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Volume 265, May 22 – May 23, 1940
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Volume 265, May 22 – May 23, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 265
May 22 and 23, 1940
Regraded Uclassified
- A -
Book Page
Agriculture
See War Conditions
American Bemberg Corporation
Memorandum on additional financing addressed to
Securities and Exchange Commission: Copy transmitted
to Treasury by State Department - 5/23/40
265
308
Appointments and Resignations
Mead, George Jackson: Biographical sketch - 5/22/40
161
a) Enthusiasm expressed by HMJr - 5/23/40
334
b) HMJr asks White House to arrange for transport
by Army planes - 5/27/40: See Book 266, page 221
- B -
Bank of America
See also Reconstruction Finance Corporation
Federal Bureau of Investigation report as made by
Unschuld (Henry) and Rozan (Max) concerning Giannini's
contribution to Bund "to get HMJr" given to Secret
Service - 5/23/40
274
a) Wilson (Secret Service) comment: See Book 266, page 165
Belgium
See War Conditions
Brazil
See Latin America
Business Conditions
Haas memorandum on sales and new orders for week ending
May 18, 1940
157
Economic Developments: Noble (Commerce Department) report -
5/23/40
352
0 1 I
Chen, K. P.
See War Conditions: China
China
See War Conditions
- D - -
Defense, National, Council of
See National Defense, Council of
Defense Fund, National
See National Defense Fund
- F -
Finland
See War Conditions
France
See War Conditions
Freight Shipments
Heas memorandum - - 5/23/40
255
e I I
Book Page
Giannini, Amadeo P.
See Bank of America: Contribution to Bund "to get HdJr"
reported by Max Rozan and Henry Unschuld in
investigation by Federal Bureau of Investigation -
5/23/40
265
274
a) Wilson (Secret Service) comment:
See Book 266, page 165
Great Britsin
See War Conditions: United Kingdom
- I - -
Italy
See War Conditions
hg I I
Japan
See War Conditions
Jonas, Edouard
See War Conditions: France
- L -
Latin America
Brasil: "Hot Money" beginning to flow in: Report from
American Embassy, Rio de Janeiro - - 5/24/40
367
Peru: Comment on exchange and trade situation - 5/22/40.
131-A
a) Deterioration as result of pressure
by British
- M -
Martin, Glenn L., Company - Middle River, Maryland
Federal Bureau of Investigation report on conditions -
5/22/40
149
Mead, George Jackson
See Appointments and Resignations
- N -
National Defense, Council of
For set-up, see pages 33 and 39
National Defense Fund
Contributions coming into Treasury discussed at
group meeting - 5/23/40
333
Netherlands
See Har Conditions
Norway
See War Conditions: Scandinavia
Regraded Uclassified
- P -
Book Page
Peru
See Latin America
Poland
See War Conditions: Airplanes
- R - -
Reconstruction Finance Corporation
Legislation permitting purchase of preferred stock
in banks and insurance companies discussed by
HMJr and Foley at Senator Glass' apartment. -
5/23/40
265 344
a) HMJr states this is retaliation by Jones
for his efforts to rehabilitate Bank of America
b) Extension of amortization of real estate loans
from ten to fifteen years also opposed by Treasury,
Comptroller of Ourrency, and Federal Deposit
Insurance Corporation
Jones withdraws both recommendations 5/24/40
347
a) HMJr describes interview with Jones to Bell,
Delano, and Foley
348
1) HMJr's own comments for diary
350
Rozan, Max
See Bank of America
- S - -
Scandinavia
See War Conditions
Switzerland
See War Conditions
- T -
Transamerica
See Reconstruction Finance Corporation
- U -
United Kingdom
See War Conditions
Unschuld, Henry
See Bank of America
Regraded Uclassified
- n -
Book
Page
War, Assistant Secretary of
Foley memorandum on duties of office - 5/22/40
265
4
War Conditions
Agriculture:
Foreign developments for Cabinet discussion -
5/23/40
339
Airplanes:
German fuel injection engine and VDM propeller to be
placed in hands of United States Air Corps by
French Air Ministry - 5/22/40
26
Photographs of various airplane models
54
Flying Fortresses: General Marshall tells H&r there
are 52 in United States; there should be 136 -
5/22/40
85
Navy airplane set-up in the Pecific discussed by
Marshall and H/Jr - 5/22/40
85
Army-owned Aircraft: Release of for export -
Brett memorandum - 5/23/40
194
Training aircraft on order for Air Corps of Army
and Navy: Mead memorandum - 5/23/40
197
Progress report: Orders by British and French -
5/16-22/40
228
Engine Expansion Program:
Conference; present: H.Jr, Carmen, Lombard,
Hinckley, Williken, Young, Meed, and marner -
5/22/40
5,35
Gilman (formerly Chief Engineer for Pratt-Whitney
and for Air Corgs at Dayton) colding as HWr's
assistant - 5/22/40
77
General Marshall, HWr, and McReynolds confer -
5/22/40
83
a) If orders could be placed throughout 1941,
manufacturers could increase potential
production
b) Engines still the bottleneck
Engines:
Rolls Royce: Production in United States discussed
by HWr, Mead, Ollie, Ballantyne, and Young -
5/23/40
174
a) Packard 4-M engine considered very similar
but with greater horse-power
182
b) Chrysler "backing off" Rolls engine because
of metric system used - 5/23/40
183
c) Characteristics of Rolls Royce-Merlin engine -
5/23/40
184
Allison production, General Motors plant in Canada
to build Bristol engines, discussed by HNJr, Mead,
and Sloan - 5/23/40
234
Packard: Considered very similar to Rolls Royce engine
but with greater horse-power - 5/23/40
182
FDR's Navel Alde told Edison has assured conpany of
21 million contract; HWr wante no contracts made
until entire picture has been studied - 5/23/40
238
a) Compton (Navy Department) tells HWr
story of interview with Edicon - 5/23/40
248
Regraded Uclassified
- W - (Continued)
Book
Page
War Conditions (Continued)
Airplanes (Continued)
Machine Tools:
War and Navy asked to send representatives to
conference HAJr is planning - 5/23/40
265
170,172
Conference; present: HMr, McReynolds, Young,
Captain Almy, and Major Hauseman - 5/23/40
208
Coordinator suggested by Brett - 5/23/40
236
Poland: Pursuit planes, motorized equipment, and anti-
aircraft batteries requested of United States -
5/23/40
273
Belgium:
Banque Belge: Federal Reserve Bank of New York tells
Bank of England freezing order will be rescinded -
5/22/40,
123
Bank to accompany Government: Bullitt report -
5/23/40
279
China:
War materials received 4t Rangoon and re-exported
April 1-15: Report of American Consulate General -
5/22/40
165
Chen, K. P.: HaJr thanks Finance Minister "for sending
so able a man to head mission negotiating for credits" -
5/23/40
343
Exchange market resume - 5/22/40, et cetera
101,305
Finland: FDR asked for advice on status of December 15th
payment and future attitude - 5/22/40
155
Francer Jonas (Edouard) cables HaJr to aid France -
5/23/40
270
Germany:
Resume of news broadcasts following invasion - 5/22/40
125
Economic plan for Europe: Kirk report - 5/23/40
283
Italy:
Stock prices charts - 5/22/40
111,164
State Department requested to substitute index of thirty
stocks for individual stock quotations computed and
published in "Il Sole" - 5/22/40
148
Ships in Port of New York and their cargoes - 5/23/40
285
Japen: Continued decline of pound reviewed by Ambassador
Grew - 5/23/40
269
Munitions, Organizing for Emergency Production of:
Conference at white House; present: FDR, HAJr,
General Marshall, Admiral Stark, General Watson,
McReynolds, and FDR's Naval Alde - 5/22/40
28
a) Memorandum prepared by Colonel H. K. Rutherford
(Director, Planning Branch, Ordnance, War Department)
discussed
30
b) National Defense Council set up
33
e) Discussion at Treasury group meeting
41
Regraded Uclassified
- W - (Continued)
Book
Page
War Conditions (Continued)
Netherlands:
Nederlandsche Handel Mestschappij East:
Federal Reserve Bank of New York tells Bank of
England freesing order will be rescinded -
5/22/40
265
123
Blydenstein, London House of: Bank of England tells
Federal Reserve Bank of New York will probably
be bankers for Dutch Government in London; will
probably apply also - 5/22/40
123
De Nederlandsche Bank: Further instructions concerning
seat of government in London end transfer of bank
funds to the Government - 5/22/40
262
Central Bank of Netherlands: Schlthst to be Reich
Commisser - Kirk reporte - 5/23/40
283
Polend: See war Conditions: Airplanes (Poland)
Scandinavia:
Norway: Federal Bureau of Investigation report on
shipping - 5/22/40
109
Securities Markets (High-Grade):
Current Developments: Hans memorandum - 5/23/10
313
Strategic Materials:
Smokeless Powder:
Conference; present: HAWr, Purvis, Young, Sullivan,
Bloch-Laine, Picot, and Bradway (duront) -
5/22/40
16,50
Resume of deliveries by duPont - 5/23/40
191,203,205
a) Compton (Navy Department) memorandum
Tungsten: Consumption in stocks on hand of United
States Steel Corporation (confidential information):
White memorandum - 5/22/40
92
Switzerland: United States asked to instruct consular
officers to give same assistance in witnessing lists
of securities us was done in Holland - 5/22/40
135
a) British Embassy will cable London United States
will BO instruct if Switzerland requests it
311
U.S.S.R.: Cocoa and Coffee (Bramil to Kobe, Japen) trans-
shipment in California: Federal Bureau of Investigation
reports request - 5/23/40
292
United Kingdom: "Far-reaching and draatic legislation"
reported by Kennedy - 5/22/40
140
harner, Edward P.
Biographical sketch
147
Westrick, Gerhart Aloia (Dr.)
Federal Bureau of Investigation report - 5/22/40
114
Regraded Uclassified
1
May 22, 1940
10:45 a.m.
Operator: Go ahead.
H.M.Jr:
Hello.
Joseph
Kennedy:
Hello, Henry.
H.M.Jr:
Yes, Joe.
K:
Do you know the name E. G. 0-1-1-e-y?
H.M.Jr:
E. G. what?
K:
E. G. 0-1-1-e-y.
H.M.Jr:
No, I don't.
K:
Well, he's at the General Motors building in Detroit.
H.M.Jr:
Yes.
K:
He represents that company; he's being advised to
proceed at once to Washington
H.M.Jr:
Yes.
K:
and he's to find out and maybe will work out
the plans of what you want.
H.M.Jr:
Good.
K:
They're willing to do 80.
H.M.Jr:
Yes.
K:
The only thing they can't spare you is a man at this
time because they're using them all here.
H.M.Jr:
I see.
K:
But they're -- you can have their plans and you can
have anything like that if you want -- if they want
to send a man on here but I would think that after
you have finished talking to Olley then you could
decide what you wanted to do.
D
H.M.Jr:
That's right.
Regraded Uclassified
2
- 2 -
K:
E. C. Ollev.
H.M.Jr:
Right.
R:
Now listen, the only thing about it 18 that I'm
probably B little fester then the -- than their people.
H.M.Jr:
Yes.
K:
Because they're -- the head of the company has been
in conference here with the topside people.
H.M.Jp:
Yes.
K:
And he 18 getting in touch with Olley.
R.V.Jr:
Right.
K:
Now, he may be a counle of hours behind me but I thought
that if you wanted to save time you might tell him to
come on then and then when he gets the information have
it transferred to Weshington.
H.M.Jr:
I'll do that. General Motors building in Detroit.
X:
Yeah.
H.M.Jr:
I'll -- I'll call him right away.
M.
And then you can tell him to go there and he's going
to get the instructions -- and he will probably get
the instructions while he 18 en route to Washington.
H.V.Jr:
I gee. I'll do that, and incidentally I checked that
-- your cable of yesterday hasn't come in yet to me.
K:
Do they say it's there?
H.M.Jr:
I -- they haven't been able to locate it. I'm rais-
ing hell about it.
K:
Well, it's right there, Henry. I mean, I -- I'll
send them the time and everything. It went --
around -- it left here yesterday sometime around
three or four o'clook. That would be around ten
o'clock your time.
H.M.Jr:
Well, I'm going to raise hell about it.
Regraded Uclassified
3
- 3 -
K:
Yeah, well it went.
H.M.Jr:
Right.
K:
And I'll find out about it right this minute.
H.M.Jr:
And the question of which size I take it this fellow
will know.
K:
Yeah, I think he is the fellow that -- tell him what
you want. All I can tell you 18 that they are meet-
ing here at which the topside people -- they agree
to do -- work it out whichever way you wanted it.
The only thing that there's going to be trouble about
is trying to send you any people.
H.M.Jr:
I see.
K:
But you can have everything else.
H.M.Jr:
I see. Well, that's
K:
They will let me know because they just notified
me that over the telephone.
H.M.Jr:
Well, I'm very much obliged and I'll get in touch
with Olley right away.
K:
All right. If there's any question or there's any
delay in anything, let me know again.
H.M.Jr:
I'll do that.
K:
All right, Henry.
H.M.Jr:
Very much obliged.
K:
Not at all.
H.M.Jr:
Goodbye.
K:
Goodbye.
Regraded Uclassified
TREASURY DEPARTMENT
4
INTER-OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
May 22, 1940
FROM
E. H. Foley, Jr.
I have had an examination made of the statute creating the
office of the Assistant Secretary of War and delegating functions
and duties to such office. All of the powers of this office having
to do with industrial mobilization and national defense must be
carried out under the direction of the Secretary of War.
While it is true that the Assistant Secretary of War has certain
functions under the National Defense Act which cannot be transferred
by the Secretary of War to other offices in the War Department, never-
theless the Assistant Secretary of War discharges these functions under
the direction of the Secretary of War.
9.14.7h.
Regraded Uclassified
5
RE AIR EXPANSION PROGRAM
May 22, 1940
2:30 p.m.
Present:
Mr. Carmen
Mr. Lombard
Mr. Hinckley
Mr. Milliken
Mr. Young
Mr. Mead
Mr. Warner
Mrs Klotz
H.M.Jr:
I appreciate you gentlemen coming this way so
fast, and so forth and so on. Have you had
any opportunity to know - to have explained to
you what I want to do?
Milliken:
We have had a few moments' conversation with
Mr. Young.
Young:
I talked with them B. few moments before we came
in on the general problem.
H.M.Jr:
You didn't bring Taylor with you, did you?
Mead:
No, I can get him.
H.M.Jr:
No, it is all right.
Well, let me explain it to you and then you
gentlemen tell me what you can do to help me.
For the time being, I am trying to do a Job
for the President until he can get somebody
better to do it and that is largely for the
moment the production of airplane engines. It
is engines at the moment.
As you gentlemen most likely know - besides doing
this for the Government, I have handled the Allied
purchasing as far as the contact with the Govern-
ment is concerned and our whole pursuit ship pro-
gram is built around Allison, as you know, and
Allison, I think, has turned out six engines so
we are all very much worried about Allison. That
is number one.
Number two, we want to increase our engine pro-
duction over and above what the present production
is that the Allies have placed with us and that
Regraded Uclassified
6
- 2 -
gets down to a question of possibly licensing
other companies to manufacture. For the moment
we think some of these smaller horsepower, the
four and six hundred horse - take it away from
either Pratt & Whitney or Wright and give it
to somebody else. Keep Pratt & Whitney and
Wright in production up to the time that these
new plants get under production, but we are try-
ing to look ahead for several years and not just
for several months. Then the question 1s, where
can we get another in line liquid cooled engine
so all our °68' are not in one basket and the
Government has assisted and helped Continental
who have what they call a flat engine. So also
does Lycoming.
Then we secured, after great difficulty and a
great length of time, a Rolls Royce engine which
went on the test block today at Dayton, and if
we think it is good, the United States Government
can get B. license from the British Government
direct.
Then there is another program of the British
Government that is to consider building a plant
either in Canada or the United States itself to
manufacture the Bristol engine.
Of course, there would be a great deal of pro-
duction of engines in the smaller class for -
what do you call it, your pilots?
Hinckley:
That is training planes.
H.M.Jr:
Two or three hundred horse, isn't it?
Hinckley:
The Army uses two hundred and three hundred, don't
they?
Mead:
Two hundred, four hundred and six hundred are
the horsepowers.
U.V.Jr:
For the moment it 1s all engines, because we are
in simply a deplorable condition.
Well, to Eive you an example we are talking here
Regraded Uclassified
7
- 3 -
very confidentially - one of the many problems
I've had dumped in my lap, unless I can Cet
five Allison engines between now and the first
of June to send down to Curtiss-Wright to go
into the Curtiss P-10, it will delay their whole
program by two months, because they have never
put an Allison engine in a P-40, which Is designed
for the French, and the design is E little dif-
ferent - I don't know, but what should be on the
right hand is on the left and vice versa. It is
different and they would have to fit these engines
in, you can understand that, and unless we can
get then five engines to try the thing out, their
whole program is set back two months and you might
just as well ask - I don't know, five - something
very rare, If you can think of something very
rare. What is the great diamond? You might as
well ask me to 1ve you five more Hope dianonds
as to give you five Allison englnes.
How, that is the present problem and in going over
this thing with Mr. Hinckley and Mr. Warner here
in the Sest, Mr. Wead is available, plus Xr. Taylor
from N.I.T. and I wondered what California Tech.
can do for the immediate problem to help us on
this,
Have I stated it about right, Bob?
Warner:
I might perhaps add a word, Mr. Secretary, as the
people from California were not here yesterday,
that when this was discussed yesterday we had a
committee composed of Mr. Rinckley and )r. Hunsaker
and Dr. Mead and Faul Johnston and myself and we
all counted ourselves out almost immediately and
said this was an engine problem, design and pro-
duction, and George !fead is the man who has had
engineering experience and it should be completely
turned over to him with the discretionery power
of finding his own assistant. So Mr. Hinckley
and I in this respect are bystanders and Dr. Hun-
saker has gone home.
Binckley:
Dr. Head is carrying the ball at the moment.
Regraded Uclassified
8
- 4 -
H.M.Jr:
Well, but don't misunderstand what Mr. - he is
talking for himself.
Warner:
Yes.
H.M.Jr:
I mean, it sounded --
Warner:
I say we have withdrawn ourselves. There has
been another group in here and Dr. Mead is the
engine expert.
H.M.Jr:
Yes. In other words, he is the only survivor
from yesterday.
Warner:
Right.
H.M.Jr:
Is that fair?
Warner:
Right.
H.M.Jr:
I mean, he is the only survivor out of yesterday
who would stay after I described the thing.
Now, how do you gentlemen feel with this thing
as to the method - as to this great difficulty
concerning engines?
Carmen:
.... (unintelligible accent)
....there are two
different schools of thought. Some of them say,
"Give us more power, something like engines with
two thousand horsepower, and we will do the same
thing that a smaller engine will do." Now, it
is a questionable problem. I think that we are
inclined to believe that - the top performance
should reach reasonably --
Lombard:
The top speed can be reached with a liquid cooled.
The top rated climb probably would be reached
with the air cooled.
H.M.Jr:
Which one of you is Milliken?
Milliken:
I am.
Carmen:
I don't know what your --
9
- 5 -
Milliken: Yes. I say that the most surprising thing
to me B8 A result of our survey - we talked
to all of the major manufacturers yesterday
and discussed this thing in some detail. The
thing that was most surprising to me was the
lack of interest, with one or two exceptions,
in the liquid cooled engine. That is primarily
because California has not concentrated on the
pursuit type of airplane. The manufacturers
were not interested in pursuits, didn't want
any liquid cooled engines, didn't see any use
for them. The manufacturers - one manufacturer
who had been producing pursuit planes said they
weren't interested in liquid cooled, that they
thought the two thousand horsepower air cooled
engine was the thing for a pursuit.
The other people that we talked to who have been
considering pursuit planes and have designed
pursuit planes feel that what they want is a
fifteen hundred horsepower liquid cooled purquit.
The twelve hundred horsepower, they Day, was
satisfactory until the new military requirements
appeared. There has been such a demand for in-
creased fire power and armor that the twelve
hundred horsepower engine, they now feel, is &
little too small and fifteen hundred horsepower
is what they think is necessary.
Carmon:
A large number of ¿uns and armo:* plate.
Millikon:
But in general we found B. surprising lack of
interest in the liquid cooled engine with these
one or two exceptions.
11.M.Jr:
Did you talk with Vultee?
Milliken:
Yes.
E.M.Jr:
And they are not interested?
Milliken:
Vultee is interested in the air cooled engine.
Lombard:
Vultee belleves entirely in the air cooled.
H.N.Jr:
And North American?
Regraded Uclassified
10
- 6 -
Carmen:
Similarly, with somewhat more power.
H.M.Jr:
You (Young) be sure that these fellows meet
Ziegler. Ziegler is the chief designer for
the French Government, civil, and I think that
it would be interesting to meet him. He is
very intelligent.
You were talking about these engines. You were
saying that there 1a very little interest in
the liquid cooled.
Carmen:
Yes.
H.M.Jr:
Well, it is important to decide whether the Govern-
ment wants to put its money into something that
we might expect to have in B. year and 8. half or
two years and have something which we hope will
be B. little bit better than anybody else's.
That 1s why the President is having me do this,
because I have no preconceived notions. I mean,
I am not riding a liquid cooled hobby or air
cooled hobby. I want something that will hit 8.
little harder and fly a little faster than any-
body else has got. That is all I want.
Lombard:
One of the manufacturers in particular pointed
out that he thought the air cooled engine was
the more reliable engine with less maintenance
trouble and that with a fleet of air cooled
military airplanes, you could have them in the
air more of the time than you would with B. liquid
cooled engine. Every time you have & bullet go
through your liquid cooling system, of something
of that sort, that engine 1s put out of commission,
whereas it takes a more vital shock to put an
air cooled engine out of commission, so that, from
the point of view of merely keeping the airplanes
in the air, he was very much in favor of the air
cooled engine.
H.M.Jr:
Well, 1f you will talk with Colonel Jacquin and
Mr. Ziegler of the French Mission, they will tell
you that that argument doesn't bother them, but
I mean I heard that argument two months ago
and the French Mission has crossed that bridge
11
- 7 -
and I think it would be interesting to have you
talk to Colonel Jacquin and Mr. Ziegler, because
the English haven't anybody comparable to those
people here, but I heard the very same thing
and then when they got all through and done, they
wanted the liquid cooled engine.
Lombard:
I see.
H.M.Jr:
Now, what they have done to overcome that 18, they
have armor plate around the engine.
Lombard:
Oh, yes.
H.M.Jr:
They put armor plate around the engine and around
the pilot and they 3ay it doesn't make any dif-
ference. Now, I can't argue with you technical
people, but these two Frenchmen can.
Hinckley:
Is that really the problem right now, Mr. Secre-
tary? The problem is to get out some motors,
isn't 1t?
H.M.Jr:
That is right.
Hinckley:
Any kind, with horsepower.
Lombard:
Of course, the problem is tied in with what type
of motor you want and we are --
Hinckley:
Well, it is eventually, but right now the crying
need is more motors.
Warner:
We know there are high performance ships that have
been designed around liquid cooled engines in this
country. We are waiting on the Allison, for example,
right now and if there aren't Allisons, there won't
be any airplanes of the type on which time has
already been spent.
Lombard:
Liquid cooled versus air cooled - we thought of
another question which you didn't mention, the
question of the trainers.
Carmen:
You see, the Allies like to use the Menasco
engine.
Regraded Uclassified
12
- 8 -
Milliken:
The primary trainer.
Carmen:
Primary trainer, which 1s an air cooled engine
but built light and I believe that it is - it
will use more than Allison, because it will
be harder to get them. You need some survey
about the two factories, the Menasco and Kinner,
I see, and I mean some survey about the pro-
duction now and about the possible production.
I mean six months or a year from now.
H.M.Jr:
You have those.
Carmen:
We have those data.
H.M.Jr:
Well, what I would like you to do, when we get
through here, would be if you gentlemen would
go with Mr. Mead and If Mr. Warner cares to
go with them it would be good, and sort of put
your heads together and talk the thing over.
Mr. Mead has had a day's head start and he has
been with General Brett, who does procurement
for the Army and Captain Kraus, who does procure-
ment for the Navy, and exchanged information.
Now, one thing that I wanted to ask about, have
you people in California developed anything along
the plastic line where they can turn out either
small or big planes fast?
Williken:
There is one development about which I think none
of us knows very much. Colonel Clark is interested
in it. They have so far, I think, produced one
airplane.
B.M.Jr:
And what 1a that, Mr. Milliken.
Milliken:
It is a trainer, essentially a primary trainer
type.
Mead:
That isn't the plastic airplane, really, is it?
Milliken:
That is the Timm. Howard Hughes 1s making it
with 8. technical expert.
Warner:
That is 8. plywood, adhesive and varnish airplane.
Regraded Uclassified
13
- 9 -
H.M.Jr:
Is that something which the Government ought
to look into and put some money into?
Warner:
I think the Government ought to look into that
general type of production. I think for trainers
undoubtedly if we want 8. very large number of
identical planes, they can be built with much
less labor from plywood than from other materials.
Carmen:
It is not a real plastic, it is plywood.
H.M.Jr:
Is that a West Coast company?
Warner:
There is B. company on the East Coast, also, New
Jersey, that is working on very similar lines.
Carmen:
It 18 EL private --
Warner:
It was originally Sherman Fairchild's and it
migrated to California about a year ago.
Milliken:
They have split 1t, 8.3 I understand. Sherman and
Hughes are working on it, Sherman in the East
and Hughes on the Coast.
Warner:
There are several studies going on in various parts
of the country.
Milliken:
Those are certainly in the experimental stage,
though, and not even in the beginning of the
production stages.
Warner:
Yes, but they have built fuselages. They have
the dies for building fuselages. They can re-
produce those. There is no reason to doubt
that they can be put into production as rapidly
as dies can be built for relatively simple fuse-
lages. Possibly for wings, though that 18 not
certain. They have made wings and tail sur-
faces in New Jersey.
Carmen:
It seems to me they have done it with England,
but I don't think it has reached the productive
stage.
Warner:
That was B. more truly plastic airplane.
Regraded Uclassified
14
- 10 -
Carmen:
About two years ago, but this was also in the
experimental stage. I suspect Germany also
will go very far this year in that line.
H.M.Jr:
But if we need a lot of trainers, and we do,
would it be worth while looking into this
plywood plane?
Warner:
Very much.
Carmen:
I think so. Time and price would be important.
Warner:
If we wanted to turn out a thousand of any one
model and required them to be rugged enough
for training service, I think that would be
the quickest and most economical method of
making many of the parts.
H.M.Jr:
Have you (Mead) 8. room where you can meet?
Mead:
Oh yes, sure.
H.M.Jr:
Mr. Mead has been here 24 hours, so he feels at
home.
Mead:
Thanks to you.
H.M.Jr:
lie is already - I mean, I am sure he has got a
lot of Treasury red tape in his pocket. Why
don't you gentlemen sort of get together and
I will be back here from the White House around
5:00 and 1f you have some ideas by that time,
I would be glad to talk again and sort of rub
the edges off a little bit and maybe you won't
be quite 80 formal back in the other room as
you are here. I think from what I have stated
and plus what you (Warner) know and Mr. Mead
knows, I think you have got what our immediate
problem is. As Mr. Hinckley says, we need &
lot more engines as of yesterday and we find
ourselves in B very embarrassing situation and
we would like to - so I think if you would go
back to wherever they have given you a room
and then when I come back from the White House,
I would be glad to talk some more.
Regraded Uclassified
15
- 11 -
Warner:
May I ask one short question, the general answer
to which you may be interested ini In your study
of the production capacity of Menasco and Kinner,
you were assuming their present types of engine
which would require new airplanes. There has
been some talk also of licensing the Whirlwind
and Wasp, Jr. in those planes.
Milliken:
We studied that.
Carmen:
Menasco believes for military combat it would be
better to build something for the license.
H.M.Jr:
What you ought to know is, we are signing contracts
today or tomorrow with both Pratt & Whitney and
Wright, the Government is, so that we can license
other manufacturers to make the four and six hun-
dred horsepower Wright and Pratt & Whitney, 30
we will be in a day or two in a position to ne-
gotiate with other manufacturers to license them
to make the four and six hundred horse, either
Wright or Pratt & Whitney.
Carmon:
It is a period of time we are talking about.
E.M.Jr:
The Government will have the right to license
other people in a couple of days. When I come
back, 1f you gentlemen are still on friendly
terms, end so forth and so on, I will be glad
to see you.
Regraded Uclassified
16
RE SMOKELESS POWDER
May 22, 1940
3:30 p.m.
Present:
Mr. Purvis
Mr. Picot
Mr. Young
Mr. Sullivan
Mr. Bloch-Laine
Mr. Bradway
Mrs Klotz
H.M.Jr:
Mr. Bradway, the reason I wanted to see you
was, this Allied Purchasing Commission works
with me at the President's direction. You
may or may not know it.
Bradway:
Yes, I know it.
H.M.Jr:
And on this question of powder plants, you
evidently wanted to get the clearance of the
State Department and I take it you have got
that.
Bradway:
I heven't. I have the letter ready to present
and Mr. Yost said he had made a date for me
to come and see you at 3:30 and that I should
keep the letter until after the conference. I
have the letter written.
H.M.Jr:
What 1s the letter?
Bradway:
Well, 1t is just B. form letter.
H.M.Jr:
You mean you want to clear it with the State
Department?
Bradway:
It is just the form letter we send,
H.M.Jr:
Well, can I handle it for you?
Bradway:
If you wish. As far as I am concerned, I would
have gone back and 01 ven it to Mr. Yost.
H.M.Jr:
Well, I would be glad to handle it for you.
Bradway:
That would be all right.
H.M.Jr:
Now, on the assumption that the State Department
says yes and that we get the green light from
the Army, on that assumption, see, could you
Regraded Uclassified
17
- 2 -
be saving time for yourself and the Allied
Purchasing Commission and get It down - to
get together up to the point of signing a
contract?
Bradway:
You mean so far ES the information we are
going to give to CIL?
E.M.Jr:
Yes,
Bradway:
I am not sure that there would be & contract
there.
Purvis:
There would be no contract in that case between
you. We are going ahead, so far as the Canadian
contractor is concerned, as if that permission
is going to come.
H.M.Jr:
Well, I mean, are you waiting on anything, pending
this permission?
Purvis:
For the moment we are going straight ahead. There
would be a moment in the very early future where
if it wasn't there, it would begin to hold things
up, but we are assuming things to be favorable.
Bradway:
You understood our position, Mr. Morgenthau, is
this: We have received from the Canadian Indus-
tries a letter making & formal request for the
"know-how" and technical assistance with the pro-
posed powder plant. The duPont company, assuming
that we get clearance from the State Department,
will not make a contract for that technical
assistance. It won't be necessary. In so far
as that - now, in so far as the - it is my under-
standing in the first place that from the United
States Government's angle - you may correct me
if I make 8. mistake here - from the United States
Government's angle, they were prepared to release
this information to Canadian Industries, Limited,
1f and when the Allied Purchasing Commission had
made a contract with the duPont company or - or
any other company for a capacity with EL minimum,
I believe, of 20,000 tons.
H.M.Jr:
Twenty-four.
Regraded Uclassified
18
- 3 -
Purvis:
No, twenty-four is probably what we will do,
but twenty thousand is on the record.
Bradway:
Yes, twenty-four thousand is the figure, but
twenty thousand is what we were talking about.
H.M.Jr:
The understanding was that if they sign up with
United States manufacturers for B. given amount
of tonnage - it was twenty thousand tons.
Purvis:
Twenty thousand tons.
E.M.Jr:
When that was done, that in return WB would give
them technical Assistance.
Bradway:
We would give the CIL the information, technical
information, or make some arrangements --
Purvis:
The only question now is whether we can run the
two things together, because I have given you
my word that we shall be making an arrangement
for those quantities. I an just bringing the
thing along in parallel.
Well, before I can tell the State Department to
release this, I will have to talk with the Army,
because that is the understanding I have with
the Army and we will make this another thing I
have to give to General what's-his-name.
Dradway:
Of course, the duPont company has no particular
part in this procedure at the moment.
N.M.Jr:
I didn't know just what 1t was, but the thing
I am interested in - and I did pase the word
of the President on - and that is that twenty-
five hundred - two million five hundred thousand
pounds of powder that the Navy released.
Bradway:
Yes.
H.M.Jr:
Has that ever been cleaned up?
Bradway:
No. We expect a letter from the Secretary of
War any day. It hasn't come in yet. The moment
that comes in, we will make a contract.
E.E.Jr:
You are waiting for 8. letter from the Secretary
of War?
Regraded Uclassified
19
- 4 -
Bradway:
The Secretary of War. You see --
H.M.Jr:
I thought Colonel Burns instructed you people
to go ahead with it.
Bradway:
We had no letter from the War Department. It
was agreed, yes, that they would release the
powder, in so far as the War Department was con-
cerned.
H.M.Jr:
What kind of a letter do you want?
Bradway:
They know exactly what to write. There is a
paragraph of the agreement that was reached in
General Harris' of ice --
Purvis:
A point, I think, has arisen which may be de-
laying this, Mr. Secretary, and that is that
when you talked with me your belief was that
it would be possible for us to get this release
as from the first of June.
H.M.Jr:
That is right.
Purvis:
Now apparently as EL result of a meeting they had
down here in Washington, it 1s the first of
October. It is to recapture that that we are
anxious to do.
Bradway:
Just a moment, Mr. Purvis. The Navy released
that capacity to us and their release was based
on the amount of powder they would have asked
us to make beginning the first of October for
granulation, not delivery.
Purvis:
The first of October?
Bradway:
Granulation, that is right.
Purvis:
Or the first of June.
Bradway:
No, no, first of October.
Purvis:
Well, that may be the answer.
Bradway:
You see, that comes down to that, that they have
unfinished at the present time & certain amount
Regraded Uclassified
20
- 5 -
of powder. They cancelled their proposal that
they put out for 700,000 pounds. There remains
unfinished on their orders & certain amount of
powder. Right now we are making 600,000 pounds.
H.M.Jr:
Yes, but Mr. Bradway, may I ask B. question,
because I think this goes to the heart of the
problem.
Purvis:
My understanding was that the first release we
got from the Navy, 600,000 pounds, at the rate
of 150,000 pounds a month, approximately - that
you remember.
Bradway:
That is right.
Purvis:
As I understand it, when that release was given
us, there was 8 quantity of 565,000 pounds in
process of manufacture which had to be held back,
1s that right, on order?
Bradway:
More powder on order, oh yes.
Purvis:
Now then, when we get finished on the fifteenth
of July with that 600,000 pounds, doesn't the
565,000 come under that?
Bradway:
Not all of it. You see, that is quite involved.
Purvis:
You see, there is a new 22 million pound capacity
over and above the 600,000 pounds.
Bradway:
That two and & half actually will amount to about
two and a half million pounds, but that doesn't
begin until the first of October, in 30 far as
our powder schedules are concerned and the
Secretary of War's letter will release it as of
that date.
Purvis:
May I ask you one other question? If an addi-
tional 2% million pounds over and above the
original 600,000 pounds - 1f the capacity for
that 2/8 million has been released as from the
first of June over and above the 600,000 pounds
capacity --
Bradway:
Yes, but it wasn't released as of the first of
June.
Regraded Uclassified
21
- 6 -
Purvis:
I see. I thought the 565,000 pounds belonged
to the 600,000 pound capacity and that this
21 million was something fresh that was can-
celled with you.
Bradway:
I know, but Mr. Purvis, after all, there the
Navy schedules would run over a period of 18
months.
Young:
Did the Navy set that date of October 1, Mr.
Bradway?
H.M.Jr:
I set the date with Mr. Compton of June 1 and
Mr. Compton agreed to it and the President
directed him to do SO.
Bradway:
I am sorry, but there must have been some mis-
understanding there.
H.M.Jr:
This 21 million pounds that I am talking about
is a contract between the Navy and you, isn't
it?
Bradway:
There is no contract.
H.M.Jr:
Well, it was an order.
Bradway:
No, we had no orders. It was simply B. statement
by the Navy to us that, "We will require for the
next four or five years, based on our ship con-
struction schedule, more powder from you than
we anticipated. We will want 21 million pounds."
We said, "All right, we will make a mental reserva-
tion of that," and we have that lined up on our
production schedule along with the other require-
ments.
H.N.Jr:
Were you making 1t?
Bradway:
No.
Purvis:
Were you prepared to make it?
Bradway:
We can in October, yes.
Regraded Uclassified
22
- 7 -
Purvis:
In October?
Bradway:
Yes, certainly. That is the capacity that is
released, that is exactly it. What the Army
is going to release --
H.M.Jr:
The impression that I was under, and certainly
the impression that Mr. Compton and Admiral
Furlong left me under, was that you are manu-
facturing at the rate of 10,000 pounds a day
for the Navy.
Bradway:
No.
H.M.Jr:
Now look, would you do something for me?
Bradway:
Our manufacturing schedule, if I may interrupt,
is very complicated and unless you are familiar
with --
H.M.Jr:
Now, I will tell you what I would like you to
do. I would like you gentlemen to go to the
Assistant Secretary of the Treasury Sullivan's
office now and let's get this thing down in
black and white, how much the Army and Navy -
and so forth and 80 on - because we have given
these people our word that they could get 1t,
but evidently from what you have told me we
have given our word on something that doesn't
exist, 80 let's get it - because this takes
more time than I have got. Couldn't you all
go in Mr. Sullivan's office and put it down in
black and white? If there is something - you
expect a letter, you expect a release, you
expect this and that, if I know what it is --
Bradway:
I can tell you. As far as --
H.M.Jr:
I want to get it down in black - it is impossible
for me to carry all these things in my head and
everybody - it 1s no reflection on you - but every-
body in the Government, I will put it that way,
tells you a different story.
Bradway:
of course, I haven't told you any story yet.
Regraded Uclassified
23
- 8 -
H.M.Jr:
I said the Government, so why don't you go -
is that agreeable with you?
Bradway:
Yes, of course.
H.M.Jr:
Go to Mr. Sullivan's office. Have you gentlemen
got time?
Purvis:
Too much of it.
Bradway:
As far as we are concerned, remember this, that
we are in the hands of the Army and Navy or the
Government, 1f you want to put it that way, and
we can make no statements for the Army or Navy.
We are speaking for duPont.
H.M.Jr:
Well, you talk with duPont and maybe you could
get - maybe you could get Louie Johnson and
Compton each to send somebody over to the office
right away. Maybe Admiral Furlong or somebody.
I want it on 8. piece of paper what they are talk-
ing about. One person says they get this, and
the Army says this, and the Navy says that. DuPont
says something else. Now, try to get it together.
Sullivan:
All right, sir,
Bradway:
They have it in the Secretary's office now, the
formal letter they are going to release to us,
with the very paragraph of the agreement that
was made over in General Harris' office.
Young:
Release it as of October 1.
H.M.Jr:
Mr. Compton said June 1. Thank you for coming
down.
Bradway:
Thank you; glad to have met you, Mr. Morgenthau.
Maybe we can straighten this out and this other
thing on the release from the State Department,
you will take care of that?
H.M.Jr:
Definitely. The way I would start it, get Mr.
Purvis to tell you what I said the Administration
would do.
Regraded Uclassified
24
- 9 -
Purvis:
I have the memorandum that I made then.
H.M.Jr:
And then 1f necessary let Johnson and Compton
either come themselves or send somebody over,
but see if you can't sweat this thing through
so at least we can get together, because some-
body is haywire.
Sullivan:
Then shall I get in touch with you as soon as
we finish?
H.M.Jr:
When it is all on a piece of paper and it needs
action, when it gets down to details, Mr. Wood-
ring or Mr. Edison decide something, or Mr. Hull,
when it is down to that, inform me, but not until
it is in the form that it needs the signature
of a Cabinet officer. When it is in that form,
bring it to me.
Thank you very much.
Regraded Uclassified
OUPON
STATE -
E.I. DU PONT DE NEMOURS & COMPANY
INCORPORATED
WILMINGTON, DELAWARE
DOPLOSIVES DEPARTMENT
May 22, 1940.
Mr. Joseph C. Green, Chief,
Division of Controls,
Department of State,
Washington, D.C.
Dear Mr. Green:
The Canadian Industries Limited of Montreal,
Canada, in which concern the du Pont Company has a financial
interest, has requested that we furnish them with plans and
technical assistance in the construction and operation of &
plant to be used for the manufacture of nitrocellulose smoke-
less cannon powder. The powder manufactured at this plant
will be supplied to the British Government for military purposes.
The du Pont Company would like to be advised by
the State Department as to whether compliance with the request
of Canadian Industries Limited would contravene any treaty or
statute of the U. 8. Government.
Very truly yours,
SMOKELESS POWDER DIVISION
7
F. W. BRADWAY - MANAGER.
FWB/o
Regraded Uclassified
26
May 22, 1940
The original of this was given to
General Marshall today at 4 p.m.
GERMAN AIRCRAFT ENGINE & PROPELLER
Some time ago one of the aviation
engine makers (Curtiss Aircraft Co.) expressed
the wish to obtain from the French Air Ministry
a German fuel injection engine and a VDM
propeller.
The French Air Ministry has just
replied that they did not see their way clear
to comply with the request of one particular
engine maker but that they were quite willing
to deliver engine and propeller into the hands
of the U. S. Air Corps for them to use and to
place at the disposal of any engine maker that
they thought fit. Shipment will be made as
soon as Air Ministry knows to whom to address it.
May 22, 1940
Regraded Uclassified
Menorandum of Conference of the President
held at The White House at 4:30 May 22, 1940-
Present: The President
Secretary Morgentheu
General Marshall, Chief of Staff, Army
Adriral Stark, Chief of Operations, Navy
William H. McReynolds, Administrative Assistent to the
President
Brigadier General Watson, Secretary to the President
President's Neval Aide
Secretary Morgenthau explained to the President that the volume
of work developing in connection with the preparedness program, par-
ticularly with respect to handling foreign orders which intimately
affect the army and navy preparation program, was becoming BO great
88 to make it vitally necessary that some more formal organization
and authority be set up for handling this work to make sure that it
functioned efficiently. He pointed out that the Allied Purchasing
Commission had placed in his hands requests for munitions and equip-
ment in such quantities as to make it necessary for this country to
place the manufacturing production facilities of the country for the
types of material involved practically on e wer mobilization basis
in order to meet that situation.
As a first step, the Secretary suggested that the plan outlined
in the memorandum to him, dated today, by Colonel H. K. Rutherford,
be fully put into effect with certain modifications indicated on the
chart which the Secretary himself had presented. The President looked
at the memorandum and chart briefly and immediately stated that he
did not want to do the job that way; that he felt the whole program
would get out of balance if this were done because of the emphasis
pleced on the industries immediately involved to the detriment of
other essential functions; and that he was himself planning to re-
constitute the Council of National Defense, which is B. legal organize-
tion provided for this purpose; that he had in mind the persons to
serve. As far as the Cabinet members were concerned, he would edd
the Secretary of the Treasury and he also would add the Director of
the Bureau of the Budget. He also stated that he would expect
McReynolds to act as the Executive Secretary for that Board.
In the discussion that followed the President had the Chief of
Staff review the problems raised by the Allied Purchasing Commission
with respect to their request for the transfer to them of munitions,
planes and other equipment now either in the hande of the military
Regraded Uclassified
29
- 2 -
brenches in this country or under order for delivery. The President
agreed with the suggestions made by General Marshall as to what could
be done and what couldn't; asked that he ascertain how such transfers
of material could be legally made to the allied governments; and di-
rected that the twenty-five bombing planes bought in the "first lot"
by the Navy, which are now considered unsafe to fly and ready for the
junk heap, be offered if the Allies should decide they could make use
of them.
May 22, 1940
MEMORANDUM FOR THE HONORABLE HENRY MORGENTHAU, JR.
Subject: Organizing for Emergency Production of Munitions.
1. In compliance with your verbal request, the following
information on the above subject is submitted.
Since its organization eighteen years ago, the Army and
Navy Munitions Board has given its entire attention to the problem of
preparing for the prompt and effective production of munitions in an
emergency. The plans which it has developed over these years are the
product of no individual or group. They have been evolved gradually and
carefully. They are based on World War experience, modified and improved
upon by advice and counsel from a multitude of sources - within Army and
Navy - from other Government Departments and from outside agencies and
individuals. The sole desire actuating those who have worked on the plans
has been to perfect our measures of national defense so that in time of
need they might be practical and immediately effective. The fact that
these plans have been reviewed and approved by so many qualified individ-
uals justifies the conclusion that they are sound and will be effective
in an emergency. The following 1s a general summary of the activities
which have been involved in preparing these plans:
8. Determination of types and computation of requirements
for a major war effort. This task has been completed for general situs-
tions but may need some slight revision to adapt the results to the
specific situation now confronting us.
b. Completion of an industrial inventory of the country
and sarmarking suitable plants for the war-time production of specific
items of munitions. In the past twenty years, some 20,000 plants have
been inspected and over 9,000 are now earmarked for the production of
problem items. Training of those plants for their war missions is pro-
ceeding as rapidly 88 available funds will permit.
C. Army and Navy plans for procurement in war have been
coordinated, and combined where possible, in the interest of effectiveness
and to avoid competition and conflict of interest. Requirements of the
Maritime Commission have been included. The easential needs of the civil
population have been allowed for in allocating plants for war production.
d. Detailed studies have been carried out regarding important
economic factors upon which the success of the industrial war effort
depends. Other interested Government Departments, tecimical societies,
organized industrial and business groups, and qualified individuals have
Regraded Uclassified
31
contributed to the completion of the plans for meeting these problems.
Among the more important activities on which studies were initiated
by the Army and Navy Munitions Board and for which plans have been prepared
or are in process are the following:
New Construction for munitions production
Strategic and other materials
Power and Fuel
Transportation
War Trade
War Credits
Machine Tools and Equipment
Labor Supply and Industrial Deferments
It is the belief that these plans outline sound and practical
methods of organizing for the effective prosecution of warfare on the industri-
al end economic front, whatever agency or agencies be decided upon to execute
them.
It is believed, however, that the Army and Navy Munitions Board,
with some strengthening of personnel can meet the present emergency effectively.
It 18 already organized as B. going concern and can expand its activities
without delay. It enjoys the confidence of industry and can readily obtain
full cooperation.
It is therefore recommended that the following steps be taken:
B. The functions of the Army and Navy Munitions Board be
clarified and confirmed by B. statement from the President and such additional
funds and personnel as may be needed for ita effective action be made
available.
b. An "Advisory Committee for Munitions Production" be
organized by the Army and Navy Munitions Board to assure maximim effectiveness
in the utilization of all industries essential to carrying out the minitions
program now being launched.
The attached diagram outlines the organization proposed above with
some additional suggestions regarding the possible activities of the new
committee.
H. K. RUTHERFORD,
Colonel, Ord. Dept.,
Incl.
Director, Planning Branch.
Regraded Uclassified
32
PRESIDENT
:
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JOINT BOARD
AERONAUTICAL
ARMY AND NAVY MUNITIONS
JOINT ECONOMY
BOARD
BOARD
BOARD
:
:
:
:
:
ADVISORY COMMITTEE FOR
MUNITIONS PRODUCTION
:
:
:
:
:
:
:
:
:
:
:
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AIRCRAFT
OTHER
MACHINE
FACILITIES
MATERIALS
FOREIGN
MUNITIONS
TOOLS
Including
ORDERS
CONSTRUCTION
Regraded Uclassified
33
May 23, 1940.
MEMORANIUM FOR THE SECRETARY:
I checked with Ed Foley with respect to the Council of National
Defense and find that that is en statutory organization limited in
membership to the
Secretary of War
Secretary of Navy
Secretary of Interior
Secretary of Agriculture
Secretary of Commerce
Secretary of Labor
end may not be supplemented by the addition of other ex officio members
or outside members. It seems likely that the President would want to
use the authority contained in the 1916 law as a substitute for the
Council of National Defense and create by Executive Order a "Board of
Mobilization of Industries Essential for Military Preparedness" which
would permit him to place on such a board anyone he selects.
Regraded Uclassified
THE PRESIDENT
Army and Navy
Munitions
Board
Facilities
Other
Aircraft
Machine
Including
Materials
Foreign
Munitions
Tools
Con -
-
Orders
struction
Engineer-
Pro-
ing
duction
34
Regraded Uclassified
35
RE AIR EXPANSION PROGRAM
May 22, 1940
5:45 p.m.
Present:
Mr. Warner
Mr. Mead
Mr. Milliken
Mr. Lombard
Mr. Carmen
Mr. E. N. Taylor
H.M.Jr:
Well, where do we start, Mr. Warner?
Warner:
Well, I just came in. I was with them the first
part of the afternoon, but Dr. Mead had better
start.
Mead:
Well, I think that Mr. Carmen has some doubt of
what the gentlemen who come to us from the
Facific Coast could contribute and I think he
might tell us about it.
Carmen:
We have been following five points in our dis-
cussion. The first one would be the immediate
need for Allison engines. We say this is B.
job for engineering production specialists, and
one suggestion that came up was a lowering of
the existing requirements since this engine has
the highest requirements in the United States
and many of them should be reconsidered.
(unintelligible accent)
Dr. Mead believes we should raise the horsepower
up to 1500 or more.
Now, the third question that must be discussed
is the problem of shifting the engine production
for the trainers off from the big companies and
to the smaller companies. Now, we gave out the
data of our survey and I don't think that we can
have much of a part in it. On Menasco and Kinner,
we gave Dr. Mead the data on the present pro-
duction and future production connected with this.
The first question is the standardization. I
think we agree that the types for the larger
engine are pretty well determined and we gave
Dr. Mead the information that we got from these
companies. The problem is 8. thing to be worked
out with each type which is desirable for the
small trainer ship.
Regraded Uclassified
36
- 2 -
.... (unintelligible).
The fifth question is what you mentioned, the
plastic or plywood airplane. I have been asked
to report about the present status of these
new plywood airplanes, to find out how far they
are from production.
H.M.Jr:
I should think unless we were duplicating some-
thing that somebody else is doing that it would
be very useful to know whether they could get
out a plastic or plywood primary trainer, wouldn't
you think 30?
Warner:
Yes, by all means. I think we ought first to
find out how far the Army and Navy have gone.
I know that this particular airplane that 1a
under development in Glendale has been subject
to a certain amount of study by the Army. They
had under consideration giving of service test
orders for the airplanes over a year ago and
there is a certain amount of history which I
don't know, but which ought to be looked up.
H.M.Jr:
Could you get that tomorrow?
Warner:
We will discuss it and see that it is secured,
whether I get it or whether somebody else does.
H.M.Jr:
But I mean, and make it available? I am think-
ing that if this group from California could
concentrate on that, I think that might be a
real contribution, because these primary trainers -
well, what 18 the estimate of what they think they
will need?
Mead:
I don't know just how many --
H.M.Jr:
It is a great many, anyway. I can tell you
roughly that it 1s about 3,000.
Carmen:
Three thousand.
Mead:
That is the Army only.
Carmen:
The primary trainer --
Regraded Uclassified
37
- 3 -
Mead:
But you must realize that that depends on what
basis they are starting from. They were talking
about & certain assumed number of airplanes
and if so, then they would have six thousand or
three thousand of these ships.
Warner:
You can figure about eight in a year in a ship.
H.M.Jr:
We could find that out from General Brett very
easily. Could you find that out and make it
available to these gentlemen?
Warner:
Yes. I think Mr. Hinckley already has some in-
formation on the training requirements.
Carmen:
We believe this is a good airplane and so designed
as to make for more or less easy manufacturing,
so it looks like it should be investigated. It
is not yet in production.
Milliken:
No.
H.M.Jr:
You (Warner) could find out if they want anything
done, if they are entirely satisfied in the
primary trainer field that they can put the thing
into mass production fast; I mean, whether it is
80 far off that you can't fool with it.
Warner:
Yes.
Milliken:
Is there any question of Allied purchases on a
large scale of primary trainers or is the Allied
production capacity adequate to their needs?
H.M.Jr:
The thing changes so fast. As of yesterday, they
weren't interested in the market.
Milliken:
They were not?
H.M.Jr:
Yes. Today they practically are looking to us
for all their purchases, everything, so I mean
it is - but they didn't list that in the big
list they gave me today, but - I mean, it just
changes over night. Today the question is,
"What can you give us?" Yesterday they were
bargaining on five cents. Today it is, "What
have you got?" That is how quick the thing
changes.
Regraded Uclassified
38
- 4 -
Warner:
of course, the Allies want & ship that is in
production, they want something that they can
put into the Canadian training fields this
fall if possible, certainly by next summer.
H.M.Jr:
Well, Mackenzie King called up the President
and asked him for 300 trainers tomorrow, that
is what he wanted, 300, just like that. He
wanted 300 trainers right away.
Warner:
We haven't any 300 real training airplanes. We
have B. considerable number of light planes that
are available for the very first stage of primary
training that can be used precisely as they have
been training the C.P.T., the Civilian Pilot
Training boys this year. We can get a great
many of those in a short time.
H.M.Jr:
I should think unless that study is being made
that that would be an excellent study and B.
very useful one, what is there in the primary
training field which could be put into mass
production immediately.
Warner:
of course, the plastic would be at the very
least for 18 months and probably for two years
away. To get the production process developed,
which 1s the smallest part of it, to get out
a design which is found satisfactory, which
has even a minimum amount of testing and is
brought to the point where it CRD be put into
production - I think to get them running in
any considerable number within two years would
be quite B remarkable feat.
H.M.Jr:
Well --
Warner:
Is that right?
Milliken:
I don't know how far they have gotten at all.
They have been very secretive about it.
Warner:
I am assuming that the production process is
well along, but the development of design -
and to put it into production in a brand new
material would take close to two years.
Regraded Uclassified
39
- 5 -
Milliken:
This North American trainer that Carmen men-
tioned was flown 39 days from the time the
first sketch was made and the general over-all
shape is something which I should think could
be done in 8. plastic or could work quite satis-
factorily. Now, if the company can do that -
if the production facilities are available,
it should be possible to do it in & much shorter
time, but I don't know how far along they are
with the process.
Meed:
That, I think, covers the ground pretty well,
Carmen. That covers the ground pretty well
that you had in mind?
Carmen:
Everything ve telked about this afternoon.
H.M.Jr:
Well, the thing that secms to me - 30 that we
would not be duplicating each other here and
any other Government effort, if the Civil
Aeronautics could find out tomorrow what is
the situation, the research and production
in the primary training field, and these gentle-
men can see what it is and then find out whether
there is 8. Job to be done there.
Warner:
Yes, we will get that for you tomorrow.
H.N.Jr:
And then if they would meet on that and then if
they care to meet with me again tomorrow after-
noon, I will be available.
Regraded Uclassified
40
May 22, 1940
9:50 a.m.
Present:
Mr. Bell
Mr. Gaston
Mr. Sullivan
Mr. Foley
Dr. White
Mrs. Klotz
HM,Jr: I asked you gentlemen, and ladies, to
come in as friends of mine and I can't impress on
you how much I don't want this thing talked outside
of this room. See? Because I was disturbed the
other day -- well, I will be frank and use this as
an example if you (Sullivan) don't mind this, that
you evidently discussed with Lauch Currie, Biggers
coming in. I don't understand why you did.
Mr. Sullivan: No, sir.
Mr. Gaston: I will say about Biggers that
Perlmeter met Biggers in the hall
Mr. Sullivan: He knew that you were seeing
somebody and he wanted to know whether or not any-
thing had definitely been done about it. I told
him I thought it was now being negotiated and that's
the phrase I used.
HM,Jr: But you must have told him the name.
It's not important other than I Just want to
illustrate please be extra careful these days.
Mac isn't here because he's talking to Colonel
Rutherford. What I wanted to ask you -- I used you
as the whipping boy.
Mr. Sullivan: That's all right.
41
-2-
HM,Jr: Colonel Rutherford is on the Munitions
Board. He's the man who worked with Stettinius on
this whole broad business and all the rest of the stuff.
And he comes in here with the plan of 1916. There
was a Council of National Defense made up of six Cab-
inet members and under that comes an Advisory Committee
and then comes the Munitions Board. Now if they are
going to get things done, set up six members of the
Cabinet of which the Treasury 1s not a member, they
might just as well have a Cabinet meetings and they
don't do anything. Advisory Committee -- President
at this time hasn't got anybody. It does not fit
the picture. The machinery is in the Munitions Board.
Mr. Bell: There 1s a Council of National Defense.
HM,Jr: Statutory, yes.
Mr. Bell: I thought there was
HM,Jr: On the statutes it exists. Six Cabinet
members.
Mr. Bell: And such other people as the President
wishes to appoint. They never meet. It does exist,
because there is the nucleus
HM,Jr: What I was thinking, in order to get this
thing going -- as General Marshall said yesterday, the
Allied orders which I gave him to advise me what they
could do, puts this country on what do they call it?
On "a mobilization basis". The Allied orders I re-
ceived yesterday puts this country on a mobilization
basis.
Now, the thought I had in mind -- and Mac 16
sitting in with this fellow now. For the present,
to implement this Army and Navy Munitions Board and
if he wants the thing done Mac says for me temporarily
to go in as Chairman until the President can know where
he 1s at. Now, I don't know whether I ought to do
the thing physically or for other reasons and I would
like your advice to see what you think about it.
Regraded Uclassified
42
-3-
MacReynolds agrees that the next move for
the President 1s to blow up that Munitions Board,
enlarge it with people he wants, but they have the
machinery 90 you could touch a button and do this,
that, and the other thing.
Brett sends me word "You have to do something
for machine tools". I can't do this thing without
a staff. The question 1s should I drop out and tell
the President to give the whole works to the Munitions
Board or go in as Chairman of the Munitions Board.
I don't know.
Mr. Bell: I don't know how the Munitions Board
1e tied in with the industrial mobilization plan.
HM,Jr: They are it.
Mr. Bell: As outlined in the statute.
HM,Jr: But, as I recall, the statutory powers
are vested in the Assistant Secretary of War.
Mr. Bell: So it may be he is Chairman.
HM,Jr: They say they are Joint chairmen, but
the President would have to tell Johnson and Compton
that for the time being Morgenthau 1s going to preside
for him as the representative of the President. And
Johnson said the other day that he realized that the
statutory authority was his, but by direction I was
doing all the stuff and it was perfectly agreeable to
him.
Mr. Foley: I don't think that's true. I think
that's what he says, but that 1sn't true. He gets
those powers to be exercised under the supervision of
the Secretary of War.
Mr. Bell: No, he doesn't.
Mr. Foley: Yes, he does, Dan.
Mr. Bell: Have you read the Act?
43
-4-
Mr. Foley: Yes.
Mr. Bell: Well, funny Act. It certainly
directs the Secretary of War to do it.
Mr. Foley: Under the supervision of the Sec-
retary of War and the job was created in connection
with industrial mobilization to be of assistance to
the Secretary of War and I think when he keeps talking
that way he's not talking accurately.
Mr. Bell: I hope you are right, but I know we
studied it when I was in the Budget.
HM,Jr: Take & look at it. We looked at it
once before and the thing seems to flow directly to
him.
Mr. Bell: When I was in the Budget we looked
into it and we thought it was a terrible way to write
a statute.
Mr. Foley: It's like all these things, Dan,
it's
Mr. Bell: Like the Comptroller of the Currency.
Mr. Foley: Take United States Housing Authority,
in Interior. If you have a strong man at the head of
it he will dominate it. If you have a weak man, like
Woodring, then a stronger man, like Johnson, will walk
away with the Dowers and he will say they were given to
him and acts independently of the Secretary of War.
Hil, Jr: Like the Assistant Secretary of the
Treasury (meaning Bell). After he's appointed I have
to go around and ask him.
Mr. Foley: Same thing.
Mr. Bell: I don't think BO.
Mr. Foley: We took a look at it the other day.
Regraded Uclassified
44
-5-
Mr. Bell: Then you are more current.
HM,Jr: Well, it's a detail, because the Pres-
ident
Mr. Foley: It's a matter of personality, but
it's not a matter of law, I don't believe.
HM,Jr: But Just as a matter of Henry Morgenthau,
Jr., and the Treasury Department, what about me?
Mr. Gaston: In your interest I would say no, but
I don't think there is anybody else to do it. Haven't
got anybody else who 1s fitted for the job.
Mr. Bell: No chance of getting the situation
straightened out over there? Nothing in the cards?
HM,Jr: Certainly not until after the middle of
July. I don't know what happens in the middle of July!
I have told him, but I don't think anything. It may
if it gets worse.
Harry, you are usually vocal.
Dr. White: I have rather definite ideas on the
subject. I feel you can do nothing else and in saying
that I am not particularly interested about your health.
I will be frank about it. I think the problem is much
too important. I am convinced that you could do a swell
job at it and I am convinced further that nobody in the
Army or Navy could and I am very doubtful about many of
the names I have heard mentioned.
Mr. Gaston: You can't bring in anybody from the
outside.
Dr. White: I think you would be the ideal man
for the job. I think it would be a tough job on you.
There are certain mitigating factors which would make
it possible to carry it through. One 18 you have been
in the Treasury for a long time and have developed a
good organization. I think there are good men who
could relieve you of responsibility for routine matters
and critical matters that come up need not occupy much
Regraded Uclassified
45
-5-
of your time, so I think you could devote the bulk
of your time and If you could surround yourself with
other competent men on that angle I think you could
carry through. I do think there will be terrific
stress and strain and you will pay a great price
physically. I am frank to confess I don't weigh
that very highly in what I view as the importance
of the other sides. It has that degree of import-
ance. So I think if the opportunity 16 given to you
and if you are responsible only to the President 80
you can have a free hand in the matter and if you have
some selection of the men who will work under you and
with you, I would definitely say that you can do nothing
other than accept.
HM,Jr: Ed?
Mr. Foley: I feel very much the same way Harry
feels. I think it's a duty that you have to assume.
When you take it on, you have to realize it's going to
be the toughest Job that anybody could take on. I
think there will be an awful lot of shiping and an
avful lot of outting under and all the rest of it, just
as there was yesterday in the Vinson-Trammell business.
And I think you can do it better than anybody in the
Government and I think anybody in the Government that
I know, who I would consider qualified to do that job,
can do it better than anybody outside, who might be
brought in from the outside.
HM,Jr: How about letting Harold Ickes do it?
Mr. Foley: Well, of the people in the Government
I think Harold Ickes would be my second choice.
HM,Jr: You don't have to be polite.
Mr. Foley: I am not being polite.
Mr. Gaston: Nobody 16 being polite.
HM,Jr: Excuse me, I am being polite. (Laughter)
And Mrs. Klotz 1s being polite.
Mr. Gaston: I accept the correction.
-6-
Dr. White: I think there 18 something more too
from my point of view, Not only do I think you will
bring to it that degree of aggressiveness and imagina-
tion required of a Job of that kind -- it's anything
but & Job that should be handled in the customary
fashion -- but I have fears that if some -- that there
is danger of approaching this and forgetting many social
considerations which are vitally important and on which
there are sometimes decisions to be made in which there
1e a tendency to overlook matters of fundamental 1m-
portance to our domestic situation. I think you would
bring to that the prestige of conservativeness too which
would carry it forward, make possible your defense of
things that would come, that I think is very important.
(At this point General Watson phoned and the Sec-
retary explained that the President is seeing HM, Jr,
General Marshall, Admiral Stark, at 4:15. HM, Jr ex-
plained to his group, "I had to have it to settle this
thing.")
Ur. Gaston: It's very simple to me. A lot of
sacrifice for you, but we can't ret anybody from the
outside. They are all tainted and it won't do and
there is nobody in the Government who can handle it
but you.
HM,Jr: I don't know that the President wants
me to handle it.
Mr. Bell: What kind of a man 1s General Harboard?
HM.Jr: I don't know.
Let me give you an example. I was talking to
somebody last night. Do you know what is the trouble
with the French Army? They have people who fought
the battles of the first World War. You don't see
General Hinderburg leading the German army today. You
don't see -- where are those people? They are either
in the grave
Mr. Gaston: They are still muttering "It's the
man with the bayonet who decides a battle".
47
-7-
HM,Jr: And they make a man Vice Premier who
is 72 and look at England.
Mr. Foley: He's 82, Mr. Secretary.
Dr. White: Toynbee, who 18 probably the world's
greatest historian, has Just finished five volumes.
One of his vólumes is right on that point and in 1938 --
Huntington Cairns who gets a book as soon as 1t comes out
told me about this -- he AB developed that very point.
He has shown that all the way back DE in history, as far
as history goes, and he shows how every subsequent war
has always been lost when the leaders of the former
have been in power in the subsequent ones beanuse they
used the techniques and training that they got in the
former war and the significant thing 1s he wrote, in
1938, he more or less prognosticated what would happen
in 1940, because they are using the same Generals, with
some expension of course, that they used in the World
War whereas the Germans, with an entirely new approach,
an antirely new group of men, will utilize new methods.
HM,Jr: To illustrate: the best story I know.
For six months or a year the Army has been trying to
cet hold of two Rolls Royce engines. So they get
turned down. I det them two engines. I said, "General
Brett, when will those engines be available." He said
"Next week, Tuesday or Wednesday.' I said, "Where are
they?" He sald, "They are on a freight train." I
said, "Find out where they are, stop them and I will
put a truck alongside to take them to Dayton. He said
all right. Towards evening, Phil Young was on this
thing. He calls him up and he says he was wrong.
They are not on A freight train, have never cleared
Customs. They are on a dock at New York. So they
got Harris out of bed and got those two engines and sent
them by express and they started testing them this morn-
ing, Just one week shead of what they said. The Army
itself -- if I was in there, believe me, Brett would
get A dressing down of his life. I don't mind saying,
in this room, try to find General Arnold in town. He's
not here and he won't be here until we get the bill
through. You have to do this kind of stuff around
here. They have not to move.
Regraded Uclassified
48
-8-
Mr. Sullivan: I don't think you have any
choice.
HM,Jr: As I say, I haven't any idea whether
the President wants this or not.
Mrs. Klotz: That's the most important thing
whether the President does not feel that youshould
do it.
HM,Jr: What do you think?
Mrs. Klotz: Your health 18 a very important
consideration.
HM,Jr: I wish you would look up the law in
the next hour or two.
Mr. Gaston: You could sleep 20 hours a day and
do more in the next 4 hours than the rest of that bunch
would do in 16.
Mr. Foley: The Treasury Department is go big
and 80 powerful and has 80 many ramifications and it
touches industry in so many different planes that I
think the head of the Treasury Department 1s the fellow
that has to do this Job.
HM,Jr: You can't do it -- it's Just like --
talking to Mr. Sloan of General Motors. All right,
I said, what about Allison? Well, everything 1s
fine. Well, I can't see you. I can't look you
in the eye. I don't know whether you mean it. I
want you to come down and tell me that across the
desk. He said, When? I said tomorrow at 11.
They just made the most terrible mistake on
the Allison engine.
I
Mr. Foley: Well, 1f the head of Interior was
doing it and Sloan said the reason we have not done
it was because of a tax situation over there in the
Treasury, what could Ickes do? He could not give
them an argument, He could not tell them that's not
BO.
49
-9-
Dr. White: I agree with Harry, the people
they are talking about are Just too terrible.
Mr. Foley: I did not get the name of the
fellow who 18 with Mac.
HM,Jr: Rutherford. He's secretary of this
Board.
Mr. Bell: He's an Army officer too.
Dr. White: We have had some dealings with him.
HM,Jr: Oh, I wish you would hear him! It's no
Job for Barney Baruch, or his crowd.
Dr. White: On what you spoke to John about,
there 1s some misunderstanding. I know Currie spoke
to me yesterday morning and told me you were getting
Biggers.
Mrs. Klotz: I think Mac told because Mac took
him down and showed him the room.
Mr. Sullivan: As a matter of fact, he said
Biggers. I said who? He said the fellow with Libby,
McNeil Glass.
HM,Jr: I Just wanted to give my people, who
are partners in my crime, a chance to say you ought
or ought not to take it. But as far as the Treasury
has been going the last few days, it has been going
very nicely. Dan looks fairly well. If he does not
get enough help -- we have all the money.
Mr. Bell: I think it's too bad that you have
to do double duty. It might turn out to be treble
duty. Two other Departments. And you certainly
can't divorce yourself from the Treasury. I don't
see any other choice as the situation has developed.
It's unfortunate that another Cabinet officer can't
do his Job. I certainly don't think Ickes could do
it because he would have everybody in the Government
and in industry mad in two months, speaking frankly.
I don't think they would even cooperate with him.
Mr. Gaston: In two days even.
000-000
Regraded Uclassified
50
MEMORANDUM
May 22, 1940.
TO:
Secretary Morgenthau
FROM:
Mr. Sullivan
SUBJECT:
Conference with Mr. Purvis, Mr. Ballantyne, Mr. Picot,
Mr. Bloch-Laine of the Anglo-French Mission; Mr. Bradway
of duPont; Mr. Young and Mr. Sullivan.
Discussion revealed a misunderstanding as to the date
upon which the Army's release of duPont in behalf of the Anglo-French
Purchasing Mission was to become operative. The Anglo-French Pur-
chasing Mission, and I believe the Secretary of the Treasury, under-
stood that on an order for the Anglo-French Purchasing Mission of
2,000,000 pounds, duPont was to start on June 1st. Mr. Bradway
understood that they were to start on October let.
In the absence of Assistant Secretary of Mar Johnson and
Colonel Burns, I talked with Colonel McMoreland who advised me that
there had been prepared for the signature of the Assistant Secretary
of War a letter addressed to the duPont Company releasing out of
capacity reserve for the Army 200,000 pounds per month starting
October lat. After it was explained to Colonel McMoreland that the
Foreign Purchasing Mission heartily desired to receive this powder
as soon as possible, be agreed to talk tomorrow morning to the
Ordnance Department and to find out:
1. If the Army can relesse its full reserve capacity
with duPont of 400,000 pounda per month for 5 months, starting
June 1st or,
2. If it can advance the date upon which its release
of 200,000 pounds per month is to become operative from
October 1st to June lst.
He is to call me in the morning after the War Department
has come to a conclusion on this matter and I agreed to call Assistent
Secretary Johnson and explain to him my conversation with Colonel
McMoreland this afternoon and to attempt to expedite the matter.
Purvis and Bradway are in accord that a contract can be executed
within a day or two after the release 18 received by duPont from the
Army. Vr. Bradway states that it may not be possible to start work
OD June 1st, but they will be able to do 80 within 8. few days after
Regraded Uclassified
51
- 2 -
June 1st and certainly soon enough after June 1st to complete the
2,000,000 pound order in 5 months from June 1st. It requires 2
months for the process of manufacture to be completed and accordingly
complete delivery under this understanding would be made about
December 31st. It is understood that the release being discussed on
the 2,000,000 pound order is to be substituted for the pending
release of 200,000 pounds per month or the equivalent capacity for
12 months.
This memorandum was dictated in the presence of all
participating in the conference and is approved by all.
JLS
52
TELEGRAM SENT
OK
GRAY
May 22, 1940
5 p.m.
AMEMBASSY
LONDON
936,
FOR THE AMBASSADOR FROM THE SECRETARY OF THE
TREASURY:
Dear JOE:
The reason I had not seen your 1299 before our
conversation was that the message had been received
in Washington without any indication therein that it
was intended for me.
HULL
(CWG)
EA:HF:MEG
Regraded Uclassified
53
May 2 22/40
63862
19331 A
Regraded Iclassified
63825
NORTH AMERI AN BC - 2
19269 Regraded UC lassified
56
to
BTS in
Service and
an adv.
32466
A
15630.RS
Regraded classified
A
338
&
53832
SEVERSKY PT-8
Regraded U lassified
Reg ade Regrade d Uc Uclassified
13343 A C.
FIELD TEXAS
03
67412
VULTEE BT - 13
19726 A. raded Uclassified
4
NORTH AMEP CAN BT - 14
19654 6 C graded Uc Uclassified
63
P.Ts in
Service and
on adu.
IIIIIII
AC.28.2993
USARMY
182
INSOLIDATED
40552
15868.9
graded Uclassified
43041
16843 R.C.
Regraded Uclassified
54057
STEARMA PT-13
Regraded Uclassified
C4316
19393Regraded Uclassified
68201
Regraded Uclassified
C8022
FAIRCHILO 0 PT-19
19752A
Regraded Uclassified
Regraded Uclassified
19394 A.C
Regraded Uclassi
73
Navy Training
Types
X.3.1-1
10-11-25 1
A: - -50757
is
,70
ve
11.
YO'EE to D F R (4) I CATICA!"
Regraded Uclassified
AND
S.NAVY 47/
1
77
May 22, 1940
3 p.m.
Present:
Mr. Purvis
Mr. Bloch-Laine
Mr. Young
HM,Jr: Let me tell you what I got. This
fellow Gilman would not talk to anybody but me. I
got the best engine engineer in the United States,
who 1s free, who 1s coming to work as my assistant.
Mr. Purvis: Oh, good work!
HM,Jr: He's a marvel! Dr. Mead was chief
engineer for Wright; he was chief engineer for Pratt-
Whitney and chief engineer for the Air Corps out at
Dayton.
Mr. Purvis: That will be a great relief because
you have got to have men.
HM,Jr: This fellow know airplane engines.
Mr. Purvis: That's right.
HM,Jr: And he has an assistant now. An engine
man from M.I.T., A going production nan too.
Mr. Purvis: Good !
HM,Jr: And he says the greatest crime W&B com-
mitted when we let Carl Ward leave the country. But
at least I have got technical assistance and the best
available in the United States on engines.
Mr. Purvis: Yes. That's very, very good. I.
Fedden could have talked to him.
HM,Jr: My wife saw you walking around the White
House yesterday.
Mr. Purvis: of all the extraordinary things to
Regraded Uclassified
78
- 2 -
happen! I have only once seen a ball game in America
in the 25 years I have been here and for the first
time since the war news was BO bad I could not sleep
go we went and SAW a baseball came. It was the Treasury
and F.B.I. and we found ourselves ardent supporters of
the Treasury team.
May I add just one or two things that might
interest you?
Pratt Whitney will be signed this afternoon. I
have to 80 back this afternoon and do it, but it 18
arreed and finished.
HM,Jr; Will you open & bottle of champagne for
this
Mr. Purvis: I would love to.
Another important thing: that Monnet has tele-
(honed and asked me to send you his best regards and
Asked us to try and think un in a rather different way
the possibilities in regard to producing war materials
here, both for the shorter term and for the longer
term -- the creation of output -- to think in large
quantities and we have word from our people not to ask
too many questions over there as to what they want, to
try andima what they want end start the thing
without getting in touch with them.
Mr. Bloch-Laine: In view of what can be had.
In fact 80 far with us undoubtedly they were trying to
fill gaps in their production here; sometimes ask us
things which were almost impossible to be had, such
as certain things that would have taken a new factory
to be built for relatively small quantities. Today
the outlook 1s entirely different. There are going to
be a great many things 88 a result of that battle in
the north of France that will not be produced, because
that north 18 going to be very much destroyed from the
voint of view of steel, especially steel, and some other
things that we have in the region of Lille, and certainly
they are going to lack a good many things, 90 it seems
to me the problem 18 reversed and it 16 not so much a
question of how to fill this or that gap, but largely
the ones that can be found in this country relatively
and quickly or which are the best ones on which to
Regraded Uclassified
79
- 3 -
concentrate or what are the things on which production can
be doubled up on account of your own preparedness program.
Such a kind of entente can be reached and then instead of
trying to tell us, there would be a reverse of the eitua-
tion in view of what can be done here. We would tell them
this, that or the other thing can be done. And they could
adjust themselves.
HM,Jr: I don't mean to interrupt you.
Mr. Bloch-Laine: No, I said everything I meant to
say.
HM,Jr: After all, what you gave me yesterday
morning was 8. large order.
Mr. Purvis: It was.
HM,Jr: General Marshall 1a coming here at four
o'clock and the President of the United States is seeing
us at four thirty. Now, I cannot move any faster than
that, because what you Are asking me 1s 8. major military
decision.
Mr. Purvis: That's right.
HM,Jr: A major military decision has to be made
and the Chief of Staff has to make it in the first instance,
and then after that it has to be politics. I don't mean
political but p-o-l-i-t-1-c.
Mr. Purvis: How it fits in with public opinion as
it 1s today.
HM.Jr: There is no use rushing me. I got it at
five minutes of one. At one o'clock the Chief of Staff
had it. He's personally behind it. Spending his time
on it today and at four thirty we see the President.
I appreciate the pressure you gentlemen are under but
nobody could move as quick.
Mr. Purvis: Monnet 1a telephoning anxiously.
You see. Could I put it this way? Is it your thought
that I would for the moment better stop here and go to
New York and come on your call? We would like to get to
Monnet as soon as possible the general thought of the way
it is liable to go.
Regraded Uclassified
80
- 4 -
KM,Jr: If I have a message for you after this
meetins, both of you, and you 60 back to New York and
I have something which 18 encouraging, I will give you
0 MAS on the phone.
Xr. Purvis: Thank you very much.
H..Jr: If it gets down to detail that you can have
your five engines or this or that as soon AB -- incidentally,
you have all of my copies which I want for four o'clock.
The Dunont man has been to the State Department and
COROS here at three thirty. I might Just AB well see him
vita you.
Xr. Purvis: Submose the Just hang around.
HV,Jr: Plus Sullivan who has been studying this.
Fr. Purvis: I think it would be splendid.
Ill.Jr: You went to 1ve me something else?
Mr. Purvis: One other little something that came
this horeing from Paris this time.
Mr. Bloch-Laine: I cannot promise that it 1s the
Init.
SH,Jr: Didn't you ask me for this in R different
way?
Vr. Bioch-Laine: That was powder.
Mr. Purvis: This is T.N.T. This 19 just 'nlain
stratulit out stock.
HM,Jr: You have not got 8 ribbon cony of this bill.
Mr. Your No, sir, that's the only copy there 1e.
You have the original to General Marshall.
HM,Jr: This you are giving me May 22nd.
Mr. Purvis: This is a little essier. That T.N.T. is
southing which comes off the shelf and 1s used by the
Regraded Uclassified
- -81
- 5 -
British and French or Americans 1s all the same T.N.T.;
whereas nitro-cellulose has to be different size to fit
different guns.
HM,Jr: Have you got a copy for General Marshall?
Now, you gentlemen want to wait until Dupont comes?
Mr. Purvis: Yes.
Mr. Bloch-Laine: I don't want to be all the time
asking. This is something we don't ask. This is some-
thing we offer. Rather amusing.
HM Jr: Wonderful! Handle it the same way.
Mr. Purvis: Through the Commanding Office Wright
Field.
H.M.Jr: Yes. Wonderful!
trum arthur Purvis
82
may 22,1440
T. N. T,
We have received from Paris a
request to hasten as much as possible the
deliveries of T.N.T.
Our Atlas contracts cannot provide
us with any T.N.T. for France before August.
Would it be possible to obtain
from the United States Army and Navy stores,
2,000 tons for immediate shipment, or a priority
on DuPont production for the immediate future?
9 have geven copy th
P. young
May 22, 1940.
Regraded Uclassified
83
May 22, 1940
4 p.m.
Present:
General Marshall
Mrs. Klotz
Mr. McReynolds
General Marshall: In the first place, we
have gone from 8 big reserve to a 15% reserve.
The Allied purchasing people, turning to American
equipment, for planes. We are then in a position
to drop out that reserve and have no reserve over
operating planes, because our equipment, the plane
they are turning out 18 readily usable on a broad
basis. Then I am of the opinion, and all my ad-
visers are, that in our situation, with what is go-
ing on in this part of the world, with the slow de-
liveries we already have before us, that we could
not accept a delay over the present prodoedure, which
1s very slow in getting the operating planes for the
GHQ air force. They are getting that figure in some
exact form with the 15% cut off and on the combat
planes feature. But if the manufacturer -- and that
16 a matter on which you are an expert -- I am told
that if the manufacturer could be assured of a con-
tinued production, say up to the end of 1941, rather
than as some of them have contracts terminating early
in 1941 and the others in the middle of 1941, if they
were assured of that and had orders to cover that in
& big way, then immediately their procedure would be
such as to increase production beginning in about the
fourth month from now on an increased basis to such
an extent that we would go along with the same rate
of delivery. We would receive no benefit from that
procedure, but the Allies would for all those orders.
I am not talking about planes for immediate delivery
because, 8.8 I 866 it right now, we have none for 1m-
mediate delivery.
HM,Jr: May I interrupt you. I had at my
house Vaughn and Wilson and they assured me, in one
case they are working 7 days three shifts, and the
other 6 days three shifts and they said, "Mr. Morgen-
thau, with all the money in the world, if you gave it
to us, we could not increase our engine production.'
Regraded Uclassified
84
-2-
General Marshall: That's what I thought you
told me the other day. That's the bottleneck.
HM,Jr: So even if we gave them this plane
business, we would not get the engines, 80 it all
comee back to engines.
General Marshall: Yes, sir. You are exactly
right.
HM,Jr: I know what the plane people are manu-
facturing because Brett gave me that statement.
General Marshall: The other thing he was to
take up was the engine part.
HM,Jr: The engine thing, for the next three
or four months 18 absolutely hopeless and tomorrow
morning Sloane 1e coming in at 11 o'clock. I said
I want him to look me in the eye and tell me he 18
going to do something.
General Marshall: As to engines, there were
two things. One, to get five engines to ship abroad
and the other was 5 or 6 for delivery at Buffalo and
they assure me they are working it out BO that can be
done.
HM,Jr: That will be swell. Will I get that
in a memorandum?
General Marshall: Yes. I will have that over
tomorrow morning. But Breat assured me he thought he
had that worked out.
HM,Jr: That will be something.
General Marshall: That isn't a very b1g request
either.
HM,Jr: That would make them vary happy.
General Marshall: That's & small one.
M.Jr: But you think we can do something on
those half dozen engines.
Regraded Uclassified
85
÷
General Marshall: Yes. Both different re-
quests, one for five and one for six, Brett has
those papers. I will give you & brief on the bomber
situation in the same manner that I had the document
prepared on the P-36's.
On hand in the Continental United States there
are 52 flying fortresses. However, as you are un-
doubtedly familiar, that 1s the only real thorough
bomber to cope with modern things despite the fact
ithas not gas proof tanks. There are 52 in the United
States.
HM,Jr: And no gun in the tail.
General Marshall: No gun in the tail, now.
Out of a total of 136 required for the equipment of
the squadrons. Obvious shortage of 93. That 18
our only modern bomber and, of course, it is not the
type of bomber you would use over there unless they
wanted to send it over into Germany. 52 planes of
this type 1s far from sufficient for training of
pilots now assigned to squadrons If we send them
over now they would have to train the pilots, because
there 1s quite a technique to piloting these and It
will be 2 or 3 months before they could use it and
this shortage of pilots and crews will be aggravated
when additional pilots report. Also, I am going into
a conference with Admiral Stark which the Admiral does
not know about yet, to try to make & chance in their
Naval set-up in the Pacific. One of these 18 we have
to put 52 planes in the water. Of the B-18 -- that's
the ordinary 2-engine -- we have now -- there are 240
in the United States. We are using those as a sub-
stitute plane for the b1g flying fortresses. They
would be very difficult to ship over there.
HM,Jr: Which are those?
General Marshall: The B-18, of which we have
240. The B-17 could be ferried via Newfoundland.
The B-18 can't make that field and can't be sent below
deck on a carrier 80 only a small number could be put
on the upper deck. The elevators are too small.
Regraded Uclassified
86
However, those planes, deficient as they are, are
the only means of training vilots. So our situation
in bombers 18 very serious to us, because we have this
antiquated force in Panama and Puerto Rico and Hawaii
as well 88 of course in the United States, with the
exception of these 52 flying fortresses. Tomorrow
I should have a decent memorandum on this thing, to-
morrow morning I hope, along with the engine part of
It. Now here are the other papers you gave me.
HM,Jr: I have gets of these.
General Marshall: If you turn down here and
get to the next thing, I will read and you can look
at it if you want to. This refers to all the material
other than air stuff.
In effect, the thing 18 this. We have ignored
the legal requirements, both of the Neutrality Act
and of the law which states exactly how we will de-
clare things surplus and we have ignored the political
implications of any action. We have addressed our-
selves simply to the proposition, duly safeguarding
our situation of National defense in the light of
the present situation, what, beyond that, might we
spare if means were found of getting it over to the
Allies. It boils down to this:
75 m.m. field guns and ammunition, we have none.
The shortage 1s terrible and we have no ammunition for
anti-aircraft and will not for six months 80 if we gave
them the gune they could not do anything with them.
Anti-tank material could be produced by industry in
quantities in 12 months and it is to our advantage if
they want to do it. Anti-tank guns, the situation
is similar, a shortage. .50 caliber, our situation
is the same.
Now we come to some things we can do. Browning
.30 light machine gun. I feel we can release 10,000
as they stand, unmodified, because we have a great many.
Automatic rifle, unmodified, I feel we can release
25,000 without jeopardizing ourselves. Enfield rifles,
I feel we can release 500,000. Those we can declare
Regraded Uclassified
87
-5-
surplus and manage that under the law. Automatic
pistols, we have none. 75 m.m. field gunn, of the
British design that fires either American or French
amminition, I feel we might release 500.
HM,Jr: I am giving & double line to the
legal ones. Could you declare that surplus?
General Marshall: If I could get into church
I could. It's pretty nearly surplus, in this respect.
On the basis that we are going after 105 guns and we
have 80 many of those that we can't bring other troops
up into them until we get new production. So I can
stretch my conscience there. Mortars, we can release
500 of those and 50,000 rounds of ammunition. That
1a a thing we don't want to use. We have a lot of
ammunition. Deteriorating very rapidly.
Now here is & tricky one and it's the vital
item of the plot. Caliber .30 ball ammunition. The
proposal here 1a we might release 100,000,000 rounds
80% machine gun and 20% rifle. You see, none of those
machine guns are worth anything to them without ammuni-
tion.
HM,Jr: How's your conscience on this?
General Marshall: Well, the situation there 18
this. We are running up to production now of almost
800,000 rounds a day of all kinds of .30 caliber. That
is tracers, blanks, and things of that sort. Very
little powder involved in it. The ammunition 18 very
cheap. We are getting rapid production and it's de-
teriorating a lot so that we have that excuse for try-
ing to do it, but just to say out and out
HM,Jr: I am putting two lines.
General Marshall: Now, in addition to the above,
there is a lot of things below that we have declared
surplus, but up to the present time the State Department
decision has been even though surplus, nothing to be sold
to belligerents. If the State Department decides to
Regraded Uclassified
88
-6-
sell to belligerents, there's the material that 10
legal. Any South American country that wants to
buy that, we will sell it to them.
I might say there was a request in there
that they ask for, in connection with Colt, order
for machine guns, and I have not got the dat. They
were trying to work out a way with the Assistant
Secretary's side and I have not got that for you.
With reference to releasing powder machinery.
The War Department 1s agreeable to releasing such
equipment in excess of its own requirements provided
it 1s replaced in kind with new equipment.
With reference to release of 125 tone of nitro-
cellulose powder, the War Department cannot agree to
such a release. I might say all our ammunition for
cannon, rather than emall arme, 1s in such a dangerous
situation that there we could not do anything without
prejudicing our own situation too seriously.
This memorandum is just in the form it came to
me from General Wesson. I hadthe people concerned
go over this with General Wesson. They went over the
various items and he was just able to get this to me
at 3 o'clock 80 I have no memorandum to you.
The question of price was spoken of and the gen-
eral thought was this: that of certain types of materiel
where it 1s of the antiquated pattern, it ought to be
about 75%. of certain types where it has a positive
value today or can be readily modified to an e xcellent
weapon, like the modified rifle, it ought to be 100%.
That is, again, a question of Governmental policy and
that 18 where I believe the Secretary of War has to
bear the burden of the plot, Some of the deteriorated
ammunition would be at much less price.
HM,Jr: If you don't mind, I would like to sub-
stitute this chart for this one.
General Marshall: That's all right with me.
Mr. McReynolds: Only leaves out the confusion
of the other members.
Regraded Uclassified
09
-7-
HM,Jr: Why don't I have both?
Mr. McReynolds: The only change is that we
have brought down that aircraft stuff into two seo-
tions. (The chart referred to 1s attached to report
of White House meeting at 4:30.)
HM,Jr: If I may take the two minutes I have
left before I go over -- depending upon how much time --
the principal thing that I have asked this meeting for,
General, is this. The President has got to make up
his mind how he's going to handle this question -- I
want to try to get the President to make up his mind
how he's going to handle all of this program stuff
plus the orders from the Allies. They come in today
and say "things have changed and we are going to have
to buy practically everything here". That puts
us,
AB I think you said, on 8 mobilization basis.
General Marshall: Something has to be done to
out it on a normal basis. This has been catch AB
catch can. It has to go on a formal basis.
HM,Jr: That's the point. I have had my talk
with Pa Watson, with McReynolds because it's an admin-
istrative matter, and I asked for this meeting 80 that
the President will make up his mind and not do some of
the things which I think he is thinking of doing, taking
on three assistants to himself. Continue this -- give
one man this.
General Marshall: It's going to get 80 confused
nobody will know where they are.
HM,Jr: That's the purpose of the meeting and
I hope I have your backing.
General Marshall: Oh, absolutely! We have
to get on a solid business basis right away.
HM,Jr: Here's something to you. They are going
to give you something. (Memo of 5/22 "German Aircraft
Engine and Propeller". ) They made a regular ceremony
here. It will be sent to New York, care of the Air
Corps, Dayton, Ohio.
o0o-o0o
Regraded Uclassified
TREASURY DEPARTMENT
DEPARTMENTAL STOCK Form 2131
SPECIAL
Treasury Department
90
It Is Important
Division of Monetary Research
that this Paper
Date 6/5/40 19
should be made
Special.
To:
Miss Chauncey
PRINTING - 2-0010
From:
L. Shanahan
Am returning herewith the Stettinius
material - about which you asked the
status,
On May 29 a memorandum was prepared
to the Secretary, from Mr. White, entitled
"Tungsten". The gist of the memo was
given to the Secretary orally by HDW
and the original sent you for your
records.
MR. WHITE
Branch 2058 - Room 210
is rite
31
Please &
Hugh about this
may N/xo.
Regraded Uclassified
Mr Stelliness Sak
This X Hull E
lrd. may 40, 10:18
92
The chances of en individual or a specific industrial company
stitsining the general information requested are extremely poor, As
on illustration: a single company rould probably be plad to furnish
the Information to a Covernment efency confidentially, but would be
reluctent to rive it to anyone else. A Government agency could
protably obtain this information by writing directly to verious com-
panies.
On the particular subject of tungsten, a Government agency might
be chle, however, to get the information more easily through the Bureau
of Department of the Interior, or the Army and Havy Munitions
Hoard. "a understand various consumers of tungsten file monthly reports
mith the Turesu of Mines showing the consumption of tungsten and stocks
en idea. Further it is believed that the Army and Navy Munitions Board
- -D thorough study of the tungsten situation.
Conflosation information on tungsten consumption and stocks on
3AD of 200 United States Stael Corporation is 85 follows: (consumption
below in the form of ferrotungsten-W)
In the last four years consumption has varied from 1,000
pounds to 12,000 pounds ennually.
In 1939, about 2,900 pounds were used, and it is estimated
that 1940 recuiremente "ill total between 10,000 and 15,000
pounde.
At the end of April 1940, sbout 6,200 pounds of ferrotungsten
were on hand.
In the past, purchases have been made from metallurgical sources
in this country, specific firms utilized being on the list of
firms prepared and submitted with letter of April thirtieth.
The Corporation expects to obtain additional supplies when needed through
the shine or similer sources. If the inquiry relates to the more fundsmental
question of the availability of foreign and domestic ares, BE presenably is
to case, it is believed that inquiries directed to come of the dealers on
that list might bring results.
It. should be noted from the figure shown above that the Steel Corporation
is B very small factor in the consumption of tungston. That is probably true
of the industry generally ne compared -ith cortain other industries such ES
electric equipment and radio.
Regraded Uclassified
93
- 2 -
In view of those two industries probably being more important
consumers of tungsten than the steel industry, it is suggested that
perhaps additional information can be secured from companies such
as General Electric or Radio Corporation of America.
Regraded Uclassified
34
May 22, 1940
10:40 a.m.
H.M.Jr:
Hello.
General
Marchall: Good morning, Mr. Secretary.
",",Jr:
How are you, General. General, I had B. fairly satis-
factory talk with Colonel Rutherford this morning.
Yes, sir.
H.M.Jr:
But I told him I wasn't entirely satisfied with his
suggestion, and the reason I wesn't 18 that there
were too many Daper committees.
I see.
The the thought that I had in mind for the immediate
emergency was the possibility of increasing the
Munitions Board.
I see.
H.M.Jr:
And let that function for the time being.
Yes, sir.
H.".Jr:
And let the President out a couple of people in there
that he has confidence in. Now,
I.....
M:
I see. What Was Rutherford's reaction to that?
U.".Jr:
He liked it.
He liked it?
He said
M:
Well, that strikes me PB B. very good intermediate step.
I'm not the expert on that but that sounds sensible
to me.
H.".Jr:
He liked it.
M:
Well, that's fine.
Regraded Uclassified
95
- 2 -
H.M.Jr:
Now, this meeting at 4:15 at the White House
M:
Yes, sir.
E.M.Jr:
Is at my suggestion, and it's for this buroose.
57
Yes, sir.
E.M.Jr:
And I wondered if you could drop over here a little
earlier BO we could
Whatever time you say.
H.M.Jr:
Well, a quarter of four?
M:
I'll be there.
H.M.Jr:
And then we could talk B little bit about
X;
All right, sir, and I'll arm myself a little bit
before I get there.
H.V.Jr:
But this is the way -- and the suggestion -- the way
I'm working it, I know the President and you set un
all these
organizations
M:
Yes.
P.M.Jpr
Huh?
in
Well, I'll be there at 8. quarter of four and I'll talk
to Rutherford and boil myself out before I get there.
H.".Jr:
There's just going to be you and Stark and myself.
V:
Yes, sir.
E.M.Jr:
And the purpose of it 1s this. And maybe by a quarter
of four you could have some anewers on all that Allied
stuff.
X:
Yes, sir. I've got it in my hands and I've got a
committee here right now.
H.M.Jr:
Thank you 80 much.
M:
All right, sir.
Regraded Uclassified
96
May 22, 1940
10:50 a.m.
H.M.Jr:
Hello.
Onerator: Mr. Hoover. Go ahead.
H.M.Jr:
Hello.
J. Edgar
Hoover:
Hello.
H.M.Jr:
Good morning.
H:
Good morning, Mr. Secretary. I just wanted to give
you a call to let you know the status of that matter.
Il.M.Jr:
Please.
H:
The verbal instructions came through. The written
instructions have not as yet come through because
I understand that the party to whom he dictated
them 18 111 and hasn't been able to transcribe her
notes.
H.M.Jr:
For heavens sakes.
H:
But the word came through and we have resumed the
contact which I -- with what I know 18 going to be
excellent results here.
H.M.Jr:
Well, we -- Just never mind the written instructions.
H:
Yes. The thing about it 18 you certainly got the
wires cleared for us.
H.V.Jr:
Well, let me know if there 1s anything else because
B:
I will, and I think maybe in working out some of these
things we -- we may want the assistance -- I'm quite
sure that we will want it -- of the Coast Guard on
some things that they can do on radio, you know.
H.M.Jr:
Well, the person to talk to on that is Herbert Geston.
H:
I will. I'll take it up with him.
N.M.Jr:
And you'll find him most cooperative.
Regraded Uclassified
97
- 2 -
di
Yes, they've been very helpful on some of the things
already, and I think in this thing we'll really be
able to get some results now.
H.M.Jp:
And they're particularly good at breaking codes.
H:
Yes. Well, that -- that of course 18 the thing.
Very fortunately -- this is just for your own infor-
mation -- we were able last night to send the first
message through to the other side for the group
that's here.
H.".Jr:
on, really.
R:
Yes. They have set up on the -- Long Island here
-- one of their short wave stations.
K.M.Jr:
Yes.
H:
Which, however, happened to be two of our men.
H.M.Jr:
Yes.
R:
And therefore we have the immediate inside of that.
H.Y.Jr;
Have you -- do you -- was it in code?
Yes, it was -- that 1s, it was in code that we knew
of, you Bee?
H.M.Jr:
Oh.
H:
Because our men were hired by this particular party
to build the set and to operate it.
H.M.Jr:
I see.
B:
And while our men were not supposed to know the code
they did from the facts of a man that we had ap-
brehended about six weeks ago.
H.M.Jr:
Was it important?
H:
It was Just -- no, the message RB a matter of fact
was meant as the first contact message.
H.M.Jr:
I see.
Regraded Uclassified
88
- 3 -
H:
But I imagine now most daily we'll begin to get some
really important material and I will send copies of
that to you if anything turns up there would be of
interest.
H.M.Jr:
Yes, I'm very much interested.
E:
Because I think, naturally, it fits into the whole
picture.
H.M.Jr:
Yes, it does.
R:
It just shows the value of getting this other thing
ironed out.
H.M.Jr:
Well, thank you very much.
H:
Well thank you very much indeed. We are very grateful
to you for it too.
H.M.Jr:
All right.
H:
Thank you. Goodbye.
Regraded Uclassified
39
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
May 22, 1940
FROM
E. H. Foley, Jr.
The Pepper resolution, which was disapproved by the Senate Foreign
Relations Committee this morning by a vote of 10 to 1, provided that the
President might sell to countries which were subject to unprovoked
invasion aircraft, aircraft parts or equipment belonging to the United
States which in the judgment of the President could be sold and delivered
without imperiling our national defense. Machine guns and other equip-
ment not relating to aircraft were not included.
9.1%
Regraded Uclassified
100
Secretary Morgenthan
May 22, 1940
B. H. Foley, Jr.
The Pepper resolution, which was disapproved by the Sonate Foreign
Relations Committee this morning by a vote of 10 to 1, provided that the
President might sell to countries which were subject to unprovoked
invasion aircraft, aircraft parts or equipment belonging to the United
States which in the judgment of the President sould be sold end delivered
without imperiling our national defense. Machine gune and other equip-
met not relating to aircraft were not included.
- 1. it. T., Jr7
EHFIS 5/22/40
Regraded Uclassified
101
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
May 22, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
CONFIDENTIAL
Sterling had a steadier tone in the New York foreign exchange market today.
The opening quotation was 3.22, as compared with last night's close of 3.17-1/2.
During the morning, the rate moved between 3.20 and 3.24, and at noontime it
was quoted at 3.22-3/4. It experienced little change in the afternoon session
and the closing quotation was 3.23.
The sterling turnover figures given below revealed that there was some
expansion in the volume of business. The major part of foreign bank orders to
purchase sterling came from Chinese banks.
Sales of spot sterling by the dx reporting banks totaled L372,000. from
the following sources:
By commercial concerns
L264,000
By foreign banks (South America and Europe)
L108,000
Total
1372,000
Purchases of spot sterling amounted to L511,000, as indicated below:
By commercial concerns
L117,000
By foreign banks (Far East, Europe, South America, & Near Ent)394,000
Total
1511,000
The following reporting banks sold cotton bills totaling L20,000 to the
British Control on the basis of the official rate of 4.02-1/2:
L12,000 by the Irving Trust Company
4,000 by the National City Bank
3,000 by the Guaranty Trust Company
1,000 by the Bank of Manhattan
L20,000 Total
On continued selling of French france by Italian interests, the franc rate
declined in New York in relation to both the dollar and the pound. In terms of
dollars, the franc touched a low of .0176 this afternoon, and closed at .0176-5/8.
The videst cross-rate was 183.52 france per pound, and the final franc-pound quo-
tation was 182.87. The New York bank which reported yesterday the receipt of
orders from Italy to sell French france, today informed the Federal Beserve Bank
that so far it had disposed of about 23,000,000 france in the Iev York market
for Italian account. Another bank stated today that it vas attempting to sell
france here by order of the Italian National Institute of Exchange.
Regraded Uclassified
-
- confidential
The Federal Reserve Bank further learned that one of these New York banks
dispatched an over-night cable to authorised banks in France, offering them
French france in return for sterling, and that today the New York bank received
A cable from France stating that the authorized banks there were unwilling to
exchange pounde for france. From the evidence supplied by this interchange of
cables, and from the information received & week ago from New York banks to the
effect that French authorised dealers would sell france against pounds, the
following assumption can be drawn: under present conditions. the French
authorities will not allow the French franc to strengthen against sterling
beyond a cross rate of 176.50 france per pound in the open market, but are
unwilling to place any check upon a depreciation of the franc vie-a-vis the
Found.
The other important currencies closed as follows:
Sviss france
.2242
Canadian dollars
21-3/8% discount
Beichsmarks
.4000
There vas little change in the yuan quotations received from Shanghai.
Against sterling. that currency improved 1/16d to 4-1/8d. In terms of dollars.
12 W/18 5-1/20, off 1/16¢.
The Federal Reserve Bank of New York reported the following shipments of gold:
$50,075,000 from Canada, representing two shipments from the Bank of Canada. Ottawa,
to the Federal Reserve Bank of New York for account of the Bank of
England. The disposition of these shipments is unknown at the present
time.
3,575,000 from Canada, shipped by the Bank of Canada, Ottawa, for its own account.
to the Federal Reserve Bank of New York, for sale to the U. S. Assay
Office.
560,000 from Peru, shipped by the Central Bank of Peru. for its own account
to the Chase National Bank, New York, for sale to the U. S. Assay Office.
235.000 from Hong Kong. representing two shipmente from the Chase Bank, Hong
Kong. to the Chase National Bank, San Francisco, for sale to the U. 8.
mint.
$54,745,000 Total
The State Department forwarded to us cables stating that the following gold
shipments would be made:
322,000 from England, representing two shipments by the Chase National Bank,
London. to its head office at New York.
198.000 from Hong Kong. shipped by the Chartered Bank of India. Australia and
China. Hong Kong. to the Bank of California N. A., San Francisco.
120.000 from Hong Kong. shipped by the National City Bank, Hong Kong. to the
American Trust Company, San Francisco.
42.000 from England, shipped by Sesual Montagu & Company, London, to the Bank
of London and South America, New York.
21,000 from England, shipped by Samuel Montage & Company, London. to the
Guaranty Trust Company, New York.
703,000 Total
Regraded Uclassified
103
3 -
of the above shipments, those being sent from England will be sold to the U. 8,
jossy Office at Sex York, and those coming from Hong Kong are for sale to the
U. 5. mint in San Francisco.
On the report of May 15 received from the Federal Reserve Bank of New York
giving the foreign exchange positions of banks and bankers in its district, the
total position of all currencies vas short the equivalent of $16,417,000, a de-
grease of $171,000 in the short position. The net changes in the positions are
as follows:
SHORT POSITION
SHORT POSITION
DECREASE IN
COUNTRY
MAY 8
MAY 15
SHORT POSITION
Ingland
$ 4,515,000
$4,929,000
$414,000 (Increase)
Europe
7,993,000
8,181,000
188,000 (Increase)
Canada
177,000 (Long)
641,000
(Long)
464,000
(Increase in
Long Position)
Latin America
567.000
173,000
394,000
Japan
3,480,000
3,441,000
39,000
Other Asia
209,000
342,000
133,000 (Increase)
All Others
1,000
8,000 (Long)
9,000 (Increase in
Long Position)
Total
$16,588,000
$16,417,000
$171,000
The Bombay gold price was alightly higher at $36.74.
The Bombay spot silver quotation worked out to the equivalent of 44.36#.
up 3/16#.
The London silver pricessoved off sharply today. The spot and forward
quotations vers 21-3/16d and 21-1/16d respectively, representing a decline of
1-3/8d in each case. A report from London stated that there was general specu-
Intive reselling, with an absence of buyers. The U. S. equivalents, calculated
at the open market rate for sterling, were 30.27 and 29.86#. On the basis of
the official sterling-doller rate, the spot price was equivalent to 38.52#.
We have not yet received any authoritative report that the British Government
requires silver exports to be paid for in certain foreign currencies or in
sterling obtained at the official rate.
Handy and Harman's settlement price for foreign silver vas unchanged at
35#. The Treasury's purchase price for foreign silver vas also unchanged at
35#.
There were no purchases of silver made by us today.
B.M.P.
CONFIDENTIAL
Regraded Uclassified
104
May 22, 1940
9:45 a.m.
H.M.Jr:
Hello.
Onerator: Go ahead.
H.M.Jr:
Hello. Hello.
Robert
Doughton:
Oh -- Secretary?
H.V.Jr:
How are you, Bob?
D:
All right, Henry. How are you getting along?
H.M.Ja:
Fine. Got any good stories to tell me like outside
insistence.
D:
How's that?
H.M.Jp:.
Have you got any more funny stories to tell me?
D:
I didn't get that?
H.Y.Jr:
You told me B. good funny story the last time you were
down here.
D:
Yeah. Well, I haven't got any more. I'm sorry you
weren't here the other day. I was down to our
State Convention when you called.
H.M.Jr:
Well, you didn't miss a thing.
D:
Jere went down though and told me about what was
said and done, but somebody 18 asking me every day,
every hour, about this tax situation. How soon are
you going to be able to tell us what you've got on
your card?
H.M.Jr:
Well, I tell you, I don't know anything more than
when Jere was down here.
D:
You don't?
H.M.Jr:
Not a thing. I read by the papers the President
doesn't want any millionaires. See?
D:
Yeah.
Regraded Uclassified
105
- 2 -
N.M.Jr:
So you and I are going to have to change our habits.
D:
Going to have to do -- how was that you said?
H.Y.Jr:
You and I are going to have to change our habits.
D:
In what respect?
H.M.Jr:
Well, he doesn't want any millionsires.
D:
What?
H.K.Jr:
He doesn't want any millionaires.
D:
on -- well, I -- that eliminates me completely.
E.V.Jr:
That's right.
D:
Yeah.
R.M.Jr:
Now, Bob, he hasn't telked to me
D:
Huh?
F.M.Jr:
The President hasn't said 8. thing since Friday. Not
a thing.
D:
He hasn't?
H.M.Jr:
Not a word.
D:
Well, we can't do anything. Some -- the members of
our Committee, you know, some of them are restless
and want to know and members of the House and every-
where are pulling on us. of course we can't tell --
we Just tell them that we can't make a move or do &
thing until we hear from down there.
W.M.Jr:
That's right. Tell them to keep their undershirts on.
D:
How's that?
H.M.Jr:
Tell them to keep their undershirt on.
D:
Well, we're trying to get them to keep their modesty
all they will.
E.M.Jr:
0. K.
D:
All right. Well, thank you.
Regraded Uclassified
106
- 3 -
H.M.Jr:
If I know anything I'll call you.
D:
All right. Thank you very much, Henry.
107
May 22, 1940
3:21 p.m.
H.M.Jr:
Hello.
Operator:
Secretary Perkins.
H.M.Jr:
Thank you. Hello.
Sec'y
Perkins:
Hello, Henry.
M.M.Jr:
Yes, Frances. I hope you didn't mind my using your
name Monday.
5:
Not at all. (Laughs) I want to say I think you
got -- you helped the President get out an awfully
good statement. It was just right, you know, about
this -- it's all right for the time being
On labor you mean.
P:
Yes. I think it's fine. What I was going to Bay
is that I heard -- you know, somebody brought me
secondhand information that there was going to be
8 conference today or tomorrow or the next day
between you and McReynolds and somebody or other
about recruiting labor supply.
E..M.Jr:
Well, that, McReynolds 18 doing in his capacity as
Administrative Assistant to the President.
é,
Yes.
H.M.Jr:
He's handling that himself.
?:
Well, 1e he going to have such a conference?
I don't know, Frances. I -- I Just know he's been
doing it at odd moments. Would you like to talk
to him.
P:
Yes, I would, because -- I mean really -- I mean,
he haen't talked to anybody here who knows any-
thing about it.
H.M.Jr:
Well, do you mind if I -- I could just switch you
over to him.
Regraded Uclassified
108
- 2 -
P:
I'd love to.
H.M.Jr:
Because he's handling it directly and I really
don't know much about what he's doing.
P:
All right. Fine.
H.M.Jr:
Just a second, please.
Operator:
Operator.
H.M.Jr:
Would you give the Secretary of Labor to talk
to McReynolds, please?
0:
Surely.
H.M.Jr:
Thank you.
Regraded Uclassified
JOHN EDGAR HOOVER
DIRECTOR
109
Federal Sureau of Investigation
United States Department of Justice
Mashington, D.C.
PERSONAL AND
CONFIDENTIAL
Way 22, 1940 readred return
The Honorable
Boyn
The Secretary of the Treasury
MYL
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith, as of
possible interest to you, a copy of a state-
ment dated May 21, 1940, which contains in-
formation obtained from a confidential source
with regard to the present status of Nor-
wegian and Danish commercial shipping.
Sincerely yours,
is stower
J John Edgar Hoover
Director
Inclosure
Regraded Uclassified
John EDGAR HOOVER
DONATIONS
Federal Bureau of Investigation
United States Department of Justice
Mashington, D.C.
May 22, 1940
MISMIRANDUM
Information has been obtained from a confidential saurce
to the affect that Norwagian Consule throughout the world have
ceased exercising control over Norwagian shipping because of DUB-
flisting orders received from Norway. It is reported that the
British Navy has assumed responsibility for all Norwagian ships.
Norwagian shipping is allegedly operating at the present time
under the direction of the British Admiralty. It is further 14-
parted that such control over Norwegian shipping was obtained by
the British Admiralty due to the fast that insurance sannet be
obtained anywhere by Norwagian ships unless it 10 definitely
agreed that the ships will operate under the sontrol of the
Dritish Admiralty, particularly with regard to which waters and
ports are to be visited by these ships during the course of 000-
mercial voyages. It is reported that Norwagian vessals are
presently prohibited from entering Spanish, Italian, or Chilean
ports. Additional information furnished by the above mentioned
source indicates that Norwagian ships are presently being
scised M prizes by the British Havy in the event they are
unable to exhibit letters from British Consuls in the ports
visited by them during the course of commercial voyages. It
is also stated that the owners of Norwagian ships now operating
under Japanese charters are being encouraged to break such
charters, in which connection the British Government is al-
legedly perfecting arrangements whereby the Norwagian owners
in question can plead "foree najoure."
Information obtained from the above mentioned -
fidential source is to the effect that Danish ships are
presently being treated by the British as ensay ressels, al-
though efforts are allegedly being expended by the British to
obtain control of Denieb shipping by promising no interference
with such vessels if adequate guarantees are unintained that
these vessels will not operate in the interests of Germany
and that no money realized through their cargoes or wagness
will reach Demark while that country 10 under Derman control.
Regraded Uclassified
112
ITALIAN STOCK PRICES
(Milan)
Dec. 31, 1927 = 100
Weekly
Daily*
1939
1940
1940
JULY
AVG
SEPT.
OCT.
NOV.
DEC
JAN,
APRIL
MAY
JUNE
FEB.
MAR.
PER
APR.
MAY
JUNE
JULY
6
13
20
27
4
11
18
25
e
15
22
DENT
PER
PER
PER
CENT
CENT
CENT
210
210
170
170
200
200
165
165
190
190
190
160
160
180
170
170
155
155
160
160
150
150
150
150
145
145
140
140
SHARES
SHARES
THOUSANDS
THOUSANDS
130
200
Volume
200
(30
120
120
100
100
110
JULY
110
o
o
AUG,
SEPT.
OCT.
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
6
13
20
27
4
11
18
25
1
a
15
22
1939
1940
APRIL
MAY
JUNE
1940
DAILY FOR LATEST WEEK ONLY
Office of the Sincerely, of the Treasury
at and
FO - 141 + 14
112
JI
GRAY
PARIS
Dated May 22, 1940
Rec'd 2 p.m.
Secretary of State
Washington
822, May 22, 6 p.m.
FOR THE TREASURY.
Cariguel has just informed a member of my
staff that hE will immediately advise him should the
Bank of France move from Paris.
COVE de Murville whom the Embassy telephoned
this afternoon in regard to the lease of a bank
building at Locustes for the Guaranty Trust stated
that the Finance Ministry had no intention of
leaving Paris. It is believed that his remarks
referred to the principal officers of the Ministry
inasmuch as certain of its personnel has already been
moved to the south.
BULLITT
DDM
313
REB
TELEGRAM SENT
GRAY
May 22, 1940
5 D. m.
AMERICAN CONSUL
MILAN (ITALY)
25
REference your despatch 677, May 4.
The Treasury Department has noted your statement that
1 daily index of 30 stocks is computed by a brokers'
service bureau and published in "Il Sole".
You are instructed to substitute the index mentioned
for the list of individual stock quotations now being
transmitted If such can be done without causing delay.
Otherwise, the existing procedure should be continued
without change.
In the event it is found possible to substitute the
index for the individual stock quotations it is requested
that the index bE cabled for May 4, May 11 and May IF,
1940 and daily thereafter.
The cost of the telegrams involved in this service
should bE charged to the Treasury Department.
HULL
(HF)
EA:HF :MEG
Regraded Uclassified
OHM "EDGAR HOOVER
114
DIRECTOR
Federal Furren of Investigation
United States Department of Justice
Washington, B. C.
May 22, 1940
PERSONAL AND CONFIDENTIAL
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
Supplementing my letter of May 6. 1940,
I am transmitting herewith a copy of an additional
memorandum dated May 21, 1940, pertaining to
neturnal
Dr. Gerhart Alois Westrick, which may be of some
interest to you.
Sincerely yours,
& stoover
Enclosure
115
May 21. 1940
MEMORANDUM
RE: DR. GERHART ALOIS WESTRICK,
with alias
The following telegrams were dispatched by Dr. Gerhart
Alois Westrick while he resided at the Plaza Hotel in New York
City recently.
March 12, 1940, sent to Westrick (probably Dr. Westrick's
wife), Neubabelsberg, Germany. "Fortunately arrived in my old
rooms at Plaza. Hope to see you very soon. Heartiest wishes."
March 14, 1940. sent to Signalwerks, Berlin, Germany.
"Hahnemann happy over information San Francisco, New York.
Meetings. Best wishes to all."
March 14, 1940, sent to Emundge, Berlin, Germany.
"Hoffman thanks for telegrams Sen Francisco, New York. Will
discuss everything with Stockton. Best wishes."
March 15, 1940, sent to Westcourt, Berlin, Germany.
(English). "Please advise immediately re Finkenhof at Washington
Mayflower Hotel. In great sorrow as two cables unanswered."
March 18, 1940, sent to Westrick, Neubabelsberg, Germany.
"Because of high cost of clothes please if no difficulty cutaway,
summer coat, raincoat. Fuehrerschein (could mean driver's certi-
ficate or literally leader's certificate). Have you company to
Italy. Best wishes."
March 20, 1940, sent to Westcourt, Berlin, Germany.
"Agreement fusion (not a German word) Allenburg (could be the
name of a person or place) imparted blank power of attorney
will be sent tomorrow. Please Easter flowers for Finkenhof.
With heartiest Easter greetings."
March 22, 1940, sent to Westcourt, Berlin, Germany.
"Heartiest thanks and return Easter telegrams. Settlements
properly understood."
Regraded Uclassified
116
ru # 1
March 22, 1940, sent to Westrick, Neubabelsberg, Germany,
"With heartiest Easter wishes. Thanks for telegram. Cable about
your difficulties and if they can be alleviated from here. On
April 12 Easter 026 hunt in the Plaza."
March 25, 1940, sent to Westcourt, Berlin, Germany.
"Do not send settlements. Please confirm."
March 25, 1940, sent to Westrick, Stallupoenerallee,
Berlin. Charlottenburg. "Assume that you also examined Hases
(very likely B name) purpose and have no considerations."
March 28, 1940, sent to Westrick, Neubabelsberg, Germany.
with innermost wishes and do not worry. Heartiest wishes."
March 31, 1940, sent to Westcourt, Berlin, Germany.
"Cable if trip started."
April 2, 1940, sent to Kodak, Berlin, Germany. "Heartiest
thanks for cable. Accept gladly. Conference Rochester first of
May contemplated. Cable if earlier conference required."
April 2, 1940, (English). sent to Stanelges, Berlin,
Germany. "Reciprocate heartiestly cable greetings. Would be
much obliged for copies of every letter to Brofos or Itt by
Clipper."
April 3, 1940, (English). sent to Westcourt, Berlin,
Germany. "Two number two aets Gillett of utmost importance. Please
approach Hewel."
April 3, 1940, (English). sent to Mrs. Sloan Colt.
Tuxedo Park, New York, "Thank you very much for your very kind
invitation for week end. I am sorry that I am busy this week
and and for the next one. I expect the arrival of my family with
the Rex, Thanking again for your kindness and hoping to see you
and Rr. Colt very soon."
April 5, 1940, sent to State Secretary Keppler, Behran
Street 39-A, Berlin, Germany. "Would be especially thankful if
ay associates Dr. Koener and Mr. Bahner would be welcome for by
chance Bahner appears to be of special importance."
April 5. 1940, sent to Westcourt, Berlin, Germany.
"Three desired installments will follow direct by cable, agreement
telephonically momentarily."
Regraded Uclassified
117
- 3 -
April 6, 1940, (English), sent to Westrick (probably Hrs.
getrick). S.S. Rex. "Most happy about cable Areviderci."
April 7. 1940, sent to Westcourt, Berlin, Germany. "Eric
afraid missing Allianz insurance payment, because their Mannix cable
of the first and twenty-first not answered."
The following telegrams were ment by Dr. Westrick since
to has been residing at the Carlyle Hotel. 35 West 76th Street,
law York City.
April 18, 1940. sent to Westcourt, Berlin, Germany. "Seven
new adiress without difficulty in the future name Webster Carlyle
Notal."
April 18, 1940, sent to Westcourt, Berlin, Germany.
"Acht cabled Erikas resignation explanation. Attempt before agree-
ment to get insurance against loss of Varauszahlung (this probably
should be Darauszahlung) payments. Signed Webster."
April 23, 1940, sent to Westcourt, Berlin, Germany. "Ten
yours four both yes (does not make sense but sentence 1E not complete)
Bric angered over cost of removal, Please (make) closer inquiry
reduction insurance premiums because of cost of removal."
April 29, 1940, sent to Signalwerk, Berlin, Hahnemann.
"Heartiest thanks to the committee for those friendly thoughts with
the hope of seeing each other soon again at the Kay Bowl (apparently
a special May punch) mnde according to Hahnemano's receipt."
April 22, 1940, sent to Vestcourt, Berlin, Germany.
"Eppecially thankful if Farn worked energatically. Please send
private address Professor Becker."
April 29, 1940, sent to Testcourt, Berlin, Germany.
"Hoernecke will call on Wangenheim May first."
April 29, 1940, sent to Boudotweck, Berlin, Germany.
"Sincere hearty well wishes to Gaugiplon. Wish him future success."
May 1, 1940, eent to Signalwerk, Berlin, Tempelhoff. Germany.
"Hahnemann please advise what total purchase "Sch" and "Ko" necessary.
Vill working cepital the limit thereby. Inquire."
May 1, 1940. sent to Westcourt, Berlin, Germany. "Dreisehn
(manga thirteen: probably misspelled for Reisend, which means charming.
Regraded Uclassified
- 4 -
118
inviting) enthusiastic over Boden lake trip. Properly handled letter
April 4. Will eventually hasten entry freight free. Business agree-
ments with Mann must include terms that he can control real estate
upon my return."
May 1, 1940, sent to Westcourt, Berlin, Germany. "Zwolf
advised Beck that Wagoner (may be Dr. Westrick's secretary inasmuch
as she is now living at the Carlyle Hotel under this name) purchased
Viessher three hundred thousand. Understood if Schippert agreeable.
Hasten balance remittance."
In connection with the foregoing telegrams, all of them
that were not marked "English" were sent in German and were trans-
lated as shown above.
In addition to the telegrams sent by Dr. Westrick, there
was another telegram sent by Baroness Wangenheim, Dr. Westrick's
secretary. from the Plaza Hotel. This telegram was sent to
Wangenheim, Joachim Friederich St. 50, Berlin, Halensee, Germany.
"Arrived well at Plaza. Everything fine and greetings. Signed
Minki."
Regraded Uclassified
119
STRICTLY CONFIDENTIAL
(Confidential)
PARAPHRASE
A strictly confidential telegram of May 22, 1940,
from the American Ambassador at Paris reads substantially
as follows:
On the morning of May 22, Mr. Chauvel of the French
Foreign Office was informed of the contents of the Depart-
ment's telegram of May 21 in regard to the transit of
goods through French Indochina to China. Chauvel expressed
great satisfaction at the approach by this Government as
it would assist him in the efforts which he has been mak-
ing to arrange for the immediate release of the trucks and
their shipment forward.
Regraded Uclassified
PARAPHRASE OF TELEGRAM SENT TO THE AMERICAN
EMBASSY, ROME, ON MAY 22, 1940
For Myron Taylor.
Referring to your no. 6, from Florence, and to
the Embassy's supplementary telegram:
The following 18 the reply from Treasury:
Treasury has made arrangements with the Federal
Reserve Bank of New York to hold the Vatican gold on
the same basis as the Federal Reserve Bank holds gold
for other foreign account. It will be necessary, of
course, that the Bank be furnished with appropriate in-
structions, signatures and similar documents by the
Vatican in order that the Bank will be able to handle
the gold account. The gold shipment which is desired
by the Vatican does not need to be held up in any way
by this, however.
HULL
EA :MSG
Regraded Uclassified
121
lw
GRAY
Paris
Dated May 22, 1940
Rec'd 2:35 p.m.
Secretary of State
Washington
819, May 23, 5 p.m.
FOR THE TREASURY.
The Bank of France has just announced that all
Belgian accounts will be blocked until further notice.
This prohibition is not applicable however to accounts
opened in the name of Belgian nationale who can prove
that their customary place of residence is in France
or that they have left territory occupied by the enemy.
The market broke this morning under the influence
of the frank explanation given by Reynaud to the Senate
last evening in regard to the seriousness of the present
military situation. The downward movement was checked
AS a CONSEQUENCE of Reynaud's radio address this after-
noon in which he quoted Weygand as saying that the war
would bE three quartere won if France could hold out for
the next month. Rentee dropped fractionally with the
Exception of the 1925 exchange guarantee issue which
lost
Regraded Uclassified
122
lw -2- No. 819, May 22, 5 p.m., from Paris
lost 3.80 france and the 1937 Exchange guarantee issue
which declined by 2.85 francs. French stocks WEIE
generally lower although part of the losses sustained
in this morning's session WETE regained in the After-
noon. Suez TOSE 450 points.
BULLITT
CSB
54(e)
FEDERAL RESERVE BANK
OF NEW YORK
223
OFFICE CORRESPONDENCE
DATE May 22, 1940
CONFIDENTIAL FILES
SUBJECT
TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF ERGLAND
Mr. Bolton called me at 11:20 o'clock s.m. today. I
referred to his recent cable regarding Nederlandsche Handel
Mastschappij East and the Banque Belge and told him that the Treasury
had issued licenses unfreesing both. In connection with licenses,
Mr. Bolton asked whether we had received an application from the
London house of Blydenstein. That firm, as he put it, was entirely
under the British Control and confidentially it would probably be
the bankers of the Dutch Government in London. From our point of
view, Bolton added, "they will be pretty well looked after." I
replied I had seen no application but would look it up.
I also referred to his recent cable about the routing
of confidential messagen and confirmed that we would act as suggested.
I added that we would use the Postal and the Western Union cable
companies in addition to the Imperial. I next mentioned Mr. Cattern's
cable to Mr. Sproul of May 18 about British Government assets in
this country, I wanted him to know, I said, that the Treasury in
Washington had not as yet heard from the British Embassy.
I asked what the status was of Norwagian, Dutch, Belgien
and Jonish accounts in the London market. Could it be said that they
were all blocked? That was not entirely true, Bolton replied, but
the situation was as follows:
(1) as regards Norwegian accounts, all out-
payments were subject to license but the
Trading with the Enemy Act allowed certain
transactions antered into before the
Regraded Uclassified
FEDERAL RESERVE BANK
124
OF NEW YORK
FFICE CORRESPONDENCE
DATE May 23, 1940.
CORFIDENTIAL FILES
SUBJECT: TELEPHONE CONVERSATION WITH
L, W. Knoke
BANK OF ENGLAND
8
invasion of Norway and certain payments
if conclusive evidence was furnished
that no enemy interest was involved.
(2) Danish funds were completely blocked.
(8) Dutch funds were in effect blocked for the
time being. The Trading with the Enemy
Branch (of the Treasury and the Board of
Trade) would allow certain payments to be
made for account of people in the United
Kingdom, for instance, the settlement of
pre-invasion debts, otherwise they were
blocked.
(4) As regards Belgium, they had only today
taken steps, that country now being more
than half occupied by the meny. Caution-
ary notes had been put out today asking
banks not to make payments without the
consent of the Bank of England.
In a general way, every payment from en account
of a resident in an occupied country was under
the control of the Tradingwith the Enemy Branch
who were the managers of the Trading with the
Enemy Act.
The only other thing he wanted to mention was that if
there was an emergency, such es an invasion, he might ask us to sell
large amount of gold for them "to give us disposable funds in case
we cannot contact you." I stated that I assumed that that would be
gold which was ready for prompt delivery and asked how he would give
the instructions. To that he said he did not know now but at any
rate they would be given in good time and would be properly authenticated,
Be idded, "I wanted to warn you of what I shall probably want to do
if the worst should happen."
LOKIKE
Regraded Uclassified
German News Broadcasts, May 15 - May 22, 1940
125
Reception excellent throughout.
The German radio news service during the last week con-
centrated naturally on the military events. Generally speaking
the reports given out by the German military command proved
reliable. They displayed great pride and satisfaction, but were
not really boastful. The semi-official communications were of
a different nature. The news distributed by the Air Ministry
with regards to successes against the R.A.F. and against the
British navy seem to be far off the truth. Mr. Goebbels' dictations
serve always political aims, but he has come more clearly
into the openduring the last two days. Before that the chief
items were supplied by the military command.
On the whole the German reports were straight victory
bulletins, hardly anything was said about German losses with
the exception of the admitted small losses in air-fighting
It is obvious, however, that the Germans are wondering about
the cost of victory. In special broadcasts, as given in the
so-called "Deutschland-Echo", German soldiers in Holland,
Belgium or France were interviewed about individual actions
and usually asked at the end about losses and casualties.
They stated always that German losses had been small or even
negligeable. To-night an officer telling the story of the
attack against a fortification in France added, however, that
in this particular case the losses of the French had been
small, too. I do not wish to give the impression that the
Germans when they will learn the German losses will do what
the British and French were not able to do, namely destroy
Regraded Uclassified
126
- 2 -
Hitlerism. The German people will probably forgive Hitler
everything if he achieves a smashing victory. But if Hitler
falls short of gaining this victory the losses in German lives
will weigh heavily against him. The Nazis seem to be aware of
this.
There were two major political objectives in the strategy
of the German radio. First, to show that the French and British
reports had been unreliable like in the days of the Norwegian
campaign. Second, to arouse suspicion against the unity of
GreatBritain and France. At the same moment, when the appoint-
ment of Weygand was announced Berlin offered the explanation.
Gamelin had advised the government to use the French army for
the protection of Paris and France, but Churchill had gone
to Paris and had insisted on the protection of the Channel ports
and England. Thus Churchill had forced the French to continue
the bloody battle for the benefit of England. This note has
been kept up ever since. To-night it was declared in contrast
that the British army was going home, Lord Gort had already
returned to London, and the British would leave the French alone
in the war on the continent. In London complete confusion
rules and in Paris it is even worse. The cabinett Reynaud is
not supported by the plain people etc.
Apparently 8 great deal of thought is given in Berlin to
the American attitude. There were no direct reports over the
German radio about the reactions of any particular country to
the events in Flanders and France. Only general remarks about
the overwhelming impression created by the German victories
everywhere could be found. In addition there were each time
specific quotations from Italian newspapers about the German
Regraded Uclassified
127
- 3 -
strategy. Italy, however, was the only exception to the general
rule. But in the special broadcasts to America more can be
found. Yesterday "Harry" reading his letter to the folks back
in Iowa had nothing but sheer praise for President Roosevelt's
preparedness program. The Germans had the fullest understanding
of such measures. They all thought very highly of the Monroe
Doctrine and hoped that the Americans would enforce the
doctrine against evrybody including England! In to-day's
news an article from the London News Chronicle was quoted
which had stated that France and England would have to fight
the battle all by themselves since not even a declaration of
war by the US could have any influence on the outcome of the
present battle.
It may perhaps be worthwhile mentioning that to-day the
Danish legation in Berlin moved into its new building con-
structed and given by the German government. The Danish
minister, Count Zahle, had at once unfurled the Dlag of Danmark
and Iceland. Iceland seems to be under German protection as
well? It is hard to say what other points Germany might raise
when Hitler could dictate peace. It has been pointed out by
the German radio already that the Nazis consider the present
events as the "Goetterdaemmerung" of the system of Versailles
"a peace made under the sign of democracy". They certainly
think of the peace settlement in terms of a total reorganisation
of Europe. To-night Berlin told of the "new continental system"
created by German arms, a"blockade of the blockaders reaching
from Trondhjem to Boulogne"; this was to become the nucleus of
a system which England would be unable to disturb for her own
selfish ends.
Regraded Uclassified
128
- 4 -
To-night an article was referred to that had appeared in
to-day's Voelkischer Beobachter. The article may well reflect
Mitler's ideas about the present German offensive. Any new
war, it was said, starts where the last left off. The last
war had ended with the German offensive in Spring 1918 planned
by Ludendorff. But this offensive had been launched four years
late when the German army was tired and its equipment outworn.
This mistake had been avoided this time, the drive had been
launched with fresh troops and first-class equipment. Whereas
the Ludendorff campaign had been stopped 25 miles off Amiens
the German army in 1940 had passed Amiens and reached the CERTY
coast.
However, I feel not sure that the German High Command is
certain to gain a complete victory. To-night it was stressed
that Franco-British resistance was stiffening and that the
Germans were meeting crack divisions. It was added that the
British army was particularly well equipped, too. Apparently
it is felt in German quarters that the German drive has reached
Its limits for the time being. But, of course they are still
trying to win their Cannae on the last gallon of gas they may
have left at the front. I myself do not venture a guess about
the outcome of the present battle. More precisely speaking, it
seems to me that the third battle has just started. After the
battle in Holland and Eastern Belgium, after the second battle
of the Meuse, the third battle of the Somme and Aisne has
just begun. The Germans are apparently not convinced yet that
they can turn this battle definitely aginst the Allies.
May 23, 1940. 2 a.m.
Hajo Holborn
Regraded Uclassified
129
Ankara, Turkey,
May 22, 1940.
No. 1459
Subject: Account of Hadelin Rothe, Counselor of the
Belgian Legation at Ankara, in the Banque
Selge pour 1'Etranger.
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
With reference to my telegram no. 54 of May 13.
B 7. n. 1940, regarding the accounts in the Guaranty
Trust Company of New York of the Belgian Minister to
Turkey, I have the honor to inform the Department that
I have now been approached by the Counselor of that
Legation, Monsieur Hadelin Rothe, in connection with
his account in the Panque Belge pour l'Etranger at 67
Tall Street, New York City.
Monsieur Rothe requests that an arrangement be made
dmilar to that for Monsieur Paternotte, whereby the
Banque Belge pour l'Etranger may be authorized to nake
payments on his order out of his checking account.
The account bears the number 2239N.
Regraded Uclassified
130
- 2 -
1/
For the Department's information a copy and trans-
2/
lation of Monsieur Rothe's letter of May 20, 1940, are
enclosed.
Respectfully yours,
J. V. A. MacMURRAY.
Enclosures:
1/ - Copy of letter dated May 20,
1940, from Monsieur Rothe;
2/ - Translation.
701.1/851.6
RN:rs:mej
COPY
Regraded Uclassified
131
Inclosure no. 2 to despatch no. 1459 dated May 22, 1940,
from the American Embassy at Ankara, Turkey.
TRANSLATION
BRIGIAN LEGATION
Ankara, May 20, 1940.
Mr. Ambassador:
Referring to our telephonic conversation of this
Liternoon, I take the liberty of requesting your good
offices with a view to obtaining - as it has been done
for itr. Paternotte - authorization to make free use,
should the necessity nrise, of sums deposited in check-
ing account No. 2239N at the BANQUE BELGE POUR L'ETRANGER
(Overseas) Ltd., 67. Mall Street, New York.
With warmest thanks for the kind intervention which
you may make for me in this connection, I take the
occasion, Mr. Ambassador, to renew to Your Excellency
the assurances of my very high consideration.
(Signed) H. Rothe
Counselor of the Belgian Legation.
Hie Sxcellency
Mr. J. Mackurray,
Ambassador of the United States of America
Ankara.
COPY
Regraded Uclassified
131-A
CONFIDENTIAL
PARAPHRASE OF TELEGRAM RECEIVED
From:
Lima
Dated:
May 22, 1940
Rec'd:
10:34 p.m., 10:45 p.m.,
and 10:42 p.m.
52, May 22, 5 p.m.
I met yesterday with the Minister of Foreign Affairs
and the Minister of Finance, at their request, to discuss
the deterioration of the exchange and trade situation
resulting in large part from trade and financial pressure
applied by the British. It was stated by the Finance
Winister: (a) that Great Britain W&B expected to block
surplus exchange for Peru within a few days: (b) that it
was expected that there might be such a depreciation in
the sol as & result of the disappearance of free sterling
exchange that it would be impossible to continue unrestricted
importation (he said that automobile importers had already
been requested to import Canadian-made instead of American
automobiles); (c) that import restrictions and exchange
control are opposed by Peru; and (d) that the Peruvian
Government hopes that it may be possible to develop some
plan for immediate assistance.
It was suggested by the Minister of Finance that a
credit of about $5,000,000 against about 160,000 bales of
the
Regraded Uclassified
131.B
-2-
the 1940 cotton orop--representing normal British purchases
of cotton during the remainder of 1940--would be the most
practical form of assistance. This operation, he said,
would involve the issuance of warrants by Peruvian banks to
producers or exporters in Peru for cotton stored in Peru,
which warrants would be discounted in the United States, the
proceeds therefrom being used to finance Peruvian purchases
in the United States.
The Minister of Finance believes that the continued
demand for Peruvian cotton despite the outcome of the war
would result in the credit's being self-liquidating. He
said that offers have been received from the Japanese for
the purchase of more Peruvian cotton on a barter basis, but
that Peru desires to avoid obligating itself to Japan any
further.
It was also observed by the Minister of Finance: (a)
that he believed it would be contrary to existing legisla-
tion to borrow against legal reserve gold and that it would
be necessary to withdraw needed exchange to borrow against
gold production, since most of the gold 18 exported; (b)
that he concedes that it would now be very useful to make
some token settlement of Peru's debt default in recognition
of this difficulty; (o) that although $600,000 18 as much
8.8 Peru can afford at present for its participation in the
Inter-Americen
Regraded Uclassified
13t-C
-3-
Inter-American Bank, it has nevertheless agreed in principle
to such participation; (d) that, in the circumstances, he
hopee it will be possible for the Governments of Peru and
the United States to cooperate in a plan which will include
comprehensive industrial and agricultural developments, on
a complementary basia, by the use in Peru of capital from
the United States, and that such & plan will lead to & per-
manent and profitable relationship; and (e) that the policy
of the Peruvian Government regarding possible restrictions
of imports to conserve foreign exchange, in the near future,
will be influenced as a result of this effort to obtain a.
credit of some kind from the United States.
A trade agreement was not mentioned. I explained to
the Minister of Finance the details of the organization of
the United States Government through which financial assist-
ance might be extended to foreign governments. Beltran was
to be informed of our conversation by the two Ministers.
The air-mail pouch leaving May 24 contains a memorandum by
the Winister of Finance.
In connection with a request for financial aid, I recog-
nize the weakened position of Peru and the rather poor
economic risk. Neverthelese, much greater importance must,
I believe, be attributed to considerations of policy and a
long-range program. There is reason to believe that our
action
Regraded Uclassified
131-D
-4-
action in this connection may have a decided influence on
the success or failure of the Prado administration, and I
believe the present Government is a good moral risk. It
may be assumed, however, that other similar requests for
assistance might follow this one.
The Department's observations or alternative sugges-
tions would be appreciated.
NORWEB
RA:RFW:GMB
132
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 22, 1940
Secretary Morgenthau
TO
Mr. Cochran
FROM
STRICTLY CONFIDENTIAL
Kr. Purcell of the S.E.C. Commission telephoned me at 10 o'clock this morn-
ing. Be said that the Chairman had asked him to bring up two pointe with the
Treasury, The first wes as to whether American securities had been destroyed
it the Netherlands or in Belgium under the arrangement which had been discussed
at the Secretary's residence when Mr. Frank was present, 1 gave Mr. Purcell
F. full story on this subject, with the conclusion that we were not aware that
any American securities had been destroyed in Europe so far under the arrange-
ment which had been discussed.
Secondly, Mr. Purcell asked that we provide, with the assistance of the
Federal Reserve if necessary, most recent information in regard to sales of se-
curities, say from May 10 on, made for Norwegian, Danish, Dutch or Belgian
account. The Commission wanted this information particularly because of the
statement made in Congress that German selling of the above-mentioned securi-
tiee had been responsible in part for the recent drop in the security market.
7 tale Mr. Purcell that I would discuss this matter with my colleagues who are
interested in the assets of the above-mentioned countries.
B.M.
Regraded Uclassified
133
EDA
GRAY
PARIS
Dated May 22, 1940
RECEIVED 12:02 p.m.
Secretary of State
Washington
807, May 22, 1 p.m. (SECTION ONE).
FOR THE TREASURY.
Barrett has just informed a member of my staff
that all the American banks intend to remain in Paris
until officially ordered to Evacuate by the Bank of
France. Meanwhile the banks are endeavoring to obtain
quarters in the South of France which could be used in
the event that evacuation orders are received.
All civil works both public and private which mre
financed by funds derived from loans or from recourse
to the financial market are suspended as from today
until the End of hostilities. This prohibition, of
course, does not affect the activities of companies
Engaged in filling national defense orders. In the
decree concerning this measure which was published
tn today's Journal Official it was stated that this
step had been taken "in order to reserve for the
national defense all resources and means of production
of the country."
KLP
BULLITT
134
HSM
GRAY
Paris
Dated May 22, 1940
Rec'd 9:15 a. m,
Secretary of State,
Washington.
807, May 23, 1 P. m. (SECTION TWO)
Another doores provides for the creation of a
special control service which will concern itself with
the enforcement of measures relating to the control of
prices, restrictions on consumption and declarations of
stocks of commodities. The service will bE attached to
the National Economy Section of the Finance Ministry.
Special control officers acting in liaison with prefect
will be appointed in each department.
The rationing of sugar will commence June 1, 1940,
Each individual consumer will be entitled to buy 750
grams of sugar per month.
An additional sun of 50 million francs has been
allocated for refugee relief purposes thereby bringing
the total thus far authorized for this work to 3,750
million francs. (END MESSAGE).
BULLITT
KLP
Regraded Uclassified
TREASURY DEPARTMENT
185
INTER-OFFICE COMMUNICATION
DATE May 22, 1940
Secretary Morgenthau
TO
STRICTLY CONFIDENTIAL
FROM
Mr. Cochran
Mr. Pinsent called on me at 12:45 today and left with me an unaigned
copy of a message which his Embassy had received on May 20 from London, and
which he understood had also been sent to the British Legation at Berne.
This meusage read &8 follows:
"Te think it desirable that United States Government should
!=:ediately instruct their consular officers in Switzerland to
give assistance B.B. regards witnessing liste of securities in same
eay as WSB done in Holland, Please take appropriate action."
Mr. Finsent thought it urgent that an instruction be sent to our Legation
along the same lines as he understood we had instructed our Legation in the
Zetzerlands and also our Embasey in France, I explained to Mr. Pingent that
né had sent thege instructions only upon the specific request of the Dutch
Winister and the French Financial Attache, respectively. I told him that we
sad not sent a message to Belgium since the Counselor of the British Embassy
le this city had felt that it was not necessary. I told him that WE could
not Indicate in any message to Berne that the Swiss had requested us to send
It, Mr. Pingent stated that he had been in contact with the Counselor of the
Swice Legation and that the latter was sympathetic with the idea of an in-
struction to Berne by no, but that he could not request it in the absence of
instructions from his own Government.
I told Pinsent that Secretary Morgenthau had, through Secretary Wallace,
Int the Swise Vinister know that we were at his service, and would be glad to
receive Swiee bankers from New York for consultation on the question of securi-
ties, If the Swies Minister might degire it, We had received no reaction from
the 3wiss Legation in the premises. I told Mr. Pinsent that I would draw up a
cablegram along the lines of the one which we had sent to The Hague and Paris,
for the information and appropriate guidance of our Minister if he should be
called on by the Swies to render similar services, but that I was not sure this
would be approved by the Treasury and State Department officials, He understood
fally the difficulties involved.
Messrs. Bell and Bernstein approved the draft of à cablegram in the premises.
the took the matter up with the State Department, before sending over any
draft. Mr. Livesey thought a matter of policy was involved which only Mr. Berle
could decide. Consequently I spoke with Mr. Berle last night at 7 o'clock. He
preferred that no message should be sent to Switwerland without some indication
from the Swine that they wanted our cooperation. He thought that Switzerland had
0.0 eyen chance of escaping invasion, and he was impressed by the apparent Swies
Regraded Uclassified
136
-2-
desire to avoid anything which could be interpreted as & fear that neighbors
might come in and steal their securities.
I told Mr. Bell this morning that I had not sent the draft cablegram to
the Department of State, after speaking with Mr. Berle. Mr. Bell let me
know that he had mentioned the matter to the Secretary this morning. Mr.
Bell agreed that we should take no further action at present. Consequently,
I as filing, attached to this memorandum, the draft cablegram which was never
sent,
Regraded Uclassified
We think it desirable that United 137
cutrom London ion
States Government should immediately instruct
their Consular Offices in Switzerland to give
and Berne
washing
assistance as regards witnessing lists of
Received 20/5.
securities in same was as was done in Holland.
Please take appropriate action.
:MAB
Dr 20
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 21, 1940
TO
Dr. Feis
STRICTLY CONFIDENTIAL
FROM
Mr. Cochran
will you kindly send the following cablegram:
"AMERICAN LEGATION BERNE:
For your confidential information and for your
appropriate guidance in the event that similar services may
be requested from you by Swine authorities, there is quoted
cablegram #404 which the Department gent to the American
Embassy at Paris, May 18, 1940:
The Financial Attache to the French Embaney has
informed the Treasury that his Government is considering ad-
vising its nationals to destroy American securities in their
possession where there is danger that such securities might
be lost or captured. In such cases the French Government will
probably advise the owners to accomplish the destruction in the
presence of an appropriate notary or Judicial officer and also
a responsible official of a bank, preferably one whose signature
is on file with the Federal Reserve Bank of New York, It is
further intended to have the owner and these witnesses certify
to the securities so destroyed, identifying them appropriately,
and to request authentication of the signature of the Government
officer by a concul of the United States, after which such cer-
tificates of destruction would be left with the consul to be
forwarded to the United States by pouch.
Consula are authorized to receive such certificates and to
authenticate the signatures of appropriate Government officials
who have witnessed such destruction. In cases of importance and
if circumstances permit they may. 1f requested witness such do-
struction and state that fact in the document. They may also
transmit such certificates by pouch. If requested execute in
triplicate retaining one copy. giving one copy to interested party
and forwarding original to Department. They should point out
that authentication and transmission of such a document does not
constitute an assurance that the destroyed securities will be
replaced, but only creates documentary evidence which might be
of assistance in case replacements is later sought. They should
Regraded Uclassified
139
-2-
To: Dr. Feis
also make it clear that while every care will be taken to ensure the
safe transmission and custody of such certificates the United States
Government and its officers accept no responsibility in that con-
nection.
Repeat foregoing to Consuls.
American freezing system would not be effective to block transfer
or sale of bearer obligations or certificates, as such securities
might appear in other markets. 18
140
JI
PLAIN
London
Dated May 22, 1940
Rec'd'1:43 p.m.
Secretary of State
Washington
1326, 22nd.
FOR TREASURY FRO.1 BUTTERWORTH.
The most far-reaching and drastic legislation
in British history is being passed through all stages
of both houses of Farliament today giving the British
Government power of complete control over all persons
and property.
In introducing the bill Mr. Attlee, the former
leader of the Labor Party and now the new Government's
leader in the House of Commons, said that the gravity
of the situation made it necessary for the British
Government to have these powers but they were not
requested in a spirit of panic. HOWEVER, his
Explanation of the use these powers would bE put to
in the near future was not in most instances procise.
For Example, hE said: "There may have to bE
control of the finances of the country and the banks;
it
Regraded Uclassified
141
-2-#1326, May 22, from London
it may bE done centrally; it may bE if conditions
require it it will have to bE done through regional
commissioners." HE was precise in that the EXCESS
profits tax is to be at the rate of 300 F arcent.
There will bE power to inspect premises and require
employers to produce their books. Some Establish-
ments may bE completely controlled immediately, others
later on and the controlled enterprises will "in
effect bE working on government sccount with wages
and profits under government control". HE indicated
that other estsblishments may be ordered to carry on
though perhaps at B loss and that they will receive
adequate remuneration. "The Essential thing is that
over 3 wide f1 Eld of industry (how wide one cannot
say at the moment) industry will bE carried on for the
community in effect and not for private profit." Mr.
Attlee also stated that the Minister of Labor will bE
given power to direct any person to perform any ser-
VICE required.
KENNEDY
KLP
Regraded Uclassified
142
JI
GRAY
Milan
Dated May 22, 1940
Rec'd 1:45 p.m.
Secretary of State
Washington
38, May 22, 6 p.m.
FOR TREASURY DEPARTMENT.
Today's prices as follows: 190; 325. 50;
505; not listed; 976; 193; 1610; 59. 25; 220,
Volume 114,375.
Increased buying in active trading Enable
most issues recover points lost during preceding
week. Market closed tomorrow.
SCHOLES
HTM
Regraded Uclassified
143
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 22, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Irigoyen telephoned me from Buenos Aires yesterday afternoon at 3
o'clock. He wanted the latest news of the European war, and also details
with regard to our commodity and stock markets. He stated that the
Buenos Aires market was principally governed by spot news from Europe, and
that Argentine Government bonds had been depressed to such an extent that
Government support had been necessary.
B.M.
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 22, 1940
TO SACROTARY Morgenthau
FROM Mr. Cochran
At 5 o'clock yesterday evening Mr. Livesey telephoned ne from the State
Department in regard to the receipt through Ambassador Phillips at Rome of
# messuge from Mr. Myron Taylor, concerning the desire of the Vatican to have
6211 ermarked in this country. Mr. Livesey stated that the State Department
earnly favored our rendering this service. A memorandum of the message from
in Phillips, which is highly confidential, WES being sent to me. Mr. Taylor
124 received the communication from the Vatican while at his home in Florence.
3+ la proceeding to Rome on Wednesday, May 22, and has an appointment at the
Vatican for May 23, so B. reply should leave Washington on May 22.
I telephoned the memorandum to Mr. Knoke at the Federal Reserve Bank in
Zev York last night and let him know that the State Department had indicated
16t interest in this service being arranged, and that the Secretary of the
Treasury, to whose attention I had brought the matter after I had consulted
our legal division, also favored our arranging the service. Mr. Knoke promised
to look into the matter at once.
At 9 o'clock this morning Mr. Knoke telephoned me in regard to the
Taticen gold. He said that the Federal Reserve Bank counsel thought that the
Federal Reserve Bank should not itself earmark the Vatican gold. The follow-
1:6 alternatives were suggested:
(1) The Federal Reserve Bank at New York might earmark
the gold as fiscal agent of the Treasury, ne in the Brazilian
case:
(2) The gold could be earmarked in the name of the B.I.S.,
although this would lead to publicity since the matter would
have to pass through the various officers of different nation-
alities operating the B.I.S.;
(3) The Vatican has an account with the National City
Bank and with J. P. Morgan and Company. Since they already have
this setup with private banks in New York, Knoke suggested that
we night let the gold be consigned to the Federal and then be
earmarked with the Federal in its vaults, in the name of the
National City Bank in an account marked "X". Another possibility
would be for the Treasury to give B. license to the National City
to hold this gold in its own vaults.
Regraded Uclassified
2
I indicated to Mr. Knoke our desire that the transaction should not be II
viscial one involving any one of the above alternatives. Our preference was
the ao ordinary earmarking account by the Federal itself. When Enoke raised
IM question ns to the status of Mr. Taylor and of the Apontolic Delegate in
Reshington, I called him back, after talking with Mr. Livesey of the State
Department and Mr. Bernstein of the Treasury.
I told Xr. Knoke that while the President did have Mr. Taylor as bie
medial representative in contact with the Vatican, there vas no exchange of
accredited Ambassadors and that the papal representative in Washington vas not
DD our diplomatic list. I told V.r. Knoke that the National City and Morgan
sut have had some satisfactory arrangement with respect to signatures, the
point upon which Mr. Knoke seemed chiefly concerned. I told him that we could
certainly undertake to obtain through diplomatic channels, whether it be
Anbassedor Phillips or Mr. Taylor, such facts and signatures as may be neces-
very to anfeguard the Federal in accepting and handling the account. I insisted
the necessity for speed, and told Mr. Knoke that if he could not work ont
D arrangement today with his officials and those of the Federal Reserve Board
is Veshington, we would have to send a cablegram to Rome that we were agreeable
that the gold should be shipped, and that an arrangement for taking care of it
you're be consummated as early as possible. Kr. Knoke said that in any event
the Sev York bank looked to the Government to prepare the draft of any menange
enswering the Vatican request for such assurances BB other states with deposits
in America are granted that the gold will be intact and free.
When I brought this matter to Kr. Bell's attention, after speaking with
In Enske. the Under Secretary called Governor Harrison at 11:20 this morning.
(% Bell explained to Mr. Harrison our interest in seeing the Vatican gold taken
CAPE of vithout too much legal contraversy and without any special arrangement
which night eventually attract publicity and add to the difficulties of this
maintaining a special representative such as Mr. Taylor. Mr. Bell
misined our willingness to write a letter to the Federal Reserve Bank at New
Tore indicating that we would be pleased if the Federal Reserve Bank would ac-
cept the earnark deposit, and that we would obtain through diplomatic channele
such signatures and other confirmation as might be required. While Mr. Harrison
favored one of the other alternatives, he said that he would try to meet our
request. In answer to Mr. Bell's inquiry as to whether the Governor would take
Ele matter up with the Board in Washington, or whether the Governor would do
this, the latter replied that he would attend to it.
It will be necessary, therefore, for us to send 8. letter to the Federal
reserve Bank at New York, and also to get $ massage to the State Department yet
Today for transmission to Rome,
13ml.
Regraded Uclassified
146
CABLE
PARIS
May 22, 6 p.m.
No. 822
FOR THE TREASURY.
Cariguel has just informed a member of my staff that be
will immediately advise him should the Bank of France move
from Paris.
Couve de Murville whom the Embassy telephoned this afternoon
in regard to the lease of a bank building at Locustes for the
Guaranty Trust stated that the Finance Ministry had no intention
of leaving Paris. It is believed that his remarks referred to
the principal officers of the Ministry inssmich as certain of
its personnel has already been moved to the south.
Telephoned from State Department.
May 22, 1940 - 4:35 p.m.
PA
Regraded Uclassified
147
5/22/40
WARNER, EDWARD P., engineer, editor; b. Pittsburgh, Pa., Nov. 9,
1894; 5. R.L. and Anne (Pearson) W.; B.A., Harvard, 1916, B.S., 1917;
B.S., Vass. Inst. Tech., 1917, M.S., 1919; m. Joan, d. of William H.
Potter, Feb. 13, 1931. Instructor in aeronautical engineering,
Massachusetts Institute Tech., 1917-18; aero. engr. U.S.A., 1918;
chief physicist Nat. Advisory Com. for Aeronautics, 1919-20; tech.
attache N.A.C.A. in Europe, 1920; asso. prof. aeronautical engineer-
injy Mass. Inst. Tech., 1920-24, professor since 1924 (non-res.
prof. since 1926); asst. sec. of Navy for aeronautics, 1926-29;
editor of Aviation, 1929-35; now cons. engr. Chmn. Vass. State Bd.
Aeronautics, 1922-25; ex-chun. Boston Municipal Air Bd.; chmn. sub-
com. on aeronautics branch of Business Advisory and Planning Council
for U.S. Dept. of Commerce; vice chmn. Federal Aviation Comm.,
1934-35; mem. Nat. Advisory Com. for Aeronautics, 1929-35. Fellow
Inst. Aero. Sciences, Royal Aeronautical Soc.; nem. Am. Physical
Soc., Soc. Naval Architects and Marine Engra., Am. Soc. Mech. Engrs.,
Soc. Automotive Engrs. (v.p. 1929; pres. 1930); pres. Am. Bur. of
Aircraft, 1930-35. Clubs: Cosmos (Washington, D.C.); Harvard
(New York). Author: Aerostatics, 1926; Airplane Design-Aerodynamica
(awarded medal of Aero Club de France as leading work in aviation of
year), 1927; Aviation Handbook, 1931; Airplane Design-Performance,
1936. Contor. many papers on scientific, industrial, and ednl. sub-
jects. Recipient of Wright medal, Soc. Automotive Engrs., 1932.
Appointed Member of Civil Aeronautics Authority, April, 1939.
Regraded Uclassified
148
May 22, 1940
Dr. Poin
Mr. Cochran
vill you kindly send a cablegram along the following lines:
"American Consul Nilam
Reference your Despatch 677 May "
The Treasury Department has noted your statement that
n. daily index of 30 stocks is computed by a brokers' service
buress and published is "Il Sole'.
Ten are instructed to substitute the index sentioned
for the list of individual stock quotations now being trans-
mitted if such can be done without causing delay. Othervise,
the existing procedure should be continued without change.
In the event it is found possible to substitute the
index for the individual stock quotations it is requested
that the Index becabled for May 4, May 11 and May 18, 1940
and daily thereafter.
The sest of the telegram involved in this service
should be charged to the Treasury Department."
(Init.) H. Me, Qa.
Unit) G.H.
IMC/rm 5/22/40
Regraded Uclassified
149
May 22, 1940
My dear Mr. Hoover:
I have your letter of May 21.
Thank you for giving no the
opportunity of reading this confi-
dential material which I shall guard
with the greatest of secreey.
Yours sincerely,
(Signed) H. Morgesthau, Jr.
Mr. J. Edgar Hoover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. c.
150
May 22, 1940
My dear Mr. Heaver:
I have your letter of May 21.
Thank you for giving me the
opportunity of reading this confi-
dential material which I shall guard
with the greatest of secrecy.
Yours sincerely,
(Regned) H. Morguthau, Jr.
Mr. J. Edgar Hoover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. c.
151
May 22, 1940
My dear Mr. Hoever:
I have your letter of May 21.
Thank you for giving - the
opportunity of reading this confi-
dential material which I shall guard
with the greatest of secreay.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Mr. J. Edgar Reover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. c.
Dearaded
JCHN EDGAR HOOVER
DIRECTOR
152
Federal Burrau of Investigation
United States Department of Justice
Washington, B. C.
May 21, 1940
Personal and Confidential
Nonorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
There has just come to my hand the
inclosed letter, the contents 0," which I thought
were 0.5 such interest to call to your personal
attention. As you note, the writer imposes a
great degree 0,0 secrecy upon this matter. I am
having an immedi ate inquiry made into the situa-
tion to ascertain what the facts are.
Sincerely yours,
C>
rdgon
Inclosure
Regraded Uclassified
Baltimore, Varyland,
50ym 20-1,40,
Mr.John "Dgar Poover,
Peñernl Bureau of Investigntion.
Washington,T
Tenr Str:
T resire to subrit to you for your information and action the following
information, which I request you bold in confidence untill such time as It 18
necessary to rever.1 same. Both the men whosenames and addresses, I am handing
you "1so myself have to work for f. living and should this information by
any chance reach our employers, we know only too well what our fate would
be.We have tried to plan some way in which we could take this matter up
with nome officeal or the organization but 88 they All Beem to belong to
the sure clique we have decided to place the matter in your hands.
T have been employed by the Glen .Martin, Company. Middle River, K. for
the past year during which time time T have had emple time to not only
observe for myself conditions 88 they exist throughout the plant but also
to hear other loyal employees discuss and condemn these conditions.
First let ne na, that almost ninety percent of all department heads
or sub-foremen, throughout the entire organization are either Cermans, by
birth or in symphthy with the Terman nation For the past several months they
have become more 101 in their outspoken praise of Hitler. and his hordes,
the supertority of all makes of German, makes of planes, artillery, fighting
ability and I'ving conditions. They have become more domineering each day
and due to the fort that every key position is now held by one of this type
they are now 1r. position to not only slow down production but to close the
plant entirely. The experimental department, Navy ship department in fact
every department is under the supervision of one or more Germans, some of
whom have difficulty in apenking the english language, While it is true
these men are Supposed to have citizenship papers, 1t doesnt take one long
to form en opinion after seeing them congregate each morning andpraise
the exploits of Pitler, and his war machine and plan what the next step
will be Just this rast week neverol of them were passing around a phamplet
called, Wake up America, and while I wesnt able to get hold of one of them
I was informed by others it was propegands advocating the persecution of
the Jews, end other non believers.
For instance, this past. winter I WELB transferred to the department
where the bombers for France were being assembled and it WED there that
my eyes were reclly opened. Having been an investigator for the Government,
At one time I naturally looked for things and really found them. Holes
punched in gas tanke and covered over with tape, rivetts drilled and filled
with soop and other things that would lead to delay.On one occasion I
removed the entire akin from 2. center wing and in the apars instead of
one eighth holes some had been enlarged to a quarter inch which weakened 1.
the aper.? took a number of these to the office and reported what I had
found and shortly after was transferred back to my old department.
Just this past week we started working on the new army bomber and on
one of the engine mount tubes I gound some 80 badly burned in welding I
NPB Able to brenk them off with my hande, yet each 18 supposed to carry AL
oad of twenty seven hundred pounds. This of course could have been acci-
dental, yet could have caused & number of deaths if not detected. It 16 true
the government inspectors are supposed to watch for these things yet I
see things every day that get by the inspectors.
Regraded Uclassified
Another thing that roused my suspicion WEB P case of a German fellow
who mdrks in my department and who by the way 1a a personal friend of the
then foreman of this department. This fellow always cade sketches of every
Bb that was handed him to work on.He suddenly quit and returned to Germany
where he remained for three or four months, then returned to this country
and 18 again working at the same Job.Anothee fellow who ie a well known C
communist, and secretary of the CIO union, and who threatened to call the
men out on strike, because of his attitude was taken off bench work and
eppointed an inspector a position which he now holds.
I could P,O for hours mentioning things that are hargening there every
day but for the time will conclude.I an at your service at any time or
place as are the men whose names I hand you and we will be only too glad
to assist you in any way possible in eliminating what 18 sure to Lecome
- serious situation later on if let E0.
Any of the men whose names appear below can and will tell you a story
that I am sure will prove worth your investigation.
Thanking you again for any interest you may take 1: the above matter
and again requesting that this be held In, confidence, remain,
thile ours,
George W. Vanden.
3243-Baltimore, St.
Baltimore, Ed.
Names.
Length of service.
Address.
red W.Burkmar.
Five years.
100- So. "D" St.
Glen Burnie, Md.
Frank Reiss.
Twelye years.
4031-havon St.
Balt.Ed.
Joseph Chester.
Three years.
1011- Ashburton St.
Balt.Md.
A.G.Aldrich.
Seven years.
11- Broadship Road.
Dundalk MD.
John J.Kiel.
Eleven years.
2312- Longwood St.
Balt. Md.
Charles C.Eckert,
Six years.
plo-:N.Edgewood St.
Balt. Md.
Charles J.Dews.
Eight years.
3/33-Wilkens Ave.
Balt.Md.
P.3.I am positive there is something worth while to be uncovered here
and once it 1a started there are plenty more men who will be more
sheets and you will readilly see that the old Adage of, The devii
then glad to give you further information.Just check the overtime
takes care of his own applies here one hundred percent.
Ged.
Regraded Uclassified
MAY 2 2 1940
ny lear Mr. President:
You will recall early in December you publicly ennoused
une the payment 10 be reseived from Mainad on December 15.
19% in the anount of 2234,693. m account of its indebted=
pete to the United states would be hold in europense and that
you would recommend to the Congress much - be used for
the benefit of the Fimish people. following your
Date and at your direction. I instructed the Transure of the
"hisad sre " to hold the - received on December 15. 1939
Crán Pinlend in a suspense account, vithout formal covering
into the Transury. Upon receipt of the funds from the Finnish
Vinlater I nate reference to year instructions to hold the prom
not in n sumpense account pending your recommendation to the
Congress.
In your letters of January 16, 1940. to the President of
the Senate and the Depender or the House of Hopresentatives
reference VAS made to your directions to hold the Finnish
mon ber 15. 1939 promote in a separate newroat meading make
nation, if any. M the Congrees might desire to take with
perport to 11, and after briefly revieving the Minnish siture
tien and Fialend's need for assistance, it were suggested that
the most reasonable approach would be action by the Googress
authorizing BA increase in the revolving new of the Export=
Import lisnk to enable it to finance exportation of agrioul=
burd surpluses and nanufactured products, not including Dr
Tenente of WITH AS & result of this recomemistion the lend-
loss powers of the export=Import Senk were increased.
Movemer. no nation has been taken by the Congress vith
most to the amount received from Finland on December 1% 1939
additional amounts which are due contentally as the ralief
which VAI insurred in 1919 rend 1920. In the overs
Regraded Uclassified
156
or - I
you decire to take further action with respect to this matter
I shall be give to propare the draft of legislation
and letters of recommendation the your signature to the Presi-
dont of the and the Speaker of the Homes.
20 would be approciated if you world inticate whether you
desire to:
1. Take no further notion at this times
2. Recommend the return to Finland of the
payment made a December 15th Smits w
3. Recommend the return of the December 15th
payment and the postpanement of all payments
- from Finland within the next two or three
I
Faithfully,
(Signed) H. Morgesthau, Jr.
the President,
the white Kease.
s Information i
M Measenger 5 3 pm
File to Mr. Thempson
-
VIRIVI
Magr 20, 1940,
Regraded Uclassified
157
CONFIDENTIAL
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 22, 1940
Secretary Morgenthau
to
FROM
Mr. Haas MA
Subject:
Repliés to telegrame regarding sales and new orders
for the week ending May 18.
To date, reports have been received from 21 reporting
companies. of these, 14 report no significant change in sales
turing the week ended May 18 as compared with the previous
week, 2 report a perceptible decline in sales, 3 report a sub-
stantial increase, and 2 will send figures later when compiled.
Quoting those reporting B. decline in sales:
Sherwin-Williame Co.: "Current indications are that
business 18 slowing off very perceptibly, in spite
of the fact that this should be the peak of our
season."
American Locomotive Co.: "Re telegram. Orders received
last week show sharp decline from level prevailing
during previous two months period. Inquiries and
quotations requested show no material change."
Those reporting a substantial increase in aales above
those of recent weeks are:
U.S. Steel Corp.: In the week ended May 16, new orders
increased to 236,000 tons (70 per cent of capacity)
the higheet since last November, which compares with
226,000 tons (67 per cent) in the previous week,
American Woolen Co.: Sales last week increased to
$981,000, the highest in five weeke, and more than
double the previous week's figure. Increased sales
of knitting yarns were responsible for the upturn.
General Electric Co.: Sales last week rose to
88,900,000 from $7,900,000 the previous week,
reaching the highest figure since early February.
Regraded Uclassified
158
Secretary Morgenthau - 2
The following companies reported no significant change:
International Harvester Co.: "No significant change
in new business last week over previous month's
report. Reaction to market 18 usually not immediate
in our business, but 8. continuation of downward trend
of commodity prices will have an adverse effect on
consumer sales."
Westinghouse Electric Co.: "Your telegram twentieth.
No significant increase or decrease in new business
last week. May business expected elightly less than
April."
Texas Co.: "Reference telegram May 20. Sales last
week slightly off but no significant change. Our
domestic gasoline sales first 15 days May 1940
2,033,177 barrels, compared with 2,046,593 for same
period last year, decrease 13,416 or .66 percent."
American Brake Shoe and Foundry Co.: "In reply to your
telegram of May 20th regarding our business during
the last week, I beg to advise there has been no
change from preceding weeks. It has been running
along on about an even keel for some time."
Air Reduction Co.: Sales of $464,000 during the week
ended May 14 remained practically unchanged from the
figure of $460,000 for the previous week.
American Car and Foundry Co.: "Reports received to
date do not indicate any significant increase or
decrease in new business of our Company last week.
To my thinking there is nothing in this situation
to require comment."
Baldwin Locomotive Works: "Replying to your telegram,
there was no noticeable increase or decrease in new
business last week, nor 80 far this week."
Standard Oil Company of New Jersey: Domestic sales,
at the moment, are entirely normal. "Foreign ship-
ments show 8. falling off, but this was also the case
over the past five or six months and we do not place
any new significance on the situation 80 far as
exports are concerned."
159
Secretary Morgenthau - 3
Cannon Mills Co.: Bales last week showed no signifi-
cant change, totalling $310,000, versus $342,000 in
the previous week and $196,000 two weeks previous.
Pacific Mills: Sales last week showed no more than nor-
mal fluctuation, totalling $652,000, versus $663,000
in the previous week and $813,000 two weeks previous.
J. C. Penney Co.: "We have not received figures recent
enough to reply in a definite way to the wire of
May 20
However, from what information 18 avail-
able it appears that no significant increase or de-
crease wae operative for that period. Our business
appears to be developing at about the same pace 6.6
experienced for the last thirty days."
American Steel Foundries: "There has been no appreci-
able decrease or increase in our business during the
past week."
Sears, Roebuck and Co.: "We have been watching very
closely the effect of the present disturbance on our
business. Our feeling 18, that our business 1s con-
tinuing at about the same rate as before the present
disturbance in the stock and commodity markete. This
18 true of both our retail and mail order business.
There has been no significant increase or decrease in
the sales of our company in the last week."
International Business Machines Corp. "Our reports do
not indicate any significant increase or decrease in
new business of this company during the last week.
However, during the past two weeks the volume of new
orders received by this company shows B. tendency to
fall off as compared with the two weeks prior to that
time, although the new orders received in the past
two weeks show an increase over the new orders re-
ceived in the same two weeks last year."
Reports were aleo received from two companies that will
send figures later:
Johns-Manville Corp. will send us weekly sales figures
when compiled on Thursday.
Regraded Uclassified
160
Secretary Morgenthau - 4
General Motors Corp. will send figures at the end of
the week covering retail sales during the second
period of May, together with their comments. "Based
on the number of new cars financed by General Motors
Acceptance Corporation in the week ended May 20th
there 1s no indication of any significant change in
volume. However, due to a lag in the financing fig-
ures, this probably reflects in part retail sales
during the first ten days of May."
5-22-40
161
MEAD, GEORGE JACKSON, aeronautic engr.; b. Everett, Mass., Dec. 27,
1891; S. Ceorge Nathaniel Plumber and Jenny (Lehman) M.; prep. edn., St.
George's Sch., Newport, R. I., and Choate Sch., Wallingford, Conn.;
student Vass. Inst. Tech., 1911-15; D. E. Cary Hoge, May 18, 1921;
children - George Nathaniel Jackson, Mary Randolph, Peyton E., Charles
Cary. Exptl. engr., Sterling Engine Co., Buffalo, N. Y., 1916, Wright
Martin Aircraft Corpn., 1916-19; engr. in charge power plant labs.,
U.S. Air Service, Dayton, 0., 1919; chief engr. Wright Aeronautical
Corph., 1920-25; v.p. Pratt & Whitney Aircraft Co., 1925-30; Vapa
non. exec. con. and clmn. tech. advisory com. United Aircraft &
Transport Corph., 1930-34; cons. engr. United Aircraft Corpn., 1934-35,
v.p. and dir. since 1935. Mem. Am. Soc. V.E., Soc. Automotive
Engre. Instn. Automobile Engrs., Inst. of Aeronautical Sciences,
Royal Aeronautical Soc. Republican. Episcopalian. Clubs: Hangar,
Engin ers (New York); Hartford, Hartford Golf, Farmington Country,
182
Kap 22, 1940
Dr. Peis
Mr. Cestram
STRICTLY CONFIDENTIAL
The following 10 reggested as a reply to the strictly confidential
nossage received from Mr. Hyron Tayler, which vsa the subject of - memerander
transmitted free the Department of State to the Treasury Department # the
evening of May 21:
"VZ HAVE ARRANGED VITE FEDERAL RESERVE BARK OF nov TORE
TO HOLD VATICAN GOLD ON SAME BASIS AS BANK HOLDS GOLD FOR OTHER
FOREIGN ACCOUNT. OF COURSE IN ORDER FOR THE BANK TO » AND TO
HANDLE THE GOLD ACCOUNT 19 WILL 33 NECESSARY FOR THE RANK TO If
FURNISHED APPROPRIATE INSTRUCTIONS, SIGNATURES AND OTHER DOCU-
MANTS FROM THE VATICAN. THIS HERD NOT IN ANY WAY HOLD UP AST
COLD SHIPMENT DESIRED BY THE VATICAN."
sur
UMC:4m
Regraded Uclassified
163
May 22, 1940
Dr. Feis
Mr. Cochran
will you kindly send the fellowing cablegram:
"AMERICAN EMBASSY LONDON.
For the Anbaccador from the Secretary of the Treasury.
Dear J001
The reason I had not seen your 1299 before our con-
versation was that the monango had boen received is Washington
without any indication therein that it was intended for me."
10.00
Regraded Uclassified
164
ITALIAN STOCK PRICES
(Milan)
Dec. 31, 1027 = 100
Daily
*
Weekly
1940
1939
1940
APRIL
MAY
JUNE
JULY
AUS
SEPT
OCT
NOV
DEC
JAN.
FEB.
MAR.
APR.
MAY
JUNE
JULY
6
13
20
27
4
Il
18
25
6
15
22
YPEST
um
PER
PER
PER
PER
CENT
CENT
CENT
CENT
210
210
170
170
200
200
165
165
190
190
160
160
180
180
155
170
170
155
150
160
160
150
150
150
145
145
SHARES
140
140
SHARES
THOUSANDS
THOUSANDS
200
Volume
200
130
130
100
100
120
120
o
110
110
o
11
18
25
:
e
15
22
JULY
AVG.
SEPT.
OCT,
NOV.
DEC.
JAN.
FED.
MAR.
APR.
MAY
JUNE
JULY
6
13
20
27
4
1940
APRIL
MAY
JUNE
1939
1940
- DAILY FOR LATEST WEEK ONLY
Other of the Security of the Treasury
FO - 141 - TA
(
- of - and
20
Regraded Uclassified
165
No. 313
AMERICAN CONSULATE GENERAL
Rangoon, Bursa, May 22, 1940
STRICTLY CONFIDENTIAL
Subject: War materiale for China; statistics of imports
at Rangoon re-exported to China during the
period from April 1 to April 15, 1940.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to transmit herewith statistics of the
transit shipments of war supplies for China made during the
period April 1 to April 15, 1940.
The supplies reexported to China from Rangoon in the per-
iod stated were valued at Re. 1,932.909 or at the rate of ex-
change now prevailing (one rupee equals $0.30). $579,872.
The total value of all war supplies for China shipped
through Burma up to April 15, 1940, was Rs. 117,374,722 or ap-
proximately $40,518,907.
Respectfully yours,
V. Leonard Parker
American Vice Consul
In quintuplicate to the Department
800
JO
Regraded Uclassified
- 2 -
86
WAR MATERIALS FOR CHINA
Statistics of imports at Rangoon re-exported to China
during the period April 1 to April 15, 1940.
Type of
Number of
Description
Country
Value in
Naterial
Packages
and Quantity
of Origen
Rupees
Emplosives 1,508,644
TNT
1,200,000 cases
United States
879,556
Tetryl
88,184 cases
271,582
Smokeless
powder
220,460 cases
536,220
(
Aircraft
62
Parts
8 cases
Hongkong
150,649
parts
Parte
39 boxes)
Hongkong
82,092
9 druns)
Parts
1 box
United States
3,760
Parts
1 case
United States
1,257
Radio transmitter 2 cases
United States
5,071
Cotton fabric
2 boxes
United States
2,722
Rs. 1,932,909
Regraded Uclassified
167
- 3 -
WAR MATERIALS FOR CHINA
Statistics of imports at Rangoon re-exported to China during the period from April 1
to April 15, 1940
RECAPITULATION
VALUES BY COUNTRIES OF ORIGEN
Country of
Value in
Value in
Origen
Rupees
U.S. Dollars
.
United States
1,700,168
510,050
¿. Hongkong
232,741
69,822
1,932,909
579.872
VALUES BY TYPES OF MATERIAL
Type of
Unit
Quantity
Value in
Value in
Material
Rupees
U. S. Dollars
1. Explosives
case
1,508,644
1,687,358
506,207
2. Aircraft parts
package
62
245,551
73,665
1,932,909
579.872
COPY
168
American Foreign Service, Hanoi, Indochina,
May 22, 1940.
No. 91
Subject: Release of Trucks held at Haiphong.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to By despatch no. 88
of May 17, 1940, in regard to the measure taken by the
Government General of Indochina to prohibit the export-
ation of trucke from Indochina, particularly to that
paragraph (page 4) dealing with the transshipment to
Rangoon of trucks in boxes. The Department will recall
that the boxes now at Haiphong contain only parts of
trucks. the other parts having already been transshipped
to Rangoon.
Under date of May 18, 1940. the Secretary General
of the Government General of Indochina, Mr. Delsalle,
informed the Chinese Consul General that the boxes
(234 in all) containing parts of trucke may be trans-
shipped to Rangoon as originally planned. At the same
time, the circulation of the remaining trucks within
Indochina limits was authorized, thus permitting cargo
to be carried from Haiphong, or from the railhead at
Nacham, to the frontier, where such cargo can be trans-
shipped into trucks entering from China.
The
Regraded Uclassified
169
- 2 -
The situation therefore appears to have become
considerably easier, both in so far as the "blocking"
of trucks (whether assembled or in boxes) and the flow
of transit cargo over the Caobang road are concerned.
From the tone of Mr. Delsalle's letter to the Chinese
Consul General and from his conversation with me, I
believe that, if events in Europe evidence a. lessening
gravity, there will be a relaxing of the incontestable
tension in Indochina with a corresponding relaxing of
the restriction upon the exportation of trucks.
Respectfully yours,
For the Consul at Saigon,
Charles S. Reed II,
American Consul.
In triplicate to the Department (By air mail)
Copies to the Embasay, Chungking and Peiping
Copies to Consulates General, Hongkong and Shanghai
Copies to Consulates, Kunming and Saigon
815.4/800
CSR:cer
COPY
170
May 23, 1940
9:03 a.m.
H.M.Jr:
Hello.
Operator:
Secretary Woodring.
H.M.Jr:
Thank you.
0:
Go ahead.
H.M.Jr:
Hello. Hello. Hello.
0:
Well, I thought he was on there.
H.M.Jr:
All right.
0:
I'll ring him right back.
H.M.Jr:
All right. Hello.
Harry
Woodring:
Yes.
H.M.Jr:
Harry
W:
Yes, Henry.
H.M.Jr:
Good morning.
V:
Good morning.
H.M.Jr:
Harry
W:
Yesh.
H.M.Jr:
.....when I was with the President yesterday he's
asked me to call in the machine tool industry.
W:
A little louder, I can't hear you.
H.M.Jr:
He's asked me to call in the machine tool industry.
W:
Yes.
H.M.Jr:
And I would like, if you would, to detail some
officer who knows machine tools......
W:
Yes.
171
- 2 -
H.M.Jr:
that could work with me on this.
W:
Yes.
H.V.Jr:
If it's agreeable to you, and if he could come to
my office at 2:30.
V:
Today?
H.M.Jr:
Today.
Y:
All right. Now, 1s there any information that we
could in the meantime prepare for you and send over
to you -- a memorandum or anything that would help
you?
H.M.Jr:
No, just -- first, what are the Army's own needs, you
see?
M:
Yes.
H.M.Jr:
In that field, and what information have they as to
the needs particularly 8.8 it affects aviation. See?
W:
I see.
H.M.Jr:
In other words BO we can take care of the Army and
Navy first.
So
W:
That's right. I'll do that, at 2:30.
H.M.Jr:
Yeah, and I'm asking the Navy to do the same thing.
W:
The same thing.
H.M.Jr:
Yeah.
V:
All right, Henry, we'll be there -- we'll have him
there at 2:30 at your office?
H.M.Jr:
If you please,
W:
All right.
H.M.Jr:
Thank you.
W:
Goodbye.
172
May 23, 1940
9:05 a.m.
H.M.Jr:
Hello.
Operator:
Secretary Edison can be reached at the hotel.
He'll be in his office in an hour.
H.M.Jr:
Oh: Well, let me talk to him at his hotel.
0:
All right.
H.M.Jr:
Hello.
0:
Yes, sir.
H.M.Jr:
And tell Phil Young to be in my outer office in
about three minutes.
0:
Right.
9:06 a.m.
H.M.Jr:
Hello.
0:
Secretary Edison.
H.V.Jr:
Thank you.
0:
Go ahead.
H.M.Jr:
Hello.
Charles
Edison:
Good morning, sir.
H.M.Jr:
Good morning, Governor. How are you?
E:
(Laughs) A little premature -- a little premature.
H.M.Jr:
Well, I like to be amongst the first.
E:
(Laughs) O. K.
E.M.Jr:
Charlie
E:
Yeah.
H.M.Jr:
the President asked me, in connection with what
I'm doing for him on aviation, to call in the machine
tool industry A6 well. Hello?
- 2 -
173
E:
Yes.
H.M.Jr:
And I wondered if you couldn't detail some officer
who knows machine tools and knows what the Navy
needs
E:
Yes, sir.
H.M.Jr:
to work with me on this thing.
E:
Yes, I will. We've got a very good one.
H.M.Jr:
And could he be over here at 2:30 at my office?
E:
2:30 your office.
H.M.Jr:
Yeah. Somebody who knows what the Navy needs.
E:
All right, sir. I'll have him there.
H.M.Jr:
Fine. How are you otherwise?
E:
Oh, I'm pretty good, pretty good.
H.M.Jr:
I see. You're not -- you don't want any jobs up in
Detroit -- I mean in New Jersey.
E:
Any jobs?
H.M.Jr:
Well, all politicians want jobs.
E:
(Laughs) Oh, I want a -- I want the right to hand
out a few, that's all.
H.M.Jr:
O. K. All right. All right, Charlie.
E:
All right, I'll have him there, Henry, and I think
-- we made quite a study on that machine tool thing
and we've gotten up a very fine book on it, a
catalog of where they are, the kind they are,
specifications, what's needed, and all that.
H.M.Jr:
Good.
E:
I think it would be very helpful.
H.M.Jr:
Thank you BO much.
E:
All right. Goodbye.
H.M.Jr:
Goodbye.
174
RE AIR EXPANSION PROGRAM
May 23, 1940
9:15 B.M.
present:
Mr. Mead
Mr. Olley
Mr. Ballantyne
Mr. Young
Did you get your instructions from England?
0120y:
No.
That helps, doesn't it?
Cleey:
I will take your word for it.
HAMPY:
Well, I can tell you - I can't lay my hands
on the cable, but Ambassador Kennedy saw Lord
Beaverbrook with the president of your company
and Lord Beaverbrook was supposed to have seen
the Prime Minister yesterday and I don't know
the name of the president of your company, but
he said the president of Rolls Royce - he saw
him with Lord Beaverbrook and then Lord Beaver-
brook asked for an appointment with the Minister.
I spoke to Mr. Kennedy and he said that it was
all fixed and he said that they want Olley to
come to see us and they said he ought to get
the cable shortly, but he said, "Tell him to
take our word for it."
Olley:
0. K. I would do that, anyway.
H.P.Jr:
Now, here is what we would like, you see. What
I have asked for is, if the British Government
would license the United States Government to
manufacture this engine. I want it between
Governments and then we would assign it to
whoever we thought could do the job best, con-
sulting the Rolls Royce, but - in other words,
we want to keep it between Governments and we,
the Government, want the license on that thing
and that is the way I put it up to him.
Now, let me ask you this: We have got these
two engines of yours which are supposed to
have gone on the test block yesterday.
Olley:
Yes.
Regraded Uclassified
175
- 2 -
H.M.Jr:
Do you know what models those are?
olley:
Those are Merlin 10, two-speed super charger.
H.M.Jr:
Is that the latest?
olley:
There is a Merlin 20, about which they have
sent me no details. The Merlin 10 1s the latest
production model. From what I understand, the
Merlin 20 is more or less experimental.
H.M.Jr:
Well now, the Merlin 10, how much horsepower is
that, what is that rated at?
Olley:
They don't take me into their confidence very
much, but 1200 horsepower at twelve thousand feet.
Mead:
That sounds conservative enough.
Olley:
That is the latest information I have.
H.M.Jr:
Did you see the Bristol man when he was over here?
Olley:
Whitehead, you mean?
Head:
Fedden.
Olley:
No, I haven't seen Fedden.
H.M.Jr:
Well, the point that you (Mead) want to ask is -
I mean, is this B. sufficiently recent model for
us to go in production on 1f everything went
along all right?
Head:
Well, I think we want at least the most proven
one they have, if we want to get going immediately.
H.M.Jr:
That is right.
Mead:
So I should think 10 would be the one.
Clley:
Yes, I think 10 would be the one.
H.M.Jr:
Now, the only bad news of this picture - and I
am not going to take it - they won't send anybody
over. Is that necessary, though? Should I put
176
- 3 -
up e b1g fight that we must have somebody or
are you that person?
olley:
I am not really so terribly competent B.S you
might think I was by being stuck over here,
because I have only just been snatched back
from General Motors. I have been with them
for nine years.
K.M.Jr:
Where?
Olley:
First of all in Detroit and then two years in
Foxhall in England.
R.M.Jr:
Are you an engineer?
Olley:
Yes.
Mead:
I might add he is very modest.
H.H.Jr:
I see.
Olley:
No, I have that reputation, but it is wrong.
Head:
But I don't think we could manage this b1g a
program with just one man. It would mean more.
Olley:
No.
Mead:
Even if they were willing to let us have your
motor.
U.N.Jr:
Well, Mr. Mead, isn't this the thing, before we
get into the thing, as long as Mr. Olley has
nothing from his company or his government, I
suppose we might just as well go on out to
Dayton and take a look at the engine.
Mead:
Well, I think after we are through here, if Mr.
Olley has time, we could clear away a good deal
of the questions we need to get answered of
a general character, in so far as he is willing
and able to answer them. It might help us a
good deal, For instance, you spoke of two
runs. Well, 1f we got a. complete set and
questions of that kind perhaps you would be
willing to help us on.
Regraded Uclassified
177
- 4 -
Alley:
I will help you every possible way I can.
Why I say I am not quite sure how competent
I am is that I haven't worked for Rolls Royce
recently. As you know, I helped design the
old engine, the old Eagle engine of the last
war R.S. Royce's personal draftsman on that
stuff, and after that I was ten years with
Rolls Royce at Springfield in the American
plant building the motor cars, and after that
I was nine years with Ceneral Motors putting
the independent suspension on it, doing the
Independent suspension Job, and then I have
just been recently snatched back to aircraft
engines, so I am not really up to date on
aircraft engines. I have hed a rather inten-
sive training on this engine, because we have
been trying to get - we have been getting tools
and material for it.
That 18 what you have been doing?
Olley:
Yes,
Yead:
That 1s just what we need help on.
You have been getting the tools and the materials?
Olley:
Yes.
Then you know what they need.
(1ley:
Pretty well, yes. That has been our job, you seo,
to get the machine tools and the tooling and some
of the material over here, so I could help along
those lines.
You brought somebody down with you from Canada,
they say.
11ay:
No, we called for the only Rolls Royce test man
on this side. He 18 a fellow called Osborne,
who is working at Fort Williams for the Canadian
Car & Foundry, putting Merlin engines into Handley
Paige planes which are being built in Fort William.
I telephoned him yesterday to come and see me
in Detroit, with the idea of his going down to
Regraded Uclassified
178
- 5 -
Dayton to be what help he could on dismantling
and inspecting this engine and particularly to
bring any tools that he had which were necessary
for the job.
Mead:
I talked to Colonel Paige this morning and the
engine is down. The other one is on the stand.
clley:
Colonel Paige has got some darned good men there,
then.
Mead:
Well, they worked all night.
H.M.Jr:
Are the Chrysler people there?
Mead:
I don't know about that. It was half past seven
in the morning and he wasn't at the office yet.
H.M.Jr:
You (Young) could check and find out.
Young:
Yes, They should have been there yesterday morn-
ing.
Olley:
Now, on the general proposition of manufacturing
the Rolls Royce engine in this country, we shall
be up against exactly the same thing that we had
to face in '17 and '18, and that is that it has
to be redesigned in the auxilliary details for
American production. I know that from the struggle
we have had to buy some of the material over here.
Now, George Mead was saying that that might delay
us. It will delay us much worse if we don't do
it.
Mead:
I think that is something that you and I will
have to go into a huddle on.
Olley:
May I offer one piece of evidence? I know George
Mead will --
Mead:
You mean to show me a picture of the rear of
the engine now?
Olley:
No, sir, to show you a picture of one detail of
the starter.
Regraded Uclassified
175
- 6 -
CAND:
I agree where we can take off B whole unit
and put on another one, we can probably do
it.
CILRY:
That thing, I would turn the Eclipse Bendix
boys, Ray lansing and his gang, loose on that
right away and put it up to them.
But I think generally speaking we would agree
that in so far as it 18 humanly possible it
ought to be a perfect copy, because there will
be the least delay in going into production.
Alley:
Yes. Well, there is this about that engine.
The main portion, if you will just look et
those drawings, for example, or my arrangement
drawings up in Detroit, the main portion of
that engine is simple.
Tead:
I know. You see, I spent several days with --
Cley:
Crankcase, crankshaft, con rods, pistons, cylinders,
cylinder liners, reduction gear, all that stuff
1s simple and straightforward. When you get
to the rear end of the engine, you have got an
absolute Chinese puzzle of stuff there that
definitely needs redesigning for production
purposes. Otherwise, it will be EL sheet anchor
around the whole thing. You will nevor get
anywhere.
of course, I think we should bear in mind that
1f the war goes on, this is B. source of supply
for you if you need more engines.
Wley:
Yes.
Meed:
And consequently we don't want to go very far
afield to spoil the installation interchange-
ability.
illey:
That 1s one thing where we should get, to my
mind, where we should get a small gang together
with those two points in mind, that we have
got to make the thing produceable and we have
still got to keep it usefully similar.
Regraded Uclassified
180
- 7 -
Mead:
It seems to me if we went on that basis, that
Rolls had more reason than ever to give us a
hand, that perhaps they will never get any of
this source of supply, but still it is the
potential --
H.M.Jr:
Right. Well, I said this to them over the
phone, to Ambassador Kennedy. I said, "Cer-
tainly as an ace in the hole I don't know what
they could do better than to start us producing
these engines in this country," and the fact
that the Government itself 1s contemplating
doing the Bristol engine and the French are
planning to do the Hispano.
In the case of the Bristol, the British Govern-
ment is thinking of doing it itself and in the
case of the Hispano, the French Government.
Now, we want to come along and do this thing
with our own money and so I should think that
the British Government would welcome this.
Clley:
They certainly should.
E.K.Jr:
I gather that they have. Well, I don't think
there is much more that I can do. I think
the best thing to do - have you any suggestions?
Ballentyne: Well, I was going to suggest, sir, that I think
Mr. Purvis remarked to you about an engine with
a higher horsepower. I think it was B. Rolls
Royce engine, a Vulture.
Olley:
I certainly would not touch the Vulture at this
time. That is the 24-cylinder square engine and
as I get it, by word of mouth, there are two
projects in mind. One, the - you remember the
Snyder Company 12-cylinder six-by-six.
Mead:
Six and EL half, wasn't it?
Olley:
Yes, and one project was to make - to moderate
that a little bit to make B. good military engine
out of it. That appealed to me right away because
it is a simple engine and it should be fairly
reasonably simple nowadays to make the stunt
engine of 1939 into a practical military engine
of 1940.
181
- 8 -
The other scheme is this square 24-cylinder
Vulture. Of course, I haven't seen any details
of that at all, but as a manufacturing pro-
position I wouldn't touch it at this time. It
means articulated rods.
Mead:
It meant a considerable headache at Darby, too.
I have seen the engine.
clley:
They have had a dogfight on the rods, I under-
stand, for quite B. while.
Dead:
It seemed to me that our immediate urge was for
something that was proven and ready to go, be-
cause even then we can't get it out fast enough,
so that all these other sizes would be B. matter
of thinking of after this and in place of it.
Olley:
Yes. The Merlin engine is a well worked out
design that started in 1935 or 1936 and has
quite & lot of background to 1t, and it has been
stepped up in power very much like the Wright
Cyclones.
I.V.Jr:
I am going to turn you over to Mr. Mead, see,
and thank you very much for coming in. I just
want to say one word to Mr. Mead.
Regraded Uclassified
182
May 23, 1940
Comdr. Carney said the Packard 4M engine
is very close to the Rolls Royce engine but has
greater horsepower. It is a marine type but with
very minor changes would be available for aircraft
engines.
Packard could produce 20 engines per day after
12 months.
D.E.M.
183
CONFIDENTIAL
May 23, 1940
To:
The Secretary
From: Mr. Young
General Brett advised me by telephone at 2:00 P.K.
that the Chrysler engineers had been at Wright Field
since yesterday morning. He added further that Chrysler
had backed off on the Rolls engine because it used the
metric system and was now studying the Continental.
Evidently, Chrysler was inclined more and more to
the idea of designing an engine of its own from the
ground up.
Py.
(vill 0-29-25-10M
ACORDSS REPLY TO
WAR DEPARTMENT
AIR CORPS
184
MATERIEL DIVISION
May 23, 1940.
The Honorable Mr. Henry Morgenthau,
FOR - The Secretary of the Treasury.
Washington, D. Fate C.,
subject: Characteristics of the Rolls Royce-Merlin Engine.
In accordance with request of Lieutenant VcKny of your office,
-DF following information concerning the Rolls Royce-Merlin engine is
Avenished:
1. The highest known continuous output of A Rolls Royce-
urlin engine is obtained from the Model "RM2SM". This engine is simi-
lar 10 the Merlin "X" in that both are fitted with two-speed super-
but the "RM25M" has been designed specifically for operation
lith 100 octane fuels. This engine has a take-off of 1320 horsepower
e maximum power in high or low gear ratio of 1160 horsepower at
76,730 feet. The engine is of the standard 12-cylinder "V" type, cooled
216 Rihylene Glycol. The dry weight of the two-speed "X" Merlin engine
in proted nt 1390 pounds and the Model "HM2SM" engine weight has been
sectioned the same by our Military Attaches. A particularly fine fea-
are of this engine is the two-speed internal supercharger blower. The
2 Core has been interested in this blower for several years.
2. The comparison of the Berlin and the Allison in given
in tobular form:
Rolls Royce-
Allison
Merlin
(P-40 Engine)
Take-Off Power
1320 HP
1090
Fower at Altitude
1160/16,730 it."
1090/13,200 ft.
Supercharger
Two-Speed
Single Stage
Dry Weight
1394 lbs.
1340 lbs.
Displacement
1641 cu. in.
1710 cu. in.
5.85 sq. ft.
5.5 BQ. ft.
Frontal Area
-
The engine in the Spitfire flown in Ottawa only had B. normal
reting at 16,730 ft. of 1050 HP. Other Allison modela have a
military rating of 1150 at 12,000 ft.
SH Sntt G.H. BRETT,
Brig. General, Air Corps,
Chief, Materiel Division.
have swin 4/4 the the Geoge friend,
Regraded Uclassified
185
May 24, 1940
Since Mr. 01117 was unable to reach Mr. Hiwes
yesterday afternoon it was decided that HM, Jr would
speak to Ambassador Kennedy this morning at 6:00 a.m.
However, late last night Mr. Ollie did get through
his call to Mr. Hines and it WAS not necessary, there-
fore, to send this cable to Ambassador Kennedy.
786
May 23, 1940
Note for transmission to the American Embassy in London
The Secretary of the Treasury requires the following questions to
be transmitted to Rolls Royce, Derby, England, attention of Mr. E. W. Hives,
General Manager,
(1) Recognizing the importance of building a proven engine and
assuming that special efforts will be made on this side to
enable the production of engines in twelve months, would
Rolls Royce recommend building the Merlin X engine, the
Merlin II, the Vulture, or the Griffon?
(2) What 1e the essential difference between the Morlin I and
Merlin XX engines?
(3) What are the rated powers of all four engines, and at what
altitudes and for what running times are these powers obtained?
(4) What are the weights and displacements of these engines?
(5) How quickly can Rolls Royce send a complete set of prints
either blue or Van Dyke of assemblies and detailed parts and
essential prints of manufacturing tools, such drawings to
refer to whichever engine they believe should be built? It is
suggested that preliminary prints should be sent immediately by
airplane also handbooks and other instruction literature.
(6) How quickly can Rolls Royce send a production engineer, preferably
Mr. Blackstone, also B. design engineer and a test engineer?
Olley
Regraded Uclassified
187
May 23, 1940
9:48 a.m.
H.M.Jr:
Hello.
Operator:
Secretary Edison. Go ahead.
H.M.Jr:
Hello.
Charles
Edison:
Hello.
H.M.Jr:
Charlie
E:
Yes, sir.
H.M.Jr:
Henry. Henry Morgenthau.
E:
Yeah.
H.M.Jr:
Charlie, could I have Captain Kraus of the Navy,
you know, the engineer.
E:
Could you have Captain Kraus what?
H.M.Jr:
Could I borrow him for 8. couple of days to help me
on this aircraft business?
E:
Why yes, I think so. He's more or less assigned to
your work anyway, isn't he?
H.M.Jr.
That's right. That's right. He has been but I
just didn't -- wanted to make sure it was all right.
Hello?
E:
Yes, it's all right me, sure.
H.M.Jr:
Well
E:
I don't know what he's doing -- I thought he was
working with you.
H.M.Jr:
He is. He 18. Is he -- are you at the Navy now?
E:
No, I'm at my office in the hotel.
H.M.Jr:
Oh.
E;
However, I'll be at the Navy shortly. Why?
188
- 2 -
H.M.Jr:
Well, just if you'd tell somebody that -- I don't
know, maybe it's not necessary -- that I can --
I'll be calling on Kraus for quite a lot for the
next few days or 8. week or 80 until we get this
thing straightened out.
3:
Well, you go right ahead and call on him end if --
if there's any -- I mean, if he's on some special
assignment -- he's here in town, isn't he?
4.9.Jri
Oh, yes. I'll call him if it's agreeable to you, and
SAV T smoke to you.
E:
It's agreeable to me.
H.M.Jr:
All right.
E:
Perfectly. Unless you hear from me to the contrary
that he's on some life-saving mission, why you can
have him.
H.M.Jr:
Feir enough.
E:
(Leughe)
H.V.Jr:
Thank you.
E:
Say listen, Almy 18 coming over. Did your secretary
tell you?
".".Jr:
No.
in
Well, I -- I
T.X.Jr:
Almy?
ist
I celled right back and said that Captain Almy
would represent the Navy at your meeting at 2:30
on machine tools.
P.M.Jr:
Good. Thank you.
is
All right, sir.
H.V.Jr:
Ever 80 much obliged.
is
Goodbye.
Goodbye.
Regraded Uclassified
189
May 23, 1940
9:53 a.m.
H.V.Jr:
Hello.
Operator:
Captain Kraus.
H.M.Jr:
Hello.
Kreue:
Captain Kraus speaking, Mr. Secretary.
H.M.Jr:
Good morning.
R:
Good morning, sir.
H.M.Jr:
I was just talking with Mr. Edison and I said I WAS
going to lean on you even more heavily than what I
have been and he said, "Fine," unless you had some
life-seving detail thet he didn't know about.
K:
All right, sir.
H.V.Jr:
And he said If I didn't hear from him again why I
could call on you 8.6 much 88 you could take it
physically. Now, the immediate thing 18 this.
You most likely know Mr. Mead 18 coming down to
help me until I get this particular assignment
finished.
K:
Yes, sir.
H.M.Jr:
And he would like very much to have your assistance,
and would it be convenient for you to come over to
the Treasury at 11:30?
X:
I think I can get over there, Mr. Secretary. I have
a rather important engagement here at ten, but I
think I'll be clear of that by that time.
H.M.Jr:
Would twelve o'clock be better?
K:
No, I think 11:30 will be all right.
F.M.Jr:
He's in room 296.
V:
296.
H.M.Jr:
On my floor.
Regraded Uclassified
190
- 2 -
K:
All right, sir. I'll be over at 11:30 then.
H.M.Jr:
At 1130, at -- room 290 -- 296.
K:
296 at 11:30 with Mr. Mead.
H.M.Jr:
Righto.
K:
All right, sir.
H.M.Jr:
Thank you.
191
THE ASSISTANT SECRETARY OF THE NAVY
WASHINGTON
23 May 1940
EMORANDUM TO SECRITARY MORGENTHAU
In further reference to our conversation at the Cabinet
Meeting on Friday, May 17, concerning the availability of
duPont powder for the British, please be advised that I
asked Admiral Furlong to obtain for me the exact status
of this situation.
According to Mr. Bredway of the duPont Company, with whom
Admiral Furlong conferred, this firm is now producing powder
for British account from the 600,000 pounds on which we
deferred delivery sometime ago. In addition to this, they
are working on the replacement of the 600,000 pounds which
we will need. The 2,500,000 pound capacity apparently can
not be worked on by duPont until October with deliveries
starting 1 December at the rate of 200,000 pounds e month.
No could and would be willing to accept a second deferral
of our requirements which would shorten our current needs
somewhat. However, if we did this, there is only 225,000
pounds of the 600,000 pounds of the kind that the British
would want. This, you will recognize, is only a drop in
the bucket. Even if we did this, deliveries could not start
until 1 November from the duPont line which, as you see, 18
only a thirty day saving in time.
I nm informed by duPont, although I have not verified this,
that the Army of course is still requiring 7,000,000 pounds
e year from this source and no doubt that, too, has some
effect on their production capacity and ability to make
ecrlier deliveries than those indicated above.
I can assure you that Admiral Furlong indicated very defi-
nitely to Mr. Bradway of the duPont Company the necessity
for expediting deliveries to the British.
Respectfully
Lewis Compton
Regraded Uclassified
SECRET
WAR DEPARTMENT
192
G-4
WAR DEPARTMENT GENERAL STAFF
RCM
SUPPLY DIVISION, G-1
WASHINGTON, D.C.
copyt
May 23, 1940.
pent
27-40
MEMORANDUM FOR THE CHIEF OF STAFF:
Subject: Availability of Ordnance Materiel for Release
without Adversely Affecting National Defense.
1. The following items have already been declared surplus and
are available for sale under existing laws:
Quantity
on Hand
Serv.
Unserv.
a. Cal. .30, Lewis machine gun, ground, M1917
1,157
18%
82%
b. Cal. .30, machine gun, Vickers, ground type
7,071
43%
57%
C. Cal. .30, Marlin tank machine gun
2,602
67%
33%
d. Cal. .30, Marlin aircraft machine gun
15,638
94%
6%
e. Cal. .30, Vickers aircraft machine gun
5,124
70%
30%
1. Cal. .30, Lewis aircraft machine gun
38,040
34%
66%
2.
The following items may be declared surplus without detriment to
the National Defense for reasons stated after each item:
a.
10,000 Cal. .30 Browning machine guns, Model 1917, Unmodified.
There are 64,929 of these machine guns on hand of which 8,407 have
been or are being modified by changing elevating devices to permit use against
aircraft and 7,430 are being converted into air cooled light maching guns,
leaving a surplus over and above PMP requirements of 49,092 of these guns.
This would provide for an augmentation to a force of 4,000,000 men and still
leave a surplus of 1591 guns. However, a new light machine gun is under
development which could be put into production in 9 months after adoption as
standard. If the new type light machine gun is slow in its development,
arrangements have been made with the General Motors Co. by educational orders
already placed to manufacture the Modified Browning gun in ample quantities,
and in ample time, for augmentation.
A
25,000 Browning automatic rifles, И 1918, unmodified.
There are 81,250 of these on hand of which 8000 are being modified
by adding new sights, new butt plates, a bipod at the front, stock rest at
the and a rate reducer, leaving a. surplus over and above PMP require- to
ments rear, of 73,250 of these guns. This would provide for an augmentation a
force of 4,000,000 men and still leave a surplus of 49,260 guns.
SECRET
Regraded Uclassified
SECRET
di
500,000 Enfield Cal: -30 rifles.
There are 1,800,000 of these rifles on hand. There are also
900,000 Springfield rifles on hand and 240,000 new Garand rifles either on
hand or in prospect for procurement by June 1942, or perhaps sooner. The
requirements for 4,000,000 men amount to about 2,000,000 rifles. Hence
it is evident that, excluding the Garand rifle altogether, there is a
scroldo of 700,000 shoulder fifles over and above the requirement for
4,000,000 men.
in
500 - 75mm British design guns.
These guns cannot use the British ammunition but can use the
French 75 inm ammunition. There are on hand a total of 4470 of 75mm guns,
of which 530 are British type which are in storage, 320 of the American type
which are in storage and 3450 of the French type of which 1675 have been
modified to permit towing by trucks and 1439 are in the process of being
converted into the solit trail types. The PMP requirement in 75 mm guns
La 1439. There are not sufficient field artillery funs on hand for B.
force of 4,000,000 men but it is agreed that the British type gun will not
be employed in the theater of operations and that further production of
Field artillery guns will probably be restricted to larger calibers.
él
500 - 3" Stokes Mortare (Would WAS Type) and 50,000 rounds of
linkes Mortar ammunition.
This wespon has been replaced by the 60 nm Mortars and 31 nam
my which are being produced at B rapid rete.
No requirement exists for the Stokes Mortar either for the PMP
or sugmentations thereto.
P.
Cal. .30 ball ammunition.
None can be declared surplus but the question of exchange of old
Amunition for new ammunition is under consideration by the Chief of
Ordnance.
R. C. MOORE,
Brigadier General,
Amaistant Chief of Staff.
SECRET
Regraded Uclassified
- REPLY 10
CHIEF OF THE AIR CORPS
are DEPARTMENT
copy
194
WASHINGTON.D.C.
WAR DEPARTMENT
pat 5/27/40
OFFICE OF THE CHIEF OF THE AIR CORPS
SECRET
WASHINGTON
May 23, 1940
MEMORANDUM for the Chief of Staff
SUBJECT: Release of Army-Owned Aircraft for Export
1. The attached request of the Anglo-French Purchasing Board
involves the immediate release of airplanes now being used for
training, and airplanes now on contract for initial equipment of
units of the GHQ Air Force.
2. B. Manufacturers have stated that deliveries on current
contracts can be accelerated by substantially increasing present
orders for airplanes not in production.
b. Immediate orders for 3,000 airplanes of similer types
now on order will accelerate deliveries to a degree that will
assure the completion of the Aviation Expansion Program on schedule,
provided:
That airplanes released for export, over and above
requirements of Army delivery schedules, conform to Air Corps
specifications with respect to details, design, armament and
equipment;
That current delivery schedules are maintained with
exception of 15% for reserve in the continental United States
and 25% for reserves in foreign possessions;
That attack airplanes, Type A-17, are replaced in kind
by advanced training airplanes, Type AT-6;
That the Government immediately initiate action leading
to the acceleration of engine deliveries.
- 1 -
SECRET
Regraded Uclassified
195
Memorandum for the Chief of Staff
May 23, 1940
SECRET
3. There are two possible methods of realizing accelerated
delivery rates, i.e.:
B. Additional Army Purchases.
This method would require the expenditure of approx-
imately $300,000,000 by the Government, for the purchase of air-
planes. It would have the advantage of:
(1) Utilizing the maximum potential capacity of
aircraft manufacturers of critical Army types;
(2) Substantially increasing delivery rates within
four to six months from date of order, and of providing
positive initial steps toward the augmentation of the combat
strength of the GHQ Air Force.
The principal disadvantage of this method is the dif-
ficulties incident to incorporeting improvements in design and
changes in equipment that are constantly necessary at frequent
intervals under present world conditions. On the other hand,
placing large orders for present advanced types now in production
would allow the manufacturers to plan and coordinate their pro-
duction in a manner that would provide for the economical and
timely incorporation of new features as required.
b. Additional Foreign Purchases.
This method envisions the placing of large orders, by
the Anglo-French Purchasing Board, for airplanee identical to
Army types now in production. It would have the same desired
effect on delivery schedules as the placing of additional orders
by the Army.
This method has the disadvantage of placing a large
percentage of the total potential capacities of key manufacturers
under control of foreign purchasers. It would require the com-
plications of commandeering, if there is an early requirement,
additional combat airplanes for the discussed expansion of the
Army Air Force.
- 2 -
SECRET
Regraded Uclassified
196
Memorandum for the Chief of Staff
May 23, 1940
SECRET
4. In the final analysis, additional orders for Army types
would serve the dual purpose of accelerating deliveries for export
and provide for a timely and orderly expansion of key manufacturing
facilities. "Piecemeal" releases of Army types for export will
seriously interrupt and delay the execution of the present Aviation
Expension Program as well as hinder the initiation of an orderly
and adequately planned production program for augmenting the Air
Forces of the United States.
So H.Smitt.
Incl. 1
Part No. I, Aircraft
& Engines - 7 sheets
SECRET
- 3 -
TREASURY DEPARTMENT
137
INTER OFFICE COMMUNICATION
DATE
May 23. 1940
TO
Secretary Morgenthau
FROM
Dr. Merd
I Fill sending you herewith two sets of tables which show the status
of the training aircraft on order for the United States Army Air Corps
call the United States Navy. You will note that the Havy uses but three
types of engines in their training aircraft and that the Army uses a
considerably greater number.
The Army situation is being studied, however, with a view toward
reducing the total number of types employed. The items marked with en
isteriation the Army tables indicate those engines which are now on
order for the present expansion program. We have had some indication
loo that the Army may still further simplify its engine procurement
roblem by the elimination of the so-called basic trainer type.
In addition to the moves that are being made to solve the engine
problem, a study of all methods of nanufacture which asy lead to more
economical and more rapid production is being undertaken as & part
of this program. One of the first moves in this direction is a survey
of the so-celled plastic method of construction as applied to training
aircraft,
Regraded Uclassified
meads given S/23/40
TRAINING AIRCRAFT U. 8. ARMY
General
Manufacturer.
Model No.
Approx.
Engine make
Hp.
General type.
Classification.
No. on
and model.
hand or
on order.
Primary trainer
Consolidated
PT-3
5
Wright R-790
235
Biplane fixed land-
ing gear
PT-3A
61
#
If
If
Stearman
PT-9B
1
Lycoming R-680
180
If
Consolidated
11-D
20
Lycoming R-680-3 200
N
Stearman
PT-13
21
Lycoming R-680-5 215
PT-13A
130
Lycoming R-680-7 215
PT-13B
180
Lycoming R-680-11220
Waco
XPT-14
13
Continental
220
670-5
St. Louis Car
XPT-15
13
Wright R-760 E.T.225
Ryan
XPT-16
15
Menasco L-365-1 125
Low-wing monoplane
fixed landing gear
Stearman
PT-17
150
Continental
220
Biplane fixed
R-6705
landing gear
#
PT-18
150
Jacobs R-755-7
225
#
#
Fairchild
PT-19
270
Ranger L-440-1
175
Low-wing monoplane
fixed landing gear
Ryan
PT-20
30
Menasoo L-365-1 125
#
.
Regraded Uclassifie
- 2 -
39
8
General
Classification. Manufacturer Model No. Approx.
Engine make
Hp.
General Type
No. on
and model.
hand or
on order.
Basic trainer
Douglas
BT-2
68
P & W R-1340-0
450
Imeplane fixed
landing gear
#
Consolidated
BT-7
5
P & W R-985
300
#
Seversky
BT-8
20
P & W R-985-11
400
Low-wing monoplane
fixed landing gear
N. American
BT-9A
62
Wright 7-975
400
.
#
#
BT-9B-0
163
Wright 7-975-7
400
.
If
-
.
BT-10
1
P&W R-1340-49
550
#
Vultee
BT-13
300
P & W R-985-25
450
Low-wing monoplane
N. American
BT-14
251
#
.
.
Advance trainer
#
.
B0-1-2
170
P & W R-1340
N
Low-wing monoplane
with retractable
landing gear
#
I
#
BC-1A
83
P & W R-1340-49
550
.
M
If
If
AT-6
94
P & W R-1340-49
#
.
Regraded Uclassifie
200
TRAINING AIRCRAFT U. S. NAVY
General
Manufacturer.
Model No.
Approx.
Engine make
Hp.
General type.
Classification.
No. on and model.
hand or
on order.
Primary trainer
Stearman
NS-1
47
Wright R-790
220
Biplane - wheel or
float
If
Naval Air. Fact. N3N-1
167
Wright R-790 or
220
Wright R-760
235
#
=
#
#
If
"
If
N3N-3
150
Wright R-760
235
#
-
#
#
If
#
If
N5N-1
1
Wright R-760
235
Monoplane
Advance trainer
N. American
NJ-1
40
P & W R-1340
500
Monoplane - wheels
#
-
If
=
SNJ-1
16
.
.
#
#
-
If
#
"
SNJ-2
36
M
550
W
#
Engines used in Navy trainers:
Wright R-760
Wright R-790
P & W R-1340
Regraded Uclassifie
201
ENGINES USED IN ARMY TRAINERS
Make
Model
Rating
(Sea-level, indicated) unless
Continental
R - 670 - 5
220 hp.
Jacobe
R - - 755 - 7
225 hp.
Lycoming
R - 680 -
180 hp.
R - 680 - 3
200 hp.
R - 680 - 5
215 hp.
R - 680 - 7
215 hp.
R - 680 - 11
220 hp.
Menasco
L - 365 - 1
125 hp.
(att Natt and Whitney
R - - 985
300 hp.
R - R - 985 - 11
400 hp.
R - 985 - 25
450 hp.
R - 1340 - B-c
450 hp.
R - - 1340 - 49
550 hp.
(at 5000
ft.)
Ranger
L - 440 - 1
175 hp.
right
R - - 760 - ET.
225 hp.
R - - 790
235 hp.
R - - 975
400 hp.
R - - 975 - 7
400 hp.
Engines tor present
expansion program.
202
only copy
TREASURY DEPARTMENT
PROCUREMENT DIVISION
Bearefary Bg he
OFFICE OF THE DIRECTOR
WASHINGTON
not seen
May 23, 1940
MEMORANDUM FOR MR. PHILLIP YOUNG
There is attached hereto a letter just received from Admiral
Furlong, Chief of Ordnance, Navy Department, which is self-
explanatory.
att.
you
.
203
IN REPLY ADDRESS
SUNFAC OF OPENANCE NAVY DEPARTMENT
NAVY DEPARTMENT
ANG nota YO MVL.
BUREAU OF ORDNANCE
MRS
WASHINGTON, D.C.
23 May 1940
Memorandum for Captain Harry Collins,
Director of Procurement.
The DuPont Company is now manufacturing powder for the British
on the 600,000 lb. deferment nade by the Navy some months ago. This
powder will all be manufactured and pecked ready for delivery to the
British by July 31st. Some of it will be finished by July 1.
of the 2,500,000 lb. capacity that the Navy released to other
orders, it is stated by DuPont that the Company will not start nan-
ufacture until October and will make the first deliveries on it in
December at rate of 200,000 lbs. per month.
I asked the DuPont representative if the Navy should give up
all the remaining capacity that DuPont now has in process of manu-
facture for us, what amount that we are getting could be made evail-
able to the British. He stated that only 225,000 lbs. of our capse-
ity in their powder lines could be used to make the kind of powder
the British want, and that they could start to make this in Septem-
ber and deliver it to the British in November.
I an willing to further defer this amount for us although it is
such a small amount 88 to be of little help to the British. If we
really want to help the British at DuPonts, it would be necessary to
cancel some of the 7,000,000 1b. capacity that the Army has now under
manufacture end let DuPont turn whatever is cancelled or deferred
right over to the British.
The Bureau of Ordnance of the Navy 18 willing to again defer,
as stated above, all of the capacity we are hsing in the powder line
that makes the size of powder the British want. The small amount we
retain is for 171 and 5" antiaircraft powder, made on machines that
can not make the British powder. I em willing to go the limit on
our own deferments or even cancellations to help the British.
OSV
* R. FURLONG
Chief of Bureeu.
Regraded Uclassified
204
Telephone Conversation - Mr. Louis
Johnson called Mr. Sullivan at 10 1.2.
in response to call from Mr. Sullivan
at 9:40 a.m., May 23, 1940.
Sullivan: Hello Louis.
Johnson # Hello John.
Sullivan:
I called you yesterday.
Johnson :
Yes, I know, powder. I went over those figures this morning with
Colonel McMoreland. Re is on his way over there now, if he isn't
already sitting outside. I told him to show you the exact status.
I don't see how in the world we can do it, John, - with another
powder plant coming along we are actually out. With powder the
White House released to Finland, and Mr. Morgenthau's request to
release to the Allies, - we are in a critical state with our own
present program. Not that I don't want to help those people, but
I think we have reached the bottom on those figures. To are going
to do whatever the Administration's program wants, That's why I
sent McMoreland to you with the exact figures right away to show
you the whole breakdown. You can see that it is just what I told
you. We are trying to be good soldiers, John.
Sullivan: All right, thanks very much.
Regraded Uclassified
205
MEMORANDUM
May 23, 1940.
TO: The Secretary.
FROM:Mr. Sullivan
CONFERENCE: Present: Colonel McMoreland of the office of the Assistant
Secretary of War; Mr. Pallantyne of the Anglo-French Pur-
chasing Board; Kr. Young and Mr. Sullivan.
Colonel McMoreland stated that it would not be possible to advance
the release date on powder for the British ahead of October lat, 1940,
nor to increase the amount to be released beyond 200,000 pounds per month
without disrupting the present loading schedule and closing down arsenals.
In his figures we discovered that there was an allowance of 600,000 pounds
for the Finns and he called the Finnish minister to find out whether the
Finns were to exercise this option. The Finnish minister called back to
say that he was waiting for advice on this matter. MoMoreland said the
Army would gladly release Hercules from this 600,000 pounds if the Finne
did not want it. As to the balance of the present British requirements,
when he left he agreed to go through the loading schedule again to see
if he could in any way advance the date of increase of the amount beyond
200,000 poubds per month starting October 1st.
Mr. Young and I concur that unless the Army revises its requirements
for its loading schedules, the only other chance of securing this powder
for the British is through an additional release from the Navy, which in
view of the present releases, appears doubtful,
In regard to the contract pending with Colt for 15,000 manhine guns,
Mr. Ballantyne acknowledged that the situation in regard to a capital
advance for the purpose of increasing facilities 18 identical with the
situation they faced in aircraft and engine factories. This had not been
hereto appreciated by Mr. Ballantyne or Vr. Purvis and when the conference
ended Mr. Ballantyne agreed to call Mr. Purvis in New York and we believe
he will recommend the advance of $2,500,000 for additional facilities.
In return for this the Army will agree to release half of its capacity
on the 50 millimeter gircraft machine guns starting in December, 1941.
Mr. Young and I believe that the demande of the Army are reasonable and
that the Anglo-French Purchasing Board should advance the $2,500,000.
TLS
Regraded Uclassified
EMK:
206
Mrs. McHugh would like to know where the enclosure
to this despatch is.
ka
no inclose received by
State Deft.
Inclosure
207
No. 564
American Consulate General,
Amsterdam, Netherlande. May 23, 1940.
Subject: Delivery of a Personal Message from the
Secretary of the United States Treasury
to the President of the Netherlands Bank.
The Honorable
The Secretary of State,
Washington.
Sir:
In reference to the Department's telegram number 29 dated
May 8, 6 p.m. in which was transmitted a personal message for Mr.
Trip, President of the Netherlands Bank from the Secretary of the
United States Treasury, and By reply thereto contained in Despatch
No. 559 dated May 9, 1940. I have the honor to transmit herewith
for record purposes and in connection particularly with the last
paragraph of the despatch referred to above, a copy of 8. letter
dated May 10, 1940 from Mr. Trip to ne in which he expresses his
thanks for the action taken by the United States Government and
particularly Mr. Morgenthau.
Very respectfully yours,
Frank C. Lee.
American Consul General.
In quintuplicate to the Department of State:
Copy to the American Legation, The Hague.
File No. 102.1/FCL/prf.
COPY
208
G
MACHINE TOOL PROGRAM
May 23, 1940
2:30 p.m.
Present:
Mr. McReynolds
Mr. Young
Captain Almy
Major Hauseman
Captain, just to be sure I have enough to do,
the President asked me in connection with this
airplane thing that I am doing for him to look
into the machine tools, and Mr. McReynolds ex-
plained - he is Administrative Assistant to the
President and I am just borrowing him and the
thing that I wanted to know was this: After all,
airplanes are important and just because I am
doing them, I don't want to distort the thing
and I wondered how far the Navy has gone, first,
as to tools they need to take care of the existing
program, what tools do they need when this bill
passes, and furthermore, what about the machine
tools which are on order for foreigners.
May:
I am not sure I have much information in regard
to the aviation requirements of the Navy, other
than those that they will require in their own
plants: that is, for their manufacturing and main-
tenance plants and for those additional stations
that are being built. I wasn't able - after I
got word to appear over here, I was unable to
get in touch v/1 th the planning officers that have
this plant extension program in hand and I am
not sure that they know too much about what they
want to do. I am quite sure they don't.
Well, this is giving you a little notice. The
machine tool people are due in here, et committee
representing the industry, Monday at 11:00 o'clock,
see, and I would like you, 1f you would, to come
back at 10:30 Monday, at which time you and who-
ever the Army senda here - and maybe you could
get together with the Army man before that, you
see, so that - I would divide it up like this:
First, what are the requirements that the Navy
needs for its own program.
Almy:
We know that very definitely now.
All right, then If you could segregate that,
general, and then off on the side would be
Regraded Uclassified
209
- 2 -
aircraft, and if - I don't know whether you have
it by companies or by tools. I don't know how
you do that, you see.
Almy:
We have it in the form of what we call plant de-
ficiencies. In other words, we have for each
plant or each station B. deficiency index which
tells us exactly the tools that they want to
bring up their activity to any specified level
within the capacity of that plant. That is true
of aviation B.S well as Navy Yards and --
That 12 within the Navy?
Almy:
That is within the Navy.
I mean that doesn't include the - I mean, 10,000
long distance bombers, you don't know how many
tools it takes to make those 10,000 long distance
bombers?
Arty:
I can't speak authoritatively for that - for them
right now.
Well, I am siving you notice, so to speak, and
you see what I mean. Then I an particularly
interested 1f you and the Army can say, "Now look,
Mr. Morgenthau, here is & list of tools which we
need and by countries, England, France, Russia,
Japan, Italy," wherever they are. "Now, these
are the things we need. that can we do about
that?" I know they have been grabbing it. I
know they have grabbed a lot, but they haven't
begun to grab enough.
Almy:
They grabbed everything that - I have already set
up the machinery in the Navy Department with the
connivance of some of the Customs and Coast Guard
and have been grabbing everything that we want,
and we use our discretion as to what we want, that
1e designed for export, that is on order or for
export, and I am gradually collecting all the
information of all the tools that are on order
in this country and I - some of this equipment
that was on order and ready for shipment I have
purchased outright by proprietary means and
had to use the big stick to fortify these companies
Regraded Uclassified
200
- 3 -
because they have definite contractual obliga-
tions and probably you should know this, that
this morning I asked the Customs to investigate
a foreign shipment that was alongside a vessel
of - in New York, and this was part of a two-car
shipment of one machine that the President has
ordered us not to let get away from us.
M.S.Jr:
Is that a 150-foot lathe? You know, I asked
three months ago and Mr. Edison wrote me formally
turning me down. Did you know that?
Almy:
I knew that. There is a still bigger one than
that by that same company.
H.M.Jr:
General Machinery, also for Russia?
Almy:
Yes, sir.
I forget whether the first one was Russia or Japan,
Alay:
Both of them were Russia and I --
H...Jr:
Who do you contact when you want something in
Customs?
Almy:
Oh, I go directly to the company.
R.M.Jr:
I say, who in Customs?
Almy:
I handle' that through O.N.I. and they telephone --
K.R.Jr:
We have that.
Almy:
I heard, but I don't recall. But I gave them the
car numbers and stuff.
H.M.Jr:
Well, could you, as I say, bring me up to date,
because we don't want to all be felling all over
each other. This aircraft engine thing, the
more deeply we go into it, the more difficult
it 1s to do anything.
Almy:
I haven't done anything - the aircraft engine
industry is interested in two kinds of equipment,
particularly, milling machines which they want by
the thousands and harmers, forging hanmers, end
Regraded Uclassified
211
- 4 -
I haven't yet gotten my fingers on that equip-
ment.
H.M.Jr:
I see,
Almy:
As perhaps you know, the proposed Naval legis-
lation allows us to - well, commandeer that
stuff, place an order for it without compe-
tition and direction that this order - or it
states that this order has priority over any
other demand for export, so that --
MeR:
Subject to the discretion of the President.
Almy:
Oh yes, subject to the discretion of the Presi-
dent. So that I am now just serving notice on
these people and when this becomes a law, there
is - there is nothing I can do now unless I can
bluff them.
H.N.Jr:
You are doing no worse - I have got 3500 tons
of toluol that the - I have got a request to
try to hold in an Italian ship which is supposed
to sail every day and by hook or crook we have
been holding that for a week now, 3500 tons of
toluol.
MoR:
We wouldn't clear the ship.
H.M.Jr:
So we are all in the same business.
Incidentally, don't worry, there is only one copy
of that record that goes in my safe, but I can't
remember. There is only one copy and the rest
is destroyed. If it bothers you, I will stop it.
Does it bother you?
Almy:
Not at all. Not a bit.
H.M.Jr:
I can't remember. I used to try to dictate at
night what I thought I said. The thing - you
have got what I want, you see, and all I am try-
ing to do is to get - when these machine tool
fellows come in and then the other thing which
we are thinking about, we have had a lot of
talks with many here about plant expansion and
these boys don't want to expand.
Regraded Uclassified
212
- 5 -
Almy:
I know.
See? Now, yesterday everybody wants to know what
was Thurman Arnold doing in here. lie came here
with his whole staff, Re tells me - and this is
just in the family - that the minute I get to
the point with the machine tool industry that
they won't expand or won't play ball, he is going
to call 150 of them before the Grand Jury and he
says, "You watch them expand," and my understanding
with the President on that discretionary money
he has got, I am sitting in on it when It in
going to be divided up, so when these machine
tool fellows say, for instance, that there are
certain things that the Army and Navy need, after
all, it only goes so far and 1f these fellows
won't build, we, the Government, may have to
build the plants. That 1s one of the things I
an looking forward to and that is why I said
that the names of the companies, you see --
sings
Well, of course in this machine tool industry
there is a certain point that they can't expand
beyond because they haven't the skilled work-
men. I think their best chance of expansion,
from talking with them, is that they can buy
part from specialists - they can buy gears and
link screws and they can buy - set up to manu-
facture parts to detailed specifications and
procision accuracy, which will allow them - the
principal builders to do the assembly and the
large finish work, and I think that they can,
through that means, reach 50 to 100 percent
greater production than they have now, but to
go out and build a machine tool plant and start
from scratch, it would be rather difficult.
Another thing that has been done to some extent,
it has not been carried B.5 far as it might,
certain squipment manufacturers - for instance,
one printing press manufacturer that I know of
has stopped making printing presses and he is
making machine tools under the patents and a
working agreement wi th B. standard maker. That
can be carried to & very considerable extent,
so I feel confident that wa could probably
Regraded Uclassified
213
- 5 -
bring up our production of tools to, say, 75 to
100 percent over what they think they can do.
Well, that would be wonderful.
Almy:
Now, there is - I think I ought to tell you in
advance what our Army and Navy's plans are. They
aren't articulate yet so that we can reduce them
to paper, but we are both studying them and we
have both come to very near the same conclusions.
First, we will divide among ourselves ES the only
people that could get them these tools that are on
foreign order that we want to grab. We will dis-
tribute those to the arsenals and to the Navy
Yards or maybe to some of our principal con-
tractors who may be authorized - may require
immediate equipment, allow them to purchase it
or sell it to them after we buy them, 1f there
is no plant extension.
The second will be to place on order on our
allocation war plan scheme our Government plant
deficiency requirements and allocate that to
the industry on the plan that we have worked
out over a period of years, and it seems to be
pretty good.
The third will be the large and the tough one,
and that is - we are all agreed up to this point.
Now, the third will be on the allocation to the
industry and from our very extensive talke with
them, this allocation must come - they must be
virtually commandeered to deliver according to
some plan so much - ten percent of the machine
tool builders and twenty percent to the Navy and
thirty percent to the Army and forty percent to
& certain kind of an industry and that sort of
thing. Otherwise, they will be in a jam so
that they won't know what to do. They will be
afraid to move, because their best customers
will be people that they will he afraid to serve
and they will lose their good will. That is the
stumbling block they have run onto now.
Now, have you got any direction as to when you
begin to grab this stuff, about grabbing stuff
Regraded Uclassified
214
- 7 -
belonging to England and Prance?
Almy:
No. So far as I know, it is not in the Presi-
dent's picture to grab anything that belongs
to England and France except that they have
given to us - that 18, the Army has made avail-
able to us - we are being furnished information -
all the machine tools that they have ordered in
this country. We intend to grab some of that
for one very good reason, and that is, in this
grabbing business we can't show discrimination
between nations, so it is our purpose to let
some go to Japan, some go to Russia that we don't
particularly want, and grab some of the English
and French, and I am negotiating for certain
Swedish equipment now and probably Norway and
Denmark and the Netherlands; they have some,
not much, but I certainly will grab some of
that just to spread it around.
M.M.Jr:
How much English and French are you going to
grab?
Almy:
I don't think very much.
R.M.Jr:
Don't, because otherwise I would have to get
the President to give you an order not to.
Almy:
oh, this is unofficial, but I have an agreement
with the State Department not to show discrimin-
ation. This will have to apply unless the
President directs otherwise, to grab something
of everybody, but I think I can get or I can
find out from them the things that will hurt
them least and I don't intend that it will be
very much.
(Major Hauseman entered the conference)
M.M.Jr:
Did you get lost?
suseman:
No, I didn't know anything about it until ten
minutes ago.
M.M.Jr:
Well, I spoke to Woodring at 9:00.
Regraded Uclassified
215
- 8
Hauseman:
I am sorry.
11.7.Jr:
I am sorry, too.
Almy:
We grabbed the other day - two days ago, we
grabbed two large lathes from General Machinery,
under order for Amtorg, and the Russian Ambassa-
dor appeared at the State Department yesterday
frothing at the mouth, but they are not at all
excited about it and they will be told in due
course, which will be after this hoped-for law
passes allowing us to commandeer, that these
have been commandeered by the Government.
Well now, I would like to explain this, that the
Allied Purchasing Commission is accredited to me
by the direction of the President. I mean, I
see them and Mr. Philip Young is my contact be-
tween the Allied Purchasing Commission and myself.
The President has assured them through me that
anything that we do on our program will be to
expand on top of theirs and not to interfere with
their program. I would like to explain that.
Now, if you have got to take some little incon-
sequential piece just to say you took one piece -
but I have passed the word of the President to
them that --
Almy:
That is in accordance with my instructions.
Just so that there is no misunderstanding, be-
cause I am doing the same kind of thing that you
are doing. I am - by hook or crook, I am holding
up 3500 tona of toluol on an Italian boat in
New York harbor for about B. week. When the
Italians will begin to holler, I don't know,
but we are doing that sort of chancy thing
every day; but on the other hand, I did pass the
word of the Administration to the Allies that
we would not interfere with them.
What we are going to do in the way of araaments
here will be over and above their own program.
I would like to keep that word. That is why
I asked you to come over here. If you would
help me on that - I don't want to go and see
teacher unless I have to.
Regraded Uclassified
216
- 9 -
Almy:
I informed Mr. Compton, who has this program in
charge, that I intend to grab something from
everybody.
L.E.Ir:
I understand. We are together.
Almy:
I don't think we need be concerned about our
hurting them particularly.
What I am doing is this: The President asked
me last night to take on the machine tool indus-
try for him, in addition to aircraft. They are
coming in at 11:00 o'clock Monday. What I em
asking the Army and Navy to do, 1! they would,
to let me know If they could, Monday at 10:30,
half an hour before the machine tool fellows
come in, what are the needs of the Army and
Navy for its own program.
|auseman:
You mean for this present program?
When the bill passes. What do you need? What
I am interested in is by plants, by companies,
you see, because I am particularly interested
in aircraft, but I don't want to get aircraft -
I mean, just because I an interested in it
doesn't mean it is more important than anti-
aircraft or tanks or powder or armor plate or
anything else, but the thing - our contacts with
these fellows before this makes me believe there
is a kind of a gentlemen's understanding in the
machine tool industry that they are not going
to expand their plants. They will work three
shifts, but they are not going to expand. I am
afraid - I hope I am wrong - that when 1t comes
to a showdown, when we know what the Army and
Navy need, plus what we need for aircraft, what
we need for civilian plants to fill our orders,
we may have to put some pressure on these boys
to expand, because they have sat very tight
and they like to consider themselves rugged in-
dividualists, and so forth and 80 on, end they
are.
So if you two gentlemen would get together be-
tween now and 10:30 Monday, then I could spend
a half hour with you from 10:30 to 11:00 so
Regraded Uclassified
217
- 10 -
you could say, "Well now, Mr. Morgenthau, we
won't give you the whole thing but we have
got it. We know what we need, we know which
companies to look for --" particularly, if
you would have the aircraft people tell you
what they think they need so that would be
put off to one side and when these people
come in now and they say, "What do you want
to do?" you say, "Well, here are the following
companies that are going to be called upon to
give us one and a half or two or three times
their present production," so that I can say
to these gentlemen, "All right, now this is
a rough estimate, gentlemen. We are going to
call on you for one, two, three or four times
your present production. What are you going
to do to meet this program?" That 18 what
we want and we want this committee that 1s
coming in to - you see, they are going to
Dayton to a big committee on Tuesday, the
whole industry 18 meeting on Tuesday, 30 it
is an ideal thing to meet on Monday.
llauseman:
This meeting on Monday is just with machine
tool builders, Mr. Berner and 30 on?
H.M.Jr:
Tell Berner 1s coming in at 11:00 and 1f you
two gentlemen come in at 10:30, you would
simply say, "Now, Mr. Morgenthau, we have
been over this thing and these are the companies
which we think I wouldn't say we are going
to have trouble with them, but these are the
fellows that we know are going to be called on
for great expansion in this program, do you see.
Rauseman:
Of course, we can give you the list of mechine
tools we will need for our arsenals for the
new amminition plants in the President's pro-
gram end the new smokeless powder plants. or
course, now, what civilian industry will need
we don't - we don't know what companies will
get the bids, because this all goes out on
competitive bidding. That Is a shot in the
dark.
H.K.Jr:
All right, we are all shooting in the dark,
but look, I did B. job for Pratt & Whitney
218
- 11 -
and Wright. I mean, they were in desperate
shape and by calling them in and going over
and over again, we finally got down to some-
where between 24 and 30 companies, the par-
ticular things that they needed, and it wasn't
& question of competition, because - I foolishly
told them the story - I didn't mention the name
of the man in Philadelphia who makes B. valve
grinder, I think, B. machine tool to make 8. valve
grinder. He has forty men and they say when the
fishing is good he goes fishing and he doesn't
come back until he has caught his fish and he
doesn't care, so I told the story and the damn
New York Times ran it and the machine tool
people are all mad at me and they say you can't
get them to put on more than 40 men. Is there
a Hall machinery company?
Hauseman:
Yes, in Philadelphia.
M.I.Jr:
They say he is B. great fellow, but he wouldn't
go along. It isn't B. question of competition,
they just won't make any more. They say there
are a great many Mr. Halls in the industry.
What we have got to do is - let's say we will
expect - so it doesn't make any difference on
competition.
As I understand the certain thing, only Mr. Fall
can make the demn thing. Is that right?
Sauseman:
Well, there is one other company who makes it.
A.M.Jr:
If we figure roughly me are going to expect
three times E.S many units of whatever Mr. Hall
makes and Mr. Hall sits back and says, "I will
be God damned if I am going to expand my plant,"
then it is up to us and the Department of Jus-
tice to have this fellow do it and Mr. Thurman
Arnold was here with his whole staff yesterday
and he will do anything that we want 1f they
don't cooperate.
Now, I am the last person in the world to use
the big stick, but If Mr. Hall won't behave
himself and says, "Well, I am going fishing,
Regraded Uclassified
219
- 12 -
to hell with this thing, then what are we
going to do about Mr. Hall? That is where
I can be helpful to the Army and Navy and
the sirplane industry and I will go the
limit. I don't expect you to come in with
the last word, but I do went something so
that when these people go out to Dayton for
.
this convention, we can say, "All right,
gentlemen, a very quick survey shows this,
that the needs of the Navy, Army, aircraft,
these are the companies that are going to
be called upon for greatly increased pro-
duction. Now, what are you people going
to do to help the Government?" That is
roughly what I want, see. I don't expect to
have & finished program, but something so
that I can give Tell Berner something and his
crowd that are coming here something to take
out to this - they sent word their feelings
were hurt because we had the aircraft people
in Monday and they hadn't been invited in,
so 0. K., we will invite then this Monday,
so I want something to tell them. I want
something more than I had last Monday.
You are not promising not to hurt their feel-
ings more than you did last Monday?
No. That is very roughly what I want. Between
now and Monday, could you two gentlemen get
together and give me something end come at
10:30 and stay with me when Mr. Tell terner
and his crowd are here and you talk to them
and meet them and I can -ive them B. little
talk and then they go out Tuesday and they
say, "Well, this is e rough idea of what the
Government needs. "
Almy:
Our allocations are by firms.
R.M.Jr:
By firms?
Almy:
Yes,
M.N.Jr:
That is what I want, by firms.
Regraded Uclassified
220
- 13 -
Almy:
Certain firms are allocated to the Army and
certain to the Navy and we allocate within
the Navy to certain activities. I don't
know whether you (Hauseman) do or not. Do
you?
l'auseman:
We don't handle it quite that way. Of course,
you are speaking now on & plan of war production,
because you don't have that allocation system
in effect today.
Almy:
Well, we are going to put it in effect.
H.M.Jr:
All it needs is for the President to declare a
national emergency under Section 120, and then
you can go ahead.
Elmy:
I don't think it would be necessary. I think
we certainly can go ahead on our Immediate
warrants, our immediate deficiencies for our
own plants.
Mauseman:
For our own plants, yea, you and I shouldn't
have any trouble.
Almy:
Now, for industry as EL whole, we have got to
do that or we can't protect these manufacturers.
They can't work any other way, because if we
go and take over the orders - we place orders
that affect their contractual requirements
or affect their good will to their regular cus-
tomers, that isn't fair. lie have got to set
up something that will give them an authority,
80 they have nothing to do but play ball, but
that is what they want. They are going to
demand that, I know that from talking with
them. I talked with them the other day for
about fifteen minutes up in Cleveland and it
1s very clear that if we are to do business at
all we ought to protect them. I think we will
find very definitely Monday B demand that we
do protect them.
Now, this will have to be - it can be set up
if the President invokes this part of the
National Emergency Act or it can be set up
if he appoints a Commission.
Regraded Uclassified
221
- 14 -
R.M.Jr:
Do you (McReynolds) understand what they are
talking about?
McR:
Yes.
H.M.Jr:
0. K. I am not familiar with 1t, but you know.
MeR:
Yes.
Rauseman:
Mr. Morgenthau, may I ask one more question? I
want to be sure I understand the thing correctly.
Now, this list of machine tools that you want,
you want them - you want to know so many lathes,
so many - you don't care?
H.L.Jr:
No, I want you to put your heads together by
companies.
Hauseman:
By machine tool companies?
H.M.Jr:
Yes.
l'auseman:
I see.
E.M.Jr:
By machine tool companies. and talk in general-
ities. I don't want to pin you down. You say
to me, "Now look, Mr. Morgenthau, here is a
list of companies and for the Army and Navy's
needs alone, these are the companies we are
going to make the biggest demands on."
Now, if you have got it, private industry in
order to supply us with our needs, these are
also the companies, you see, so that when you
get through you give me one list and you
could put after them one, two, three, and
number one would be the ones that are going
to have the biggest demands on them and number
two - rate them, if you wish, by three or by
five, and these are the companies which, as
far as we can tell under the present program,
plus the orders which are coming in from the
Allies - this is our best guess that will
have to either have to double, triple or
quadruple their plants.
222
- 15 -
Now, that ought to be simple, because when you
say double or triple you are not getting down
to how many lathes - I don't want to ask the
impossible. I would like to know which com-
panies, so I could say, "All right, gentlemen,
If you have got to triple your production,
what the hell are you going to do about 1t?"
And 1f they sit back and say, "We can only give
you what we have got," then we will say, "0. Y.,
we will go after you."
Aley:
I think, Mr. Morgenthau, they will tell you
that they will be willing to expand within the
limits of the personnel it will require.
That is all right. You understand what I want.
`suseman:
Yes, sir,
110%, en the personnel, I want you to hear what
McHeynolds is doing.
Well, we are merely making B survey of available
personnel in these various flelds.
You are doing this for the President.
Yes. First, with respect to the personnel that
will be available for your Navy Yard plants and
your arsenals and your Eun factories and what-not.
The civilian personnel that the Government requires.
I have got a cormittee working on that. I have
cot all the departments working on it, The Army
and Navy are working on It, too. That is B.
committee handling the recruiting program to
develop your industry within the - we are going
to have to work for the Government, but the
same people that we have from Employment Service
and Labor Statistics and what-not are the ones
that are going to have the responsibility for
making some survey in connection with your people
with respect to the same kind of individuals
that vill have to be used by industries.
Now, I have brought in just as an experiment
some of the officers of - well, I took the
experiment first of the General Motors people.
Regraded Uclassified
223
- 16 -
I had three of their vice-presidents down here
the other day and asked them of their own
volition, so we wouldn't be damned for sending
out a lot of questionnaires. I said, "You do
it." I told them what I wanted to know and
asked where they expected to get their per-
sonnel. "Well, what do you know about trained
personnel, what is the source of it and how
much will you need and what plan have you made,"
and they are going to make B. report to me of
their own study within their own - whatever
plans they have in that company. I think pro-
bably we can get some help by calling in the
management of these fellows from those various
companies and let them use whatever ingenuity
they can about the recruiting of personnel and
it will give us a little hold-out.
What they did in this Allison plant with respect
to machine tools was very interesting. They
are not producing them, but that isn't because
they have not got machine tools. They asked
the machine tool people when they expanded
that plant how long it would take them to equip
them and then they said 8. year. They said, "We
will give you 60 days; otherwise, we will make
them ourselves," and they got them in 60 days.
And they would. They are doing some of it.
They have turned over some of the stuff to the
Cadillac plant and there are a lot of possi-
bilities - well, you mentioned it yourself a
while ago with respect to the - outting down
the details of work that would have to be made
by the maximum skills and allocating it some
place else.
There are a lot of possibilities in that field
and what I am trying to do is merely tie in
this survey of available personnel 80 that
they can't fool us on what there is and - also
so that we won't be running competition between
recruiting for our Government plants and the
industry - necessary industries recruiting for
themselves, not get into & competitive situation,
We are trying to cover the field as best we can.
224
- 17 -
I make it my principal job to keep our boys
off of each other's necks and keep them dupli-
cating and not stop anybody from getting in-
formation that they are now doing.
Almy:
of course, that is going to depend - part of
it is going to depend on your allocations to
the industry.
Oh, yes, We have got to find out what the
capacity is in these various different indus-
trios. Now, today the boys are going into this
machine tool thing with respect to the plants
that now are working on three shifts, those
that are working on two, and those who are work-
ing on one and don't want to work on but one,
what the plant's capacity is if the personnel
were available to increase their production up
to their maximum --
Mac, do you think I made my request too general
to these people?
Le?:
No, I don't. I think the thing you need to know
to talk to the machine boys is merely how much
relatively they must increase their production
in order to meet the program that you want to
put in.
Mauseman:
That is right, but 11 I may be permitted to say
so, it seems to me, just knowing the machine
tool crowd and Mr. Serner and knowing some of
the companies, what would be the best thing to
present to them 1a not by the load that is
placed on individual companies, what we want,
but how many lathes do we want, so es to give
them the problem of saying that we will get
so many lathes from American Tool and so many
from LeBlond and so many from Lodge and Shipley,
I mean, let them study the problem and allocate
the number of --
Supposing you do it both ways, will you? Can
you do it both ways?
eman
Well, I can try to.
Regraded Uclassified
225
- 18 -
H.R.Jri
Do 1t by companies, anyway, because it doesn't
do me EL bit of good to 80 to Thurman Arnold
and say, "I need a thousand lathes and I can
only get two hundred." He comes right back
and says, "What companies?"
superian:
As I said, there is where the machine tool
builders should come in and say, "Well, my
oninion is you should expand American Tool,
LeBlond, Lodge and Shipley."
Well, give it to me the way I asked you.
isemán:
Yes, sir.
And then be prepared to do the other thing,
too, if you can. That is Tair, isn't it?
Oh yes, sir.
I mean, do it both ways so if they come back
and say, "All right, Major, how many machine
lathes do you want?" you have got the answer,
but let me do it my way, because I want to
have them - let them know that 1 can call them
by name and then if they say, "Well, all right,
get down to business, boys, how much does that
mean in terms of this and that and the other,"
and then If you have the answer, swell.
Well, your philosophy with respect to your pro-
posal there is the same as mine when I called
these vice-presidents in and said, "Vihat will
you do?"
Mandeman:
Yes, sir, you gave me some of the thought on
that.
VeR:
You are just as much American 6.8 I am. You
ought to have the same amount of interest I
have in seeing this job done. What will you
do and let me know in detail what it is.
S.H.Jr:
Don't misunderstand me. So far, I have had
nobody refuse to cooperate, nobody, but I
would like to have two six shooters and I
Regraded Uclassified
26
- 19 -
would like to have them loaded for bear in
case I need them 80 I EUTI not just bluffing,
but nobody has turned me down yet,
12mg:
Well, Mr. Morgenthau, the other day I talked
with Mr. Pentschler and I got hold of him
half an hour efter I got the order from the
President and he told me he had three million -
eight hundred thousand dollars worth of stuff
for Japan and Russia and I didn't even know
how much money the Navy had or could get and
I just simply said to hold it and I said I
divin't know how this was soing to be financed,
I didn't know whether it would be a deficiency
bill or whether we would ¿ᵉᵗ some money author-
ized from Congress, or what it was all about,
but I was going to get the money and I would
buy all that equipment and we telked about
it. He [ave me a list of it, and so forth.
In half an hour he called me up and said, "Are
you going to have any trouble financing that?"
and I sald, "No, I don't think SO. If the
President orders it, I know I am not. I don't
know how It will be." ñe said, "Don't think
of financing. If necessary, I will give it
to you. Better still, I will rent it to you
for a dollar B. year."
dete
You are getting that.
Which Rentschler WBB that?
Aloy:
Fred.
Well, Gordon is the fellow that came to see me
three months ago and cried, begging me to take
this stuff off and I put It up to your people
and they turned me down cold.
Viny:
Well, of course those particular 10thes are
no good for anybody but Ordinance, I couldn't
interest the Ordinance people in them and
I don't know whether the Ordinance is coing
to take them now or not, but If they don't,
I will If I have to stick them out in a
cornfield.
Regraded Uclassified
227
- 20 -
H.M.Jr:
I will see you at 10:30, Monday, and get
together before, will you?
Thank you very much.
228
STRICTLY CONFIDENTIAL
Number of Airplanes Ordered by the British and
French Governments from May 16 to May 22, 1940.
Classified by Manufacturer and by Type of Plane
Glenn L. Martin Co.
Martin 187 reconnaissance bomber
480
Douglas Aircraft
DB7B 2-engine bomber
275
Boeing Airplans Co.
DB73 bomber
275
Lockheed Aircraft Corp.
P38 pursuit
800
Total All Companies
1,830
Treasury Department, Division of Research and Statistics.
May 23, 1940.
Source: Anglo-French Purchasing Board.
Regraded Uclassified
229
STRICTLY CONFIDENTIAL
Number of Airplanes Delivered to the British and
French Governments from May 16 to May 22, 1940,
Classified by Manufacturer and by Type of Plane
Glenn L. Martin Co.
167F 2-engine bomber
12
Curtise-Wright Corp.
Hawk 7545 pursuit
23
North American Aviation
NA64 basic trainer
12
Douglas Aircraft
DB7 2-engine bomber
10
Lockheed Aircraft Corp.
B14 2-engine reconnaissance bomber
IN
2
Total All Companies
59
Treasury Department, Division of Research and Statistics.
May 23, 1940.
Source: Anglo-French Purchasing Board.
230
STRICTLY CONFIDENTIAL
Number of Airplane Engines Ordered by the British and
French Governments from May 16 to May 22, 1940.
Classified by Manufacturer and by Type of Engine
Wright Aeronautical Corp.
GR2600 (1700 h.p.)
1,824
Allison
V1710-015 (840 h.p.)
2,288
V1710-E4 (840 h.p.)
206
V1710-F3R (840 h.p.)
875
Total Allison
3,369
Total All Companies
5,193
Treasury Department, Division of Research and Statistics.
May 23, 1940.
Source: Anglo-French Purchasing Board.
Regraded.
231
STRICTLY CONFIDENTIAL
Number of Airplane Engines Delivered to the British
and French Governments from May 16 to May 22, 1940,
Classified by Manufacturer and by Type of Engine
Pratt & Whitney
R985- SB4G
( 825 h.p.)
24
R1830-S030
(1050 h.p.)
5
R1830-83040 (1200 h.p.)
9
R1830-S101G (1200 h.p.)
2
Total Pratt & Whitney
40
Wright Aeronautical Corp.
GR1820-G102A (1200 h.p.)
4
GR1820-G205A (1200 h.p.)
33
GR2600
(1700 h.p.)
12
Total Wright Aeronautical Corp.
49
Total All Companies
89
Treasury Department, Division of Research and Statistics.
May 23, 1940.
Source: Anglo-French Purchasing Board.
STRICTLY CONFIDENTIAL
Sobedgjed by Nouths, of Airplane Orders of sal Fresch Sovernmente
Cleasified by Masufacturer and ky Type of Flass, May ce, 1940
I
Adjustments five prior
:
Rehaduled inliveries for fature moths
Total unfilled
schedule II Abrad of schedule
:
el im of plans
I
arders - of
-- of May 28
-
na of May 29
a
1941
1,
SAY 22
(to be when sa (to le definited from:Hay 25
,
a
1
1
:
]
.
future schedulete
fature acheduled
I
so
E
June
2
July
:
Ang.
Tept.
Oct.
Box,
Dest.
2m.
Tel.
Mar,
AVIT-
,
May
1
I
deliveried)
July
deliveries)
Ame-
Des.
Box,
C
:
34*1
Date
E
(Jace :- Mar Un Ca.
1577 2-mpm server
07
IN
13
Martin VAT
450
1
11
4a
23
51
a
44
B?
2
55
40
Clean 1 Marija ci,
562
13
1
13
E
ey
57
33
falls
"
55
55
4)
information Cary.
line 75th purpuit
20
an
- 75a5 pursuit
5
5F
*
$
54
-
13
15
-
LE
- (24 persuis
TOO
18
37
5
K1
62
48
as
El
&
&
50
Teste 95,4 parent
160
LE.
P
et
21
12
=
81
Total Curp.
1,261
6.
e
5
=
n
e
gé
de
1
15
"
5%
51
*
71
72
73
K/
forth AMERICAN ATTATION
tails boto Registr
129
41
5
5
8
R
32
Sale health tratuir
690
I
3
I
#7
55
:
55
55
be
GL
M
56
5
Il
30
Tukes Morth American Artation
119
2
41
5
43
47
Il
R
el
55
55
56
to
$
66
66
12
a
Unique Aircraft
227 - boaber
142
*
I
&
5
30
2074 imagin Soaber
300
1
5
in
15
30
=
X
en - booker
$35
2
.
T
3
14
%
is
73
di
57
of
44
de
Total Aircraft
B77
M
,
41
45
40
15
R
28
y
3
F
%
61
73
de
47
R.
$
Gs
Boxting Airplane 54.
-- Mater
275
è
12
LM
35
45
51
52
&
Valied discraft Corp.
7156 Chance Tought bonitar
50
3
7
a
12
12
,
Aireraft
15-2000
8
1
a
-
4
HV
5
3
4
-
M
E
.
6
5
1
Imagin Kalez
él
e
2
5.
e
5
5
3
5
5
5
3-9 baster
8
I
3
7.
12
12
42
13
discraft
166
2
-
-
8
.
11
13
15
21
21
16
18
5
5
5
Airpraft
ajec MITE ficilar
ex
W
R
11
Drivitor can.
Turnelt
abé
12
17
*
&
7
31
36
Nell Airoraft Corp.
233 pureus
201
1
2
6
lo
13
16
22
27
as
M
25
17
ASCEPTED Date,
⑆
remonsissance Somber
240
,
1
is
22
*
$
&
E
a
aux
2-engism tobber
76
7
7
a
K
6
я
D1º 2018 2-mgine
24
R
la
31% 20% 2-engias business
95
11
in
17
35
17
F
I
2M
partit
ADO
R
2)
6
10
70
13
loo
soo
IDD
100
100
Total Lockbook Aircraft Dary.
1,736
I
I
If
e
37
30
17
39
is
74
R
104
DE
146
-
APO
too
too
Tekei ass Companies
5,70
=
97
Mb
395
Lake
295
R
R
244
28
2FT
302
405
WIE
492
wgg
446
4:8
170
a
5'
.
Transury Separtment, Division of Insurance asít Statistics.
May 11, 1940.
Purchasing Brant.
.
beyrewerks our carter of dell'wries for Nay,
STRICTLY CONFIDENTIAL
Regraded Uclassified
Deliveries, by Meaths, of Airplase ligia Orders af Britte and Trust Doverments
STRICTLY CONFIDENTIAL
by Manifacturer and by type of Englise, 442 a. 1940
:
Aljustments time prior motia
Scheduled delivaries for fature
Total infilied
schedule Alient of schelule
1940
ed line of engine
oriers M of
" of key 22
As of MAY 22
1941
May 22
(to be sided to (to les debotal from May 2)
:
F
:
future
fature
to
im
July
Aug.
Sept.
Gel.
Sar.
Date.
Jan.
7xh,
Mar,
Apr
MAY
June
daty
?
Sept.
dell
avr.
Deg.
deliveries)
smill . Villary
4795-43
I
57
17
5
5
5
12
5
5
5
2985-182
a
Tal
500 t.p.)
a
1
1.
01940-190
( Son S.p.)
352
1
,
1
21
55
35
55
"
T2
=
-
17
10
17
is
y
57
0525-2044
- n.p.l
R57
I
2
325
Les
120
LES
131
137
115
15
1
11050 N.B.)
4
4
(1050 6.7.7
30
31
E
as
DE
12205
234
e
la
6
2
12
&
24
28
16.
16
18
11
11
11
La
LE
a
12
13
(3200 lived
3,003
334
a
254
añi.
259
all
243
207
an
and
237
250
137
(1850 now
ave
75
DIE
155
167
187
DE
Total ceass 4 withing
5,954
354
a
Il
423
e
423
411
-
424
409
335
138
317
yes
as
-
200
de
Aly
12
13
TODAY Aemunitical Dary.
($200 not
254
34
10
53
e
55
14
192
12
17
»
24
n
R
%
(100
5.5.)
1,133
22
M
15%
SAT
176
176
sys
17e
$1200 N.p.)
1,003
11
17
2.
as
117
120
117
110
147
100
300
(1220
1,194
as
15
164
Lao
190
-800
200
200
200
10
30
150
240
270
aso
250
260
no
204
(1700 0.00)
297
15
-
-
-
F
$
-
$17.00
503
as
x
59
IM
101
is
150
Total Aerocautions am.
6,001
53
14
4a
14%
21
are
BE
Mt
414
412
2M
BA
RI
+36
423
474
470
-
-
-
Allieno
virio-day
L
3.193
T
=
4
54
13
140
200
zya
5%
3/5
333
533
300
aye
258
E
71710-04
, -
25%
1
,
:
10
20
a
25
2
-
25
as
21
11/10-738
- -
RIS
,
A
43
43
67
109
Las
213
425
Total Allien
4,18%
1
2
y
21
11
199
263
215
110
353
171
401
574
354
192
as
214
225
Total all Companied
15.138
421
90
INI
312
582
you
1,111
1,117
271
972
1,472
1,081
1,114
LIS
1,122
995
959
834
LEE
12
11
Treasury Department, Division of and Statietics.
sar 23.
fource: Auglo-Fressn Purchastag Soard,
Depresents ob# giarver of expensive inlivacion der -
STRICTLY CONFIDENTIAL
Regraded Uclassified
34
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Dr, Head
Subject: Conference of Secretary Morgenthau, Mr. 5loan, and G. J. Mead
The question of Allison production was discussed, and Mr. Sloan stated
that he felt that Allison had done & remarkably fine job in getting the
new plant in production in such a short period. At present there was little
OF no production. as they were engaged in trying out the tools and instruct-
Las two additional shifts of man, Mr. Sloan stated that the shipments would
have concht up and exceeded the commitments to our Government by September;
nurtherwore, that the plant would be operating at capacity in November, at
valon time he stated the output would be 400 engines per month.
Some of the delay was attributed to changes in design, the necessity
for building right and left hand engines, the changes necessary for the Bell
Fighter. and the difference between Allied and American requirements,
Mr. Evana has been put in charge of the Allison plant, while Mr. Drystatt is
recognsible for the parts being manufactured at Cadillac. At your suggestion
Kr. Sloan agreed that he would meet us at Indianapolis in two wooks' time.
Mr. Sloan raised the question of whether the General Motors Corporation
should put 50 million dollars into B plant in Canada to build large Bristol
aircraft enginee for the British. Ee stated be had been approached by
Mr. Fedden and had been requested to give an immediate answer. His board had
Regraded Uclassified
235
Secretary Morgenthau - 2
authorized him to make the decision, based on your advice. You told Mr. Sloan
that you felt it unwise to give him a definite decision for a few days, but
in any event the plant should be built in the United States, not in Canada.
It was pointed out to Mr. Sloan that the engine in question as far as ve
knew was not e proven type. It was intimated that ve may need the entire
production capacity of this country ourselves and that until a survey has
been made of our needs va feel it most unwise for General Motors to make any
commitment, to which Mr. Sloan agreed.
Dictated by Dr. Mead, but
not read by him.
236
CONFIDENTIAL
May 23, 1940
To:
The Secretary
From:
Mr. Young
On May 21st, General Brett talked with me on the
telephone concerning the machine tool situation. On the
same day, he also talked with Lt. McKay, who gave you
a written note covering the same matter.
It was General Brett's suggestion that a coordi-
nator for the machine tool industry was necessary. He
mentioned the names of Mr. Batt, S.K.F., and Mr. Pratt,
formerly with General Motors.
In addition, General Brett said he had heard three
complaints from airplane engine manufacturers, stating
that machine tools were being shipped at high prices to
Japan and Russia. General Brett understood these engine
manufacturers to say that the same tools could be used
in the manufacture of plane engines.
As a matter of fact, Mr. Yost, Acting Chief of the
Division of Controls in the absence of Joe Green, told
me last week that machine tools were being shipped to
Russia and Japan, but that those tools were not the type
or the kind which could be used by plane engine factories.
General Brott doubted the validity of these complaints.
P4.
237
May 23, 1940
General Brett called and said some sort of a
coordinator would seem advisable for machine tools -
possibly Mr. Batt (SKF) or Mr. Pratt formerly with
General Motors.
Also yesterday some complaint developed about
shipments of machine tools to Russia and Japan.
Will you talk with him?
May 23, 1940
4:30 P.E.
HM,Jr called Captain Collaghan, the President's Naval
Aide, at 4:30 p.m., and the following is EM,Jr's side of
the conversation:
"How are your
I am alive.
I an calling you in your capacity as the President's
Naval Aide. President Gilmore of the Packard Engine Company
came in to see me about his engine. He has a 1300 h.p.
engine. I told him to keep his shirt on because I was
working on the whole engine picture, but he went over to
see Edison, through the back stairs, and I understand that
Edison promised him a development contract which may run
between $1,000,000 and $1,500,000. That is not playing
ball. We will not be ready for & week on this engine
picture and we do not want Packard to get any special treat-
ment. I would like to have the President know this and
that he should tell the Navy not to do anything on new air-
craft orders unless they are cleared either through the
President, you or me. Re cannot tell the other manufac-
turers that there are no orders until #E have finished
our study and then let Packard get special treatment.
I will keep you posted on what we are doing."
Regraded Uclassified
239
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
May 23, 1940
FROM
E. 8. Foley, Jr.
The Council of National Defense was established in 1916 by
an Act of Congress. The members of the Council are the Secretary of
Mar, the Secretary of the Navy, the Secretary of the Interior, the
Secretary of Agriculture, the Secretary of Commerce, and the Secretary
of Labor. In all probability legislation would be required to add
additional representation to this Council.
However, I wish to cell your attention to a power which would
enable the President "to appoint & Board of Mobilization of Industries
Essential for Military Preparedness." This authority was given to the
President in June 1916. So far as I have been able to learn, the authority
has never been exercised. This power would seem to give the President the
elasticity insofar e.s membership is concerned which the powers relating
to the Council of National Defense would not permit.
It is interesting to note that Executive Order #6166 appears to
have transferred from the Council of National Defense to the Procurement
Division of the Treasury Department all functions in connection with policies
and methods of procurement of equipment, stores and supplies.
In the event you should decide to recommend that the President
utilise this power, I should like to have an opportunity to go over the
matter with the Attorney General before you speak to the President.
F.11.7h.
REFER TO FILE No.
240
TREASURY DEPARTMENT
WASHINGTON, D. C.
OFFICE OF THE CHIEF
u.s. SECRET SERVICE
May 23, 1940
Memorandum for the Secretary
From Chief, Secret Service
I have just been advised by Supervising Agent Starling
that at 2:00 A.M. this morning you advised the switchboard
operator at the White House that your telephone rang and
that as your telephone had not been rung by the operator
at the White House he so advised you.
At 2:28 A.M. the President, from his bedroom, said his
telephone had rung but the White House switchboard operators
on duty (Abbott and Burley) had not called his room.
At 4:30 A.M. the telephone in the usher's office rang.
The switchboard operators did not ring it.
The matter was reported to the telephone company at
8:00 A.M., and they sent two telephone trouble mechanics to
the White House to try to locate the trouble.
At 11:00 A.V. Supervising Agent Starling notified me
regarding the matter and I called upon Mr. Kelly, wire
technician for the Alcohol Tax Unit, to immediately attempt
rected.
to locate the cause of the wire disturbance Bar and have it cor-
Regraded Uclassified
241
May 23, 1940
10:09 a.m.
H.M.Jr:
Hello.
Operator:
Mr. Berna in Chicago.
H.M.Jr:
Thank you.
0:
Go ahead.
H.M.Jr:
Hello.
Tel
Berna:
Good morning, Mr. Morgenthau.
H.M.Jr:
How are you?
B:
Very well, thank you, sir.
H.M.Jr:
Mr. Berna, the President asked me to get together
with the machine tool industry and talk over with
them both the aviation problem and the whole
problem from the standpoint of the government.
B:
Yes, sir.
H.M.Jr:
Now, can you get your gang together?
B:
We're going to have our spring meeting next Tuesday.
H.M.Jr:
Yeah.
B:
Unfortunately, that will make Wednesday the earliest
possible date.
H,M.Jr:
Oh, no, no. I want to Bee them Monday. Where are
you going to meet?
B:
In Cleveland.
H.M.Jr:
Well, let them come via -- Cleveland via Washington.
B:
(Laughs)
H.M.Jr:
I don't want all
B:
of the Committee, Mr. Burke, by
long distance phone immediately; Mr. Stilwell 18
242
- 2 -
still on the Committee but he doesn't happen to be
Chairman now; and I'll try to arrange that. What
time in Washington do you want us? What time on
Monday?
H.M.Jr:
11:00 o'clock Monday.
B:
11:00 a.m. Monday.
H.M.Jr:
Yes.
B:
All right, sir. Now, I'll report back to you by
telegram definitely that that's been done.
H.V.Jr:
Well, I consider it done.
B:
Thank you, sir.
H.V.Jr:
You fellows can go to Cleveland Tuesday, and you'll
know more about what the Government wants.
B:
All right, sir.
R.M.Jr:
Seriously.
in
Yes, sir. 11:00 a.m. Monday.
H.M.Jr:
11:00 A.T. Monday, and you -- you send me 8 telegram
who all 18 going to be here.
in
I'll - I'm to wire you who 1£ to be here.
V.".Jr:
What's that?
B:
Did you ask me
H.V.Jr:
Wire me who 18 going to come and keep it down, if
you can, to a half a dozen.
Yes, sir.
S.V.Jr:
Will you?
B:
Yes, sir.
H.M.Jr:
You don't -- you don't have to have more then helf
a dozen, do you?
243
- 3 -
B:
No, sir. No, there's just about a half a dozen
on that committee.
H.M.Jr:
Well, I mean, if it's seven I wouldn't kick.
B:
(Laughs) Well, we'll hold it down.
H.M.Jr:
All right.
B:
Thank you, sir.
H.M.Jr:
Thank you.
B:
Goodbve.
244
May 23, 1940
3:35 p.m.
Robert
winckley:
Hello, Mr. Secretary.
H.".Jr:
Hello, Bob.
I've had Captain Jacquin, 18 it, in here.
H.W.Jr:
The Frenchman.
Yeah.
E.M.Jp:
Colonel.
H:
Colonel. Well
H.N.Jr:
Got promoted.
All right.
H.V.Jr:
O. K.
F:
We're going along with him to get some information
on orivate planes that he wants.
H.M.Jr:
Good.
Yesterday I saw Purvis in your office. He said
they might be interested in the D.C. 3's that
the airlines have on order.
S.M.Jr:
Yeah.
Well, they -- if they are going to be interested
they should make up their minds on that end we
should start to work on it, because that's going
to be B. difficult and touchy problem.
H.V.Jr:
Well, they are interested. They gave me 8. formal
request they'd like to buy them.
They did?
H.M.Jr:
Yeah, 33 of them I think, or something like that.
E:
Well, we'd better start to work on it.
H.M.Jr:
Yeah, they'd like to buy them if they could get
them.
Regraded Uclassified
245
- 2 -
H:
Uh-huh.
H.M.Jr:
They'd like to have them right away, of course.
Will you work on it?
H:
Yeah, I tell you what I would like to do. I would
like to get Colonel Gorrell, who 18 the chairman
-- president of their transport association, in to
Bee you on that.
H.M.Jr:
See who?
H:
See you.
H.M.Jr:
0. K. Anytime you say you bring him over. Just
give me a day's notice.
H:
He has headquarters in -- headquarters in Chicago
but I think I could have him here tomorrow.
H.M.Jr:
Well, have your secretary call Lieutenant McKay,
you know -- my office.
H:
Yeah.
H.M.Jr:
And fix the appointment, and we'll do it together.
H:
Now, I -- on the development of this plastic plane
for training, I think Millikan could be given an
assignment on that and turned loose.
H.M.Jr:
All right, now let me just -- may I check that
with Mead?
H:
Sure.
H.M.Jr:
Just to make
E:
Oh, by all means.
E.M.Jr:
Keep my own office
......
H:
Oh, by all means, because I -- I thought that while
that is under Millikan's line as engines are in
Mead's line.
K.M.Jr:
Now, Millikan -- you mean Millikan of California.
H:
of Cal Tech, yes, sir.
Regraded Uclassified
246
- 3 -
H.M.Jr:
I'll see him before he leaves.
H:
Yes, I think that'd be -- I think that's going to
be pretty important because, if these people take
all our light planee out of here, it's certainly
going to crimp us on 8. pilot-training program.
H.M.Jr:
And turn -- turn him loose on plastic planes.
H:
Yeah.
H.".Jr:
Right.
H:
I had a -- word from New York today that suggests
that we don't try to build such good motors as the
British are requiring of us, that we out down the
quality and increase the output. I suppose that's
been explored, hasn't it?
H.M.Jr:
Well, I tell you when Mead -- Mead is going to
explore that. He's going to be at Allison Saturday.
in
Yeah.
H.M.Jr:
He's -- tomorrow he's at Dayton.
H:
Yeah.
H.M.Jr:
And he's got that in mind. Sloan WAB here for an
hour and a half this morning, and he's going to
spend Saturday at Allison and he's got that in
mind.
to
I see.
H.M.Jr:
See?
Well, that's fine. That's all I have on my list
today, sir.
H.M.Jr:
Thank you, and I can't tell you how much I an-
preciate this fellow Mead. He's a wonder!
E
Yes, he 18.
H.M.Jr:
He's simply a wonder 1
in
Yeah. Well, I'm certainly happy we've got him.
H.M.Jp:
Thank you.
H:
Thank you, Mr. Secretary.
Regraded Uclassified
247
May 23, 1340
3:38 p.m.
H.K.Jr:
Mead?
George
Yead:
Yes.
F.".Jr:
Morgenthau.
Y:
Yes, sir.
H.W.Jrt
Bob Hinckley just called, and he said he'd be
delighted if you would turn Millikan of California
Tech loose on that plastic plane business.
All right.
H.M.Jr:
I think if I could have a little memo on that thing
also before you go to show the President, see......
M:
On the plastic planes?
B.M.Jr:
Well, its just that we've got this group -- just BO
I can show them we are doing something -- I mean,
we've got this for the plan of the need for just
a one-page memorandum AB to the need, you see.
K:
Oh, yes. Well, I have all this story together
but I haven't any descriptive memorandum which I
could try and get out.
H.M.Jr:
Do you think that you could do that before five
or when you leave? Is there a train at five?
M:
Well, I'll get Johnston to do it if I can't.
H.M.Jr:
Get Johnston to do it.
M:
Yeah. I will.
H.M.Jr:
I'll see you in a little while.
M:
All right. I've got two or three things before I
go that I'd like to talk to you about.
H.M.Jr:
I'll see you in about twenty minutes or half an
hour.
All right.
H.M.Jr:
Thank you.
Regraded Uclassified
248
May 23, 1940
4:40 p.m.
Lewie
Compton:
Hello, Mr. Secretary, this is Lewis Compton.
H.M.Jr:
Talking -- Morgenthau.
C:
How are you today, sir?
H.M.Jr:
I'm fine.
0:
Mr. Morgenthau, we just had B. telephone call from
Callahan
H.M.Jr:
Yeah.
6:
stating that the President made Bome inquiries
about this Packard situation.
H.M.Jr:
Yeah.
C:
I wanted to give you the full and complete story
about it, Mr. Secretary, if I may. It will just
take a moment to tell you about it.
H.M.Jr:
Surely. I have lots of time.
C:
Mr. Gilmer, the president of Packard Motor Car
Company, requested an appointment with Mr. Edison,
which was granted, and he met Mr. Edison at eleven
o'clock in the morning.
H.M.Jr:
Yeah.
C:
Gilmer had two propositions to make. One was that
he 18 now producing these high-speed, water-cooled
gasoline engines for our Scott-Payne motor torpedo
boate, you Bee.
H.M.Jr:
Yeah.
0:
He said that they are about 75% O. K. for aero-
nautical work. It would require some additional
research and development work to make them BO that
they would be absolutely useable in aircraft, BO
that his conversation took two phases. The first
phase of it was -- they request that Mr. Edison
consider giving Packard a development contract
where they manufacture one, or two, or three --
not more than three
249
- 2 -
H.M.Jr:
Yeah.
0:
engines under B. development contract. We
have numbers of those out. We've even got two or
three out on Diesels for aircraft, for instance.
E.V.Inr
Yeah.
C:
The second phase of his conversation concerned
the possibility of Packard getting a license to
manufacture engines already approved, such as
Allison or Curtiss Wright or any of those names.
E.V.Ir:
Yeah.
C:
Mr. Edison listened and made no commitment what-
ever, of course, and told Gilmer that he would
consider both propositions and consult with him
further at some future date. At noon or twelve-
thirty, Mr. Edison asked me to go to lunch with
him, and I went with Mr. Edison and Admiral King,
of the General Board of the Navy, and Captain Dale,
end Mr. Edison's eide. Mr. Edison told me of this
conversation with Gilmer. I immediately recommended
to Mr. Edison that this thing, as far as the develop-
ment contract was concerned, was something to con-
sider with the technicians in the Bureau of Aero-
nautics, and that Admiral King could run with the
ball for Mr. Edison but he should check in with
Admiral Towers because it's Bureen of Aeronautics
money.
H.M.Jr:
Yeah.
DE
Then I said the other phase of it -- this licens-
ing business -- 16 B matter now being handled by
Mr. Morgenthau, the Secretary of the Treasury, and
in order to let the left hand know what the right
hand 18 doing and have no confusion in this thing,
Admiral King should immediately check in with
Captain Kraus, who 18 the Navy's liaison with
Treasury.
That's right.
So Admiral King got in touch with Kraus, had a
meeting with him yesterday afternoon, at which
meeting it WAS decided, and Admirel King BO
recommended to Mr. Edison this morning, that the
Regraded Uclassified
000
- 3 -
development thing be dromed -- divorced entirely
from this other thing -- and receive consideration
along with anything else from your end of it.
You Bce?
Well, that's fine.
Then the development contract -- they haven't
even decided on that yet -- Admiral King and
"r. Edison are in conference right now
Well, look
weighing the -- whether or not to E°
ahead with the development. We do went e water-
cooled engine development.
Well, could I ask you to do this, and if you want
it direct from the President, I'll ask him to give
it direct. I need four or five days more on this
engine picture, see?
Yeah.
And then, I hope by Tuesday or Mednesday or next
week, I'll want to sit down with the Army and Nevy,
end then with the President, and try to get a sort
of B. standardized thing on engines for Army and
Navy and the Allies. Because the way the thing
18 now, it's just cook-eyed and we'll never get
production. Now Packard didn't play fair with me.
He asked me what the situation was. Ve said, "All
I want to know 18 development serious." I said,
we're demn serious. I said there's nothing for
four or five days, but we'll let you know. Now he
was around here trying to get one of these licenses.
2:
Yeah, we've shunted him off from the White House --
he got no encouragement here -- we've sent him
right back to Treasury.
E.M.Dr:
Well, if the manufacturer can play the Navy off
against the Treasury -- the Treasury against the
Army, we're not going to get anywhere.
Well, we've refused to do that. You Bee? In this
case, we sent him -- on the license thing -- we sent
him right back to Treasury -- wouldn't even talk to
him about it.
Regraded Uclassified
251
4
H.M.Jr:
I think what I'd better do 80 that there oan be no
misunderstanding certainly as far as I an concerned,
I am going to ask the President tomorrow if he
wants it -- that we're sort of at 8 standstill
for four or five days, which isn't very much when
you consider the mess that we're in.
C:
Well, that's All right -- entirely all right with
118,
E.".Jr:
And then, after we know where we are on the license
thing -- whether we want to give Packard a license
or whether we don't, I mean, before I make any
recommendations to the President, I'll clear it
with Army and Navy first. See?
C:
Well, that's fine.
H.M.Jr:
But, if we could just sort of stand still for
four or five days, and find out where we're at --
put all our cards on the table together -- it
would make it lots easier for me. It's hard
enough as it 18.
C:
Well, I wanted you to know that the appointment
with Packard was initiated by Packard. In other
words
H.M.Jr:
well, he stood on my doorstep for twenty-
four hours and finally I had him come in and I
said won't you come back in e week because we
haven't got anything, and then he runs over there,
which
well, that didn't avail him anything 88 far
as the production of the licensing goes because we
just simply didn't talk to him about it. We gave
him no encouragement. Now on the development con-
tract, of course, that's something else. That has
nothing to do with production anyway.
H.M.Jri
No, but it's just if the President should decide
where he's going to put the development money, see --
I mean, I've tried to give to him the whole picture
on the engine thing in the United States, and when
he's got it, well, he's going to be as sick as I
am.
D:
Well, it's not too good, I know.
Regraded Uclassified
252
- 5 -
H.M.Jr:
But
C:
well, if you hear anything, Mr. Morgenthau,
any rumors, or anybody says anything, if you'll
just give me & buzz on the phone here, and if I
haven't got the answer I'll get it for you in a
hurry.
H.M.Jrt
Thank you very much.
0:
The lowdown is that the word got to Callahan
some how or other that we had a contract with
Packard, or had promised & contract to Packard
to produce airplane engines. Well, that just
1sn't true. And that not only 1sn't true, but
we never even thought of doing it, and my first
recommendation to Mr. Edison, which he followed
immediately, was to get Kraus in the picture
right away BO that there would be a tie-in with
your effort there and would be no confusion.
H.M.Jr:
Thank you BO much for calling.
C:
All right, sir.
H.M.Jr:
Thank you.
C:
Good-bye.
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
753
INTER-OFFICE COMMUNICATION
DATE May 23, 1340
TO
Secretary Morgenthmu
FROM Kin Cochran
No. Leroy-Beaulieu, Financial Counselor of the French Embassy, telephoned
11 this noon from New York. He had received a cablegrem from his Government
to sta effect that the cablegram which had been sent to Leroy-Beaulieu BONE
Lega BEO, and which he had summarized to us, had not only been meant to indi-
este concern over American securities falling into the hands of invadors in
Puropa. but also over the possibility of such securities being imported into
in United States and sold on this market. I told Leroy-Reaulieu that we had
went the cablegram to Paris, as agreed upon, and that we had received word back
Ust the French officials had been informed by our Embassy as to the services
eich our officers might render in authenticating the destruction of American
incurities, I added that the Treasury was also notively studying the other two
points covered in the French cablegram, namely, the control of admission into
vat the sale within the United States of securities which may have been acquired
If 3 result of military invasion. Leroy-Beaulieu mentioned the fact that his
Ambarsador understood that Lord Lothian had received a message from London on
tife subject. I confirmed that Pinsent had taken the matter up with us, and
that W have been studying it this week, but have nothing definite yet to re-
you
Leroy-Beaulieu naked If there WAD any basis for the story in this morning's
(ruse to the effect that German balances are being transferred to Sweden. Ee
<100 had heard the rumor of German nales on the Yew York market of securities
of the invaded countries, which was alleged to have contributed to the depres-
tios in our market the past few days. I told Leroy-Beaulieu that Pinsent had
received an unconfirmed report from Stockholm a few days ago to the effect that
A number of German accounts including official funds were being transferred from
Insurance companies in the United States to banks in Sweden, under telegraphic
instructions from Germany to the United States. I told Leroy-3eaulieu that ve
had дз knowledge on this point. He stated that he had talked with the Chase
Sank and had been informed that this institution YD.6 not avare of any recent
imariers of the type under reference. I told Lercy-Beaulieu that ve vere check-
Inc over the reports of sales of securities from accounts of invaded lends, but
vere not yet aware that there had been any German anlo thereof the past few days
1: affect the stock market.
Lercy-Beaulisu referred to the decrees taken in France two days Ago in re-
AND to American currency and securities. Hio people regretted that they could
=== give un any prior notice, but had taken these stepa in very upset conditions
veich they were sure ve would understand. Leroy-Beaulieu thought the general
situation and atmosphere of France were a little better today. That 1s, confi-
Lence had been recovered by the populace to a certain extent and panic among
the civilians of northemsteru France had subsided. Ea emphasized the confusion
1/mt had resulted from refugees from the most densely populated part of the
Regraded Uclassified
254
- 2 -
country endeavoring to move wast and south at the same time the French Govern-
ment vas rushing troops in that direction, over the same highways, to meet the
Germans. Leroy-Beaulieu insisted that there was no panic as far as the aray
was concerned, but simply a very difficult situation in establishing communica-
tions and getting troops into position to meet the enemy.
Mr. Leroy-Beaulieu will be in Washington tomorrow, Friday, and desires to
show us certain confidential information.
10.m.
255
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Mr. Haas MA
Subject: Railroad freight movement for export.
Receipts of freight for export at New York increased
during the week ended May 18 to about the average level of
recent weeks, while receipts at 9 other North Atlantic ports
held about stationary. The net change in the week's total
for the entire area was an increase of 336 cars. (See Chart 1
and table attached).
The volume of freight exported from New York during the
week ended May 18 was further reduced by 207 cars to a total
of 3,683 cars, according to figures derived from reported data.
(See Chart 2). The reduced exports, at a time when export
receipts were increasing, has raised the volume of lighterage
freight in storage and on hand for unloading in New York harbor
to 7.587 cars, a higher total than in any week since March.
(See Chart 3)
Regraded Uclassified
256
RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK
AND AT 9 OTHER NORTH ATLANTIC PORTS
Week ended
9 other North
1939-40
New York 1/
Atlantic ports
Total
(
In carloads
December 2
3,435
December 9
3,922
1,548
5,470
December 16
4,088
1,658
5,746
December 23
4,848
1,602
6,450
December 30
3,856
1,104
4,960
January 6
4,000
1,251
5,251
January 13
4,056
1,433
5,489
January 20
4,060
1,557
5,617
January 27
4,389
1,825
6,214
February 3
4,274
1,498
5.772
February 10
4,617
1,590
6,207
February 17
3,974
1,637
5,611
February 24
4,550
1,667
6,217
March 2
4,577
2,388
6,965
March 9
4,059
2,448
6,507
March 16
4,072
1,845
5,917
March 23
4,424
2,033
6,457
March 30
4,150
1,492
5,642
April 6
3,979
1,551
5,530
April 13
3,957
1,866
5,823
April 20
4,133
1,557
5,690
April 27
4,346
1,248
5,594
May 4
4,255
1,522
5,777
May 11
3,793
1,619
5,412
May 18
4,165
1,583
5,748
Source: General Managers' Association of New York, Daily
Report of Operating Conditions in New York Harbor.
2/ Source:
Association of American Railroads, Car Service
Division, Report of Carload Freight for Export
and Coastal Vessel Movement. Includes Searsport,
Portland, Boston, Providence, Philadelphia,
Chester, Wilmington, Del., Baltimore, and Norfolk
(or Hampton Roade).
Regraded Uclassified
RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK
AND AT 9 OTHER NORTH ATLANTIC PORTS
1939
1940
NOV.
DLC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
CARLOADS
CARLOADS
THOUSANDS
THOUSANDS
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
NEW YORK
3.5
3.5
3.0
3.0
2.5
2.5
9 OTHER PORTS
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
o
0
28
11
25
9
23
6
20
3
17
2
16
30
13
27
11
25
8
22
NOV.
DEC.
JAN.
FEB.
MAR,
APR.
MAY
JUNE
1939
1940
257 Chart 1
Office of the Secretary of the Treasury
of - - Intere
Regraded Uclass
Regraded
CARLOADS OF FREIGHT EXPORTED FROM NEW YORK -
1939
1940
NOV,
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
CARLOADS
1
CARLOADS
THOUSANDS
THOUSANDS
5.5
5.5
5,0
5.0
4.5
,MMN
4,5
4.0
4.0
3.5
3,5
3.0
3,0
2.5
2.5
28
11
25
9
23
6
20
3
17
2
16
30
13
27
11
25
a
22
NOV.
DEC.
JAN.
FCB.
MAN,
APR.
MAY
JUNE
1939
1940
258 Chart 2
. AS ESTIMATED FROM DATA OF GENERAL MANAGERS' ASSOCIATION OF NEW YORK,
Office of the Secretary of the Treasury
of -
C - 308
Regraded
STORAGE
AND ON HAND FOR UNLOADING IN NEW YORK HARBOR *
1939
1940
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
CARLOADS
JUNE
CARLOADS
THOUSANDS
THOUSANDS
10
10
9
9
8
B
7
7
6
6
5
5
4.
4
28
11
25
9
23
6
20
3
17
2
16
30
13
27
11
25
8
22
NOV.
DEC.
JAN.
FEB.
MAR.
APR.
MAY
JUNE
1939
1940
259 Chart
.
LARGELY EXPORT FREIGHT, BUT ABOUT 10% REPRESENTS FREIGHT FOR LOCAL
AND COASTAL SHIPMENT. FIGURES EXCLUDE GRAIN.
Office of the Secretary of the Treasury
- of - - -
C - 303
3
260
May 23, 1940
Mr. Livesey
Mr. Cookren
There are attached copies which I have had made from & not of copies
received from Vise President Legan of the Federal Reserve Back of New York.
The cablegrame included in these documents have been made ovailable to the
Preasury. but we were not aware of the advice being given the Minister of
the Notherlands, as set forth is the membership. It to felt that the
Department of State should have svailable the information contained is the
attached papers.
10.m.
HMC/ram 5/23/40
261
COPY
May 22, 1940.
Mr. Bernstein:
Copies of "A" and "B" hereto attached were given to
Mr. von Hemert, who called on us at the request of Dr. Loudon, the
Netherlands Minister in Washington, to discuss this matter.
Mr. von Hemert is sending a copy of "A" to Dr. Loudon, who presumably
will use it as the basis of a cable to his Government in London.
W.S.L.
Regraded Uclassified
262
COPY
"Д"
May 22, 1940.
In its cable No. 168, dated Amsterdam, Vay 13, 1940, De
Nederlandsche Bank informed the Federal Reserve Bank of New York
that the right to dispose of gold account upo and dollar account
age with the Federal Reserve Bank of New York no longer belongs to
De Nederlandsche Bank but has been transferred to the Netherlands
Government effective on that date. This cable ie considered by the
Federal Reserve Bank of New York to be B. revocation of the credit
previously authorized by De Nederlandsche Bank in the amount of
$6,960,000 to be drawn upon by the Netherlands Minister in Washington
up to the amount of $145,000 monthly.
It is therefore suggested that the Government of the
Netherlands advise the Secretary of State of the United States
through the American Embassy in London (1) that the seat of the
Government of the Netherlands has been transferred to London, (2)
that the gold in the gold account age in the name of De Nederlandsche
Bank with the Federal Reserve Bank of New York and the funds in the
dollar account "y" in the name of De Nederlandsche Bank with the
Federal Reserve Bank of New York are gold and funds of the Govern-
ment of the Netherlands and that the right to dispose of the gold
and funds in such accounts has been transferred from De Nederlandsche
Bank to the Government of the Netherlands, and (3) what representative
or representatives of the Government of the Netherlands have been
designated and authorised to give instructions in behalf of such
Government to the Federal Reserve Bank of New York regarding the
disposition of the gold and funds in such accounts or any part thereof.
Regraded Uclassified
263
- 2 -
It will also be desirable to suggest that the Minister
of the Netherlands to the United States write a letter to the
Secretary of State of the United States requesting that the Federal
Reserve Bank of New York be advised accordingly, in order that it
may be in a position to act upon the instructions given to it in
behalf of the Government of the Netherlands.
264
COPY
INCOMING CABLEGRAM
Amsterdam, May 14, 1940
Federal Reserve Bank of New York
New York
No. 171
*ZENYT
De Nederlandsche Bank
*ZENTT-NETHERLANDS means: in accordance with
Netherlands cable No. 163 May 10; "We request you after
receipt of that message (Message containing word "ZENYT")
no longer to execute any instructions sent to you on our
behalf if and when such instructions are dispatched to you
from the Netherlands".
Test Correct
RCA 6 1b
265
COPY
INCOMING CABLEGRAM
Amsterdam, May 13, 1940
Federal Reserve Bank of New York
New York
No. 168 STRICTLY CONFIDENTIAL
Will you kindly note that the right to dispose
of our gold account "y" and our dollar account age with your
institution no longer belongs to our bank but have been trans-
ferred to the Netherlands Government effective today. If and
when the Netherlands Government draws on the said account they
will probably do so through the intermediary of the Bank of
England.
DE NEDERLANDSCHE BANK
EMH
RCA 53
Test Correct
266
COPY
INCOMING CARLEGRAM
Amsterdam, May 13, 1940
Federal Reserve Bank of New York
New York
No. 167
Our number 153 Our credit in favour of the Nether-
landa Minister in Washington. Credit increased with $600,000
to $6,960,000. Monthly drawings now allowed up to $145,000.
Please disregard further instructions our number 153. New
instructions reads as follows: In case balance of dollar
account 3 not sufficient to cover said drawings you are auth-
orized to take over as much gold of gold account y as necessary
for the purpose.
IE NETERLANDSCHE BANK
RA
RCA 67 Code
Test correct
267
COPY
INCOMING CABLEGRAM
May 7. 1940
Amsterdam
Federal Reserve Bank of New York
New York
No. 153
By order of our Minister of Finance request
you to open credit of $6,360,000 in favor of the Netherlands
Minister in Washington This credit is valid until further
notice and may be disposed of by drawing not to exceed
$132,500 each month In case balance our dollar account not
sufficient to cover said drawings you are authorized to take
over as much gold from our gold account as necessary for the
purpose.
IE NEDERLANDSCHE BANK
MY RCA 58 Test correct
268
JR
GRAY
Bern
Dated May 23, 1940
Rec'd 7:20 a.m.
Secretary of State,
Washington.
47, May 23, 10 a.m.
REference my telegram No. 31, May 6, 5 p.m.
Official Swiss trade statistics (confidential)
list imports of gold bars in April as follows in
millions of francs: Italy 12, Russia 10, Netherlands 4,
Great Britain 1.7, Germany nil, total 28. Exports:
United States 90, Italy 10, Netherlands 4.7, total 105.
HARRISON
KLP
269
HSM
GRAY
Tokyo
Dated May 23, 1940
Rec'd 7:58 a. IIIs
Secretary of State,
Washington.
364, May 23, 2 P. m.
The continued decline of the pound is being viewed
here with increasing gravity because of the seriously
adverse Effects on Japanese exports in general and on
Japanese imports from British areas. Although in normal
times cheap sterling is advantageous in purchasing from
British areas considerations involving trade within the
sterling area, need for retaining materials for war pur-
poses, Et cetera, are making importations into Japan from
British areas increasingly difficult. The press this
morning reports that the Japanese Government is consider-
ing the fixing of starling at a rate calculated best to
SErVE Japanese requirements, the loss to Exchange banks
due to differences between such rate and the rates on the
free market in NEW York to be borne by the Covernment.
Until funds can be found to operate the plan importers
will bE required to fix Exchange contracts with banks not
later than two WEEKS after issuance of import and fortign
exchange permits.
GREW
RR
Regraded Uclassified
270
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Edouard Jonas, the sender of the attached cablegram, is a prominent
French citizen who was in the French Parliament for many years, and may still
be. His District is in Southern France, but he is the owner of an important
antique and works of art shop on the Place Vendone, Paris, and also has a
business in New York. He married a wealthy American widow. It is possible
that the Secretary may have met him in Paris. I believe he has been active
in relief work.
271
Miss Chauncey brought this in to find
out if you know who Edouard Jonas is.
ek
Deareded i
di
272
Treasury Department
aran
TELEGRAPH OFFICE
24w
WP178 FO CABLE
EVO WAY 22 PM 3 or
PARIS 41 MAY 22/1924 1940
LC HIS EXCELLENCY HENRY MORGENTHAU
WASHNDC
I KNOW HOW MUCH YOU ADMIRE FRANCE WE BEG UNITED STATES SAVE US FROM
BEING SCRATCHED BY GANGSTERS FROM THE MAP OF THE WORLD DO SEND US
TANKS AND PLANES GOD BLESS YOU
EDOUARD JONAS
303P
Regraded Uclassified
273
TREASURY DEPARTMENT
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
May 23, 1940
MELIORANDUM FOR THE SECRETARY
Diere was received this morning from the Counselor of the Polish Embassy a
remorandum requesting:
(1) - 200 Curtiss pursuit planes, P-36
or P-40
(2) - Motorized equipment for one division
consisting of motorcycles, heavy and
light tanks, and motor trucks.
(3) - 4 anti-aircraft batteries with suitable
ammunition.
The Counselor did not have any definite information concerning motorized
equipment or anti-aircraft batteries.
in transmitting this request to General Gregory, Army member of the Liaison
Committee, be was asked to get information as to the quantity and types of
equipment for a motorized division, and also information concerning anti-
aircraft batteries that might be built in this country.
274
REFER TO FILE No
TREASURY department
WASHINGTON, D.C.
OFFICE OF THE CHIEF
U.S. SECRET SERVICE
May 23, 1940
Memorandum for the Secretary
From Chief, Secret Service
On Tuesday morning, May 14, 1940, you handed me a
letter to you from Director Hoover relating to B. report
made to F.B.I. agents by Henry Unschuld in connection
with alleged statements made by Mr. Giamini of the Bank
of America. At that time you telephoned Director Hoover's
office and in his absence talked to Mr. Tan advising him
that you had referred the matter to the Chief of the Secret
Service. You requested the entire file on the case and you
were informed that if Chief Wilson phoned after noon that
it would be arranged.
I telephoned at the time specified and explained that
we desired whatever was available in their files regarding
any of the persons mentioned. I was advised that it would
be sent to my office by messenger the next day.
I again telephoned for the papers on Saturday and was
advised that it would be ready at 4:00 P.M. on Saturday
and placed in the mail or we could have it on Monday morning
if we sent B. messenger for it. I a stated that I would send
for it at 10:00 A.M. Monday.
When the messenger from the Secret Service called for
it on Monday, they did not understand what papers he de-
sired and he called my office. I again phoned the F.B.I.
and talked to Mr. Tan (Assistant Director) and he said that
the papers were then ready and would be handed to our messen-
ger, that there had been B. slight misunderstanding regarding
them. The papers were then turned over to our messenger.
275
May 25, 1940
Memorandum for the Secretary
From Chief, Secret Service
On Tuesday morning, May 16, 1940, you handed M 5.
letter to you from Director Hoover relating to a report
made to F.B.I. agents by Henry Unschuld in connection
with alloged statements made by Mr. Giamini of the Bank
of America. At that time you telephoned Director Hoover's
office and in his absense talked to Mr. Iss advising him
that you had referred the matter to the Chief of the Secret
Service. You requested the entire file on the case and you
were informed that if Chief Wilson phoned after noon that
it would be arranged.
I telephened at the time specified and explained that
we desired whatever was available in their files regarding
any of the persons mentioned. I was advised that it would
be sent to my office by messemger the next day.
I again telephoned for the papers on Saturday and was
advised that it would be ready at $100 P.M. on Saturday
and placed in the mil or we could have it on Monday norming
if we sent a. messenger for it. I stated that I would send
for it at 10,00 A.M. Monday.
When the messenger from the Secret Service called for
It on Monday, they did not understand what papers he de-
sired and he called my office. I again phoned the P.B.I.
and talked to Mr. for (Assistant Director) and he said that
the papers were them ready and would be handed to our
ger, that there had been a elight misunderstanding regarding
them. The papers were then turned over to our messenger.
Regraded Uclassified
276
MP
GRAY
Paris
Dated May 23, 1940
Rec'd 3:23 p. m.
Secretary of State,
Washington
834, May 23, 5 p. n.
FOR THE TREASURY.
A further decree regarding banking intermediaries,
please JEE Embassy's telegram of May 3, is published in
today's Journal Official. It provides that (one) II approved
intermediories" of the Foreign Exchange Office may im-
port French and foreign coins and banknotes and all classes
of securities, (two) "specialized intermediaries" may
import "Class B foreign currencies" (i.ë. currencies of
foreign countries other than those included in the ster-
ling and "hard" currency groups) and securities payable
in "Class B foreign currencies", (three) those "special-
ized intermediaries" which are authorized to hold "pro-
fessional accounts" (i.t. business acounts) may import
all classes of occurities. (END SECTION ONE)
BULLITT
KLP
277
JT
GRAY
PARIS
Dated May 23, 1940
Rec'd 3:36 pemo
Scoretary of State,
Washington,
834, May 23, 5 p.m. (SECTION TWO)
Another decree stipulates that overtime in EXCESS
of sixty hours per week will be paid at the full wage
rate. Heretofore all work in EXCESS of forty hours per
WEEK vas paid on the basis of sixty per cent of the
normal wage rate the remaining forty per cent being
turned over to the Government.
In order to maintain stability of domestic priots of
tin plate and iron the Government will pay any increases
in the cost of importing these commodities resulting
from augmented ocean freight.
The market was fairly firm today. Rentes increased
fractionally as did most French securities. Suez gained
650 franos,
The Bank of France statement for the WEEK ended Day
16 shows an increase in note circulation of two billion
francs the total circulation being slightly under 161
billion. Provisional advances to the state increased
one and a half billion.
BULLITT
CSB
Regraded Uclassified
278
HSM
GRAY
Berlin
Dated May 23, 1940
Rec'd 12:35 P. me
SECRETARY of State,
Washington.
1475, May 23, 10 a, m.
FOR TREASURY FROM HEATH AND FOR THE INFORMATION
OF THE DEPARTMENT.
While the German sElling rate for dollar drafts
to travellers holding a permit to purchase forzign
Exchange remains around 2.502 marks to the dollar the
Exchange authorities have allowed the official selling
rate of dollar currency to rise from an average selling
rate of 2.62 marks on May 3 to 2.91 marks today Explain-
ing the action as due to higher costs of shipment and
insurance for international transactions in currency
and also as an effort to adjust demand to supply.
KIRK
RR
279
JR
GRAY
Paris
Dated May 23, 1940
Rec'd 2:30 pame
Secretary of State,
Washington.
833, Day 23, 4 p.m.
FOR ThE theasury.
Janseens of the National Bank of Belgium has just
furnished 2 member of my staff with a copy of n letter
from Outtin approving the decision of the Bank to
accompany the Belgion Government. HE also Enclosed a
copy of the modification in the commercial charter of
the Sank necessitated by this decision. Jenssens has
sent copies of both documento to the NEW York Federal
RELEIVE Bank and to the Board of Governors of the
Federal RESERVE System (please SEE the Embassy's No. 791,
May 21, 5 p.m.). A translation of the letter is as
follows:
"Brussels, May 15, 1940.
Mr. Governor: I have taken note of the decision
which is to bE taken by the National Bank, at my
request and in the name of the Government, to continue
to carry on its monetary functions in a part of the
territory not occupied by an Enemy power in order that the
to continue
needs of the Treasury may bE provided for, and/to carry
on
Regraded Uclassified
280
-2- #833, liay 23, 4 p.m., from Paris.
on its functions as cashier of the State, and that
for these reasons the following has been decided upon:
(END SECTION ONE)
BULLITT
HSM
281
BJS
GRAY
PARIS
Dated May 23, 1940
REc'd 3:30 P. m.
Secretary of State,
Washington
833, May 23, 4 P. mi (Section Two).
In accordance with the provisions of the Royal Arrete
of February 2, 1940 relative to the administration in time
of war of commercial concerns or concerns having a commer-
cial form the office of the bank is to be established in
any Belgian or fortign city in which the seat of the Belgion
Government should actually have been moved.
The administration of the Bank is to bE assured within
the limits of their respective powers by those members of
the Board of Directors the REGENCY Council and the College
of Auditors who are able to meet together and consult in
that place,
The administrative directive or dispositive powers
of members of the Board of Directors the REGENCY Council and
the College of Auditors residing in other localities are
suspended.
The position of all those who for any reason whatsoever
have the right to dispose of the properties and rights of
the bank and who are in a part of the territory occupial
by
Regraded Uclassified
282
-2- 833 May 23, 4 P, m. from Paris
by an Enemy power are suspended.
I hereby confirm to you my approval of the above mention,
Ed decisions. Signed Gutt."
Pending final decision as to the French city in which
the Belgian Government is to bE Established (it is understood
that the Government is moving from its provisional headquart-
ers at Havre) the National Bank of Belgium will continue
to operate at the Bank of France in Paris. (End of MESSAGE).
BULLITT
CSB
Regraded Uclassified
283
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE: May 23, 1940, 3 p.m.
NO.: 1481
Reference is made to telegram of May 21, No. 1443
from the Embassy.
The following 18 for the information of the Department
and for the Treasury from Heath:
I Baw Wohlthat of Goering's organization yesterday.
Wohlthat has undertaken a variety of special economic missions
for the Reich Government, including the negotiations in
March 1939 for a trade agreement with Rumania.
Wohlthat told me that he was leaving today to take the
post of Reich Commissar for the Central Bank of the Netherlands.
Germany did not intend to replace the guilder by the mark,
Wohlthat asserted to me. The Job Wohlthat 18 to do, it 18
understood, is to reorganize the Netherlands monetary and
banking system. It is noted, in connection with the appoint-
ment of Wohlthat, that on May 10 he published in the DEUTSCHE
VOLKSWIRT an article to which it is understood official
approval had been given about the new economic order in
Europe. He stated in this article that the Third Reich's
aim is to create a Greater Germany as a new strong sconomic
center in Europe. Outside of the political boundaries of
this Greater Germany it aims to mark out an area in the
northern and southeastern part of Europe which will practice
close economic cooperation with Germany but which will
restrict
Regraded Uclassified
284
- 2 -
restrict its trade with the great powers, as for instance
England and France, which had no natural or vital economic
relation to the area, according to Wohlthat. It was con-
templated that this area of German economic influence would
be supplemented by the return of German Colonies, and its
boundary on the East would be the Russian sphere of interests.
KIRK.
EA:LWW
Regraded Uclassified
285
TREASURY DEPARTMENT
WASHINGTON
May 23, 1940.
MEMORANDUM FOR THE SECRETARY:
The attached letter from the office of the Col-
lector of Customs at New York, giving a list of Italian
ships in port and their activities, is submitted to you
Just as a matter of information.
Banil Kanio
Encl.
Regraded Uclassified
286
IN REPLY REFER TO:
JGCF :ks
TREASURY DEPARTMENT
UNITED STATES CUSTOMS SERVICE
OFFICE or HE COLLECTOR
NEW YORK, N.Y.
DISTR = NO. 10
- ALL - - - arri
is -
3
May 22, 1940.
YOUR FOR THE ASSISTANT COLLECTOR:
The following is a list of Italian ships in port and
Mair activities:
Thud
Italian SS FORTUNATA loading at Kent Street, Brooklyn
oil
Salis Sat. May 25, 1940 for Senos. Arrives at Genon
on June 19, 1940 -- or 25 days from date of suiling.
Italian SS SANTAROSA loading at Erie 3asin, Breakwater.
mils Thursday, way 23rd for Lorfolk. Sails from
(Stee)
Horfolk Londay, May 27, 1940 for Benos, Italy. Will
arrive at Cence June 18, 1940 -- or 20 doys from date
of sailing.
Indian tanker ATLAS loading at Perth Amboy, D. J.
Smils Saturday, May 25th for lenon, Italy. will
(Benyol)
arrive et Genue June 19, 1940 -- or 25 days from
date of stiling.
lay Italian 28, SS 10w for venoa loading Ituly. at pior Arrive 3 hoboken, at senou saile (Sennal)
June 12, 1590 -- or 20 days from date of sailing.
The above dates are approximate.
John Ge Fitzgerald,
John
G.
C.
Inspector of Customs No. 120.
Regraded Uclassified
287
Hap 23, 1940,
Dear DPs Butchines
It was very good of you to vise me as you
did and I appreciate your prompt and friendly
cooperation in the matter of Dr. Viner's vark
with the Treasury Department. we are looking
forward to having Ms associated with - here,
s I i I and I $
services available at this time.
(Signed) E. Morganthau, Jr.
I I á ₫
President, University of Chiengo,
Chienge, fillnode.
GEF/dbs
Regraded Uclassified
1 288
May 23, 1940.
Dear Title Hutchiner
It vas very good of you to vise DE as you
die and I appresiate your prompt and friendly
cooperation in the miter of The TEAM'S work
4th the Treasury Department. Ve nre looking
forward to having him associated with us here,
and we appreciate your courtesy in maiding his
services available at this time,
Sincerely,
(Signed) H. Mongenthau, Jr.
Dr. Robert No Butchine,
President, University of Chinge
Chicago, Illinois.
GEF/dbs
Regraded Uclassified
1 289
May 23, 1940,
Thease DPo
10 vas very good of you to vise no as you
did and I appreciate - prompt and friendly
cooperation in the matter of Dr. Viner's work
I Includa I the # 1 %
forward to having his associated with - here,
and we appreciate your courtegy is midng his
services available at this news.
(Signed) H. Morgenthan, Jr.
Dr. Rebert no
President, University of chicago,
Chicago, fillando.
GEF/dbs
Regraded Uclassified
Treasury Department
290
TELEGRAPH OFFICE
25w
WAF31 M 18
1910 MAY 23 PM 12 16
UG CHICAGO ILL MAY 23 1940 1042A
THE HON HENRY MORGENTHAU JR
SECRETARY OF TREASURY
ASSURE YOU I WILL PLACE NO OBSTACLES IN WAY OF MR. VINER'S
COOPERATION WITH THE TREASURY. KINDEST REGARDS.
ROBERT M HUTCHINS
1215p
Regraded Uclassified
VINER, Jacob
291
OFFICIAL
DR. ROBERT M. HUTCHINS
PRESIDENT UNIVERSITY or CHICAGO
CHICAGO ILLINOIS
MAY 21, 1940
IN VIEW OF SERIOUS SITUATION ABROAD WOULD GREATLY
APPRECIATE IF YOU WOULD AGAIN MAKE DR JACOB VINERS
SERVICES AVAILABLE TO THE TREASURY STOP DR VINER
IS RETURNING TO CHICAGO TONIGHT AND WILL GET IN
TOUCH WITH YOU DIRECTLY KIND REGARDS
HENRY MORGENTHAU JR
67m
meet
atty
may st $ BEDE
Copy to Mrs. Farrell
Regraded Uclassified
May 23, 1940
" 292
My dear Hoover:
This will acknowledge receipt
of your letter of May 20th, regarding
the transshipment of cocoa and coffee.
I have read this with interest.
Yours sincerely,
(Signed) E. Morgenthau, Jr.
Mr. J. Edgar Hoover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. c.
Regraded Uclassified
:
May 23, 1940
293
My dear Noover:
This will acknowledge receipt
of your letter of May 20th, regarding
the transshipment of 00008 and coffee.
I have read this with interest.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Mr. J. Edgar Hoover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. c.
Regraded Uclassified
294
May 23, 1940
My dear Hoover:
This will acknowledge receipt
of your letter of May 20th, regarding
the transshipment of oocoa and coffee.
I have read this with interest.
Yours sincerely,
(Signed) H. Morgesthan, Jr.
Mr. J. Edgar Hoover, Director
Federal Bureau of Investigation,
Department of Justice,
Washington, D. C.
Regraded Uclassified
JOHN EDGAR HOOVER
DIRECTOR
Federal Surrau of Investigation
United States Department of Justice
Mashington, B.C.
May 20, 1940
PERSONAL AND CONFIDENTIAL
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
The San Francisco office of this Bureau is
in receipt of information from a confidential source to
the effect that the American President Lines had been
approached by "Sovfrscht, Moscow", regarding the trans-
shipment of cocos and coffee from Brazil for Kobe, Japan.
The transshipment would allegedly be made at San Francisco
or Los Angeles, California, aboard the S.S. President
Garfield or the S.S. President Pierce, or both. It in
reported that the letter of credit for freight and
handling charges has been arranged in Moscow, Russia,
through the Chase National Bank, New York, New York,
The confidential source also displayed a copy
of a cable which was written in the "new Boe", a com-
mercial code, dated March 29, 1940, by McCormick, Portland,
Oregon, from "Sovfracht, Moscow". The cable requests that
arrangements be made for the transshipment of 2500 tons of
coffee at Santos, Brazil, and 2500 tons of cocoa at Bahia,
Brasil, during the month of April, 1940.
The above data are being furnished to you for
your information and are also being furnished to Honorable
Adolf A. Berle, Jr., Assistant Secretary of State, Depart-
ment of State, Washington, D. C. No investigation in this
matter is being conducted by this Bureau.
Sincerely yours,
,
Hower
JC John Edgar Hoover
Director
Regraded Uclassified
JOHN EDGAR HOOVER
DIRECTOR
Federal Bureau of Investigation
United States Department of Justice
Washington, D.C.
May 20, 1940
PERSONAL AND CONFIDENTIAL
The Honorable
The Secretary of the Treasury
Washington, D, C.
My dear Mr, Secretary:
The San Francisco office of this Bureau is
in receipt of information from a confidential source to
the effect that the American President Lines had been
approached by "Sovfracht, Moscow", regarding the trans-
shipment of 00008 and coffee from Brasil for Kobe, Japan.
The transahipment would allegedly be made at 8an Francisco
or Los Angeles, California, aboard the S.S. President
Carfield or the 3.3. President Pieroe, or both. It is
reported that the letter of credit for freight and
handling charges has been arranged in Mossow, Russia,
through the Chase National Bank, New York, New York.
The confidential source also displayed a copy
of a cable which was written in the "new Boe", a com-
mercial code, dated March 29, 1940, by McCormick, Portland,
Oregon, from "Sovfracht, Moscow". The cable requests that
arrangements be made for the transshipment of 2500 tons of
coffee at Santos, Brasil, and 2500 tons of COCOS at Sahia,
Brasil, during the month of April, 1940.
The above data are being furnished to you for
your information and are also being furnished to Honorable
Adolf A. Barls, Jr., Assistant Secretary of State, Depart=
ment of State, Washington, D. C. No investigation in this
matter is being conducted by this Buresu.
Sincerely yours,
John Edgar Hoover
Director
Regraded Uclassified
OHN EDGAR HOOVER
DIRECTOR
9.8
737
Federal Tureau of Investigation
United States Department of Justice
Washington, D. C.
May 23, 1940
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith a memorandum
covering material in the files of the Federal Bureau of
Investigation relative to one Walter P. Reuther, which I
thought might be of interest to you.
I have been informed Walter P. Reuther
is the individual Madam Frances Perkins, The Secretary of
Labor, contemplates appointing as head of the Safety Device
Board of the Department of Labor, which Board makes inquiry
into safety devices in various factories throughout the
country.
With assurances of my highest regards,
Sincerely yours,
edgan
Enclosure
PERSONAL AND CONFIDENTIAL
Regraded Uclassified
May 22, 1940
DEMOHANDUM
RE: WALTER P. REUTHER
Information has been received to the effect that Madam Frances
Perkins, The Secretary of Labor, contemplates appointing Walter P, Reuther
as head of the Safety Device Board of the Department of Labor. This Board
sakes inquiry into safety devices in various factories throughout the
country. The following information appears in the files of the Federal
Bureau of Investigation relative to Walter P. Reuther.
Walter P. Reuther originally came from West Virginia. His father
or a labor organizer there. He attended Wayne University, Detroit,
Eichigan, from 1930 until 1933.
It has been alleged that Walter P. Reuther, accompanied by a
tenther, tsparted from the United States for Russia during 1933; that
after residing in Russia for several months and while there they engaged
in - study of agitation propaganda, taking courses allegedly given under
the auspices of the Soviet Union. During 1933 Walter P. Reuther is said
THE have advised the Soviet authorities relative to labor conditions in
the United States. The date of his return to the United States is not
decimitely known. However, upon his return he enrolled in the Brookwood
Laoor College at Katonah, New York, (now out of existence).
The following is a letter written in 1934 by.Walter neuther and
Ein brother Victor to Melvin and Gladys Bishop:
"Mmosavos, Topkini,
January 20, 1934.
"Dear Mel and Glad:
"Your letter of December 5 arrived here last week from
Germany and was read with more than usual interest by
Nal and I, It seemed ages since no had heard from you 80
you might well imagine with what joy we welcomed news from
Detroit. It 18 precisely because you are equally anxious
know to receive word from the 'Workers' Fatherland! that
I atm taking this first opportunity to answer you.
Regraded Uclassified
93
"Mhat you have written concerning the strikes and the general
labor unrest in Detroit plus what we have learned from
other sources of the rising discontent of the American
workers, makes us long for the moment to be back with you
in the front lines of the struggle; however, the daily
inspiration that is ours &8 we work side by side with our
Russian comrades in our factory, the thought that we are
actually helping to build a society that will forever end
the exploitation of man by man, the thought that what we are
building will be for the benefit and enjoyment of the work-
ing class, not only of Russia, but the entire world, is the
compensation we receive for our temporary absence from the
struggle in the United States. And let no one tell you that
we are not on the road to Socialism in the Soviet Union. Let
no one say that the workers in the U.S.S.R. are not on the
road to security, enlightment and happiness.
"Mel, you know Nal and I were always strong for the Soviet
Union. You know we were always ready to defend it against
the lies of resctionaries. But let me tell you, now that we
are here seeing all the great construction, watching a back-
ward peasantry being transformed into an enlightened,
democratic, cultured populus, now that we have already
experienced the thrill, the satisfaction of participating
in genuine proletarian democracy, we are more than just
sympathetic toward our country, we are ready to fight for it
and its ideals. And why not? Here the workers, through
their militant leadership, the proletarian dictatorship,
have not sold out to the owning class like the S.P. in Dermany
and like the Labor Party in England. Here they have against
all odds, against famine, against internal strife and civil
war, against sabotage, against capitalist invasion and siolation,
our comrades here have maintained power, they have won over the
masses, they have transformed the 'dark masses' of Russia into
energetic enlightened workers. They have transformed the Soviet
Undon into one of the greatest industrial nations in the world.
They have laid the economic foundation for Socialism, for a
classless society. Mel, if you could be with us for just
one day in our shop you would realize the significance of the
Soviet Union. To be with us in our factory Red Corner at a
Shop Meeting and watch the workers ss they offer suggestions
and constructive criticism of production in the shop. Here are
2
Regraded Uclassified
"no unsses to drive Tear into workers. No one to drive them
in made speed-ups, Here the workers are in control. Even
the shop superintendent has no more right in these meetings
than any other worker. I have witnessed many times already
when the superintendent spoke too long, the workers in the
hall decided he had already consumed enough time and the floor
was then given to a lathe hand who told of his problems and
offered suggestions. Imagine this at Fords or at Briggs, This
Ls what the Outside World calls the 'Ruthless Dictatorship in
Russia,' I tell you, Mel, in all the countries we have thus
for been in, we have never found such genuine proletarian
:emocracy. It is unpolished and crude, rough and rude, but
proletarian workers' democracy in every respect. The workers
in England have more culture and polish when they speak at their
meting but they have no power, I prefer the latter.
"In our factory, which is the largest and most modern in Europe,
and we have seen them all, there are no pictures of Fords and
Rockefellers, or Roosevelts and Mellon. No such parasites, but
rather huge pictures of Denin, ... etc., greet the workers'
eyes on every side. Red banners with slogans 'Workers of the
world Unite' are draped across the craneways. Little red flags
fly from the tops of presses, drill presses, lathes, kellers,
itc. Such a sight you have never seen before. Women and men
work side by side - the women with their red cloth about their
neads, the men with their fur hats, We work here seven hours
per day, five days a week (our week here is six days long). At
noon we all eat in a large factory restaurant where wholesome
plain food is served, A workers' band furnishes music to us
(rom an adjoining room while we have dinner, For the remainder
of our one hour lunch period we adjourn to the Red Corner recre-
atton where workers play games, read papers and magazines or
technical books or merely sit, smoke and chat. Such a fine
spirit of comradeship you have never before thessed in your
life. Superintendent leaders and ordinary workers are all alike,
if you saw our superintendent as he walks through the shop greet-
Lne workers with 'Hello Comrado' you could not distinguish him
from any other worker,
"The interesting thing, Mel, is that three years ago this place
here was a vast prairie, a waste land and the thousands of workers
here who are building complicated dies and other tools were at
that time peasants who had never before even seen an industry
Set alone worked in one. And by mere brute determination, by
J
Regraded Uclassified
"the determination to build a workers! country second to none
in the world; urged on by the spirit of the Revolution they
have constructed this huge marvelous auto factory which today
Is turning out modern cars for the Soviet Union. Through the
bitter Russian winters of 45 degrees below they have toiled
with bare hands digging foundations, erecting structures, they
have with their own brute strength pulled the huge presses into
place and set them up for operation. What they have here they
have sacrificed and suffered for; that is why they are not BO
ready to turn it all over again to the capitalists. That is
why today they still have comrades from the Red Army on guard
at the factory at all times to prevent counterrevolutionists
from carrying on their sabotage,
"About a twenty minute walk from the factory an entirely new
Socialist City has grown up in these three years. Here over
50,000 of the factory workers live in fine new modern apartment
buildings. Large hospitals, schools, libraries, theaters and
clubs have sprung up here and all for the use of those who work,
for without a worker's card one cannot make use of all these
modern facilities. Three nights ago we were invited to the club
house in 'Seagor' (Socialist City) to attend an evening of enjoy-
ment given by the workers of the die shop. Imagine all the
workers with whom we daily work, camo together that evening for
a fine banquet, a stage performance, a concert, speeches and
a big dance. A division of the Red Army was also present as
guests. In all my life, Mel, I have never seen anything BO
inspiring. Mel, once a fellow has seen what is possible where
workers gain power, he no longer fights just for an ideal, he
fights for something which is real, something tangible. Imagine,
Mel, Henry Ford throwing a big party for his slaves. Here the
party was no gift of charity from someone above for we own the
factory, we held the meeting and decided to have the party and
it was paid for from the surplus earnings of our department.
What our department does is typical of the social activities
which are being fostered throughout the entire factory and the
entire Soviet Union.
"Mel, we are witnessing and experiencing great things in the
U.S.S.R. We are seeing the most backward nation in the world
being rapidly transferred into the most modern and scientific
with new concepts and new social ideals coming into force. We
are watching daily Socialism being taken down from the books on
the shelves and put into actual application. Who would not be
inspired by such events?
Regraded Uclassified
302
"And now my letter is getting long and still I have said
little, for there is 80 much to say and 80 little time in
which to do it. We have written Merlin and Coach rather
lengthy letters and have requested they forward them to you
to save duplication of material.
"I believe there is little in this letter which they have not
already received BO there will be no need of your forwarding
this to them.
"A word about your letter. You mentioned that
"Keep your eye on the S.P. It being affiliated to the
Second International I am not 50 certain it is 'drifting'
in the right direction, certainly not in the light of recent
events.
"Let us know definitely what is happening to the YPSL and
also the 'Social Problems' Club at C.C.C.
"Carry on the fight for a Soviet America.
Vic. and Wal."
The foregoing letter is thought to be significant inasmuch as it
definitely reflects the attitude of Walter P. Reuther in January of 1934.
In 1936 Walter P. Reuther was a C.I.O. organizer on the West Side
of Detroit, Michigan.
According to information in the files of the Federal Bureau of
Investigation, Walter P. Reuther, in May of 1937, at which time he was
President of the United Automobile Workers of America, Local #174, was one
of the speakers at a Conference for the Protection of Civil Rights (an
affiliate of the Committee to Aid the Spanish Democracy). Walter P. Reuther,
according to this report, was alleged to have stated that he had made a study
of the Fascist situation and that he was a disciple of Anna Louise Strong.
He further stated at that time that he had spent two years in the Soviet Union,
where he had worked in a factory.
Walter P. Reuther has two brothers, Victor and Roy Reuther, both of whom
are said to have been engaged in similar activities.
- 5 -
303
According to information received, the appointment of Walter P.
Reuther was sponsored by Lee Pressman, attorney for John Lewis and other
members of the International Juridical Association, 100 Fifth Avenue,
New York City.
There is on file in the Identification Division of the Federal
Bureau of Investigation a fingerprint record, received April 20, 1937,
indicating that one Walter Reuther was taken into custody with one Victor
Reuther, in connection with "recent sit-down strikes", and fingerprinted
by the Police Department of Detroit, Michigan. There is also a fingerprint
record indicating that the same Walter Reuther was fingerprinted, in connec-
tion with an application for a pistol permit, by the Police Department at
Detroit, Michigan, on January 9, 1940.
- 6 -
Regraded Uclassified
304
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthan
FROM Mr. Cochran
Mr. Livesey telephoned me this afternoon in regard to the documents which
to had sent me last night. consisting of a draft of a letter from the Department
of State to the Canadian officials, and from the latter to the Department of
State, effecting an arrangement in settlement of the differences over the recent
Canadian exchange regulations, requiring Americans temporarily resident in
Canada to surrender their foreign exchange holdings to the Canadian authorities.
against Canadian dollars.
Mr. Livesey told me that Mr. Coyne, Secretary of the Canadian Foreign Ex-
change Control Board, had been down here last week discussing the above mentioned
matter and has now telephoned from Ottawa wanting to know whether some agreement
may shortly be reached, or whether the Canadian authorities should get out a
notice extending beyond May 31 the time within which a special arrangment may be
negotinted with the United States to exempt American citizens in Canada from the
provision of the new act, on a basis of some sort of reciprocity.
Mr. Livesey stated that Mr. McDonnel, Secretary of the Canadian Legation in
Yorhington, finds acceptable the State Department drafts, but that these have
not Been submitted to the authorities at Ottawa. Livesey explained that Sections
1, 2 and 3 are Canadian draft, while the drafting on reciprocity 1s principally
&
Mr. Bernstein was in my office when Mr. Livesey telephoned. I told Mr.
Livesey that Mr. Bernstein and I had glanced throught the file, including the
drafts received last night, and that we would let him know RS soon as ve had
some authority from the Treasury Department to express its position.
BMS.
Regraded Uclassified
TREASURY DEPARTMENT
305
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
CONFIDENTIAL
Sterling moved downward today from an opening of 3.23-1/4 to a low of 3.18-1/2
late in the afternoon. The final quotation was 3.18-3/4.
Sales of spot sterling by the six reporting banks totaled L497,000, from the
following sources:
By commercial concerns
L250,000
By foreign banks (Europe)
L247,000
Total
L497,000
Purchases of spot sterling amounted to L338,000, as indicated below:
By commercial concerns
L125,000
By foreign banks (Far Fast and Europe)
L213,000
Total
1338,000
The following reporting banks sold cotton bills totaling 11,000 to the
British Control on the basis of the official rate of 4.02-1/21
I 5,000 by the Irving Trust Company
4,000 by the National City Bank
2,000 by the Guaranty Trust Company
L11,000 Total
A Dow Jones despatch from London stated that Sir Kingsley Wood, Chancellor
of the Exchequer, was asked in the House of Commone if he would consider ending
the "stop" on American exchange. The Chancellor vas reported to have made the
following written statement in reply. "If the suggestion is that sterling should
be freely convertible into dollars at the official rate for all purposes, I re-
gret that in the present circumstances this 1e impracticable. If. on the other
hand, the suggestion is that the official rate of exchange which has prevailed
since the outbreak of the war should no longer be maintained, the reply is that
I Am convinced it would be most undesirable in the national interests to adopt
this suggestion."
In contrast to the weakness in sterling, the French franc showed a firmer
tendency today. From an opening of .0179, the rate improved to a high of .0181-3/4
at noontime. It closed at .0180-1/2. The improvement in the quotation vas
attributed mainly to the cesaation of French franc sales by Italian interests in
this market. In addition, it vas reported that orders to buy French franca were
received here from banks located in Zurich. In relation to sterling, the cross
rate narrowed from 180.58 france per pound to 176.59.
Regraded Uclassified
30G
- 2 -
Developments in the other important currencies were as follows:
The Svine franc was steady all day. It closed at .2242.
The discount for the Canadian dollar narrowed this morning to 20-3/4%.
but during the afternoon, that currency had an easier tone. The final die-
count was 21-7/8%.
The reichamark closed st ,4000.
In Shanghai, the yuan was unchanged in terms of sterling at 4-1/84. Against
the dollar, it improved 1/16# to 5-9/164.
We purchased the following amounts of gold from the earmarked accounts of
the banks indicated:
$20,000,000 from the Bank of France
1,000,000 from the National Bank of Belgium
560,000 from the Royal Bank of the Kingdom of Tugoslavia
$21,560,000 Total
The Federal Reserve Bank of New York reported that the following shipments
of gold were being consigned to it:
$ 3,528,000 from South Africa, shipped by the South African Reserve Bank for
account of the Bank of Sweden, disposition unknown.
3,100,000 from England, shipped by the Bank of England, to be earmarked for
its account.
2,247,000 from England, shipped by the Bank of England, for account of the
Swies National Bank, disposition unknown.
2,115,000 from Colombia, shipped by the Bank of the Colombian Republic for its
account. disposition unknown.
$10,990.000 Total
The Bombay gold price advanced 13# to $36.87. A trader in one of the New
York banks informed the Federal Reserve Bank that his bank had purchased, a few
days ago, a small amount of gold in Hong Kong for shipment to India and/or the
United States. Be stated that this transaction was in the nature of a "trial
balloon", and that his bank had hoped to obtain from the Indian authorities a
license to import this gold into India. He finally remarked that the Indian
Government refused to grant such a license.
The Bombay spot silver quotation moved off the equivalent of 1/84 to 44.22#.
today. Spot silver was fixed at 21-13/16d. up 5/8a. and the forward quotation market
Part of yesterday's recession in the London silver quotations vas offset
vse 21-5/84, 9/16d. The U. S. equivalents, calculated at the open of the
rate for up were 31.70# and 31.19# respectively. On the basis
official sterling-dollar sterling, rate, the spot price was equivalent to 39.66/.
Harman raised its settlement price for foreign silver to at 35-1/84 35#.
today. Handy The and Treasury's purchase price for foreign silver VBI unchanged
There WETO no of silver made by as today.
CONFIDENTIAL
Regraded Uclassified
307
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
I am this noon informed by Mr. Stone of Secretary Hull's office, to
whom I posed the question yesterday evening, that the letter of May 20 to the
President from Lord Lothian was delivered promptly to the President, through
the State Department. Copies of the letter were made and distributed to five
or six officers in the State Department who are studying the proposals made by
the British. It is expected that there will be a meeting of those officers
this afternoon or Friday morning to make recommendations before Secretary Hull
goes to the Cabinet meeting. It 16 possible that the State Department may
communicate with us after this meeting, or that Mr. Hull may take the matter
to Cabinet. So far no one in the State Department is in a position to discuss
the matters with us, pending a clarification of the State Department's own
position, and the selection of a spokesman.
Regraded Uclassified
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
308
INTER-OFFICE COMMUNICATION
DATE May 23. 1940
TO Secretary Morgenthau
FROM Kr. Cochran
Kr. Pinsent today handed to me the attached copy of a memorandum,
the original of which had been delivered to Mr. Dunn in the Department
of State, concerning financing by the American Bemberg Corporation.
It is my opinion that I should speak to Mr. Dunn on this subject to
discuss the question as to whether it should be referred directly to the
Securities and Exchange Commission.
After talking with Mr. Bernstein, I telephoned Mr. Dunn this after-
noon, who informed me that this matter had been referred by him to
Mr. Livesey. Upon getting in touch with Mr. Livesey I was informed that
he was sending one copy of the memorandum to the Treasury and snother to
the Securities and Exchange Commission. Livesey thought that this matter
concerned the Securities and Exchange Commission most particularly.
In my conversation with Mr. Dunn, he told me that the State Depart-
ment thought we should watch such transactions with some care, since he
unierstood there had been quite a bit of German capital filtering into
Dutch or so-called Dutch concerns.
A.M.P.
Regraded Uclassified
309
It in understood that the American Bemberg
Corporation has applied to the Decurities and Exchange
Commission for permission to issue 70,000 shares
of common stock (half of them is stock), value about
$1,300,000.
The intention of the company is apparently
to use the proceeds of this iesue and its own liquid
resources to pay to the Algemeene Kunetzijde Unie N.V.
of Arnhem, Holland:-
(a) about $1,800,000 in repayment to German
guarantore of interest paid by them on prefer-
ence stock in the American Bemberg Corporation,
the guarantors' claims having been acquired in
the latter part of 1939 by the Algemeene
unstzijoe Unie N.V.; and
(b) about 850,000 in respect of arrears of sinking
fund for preference shares held by the Algemeene
Eunstzijoe Unie N.V.
it is understood that the real control, both
of che American Bemberg Corporation end of the Algemeene
Runstzijde Unie N.V., is in German hands (even spart
from the present occupation of Holland), and there is 8
strong probebility that any funds reaching the Dutch
company would be at the disposal of the German controlling
interests and through them st the disposal of the
Derman Government.
It might be asked whether it la legitimate
that the proceeds of an issue such 66 18 proposed should
be used for the purpose of paying guarantors' claimsin
respect of interest, and arrears of sinking fund, due by
the American Bemberg Corporation.
It might slso be
asked whether it is legitimate that the proposed
N3:GHSP:NT
Regraded sinking/ Uclassified
710
-2-
sinking fund payment should be made in respect of
one selected group of preference shares issued by the
Corporation.
Lastly, it might be asked whether the
transaction would not require & licence from the
United States Treasury under the Executive Order of
May 10th, providing for the control of transactions
relating to property interests held by Holland or
by Dutch nationals.
Regraded Uclassified
321
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Pinsent called on ne at 12:30 today, He took up three or four
matters.
Pinsent stated that after talking with me yesterday he had cabled London
that we would issue instructions to our diplomatic and consular officers in
Switzerland, along the lines of those sent to the Netherlands, if the Swine
requested Lt.
Pincent confirmed the information which he had given me late yesterday
evening over the telephone, namely, that the copy of the letter which Lord
Lothian had addressed to the President under date of May 20, had been pro-
vided the Treasury Department directly by the British Embasey at Secretary
Eull's own suggestion, since the State Department was aware that several of
the points mentioned therein fell within the Treasury's field.
Mr. Pinsent saked that I let the Secretary know that no reply had been
received in regard to the suggested visit of Sir Frederick Phillips to this
country. The Embasay does not feel that, in view of recent developments, it
is in a position to press this matter unless the Secretary urges it.
Following the conversation with the President which led to his letter of
May 20, Lord Lothian has cabled his Government in regard to our concern over
the safeguarding of British securities and gold, The Ambassador reported that
he was sure we would give the necessary instructions to our consuls in the
British Islee if their assistance might be required by the British in connection
with the disposal of securities. The British has asked for instructions
in the premises, but has received no word as to what the British officials are
doing or may desire from this side,
NMS
Regraded Uclassified
STRICTLY CONFIDENTI
TREASURY DEPARTMENT
(312
INTER-OFFICE COMMUNICATION
DATE May 23. 1940
TO
Secretary Morgenthau
FROM Kr. Cochren
Xr. Knoke telephoned me this noon to the effect that the Norwegian
Minister had desired to draw on funds with the Federal under the new
arrangement, but that the authenticated signature which the Federal had
requested had not yet been received. Knoke had been informed by the
Sorwegian Minister that his signature had been submitted to the State
Department two or three days ago with the understanding that it would be
authenticated and forwarded to the Federal.
I have now talked with Mr. Hugh Cummings, in charge of the Scandi-
davian desk in the Department of State. He confirmed that the signature
of the Norwegian Minister had been received day before yesterday in
yr, Currings' absence. Mr. Cumnings had prepared a letter, upon his re-
turn from New York yesterdAy, but Mr. Berle had not been present to sign
11. This letter, trensmitting the authenticated signature to New York,
vat supposed to be on Mr. Berle's desk. Consequently, I spoke with
X. Serie's secretary and asked urgently that the letter be signed and
mited to New York tonight. I then informed Mr. Knoke as to the above
facts. Kr. Knoke, in turn, told me that the transaction which the
Corvegian Minister has asked the Federal to take care of is an order from
him, set forth in a letter dated May 22, for the Federal to pay $150,000
to the New York Trust Company, this anount to be placed in a special no-
count "Christiania General Storebrand", for the exclusive use of the
Royal Norwegian Legation in Washington. This amount 18 to be debited to
the Norges Bank account. Knoke asked that this matter be brought to
D. Bernstein's attention for the issuance of B. license so that the pay-
nont can be made as soon as the signature letter is received from the
Department of State. Knoke reminded me that the Treasury ves taking care
of these diplomatic applications, and hoped our license would not be
limited to this single transaction.
HMS
Regraded Uclassified
W323
TREASURY DEPARTMENT
CONFIDENTIAL
INTER-OFFICE COMMUNICATION
DATE May 23, 1940
TO
Secretary Morgenthau
FROM
Mr. Haag
Subject: Current Developmente in the High-grade Securities Markets
SUMMARY
(1) Treasury securities broke sharply Tuesday on receipt of
unfavorable war news, but yesterday's losses were minor.
Treasury securities are now at new lows for the current
crisis (Charts I and II).
During the week ended May 15 -- the period of greatest
market decline -- weekly reporting member banks in New
York City increased their holdings of Treasury direct ob-
ligatione by $48 millions. Government security purchases
by the Federal Reserve System during the current orisis
have totaled $10.4 millions.
(2) High-grade corporate securities declined markedly on
Tuesday, but recovered slightly yesterday (Chart II).
The tendency of municipal bond prices has been downward
throughout the crisis.
(3) Recent developments in the European war have resulted in
the postponement of at least three new bond offerings in
the past week. Despite the unsettlement of the market,
however, the United States Steel Corporation last week
successfully floated an issue of $75 millions of serial
debentures. This issue is unusual in that each eemi-
ennual maturity bears a different coupon, and that all
maturities were offered at par. Offering yields are shown
in Chart III.
(4) The net "rights value" of the 3-3/8 percent Treasury bonds,
due June 15, is only 17/32. Rights values on the whole
are the lowest since lest September and, with that excep-
tion, the lowest since the end of 1937 (Chart IV).
(5) The dollar bonds of foreign governments, except those of
Norway and Denmark, fell in price during Tuesday's break,
but the general tendency yesterday was one of recovery
(Chart V). Paradoxically enough, British consols and
French rentes were strong on Tuesday, despite unfavorable
war news.
Regraded Uclassified
314
Secretary Morgenthau - 2
I. United States Government Securities
After a minor rally in the latter part of last week
United States Government securities declined sharply on Tues-
day, May 21. Further small declines occurred Wednesday in the
prices of Treasury bonds (Chart I). Treasury securities are at
new lows for the current war crisis. The following table shows
the price changes by maturity classes during the sharp break
immediately following the invasion of the Low Countries, during
last week's rally, and on Tuesday and Wednesday of this week:
:
:
Average price change
: May 10- : May 15- : May 21-
: May 14 : May 20 : May 22
(Decimals are thirty-seconds)
Notes
1 - 3 year
- .13
+.01
- .03
3 - 5 year
- .30
- .02
- .07
Bonds
5 - 15 years to call
-2.16
+ .05
- .16
15 years and over to call
-2.31
+ .10
- .17
The average yield of long-term Treasury bonds increased
three basis points on Tuesday to 2.46 percent, but remained
unchanged yesterday (Chart II). Since the close on May 9, the
price declines of the long-term bonds have caused the average
to increase by twenty-one basis points in all.
During the week ended May 15 - the period of sharp market
deoline accompanying the invasion of the Low Countries - weekly
reporting member banks in New York City increased their holdings
of Treasury direct obligations by $48 millions, about 60 percent
of which sum consisted of Treasury bonds. Reporting banks out-
side of New York City increased their Treasury bond holdings
by $14 millions. During the current crisis the Federal Reserve
Open Market Account has purchased a total of $10.4 millions of
Treasury securities.
Regraded Uclassified
Secretary Morgenthau - 3
II. Other Domestic High-grade Securities
High-grade corporate bonds fell sharply on Tuesday,
but recovered alightly yesterday (Chart II). The average
yield of high-grade corporate bonds, moving inversely to
prices, closed yesterday at 2.98 percent. This compares with
an average yield of 2.70 percent on May 9, just prior to the
beginning of the current war orisis. Municipal bonds have
fallen almost continuously since the beginning of the crisis.
III. New Security Issues
The intensification of the European war has unsettled
the market for new securities, and has resulted in the post-
ponement of at least three new offerings within the past week.
The three referred to consisted of $60 millions of bonds of the
Texas Corporation; $32 millions of bonds and 150,000 shares
of preferred stock of the Indianapolis Power and Light Company:
and $7 millions of bonds of the State of New Hampshire. In
the case of the New Hampshire issue, bids were notually received
on two separate occasions, but were rejected each time as involv-
ing too high an interest cost.
A notable exception to the general tenor of the new
issue market was the $75 millions debenture offering of the
United States Steel Corporation, made on Wednesday, May 15,
which is reported to have gone well despite the unsettled con-
dition of the market. There was a good demand for the deben-
tures from institutional investors.
The United States Steel issue consisted of serial deben-
tures maturing semiannually from November 1, 1940 to May 1, 1955.
In contrast to the usual pricing practice of fixing B. limited
number of coupon rates and offering the various maturities at
different prices, each semiannual maturity bears & different
coupon, ranging from -375 percent for the shortest to 2.65 per-
cent for the longest. All maturities were offered at par.
Thus the coupon on each maturity 18 the same as the yield to
maturity. Chart III shows the offering yields of the various
serial debentures and, for perspective, shows the comparable
yields of United States Treasury bonds.
Regraded Uclassified
Secretary Morgenthau - 4
IV. Value of "Rights" to Purchase Treasury Securities
The price of the 3-3/8 percent Treasury bonds called for
redemption June 15 was 100-24/32 on Wednesday, May 22. This 10
only 17/32 in excess of a zero yield to maturity. A premium
of the latter amount on a new issue offered in exchange would
permit a purchaser of 3-3/8's at the current price to "break
even" -- assuming that the use of the money between now and
June 15 18 of no value. This is the lowest "rights value" on
a maturing Treasury issue since December 1937.
As previously noted, the prices of short-term Treasury
securities -- 1.0., those due within the next two or three
years -- have fallen along with those of other maturities.
This decline may be due to a change in effective interest
rates on short-term money, or it may reflect B change in the
market's anticipation with respect to future Treasury refund-
ing operations. The market action of HOLC 5/8 of 1 percent
notes, due May 15, 1941, suggests, however, that it has been
due more to interest factors than to rights factors. The
yield of the one-year HOLC notes (with respect to which an
exchange offer 18 not expected) increased from .14 percent on
May 6 to +37 percent on Wednesday.
Irrespective of its cause, however, the decline has
tended greatly to reduce the extent to which short-term Treae-
ary securities are selling at prices in excess of a zero yield
-- and 80 greatly to reduce "rights values" as conventionally
computed. Chart IV shows, as of yesterday's close, all issues
of direct Treasury securities selling at prices in excess of
& zero yield, either to earliest redemption date or to the
next preceding regular Treasury financing date.
As of last night's close, there were only four issues of
Treasury securities selling at prices in excess of & zero
yield to earliest redemption date and only eight issues sell-
ing at prices in excess of a zero yield to the next preceding
regular financing date. Both bases have been shown because
of the uncertainty with respect to the effect of the war
orisis on future Treasury financing operations. On either
basis, rights values are now the lowest since last September,
and with that exception the lowest since the end of 1937.
Regraded Uclassified
317
Secretary Morgenthau - 5
V. Foreign Government Securities
The dollar bonds of foreign governments, except those of
Norway and Denmark, declined in price on Tuesday (Chart V).
Four of the issues shown in the chart, however, registered
price gains yesterday, Belgian and Italian bonds more than
making up their losses of the previous day.
Paradoxically enough, the internal securities of Great
Britain and France were strong on Tuesday when the war news was
distinctly unfavorable for the Allies. British 2-1/2 percent
consols rose 1-1/4 points on that day, but lost 3/4 of a point
yesterday, closing at 71-3/4, to yield 3.52 percent. French
3 percent rentes rose 1.55 points on Tuesday to 71.75, but fell
back yesterday to 71.20, equivalent to a. yield of 4.26 percent.
Attachments
Regraded Uclassified
PRICES OF DOLLAR BONDS OF SELECTED POREIGN GOVERNMENTS
1940
APRIL
MAY
JUNE
6
13
20
27
+
11
18
25
1
DOLLARS
a
15
22
DOLLARS
110
110
CANADA
5's or 1952
100
100
BELGIUM
6's 5 or 1955
90
90
80
60
AUSTRALIA
3's OF 1957
JAPAN
51's OF 1965
70
70
60
60
50
50
ITALT
7's OF 1951
40
40
HORWAY
42's OF 1965
30
30
20
20
DENMARK
42's OF 1962
10
10
D
b
13
20
27
o
4
Il
18
25
1
e
15
22
29
ARMIL
MAY
JUNE
1940
the of the Secretary of the Trabamary
- of - - -
10 - 145
Regraded Uclassified
RIGHTS VALUES OF TREASURY SECURITIES
May 22, 1940
POINTS
POINTS
THIRTY-SEOONDS
THIRTY-SECONDS
ADDITIONAL RIGHTS VALUE IF REDEEMED AT FIRST REGULAR
FINANCING DATE PRIOR TO MATURITY OR FIRST CALL DATE
28
28
RIGHTS VALUE IF REDEEMED AT
MATURITY OR FIRST CALL DATE
24
24
20
20
NOTE
16
16
12
12
319
BOND
8
8
4
4
o
JUNE15
DEC.15
JUNE15
DEC.15
0
MAR.15
AUG.1
MAR.15
1940
1941
1942
1943
1944
Office of the Secretary of the Treasury
I . 1 I 1
F - 175
Regraded Uclas
OFFERING YIKLDS OF NEW SERIAL DEBENTURES OF THE UNITED STATES STEEL CORPORATION
COMPARED WITH YIELDS OF TREASURY BONDS, MAY 14, 1940
1940
'41
'42
'43
'44
'45
'46
'47
'48
149
150
'51
'52
'53
'54
'55
'56
'57
*58
159
'60
PER
,
PER
CENT
CENT
2.4
2.4
U.S. STEEL DEBENTURES
2.0
2.0
TREASURY BONDS
1.6
1.6
(x330
1.2
1.2
.8
.8
-4
.4
o
o
1940
'41
142
'43
'44
'45
'46
147
'48
'49
'50
'51
152
153
'54
'55
'56
'57
'58
159
'60
Office of the Secretary of the Treasury
o
of - -
F
Regraded Uclassified
321
Chart II
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
1939
JAN
FEB
MAR
APR
MAP
JUNE
JULY
AUG
EEPT
OCT
NOV
DEC
a
JAN
1945
is
=
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=
di
FEB
1940
3
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MAR
-
.
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MAY
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9.
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JULY
AUG
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OCT
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=
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PER CENT
inverted Scale
inverted Scale
PER CENT
PER CENT
WEEKLY, Saturday Quotations
DAILY
2.5
20
20
Long Term
Treasury
22
22
2.2
24
2.4
24
Long Term Treasury
(12 years - more to earliest caw deta)
26
2.6
26
2.0
2.0
28
Corporate
3.0
30
30
Corporate
3.2
12
3,2
34
3.4
3.4
1
3.6
"
16
38
16
3.8
PER
PER
CENT
CENT
PER
CENT
100
100
100
80
80
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Spread Between Long Term
Treasury and Corporate*
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MAR
APR
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SEPT
OCT
1940
1939
- - - anonge - comparition of - form everage
I
Regraded Uclassified
Count-I
CRANGES IN THE PRICES
U.S.
CURITION
Points Plotted Represent the Difference from June 5, 1000 Price of Bach Naturity Class
1939
WAY
SEPT,
BOY,
1940
JAM.
MARGI
1940
NAME.
MAY
2
APRIL
wins
5
15
POINTS
23
30
MY
6
13
20
-
27
4
II
=
(det
Saturday Quotations
(RET -
25
Tipalets
+1 á
Daily
(NET CHANGE)
+3
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+
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+
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NOTES,
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NOTES. 1-3 Yes,
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Bowns
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:
TO CALL
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to CALL
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Boses, 5-15 Yes.
TU GALL
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-6
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-21
-21
to
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7
JULY
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JAM,
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MAY
2
9
is
23
30
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13
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11
18
25
1939
1940
APRIL
MAY
1940
of The Treasury
1-153-4-1
init
323
GROUP MEETING
May 23, 1940
10:00 a.m.
Present:
Mr. McReynolds
Mr. Young
Mr. Gaston
Mr. White
Mr. Graves
Mr. Haas
Mr. Cotton
Mr. Harris
Mr. Cochran
Mr. Foley
Mr. Bell
Mr. Schwarz
Mrs Klotz
Mr. Sullivan
H.M.Jr:
Today is Ed's birthday. What is it, Ed, 35?
Foley:
That is right.
Gaston:
You are eligible to be President now, aren't
you, Ed?
Foley:
I can run.
H.M.Jr:
Mr. McReynolds?
McR:
I don't have anything.
H.M.Jr:
Chick, did you get that fixed up?
Schwarz:
Yes, sir.
McR:
I have got the record completed on that con-
ference with the President yesterday.
That fellow that called up, you know, I told
him the answer was no. He said he had already
had his ears knocked back by the Secretary and
he wasn't going to stick them out again and
that he would take your answer.
H.M.Jr:
Is that what he said? Well, it is most ridicu-
lous. I knew Tom Beck 20 years ago and he
called up and I thought for old times' sake I
would answer the telephone. I said hello to
him, "How are you?" He is president of the
Colliers and Crowell Publishing Company and
Regraded Uclassified
324
- 2 -
so forth and 80 on and he says, "Now, Henry,
I would like to know whether I can put B. red
neon sign on the Treasury to advertise this
aviation chamber of commerce meeting that Is
coming Sunday," and I said, "Well, Tom, I have
got a pretty good sense of humor, but it seems
to me it is pretty silly for you to call me
up in these times on 8. matter like that.' Can
you imagine? I felt like saying, "Why don't
you call up the President? Maybe he could
help you out. He harn't got anything to do."
Of course, what happened was, they called me
and I told them no and apparently Tom, knowing
you, thought he would get & different answer
by calling you, but Tom said he was very
grieved as far as I was concerned. He said,
"I am not going any further, I will take your
answer."
T.L.Jr:
Well, I just wanted to make sure he didn't get
it.
NoR:
He didn't get it.
9.1.Jr:
O. K. Anything important?
%03:
No.
H.M.Jr:
Dan?
Harold?
Harry?
White:
You may have noted that China has been selling
securities very heavily for the last three or
four days in the Far East and we were wondering
what it was and we got in touch with the SEC
and asked them to make investigations, since
it was occurring over four days consecutively
and we have got the concern's name and we are
trying to find out how wide they are and if
possible who is selling it and so on. We haven't
any definite information yet, but we may have
some by tomorrow, but it is 8. very unusual
circumstance.
Regraded Uclassified
325
- 22)-
H.M.Jr:
Mr. Bell, you didn't report on your trip to
Mr. Hull yesterday.
Bell:
That is right. Well, it wasn't very success-
ful. Mr. Hull, of course, didn't have a lot
of time to give to it and we went down in
Dr. Hornbeck's office and talked for an hour
or so and it finally wound up that Dr. Hornbeck
was to tell the Chinese Ambassador that his
government did not want to receive their cable
and that he had no suggestions to make as to
a reply but that the State Department would go
on and consider the memorandum which we left
with them and we will hear from them later and
he said undoubtedly it would take two or three
days.
H.M.Jr:
Harry?
White:
There is a personal communication to you from
Nicholson from the Bank of China. They want to
make some arrangement to safeguard their pro-
perty in Shanghai by creating an American cor-
poration. We will take it up here.
H.M.Jr:
Please.
White:
This is & matter of a little interest. The
trucks which apparently China has in Indo-China --
H.M.Jr:
They are stuck, 650 of them.
White:
They are holding them.
H.M.Jr:
650, is that right?
White:
648, isn't it? No, 650.
H.M.Jr:
Just checking up on myself.
White:
You may also have noticed the statement that
there was a feeling that about a third of the
Netherlands reserve of gold was left in Nether-
lands.
H.M.Jr:
Can't you give me any good news?
Regraded Uclassified
326
- 3 -
White:
Well, I have got a letter here that I have
been trying to get you to sign for 8. couple
of weeks. It is good news for somebody 1f
you sign it.
H.M.Jr:
What is it, a raise for somebody?
White:
No, it is just that Chinese letter that you
were going to consider.
H.M.Jr:
Can I read it?
White:
Oh, yes.
H.M.Jr:
I mean, is it in Chinese? That puts me under
great handicap, I have got to sign it. Well,
I would love to do that.
White:
That is fine.
H.M.Jr:
That is easy.
Bell:
Does it cost us anything?
H.M.Jr:
No, the only thing I am opposed to is this anti-
stabilization club, these second-story workers
who stay up nights trying to find new ways to --
White:
That 1s very funny, because there is another one
coming in tomorrow from Mr. Welles.
H.M.Jr:
Incidentally on that, do you know what the Presi-
dent calls the stabilization fund? My youngest
child. He says that is the way I treat it.
White:
It is more like catnip with a lot of tomcats
around. Let's let that pass.
H.M.Jr:
All right, go ahead.
White:
Take that out of the notes.
H.M.Jr:
Go ahead, Harry.
White:
That is all I have.
327
- 4 -
H.M.Jr:
It is enough.
Harris:
There are five ships in New York that either
are loading or will presently load for Italy
and they are taking full cargoes, in one case
steel, in another case benzine, and the other
one has the toluol and what-not. The first
of those can't arrive - they are very slow
boats and they can't arrive in Italy until
June 15. None of these ships can reach Italy
before the 15th of June, even if they are not
held up by the British control. If that has
any bearing on the situation, it would look
like there has been no effort made to call
back Italian ships in & hurry.
H.M.Jr:
I tell you what I would like you to do. I
would like you and Gaston to see A. A. Berle
and between you and Berle, settle it. Between
you and Gaston and Berle, settle this thing,
see.
Harris:
What do you mean, settle it?
H.M.Jr:
Well, either that we are going to let them sail
and no monkey business, or some monkey business.
Harris:
That has all been settled. Until some legislation
passes, there is nothing we can do.
Gaston:
There is nothing we could do but a short delay.
H.M.Jr:
I thought you had a way of holding up that one
ship.
Harris:
Well, I haven't given up on that yet. It just
depends on whether my man makes good. Unfortunately,
he has been drunk for five days. He is under in-
dictment as well.
White:
What is your other friend doing, Basil?
Harris:
He is going to stagger to victory.
H.M.Jr:
Federal indictment?
Harris:
Yes.
328
- 5 -
H.M.Jr:
That ought to be helpful.
Harris:
He publicly. is a labor leader. I won't give his name
H.M.Jr:
Mr. Arnold was around here yesterday and telling
me he would help, he would turn the steam on or
off, any way I want it. I mean facetiously. He
hasn't he? got much sense of humor on himself, has
Foley:
It isn't very good,
H.M.Jr:
His crowd liked what I said, but be didn't, did
he? I was surprised, because he likes to give
it so well to other peopla, but he couldn't take
it, could he?
%eR:
Well --
H.N.Jr:
He didn't think it was so funny.
McR:
I know, but give him time. He will laugh about
it later.
White:
There 1s a draft of & bill that has been pre-
pared which the State Department has that would
give the President very broad powers to handle
just this situation. If the State Department
knew - probably they do know about this toluol --
H.N.Jr:
It was told us by the State Department.
Harris:
Oh, they know all about it.
H.Y.Jr:
O. K.
Harris:
Procurement Department, everybody knows about it,
but there just is nothing we can do at the moment.
H.M.Jr:
George? You haven't vivon me that one on where
the steel ingots are.
Hans:
oh, I was planning on giving you that tomorrow.
U.M.Jr:
Is that when you will have it?
Regraded Uclassified
329
- 6 -
Haas:
made. I had it for this morning but the map wasn't
H.M.Jr:
Are you also overslept?
Haas:
No, I am all right. I don't think so. What
made you ask?
H.W.Jr:
This is getting B. little too rough around here.
Klotz:
If you want to tell 1t, I will go out.
Haas:
Go ahead, I can take it.
S.M.Jr:
No, it was on Mac yesterday, so it is all right.
I thought those telegrams were very encouraging.
We have these 26 business concerns who report
weekly their orders. One of them told me that
business had gone to pot, so George sent out
telegrams and he has heard from practically
all of them with the exception of two, I think.
Their business had not been disturbed last week
and it was going along at the same rate of in-
crease as it had right along. Is that about
right?
llas:
That is right, and three of them showed rather
large increases.
H.M.Jr:
It just shows how one man comes in here and told
me his whole business had collapsed last week,
B. big manufacturer. You can't go by one isolated
instance.
White:
He must have been producing French flags or
something.
Harris:
French dictionaries.
H.M.Jr:
I am just laughing because you are so silly, not
because you are funny, Harry. I don't want you
to think that that is really wit.
White:
On the contrary, I think it is a very witty
remark.
Regraded Uclassified
330
- 7 -
H.M.Jr:
I am for anything that will give EL good laugh.
0. K.?
Sullivan:
I talked with Johnson this morning and he can't
figure out any way in which they can advance
the release dates on that powder to the British,
but he sent Colonel MacMorland over and I think
he is in there now. I don't understand what he
means, but if we can figure out any way, he will
try to be B. good soldier.
E.M.Jr:
Listen, I must - well, see if we can get it the
first of June.
Sullivan:
Yes, sir.
B.M.Jr:
And I will take the first of July if I have to,
but I would like the first of June.
Jullivan:
All right. There are two things. We want 400,000
pounds a month starting the first of June. Now,
it is 200,000 starting the first of October.
H.F.Jr:
Oh, that is terrible.
Sullivan:
And I am trying to --
H.M.Jr:
Well, he has got to be a good soldier and I will
tell you what we will do. Lot's stick to the
first of June. It 1s just as easy to stick to
the first of June. Will you do that?
Sullivan:
Yes, sir. Suppose they offer 200,000 starting the
first of June?
H.M.Jr:
I don't know the picture. I would have to 8° into
it with you. Don't give in anything without coming
to see me. What else?
Sullivan:
Mr. Young suggests that we had better talk with
Purvis again before we give them the final word
on that.
Young:
I think we also ought to talk to Colonel Burns.
H.W.Jr:
On what?
Regraded Uclassified
331
- 8 -
Young:
Powder.
H.M.Jr:
Well, if you two fellows could carry the ball
up to the place you are stymied, it would help
me a lot.
Sullivan:
All right, sir.
H.M.Jr:
And I tell you what the two of you might take
on together, as long as you have contacted Louie
Johnson, is those machine guns for the sirplanes
for the Allies, those 14,999 machine guns they
need, Colt. That is stymied in the War Depart-
ment, too. So I think if you - do you know
about it?
Sullivan:
No, haven't heard of it.
MoR:
Well, the munitions --
Haas:
This is a new system.
H.N.Jr:
They were all agreed and ready to sign last
Wednesday when Louie Johnson stopped them for
some reason or other.
Sullivan:
You mean the War Department was ready to re-
lease?
H.M.Jr:
It was just a new order, brand new guns. They
need these guns for the planes and the President
last Friday at Cabinet told Woodring he wanted
it done by Saturday.
Young:
Is that this Colt contract along with the two
million five hundred thousand capital assistance?
H.M.Jr:
That is right. Give the story to Sullivan.
Young:
I don't think I have it all.
H.M.Jr:
-
Well, get it and fight it out.
Sullivan:
Who knows it, Purvis?
H.M.Jr:
Yes. Will you, because it is a question of working
it out with Louis Johnson and I would like your
help, John.
332
- 9 -
Klotz:
Ballantyne knows the story.
H.M.Jr:
Ballantyne does?
Klotz:
I think so.
Young:
Isn't there a major question of policy there
as to the Allies putting up all the assistance
while the Army is getting some of the powder
at the same time?
H.M.Jr:
I don't know what it is.
Young:
There is & major question there, I think.
H.M.Jr:
I don't know, but I would like Sullivan to help,
because it is & question of sitting down and
sweating it out with Louie Johnson. I talked
to Louie last week. Friday at Cabinet the
President said to settle it. I spoke to the
President last night on the machine guns and
the powder and he said, "Settle it by tomorrow."
McR:
He wanted them to go out in the Cabinet room
and settle it before they went home.
H.M.Jr:
So I think, John, 1f you could get in on this,
it would help. I mean, you have got time, haven't
you?
Sullivan:
Yes, sir,
Young:
No comments.
H.M.Jr:
Chick?
Schwarz:
I would like to check on this reference to Dr.
Mead and Professor Taylor as special advisers
in connection with Government procurement related
to the national defense program.
H.M.Jr:
Special advisers to me?
Schwarz:
You have appointed them as special advisers.
H.M.Jr:
Have you got a release on it?
Regraded Uclassified
333
- 10 -
Schwars:
It will soon be ready.
H.K.Jr:
How does it go?
Schwarz:
Secretary Morgenthau today announced the appoint-
ment of Dr. Mead and Mr. Taylor with their titles
as special advisers in connection with Government
procurement related to the national defense pro-
gram.
K.M.Jr:
Does that sound all right?
Bell:
Special advisers to whom?
TicR:
Secretary of the Treasury. Do you want to iden-
tify it further?
Schwarz:
I say, too, that they have been designated by
the President.
K.M.Jr:
Oh, let me do 1t verbally, and just have their
history. Cut off the rest. Have you got the
history?
Schwarz:
I have the history following. We can fix it up.
Tie can give them the history afterwards,
E.R.Jr:
Yes, I will just tell them who they are and say
that you have 8. release for them. Better let
me do it myself.
Schwarz:
There 10 one other important item that is going
to need & solution pretty quickly, is this
accumulation of contributions coming in.
H.M.Jr:
Well now, I tell you what I did on that. Forster,
Chief Clerk, asked me about that and I said they
are all going to Bell and if he and Bell didn't
know what to do with a lot of loose change, they
weren't as smart as I thought they were and he
said 0. K., he would take care of that.
Schwarz:
Here is an editor of & small paper in Griffin,
Georgia, who writes 8. full-page editorial in
which he urges everybody in the country to
write or wire you, agreeing to contribute 8.
week's income to contribute to & national
defense fund.
Regraded Uclassified
334
- 11 -
H.M.Jr:
Perfectly seriously, I think you had better
talk to Bell about it. I wouldn't know how
to set up a fund like that.
Bell:
We have got 8. long standing policy around here
that we can't accept donations that have con-
ditions attached to them, and I sent a press
release --
H.M.Jr:
It is in Dan Bell's department. What do we
have these permanent fiscal assistants for,
anyway?
Bell:
I don't know.
White:
It reminds me, I was talking to & banker yes-
terday - this may be of some interest 1f you
want to follow it up.
H.M.Jr:
Are you serious?
White:
I am serious now. I will let you know when I
am surly and when I am witty, so you can tell.
McR:
The boss says you don't need to bother.
White:
I can't pick up an answer to that. You have got
me stuck.
He said that in talking with numerous bankers in
New York that he thought that with very little
organization and ballyhoo that there is & splen-
did chance to get all the bankers, the people
who hold tax-exempt securities, to turn them in
in exchange for not tax-exempt, as part of their
contribution. He said there is & great deal of
talk about it. I said I would pass this on for
what it is worth. He is quite a serious person.
B.M.Jr:
All right. Talk with Dan about it.
What else?
Schwarz:
That is all.
H.M.Jr:
I am terribly fortunate in this George Mead. My,
what B. fellow he 1s. I suppose he is absolutely
335
- 12 -
the outstanding engine engineer in the United
States who is not connected with 8 company or
the Army and Navy. He has come down here. He
and Fred Rentschler together went into business
as partners who started in Pratt & Whitney and
they got out a year ago. lie has no stocks in
aviation engines, no connection whatsoever.
Gaston:
Is he one of the men who was with Wright before
they formed that company?
H.W.Jr:
He was chief engineer for Wright.
Caston:
He 1s the nan who designed the engine.
. . . :
He was chief engineer for Wright. He built the
Ilispano Suiza engine during the War, 14,000 of
them, but I an very, very lucky to get him.
Melt:
or course, the most important part of the story,
so far PS he 1s concerned, If you want to give
anything out, 1s the fact that --
8.163r:
Just to give you a little idea, my figure 1s
a little rough, but he is giving it to me, be-
tween the Army and liavy, they buy about six or
seven different kinds of training planes with
six or seven different kinds of engines for
training purposes and he hopes by Monday to
have that down to two trainers and two engines
for the Army and Havy. If me did nothing else,
it would be worth it to get it down to two.
And then there is this plastic wood trainer
which they don't seem to know anything about
and which they think that Howard Hughes has,
They are looking that over. He has no imagin-
ation, nothing. I mean, it is a great help to
the Government.
Cochran:
Matthews will be over here at 11:30. I have
a visitor coming at 10:30, Fr. Gary, who was
Assistant Manager of the National City Bank
in Paris and since then he has been in charge
of a branch in London and he has just come
back now on leave. I will give you a memorandum
on it If he has anything to say.
Regraded Uclassified
336
- 13 -
H.M.Jr:
Right.
Foley?
Voley:
This morning in the Washington Post, Lugene Meyer
editorially offered some advice on national de-
fense. Ee pointed out that there ought to be
a five-man board, non-partisen board of indus-
trialists to assist in the program. I want to
point out that during the War Eugene Meyer was
chairman of the subcommittee of the War Industries
Board having to do with non ferrous metals. Dur-
ing the Nye inquiry it developed that all during
the War years while he was serving in such
capacity he owned stocks in Kennecott Copper and
Anaconda Copper, Inspiration Copper, Otah Copper
and American Smelters and a very considerable
portion of his income came from dividends on
that stock during those years when he was con-
trolling prices, allocating orders for the metal
industries.
White:
That is just occasion for my remark that the
committee is nefarious. That is witty, you will
have to admit that.
H.L.Jr:
That is good.
White:
That makes up for the last one.
Harris:
He may be nefarious, but as I recall, he did &
swell job.
White:
For whom?
Foley:
For himself.
Marris:
No, not for himself.
4.M.Jr:
You can't pick on my Eddie today, he is a birthday
child.
Marris:
Oh, I forgot.
H.M.Jr:
I am not going to let anybody pick on my Eddie
today.
Regraded Uclassified
337
- 14 -
Foley:
Congressman Crawford made & speech in the
House a couple of days ago accusing the
SEC of lax methods because of the break in
the market. The SEC very charitably came
back and said that 1f anybody was to blame,
it was the Treasury, because the Treasury was
charged with the responsibility of administer-
ing the freezing order of the President, which
I didn't think was quite cricket.
H.M.Jr:
Well --
Bell:
I didn't get that out of there.
Foley:
He said while they regard Mr. Crawford's
remarks more a reflection on the Treasury,
which is charged with enforcing President Roose-
velt's embargo on movements of assets of the
invaded nations, than on the SEC, the officials
surveyed the situation and said they found no
evidence that foreign selling orders were 8.
factor in the market slump.
Bell:
We are now just getting in weekly reports under
our general licenses and in a day or two we
will be able to see what the volume of trading
is under those licenses, and 1f they are like
that, maybe we will have to do something to cur-
tail them. I don't think they are.
H.M.Jr:
Well, you can tell the press afterwards in view
of this not being cricket, three times Mr. Frank
has called me up saying he wanted to close the
Stock Exchange in the last week and three times
I told him no. As of last night, I was still
right. Let's see how the market 18 now.
Cochran:
The SEC phoned yesterday, as I told you, Dan,
and wanted information on sales.
H.M.Jr:
That 1s all right. Should I write B. letter to
Jerome Frank?
Foley:
No, I don't think so.
Schware:
There are more important things.
Regraded Uclassified
1 338
- 15 -
H.M.Jr:
Tell him I feel hurt. No, I wouldn't tell him,
would you?
Foley:
No, I don't think so, officially.
H.M.Jr:
If you happen to see him, you can tell him.
(Examining market report) See, up two points.
My advice is still all right.
Cochran:
There is an editorial in the Wall Street Journal
commending the policy of not yielding to fright
and closing the market.
H.M.Jr:
You know Frank did want to close it.
Foley:
I know it.
H.M.Jr:
Did you know he talked to me each time?
Foley:
Yes, you told me that Friday night from the
White House he called you.
H.M.Jr:
And Monday, twice. All right.
Gaston:
I have nothing.
H.M.Jr:
I just want to say I appreciate the fact that
all of you are helping me by the fact that I
see so little of you I can do this other stuff
and keep the Treasury running. I appreciate it
very much.
OFFICE or FOREIGN AGRICULTURAL RELATIONS
May 23, 1940
2774
FOR CABINET 1.EETING
SIGNIFICANT FOREIGN DEVELOPMENTS
(Received May 17 to May 22, 1940)
ARGENTINA: At the suggestion of the Ministry of Agriculture the
agricultural grain exchanges of Buenos Airee and Romario have established
the following maximum daily price changes from closing prices of the
previous day: flexseed 70, wheat 50, and corn, oats, and barley 10 con-
tavos per 100 kilograms. In centa per bushel, United States currency, the
maximum daily price changes are as follows: flaxsed 5.29 cents, whest
4,05 cents, corn 0.76 cents, oats 0.43 cente, and barley 0.65 cents.
CANADA: There is no foundation to the rumor that Canadian pulp
millo cannot commit themselves for deliveries during the second half of
1940 beyond existing contracts. Indications are that the rumor was initi-
ated by interests desiring to sell pulp on hand. The price structure may
be firmer in the second helf of 1940 and occasional shippers of pulp may
export less because of increased manufacture of news print.
& reduction of more than 30 percent from the record area of 69,000
acres harvested last year is expected in the Canadian flue-cured tobacco
acreage in 1940. The reduction is being encouraged by the Ontario and
usbec Provincial Governments, by the canks, and by the tobacco marketing
and cooperative associations because of the general expectation that
another large crop (82,625,000 pounde in 1939) would only result in very
low prices in view of large unsold stocks now on hand and the likelihood
that British imports of Canadian leaf will not be resumed on E: substantial
scale before July 1941.
Fermers' intentions to plant indicate B. Canadian flaxseed area for
1940 of 350,000 acres compared with 307,000 acres in 1939, Normally the
yield of flarseed in Canada is less than half that of wheat. Flazabed
prices, therefore, must be twice ea high es those for wheat in order for
the crop to be attractive to farmers, Such a relationship now exists and
that accounts for the farmers' intentions to increase plantings. High
freight rates on flaxseed from Argentine and the impossibility of obtain-
ing supplementary supplies or linseed oil from the Netherlands are con-
tributing factors.
DUTCH EAST INDIES: The Commercial attaché of the Netherlands
Netherlande shipowners who are now in London and that they had assured
Legation in Londou advised the American Embeasy that he had spoken to
him that the urgent necessity of providing 0.0 much transge B.6. possible
for the trade between the Netherlends Indies and the United States of
America was recognized and that they expected to be fully able to meet
the demand.
Regraded Uclassified
340
CERMANY: Beyond an increase in the butter ration, almost exactly
balanced by a reduction in the margarine ration, and en extra distribution
of 125 grams of artificial honey to all consumers, the German food rations
for the period June 5 to June 30 will show little change from the May
rations.
The combined retion for butter and margarine for the 4-wook period
in June is 890 grame, as compared with 887.5 grano during the present
period. However, a normal consumer must take at least 500 grams of that
amount in butter and the balance optionally in butter or margarine, wherees
at the present time he is required to take only 357 grams of his fat ration
in the form of butter. The distribution of honey vas previously restricted
to children, but during June all adult consumers will receive 125 grams
and all children under 14 years of age 250 grans,
la in the current rationing period holders of food cards for miscel-
laneous provisions will be able to purchase one large or two small cans of
condensed milk, or one large can of fruits or vegetables, or 250 grams of
dried fruit. In its decree the Food Ministry emphasizes, however, that it
is only proposed to clear the stocks of these products now possessed by
the trade and that, therefore, consumers must not expect indefinitely to
be able to exercise any choice with respect to the above-mentioned products.
INDIA: The Government of India introduced 8. system of control by
licenses for the importation of 8. number of classee of goods, among which
are included the following: raw cotton, motor vehicles, toilet requisites
and soap, proprietary and patent medicines, radios, exposed cinamatograph
films, beer, menufactures of tobacco, fresh and preserved fruits, jame,
pickles, etc., stationery, leather, rubber tires and other rubber manufec-
tures, wearing apparel, haberdashery, requisites for games and sports,
hardwares and clocks. All goods imported from places in the British Empire
except Hong Kong are exempt from the restrictions except proprietary and
patent medicines, rubber goods, stationery, and motor vehicles. All goods
listed above when imported from France are subject to license except toilet
requisites, soap, and apperel. No restriction will be applied to scheduled
goods arriving in India on or before May 27, or to those ordered before
May 15 and shipped to India by May 27, provided the transactions are regis-
tered with the Import Trade Controller at Calcutta, Bombay, Madres, and
Karachi before June 20. It is understood that licenses for general importe
of scheduled goods will be granted only to meet vital requirements. Goods
imported by the central government for defense purposes are exempt from
requisitions.
JAPAN: Japanese trading, shipping and industrial circles are express-
ing concern over the increased difficulty since the invasion of Belgium and
the Netherlande in securing vital foreign rew materiale required for heavy
industries. The latest European war developments are expected to result
in & strengthening of import control measures in the British, French, and
Netherland territories in the Far Bast which would be harmful to Japanese
export trade. Particular concern is felt regarding the possible withdrawal
of Netherlands shipping from the Japanese-South Seas services which would
make imports of Nethorlands Indies rubber, petroleum, scrap iron and
bauxite extremely difficult because of the whortage of Japanese bottoms.
The Japanese Government announced that a nationwide rationing
system for matches and sugar would be introduced on July 1. The monthly
allotment of matches will be two small bores per person, or about five
matches 1 day. The monthly allotment of sugar will amount to 0.78 pounde
per person, It was reported that a coupon system 18 to be adopted June 1
for the distribution of cotton goods.
The Japanese Central Silk Association has petitioned the Government
to take steps to stabilize raw silk quotations at 1650 yen per bale for
the year beginning July 1 and has proposed further that the Government
purchase silk if quotations fall 20 percent below that level. The money
for the Government purchases would be obtained from 8. fund to be obtained
by earmarking all margius received in excess of certain established levels
for that fund. Raw silk prices during the week ending May 11 advanced to
1610 yen per bale, partly under the stimulus of the anticipation that the
proposal would be accepted and partly 88 a result of damage to mulberry
trees by recent frost.
The Australian Wheat Board is reported to have sold 100,000 tons
of flour to the Mitsui Bussan Kaisha, a large merchant firm of Japan.
The flour, which 1a equivalent to nearly 5,000,000 bushels of wheat, is
being milled in the several Australian States. The sale, which vas con-
cluded at current market prices, 18 understood to be worth about 61,000,000
in Australian currency. Australian flour mills recently have been working
only part time. The sale to Japan will enable them to work full time for
1 few months. The contract, moreover, will relieve the existing shortage
of bran and pollard in Australia.
RUSSIA: The Central Committee of the All Union Communist Partyof
Bolaheviks has resolved, in view of the late spring and delayed sowing
and in order not to take party workers away from the sowing, to postpone
the 18th All Union Party Conference from June of this year to the end of
the year.
UNITED KINGDOM: The American Embassy in London called the attention
of the Ministry of Economic Warfare to the the United feot Kingdom that all without goods from import Holland
license only and especially Warfare American-owned tion from Selgium was fair those and replied also that for countries without can directed those this goods now that be certificates same at goods now to imported to the the privilege lying the for United moment fact which in into of Holland should Kingdom. that it origin applications is under physically be and and are extended The present Belgium interest, requisitioned Ministry have impossible regulations to can been and the be of made. United Economic legally that for to move military it these Atten- States, seemed shipped goods
needs, out of or Belgium to move or Holland refugees. because but has all promised ships prompt consideration and reply.
Regraded Uclassified
342
Control of domestic prices will be widely extended under a recently
issued Board of Trade order effective June 10. Goods brought within the
price-control scheme by the order include all kinds of clothing, boots and
shoes, domestic hardware, furniture, radio sets, gramsphones, bicycles,
perambulators, clooks and watches, drugs, soap, candles, matches, outlery,
household textiles and a number of other classes of goods. The prices of
most of the more important materials used in the actual manufacture of the
goods listed will also be controlled. Fixed prices are not established,
but any undue increases in prioe may be made the subject of complaints to
the appropriate price-regulation committee. Another order, effective "
from May 11, establishes permitted maximum wholesale and retail prices for
certain specified branded goods, mainly apparel, textile piecegoods, and
knitting yarns.
Maximum prices of imported feed grains and other feestuffs WOTE
increased by order of the Ministry of Food. The reason given for the in-
creases was to prevent losses to the Government resulting from increased
coat of imported faedstuffs. The schedule of feedatuffs prices for the
more important items, effective May 16, compered with previously eristing
prices given in parentheses, is as follows: corn, Cinquantina, 113.48
(93.31) cents per bushel; other corn for feeding, 100.88 (80.70) cente per
bushel; barley, 86.46 (69.17 cente per bushel; No. 1 Canadian osts remain
at the same figure, namely 63.41 centa per bushel. The Creels Control
Board also announces revisions of c.i.f. selling prices of same grains
when not destined for feeding purposes. The new prices, effective May 18,
compared with those previously existing given in parentheses, were as
follows: corn, Cinquantins, 117.69 (94.15) cents per bushel; all other
corn, 101.21 (84.74) cents per bushel; barley, Australian Chevalier, 108.08
(77.82) cente per bushel; oats, Canadien, 72.63 ( same price) cente per
bushel; and all other oats, 68.60 (62.54) cente per bushel.
The Flax Control of the Ministry of Supply advised the American
Embassy that export licenses for flax line have been suspended temporarily
pending some clerification of the general supply position. The Embasey
was also advised that export licenses have not yet been withdrawn but that
there is some possibility that this may be necessary and that no fresh
licenses will be granted,
The Board of Trade advised the American Embessy that it 18 proposed
imports. It is not possible at present to say exactly what the policy will
to make rosin subject to import license, the main object being to control
be in licensing future imports, but there is DO intention of excluding
imports from the United States. It is apparent, however, that imports of
rosin will be restricted in view of the fact that substantial stocks have
accumilated.
Regraded Uclassified
2
MAY 23 1940
your Lacellency:
106 that Che is returning 23 his, - 118, to case
was in Liank you and pour covernment for solecting 80
able & D&D to lead the sission to negotiale for the credits axtended
us the Government. is have found -5. Chen to be A an of great
shility, vieto ARE integrity. Throughout de stay In the United
States, I, Cien's relations with w EDG du other officials in
the we benn -.00L condition saw e love nothing
but addivation for the not in midel be account Last - Insion
a a conclusion through . 01 THE Tradition and
disficulties.
/ JWA Propert and admiration for your country's
thief time AGET crying eircumstances have Leen ont despered
by V acquirimento with and 1 feel Lest visa- 120 Leen
the or 40 tea 8180 been true for all Line people ADU CODE
in contait with 110. Ut. Llwa 1.28 served his countr, mell - only
18 successful consultion the espation you antructor his at
king 4 strenglowning Ww \rwittional 1100 of Intended: cateoun
the Vited late and - dns.
-1th 12 surt cordial any -- 59 1101 Der your comminant
address,
yours,
(Signed H. Morgenthau, J.
other, 02 Who -
nie (Avellency, J. de he
Inister cl rinance,
-Mine.
File to Mr. Thompson
Via lippes
HDW:dal
5-8-40
Regraded Uclassified
Memorandum for the Secretary's Disty
On Monday, May 13, 1940 at 6:30 p.m., Secretary Morgenthau and
Ed Foley called on Senator Glass et his apartment in the Mayflower Hotel
in regard to the legislation pending before the Senate Banking and Currency
Committee which would confer power upon the Federal Loan Administrator to
request the R.F.C. to purchase preferred stock in banks and Insurance
companies.
Secretary Morgenthau told Senator Glass that this provision repre-
sented an effort on the part of Mr. Jones to retaliate against Secretary
Morgenthau for Secretary Morgentheu's efforts to rehabilitate on e sound
basis the Bank of America. Secretary Morgenthau pointed out that he held
up the letter which Mr. Jones addressed to the Treasury requesting the
Secretary of the Treasury to authorize the R.F.C. to loan money to Trans-
america to finance the distribution and sale of preferred stock of Bank of
America. Secretary Morgenthau told Senator Glass that Transamerice, the
top holding company for Bank of America, was under investigation at the
time by S.E.C. in connection with a proceeding for delisting of its stock.
The Secretary sald that he blocked Mr. Jones' effort to give this company
Government funds while it was under investigation. Senator Glass said that
he was against bank holding companies and he would not have introduced the
bill if he had had an opportunity to read it. He added that Mike Flynn of
the Wall Street Journal had taken the bill off his desk end be did not have
en opportunity to read it until after it was introduced. Secretary Morgenthau
said that Mr. Jones was too big E man to stoop to these methods end he *sked
Senator Glass not to make it necessary for him to come before the full Com-
mittee and tell the Bank of America story.
Secretary Morgenthau also pointed out that the legislation would
extend from 10 to 15 years the amortization of real estate loans, The
Secretary pointed out that F.D.I.C. and the Comptroller of the Currency
both thought this liberelisation was not in the interest of liquidity and
might impair the standing of national banks. Senetor Glass replied that up
until & few years ago no national banic could make B. real estate loan and
he NEW wholly opposed to further liberalization of D. power he thought was
already too liberal.
Senator Class said he was opposed to the two provisions of the bill
sentiched by the Secretary and probably would vote against the whole DILL.
Regraded Uclassified
Regraded Uclassified
Reservation for the Benretary's MARY
On Monday, May 13, 1940 at 4130 p.m., Becretary Morgenthau and
M Feley called on Senator Glass at his apartment in the Mayflower Notel
in regard to the legislation pending before the Benate Banking and Currency
Committee which sould confer power upon the Federal Loan Administrator to
request the R.F.C. to purchase proferred stock in banks and insurance
companies.
Secretary Morgenthau told Senator Glass that this provision repre-
sented an effort on the part of Mr. Jones to retaliste against Secretary
Morgenthau for Secretary Morgenthau's efforts to rehabilitate on a sound
basis the Bank of America. Secretary Worgenthau pointed out that he hald
up the letter which Mr. Jones addressed to the Treasury requesting the
Secretary of the Treasury to authorize the R.F.C. to loan money to Trans-
america to finance the distribution and sale of preferred stock of Bank of
America. Secretary Morgenthau told Senstor Glass that Transamerion, the
top holding company for Bank of America, was under investigation at the
time by S.E.C. is connection with a proceeding for delisting of its stock.
The Secretary said that be blocked Mr. Jones' effort to give this company
Government funds while it was under investigation. Senator Glass said that
he was against bank holding companies and be would not have introduced the
bill if be had had an opportunity to read it. He added that Mike Flyan of
the Wall Street Journal had taken the bill off his desk and he did not have
an opportunity to read it until after 11 me introduced. Secretary Morgenthau
said that its. Joass was too big a sen to stoop to these methods and he assed
Senator Glass not to make it necessary for him to come before the full Com-
mittee and tell the Bank of America story.
Secretary Morgenthau also pointed out that the legislation would
extend from 10 to 15 years the amortisation of real estate loans. The
Secretary pointed out that F.D.I.C. and the Comptroller of the Currency
both thought this liberalisation was not in the interest of liquidity and
eight impair the standing of national banks. Senator Glass replied that up
until a few years ago no national bank could sake A real estate loan and
be was wholly apposed to further liberalisation of a power be thought WE
already too liberal.
Remator Glass said De vas opposed to the two provisions of the bill
nantioned by the Secretary and probably would vote against the whole bill.
EXP:@ 5/23/40
- - IMANCE CORPORATION
- - FARM AUTHORITY
FEBRAL HOUSING ADMINISATION
HOME CENTER use CORPORATIONS
- art - COMPART
346
FEDERAL - cas - BOARD
new - COMPORATION
- - MORTGAGE ASSOCIATION
FEDERAL SAVINGS AND LOW INSURANCE COMMISSION
LAPORT IRPORT SAME or -
FEDERAL LOAN AGENCY
WASHINGTON
JESSE H. JONES
FEDERAL LIBAN ADMINISTRATOR
May 24, 1940
Dear Henry:
Enclosed copy of my statement to Chairman
Steagall. I shall present a similar one to Senator
Wagner, Tuesday morning when that Committee meets.
Sincerely yours,
S
Administrator
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
Regraded Uclassified
347
FEDERAL LOAN AGENCY
WASHINGTON
Jesse H. Jones
Federal Loan Administrator
May 24, 1940
Dear Chairman Steagall:
I suggest that you eliminate from H. R. 9687
the Section which deals with the request for the pur-
chaso of preferred stock in banks and insurance com-
panios by the REC. I have had a conforence with the
Socretary of tho Treasury this morning and am convinced
that the proforred stock mattors will bo handled expe-
ditiously and to tho entiro satisfaction of the RFC,
without change in the law.
I also suggost that the Soction which would
amond the Fodoral Rosorvo Bank Act so as to pormit
15-yoar amortized loans on improved roal ostato by
banks, instoad of 10-yoar as is now the caso, be olim-
inatod from the bill.
I expoct to como back to Congross at tho noxt
Session with moro complete rocommondations on this sub-
joct, bocause in my opinion the present banking laws are
unduly rostrictivo. Improved incomo-boaring roal ostato,
both farms and businoss proportios, is ontitlod to credit
and crodit facilitios as favorable as business and indus-
try onjoy.
Sinceroly yours,
(Signod) Josso H. Jonos
Administrator
Honorable Honry B. Stoagall
Chairman
Banking and Currency Committoo
Houso of Reprosontativos
Washington, D. C.
346
May 24, 1940
Present:
Mr. Bell
Mr. Delano
Mr. Foley
HM,Jr: I thought you would like to know that
after an hour and a quarter Mr. Jones is going up on
the Hill and announce before the Committee that at the
request of the President of the United States and the
Secretary of the Treasury he is going to withdraw those
two amendments. I am a wreck. But that's the answer.
Mr. Delano: I think that's fine.
HM, Jr: For after he makes his statement then
I'm going to make my statement that he and I are pals,
out I Just told him, "You talk first."
Mr. Foley: The flag still flies over the Treasury.
HM,Jr: He said, "I never have refused you any-
thing." I said, "I've never asked you. Now, Jesse, you
said I am your superior. All right now, I am going to
ask you to do this." He said, "All right. # He said,
"I recognize the Secretary of the Treasury as my superior."
"All right, I'll ask you to do this."
Now on top of this, this is the letter he 18 going
to send. This 18 his timetable on us. I told him from
now on 24 hours' service or somebody goes out the window.
Seriously, there 18 no reason, unless you are going to
turn him down, that you don't tell him in 24 hours.
Mr. Foley: That's right. Only got one every six
weeks.
Regraded Uclassified
349
- 2 -
HM,Jr: And, then, I said if there was any ques-
tion that you would call Sam Husbands yourself.
Mr. Bell: 0. K.
HM,Jr: I am just sunk.
Here 18 something about the Stabilization Fund from
Sumner Welles. You have to read it and just help me out.
We won't go in for congratulations until he makes a etate-
ment. I asked him to repeat it. He said, "At the request
of the President of the United States and the Secretary of
the Treasury" -- evidently the President went down the
line for me.
Mr. Foley: Was he friendly when he left?
HM,Jr: We are pals. I told Jesse, "No matter what
you have done in the last two different times something
came up in connection with should you or shouldn't you,
and both times I said to you you should. But Jesse what
you have done is Just too small to go and try to stick a
pin in my back -- it's too small for a big man like you.
It's beneath you. What you are going to say is all right
but I talk last."
Mr. Bell: He knew it. He knew what he had done.
HM,Jr: We had him here for 50 minutes. I covered
the whole field. Thank you two gentlemen, Ed and you,
Delano, for putting up the fight on the Hill. I appreciate
it very much.
Mr. Delano: Of course I would like to say I hope
you are convinced that I did go down the line.
HM,Jr: My God yes! I em thanking you.
And as I said once before, and the boys thought I
shouldn't, your grandchildren will be proud of you.
00000000000
Regraded Uclassified
350
After the group left, the Secretary diotated the
following:
I caught him red-handed lying because he said he
called Harold Smith before he put the bill in. He called
him up an hour before. So I let it pass and I said, "I
spoke to Harold Smith the next day and he said you did not
call him until ten o'olock that night." He never said a
word. He said, "The President said you think I am doing
this thing on account of the Bank of America." He said,
"I never mentioned Bank of America on the Hill. I men-
tioned everythim else." Then he spoke of four or five
cases which we turned him down on. He complained about
them and said our boys don't know.
I said, "Jesse, I know that Giannini called up
Congressman Ford and told him this was part and parcel
of Bank of America." He said, "Well,, I did not ask
Giannini to do that." I said, "I did not say you did,
but he did it." And I said, "One of the greatest things
I have done since I have been Secretary of the Treasury
has been the Bank of America." He said, "You never could
have done it if it had not been for me." I said, "Oh, no.
Jesse. Oh, no. You didn't help it, Jesse. I did not
get any help from you and I am not going to take thie now,
I am not going to take it."
I said, "For you to stick a pin -- and that's all
it 16 -- 8. pin prick into me in these times, I am Just not
going to take it."
I am exhausted! But I just made up my mind I
wasn't going to get excited. I had him almost crying.
Seriously!
BUREAU OF FOREIGN AND DOMESTIC COMMERCE351
OFFICE OF THE DIRECTOR
May 24, 1940
From
DIRECTOR
To
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
For
Sent at the request of Mr.
Noble, Under Secretary of Com-
merce.
Damn m. young
James W. Young,
Director.
May 23, 1940
952
ECONOMIC DEVELOPMENTS
INDUSTRIAL PRODUCTION has definitely moved up thus far in May due
primarily to 4. sharp expansion in the rate of steel output. The
steel ingot rate has risen about 20 percent since the and of April.
Cotton-mill activity and lumber and electric power output have 1a-
cressed fractionally, but these gains are offset by & decline in
automobile assemblies. One indication that the revival night -
tend beyond the steel industry is given by carloadings data which
have shown as increase in recent weeks. All the sajor categories
of traffic have reached their highest points for the year.
EXAMPLES:
Industrial
Steel Ingot
Automobile
Carload-
Activity
Production
Production
ings
(1923-25=100)
s capacity)
(thousends)
(thousends)
April 27
111
60.0
101.4
645
May 4
112
61.8
99.3
666
a 11
113
65.8
98.5
681
- 18
115
70.0
99.0
679
25
-
73.0
-
-
SIGNIFICANCE: Reserve Board's production indax will be up for
May, probably 3 to 4 points from the April figure of 102. The
rise is almost wholly accounted for by steel. All that is indi-
cated with certainty at this time is that inventories of seai-
finished steel products are no longer being liquidated-we calcu-
late that steel production (73 percent of capacity) is DOE 4-
proximately equal to consumption (between 70 and 75 percent of
capacity). is we pointed out & month ago (April 18) at coderete
lift in the production index vas possible If inventory liquida-
tion ceased.
NEW ORDERS RECEIVED BY MANUFACTURERS IN APRIL, according to prelimi-
mary data from the Department's monthly industry survey, recorded
. coderate rise over the March totals, and probably equaled the
about the same as in March. Incoming business in the primary steel
shipment rate for the first time since November. Shipments were
industry improved, but only moderately considering that some só-
vance purchasing occurred in the latter part of April following
the announcement of 6. price increase on May 1. Orders placed be-
fore that date were accepted for delivery up to July 1 at the re-
duesd prices. However, trade reports indicate a substantial rise
in new steel business 60 far in May-including a large volume of
export seles-and these reports would appear to be borne out try
the advance is the rate of ingot production.
INVENTORIES of MANUFACTURERS declined in April by . core substantial
anount than that reported for March.
Regraded Uclassified
- 2 -
353
Regraded Uclassifie
EXAMPLES of recent changes
lianul'esture's'
Shipments
New Orders
Inventories
1939
(December 1938=100)
October
125
167
101.6
November
124
134
104.5
December
123
114
107.3
1940
January
118
110
109.7
February
112
103
110.5
March
118
110
110.3
April (preliminary)
119
115
109.5
SIGNIFICANCEs The data show same liquidation of inventories in
April-in part seasonal. The volume of incoming business vas not
large enough to give a general stimulus to activity, end hence the
pattern of production so for in May outlined above is what would
be expected. The special influences detailed above have produced
a very marked rise in the steel industry which is the primary fee-
tar in the rise in the production index; other industries on the
average are holding even.
HEAVY DOWNWARD PRESSURE upon security and commodity prices continues
with the selling notivated by German military successes. The
bearish interpretation of the war's developmento have sent stock
averages down to mid-1938 levels. Virtually all sensitive como-
dity prices have weekened since the German push started on May 10.
Hardest hit were domestic agricultural commodities, particularly
foodstuffs which have declined at & rapid rate.
EXAMPLES:
Security Prices - Dos-Jones
Stocks
Bonds
Industrials
Railroad
Utilities
1938
April 2
101
19
15
83.9
July 23
142
30
23
89.8
1939
August 26
132
26
24
88.6
September 30
153
36
25
89.7
1940
May 9
148
n
25
89.6
May 22
115
22
19
83.3
,
54
Sestive Connodity Price Indexes
(August 1939=100)
Sept.
13
1
My 13
Hey
22
Total index
1.7.2
115.1
118.1
111.2
Import
134.1
116.4
122.0
114.0
Domestic
122.9
114.3
115.6
109.4
Domestic griendural
122.4
122.2
123.0
114.2
Foodstuffs
127.8
117.5
119.3
108.4
hav industrials
126.7
113.2
117.1
113.2
IGNIFICANCE Despite the upturn In procnotion, the overts of
the part too veeks have introduced additional uncertainties which
must be considered in business calculations. The security markets
take an adverse view of the probabilities concerning our export
trade, and apparently for the ament do not consider that the
erganent expenditures in prospect loos mufficiently large to sain-
tain activity sad mofits. While market declines tenc to feed
upon themsolves and sentiment can change, liquidity psychology
has been dominent recently, and this influences the new
outlook. If present griculturyi prices continue, farm income
will be down sharply and a depressed stock market will have an
séverse effect upon expenditures for durable consumers' goods and
industrial lant nd equipment, both of which are vulnerable in
any event. The potentialition of contraction from these sources
would far outweigh possible expension from srassent progress shich
have been publicly announced. The latter MAY be supplemented, and
the silitary situation of the Allies my not prove to be 00 perious
ed it appears.
UST DEPORTANT TO NOTE is the fact that serious coucern about the noasi-
ble defeat of the Allies is general. If the Germans win 6. quick vic-
tory, some of our existing business would disappesr and defense con-
siderations would receive oven more videspread recognition than they
do at present. Irrespective of this potential, M. government program
designed to deal more aggressively and more prosptly with the Mall-
ties of our situation becomes daily - coopelling need.
THE ONE NEW EXPANSIONARY FACTOR in the situation is the emergency de-
fense appropriation of $896 aillion requested of Congress by the
President lest week. During the next for months the approprintion
of this sus is not likely to raine the rate of overnment expends=
tures appreciably. Expenditures have been running at follower
Regraded Uclassified
1 355
4 -
Major Types of Budget Expenditures
(Million of dollars)
1939
1940
Se. Average
Jan.
Feb.
No.
4a.
National Defense
108
134
151
245
163
Public Works
94
74
B
66
67
Work Progress & Balief
1%
152
144
168
166
Astirements, Pensions, etc.
79
97
#
%
97
Agricultural Programs
100
138
147
140
112
Departmental
63
di
68
$
di
Other
11
11
5
11
15
Interest
a
36
19
146
$
Total Rependitures, excluding
Debt Betirement and True-
fors to Trust Accounts
722
717
658
821
762
SIGNIFICANCES the budget for fiscal year 1941 as proposed by the
President in January would have reduced expenditures by appreach=
mately $600 million on a email basis but probable Congressional
increases plane expenditure of was funds in 8 months would offset
the propared decrease. The new armont progrem, therefore, will
probably be a not increase above the fiscal 1940 total in the govern-
nont contribution to total expenditures. It 10 recognised, however,
that monentus our be attained only gradually on 4. progres of the
character contemplated, If, therefore, the above total is the full
additional appropriation, it is doubtful that the estual net in-
crease in expenditures te the fiscal year will even equal this
momt. Thus, while the program publicly envoused to date would
have - stimisting offect, it is not sufficiently large to be
a major determinent in business prospects. For national dafense
purposes, 10 dose net appear adequate under existing conditions,
Should 4 quick declaies in the war be reached, it would not be
sufficient to arrest the deflation which would - at B. time
- our defense position would be me more important than at
this smate
1800 MY
Regraded Uclassified
FOREIGN TRADE NOTE:
Commany: The effect of the German occupation and the war on the trade of
the Protectorate of Bohenta and Morevie is shown in the exporte Buring
to the
the first quarter of 1940. of the 35 items figuring in the declared
U.S.
exports for the first quarter of 1939, only 7 reme ned during the first
(horter of 1940, and of the ? approximately one-half of the exports
represented machinery and other supplies exported from the Data shoe
fectory in Moravie to its factory in the United States. There was N
docline of over 95 percent as compared with the first querter in 1930.
Potatoma are now subject to retioning in griin at the rate of 2
kilos per person per week, and only 1 vilo may be drawn at - time.
In the opinion of local experts, the present potato ration is con-
aiderably below the sverage consumption of es working family, which
is estimated et about helf a kilo per person daily.
It is believed that at the time or the German occupation of the
principal Norwegian ports, 2011 of the whele oil that has recently
been brought by the wheling fleet reasined in Norwegien bottoms
and had probably fallen into the hands of the Cermane. This probably
included the whole 011 purchased by Great Britain.
The trade between Cermany and Turkey during February 1940 showed A
decline or about 88 percent.
Itely) According to a recent report by the Militery tteche describing
conditions in Itely, one of the remarkebl developments 12 the grow-
the freedom of discussion by Italians critical of the regime. Die-
cussions which would have been dangerous even in the intimacy of the
fextly are how carried on more or less publicly.
Rumania: of the exports of petroleum of the merican Petrolous Company in
Rumanie during March 1940, 66 percent vent t England, and only 29
persent to Cermany.
United Kingdom: The ecarcity of paper is oviden 4d by the new order of
the Ministry of Supply, TO uoing the quantity of paper -hioh may be
Jalivered by producers 1 any customer to 30 percent or the ;uantity
delivered during the corresponding period in 1939.
U.S.S.R.) Exports from Russian Blook 50a ports pessing Istanbul during
the first three months of 1940 amounted to only 14 roent of the
volume of shipments during the corresponding period of 1939, represent-
Inc almost entirely manganess for the United States.
Survan of Foreign and Comestic Commards,
May 24, 1940.
Regraded Uclassified
STOCK PRICES, DOW-JONES WEEKLY AVERAGES
357
INDEX NUMBERS, 1939 = 100
130
120
20 RAILROADS
110
30 INDUSTRIALS
100
15 PUBLIC UTILITIES
90
80
JULY
AUG.
SEPT.
OCT.
NOV.
DEC.
JAN.
FEB.
MAR
APR.
MAY
JUNE
1939
1940
CASH INCOME AND OUTGO AND EXCESS OF CASH OUTGO
MILLIONS OF DOLLARS
1200
1000
CASH OUTGO
800
600
CASH INCOME
400
EXCESS OF CASH OUTGO
200
o
-200
1936
1937
1938
1939
1940
Regraded Uclassified
356
WEEKLY NEOLESALE PRICE INDEXED
.
I
1
1939
I
1940
'Percentage increase,
'May 18. 1940 from
Group
-
-
I
I
May
#
I
Aug.
#
Sept.
May
May
#
May 20,
Aug. 26,
20
.
3
26
16
I
11
.
I
18
.
I
.
1939
1939
I
,
1
-
,
#
-
-
All commodities
75.9
1
74.8
-
79.3
1
76.4
# 78.5 I
3.4 I
4.9
Form products
64.1
1
61.1
.
69.7
1
69.2
1
68.2 ,
6.4 .
11.6
Foods
67.4
.
66.7
I 75.5
71.6
I
71.7 I
6.6 #
7.5
ALL commodities other than
e
e
I
#
,
#
farm products and foods
80.7
#
80.4
,
82.4
I
82.5
,
82.9 I
2.7 #
3.1
Hides and leather products.
92.2
1
92.6
I
98.3
I
102.2
. 102.4 1
11.1 .
10.6
Textile products.
67.0
I
67.4
#
71.4
1
72.3
. 72.6 ,
8.4 II
7.7
Fuel and lighting materials'
74.4
1
73.2
8
74.1
1
72.4
1
72.3 1
- 2.8 -
- 1.2
Xetals and metal products
93.5
#
93.5
*
94.9
1
94.5
I
94.7
1
1.3 I
1.3
Building materials.
89.3
#
89.7
. 90.7
I
92.0
I
92.7
I
3.8 -
3.3
Chemicals & allied products'
(1)
1
(1)
,
(1)
F 76.8
1 76.8 .
-
-
-
House-furnishing goods.
86.9
*
87.0
I
57.1
89.9
I
89.9
I
3.5 .
3.3
Miscellaneous
73.7
I
73.1
I
76.1
.
76.8
,
78.2
,
6.1 e
7.0
I
I
I
@
I
haw materials
69.0
#
66.2
.
73.0
#
72.5
1
72.2 1
4.6 .
9.1
Senisanufactured articles
74.0
#
74.4
,
82.0 .
78.2
I
78.6
1
6,2 "
5.6
Finished products
79.9
I
79.3
-
82.3
I
81.5
I
81.8
I
2.4 ,
3.2
I
I
1
I
I
I
(1) Comparable data not available.
Source: U. 8. Department of Labor, Bureeu of Labor Statistics.
Regraded Uclassified
359
SELECTED COMMODITY PRICE SERIES
1939
1940
Commodity
Unit
May 24
August 50
Sept. W
May 15
May 22
#
Copper, electrolytic,
Sev York
per lb.
10
10 1/2
12
11 1/2
11 1/2
Load, prompt shipment,
Nov York
do
4.75
5.05
5.50
5.00
5.00
Zinc, Nov York
do
4.84
5.14
6.64
6.14
6.14
Tin, straits, New York'
do
48 17/20
49 3/4
75
51 1/2
53 7/8
Rubber, plintation,N.I.
do
16 1/2
16 13/16
22 1/2
23 1/2
20 3/6
Rides, 11ght native
cons, Chicago.
do
20 3/4
11
15
13 1/2
11
Bilk, 13-15 denier,
78% seriplane, N.I. 18 per lb.
2.78
2.72
3.21
2.83
2.78
Cotton, middling, ever-
age, 10 markets. per 1b.
9.42
1
8.53
9.01
9.43
9.59
Print cloth, 60 I 64,
38 1/2 inches, 1. I.'d per yd.
41/4
-
5/8
53/8
43/4
4 5/8
Hool tops, July 1940
utures, Bev York. per 10 2/82.2
1/81.5
3/111.9
94.0
85.0
Sugar, rhw, 96°, duty
free, New York
do
2.90
#
2.92
3.70
2,90
2.70
Cocoa, Accre, New York
do
4.60
4.38
6.45
5.72
4.79
Coffee, Santos, No. 4,
New York
do
71/2
7 5/8
73/4
-
71/4
7 1/4
Lard, cash, Chicago.
do
6.60
5.65
7.75
5.37
5.15
Cottonseed oil, July
1940 futures, B. I.
do
6.66
5.61
3/
7.30
6.47
6.15
Theat, July 1940 fur
tures, Chicago
per
bu.'2/
.77
7/5'3/
.67
1/4'3/
.85
3/8
.85
5/8
.83
Boys, good and choice,'
220-240 lbs. Chicago's per 6.78
6.88
8.13
5.68
5.60
Stears, beef, medium,
750-1,100 lbs., Chi.
do
-
8.75
5.38
,
8.88
9.00
9.13
Nominal. 2/ July 1939 futures. 2/ December 1939 futures. w Hoga weighing 220-250 lbs.
Sourcess All commodities, with the exception of wool tops, cottonseed oil, hogs, and
steers, are taken from the Journal of Commerce: roal tope and cottonseed oil are taken
from the fall Street Journal, and hags and steers are from the U. B. Department of
igriculture, Bureau of Agricultural Reomonics.
Regraded Uclassified
360
COMPOSITE PRICES OF PIG IRON, STEEL SCRAP, AND FINISHED STEEL
I
1
Pig Iron w
Steel Scrap
Finished Steel 2/
Date
,
1
I
(Dollars per gross ton)
(Cente per pound)
I
.
1939:
,
May 23
20.61
,
14.08
1
2.236
August 29
20.61
I
15.62
.
2.236
September 19
22.61
-
19.25
.
2.236
October 3
-
22.61
I
22.50
.
2.236
1
I
1
1940:
*
e
May 14
I
22.61
I
17.58
I
2.261
May 21
,
22.61
-
17.92
I
2.261
I
9
.
Besed upon average for basic iron at Valley furnace and foundry
iron at Chicago, Philadelphia, Buffalo, Valley and Southern iron
at Cincinnati.
Based upon No. 1 heavy melting steel quotations at Pittsburgh,
Philadelphia, and Chicago.
Based upon steel bars, beans, tank plates, sire, rails, black pipe,
sheets and hot-rolled strip. These products represent 85 percent
of the United States output.
Source: The Irom Age.
3 V/I
Regraded Uclassified
Lucide : Lient my Kay gave this
file to me 8 said that the Secy.
Bad taken it over to Calinet I
secured the President's approval
& that Cochran's office had
mailed the letter out the 24ᵗʰ H.
(as for ac he knew)
P.B.M.
THE SECRETARY OF THE TREASURY
WASHINGTON
May 24, 1940.
ORANDUM FOR THE PRESIDENT:
Annexed is a letter which I propose to send to
the Federal Reserve Bank of New York authorizing the
Bank to deal with the Vatican gold on the same basis as
other gold held by the Federal Reserve Bank for foreign
account. The State Department has approved such action.
If you approve the sending of such letter kindly BO
indicate below.
Secretary of the Treasury.
Approved:
Regraded Uclassified
THE SECRETARY OF THE TREASURY
WASHINGTON
May 24, 1940.
Dear Sirs:
There are enclosed a memorandum referring to an inquiry
received through the State Department relative to earmarking gold
in New York for the Vatican and a copy of the reply thereto mde
by the Government.
Needless to say, the Treasury Department would be pleased
if the Federal Reserve Bank of New York would take whatever steps
are necessary to open the gold account for the Vatican.
You are hereby licensed to deal with gold for the account
of the Vatican to the same extent and on the same terms and con-
ditions as you are authorized to deal with other gold for foreign
account pursuant to your license No. NY-18-1. You are also author-
ised, as fiscal agent of the United States, to purchase for the
account of the United States, gold held by you under earmark for
the Vatican in the same manner, and at the same rates and subject
to the same terms and conditions, as in the case of other gold
held by you for foreign account as stated in my letters to you
of January 31, 1934 and February 7, 1934.
The within license is issued end authority to purchase
gold conferred with the approval of the President.
Regraded Uclassified
24
- 2
We are prepared to be of any necessary assistance in obtain-
A
through the State Department any information, authorisations,
tructions, signatures or other documents, including verification
in
authentication thereof, which you my need in comection with
this mtter.
Very truly yours,
Secretary of the Treasury.
Federal Reserve Bank of New York,
New York, New York.
Inclosures.
Regraded Uclassified
I
365
ORANDUN
C
0
?
I
STRICTLY CONFIDENTIAL
Mr. Myron Taylor has reported to the President that the
Vatican State would like to ship to New York for deposit and
safekeeping with New York bankers a siseable amount of gold
bare which it does not wish to sell. The Vatican asks of the
United States Government such assurance as other states with
deposits in America are granted that the gold will be intact
and free. The Vatican very much desires to avoid any publi-
city on the matter.
Mr. Taylor urgently requests a reply to be in his hands
at Rome Thursday morning, the twenty-third.
Regraded Uclassified
366
PARAPHRASE OF TELEGRAM SENT TO THE AMERICAN
EMBASSY, ROME, ON MAY 22, 1940
For Myron Taylor.
Referring to your no. 6, from Florence, and to
the Embasy's supplementary telegram:
The following is the reply from Treasury:
Treasury has made arrangements with the Federal
Reserve Bank of New York to hold the Vatican gold on
the same basis as the Federal Reserve Bank holds gold
for other foreign account. It will be necessary, of
course, that the Bank be furnished with appropriate in-
structions, signatures and similar documents by the
Vatican in order that the Bank will be able to handle
the gold account. The gold shipment which is desired
by the Vatican does not need to be held up in any way
by this, however.
HULL
EA:MBG
Regraded-Uclassified
987
VOLUNTARY
(of interest to the Treasury Department)
"Hot Money" is Beginning to Flow to Brazil, Partly From the
United States.
From
Ware Adams, Second Secretary of Embassy
American Embassy.
Date of Completion:
May 24, 1940
Rio de Janeiro, Braxil
Date of Mailing:
May 24, 1940
APPROVED:
A. W. Childs, Assistent Commercial Attache
Surprisingly enough, funds recembling "hot money" are beginning
to flow to Brazil as a result of the extension of the war that began
with the invasion of Norway last month.
Two main types of funds are coming to Brazil:
(1) those of residents of France (who remain there), fleeing the
danger of war and escaping the French exchange restrictions, and
(2) those of emigrants from other areas of Europe who have not yet
found a new place of permanent residence.
In some cases balances that were being held in New York were
transferred to Brazil due to uneasiness caused by the freering
there of Norwegian, Danish, Belgian and Dutch assets,
That this "hot money" should come to Brazil is all the more our-
prising since it is immediately "cooled" here by the exchange control
system already in force under which it could lenve Brazil at a future
date only under permits which may be refused or granted entirely at
the discretion of the control authorities.
COPY
Regraded Uclassified
368
- 2 -
Local bankers handling these transfers estimate that at the
present rate they amount to about a million dollars a month. They
thus constitute an appreciable item in Brazil's balance of payments
(four or five percent of current exports) and offer a partial
explanation of the curious fact that the Bank of Brazil's foreign
exchange position continues to be satisfactory in spite of the loss
of important Scandinavian and Dutch export markets during the past
month or 80.
File No. 850
WA:AM
Regraded