodity credit situation.
HMJr:
Oh. Well now, this 18 what I'm trying to do for the
present, and I hope to be successful, but I'm keeping
myself free. We still haven't come to an agreement
with Jesse Jones on this self-liquidating thing.
W:
Uh-huh.
HMJr:
So Jones 1s coming over here at 12:30 and the President
wanted it yesterday at noon, he wanted it today at noon,
and I haven't got it yet, 80 could I get in touch with
you after lunch?
W:
That'll be fine.
HMJr:
Could I do that?
W:
It will be -- just be splendid.
HMJr:
Thank you, Henry.
Regraded Unclassified
57
- 2 -
W:
All right.
HMJr:
That's too bad about Claude, isn't it?
W:
Yes, yes that's --
(Balance of conversation not recorded.)
58
July 7, 1939
1:02 p.m.
HMJr:
Hello.
Operator: Mr. Jones. Go ahead.
HMJr:
Hello.
Jesse
Jones:
Hello, Henry.
HMJr:
How are you-all coming along?
J:
Well, we're a hundred percent -- in 8. hundred percent
agreement and the boys have gone home. I told them to
write it up and send it on its way.
HVJr:
Wonderful! Then we don't have to Bee each other.
J:
No, that's right, and I've got an engagement anyway.
I don't know whether I'm going to be able to keep it
or not.
HMJr:
Well
J:
I doubt even if the peoples are still waiting but the
boys left here about three minutes ago, Henry.
HMJr:
And then it's on its way from -- to the White House then.
J:
All right, we -- the boys said they'd do that. Now, I
told them that Steagall is anxious to have 8.00py as
soon as it's available.
HMJr:
Right.
J:
He said he would introduce it Monday and have hearings
Tuesday.
HMJr:
Well, what I'm going to do 18 to send it over to the
President.
J:
Yeah.
HMJr:
And tell him that you and I are in agreement.
J:
O. K.
HMJr:
And then the reet is up to him.
J:
0, K, Fine.
Regraded Unclassified
- 2 -
58
HMJr:
Is that all right?
J:
Perfectly fine.
HMJr:
Well, you and I usually
J:
get together.
HMJr:
If they give us time enough.
J:
That's right.
HMJr:
Well, aren't you going to get a little rest?
J:
Well, if I ever get set I am, yes, and I intended to get
away the latter part of the month.
HMJr:
I'll be darned!
J:
But there's been damn near -- well, a lot of these
things, and
HMJr:
Well, I
J:
anyway we -- I'm glad we got in entire agreement
on this thing.
HMJr:
Well, I'm delighted, Jesse.
J:
And what I -- was Just hoping we would get it BO that
there would be as few criticisms in the committee.
HMJr:
Right.
J:
Now, I've left off the Export Bank and we might want
to add that on Monday.
HMJr:
I see.
J:
And I'll talk to Steagall about that.
HMJr:
Fine.
J:
I want to get up on the Hill and I'm going up there
now.
HMJr:
Yeah.
J:
And ão a little more shuffling around.
Regraded Unclassified
- 3 -
60
HMJr:
Fine !
J:
O.K.
HMJr:
Thank you.
July 7, 1939
61
3:15 p.m.
Operator:
Operator.
HMJr:
Ed Foley.
0:
Right.
(Brief pause.)
0:
Mr. Foley.
Ed
Foley:
Yes, Mr. Secretary.
HMJr:
Ed, I forgot to tell you something very important.
When the President was talking to Sam Rayburn about
this, what I call the Recovery Bill, he -- he talked
about the foreign loan and said it wasn't in, but that
Jones was hopeful of getting an amendment which would
add a hundred million dollars to the authority of the
Export-Import Bank.
F:
Yeah.
HMJr:
And the President said that that's what he would like.
Now, while I couldn't gather here what Rayburn said,
I gathered that he acquiesced that that was possible.
F:
I see.
MWr:
And so let's keep that in mind and let's push for that,
you see, because I, personally, am very anxious to get
the additional authority and get it open and above
board, and not do it this roundabout way that Jones is
talking about.
F:
Well, does that mean that you want to include
HMJr:
No.
F:
that in this legislation?
HMJr:
No, that will be separate and -- and
F:
Yeah.
HMJr:
talked about getting it -- sort of an
amendment in the Committee when it goes to Committee,
but let's watch it.
F:
Yeah.
Regraded Unclassified
- 2 -
62
HMJr:
And let's talk to Rayburn. I just don't want to take
Jesse's word for it.
F:
Sure !
HMJr:
I don't -- I mean by that -- I don't mean he lied to
me, but
F:
Yeah, I understand.
HMJr:
But I want to do our own pushing.
F:
Sure !
HMJr:
And
F:
But not make it part of this legislation
HMJr:
No.
F:
but try to get it after the legislation as intro-
duced is being considered.
HMJr:
Yes.
F:
Um-hm.
HMJr:
And then Cotton is going on as director there in place
of Archie Lochhead.
F:
Yeah.
HMJr:
And he's sitting here now, and I'm going to ask him to
push too, you see?
F:
Fine.
HMJr:
The two of you can work together to make sure we get
the extra hundred million.
F:
Sure.
HMJr:
O. K.?
F:
All right, sir.
HMJr:
All right.
F:
Goodbye.
HMJr:
Good night.
July 7, 1939
63
11:20 a.m.
HMJr:
Hello.
Frank
Murphy:
Hello, Henry.
HMJr:
Hello, Frank.
M:
Henry, did you check up on Sam Clark?
HMJr:
On who?
X:
Sam Clark.
HMJr:
Now
M:
Remember I spoke to you about it
HMJr:
Yes.
M:
at Cabinet meeting.
HMJr:
You're right. And I've got no report.
M:
Uh-huh.
HMJr:
But I've got my staff coming at 11:30 and I'll ask them
then why they have not reported.
M:
Yes, and have somebody send me a note about it.
HMJr:
Ah
M:
I'm sure it'll be all right, but I'd like to
HMJr:
I'll -- I'll
M:
I just want it cleared with you and your
department.
HMJr:
Yes, I don't understand why they didn't let me know.
M:
Uh-huh.
HMJr:
Is that all you've got on your mind?
M:
That's all, Henry.
HMJr:
How are you today?
Regraded Unclassified
64
- 2 -
M:
I'm just fine, thanks.
HMJr:
Good !
M:
All right. I'll see you later, Henry. Good bye.
This - in
65
Bill as okayed
by President
7-7'39
when Walkility
Foluy.
-
66
7-7-39.6 3 9.66
DRAFT OF BILL FOR
SELF-LIQUIDATING PROJECTS ACT OF 1939
July 8, 1939
Summary by Sections of the Draft of Bill to Carry out the
Self-Liquidating Program.
Section 1 provides that when enacted the bill may be cited as the
"Self-Liquidating Projects Act of 1939."
Section a provides that the Reconstruction Finance Corporation
shall issue its notes or other obligations upon the direction of the
President to finance the self-liquidating improvement program to be
carried on by the Department of Agriculture, the Public Roade Adminis-
tration, the Public Works Administration, the Rural Electrification
Administration, as well as by the Reconstruction Finance Corporation
itself.
Cection 3 provides that the Reconstruction Finance Corporation Act
shall apply to such notes or other obligations, except that the maturity
may be forty years, and increases the abount which may be outstanding
under existing law to $2,560,000,000. plus unobligated balances of present
appropriations available to the Department of Agriculture and to the
Rural Electrification Administration. The purpose of this latter pro-
vision is to avoid duplication of the program.
Section 4 provides for the proceeds of such notes and other obliga-
tions to be deposited with the Treasurer of the United States and disbursed
to the agencies carrying out the program in amounts indicated by the
President's letter to Senator Byrnes of June 21, 1939.
Section 5 authorizes the Public Roads Administration, in cooperation
with state agencios, to carry out & program of highway improvements in-
cluding toll roads, bridges, tunnels, express by-passes and the acquisition
of adjacent land for investment purposes. This section also confors
powers sesential to the prompt and effective execution of the program
contemplated in the report of the Bureau of Public Roads dated April 27,
1939, and published as House Document No. 272, 76th Congress, First Session.
Provision is made for the Attorney General to handle all condemnation
proceedinge under the General Condemnation Act or under the 1931 Act per-
mitting possession to be taken by the Government upon filing of a declare-
tion of taking.
Section 6 provides that no further consent of Congress need be re-
quired before bridges or tunnels may be built across navigable waters
notwithstanding that ouch waters may not be wholly within a single state,
but requires that the approval of the Secretary of Ter to the plans and
specifications be obtained in accordance with the General Bridge Act.
Section 7 authorizes the Public Works Administration to make loans
for projects of the character which it has heretofore financed and con-
tains powere deemed desirable in the light of the experience of that
Administration.
Section 8 authorises the Reconstruction Finance Corporation to enter
into contracts for the construction of rolling stock and shop equipment
for railroads and selling or leasing the e.c.m. with or without the option
to purchase. Provision in also mate for 120 purshase of 010 relling stock
and squipment for approping or rebuilding.
Regraded Unclassified
2
Section 9 authorizes the Rural Electrification Administration to maloe
loans to finance projects of the character it is authorized to finance
under the Rural Electrification Act of 1936 and eliminates restrictive
provisions in that Act which would militate against an effective program.
This section preserves, however, the prohibition in the Rural Electrification
Act against the financing of competitive facilities.
Section 10 relates to the $40,000,000 appropriation made at this session
of Congress for Rural Electrification projects for the fiscal year 1940, and
authorizes the Secretary of the Treasury to transfer the unobligated balances
of appropriations previously made to the Rural Electrification Administration,
This section makes an equal amount available to the Administration for fi-
nancing projects under the bill.
Section 11 authorizes the Secretary of Agriculture to make loans to
farm tenants, share-croppers and migratory farmers for the purposes provided
in the Bankbad-Jones Farm Tenant Act.
Section 12 authorizes the Secretary of the Treasury to transfer the
unobligated balance of appropriations previously made to the Secretary of
Agriculture to carry out the Bankhead-Jones Farm Tenant Act and supplemental
legislation. This section makes available to the Secretary of Agriculture
an equal amount for loans under the bill. This section relates to an esti-
mated balance of $100,000,000 presently available for loans for such purposes
by the Secretary of Agriculture.
Section 13 provides that all revenues of the agencies charged with
administering the bill which are derived from projects constructed or
financed under the bill shall be deposited with the Treasurer of the United
States to the credit of the Reconstruction Finance Corporation and requires
the Corporation to use such revenues to pay the notes and other obligations
issued to finance the program, together with interest thereon, except to
the extent that the Corporation makes part of such revenues available as a
revolving fund for further projects if there is any surplus available for
such purpose.
Section 14 authorizes the Reconstruction Finance Corporation to sell
securities acquired as evidence of loans made by any agency under the bill and
to use such proceeds an a revolving fund for further loans after providing
for the payment of the interest on and principal of its notes and other
obligations issued under the bill.
Section 15 makes available funds provided by the Reconstruction Finance
Corporation to the agencies charged with carrying out the self-liquidating
program without any further appropriation for expenditures under the bill, and
requires that all such expenditures shall be accounted for and audited by the
General Accounting Office.
Section 16 provides that the Secretary of the Treasury and the Federal
Loan Administrator shall male an annual examination of the status of the
program and report the results to the President and to the Congress. This
section nino provides to the extent that it appears that the program may not
DE on a welf-liquidating basis the Secretary of the Treasury shall pay the
Reconstruction Zinance Corporation any actionted deficiency, n appropriation
for which is authorized.
Regraded Unclassified
3
Section 17 imposes a duty upon overy agency constructing or
financing projects under the program to undertake projects and make
lonns with a view to recovering the amount invested with interest suf-
ficient to reimburse the Reconstruction Finance Corporation for the cost
to it of the capital required for ite operations under the bill. This
section also places a ceiling on the interest rate at the highest yield
on the longest term, direct or indirect, obligation of the United States
which 16 outstanding.
Section 18 provides that the services of Federal, state, and local
agencies may be utilized and that reimbursement may be made for such
services.
Section 19 dispenses as to real property acquired under the bill
with the requirement of existing law that the United States must acquire
exclusive jurisdiction over real property and empowers the Attorney General
to dotermine how much jurisdiction is desirable.
Section 20 provides that administrative expenses for the fiscal year
1940 shall be paid from the proceeds of notes and other obligations issued
by the Reconstruction Finance Corporation in amounts to be fixed by the
Director of the Bureau of the Budget.
Section 21 provides that the Act confore only cumulative powers
and that nothing in it shall be construed to affect the operation of any
reorganization plan promulgated pursuant to the Reorganization Act.
Section 22 contains the usual provision authorizing appropriations
of such sums as may be necessary to carry out the provisions of the bill.
Unless an impairment should be found after the annual appraisal required
by section 16, none will be required except for administrative exponses.
Section 23 increases the amount of loans for financing and facilitat-
ing exports which the Export-Import Bank of Washington 1s authorized to
have outstanding at any one time from $100,000,000.00 to $200,000,000.00.
Regraded Unclassified
A BILL
To provide for the construction and financing of
self-liquidating projects, and for other purposes.
1
Be it enacted by the Senate and House of Representatives of the
2 United States of America in Congress assembled, that this Act may be
3 cited as the "Self-liquidating Projects Act of 1939.'
4
Authorization of Bonds
5
SEC. 2. In order to provide a sound method of financing which,
6 without burdening the national taxing power, will make it possible
7 to increase employment through a self-liquidating improvement
8 program, the Reconstruction Finance Corporation (herein called the
9 "Corporation"). upon the direction of the President, shall issue from
10 time to time notes, debentures, bonds, or other obligations to enable
11 the Department of Agriculture, the Public Roads Administration, the
12 Public Works Administration, the Rural Electrification Administration,
13 and the Corporation to carry out their respective functions as herein-
14 after provided.
15
Provisions Concerning Bonda
16
SEC. 3. The provisions contained in the Reconstruction Finance
17 Corporation Act, approved January 22, 1932, as amended, shall apply
18 to the notes, debentures, bonds, or other obligations issued to
19 carry out the provisions of this Act, except that
20
(a) Such notes, debentures, bonds, or other
21
obligations may mature at such time or times,
22
not exceeding forty years from their date,
23
and contain and be subject to such terms,
24
covenants, and conditions AS the Corporation,
25
with the approval of the Secretary of the
Regraded Unclassified
2
1
Treasury, may prescribe; and
2
(b) The amount of notes, debantures, bonds, or
]
other obligations which the Corporation may
4
issue and have outstanding at any one time
5
under existing law is hureby increased by the
"
amount thereof directed to be issued by the
7
President, not to exceed 2,560,000,000, plus
"
an amount equal to the amount of unobligated
9
balances of appropriations transferred under
10
sections ten and twelve of this Act.
11
Disposition of Bond Proceeds
12
SEC. 4. The Corporation is hereby authorized and directed to
13 daposit all proceeds realized from the sale of notes, debentures,
14 bonds, and other obligations issued for the purpose of carrying out
15 this Act, with the Treasurer of the United States to the credit of the
16 Corporation, The Treasurer of the United States is hereby authorized
1) and directed to receive such moneye and hold the same in A special
18 account or accounts to the credit of the Corporation, and to transfer
1/ from time to time such amounts as the Corporation, upon the direction
20 of the President, shall order to such special disbursing accounts with
21 naid Treasurer 15 the Secretary of the Treasury shall designate, in order
22 to crovido funds for the following dopartments, administrations, and
23 agencies of the Government in not to exceed the following amounts for
24 the following purposes, in addition to sums available for such purposes
25 from tolls and charges collected from the repayments of the interest on
26 and principal of loans made, and from the sale of securities acquired,
27 under this Act:
20
(1) To the Public Roads Administration: the sum
20
of 750,000,000 for post-roads, highways,
30
parkways (in cooperation with the National
Regraded Unclassified
3
1
Park Service of the Department of the Interior),
2
grade-crossings, underpasses, overpasses, viaducts,
3
bridges, and tunnels, including crossings over
"
or under navigable waters, and other transporta-
5
tion facilities, including works, undertakings,
6
or projects incidental thereto or to encourage
7
the use thereof, and all or any part of any of
8
such facilities and appurtenances thereto, such
9
as lands, rights in lands, rights of access,
10
easements, buildings, equipment, and machinery
11
(herein called "highway improvements"), as
12
provided in section five of this Act and
13
property acquired for investment purposes as
14
provided in said section;
15
(2) To the Public Works Administration: the sum
16
of $350,000,000 for projects of the character
17
heretofore financed by loan or grant or both
18
by the Federal Emergency Administration of
19
Public Works under Title II of the National
20
Industrial Recovery Act, the Emergency Relief
21
Appropriation Act of 1935, the Emergency
22
Relief Appropriation Act of 1936, the Public
23
Works Administration Extension Act of 1937,
24
and the Public Works Administration Appropriation
25
Act of 1938 (herein called the "non-federal
26
public works"), as provided in section seven
27
of this Act;
28
(3) To the Corporation: the sum of $500,000,000
29
for engines, locomotives, tenders, freight
30
and passenger care of all types and classes,
Regraded Unclassified
4
1
and parts thereof and appurtenances thereto
2
and other rolling stock and railway shop equip-
3
ment (herein called "railroad equipment"),
4
as provided in section eight of this Act;
5
(4)
To the Rural Electrification Administration:
6
$500,000,000 for projects of the character
7
heretofore financed or authorized to be financed
3
or carried on by the Rural Electrification
9
Administration under the Rural Electrification
10
Act of 1936 (herein called "rural electrification
11
projects"), as provided in section nine of this
12
Act;
13
(5)
To the Department of Agriculture: 600,000,000
14
for facilities for farm tenants, farm laborers,
15
share croppers, and other individuals who obtain,
16
or who have in the past obtained, the major
17
portion of their income from farm operations,
18
including rural rehabilitation loans, projects
19
for the provision of additional water facilities,
20
and farm tenant loans as provided for in Title I
21
of the Bankhead-Jones Farm Tenant Act, approved
22
July 22, 1937 (herein called "rural security
23
projects"), as provided in section eleven of
24
this Act.
25
Highway Improvements
26
SEC. 5. Subject to the provisions of this Act, and using in such
27 connection states, municipalities, and other public bodies to the fullest
28 extent consistent with sound administration and economical management,
29 the Public Roads Administration shall have power:
30
(a) To construct, reconstruct, alter, extend,
5
1
enlarge, improve, repair, and acquire highway
2
improvements with a view to promoting interstate
3
commerce, aiding in the national defense,
4
facilitating the use of the mails, or promoting
5.
the general welfare;
6
(b) To maintain and operate highway improvements;
(c) With the approval of the Corporation, to fix,
maintain, and collect tolls, and other charges
9
for the use of highway improvements which shall
10
be sufficient (after making reasonable allowances
11
for operation and maintenance expenses for
12
depreciation to the extent not provided for by
13
amortization, and contingencies) to amortizo the
14
cost of such highway improvements with interost
15
as horeinafter provided;
16
(d) To use for further highway improvements the
17
revenues derived from such collections to the
11
extent not needed in the judgment of the
19
Corporation to must reasonable allowances for
20
operation and maintenance expenses or for the
21
amortization of the cost of highway improvements
22
with interest as hereinsfter provided, or for
23
depreciation to the extent not provided for by
24
amortization, and contingencies;
25
(e)
To acquire in the name of the United States
26
by gift, purchase, exchange, or by the exercise
27
of the power of eminont domain or otherwise, and
23
to hold, lease (as lossor with or without the
29
option to purchase, or LS lessee), use, sell,
as
exchange or otherwise dispore of real property
Regraded Unclassified
6
1
necessary or convenient for carrying out any of
2
its functions hereunder in connection with
3
highway improvements or in connection with any
4
construction undertaken in accordance with the
5
Federal Highway Act, as amended and supplemented;
6
(f) In connection with any sale or lease to
7
any state, municipality, or other public body
8
to enter into such contracts and agreements as
9
the Commissioner of Public Roads may deem de-
10
sirable, which contracts and agreements may in-
11
clude provisions for deducting from the unpaid
12
portion of the sale price, rental payments, or
13
loans, an amount equal to any profit which the
14
Corporation may determine to have been realized
15
from the sale of adjacent property acquired
16
pursuant to subsection (g) of this section;
17
(g) To acquire by purchase, but not by condemnation
18
for investment purposes, any real property in
19
the vicinity of any highway improvements or
20
Federal-aid construction if, in the opinion of
21
the Commissioner of Public Roads and the
22
Corporation the price at which such real property
23
may be purchased is such as to make it probable
24
that the United States will, as a result of
Regraded Unclassified
7
1
appreciation in land values resulting from any
&
highway improvement or Federal-aid construction,
be ablo to dispose of such property, within
4
twenty years, at such a price as to result in a
5
profit; and to sell any such real property at
0
public sale after advertisement and competitive
bidding and upon such other terms and conditions
-
as the Commissioner of Public Roads and the
9
Corporation may in their judgment deem in the
10
public interest;
11
(h) To expend moneys for the purpose for which any
12
real property has been purchased, or possession
13
thereof has been taken during the course of
14
condemnation proceedings and in advance of final
15
judgment thereon, in demolishing existing
16
structures theroon, in improving such real
17
property in any way, or in constructing any high-
18
way improvement thereon, notwithstanding the
19
provisions of soction 355 of the Revised Statutes,
20
or any other law restricting the expenditure
21
of public moneys upon real property, the title
22
to which has been acquired by the United States;
23
(i) To prescribo and publish such rules and regula-
24
tions for the proper government and protection
25
of, and maintenance of good order on, highway
26
improvements or adjacent real property of the
27
authority, wilful violation of which shall be
28
punishable by n. fine of not more than 3500 or
29
imprisoment for not moro than three months, or
8
both; and to authorize employees of any department
Regraded Unclassified
8
1
of the government, with the consent of the head of
2
such dopartment, to make arrosts for the violation
3
of such rules and regulations, and any person so
4
arrosted shall be takon before the nearest United States
5
Commissioner within whose jurisdiction the highway
6
improvement is located for trial; and upon sworn in-
7
formation by any competent porson any United States
B
Commissioner in the proper jurisdiction shall issue
9
process for the arrest of any person charged with viola-
10
tion of such rules and regulations; but nothing horein
11
contained shall be construed as proventing the arrest
12
by an officer, agont, or employee of any public body,
13
with or without process, of any person for the viola-
14
tion of any state or local law, ordinance, or regulation,
15
for the government and protection of, and maintonance of
16
good order on highway improvements, and any person BO
17
arrusted shall be triod and punished according to the
18
lave of said stato;
19
(1) To institute and carry on, under the direction of the
20
Attorney General, condemnation procoodings for the pur-
22
pose of taking any real property (which term includes
22
for purposes of this Act property devoted to another pub-
23
lic use, lands under mator, water rights, incorporeal
hereditaments, chattels roal, and all rights and interests
25
in land, whether fees simple absoluto or any lossor
26
interest) in the manner or modo of procedure provided
27
by an act entitled "An Act to authorize condemnation
28
of Incd for sites of public buildings, and for other
29
purposes", approved August 1, 1888, as amonded,
Regraded Unclassified
9
1
or of an act entitled, "An Act to expedite
2
the construction of public buildings and
3
works outside of the District of Columbia by
4
enabling possession and title of sites to be
5
taken in advance of final judgment in proceed-
6
inga for the acquisition thereof under the power
7
of eminent domain", approved February 26, 1931,
E
88 amended;
9
(1c) To enter on any real property for the purpose
10
of making surveys, borings, tests, and examinations;
11
(1) To pay all expenses in connection with the ac-
12
quisition of real property, including all foos for
13
abstracts, official certifications, ovidences of
14
title, and recordation, notwithstanding the
15
proviso in section one of the Act of March 2,
16
1899, relating to the payment of such expenses
17
and fees.
18
Crossings on Navigable Waters
19
SEC. 6. The consent of Congress to the construction, reconstruc-
20 tion, or acquisition by the Public Roads Administration of any bridge,
21 tunnel, or other crossing over, under, or across any navigable waters
22 of the United States, under this Act shall be decmed to have been
23 obtained and affirmatively authorized by virtue of this Act within
24 the meaning of sections nine, ten, and eleven of the Act of March 3.
25 1899, as amended, whether or not such structures cross rivero and other
26 waterways the navigable portions of which lio wholly within the limits
27 of a single state: but no such structure shall be constructed, recon-
28 structed, or maintained under this Act unless and until all the
29 limitations, restrictions, and other provisions of an act ontitled,
30 "An Act to regulate the construction of bridges over navigable waters",
Regraded Unclassified
10
1 approved March 23, 1906, as amended, except the provisions of section
2 six thereof, shall have been complied with by said Administration,
5
Non-Fedoral Public Works
4
SIC. 7. Subject to the provisions of this Act, the Public Works
5 Administration shall have power:
6
(a) To make loans to finance or aid in financing
7
the construction, reconstruction, extension, or
8
improvement of non-federal public works; and for
9
the temporary operation of any such non-federal
10
public works for such poriod as the Commissioner
11
of Public Works shall deem necessary;
12
(b) To purchase securities to evidence loans for
13
non-federal public works, and to exchange such
14
securities for other securities if the Commissioner
15
of Public Works shall dotermine that such exchange
16
is advisable to assure repayment of any loan mde
17
horeunder or interest thereon;
18
(c) To use the sums realized from repayments of the
19
interest on and principal of loans made by it
20
under this section and the proceeds realized from
21
the sale of any securities acquired by it hereunder
22
for the making of further loans for non-federal
23
public works to the extent such procoods are not
24
needed, in the judguant of the Corporation, to
25
mintain the loans for non-federal public works on
26
a self-liquidating basis;
27
(d) To organize under the laws of the District of
28
Columbia or of any state or territory a corporation
29
or corporations to aid the Public Torks Administration
30
1/1 enrrying cut its iunctions hereunder, and to maled
Regraded Unclassified
11
1
loans and advances to any much corporation.
2
Railroad Equipment
3
SEC, 8. Subject to the provisions of this Act, and without regard
is to the limitations and restrictions of the Reconstruction Finance
5 Corporation Act, approved January 22, 1932, as amonded and supplemented,
6 the Corporation shall have power:
7
(a) To prepare plans and designs for the construction,
to
robuilding, or ropair of railroad equipment;
9
(b) To onter into contracts for the construction, re-
10
building, repair, or scrapping of any railroad
11
oquipment upon such terms and conditions as may be
12
agreed upon pursuant to public bidding or private
13
nogotiations;
14
(c) To lease, with or without the option to purchase,
15
or to soll or ront upon ouch terms and conditions
16
as it shall prescribe, any ruilroad equipment 80
17
acquired;
18
(a) To entor into contracts for the purchase of
19
old railroad equipment for the purpose of lease
20
or résale in its crinting stato or for the purpose
21
of rebuilding, repairing, or scrapping the same
22
for lease or resale;
23
(o) To use the proceeds realized from any loases,
24
sales, or other contracts with regard to railroad
25
equipment for carrying on further oporations under
26
this section to the oxtent mich proceeds are not
27
nooded, in the judgmont of the Corporation, to
28
maintain its operation as to railroad equipment
29
on a solf-liquidating basis.
Regraded Unclassified
12
1
(f) To organize under the laws of the District of
2
Columbia or of any state or territory a corporation
3
or corporations to aid the Reconstruction Finance
4
Corporation in carrying out its functions hereunder,
5
and to make loans and advances to any such corporation.
10
Rural Electrification Projects
7
SEC. 9. Subject to the provisions of this Act, the Rural
8 Electrification Administration shall have power:
9
(a) To make loans to finance or aid in financing rural
10
electrification projects;
11
(b) To purchase securities to evidence loans made by
12
it, and use the sums realized from repayments of
13
the interest on and principal of loans made by it
14
under this section and the proceeds realized from
15
the sale of any securities acquired by it hereunder
16
for the making of further loans for rural electrifica-
17
tion projects to the extent such proceeds are not
18
needed, in the judgment of the Corporation, to main-
19
tain the loans for rural electrification on a self-
20
liquidating basis;
21
(c) To exercise the powers granted by this section
22
without regard to the provisions of subdivisions
23
(b), (c), and (d) of section three and the last
24
sentence of section five but subject to the require-
25
ments of section two of the Rural Electrification
26
Act of 1936.
27
Transfer to Rr al Electrification Administration
28
SEC. 10. The Secretary of the Treasury shall pay over and transfer
29 to such special disbursing account or accounts with the Treasurer of the
Regraded Unclassified
13
1
United States as shell be designated by the Secretary of the Treasury
2
under section four of this Act all or any part of any unobligated
balances of such suns heretofore appropriated or available to the
/, Rural Electrification Administration to enable it to carry out the
provisions of the Rural Electrification Administration Act of 1936,
6 and such funds shall therewon be available to the Rural Electrifica-
7 lion Administration for financing or aiding in financing rural electri-
Mostion projects under this Act, in addition to all other moneys
available or to be available for such ourpose under this Act.
10
Rural Security Projects
Il
SEC. 11. Subject to the provisions of this Act, the Socretary
12 of Avriculture shall have power:
13
(+) To undertake and make loans for rurol security
14
projects;
15
(b) To purchase securities to evidence such loans,
16
and use the sums realized from repayments of
17
the interost on and principal of loans made
1"
under this section and the proceeds realized
19
from the sale of any sconrities acquired by
it hermunder for the making of further loans
11
for rural security projects to the extent such
A
proceedo are not needed, in the judgment of the
Comporation, to meintain such loans on a self-
liquidating basin.
Transfer to Socretary of Agriculture
850, 12, The Secretary of the Treasury shall pay over and
transfer to such special disbursing account or accounts with the
Presurer of the United States as shall be designated by the Secretary
of the Treatry under soction four of this Act -11 or any port of
balances of euma herotofore appropriated or avail-
XI
M to the Secretary of Agriculture to enable him to cerry out.
Regraded Unclassified
14
1 the provisions of Title I of the Bankhead-Jones Farm Tenant Act, the
a Emorgency Relief Appropriation Act of 1938, the Work Relief and Public
3 Works Appropriation Act of 1939 and such funds shall thereupon be
4 available to the Secretary of Agriculture for financing or aiding in
5 financing rural security projects under this Act, in addition to all
6 other moneys available or to be available for such purposes under
7 this Act.
B
Disposition of Project Revenues
3
SEO. 13, The Department of Agriculture, the Public Roads Ad-
10 ministration, the Public Works Administration, the Rural Electrifica-
11 tion Administration, and the Corporation shall deposit all revenuss
12 and receipts derived from the works, projects, or undertakings con-
13 structed, lensed, reuted, or sold, or repayments of the interest on,
14 or principal of, all loans made to nid in financing works, projects,
15 01" undertakings, in carrying out their respectivo functions under this
16 Act in R special account or accounts with the Treasurer of the United
17 States to the credit of the Corporation, and all such revenues and
18 receipts shall be used by the Corporation exclusively for the payment
19 of interest on its notes, debentures, bonds, or other obligations irsued
20 for the purpose of carrying out the provisions of this до, n.s. such
21 interest shall becouse due and payable, and for the purchase, retirement
22 or redemption of such notes, debentures, bonds, or other obligations,
23 except to the extent that the Corporation makes such revenues and
24 receipts available for the construction and financing of further works,
25 projects, or undertakings as provided in this Act,
36
Sale of Sucurities
27
SEC. 14. The Corporation shall have the power, with the approval
28 of the Secretary of the Treasury AS to the time of any such sale, to
25 2011 or otherwise dispose of any socurities acquired by any department,
30 administration, or agoncy in carrying out its functions under this
Regraded Unclassified
15
1 Act. and in connection with any such sale to make such contracts and
2 agreements as seem to the Corporation advisable: and all sums
3 realized from the snle of such securities shall be deposited by the
4. Corporation in a special account or accounts with the Treasurer
5 of the United States and shall be used exclusively for the payment of
6 interest on notes, debentures, bonds, or other obligations issued for
7 the purpose of carrying out this Act, as such interost shall becomo due
8 and payable, and for the purchase, retirement, or redemption of such
9 notes, debentures, bonds, or other obligations, except to the extent
10 that the Corporation makes the proceeds of such sales available for the
11 making of further loans as provided in this Act.
12
Availability and Audit of Funds
13
SEC. 15. The departments, administrations, and agencies for which
14 funds shall be provided by the Corporation pursuant to this Act may use
15 such funds for the purpose of carrying out their respective functions
16 under this Act without further appropriation and such funds shall be
17 continuously available for such purposes. Except as to the expenditures
18 of the Corporation which shall be governed by the Reconstruction Finance
19 Corporation Act, approved January 22, 1932, as amonded and supplemented,
20 All such oxpenditures shall be accounted for and audited in accordance
21 with the terms and provisions of the Budget and Accounting Act of 1921,
22 as amonded, the samo as if an appropriate appropriation account had been
23 established therefor pursuant to an appropriation warrant or a covering
24 warrant.
25
Appraisal of Program
26
SEC. 16. The Secretary of the Treasury end the Federal Loan
27 Administrator shall causo an examination to be made annually of the
2g status of the self-liquidating improvement program for the financing
29 of which notes, debentures, bonds, or other obligations of the
30 Corporation shall have been issued under this Act. Such examination
Regraded Unclassified
16
1 shall be made as of the last day of December in each year boginning
2 with December 31, 1940. The Secretary of the Treasury and the
3 Foderal Loan Administrator shall submit a report of such examination
4 to the President and to the Congress. If such examination discloses
5 that the probable recovery of the cost of all works, projects, or
6 undertakings carried out under this Act, and of all loans made to
7 aid in the financing of the same, together with the cash on hand in
8 the special account or accounts of the Corporation provided for by
9 section four of this Act, is loss than the principal amount of all
10 notos, debentures, bonds, or other obligations issued pursuant to
11 this Act, and interest thereon, the Secretary of the Treasury on
12 behalf of the United States shall pay to the Corporation a sum equal
13 to the amount of such difference. There is horeby authorized to be
14 appropriated annually, commencing with the fiscal year 1941, out of
15 any money in the Treasury not otherwise appropriated, a sum equal
16 to the amount needed to enable the Socretary of the Treasury to
17 make such payment. Whenever such examination shall disclose a surplue,
18 the Corporation shall. reimburso the Treasury to the extent of such
19 surplus for the amounts, if any, proviously paid under this section.
20
Duty of Fodoral Agencion
21
SEC. 17. The Department of Agriculture, the Public Roads
22 Administration, the Public Works Administration, the Rural Electrifica-
23 tion Administration, and the Corporation shall exercise their powers
24 under this Act with A view to recovering the cost of the works, projects,
25 or undertakings carried out under this Act, or loans made to aid in
26 financing the same, with interest to be fixed by the Corporation on the
27 date of enactment of this Act and the first day of oach calendar quarter
28 thoreafter, at a rate or ratos which may reasonably be expected to
29 reimburse the Corporation for the cost to it of the capital required
30 for its operations under this Act, having due rogard to the yiold on
Regraded Unclassified
17
1 obligations of the United States of comparable maturity or maturities
2 to that of such loans and the rate and period of amortization of the
3 cost of such works, projects, or undertakings, but not to exceed the
4 multiple of one-eighth of one percent next higher than the highest
5 yield to maturity (based on market prices) on the longest term out-
6 standing issue of obligations of the United States, direct or indirect.
7 For the purposes of this section, the yield on any callable obligation
S selling above par shall be computed to its earliest callable date and
9 said date shall be deemed to be the maturity thereof. Nothing herein
10 shall be construed to require the alteration or readjustment of any
11 rate once the interest has been fixed for any such works, projects,
12 undertakings, or loans.
Regraded Unclassified
18
1
Assistance by Governmental Agencios
2
SEC. 18. Any department, administration, or agency authorised
3 to perform any function under this Act shall have power to utilizo
It the services of fedoral, state, and local agencios and thoir
5 employees and, notwithstanding any other provision of law, to
6 reimburse such agencios and thoir employees for services rondored
7 for such purposes.
8
Exclusive Foderal Jurisdiction Not Required
9
SEC. 19. Notwithstanding the provisions of any other law, the
10 obtaining of exclusive jurisdiction in the United States over real
11 proporty to bo acquired under this Act shall not be required; but the
12 Attorney Goneral may, in such cases and at such times as ho may deem
13 dosirable, secure from the stato in which such real proporty is
14 situated, such jurisdiction, exclusive or partial, over any such real
15 proporty as the Attorney Gonoral may deem dosirable and accept such
16 jurisdiction on behalf of the United States by filing a notice of
17 such acceptance with the Governor of such state or in such other
18 mannor as may be prescribed by the laws of the state within the
19 borders of which such roal property is situated. Unloss and until
20 acceptance of such jurisdiction on bchalf of the United States has
21 boon mado 06 aforoanid, it shall be conclusively presumed that no such
22 jurisdiction has been accepted.
23
Administrative Expenses for the Fiscal Year 1940
24
SEC. 20. Administrative expenses of the dopartments, adminio-
25 trations, agencies of the Government and amounts required to reimburse
26 states, municipalities, and other public bodies and employees thereof
27 for servicos rendered in carrying out the purpose of this Act shall
28 bo paid for the fiscal year onding Juno 30, 1940 from such amounts
29 Gs may, with the approval of the Director of tho Burosu of the
30 Sudget. be resorved from the proceeds realized from the sale of
Regraded Unclassified
19
1 notos, dobentures, bonds, or other obligations of the Corporation
2 for the payment thereof, in addition to the unobligated balancos of
3 sums horotoforo appropriated or authorized to be used for such
la administrative expenses, any provision in this or any other law to
5 the contrary notwithstanding.
6
Saving Clauso
7
SEC. 21, The powers conforred by this Act are in addition and
8 supplemental to the powers conforred by, and shall not bo affocted
9 by the limitations in, any other law; and nothing in this Act shall
10 be construed to limit or in any way curtail the existing powers of
11 any department, administration, or agency of the Government, or the
12 powors conforrod upon the Prosident by the Reorganization Act of
13 1939, approved April 3. 1939, or any reorganization plan heretofore
14 or hereafter transmitted by the President to the Congress which has
15 horetoforo takon effect or which may hereafter take offoct pursuant
16 theroto; and the administration of the provisions of this Act shall
17 be subject to the provisions of such reorganization plans.
18
Appropriations
19
SEC. 22. There is heroby authorized to bo appropriated from
20 time to timo such sume as may be necessary to carry out the provisions
21 of this Act.
22
Export-Import Bank of Washington
23
Sec. 23, Section 9 of the Act approved January 31, 1935 (49
24 Stat. 4), as amended, is hereby further amended, by striking from
35 the provise at the end of the last sentence thereof "$100,000,000"
28 not insurting in lisu thereof $200,000,000."
Regraded Unclassified
SELF-LIQUIDATING INVESTMENT PROGRAM
Private Capital
Sale
of
Service
#
I
Reconstruction Finance
Corporation
#2700 Mil.
$100 Mil,
Maximum Indrease
From Existing
in Bond Issues
Bond Author
Authorized
ization
Flow of investment Funds
Agricultural
R.F.C.
Works
Expert-Impert Bank
Program
R.B. Equipment
Program
Export Trade
Program
#1,100 Mil
Program
$500 MIL
$1,100 Mil
$100 Mil
Parm Security
Rural Electrification
R.R. Equipment
Self - Liquidating
Non- Pederal
Loans
Loans
Construction
Highways, Bridges
Public Works
Toreign Loans
$600 Mil.
$500 Mil
$500 Mil.
4750 Mil.
$350 Mil.
$100 MIL
Repay ments
Reconstruction Finance
Corporation
I
Retirement or Brads
Reinvesements
Bondholders
Regraded Unclassified
The Barkley-Steagall Self-Liquidating Projects Act of
1939, introduced today, would make available the following sums for
the following purposes: Non-Federal public works of a character
which will return to the Federal Government its investment in them,
$350,000,000; self-liquidating express post roads and highway
improvements, 3750,000,000; rolling stock and shop equipment for
lease to railroads, 3500,000,000; rural electrification loans,
$460,000,000, plus $40,000,000 already appropriated; self-liquidating
farm tenancy loans, $500,000,000, plus not more than £100,000,000
of funds already appropriated; loans through the Export-Import Bank,
$100,000,000. Of the sums made available for the first time by
this Act, the President has estimated that the following amounts
would be spent in the current fiscal year: Non-Federal public
works, 3150,000,000; express post roads, $150,000,000; railroad
equipment, $100,000,000; rural electrification, $20,000,000; farm
tenancy loans, $250,000,000. Probably all of the $100,000,000 to
finance foreign trade would be obligated if not disbursed during the
current fiscal year. The purposes for which the money could be
spent are set forth in more detail in section 4.
The Bill would not create any new agency or disturb any
existing authority. The money made available for non-Federal
public works would be handled by the Commissioner of Public Works,
the money for express post roads and other highway improvements
would be made available to the Commissioner of Public Roads,
Regraded Unclassified
- 2 -
money for railroad equipment would be handled by the Reconstruction
Finance Corporation, the Rural Electrification Administration would
receive the money for enlargement of their program, the Department
of Agriculture would handle funds for the farm tenancy program, and
the money for loans to facilitate exports would be made available
to the Export-Import Bank,
All disbursements would be for projects which are self-
liquidating in character. The Bill specifically imposes upon each
operating agency the duty to undertake projects and to make loans
with the aim of recovering for the Federal Government the full
amount invested plus interost sufficient to reimburso the Government
for the cost of the borrowing. The maximum interest rate which
may bo charged by any operating agency on loans under this program
would be limited, however, to the highest yield on the longest
term direct or indircct obligation of the United States which is
then outstanding. At present, this would be approximately 2.3%.
The expectation is that all money paid out will be recouped by
the Federal Government through repayment of public works, rural
electrification, farm tenancy and foreign trade loans, through toll
and other highway revenues and through rontel of railroad equipment.
The self-liquidating character of the program pormits it
to be financed through a mochanism which also is provided in the
Bill introduced today. Because the obligations incurred under the
program will be liquidated by the income from the program itself,
Regraded Unclassified
- 3 -
these obligations may properly be segregated from other public debt
obligations which are in large part dependent upon the Federal tax-
ing power for their ultimate repayment. This principal of segregat-
ing sclf-liquidating obligations of the Federal Government was
ostablished in the creation of the Reconstruction Finance Corporation
in 1932.
Therefore, to provide the funds for the program the amount
of obligations which the Reconstruction Finance Corporation is
authorised to have outstanding at any one time would be increased
by $2,700,000,000. This authorization would cover the $2,560,000,000
made svailable for the first time by this Bill plus not more than
3100,000,000 of the money alroady appropriated for farm tenancy loans
and the 940,000,000 already appropriated for rural eloctrification
advances. Those latter two appropriations, already made, would be
financed through the now nochanism to avoid any artificial division
between the sources of moncy available for these two programs.
The Reconstruction Finance Corporation also would be
authorized to issue obligations having maturities up to 40 years
80 that the socurities issued to finance the program may bear
a proper relation to the life and amortization period of the in-
provoments being financod. At present the Reconstruction Finance
Corporation can not issue obligations having a maturity of more
than five years.
Regraded Unclassified
- 4 -
All revenues and loan repayments collected under the
program are required by the Bill to be deposited with the Treasurer
of the United States for the account of the Reconstruction Finance
Corporation. The Corporation can use this money to rodoom the
obligations which it has issued or it can uso the repayments as
& revolving fund to finance additional projects.
To make doubly suro that the program will be continually
solvent, the Socretary of the Trensury and the Foderal Loan
Administrator would be instructed by the Act to appreiso annually
the assets acquired by the various oporating agencios. To the
extent, if any, that this examination indicatos that the program
will not be self-liquidating, the Socretary of the Treasury must
secure from Congress an appropriation for the account of the
Reconstruction Finance Corporation. Thus, if any losses accrue,
they will be charged off currontly, and the Corporation will at
all times have cash, current revenues and prospoctive income
sufficient to service the indebtodness incurred for the program and
to retire that indobtodness as it moturcs. Conversely, if there
is any surplus, it will be used to reimburse the Treasury for any
advances the Treasury has made.
Regraded Unclassified
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
Secretary Morgenthau
TO
E. H. Foley, Jr.
FROM
Statement for the Secretary's Diary
At the Secretary's suggestion, Foley end McReynolds "walked" to the
White House the draft of the legislation approved by Jesse Jones to carry out
the program outlined in the President's letter to Senator Byrnes of June 21,
at 4:45 p.m., Friday, July 7. After waiting for about fifteen minutes with
General Watson, Foley and McReynolds were asked to come into the President's
office. Foley told the President that he was sorry to have given him BD much
worry in connection with the preparation of the legislation. The President
rewarked that it wasn't Foley's fault, and appreciated the difficulties Foley
had encountered. The President seked Foley to explain the Bill. Foley
pointed out that he had attempted to redraft the legislation precisely as the
President had indicated on July 5, namely, to eliminate the financing corpora-
tion and substitute the RFC in its stead. Foloy handed the President the
section-by-section summary of the Bill, which the President read aloud, asking
an occasional question. When he had concluded, the President said the Bill was
in excellent shape, end was just what he wanted. The President asked Foley to
get the Bill up to Senator Barkley that evening, M the Senator wanted to take
it with him to Kentucky over the week-end to read. The President also requested
Foley to get copies of the legislation to Congressmon Steagall and Rayburn 56
Boon as possible.
Regraded Unclassified
68
- 2 -
The President chided McReynolds and Rudolph Forster about McReynolds'
new duties at the White House. When the President asked Forster what he thought
about Mr. McRaynolds coming to the White House to help him set up the adminis-
trative procedure for the new White House assistants, Forster said that it would
please him very much.
The President asked Foley what he thought the effect of Jesse Jones
being the loan administrator would have on the execution of the RFC part of the
proposed self-liquidating program under the management of Emil Schrem. Foley
informed the President that there was no reason to believe that Jesse Jones
as head of the loan agency would not dominste Emil Schram as Chairman of the
RFC just as much as Jesse Jones as Chairman of the RFC dominated Emil Schrem
as Director of the RFC. The President replied that the Federal Loan Adminis-
trator was not mentioned specifically any where in the Bill. Foley pointed out
that this was not quite accurate, since the Federal Loan Administrator was
mentioned along with the Secretary of the Treasury as one of the two people
to make the annual appraisal of the assets of the RFC under the program.
The President seemed satisfied with this explanation, and expressed the
hope that Rmil Schram would assert his independence.
The President seemed in good spirits, although he WRB quite business-
like. The President thanked McReynolds and Foley for the work they had done
in the preparation of the legislation.
E.N.th
Regraded Unclassified
69
Conference held in the Office of the Secretary, July 7, 1939,
at 11:00 A.K.
Present: Mr. Dickerman of the National Locomotive Works
Mr. C. J. Hardy, President of the American Car &
Foundry Company
Mr. L. B. Currie and Mr. White
The Secretary stated that he was interested in getting the
views of Mr. Hardy and Mr. Dickerman, as men with considerable
practical experience with the railroad equipment problem, as to
the most effective way of inducing the railroads to acquire more
equipment. He said that on this matter there apparently were two
schools of thought in Washington; one believed that more could be
accomplished through leasing of equipment, and the other favored
lending the railroads the funds with which to purchase equipment.
The Secretary said he would like an expression of their views as
to which of the two methods they thought would be the more effec-
tive.
Mr. Dickerman began by taking up in some detail the status
of railroad equipment but the Secretary indicated that he was not
a railroad man and didn't wish to attempt to learn the details of
railroading but was simply interested in getting their views on
the particular proposal being recommended in the bill.
Both Mr. Dickerman and Mr. Hardy were a little vague as to
the merite of the respective methods but seemed inclined to the
belief that the goyernment could be most helpful by participating
in the risk of loans to be extended by banks or by equipment
companies.
When pressed for specific comments as to whether or not the
railroads were in need of any new equipment, they emphatically
stated that most of the railroads did need and should have more
new equipment. They also admitted that theirs was one of the most
depressed industries and that the government should attempt to
stirulate the demand for new locomotive and freight cars.
The Secretary suggested that they go to Mr. White's office
and discuss the matter in further detail with Mr. Currie and
Mr. White and make whatever suggestions or recommendations they
felt would make the proposal effective.
Regraded Unclassified
70
- 2 -
Subsequently (in Mr. White's office) they carefully went over
the part of the bill that related to railroad equipment. They ex-
pressed concern lest the bill be interpreted as a device to
extend the government control over railroads and wished some clause
to be inserted which would assure the public that such was not the
intention of the bill. They later submitted a suggestion in writing
which was turned over to the Legal Department for consideration.
SELF-LIQUIDATING INVESTMENT PROGRAM
Private Capital
Gi
I
+
Reconstruction Finance
Corporation
$2,700 Mil.
$100 Mil.
Maximum Increase
From Existing
in Bond lesues
Bond Author
Authorized
ization
Flow of investment Funds
Agricultural
R.F.C.
Works
Export-Impert Bank
Program
R.R. Equipment
Program
Expert Trade
Program
Program
#L100 Mil.
8500 Mil.
$1,100 Mil
$100 Mil
Farm Security
Rural Electrification
2 .R. Equipment
Self- Liquidating
Non- Federal
Loans
Loans
Construction
Righways, Dridges
Public Works
Poreign Loans
$600 Mil
#500 Mil
1500 MII
8750 Mil.
$350 Mil
$100 MIL
Repeyments
Reconstruction Finance
Corporation
[
I
Retirement -- Bonde
les Renveschents
Bondholders
Regraded Unclassifi
72
The Barkley-Steagall Self-Liquidating Projects Act of
1939, introduced today, would make available the following sums for
the following purposes: Non-Federal public works of a character
which will return to the Federal Government its investment in them,
$350,000,000; self-liquidating express post roads and highway
improvements, 3750,000,000; rolling stock and shop equipment for
lease to railroads, $500,000,000; rural electrification loans,
$460,000,000, plus $40,000,000 already appropriated; self-liquidating
farm tenancy loans, $500,000,000, plus not more than $100,000,000
of funds already appropriated; loans through the Export-Import Bank,
$100,000,000. Of the sums made available for the first time by
this Act, the President has estimated that the following amounts
would be spent in the current fiscal year: Non-Federal public
works, $150,000,000; express post roads, $150,000,000; railroad
equipment, $100,000,000; rural electrification, $20,000,000; farm
tenancy loans, $250,000,000. Probably all of the $100,000,000 to
finance foreign trade would be obligated if not disbursed during the
current fiscal year. The purposes for which the money could be
spent are' set forth in more detail in section 4.
The Bill would not create any new agency or disturb any
existing authority. The money made available for non-Federal
public works would be handled by the Commissioner of Public Works,
the money for express post roads and other highway improvements
would be made available to the Commissioner of Public Roads,
Regraded Unclassified
- 2 -
73
money for railroad equipment would be handled by the Reconstruction
Finance Corporation, the Rural Electrification Administration would
receive the money for enlargement of their program, the Department
of Agriculture would handle funds for the farm tenancy program, and
the money for loans to facilitate exports would be made available
to the Export-Import Bank.
All disbursements would be for projects which are self-
liquidating in character. The Bill specifically imposes upon each
operating agency the duty to undertake projects and to make loans
with the aim of recovering for the Federal Government the full
amount invested plus interost sufficient to reimburse the Government
for the cost of the borrowing. The maximum interest rate which
may be charged by any operating agency on loans under this program
would be limited, however, to the highest yield on the longest
term direct or indirect obligation of the United States which is
then outstanding. At present, this would be approximately 2.3%.
The expectation is that all money paid out will be recouped by
the Foderal Government through repayment of public works, rural
electrification, farm tenancy and foreign trade loans, through toll
and other highway revenues and through rental of railroad equipment.
The self-liquidating character of the program permits it
to be financed through a mochanism which also is provided in the
Bill introduced today. Because the obligations incurred under the
program will be liquidated by the income from the program itself,
Regraded Unclassified
74
- 3 -
these obligations may properly be segregated from other public debt
obligations which are in large part dependent upon the Federal tax-
ing power for their ultimate repayment. This principal of segrogat-
ing sclf-liquidating obligations of the Federal Government was
established in the creation of the Reconstruction Finance Corporation
in 1932.
Therefore, to provide the funds for the program the amount
of obligations which the Roconstruction Finance Corporation is
authorized to have outstanding at any one time would be increased
by $2,700,000,000. This authorization would cover the $2,560,000,000
made available for the first time by this Bill plus not more than
$100,000,000 of the money alroady appropriated for farm tenancy loans
and the $40,000,000 already appropriated for rural electrification
advances. These latter two appropriations, already made, would be
financed through the now mechanism to avoid any artificial division
between the sources of moncy available for these two programs.
The Reconstruction Finance Corporation also would be
authorized to issue obligations having maturities up to 40 years
so that the socurities issued to finance the program may bear
a proper rolation to the life and amortization period of the im-
provoments being financed. At present the Reconstruction Finance
Corporation can not issue obligations having a maturity of more
than five years.
Regraded Unclassified
75
- 4 -
All revenues and loan repayments collocted under the
program are required by the Bill to be deposited with the Treasurer
of the United States for the account of the Reconstruction Finance
Corporation. The Corporation can uso this money to rodeem the
obligations which it has issued or it can use the repayments as
a revolving fund to finance additional projects.
To make doubly sure that the program will be continually
solvent, the Secretary of the Treasury and the Fodoral Loan
Administrator would bo instructed by the Act to appraiso annually
the assets acquired by the various oporating agencies. To the
oxtent, if any, that this examination indicates that the program
will not be self-liquidating, the Sccretary of the Treasury must
socure from Congross an appropriation for the account of the
Reconstruction Finance Corporation. Thus, if any losses accrue,
they will be charged off currently, and the Corporation will at
all timos have cash, current revenues and prospoctive income
sufficient to orvice the indebtodness incurred for the program and
to rotire that indobtodness 05 it matures. Conversely, if there
is any surplus, it will be used to reimburse the Treasury for any
advances the Treasury has made,
Regraded Unclassified
76
DRAFT OF BILL FOR
SELF-LIQUIDATING PROJECTS ACT OF 1939
July 8, 1939
Summary by Sections of the Draft of 3111 to Carry out the
Self-Liquidating Program.
Section 1 provides that then enacted the bill may be cited as the
"Self-Liquidating Projects Act of 1939."
Section 2 provides that the Reconstruction Finance Corporation
shall issue its notes or other obligations upon the direction of the
President to finnnce the self-liquidating improvement program to be
carried on by the Department of Agriculture, the Public Roads Adminis-
tration, the Public Works Administration, the Rural Electrification
Administration, as woll es by the Reconstruction Finance Corporation
itself.
Cection 3 provides that the Reconstruction Finance Corporation Act
shall apply to such notus 01' other obligations, except that the naturity
may be forty years, ar? increases vito amount which may be outstanding
under oxisting law to $2,560,000,000, plus unobligated balancus of present
appropriations available to the Department of Agriculture and to the
Rural Electrification Administration. The purpose of this latter pro-
vision is to avoid duplication of the program.
Section 4 providos for to proceeds of such notes and other obliga-
tions to be deposited -1th the Tressurer of the United States and disbursed
to the agoncies carrying out the program in amothits indicated by the
Prosident's letter to Sumator Syrnes of June 21, 1939.
Section 5 authorizes the Public Roade Administration, in cooperation
with state agencies, to carty out A program of highway improvements 1A-
cluding toll roads, b:1d,es, tunnels, express by-passes anó the acquisition
of adjacent land for investment purposes. This section also confore
powers ensection to the prompt and effective execution of the program
contemplated in the regort of the Dureau of Public Roads Ented April 27,
1939, and published as House Document No. 372, 76th Congress, First Session.
Provision is made for the Attorney General to handle all condemnation
proceedings under the General Condemnation Act or under the 1931 Act per-
citting possession to be taken by the Government upon filing of a declare-
tion of taking.
Section 6 provides that no further consent of Congress need be re-
quired before bridges or tunnéls may be built асгорь navigable waters
notwithstanding that suda waters may not be wholly within a single state,
but requires that the sproval of the Secretary of Tar to the plans and
specifications be obtained in accordance with the General Bridge Act.
Section ? authorizes the Public Worke Administration to make loans
for projects of the curracter which it has heretofore financed and con-
tains powers deemed desirable in the light of the experience of that
Administration.
Section 8 authorizes the Reconstruction Finance Corporation to enter
into contracts for the construction of rolling stock and shop equipment
for railroads solling or leasing the same with or without the option
to purchase. Provision le also cade for the purchase of 210 rolling stock
and equipment for scraping or rebuilaing
Regraded Unclassified
2
Section 0 authorizes the Rural Electrification Administration to malce
lonns to finance projects of the character it is authorized to finance
under the Rural Electrification Act of 1936 and eliminates restrictive
provisions in that Act which would militate against an effective program.
This section preserves, however, the prohibition in the Rural Electrification
Act against the financing of competitive facilities,
Section 10 relates to the $40,000,000 appropriation made at this session
of Congress for Rural Electrification projects for the fiscal year 1940, and
authorizos the Secretary of the Treasury to transfer the unobligated balances
of approprintions previously made to the Rural Electrification Administration.
This section makes an equal amount available to the Administration for fi-
nancing projects under the bill.
Section 11 authorizes the Secretary of Agriculture to make loans to
farm tenants, share-croppers and migratory formers for the purposes provided
in the Bankilead-Jones Farm Tenant Act.
Section 12 authorizes the Secretary of the Treasury to transfer the
unobligated balance of appropriations previously made to the Secretary of
Agriculture to carry out the Bankhead-Jones Farm Tonant Act and supplemental
legislation, This section makes available to the Secretary of Agriculture
an equal amount for loans under the bill. This section relates to an esti-
nated balance of $100,000,000 presently available for loans for such purposes
by the Secretary of Agriculture,
Section 13 provides that all revenues of the agencies charged with
administering the bill which are derived from projects constructed or
finnnced unior the bill shall be deposited with the Treasurer of the United
States to the credit of the Reconstruction Finance Corporation and requires
the Corporation to use such revenues to pay the notes and other obligations
iscied to finance the program, together with interest thereon, except to
the extent that the Corporation males part of such revenues available as a
revolving fund for further projects if there in any surplus available for
moh purpose.
Section 14 authorizes the Reconstruction Finance Corporation to sell
vecurities acquired as evidence of loans nade by any agency under the bill and
to use much procode as a revolving fund for further loans after providing
for the payment of the interest on and principal of its Notes and other
obligations issued under the bill.
Section 15 makes available funds provided by the Reconstruction Finance
Corporation to the agencies charged with carrying out the self-liquidating
program without any further appropriation for expenditures under the bill, and
requires that all rich expendivures shall be accounted for and audited by the
General Accounting Office.
Section 16 provides that the Secretary of the Treasury and the Federal
Long Administrator shall make an annual examination of the status of the
program and report the results to the President and to the Congress. This
section also provides to the extent that it absents that the program may not
to on e basis the Secretary of the Treasury shall pay the
Reconstruction Finance Corporation any ustimated deficiency, an appropriation
DE which 14 minorized.
Regraded Unclassified
a
Section 17 imposes & duty upon every agency constructing or
financing projects under the program to undertake projects and make
loans with a view to recovering the amount invested with interest suf-
ficient to reimburse the Reconstruction Finance Corporation for the cost
to it of the capital required for its operations under the bill. This
section also places a coiling on the interest rate at the highest yield
on the longest term, direct or indirect, obligation of the United States
which is outstanding.
Section 18 provides that the services of Federal, state, and local
agencies DAY be utilized and that reimbursement may be made for such
services.
Section 19 dispenses as to real property acquired under the bill
with the requirement of existing law that the United States must acquire
exclusive jurisdiction over real property and empowers the Attorney General
to determine how much jurisdiction is desirable.
Section 20 provides that administrative expenses for the fiscal year
1940 shall be paid from the proceeds of notes and other obligations issued
by the Reconstruction Finance Corporation in amounts to be fixed by the
Director of the Bureau of the Budget.
Section 21 provides that the Act confers only cumulative powers
and that nothing in it shall be construed to affect the operation of any
reorganication plan prosulgated pursuant to the Reorganization Act.
Section 22 contains the upual provision authorizing appropriations
of such sums se may be necessary to carry out the provisions of the bill.
Unless an impairment should be found after the annual appraisal required
by section 16, none will be required except for administrative expenses.
Section 23 increases the amount of loans for financing and facilitat-
ing exports which the Export-Import Bank of Washington is authorized to
have outstanding st any one time from $100,000,000.00 to $200,000,000.00.
Regraded Unclassified
A BILL
To provide for the construction and financing of
self-liquidating projects, and for other purposes.
1
Be it enacted by the Senate and House of Representatives of the
2 United States of America in Congress assembled, that this Act may be
3 cited as the "Self-liquidating Projects Act of 1939."
4
Authorization of Bonds
NM
SEC. 2. In order to provide a sound method of financing which,
6 without burdening the national taxing power, will make it possible
7 to increase employment through a self-liquidating improvement
8 program, the Reconstruction Finance Corporation (herein called the
9 "Corporation"), upon the direction of the President, shall issue from
10 time to time notes, debentures, bonds, or other obligations to enable
11 the Department of Agriculture, the Public Roads Administration, the
12 Public Works Administration, the Rural Electrification Administration,
13 and the Corporation to carry out their respective functions as herein-
14 after provided.
15
Provisions Concerning Bonds
16
SEC. 3. The provisions contained in the Reconstruction Finance
17 Corporation Act, approved January 22, 1932, 0.9 amended, shall apply
18 to the notes, debentures, bonds, or other obligations issued to
19 carry out the provisions of this Act, except that
20
(a) Such notes, debentures, bonds, or other
21
obligations may mature at such time or times,
22
not exceeding forty years from their date,
23
and contain and be subject to such terms,
24
covenants, and conditions as the Corporation,
25
with the approval of the Secretary of the
Regraded Unclassified
2
1
Treasury, may prescribe; and
2
(b) The amount of notos, dobentures, bonds, or
other obligations which the Corporation may
4
issue and have outstanding IT. any one timo
under existing law is h reby increased by the
amount thereof directed to be issued by the
President, not to exceed 2,560,000,000, plus
--
an amount equal to the amount of unobligated
9
balances of appropriations transferred under
10
sections ten and twelve of this Act.
1L
Disposition of Bond Proceeds
12
SEC. 4. The Corporation is hereby authorized and directed to
13 doposit all proceeds realized from the sale of notes, debentures,
14 bonds, and other obligations issued for the surpose of carrying out
15 this Act, with the Treasurer of the United States to the credit of the
16 Corporation. The Treasurer of the United States ia hereby authorized
17 and directed to receive such moniy's and hold the same in n. soecial
12 account or accounts to the crodit of the Corporation, and to transfer
by from time to time such amounts as the Corporation, upon the direction
20 of the President, shall order to such special disbursing accounts with
21 acid Treosurer as the Secretary of the Treasury shall designate, in order
22 to provide funds for the following departments, administrations, and
23 agencies of the Government in not to exceed the following amounts for
24 the following purposes, in addition to sums available for such gurposes
25 from tolls and charges collected from the repayments of the interest on
26 and principal of loans made, and from the salo of securities acquired,
27 under this Act:
28
(1) To the Public Roada Administration: the sum
29
of 750,000,000 for post-roads, highways,
30
parkways (in cooperation with the National
Regraded Unclassified
3
1
Park Service of the Department of the Interior),
2
grade-crossings, underpasses, overpasses, viaducts,
3
bridges, and tunnels, including crossings over
4
or under navigable waters, and other transporta-
5
tion facilities, including works, undertakings,
6
or projects incidental thereto or to encourage
7
the use thereof, and all or any part of any of
to
such facilities and appurtenances thereto, such
9
as lands, rights in lands, rights of access,
10
casements, buildings, equipment, and machinery
11
(herein called "highway improvements"), as
12
provided in section five of this Act and
13
property acquired for investment purposes as
14
provided in said section;
15
(2) To the Public Works Administration: the sum
16
of $350,000,000 for projects of the character
17
heretofore financed by loan or grant or both
18
by the Federal Emergency Administration of
19
Public Works under Title II of the National
20
Industrial Recovery Act, the Emergency Relief
21
Appropriation Act of 1935, the Emergency
22
Relief Appropriation Act of 1936, the Public
23
Works Administration Extension Act of 1937,
24
and the Public Works Administration Appropriation
25
Act of 1938 (herein called the "non-federal
26
public works"), as provided in section seven
27
of this Act;
28
(3) To the Corporation: the sum of $500,000,000
29
for engines, locomotives, tendors, freight
30
and passenger care of all types and classes,
Regraded Unclassified
4
1
and parts thereof and appurtenances thereto
and other rolling stock and railway shop equip-
ment (herein called "railroad equipment"),
4
as provided in section eight of this Act;
5
(4) To the Rural Electrification Administration:
6
$500,000,000 for projects of the character
7
heretofore financed or authorized to be financed
il
or carried on by the Rural Electrification
9
Administration under the Rural Electrification
10
Act of 1936 (herein called "rural electrification
11
projects"), as provided in section nine of this
12
Act;
13
(5)
To the Department of Agriculture: $600,000,000
14
for facilities for farm tenants, farm laborers,
15
share croppers, and other individuals who obtain,
16
or who have in the past obtained, the major
17
portion of their income from farm operations,
18
including rural rehabilitation loans, projects
19
for the provision of additional water facilities,
20
and farm tenant loans as provided for in Title I
21
of the Bankhead-Jones Farm Tenant Act, approved
22
July 22, 1937 (herein called "rural security
23
projects"), as provided in section eleven of
24
this Act.
25
Highway Improvements
26
SEC. 5. Subject to the provisions of this Act, and using in such
27 connection states, municipalities, and other public bodies to the fullest
28 extent consistent with sound administration and economical management,
29 the Public Roads Administration shall have power:
30
(a) To construct, reconstruct, alter, extend,
Regraded Unclassified
5
1
enlarge, improve, repair, and acquire highway
2
improvements with a view to promoting interstate
3
commerce, aiding in the national defense,
4
facilitating the use of the mails, or promoting
5
the general welfare;
6
(b) To maintain and operate highway improvements;
7
(c) With the approval of the Corporation, to fix,
:
maintain, and collect tolls, and other charges
9
for the use of highway improvements which shall
10
be sufficient (after making reasonable allowances
11
for operation and maintenance expenses for
12
depreciation to the extent not provided for by
13
amortization, and contingencies) to amortize the
14
cost of such highway improvements with interest
15
as hereinafter provided;
16
(d) To use for further highway improvements the
17
revenues derived from such collections to the
1.
extont not needed in the judgment of the
19
Corporation to must reasonable allowances for
20
operation and maintenance expenses or for the
21
amortization of the cost of highway improvements
22
with interest as hereinafter provided, or for
23
depreciation to the extent not provided for by
24
amortization, and contingencies;
25
(e) To acquire in the name of the United States
26
by gift, purchase, exchange, or by the exercise
27
of the power of ominent domain or otherwise, and
28
to hold, loase (as lossor with or without the
29
option to purchase, or DS lersee), use, soll,
Я
exchange or otherwise dispose of real property
Regraded Unclassified
6
1
necessary or convenient for carrying out any of
2
its functions herounder in connection with
3
highway improvements or in connection with any
4
construction undertaken in accordance with the
5
Federal Highway Act, as amended and supplemented;
6
(f) In connection with any sale or lease to
7
any state, municipality, or other public body
oa
to enter into such contracts and agreements as
9
the Commissioner of Public Roads may deem do-
10
sirable, which contracts and agreements may in-
11
clude provisions for deducting from the unpaid
12
portion of the sale price, rontal payments, or
13
loans, an mount equal to any profit which the
14
Corporation may determine to have been realized
15
from the sale of adjacent property acquired
16
pursuant to subsection (g) of this section:
17
(g) To acquire by purchase, but not by condemnation
18
for investment purposes, any real property in
19
the vicinity of any highway improvements or
20
Federal-aid construction if, in the opinion of
21
the Commissioner of Public Roads and the
22
Corporation the price at which such real property
23
may be purchased is such as to make it probable
24
that the United States will, as a result of
Regraded Unclassified
7
1
appreciation in land values resulting from any
highway improvement or Federal-aid construction,
be ablo to dispose of such property, within
4
twenty years, at such a price as to result in a
5
profit; and to sell any such real proporty at
public sale after advertisement and competitive
bidding and upon such other terms and conditions
as the Commissioner of Public Roads and the
D
Corporation may in their judgment deem in the
10
public interest;
11
(h) To expend moneys for the purpose for which any
12
real property has been purchased, or possession
13
thereof has been taken during the courso of
14
condemnation proceedings and in advance of final
15
judgment thereon, in domolishing existing
16
structures thereon, in improving such real
17
property in any way, or in constructing any high-
13
why improvem thereon, notwithstanding the
by
provisions of section 355 of the Revined Statutes,
20
or any other law restricting the expenditure
21
of public moneys upon real property, the title
22
to which has been acquired by the United States;
23
(1) To prescribe and publish such rules and regula-
24
tions for tho proper government and protection
25
of, and maintenance of good order on, highway
26
improvements or adjacent real property of the
27
authority, wilful violation of which shall be
28
punishable by a fine of not moro than 3500 or
29
imprisonment for not more than three months, or
30
both; and to authorize employees of any department
⑈
Regraded Unclassified
8
1
of the government, with the consent of the hoad of
2
such department, to nake arrosts for the violation
3
of such rules and regulations, and any person 90
arrosted shall be takon before the nearest United States
5
Commissionor within whose jurisdiction the highway
6
improvement is located for trial: and upon sworn in-
7
formation by any competent person any United States
8
Commissioner in the propor jurisdiction shall issue
9
process for the arrest of any person charged with viola-
10
tion of such rules and regulations; but nothing horein
11
contained shall be construed as proventing the arrest
12
by an officer, agent, or employee of any public body,
13
with or without process, of any person for the viola-
14
tion of any state or local law, ordinance, or regulation,
15
for the government and protoction of, and maintenance of
16
good order on highway improvements, and any porson DO
17
arrested shall be triod and punished according to the
18
lava of said stato;
19
(a) To instituto and carry on, under the direction of the
20
Attorney General, condemnation procoodings for the pur-
21
pose of taking any real property (which term includes
22
for purposes of this Act property devoted to another pub-
23
lic use, landa under mater, water rights, incorporeal
24
hereditaments, chattels real, and nll rights and interests
K/
in land, whether fees simple absoluto or any lossor
26
interest) in the manner or modo of procedure provided
27
by an not entitled "An Act to authorize condemnation
25
of land for aites of public buildings, and for other
29
purposes", approved August 1, 1888, ne emended,
9
1
or of an act entitled, "An Act to expedite
2
the construction of public buildings and
3
works outside of the District of Columbia by
4
enabling possession and title of sites to be
5
taken in advance of final judgment in proceed-
6
ings for the acquisition thereof under the power
7
of eminont domain", approved February 26, 1931,
to
as amended;
9
(k) To enter on any real property for the purpose
10
of making surveys, borings, tests, and examinations;
11
(1) To pay all expenses in connection with the ac-
12
quisition of real property, including all foes for
13
abstracts, official certifications, cvidences of
14
title, and recordation, notwithstanding the
15
provido in section one of the Act of March 2,
16
1899, relating to the payment of such expenses
17
and fees.
15
Crossings on Navigable Waters
19
SEC. 6. The consent of Congress to the construction, reconstruc-
20 tion, or acquisition by the Public Roada Administration of any bridge,
21 tunnol, or other crossing over, under, or across any navigable waters
22 of the United States, under this Act shall be deemed to have been
23 obtained and affirmatively authorized by virtue of this Act within
24 the meaning of sections nine, ten, and eleven of the Act of March 3,
25 1899. as amended, whether or not such structures cross rivers and other
26 waterways the navigable portions of which lio wholly within the limits
27 of a single state: but no such structure shall be constructed, recon-
28 structed, or maintained under this Act unless and until all the
29 limitations, restrictions, und other provisions of an act ontitled,
30 "An Act to regulate the construction of bridgos ovor navigable waters",
Regraded Unclassified
10
1 approved March 23, 1906, as amended, except the provisions of section
2 six thereof, shall have been complied with by said Administration,
3
Non-Federal Public Works
4
SEC. 7. Subject to the provisions of this Act, the Public Works
5 Administration shall have power:
6
(a) To make loans to finance or aid in financing
7
the construction, reconstruction, extension, or
8
improvement of non-federal public works; and for
9
the temporary operation of any such non-federal
10
public works for such period ELB the Commissioner
11
of Public Works shall deem necessary;
12
(b) To purchase securities to evidence loans for
13
non-federal public works, and to exchange such
14
securities for other securities if the Commissioner
15
of Public Worlts shall detarmine that such exchange
16
is advisable to assure repayment of any loan made
17
hereunder or interest thereon;
16
(c) To use the sums realized from repayments of the
19
interest on and principal of loans made by it
20
under this section and the proceeds realized from
21
the sale of any securities acquired by it herounder
22
for the making of further lonns for non-federal
23
public works to the extent such proceeds are not
24
needed, in the judgment of the Corporation, to
25
mintain the loans for non-federal public works on
26
a self-liquidating basis;
27
(d) To organize under the laws of the District of
26
Columbia or of any state or territory a corporation
20
or corporations to aid the Public Works Administration
10
in carrying out itm functions hereunder, and to make
Regraded Unclassified
11
1
loans and advances to any such corporation.
2
Railroad Equipment
3
SEC. 8. Subject to the provisions of this Act, and without regard
4 to the limitations and restrictions of the Reconstruction Finance
5 Corporation Act, approved January 22, 1932, as amonded and supplementod,
6 the Corporation shall have power:
7
(a) To preparo plans and designs for the construction,
g
robuilding, or repair of railroad equipment;
9
(b) To enter into contracts for the construction, ro-
10
building, repair, or scrapping of any railroad
11
oquipment upon mich terms and conditions as may be
12
agroed upon pursuant to public bidding or private
13
nogotiations;
14
(c) To lease, with or without the option to purchase,
15
or to soll or rent upon such terms and conditions
16
as it shall prescribe, any railroad equipment so
17
acquired:
18
(d) To enter into contracts for the purchase of
19
old railroad equipment for the purpose of lease
20
or resale in its oxisting state or for the purpose
21
of rebuilding, repairing, or scrapping the samo
22
for lease or resale:
23
(c) To use the proceeds realized from any loases,
24
salos, or other contracts with regard to railroad
25
equipment for carrying on further operations under
26
this section to the extent such proceeds are not
27
nooded, in the judgmont of the Corporation, to
25
maintain its operation as to railroad equipment
29
on a solf-liquidating basis.
12
1
(f) To organize under the laws of the District of
2
Columbia or of any state or territory a corporation
3
or corporations to aid the Reconstruction Finance
4
Corporation in carrying out its functions hereunder,
5
and to make loans and advances to any such corporation.
6
Rural Electrification Projects
7
SEO. 9. Subject to the provisions of this Act, the Rural
8 Electrification Administration shall have power:
9
(a) To make loans to finance or aid in financing rural
10
electrification projects;
11
(b) To purchase securities to evidence loans made by
12
it, and use the sums realized from repayments of
13
the interest on and principal of loans made by it
14
under this section and the proceeds realized from
15
the sale of any securities acquired by it hereunder
16
for the making of further loans for rural electrifica-
17
tion projects to the extent such proceeds are not
18
needed, in the judgment of the Corporation, to main-
19
tain the loans for rural electrification on a self-
20
liquidating basis;
21
(c) To exercise the powers granted by this section
22
without regard to the provisions of subdivisions
23
(b), (c), and (d) of section three and the last
24
sentence of section five but subject to the require-
25
ments of section two of the Rural Electrification
26
Act of 1936.
27
Transfer to Rral Electrification Administration
38
SEC. 10, The Secretary of the Treasury shall pay over and transfer
29 to such special disbursing account or accounts with the Treasurer of the
13
1 United States as shall be designated by the Secretary of the Treasury
2 under section four of this Act all or any part of any unobligated
3 balances of such suns heretofore appropriated or available to the
/, Surul Electrification Administration to enable it to carry out the
5 provisions of the Rural Electrification Administration Act of 1936,
5 and such funds shall thereupon be available to the Rural Electrifica-
D tion Administration for financing or aiding in financing rural electri-
1 fication projects under this Act, in addition to all other moneys
+ available or to be available for such purpose under this Act.
10
Rural Security Projects
11
SEC. 11. Subject to the provisions of this Act, the Secretary
12 of Agriculture shall have power:
13
(a) To undertake and make loans for rural security
14
projects;
15
(b) To purchase securities to evidence such loans,
16
and use the suns realized from repayments of
17
the interest on and principal of loans made
19
under this section and the proceeds realized
19
from the sale of any securities acquired by
DO
it hereunder for the making of further loans
21
for rural security projects to the extant such
22
proceeds are not needed, in the judgment of the
PO
Corporation, to maintain such loans on a self-
liquidating basis.
35
Transfer to Secretary of Agriculture
26
SEC. 12, The Secretary of the Treasury shall pay over and
2) transfer to such special disbursing account or accounts with the
26 Treasurer of the United States an shall be designated by the Secretary
29 of the Treasury under section four of this Act all or any part of
3) any inobligated balances of sume heretofore appropriated or avail-
11 able to the Secretary of Agriculture to enable him to cerry out
Regraded Unclassified
14
1 the provisions of Title I of the Bankhead-Jones Farm Tenant Act, the
2 Emergency Relief Appropriation Act of 1938, the Work Relief and Public
3 Works Appropriation Act of 1939 and such funds shall thereupon be
4 available to the Secretary of Agriculture for financing or aiding in
5 financing rural security projects under this Act, in addition to all
6 other moneys available or to be available for such purposes under
7 this Act.
8
Disposition of Project Revenues
9
SEC. 13. The Department of Agriculture, the Public Roada Ad-
10 ministration, the Public Works Administration, the Rural Electrifica-
11 tion Administration, and the Corporation slvill deposit all revenues
12 and receipts derived from the works, projects, or undertakings con-
13 structed, lensed, rented, or sold, or repayments of the interest on,
14 or principal of, all loans made to aid in financing works, projects,
16 or undertakings, in carrying out their respoctive functions under this
16 Act in a special account or accounts with the Treasurer of the United
17 States to the credit of the Corporation, and all such revenues and
18 receipts shall be used by the Corporation exclusively for the payment
10 of interest on its notes, debentures, bonds, or other obligations issued
30 for the purpose of carrying out the provisions of this Act, BB such
81 interest shall become due and payable, and for the purchase, retirement
22 or redemption of such notes, debentures, bonds, or other obligations,
23 excopt to the extent that the Corporation makes such revenues and
24 receipts available for the construction and financing of further works,
25 projects, or undertakings as provided in this Act.
26
Sale of Securities
27
SEC. 14. The Corporation shall have the power, with the approval
28 of the Secretary of the Treasury as to the time of any such sale, to
29 0011 or otherwise dispose of any accurities acquired by any department,
20 administration, or agency in carrying out its functions under this
Regraded Unclassified
15
1 Act, and in connection with any such sale to make such contracts and
2 agreements as seem to the Corporation advisable; and all sums
3 realized from the sale of such securities shall be deposited by the
4 Corporation in EL special account or accounts with the Treasurer
5 of the United States and shall be used exclusively for the payment of
6 interest on notes, debentures, bonds, or other obligations issued for
7 the purpose of carrying out this Act, as such interest shall becomo due
5 and payable, and for the purchase, retirement, or redemption of such
9 notes, debentures, bonds, or other obligations, except to the extent
10 that the Corporation makes the proceeds of such sales available for the
11 making of further loans as provided in this Act.
12
Availability and Audit of Funds
13
SEC. 15. The departments, administrations, and agencies for which
14 funde shall be provided by the Corporation pursuant to this Act may use
15 such funds for the purpose of carrying out their respective functions
16 under this Act without further appropriation and such funds shall be
17 continuously available for such purposes. Except as to the expenditures
18 of the Corporation which shall be governed by the Reconstruction Finance
19 Corporation Act, approved January 22, 1932, as amonded and supplemented,
20 All much expenditures shall be accounted for and audited in accordance
21 with the terms and provisions of the Budgot and Accounting Act of 1921,
22 as amonded, the same as if an appropriate appropriation account had been
23 established therefor pursuant to an appropriation warrant or a covering
24 warrant.
25
Appraisal of Program
26
SEC. 16. The Secretary of the Treasury and the Fodoral Loan
27 Administrator shall cause an examination to be made annually of the
28 status of the self-liquidating improvement program for the financing
29 of which notes, debentures, bonds, or other obligations of the
30 Corporation shall have been issued under this Act. Such examination
Regraded Unclassified
16
1 shall be made as of the last day of December in each year beginning
2 with December 31, 1940. The Secretary of the Treasury and the
5 Federal Loan Administrator shall submit n. report of such oxamination
4 to the President and to the Congress. If such examination discloses
5 that the probable recovery of the cost of all works, projects, or
6 undertakings carried out under this Act, and of all loans mado to
7 aid in the financing of the same, together with the cash on hand in
B the spocial account or accounts of the Corporation provided for by
9 section four of this Act, is less than the principal amount of all
10 notos, debentures, bonds, or other obligations issued pursuant to
11 this Act, and interest thereon, the Secretary of the Trensury on
12 behalf of the United States shall pay to the Corporation n sum equal
13 to the amount of much differenco. There is hereby authorized to be
14 appropriated annually, commencing with the fiscal year 1941, out of
15 any money in the Treasury not otherwise approprinted, B. sum oqual
16 to the amount nooded to enable the Socretary of the Treasury to
17 make such payment. Whenever such oxamination shall disclose a surplus,
18 the Corporation shall reimburse the Treesury to the oxtont of such
19 surplus for the amounts, if any, proviously paid under this section.
20
Duty of Federal Agencies
21
SEC. 17. The Department of Agriculture, the Public Roads
22 Administration, the Public Works Administration, the Rural Electrifica-
23 tion Administration, and the Corporation shall exercise their powers
24 under this Act with a view to recovering the cost of the works, projects,
25 or undertakings carried out under this Act, or loans mado to aid in
26 financing the same, with interest to bo fixed by the Corporation on the
27 data of enactment of this Act and the first day of each colendar quarter
28 thoroafter, at B. rato or ratos which may reasonably be expected to
29 reimburse the Corporation for the cost to it of the capital required
30 for its oporations under this Act, having duo rogard to the yiold on
17
1 obligations of the United States of comparable maturity or maturities
2 to that of such loans end the rate and period of amortization of the
3 cost of such works, projects, or undertakings, but not to exceed the
4 multiple of one-eighth of one percent next higher than the highest
5 yield to maturity (based on market prices) on the longest term out-
6 standing issue of obligations of the United States, direct or indirect.
7 For the purposes of this section, the yield on any callable obligation
8 selling above par shall be computed to its carliest callable date and
9 said date shall be deemed to be the maturity thereof. Nothing herein
10 shall be construed to require the alteration or readjustment of any
11 rate once the interest has been fixed for any such works, projects,
12 undertakings, or loans.
Regraded Unclassified
18
1
Assistance by Governmental Agencios
2
SEC. 18. Any department, administration, or agency authorized
3 to perform any function under this Act shall have power to utilizo
4 the services of federal, state, and local agencios and their
5 employees and, notwithstanding any other provision of law, to
6 roimburse such agencios and thoir employees for services rondorod
7 for such purposes.
8
Exclusive Foderal Jurisdiction Not Required
9
SEC. 19. Notwithstanding the provisions of any other law, the
10 obtaining of exclusivo jurisdiction in the United Statos over real
11 proporty to be acquired under this Act shall not be required; but the
12 Attorney Goneral may, in such cases and at such times as ho may deem
13 dosirable, secure from the stato in which such roal proporty 1s
14 situated, such jurisdiction, exclusive or partial, over any such real
15 proporty as the Attorney Genoral may decm desirable and accopt such
16 jurisdiction on behalf of the United States by filing a notico of
17 such acceptance with the Governor of such state or in such other
18 mannor as may be proscribed by the laws of the state within the
19 bordors of which such real proporty 18 situated. Unless and until
20 acceptance of such jurisdiction on bohalf of the United States has
21 boon mndo as aforcaaid, it shall be conclusively presumed that no such
22 jurisdiction has boen accepted.
23
Administrative Exponses for the Fiscal Year 1940
24
SEC. 20. Administrative expenses of the dopartments, adminis-
25 trations, agencies of the Government and amounts required to roimburso
26 states, municipalities, and other public bodios and employees thereof
27 for services rendered in carrying out the purpose of this Act shall
28 be paid for the fiscal year onding June 30. 1940 from such amounts
29 as may, with the approval of the Director of the Burosu of the
30 Budget, be reserved from the procceda realized from the sale of
Regraded Unclassified
19
1 notos, dobentures, bonds, or other obligations of the Corporation
2 for the payment thereof, in addition to tho unobligated balances of
3 sums herotoforo appropriated or authorized to be used for such
14 administrative expenses, any provision in this or any other law to
5 the contrary notwithstanding,
6
Saving Clause
7
SEC. 21. The powers conforred by this Act are in addition and
8 supplemental to the powers conferred by, and shall not bo affected
9 by the limitations in, any other law; and nothing in this Act shall
10 be construed to limit or in any way curtail the oxisting powers of
11 any dopartment, administration, or agency of the Government, or the
12 powers conforred upon the President by the Reorganization Act of
13 1939, approved April 3. 1939, or any reorganization plan heretofore
14 or hereafter transmitted by the President to the Congress which has
15 heretofore taken effect or which may hereafter take effoct pursuant
16 theroto: and the administration of the provisions of this Act shall
17 be subject to the provisions of such reorganization plans.
18
Appropriations
19
SEC. 22. There is heroby authorized to bo appropriated from
20 time to time such sums as may be necessary to carry out the provisions
21 of this Act.
22
Export-Immort Bank of Washington
23
Sec. 23, Section I of the Act approved January 31, 1935 (40
24 Stat. 4), ao amended, is hereby further amended, by striking from
25 the proviso at the end of the last sentence thereof "$100,000,000"
26 and insurting in lieu thereof $200,000,000."
PARAPHRASE OF TELEGRAM RECEIVED
Af
FROM: American Embassy, Berlin
NO.: 607
DATE: July 7, 1939, 3 p.m.
Reference is made to Embassy's 584 of July 3,
1939, 7 p.m.
Puhl said today in & conversation with Heath, that
when he conferred with Lamont in Brussels on July 4 he
made the suggestion that B. possible solution might be to
exchange German bonds for Austrian 1930 dollar bonds.
Puhl informed Lamont that he would make an effort to get
the other agencies concerned to agree to this procedure.
He said that the advantage of this procedure would be
that it would obviate Germany's public acceptance of
responsibility for paying the debte of Austria, for which
Germany arguss it is not liable "in principle". He said
that it would be difficult to secure German agreement to
the procedure but provided there were no "further surprises
in relations", he hoped to be able to do so. Puhl stated
that the tentative proposal which he had made to exchange
Austrian for German obligations, was based on the under-
standing of the Reichsbank that the bonds still remaining
in the hands of Americans amounted to only $2,000,000 or
$3,000,000 BO the servicing cost would not be large. It
use
Regraded Unclassified
78
-9-
was Lamont's opinion, however, that the amount of bonds
outstanding in the United States was $10,000,000, to which
Puhl replied that it would be difficult, if not impossible,
for Germany to pay service on such an amount with its
exchange resources in the present state, Lamont promised
Puhl that he would find out the amount of Austrian 1930
bonds still owned by Americans and that he would report
to him. The suggestion had been made by Lamont that an
exchange might be made of Austrian bonds for Dawes plan
bonds. To this Puhl answered that not enough Dawes bonds
were held by the German Government to carry out the
exchange. Puhl had stated that 4 percent was the maximum
interest rate which would be paid by the German Government
and Lamont had held out for 5 percent. It was agreed,
however, that if agreement of the German Government were
obtained to the bond exchange proposal, & discussion of
the interest rate would be taken up again.
Please repeat to the Treasury.
KIRK
EA:EB
Regraded Unclassified
Mr.
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
DATE July 7, 1939
CONFIDENTIAL FILES
TELEPHONE CONVERSATION WITH
SUBJECT:
TO
J. V. McKeon
BANK OF ENGLAND
47E
FROM
I called Mr. Bolton at eleven o'clock this morning
and, in his absence, spoke with Mr. Hawker. Be was very
such pleased that the Monetary Bill had been signed yesterday;
I promised to send his a copy of the text of the bill BE soon
as I received one. Hawker was interested in knowing whether
I had any idea what Mr. Roosevelt's policy would be with re-
gard to the foreign silver price. I told his that I was in
no osition to venture an answer to that question.
I referred to our gold order renewal and Hawker
said they had received it and were very grateful. All ex-
changes were quiet in London with the exception of guilders
which continued week due largely, in Howker's opinion, to the
unsettled political situation in Hollend. I promised to keep
in touch with him if anything new developed.
JIMCE/BOC
Regraded Unclassified
80
AC
PLAIN
London
Dated July 7, 1939
Reo'd 2:38 p.m.
Secretary of State
Washington
No. 950, July 7, 6 p.m.
FOR TREASURY FROM BUTTERVORTH.
1, With reference to my 944 July 6 2 p.m. the
Overseas Trade Guarantees Bill is published today the
only further interesting features revealed being (A)
the fact that credits may bE for as long as fifteen
years and (B) the clause which Empowers the Board of
Trade to hold securities guaranteed by it, the financ-
ing of which is to be provided from the consolidated
fund. In Effect this means that long-term credits
under this bill can bE financed by Treasury bills.
According to the City Editor of the TIMES the normal
procedure for shorter credits will doubtless bE the
same as under the carlier act namely that the Board
of Trade will guarantee foreign government bills and
promissory notes which it will sell in the money market.
The fact that the limit of credits which may be
granted for products not produced in the United King-
dom is increased from the L2 million provided in the
old
Regraded Unclassified
81
- 2 - #950, July 7, 6 p.m., from London
old act to L6 million leaves by far the greater part
of the credits as assisting British xports and
since these credits are in Effect to be used prac-
tically entirely for armaments and war materials the
impact on the British armament industries will bE
important. With the June unemployment figure down to
1,349,000 and surplus labor in the Engineering and
armament industries rapidly disappearing Especially
in some important districts the question of labor
scarcity in the near future in certain scctions of
British industry comes the nearer. Incidentally the
fact that Expenditure Excluding borrowed funds on
"defence" services in the first quarter of the present
fiscal year was L109 million as compared with I 66
million in the corresponding period last year is an
indication of the materially increased rate of arma-
ment production.
The money market and capital market implications
of the new act are also important. Though all the
credits will probably not be for long periods doubtless
B large proportion of the total will be carried out
through the new mechanism which will involve an in-
crease in the tap issue of Treasury bills. This will
not decrease the amount of tender bills but it may
add
82
- 3 - #950, July 7, 6 p.m., from London
add materially to the total floating debt. In the
arrangement of interest terms it appears that the Gov-
ernment Envisages n rate of some 3-1/2 per cent a
fnct which indicntes that it intends to fund the Treasury
bills which will have to bE issued at a relatively early
date.
The fact that n number of trustee issues were
flonted during June with very varying SUCCESS has on
the one hand demonstrated that the capital market's
digestion is delicate and very dependent on the poli-
tical outlook on the day of issue, and on the other
hand produced 2 certain amount of speculation ns to
whether the stare is being cleared for B. Government
issue in the not very distant future.
The prsss including the TIMES notes that most
of the increase of L50 million in the credits to be
which
granted when "in the national interest"/will bE pro-
vided for by the bill have probably already been
allocated and practically the only criticism of the
bill is that the total of L60 million (which after
interest is included is estimated to be in Effect
nearer L100 million) 18 too small.
2, Press announcements declare that the Association
of
83
#950, July 7, 6 p.m., from London
of Investment Trusts and the Association of Insurance
Companies have circulated to their members question-
aires regarding their holdings of foreign securities as
of June 30 last. A detailed list is not requested but the
total value of foreign securities are to bE divided into
the following groups. (1) United States dollar securi-
ties, (2) Canadian dollar securities, (3) other foreign
securities excluding those of British Dominions and
France, (4) international securities which oan be TE-
alized outside the United Kingdom, Dominions and France.
Securities are to be grouped under currencies and not by
countries; for Example Australian dollar bonds are to be
classified as United States dollar securities. Insurance
Companies are also being asked to give information re-
garding their holdings of real Estate and mortgages.
The British Treasury is evidently making these prelimin=
ary investigations for proparations in the event of war
as mentioned in sections 3 and 4 of my 645, May 9, 6 pame
3. One silver shipment was invoiced today totaling
216,057.02 standard ounces at 20 1/8d. per ounce the value
being pounds 18,117,55.84. from Mocatta and Goldsmids
for account of Baker Platinum Company to Irvington
Smelting and Refining by the PRESIDENT ROOSEVELT on
July 7. This shipment represents delivery of a forward
contract
Regraded Unclassified
84
-5- #950, July 7, 6 p.m., from London
contract transacted two months ago.
The day-to-day basis of the official American price
for fortign silver has made arbitragsurs leave the
silver market alone but there was a moderate size fixing
today consisting of many small speculative selling and
buying orders with the price both at the fixing and
thereafter at 17 3/8d. for spot and 17d. for forward.
4. The dollar was offered today on Japanese account
muking support by the British fund unnecessary. The
forward dollar was also offered but the turnover was not
large, the three months premium standing around 1 7/8.
Gold was fixed at a 1/2d. premium. Somuel Montagu was the
sole buyer wanting 162 bars but they reduced their re-
quirements to 110 bars, 15 of which were married and about
50 supplied by the British fund.
KENNEDY
HPD
Regraded Unclassified
85
JR
GRAY
Paris
Dated July 7, 1939
Rec'd 1:26 p.m.
Secretary of State,
Washington.
1268, July 7, 4 p.m.
(SECTION ONE)
FOR THE TREASURY.
Trading continues very quiet on the Exchange market.
The fund did not intervene today, apparently, pressure on
the florin led Amsterdam to sEll n substantial amount of
dollars. The security market was inactive and irregular
with no important changes.
The adverse foreign trade balance for the month of
June 1939 is 865 million francs compared with 1,523
millions in June 1938. The adverse balance for the first.
six months of 1939 is therefore 6,725 millions compared
with 9,300 millions for the same period of last year.
During this period imports increased by 1,501 millions and
Exports by 4,076 millions compared with the corresponding
period of 1938.
(END SECTION ONE).
BULLITT
KLP:HPD
Regraded Unclassified
86
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
NO.: 1268 (SECTION TWO)
DATE: July 7, 1939, 4 p.m.
According to information which we have received
from an authorized source, discussions are now being
held between German and French authorities with
reference to adjusting financial questions in which
the two countries are interested, We are informed
that on certain questions decisions of principle
have already been made. It is said, in this respect,
that no modification of the August 2 agreement for
the service and amortization of the Dawes and Young
loans is contemplated. It appears unlikely also
that any important change will be made in the pro-
visions of the August 2 agreement relating to the
old Austrian debt and to Germany's foreign debt.
EA:EB
Regraded Unclassified
87
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris
NO.: 1268 (SECTION THREE)
DATE: July 7, 1939 4 p.m.
With reference to the private credits covered by
the July 10, 1937 arrangement, there will be an increase
in the amounts to be provided by Germany for the transfer
necessary for their settlement. There will, however, be
& provision in the new arrangement to suppress the bonds
which have previously been delivered by the German Govern-
ment to set off the non-transferrable balance of the debt
owed by Germany to certain of its creditors which could
be used in Germany by holders for payments of taxes, travel
and so forth.
(END OF MESSAGE)
BULLITT
EA:EB
Regraded Unclassified
88
TREASURY DEPARTMENT
Washington,
ASSISTANT SECRETANT
JUL 8 1939
MEMORANDUM FOR THE SECRETARY:
I sent you under date of June 18th B. memorandum from W. F.
Johnson of the Bureau of Customs, dated June 16, 1939, addressed to
me, concerning the disposition of cameras which have been seized
and forfeited by the Customs Service, which was returned with 8
slip signed by Mise Chauncey, reading es follows:
"Mr. Gibbons:
The Secretary would like to have furnished El
list of officials and offices which have received cameras
since Jenuary 15, 1936, with dates of such assignment."
In compliance with this request, I addressed B memorandum
to the Commissioner of Customs under dete of June 24, 1939, request-
ing the disposition by the Buresu of these seized cameras:- who
signed for them, end under what circumstances they were assigned by
the Eureau. I also eaked if it were possible to secure e record
which would indicate whether or not any of them were used for other
than official purposes.
Under date of June 29, 1939, the Commissioner addressed a
aemorandum to me transmitting B list of these cameres which have
been assigned "for official use in the Customa Service". He also
Included in the list the cameres and lenses which have been assigned
by the Procurement Division under authority of section 303 of the
Liquor Law Repeal and Enforcement Act to ectivities over which the
Bureau of Customs has no administrative control.
This showed that one of the cameres had been assigned to
one of the Assistant Secretaries of the Treasury. This proved to
be an error, for insteed of being assigned to en Assistant Secretary
of the Treasury, it was assigned to Mr. Gaston, et that time As-
sistent to the Secretary. Mr. Gaston advises me that this camere
in used for official purposes only. Five of them were elso assigned
to Mr. Ballinger, who likewise assures me that they are used by the
men whom be has assigned to the investigation of the Customs Service
for official use only.
The Commissioner's memorandum states that the assignment
of these cameras to the verious administrative field offices hes in
euch instance been based on 8 request, supported by 8 statement
Regraded Unclassified
- 2 -
that the cameras or lenses would be helpful in connection with in-
vestigative, enforcement, end other customs activities. The attached
list of assignments shows the number of cameras that have been 08-
signed to each Custome Agency District, BB well 88 each Customs
Patrol District, 8.6 illustrated by the first item on the list show-
ing that 15 cameras have been assigned to the District Superintendent
of the Nortbeast Customs Patrol et Buffelo, New York, Mr. J. J.
Mullen, District Superintendent receipting for them, and he in turn
being held responsible for their assignment to officers under him.
I have addressed B. memorandum to the Commissioner of Cus-
toma, Commissioner Anslinger of the Bureau of Narcotics and Mr.
Ballinger Prequesting them to have specific instructions issued 10
the heade of all field offices that these cemeras must be kept w-
der lock and key in the office of the administrative officer re-
sponsible for them, end that a receipt should be taken each time a
camere 18 assigned to en employee for official use, showing the
date of assignment, the date when returned end for what purpose it
has been used.
I am advised by Mr. W. R. Johnson, Deputy Commissioner of
Customs, 85 well BB Mr. Caston end Mr. Ballinger, that these German
cameras require B. great deel of experience to successfully operate
them. Mr. Gaston states that he put 8 roll of films in one of
them and after using the entire roll he had not obtained a picture.
One of Mr. Bellinger's men took 8 picture of what he regarded as
slight infraction of rules on the part of a customs employee at
Key West, with the same result. I have, therefore, elso asked the
Commissioners of Customs and Narcotics to secure information from
the field showing results accomplished.
Assistent Secretary.
Inclosures.
X
copy attached
Regraded Unclassified
JUL 8 1939
IMORANDOM FULL
COMMISSIONER MOTLE
COMMISSIONER ANSLINGER
MR, BALLINGER:
Referring to the assignment of seized ceneres and
Losses to field officers for official use:
While 1 understand the use of these cameras for other
than official use, by the officers to whom they are essigned, would
ast violate any Federal law, nevertheless, in my opinion, any officer
seking such use of Govellment property would be subject to a severe
reprimend.
Hosever, in order to definitely establish a code of
ethics covering this particular itm of Government property, will you
please see to it that specific instructions are issued to the heads
of all field offices that these cameras must be kept under look and
say in the office of the administrative officer responsible for them
when they are not in official use and that e receipt should be taken
sech time . cemere is assigned to en employee for official use, show-
Lag the date of assignment, for what purpose it is to be used, end the
date of its return.
Both Mr. Gaston and Mr. Ballinger have advised ne that
the German cancres require special training to successfully operate.
Kr. Caston claims to have used an entire roll of film without pro-
dueing a photograph. I sould suggest, therefore, that you nake in-
quiry of the various field offices covering results obtained.
Assistant Secretary.
880:de:bb
Regraded Unclassified
ASSIGNED FOR OFFICIAL USE IN THE CUSTOMS SERVICE
To Whom Assigned
Quantity
Camaras
Extra
Date B/L Authority
Seizing Office
Lenses
(Collector)
J. J. Mullen,
1
Leica
2
3/6/39
Chicago, Ill.
District Superintendent,
2
Kodak Retina 6
3/7/39
New York,
Northeast Customs Patrol.
10
Leica
"
#
Buffalo, New York
1
Robot
#
-
1
Super
=
.
Balbina
15
coll
P. G. Fraser,
1
11/30/38
Chicago, Ill
District Superintendent,
1
5/1/39
#
Northwest Customs Patrol.
1
5/6/39
#
Havre, Montana.
4
Leica
2
10/12/37
New York, N.Y.
3
=
11/11/37
#
3
=
9
4/1/39
#
8
Contax
=
.
1
Robot
-
=
1
Kine-Exakta
6/10/38
Portland, ore.
1
Rolleiflex-Compur
#
.
4
Contax
1
3/7/59
New York, N.Y.
1
Kodak Retina
#
#
26
15
91
Regraded Uncla
ASSIGNED FOR OF ACORD USE IN THE CUSTOMS SERVICE
To Whom Assigned
Quantity
Cameras
Extra
Date B/L Authority
Seizing office
Lenses
(Collector)
Grover C. Webb,
2
11/30/38
Chicago, Ill.
District Superintendent,
1
Leica
2/13/39
Galveston
Southwest Customs Patrol
1
Welts-
5/4/58
Los Angeles
n Paso, Texas
Perle
1
Ikon
11/29/38
-
1
Leica
2
3/6/39
Chicago, Ill.
1
Contaflex
4/1/39
New York
1
Reflex-
=
-
Korelle
8
Contax
1
e
-
5
Leica
n
W
3
Contaflex
"
=
4
Contax
6
#
E
1
Contax
12
2/5/39
#
5
Leica
3/7/39
.
2
Rolleiflex
.
.
32
23
G. C. O'Donoghue,
6
Leica
3/7/39
New York
District Superintendent,
2
Contax
#
-
Southeast Customs Patrol
8
Jacksonville, Florida.
32
Regraded Unclassifie
SERVICE
To Whom Assigned
Quantity
Cameras
Extra
Date B/L Authority
Seising office
Lenses
(Collector)
F. R. Proctor,
1
Leica
3/7/59
New York
Supervising Customs Agent,
2
=
3/29/38
Baltimore
Baltimore, Maryland.
1
3/7/39
Chicago
J. J. Flynn,
1
Leica
3/7/39
New York
Supervising Customs Agent,
-Boston, Massachmsetts.
W. H. Tidwell,
1
Contax
5/7/59
chicago
Supervising Customs Agent,
Chicago, Illinois
C. E. Wyatt,
2
Leica
3/7/39
New York
Supervising Customs Agent,
Detroit, Michigan.
Edward A. Gleason,
1
Leica
1
5/1/39
Seattle
Supervising Customs Agent,
Jacksonville, Florida.
J. W. Roberts,
2
Leica
10/12/37
New York
Supervising Customs Agent,
1
"
4/1/38
#
New York, New York.
1
Contaflex
4
5/29/38
.
J. B. Morgan,
1
Contex
3/7/39
New York
Supervising Customs Agent,
st. paul, Minnesota.
H. 8. Creighton,
3
Leica
6/10/38
Galveston
Supervising Customs Agent,
1
-
7/6/38
"
Houston, Texas.
Fred'k H. Gardner,
4
Leica
1
3/7/39
Chicago
Supervising Customs Agent,
3
E
4/28/59
San Francisco
San Francisco, California.
93
Regraded Unclas
FOR PAYMENT ON THE CUSTOMS SERVICE
To Whom Assigned
Quantity
Cameras
Extra
Date B/L Authority
Seizing Office
Lenses
(Collector)
C. A. Emerick,
1
Leica
12/9/38
New York
Customs Agent in Charge,
1
Contax
9/11/37
Los Angeles
Los Angeles, California.
Frank D. Henry,
1
Contaflex
3/29/38
New York
Customs Agent in Charge,
Ogdensburg, New York.
David L. MacFarlane,
1
Leica
7/8/58
Baltimore
Customs Agent in Charge,
Philadelphia, Pennsylvania.
H. R. Gillis,
1
Leica
3/7/39
New York
Customs Agent in Charge,
Portland, Maine.
Hector C. Lende,
1
Contax
3/7/39
Chicago
Customs Agent in Charge,
Portland, Oregon.
84
Regraded Unclass
To Whom Assigned
Quantity
Cameras
Extra
Date B/L Authority
Seizing office
Lenses
(Collector)
A. A. McPhatres,
1
Leica
3/7/39
New York
Customs Agent in Charge,
St. Albans, Vermont.
Howard 1. Moore,
1
Contax
2/24/59
san Juan
Customs Agent in Charge,
San Juan, Puerto Rico.
V. C. Zeluff,
1
Contax
3/7/59
New York
Customs Agent in Charge,
Tampa, Florida.
Mrs. D. D. Greene,
1
Leica
4/3/59
New York
Chief Chemist,
Boston, Massachusetts.
Mr. John 1. Custer,
1
Leica
5/5/39
San Frendsco
Chief Chemist,
Los Angeles, California
L. B. MoSorley,
10
Contax
14
12/9/38
New York
Chief Chemist,
New York, New York
Williem Hannan,
1
Contax
8/3/58
chicago
Appraiser of Merchandise,
Chicago, Illinois
A. C. McQueen,
1
Contax
1/17/39
Philadelphia
Appraiser of Merchandise,
Philadelphia, Pennsylvania.
J. Walter Doyle,
1
Ikon
2/28/39
Honolulu
Collector of Customs,
Honolulu, T. H.
95
Regraded Unclas
To Whom Assigned
Quantity
Cameras
Extra
Date B/L Authority
Seizing Office
Lenses
(Collector)
Harry M. Durning,
2
Contax
3/18/38
New York
Collector of Customs,
New York, New York.
Bureau of Customs,
3
Contax
1
1/9/39
Chicago
Washington, D. C.
1
Leica
.
#
(For Bureau stock and
1
Contax
4/10/39
=
issuance to field
officers as required)
Fred W. Gast, Chief,
7
Leica
8/11/38
st. Louis
Division of Engineering and
1
Contax
3
1/3/39
New York
Weighing,
Bureau of Customs,
Washington, D. C.
Mr. 1. J. Shamhart,
1
Leica
1/9/39
Chicago
In Charge of Enforcement,
Bureau of Customs,
Washington, D. C.
96
Regraded Unclassif
AUTHORITY TO OTHER FEDERAL AGENCIES
To Whom Transferred
Quantity
Cameras
Extra
Date B/L Authority
Seizing Office
Lenses
(Collector)
Office of the Assistants to the
1
Contax
6/10/38
Baltimore
Secretary of the Treasury
Ballinger Committee,
3
Contax
1/3/39
New York
Treasury Department,
1
Leica
=
.
Washington, D. C.
1
Contax
1
2/7/39
E
1
Leica
"
=
W. J. Keester, Commander,
2
Leica
1/3/59
=
U. S. Coast Guard.
Stewart Berkshire,
1
Leica
5
2/13/59
Chicago
Deputy Commissioner,
1
Contax
1
10/17/38
B
Internal Revenue,
1
Pronto
1
4/19/59
New York
Treasury Department.
1
Kodak
.
1
Deckel-
Vergi
=
#
2
Gauthier-
=
.
Certix
1
Zeiss Ikon
=
#
1
Gauthier-
Pronto
e
=
Frank J. Wilson,
1
Contaflex
12/29/36
#
U. 8. Secret Service,
1
Contax
#
=
Treasury Department.
1
Leica
6/2/39
=
1
Contax
1/31/59
Boston
1. J. Anslinger,
2
Leica
3/22/59
Chicago
Bureau of Narcotics,
2
If
4/1/38
New York
Treasury Department.
1
=
12/21/58
.
2
Contax
12/8/38
Cleveland
97
Regraded Unclas
AUTHORITY TO OTHER FEDERAL AGENCIES
To Whom Transferred
Quantity
Cameras
Extra
Date B/L Authority
Seizing Office
Lenses
(Collector)
Thomas Parran,
2
4/20/39
New York
Surgeon General,
U. S. Public Health Service,
Treasury Department.
W. S. Erwin, Chief,
2
small
11/9/37
=
Division Purchase and Sales,
$18 each
Department of Commerce.
W. H. Wagner, Assistant,
1
small
11/7/36
If
Immigration and Naturalization Ser.,
$18.80
Labor Department.
1
small
6/2/38
San Francisco
$18
98
Regraded Unclass
99
July 8, 1939
FOR THE SECRETARY'S FILES:
At 12:15 I called the White House and asked
for Mr. Early. His office explained that he was out of
town with the President. I then talked to Mr. Hassock
telling him that Senator Barkley had asked the Treasury
to prepare a press release which the Senator would give
out explaining the Self-Liquidating Projects Act.
I asked Mr. Hassock whether the White House would like
to see the statement we had prepared. He replied that
he would not, but would trust our discretion.
ESD
7-8
100
Barkley Barkley-Steagall steagall
Self-Liquidating Projects Act of 1939,
introduced today, would make available the following
suns for the following purposes: Non-Federal public
works of a character which will return to the Federal
Government its investment in them, $350,000,000;
self-liquidating express post roads and highway in-
provements, $750,000,000; rolling stock and shop
equipment for lease to railroads, $500,000,000; rural
electrification loans, $460,000,000, plus $40,000,000
already appropriated; self-liquidating fare tenancy
not more Than of funds
loans, $500,000,000, plus,$100,000,000 already appro-
printed; loans through the Export-Import Bank,
$100,000,000. or the sums made available for the
first time by this Act, the President has estimated
that the following amounts would be spent in the
current fiscal year) Non-Federal public works,
$150,000,000; express post roads, $150,000,000;
railroad equipment, $100,000,000; rural electrifica-
tion, $20,000,000; farm tenancy loans, $250,000,000.
Probably all of the $100,000,000 to finance foreign
trade would be obligated if not disbursed during the
current finoal year. The purposes for which the
money could be spent are set forth in more detail in
section 4.
The Bill would not create any new agency
or disturb any existing authority. The money made
Regraded Unclassified
101
- 2 -
available for Non-Federal public works would be
handled by the Public Vorks, a the money
for express post roads and other highway improvements
would be made available to the Commissioner of Public
Roads, money for railroad squipment would be handled
by the Reconstruction Finance Corporation, the Rural
Electrification Administration would receive the money
for enlargement of their program, the Department of
Agriculture would handle funds for the farn tenancy
program, and the money for loans to facilitate exports
would be mnde available to the Export-Import Bank.
All disbursements would be for projects which
are self-liquidating in character. The Bill specifically
imposes upon each operating agency the duty to undertake
projects and to make loans with the aim of recovering
for the Federal Government the full amount invested plus
interest sufficient to reimburse the Government for the
cost of the borrowing. The maximum interest rate which
may be charged by any operating agency on loans under
this program would be limited, however, to the highest
yield on the longest term direct or indirect
obligation of the United States which is then outstanding.
as present This would be approximately 2. 390
the expectation is that all money paid out will be re-
couped by the Federal Government through repayment of
public works, rural
Regraded Unclassified
102
- 3
electrification, farm tenancy and foreign trade loans,
through toll and other highway revenues and through
rental of railroad equipment.
The self-liquidating character of the program
permits it to be financed through a mechanism which also
is provided in the bill introduced today. Because the
obligations incurred under the program will be liquidated
by the income from the program itself, these obligations
may properly be segregated from other public debt
obligations which are in large part dependent upon the Federal
taxing power for their ultimate repayment. This
principal of segregating self-liquidating obligations
of the Federal Government was established in the
creation of the Reconstruction Finance Corporation in
1932.
Therefore, to provide the funds for the program
the amount of obligations which the Reconstruction
Finance Corporation is authorized to have outstanding
at any one time would be increased by $2,700,000,000.
This authorization would cover the $2,560,000,000 made
available for the first time by this Bill plus not morethon
ofthe money
$100,000,000 Alrendy appropriated for farm tenancy loans
and the $40,000,000 already appropriated for rural
oppropriations, already made,
electrification advances. These latter two 100 would
be financed through the new mechanism to avoid any
Regraded Unclassified
103
artificial division between the sources of money available
for these two programs.
The Reconstruction Finance Corporation also
would be authorized to issue obligations having maturities
up to 40 years so that the securities issued to finance
the program may bear a proper relation to the life and
amortization period of the improvements being financed,
At present the Reconstruction Finance Corporation can not
issue obligations having a maturity of more than five
years.
All revenues and loan repayments collected
under the program are required by the bill to be deposited
with the Treasurer of the United States for the account
of the Reconstruction Finance Corporation. The Corpora-
tion can use this money to redeem the obligations which
it has issued or it can use the repayments BE a revolving
fund to finance additional projects.
To make doubly sure that the program will be
continually solvent, the Secretary of the Treasury and
the Federal Loan Administrator would be instructed by
the Act to appraise annually the assets sequired by the
various operating agencies. To the extent, if any, that
this examination indicates that the program will not be
self-liquidating, the Secretary of the Treasury must
secure from Congress an appropriation for the account of
the Reconstruction Finance Corporation. Thus, if any
Regraded Unclassified
104
losses accrue, they will be charged off currently, and
the Corporation will at all times have cash, current revenues
and prospective income sufficient to service the indebted-
ness incurred for the program and to retire that indebted-
ness as it matures, Conversely if there is any
surplus, it will be used to remindure
the Treasury for any advances the
Heasury has made
TREASURY DEPARTMENT
105
INTER OFFICE COMMUNICATION
DATE July 8, 1939
TO
The Secretary
FROM Miss Lonigan w
The total number of WPA workers on June 28, 1939
1s 2,550,501.
The decrease from the week ending June 21 to the
week ending June 28 was 26,005 workers.
106
WORKS PROGRESS ADMINISTRATION
Number of Workers Employed
United States
Monthly W.P.A. Employment
Weekly W.P.A. Employment
1835
1936
1937
1938
1939
1935
1939
M
M
J
3
M
J.
-
M
J
$
N
MAR,
MAY
JULY
SEPT.
NOV.
JAN,
mas,
MAY
-
JULY
SEPT.
NOV.
MILLIONS
MILLIONS
WILLIONS
in
or
OF
will
MORKERS
WORKERS
WARERS
3.5
3.5
Jull
3,4
3.4
4,2
3.3
3.3
3.2
3.2
-
3.1
3.1
3.0
3.0
-
2.4
2.9
2.9
2.8
2.8
2.0
2.7
2.7
2.6
2.6
1,4
2.5
1.0
2.5
2.4
<.4
2.5
2.3
1.2
2.2
2.2
2,1
2.1
en
2.0
2.0
1.9
1+9
1.8
1,0
1.7
1.7
1,6
-
1.6
SOFT.
3
-
-
M
"
M
of
E
M
-
N
JAN,
MAY.
MAY
JULY
SEPT.
NOV.
NAY
JULY
NOV.
JAN
1937
1938
1939
1938
1933
1936
SOURGES WORKS PROGRESS ADMINISTRATION
Office of the Secritary of the Treasury
- / - and Instruction
WORKS PROGRESS ADMINISTRATION
107
Number of Workers Employed - Weekly
United States
Week ending
Number of Workers
1938
(In thousands)
October 1
3,228
October 8
3,224
October 15
3,266
October 22
3,300
October 29
3,346
November 5
3,364
November 12
3,359
November 19
3,345
November 26
3,319
December 3
3,287
December 10
3,241
December 17
3,186
December 24
3,124
December 31
3,094
1939
January 7
3,070
January 14
3,030
January 21
3,001
January 28
2,986
February 4
2,966
February 11
2,966
February 18
3,011
February 25
3,043
March 4
3,032
March 11
3,009
March 18
3,015
March 25
3,009
April 1
2,980
April 5
2,906
April 12
2,761
April 19
2,752
April 26
2,751
May 3
2,734
May 10
2,660
May 17
2,622
May 24
2,609
May 31
2,598
June 7
2,594
June 14
2,590
June 21
2,577
June 28
2,551
Source: Works Progress Administration.
8 Confidential.
WORKS PROGRESS ADMINISTRATION
108
Number of Workers Employed - Monthly
United States
Number of Workers
1936
(In thousands)
June
2,256
July
2,249
August
2,377
September
2,482
October
2,581
November
2,483
December
2,192
1937
January
2,138
February
2,146
March
2,115
April
2,070
May
1,999
June
1,821
July
1,569
August
1,480
September
1,451
October
1,476
November
1,520
December
1,629
1938
January
1,901
February
2,075
March
2,395
April
2,582
May
2,678
June
2,767
July
3,053
August
3,153
September
3,219
October
3,346
November
3,319
December
3,094
1939
January
2,986
February
3,043
March
3,009
April
2,751
May
2,598
June
2,551 a
Source: Works Progress Administration.
a a Confidential.
Monthly figures are weekly figures for the
latest week of the month.
They include certified and non-certified workers.
Regraded Unclassified
109
AC
GRAY
Habana
Dated July 9, 1939
Rec'd 1:40 p.m.
Secretary of State
Washington
74, July 9, 1 p.m.
I saw the President Saturday afternoon and
in answer to my specific inquiries he said as
follows:
(OnE) The measure was retroactive but not
as regards contracts calling for payment in dollars
(he was unable to clarify this).
(Two) All banks WERE free to accept or decline
transactions but that continued refusal to deal in
Exchange might lead to their being considered guilty
of conspiring to depress the peso.
(Three) Every consideration had been given to
the provisions of Article 11 of the reciprocal trade
agreement and that they would bE observed.
(Four) The provisions of Article No. 1170 of
the Civil COdE would also bE observed
The bill was pagged by the HOUSE of Representa-
tives Saturday afternoon but he had not yet received
it and would study it with his advisers Sunday and
Monday
Regraded Unclassified
110
- 2 - #741, July 9, 1 p.m., from Habana
Monday. All proper consideration would bE given
banks of good reputation but not to others which he
considered in large part to blame for fluctuations
in Exchange and to have profited thereby mentioning
confidentially the National City and several Cuban
banks.
I asked him to give careful consideration to
the points that I had brought to his attention which
might have serious Effect upon our pending negotiations.
HE said that regulations would bE published with the
law which would clothe the EXECUTIVE with the fullest
discretion in its enforcement but that the measure
might bE amended when the emergency had passed.
WRIGHT
RR
Regraded Unclassified
111
EG
GRAY
Habana
Dated July 10, 1939
Rec'd 2 p.m.
Secretary of State,
Washington.
75, July 10, 1 p.m.
My No. 74, July 9, 1 p.m.
Embassy is unofficially informed that the bill
has oven signed by the President and is being printed
in the official gazette.
The President told clearing house members yester-
day that in addition to Exemptions provided in Article
One of the bill the regulations under the law would
provide that the following transactions, would bE EX-
Empted:
(one) dollar drafts and dollar collections for
imports
(two) letters of credit
(three) Exchange transactions in general with the
United States
(four) dollar debts collatEratEd by Cuban Govern-
ment obligations.
Since
Regraded Unclassified
112
-2- #75, July 10, 1 pame from Habana
Since such Exemptions are not specifically
authorized in the law bankers and their attorneys
consider that they would be 1116gal though the
Cuban Government might bE in a position to Enforce
them.
The immediate results of the passage of the
bill so constituted have been:
(one) all dollar loans have stopped
(two) banks are reluctant to make loans in pesos
(throe) purchases and sales of commodities have
been reduced to a minimum
(four) a complete lack of confidence regarding
security of property and capital Exists.
(five) Article II of bill together with Article
VII of Presidential decree of July 6 (BEE Commercial
Attache's E and t note number 18 of July 8) has been
interpreted to mean that the government intends to
control the actions of bankers and businessmen through
continued threat of imprisonment.
(six) Although the dollar remains legal tender
in Cubo it has in practice been Eliminated as a part
of Cuba's monetary system insofar ns future domestic
transactions are concerned and to that extent the
clasticity
Regraded Unclassified
113
-3- #75, July 10, 1 p.m. from Habana
elesticity which has characterized the monstary
system of Cuba has disappeared and the Cuban Govern-
ment lacks any mechanism to restore it.
The Embassy has made no formal representations,
WRIGHT
KLP:WWC
Regraded Unclassified
114
HR
GRAY
Habana
Dated July 10, 1939
Rec'd 3:25 pame
Secretary of State
Washington
76, July 10, 3 pame
CONFIDENTIAL
My telegram No. 75, July 10, 1 peme
Law published in Official Gazette today.
I am reliably informed that President has now in-
quired of former SECRETARY of the Treasury Garcia Montes
what would bE the Effect if all dollar bank deposits
were made payable in pesos. HE was told it would bE
disastrous.
WRIGHT
ALC :KLP
Regraded Unclassified
115
TREASURY DEPARTMENT
AA
INTER OFFICE COMMUNICATION
DATE July 10, 1939
TO Secretary Morgenthan
FROM 1. H. Hadley
Review of the Government Market
Week ending July 8, 1939
The government market turned around sharply during the week just
ended and showed substantial gains. Improved investor sentiment in
regard to the European situation brought about buying in bonds by banks
both in New York City and outside. Treasury bonds callable after ten
years gained about 3/4 point compared with losses of about 1 1/8 points
the previous week. Treasury notes were firm but the gains were not
large, smounting to only 1 and 2/32nds for the week. Guaranteed issues
showed gains up to 8/32nds, RFC and HOLC bonds showing the greatest
strength.
Dealers' Portfolios
The only significant change in dealers' portfolios was a reduction
of about $17 million in bond holdings. Total portfolios were reduced
about $20 million. Dealers' holdings are now at about their lowest
level since the end of March.
Regraded Unclassified
-3-
Dealers' Portfolios
(in millions)
Week ended
Yook ended
July 1
July 8
Net Change
Treasury bonds
31.1
14.4
- 16.7
Treasury notes (1 year)
19.7
22.6
+ 2.9
Treasury notes (1-5 yrs.)
23.0
20.4
- 2.6
Treasury bills
0.4
0.5
+ 0.1
H.O.L.C. Bonds
21,0
19.9
- 1.1
F.Y.M.C. bonds
4,8
2.4
- 2,4
100.0
80.2
- 19.8
After the holiday, volume increased over the previous week with total
daily figures running about $130 million, of which about $100 million
vas in bonds.
New Security Issues
There were DO new security issues of any consequence during the
week just ended.
Corporate Bond Market
The corporate market moved higher with high grade issues reaching
new record levels for a gain of more than 3 1/2 pointe in the last three
months. Second grade bonds recovered practically all of the losses of
the previous week and, as reflected by Moody's average, are now only
about 1/4 point below the high reached the first part of June. However,
second grade issues are lagging somewhat behind higher grade issues La
attaining levels reached in March. Because of the July 4th holiday,
activity in the bond market was comparatively light.
Regraded Unclassified
117
-30
Treasury Investment Accounts
There were no purchases or sales in the New York market for
Treasury investment account during the week ended July 8.
HOLC Bonds
Including sales today, (Monday, July 10), $3,750,000 1-1/2%
bonds were sold in New York, bringing the total sold to date to
$49,650,000. The balance unsold amounts to $50,350,000.
Federal Reserve System Account
The only transaction by the Federal Reserve Bank was the replace-
ment of $18,913,000 maturing Treasury bills.
118
Memorandum of Conference in the Secretary's
Office at 3 D.M., July 10, 1939.
Frésent: Secretary Morgenthau
D. W. Bell
Mr. Foley
Mr. McReynolde
Secretary Wallace
Mr. Mastin G. White, Solicitor for Agriculture.
Secretary Wallace stated that under the President's Reorganiza-
tion Plan -1, the Commodity Credit Corporation was transferred
to the jurisdiction of the Department of Apriculture, and that
there appears to be conflict between the purposes of that
Order and the existing terms of the Certificate of Incorpora-
tion and By-Laws of the Corporation which vest in the stock-
holders (Secretary of the Treasury holds all of the stock),
ultimate control over the Corporation. He pointed out that
while the Reorganization Plan made no specific reference to
the Executive Order of March 1938, placing the stock of the
Corporation in the hands of the Secretary of the Treasury, he
felt it was desirable to eliminate what he considers B. conflict
between the two orders by E. supplemental order of the President,
Secretary Wallace stated that he had initiated such an order,
which be believed now to be in the hands of the Treasury. and
he therefore inquired what action was contemplated. Mr. Bell
Informed him that the Order in question was not now in the
hanás of the Treasury but in the Budget.
After some discussion in which Secretary Vallace expressed his
objection to having Jesse Jones represented on the Board of
Directors of the Commodity Credit Corporation, and also to having
the majority of the Board composed of individuals not under his
control aa Secretary of Agriculture, he was informed by Secretary
Mopgenthau that he (Secretary Morgenthau) would discuss the
matter with the President at the first opportunity and ascertain
dot his wishes were with respect to the control of the capital
stock of the Corporation.
Secretary Norgenthau stated that té had no desire to be represented
on the Board of Directors - in fact, he declined to have such
representation on the Board. Secretary Vallace stated that he
would welcome Treasury representation if the Secretary was willing
to termit it, but that he felt it WAO necessary that the majority
representation should be under his control. He stated, in any
Regraded Unclassified
119
- 2 -
event he would like, as a matter of protection to himself,
Secretary Morgenthau to designate someone to sit at the meetings
of the Board of the Commodity Credit Corporation. Secretary
Morgenthau stated that while he would not consent to formal
representation on this or any other administrative board, he
would be willing to designate someone to sit at the various meet-
ings as an observer.
Secretary Morgenthau stated that he was entirely uninformed with
respect to the Cotton-Rubber deal recently agreed upon and would
like to know the details of that deal and the negotiations lead-
ing up to it. Secretary Wallace stated that he would be delighted
to see that such information as the Secretary desired was furnished
him in the necessary detail.
Secretary Wallace suggested that Dr. Haas would be a very
satisfactory contact to sit at the meetings and through him the
Department of Agriculture could keep Secretary Morgenthau informed
on such matters B.S might be of interest to him. It was agreed that
Dr. Haas would call on Mr. Carl Robbins, of the Department of
Agriculture, for detailed information on the Cotton-Rubber deal and
that he would subsequently make such contacts as seemed desirable
for the purpose of keeping Treasury informed on Agriculture activities.
120
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE July 10, 1939
TO
Secretary Morgenthau
FROM
Mr. Haas 9011
Subject:
The Business Situation,
Week ending July 8, 1939.
Conclusions
(1) The business trend apparently continues upward,
following a setback during the holiday period. Stook prices
here and abroad turned somewhat stronger last week. Auto-
mobile sales and construction awards increased sharply during
the final periods of June. The New York Times index of
cotton mill activity has reached the highest level in nearly
two years.
(2) Political uncertainties abroad continue to dampen
business confidence and to hold down stock and commodity
prices. While ourrent thought centere on the possibilities
of war, there remains in the background the possibility of
8 very favorable turn for world business, and for recovery
in the United States, if the menace of war could be removed.
The rapid advance in re-armament by Great Britain and her
allies raises the question whether the issue between war and
world business revival may not be decided within the next few
months.
Current business trends
Business activity in the United States, as represented
by the New York Times index, declined slightly during the
A substantial decline in automobile production featured the
week ended July 1, the combined index dropping 0.5 to 90.8.
week, while the adjusted index of cotton mill activity rose
to the highest level in nearly two years.
Regraded Unclassified
121
Secretary Morgenthau - 2
During the following week, which includes the 4th of
July holiday, the indexes of steel production and automobile
production will show substantial setbacks. Evidence that
the underlying trend is improving, and that the business
index is likely to continue upward, 18 provided by various
indications. Construction awards improved sharply in the
last period of June, for both total and residential data.
This raises the daily average residential awards for the
month as a whole to $4,304,000, as compared with only
$3,747,000 during the first half of the month. It 18 etill
substantially helow the May average of $5,147,000.
New automobile sales during the last 10 days of June,
according to the Wall Street Journal, improved 80 sharply
that the month as a whole made the best gain over 1938 of
any previous month this year. General Motors' new car sales
rose to 8 daily average of 4,500 units in the last period of
June, versus 3,900 and 4,000, respectively, in the two
preceding periods.
The improvement in cotton mill activity is aided by
rising cotton prices, and by an increasing amount of cotton
which the price rise has released from Government loan stocks.
It is reported by the Commodity Credit Corporation that
231,696 bales had been repossessed by growers through June 29,
which does not include some quantity on which reports have not
yet been received.
In Great Britain, the upward trend of business activity
has been resumed following the Whitsuntide holidays. (See
Chart 1.) The Economist monthly index for May shows B further
gain of one-half point to 1091, comparing with a low of 101
in December. Iron and steel activity and foreign trade
have contributed most to the improvement. It is of note
that exports have increased markedly along with improvements
in other indexes.
those in the United States, using indexes of 15 comparable
A comparison of commodity prices in Great Britain with
British substantially widened their margin over prices
basic commodities published by the Bank of England, shows that
1938, the marked decline in sterling exchange. (See
in the United prices States during the last quarter of 1937 and early
British prices last week declined somewhat more than prices
Chart preceding 2.) Binos that time the margin has remained about steady.
In this country.
Regraded Unclassified
122
Secretary Morgenthau - 3
Our new orders index (shown in Chart 3, in comparison
with the New York Times business index) has magged slightly
during June, while holding within the range of the previous
month. During the past week the index has improved with
upturne in steel and textile orders. New orders reported by
the U. S. Steel Corporation has risen to the equivalent of
49 per cent of capacity, continuing a gradual rise for the
third successive week. This seems to indicate that specifi-
cations for delivery on automobile steel, which are expected
to raise the level of steel activity during July, are being
received in increasing volume.
Stock market situation
A firm undertone in the stock markets here and abroad
was revealed in the failure of selling to develop in any
volume on the recent Danzig incidents, which suggeste the
possibility of a strong recovery in the markets if war 1s
avoided. Stock prices in New York, London, and Paris have
improved during the past week.
The extent to which stock prices may already have die-
counted war possibilities is reflected in a comparison of
yielda on high grade common stocks with those on high grade
bonds, to which attention has been called by Moody's Investors
Service. The present yield ratio shows stock prices to be
approximately as low, relative to bonds, as in June 1932,
when prices were about at their depression lows.
A comparison of industrial stock prices with industrial
production, and with earnings of industrial corporations,
18 shown in Chart 4. It will be noted, in the upper section
of the chart, that stock prices during the past several
months have declined more than would normally be expected in
view of the moderate setback in industrial production, and
have scarcely reflected the vigerous business upturn in June.
While the present low interest rates would tend to
raise stock prices as compared with earlier years, this
factor has apparently been offset in part by 6. lower current
level of corporation earnings in relation to industrial
production. (Indicated in lower section of chart.)
Regraded Unclassified
Secretary Morgenthau - 4
The foreign handioap
While attention continues to be centered on foreign
uncertainties and the possibility of war 8.6 the most im-
portant handicape to business recovery, there remains in
the background the possibility that developments in Europe
may turn in a direction strongly favorable to business
revival throughout the world, if the menaoe of war can be
removed. The United States would be favorably situated to
share in such a revival, in view of the present low inventory
levels, well-deflated speculative positions, high excess
reserves, and a business trend that is beginning to improve
in spite of foreign handicaps.
In such an event, the industrial activity generated by
renewed world confidence would compete with armament activity --
which would doubtless be continued by the democracies until
the menace of war was completely eliminated -- creating 8
heavy demand for raw materials, labor, and factory capacity.
The present pitch of armament activity is indicated by the
fact that steel production during May established a new high
record in England, and rose to the highest level in more than
eight years in France.
Considering the rapid advance being made by Great Britain
and her allies in war preparation, which month by month
increases the odds against Germany in a European war, the
question may be raised whether the issue between war and a
world business revival may not be decided in the next few
months.
Regraded Unclassified
INDICES OF UNITED KINGDOM BUSINESS ACTIVITY.
LONDON FINANCIAL TIMES
Weekly
1938
1939
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
PER
PER
CENT
CENT
124
124
120
120
UNADJUSTED
116
116
112
112
ADJUSTED
108
108
104
104
100
100
OCT.
DEC.
FEB.
APR.
JUNE
AUG.
ocT.
DEC.
124 Chart
1938
1939
1
the di the Secretary of the Treasury
Drawn of Resert and Statistics
C - - 261 - I
Regraded Unclas
COMMODITY PRICES IN U.S. AND U.K. AND STERLING EXCHANGE
Prices of 15 Comparable Basic Commodities
1936
1937
1938
1939
1940
J
E
M
J
s
N
J
M
M
J
$
N
J
M
MJSNUMMJSNJMMUT
2
PER CENT
DOLLARS
(PRICES)
PCR POUND
220
5.20
Sterling in N.Y.
210
5.00
200
4.80
190
4,60
180
4,40
170
4.20
U.K.
SEPT. 19, 1931,=100
160
4.00
150
3.80
WL End. July é
U.B.
SEPT. 19, 1931=100
140
3.60
Wk.End July &
130
3.40
120
3.20
110
3.00
J
M
M
J
$
N
J
M
M
4
$
N
J
M
M
J
$
N
J
M
M
J
$
#
J
M
2
J
$
N
1936
1937
1938
1939
1940
125 Chart 2
*MAY AND JUNE 1939, PRELIMINARY
- of the Secretary of the Treasury
of and -
Regraded Uncla
WEEKLY NEW ORDERS AND BUSINESS ACTIVITY
JAN
MAK.
MAY
JULY
SEPT,
NOV.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
PERCENT
PERCENTAGE
(N.Y. TIMES)
POINTS
(NEW ORDERS)
105
120
100
105
NEW ORDERS
95
90
90
75
85
60
BUSINESS ACTIVITY
NEW YORK TIMES
(EST. NORMAL - 100)
80
45
126
75
30
70
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
JULY
15
SEPT.
NOV.
1938
1939
CONFIDENTIAL
Chart 3
Office of the Secretary of the Treasury
- 4 - and States
Regraded I-96 Unclas
127
Chart 4
INDUSTRIAL STOCK PRICES AND CORPORATE EARNINGS
COMPARED WITH INDUSTRIAL PRODUCTION
Quarterly, 1032 to Date
PER
PER
CENT
CENT
(PRICES)
Stock Prices and Production
(PRODUCTION)
150
120
1.30
110
PRICES or 350 STOCKS
1926 = 100, STAND. STAT,
110
100
I
write June 29
90
90
70
08
50
INDUSTRIAL PRODUCTION, F.R.B.
1926 - 125 = 100
70
30
09
1932
1933
1934
1935
1936
1937
1938
1939
1940
PER
PER
CENT
CENT
(CARNINGS) Earnings and Production
(PRODUCTION)
110
110
EARNINGS, 120 CORPORATIONS
1926 = 100, STAND. STAT.
85
100
edunt
3
90
35
60
10
INDUSTRIAL PRODUCTION, F.R.B.
70
1923 - 125 = 100
-15
60
1932
1933
1934
1935
1936
1937
1938
1939
1940
" the Secretary of the Treasury
C 278
- # and
128
GROUP MEETING
July 10, 1939.
Mr. Gaston
11:30 a.m.
Present:
Mr. McReynolds
Mrs Klotz
Mr. Duffield
Mr. Haas
Mr. White
Mr. Gibbons
Mr. Bell
Mr. Lochhead
Mr. Graves
Mr. Hanes
H.M.Jr:
How's everybody?
Gaston:
They all look well.
White:
Present and accounted for.
H.M.Jr:
Isn't Foley here?
Duffield:
He may be on the Hill, Mr. Secretary, because Mr.
Barkley wanted to see him this morning.
H.M.Jr:
Mac, between you and Foley, I was to let the
Attorney General know about Sam Clark - somebody
....
Mcñ:
Nobody said anything to me about Sam.
H.M.Jr:
(on phone) Mr. Foley or Miss McGuire.
Didn't you (wraves) make an investigation?
Graves:
No one spoke to me about it.
H.M.Jr:
(On phone) Hello. - Hello. - Hello. - Miss
McGuire, I think ten days ago I asked - at least
ten days ago, I asked Mr. Foley to have an inves-
tigation made of Sam Clark for head of the Tax
Pureau over at the Attorney General's office. The
Attorney General just called up and said why don't
I let him know. I want to ask the same question
of Mr. Foley. - - I want an answer this after-
noon, without fail. - - Thank you.
Graves:
Mr. Morgenthau, I didn't understand your question. 1
We are - Mr. Irey is making an investigation, mean.
129
-2-
H.M.Jr:
On my God - I don't like to have the Attorney
General calling up, saying, "Why don't you come
through?" It's at least ten days. I sent him
a special thing.
Graves:
Mr. Foley called me right after you called him.
H.V.Jr:
Isn't it ten days? Well, come through this after-
noon, will you please?
Graves:
All right.
M.E.Jr:
Mac, will you see that I get B. report this after-
noon on Sam Clark?
JOA:
Yes, sir.
H.M.Jp:
For the - he's over in S.E.C. now - for head of the
Tax Division.
Graves:
Mr. Irey called as man down, put him right on that.
I like tothink you're efficient.
(Dell comes in)
Hello, Dan.
Bell:
Good morning.
H.H.Jr:
weorge.
daes:
Yes, sir.
H.V.Jr:
-ake a pencil and paper. I'd like to go back, if
you can, on, say maybe three or four years, if you
can, and: what proportion of the steel sold by the
steel industry goes to private industry and what
proportion goes to governmental units; and if you
could get it for me up to the first six months of
this calendar year, I'd like to have it. And I'd
like to have it damn quick, too, if It's going to
do any good. I read in the New York Times a report -
there's a Steel Institute of Pittsburgh, isn't there?
8883:
Steel Institute.
130
-3-
H.M.Jr:
Every order they received last week went to a
publicly financed outfit - I mean to some unit of
government. Every single order. They didn't have
an order except
....
I want the same thing for
cement. bee? And when you get it on the govern-
ment thing, if you could break it down E little bit -
the Federal, state and county, if they have it.
Haas:
Uh-huh.
H.M.Jr:
Wee? Also on the private side. Huh?
Haas:
Yes. If we - shall we work first - we'll work on
both of them simultaneously, but get the steel -
the cement thing is more difficult than the steel.
H.M.Jr:
well, you can have the cement figure - now, Pro-
curement ought to help you. Procurement once gave
me a cement figure for one year when the Government
bought 75 percent of all cement manufactured.
Haas:
That's right, yes.
H.M.Jr:
What I have in mind is for this legislation, see?
If the Government wasn't doing so and so, where
would your cement industry be, where would your
steel industry be? You know where your railroad
industry ....
White:
Does the Procurement buy for the U.S.H.A. program?
MeR:
No.
H.M.Jr:
Excuse me, Mr. McReynolds, they buy, I know, the
coal after the things are finished, because I had
a complaint it was lousy coal.
McR:
Well, that's when they're operating; but they're
done on private contracts.
H.M.Jr:
What?
Men:
The U.S.H.A. ...
H.M.Jr:
But they do buy their coal when the thing is
finished.
131
-4-
Bell:
I think that must have been the old Public Works
Housing outfit, because they 're operating those
units.
H.M.Jr:
well, the one I have in mind is the one completed
in Chicago.
Bell:
That was a Public Works. I don't believe any have
been completed under the United States Housing program,
the 800 million.
H.M.Jr:
"hat? Anyway, George, if you'll go to town on this -
and I want something in a day or two.
Haas:
Fine.
H.M.Jr:
Huh?
Heas:
I'll have something.
Bell:
Had some of this when you made up those charts a
year ago.
Raas:
Yes, we had a figure on steel and we had a figure
on
White:
Pupposing the Government buys battleships that are
made from steel which private companies produce.
H.M.Jr:
well, that's included.
Haas:
That should be in it.
H.M.Jr:
Sure, sure. *efinitely. Or the Shipping Doard -
Maritime Commission now. Hun?
McR:
Sure, those are Government-owned.
H.M.Jr:
It would be a very interesting figure.
Mr. Gaston?
Gaston:
Mr. Delano wanted me to let you know that he's
communicated with the three bankers. Mr. *pencer
will be able to be here on Thursday. Mr. Ottley and
Mr. Smith are both uncertain. Mr. Smith has to
132
-5-
cancel some engagements that he has. But they -
all of them expect to be here by Thursday or Friday.
H.M.Jr:
Good.
Gaston:
And it depends on Tom's plans.
H.M.Jr:
O.K.
Gaston:
+he boys have gotten up a draft on tax-exempts for
Mr. Hanes, and we're working on it this morning,
will work with Mr. Hanes during the day.
H.M.Jr:
Good.
Gaston:
The New York Herald-Tribune continues to print in
its Sunday papers attacks on Customs apparently
inspired by this broker, Ben Leavett. They had
another one yesterday which is rather mild.
H.M.Jr:
well, the worst thing about yesterday's was the
headlines.
Gaston:
Yes, yes.
H.M.Jr:
When you read the article, there was nothing to it.
Gaston:
There's not much in the article to substantiate
the head.
(Hanes comes in)
H.M.Jr:
Hello.
Hanes:
Hello. 100 late to get in?
H.M.Jr:
I made it late thinking you would get in about this
time. Heard you missed your plane.
Banes:
Missed it by about five minutes.
(bt cetera....)
Gibbons:
Is the Coast Guard taking good care of you?
Hanes:
Yes, fine, couldn't be better.
H.M.Jr:
Is that all, Herbert?
133
-6-
Gaston:
That's all.
Duffield:
Nothing.
Heas:
Here's the letter on the "Time" article.
H.M.Jr:
What's that?
Huas:
The reply.
H.M.Jr:
Yes.
daas:
You've got good material to reply on, it seems to me.
I put it in there. It's just a draft.
H.M.Jr:
well, if I have time I'll read it after I've gone
around. I'd like to read it aloud.
Anything else?
Haas:
That's all.
H.M.Jr:
Harry, here are two things I cut out of this morning's
paper that I'd like you to look at.
Anything else?
White:
The inflow of capital has been resumed. This is
the second week running.
H.M.Jr:
Inflow.
White:
Inflow, yes. It's running about 15 million - last
reported week.
We have here a memorandum on the Japanese currency
war in China, which, if you want to review it and
see what its significance is
....
H.M.Jr:
How long is it?
White:
Oh, just three pages. There's nothing you can
do about it.
H.M.Jr:
Thanks. Anything else?
White:
No. we have that silver stuff ready for tonight in
134
-7-
case anything does nappen that you might
H.A.Jr:
well, I see the papers insist that Mr. dull is
going to go up and testify to defend the purchase
of foreign silver. By some rare accident they got
the idea that it's a State Department matter and
the Treasury wasn't interested.
hanes:
You sorry?
6.M.Jr:
Well, I'm still laughing, and I told Parkley - just
now long I can keep on laughing I don't know, but
I told Parkley when he asked be to go up and tes-
tify - I said, "On what basis?" de said, "Well,
they want it for Mexico and Canada."
"On," I salu, "it's a matter of foreign affairs;
you better call up the State Department." Which
ne proceeded to do.
Shits:
Is there going to be any attempt here to prepare
any material for defending the recovery bill, the
new lending bill?
0.1.Jr:
No, but there should be.
Multe:
I'm wondering wuether we couldn't prepare a couple
speeches for the house and the Senate.
d.2.Jr:
Fine: swell. wet your friend Sauch to collaborate
with you.
*hite:
All right. Or they can prepare several. there
can be - more than one Penator can give 8 speech
in favor of it.
8.2.Jr:
Fine. Anything else?
"nite:
No, that's all.
4.2.Jr:
1 think that would be appreciated.
"anny?
Fell:
Nothing.
S.M.Jr:
Wonderful.
Regraded Unclassified
135
-8-
Lochhead: You notice the rates are holding very quiet; and
Angland said they didn't have to do anything this
morning.
H.M.Jr:
weorge, on that thought - I gave you steel and
cement; you might have some other ideas and expand
it, see? Will you?
Hass:
Uh-huh.
H.M.Jr:
If there's anything else. I can't think of anything
else. There might be something else.
"hite:
-here's something else that I had forgotten. Un
this silver, I think that We ought to consider send-
ing one or possibly two men around to some of the
important leading silver mines in the country; we
ought to be prepared next time with a more intimate
acquaintance. This problem will crop up again, It
takes a long time to get it and prepare it - as to
the exact situation in the mines. we have to depend
upon the Dureau of Mines, which is rather distorted.
And after tais thing dies down, I think we ought to
send somebody around.
H.M.Jr:
I'm sure my successor will appreciate it. The bill
runs for two years, doesn't it?
white:
Well, if you'll assure me that you won't be the
successor, WE can stop working on it.
Lochhead:
Go sit in the corner, Harry.
(Hearty laughter)
White:
Very good idea.
H.M.Jr:
O.K. These week-ends are good.
Gibbons:
On this Leavett stuff, we're sending two agents from
outside New York in to see what we can find out
about it. And Leavett at my request two years ago
wrote one of the - promised to give me specifications,
you know. de wrote a letter of generalities; 1 replied
and asked him to give me some specific cases, and he's
never replied to that letter. More or less of B
racketeer.
136
-9-
H.M.Jr:
Well, I hope he gets something.
wibbons:
That memorandum I spoke to you about on wait....
H.M.Jr:
Yes, I'm taking care of that.
Gibbons:
You're taking care of that.
H.M.Jr:
Yes, I'm taking care of that. I'm O.K. on that.
wibbons:
Will you let me know if it's
++++
H.M.Jr:
Yes, I'm going to....
Gibbons:
You know, Offie told me he was a very sick man.
H.M.Jr:
O.K.
Graves:
wast "ednesday you phoned me to have for you today
a report on Section 102 of the Revenue Code.
H.M.Jr:
Yes. Will you give a copy to Mr. Hanes?
Graves:
Yes, indeed.
H.A.Jr:
The President asked for a report on 102. I won't
read it now.
Graves:
That's entirely prospective, stating what we purpose
doing from now on in the application of that section.
H.M.Jr:
I'll read it. Anything else?
Graves:
That's all.
H.M.Jr:
Mac?
McR:
No. My daughter beat me playing golf yesterday, so
I'm kind of low.
H.M.Jr:
Your daughter what?
McR:
Beat me playing golf yesterday.
H.M.Jr:
I'd like to meet her. Well, that's very good. wid
she really?
137
-10-
McR:
Yes, she ...
H.M.Jp:
Phe must be good.
McR:
Well, she started at - the pro started her out when
she was seven years old. I know I didn't teach
her, or she wouldn't be any good.
There is one little piece of gossip. Corry Gill
called ne this mor ning and after some conversation
H.M.Jr:
I can't hear very well.
MeR:
Corry Gill called me this maning and after some
conversation told me he was giving us another
750,000 to take care of the statistical project,
the white collar project.
H.M.Jr:
Is that Alcohol?
McR:
No, that's this statistical project on the income
tax returns.
H.L.Jp:
Oh.
Men:
"hat he called up for was to get the consent to
withdraw the Alcohol Tax and Miscellaneous +ax
projects and give the money to this statistical
Gaston:
Senator Guffey, in other words.
McR:
Said we wouldn't do it; sorry, we wouldn't
H.M.Jr:
"hy Guffey?
"aston:
It's in Philadelphia.
McR:
Couldn't get the Revenue projects away, so he gave
us the additional money.
H.M.Jr:
Now, which has got it?
Gaston:
Poth.
Men:
Well, he originally gave us
H.M.Jr:
I mean from now on how will it be, Mac?
138
-11-
McR:
Both. He originally gave us $750,000, with dis-
cretion definitely in the Treasury to decide which
'one of the projects we'd apply it to, but advising
us very definitely to abandon the Revenue projects
and take the statistical projects.
H.M.Jr:
I see.
McR:
"ell, we told him "No" and we went ahead with the
discretion they gave us and allotted it definitely
tothe Revenue projects and turned it over and then
went ahead and told him we wouldn't use any of it
for the statistical projects. This morning he called
and wanted us to change our mind. I told him we
wouldn't change our mind.
H.M.Jr:
"here is it now, after you've had your conversation?
4cn:
we've still got the 750 in Revenue, refused to take
it away from them; and they gave us another 750 to
go ahead with the statistical.
H.M.Jr:
That's what I was trying to get. In other words,
congratulations are in order.
Men:
Another $750,000 we've got.
H.M.Jr:
That's swell.
Anything else, Mac?
den:
'hat's all.
H.M.Jr:
Let me read this letter. They had what I thought
was an unnecessarily mean article in Time about my
forecasting revenue, and I thought it was inaccurate,
because if my memory served me right, the Department
of Commerce shifted their base this year, didn't
they?
Haas:
This didn't involve that. This was just a dirty
crack.
H.M.Jr:
wet me read this thing. Did you write this, weorge?
daas:
Yes.
139
-12-
H.M.Jr:
"Dear Mr. Luce:
"I have read with a natural, if somewhat surprised,
interest the article on page 51 of the issue of 'Time'
for July 10, 1939, referring to my opinion last
December as to 1939 business prospects. After stat-
ing it as my opinion that prosperity would be back
in 1939, the article continued 'By prosperity he meant
something much closer to 1937's 469 billion national
income than to 1938's recession income of less than
$65 billions. Last week, while H.M. was waving out
the old fiscal year, the Commerce Department issued
its figures on national income for the first five
months of calendar 1939: it showed national income
running at the rate of $65.4 billions, only 3 percent
above the rate of 1938.'
"where is no statement in which I recall forecasting
a figure of national income, but I should like to
call to your attention certain statements around
the beginning of the year which reflect any forecast
of mine at that time regarding 1939 business.
"In hearings on the Treasury Department. If - and
so forth - "In reply to a question by Representative
Ludlow, I said, 'Ever since last Decoration Day,
business has had a remarkable recovery, and has
gone forward at a very rapid rate; but right now,
I would say, we seem to be in a sort of resting
period. 4he recovery has been so rapid that it is
not surprising that it seems to have reached what I
would call a temporary halt. Conditions right now
are very much better than they were twelve months
ago, I think that the country as a whole is in very
much better shape. While I never like to make
predictions, I think we can expect during this
calendar year a slow but steady continuance of
improved conditions.
Haas:
That's a perfect ....
H.M.Jr:
Perfect.
"A statement referring specifically to taxable incomes
was contained in my Annual Report for the fiscal
year 1938, prepared in December and transmitted to
Congress on January 5, 1939. I stated 'Receipts from
income taxes in the fiscal year 1940 are estimated at
140
-13-
$1,903 millions as compared with an estimate of
$2,086 millions for the fiscal year 1939. The
fiscal year 1940 - and so forth.
"Neither of these statements
H
Mass:
there is one important sentence in that, Mr.
"ecretary.
H.N.Jr:
"The fiscal year 1940 income tax receipts represent
a portion of the tax liabilities of each of the
two relatively low income years, calendar years
1938 and 1939. Although higher incomes are expected
in the calendar year 1939 than in the calendar year
1938, it is anticipated that they will not reach the
calender year 1937 level.
Eass:
That's right.
H.M.Jr:
"gain we're rignt.
Custon:
You say just definitely the opposite of shat he
points to.
M.F.Jr:
"Neither of these statements seems to indicate an
expectation on my part that business activity in
1939 would approximate the 1937 level. -xperience
so far during the year bears out the opinion contained
in my statements referred to above rather than the
opinion imputed to me by the article published in
your magazine. Just what measure of 'prosperity'
you may have had in mind is not clear, but I should
like to point out that the Federal Reserve Poard
index of industrial production for June of this
year has been estimated on 2: preliminary basis et
97-98. This compares with 102, 99, and 98 in the
first three months of the year, 92 in april end May,
and annual everages of 86 in 1938 and 110 in 1937."
Now, why do you throw that in?
88231
That's thrown in to show that this statement - both
those statements which you made correlate exactly with
the course which business has taken, if you assume
that's your course of business, BS represented by tue
federal Reserve Doard index of industrial production,
H.M.Jr:
You don't mind if I add on the bottom - make it not
141
-14-
so official - say, "With all due modesty, I think
I'm a pretty good forecaster." "hat? Hun?
Hass:
Yes, I think you're entitled to that, but I don't
think it's ...
H.M.Jr:
I don't want to make it so terribly formal.
Hanes:
You know him quite well; I'd put something like
that in.
H.M.Jr:
"with my usual modesty, may I be permitted to say... Il -
something like that.
"uffield:
If this is a personal letter to Mr. Luce, I think
that it ought to be a little bit more clear right
in the first paragraph, because my fear about this
is that it will show up in the letter column of
Time. I don't have any fear about the letter, I
think it's a good letter, but the crack they may
put underneath it is what I was worried about.
H.S.Jr:
What's the crack?
Duffield:
they always put some editor's note under a letter
criticizing them, and it would
....
H.M.Jr:
dow - do you want to take a look at it?
Duffield:
I think this is a good letter, but I just think
that before you send the letter you ought to make it
very clearly a personal letter to Luce and not a ...
H.M.Jr:
well, Just as long as it can go air mail this after-
noon, I'm satisfied.
Duffield:
Yes.
H.M.Jr:
I want it to be on a personal basis, see?
"uffield:
On a personal basis.
H.M.Jr:
Yes, I think if you could make it strictly personal -
yes, I'd like to make it personal. I don't want to
make it - I'd like to make it personal.
O.K., gents.
142
July 10, 1939
10:50 a.m.
Geo. C.
Marshall: Good morning, Mr. Secretary. General Marshall.
HMJr:
How are you? General, I wondered whether you could
do this for me. I'm very much interested in this
fight that's going on in outer Mongolia.
M:
Outer Mongolia?
HMJr:
Yes, between the Russians and the Japanese.
M:
Yes.
HMJr:
And I wondered if you could send some officer over to
my office at three-thirty
N:
Yes.
HMJr:
with a little map
M:
Yes.
HMJr:
of that area.
M:
All right, sir.
HMJr:
And what are the objectives and just what -- what is
going on.
M:
Yes, sir. Three-thirty this afternoon at your office
on the outer Mongolia situation.
HMJr:
Please.
M:
Just one minute, Mr. Secretary.
HMJr:
What's that?
M:
(Talks aside.) I'll have that done.
HMJr:
Thank you.
M:
All right, sir.
143
July 10, 1939
2:40 p.m.
Lowell
Mellett:
Hello.
HMJr:
Hello, Lowell.
M:
I see, Henry, the bills have been sent up.
HMJr:
Yeah.
M:
Now, that's going to obviate the press conference we
talked about?
HMJr:
Well, I don't know, Lowell. Ah -- we were acting under
orders here and I tell you what we were told. I sent
the stuff over Friday night. See?
M:
Yeah.
HMJr:
And then McReynolds and Ed Foley took it over, and they
saw the President; I had left. And he asked them to
prepare a press release to give to Barkley, which they
did.
M:
Yeah.
HMJr:
And then they went up and explained it.
%:
Uh-huh.
HMJr:
Now, whether he wants to do it or not, I don't know,
but this was what I was thinking. When is his next
press conference?
M:
Wednesday, isn't it?
HMJr:
What's that?
X:
His next press conference 1s Wednesday, I think.
HMJr:
Hello?
M:
Wednesday -- Wednesday, I think.
HMJr:
Well, this is what I was thinking of doing. I -- I
was thinking of writing him a note now and suggesting
that he call on Tuesday, the way he used to, this
Cabinet plus the heads of the agencies, for tomorrow
afternoon and have this thing explained. And then on
Wednesday have a press conference and do it there. See?
144
- 2 -
M:
I tell you, I didn't know -- maybe I didn't quite under-
stand you.
HMJr:
You remember on Tuesdays he used to have the heads of
all the independent agencies together -- every Tuesday?
M:
Yes.
HVJr:
Well, I'm suggesting -- going to write him a note, if
you think well of it, suggesting that tomorrow after-
noon he have the 35 heads of the independent agencies
together, plus the Cabinet.
M:
Yeah.
HMJr:
And sell this program to them then.
M:
Yeah.
H/Jr:
And then follow that on Wednesday and at his press
conference have it repeated again.
X:
Uh-huh.
HNJr:
See?
with
M:
And in that case, you go through/the idea of having
McDonald and the others tell their stories?
HMJr:
Yeah, tell it twice. Once to the Cabinet and the
independent agencies, and once to the press.
It
K:
Yeah. Well, that might be pretty good. / would -- it
would put the heads of the agencies and the Cabinet
members in a -- in a position, if they wanted to, to
sell the story
HMJr:
Well, if the
X:
on their own.
HMJr:
Right! Well, if the President will talk to them the
way he talked to Jesse Jones he'll get results.
M:
Yeah.
HMJr:
And he's Just got to do it if he wants to be successful.
X:
Yeah.
145
- 3 -
HMJr:
And everybody now is saying there are just two things that
he has to get through - one is this self-liquidating
program and the other is neutrality.
N:
Yeah.
HMJr:
And he certainly went to town last week with Jesse,
now he ought to do the whole thing with the rest of
them at one time.
X:
Yeah.
HKJr:
Then -- whether it's Wallace, or Hull, or anybody,
they ought to all get -- or Farley -- they ought to
all get behind the program.
M:
Or McNutt.
HMJr:
What.
M:
Or McNutt.
HMJr:
I don't hear you.
M:
Or MoNutt, I say.
HMJr:
Yeah, I hear that's your appointment.
M:
Oh, yes. Those Indiana boys look out for one another.
HMJr:
Well, how in the hell do you explain McNutt?
M:
Oh, I never have been able to. (Laughs)
HMJr:
Well, is the Indiana delegation worth that?
M:
I wouldn't think 80.
HMJr:
What?
M:
I wouldn't think 80.
HMJr:
Well, I WAB riding with Harry, he says he can't under-
stand that.
M:
I haven't seen -- I haven't heard anybody that does
understand it. (Laughs)
HMJr:
Well, Harold Ickes, he says he can't understand it.
- 4 -
146
M:
No. Well, maybe he's smarter than any of us.
HMJr:
Well, he usually is.
M:
Yeah.
HMJr:
Well, I'm going to write this note and get it over
to him and this will be in the form of a memorandum,
and then I -- it's up to him to make the next move.
See?
M:
Yeah. Righto !
HMJr:
But I -- I'm just -- I'm glad you called and if I
know anything I'll let you know and vice versa.
M:
Righto ! You bet.
HMJr:
Thank you.
July 10, 1939 147
3:57 p.m.
Otto
Wadsted:
Yes, but in order to definitely reserve places he
would like to -- that I sent them a little cable about
the number of rooms that you desire and if possible
the time you desire coming home. Do you want me to
write a little
HMJr:
Well
W:
......
-- a little letter for you 80 that you will have
it easier for you and not have to be bothered with
remembering these things here, I'll be very glad to
do 80.
HMJr:
Well, I'd like to first
W:
have a talk with your
HMJr:
wife.
V:
general staff about it, Mrs. Morgenthau.
HMJr:
That's right.
W:
(Laughs)
HMJr:
Could -- could you tell me the name of the hotel?
V:
Marienlyst, M-A-R-I-E-N -- Marien
HMJr:
Yeah.
W:
L-Y-S-T.
HMJr:
I see, and that has
V:
You can see that easily if -- the idea -- I'm sure in
any of those pamphlets there. It's something like
five minutes outside of Elsinore.
HMJr:
Is it on the water?
W:
Oh, yes. Very much. Rather.
HMJr:
Is it?
W:
It's on the water where you have a -- a lovely view.
I think it's one of the prettiest -- the waves, one
of the prettiest typical spots of Denmark. You have --
you -- you remember the configuration of the water,
- 2 -
148
don't you, where the two coasts go together there
into this very narrow entrance of the sound.
HMJr:
Yeah.
W:
The one going down to Copenhagen.
HMJr:
Yeah.
W:
It's very near there and you have the Kronborg on the
one side and you have the Swedish fortress on the other
side and then they have some falls.
MMJr:
Well now, I'll -- I'll talk to Mrs. Morgenthau
W:
Yes.
HMJr:
and as soon as I get an answer, I would love to
take advantage of your offer. You'll be -- you'll
be
W:
When do you think you can get away?
HMJr:
I don't know.
W:
You don't.
HMJr:
But you'll be here all week, won't you?
W:
Well, I'm not sure, but Mr. Eickhoff will be here
anyway and he knows all about it.
HMJr:
Well
V:
Our Counselor. Because I may go Wednesday with my wife
out to -- I promised her to see the west of this
beautiful country, and I may go to Yellowstone Park
and to San Francisco and Grand Canyon. Just a -- sort
of a flying round trip, don't you know.
HMJr:
I -- well, I'm ever 60 much obliged and I -- 88 soon 88
we know, I'll get in touch with your Counselor.
V:
All right. Righto. And then -- simply to tell how many
rooms you would want to have and then make your reserva-
tions from about the -- something like what would be
the 9th of August, or something like that.
HMJr:
Thank you 80 much.
149
- 3 -
W:
You already have your reservations on the Normandy,
as I understand?
HMJr:
That's right.
W:
All right.
HMJr:
Thank you 80 much.
W:
Very good, and thank you. Good bye.
HMJr:
Good bye.
150
July 10, 1939
5:03 p.m.
HMJr:
Hello.
Operator:
Go ahead.
HMJr:
Hello.
Robert
Wagner:
Henry?
HMJr:
Hello, Bob.
W:
Yeah.
HMJr:
How's the world?
W:
Oh, I don't know. How -- what do you think of the
world?
HMJr:
Well, I'm going on a strike because I -- I'll be damned
if I've got to work 130 hours.
W:
No, damnit I
HMJr:
It's too little; it's too little!
W:
That's it. It isn't enough, is it?
HMJr:
No, you and I work 260 hours.
W:
Yeah, I know, but we shouldn't.
HMJr:
No.
W:
But our work 18 a little more interesting than that
poor guy that's just digging a ditch.
HMJr:
You're right.
W:
Ah -- Henry, I wanted to ask you. Do you wan^ to be
the first witness on this lending program?
HMJr:
What a pal! What a pal !
W:
Huh?
HMJr:
I don't know.
W:
Well, I mean, you're the spearhead, and I should think
you ought to be the first witness, but I'm going to
make you decide that.
- 2 -
151
HMJr:
When do your witnesses start?
W:
Well, I'm going to start on Wednesday because I don't --
you know -- you know, people -- they're beginning to
get stale up here a little bit, Henry. Really, I
mean, men are tired; I'm tired. You know, you get a --
you get
of things.
HMJr:
Yes, well now
W:
And then
HMJr:
let me -- let me -- I wouldn't have done it that
-- I mean, I wouldn't -- I appreciate the compliment
and I -- I am ready to testify, but I Just wondered
whether I should lead off. That's a new thought.
W:
Well, who -- who would you say?
HMJr:
Ah -- well
W:
But think it over over night.
HMJr:
Well, if you push me, I'd say right now, Jesse Jones.
W:
Yeah.
HMJr:
And then, the fellows that are going to handle the money,
you see. That's what I was thinking about.
W:
I see.
HMJr:
But let -- let me sleep on it, see?
W:
Sleep on it and I'll call you in the morning, because
I must arrange the program tomorrow, because it's for
Wednesday, you see?
HMJr:
Yeah.
W:
And you decide that first.
HMJr:
Well, I - I'm going to decide it by asking the President.
W:
Well, whichever way -- I don't care. I want to get
your decision.
HMJr:-
No, but I mean, whatever I tell you will be his decision.
152
- 3 -
W:
Yeah. All right.
HMJr:
See what I mean?
W:
Yeah.
HMJr:
But thanks for giving me a little notice.
W:
All right, Henry. But then, I'll hear from you
tomorrow?
HMJr:
Positively!
V:
In the morning, Henry, so I can notify the other guys,
you know.
HMJr:
You will hear from me in the morning.
W:
Thank you, Henry. Good bye.
153
send To
Pennsylvania Hotel,
How York, How York,
July 10, 1939.
Hone Henry L. Morgenthau, Jres
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Secretary:
Before sailing I should like to thank you for
the enjoyable evening at your home on Saturday. It wes
most kind of you and Mrs. Morgenthau to invite no and
I shall count the visit as one of the personal pleasures
I most enjoyed during my stay in your country.
I am enclosing a letter reforring to the cotton
credit of which you may, of course, make whatever use you
like.
With kindest regards to yourself and Mrs. Morgenthau,
Cordially yours,
Vuey Juan Negrin
copy sent to Mrs. M. 7/12/39
154
Pennsylvania Hotel,
New York, New York,
July 10, 1939.
Hone Henry L. Morgenthau, Jres
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Secretary:
With regard to the proposed ootton credit to be
extended by the Export-Import Bank to General Franco, I
should like to point out that under the Constitution of
the Republic, a loan of this kind must be ratified by
Parliament and would be illegal without such ratification.
I am enclosing a copy of the Spanish Constitution
(1931) of which the relevant articles are paragraphs,
112, 117 and 118.
It is our position, of course, that the war and
its temporary result have not changed the laws of Spain.
A military rebellion accompanied by the invasion of foreign
states, has no power to alter the legal status as provided
by the Constitution of the Republic.
I am sure that the Constitutional Republic will
be reestablished and in that case no convention or obligation
or agreement entered into by the present regime will be
honored by use
Very sincerely yours,
Juan Negrin
Farm
TREASURY DEPARTMENT
155
INTER OFFICE COMMUNICATION
DATE July 10, 1939
TO
Secretary Morgen thau
FROM
Mr. White
Subject: Japanese Currency War in China and the Tientsin
Incident
1. The foreign concessions in China, now being threatened
by the Tientsin blockade, are vital in protecting the Chinese
national currency. The Japanese have been trying hard to
drive that currency out of use in the occupied areas but find
they cennot do BO unless they control the concession areas.
Not only does the continued existence of these foreign con-
cessions prevent the Japanese from obtaining the full economic
benefits of their military occupation but they have been 8.
source of important aid to the Chinese guerills forces now
fighting behind the Japanese lines.
2. The technique which the Jopanese have used to attack the
Chinese currency has varied from time to time, and city to
city, but the basic principle ha always been the same, that
of foreibly substituting B. fiat currency subject to strict ex-
clan.e control for the Chinese currency which in practice 18
freely convertible into foreign exchange.
3. The Japanese through their currency maneouvers have already
partly succeeded in (a) breeking down the stability of Chinese
currency, and (b) obtaining B. substantial trade advantage for
their nationals.
(a) The Japanese substitute their fiat notes for Chinese
notes and then buy foreign exchange with Chinese currency.
This practice gives them a considerable amount of foreign
exchange and weakens the Chinese currency. Japanese sales
of Chinese currency are generally considered to have been
& very important factor in driving down the Chinese currency
from 29¢ to 16¢ during 1938, and from 16₫ to 12% in June
1939. The Chinese Government on July 5 prohibited the
import of 237 non-essential commodities, in an effort to
reduce the drain of foreign exchange and to strengthen
the yuan.
Prepared by Mr. Glasser and Mr. Hooker
156
Secretary Morgenthau - 2
(b) Japanese currency in China (F.R.B. notes) 1s freely
exchangeable only for yen, and circulates at a discount
with the Chinese currency. This gives the Japanese exporter
8 large exchange advantage over exporters of third countries.
The use of this currency has the effect of excluding third
countries from trading in North China.
4. The Japanese have, however, been only partly successful.
They have not been able to prevent the circulation of the
Chinese currency in large sections of the occupied areas of
Chine. The most important reason 18 the fact that the foreign
end Chinese banks operating in the foreign concessions have re-
fused to cooperate with the Japanese authorities and continue
to transact business with Chinese currency.
The residents of the occupied areas carry on business with
the Chinese currency and utilize banks operating in the foreign
concessions for conversion of Chinese currency into foreign ex-
change. A substantial volume of foreign trade escapes Japanese
control by being cleared through the banks in the foreign conces-
sione, and as 8. consequence the Japanese are unable to obtain the
full benefit of the foreign exchange proceeds derived from ex-
oorts from the occupied areas.
(The Chinese have been able also to utilize the foreign con-
cessions 8.6 bases for their guerilla forces fighting behind the
Japanese lines and to ouy supplies, both foreien and domestic,
using Chinese currency issued by the Chungking government.)
5. Continued autonomy of the foreign concessions is of very great
importance to China in resisting the Japanese. If the Tientein
blockade is successful and the Japanese gain their objective of
controlling the banks operating in the foreign concessione in
Tientsin, Shanghai and elsewhere, then:
(a) The Japanese will have such a large quantity of Chinese
currency 98 to be able to either destroy the internetional
value of the currency or to force the Chinese Government to
establish strict exchange control and thus restrict the use
of Chinese currency to those areas which are still under
Chinese control.
(b) The guerille forces of the Chinese army will lose the
purchasing power which they have been able to obtain from
the Central Government and be forced to resort to confisce-
tion to obtain needed supplies.
(c) Banks in the foreign concessions which have urchased
of funds for China and will, no doubt, be 8 source of
large amounts of Chinese bonds will no longer be a source
funds for Japan.
157
Secretary Morgenthau - 3
(d) The Japanese will obtain the assets of the Chinese
banks and the hoarded Chinese money, art objects, jewelry,
etc., now being safeguarded in the foreign concessions.
The Japanese would acquire a considerable amount of silver
which eventually would be offered for sale to the United
States.
(e) Obtain the full foreign exchange proceeds derived
from the exports of Chinese areas under her control.
(f) The Japanese will be in a position to enforce the
complete exclusion of third countries from trade in the
occupied areas.
158
Order of Services at the Funeral
of
Claude Augustus Swanson
Late Secretary of the Raby and former Senator
from the State of Virginia
Order of Services at the Funeral
of
Claude Augustus Swanson
Late Secretary of the Raby and former Senator
from the State of Virginia
The services will be held at 1:00 o'clock p. m., Monday,
July the tenth, Nineteen Hundred and Thirty-nine.
The body of the late Secretary will be placed in the Senate
Chamber prior to the services.
The President of the United States and his Cabinet, the
Chief Justice and Associate Justices of the Supreme Court, the
Diplomatic Corps, the Members of the House of Representatives,
the Chief of Staff of the Army, the Chief of Naval Operations
of the Navy, the Major General Commandant of the Marine
Corps, and the Commandant of the Coast Guard have been
invited to attend the services in the Chamber and will occupy
the seats on the floor of the Senate assigned them by the
Sergeant-at-Arms.
The President and his Cabinet will meet in the President's
Room.
The Supreme Court will meet in its former chambers in
the Capitol.
The Diplomatic Corps, the Chief of Staff of the Army, the
Chief of Naval Operations of the Navy, the Major General
Commandant of the Marine Corps, and the Commandant of
the Coast Guard will meet in the Senate Reception Room.
The Vice President's Room will be reserved for the mem-
bers of the family of the late Secretary and the officiating clergy,
whence they will be escorted to seats on the Senate floor.
Seats will be reserved for those entitled to them upon the
Boor, to which they will be shown by the attachés of the Senate.
159
July 10, 1939
My dear Mr. President:
Now that your Self-liquidating Program
has been launched on the Hill, it seems to me
that it is equally important to get everybody
behind it at this end of Pennsylvania Avenue.
Therefore, I am taking the liberty of
making the following suggestion: that you call
together on Tuesday afternoon, the way you used
to, your Cabinet plus the heads of all the vari-
ous Independent Agencies and on this occasion
give the men who are responsible for making this
program work an opportunity to explain it. Then
if you personally will give half as good a sales
talk to this group as you did last week to a cer-
tain gentleman, I have no doubt that this program
will get the support that it needs from this end
of Pennsylvania Avenue.
Yours sincerely,
The President,
The White House.
Regraded
July 10, 1939
Ny dear Mr. President:
Now that your Self-liquidating Program
has been launched on the Hill, it seems to me
that it is equally important to get everybody
behind it at this end of Pennsylvania Avenue.
Therefore, I am taking the liberty of
making the following suggestion: that you call
together on Tuesday afternoon, the way you used
to, your Cabinet plus the heads of all the vari-
ous Independent Agencies and on this occasion
rive the men who are responsible for making this
program work an opportunity to explain it. Then
if you personally will give half as good 8. sales
talk to this group as you did last week to n cer-
tain gentleman, I have no doubt that this program
will get the support that it needa from this end
of Pennsylvania Avenue.
Yours sincerely,
The President,
The White House.
281
July 10, 1939
My dear Mr. President:
How that your Belf-liquidating Program
has been launched on the Hill, it seems to ae
that it 1a equally important to get everybody
behind it at this end of Pennsylvania Avenue.
Therefore, I am taking the liberty of
ming the following suggestion: that you call
together on Tuesday afternoon, the way you used
to, your Cabinet plus the heads of all the vari-
ous Independent Agencies and on this occasion
give the men who are responsible for making this
program work an opportunity to explain it. Then
If you personally will give half as good a sales
talk to this group as you did last week to a cer-
tain gentleman, I have no doubt that this program
will pt the support that it needs from this end
of Pennsylvania Avenue.
Yours sincerely,
The President,
The White House.
-62
so
THE
for the Decretary,
Complying with your request of technology, July 5, 1 submit the
following information with respect to the staps to be tains to the
of Internal in the application of the provisions of
soution 102 of the Internal Code,
Sootion 102 of the Revenue let of 1938 contains a - provision,
manely, that the existence of an accumulation or earnings or profite
boyond the reasonable needa of the Lusiness is determinative of the
purpose an the part of the corporation to avoid the surtax on share-
holders unless the taxpayer proves the contrary by the clear pro-
penderance of the evidence. The effect of this care provision is to
shift the burden of proof to the tasgayer and the caterially strong>
then the position of the Tharomas in undertaking to defeat afforts to
avoid purtax upon individual shareholders by fuilure to distribute
surporate carnings.
With this change in the Law, revised instructions will be
to all internal revenue Agents in charge and other afficers and 05-
playees of the Bureau consorned, requiring that close attention shall
be Aven to all exporation returns to detentine whether motion 18
la applicable. the types of corporation relaire to which the Instruction
None will require attention include the followings
1. Corporations which have not distributed at least 70
percent of their earnings as tamble dividends.
1. Corporations which have invested carnings in unlisted
securities or other propertive unrelated to their
normal bustones activities and not readily converti-
blo Into ench.
2. Corporations which have advanced BOW to afficers or
stockholders in the l'arn of Lowe out of undistributed
profits or surplus from which termile dividends aight
have been declarade
4. Corporations, & majority a' visuse stock is Iseld by a
family group or other smil crap of individuals, of
by & trust or truste for the bonefit of auch proups.
Regraded Unclassified
Regraded Unclassified
-
for the Decretary.
5. Corporations, the distributions of which, while excess
Ing 70 percent of their carnings appear to be Londo-
quate when considered in competion with the nature of
the business or of the financial position of the corpo-
retion, or with accumulations of cash or other quick
assets which appear to be beyond the ressonable mode
a the business.
in DO far as cases of the first four types are concerned, the
instructions will provide that la every Instance the action
cor's report drall contain a opecific recommintion for the applica-
tion or nonapplication of section 102.
Employees will be designated in and finid office so apecialize
on the application of section 102, whose responsibility It will le to
pass personally upon each case in which recommendations have been made
by assistaing or revieds; offlours with respect to the application or
of that section. Special attention will also be (Iven
3 these types air CASON in the post review of returns in Mashington,
and detailed date will be maintained currently In Washington in :-
spect of all 00808 in which liability under sootion 102 10 suggested
DO that the officers of the Department mind Interested condittons of
congross my be Impt appropriately informed.
X will be reserved that persunal bolling are now
taxed under suotion 351 of the Revenue 100 of 1004 and corresponding
mentions of the levorate note of 1956 and 1920 and the Internal love-
taso Code. The provisions of the statute establishing high tax ratos
on carnings hold in such corporations have eliminated the largest
croup of chase which previously fell within the provisions of section
102, and that section now las application only to corporations door
than personal holding companies.
It is believed that unler the plan which 10 in advid, as antined
above, the Bureau will be able to provide an adequate arrangment to
Insure that unreascrisble accumulations of current carrities in corporate
structures will be taxed as directed by section 102.
Signed Harold N. Graves
Acting Comissioner.
164
CJ
PLAIN
LONDON
Dated July 10, 1939
Rec'd 2:35 p.m.
Secretary of State,
Washington.
965, July 10, 6 p.m.
FOR TREASURY FROM BUTTERWORTH.
With no further international news of significance
the stock market and the foreign Exchange market were
quiet today but silver again slumped in value, the fix-
ing price for spot being 16 1/16 and for forward 15 5/8.
The fixing was not large, such buying as there was being
on Indian account. After fixing, the price was steady
on limited Indian buying but a further fall in the price
is EXPECTED tomorrow unless the price fixed in Washington
today should bE such as to promote steadiness.
72 of the 131 bars of gold dealt in at the fixing
were supplied by the Bank of England. 19 bars WETE
married and Samuel Montagu WQB the sole buyer.
KENNEDY
KLP:WWC
Regraded Unclassified
165
JR
GRAY
Paris
Dated July 11, 1939
Rec'd 1:25 p.m.
Secretary of State,
Washington.
1284, July 11, 5 pame
FOR THE TREASURY.
Accounts published in the French press of the
monthly board meeting of the B.I.S. held yesterday
indicate that Dr. Funk explained the new organization
of the REICHSBANK and remarked that the change ill
in no way interfere in the relations between the
REichsbank and the B.I.S. Furthermore the statement is
made by the bank that suggestions which have appeared in
certain newspapers regarding the possible consequences
for the B.I.S. of the transfer of the Czech gold have
no foundation and that no steps have been taken to
withdraw any government funds deposited with the bank.
On account of the "holidays" the next board meeting
will bE hEld on October 9.
The uncertainty of the international situation and the
approach of the holiday season has brought transactions
on the Exchange and security markets to a low Ebb.
Business
Regraded Unclassified
166
-2- #1284, July 11, 5 p.m., from Paris.
Business was again on a restricted scale today and
changes in rates were unimportant.
BULLITT
CSB
42713038
167
As LENDING BILL STRATEGY
July 11, 1939.
12:40 p.m.
present:
Mr. Foley
Mr. Gaston
Mr. White
dr. Duffield
Foley:
Now, Larry - Wagner went right from the Foreign
Relations Committee hearing to the floor, because
this change in tae WPA law to meet the strike situa-
tion is up. Through his clerk, Larry got to "agner
on the floor about Wallace appearing first and then
Carmody and then Jones; and then you would come down
if the Committee wanted you to. And that was satis-
factory to "agner, to handle it that way.
Now, he - Larry wasn't able to see Barkley either,
because Parkely was at tue same meeting and went
directly to the floor for the same purpose, and we
haven't been able to talk to Barkley. I put in a
call for Parkley after I left your office.
H.d.Jr:
(on phone) Just leave word - I don't want to -
register with Senator wagner's office that I am
available to talk; call up nis office. I won't try
to get him off the floor.
de called me back.
Acley:
Now, I talked to Steagall and Steagall told me that
he'd know et little bit more tomorrow about LOW the
situation looked. de wents to get reported out the
Straus nousing bill before ne takes this up, but he
says if he hasn't got the votes he's going to continue
to talk about the Straus housing bill and hold hearings
on this at the same time. In other words, ne'll hold
hearings on Streus in the morning and on this in the
afternoon. And he would rather have had you come
down first and as the principal member of the Cabinet
to outline the financial aspects and the financial
soundness of the program; but he said that he SBW
the strategy in having Wallace explain the Farm
*ecurity and toe Rural Electrification side of the
program first, which is the most popular part of it,
and get it off to a good start, and then have Garmody
come down on Public Roads and on Public "orks, then
Jones on the railroads and the export-Import Bank;
then, if necessary, call you to clean up. And he
said that that was agreeable to him; that ne'd call
me tomorrow noon after he'd had a chance to survey
the situation.
Regraded Unclassified
168
-2-
H.M.Jr:
The only thing I want to say is, Harry, you and
Duffield better get busy on a statement for me.
White:
Well, "d already asked me to prepare one.
B.M.Jr:
"ell, and "uffield, too.
white:
I'll get to work.
H.M.Jr:
It better be painted with kind of a broad brush -
the unemployment situation and what we've been
trying to do. Now, that - of course, I'd like to
say what I think, and wast I think is this, and you
can boil it down into one sentence or you can make
a thousand words out of it if you want to. And that
is this; this is tue way I feel about it: that just
as long as the world is in the present situation - I'm
using these figures that ualf of the world is putting
three quarters or more of its stuff into non-productive
purposes, and consequently our outlets in the world
market shrink as the world trade shrinks; and until
we have peace or war, we've got to take care of our
own internal situation, and the way we've got to take
care of our own internal situation is through supply-
ing work for people. Now, just as soon &S the world
sanity returns, I hope by peace that we can go back
into exchange of goods on a normal basis, and then
we won't have to do this sort of thing we're doing
now; and until the thing is settled one way or the
other we've just got to do something, and this is
the best way, the senest way, we know.
that's what I believe. You fellows can build that
up so that my figures and my statements are sccurate,
and so forth and so on; I don't know just how much the
world trade is shrinking.
white:
That wouldn't be enough of a basis, but that would be
one of the ingredients.
H.A.Jp:
Well, that's one.
"hite:
I think it's a good opportunity to make a clear,
forceful statement of your position on that. Doesn't
have to be very long; can be as long 89 - a little
shorter than your tax statement.
H.M.Jp:
well, anyway - but you better have something tomorrow
Regraded Unclassified
169
-3-
morning in rough form, gents.
white:
I thought you (Foley) said Monday, Tuesday, we
were going to be called.
Foley:
well, I don't think you'll be called in the House
before Monday or Tuesday and in the Senate before
riday.
"hite:
di week from Friday.
roley:
No, no, this Friday. de's going to start tomorrow.
White:
I see.
4.M.Jr:
If Lauch Gurrie is not busy, maybe he can help. But
I don't want to be caught short without a statement.
Foley:
'hat's right.
E.M.Jr:
Pecause if worst came to worst, 4d Foley would have
to go up there and do it ad lib.
roley:
That would be terrible.
G.V.Jr:
I wonder why they don't make these fellows go up
that really write the thing.
"hite:
No, there's a good deal of sense in that, because
after all, who does
....
H.M.Jr:
Just a second, just a second. I've got this call
from the White House, (voes out to take call)
(Secretary returns)
One other chore, then I
(On phone) John Carmody, please.
-
"hat?
-
O.K.
(Has conversation with Senator wagner)
Regraded Unclassified
170
RE SET-UP OF COMMODITY CREDIT
CORPORATION
July 11, 1939.
2:35 p.m.
Present:
Mr. Gaston
Mr. Foley
Mr. McReynolds
Mr. Pell
H.M.Jr:
Gents, here's a tough one. I need a little advice.
In talking with the President of the United States
this morning, I was very frank with him about this
agricultural matter, and I told him I held the stock
by his direction in Commodity Credit and Wallace was
over here looking daggers at me; that + personally
thought the President should, the first of January,
have another reorganization plan and create a new
farm lending agency which would have everything in
it that nas to do with farming from every standpoint.
It was smart, the President agreed with me; he's going
to do it. Now
...
Men:
Grand.
H.M.J.:
What?
McR:
Perfect.
H.M.Jr:
Now, I said, "From every angle - the farmer's angle,
and from the angle of Governor McNutt."
Geston:
Uh-huh.
H.M.Jr:
Now, Mr. Henry Wallace just called me up. He has an
alternative proposal. to make. de is willing that I
should certify who the directors should be, but I've
got to let him know right away, because he just has
to do something about his organization. So 1 said
I had to talk it over with my associates, and would
let him know.
Oh, I told the President - I said Danny got by the
pipe-line that he told Jones to continue the organi-
zation, or something like that; but he said that
wasn't SO. But ne wants me to sit.
"Now," I said, "I think..." - oh, another thing
+ said to the President - I said, "Jesse Jones has
two directors; I think he'd be willing to give up
one." See?
171
-2-
Now, I'm not very good on these arguments, and I
was just - it was running through my. head to write
Wallace a letter and simply say, "Now, I have - since
our meeting on May 10, I have had an opportunity to
discuss with the President the matter of trusteeship
of the stock of Commodity Credit, and the President
wishes the Secretary of the Treasury to continue to
hold it." Period.
Now, I'm open to argument. I didn't ask - you
fellows are in here to give me your advice. Now,
we know what the President wants.
Put I promised Jesse whatever I'd do on director-
snips, you see, I'd talk to him first. I had a
call in, and he's not in. I think Jesse's willing
to withdraw one director.
Foley:
But that won't satisfy wallace, because he still
controls the Export-Import Bank representation.
B.M.Jr:
You mean Commodity Credit.
Bell:
No, Pierson.
roley:
Pierson. You see, he's got - Jesse nas two from
the R.F.C. and Pierson, so he's got three.
Dell:
And also Goodloe. as a matter of fact, ne's ...
A.V.Jr:
"ho are the directors on this thing? wo you know
them off-hand? who in your office would know?
well:
they're in my file.
Past m:
^ren't they in the Directory?
sell:
*hey may be in the Directory. Wells in Farm Credit.
And that fellow Robbins is one - he talked about
yesterday.
G.M.Jr:
Who is Robbins?
Bell:
He's & new man.
Foley:
Jesse's got four votes - either nas or controls - and
that's what Wallace is kicking about. He can control
the Doard.
172
-3-
Bell:
I raised the question ...
Gaston:
The directors are J. B. Wells - that's Farm
Credit; Lynn Talley, R.F.C.; "ilford Johnson ...
Foley:
R.F.C.
Gaston:
Warren Lee Pierson.
Foley:
R.F.C.
Gaston:
Clifford Durr.-
Foley:
R.F.C. - Assistant General Counsel. That's four.
Gaston:
John Goodloe.
Foley:
Five.
Gaston:
Albert Black.
Foley:
I don't know him. Who's he?
Pell:
de's Agriculture.
Gaston:
R. M. Avans.
Bell:
Agriculture.
Gaston:
That's all.
Foley:
Jesse's got five votes.
Men:
Five to two.
Pell:
There ought to be ten.
Caston:
Wells, Talley, Johnson, Pierson, Durr, Goodloe,
Black, Avans.
Bell:
May be a couple vacancies.
H.M.Jr:
Well, I - this is - who has an alternative suggestion?
Pell:
I was going to ask a question: if you shouldn't give
consideration to maybe reducing the number of the
Board of Directors and giving Wallace maybe three
out of seven, giving Farm Credit two and Jesse a
173
-4-
other one.
couple, and giving him at least more than any
H.N.Jr:
Well, what I thought I would do - first I'd write
this letter, then let him go through the ceiling
and then let him come back; then, as my second
shot, I'll
....
Foley:
¹hen ne'll ask you to certify the Board.
Pell:
well, I was going to suggest as a part of your
letter that you ask for nominations to be elected
to the Poard.
Waston:
You ought to have five directors, two from R.F.C. -
one from R.F.C. direct, one from Export-Import Pank -
one from Farm Credit, one from Agriculture, and the
fifth man holding the balance of power, from Treasury.
H.M.Jr:
No, I don't agree. I think that "allace ought to
have the
...
Foley:
Balance of power.
H.M.Jr:
... the majority.
Foley:
Just let him have three.
Gaston:
Three - two from Agriculture, one from Farm Credit.
H.M.Jr:
Two from Agriculture, one from Farm Credit.
Dell:
I don't know why Export-Import bank is on there.
H.M.Jr:
I would say three from Agriculture, one from
foley:
Farm Credit.
H.W.Jr:
... Farm Credit, and one from Jones.
Bell:
That's enough.
H.M.Jr:
Hun?
Dell:
That's O.K.
H.M.Jr:
I'm willing to do that.
Pell:
And then let the thing go along as it is until January,
and then change it.
174
-5-
H.M.Jr:
Yes.
Gaston:
Uh-huh.
Foley:
Well, that will satisfy Wallace ...
H.M.Jr:
What?
Foley:
That will satisfy Wallace, it won't satisfy Jones.
H.M.Jr:
I think so.
Pell:
I think it will if you explain to Jones what you've
said here.
H.M.Jr:
Yes. I'll just tell Jones the truth.
McR:
What can Wallace do in the meantime?
H.M.Jp:
That's why I was going to shoot this thing over.
*hen when he gets all real excited I say, "You haven't
given me a chance. I'm willing to give you a majority
of the Board. What are you kicking about?" I mean
give him the worst first and then - "Well, the
President called me - 'Well, why did you do this?' -
!well, ne never gave me a chance. in
If I give it to him all at once, I have nothing left
to trade with. What do you think, Mac?
Men:
That's all right.
H.M.Jr:
"hat?
Men:
It's all right, providing you're not putting him in
the position so he can ball the thing all up until
January.
H.M.Jp:
"ell, how can he? Let's just see what happens. I
just - if he wants to know ... What he came over
here yesterday for - he wants to know - he asked for
the stock, didn't he?
Mas:
Yes.
H.M.Jr:
Then I said, "I've talked to the President... " - well,
I have - 11 and the President told me to hang on to
the stock."
Doaradod
175
-6-
Foley:
Sure. And in the meantime he anticipated that's
what would happen and the President would say you
should hang on to the stock, so he said, "Now, you
certify the directors that you're willing to nominate
and I'll, tell you whether that will be satisfactory
with me." So you've turned it around and you've just
given him a letter and let him come back with the
alternative proposition and say, "That's all right
with me." de'll come back with this proposition;
let him make it instead of you.
H.M.Jr:
Exactly. Let me just try E letter.
(on phone) Hello. - That's all right. Fine. -
3:30 for Carmody.
wet me just try a letter. Secretary Wallace.
"My dear Mr. *ecretary:
"I had an opportunity today to discuss with the
"resident the question of the trusteeship If -
is
that what it is, is that the correct language?
Gaston:
That's all right.
H.M.Jr:
If the trusteeship... " - what?
Dell:
Isn't exactly trusteeship, it's the powers and
functions
...
H.M.Jr:
Let me just give you the idea, and then supposing,
wan, you write a letter, then we can take a look at
it.
You needn't take this. Just something like this.
"My dear Wallace:
"I had an opportunity today to discuss with the
President the question 11 - I'll use the word
"trusteeship," you can use whatever you want -
"
of the stock of the Commodity Credit. It
is the resident's wish that the Treasury continue
to hold this stock in his behalf.'
Bell:
Uh-huh.
Regraded Unclassified
176
-7-
H.M.Jr:
Paragraph.
"I am ready to call an annual meeting any time
that suits your convenience. IT See?
Bell:
That's good.
H.M.Jr:
What?
Bell:
That's good.
TREASURY DEPARTMENT
tile
177
INTER OFFICE COMMUNICATION
DATE July 11, 1939
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Treasury Position With Respect to Continued
Purchases of Foreign Silver
An evaluation of the economic advantages and disadvan-
tages resulting from continued purchases of foreign silver
could reasonably lead to any of the following three conclu-
sions:
1. The net economic gain or net economic loss result-
ing from the purchase of foreign silver is 80 small that the
decision as to whether or not the purchase of foreign silver
should be continued should be decided on the basis of consid-
erations other than economic,
or
2. A continuation of the purchases of foreign silver
yields on the whole a net economic gain to the people of the
United States though the net gain 1s of small dimension,
or
3. The chief economic advantage which results from
the purchases of foreign silver is that it keeps some 15,000
to 25,000 more persons employed in the United States during
the year than would be the case were the program dropped.
In view of the fact that there are better methods of increas-
ing employment than additions of silver to our monetary stock,
the purchases of foreign silver should be discontinued.
TREASURY DEPARTMENT
file
178
INTER OFFICE COMMUNICATION
DATE July 11, 1939.
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Treasury Position with Respect to Continued Purchases
of Foreign Silver,
During the first half of 1939 the Treasury has been
purchasing about 25 million ounces of foreign silver a month.
The continued purchase of foreign silver has both economic and
political consequences. This memorandum 18 confined to A dis-
cussion of the economic consequences.
Certain minor economic advantages ensue from the American
purchase of this foreign silver and certain minor disadvantages.
1. The purchase of foreign silver results in an addition
to our excess reserves of from $50 to $150 million a year -
depending upon the amount of silver certificates issued against
the seigniorage.
Inasmuch as our excess reserves already amount to $4.2 billion
an increase of $100 or so a year would have a negligible influence
on the credit situation.
2. The silver which we acquire is useless in making pay-
ments to other countries.
This 18 8 consideration which deserves no weight because we
have far more gold with which to settle our international balance
of payments than we can possibly use in the foreseeable future.
Therefore, even though some of our silver imports are obtained
at the expense of gold no economic loss is now sustained by that
substitution nor can any loss possibly be sustained in the
foreseeable future.
3. Serves to increase the price which industrial users of
silver have to pay for silver by possibly from 56 to 10€ an
ounce.
Regraded Unclassified
179
Secretary Morgenthau - 7/11/39 - 2
If we cease purchasing our foreign silver the price would
eventually settle probably in the neighborhood of 25% en
ounce. We consume about 50 million ounces of silver & year
in the arts. Presumably a large part of the $5 to $10 m11-
lions saving from the lower cost of industrial silver would
be passed on to the consumer in favor of lower prices for
the finished product.
4. Additions to our monetary stock of e metal having 8.
potential market value which 1s only E. fraction of its monetary
volue represent & threat to the future stability of our monetary
system.
In view of the fact that our monetary stock of gold amounts to
16 billions and that our annual purchases of silver have a
monetary value of $250 millions, any threat to the soundness
of the dollar is too remote to be significant.
5. Employment in the United States is increased 88 E
conse uence of our purchases of foreign silver by some 15,000
to 25,000 persons per year. This increase in employment results
from the increase in our exports consequent upon our purchases
of foreign silver. The foreign countries selling eilver acquire
dollar balances, and most of these dollar balances are expended
in obtaining increased imports. The bulk of additional imports
come directly or indirectly from the United States.
Though there are better ways of reducing unemployment than the
urchase of foreign, silver, the latter does not prevent the
better ways from being adopted.
6. The purchases of foreign silver cost the United States
Treasury nothing. On the contrary, for every dollar's worth of
foreign silver purchased the Treasury obtains e seigniorage equal
to approximately $2.50.
Seigniorage profit is not simply "bookkeeping" profit. It 18
Just as real 8 source of revenue to the Treasury BB an increase
in taxes. It can be spent or it can be used to redeem obliga-
tions just as any other source of revenue. Unlike taxes, seign-
lorage if spent does not in times of E large amount of idle labor
and cenital deprive citizens of real purchasing power but adds to
that purchasing power.
7. Purchases of foreign silver by replacing in our monetary
stock each year from $10 to $25 millions of gold with silver serves
to increase gold holdings of other countries by that amount. Other
countries need gold more than we do and therefore the redistribu-
tion is an economic benefit to the United States 88 well 8.8 to
foreign countries.
The sumsinvolved, however, are 80 small 88 to be quite unimportant.
Regraded Unclassified
180
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 11, 1939
TO
Secretary Morgenthau
FROM
Joseph P. Cotton, Jr.
Interview with Judge Moore
re: Spanish Cotton - Cuba.
1. Judge Moore was not very communicative as regards the Spenish
cotton credit situation. However, he did indicate that the desl might
be set up in such a way that the Spaniah Government would receive the
credit. Under these circumstances, he agreed that your point, about
a provision in the Spanish constitution requiring Parliamentary approv-
el of the assumption of obligations by the government, is well founded.
He is going to try to get information on this point in the State De-
partment.
On the question of assurances against assertion of counter-
claim arising out of purchases of Spanish silver by the United States
Government, you will recall that we originally took the position that
It would be desirable to have assurances both from the Spanish Finance
Minister and the Bank of Spain, wheress Warren Pierson is taking the
position that assurances from the Spanish Ambessador here would be
sufficient. I got the impression that Judge Moore WELE doubtful in his
GWO aind whether assurances from the Ambessador alone should be con-
midered satisfactory.
2. I presented your letter about my replacing Mr. Lochhend on the
Export-Import Bank. Judge Moore is referring it to Warren Pierson for
the necessary arrangements to be made.
3. Relative to Cuba, within the last few days the State Department
has become aroused about the situation in Cuba - i. e., the peso dis-
count and the adoption of a law making certain dollar obligations pay-
able in pesos, which it is feared may have a discriminatory effect on
American interests - and is at present formulating a program for 10-
mediate action as opposed to somewhat extended studies, with 8 view to
recommendations on the Cuban proposals for revision of banking laws,
*hich have been in progress for some time. Accordingly, it is probable
that the State Department will have some program to put up to us on the
Cuban situation within the next few days.
our Ambassador in Cuba has been recalled by the State Department
for consultation.
18.eh
Regraded Unclassified
181
July 11, 1939
HM,Jr spoke to Mr. Hull at about 11:20.
HM,Jr: At 12:30 I am having a meeting in
regard to dumping from the City of Danzig.
I
wonder if you could send somebody over at 12 o'clock
to Ed Foley 80 that they could talk it over before
the meeting. They say that we have to do something
about it today as a shipment of amber is on its way
to Florida. It's damn bad luck that it had to be
Danzig of all places in the world.
(Mr. Hull agreed to send somebody over.)
HM,Jr: While I am on the telephone, I was
talking to the President this morning about foreign
silver and he asked me to think over the possibility
of making separate treaties with each silver mining
country and treat it like any other commodity. I
would like you to think about it and would like to
have your ideas. I think it is fraught with danger.
o0o-o0o
Regraded Unclassified
182
Prepared by Wesley Lindow,
Division of Research and Statistics
TREASURY department
183
INTER OFFICE COMMUNICATION
DATE July 11, 1939
TO
Secretary Morgenthau
FROM
Mr. Haas and
Subject: Reduced average size of mortgages on new homes
accepted for insurance*
1. The average size of mortgages on new 1-4 family
homes accepted for insurance by the Federal Housing Adminis-
tration has been decreasing steadily year by year. The fig-
ures for 1936 to date are 86 follows:
1936
$4,711
1937
4,638
1938
4,601
1939 (first 5 months) 4,504
2. These reductions have taken place notwi thatanding
the fact that the average ratio of loan to appraised value
on new homes has been increasing year by year. The figures
for 1936 to 1938 are 8.8 follows: (Data for 1939 are not
available.)
1936
73.2
1937
75.3
1938
82.4
The large increase in the 1938 ratio over 1937 18 mainly the
result of increasing the maximum permissible loan from 80
percent to 90 percent of appraised value in the case of mort-
gages on small new owner-occupied homes. This liberalization
was provided in the 1938 amendments to the National Housing
Act. For the year 1938, almost 63 percent of new home mort-
gages accepted for insurance were for amounts between 81 and
90 percent of appraised value.
3. The explanation for the fact that the average mort-
gage has been decreasing while the average ratio of loan to
value has been increasing is that there has been a. steady
decrease in the average value of property covering mortgages
on new homes accepted for insurance, as follows: (Single
family homes)
Prepared in to your request for a report covering
points raised response in the attached letter from Stewart McDonald
dated June 24, 1939.
Regraded Unclassified
184
Secretary Morgenthau - 2
1936
$6,255
1937
5,978
1938
5,530
The successive reductions are due mainly to the increas-
ing importance of small homes as compared with more expensive
ones. In 1938, only 16.8 percent of new homes accepted for
mortgage insurance were valued at more than $7,000, as com-
pared with 26.3 percent in 1937, and 30.5 percent in 1936.
The following table shows the distribution of the property
valuations for new single family homes accepted for mortgage
insurance in the last three years:
:
Property valuation
:
Distribution (percent)
:
1936
:
:
:
:
1937
:
1938
Less than $5,000
38.8
39.7
42.5
$5,000 to 6,999
30.7
34.0
40.7
7,000 to 9,999
19.7
18.3
13.2
Over 10,000
10.8
8.0
3.6
100.0
100.0
100.0
185
MR. MORGENTHAU'S OFFICE TO-
Mr. Hanes
Mr. Gaston
Mr. Gibbons
Mr. McReynolds
Mr. Alexander
Mr. Harper
Mr. Allen
Mr. Helvering
Mr. Bartelt
Mr. Irey
Mr. Batchelder
Mr. Julian
Vr. Boll
Mr. Kilby
Mr. Borkshire
Mr. Lochhead
Mr. Bornard
Miss Lonigan
Mr. Birgfeld
Mr. Maxwell
Er. Blough
Adm. Peoples
Ir. Broughton
Miss Reynolds
Ir. Bryan
Mr. Rose
Ir. Cannon
Mrs. Ross
Mr. Davis
Mr. Sloan
Mr, Delano
Mr. Spangler
Visa Diamond
Miss Switzer
Miss Zianagan
Mr. Tarleau
Mr. Foley
Mr. Thompson
Mr. Graves
Mr. Upham
Mr. Haas
Mr. White
Mr. Hall
Mr. Wilson
Mr. Hanna
Ir. Haas:
For study and report.
N.M.Chauncey
Regraded Unclassified
186
FEDERAL HOUSING ADMINISTRATION
WASHINGTON
TEWART McDONALD
ADMINISTRATOR
June 24, 1939
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
Washington, D. C.
Tobeans 11m/v
Dear Mr. Secretary:
I discussed this subject with you the other
day.
It is interesting to note that our average
mortgage on new construction has dropped during the past
four years, notwithstanding the fact that for the past
year 65% of our mortgages have been 90% mortgages as against
80% heretofore. Also the average mortgage on existing con-
struction remains practically identical with what it was
when we started in 1936.
Sincerely yours,
Stewart McDonald
Administrator
Iied
NO 14
ENING 10. 1,
187
FEDERAL HOUSING ADMINISTRATION
MEMORANDUM
DATE June 22, 1939
Mr. Stewart McDonald, Administrator
THOMY
Raymond T. Cahill
UBJECT
Average Amount of Mortgage Under Title II
1936
1937
1938
1939
Average Amount of Mortgage
for both New and Existing
Construction
$3,973
$4,122
$4,344
$4,265
Average Amount of Mortgage
on New Construction
4,711
4,638
4,601
4,493
Average Amount of Mortgage
on Existing Construction
3,756
3,864
3,825
3,796
Raymond T. Cahill
Regraded Unclassified
TREASURY DEPARTMENT
186
INTER OFFICE COMMUNICATION
DATE July 11, 1939
TO
Secretary Morgenthau
FROM
Mr. Hase YOR
Subject: Per cent of steel production and production of
certain other products attributable to govern-
mental activity.
Conclusions
(1) Steel
While accurate estimates are difficult, calculations we
have made as explained below indicate that governmental
activity accounted for approximately 11 per cent of total
steel production in 1936, for 7 per cent in 1937 and for 12
per cent in 1938. Data for 1939 are not yet available. The
Bureau of Labor Statistics believes these figures are not
far wrong, but perhaps & trifle high. A round figure of 10
per cent would probably be a usable figure.
The Bureau of Labor Statistics estimates that construc-
tion steel used in Federal-financed projects accounted for
approximately 55 per cent of the total production of this
steel in 1936, for 33 per cent in 1937, and for 48 per cent
in 1938.
(2) Other products
Calculations made by the Bureau of Labor Statistics,
Division of Construction and Public Employment, show the
following percentages for certain other products:
Per cent of total production used in
Federal-financed projects
1936
1937
1938
58
45
57
Cement
Sand and gravel (commercial
44
33
50
production)
Brick and other structural
47
29
38
clay products
Regraded Unclassified
Secretary Morgenthau - 2
(3) State and local projects
No data are available on the amounts of steel and other
materials involved in State and local projects. The total
euma spent on such projects, in fact, are not yet known,
though B. WPA project 1s now under way to compile these figures.
Steel products
Estimates of the proportion of steel products used in
Federal-financed projects may be derived from calculations
made by the Bureau of Labor Statistics, Division of Construo-
tion and Public Employment, showing the percentage of the
total production of structural steel (fabricated structural
steel plus reinforcing bars) used in Federal-financed projects,
combined with data on the total value of steel products used
in these projects, as compiled by the same Bureau.
The Bureau of Labor Statistics estimates that Federal-
financed projects accounted for 55-5 per cent of structural
steel production in 1936, 33.3 per cent in 1937, and 47.9
per cent in 1938. The Iron Age estimated in January that
during the early part of 1939 the proportion would continue
at about the same rate as in 1938.
As B percentage of total steel output, the Government
use of structural eteel alone accounted for 4.6 per cent in
1936, for 2.7 per cent in 1937, and for 4.5 per cent in 1938.
The proportion which structural steel formed of all iron
tion projects financed by Federal funds, 88 compiled by the
and steel products (excluding machinery) involved in construe-
Bureau of Labor Statistics, 18 indicated by the following
figures in dollar values:
Total iron and
Per cent
Structural steel
steel products
of total
1936
$113,684,435
$275,998,812
41.2
84,040,196
209,481,242
40.1
1937
74,508,147
204,117,250
36.5
1938
59,741,863
42.6
1939 (let cuarter)
25,444,610
Regraded Unclassified
190
Secretary Morgenthau - 3
The percentages given above are doubtless somewhat
low, if used to represent proportionate tonnage, since the
construction steel has a lower average value per ton than
the other steel products used on Federal projects. However,
one may estimate the total tonnage roughly from the dollar
values given above, if it be assumed that the discrepancy
would be offset by the additional steel contained in machinery
and transportation equipment used in these projects (totalling
$179,145,185 in 1938). Estimated in this manner, the percent-
age of total steel production accounted for by Federal
activities in each year is approximately as follows:
Per cent
1936
11
1937
7
1938
12
Data for 1939 are not yet available.
- THE di & - -
191
AND - TO -
TREASURY department
UNITED STATES COAST GUARD
HEADQUARTERS
WASHINGTON 11 July, 1939
Memorandum for The Secretary of the Treasury.
This memorandum has reference to your recent informal
request to be furnished with a statement as to the economies
and estimated savings for the current fiscal year to be brought
about by the merger of the former Lighthouse Service with the
Coest Guard,
Two estimates are submitted. The first is based on the
assumption that no immediate discharge of personnel will be mãe
and that savings will be effected by & gradual reduction of
personnel through attrition. This WELL the method proposed in
n letter to the Bureau of the Budget from the Treasury Department
concerning the merger of the Cosst Guard and Lighthouse Service,
wherein it was stated:
"The plan does not call for the immediate
discharge of any personnel and the savings will be
effected by the non-filling of vacancies as they occur
through attrition. After one year of operation of the
consolidated services, during which the details of
the consolidation will be perfected, it is estimated
that the plan will result in a reduction of about 5%
of the present annual cost of operation and maintenance
of the Lighthouse Service.
*
This will result in annual savings of about $500,000.
It is to be recognized that major savings can be realized
only by replacement of the present civilian administrative and
operational personnel of the Lighthouse Service with corresponding
grades and ratings in the regular Coast Guard (which will require
legislation). and by the performance of Lighthouse Service duties
by regular unite of the Coast Guard as additional duty.
During the first year necessary details will be worked out
and practical economies inventigated, bearing in mind that essential
work shall not be reduced or interrupted by such changes. Steps
already have been taken to this end. Lighthouse and Coast Guard
districts and their administrative staffs are being merged, like
functions of operations, communications and engineering are being
- 1 -
Regraded Unclassified
192
Memorandum for The
FB-020-62, Secretary of the Treasury,
11 July, 1939,
amalgamated; investigations are being unde 58 to the advisability of
decommissioning certain units of the Lighthouse Service and replacing
them with those of the Coast Guard, and arrangements are being made
for the general unification of the Service. Legislation has been
drafted to authorise, (1) consolidation of appropriations, (2) in-
duction into commissioned, warrant and enlisted grades of the Coast
Guard certain of the civilian personnel of the Lighthouse Service,
and (3) provision for the retirement of such of this civilian per-
sonnel, not 80 inducted, whose services will not be required, and the
replacement of retired civilian personnel with Coast Guard personnel.
Inseruch as Reorganisation Plan No. 2 transfers all Lighthouse
Service personnel to the Coast Ouard without change in classification
or compensation, the only economies that can be effected pending legis-
lative action, except through discharge, will be:
(1) The difference between the active pay and retired pay of
personnel of the Lighthouse Service who are retired in
1940 and not replaced.
(2) Lapses of positions during 1940 and not replaced,
(3) Replacement of Lighthouse Service personnel by Coast Guard
personnel.
(4) Savings in rentals where offices are combined.
(5) Economies resulting from utilization of Lighthouse Repair
depots for effecting certain ship repairs with ship's forces.
(6) Using Coast Guard equipment and men wherever possible in
performing Lighthouse duties.
There can be no assurance of the value of any estimate which
may be made at this time as to the savings that will be made the first
year. The very act of consolidation introduces come expense. If
pending legislation. referred to above, is authorized by Congress
during the present session, it is hoped that one or two percent of the
appropriation of the Lighthouse appropriation for the current fiscal
year will be saved. Under this plan the annual savings will be between
$100,000 and $200,000,
The second estimate calle for discharge of civilian personnel,
including administrative personnel in key positions. In addition to the
savings enumerated under the first ostimate, the following Saving, amounts
would be saved:
(1) Consolidation of administrative
offices in Washington.
$ 20,500
(2) Reducing the number of districts
24,300
in the field
(3) Consolidation of field personnel with
20,800
district forces.
- 2 -
Regraded Unclassified
193
Memorandum for The
PB-020-62, Secretary of the Treasury,
11 July, 1939
(4) Discharge of certain civilians in the field
Saving
forces and replacing them with Coast
Guard personnel (estimated)
$ 100,000
Total
$ 165,600
Under this plan the annual savings will be from $265,000 to $365,000.
If savings are to be effected as outlined in the second
estimate, it will be necessary to discharge outright persons in
the former Lighthouse Service who otherwise would be retired under
their own retirement provisions. Such procedure would entail curtail-
ment of work until such time as the regular personnel of the Coast
Guard became skilled in the new duties. Because of this, and because
of the manifest injustice of discharging men approaching retirement
age, I do not recommend that the second plan be adopted.
museschi
R. R. WAESCHE,
Commandant.
1838
- 3 -
194
July 11, 1939
9:17 a.m.
HMJr:
Hello.
Harold
Ickes:
Hello.
HMJr:
Hello, Harold.
I:
Hello, night. Henry. I'm awfully sorry I can't come Thursday
HMJr:
Oh, I'm sorry too.
I:
I'd love to come.
HMJr:
We'll miss you and your money.
I:
All right.
HMJr:
Another time.
I:
Thanks, Henry.
HMJr:
Good bye.
I:
Good bye.
July 11, 1939
195
10:43 a.m.
HMJr:
Hello.
Operator:
Judge Moore.
HMJr:
Hello.
R. Walton
Moore;
Good morning, Mr. Secretary.
HMJr:
How's the great traveler?
V:
Pretty -- pretty good. (Chuckling). He's been going
too strong though recently. I had to go down to
Richmond in addition to everything else yesterday after-
noon to Claude Swanson's funeral.
HMJr:
Oh, for heavens sakes! Judge, at your convenience,
could you see Mr. Joe Cotton who 18 with us looking
after Export-Import Bank? I'd like him to talk to
you on some new angles on the proposed
M:
Yes.
HMJr:
loans to cotton states, and legal matters.
M:
Yes.
HMJr:
When would it be convenient -- could you see him some-
time this afternoon?
M:
Yes. Supposing you let him come up here, we'll say,
anytime this afternoon he thinks now.
HMJr:
Well, you name it and he'll be there.
M:
I'll be there.
HMJr:
Well now, what time would you like to see him?
M:
Well, suppose we say about 3:30?
HMJr:
He'll be at your office at 3:30.
M:
Yes, and glad to see him.
HMJr:
Thank you.
Mt
How are you?
Regraded Unclassified
- 2 -
196
HMJr:
Oh, I'm fine.
M:
And how is Mrs. Morgenthau?
HMJr:
She's very well.
M:
Is she here now?
HMJr:
No, unfortunately, no.
M:
Well, I -- I think it's fortunate because it's been
dreadfully hot here until this morning.
HMJr:
Yeah. Well, she's sensible.
M:
Yes.
HMJr:
Well, he'll be there at 3:30.
M:
Yes, sir.
HMJr:
Thank you.
M:
All right.
197
July 11, 1939
11:01 a.m.
Operator:
Miss Callaway.
Gladys
Callaway:
Yes.
HMJr:
Miss Callaway.
C:
Yes, Mr. Morgenthau.
HMJr:
Will you tell Mr. McReynolds that this man,/Congressman that
Robert Doughton wants a Job -- I'm afraid we'll have to
do it.
C:
Yes.
HMJr:
And whether McReynolds will talk to me about it this
afternoon.
C:
Uh-huh. All right.
HMJr:
See?
C:
Fine! I know what it is.
HMJr:
Yes, Johnny Hanes said that
C:
Yeah.
HMJr:
it's a matter of life and death
C:
Um-hm.
HMJr:
more or less.
C:
All right.
HMJr:
Thank you.
198
July 11, 1939
12:46 p.m.
HMJr:
Hello.
Operator: Go ahead.
Robert
Wagner:
Hello.
HMJr:
Hello, Bob.
W:
Yes, Henry.
HMJr:
Well, where do we go from here now with that vote on
Neutrality?
W:
Yeah -- well, I don't know.
HMJr:
What?
W:
I guess we were lucky to get our bill through.
HMJr:
I'll say BO.
W:
I -- well, you know, it was by one vote.
HMJr:
You mean that it's held in Committee.
W:
Yeah.
HMJr:
Yeah, we got it on the ticker here.
W:
Yeah. Well, I don't know. I don't know what the
President 18 going to do.
HMJr:
No.
W:
That -- I mean -- I'm not 80 -- I wasn't sure yet just
what I was going to vote for, but I certainly am
against evading responsibility by just ducking it.
HMJr:
Yeah.
W:
I think that's a mistake.
HMJr:
Yeah.
W:
Just as I say I don't think that MoNutt appointment 16
80 hot either.
Regraded Unclassified
- 2 -
199
HMJr:
Well, you know -- I don't
W:
I can't help
HMJr:
I don't get in on that stuff, you know.
W:
I know, but I -- I -- I've -- I'm a sponsor of three d'
the matters that are right under him and God I don't
want any politics in them.
HMJr:
Yeah. Well, I can't argue with you, Bob.
W:
What?
HMJr:
I can't argue with you.
W:
No, I know, and I tried to talk to our friend and I
think he ducked me because he was in a conference all
evening. I wanted to tell him it wasn't 60 hot. Well,
I -- but I'm -- I'm a good sport.
HMJr:
Yeah.
W:
Maybe I'm wrong about it.
HMJr:
No.
W:
Well, Henry, what about tomorrow?
HMJr:
Well, here's the thing. I went to see the President
this morning and he said he thought it would be much
better to put the fellows on first that have to do
with the funning of it, and let me go on last.
W:
I see.
HMJr:
I mean, now there's -- for instance, Wallace 16 going
to have the roads with McDonald; he's going to have
Rural Electrification and I don't know where roads
are -- wherever it 18. Me.
W:
Yeah.
HMJr:
Carmody.
W:
Yeah.
HMJr:
And then Jones has got the other stuff. It'll put
some of those boys on first
200
- 3 -
W:
Yeah.
HMJr:
and then if you still want me I'll come up and be
delighted to give a statement.
W:
All right. Well now, who do you suppose ought to go first?
I -- this is tomorrow morning 80 I can
HMJr:
Well, I think that Carmody or -- or Wallace, either one.
W:
Suppose I put Wallace and Carmody on tomorrow?
HMJr:
That would be all right. Then put Jones on next and
then I
W:
Yeah. Yeah. All right, fine.
HMJr:
But that -- he said -- I explained -- you know how jealous
everybody is. If I go up first why then these fellows
kind of lay down.
V:
Yeah. Yeah.
HMJr:
So
W:
Well, I'll take your Judgment on it, Henry.
HMJr:
Well that's the judgment of the President.
V:
Yeah. All right.
HMJr:
Yeah, I -- I went over just especially to see him.
W:
Yeah.
HMJr:
And he said that he thought it would be better this way.
W:
The guy's a tough man sometimes, you know. Jesus, I stand
by him like a soldier, I'm not even a Colonel, don't you
know?
HMJr:
Yeah.
W:
And by God when you want to talk to him about something
he -- he kind of ducks you and then tells you the next
day he forgets about it. Cheer up. Well, you know,
it's only a friend can talk that way.
HMJr:
Yeah.
Regraded Unclassified
- 4 -
201
W:
(Laughs.)
HMJr:
I guess he must love you, otherwise he wouldn't talk to
you like that.
W:
Yeah, sometimes. well I tell h2m -- I'm pretty frank with him
HMJr:
Yeah.
W:
All right.
HMJr:
O. K.
W:
Fine.
HMJr:
Thank you.
W:
Goodbye.
HMJr:
Goodbye.
202
July 11, 1939
12:51 p.m.
Operator: Go ahead,
HMJr:
Hello. Morgenthau talking.
John M.
Carmody:
How do you do, sir.
HMJr:
How are you? Carmody, I'd like to, if you are not too
busy this afternoon, to see you about the following
things: A week or ten days ago I took up with the
President and Mrs. Roosevelt the 1dea of starting on
a national basis this self-help co-op. like we have in
Washington and Richmond.
C:
Yes?
HMJr:
And I spoke to Colonel Harrington about it and he said
he'd call me back, but I guese he's forgotten about it.
Now, I -- I'd like to -- if you had some time this
afternoon, tell you what I have in my mind and I -- and
both the President and Mrs. Roosevelt are keenly in-
terested in it. So 18 Mrs. Morgenthau.
C:
Yes.
HMJr:
How are you fixed this afternoon?
C:
Well, I'm -- Just a minute, I'm fairly well crowded, but
HMJr:
Well, we can do it tomorrow.
C:
Well, tomorrow I'll be out of town. I've got to go away.
I -- I'll be with Harrington tomorrow,
HMJr:
Oh.
C:
Wedbetter do it this afternoon, two-thirty -- three -
three o'clock?
HMJr:
Yeah, would you bring Harrington with you?
C:
No, I don't think I would to start, although I might.
HMJr:
Well
C:
I don't know. I don't know where he is today. He's
going away himself, you know, too. He's
Regraded
203
- 2 -
HMJr:
Well, it won't take -- if you -- 1f you wouldn't mind
coming over, it wouldn't take me to say what I have on
my chest five minutes.
0:
Yeah, well I -- I think I
HMJr:
want to come alone.
C:
I think -- well, I think 80. Then -- then I'll talk to
him and perhaps we'll talk about it on the way out and
he can talk to you when he comes back. I -- I think I
know what it 18. Yeah.
HMJr:
Three o'clock?
C:
I say, I think I -- I have an idea what -- what it 18.
I -- I'm aware of what they're doing here and in Rich-
mond and
HMJr:
Well, could you come at three o'clock?
C:
I'll try to do that, yes.
HMJr:
Well, is that definite?
C:
Well, yes. Let's put down three o'clock. Three o'clock.
HWr:
You'll be over here.
C:
Yes, and if I change it -- if I have to change it because
I'm tied up, I'll call you in advance.
HMJr:
O. K.
C:
I may drop in earlier than that, you see?
HMJr:
Well, if you -- well, do you want to make it earlier?
C:
Well, I can't do it because I don't know how long it'll
take. I'm having luncheon with Harry Hopkins end some
other people and I can't -- I don't know what their --
what their business is.
HMJr:
Well, I'll be working and if you drop by, I'll stop what
I'm doing.
C:
I'll try to do that, yeah.
101Jr:
If you drop
Regraded Unclassified
- 3 -
204
C:
But if I don't do that, I'll be there at three o'clock.
HMJr:
O.K.
C:
Yeah.
205
July 11, 1939
2:24 p.m.
HMJr:
Hello.
Henry
Wallace: Hello, Henry.
HMJr:
Yeah.
W:
Henry, in order to avoid bothering the President unduly,
I -- another alternative has occurred to me which, if
it meets with your approval, I think may handle the
situation.
HMJr:
Yeah.
W:
The matter we were talking about yesterday.
HiJr:
Yes.
W:
This would mean that an agreement between you and me
that you, as holder of the stock, would certify the
folks we would nominate as directors.
H/Jr:
Well, I'll take that up with my people this afternoon
and see what they think and -- I just don't know how
to answer you. Let me think about it, Henry, will you?
W:
Would you let me know as soon as you arrive at 8. view,
because I think we've -- we've got -- we have some
definite organization problems here and we can't take
ahold of them unless we know
HMJr:
0. K. I'll try
W:
where we are.
HMJr:
yes, I'll talk to the -- I'll try and let you know
just as soon as I can.
V:
Yeah.
HMJr:
Thank you.
V:
All right. Good bye.
Regraded Unclassified
206
July 11, 1939
3:27 p.m.
HMJr:
Jesse
Jesse
Jones:
Yes, Henry.
HMJr:
.....how are you?
J:
Pretty good. How are you?
HMJr:
I'm all right. Jesse, the reason I'm calling you, you
remember I talked to you about Wallace and Commodity
Credit and
J:
Yeah, I remember that.
HMJr:
Now, I'd like to let you know what I'm doing. I mean --
I'm sitting tight, but I'd like you -- to let you know
the whole story, see?
J:
All right.
HMJr:
And it -- it's getting to be quite a fight.
J:
Yeah.
HMJr:
Now, you wouldn't want to stop by here in the morning,
would you?
J:
I'd be glad to.
HMJr:
What time would suit you?
J:
What time would suit you?
HMJr:
Any time at all.
I
J:
Nine thirty?
HMJr:
Ah
J:
Is that too early for you? Ten o'clock?
HMJr:
No, well, I was going to suggest -- is nine too early
for you? I don't want to rush you. Ten o'clock 18
all right.
J:
Well
Regraded Unclassified
- 2 -
207
HMJr:
I usually have a staff meeting at nine thirty, you see.
J:
I see. Well, I'll -- I'll try to make it
HMJr:
I -- ten c'clock is all right.
J:
Well, I'll try to make it ten. I've got a -- I've got
a seance tonight of I don't know how long with John Fahey.
HMJr:
Yeah.
J:
And I could either
HMJr:
Well, when would
J:
I could either make it nine or ten.
HMJr:
Well
J:
Whichever suits you the best.
HMJr:
I -- I give you your choice, how's that?
J:
Well, let's make it ten then.
HMJr:
All right.
J:
'hat'll be a little better.
HMJr:
Ten o'clock.
J:
All right, thanks.
HMJr:
It won't take long, but I want you to know, because in
the first place I told you
J:
Yeah.
HMJr:
I'd keep you posted.
J:
Yeah.
HMJr:
And it's a big fight and it's -- he's getting -- it'
J:
All right, well, I'll -- I'll come at ten o'clock then.
HMJr:
It's not very pleasant.
J:
All right.
HMJr:
All right.
J:
I'll come.
HMJr:
O. K.
Regraded Unclassified
July 11, 1939
208
3:48 p.m.
HMJr:
Hello.
OPerator: Mr. Eccles. Go ahead.
HMJr:
Hello.
Marriner
Ecoles:
Hello.
HMJr:
Hello, Marriner.
to
Oh, I told you two weeks ago that I'd advise you each
week what we're going to do with our bills.
HMJr:
Yeah.
E:
There's 35 million 500 thousand due this week.
HMJr:
Yes.
E:
And we're replacing 20 million of them.
HMJr:
I see.
E:
Bo that the statement on Friday will show that 15 million
five will run off.
HMJr:
O. K.
E:
And now we'll -- I'll -- what we'll do each week -- do
you want me to call you every week on it?
HMJr:
Well, if you call
E:
Some weeks we might replace and some weeks we might not.
We're feeling the market. We're trying to avoid
HMJr:
I'd appreciate it, because it only takes a minute to
call me.
E:
Well, I -- I didn't want to bother you if you didn't
want me to.
HMJr:
I'd -- I'd like to.
is
All right. Now, this -- this won't show up until Friday
in the press and BO
HMJr:
I won't say anything.
Regraded Unclassified
209
- 2 -
E:
......if you'll still treat it confidential.
HMJr:
I won't say a word.
E:
O. K. then.
HMJr:
Thank you.
E:
All right.
HMJr:
Good bye.
210
July 11, 1939.
Honorable Henry A. Wallace,
Secretary of Agriculture,
Department of Agriculture,
Washington, D. C.
My dear Mr. Secretary:
I had an opportunity today to discuss with the
President the matter which you and I talked about yesterday
conceraing the Commodity Credit Corporation.
He asked ne to advise you that it 18 his wish that
I continue to exercise on behalf of the United States any end
all rights rising out of the ownership by the United States
of the capital stock of the Commodity Credit Corporation pur-
suant to the provisions of Executive Order No. 7848, dated
March 22, 1938.
I all ready and willing to call an annual meeting of
the stockholders of the Commodity Credit Corporation at any
time which suite your convenience.
Sincerely yours,
Secretary of the Treasury.
DWB:MIM
This carbon sent to this
office by Mr. Bell's office.
Regraded Unclassified
211
July 12, 1939
My dear Mr. President:
I thought you night be 19-
terested in reading the attached
report on silver purchases for the
period July 1 to July 11th.
Sincerely yours,
The President,
The White House.
212
July 12, 1939
Secretary Morgenthan
A. Lockhead
SILVER PURCHASED IN E. Y. JULY 1 TO JULY 11
Date
Ounces
Price
July 1
-
Saturday
. 3
-
Holiday
- 1s
-
Holiday
# 5
-
No price set
. 6
954,000
36-3/44
# 7
-
.36-3/44
# 8
-
Saturday
. 10
408,000
.35#
.
11
210,000
.35#
1,572,000
Regraded Unclassified
13
ORIGINAL AND TWO COPIES BY SPECIAL
MESSENGER TO Mr. F. E. Johnston, Clerk
JUL 12 1938
of the Senate Finance Committee. Room 310, Senate Office Bldg.
to four Hr. Childrent
Reference is mate to your letter of July 11, 1939, in witch
you 10th for a report on can amendment intended to be proposed to 16 9.
6/35 to senstor Shipstend. The anondment provides for the reduction
of the Stabilication Fund from $2,000,000,000 to $500,000,000 and the
zi of the $1,500,000,000 as a basis for the Encrease of coins and our
may to be used to retire special obligations which 170 held in the
Voterni 014-Age and Survivor Insurance Trust Tund, the Mailroad Retire-
ment Account and the Unexployment Trust Pund. The amounts the paid
Into the funts are to be well for the purpose of purchasing at the
matest price interest-bearing Government or
childations or for the sequisition of any with obligations on original
issue st par. The also provides for the crediting to the
Teleral mA-Age and Surviver Insurance Trust Past any increase in the
THE of gold should the dollar be further revelued und all accounts
hereifter retained AR seignioraça 12000 the delivery of stlow to the
United States nints for coinage.
I do not believe It advisable to reduce the Stabilization 2nd
nt this Mary In view of the disturbed international cituation st is
commitial that ve unintain a fund of edequate size to protect the
interests of this country. In this connection It 10 also to be noted
Limit una the Writish throughange Equalisation Account VOS first created
in 1932. the sesete of the Paid mounted to $175,000,000 or exprosi=
mitely $875,000,000. since that sine the size of the within Txchnique
Equalisation Account has been increased, so that today Its sive in
10PM of dollars is $2,875,000,000.
I have on a rember of opportune stated that the
nation Fund canned to be nontel, the $2,000,000,000 should be used for
the retirent of the public debt. I - otill of that view I believe,
however, that when the debt to retired 10 should be dont in - orderly
name BO as not to upset the condition of the Covernment bond market be
= at time visa the credit structure of the country would not
of Government were obligations, the market price of Government obligations
Averady - to 00 into the market and purchase over $1,500,000,000
& affected. If, M is intended w the proposed control the
would he redead to math a Meh lovel rat the yield on Covernment
obligations would be refund to 00 lov a point M to create M
market for Government chilestions.
Regraded Unclassified
214
- 2 -
According to the Federal Reserve Balletin of July, 1939, the
excess reserves of nember banks amount to more than $4,200,000,000 and
are very neer their all-time high. If the proposed comminent is
adopted, the - receives of member banire vill be increased to name
than $5,500,000,000 and the possibility of an inflation will be our-
respondingly insuranced.
According to the Circulation Statement of United States Money
for June 30, 1939. there is in circulation more than $7,000,000,000 of
coins and currency which on a yer capita bacis amounts to 053.72. the
amount of currency now in circulation both on a total and per capita
basis is the greatest in the history of this country. 90 issue on
additional $1,500,000,000 of coins can currency would NOTTO no public
need for money. This money would imediately be redeposited in the
banks, thus increasing 620061 reserves.
The methods nov followed with respect to the issuance of
special obligations for the 01d-Age Reserve Account, the Unemployment
Trust Fund and the Railroad Retirement Account are such that the
moneys in these Funds are imediately invested, and when needed to
meet benefit payments, moneys can be made imediately available by the
redemption of such special obligations. This element of flexibility
in the administration of the Funds would be lost If the anendment vere
adopted. There 10 also & likelihood that the adoption of the amendment
would result in a loss of revenue to these Anda since the yield on
$1,500,000,000 of Government obligations that could be purchased in
the market for the Funds is likely to be less than the interest rate
on the special obligations.
The foregoing is also applicable to the anandment's proposed
use of silver seigniorage and additional 6018 increment.
I accordingly recoment that Senator Shipstend's amendment
be not adopted.
Terry traly yours,
(Signed) H Morgenthau, Jr.
7-11-39
Secretary of the Treasury.
Honorable Pat Barrison,
Chairman,
Comittee on Finance,
United States Senate,
Washington, D. C.
Regraded Unclassified
516.23
JUL 12 1939
My dear Mr. Chairman:
Reference is made to your communication of July 3, 1939, en-
closing a copy of bill S. 2741, "To amend section 308 (an adminis-
trative provision) of the Tariff Act of 1930', and requesting a
statement of the Department's views on the proposed legislation.
The bill provides that subdivision (3) of section 308 of the
Tariff Act of 1930 (U.S.C., 1934 edition, title 19, sec. 1308) be
amended to read as follows:
*(3) Samples for use in taking orders for
merchandise, and articles for examination with &
view to reproduction or for display or competi-
tion for noncommercial purposes at fairs, shows,
meets, or exhibitions;"
The amendment would extend to articles brought into the United
States temporarily for display or competition for noncomercial pur-
posse at faire, shows, mosts, or exhibitions, privileges correspond-
ing to those now granted by section 308 and other provisions of the
Tariff Act of 1930 to several classes of articles under closely
similar conditions.
The Treasury Department perceives no objection to the enactment
of the bill into law as.no new administrative difficulties would be
imposed thereby.
In view of the urgent request for expedition of $110 report,
advice has not been secured from the Barwals of the Budget LE to that
relationship of the /rojused legislation to the President's
Tory truly yours,
Action
Secretary of the Treasury.
Honorable Pat Harrison,
Chairman, Committee on Finance.
United States Senate.
Regraded Unclassified
216
JUL 1% 1939
My dear Mr. Chairmane
Reference is made to your communication of July 10, 1939,
enclosing a copy of bill H.R. 6999, "To amend section 308 (an ad-
ministrative provision) of the Tariff Act of 1930", and requesting
a statement of the Department's views on the proposed legislation.
The bill provides that subdivision (3) of section 306 of
the Tariff Act of 1930 (U.S.C., 1934 edition, title 19, see. 1308)
be amended to read as follows:
"(3) Samples for use in taking orders for
merchandise, and articles for examination with
& view to reproduction or for display or competi-
tion for noncommercial purposes at fairs, shows,
meets, or exhibitions;".
The amendment would extend to articles brought into the
United States temperarily for display or competition for non-
commercial purposes at fairs, shows, neets, or exhibitions,
privileges corresponding to those now granted by section 308
and other previsions of the Tariff Act of 1930 to several classes
of articles under closely similar conditions.
The Treasury Department perceives no objection to the ennet-
mont of the bill into law as no new administrative difficulties would
be imposed thereby.
In view of the urgent request for expedition of this report,
advice has not been secured from the Bureau of the Budget as to the
relationship of the proposed legislation to the President's program.
Very truly yours,
(Signed) Herbert E. Gaston
Motine
Secretary of the Treasury.
Honorable Robert L. Doughton,
Chairman, Committee an Ways and Means,
House of Representatives.
Sistute
7/11/39
Regraded Unclassified
217
GROUP MEETING
July 12, 1939.
Mr. Gaston
9:30 A. M.
Present:
Mr. Foley
Mrs. Klotz
Mr. McReynolds
Mr. Graves
Mr. Gibbons
Mr. Lochhead
Mr. White
Mr. Haas
Mr. Duffield
Mr. Bell
H.M.Jr:
Gene, were you at the President's press conference?
Duffield:
Yes. I've got a memo on it for you.
H.M.Jr:
I'd like to see it.
Duffield:
I'll get it right now.
H.M.Jr:
Mac?
McR:
No, I have nothing.
H.M.Jr:
Got nothing.
Dan?
Bell:
I have nothing.
McR:
oh, I have - you asked about those Customs sales
in New York. I have a report on them on my desk,
and I've read it. There are one or two places I've
been turned over on request of other departments.
got to check, only with respect to stuff that had
So far as the sales are concerned, I think they're
absolutely clean.
H.M.Jr:
Will you show it to me?
McR:
I'll bring it in with the additional information
that I want to get.
(Mrs. Klotz comes in)
Klotz:
Good morning+
Regraded Unclassified
218
- 2 -
(Duffield hands memorandum on President's press
conference to H. M. Jr.)
H.M.Jr:
Well, Mac, you let me know more about it.
McR:
Yes, I'll give you the report of all the stuff.
H.M.Jr:
Righto.
George, how are you coming along on your study
on steel?
Haas:
I've got something for you this morning.
H.M.Jr:
Have you? Well, when I get to you.
Haas:
Yes.
H.M.Jr:
All right.
Mac, what about that special equipment for the
White House grounds?
McR:
Well, they - the Park Service is purchasing it,
and they promised to cooperate with Secret Service
on the selection. They're going ahead with it.
E.M.Jr:
Could you get a date for me when it will be in-
stalled?
McR:
The Park Service will have 1t. I guess it will be
about 60 days.
H.M.Jr:
Well, when do you.
McR:
I'll give you a date. I talked to them & couple
times. They insisted on going through another
process of competitive bids. They weren't willing
to purchase on the offers made to Secret Service.
H.M.Jr:
Well, let's have another follow-up on it.
What else for McReynolds?
Mac, has Harold - or you, Bell - has Harold Smith
done any more about taking back to the President
again the three Cutters and 15 planes?
Regraded Unclassified
219
- 3 -
MoR:
He telephoned me yesterday evening the last thing
that he had taken it back and the President turned
it down again.
H.K.Jr:
What a man! I mean the President.
Bell, whatever happened on the gold coins with
George Harrison?
Sell:
Well, I haven't pushed it very hard, but every
time I've called someone in the Federal Reserve
Bank on business, I've had them switch me to
Governor Harrison's office, and he is always out
of town. I think he's out now for B week. I left
word with his secretary to give me a ring when he
comes in. We reversed the charges.
H.M.Jr:
Now, George, Mr. Wallace says he'll be very glad to
have me designate you as contact man with the
Department of Agriculture. Now, the first thing
I want you to do - maybe I've already told you
this
Plaus:
No.
E.E.Jr:
He says that - I want - he'll be glad to explain
to you, or have explained to you, the cotton and
rubber barter deal.
McR:
I've got of memorendum on that on my desk for you,
88 a result of that conference day before yesterday;
and also have the name of the man that we contact.
It's Robinson.
Bell:
Robbins.
McR:
Robbins, yes.
U.M.Jr:
When was that conference?
McR:
Day before yesterday.
E.M.Jr:
Day before yesterday.
Haas:
I'll get that from Mac.
E.M.Jr:
Memo's on Mac's desk. He substituted the word
"Hesk" for "secretary."
Regraded Unclassified
220
- 4 -
McR:
Afraid to alibi this morning. May not know where
it 1s.
H.M.Jr:
Ed, did you have any study made of suits against
the United States Government - like Sullivan &
Cromwell - in behalf of foreign governments?
Foley:
Oh yes, that's being looked into.
H.M.Jr:
All right.
Now, I asked you to have a study made of all pending
legislation, and I see today that they have agreed
on the TVA bill - 61 million five. Does that mean
we're going to get our bonds?
Foley:
That's right, it will go through. The conference
report has been on the Speaker's desk, and it will
be agreed to probably today.
H.M.Jr:
Is there anything else?
Foley:
No; I've had that check made and I'll give you the
summary of the legislation. I have the memorandum
on my desk.
H.M.Jr:
God, what big desks you boys must have.
Mr. Haas, ....
Haas:
Yes, sir.
H.M.Jr:
I feel good, because I was in early this morning
and nobody WELB here, and I just had to do some-
thing; I cleaned my desk out. So I feel very
virtuous this morning.
Anything else for me?
McR:
Can you (Klotz) think of any more embarrassing
questions?
H.M.Jr:
I've got Jesse Jones coming in this morning.
Klotz:
We're having company today?
H.M.Jr:
Yes - just phoned.
Regraded Unclassified
221
- 5 -
Anything else for me to do?
Klotz:
No, sir. That's all.
H.M.Jr:
Mac, everything all right?
McR:
(Nods nothing).
Bell:
Nothing.
H.M.Jr:
Harold?
Graves:
Nothing.
H.M.Jr:
Archie?
Lochhead:
There's a memorandum on the silver purchases
since July 1. Incidentally, we're getting the
first kick-back from shortening the regulations.
The Phelps-Dodge people were down this morning.
We'll just let them hold on to it for & while.
H.M.Jr:
Steve?
Gibbons:
Nothing.
H.M.Jr:
I guess we can't do anything more about the Cutters,
et cetera.
Gibbons:
Apparently not. Smith is the one that took it to
the President - apparently thumbs down. You talked
to him after - once since....
H.M.Jr:
Well, I talked to him in the last 10 days.
Gibbons:
Yes, but I mean he said to send it back, and
apparently he took it back, and we can't do any
more.
H.M.Jr:
If you and McReynolds would stay behind a minute,
I'd like to talk to you.
Harry?
White:
Baldwin got in touch with me last night to say
that Secretary Wallace was going to appear before
the Committee this morning. There was some question
in their mind as to whether the maximum interest
222
- 6 -
rate was satisfactory, in view of the fact that
Farm Credit apparently has been raising some
objections, and they thought it might be desirable
on some of their loans to increase the rate. I
suggested that it would be quite undesirable for
them to go up and begin either making exceptions
or finding such criticism on points of that nature,
until they had an opportunity to talk it over with
you, et cetera; and they said - he said they wouldn't
do 1t, they'd go along anyhow, and 1f they felt that
they did have to have B. higher rate they would take
it up with you later, but that so far as he knew
this morning, when he appeared, he would not raise
that issue.
H.N.Jr:
I'm glad you mentioned it, because in explaining
my position at lunch to Kintner and Alsop - the
article they wrote yesterday was written before
lunch - I explained that I don't believe that the
Administration has begun to use the device of low
interest rate - by low interest rate I mean going
rate - as a - how should I say
hite:
As a stimulant.
H.M.Jr:
As a stimulant to get governmental units to go ahead
and construct, and that - I said, "I think, as far
as I know, I would say the average rate for RPC
is at least 4 percent. Now, when a man has to go
into some municipal outfit - has to pay 4 or 5 per-
cent, there 1s no attraction. Naturally, the mayors
and all the rest of them are making the drive to
get a grant. This going interest rate, 1f you
really charged the going interest rate, would be
an attraction to & lot of these people to go shead
and build non-federal projects. And I don't think
we have used that device sufficiently. Well, even -
I mean if I had the two alternatives 8.8 between 8.
grant and even going below the going rate, I'd
be in favor of going below the going rate. I mean
if I had two pistols and I had to make my choice.
But I think if we're going to set this Congress
out of town without getting another 500 million -
I mean we've got to stress the low Interest rute.
Foley:
That's right.
Regraded Unclassified
223
- 7 -
White:
And if they begin making exceptions in view of
the fact that Jesse Jones
H.M.Jr:
So if you'll keep that in mind for my statement
Does anybody question that - what I've just said,
as to the soundness, huh?
Foley:
Well, that's the keystone in the arch of this whole
thing. If you don't maintain that interest formula,
this program is just no good.
H.M.Jr:
And Kintner for the first time perked up and said,
"Well then, really you haven't changed any about
balancing the budget." Kintner, I think, was pretty
sour on this thing, but when he heard that thing
he began to take interest. Wouldn't you say so,
Gene?
Duffield:
Yes.
Foley:
Well, he's been talking to Ickes and Hopkins. That
column that appeared last night was written last
Friday; 1t's three days off the time of publication.
And I know he was in to see Hopkins last Friday.
And they haven't stopped those fellows, and they're
going to try to get a lump sum appropriation on
the floor, if they can.
H.M.Jr:
Hopkins?
Foley:
Yes, and Ickes and those fellows, all of them. They
don't like this very well.
H.M.Jr:
They don't?
Foley:
No. And if this interest rate is raised so that this
program won't work, and they don't get A lump sum
appropriation, they're going to blame you, and I
think the only thing to do is to make darn sure that
that interest rate formula stays in there so that
there is a declaration from Congress that these
loans have to be made at somewhere near the going
Federal rate for the term of the loan that's made
by the agency.
H.M.Jr:
Well, on the non-federal projects, the interest
rate is the keystone of the whole thing. And Bell
has a study - I wish you'd give a copy to these
224
- 8 -
people, White and them - of these interest rates
of the RFC. You have that study that you made
for me.
White:
Well, it's also apropos of the other.
Bell:
Have it in a few days. Coming in now.
H.M.Jr:
Particularly the RFC.
Lochhead:
Probably, Mr. Morgenthau, you'd be interested in
this. When Leroy-Beaulieu was down here, he
explained informally these copper purchases the
French Government was making here. I asked him
how it was financed. He said through the New York
banks. He said they spoke to the Export-Import
Bank, and said the Export-Import Bank's rate was
so much higher than even the rates of the New York
banks that they couldn't do any business.
H.M.Jr:
Well, I'd like very much to 3 tress the interest
rate on this thing, particularly on the non-federal
projects.
Foley:
On the non-federal projects, Mr. Secretary, during
this last program, because municipalities with
credit have been able to get cheap money, very
little loaning has been done. It's mostly all
been granted. PWA and RFC made the mistake of
never reducing the interest rate below 4 percent,
which has been the rate
H.M.Jr:
I said 4 - I didn't know and Gene didn't correct
me, so I said 4 percent.
Foley:
It's been 4 percent for five years, Mr. Secretary,
and they've never reduced it, although interest
rates generally for municipal money have dropped,
and a lot of these municipalities are able to
borrow on long term at around 3 or even under.
White:
The effect of a low interest rate is not so much
the fact that it becomes profitable on a non-federal
work, because you can't measure the profitability,
but what it does do 16 that 1t has a very important
psychological effect on the part of those who have
to make the decision, and they feel that 1f the
rata is very low, startlingly low, that - then
225
- 9 -
they'll say, "Well, we ought to undertake these
projects because we can borrow at one percent,
and if we wait a few years we may have to pay
three, four, five."
Foley:
May have to pay six.
White:
And from a business point of view 1t is desirable
to undertake those, So it has a considerable
stimulative effect in that direction. However, I
don't want to give the impression that Agriculture
wanted a higher rate. They merely wanted an exception
for some of their loans, to meet the criticism, I
gather, which is coming from Farm Credit, that
some of the Farm Credit loans will look pretty sour
1f they make loans at low rates of interest. The
position I took - until they talked with you - their
demands for exceptions might lead to other demands
for exceptions and sort of break down the whole
structure.
Foley:
Well, they talked to us yesterday, too, and we told
them for goodness sakes not to say anything about
the rates today when they appear, and if we have
to do anything we can do it after the hearings are
over and we get B. chance to rewrite the bill before
it is reported out.
H.M.Jr:
Have you got a man present
Foley:
Yes.
S.M.Jr:
At the hearing?
Foley:
Yes.
Bell:
Well, isn't that provision still in there?
Foley:
No.
Bell:
The President took that out?
Foley:
That's right.
H.M.Jr:
Well now, you were going to keep in touch with
Wagner's clerk. What happened after - who -
Wallace is today. Who's tomorrow?
Regraded Unclassified
226
- 10 -
Foley:
They're going to have Wallace and McDonald today,
and they're going to have Jones and his crowd
tomorrow, and Carmody on Friday, so Carmody can
go out to Chicago for that regional meeting.
H.M.Jr:
If at all they want me, it will be Monday, I take
it.
Foley:
It will be either Friday after Carmody or Monday,
depending on how the hearings go.
H.M.Jr:
0. K., fair enough. Anything else, Harry?
White:
No.
H.M.Jr:
George?
Haas:
I have this memorandum for you. That steel is
obviously very rough, and if you're going to use
it we'll do a little bit more - some more checking
on it. But a round figure of about 10 percent
I don't think is far off.
H.M.Jr:
Of Government?
Haas:
About 10 percent of the total. The problem is
adding dynamos and automobiles and trying to put
them on a tonnage basis. And cement - it's down
at the bottom - a large figure, nearly half for
the three years.
H.M.Jr:
0. K. Now, can White and Duffield have a copy
of this?
Haas:
I gave them to Harry last night over the phone.
H.M.Jr:
Well, give them copies.
Haas:
I'll give them B. copy.
H.M.Jr:
Might give a copy to Foley, too.
Haas:
Fine. Structural steel there is a rather surprising
figure, Mr. Secretary. It's over half. It's in
the second paragraph.
H.M.Jr:
Structural steel is what?
Regraded Unclassified
227
- 11 -
Haas:
About half. Over half some years. Government
used over half the structural steel. There's
another figure that might be usable. Take all
construction, 88 reported by F. W. Dodds Company
for 1937; it states that the amount publicly
financed in 137 was 53.3 percent of all construction.
H.M.Jr:
Well, that's just the figuresthat I want.
Haas:
I'll turn them over to them.
H.M.Jr:
The thing, as I say - you keep talking about this
thing that Duffield (Kintner?) said - he said,
"Well then, you still believe in balancing the
budget?" and I said, "Sure, I'm looking now after
six years - I'm looking in terms of four or five
years, and that this is the bridge which will get
us across from giving the money away to lending
it. This 1s the bridge. But it will take us four
or five years to do it, and you can't look to any
Republicans, because if you look at what the five
Republican Governors have done, in every case, with
the exception of Pennsylvania, they have increased
expenditures." And they said, "Yes, and in Penn-
sylvania they have wrecked everything."
I'm saying as much as this so as to blow a little
stuff toward you fellows (White and Duffield).
George?
Haas:
I have nothing.
H.M.Jr:
Looks like 8. good job, George.
haas:
Thank you.
H.M.Jr:
But I want you to dig in on Agriculture now.
Haas:
All right, I'll try to find out how it works.
E.M.Jr:
Well - and you might find out what are they going
to do with their bounty; I'd like to know how much
is going to export bounty and how much for food
tickets, George.
Baas:
Uh-huh.
Regraded Unclassified
228
- 12 -
Duffield:
Nothing.
H.M.Jr:
Ed?
Foley:
Here's this letter on this amendment that Ship-
stead proposes to offer to reduce the stabiliza-
tion fund.
H.M.Jr:
Did you cry plenty?
Foley:
Yes.
H.M.Jr:
Good.
Foley:
Danny Bell wrote the letter, with Bernie.
Bell:
With Harry White.
H.M.Jr:
What a mixture!
White:
I had very little to do with it.
Bell:
What?
White:
I had very little to do with it.
Bell:
I thought you said you had nothing to do with it.
I was going to object.
H.M.Jr:
Aren't you satisfied?
White:
What's that?
H.M.Jr:
Aren't you satisfied?
White:
I thought they did a good job, considering the
task they had to do.
Bell:
Wasn't the task, 1t was the time; we tried to
beat Congress adjourning, but they beat us to it
finally.
Klotz:
Can I get copies of that?
Foley:
Huh?
Klotz:
Copies?
229
- 13 -
Foley:
Yes, I'll send you some.
H.M.Jr:
Is that all you've got?
Foley:
No.
H.M.Jr:
All right.
Foley:
During the period from the first of July to the
fifth of July, while the stabilization fund was
inactive, about three thousand dollars was incurred
in the way of current liability against the fund.
The question comes up as to what we'll do about
that three thousand dollars.
It seems to me that there are three possibilities.
One, we can ask for legislation in the next
deficiency bill, which I would not advise that we
do. The other is that we get the money some place
else, which I don't think is necessary. And the
third thing, and the thing that I would advise,
is that we just make those disbursements - that
three thousand dollar disbursement - out of the
account, and go along, and when we report next time
to Congress as to the condition of the fund and the
disbursements made from the fund, if Congress says
anything about it we can say, "Why, certainly, we
didn't dismiss our people, because we expected that
the fund would be used again and the power would
be continued, and Ishad no alternative; I couldn't
dismiss my staff, I couldn't dismiss the people
that were being paid out of that account.' And if
they say anything about it, why, legislation can
be obtained at that time. But I think it would be
B. mistake, in view of all the turmoil that's been
raised about the termination of the fund and the
money going back into the general fund and all of
that, to raise the question at the present time.
Now, I have the legislation here and the letter,
but I don't recommend that we do 1t.
H.M.Jr:
Have Mac and Bell passed on this?
Bell:
I agree with what Foley says. I don't know whether
Mac has heard about it or not. Sunday I talked
with Wood, the Legislative Counsel of the Senate,
230
- 14 -
and he asked me the question as to whether we
were going to send up that item in a deficiency
bill. I said we had it under consideration. He
said, "My advice is to leave it alone, because
when you send it up in a deficiency bill, you
raise the whole question, draw it out in the open.
I'd let it alone, get confirmation of it two years
from now."
Foley:
If we ever need it - and we don't have to go to
the General Accounting Office for that - all we
have to do is report to Congress. And I don't
think the question will ever be raised, and if
the question 18 raised you can make a perfectly
legitimate defense.
Bell:
I think so.
H.M.Jr:
How is it on the reporting to Congress? Is there
something in the law?
Bell:
That's B. new provision - report to the President
and to the Congress each fiscal year. They added
"and to the Congress" right after "the President"
in the Act.
H.M.Jr:
I see.
Bell:
There's a letter coming along setting up an Audit
Committee again this year, and when that report
is ready about January 1 you'll have to send it
to Congress in addition to sending it to the
President.
H.M.Jr:
I see.
Do you want to get in on this, Mac?
McR:
Well, I talked to Bernie; Bernie came in and
talked to me about it. I told him I thought it
would be absolutely silly to raise any question
at all. The bill should be paid. After all,
the theory is that the thing continued, and why
not have guts enough to stick to your theory?
H.M.Jr:
Theory?
231
- 15 -
Foley:
There was a nasty article by George Rothwell Brown
in the Herald this morning about the continuation
of the fund and so forth.
H.M.Jr:
Who 18 he?
Foley:
Well, he's one of these columnists that write for
the Herald, I think the poorest of the whole crowd,
and this 18 a very, very bad article.
H.M.Jr:
What does he say?
Foley:
Well, he says that it was a fraud, that the statute
was repealed and by subterfuge and dictator tactics
we drove the thing right through, and we are now
acting just as though it had been done in the regular
lawful manner.
H.H.Jr:
Nasty man!
Poley:
I'm mad.
H.M.Jr:
You've got Mrs. Klotz crying. That's all right,
cheer up.
Klotz:
I'll try awfully hard.
H.M.Jr:
All right. What other good news have you got?
Foley:
Well, I have this Philippine legislation, Danny.
I don't know what to do with it. I think that
that provision ought to be called to the attention
of Congress.
H.M.Jr:
Has McNutt resigned yet from the Philippines?
Foley:
Not yet.
H.M.Jr:
He's a tough man.
Foley:
I guess he must have, though, in order to be con-
firmed. He hasn't taken his oath of office yet.
H.M.Jr:
Let's let that go over until next day, because
Jones is coming over at 10 and I've got to do
something before that. Right?
Foley:
Right.
Regraded Unclassified
232
- 16 -
H.M.Jr:
I'll tell you, if you've got something else,
after we get through with the bank thing, stay
behind and I'll clear your docket.
Foley:
Right.
H.M.Jr:
You're (Gaston) coming in on the bank thing.
Gaston:
Yes.
H.M.Jr:
I'll clear your docket for you.
Gaston:
The Swiss banker still hopes he'll get a chance
to shake your hand.
H.M.Jr:
No, no.
Caston:
He's going to meet Cochran at 3:00 o'clock.
H.M.Jr:
That's a great distinction, honor. He can meet
Merle Cochran.
Gaston:
All right. Youte programmed up all day.
Jimmy Malloy would like to have you go to a buffet
lunch and cocktail party for Andy Rahn of Minne-
sota at the Hamilton Hotel, 5:00 o'clock this
afternoon.
H.M.Jr:
I'm going to one for Summer Welles at 1:15. Who
is Andy Rahn?
Gaston:
Very prominent Shriner and lumberman, politician,
of Minneapolis, friend of Jimmy Malloy's.
H.M.Jr:
Well, will you go?
Caston:
I'm going to go in for about 15 minutes.
H.M.Jr:
Do a lot of drinking in 15 minutes.
All right.
Gibbons:
Didn't you hear that they were giving one also for
Captain Collins?
H.M.Jr:
No. A party for Captain Collins?
Regraded Unclassified
233
- 17 -
Gibbons:
Cocktail party; I think it's at the Carlton or
the Mayflower,
H.M.Jr:
Who's giving that one? Mac?
Haas:
Procurement Division.
McR:
I don't know who it is. I was telephoned that
there was going to be one, but I don't know
who's giving it.
H.M.Jr:
Well, I want to talk to you (Gibbons) and Mac.
234
July 12, 1939
My dear Mr. Chen:
I beg to acknowledge receipt of your
letter of July 6 and an glad to learn that you
are making progress with Mr. Keeshin.
If it 1s possible, I would very much like
to see Mr. Sheahan and Mr. Bassi between now and
the first of August as I would like to talk over
with them and impress upon them the importance
of their mission.
I am glad to learn that Dr. Buck is on his
way to the United States.
If you will get in touch with Mrs. Klotz
she will be glad to give you an appointment for
yourself, Mr. Sheahan and Mr. Bassi sometime next
week.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
Mr. K. P. Chen,
Universal Trading Corporation,
630 Fifth Avenue,
New York, N. Y.
235
July 12, 1939
My dear Mr. Chen:
I beg to acknowledge receipt of your
letter of July 6 and an glad to learn that you
are making progress with Mr. Keeshin.
If it 1s possible, I would very much like
to see Mr. Sheahan and Mr. Bassi between now and
the first of August as I would like to talk over
with them and impress upon them the importance
of their mission.
I am glad to learn that Dr. Buck 1s on his
way to the United States.
If you will get in touch with Mrs. Klotz
she will be glad to give you an appointment for
yourself, Mr. Sheahan and Mr. Bassi sometime next
week.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Mr. K. P. Chen,
Universal Trading Corporation,
630 Fifth Avenue,
New York, N. Y.
Regraded Unclassified
236
July 12, 1939
My dear Mr. Chen:
I beg to acknowledge receipt of your
letter of July 6 and an glad to learn that you
are making progress with Mr. Keeshin.
If it is possible, I would very much like
to see Mr. Sheahan and Mr. Basei between now and
the first of August as I would like to talk over
with them and impress upon them the importance
of their mission.
I am glad to learn that Dr. Buck is on his
way to the United States.
If you will get in touch with Mrs. Klots
she will be glad to give you an appointment for
yourself, Mr. Sheahan and Mr. Bassi sometime next
week.
Yours sincerely,
(Signed) H. Morgenthau. Jr.
Mr. K. P. Chen,
Universal Trading Corporation,
630 Fifth Avenue,
New York, N. Y.
Regraded Unclassified
237
UNIVERSAL TRADING CORPORATION
EXPORT AND IMPORT
TELEGRAPHIC ADDRESS
CODES USED
UNITRACORP
630 FIFTH AVENUE
SERTLEY'S
TELEPHONE
NEW YORK
ACHE'S
CIRCLE 5-7646
July 6, 1939
The Honorable Henry Morgenthau, Jr.
Secretary of Treasury
Washington, D. C.
Dear Mr. Secretary:
After your conference in Washington with me and Mr. Keeshin,
I cabled Dr. Kung your kind suggestions about arranging assistance in
connection with Chinese transportation problems. I received immediate
confirmation of the plan and Dr. Kung asked me to convey to you his
deepest thanks and appreciation on behalf of China for your helpful
interest.
Mr. Keeshin has been in New York with his two principal
associates and after a comprehensive discussion of the situation
we have agreed that e group of his three best men will go to China
as highway motor transportation advisers to the Ministry of Communi-
cations. The compensation for these three men will total U.S.$33,000
as follows:
Mr. Sheahan
8,000 8
for 3 months
Mr. Bassi
20,000
for 1 year
Mechanic
5,000 for 1 year
These men will edvise on all aspects on transportation except in
the training of drivers and cheuffeurs, which is already directed
by another qualified American expert now in Ohina. He is to join
the group. The head of the group will be Mr. Sheahan, the senior
executive of Mr. Keeshin's organization and can only be spared by
Mr. Keeshin for a period of three months in China. The others are
engaged for a full year. Unfortunately, due to the necessity of
Mr. Sheahan's appearance 85 witness in a pending lawsuit, the group
cannot leave this country until about August 15th.
I plan to be at Chicago around the 20th of this month
with Mr. Keeshin and his associates who are going to China and
talk with them in detail about the whole situation, so they will
have as much background of the problems to be dealt with in China
as I can give them on this side,
238
Hon. Henry Morgentheu, Jr.
-2-
23
July 6, 1939
In enswer to my urgent request for a personal conference
with Dr. J. L. Buck concerning various important matters with
reference to Foo Shing Trading Corporation, I have just received
a cable from Dr. Kung stating that Dr. Buck is leaving Hongkong
today by air, and is scheduled to arrive in New York on the 14th.
I em most anxious to learn from him the latest picture of the trans-
portation situation at home. I shall take him to Chicago with me
to meet the members of the group personally, and to assist me at
the forthcoming meetings with Mr. Keeshin and his associates. It is
also my intention to ask Dr. Buck to accompany the group to China
and to direct and facilitate their activities on my behalf.
I am also sending a report to Dr. Kung of what has been
done here and I em urging upon him the importance of seeing to it
that the Ministry of Communications and other interested officials
cooperate fully with Mr. Keeshin's group and extend them every
possible facility.
The interest you continue to show in the problems of
China is more deeply appreciated than perhaps you are aware of
as it is impossible to adequately express our gratitude, and I
want you to know how much we thank you for your advice about
the solution of transportation difficulties and the recommenda-
tion of Mr. Keeshin.
With kindest personal regards, then
incerely
K. P. Chen
KPO:GT
RECEBRARY'S
Regraded Unclassified
39
the 12 1939
Secretary Morgenthau
It. Foley
This recorandum 16 concerned with the procedure to be adopted concerning
the payment of expenses, ordinarily hald out of the Stabilization Fund, incurred
or socruing between aldnight of June 30 and July 6, 1939, the date of the Approval
of the new bill by the President. The expenses involved we 6.0 follows: Salaries
for the staff in Washington and Now York, telegraph and telephone, Mcker and
-ews service, and periodicals. The assunt of the expenses involved 10 epproxi-
sately $3,500. There are & number of ways of dealing with the situations
(1) Go to Congress for Der legislation. If the Legisistion wire distaines,
It would be the most complete protection in the payment of these How-
ever, opponents of the Administration =lght 06120 on this opportunity of raleing
again the question of the availability of the stabilization fund, On
: think it would be undesirable to follow this course.
(2) Use other appropriations. So far se I have been oble to sucertain,
there do not seem to be other appropriations which would be available at this
date to pay these expenses, and administratively there would be difficulties in
the way of making the switch retroactively to other appropriations for the
"Ive-da/ period.
(3) Fail to pay these expenses. I think this wou á be unfair 16 the
neople on the payroll, and also to the private organizations that were TOV ded
118 with service during that five-day period.
This can be justified on at lesvt neveral grounis. In the Cirst in lace, the
(4) Make the payments out of the stabil:mation and in the usuel circuse.
even the to liquidate the fund end to JAX administrative expenses
procedure If the stabilization powers were not extended on June 30, implicit
statute was of power liquidation. Secondly, Congrass wes considering the use legislation would
in the process reason to believe that at leest the stabilization
and there was every It would have been foolbardy to have diseanded the organisation enected the
and facilities Comon sense dictated the retention of the stoff and the validity facilities.
be extended. for the interim few day period until Congress lod the
The legislation. General and the courts sould be unable to question that Co grows
of the payment question, particularly when the annual audit would is relee the question. the
Comptroller of such administrative expenses. It 1a possible submitted to
might ralse I the think it 10 very unlikely that the Congress be entirely
Congress. were to be raised, our answer would time antisfactory, to
and if our answer from Congress ratifying the payment indicate of these below. expenses. agree
I think if the question were not satisfactory, then would be the appropriate If you
get that legislation this is the course to be followed, kindly 30
(lmitialed) s. a. 111 in
APPROVED 7/12/39
Regraded Unclassified
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
file
240
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
Eu
July 12, 1939
My dear Mr. Secretary:
I enclose for your confidential information
a copy of an Aide Memoire which was left at the
Department of State today by the Canadian Chargé
d'Affaires ad interim in regard to a recent press
article concerning the alleged attitude of the
Canadian authorities with respect to the United
States silver purchase policy.
Sincerely yours,
Enclosure:
As stated above.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
Department of State
BUREAU
Eu
241
DIVISION
ENCLOSURE
TO
Letter drafted
7/11
ADDRESSED TO
Secretary of Treasury
. . - -
1-1083
242
confidential
AIDE MEMOIRE
There appears in the July 8th edition of the
New York Times, page 2, column 4, a press despatch
from Ottawa dated July 7th purporting to reflect the
views of the Canadian authorities on the United States
silver purchase policy. This article gives an entirely
incorrect impression of Canadian attitude on the question.
Canada would undoubtedly be adversely affected
by cessation of foreign silver purchases. Canada is the
third largest producer of silver, and during the last
two years Canadian annual production has amounted to
over 22 million ounces. While the total annual production
does not bulk large in national income 1t is nevertheless
an important Item both in income and employment in certain
sections of the country.
If United States purchases of foreign silver should
cease Canada would be concerned over the effect on the
world market for, and prices of, silver. The prospect
of another period characterised by the great uncertainty
and drastic fluctuations in prices of silver could not
be viewed without concern under the present world con-
ditions.
CANADIAN LEGATION
WASHINGTON, D.C.
July 11, 1950
Regraded Unclassified
243
CJ
GRAY
PARIS
Dated July 12, 1939
REC'd 4:08 p.m.
Secretary of State,
Washington.
1297, July 12, 5 p.m.
FOR THE TREASURY.
The tendency of French wholesale prices in June
was downwards. The general index at the End of the
month stood at 685 compared with 693 at the end of
May and 653 one year ago. On the other hand the
index of retail prices stood at 758 at the end of
June compared with 756 at the End of May and 698 one
year ago. The industrial production index moved up
from 95 in March and April to 97 in May. The improve-
ment chiefly relates to metallurgy. Total capital
issues in June amounted to 681,000,000 francs compared
with 548 in May and 286 one year ago.
Rates were practically unchanged in light exchange
trading today. The fund continues to obtain moderate
amounts of sterling. The security market was depressed
and rentes lost about 40 centimes. Variable revenue
securities lost from one to two per cent.
)
BULLITT
NPL
Regraded Unclassified
244
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: July 12, 1939, 11 a.m.
NO.: 1290
The following is strictly confidential:
I have been told by Bonnet that agreement has
finally been reached for returning to Spain the gold
which France had been holding. Within the next few
days announcement will probably be made that this
gold will be returned to Spain.
As a quid pro quo the Spanish Government has
promised that it will receive at once 50,000 of the
refugees who are in France now. It has promised to
take from 30,000 to 40,000 each month thereafter.
BULLITT.
EA:LWW
245
CJ
GRAY
LONDON
Dated July 12, 1939
Rec'd 2:38 pame
Secretary of State,
Washington.
983, July 12, 6 p.m.
FOR TREASURY FROM BUTTERWORTH.
One. The Bank of England's usual bulletin announce-
ment shows a purchase of gold bars to the value of
pounds 20,002,848. The British (*) of the causes for
the note circulation increase mentioned in my 947
July 6, 6 p.m. the continued rise in Employment is
certain to continue for some time, renders unsuitable
the more temporary expedient of an increase in the
fiduciary issue to meet the August holiday currency
demand peak, which the transfer of gold to the Bank of
England from the Exchan E equalization account will
doubtless give the double reassurance of (a) a per-
manent increase in the currency backing, and (b)
confirmation of the belief that the exchange Equaliza-
tion fund has the gold to spare.
Two. The results of the negotiations with Rumania
and
246
⑉2⑉ #983, July 12, 6 p.m., from London
and Greeoe, reported in the second and third sections
of my number 600, May 3, 6 pame, are announced today in
two Exchange Telegraph messages in which it is reported
that (a) by an exchange of letters an arrangement has
been reached for granting export credits to Greece
of t wo million pounds to bE used for the purchase of
United Kingdom products, the relative securities to
bear interest at five per cent and to be payable over
twenty years, (b) an Anglo-Rumanian trade and payments
agreement signed today in London provides for the
guarantee for purchases of United Kingdom goods by the
Rumanian Government approximating five million five
hundred thousand pounds including provision for the
purchase of British cotton and wool yarns and carded
wool to the value of seven hundred fifty thousand pounds.
Five per cent bonds repayable over twenty years will bE
issued by the Rumanian Government guaranteed by the
Board of Trade. The agreement also amenda the Exis-
ting payments agreement.
Three. No silver was invoiced today. The spot
price at the fixing was up 3/16 to 16 9/16d on buying
from India but arbitrageurs to the United States con-
tinue to shun the market and the forward rate rose by
only 2/16 to 15 15/16d. The TIMES city Editor notes
that
247
-3- #983, July 12, 6 p.m., from London
that yesterday Indian demands for prompt shipment
WERE difficult to satisfy and that India's taking of
fair quantities on & sharp fall is significant, while
the writer of the money market column of the FINANCIAL
TIMES asserts that "fortunately, there is no quarter
from which SEVErE selling pressure on the metal need
be EXPECTED unless, of course, some of the more ner-
vous holders panic again". It would SEEM that the
London silver market is attemoting to avoid dving
n. downward lead to the Treasury, realizing that the
official quotations are not uninfluenced by the course
of prioss 08 fixed in London.
Four. The Exchange market was quiet with both the
spot and forward dollar slightly offered, the latter
at 1 3/4 premium for three months. The British fund
gave 34 of the 68 bars of gold dealt in at the fixing
and 22 WERE married with Samuel Montagu the 301E buyer.
KENNEDY
KLP
(*) Apparent omission